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S. HRG. 111–916 

MANDATORY MEDIATION PROGRAMS: CAN BANKRUPTCY COURTS HELP END THE FORECLOSURE 

CRISIS? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT 

AND THE COURTS 

OF THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

OCTOBER 28, 2010 

Serial No. J–111–113 

Printed for the use of the Committee on the Judiciary 

( 

(II) 

COMMITTEE ON THE JUDICIARY 

PATRICK J. LEAHY, Vermont, Chairman 

HERB KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

BENJAMIN L. CARDIN, Maryland 

SHELDON WHITEHOUSE, Rhode Island 

AMY KLOBUCHAR, Minnesota 

EDWARD E. KAUFMAN, Delaware 

ARLEN SPECTER, Pennsylvania 

AL FRANKEN, Minnesota 

JEFF SESSIONS, Alabama 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

LINDSEY GRAHAM, South Carolina 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

BRUCE A. COHEN, Chief Counsel and Staff Director 

MATTHEW S. MINER, Republican Chief Counsel 

SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT AND THE COURTS

SHELDON WHITEHOUSE, Rhode Island, Chairman 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

BENJAMIN L. CARDIN, Maryland 

EDWARD E. KAUFMAN, Delaware 

JEFF SESSIONS, Alabama 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

LINDSEY GRAHAM, South Carolina 

STEPHEN C. N. LILLEY, Democratic Chief Counsel 

MATTHEW S. MINER, Republican Chief Counsel 

(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, prepared 

statement .............................................................................................................. 71 

Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode Island ...... 1 

prepared statement .......................................................................................... 118 

WITNESSES 

Britt, Larry G., Homeowner, Riverside, Rhode Island ......................................... 5 

Cardullo, Robert E., Homeowner, Johnston, Rhode Island .................................. 3 

Glenn, Judge Martin, U.S. Bankruptcy Judge, Southern District of New York 13 

Lefebvre, Christopher M., Attorney, Pawtucket, Rhode Island ........................... 21 

Rao, John, Attorney, National Consumer Law Center, Boston, Massachusetts 17 

Reed, Hon. Jack, a U.S. Senator from Rhode Island ............................................ 9 

SUBMISSIONS FOR THE RECORD 

American Bankers Association, Washington, DC, statement .............................. 31 

Britt, Larry G., Homeowner, Riverside, Rhode Island, statement ...................... 35 

Cardullo, Robert E., Homeowner, Johnston, Rhode Island, statement ............... 39 

Glenn, Judge Martin, U.S. Bankruptcy Judge, Southern District of New York, 

statement .............................................................................................................. 41 

Godfrey, Richard, Executive Director, RhodeIsland Housing, Providence, 

Rhode Island, statement ...................................................................................... 69 

Lefebvre, Christopher M., Attorney, Pawtucket, Rhode Island, statement ........ 73 

Morris, Cecilia G., Judge, U.S. Bankruptcy Court, Southern District of New 

York, statement .................................................................................................... 75 

Rao, John, Attorney, National Consumer Law Center, Boston, Massachusetts, 

statement .............................................................................................................. 83 

Weatherford, Laurie K., Chapter 13 Standing Trustee, U.S. Bankruptcy 

Court, Middle District of Florida, Orlando Division, Winter Park, Florida .... 103 

(1) 

MANDATORY MEDIATION PROGRAMS: CAN 

BANKRUPTCY COURTS HELP END THE 

FORECLOSURE CRISIS? 

THURSDAY, OCTOBER 28, 2010 

U.S. SENATE, 

SUBCOMMITTEE ON ADMINISTRATIVE

OVERSIGHT AND THE COURTS, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 9:02 a.m., at 

Rhode Island Housing, 44 Washington Street, Providence, Rhode 

Island, Hon. Sheldon Whitehouse, Chairman of the Subcommittee, 

presiding. 

Present: Senator Whitehouse. 

Also present: Senator Reed. 

OPENING STATEMENT OF HON. SHELDON WHITEHOUSE, A U.S. 

SENATOR FROM THE STATE OF RHODE ISLAND 

Chairman WHITEHOUSE. All right. I will call the hearing to order. 

And before we get to it, let me thank Rhode Island Housing, Richard Godfrey and his wonderful team, for hosting this official field 

hearing of the U.S. Senate Judiciary Subcommittee on Administrative Oversight and the Courts, a panel which I have the privilege 

of chairing. I would also like to welcome all the Rhode Island Housing staffers and the other housing advocates who have joined us 

here today. And there are two elected officials here who I particularly want to recognize: Senator Harold Metts and Councilman 

Luis Aponte. I appreciate very much their interest in this. It is a 

significant issue in their communities, and it is to their credit that 

they have taken the trouble to come and listen to this hearing. 

Last summer, I convened a hearing actually in this very room to 

examine the foreclosure crisis in Rhode Island and to discuss a proposal to give bankruptcy court judges the power to reduce the principal on primary residence mortgages, the way they can on essentially every other loan, including loans on vacation homes or cars 

or boats. This has long appeared to be the most efficient and least 

costly way to keep families in their homes, but the large banks, of 

course, have fought against it with their full lobbying might, and 

we have been unable to overcome the big-bank-generated filibusters in the Senate. 

Over the year since our hearing on bankruptcy modifications, the 

foreclosure crisis has not relented in Rhode Island or across the 

Nation. The administration’s Home Affordable Modification ProVerDate Nov 24 2008 14:35 Mar 30, 2011 Jkt 065122 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\65122.TXT SJUD1 PsN: CMORC
2 

gram, while well intentioned, has not succeeded in producing 

enough modifications to stem the tide of foreclosures. We have 

known for some time that the large loan servicers play all sorts of 

games to slow down and derail the modification process, and earlier this month we learned that they are playing fast and loose 

with the foreclosure process and documents themselves. 

A process that may leave a family homeless has been now relegated to ‘‘foreclosure mills’’ and ‘‘robo-signers.’’ Forget a modification. Many of these servicers are not even providing a human being 

to confirm that the foreclosure is warranted and the documents are 

in order. 

How did it come to this? As a result of the securitization of home 

mortgages, the relationship between the homeowner and the lender 

was fractured, and the foreclosure process and system became dysfunctional. Decisions that make no economic sense overall get made 

because the fracturing has created perverse incentives within the 

system, because it is virtually impossible for a homeowner to find 

a human with authority to resolve their problem, and from sheer 

remorseless bureaucratic inertia. 

Ann Sabbagh is here, a realtor who has shared the suffering of 

numerous clients, and when she came to visit me about this problem, she memorably put the question that she hears so often this 

way: ‘‘Why is it that the bank wants to foreclose on my home, 

throw me out, and sell it to someone who will pay less than I am 

willing and able to pay right now? ’’ Until we answer that question, 

we have a continuing problem ahead of us. 

I have called on Fannie Mae, Freddie Mac, and the Federal Reserve to use their powers to institute a national foreclosure moratorium. I believe we should freeze foreclosures until the loan 

servicers can demonstrate that they have new systems in place to 

properly evaluate homeowners for modifications and, if modification is not financially possible, to provide homeowners with an orderly, humane, and logical foreclosure process. That would seem to 

be a minimum standard. I hope that my colleagues in Washington 

will consider this when we return after the midterm elections. 

This Subcommittee has jurisdiction over the courts, and today we 

will examine whether the court-supervised mediations add common 

sense to an out-of-control foreclosure process and perhaps help families stay in their homes. The bankruptcy court here in Rhode Island under Judge Votolato is one of only a handful of bankruptcy 

courts nationwide that offer pre-trial foreclosure mediation. Today 

we will hear from Judge Martin Glenn of the bankruptcy court in 

the Southern District of New York, one of the creators of the first 

such mediation program, and John Rao and Chris Lefebvre, two attorneys familiar with the Rhode Island program. 

For families in Rhode Island and across the country snarled in 

the foreclosure nightmare, it is vital that we find a way to address 

this growing crisis. Today’s hearing will help us determine whether 

bankruptcy mediation programs can serve that purpose and whether Federal legislation might be useful in replicating the Rhode Island and New York programs nationwide. 

Before I conclude my opening remarks, I want to acknowledge 

the hard work of my senior Senator, Jack Reed, in preserving and 

creating affordable housing in Rhode Island and across the country. 

3 

It is a privilege for me to work alongside such a champion of accessible housing and fair mortgage practices—something everyone 

here at Rhode Island Housing knows very well. Senator Reed plans 

to make a statement later in the hearing, and when he arrives, 

with the indulgence of the witnesses, I will stop their testimony 

and allow the Senator to make his statement. 

I am now privileged to introduce our distinguished panel of witnesses. 

Robert Cardullo is the father of three young children and a 

homeowner from Johnston, Rhode Island. Mr. Cardullo will tell the 

story of his efforts to receive a mortgage modification, an ongoing 

process which began in February of 2009. 

Larry Britt is a teacher and homeowner from Riverside, Rhode 

Island. He will discuss his struggles over the past 19 months in 

getting a mortgage modification from his loan servicer. 

Judge Martin Glenn has been a bankruptcy judge in the Southern District of New York since 2006. Prior to his appointment to 

the bench, Judge Glenn practiced law at the national firm of 

O’Melveny & Myers in Los Angles and New York. He has a Bachelor of Science from Cornell University and a Juris Doctor from 

Rutgers Law School. 

John Rao of Newport is an attorney with the National Consumer 

Law Center in Boston, where he focuses on consumer credit and 

bankruptcy issues. The National Consumer Law Center performs 

research and trains attorneys who serve low-income consumers. 

Mr. Rao was appointed by Chief Justice Roberts to serve on the 

Federal Judicial Conference Advisory Committee on Bankruptcy 

Rules. Mr. Rao earned his degrees from Boston University and the 

University of California Hastings College of Law. 

Chris Lefebvre practices family, bankruptcy, and consumer protection law in Pawtucket, Rhode Island, and is a member of the 

debtor/creditor Committee of the Rhode Island Bar Association. Mr. 

Lefebvre has a B.S. from Boston College and a Juris Doctor from 

Suffolk University Law School. 

I am delighted to have this panel with us, and I turn the hearing 

over to you, Mr. Cardullo. Please proceed. 

STATEMENT OF ROBERT E. CARDULLO, HOMEOWNER, 

JOHNSTON, RHODE ISLAND 

Mr. CARDULLO. Good morning. Senator Whitehouse, thank you 

for inviting me here today to tell my story. 

My name is Rob Cardullo, and I have three young children. 

Sophie is 8 years, Georgiana is 5 years, and Andrew is two-anda-half. I have been employed by Taco Bell for the last 12 years, and 

I am currently running their Johnston restaurant. 

In December of 2008, I discovered that my wife of 9–1/2 years 

was no longer interested in being married to me, and because of 

that fact and other details that have come up, I decided to bring 

a divorce action against my wife. The circumstances surrounding 

the divorce are such that the judge ruled in my favor, giving me 

the right to retain my home and the residence for my children. 

However, in order for me to continue to meet my mortgage payments on my salary alone, it was necessary for me to ask for a loan 

modification through my bank, which is Chase. Since February of 

4 

2009, I have been negotiating with Chase, sending them updates 

on my financial situation monthly. Rhode Island Housing also assisted me in this endeavor, for which I am very grateful. 

In September of 2009, after being put on hold when I tried to 

reach the individuals handling my application and after repeated 

submissions of documents, Chase informed me that they were denying my request based on the fact that I had too much liquid assets. The liquid assets they were referring to were the savings account of $2,200 and my 401(k) plan of $14,000. Evidently they expected me to apply my $2,200 to pay my mortgage, leaving me with 

nothing—leaving me with nothing at all in case of any kind of 

emergency. Evidently they expected me to borrow against my 

401(k) to pay my mortgage. This, however, would have been impossible for me to do—even if I wanted to—as the terms of my 401(k) 

stipulate that I must be in a state of foreclosure in order to borrow 

against my retirement funds. And if that was possible and I did 

have to borrow it, once the money ran out, would I still have my 

house? And then I have a loan to pay against my 401(k) plan after 

that. 

On the advice of Rhode Island Housing and my attorney, I resubmitted all of my materials and began the process all over again. 

Following several months of frustrating negotiations with Chase, 

going through reams of paper, and shedding many tears, they finally in May 2010 approved me for a loan modification with a reduction of my mortgage payment from $3,000 a month to $1,986 a 

month. The agreement was that I pay the reduced amount for 4 

months, and after the fourth payment, the loan modification became permanent. 

But this is just the beginning of my story. 

In August of 2010, 1 week before my fourth payment, I received 

a letter from Lenders Business Process Servicers, saying that 

Chase had sold my mortgage to them and that they were going to 

foreclose on my house because I was behind in my payments. When 

I explained to them that I was in a loan modification agreement 

with Chase, LBPS told me that they would not honor the loan 

modification, that they had bought over 9,000 loans, and they could 

not focus on just one. I should point here that the loan modification 

was government-backed by Fannie Mae and that these banks are 

not honoring them. LBPS said that if I wanted to be considered for 

a loan modification, I would have to begin the process all over 

again with them. 

I, therefore, have gone ahead and re-filed all of my documents 

with LBPS again. Yet they still continue to harass me and, as recently as last week, threatened to foreclose on me and bring legal 

action against me. I have contacted my lawyer, and again I am contemplating whether to bring legal action against LBPS. 

The recent financial crisis has had an impact on my own finances, and many individuals, too. Yet in the 4 years I have owned 

my house, I have never missed or been late with a mortgage payment. The divorce has added a further strain on my finances, making it absolutely necessary for me to have a loan modification in 

order for me to meet my mortgage payments and any other bills 

in a timely manner. 

5 

I do not want to end up in foreclosure or go bankrupt. Is this 

what I am facing? I have heard all this reassurance for more than 

a year that I am going to get stimulus money to help me get my 

loan modification in place. I am not asking for a handout—just a 

loan modification to enable me to keep my house. 

I am going to continue with my quest for a loan modification, but 

based on my experience with Chase and now a repeat of the same 

frustration with LBPS, my hopes are diminished, and I am not optimistic about the outcome. 

If LBPS denies my application for a loan modification, I will have 

no option but to foreclose or short-sell my house or face bankruptcy, all of which I would like to avoid. I cannot understand why 

Chase—I am sorry—or LBPS would not want to help someone out 

who has never missed a mortgage payment. It seems that they 

would rather take the house than work out a reasonable payment 

plan with me. I would like to point out that through all of this I 

have complied with everything, every requirement on schedule, 

time after time again, and yet the documents are never-ending. 

I have turned to Senator Whitehouse from the beginning of this 

loan modification nightmare for his assistance, and if it was not for 

the support from his office, I would be fighting this battle alone. 

Thank you very much for listening, and I am happy to answer 

any questions. 

[The prepared statement of Mr. Cardullo appears as a submission for the record.] 

Chairman WHITEHOUSE. Thank you very much, Mr. Cardullo. 

I think what we might do is allow Mr. Britt to testify and then 

maybe ask a few questions of the two of you as consumers, and 

then move on to the other witnesses who are in different parts of 

the process. 

So, Mr. Britt, would you proceed with your testimony? 

STATEMENT OF LARRY G. BRITT, HOMEOWNER, RIVERSIDE, 

RHODE ISLAND 

Mr. BRITT. Sure. Thank you, Senator Whitehouse, for initiating 

this important hearing. I would also like to thank Rhode Island 

Housing as well for hosting the hearing and providing support 

through my 19-month ordeal with Bank of America’s mortgage 

modification process. 

My name is Larry Britt, and I have owned my home in Riverside, 

Rhode Island, since 2003. I bought my home as a permanent residence in which to spend my final working and future retirement 

years. My home purchase was not an attempt to get in on the crazy 

real estate boom of the times. I work here in metro Providence as 

an adult educator, as the Senator said. 

Ironically, my saga began 19 months ago in this building with 

Linda Tavares, a very helpful Rhode Island Housing counselor. 

When I started the process in March of 2009, I had never been 

late paying any bills to any creditors—including Bank of America— 

and my credit score was near perfect. Since entering into a modification process with BofA, the bank has ruined my credit rating 

and has been a major contributor to the uncertainty about my future. My credit score has dropped 160 points as a consequence of 

improper credit reporting by BofA. My credit score monitoring servVerDate Nov 24 2008 14:35 Mar 30, 2011 Jkt 065122 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\65122.TXT SJUD1 PsN: CMORC
6 

ice sends me weekly e-mail notifications of continuing negative impacts to my credit score. So far, two creditors have closed my accounts, and three have lowered my credit limits. BofA tells me that 

I was told my credit score would be adversely impacted, but they 

cannot provide me with any documentation that proves I was told 

of this consequence. 

As I have said, I am not a deadbeat. I have always paid all of 

my bills on time. But because of legitimate financial hardships that 

I have documented, I entered into BofA’s mortgage modification 

program hoping I could avoid prospective financial problems. For 

the past 19 months, I have immediately replied to any of Bank of 

America’s inquires and requests for documentation. Before entering 

into the BofA process, I was considered a good credit risk. Now, 

simply by having applied for a program that I am well qualified 

for, my history as someone who pays their bills has been permanently damaged. Equally, I am concerned about rescinded and denied credit that my elderly mother and other family members have 

suffered as a consequence of their financial relationships with me. 

I have a detailed chronology that you will be happy that I am 

going to summarize. 

[Laughter.] 

Mr. BRITT. Because it is the same thing over and over again. 

There are four events that happen over and over again. The bank 

contacts you. You provide documentation. They say they do not 

have the documentation. You provide it again. You are approved, 

you are denied. It is just the same script over and over again. 

But the summary is it is about my interactions that I have had 

with Bank of America in the Treasury Department’s home modification center, known as HAMP. 

Chairman WHITEHOUSE. Mr. Britt, feel free to go through in the 

detail that you provide in your testimony because, frankly, the impact of this I think is—— 

Mr. BRITT. OK. I am happy to do that, but I intentionally took 

it out. 

Chairman WHITEHOUSE. The way your wrote it, your testimony 

is worth going through. It is really pretty shocking. 

Mr. BRITT. OK. In March 2009, as advised by news reports, I 

went to Rhode Island Housing and submitted an application for 

mortgage modification. This allowed Rhode Island Housing to act 

as my agent for mortgage modification with Bank of America. At 

this time I was not behind on my mortgage or other debt obligations. I have already told you that I was anticipating financial 

problems. 

Next, in March 2009, as required, I met with Money Management International, an approved credit-counseling agency. This organization determined that I was managing all of my finances correctly and that my only issue was my large monthly mortgage payment and underwater mortgage. 

In March 2009, I provided copies of all the required documentation to Rhode Island Housing for forwarding to Bank of America. 

From March 2009 to October 2009, I called Rhode Island Housing biweekly to check the status of my modification. Each time I 

called, I was told that there was a backlog and I should wait to 

hear something. 

7 

In October 2009, I was informed by Rhode Island Housing that 

Bank of America did not accept me into the loan modification program because I was not late or behind on my mortgage payments. 

Rhode Island Housing informed me to visit a Bank of America 

branch so that I could apply for a refinance of my mortgage. 

So a few days later, I went to a Bank of America branch and formally applied to refinance my loan. The refinance was denied that 

day on the phone in the branch. As I found out, the refinance step 

was a formality I needed to go through before I could apply for yet 

another mortgage modification with BofA. 

About a week later, I received a notice that I had been accepted 

into BofA’s trial modification program, and I was a given a new 

monthly payment amount for the trial period. 

A few days after that, I mailed all the requested documentation 

to Bank of America. 

Then from November 2009 to May 2010, I paid Bank of America 

my new monthly payment on or before the due date. 

From October 24, 2009, to February 2010, I checked the status 

of my modification on a weekly basis to be sure the company had 

received my documentation. I was repeatedly assured that Bank of 

America had received all information that had been requested of 

me. 

In February 2010, I received a letter from Bank of America requesting that I mail them all of the documentation that I had already provided twice before. 

On that day, I FedEx’d all the required documentation again. 

Then from February 2010 to May 2010, I called Bank of America 

weekly to check the status of my modification and to be sure that 

the bank had all of my required documentation. Each time I was 

assured that all the requested documents had been received by 

Bank of America and that the modification was ‘‘being reviewed.’’ 

In April of 2010, I received a ‘‘Notification of Default and Mortgagees Right of Foreclosure’’ from Bank of America. 

The next day I called Bank of America, and the customer service 

representative told me to ignore the letter, continue paying my 

modified payments, and that I will continue to receive these default 

notices during the modification process. 

In May of 2010, I received a letter from Bank of America stating 

that I had been denied a mortgage modification because all requested documentation had not been received by the bank. 

The next day, I called Bank of America, and I was told to disregard that letter. The customer service representative said that, 

according to Bank of America, ‘‘all documentation was complete 

and received as of March 29, 2010.’’ So this is May 2010. They are 

saying as of March everything was good. 

So last month, I started to work on filing forms with all three 

credit report agencies in an attempt to get my modified payments 

to Bank of America classified, as they appropriately should be, as 

modified payments rather than delinquent payments. That has 

been the hit to my credit report. It is these delinquent payments 

that brought my credit score way down. 

So the credit report forms encourage you to contact the creditor 

before you file any complaint. So I called Bank of America, and the 

following occurred: The representative, I asked him to review my 

8 

account and confirm that I had made all the modified payments 

that I had agreed to. 

The representative told me that my mortgage was in default as 

of May 7, 2010, and that I had been sent a letter saying I was not 

eligible for the modification program because I did not provide 

BofA with requested documentation. He also said that I had been 

sent a letter requesting the documentation. I never received this 

letter. So I explained the past chronology that you have all had to 

listen to to this representative. 

Finally, after really getting nowhere with this representative, I 

asked to speak to his supervisor, and she told me that I lied, that 

the conversations that I told her I had had with Bank of America 

never occurred and that she had the phone records to prove it. 

However, my personal phone records would prove her wrong. 

Finally, the supervisor told me that she did not have time to 

waste on me and hung up on me. And this was not the first hangup from Bank of America. 

So that is the chronology. Even more has happened, but, Senator, 

you asked for it. 

[Laughter.] 

Mr. BRITT. Okay. Shall I continue? 

Chairman WHITEHOUSE. Please. 

Mr. BRITT. Let’s see. Finally, in May 2010, I have already told 

you I got a denial letter from Bank of America. At that time, I contacted your office and gratefully got an immediate response from 

Karen Bradbury, a caseworker in the Senators Providence office. 

Karen’s efforts resulted in a connection for me with the HAMP Solution Center. At first, my HAMP caseworker sounded like the answer to my ongoing problem. The HAMP representative told me 

that he would be an advocate for me with Bank of America. He told 

that he had learned from Bank of America that I was ‘‘under review for the Making Home Affordable Second Look’’ program. 

Throughout July and August 2010, I contacted the HAMP Solution 

Center seven times. Each time, the representative there told me 

that his updates directly from Bank of America said that my modification was still under review and that I had complied with all requests for documentation as well as honored my agreement to 

make on-time modified monthly payments. 

Honestly, after a few months with HAMP, I felt like they were 

reading from the same script as the banks. When I checked in with 

them, there were never any updates; there were never any outstanding bank requests for documentation from me. Yet once a 

month or so over this same period, I received additional requests 

from the bank for more documentation, a repeat of what I had sent 

three or four times before. 

So last month, as I told you, I started to work on my credit reporting, again in the chronology, and when I found out that I was 

in default, as I told you in the chronology, I panicked at the prospect of losing my home. So I reconnected with Linda here at Rhode 

Island Housing, and on October 18th, this month, Linda determined from Bank of America that I was not eligible for any modifications. On the same day, when I went home, I received a mail 

notification from Bank of America saying, as I understood it, that 

late fees, penalties, and interest were accumulating on my mortVerDate Nov 24 2008 14:35 Mar 30, 2011 Jkt 065122 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\65122.TXT SJUD1 PsN: CMORC
9 

gage balance and that, regardless of my outcome with the modification program, I would be liable for these charges. 

On the next day, I received a modification approval from Bank 

of America. So I guess I should be happy, and I really am grateful 

to the Senator’s office and to Rhode Island Housing and even the 

HAMP Solution Center for what I hope is a final resolution. However, given the last 19 months of misinformation, can I be sure that 

Bank of America’s ‘‘approval’’ is for real? Does another Bank of 

America division have me slated for foreclosure? I cannot be sure, 

and the 19-month process has forced me into deeper financial trouble and a lot of emotional distress, just like my co-witness here. 

So I know this story is hard to follow. It is all in the written 

record. The bottom line is that although I have worked with Bank 

of America since March 2009 and the HAMP Solution Center since 

June 2010, I am still not really sure I will be OK. Last week, within a 2-day period, Bank of America has told me that I am both ineligible and approved for a mortgage modification. 

So, last, I just want to say that despite all of this, I want you 

to know that I have continued to pay all of my bills in full on time, 

and as my financial history shows, I am a guy who figures out 

what sacrifices I need to make in order to meet my financial obligations. I always have. 

So if needed, I can document anything that I have spoken 

about—activities, phone calls, documents. And I thank you for your 

time and am open to any questions that you might have. 

[The prepared statement of Mr. Britt appears as a submission for 

the record.] 

Chairman WHITEHOUSE. Thank you, Mr. Britt. 

I said that we would break into the hearing after the homeowners had their chance to testify, and Senator Reed’s timing is 

pretty well perfect. He came in just at this moment, so I would now 

like to call on him to add a few words. And then I think we may 

both have a few questions for Mr. Britt and Mr. Cardullo. 

OPENING STATEMENT OF HON. JACK REED, A U.S. SENATOR 

FROM THE STATE OF RHODE ISLAND 

Senator REED. Well, first let me thank Senator Whitehouse for 

convening this hearing. The foreclosure issue is not only a drag on 

the economy, but as Mr. Britt indicated, and Mr. Cardullo also in 

his testimony, it is a source of exasperation, anxiety, anger, frustration, and much more for families trying to deal with it. And so 

we have an obligation, I think, not only at the national level to get 

the economy moving, but at the homeowner level to give people a 

chance to get their lives in order and move forward again. 

I particularly want to thank Mr. Cardullo and Mr. Britt. Listening to your testimony, Mr. Britt, and reading yours, Mr. Cardullo, 

no one should be forced to go through the permutations and other 

operations that you have had to go through. 

Senator Whitehouse has really been at the forefront not just in 

helping our constituents, but also nationally. We both have joined 

together supporting legislation to try to find a solution in the bankruptcy courts. I think that is an issue that we will consider again 

today. Just as importantly, together we have brought about $105 

million here through the Neighborhood Stabilization Program and 

10 

the Hardest-Hit fund. Rhode Island Housing has done a remarkable job trying to help people. But we have to do much, much more. 

Unless we successfully deal with this issue of foreclosure, the economy will not expand as it should, and people’s lives will not return 

to at least close to normal. So that is our challenge. 

We have to think creatively. Obviously, one major benefit of this 

hearing, and, again, another tribute to Senator Whitehouse’s insights, is to listen to people who deal with these issues on a daily 

basis and get the advice we need to make sound policy in Washington. I just find it—‘‘ironic’’ is too mild a term. You know, 5 years 

ago, you could get a mortgage in 24 hours without any paperwork, 

no problem finding the files, no problem getting you signed up, no 

problem doing anything. And now, to get it correct it is a saga of 

years and pain. You know, if these companies—no company in particular, but if they are that efficient in giving mortgages, I would 

like to see them be that efficient in making modifications when 

they are appropriately required by the financial situation. 

Thank you. 

Chairman WHITEHOUSE. Thank you, Jack. 

One of recurring themes in your testimony and one of the recurring themes that comes out of all of our constituent work, working 

with those who are trapped in this bureaucratic nightmare, is the 

repeated requests for the same documentation. Both of you have alluded to it. Could you flesh out a little bit how many times various 

things have had to be produced by each of you? It is not just once 

or twice or three times any longer, is it? 

Mr. CARDULLO. I was told by Chase that my bank accounts and 

my check stubs are only good for 30 days, and then at the 30 days, 

you need to start sending all your information back in again. So 

I have a ream, I have a stack—it is about 40 pages that I faxed 

in every month to Chase when I was going through the loan modification with them. 

Chairman WHITEHOUSE. So you have been faxing in information 

10, 12 times at this point. 

Mr. CARDULLO. Yes, and now I am doing the same thing with 

LBPS all over again. 

Chairman WHITEHOUSE. And are they telling you that they have 

lost it? Did you hear that? 

Mr. CARDULLO. Yes. They have a 405—I think it is a 405T, which 

is basically all our debts that we have. They never get that. They 

are always missing that. That is one of the big things. And so I fax 

it in again, and, ‘‘Nope, we never got it.’’ I say, ‘‘I have the records 

of faxing.’’ ‘‘Nope, never got it.’’ 

Chairman WHITEHOUSE. What are the penalties to you for failing 

to provide—— 

Mr. CARDULLO. They can drop me—— 

Chairman WHITEHOUSE.—the requested information? 

Mr. CARDULLO. They can drop me from the loan modification program. 

Chairman WHITEHOUSE. So as best you understand it, if you are 

the bank, if you are demanding unreasonable, constant, repetitive 

amounts of information asking for the same thing over and over 

again, pretending that you never received it, there is a benefit for 

you in doing that because if you fail at any time in providing that 

11 

stuff, even if all they are doing when they get it is—if their fax machine is attached to their shredder, as Mr. Lefebvre said in his testimony, and they are just shredding it right through and not even 

looking at it as it comes, you make one mistake and you are out 

of the program. 

Mr. CARDULLO. Correct. 

Chairman WHITEHOUSE. And that is a burden of their backs from 

your point of view. 

Mr. CARDULLO. Correct. 

Chairman WHITEHOUSE. Did you get the feeling that they are 

kind of testing your resolve to see if—— 

Mr. CARDULLO. Oh, they have tested me. 

[Laughter.] 

Mr. CARDULLO. They definitely tested me. 

Chairman WHITEHOUSE. Mr. Britt. 

Mr. BRITT. I feel the same. You know, it is this—some of it is 

just making the issue confusing and kind of making us jump 

through hoops. But also, with each of—as I understand it—and I 

am not clear about it. I was in four different programs. Each time 

the new representative wanted all new documentation. And as my 

co-witness said, every time you start the process over, they want 

new—they want current documentation. 

The other thing about faxing is it does not fax into a shredder. 

At least at Bank of America, I finally found out—because I have 

a home fax, and a woman claimed that—one of the reps claimed 

that I did not fax something. And I had a record of that day faxing 

from my home exactly what she wanted and of asking her, ‘‘Are 

you in the office? I will fax it immediately.’’ And she said, ‘‘Yes, I 

am here.’’ 

Well, when I finally confronted her with this, she told me, ‘‘Oh, 

that is not the way faxes work. They go into an electronic system, 

and then another department electronically distributes the documents.’’ Which I understand. I am all in favor of electronic documents. But, again, it is a lie and, you know, yet another delay and 

a way to—I do not know—just keep me jumping through hoops. 

Chairman WHITEHOUSE. In the hopes that perhaps you will miss 

one. 

Mr. BRITT. Yes. 

Chairman WHITEHOUSE. Let me turn to Senator Reed, but let me 

ask you one last question. During the time that you indicated that 

you had your credit rating ruined by the bank, you were meeting 

all of the terms that they had demanded of you, not the original 

terms but the modification terms. 

Mr. BRITT. Absolutely. 

Chairman WHITEHOUSE. But you were in full compliance with 

their program, and yet it ruined your credit rating. 

Mr. BRITT. Yes. And they were the only ones reporting negatively 

about me. However, other creditors, on receiving this information 

about me being a bad risk, immediately lowered all credit lines to 

whatever my balance was, and several canceled my accounts. 

Chairman WHITEHOUSE. Jack. 

Senator REED. Just to follow up, to both Mr. Cardullo and Mr. 

Britt, in the course of these numerous conversations, at any point 

did representatives of the banks or the servicers kind of go offline, 

12 

if you will, and just sort of tell you what was really going on? Or 

was this—I mean, I am trying to get a sense of whether these are 

just colossally inefficient organizations or, as Senator Whitehouse 

suggests, there are somehow implicit incentives for these people to 

just make it so hard that you either go away or you fail. 

You have been at the receiving end of this, and so just any sort 

of sense you have in these dealings, whether it is one or the other 

or both. 

Mr. CARDULLO. I just think it is more the fact that they are not 

organized. You start by talking to a representative. Then they send 

you over to loss mitigation. And then they just keep on bouncing 

you back and forth, and the one hand does not know what the 

other hand is doing. And that is just one of the biggest issues. If 

I had a representative who was dealing with my file and I talked 

to that person and that was the way it was working, I am sure 

that—I am being positive with this saying that there probably 

would not have been a different income or, you know, 8 or 10 

months of not dealing with this, you know, if I was talking to a 

person versus a mega bank. 

Senator REED. Right, a better system, yes. 

Mr. BRITT. I would echo what Mr. Cardullo said. I would also add 

the reps that I worked with sounded really overworked. And I do 

not want to judge them. It is their tone of voice on the phone. But 

they certainly did not seem to care. 

Senator REED. Yes. 

Mr. CARDULLO. I would add that I have told the rep that I have 

gone through the loan mod, and they have said, ‘‘That is not my 

problem. You owe my company money, and we will take your 

house.’’ I said, ‘‘OK, go ahead. I will contact my lawyer.’’ 

Senator REED. Yes. I mean, one of the things that we have been 

trying to do is to incentivize, one way to describe it, a much more 

proactive, much more focused can-do attitude on the service of the 

banks to get it done. And we have received publicly at hearings assurances that that is what they are going to do, that they are going 

to take charge. In fact, I would think financially in many cases— 

and you might reflect on this—by modifying a loan, the bank 

salvages something more than they would in a messy foreclosure 

and loss of your home. Certainly you would be able to stabilize 

your life. So it seems to be a win-win by modifying, yet it is just 

still this big machine that is rolling along and is indifferent to their 

own well-being as well as the customer’s. I do not want to put 

words in your mouth, but is that something you are—— 

Mr. CARDULLO. Yes. It is very frustrating. I mean, I do not—I 

want to keep my house. I want to make the payments. It is just 

I do not understand why they would rather have a house sitting 

there for whatever it is and not collecting any money on it at all 

and so it goes into foreclosure or a short sale or bankruptcy. It does 

not make any sense. But they think it is rather those are my 

terms, we are not taking care of the loan mod, and you signed it, 

get done. 

Mr. BRITT. I feel the same way. I am willing to pay off a mortgage on a house that is valued at significantly less than my mortgage balance. I do not understand why the bank will not go for that 

13 

deal. It is a win for them. If they take my house, they are going 

to lose significantly on the asset. 

Chairman WHITEHOUSE. Well, Mr. Britt, that is a perfect segue 

to Judge Glenn’s testimony because the program that he initiated 

does the simplest of all possible things, and that is, require the 

homeowner and the lender to sit down and look each other in the 

face with an authorized person for the lender and the homeowner 

right there and actually have a human discussion about the problem. And that I think, first of all, solves the problem that you all 

have experienced that you cannot find anybody with authority. You 

are always grasping at people who will not give you their last 

name, who do not have the authority, who do not have the information, that you are speaking to for the first time. And it is a nightmare, and I understand that. And then you have got the problem 

that very often the servicing company has an incentive, a financial 

incentive to foreclose, even if there is a better deal for the bank, 

for you the homeowner, and for the public at large. Their incentive 

is mismatched. It is a market failure. And the bankruptcy court 

has the ability to say, ‘‘Wait a minute, that is a stupid notion,’’ and 

push back against really dumb ideas that are propagated through 

the system. 

So, without further ado, and with much appreciation for taking 

the trouble to come here, Judge Glenn. 

STATEMENT OF HON. MARTIN GLENN, UNITED STATES 

BANKRUPTCY JUDGE, SOUTHERN DISTRICT OF NEW YORK 

Judge GLENN. Chairman Whitehouse, Senator Reed, thank you 

for inviting me to speak before the Subcommittee on the role that 

bankruptcy courts can play in helping to alleviate the mortgage 

foreclosure crisis. I am one of 11 bankruptcy judges in the Southern District of New York. We have nine judges in Manhattan, one 

in Poughkeepsie, and one in White Plains. And I will discuss the 

program that became effective in our court in January 2009. And 

I have attached to my written testimony copies of the program documents that are currently in use, and they are all available on the 

court’s public website. I will also provide some data on the use and 

results of the program from its inception in January 2009. The last 

date we have collected information is October 21, 2010. 

Let me first give you some background on how the program was 

developed. As the national foreclosure crisis unfolded, bankruptcy 

courts across the country have faced substantially increased consumer bankruptcy filings, many of those filings on the eve of foreclosure sale after a borrower had seemingly exhausted consensual 

or State court efforts to avoid foreclosure. 

During 2008, after speaking with a few lawyers representing 

creditors—those are the lenders and loan servicers—my colleague 

Judge Cecilia Morris and I began exploring whether the bankruptcy court could develop a program to better address the problems of both debtors and lenders. And in adopting our loss mitigation program, we think we were the first bankruptcy court in the 

country to do that with a formal program to help alleviate the 

mortgage foreclosure crisis. And our adoption of the Loss Mitigation Program roughly coincided with U.S. Treasury’s creation of the 

14 

HAMP program. Changes in HAMP since it was first created have 

also made it easier for bankruptcy debtors to make use of HAMP. 

HAMP eligibility requirements still exclude many debtors from 

obtaining a HAMP loan modification, but increasingly, we are seeing that lenders and loan servicers are willing to consider nonHAMP modifications as well. And in our program at least, bankruptcy debtors have experienced far fewer problems with HAMP of 

the type experienced by Mr. Cardullo and Mr. Britt probably because of the judicial supervision that we are able to provide. 

After additional meetings with groups of lawyers, we drafted the 

program. The court then published documents for public comment. 

And after the comments were received, we made a few changes, 

and our board of judges adopted the Loss Mitigation Program, effective in January 2009. And the program applies to any individual 

debtor in a case filed under chapters 7, 11, 12, or 13 of the Bankruptcy Code, and it applies to any real property or cooperative 

apartment—we have a lot of co-ops in Manhattan—that are used 

as a principal residence in which the debtor holds an interest. 

While loan modification is one of the goals of our Loss Mitigation 

Program, our procedures make clear, and let me quote from it: 

‘‘Loss mitigation commonly consists of the following general types 

of agreements, or a combination of them: loan modification, loan refinance, forbearance, short sale, or surrender of the property in full 

satisfaction.’’ I will end the quote there. 

Debtors and their lawyers have often recognized, after they finally have someone they can really negotiate with with authority, 

that it is unrealistic for the debtor to keep the home in their circumstances. There can still be benefits to the debtor and the lender 

to agree upon a short sale or surrender of the property in full satisfaction with the debt. The longer a debtor keeps an unaffordable 

home, the more liability the debtor continues to face for property 

taxes, insurance premiums, homeowner assessments, zoning violations and other things of that type. 

Our results to date have been modest but, nevertheless, helpful 

in allowing homeowners to remain in their homes and lenders to 

avoid additional foreclosures. Chapter 13 of the Bankruptcy Code 

is designed for debtors with regular income. If a debtor is unemployed and has no other source of regular income, chapter 13 is unlikely to help. And a loan modification is unlikely if a debtor has 

no income to make mortgage payments. 

Now, what are some of the results? Since the inception of the 

program in January of 2009, our court has received approximately 

1,450 requests for loan modification. And of these, about 1,000 

were filed in chapter 13 cases, 25 in chapter 11 cases, and 425 in 

chapter 7 cases. And approximately 1,250 orders have been entered 

that start the loss mitigation period when these negotiations and 

discussions take place. There have only 55 orders denying loss 

mitigation requests after the court heard and sustained objections 

by the lender or loan servicers. These numbers are a good indication how infrequently a loan servicer or lender objects to going into 

the loss mitigation period. And the objections have usually been 

filed in cases of serial or abusive bankruptcy filers, with little or 

no income and no prospects of a successful outcome. 

15 

The best data we have on outcomes is for our court in Poughkeepsie. That is where Judge Morris sits. Loss mitigation requests 

were made in approximately 900 cases in Poughkeepsie during the 

period I have spoken about, and loan modifications have been approved so far in 220 cases; another 450 loan modification requests 

are still pending; and approximately 230 requests have been denied 

or withdrawn. 

To put that in context, in Poughkeepsie, loss mitigation was requested in about 40 percent of the chapter 13 cases that were filed 

in that court. Successful loan modifications have resulted in reductions in monthly mortgage payments in the range of $100 a month 

to $1,000 a month. I have heard of some larger amounts than that. 

And in a few cases, substantial principal reductions resulted. Judge 

Morris recently had one with a $120,000 principal reduction. You 

know, for a debtor living at the edge of financial collapse, reductions in monthly mortgage payments in this range can mean the 

difference between remaining in a family home, with children enrolled in local schools and neighborhood stability maintained, or 

having your life totally disrupted in searching for new housing and 

schools, assuming they can be found with the money available to 

a debtor. 

Anecdotally, over the last 6 months, my colleagues and I have 

seen increased willingness by lenders and loan servicers favorably 

to consider loan modifications. I think they are beginning to understand that there is a benefit for the lender economically if they 

modify the loan and keep somebody in their house. 

Now, let me emphasize a few other points. Each loss mitigation 

party must have a person with full settlement authority present 

during the mitigation session. This has been one of the keys to the 

success of our program. And while our procedures also provide that 

a debtor creditor or the bankruptcy court can order an independent 

mediator, that has only come up a few times. What we hear from 

lawyers is: Once we have somebody to negotiate who has authority, 

must have authority, we do not need a mediator; we just need 

somebody to sit down and talk with with authority to make a modification. 

Generally speaking, the granting of a loss mitigation request 

does slow down case administration. And in chapter 13 cases, confirmation of cases is usually delayed until after loss mitigation and 

any trial period has been concluded. And a debtor’s ability to confirm a chapter 13 plan often depends on the ability to negotiate a 

loan modification. But I think an important point is a successful 

loan modification will also affect the amount of disposable income 

that a debtor has available to pay other creditors. So unsecured 

creditors benefit as well when a loan modification is reached. So 

the time it takes to do that really can benefit everybody. 

The judges of our court have concluded that the delays in administering cases in which loss mitigation has been ordered are justified by the clarity that loss mitigation can bring, whether the result is a modification, a short sale, a surrender, or no change at 

all. And while cases remain open and active on the court’s docket 

for a longer time, that usually does not expand the work of the 

judge. 

16 

Finally, I am aware that a very similar loss mitigation program 

was adopted by the bankruptcy court in Rhode Island. In fact, 

Judge Votolato came to one of our meetings with lawyers in Poughkeepsie when we were reviewing results of our own program. The 

issues raised in the challenge will have to be decided by the Federal courts in Rhode Island. 

However, I want to emphasize that our judges considered our authority to adopt our loss mitigation program before it became effective in January 2009. It was the view of our judges then and now 

that our unquestioned authority to adopt mediation programs and 

procedures—that have long been in place in our court and courts 

all across the country—applies equally to our loss mitigation program which is modeled on our district’s mediation program. We do 

require that the parties negotiate loss mitigation in good faith, as 

we do in any mediation. But that does not compel a procedure or 

result contrary to any provision of the Bankruptcy Code. 

Chairman Whitehouse, Senator Reed, I would be happy to answer any questions you have. Thank you for the opportunity to appear before the Subcommittee. 

[The prepared statement of Judge Glenn appears as a submission 

for the record.] 

Chairman WHITEHOUSE. Thank you very much, Judge Glenn. 

I think what I would like to do is actually ask a question or two 

now before we go on to the attorneys. 

This business of securitizing mortgages had a cascade of foreseeable effects that were not really planned for. One of them is a lot 

of outside interests in the loan between the servicing company and 

the homeowner. So even though you have the servicing company in 

the room with authority and the homeowner, there is still sort of 

a shadow over that proceeding that is cast by investors who could 

be in foreign countries, who could be anywhere, who may feel that 

they have a claim as a result of the inadequate effort by the 

servicer to defend their financial interests. 

It strikes me that there is a pretty powerful value to finality at 

that point. Could you just describe briefly what happened when all 

this is concluded? Do we end up with an order that is final and 

binding on everybody, including other investors, so that everybody’s 

affairs are settled and the servicer can go forward knowing that 

they are not going to face a lawsuit in the future over having settled the case? 

Judge GLENN. The conclusion of a successful loan modification in 

our court usually results in two documents: one is a written agreement generally between the loan servicer and the borrower, and 

then an order of the court approving it. 

When we first were designing the program, we heard from many 

lawyers that, because of securitization, the loan servicers argued 

that they did not have the authority to enter into a loan modification. One of the things we have discovered since then is that typically the loan servicers take the position that they do have the authority to negotiate a loan modification if it is in the context of a 

court process. Those who say they cannot do it outside of a court 

process voluntarily say, yes, if we are in a court process, as in 

bankruptcy, we can do it. So as the program has evolved, we really 

17 

have not had a lot of pushback where loan servicers say, ‘‘We cannot do this because there are investors whom we cannot identify.’’ 

Chairman WHITEHOUSE. Thank you. 

Senator Reed. 

Senator REED. Just a quick question, Your Honor. In this workout, I would presume that on a future sale of the property the 

mortgage lender could benefit. That is one of the terms you can 

write into the agreement; i.e., if there is a reduction of principal 

and then 5 years from now it is sold and there is a profit, is that 

something you do? 

Judge GLENN. We have not seen any agreements where in a loan 

modification the lender or loan servicer has provided for shared appreciation. Certainly in discussions we have heard that, in discussions about the issues about cramdown, whether a legislative solution should include some provision that if there is a reduction in 

principal, there can be a recapture of some of it in the future. 

So the loan modifications we have been seeing, there have only 

been a handful that have included reductions in principal. But so 

far those have not included shared appreciation. 

Senator REED. Thank you, Your Honor. 

Thank you, Mr. Chairman. 

Chairman WHITEHOUSE. Mr. Rao, we will have you and Mr. 

Lefebvre now give your testimony, and we will ask you questions 

as a pair and as a panel. 

STATEMENT OF JOHN RAO, ATTORNEY, NATIONAL CONSUMER 

LAW CENTER, BOSTON, MASSACHUSETTS 

Mr. RAO. Chairman Whitehouse, thank you for holding this hearing and for inviting me, and, Senator Reed, thank you for participating in the hearing. 

When I was asked to testify last year at a hearing held by you, 

Senator Whitehouse, I began my testimony by saying that the Nation is in the worst foreclosure crisis since the Great Depression. 

Sadly, very little has changed over the past year. 

The recordkeeping that has been going on in terms of the numbers of loans in this Nation and homeowners who are in foreclosure 

or seriously delinquent that are recorded by the Mortgage Bankers 

Association continues to be record numbers. They have never had 

numbers like this since they began recording them. 

There are very credible estimates that as many as 13 million 

homeowners will be in a foreclosure by the end of the year 2014 

from the beginning of the crisis. The problem is even worse here 

in Rhode Island than in many other states. Close to 10 percent of 

Rhode Island homeowners are seriously delinquent, which puts 

Rhode Island at the highest level of the New England States, an 

unfortunate recognition we have received, but helpful, nonetheless, 

is that Rhode Island is one of the 10 States in the Nation that is 

receiving the hardest-hit funds which Rhode Island Housing is administering. 

So how has the Federal Government responded to date to this 

crisis? The primary program which has been initiated is the HAMP 

program. This is a program whose primary goal is to provide loan 

modifications to homeowners who are in default or are in threat of 

18 

being in default. And the record so far has been not substantial 

enough to meet the need. 

So far, as of the report from last month, less than 500,000 homeowners have received permanent modifications. Treasury had projected by this time that it would have been over a million, so it is 

lagging far behind. And the most recent report is interesting because the number of modifications started in September is actually 

declining, which is not a good sign. 

The other most recent development, and a very sad development, 

is what I like to refer to as the ‘‘HAMP aftermath,’’ which is an 

even larger number of homeowners, close to 700,000 homeowners 

nationwide, have been put on trial modifications, like Mr. Britt, 

where they start a trial program, and then they have been canceled 

from that trial program and not put on permanent modifications. 

Essentially they are worse off. They now have this huge arrearage 

on their mortgage that they need to catch up on. Their credit reports have been seriously dinged, like Mr. Britt, making it very difficult for them to refinance if they could. And then foreclosure begins again. And that situation is likely to get worse. 

The other real sort of problem is that there has not been an enforcement mechanism that Treasury has put in place to try to get 

the servicers to administer the program in a way that it should, 

and all the problems we have heard about. The HAMP Solution 

Center has really—Mr. Britt’s experience is not unusual. It has 

been ineffective in providing that enforcement mechanism that is 

so needed. 

So our discussion today is whether the bankruptcy courts can 

have a role in this to try to actually provide in some ways an enforcement mechanism for these loss mitigation programs to work. 

So I would like to briefly talk about a few ways in which I think 

the bankruptcy court mediation programs can be ideally suited to 

address that concern. 

The first issue—and we have heard so much of it today—is sort 

of breaking through this bureaucratic barrier. There is the nightmare of the homeowner, as both Mr. Britt and Mr. Cardullo have 

experienced, of submitting documents repeatedly and getting nowhere. The advantage of a formal court mediation program or loss 

mitigation program is, as Judge Glenn mentioned, that the servicer 

needs to designate someone who will be there to have—a designated person for the exchange of documents. And, most importantly, there is an order that is entered that sets time deadlines 

for that exchange of information to occur, and really critical, if it 

does not happen, there is someone to go to to try to enforce it. 

There is the ability for the homeowner, through counsel especially, 

to approach a judge with a motion and say, Listen, the order has 

not been complied with, the exchange of information has not occurred. 

The second item is the issue of just negotiating in good faith. An 

essential element of any program like this is that both parties have 

to negotiate in good faith. Judge Glenn mentioned that the servicer 

needs to designate someone with full settlement authority and the 

possibility that a mediator can be important. 

I have to say that this is critically important for the majority of 

States in this country like Rhode Island which are non-judicial 

19 

foreclosure States. In Rhode Island, like over 30 or more States in 

this country, there is no judge overseeing the foreclosure process. 

So there really is no one to turn to if the modification program or 

process breaks down. If it is incorporated into a court system, there 

is that ability to be in front of a judge and try to get some compliance. 

The other issue that is of a benefit for these programs is what 

I would like to basically say is just providing due process. One of 

the huge problems with the HAMP program is that homeowners 

are denied permanent modifications and they are not told why. 

Even though Treasury has now imposed requirements that they 

provide more information for the reason for denial, still many 

homeowners are given a simple denial letter with basically no information. And the formal programs within a court system have 

that ability to both require, as both Rhode Island and the New 

York programs do, an exchange of information about the reasons 

why there would be a denial and, importantly, to be able to see a 

judge if that is not provided. 

Another issue is that these programs, especially in bankruptcy, 

can provide protection from foreclosure while the process is going 

on. Mr. Britt’s example is a perfect example of one unit within the 

servicing shop not talking to the other unit. The loss mitigation 

folks are processing the applications, and the foreclosure department is processing the foreclosure, and they often do not talk to 

each other. And so the homeowner gets a letter saying they have 

been approved for a temporary modification, and the foreclosure department is sending a letter saying there is going to be a foreclosure sale in a month. And one is saying ignore that letter. 

There have been a number of cases nationwide where while this 

process is going on, the home actually has been sold at a foreclosure sale. There have been cases where homeowners have had 

their homes sold on 1 day, and then the next day or a week later, 

they get a letter saying they have been approved for a modification. 

The advantage of a program within a bankruptcy court system 

is that the automatic stay that is issued as soon as the case begins 

protects the homeowner and no foreclosure proceedings proceed at 

that point. Everything grinds to a halt. And that is a very helpful 

provision. 

Three other quick things. We are hearing a lot in the press 

today—and Senator Whitehouse mentioned the issue of the false 

affidavits being filed in these foreclosure processes, robo-signers. 

Bankruptcy courts have been dealing with this for years. They 

have been imposing sanctions where these kinds of things have 

been discovered in these cases. They know how to deal with it. And 

they also—and part of this issue of the false affidavits is trying to 

find out, for example, who the real owner of the mortgage is. And 

Senator Whitehouse asked the question about, you know, who has 

authority really to enter into a binding modification. Again, the 

bankruptcy court would be well suited to be able to root out and 

to determine that issue through the court proceedings as to who 

the true mortgage holder is. 

Two final points. Second mortgages continue to be a huge problem. Treasury indicates that at least as many as 50 percent of 

homeowners who are at risk of foreclosure have more than one 

20 

mortgage. They have a second mortgage on the property. These 

modification programs—the HAMP program has been hampered by 

that problem. You know, there is a reluctance of one servicer who 

is dealing with the first mortgage to enter into a mortgage modification if the second mortgage holder will not agree to do something with their mortgage. Bankruptcy is perfectly suited for this. 

It is a process that deals with all of the mortgages on the property. 

And, in fact, in a chapter 13 proceeding, if that mortgage, like 

many of them are in Rhode Island, is completely under-secured, 

completely underwater, that can be treated differently and more favorably for the consumer and helpful to avoid foreclosure. 

The final point is so many homeowners who are in foreclosure 

right now get modifications, even by Treasury’s own statistics; that 

many who get permanent modifications, when you look at their 

total debt picture, all of their other debts—their credit card debts, 

their medical bills, that back-end debt-to-income ratio, as it is referred to—they still after entering into a permanent modification 

have a 63-percent back-end DTI. This means that it is going to be 

very hard for them to succeed with that modification because they 

have got this other debt burden that they are dealing with. Bankruptcy, again, is perfectly suited for dealing with that. It deals with 

the whole picture for the homeowner, and they can resolve all of 

their debts at one time. 

The recommendations, Senator Whitehouse, that I would like to 

make are two. One is that the Executive Office of the United States 

Trustee’s Office which administers the bankruptcy court system 

really ought to be playing a more active role in promoting these 

programs like that in New York and Rhode Island, and we would 

hope that they would do that. There are a lot of steps that they 

could take to try to—— 

Chairman WHITEHOUSE. We are pursuing that discussion. 

Mr. RAO. Thank you, Senator Whitehouse. 

The second and final point is, while I agree with Judge Glenn 

that the authority for the bankruptcy courts to set up these programs is very clear—at least I think the authority exists currently 

in the law—nevertheless, there is reluctance, I think, on the part 

of some judges in other courts who may not feel that that authority 

is rock solid. And one possibility would be a clarifying amendment 

to Section 105 of the Bankruptcy Code that would just explicitly 

say that these kind of loss mitigation programs are within the 

court’s authority. 

Chairman WHITEHOUSE. It is our hope that we could generate 

such a provision on a bipartisan basis. In the Judiciary Committee 

we are exploring that. 

Mr. RAO. Thank you, Senator Whitehouse. That concludes my remarks. 

[The prepared statement of Mr. Rao appears as a submission for 

the record.] 

Chairman WHITEHOUSE. Thank you. 

Attorney Lefebvre. 

21 

STATEMENT OF CHRISTOPHER M. LEFEBVRE, ATTORNEY, 

PAWTUCKET, RHODE ISLAND 

Mr. LEFEBVRE. Good morning. Thank you, Senator Whitehouse 

and Senator Reed, for inviting me. 

I am not really the academic. I am the practitioner. I have been 

practicing consumer law for 23 years. I can tell you, if I had to describe what it is like in the trenches, it can be best described as 

a ‘‘circus’’ as it pertains to loan modifications. The system is not 

working. When I listened to these two gentlemen tell their story, 

for a moment I had to look closely. I thought they were the clients 

that I saw Monday, Tuesday, last month, and for the last 2 years. 

Their stories are typical of Rhode Islanders, this merry-go-round 

of—you know, I think I was quoted as suggesting that there was 

a fax to the shredder. Maybe it is not really a shredder. Maybe it 

is to the bucket next to the shredder. I am not quite sure. But the 

whole process is broken. It is not working. And it is very frustrating. 

The good news, though, the positive thing is that thankfully the 

Rhode Island bankruptcy court adopted a program similar to the 

program in New York, and I can tell you that it is working. There 

are homeowners in the State of Rhode Island who would be homeless today, no doubt in my mind, if it was not for the program that 

has been in effect for the past year in the Rhode Island bankruptcy 

court. The program is practical, it brings parties together, and it 

is effective. And I think the main reason we eliminate all of these 

problems is because we have judicial oversight. 

It is amazing. I often chuckle when I am in court when a lender 

will say, ‘‘Well, we did not get this package,’’ and the debtor’s lawyer will say, ‘‘We did send it.’’ It is amazing when the judge says, 

‘‘Gee, we will have a hearing next Tuesday. Why don’t you have 

someone from Bank of America come to 380 Westminster Street, 

and we will have a hearing and find out what is going on.’’ Within 

an hour, the package has been found. A half-hour thereafter, the 

modification has been approved. 

So judicial oversight is the key. It works. It does work. It is not 

a perfect system. There are many people who simply cannot qualify. But it is amazing when a Federal judge sets deadlines, you 

know, the recalcitrance of one or two parties—the borrower and the 

lender—it disappears. And scheduling hearings and requiring parties—servicers, investors, the person with authority—to have to 

travel to Rhode Island stimulates and moves the loan modification 

process. We have had excellent results in the program. We have 

had many interest rate reductions. We have had terms extended, 

payments lowered. In many of these chapter 13 cases, as a result 

of the lower mortgage payment, unsecured creditors are getting a 

better dividend. So I would think the unsecured creditor body— 

Visa, MasterCard—should be supportive of all of these programs. 

It would put more money in their pocket in the chapter 13 arena. 

The one thing the program does not do—does not do—is we are 

not seeing any principal reduction, and I know, Senator Whitehouse, trying to get that bill introduced about giving the bankruptcy courts the ability to cram down mortgages, I think if that 

ever did happen, those bankruptcy courts that have loss mitigation 

would see their success rates just grow exponentially because, still, 

22 

people are emerging—as John Rao mentioned, they are getting a 

loan mod, but still many of them have homes that are grossly underwater, and that burden is sometimes counterproductive, and I 

think emotionally may affect the long-term success. You know, yes, 

you get a loan modification. Yes, the payment is lower. But you 

also know that you have a house that is worth $120,000 that you 

owe $350,000 on. I think based on experience and meeting with 

people that can have a negative effect on the long-term success. 

But the program is great in Rhode Island. It is working and we 

are seeing real positive results. 

Thank you. 

[The prepared statement of Mr. Lefebvre appears as a submission for the record.] 

Chairman WHITEHOUSE. Thank you very much. 

First of all, Senator Reed during his comments mentioned the 

hardest-hit program, and I am hoping that that will be helpful for 

some folks. I know that Richard Godfrey and the Rhode Island 

Housing team is working very hard to get that up and operating 

and helping. I just want to point out that when the first five States 

were designated for that program and Rhode Island was not on 

them, what I can only politely describe as a very high and energetic level of activity was generated out of Senator Reed’s office and 

mine that was heard throughout Washington—Treasury, White 

House, everywhere. And very shortly a second tranche was allowed, 

and Rhode Island was in that; and then a second back-up on that 

was allowed, and more money is now coming to Rhode Island. And 

although, I think, we were equally vociferous, Senator Reed’s status as the senior Senator, Senator Reed’s status on the Banking 

Committee, which has a lot to do with housing, made us a particularly convincing team on that subject. So I want to give Jack great 

credit for the success of that. 

Let me ask Mr. Cardullo and Mr. Britt a question. Mr. Cardullo, 

you have been going through this process for a little over a year 

at this point. In the course of that year, how many times do you 

believe you were talking to a person who had some authority to negotiate with you and conclude an agreement? 

Mr. CARDULLO. I will let you know when I get one. 

[Laughter.] 

Chairman WHITEHOUSE. Zero so far. 

Mr. CARDULLO. Yes. 

Chairman WHITEHOUSE. Mr. Britt, it has been 19 months plus 

for you now. During that time period how often do you believe you 

were dealing with a human being who had any authority to enter 

into any kind of an agreement with you? 

Mr. BRITT. Never. 

Chairman WHITEHOUSE. Not once? 

Mr. BRITT. Not once, no. When I tried to move my way up the 

ladder within the organization, generally I was discouraged from 

doing that. I was hung up on. So I do feel the people I spoke to 

were not able to make decisions and were preventing me from 

going forward. 

Chairman WHITEHOUSE. And sometimes they would not even 

give you their last names. 

Mr. BRITT. Exactly. 

23 

Chairman WHITEHOUSE. You did not know who you were talking 

to. 

Mr. BRITT. Yes. I have lots of first names. 

Chairman WHITEHOUSE. Judge Glenn, to me one of the most 

compelling features of your testimony, you are here providing testimony to Congress. You are a sitting United States Federal bankruptcy judge, and you say just as plain as day that lenders increasingly recognize that they are better off economically by agreeing to 

a loan modification than by foreclosing on property. Why do you 

think it is that that fact so rarely is able to work itself through the 

process, outside of your court process, before they get to your court, 

to a loan modification? If it is in the bank’s interest and if it is in 

Mr. Britt’s and Mr. Cardullo’s interest, why are those two parties 

of common interest not able to bring home and propose a reasonable deal? 

Judge GLENN. In many cases, there is the third important party, 

which is the loan servicer, and the economic interests of the loan 

servicer are not necessarily aligned with that of the owner of the 

loan, if you can figure out who the owner of the loan is. So that 

is certainly a problem. 

Chairman WHITEHOUSE. And could you be a little bit more specific about that? 

Judge GLENN. Sure. Because of securitization of loans, typically 

there is a loan servicer designated early—once the loan is sold into 

a securitization trust, a loan servicer is designated. Frequently 

what happens when a debtor goes into default, most loan servicers, 

they are perfectly happy to take the monthly payments as long as 

they are regular monthly payments. But when the borrower defaults, frequently the loan servicing rights are transferred. 

I think whether the situation is improving or not remains to be 

seen, but I think at the outset, the loan servicers just were not 

equipped with staffing and computer systems to deal with the number of distressed loans there were. And the other major problem is 

the economic interests. 

HAMP, the Treasury program, tried to incentivize loan servicers 

with some payments for approving loan modifications. I am not 

sure that that has done it, but—— 

Chairman WHITEHOUSE. It does not appear to have. 

Mr. Rao, what is your thought on whether that worked? 

Mr. RAO. I think, you know, the major problem with HAMP is 

that it is a voluntary program, and so Treasury, therefore, has had 

to structure it in a way which there are carrots provided to the 

servicer and no sticks. The incentives, it appears at this point, have 

not been sufficient enough, and I think as Judge Glenn mentions, 

it is not so—I do not know that the servicer itself, since they are 

just handling essentially the collection and payments, can really 

appreciate the value that the owner of the mortgage might have in 

modifying it, having to ensure that there is a stream of payments 

that are coming on the loan versus foreclosure. The servicer does 

not have that direct recognition of that benefit. And, in fact, it 

might be even actually a counter-benefit because under the agreements that they have with the owners of the mortgage, they are 

required to advance payments to the owners of the mortgage, to 

make the payments for the homeowner if the homeowner does not 

24 

make them. And that is something that they do not like to do. And 

in some cases, it is easier for them to resolve the problem by foreclosing and to not have to incur the cost of advancing the payments 

to the owner of the mortgage during this period when there is a 

payment problem. 

Chairman WHITEHOUSE. And the fee arrangements that compensate them for their servicing are often structured in a way that 

favors foreclosure from the point of view of just the pure fee structure that they are looking at, in addition to any obligation to pay 

they might have. 

Mr. RAO. I would not say, though, that that is true in all cases, 

but certainly under at least a lot of these so-called pooling and 

servicing agreements and the fee structures that servicers have 

themselves, in some cases it does appear that it can be more profitable through the servicer to just proceed with foreclosure. 

Chairman WHITEHOUSE. And, Mr. Lefebvre, you see this happening. As you said, you are the practitioner; you see this day to 

day; you see the nightmare; you see that it does not even make 

sense for the lender to have this going on. And yet it goes on and 

on and on until finally they get to the bankruptcy court and things 

begin to settle out, begin to make sense. Finally there is somebody 

in the room, and finally there is some judicial oversight to kind of 

sort through some of the fabrications and some of the stonewalling. 

What is your practical sense of why the program in Rhode Island 

is being legally challenged? I believe it is being challenged by Deutsche Bank, correct? 

Mr. LEFEBVRE. Right. Probably it is being challenged by one of 

the servicers that is not always the most cooperative and consumer-friendly. So I am not surprised that they might want to 

challenge the ability of a Federal judge to interfere with their exclusive domain. In Rhode Island especially, we are a non-judicial 

foreclosure State, so I think for the cost of certified mail, $4.85, you 

can take someone’s home, even if they do not even sign the letter. 

I mean, they have to advertise. It is a very informal process. 

I do not know why they are challenging it. Statistically, there are 

not many objections to the loss mitigation in Rhode Island. Fortunately, today there is a group from the Rhode Island bankruptcy 

court here who, you know, I am sure has many of the statistics. 

But I was looking at some of the statistics provided on the website. 

I think 80 percent plus of the loss mitigation requests go through 

unopposed. Perhaps there—— 

Chairman WHITEHOUSE. And your experience, if I could just interrupt for a second. 

Mr. LEFEBVRE. Yes. 

Chairman WHITEHOUSE. Your experience is similar with Judge 

Glenn’s whose testimony was that out of 1,250 orders that have 

been entered, there were only 55 objections, or less than—what is 

that?—5 percent. For 95 percent, the banks are fine with it, they 

go ahead. In most cases, parties have negotiated directly without 

mediators. The banks do not even need a mediator once they have 

got somebody, a human being in the room who can break through 

the bureaucracy. So not only are there not objections; they do not 

even need mediators once they sit down with two human beings 

and can have a chance to make some sense. 

25 

Mr. LEFEBVRE. And in Rhode Island, what is happening practically is there very few law firms that probably deal with 99 percent of the foreclosures. So there are five or six law firms that deal 

with all of the foreclosures, so what ends up happening in the 

bankruptcy system, they have to—the servicer has to provide a 

contact person. But a lot of times it is the lawyers together with 

the servicer, the contact, and they were able to quickly resolve the 

issues. 

I can tell you in the last year—I collect the data for my clients; 

the HAMP programs compile it. I scan it once, and I have never 

been asked to scan it again. I can tell you my clients outside of 

bankruptcy have proof that they have scanned it one, two, three, 

four, five, six, and seven times. So all that game playing stops once 

we get into the bankruptcy process. It is really a great, great, great 

program. 

Chairman WHITEHOUSE. One last question, and then I will turn 

to Senator Reed. Have you seen in, again, your practical experience 

clients who have failed to jump through those hoops, to provide 

those documents the fifth, sixth, or seventh time, and then suffered 

an adverse consequence in the foreclosure process as a result of 

doing that when they get to you? 

Mr. LEFEBVRE. Well, absolutely. I had a gentleman last evening, 

Bank of America, had brought the documentation very organized 

with his paperwork, and he received a letter about 9 months ago 

telling him he had been eligible for a loan modification. And he 

brought in—and I personally looked at his checks and his bank 

statements, and he had been making every single payment for the 

modified payment through September. Then in the middle of September he gets a letter saying, oh, your loan modification is not 

going to be approved. The next day he gets a foreclosure notice. 

And the reason why his loan modification was denied is because he 

did not make the payments which I had right in front of me. That 

is what we deal with in the trenches. That is the frustration of this 

homeowner who happens to have a job, who could afford the home, 

and you have got the bank giving him documentation for a loan 

mod, telling him to make his payments, accepting his payments for 

10 months. Then you have the Boston law firm sending out notices 

to foreclose, and the consumer comes in totally confused, has no 

idea what to do. Then I take over. And there are some ways outside 

of bankruptcy, but the most effective way to deal with competing 

interests is to bring it into the bankruptcy arena, a judicially supervised process, and I think it very effectively balances the rights 

of homeowners, consumers, and the rights of lenders to protect 

their collateral and get non-performing loans to be performing and 

keep people in their homes and keep neighborhoods still alive and 

vibrant. 

Chairman WHITEHOUSE. Senator Reed. 

Senator REED. Well, thank you. 

Just to the attorneys at the table, Rhode Island is a State, as you 

all point out, where simply you have to send a certified letter and 

notify the paper and then the sale, et cetera. There is no judicial 

intervention. Do we have any experience—and perhaps, Judge 

Glenn, you might—in judicially supervised foreclosure States, 

26 

whether they have a better record of modifications? Or is that data 

that we just do not have? Or perhaps John. 

Mr. RAO. It is a good question, Senator Reed, and it is something 

that I do not think has been looked at yet. I know I actually have 

recently been trying to parse through the Treasury reports to see 

the number of permanent modifications that have been granted in 

States to see whether there is a correlation between a higher 

amount in judicial foreclosure States. Just quickly looking at them, 

I thought that that was the case, but I actually have not started 

to go through that process, and I do not know that anyone has done 

that. 

There are a number of judicial foreclosure States that have mediation programs similar to the bankruptcy programs in Rhode Island and New York. And depending upon how they are structured, 

they also have very good results. But not all of them are equal, as 

you might guess, and the ones that actually have had the best 

records that we have been observing at my office have been ones 

that have that requirement of appointing someone with full settlement authority, and Vermont, Maine, and—actually, the one example of a program in a non-judicial foreclosure State has been Nevada, and that has actually had some success. And it is a non-judicial foreclosure State. The court system in that State created a mediation program even though it is not a judicial foreclosure State. 

It is actually quite interesting. 

Senator REED. Just a comment more than anything else. And, 

again, let me, before I do that, commend Senator Whitehouse because this is such an issue that is central to the families of Rhode 

Island and to devote the focus, and a very technical focus, that you 

need is something that is extraordinarily commendable. So thank 

you for leading this effort, Sheldon. 

Chairman WHITEHOUSE. Thank you. 

Senator REED. But it strikes me, stepping back, that because of 

national policies, Federal Reserve policies, we have lowered the effective interest rates for banks dramatically, and it is reflected in 

current mortgage rates now. But you have borrowers who signed 

up 2, 3, or 4 years ago, and unless we have a corrective mechanism, one side is getting the benefit of extraordinarily low interest 

rates, and the other side is paying the high interest rates, relatively high interest rates of 5, 6 years ago. That strikes me as not 

only unfair but terribly inefficient, because the point of a lot of the 

macroeconomic policy has been to lower interest rates, get everybody going again, let business go out and refinance at 2 percent, 

not at 7 percent. And I think, again, if we can get a program like 

you have suggested—and I concur with the notion there has to be 

a referee with authority, and there have to be people participating 

who are empowered to cut a deal. And if you have that—and fortunately in the country we do not have to re-create this system, it 

exists in the bankruptcy courts—it is an efficient, effective way to 

do a lot of things. 

So, again, I think this was an extraordinarily useful hearing, and 

I thank Senator Whitehouse for leading the charge, not only here 

but, more importantly, in Washington, because when he goes back, 

he is going to go to the Judiciary Committee and see if we can pull 

together an effective response. 

27 

Let me thank you also. I notice that my colleagues Harold Metts 

and Luis Aponte are here, who are just superbly gifted public servants. Thank you, gentlemen. 

Thank you, Senator Whitehouse. 

Chairman WHITEHOUSE. Thank you, Senator Reed. 

This has been, I think, a very helpful hearing, and I want to say 

some particular thank you’s, first to Mr. Cardullo and Mr. Britt. I 

think a great number of Americans have experienced the frustration of being on the phone with people who will not give you their 

name, will not connect you with their supervisor, do not make any 

sense, forward you to a different number or a new person who will 

not give you their last name and will not connect you with their 

supervisor and will not make any sense. That annoys you some 

more until they refer you to another person who will not give you 

their name and will not let you talk to their supervisor and will 

not make any sense. And it is just a particularly acute and painful 

type of frustration when it is your home that is at stake. 

In America, our home is our castle. We think of homeowners as— 

it is the value that we protect by making mortgages deductible 

against our income. You know, home is home. And the notion that 

that is at risk, particularly for people with children, because there 

is no harder discussion than the one you have with your younger 

children talking about packing up their bedrooms and clearing out. 

And the idea that that is what is at stake, that a father is going 

to have to tell his daughter, ‘‘Sweetheart, you are not going to have 

your bedroom any longer. We are going to have to move. I do not 

know what the problem. The bank is going to take our home away.’’ 

And then on the other end, you have got people who will not even 

give you somebody who has authority to negotiate with you like a 

grown-up human being, and instead you are dealing with, you 

know, Brynita, I think was the name you mentioned. Again, it is 

no last name, no responsibility, will not let you talk to their supervisor, hang up on you if you get frustrated, and move you to somebody else who also does not know anything. The contrast between 

that stake and that harm that you are at the edge of and the irresponsible, cavalier way, bureaucratic way in which it is being handled is something that is just—the fact that you have been able to 

come in here and testify about it as effectively as you did and as 

calmly as you did and as thoughtfully as you did, the fact that you 

were able to marshal all of this history into—you know, it took 

some time to sit down and sort your way through this and get it 

all done for us. And I just cannot tell you how much I appreciate 

it. It gives Senator Reed and me real leverage in Washington to be 

able to do this. 

One of the interesting things about the Senate, which is a relatively small body, is that we can come in with statistics and talk 

to each other until we are blue in the face. But when you sit down 

with a colleague and say, Look, I had a constituent who came in 

and this is what is happening to him, that comes through in a very, 

very real way. So the effort that you have undertaken to come in 

here and to do that is really valuable for us, and I just want you 

to know how very, very much I appreciate it. 

Judge Glenn, what you have done in your court, your leadership 

on this, is really remarkable. I want to commend Judge Votolato 

28 

for following that lead. I am sure that he would have wanted to be 

here, but because Deutsche Bank decided that the best use of their 

resources was not to try to help homeowners but to try to sabotage 

this program by challenging it in court, and because it is pending 

in litigation, he is in a difficult position to come in and testify. So 

it is not for lack of interest in his program. It is not for lack of concern about Rhode Island. It is not for any other reason other than 

that he is on the receiving end of Deutsche Bank’s lawsuit that he 

is not a suitable witness. And your taking the trouble to come from 

New York to explain it is really commendable, and I think the simple, clear message that you bring us, which is that it is actually 

usually in the bank’s interest to get this settled, and it is as easy 

as getting two human beings in a room together as long as the 

bank’s person has authority and there is a little watchfulness to 

make sure they are not up to nonsense, which is something that 

judges do every minute in every courtroom in the land, is enough, 

that that is basically enough. And that is a very important message 

because people try to complicate all of this in a lot of ways, and 

certainly you have seen how the banks complicate it for you. But 

that was a very significant message, and you delivered it very 

clearly and effectively, and I appreciate it. 

John and Chris, thank you both so much for what you do. John, 

you are like a laser for focusing passion through expertise at this 

problem, and it really is—you have been a great resource to my office, and you continue to fight very hard to try to unsnarl this 

mess. And you see it, as does Chris, every day in your daily practices. I do not know how you put up with it. I get upset hearing 

about it, and I do not do it all day every day. You do it all day 

every day, and it must just drive you nuts, what this is doing to 

your clients. So I thank you very much for your work, and I thank 

you very much for coming in and sharing your experience today. 

I will give everybody the chance to make a closing remark or observation, if they feel there is anything we have not covered. And 

I want to put into the record of this proceeding a statement by 

Chairman Leahy, the Chairman of the Senate Judiciary Committee, which I will not read the entire thing but it thanks us for 

holding this hearing, thanks the witnesses for being here and sharing their testimony, expresses his grave concern about the document subversion in the foreclosure process, and expresses a keen 

interest in pursuing real law enforcement consequences for this. 

Certainly if the banks were getting papers from a private homeowner that were as poorly prepared, perhaps even fraudulent, as 

the papers the banks themselves, or at least their robo-signers and 

their affidavit signers appear to be filing, they would be turning 

around in a heartbeat to say, ‘‘You are a malefactor, you are a 

criminal, we cannot deal with you.’’ And I think it is time that an 

equally bright spotlight was cast on them, and if law enforcement 

is appropriate and prosecution is appropriate, Chairman Leahy 

wishes very much to see that that takes place. 

He points out that he has written to Attorney General to ask him 

if he needs more help from Congress to investigate and prosecute 

fraud and misconduct in the foreclosure process. 

He also commends bankruptcy courts in several districts, including your Southern District of New York, Judge Glenn, for the loss 

29 

mitigation programs that have been put in place so far and commends the work of State legislators who are beginning to try to 

work through this as well. 

So I appreciate very much the Chairman’s interest. We have 

been in touch with him about this hearing. Because he is actually 

on the ballot in Vermont—very safely, I happily add—on November 

2nd, he cannot be with us today. But he is very interested in pursuing this issue in Washington with a full Judiciary Committee 

hearing, and we look forward to that, and I want to thank him very 

much for his support, and without objection, his statement will be 

made a part of the record. 

[The prepared statement of Chairman Leahy appears as a submission for the record.] 

Chairman WHITEHOUSE. I will give each one of you a chance to 

make any last observation you may care to make, and then we will 

conclude the hearing. Anything to add, Mr. Cardullo? 

Mr. CARDULLO. No. Just thank you very much for your time 

today. 

Chairman WHITEHOUSE. Thank you very much. 

Mr. BRITT. Thank you as well, and I just want to add that I 

think it is important to bring to the forefront homeowners like myself and Mr. Cardullo, because there is a perception out there that 

people are trying to beat the system or trying to get something for 

nothing. That is not our objective. You know, we are not flipping 

real estate and playing the system. You know, we are involved in 

legitimate financial hardship. We have applied for a program that 

seems suited for us. And yet I think the public perception is that 

we are looking for a handout or something. I think hearings like 

this help to bring people like Mr. Cardullo and myself to the forefront. 

Chairman WHITEHOUSE. You are not trying to beat the system. 

You are getting beaten by the system. 

Mr. BRITT. Thank you. Yes. 

Chairman WHITEHOUSE. Judge Glenn. 

Judge GLENN. I just appreciate the opportunity to appear before 

the Subcommittee today and explain our program in New York. 

Chairman WHITEHOUSE. I very much thank you for coming. 

Mr. RAO. Thank you, Senator, for holding the hearing. 

Mr. LEFEBVRE. Thank you very much for inviting me to participate today. 

Chairman WHITEHOUSE. I appreciate it very much. I want to particularly thank Senator Reed for—— 

Senator REED. Well, I am not on the Committee so I am sort of 

sitting in strictly at the courtesy of the Chairman. So thank you, 

Mr. Chairman. 

Chairman WHITEHOUSE. All right. Under the rules of the Subcommittee, there is an additional week that the record of this hearing will remain open, and if anybody wishes to add anything to the 

record, all they have to do is send it to my office before that week 

concludes. Senator Metts was here earlier; he had to leave. Councilman Aponte is still here. Obviously, we would welcome any 

thoughts or comments they might care to add. 

Again, I open with your question that you raised when you came 

to my office to express the frustration of your clients. As you said 

30 

the question: ‘‘Why is it that the bank wants to take away my 

home and throw me out of it and sell it to someone else who will 

pay the bank less than I am willing and able to pay right now? ’’ 

And I think anything you would like to add or anybody else would 

like to add would be helpful. It will be open for a week. 

And with that, the gavel. 

Senator REED. Thank you. 

Chairman WHITEHOUSE. Thank you very much, Jack. 

[Whereupon, at 10:43 a.m., the Subcommittee was adjourned.] 

[Submissions for the record follow.] 

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65122.076
107 


65122.077
108 


65122.078
109 


65122.079
110 


65122.080
111 


65122.081
112 


65122.082
113 


65122.083
114 


65122.084
115 


65122.085
116 


65122.086
117 


65122.087
118 


65122.088
119 


65122.089
120 

Æ 


65122.090