S. HRG. 111–142 

FORECLOSURE MITIGATION UNDER THE 

TROUBLED ASSET RELIEF PROGRAM 

FIELD HEARING 

BEFORE THE

CONGRESSIONAL OVERSIGHT PANEL 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

HEARING HELD IN PHILADELPHIA, PENNSYLVANIA ON SEPTEMBER 24, 

2009 

Printed for the use of the Congressional Oversight Panel 

( 


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FORECLOSURE MITIGATION UNDER THE TROUBLED ASSET RELIEF PROGRAM 


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53–159 2009

S. HRG. 111–142 

FORECLOSURE MITIGATION UNDER 

THE TROUBLED ASSET RELIEF 

PROGRAM 

FIELD HEARING 

BEFORE THE

CONGRESSIONAL OVERSIGHT PANEL 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

HEARING HELD IN PHILADELPHIA, PENNSYLVANIA ON SEPTEMBER 24, 

2009 

Printed for the use of the Congressional Oversight Panel 

( 


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(II) 

CONGRESSIONAL OVERSIGHT PANEL 

PANEL MEMBERS

ELIZABETH WARREN, Chair 

REP. JEB HENSARLING

PAUL S. ATKINS

RICHARD H. NEIMAN

DAMON SILVERS


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C O N T E N T S 

PAGE 

Opening Statement of Damon Silvers, Member, Congressional Oversight 

Panel ..................................................................................................................... 1 

Statement of Richard Neiman, Member, Congressional Oversight Panel .......... 1 

Statement of Paul Atkins, Member, Congressional Oversight Panel .................. 5 

Statement of Damon Silvers, Member, Congressional Oversight Panel ............. 7 

Statement of Seth Wheeler, Senior Advisor, U.S. Department of the Treasury 11 

Statement of Eric Schuppenhauer, Senior Vice President and CFO/Program 

Executive, Homeowner Affordability and Stability Plan, Fannie Mae ............ 22 

Statement of Edward L. Golding, Senior Vice President, Economics and Policy, Freddie Mac ................................................................................................... 29 

Statement of Honorable Judge Annette M. Rizzo, Court of Common Pleas, 

First Judicial District, Philadelphia County; Philadelphia Mortgage Foreclosure Diversion Program .................................................................................. 46 

Statement of Irwin Trauss, Supervising Attorney, Consumer Housing Unit, 

Philadelphia Legal Assistance ............................................................................ 59 

Statement of Eileen Fitzgerald, Chief Operating Officer, Neighborworks 

America ................................................................................................................. 78 

Statement of Deborah Goldberg, Director, Hurricane Relief Project, National 

Fair Housing Alliance .......................................................................................... 85 

Statement of Dr. Paul Willen, Senior Economist and Policy Advisor, Research 

Department, Federal Reserve Bank of Boston .................................................. 112 

Statement of Allen Jones, Senior Vice President for Default Management, 

Bank of America Home Loans ............................................................................ 120 

Statement of Larry Litton, President and CEO, Litton Loan Servicing ............. 127 

Statement of Joe Ohayon, Vice President for Community and Client Relations, Wells Fargo Home Mortgage .................................................................... 133 


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FIELD HEARING ON FORECLOSURE MITIGATION EFFORTS UNDER THE TROUBLED 

ASSET RELIEF PROGRAM 

THURSDAY, SEPTEMBER 24, 2009 

U.S. CONGRESS, 

CONGRESSIONAL OVERSIGHT PANEL, 

Philadelphia, Pennsylvania. 

The Panel met, pursuant to notice, at 10:03 a.m. in the Kirby Auditorium, National Constitution Center, Damon Silvers, presiding. 

Present: Damon Silvers, Richard Neiman, and Paul Atkins. 

Mr. SILVERS. This hearing of the Congressional Oversight Panel 

is called to order. I thank you all for joining us today. My name 

is Damon Silvers and I serve as Deputy Chair of the Congressional 

Oversight Panel. The Panel’s Chair, Professor Elizabeth Warren 

was called to testify before the Senate Banking Committee this 

morning at a hearing on TARP oversight in Washington, DC. She 

deeply regrets that she is unable to be here, but we are after all 

the Congressional Oversight Panel. 

I will now turn the gavel over to my colleague on the panel, New 

York Banking Superintendent Richard Neiman. Richard serves as 

the Chair of New York Governor Patterson’s Halt Abusive Lending 

Transactions Taskforce and is a member of the Multi-State Foreclosure Prevention Working Group. Superintendent Neiman has 

done extraordinary work in the area of mortgage foreclosure prevention for this panel including, but not limited to, his efforts to 

put this hearing together. Consequently, it seemed appropriate to 

us for Richard to chair this morning’s hearing. Richard, the gavel. 

STATEMENT OF RICHARD NEIMAN, MEMBER, 

CONGRESSIONAL OVERSIGHT PANEL 

Mr. NEIMAN [presiding]. Thank you very much Damon for those 

kind words and also for the opportunity to share today’s hearing. 

Good morning. First, I do want to thank and am very grateful to 

the City of Philadelphia and the National Constitution Center for 

hosting this hearing of the Congressional Oversight Panel. This 

city has been hard hit by the foreclosure crisis. Too many Philadelphians know firsthand what it means to have a home taken away. 

The Panel would also like to thank Senators Casey and Specter 

and Congressmen Brady and Fattah and their staffs for helping to 

plan today’s hearing on this important issue. I also want to give 

a special thanks to Judge Rizzo of the Philadelphia Court of Common Pleas for working with the Panel’s staff on the hearing and 

inviting us to visit the court this afternoon to learn more about its 

innovative mediation program. 


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The number of families at risk of foreclosures here in Philadelphia and across the country is on the increase. What started as a 

crisis driven by subprime borrowers with inappropriate products 

has now spread to include families with traditional mortgages. 

Even prime borrowers are now losing their homes as a result of the 

downturn in the economy and the downturn in housing prices and 

job losses resulting from a recession that few predicted. 

Today’s three panels of witnesses will convey the view of (1) the 

homeowners who are in jeopardy; (2) the lenders and servicers who 

can modify mortgage terms to keep people in their homes; and (3) 

the government that is implementing and overseeing the programs 

to facilitate these modifications. Only with these three groups of 

stakeholders working together can we develop affordable and sustainable solutions to the housing crisis and a greater level of engagement and cooperation that is long overdue. I am concerned 

that the pace of modifications is not keeping pace with the rise in 

foreclosures. We are also hearing specific concerns from borrowers 

and housing counselors regarding the responsiveness and the capacity of mortgage servicers and we will hear much more from 

them today. 

To my knowledge, this hearing is the first time that Treasury, 

Fannie Mae, and Freddie Mac are together in a public forum along 

with housing advocates and mortgage servicers to discuss the 

progress of the Administration’s foreclosure prevention programs. 

We need to see this crisis from the perspective of those who are facing foreclosure, as well as those who are helping these families 

through counseling, modifications, and the judicial process. 

The broad representation that we have here today from the servicing industry is especially critical. Housing counselors and government agencies may design initiatives to help borrowers at risk, but 

ultimately it is the servicers and lenders who will determine 

whether these programs succeed. They have the power to decide 

whether to modify a loan or to pursue a foreclosure. 

As New York’s Superintendent of Banks since 2007 when the crisis began, I have seen firsthand the positive results for homeowners can be achieved when the public, private and nonprofit sectors come together with a common purpose. Foreclosure, as we all 

know, is in no one’s best interest. 

Now, some procedural issues. Because of the number of witnesses 

appearing today and the extensive scope of the testimony, we invite 

each witness to make an opening statement limited to five minutes. 

All of us have already read your written testimony, so in the five 

minute time period I strongly encourage you to highlight those 

points that best capture your main positions and constructive suggestions for foreclosure prevention. We need to be strict on our 

time constraints in order to hear from everyone, so I ask that you 

be conscious of the time. We’d like to finish our work before 1 p.m. 

and allow time for members of the public to share their comments 

with us, as well. 

So, with those opening remarks I’d now like to turn it over to 

Commissioner Paul Atkins for remarks. 

[The prepared statement of Mr. Neiman follows:] 


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STATEMENT OF PAUL ATKINS, MEMBER, CONGRESSIONAL 

OVERSIGHT PANEL 

Mr. ATKINS. Thank you very much and I’d also like to thank 

Philadelphia for hosting this in the Constitution Center and most 

importantly to all of the witnesses who are appearing today at this 

hearing, some upon rather short notice. So, thank you very much 

for your efforts in coming here. 

The issue of foreclosure mitigation and its effectiveness is one of 

the areas that Congress specifically tasked this particular Panel to 

report on under the Emergency Economic Stabilization Act of 2008. 

I think it’s appropriate for us to review what’s being done in this 

area to help address the large number of foreclosures that the U.S. 

is experiencing these days. I welcome the opportunity to learn from 

our panel of witnesses today. This is an area that like much of 

what is being done by the U.S. government in the past year is 

fraught with moral hazard if poorly implemented. The interest, of 

course, is in helping those who may be in trouble through an interaction of bad luck, a bad economy, and perhaps bad personal circumstances. If you’re out of a job, it is really difficult to make payments unless you’ve saved over time. But, just like that proverbial 

dichotomy between the ant and the grasshopper, we want to be 

sure that we’re helping the ant and not necessarily the grasshopper. 

So, I’ll be interested today to hear how these programs are operating, what steps are being taken to help those who actually deserve it, what measures are built in to root out fraud and who is 

actually bearing the cost of these extraordinary measures in particular, the taxpayers and the investors. Because I think they deserve to have accountability in this area. Thank you very much. 

[The prepared statement of Mr. Atkins follows:] 


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Mr. NEIMAN. Mr. Silvers. 

STATEMENT OF DAMON SILVERS, DEPUTY CHAIR, 

CONGRESSIONAL OVERSIGHT PANEL 

Mr. SILVERS. Thank you, Richard and good morning. It’s a pleasure to be here in Philadelphia, which is the city where I lived as 

a child. I mention this not as an exercise in mere nostalgia, but because we are here to talk about home foreclosures. An event in 

which banks, servicers, investors, courts, and ultimately officers of 

the law come together to remove a family from their home and 

their community and their children from their rooms and from 

their schools and their friends. 

I said this at our hearing in February on this subject and I will 

say it again. The fact that a lender can throw a family out of their 

home is a necessary part of a system of lending, but it is also an 

act of emotional violence and economic destruction. Foreclosed 

homes typically yield less than forty cents on the dollar to lenders 

while destabilizing neighborhoods. Foreclosure should be the last 

option after everything else fails. 

Before I turn to those economic consequences, I just want to say 

that I still see this issue through the eyes of the eight-year old I 

was here on Hamilton Street in Philadelphia and how I would have 

felt if we had suddenly been forced out of our house. Public policy 

should be about minimizing foreclosures for the same reasons it 

should be about minimizing child abuse or protecting the public 

health or educating our children. Others may disagree. Some may 

see no particular reason to view a home foreclosure any differently 

than any other failed financial transaction. Some may feel that the 

children should suffer from the sins of the parents. Some may feel 

that before the government can act to help a family, it should undertake an exhaustive inquiry into that family’s morality, business 

judgment, and general character, for fear that some of the money 

that would otherwise go indiscriminately to the stock and bond 

holders of our large banks might be tragically and improperly diverted to a less than upstanding homeowner. 

The remainder of my statement is addressed to those who share 

one or more of those views. For the reality today is that the continuously escalating mortgage foreclosure crisis threatens to overwhelm the entire effort to stabilize our financial system in the interest of broader economic recovery. This is the intersection of morality and economics. 

Current estimates from the Mortgage Bankers Association are 

that so far we’ve had between five and six million foreclosures, 

which sounds big until you recognize that this is less than half of 

what is projected to occur between now and the end of 2010. This 

tidal wave appears to be the result of a combination of predatory 

lending, a collapse of underwriting in the bubble, rising unemployment, and the inability of homeowners with negative equity to refinance. This tidal wave threatens a vicious cycle in which foreclosures exert downward pressure on housing prices, falling real estate values and defaulted mortgages push down on bank capital, 

weakened banks pull back on lending, causing business activity to 

decline and unemployment to rise, feeding more defaults. 


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This panel takes up the issue of foreclosure prevention—as my 

colleague Paul Atkins said—a statutorily mandated purpose of both 

the TARP and this panel against the continuing mystery of why 

lenders and processors are unable to renegotiate troubled mortgages at scale, when it has long been clear that such restructuring 

is generally in both parties’ interest. Despite the enduring nature 

of that mystery, two things have changed since our panel held its 

last focused hearing on foreclosures. The first is that the Obama 

Administration’s plan for prevention has been in operation. The 

second is that the driving force appears to have shifted from predatory loans to unemployment and negative equity. The Administration’s commitment to help families is admirable. However, it appears that without addressing these issues of unemployment and 

negative equity, it may not be effective. I continue to believe there 

is no way to do this on a national scale without allowing judges to 

do so in bankruptcy. 

Finally, the problem of mass foreclosures is the other side of the 

coin of weak bank balanced sheets. So long as we make our policy 

centered on pretending we have strong banks, we may not be able 

to admit that these loans have to be written down if we are to end 

up with viable housing markets and stop the downward spiral. 

As Superintendent Neiman has said, we have outstanding examples of innovative approaches here in Philadelphia and Pennsylvania. The program Judge Rizzo has been leading, the MHA Program at the state level, I think is a large part of why we are here 

today. We have an outstanding set of panels and hopefully it will 

shed light on some of these questions and how we can make this 

epidemic of foreclosures a thing of the past. Thank you. 

[The prepared statement of Mr. Silvers follows:] 


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Mr. NEIMAN. Now, for our first panel of the morning. We are 

happy to have three distinguished gentlemen who share responsibility for running the Making Homes Affordable Program of this 

Administration. I’m pleased to welcome Seth Wheeler, Senior Advisor in the U.S. Treasury Department, Eric Schuppenhauer, Senior 

Vice President and Program Executive for the Homeowners’ Affordability and Stability Plan at Fannie Mae and Edward Golding, Senior Vice President, Economics and Policy at Freddie Mac. 

Mr. Wheeler would you like to start with your opening statements? 

STATEMENT OF SETH WHEELER, SENIOR ADVISOR, U.S. 

DEPARTMENT OF THE TREASURY 

Mr. WHEELER. I would, thank you. Members Neiman, Silvers and 

Atkins, thank you for the opportunity to testify today about the 

Treasury Department’s Making Homes Affordable Program and our 

efforts to stabilize the U.S. housing market and support homeowners. I’d also like to thank Chair Warren and Representative 

Hensarling for this invitation, though they’re not able to be here 

today. I’d also like to recognize some of the housing counselors and 

advocates that will be on the next panel, who have been important 

partners in helping us understand how we can improve our efforts, 

as well as the servicers who are key in implementing it. 

We announced Making Homes Affordable or MHA in February. 

A plan to stabilize the U.S. housing market, support loan mortgage 

rates and offer assistance to millions of homeowners by reducing 

mortgage payments and preventing avoidable foreclosures. There 

are clear signs that MHA is already having a meaningful impact. 

However, as with any new program of this size and complexity 

MHA faces a number of challenges. The Administration is working 

to address these challenges and to expand and improve the program going forward. 

The Making Homes Affordable Program includes three key elements. First, broad support for the GSEs—Fannie and Freddie—to 

support mortgage refinancing and affordability across the market. 

We have supported loan mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac, including through a $200 

billion increase in the Stock Purchase Agreements and continued 

support for market liquidity. 

Second, we increased refinancing flexibilities for the GSEs, providing more homeowners with an opportunity to refinance to lower 

monthly payments. Lower rates have enabled nearly 300 million 

borrowers with GSE loans to refinance since the announcement of 

the Administration’s comprehensive housing plan. 

Third, a key part of the Administration’s broad housing plan is 

a comprehensive $75 billion program to lower monthly mortgage 

payments for borrowers and providing modifications on a scale 

never before previously attempted. On launching the modification 

program, we estimated the program could help as many as 3 to 4 

million borrowers through 2012 targeting a run rate of 20,000 to 

25,000 trial modifications starts per week. 

Six months into the program, there are clear signs that the program is working. Over 57 servicers have signed up for the program. 

More than 85 percent of loans in the country are now covered by 


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the program. As of the end of August, servicers had approved and 

extended over 570,000 trial modifications offers. Also, as of the end 

of August, over 360,000 trial modifications were already underway. 

At the beginning of October, we will report on substantial 

progress that has been made in September. We are above our target pace of 20,000 to 25,000 trial modifications started per week 

and are on track to reach our goal of 500,000 trial modification 

starts by November 1st, but we can do better. 

On July 28th we held a meeting with servicers at Treasury 

where we told them that they need to ramp up modifications and 

treat borrowers better. We asked servicers to commit to doing better. Servicers must add more staff than previously planned, expand 

call center capabilities, provide a process for borrowers to escalate 

servicer performance and decisions, bolster training, enhance online offerings and send additional mailings to potentially eligible 

borrowers. 

I think we are making key progress here. We were hitting 20,000 

modification starts prior to that meeting and we’ve bumped up that 

number by 50 percent to over 30,000 since that meeting, but there 

is more to do. 

We are working with servicers and Fannie Mae to streamline application documents and develop web tools for borrowers. We are 

committed to transparency and accountability. 

First, on August 4th we began publicly reporting servicer specific 

results on a monthly basis. The second public report was published 

earlier this month. These reports provide a transparent and public 

accounting of individual servicer performance. In the future, we’ll 

expand the content of these reports to cover additional areas. 

Second, we are working to establish specific operational metrics 

to measure the performance of each servicer and will include these 

metrics in our public reports. 

Third, servicers must report the reason for modification denials, 

both to Treasury and to borrowers. 

Fourth, we asked Freddie Mac, as a compliance agent, to develop 

a ‘‘second look’’ process pursuant to which Freddie Mac will audit 

a sample of MHA modification applications that have been denied. 

The ‘‘second look’’ process began on August 3rd and is designed to 

minimize the likelihood that borrower applications are overlooked 

or inadvertently denied. 

In addition, we are improving borrower outreach, which is essential to the success of the program. We have launched a consumer 

focused website, established a call center for borrowers and 

launched a series of borrower outreach events in cities facing high 

foreclosure rates across the country. 


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President Obama’s Housing Stabilization Plan has made significant progress in assuring the flow of mortgage credit, bringing 

down mortgage rates and providing many families with the second 

chance to stay in their homes. We are on track to meet the goals 

we set for the program. To reach 500,000 trial starts by November 

1st and offer help to 3 to 4 million borrowers by the end of 2010. 

But, we can and we must redouble our efforts to broaden the reach 

of these programs. 

We look forward to working with you and your staff to achieve 

these goals. Thank you. 

[The prepared statement of Mr. Wheeler follows:] 


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Mr. NEIMAN. Thank you very much for keeping right on time. 

Mr. Schuppenhauer. 

STATEMENT OF ERIC SCHUPPENHAUER, SENIOR VICE PRESIDENT AND CFO/PROGRAM EXECUTIVE, HOMEOWNER AFFORDABILITY AND STABILITY PLAN, FANNIE MAE 

Mr. SCHUPPENHAUER. I appreciate the opportunity to participate 

in today’s hearing on behalf of Fannie Mae. In my opening statement I’ll briefly touch on the main points of the testimony we’ve 

submitted today. 

First, as the Department of Treasury’s Administrator for the 

Home Affordable Modification Program, our principal activities include, implementing the program guidelines and policies, preparing 

the requisite forms, tools and training, to instruct mortgage 

servicers on how to modify mortgages under the program; serving 

as paying agent to calculate subsidies and compensation under the 

program; serving as record keeper for executed loan modifications 

and program administration; coordinating with Treasury and other 

parties to achieve the program’s goals. 

As Mr. Wheeler has testified, the program is making progress 

and several extensions of the program are in the works or underway. 

To make further progress, we’re focused on two main challenges. 

First, we’re helping servicers to ramp up their operations to modify 

loans under the HAMP program. We are providing information and 

resources that servicers need to implement the program through a 

special website for servicers as well as through our own businessto-business website for Fannie Mae servicers. We are also communicating all aspects of the program to servicers during both the initial rollout and as program parameters evolve. And, we are helping 

servicers implement the program and integrate with new systems 

and processes deployed for it. We work closely with the servicers 

every single day. We setup a servicer support call center. We have 

conference calls every week with the leadership of participating 

servicers. And, we provide servicers with ongoing training, both 

web-based and in person. 

Our second main focus is on expanding borrower awareness of 

the program. For example, we helped Treasury develop a website 

and a call center where borrowers can find out whether they’re eligible for the program and find out more details. This website has 

received more than 36 million page views since its launch in March 

2009. The call center offers free HUD certified counseling if borrowers need in-depth help with their case. The call center has received hundreds of thousands of calls since it launched in June 

2009. We’ve also produced consumer oriented direct mail, flyers 

and brochures describing the program. Also, we’re expanding our 

program tracking system to collect data on borrowers who did not 

obtain a modification to find out how to further assist them. And, 

we’re supporting Treasury’s efforts to train counselors so they can 

work more effectively with borrowers about the program. 

In addition, we’re continuing to work with Treasury on a multicity borrower outreach campaign that Mr. Wheeler mentioned. The 

goal is to draw struggling homeowners to events where they can 

meet with counselors and servicers and get the help they need. The 


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events we’ve held so far drew nearly 10,000 borrowers that were 

in need of help. In two weeks, we’ll be right here in Philadelphia 

as we continue to target the hardest hit markets from a foreclosure 

standpoint. 

On top of our support of Treasury’s efforts, Fannie Mae also has 

participated in over 140 foreclosure prevention events in roughly 70 

markets in the United States with a range of public, private, nonprofit and industry partners. As we carry out the loan modification 

program, I also wish to note that through August we’ve entered 

into 133,000 HAMP trial modifications, just on Fannie Mae loans. 

We’ve also completed nearly 88,000 loan workouts outside the 

HAMP program to help our borrowers avoid foreclosure. 

Finally, I’d like to touch on what we are doing to help borrowers 

refinance their homes. Last month, FHFA, our regulator reported 

that Fannie Mae and Freddie Mac have refinanced more than 2.9 

million loans this year through July. Of those, Fannie Mae has refinanced about 1.7 million loans. We’ve also made progress carrying 

out the Home Affordable Refinance Program to help our borrowers 

who saw their equity disappear as home prices fell. Previously, 

many of these homeowners were unable to refinance. Thanks to 

this program, borrowers with loan-to-value ratios above 80 percent 

and up to 125 percent can refinance for a better loan and a better 

chance to keep their homes. To support this program, we built a 

loan lookup tool on Fannie Mae’s website where borrowers can determine whether we own their loan and whether they can get refinancing assistance. We also streamlined the loan process and we 

offered new refinance flexibilities on credit scores, mortgage insurance and appraisals to support the Home Affordable Refinance Program. 

In closing, the Making Home Affordable Program has provided 

powerful tools to help borrowers modify or refinance their mortgages. The main program elements are now in place and we are 

steadily helping more borrowers. Clearly however, we have much 

work to do and progress to make. Fannie Mae sees this as a critical 

responsibility and we’ll get the job done. 

[The prepared statement of Mr. Schuppenhauer follows:] 


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Mr. NEIMAN. Thank you very much. Mr. Golding. 

STATEMENT OF EDWARD L. GOLDING, SENIOR VICE 

PRESIDENT, ECONOMICS AND POLICY, FREDDIE MAC 

Mr. GOLDING. To the members of the Congressional Oversight 

Panel, thank you for inviting me to speak today. I am Ed Golding, 

Senior Vice President of Economics and Policy at Freddie Mac and 

I head Freddie Mac’s team that supports the President’s Making 

Home Affordable Program. Freddie Mac is proud to play a vital role 

in Making Home Affordable and in fact MHA is our number one 

priority. To help meet the President’s goal of helping millions of 

families lower monthly costs and avoid foreclosure, Freddie Mac 

has introduced two new initiatives. The first is our Relief Refinance 

Mortgage Program. It assists families who are current on their 

mortgages, but cannot refinance because of declining home values. 

The program enables borrowers to lock in today’s low rates and refinance loans up to 125 percent of the value of their homes. We also 

continue to support the broader mortgage market’s refinancing 

needs. Freddie Mac, so far this year has refinanced more than 1.3 

million mortgages and on average, these refinances reduce the 

mortgage rates by approximately 1.25 percent, one and a quarter 

points. This saves families $4 billion per year. 

The second initiative is our implementation of Home Affordable 

Modification Program or HAMP. HAMP helps at risk borrowers 

keep their homes by lowering monthly payments to affordable levels. HAMP requires borrowers to go through a trial period after 

which the loan will be permanently modified. Through mid September, approximately 80,000 of our borrowers have entered trial 

periods. We are working diligently to turn these trials into final 

modifications through direct outreach to borrowers. We are also 

pushing hard to get financially stressed families into the trial plans 

even before they become delinquent. 

Freddie Mac also plays a major role in MHA as the compliance 

agent for Treasury. In this role we conduct examinations and review servicer compliance with program rules and guidelines and report these findings to Treasury. 

Because of confidentiality issues, Freddie Mac has created a separate business unit within the company known as MHA–C to carry 

out these duties. MHA–C has over 100 employees and is continuing 

to staff up. MHA–C has developed an extensive and robust internal 

control and compliance system and it has the authority to conduct 

both announced and unannounced audits of the servicers. Based on 

these reviews, we are identifying corrective actions and follow-ups 

with the servicers. We will be using a number of fraud detection 

and compliance techniques to identify borrower, servicer, and systematic fraud and to improve the quality controls in the servicers. 

Additionally, we are reviewing servicers’ implementation of the 

NPV model, which is a key component for determining borrower 

eligibility. We are testing whether they are using the model appropriately as the program requires. 

Treasury has also asked MHA–C to develop what is termed the 

‘‘second look’’ process to minimize the likelihood that borrowers are 

incorrectly deemed ineligible. We are ramping up ‘‘second look’’ efforts significantly to increase the number of files reviewed and to 


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help increase the number of HAMP modifications. In our reviews 

we have found variations in how servicers communicate with borrowers who are deemed ineligible. As a result, Treasury has issued 

guidelines earlier this month to standardize and improve communication between the servicer and the borrower. As more borrowers 

transition to permanent modifications and incentive payments are 

disbursed, we will be conducting audits to help ensure that the correct payments are made. As we move forward with MHA, we will 

continue to improve features of the compliance program to assist 

the greatest number of borrowers in need at the least cost to taxpayers. 

In conclusion, the employees of Freddie Mac come to work everyday highly motivated to make a positive difference for millions of 

families by lowering mortgage costs and helping more families keep 

their homes. We are focused on meeting the challenges involved in 

fulfilling our duties under the Making Home Affordable program 

and helping to ensure its success. 

Thank you for this opportunity to testify. I’m happy to answer 

questions. 

[The prepared statement of Mr. Golding follows:] 


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Mr. NEIMAN. Thank you very much for all keeping it within 

those timeframes and we’ll try to keep that as a habit. My first 

round of questions, I’d like to start with the metrics of success because that is what is published every month and I think by which 

the program will be judged. As Mr. Wheeler indicated, through August there was a reported 360,000 trial modifications started. But, 

I think we would all agree that the success of the program really 

will be the degree of permanent sustainable modifications that are 

eventually implemented. Though the data may not all be in yet— 

particularly with regard to borrowers who have three months of 

payments—are there any estimates or target projections that the 

Treasury is using to assess what percentage of those trial modifications we can expect to convert to permanency? 

Mr. WHEELER. Thank you for that question because I think that 

highlights one of the biggest challenges and most important priorities for Treasury. As you noted as of the end of August and as we 

discussed 360,000 trial modifications were underway. When we update again with this month’s report there’s certainly many more. 

It’s absolutely critical if the borrowers are to remain in their home 

that they complete these trial modifications and then ultimately 

are successful on their official modification. In terms of reporting, 

as you’ve noted right now we don’t have any robust reports or any 

reports that we’ve put out to date on official modifications. The 

number of official modifications is still very low. As you probably 

know we put out a grace period of 60 days. In ramping up the program we laid out the program, set forth all the documentation 

standards that borrowers are required to complete and to ensure 

that we have as high a conversion rate to fulltime official modifications as possible. We also instituted a 60 day grace period while 

we review all those documentation standards to ensure that as 

many as those as possible are able to convert. 

Mr. NEIMAN. Any best guesses? Are you operating under any operating assumptions as a particular percentage of those trial modifications? 

Mr. WHEELER. At this point most of the information is anecdotal 

as we talk to servicers, which I’m sure you have. Right now there’s 

certainly risk. If we’re not able to close out those modifications 

there’s certainly a risk that a high portion are not able to complete 

their trial modifications. There will be some who don’t make payments and I don’t know exactly what that number is, but certainly 

not a trivial number. And another segment even if they’re making 

payments, they will not complete their documentation for completing the modifications. 

Mr. NEIMAN. And we will hear information and issues around the 

documentation and outreach necessary to complete a permanent 

modification. The monthly reports also show great disparities between servicers in trial modification starts. Partly, it could be the 

result of the fact that some trial modifications may start with 

verbal information as opposed to those that utilize full documentation. Those requiring full documentation will of course have a higher conversion to permanent as opposed to those with verbal. Is this 

a concern and is that an issue that you are rethinking to address 

that issue or taking any actions to address that concern? 


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Mr. WHEELER. On that topic, I think you’ve correctly laid out the 

range of possibilities. Certainly, that may not explain all of the disparity, but a good portion may be explained on how far along 

they’re able to document before borrowers start the trial modification. I think our number one priority now is that since we’ve 

ramped up capacity that it’s essential that we have a program with 

both documentation standards, if we learn that documenting upfront is much more successful, and then allowing flexibility to start 

a trial modification. Then, I think we will rethink our standards 

and what we encourage servicers to do. At this point we have given 

them that flexibility. And just again to be responsive to this question, as soon as we have more robust data, we absolutely plan on 

reporting as soon as we’re confident in the data. So, we understand 

the critical importance of being flexible on policy as we learn, as 

well as being accountable in reporting. 

Mr. NEIMAN. We’re going to hear from servicers and borrowers 

later this morning. And we expect to hear that modifications are 

being hampered by response time and concerns about eligibility 

issues and servicer capacity. What is the one area that you would 

say that borrowers should stop doing—that servicers should stop 

doing or should be doing better to address those issues? 

Mr. WHEELER. I certainly have thoughts. I don’t want to use up 

all the opportunity to share perspectives. So, Eric do you want to? 

Mr. SCHUPPENHAUER. Yes, thanks Seth. I think from a servicer’s 

perspective it’s recognized that more needs to be done. We’re in the 

ramp up phase. Servicers have been adding staff, have been adding 

personnel, have been adding capabilities to handle the shear level 

of documentation required under this program. It has taken time. 

Part of the reason why we instituted the 60 day grace period was 

to allow that further ramp up without dropping people out of trial 

periods. We’ll continue to evaluate and that’s why we are spending 

every single moment we can to understand the issues and continue—— 

Mr. NEIMAN. Well, I’m over my time. Unless either of you have 

a quick response to what a servicer should stop doing. 

Mr. GOLDING [continuing]. Standardizing the documents and reviewing which documents are necessary. Sometimes there are variations in how much documentation is taking place from servicer to 

servicer. 

Mr. ATKINS. Thank you very much again. I wanted to move from 

maybe the macro-level down to the micro-level a bit. We talked 

about successful modifications. We’ve talked a little bit about that 

as you’re looking at the program. Overall, what about on the microlevel, what makes a successful modification of an individual loan? 

Mr. WHEELER. I’ll take the first crack. For a successful modification, I think the only metric that can be used is whether the borrower is able to complete the trial modification and is able to remain in their home. We designed the program, the incentives to 

servicers and borrowers will continue. The borrower incentives 

reach out for five years. The servicer incentives reach out for three 

years. We think that clearly tying those incentives out to that long 

a period is critical in these challenging times that borrowers whose 

loans are modified don’t just make it six months or a year, but 

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nities. So, I think that’s ultimately the measure of success. In early 

measures it was how quickly we’ve ramped up. Our next view will 

be how successful we are at converting trial modifications into official modifications. But, ultimately when looking back five years 

from now the measure is how successful are we at helping these 

borrowers stay in homes, helping economic stability and stabilizing 

neighborhoods. 

Mr. ATKINS. So, staying in their homes and meeting their obligations, I take it? 

Mr. WHEELER. And meeting their obligations, correct. 

Mr. ATKINS. And then do you have any tracking? I know it’s still 

at the early stages, but are there some studies—and I guess we’ll 

hear more about that a little bit later—tracking the ongoing nature 

of these modifications whether we will fall into a re-default situation and what sort of percentage that looks like? 

Mr. WHEELER. Perhaps, briefly Eric could comment as Fannie is 

running the data reporting efforts and then Ed could comment, Mr. 

Golding could comment on the compliance efforts to ensure that we 

have accurate tracking. 

Mr. SCHUPPENHAUER. Mr. Atkins, we are tracking a number of 

data elements as we go through the program. It is too early to tell 

at this point in the program. The first modifications were done in 

May, but we haven’t had enough time to assess. However, we do 

plan to provide a tremendous amount of transparency about the 

types of modifications that have been done. Once the modifications 

become permanent, it would be the appropriate time to show how 

deep the modifications are, the payment reduction, as well as their 

sustainability. We are committed to providing that information as 

we go forward. 

Mr. GOLDING. And we, of course will be reviewing loan files. And 

it’s important to point out we’re reviewing both loan files that have 

been completed along with those that were not completed, that the 

person was determined ineligible. So, we’ll have data of Type 1 and 

Type 2. Both the ones that were given the modifications, we’ll also 

be able to look at those that were not given modifications. 

Mr. ATKINS. As far as geographic distribution of this effort, is it 

more concentrated on the coast versus the interior of the country 

or how does that pan out? 

Mr. WHEELER. At this point, we’re starting to get the data and 

trying to verify it. Certainly, expectations are that the hardest hit 

neighborhood; areas will see the most number of modifications. 

Certainly, California, Florida, Nevada, Arizona and Ohio, Michigan 

are especially hard hit areas along with a number of others, Pennsylvania included. So, I think we expect that we’ll see modifications 

where there is the most need. But we are collecting that data and 

starting to verify that data and we will report it in the coming 

months on a detailed basis, determining how successful we are in 

each area. 

Mr. ATKINS. Okay. Well, my time is up so I’ll yield the floor. 

Mr. SILVERS. Let me pickup on some of this a little bit in the 

same vein. Mr. Wheeler, what is Treasury’s estimate of the current 

rate at which foreclosures are being initiated on a monthly basis? 

Mr. WHEELER. On a monthly basis we read analysis reports, we 

don’t have an independent estimate. 


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Mr. SILVERS. But what’s your collective sense of the data you received? 

Mr. WHEELER. I think several hundred thousand. Certainly, several hundred thousand modifications are being started each month. 

Mr. SILVERS. No, I don’t mean modifications. 

Mr. WHEELER. I’m sorry, foreclosures. 

Mr. SILVERS. And you said that the Treasury’s target is 20,000 

a week? 

Mr. WHEELER. 20,000 to 25,000 trial modifications. 

Mr. SILVERS. So, 100,000 a month roughly? 

Mr. WHEELER. Roughly, 100,000. 

Mr. SILVERS. In light of that, don’t you think you ought to be adjusting the goal? I mean, is the goal adequate? Is the goal of roughly a million intakes a year against a run rate of 3 to 4 million, is 

that an adequate goal? 

Mr. WHEELER. I think again, this an excellent question. I think 

a response can be made in several parts. First, it is the design and 

who our target population is in terms of borrowers and then second, how well we’re going against helping those borrowers. So, each 

of those can be evaluated. I think on the first point we are trying 

to help all borrowers and we will see millions, as you noted, millions of foreclosure starts over the next several years. We are targeting a subset of those foreclosure starts or those borrowers that 

are facing the risk of foreclosure. We’ve targeted borrowers who occupy their own home or residence. Borrowers whose loan balance 

is below 729,000 in principal balance and then which we’ve deemed 

that the eligible population. 

Mr. SILVERS. Can I stop you there? What I’m really interested in 

is not the question of meeting your targets and I think my opening 

remarks indicated that. I’m not really interested in the question of 

who’s been a good boy or girl and who is not. I’m interested in 

whether or not we’re going to be able with the targets you’ve got— 

and I understand that they seemed appropriate at the time they 

were sent—will that be sufficient to counteract the downward pressure of the foreclosure epidemic on housing markets in our economy? 

Mr. WHEELER. I think not only are we trying to help individual 

families, but we are trying to stabilize neighborhoods. The question 

is, who is our targeted population and who are we able to help in 

that targeted population enough to help stabilize neighborhoods? I 

think a second distinction I’d make is between foreclosure starts, 

which could certainly be traumatic for families and borrowers and 

foreclosure sales, where borrowers actually lose their homes. The 

foreclosure sales rate is much lower, but still very, very high. I 

think we are, right now, focused on as quickly as possible getting 

the program up and running, implemented as you know. For our 

entire target population we have a rule that servicers are not allowed to start foreclosure proceedings. They cannot go through a 

foreclosure sale until a borrower has been fully evaluated and we 

strongly encourage them not to even initiate foreclosure proceedings until a borrower has fully been evaluated. I think we are 

trying to move as quickly as possible to help as many borrowers as 

possible. But I think in terms of neighborhood stabilization and as 


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we watch foreclosure sales rates and borrowers losing their homes, 

I think we will need to continue to evaluate. 

Mr. SILVERS. Mr. Wheeler and other members of the panel, I 

think we had hoped that you might be the last panel rather than 

the first. We understand that you could benefit from the other witnesses. We understand that was not possible for scheduling reasons. I think that’s regrettable. However, I’m going to do my best 

to make up for it by giving you a glimpse of the testimony that’s 

going to be heard later on in the day. This is from Irwin Trauss, 

who is the Supervising Attorney for Philadelphia Legal Assistance 

and I’d like you to react to these statements. He says, ‘‘The noncompliance with the HAMP guidelines is pervasive.’’ He’s talking 

about servicers. ‘‘The absence of a meaningful method to challenge 

this noncompliance is frustrating to advocates particularly, to housing counselors who were led to believe that HAMP would be 

streamlined and self effectuating without the need for an attorney 

or for litigation.’’ It’s an odd thing for an attorney to say, in a way. 

‘‘To address this situation, we need a multi-pronged approach that 

is not dependant on the willingness of the mortgage servicers to 

agree to the solution and is not dependant on the lenders themselves determining for themselves whether they have complied 

with the requirements of the program.’’ Can you comment on that 

assessment? 

Mr. WHEELER. I’ll take just twenty seconds and then let Mr. 

Schuppenhauer and Golding cover the balance. We’ve certainly 

heard those concerns. So, it has been a primary part of our focus 

in recent months. The comments I’d like to make concern empowering borrowers and in terms of providing transparency around the 

process. These have been the key areas of feedback we’ve heard 

from housing counselors and advocates. So, we are undertaking a 

number of initiatives, many of which I outlined in my opening comments. I’ll let Mr. Schuppenhauer comment in detail on that effort. 

But, equally important is the compliance role of Freddie Mac. Specifically, if services are not getting the job done, then recommendations can be made by Freddie Mac to close that gap or penalties 

assessed as appropriate. So, Mr. Schuppenhauer. 

Mr. SCHUPPENHAUER. Thank you, Mr. Wheeler. There are two 

important points here. First, there is an escalation process that 

we’ve put in place that serves the borrowers very well. First, they 

can contact the Help Hotline that’s been established, 888–995– 

HELP, which is a trusted source for information. Second, counselors can also contact our HMP Support Center if there are pervasive issues. Finding out about these issues and dealing with them 

is of paramount importance from our standpoint so we can get the 

right training and the right tools out there in the servicers’ hands. 

I’ll turn it over to Mr. Golding to talk more about the compliance. 

Mr. GOLDING. As I mentioned, we launched ‘‘second look’’ this 

month. We soon think we’ll be able to have a large enough sample 

so that we would be able to detect whether any servicer was systematically denying modifications that should have been approved. 

Mr. NEIMAN. I’m going to use my time to follow-up on the compliance issues because that really is the bulk of what we will be hearing from housing counselors on the next panel. Evidence that 

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compliance, or violations of the HAMP guidelines. I’d like to understand a little further about, what are the compliance process schedules that Freddie Mac really intends to employ and also what kind 

of reporting will there be? And also, how transparent will it be both 

in terms of overall compliance, but also servicer by servicer reporting? Also, to the extent that you can address, what’s the response, 

are there any remedies built in as a result of that noncompliance 

for borrowers or sanctions against those servicers? I threw a lot at 

you, but please do your best. 

Mr. GOLDING. Yes. Please come back to me if I miss any of them. 

Basically, in terms of the review of servicers I divide it into two. 

One is the on-site visits looking to see what their procedures are, 

lining them up with HAMP. Are they basically implementing 

HAMP as directed by the guidelines? 

Mr. NEIMAN. What’s the staffing for this? 

Mr. GOLDING. We currently have a hundred employees. We’re 

ramping up. Our expectations are to be around 200 and we will use 

contractors as necessary to make sure that we’re adequately staffed 

to reach the servicers that we need to reach. It’s basically first lining up—I think of this as two steps—first lining up their procedures with the HAMP requirements and then the second test is 

going back and seeing whether or not they improperly implemented 

the procedure. So, testing against their stated procedures, including looking at individual loan files. I should also point out; Eric 

talked about the escalation process. We are also in constant contact 

with Fannie Mae as the program administrator listening to what 

complaints they’re getting following their data also. 

Mr. NEIMAN. Once those violations are identified they will be recorded, too? 

Mr. GOLDING. Well, first this goes a little bit into the remedies. 

Clearly, if there’s a violation where there should have been a modification, the first thing is to stop the foreclosure and make sure 

that the homeowner gets the modification. Then there are two 

areas. Let me go to the reports and then I’ll get to the remedies 

and I think I will have covered the three prongs. The reports; we 

are an agent of Treasury; the reports will be written up servicerby-servicer and given to Treasury. We are in discussions with 

Treasury as to how much of that information and what the content 

will be made public. That’s still to be determined. 

As for the remedies, clearly there’s a range of remedies that 

we’ve talked about. One of them would be to withhold the servicer 

incentive payments that were discussed. Clearly, remedies could go 

as far as terminating someone from the program. That’s not a remedy you would want to use right away because all you’re doing is 

hurting someone on that. So, what we really are focused on are correcting and making sure the homeowner gets that modification. I 

think correcting the procedures are the most important. If they are 

not implemented properly, getting to the servicer, having them correct it, and making sure that they try to maximize the number of 

eligible borrowers that are offered modifications. 

Mr. NEIMAN. So, if I heard you correctly decisions with respect 

to making these reports public and in which format, as well as 

sanctions are still open issues that have not yet been decided? 


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Mr. WHEELER. They have not been decided and certainly we have 

a strong commitment to supporting Freddie Mac in their role as 

compliance agent and ensuring that these problems are identified 

and disclosed. Exactly what the content will be has not been determined, but appropriate remedial measures will be taken. 

Mr. NEIMAN. In my last 30 seconds, I’m going to ask for a one 

letter response. What I’d like to do is, I think we should all be evaluating each other’s performance. So, what I’d like you to do is give 

a grade to the servicers in assessing their performance, recognizing 

this maybe the first semester in terms of A to F. 

Mr. WHEELER. If ‘‘C’’ means average then I think I give them a 

‘‘C’’. They’re doing very well, again against program goals, but we 

have a lot more work to do on helping borrowers and implementation. 

Mr. NEIMAN. Any other differences in grading? 

Mr. SCHUPPENHAUER. That is a fair assessment, it’s the first semester. 

Mr. GOLDING. Obviously, I’ve had college aged kids. Seth, there’s 

been grade inflations since you’ve been in college. I gave one of my 

students a B+ and he complained it was the lowest grade he had 

ever gotten and I ruined his life. So, I’m with the old scale, I think 

C is appropriate, but maybe on the new scale they don’t give C’s 

anymore. 

Mr. ATKINS. I want to turn to cost, the flip side of all of this be- cause when you were talking about $4 billion of savings on the 

Freddie Mac side for borrowers, obviously the money is coming 

from somewhere. So, I was wondering if you all could address what 

the estimated cost of all this activity is so far to taxpayers, in general? Obviously, we’re talking to both Fannie Mae and Freddie Mac 

which now are explicitly government entities. 

Mr. WHEELER. So, there are at least three different types of cost. 

There’s the cost of TARP direct outlays in terms of the financial instruments, SPA’s that enable the non-agency programs to operate. 

There’s the cost associated with lost mitigation in order to avoid future losses on Fannie and Freddie. And then the program administration cost—what we pay Fannie and Freddie. Right now, as you 

can see on the third one we don’t have a detailed cost estimate. We 

are trying aggressively to manage cost and Fannie and Freddie certainly they are doing their best to keep cost down. But, we also 

want to do the program right. It’s a balancing act. 

The first two we’ve allocated up to 50 billion in cost for the program and the process by which that’s obligated. Each time a 

servicer signs up, we establish a servicer cap for the agreement 

that we purchase via Fannie Mae on Treasury’s behalf. So, right 

now we have a certain amount that’s been obligated. That doesn’t 

mean all of that will go out the door and then ultimately we are 

able to increase those obligations as needed through the end of the 

year. Very few dollars have gone out the door and the program is 

structured so that we only pay for success. No trial modifications, 

unless they’re successful, cost the taxpayer a dime. When they are 

successful, even then the incentives are back loaded so servicers 

can earn much more all the way through an official modification. 

So, we’ve tried to be very thoughtful of shepherding and stewarding 

taxpayer resources. But again, this is a strong, strong priority of 


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the Administration to achieve economic stability and stability in 

the housing market. So, certainly we are thoughtful on both sides. 

Mr. ATKINS. Any further on your individual sides? 

Mr. GOLDING. I might just add that part of what we’re doing in 

general in lowering the frictions in the mortgage market and trying 

to get it easier to get the modification, easier to get the refinancing. 

I think to the extent that if you lower frictions, the transaction 

costs that benefit the system. 

Mr. SCHUPPENHAUER. And, as we stated in our written testimony 

and in the earlier questioning, transparency around this is something we hold very dear. It is in the early innings or the early semester, however you want to phrase it. Very few dollars have gone 

out the door, but we will be giving a full accounting as time progresses. A very full public accounting in terms of the cost of running the program, as well as the cost involved in the incentives to 

make these modifications happen and be sustainable. 

Mr. ATKINS. I have a little bit of time here remaining. I want to 

focus on quality control a little bit and just how you all are focusing on that internally, as far as internal audit. Do you have a special program that is supervising these internally? 

Mr. WHEELER. Are we talking compliance? 

Mr. ATKINS. Yes. 

Mr. WHEELER. Mr. Golding, you want to take a first answer to 

that? 

Mr. GOLDING. Yes. I guess the simple answer is yes, we have internal audit. They obviously report independently to the Chair of 

the audit committee. They have reviewed our processes. We have 

two functions. One is we’re implementing the President’s program 

on our own book and then we have the separate unit, MHA compliance. And audit has been involved in both of those. 

Mr. WHEELER. Mr. Atkins, I’d point out that the Office of Financial Stability within Treasury obviously has its own compliance 

function and dedicated teams that work with Freddie Mac. They 

design plans, establish protocols and ensure that these programs 

are following the directives. 

Mr. GOLDING. And I’d be remiss not to mention that we also have 

a federal regulator who has also reviewed our implementation. 

Mr. ATKINS. The Special Inspector General for the TARP, has he 

been involved yet with this, with you all? 

Mr. WHEELER. Certainly, at various points TARP, both Mr. 

Barsharfsky, as well as his team have been consulted. They’ve been 

very constructive and thoughtful. They’ve challenged us, I think 

more deeply about how we can do a better job and given us very 

good feedback. As well, I should point out the GAO has also given 

us constructive feedback and we have tried to be very open. Many 

of those are very, very good recommendations and we’ve tried to act 

on nearly all of those to improve the program. 

Mr. SILVERS. I want to continue on the vein of testimony we 

haven’t heard yet. First, I read you a quote before from Mr. Trauss 

that would appear to allege a fair amount of improper conduct by 

servicers trying to avoid restructuring people’s loans. One of your 

testimonies, I believe in Mr. Wheeler’s testimony, you talked about 

an interagency group that’s met to discuss fraud and other misconduct involving law enforcement and so forth. I would like Mr. 


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Trauss’ testimony reviewed as to whether or not it constitutes a 

legal problem in any respect for any servicers. In particular, whether or not any servicers are accessing TARP money upon assurances 

that they’re doing things, which they are not doing, which strikes 

me as raising a whole series of rather serious legal issues, if that’s 

the case. 

Now, I’d like to come to some other testimony, briefly. Two important financial issues are covered in later testimony. One is what 

the likely re-default rate is going to be on mortgage restructurings 

and the second is the issue of self-cure. How many people, having 

been served a foreclosure notice for getting 60 days behind, how 

many people have actually been able to get out? There are some 

historical data, I gather, that suggest that self-cure rates of 30 percent have been common in the past. On the other hand, we’re not 

really in the past and there’s data that says that self-cure rates 

now are 6 percent. Do any of you have an opinion as to which number is the right number to be thinking about here as we look at 

the economics of restructuring? 

Mr. GOLDING. First of all, it’s been a while since I’ve looked at— 

and I’d be glad to get you a further answer later. As I read the 

study, it is sort of a little bit of apples and orange versus the long 

term rate because the 30 percent cure rate—and sometimes you’ll 

hear as high as 50 depending on how serious the delinquency is— 

tends to be the long term. As I read the study, they were looking 

at a shorter time period. So, I will have to go back and make sure 

to see whether they’ve lined up the time periods. But as I read that 

there was a difference. I think your basic point is absolutely right 

we have to wait and see. This is a very different environment than 

historical studies where you saw just a few local regions with a 

downturn. 

Mr. SILVERS. You don’t disagree that the 6 percent numbers, the 

data we have on the current environment although its short term 

dropped. 

Mr. GOLDING. I agree that the cure is likely to be lower. 

Mr. SILVERS. Lower than historical? 

Mr. GOLDING. Lower than historical, yes. 

Mr. SILVERS. Mr. Wheeler. 

Mr. WHEELER. I’ll weigh in with a few thoughts here. You started 

with re-defaults and clearly re-default is essential for how we establish metrics for success and how to measure how well we’re 

doing, as well as in the NPV model. We’ve had a number of teams 

in our agency across both federal regulators, as well as the enterprises in developing an NPV model. They looked at the experience 

of OCCOTS. They looked at the FDIC experience. They looked at 

other reports on re-defaults to try to start a benchmark of what a 

set of re-default assumptions might look given certain borrower 

characteristics. I think importantly though, some of those reports 

have indicated a very high re-default rate and we do expect re-defaults. But, in program design we try to minimize those. 

Mr. SILVERS. Mr. Wheeler, is it not the case that if you design 

a poor mortgage relief program, one that doesn’t grant real relief, 

that re-default rates will be very high. And, if you design one that 

actually is sustainable, re-default rates will be lower? 


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Mr. WHEELER. Clearly, the better job we do, the lower the re-default rates will be. 

Mr. SILVERS. And, your program—I believe and I would hope you 

would agree—your program is significantly more helpful to borrowers than the voluntary modifications that were going on prior 

to the adoption of your program? 

Mr. WHEELER. There are a number of safe guards that are intended to achieve that. 

Mr. SILVERS. But, you’ve got a 31 percent income-to-payment 

number, right? 

Mr. WHEELER. Correct. 

Mr. SILVERS. That wasn’t common prior to your program, was it? 

Mr. WHEELER. Several of what we believe to be improvements 

and it’s required that every modification, HAMP modification target a 31 percent debt-to-income ratio, payment relative to their income, but also a fairly robust documentation to ensure that we get 

that modification at the right level. Again, aligning success payments so that servicers and borrowers are both incentivized to keep 

borrowers current. So, we certainly expect that our performance 

will be much better than it would’ve otherwise been. It’s still hard 

to say how much better. 

Mr. SILVERS. Well, my time has expired. I would like you all in 

writing to respond to the suggestions by a number of our witnesses 

that will succeed you. That is that as part of the Federal program 

we adopt a HEMAP-like program for unemployment, that we have 

compulsory mediation that goes on in Philadelphia as a result of 

the court system and that you look at outreach canvassing of the 

kind that goes on here in Philadelphia to actually find people. I 

would appreciate it in writing. Thank you. 

Mr. NEIMAN. I’d like to thank the panel and before dismissing 

you, I do want to highlight particularly for members of the public 

that though this is our first public setting with the three of you, 

we have been in regular contact certainly with the Treasury both 

at the senior and staff levels. Both of you have also offered ongoing 

commitments to dialogue, both in formal and in informal sessions 

and we certainly will take you up on that and look forward to that. 

Again, I thank you for making the trip here and we look forward 

to your continued involvement and response to the requests that 

we made during the panel. Thank you very much. 

Now, we’ll do a transit to the next panel of witnesses. Thank you 

very much. 

Our second panel is here to give us the homeowner’s, the borrower’s perspective on foreclosure mitigation and we really are 

privileged for the panel that we have here this morning. From your 

left you have Judge Annette Rizzo, of the Philadelphia Court of 

Common Pleas and the Director of the Philadelphia Mortgage Foreclosure Diversion Program; Irwin Trauss, Supervising Attorney for 

the Consumer Housing Unit, Philadelphia Legal Assistance; Eileen 

Fitzgerald, Chief Operating Officer for NeighborWorks and Deborah Goldberg, Director of the Hurricane Relief Project for the National Fair Housing Alliance. And, again I’m going to ask each of 

you for your opening statements. Please, do try to keep them to five 

minutes to leave time for questions and answers. Judge Rizzo. 


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STATEMENT OF HONORABLE JUDGE ANNETTE M. RIZZO, 

COURT OF COMMON PLEAS, FIRST JUDICIAL DISTRICT, 

PHILADELPHIA COUNTY; PHILADELPHIA MORTGAGE FORECLOSURE DIVERSION PROGRAM 

Judge RIZZO. Thank you. Of course, Mr. Neiman, Mr. Silvers and 

Superintendent Atkins great to have you here. ‘‘Build it and They 

Will Come’’, such were the words that started my testimony approximately one year ago when Senators Casey and Specter came 

to Philadelphia to have a Senate Judictiary Hearing on our program. In June, when we pasted the one year mark on our program, 

our motto or logon was, ‘‘We Built It and They Came’’! 

We welcome you, the Oversight Panel to Philadelphia to focus on 

our a very homegrown local effort to stem the flood of foreclosures 

happening throughout this country and particularly in our city. I 

want to just share with you some obviously overarching aspects of 

our program that we have in place, as well as some lessons learned 

in the year and a half we’ve been in progress, as well as some of 

the challenges we’ve faced, which have really been introduced by 

the first panel in terms of us implementing the provisions that we 

now have out of Washington regarding HAMP. 

Since our inception, we’ve been the subject of a multitude of 

media events, locally, nationally and even internationally. We’ve 

been the subject of conferences both in the legal and business communities and the blueprint for the implementation of programs 

across this country, either locally or on the state level. We’ve gotten 

inquires, from as far as Alaska to Maine and even to the paradise 

island of Hawaii. 

In a judicially driven foreclosure state such as Pennsylvania, we 

really view this program as one of effective case management—and 

this is of course from the judiciary perspective—to stem the tide of 

an increased caseload over the last few years where equitable remedies are available. It is not perfect. It is ever-evolving in circumstances, which change as new relief plans avail themselves. 

However, programs such as ours which are locally based, serve as 

the staging, really and the theater in which direct and timely relief 

can be crafted for homeowners on a micro basis. 

We are in extraordinary times. I don’t refer to this as the crisis— 

that’s the ‘‘C’’ word and we don’t use that here—but we see this 

really as an era of new financial challenges the likes of which we’ve 

never faced in our lifetime and it is in need of an extraordinary response. 

I really often talk about this in more lofty terms, but in problemsolving, we often look to new ways to deal with existing problems 

and I say let’s flip that. Let’s really look at a new situation in an 

old way. What I kindly refer to as the George Bailey Building and 

Loan Model. That was a system where local bankers really knew 

those customers who came into the bank. The highs and their lows 

of their finances, and based on that strong financial relationship 

and personal relationship, banking was conducted. We are returning to community banking. We are really infusing in this system 

a way to try to cut through of all of the complexities of all these 

new programs. To really be that human touch, that connection as 

you’ll see in our courtroom as you visit us, hopefully this afternoon. 


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Our program is really all about the fact-to-face between the lender and the borrower. We have created a forum in which lenders 

and borrowers can dialogue in good faith to bring about attainable, 

and, more importantly, sustainable solutions to keep borrowers in 

their homes. The provisions under the HAMP program have provided a useful roadmap for participants in our program to achieve 

such results. This is not to say that we have not encountered some 

bumps in the road; bumps which I believe are not insurmountable. 

Just briefly, the Program did begin in June of last year and we 

have passed the one and a half year marker. It is really based on 

a prototype I developed in 2004 when a moratorium was declared 

or at least requested by our Sheriff John Green. The moratorium 

was not given—I really call that the ‘‘M’’ word—but instead we did 

a prototype of actually stopping the sales, looking at these cases on 

a real micro basis to see if really we could do some workouts and 

we did achieve success in doing that. 

In addition, we also convened a group of stakeholders from all 

sides of the issue to come together and meet on a regular basis for 

four years to deal with some of the issues dealing with foreclosures 

in general in our procedures, and that really is the genesis of the 

current program. Because of this Steering Committee, we now have 

lender bar, consumer bar, the City, the Sheriff, and also all nonprofit groups involved with the issue at the table to try to develop 

the program. So the Committee is the beginning of it all. We dealt 

with day backward cases where we literally did pull cases off of the 

Sheriff’s sale block to see if we could actually do workouts and that 

was the beginning of our program. But, now our focus is more on 

the day forward program where all cases filed in Philadelphia after 

September 8th of last year are subject to conference, which we 

schedule 45 days out. Lenders are required, as they are in any civil 

action to file a civil complaint of foreclosure along with a notice to 

the homeowners that they must immediately call the Philly Hotline, the Save Your Home Hotline—which Mr. Trauss of course will 

talk to you in detail about—and as well as to attend a conference 

which we schedule automatically at the filing of the complaint. In 

that window, it’s very important that then we see a marriage between the courts and non-judicial entities, such as community outreach groups, which literally—with their staff who are experts in 

this—go out to canvas neighborhoods and actually reach people at 

their doorstep, ring the bell and go, ‘‘You’re in foreclosure. Did you 

call the hotline? Did you call the hotline!? You didn’t? Here is my 

cell phone, call the hotline.’’ 

Mr. NEIMAN. If you could start wrapping up. Thank you. 

Judge RIZZO. With that said, we have had success with about 

6,300 conferences coming through our program to date. We have 

about 1,500 in terms of actual homes we’ve saved from foreclosure. 

Approximately 3000 according to OHCD are actually in queue to be 

resolved, postponement with purpose and we are looking forward 

to more iterations of this as we move forward out of the pilot phase 

into an established program coming 2010. 

I’m sure I have more to come in terms of reaction to some of your 

questions. Thank you for your time. 

[The prepared statement of Judge Rizzo follows:] 


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Mr. NEIMAN. Thank you. Mr. Trauss. 

STATEMENT OF IRWIN TRAUSS, SUPERVISING ATTORNEY, 

CONSUMER HOUSING UNIT, PHILADELPHIA LEGAL ASSISTANCE 

Mr. TRAUSS. To the members of the Panel, I’d like to thank you 

for your invitation to share my perspective on the MHA Program 

and the HAMP Program as they relate to the availability of mortgage modifications and folks facing foreclosures in Philadelphia. 

I want to start by saying how privileged I am to be on this panel 

with Judge Rizzo. Judge Rizzo really has been the driving force behind this Diversion Program and it would not work to the extent 

that it does without her dedication to try to save people’s homes. 

This is one of the reasons why I’m worried about the replicability 

of this program because not every location is going to have a Judge 

Rizzo. 

I also want to applaud the efforts of the Treasury in creating the 

Making Home Affordable Program. I think the Program, if mandatory, if implemented as designed, could help a broad spectrum of 

people facing foreclosures in a way that would have little impact 

on the Treasury and would have a tremendous impact on avoiding 

foreclosures. However, there are areas in which Making Home Affordable as designed could not help even if it worked 100 percent 

and one of those is addressing the needs of the unemployed, as Mr. 

Silvers has already indicated. Making Home Affordable was not designed to and cannot address the needs of people who can’t pay 

their mortgages, fair mortgages, decent mortgages, simply because 

of the—of unemployment crisis. I’m sorry, to use that word, but the 

unprecedented levels of unemployment that we’re experiencing. To 

address that, I think some of TARP money, which has been recovered from the bank, should be re-purposed by this MHA Program. 

I think an additional program could be created along the lines of 

the HEMAP Program in Pennsylvania, which, by the way, over its 

life has recovered more money than it’s paid out to homeowners for 

grants and loans, which could be used to enable people to pay arrears and for continued assistance to pay mortgage payments or 

part of mortgage payments while people are unemployed. 

I’d also like to comment on a couple of things that were said by 

the previous witnesses. One, about the Hope Now Escalation Team, 

which we just found out about two days ago and we called yesterday and they don’t know, Hope Now does not know that there’s a 

Hope Now Escalation Team, as far as we can tell; at least the person we spoke to on the phone. If we run a hotline, we need to know 

these things. We’re always trying to find out where can you go. We 

called Hope Now and we said, ‘‘We want to talk to somebody in 

your Escalation Team.’’ They had no idea what we were talking 

about and they said that they do not do any sort of enforcement 

and that what they do is help consumers and make referrals. So, 

I don’t know if the Treasury people are still here or if Fannie Mae 

is still or Freddie Mac, but they need to get the word out to Hope 

Now that there is an Escalation Team. 

Mr. NEIMAN. We will make sure to convey that to the Treasury. 

Mr. TRAUSS. Also, with respect to the remedies from our experience, the servicers would like nothing better than to be kicked out 


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of the program, at least some of them. With respect to what can 

you do to a servicer who is not complying, many of these servicers 

seem to be very reluctantly involved in this program and really 

would love for business to go back to normal where they hound 

homeowners and foreclose and take sales to Sheriff’s sale because 

that’s what they know how to do, they can do it, they can do it 

quickly, they can do it efficiently, they can do it cheaply, they make 

lots of money doing it. So, the threat of being bounced from the program, I don’t think is a significant threat for compliance. 

From my perspective, despite the promise of the program, HAMP 

and MHA have not been particularly helpful in the Diversion Program with respect to achieving permanent modifications and I 

think that’s reflected in the numbers. It has been helpful in the Diversion Program because it’s served to slowdown the foreclosure 

process while lenders have been acting on HAMP applications. 

And, it’s provided some leverage to advocates to press for meaningful resolutions. But, simply put, lenders are avoiding making permanent loan modifications and as long as homeowners have no leverage to force such modifications, they will not happen in great 

numbers. Overwhelmingly, as has been pointed out in my written 

testimony, servicers are not complying with the guidelines and 

they’re doing it with impunity. Servicers generally—in my limited 

experience—seek ways to find homeowners ineligible. Even when 

servicers provide trial agreements, they do not provide permanent 

HAMP modifications at the end of them. Instead, we have seen 

them offer arrangements that are less favorable than what HAMP 

requires. 

As I pointed out in my written testimony, there’s a slew of inadequacies with respect to the enforceability of the program. I’d like 

to make two points which are related to enforceability and taking 

the problems out from the discretion of the servicers. One is that 

in the Housing Economic Recovery Act of 2008, $30 million was 

provided for attorneys to help homeowners prevent foreclosure. Because of the way the Neighborhood Reinvestment Corporation is interpreting that statute, the regulations prevent that money from 

being used by lawyers representing people to defend foreclosures, 

including participating in the Diversion Program. That needs to be 

changed. 

Mr. NEIMAN. I’ll give you an opportunity during the question and 

answer. That was my first question, on change. So, if you could just 

wrap up. 

Mr. TRAUSS. To wrap up, if you want the MHA to work, if you 

want HAMP to work, I think the most important thing is to convince the Senate to pass the amendments of the bankruptcy code. 

It would give the bankruptcy court the authority to modify mortgages and make them affordable without incentives to the homeowners. And if there is a threat, then you’re going to get lenders 

doing what we need them to do. Thank you again for the invitation. 

[The prepared statement of Mr. Trauss follows:] 


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Mr. NEIMAN. Thank you. Ms. Fitzgerald. 

STATEMENT OF EILEEN FITZGERALD, CHIEF OPERATING 

OFFICER, NEIGHBORWORKS AMERICA 

Ms. FITZGERALD. Thank you, Superintendent Neiman, Mr. Atkins, Mr. Silvers. Thanks for the opportunity to talk with you today 

about NeighborWorks’ Foreclosure Mitigation work and feedback 

we have received on negotiating modifications under the Making 

Home Affordable Program. 

By way of background, NeighborWorks is a congressionally chartered nonprofit. We were established in 1978 with a statutory 

board, which includes the Directors of the Federal Financial Regulatory Agencies and the Secretary of HUD, or their designees. Our 

mission is to expand affordable housing opportunities, working 

through a network of more than 235 community based organizations. NeighborWorks was at the forefront of identifying the foreclosure crisis, creating the NeighborWorks Center for Foreclosure 

Solutions five years ago. In December 2007, NeighborWorks was 

named the Administrator of the $180 million National Foreclosure 

Mitigation Counseling Program, which was created under the 2008 

Appropriations Act. Two additional Appropriations have been made 

since then, $180 million in July 2008 and then an additional $50 

million in 2009. 

To date, 674,000 homeowners have received counseling through 

NFMC is 1,700 grantees and sub-grantees. During this foreclosure 

crisis, working with servicers has posed challenges for counselors 

across the nation. While many issues are being addressed, working 

with servicers has continued to be a challenge since the launch of 

MHA. Before I discuss the challenges, I do want to point out that 

MHA includes a number of really successful components, the trial 

modifications having been extended and initiated. The 31 percent 

front end DTI requirement really improves a borrower’s chance of 

success and was a critical element. As was the willingness of both 

servicers and Treasury to get input on the modification process, 

and their commitment to addressing issues identified and the addition of the MHA, FHA program. 

Back to challenges, NeighborWorks recently held a series of 

seven feedback sessions with NFMC counselors on MHA implementation uncovering three major themes: difficulty communicating 

with servicers; servicers not following MHA program guidelines; 

and frustrations with the system as a whole. Given the time constraints I’ll just address a few of these. So, difficulty trying to communicate with servicers. Counselors noted that many servicers will 

not work with them. Some servicers still ask for their social security numbers, even though servicers have directed staff not to continue this practice. Counselors also told us they spend as much as 

two hours on hold trying to reach a servicer and then frequently 

are transferred to numerous phone lines before getting answers for 

their questions. Some servicers have contracted with third party 

collection agencies who call borrowers demanding payments and do 

not address refinance or modification options. 

Challenge two: Servicers are not following MHA program guidelines. Counselors gave many examples of servicers not helping 

homeowners who were current on their payments, but who knew 


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they would have trouble making payments in the near future. Instead, the servicers advised the borrowers to stop making payments and call back when they were 30, 60 or even 90 days delinquent. Counselors also reported that some servicers would not disclose terms of a modification or a payment breakdown or put their 

offers in writing. In one case, a servicer made three separate offers 

to a borrower on the telephone and then sent the borrower a letter 

stating she was ineligible for a modification. 

Servicers are giving misinformation about the program, stating 

that only Fannie and Freddie loans are eligible or misstating the 

required front and backend ratios. Other servicers are offering 

other workouts before MHA workouts, which clearly is not supposed to happen. MHA modifications are supposed to be offered 

first. 

Counselors also gave examples of a number of servicers not halting foreclosures while reviewing files for MHA eligibility. In one 

case a servicer moved forward with foreclosure sales when clients 

were being reviewed for MHA. In California there is a 90 day moratorium on foreclosure sales. When asked about this practice, that 

particular servicer said they were exempt from State and MHA requirements. 

Challenge number 3: Frustrations with the system as a whole. 

Counselors gave many examples of servicers not giving explanation 

of a denial for HAMP. They also noted it takes too long to get a 

response to the modification request, two to three months for a 

trial modification. In some cases counselors are required to resubmit the same packages when servicers lose documents or take so 

long to review them that the data and the document is outdated. 

Finally, a few thoughts on program improvements. NFMC counselors support the creation of a central portal for submitting modification requests, such as Hope Now and Treasury portals which 

are currently under development, we hope. They also would like 

uniform procedures and forms. The efforts currently underway to 

establish uniform servicer guidelines would assist counselors immensely if that happens. And finally, counselors say they could be 

more effective if they had access to servicers’ NPV (not present 

value) models to understand how servicers determine MHA eligibility. 

In sum, government entities, counselors, lender servicers and investors have to continue to work together to address this crisis and 

improve the effectiveness of the programs. 

[The prepared statement of Ms. Fitzgerald follows:] 


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Mr. NEIMAN. Thank you. Ms. Goldberg. 

STATEMENT OF DEBORAH GOLDBERG, DIRECTOR, HURRICANE RELIEF PROJECT, NATIONAL FAIR HOUSING ALLIANCE 

Ms. GOLDBERG. Thank you. I want to add my thanks to that of 

my co-panelists here for you all hold this hearing and for inviting 

me here to testify. I’m here on behalf of the National Fair Housing 

Alliance, which is the nation’s only national organization that’s exclusively devoted to eradicating discrimination in the housing market. As noted, I run the Hurricane Relief Project at NFHA and 

since 2005 our project has been working with homeowners in the 

Gulf to help them recover from the storms of that season. What we 

have found is that many of the homeowners that we have helped 

would be facing foreclosure even if Hurricanes Katrina, Rita, etc, 

had not occurred. The reason for that is that they have the same 

kinds of unaffordable and unsustainable mortgages that so many 

other homeowners around the country have and whose failure has 

really launched this current crisis. We do view it as a crisis at the 

National Fair Housing Alliance and we are very mindful of the fact 

that to a large extent the cause of this crisis have been born by 

people of color and the communities in which they live. We have 

decade worth of research that tells us that these borrowers in these 

communities have been targeted for the kinds of loans that are not 

sustainable, that are high cost, that are high risk and they have 

been on the front lines of this crisis. It’s been estimated that people 

of color, over the last couple of years have lost hundreds of billions 

of dollars worth of equity as a result of foreclosures. That’s going 

to have a profound effect on their families’ financial security now 

and into the future and it may take us generations to be able to 

recover from that. 

The foreclosure crisis is unraveling several decades worth of concerted efforts by a lot of people to promote community revitalization and wealth building in our nation’s cities. And I want to say, 

I think it’s been pointed out that the misery now is being shared 

by a lot of other people. That loans that might not be considered 

unsustainable and unaffordable are still going into foreclosure. 

That’s not the kind of sharing I think any of us want to see. 

With a crisis of this proportion we think it’s been imperative for 

the government to intervene and we applaud the Obama Administration for launching the Making Home Affordable Program and 

HAMP. Several people already talked about some of the key elements of that program that have had a really positive impact on 

the market within limits and we want to support those things, such 

as the affordable payments and some other things that have been 

mentioned. And I want to say that we’ve been trying to work since 

the beginning with Treasury and other government officials to try 

and improve the program’s operations. I think the early numbers 

indicate that HAMP is on target to meet its goal. But as has already been discussed extensively, and as we certainly believe, those 

goals are too modest and the number of foreclosure starts that are 

projected far outweigh the number of people that we expect that 

the program will be helping. Our goal needs to be to stop foreVerDate Nov 24 2008 00:44 Nov 14, 2009 Jkt 053159 PO 00000 Frm 00091 Fmt 6633 Sfmt 6602 E:\HR\OC\A159.XXX A159

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closures, not to meet the goals that have been established for 

HAMP. 

My written testimony describes a number of operational problems with HAMP and suggests a bunch of changes that we think 

would strengthen the program, would increase its transparency 

and accountability and extend its reach. My testimony also makes 

a number of proposals for steps outside of the context of HAMP 

that we believe would help us deal with this crisis more effectively. 

Clearly, I don’t have time to go through those all, so I’m just going 

to focus on a few. I want to point out two that I think have particular fair housing implications. One is the data that are collected 

and made public about how servicers are performing under the program. We think it’s very critical that loan level data, including information on the race, gender, and national origin of the borrower 

who is applying for a HAMP modification, be made available to the 

public and that this be done at a geographic level that makes it 

possible for public officials, community organizations, individual 

borrowers, and the public at large to understand how the program 

is working in their communities, to be able to identify places where 

it may not be working equitably or effectively and to intervene to 

change that. 

A second thing is that we think that there needs to be better 

support for borrowers, and particularly for outreach into communities where English is not the primary language. 

Third, we think that the NPV model must be made available to 

the public. Borrowers should know what information about them 

and their home (and a particular concern to us is how the value 

of that property is assessed) is put into the model and what the 

model tells them or what comes out of the model about whether 

they succeed or not and by how much they failed. It’s particularly 

important to catch folks who just barely failed the model’s analysis. 

We also make some suggestions for ways to make the model more 

accurate. 

We believe that it’s critical to establish a strong effective and 

neutral appeals process that is borrower initiated, where someone 

outside the system, not in the servicer’s shop, can review an application to make sure that it was handled appropriately. And finally, 

I would say we think it’s really important to stop all foreclosure actions. We are hearing of far too many borrowers who are either 

having foreclosure initiated or moving along the path towards foreclosure even though the final sale may not take place. That racks 

up a lot of costs that undermine the borrower’s ability to obtain a 

successful modification. 

And, I will stop there and welcome your questions. 

[The prepared statement of Ms. Goldberg follows:] 


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Mr. NEIMAN. Thank you. Our intent for this panel was to get the 

borrowers perspective through the views and the eyes of advocates 

and judges like yourselves. You have represented them well. The 

testimony that you all have provided us, in my opinion is really the 

most comprehensive summary of the significant issues facing this 

program and will really serve as a terrific basis for us in our work, 

as well as in our reports to the public and interactions with Treasury. My first question is designed to expand on your reports as a 

follow-up to the issues that you’ve identified and give you an opportunity to address what is the most important change either in the 

program design of the Making Affordable Home Program or in its 

implementation. If we had to leave here with one critical—and I 

was going to start with three but I know we’re pressed for time and 

some of you may overlap—think of the one most important change 

that we really should be looking at recommending with respect to 

the design of the program or the way it’s being implemented. I’ll 

start with anybody. 

Judge RIZZO. I’m going to start. Again, I hope I can get you more 

when I come a calling and you visit with us because we have more 

to talk about. I obviously have the view from the judiciary so I’m 

sort of level on all sides. Parties come to the court by due process 

equally. I have to say in terms of actually on the ground running, 

I go to my colleagues on this panel to discuss it. The bottom line 

is, I don’t know about tweaking it anymore other than just reducing it down to fine points and getting the word out where it’s easy 

to read language and that we have direct, what I would call 

batphone hotlines to really get clarity on points. Through association I’ve had being on panels in Washington, etc. I’ve had outreach 

to individuals who I personally called to get clarity on. That’s all 

well and good, but what we need is something where there is actually somewhere to go where we can get a clear, quick answer. And 

that’s why programs such as ours, I believe, really work because 

we can react to that change very rapidly on this micro basis in a 

case. But, any delay brings more arrearage, more issues with the 

property, more hopelessness, as I refer to it. So, when we wait and 

wait to get clarity the numbers are rising and that’s going to factor 

into the numerical formula to actually see if this person can really 

get—— 

Mr. NEIMAN. And getting clarity, you mean from the servicer? 

Judge RIZZO. Well, the point is the clarity, I would think from 

the program itself to those who are the stakeholders in it. So, if our 

servicers don’t understand what’s going on, how can they in good 

faith negotiate to know all the terms when in fact from the consumer side there’s a conflict—and I speak about this in my comments—there’s a disconnect of how it’s interpreted. Well, that takes 

time to unravel all of that. That is time wasted on getting this deal 

done and now we have more arrears to deal with in terms of the 

formula we apply. 

Mr. NEIMAN. Thank you. Counselors or Ms. Fitzgerald? 

Ms. FITZGERALD. I’m going to hope Debbie says transparency of 

NPV so then I’ll say the other thing I want to say. There is a huge 

process problem here. At the end, there’s a lot of good core guts to 

MHA, but if you dropped from the sky and said how could you design a more dysfunctional system, you probably couldn’t get there. 


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The hours and hours and hours of wasted time, whether that’s a 

homeowner, a counselor, or a legal structure in trying to get resolutions—every servicer using different forms for this, everyone having different requirements. While MHA is the same, the paper requirement documentation is not the same across all of the 

servicers. 

Mr. NEIMAN. How important is the web portal? Is Fannie talking 

or are administrators talking about this? 

Ms. FITZGERALD. The web portal is a really good first step because at least we can say some servicers require fax, some require 

email, some require mail. So, that solves that problem. What it 

doesn’t solve is what gets pushed up into the web portal and that 

requires some kind of standardization of documents. In the loan 

origination process lots of folks use Fannie documents. That’s become a consistent process. We’re saying come up with one set of 

documents for every counselor, every borrower. It makes outreach 

events go a lot better. So, that seems very doable. It’s not rocket 

science. Let’s just all agree to that and make that happen. 

And then, I think the other piece of the process is really trained 

staff and servicers. We are very appreciative that servicers have 

obviously added a lot of staff, which has been required and that’s 

a huge effort to get everybody on the same page. But, particularly 

on the collection side, I think a homeowner or a counselor might 

wind up talking to anyone. And while the loan modification groups 

seem to be maybe a little bit more informed it’s not clear that that 

has permeated the organizations. So, I think really making sure 

that everyone there knows this is the requirements. 

Mr. NEIMAN. I give you ten seconds. 

Ms. GOLDBERG. There isn’t just one and I think that reduces it 

too far. I want to completely underscore and echo all the comments 

that Eileen made. I would say two things. One is we need transparency across the board. Because there are so many issues about 

the program, because it is a complex program, then we need to 

know. We need to know what’s going on within the NPV model, 

with the denials for borrowers and the reasons for denial that 

they’re given, with the performance data for the servicers. The only 

way that we can really get a handle on where the bottlenecks are, 

where things are falling out is when that kind of transparency is 

provided. 

The other thing I would say is, I think we need to be looking 

ahead more at how the program guidelines must be changed to 

deal with what we can see coming down the road. We are in many 

ways—for all the good things about HAMP—we are kicking the can 

down the road to the end of the program. We don’t have really permanent modifications. We have five-year modifications and who 

knows what’s going to happen at the end of that. We have an economic climate where unemployment is at an all time high or a 

record high and expected to stay there for quite some time, but yet 

we’re not allowing for people who re-default to get a new modification or to get a forbearance or whatever might be appropriate. 

We’re kicking them out of the program. So, program changes to 

deal with circumstances like these are needed if we really want to 

get our arms around the foreclosure problem and keep it from overwhelming our economy. 


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Mr. NEIMAN. Thank you. My time has expired. 

Mr. ATKINS. I wanted to address first a question to Judge Rizzo 

because it sounds like your program is pretty interesting and I look 

forward to seeing it in action this afternoon. How are you staffing 

and supervising this? Have you taken on more folks who are able 

to delegate this? How does this work, actually? 

Judge RIZZO. Well, I always feel like it’s the Wizard of Oz. If you 

move the curtain you’ll see it’s one person working all of the gadgets. We really are short staffed in terms of the court system. We 

are really in an all stretch assignment, myself and all my staff and 

wonderful court administrators. So, from that perspective the court 

is working within its budgetary bounds. That’s not to say it’s optimistic and that of course an infusion of some funding in that regard to expand it wouldn’t be welcomed. But, more importantly, we 

are in true partnership with these non-judicial entities, these community outreach groups who actually go into the neighborhoods, 

our wonderful housing counselors under the office of Housing and 

Community Development and others, our Philadelphia VIP with 

our volunteer lawyers, Judge Pro Tems—who I appoint and they 

work without fee after being trained. We also try to support our 

wonderful CLS and PLA attorneys who actually are staffed up to 

handle the more complex cases. So, from an infrastructure perspective, the money side really goes to the City and Mayor Nutter is 

in complete support in terms of his message to call the hotline. 

We’re all in sync. It’s really a marriage of judiciary with non-judicial entities to get this thing going. So, it’s always in need of more 

legal services, more community outreach and increasing our ready, 

wonderful staffed up and well trained Housing Counselor Network 

in partnership with the courts. So, we work on a shoestring from 

the court’s internal perspective, yet we’ll of course welcome funding 

to be with our other partners. So, it’s a network and I think maybe 

Mr. Trauss can speak to some of that in terms of the funding demands that are placed on it. But, we do thank our mayor for trying 

to really support this initiative. 

Mr. TRAUSS. The court has managed to—without any increase in 

funding—to create a program in which all this happens. Most of 

the funding—as Judge Rizzo said—comes from the City of Philadelphia. A lot of it comes from the Office of Housing and Community 

Development and the cost associated with the program, which are 

somewhat invisible. One of the problems with this is that this 

model has been advocated as a cost free model. It’s all volunteer 

and in the court side that’s true, the Judge Pro Tems (JPTs) are 

volunteers, there are a lot of volunteer lawyers. But, in fact there’s 

probably a million dollars, actually several million dollars that goes 

in—probably a total of about three million dollars—that goes into 

the cost of funding the hotline, funding about 32 housing counseling agencies, funding outreach—although the amount of funding 

for outreach is actually very small for the bang for the buck. So, 

there is a significant cost and that cost is born by the City in creating the structure, the infrastructure, which needs to be there to 

have a meaningful program such as the Diversion Program. You 

have to have housing counselors. You have to have some way for 

them to get to the housing counselors where the hotline comes in. 

The hotline, as I indicated in my testimony, serves as something 


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of a coordinating function. There’s a feedback loop that’s created 

with the hotline. So, you need all these things. And also, in a lot 

of cases, you need the one thing that’s missing which is beyond the 

volunteer attorneys who get involved on a limited basis as lawyers 

that actually step in and represent people when the lenders—and 

it is not unusual—when the lenders overstep their bounds and ask 

for things that they are simply not entitled to. 

Mr. ATKINS. What kind of backlog do you have, caseload right 

now? 

Judge RIZZO. Just very quickly. When we’re in session we hear 

approximately 150 cases in the morning and 150 in the afternoon, 

that are called in. We have no backlog in a sense in that regard. 

Philadelphia has seen a bump and increase, of course, in foreclosure filings. It’s leveled off and we anticipate another bump. So, 

we’re at about 10,000 filings per year just in foreclosures. That has 

been a 2,000 jump up from the years past. But, in terms of backlog, 

we’re in flow and I think we estimate about 140 or 150 filings 

per—well actually that’s by one firm so I don’t know about how 

many filings per month. We’re steady in that regard and there is 

no backlog because on initiation they immediately go into the chute 

and they’re scheduled for the 45 day conference. I will also add, 

just to the other point almost a million dollars in pro bono services 

have been generated and given to support this program. So, that’s 

daunting, but it is actually dedicated volunteers serving. 

Mr. TRAUSS. One of the unadvertised benefits of this program is 

that to the extent that there are resolutions that are reached, it 

takes cases out of the inventory of foreclosure cased needed to be 

tried by the courts. 

Judge RIZZO. I agree. 

Mr. TRAUSS. So, that is a benefit the court experiences. For these 

to be taken out of the system early, that’s a benefit to the court 

and that saves time and money. 

Mr. NEIMAN. Mr. Silvers. 

Mr. SILVERS. Like my fellow panelists, I’m pleased to have you 

all here. Particularly pleased to have Judge Rizzo here and it’s an 

honor to be with you and we’re certainly coming to visit. Let me 

just make sure I heard the testimony right. Judge Rizzo, you said 

that you’ve had 6,300 conferences and 1,500 homes saved roughly 

from foreclosure? 

Judge RIZZO. Yes, that’s right. We can go on and on and debate 

how you describe success because from the Court’s perspective 

when it’s out of the system, those are the 1,500 because the case 

has been closed, we’re judicial. 

Mr. SILVERS. How many of those 1,500 have come back? 

Judge RIZZO. Well, that’s the point and that’s where the data has 

been. How do you measure success? So, time has to pass in effect 

for us to go back and revisit that. We’re very grateful that a national foundation has come calling to really breakdown our data 

and give us that kind of critical information. 

Mr. SILVERS. So, at this time you don’t know? 

Judge RIZZO. No, we do not. We’re dinosaurs, we aren’t very good 

at collecting our data. 

Mr. SILVERS. I would note that the kind of cost figures that 

you’re talking about in the prior exchange, $3 million, 1,500 homes 


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saved is comparable to the servicer fee that is being paid under the 

MHA program per mortgage, which is only a small portion of the 

total cost in the MHA program. 

Moving forward from that, Mr. Trauss, when you say that MHA 

should be mandatory, what do you mean? MHA is mandatory in a 

sense of participating in the program is mandatory for TARP recipients, more or less. Tell me what you mean by mandatory. 

Mr. TRAUSS. Before I answer that question. Can I answer Mr. 

Neiman’s questions about the one thing that should be done? 

Mr. SILVERS. Please. 

Mr. TRAUSS. And that is, the Administration needs to get behind 

passing the amendments to the bankruptcy code to allow for mandatory modifications. If that happened, if that was real, then bankruptcy could modify these loans and make them affordable, everything else would fall into line because the creditors would want to 

avoid that and they would be looking to what program would have 

incentives for them to make the changes that benefited everybody. 

With respect to mandatory, yes participation if you sign the participation agreement then you’re supposed to follow the rules, but 

there’re no teeth. So, I guess by mandatory I mean some system 

where there are immediate consequences for failing to do what 

you’re supposed to do. 

Mr. SILVERS. Maybe I’m not following. Laws being complicated, 

maybe I’m not following this, but it seems to me that a firm that 

signs that agreement, receives TARP funds, has entered into an arrangement with the Federal Government where they’re receiving 

money for making commitments and adhering to them and in our 

law there are real penalties, including criminal penalties for intentionally not following such an agreement, isn’t that right? 

Mr. TRAUSS. Well, I haven’t looked into it. I assume that you’re 

correct about that. What I know is that on the ground day-to-day— 

and you maybe right that five years from now they will—— 

Mr. SILVERS. My point is just that maybe we have an enforcement problem here and not a lack of penalties problem. 

Mr. TRAUSS. Well, we have an enforcement problem, but that’s 

exactly my point. I mean, it’s not a question of penalties because 

penalties down the line do not help the hundreds, thousands and 

millions of people who lose their homes. For example, Bank of 

America—I don’t know if they’re here yet—Bank of America until, 

I think August in Philadelphia at least, were telling our hotline 

people that they signed the SPA, but they were only doing GSE 

loans. They were not offering MHA or HAMP on any non-GSE 

loans. There were thousands, millions possibly, but thousands, tens 

of thousands perhaps hundreds of thousands of people were not 

being put into the system, their houses were going to foreclosure, 

they were losing their homes because Bank of America was blatantly, as far as we could tell, violating their obligations. We contacted Fannie Mae, we contacted Freddie Mac and the response we 

got from Freddie Mac was, ‘‘Yes, we know.’’ 

Mr. SILVERS. You may have noticed Mr. Trauss, I don’t know if 

you were here earlier, but I asked the Treasury Department to review your testimony in relation to allegations, plausible allegations 

of misconduct and to report back to our committee as to what they 

found. Can I ask Judge Rizzo—and Mr. Trauss you may know the 


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answer—when your outreach people go knock on a door, they knock 

on the door and the person says ‘‘Who is it?’’ what do they answer? 

Mr. TRAUSS. Well, I am not directly involved in the outreach. I 

don’t know if anybody from the agencies is here. So, I can’t answer 

exactly what they say. We do get the calls when the outreach workers—we try to coordinate with the outreach workers so that we are 

there even when we’re not. 

Mr. SILVERS. I assume they don’t answer, ‘‘It’s your bank calling’’. 

Mr. TRAUSS. No. 

Mr. SABER. They identify themselves from the organization 

they’re with. 

Mr. SILVERS. I hope that the record taker here could hear that 

response from the audience. 

Judge RIZZO. That’s Lance Saber from the City. 

Mr. SABER. They identify themselves from the organization that 

they are with. There are different organizations that are out there. 

Mr. SILVERS. Thank you. My time has expired. 

Mr. NEIMAN. We’re going to try to do one more round. We’re running a little behind so we’ll really try to keep these within our time 

limits. I’d like to go back to my first line of questions to the Treasury panel regarding their metrics of success because it is currently 

focused on trial modifications. As you all know, some trial modifications are offered and started before verification of income based on 

verbal information while other servicers do wait to verify that documentation before offering a trial modification. Do you all have any 

views as to whether either of those approaches is preferable? 

Mr. TRAUSS. I have no problem with the oral implementation and 

what I find happening is that anything that reduces the excuse 

that a servicer can give for not immediately saying, yes we will 

consider you, we are stopping foreclosure, start sending us money. 

Mr. NEIMAN. So, the earliest you can to get people into it? 

Mr. TRAUSS. Right, that is the best thing because it doesn’t take 

long. The paperwork that is required by HAMP is very minimal. 

Now, the servicers add to that paperwork, but the HAMP paperwork is pretty minimal and that’s pretty easy to get through. What 

we find is that the paperwork requirement is used as an excuse to 

frustrate the ability of people to participate. 

Mr. NEIMAN. How about from the counselor’s standpoint. 

Ms. FITZGERALD. I think it would be important to track those two 

numbers differently. So, we don’t disagree that you should give the 

borrower the modification as soon as possible, but when someone 

is going back to look at success, I guess I’d want to know, was 

there a difference in those, because I wouldn’t want folks to say 

this program didn’t work because of stated income. So, I think it’s 

really important if we’re going to do that to track separately. 

Ms. GOLDBERG. I would also add a second and related but important question is the servicers’ ability to handle the paperwork and 

review it in the timeframe that’s provided by the program. In my 

testimony I cited an example of a client we had recently in Mississippi who got one of the early trial modifications. She got it 

based on verbal information provided to the servicer. She made her 

first payment under the trial modification in April, the beginning 

of April, and at that time she sent in all of her documentation. UnVerDate Nov 24 2008 00:44 Nov 14, 2009 Jkt 053159 PO 00000 Frm 00112 Fmt 6633 Sfmt 6602 E:\HR\OC\A159.XXX A159

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fortunately, she did it without consulting with our counselors so 

she got some of it wrong, like she didn’t sign the tax return that 

she had submitted electronically originally to the IRS. Five months 

later, she’s made five payments now. That’s two payments beyond 

the trial period and the servicer—who was Chase—contacted her 

and said, the paperwork that we have for you is either missing or 

it’s invalid and if you can’t get it to us within 60 days you’ll lose 

your shot at a modification. The servicer had this paperwork for 

nearly five months and couldn’t get through it in a timely fashion 

to give the borrower the opportunity to correct the errors before the 

trial period ends. 

Mr. NEIMAN. So, how big is it? We keep hearing documentation, 

we hear it from the servicers because they’re saying the individuals 

are not providing back signed documents. We hear it from the 

counseling agencies that the documents are either lost or not being 

presented in a timely fashion. How big on a one to ten scale is documentation? 

Ms. FITZGERALD. Big, but again it’s the system: They haven’t 

sent any efficient system for collecting and making standardized 

documentation. That is, to me the bigger problem. 

Ms. GOLDBERG. I think earlier testimony alluded to one of the 

things counselors struggle with, which is that the servicers are consistently changing the system that does exist. So, you’re getting a 

new phone number, a new fax number, a new email address to 

send stuff to all the time. So, you thought you knew how to do it 

efficiently until you get the new policy tomorrow. 

Mr. NEIMAN. You may have been here when I asked the Government Panel to assess the performance of the servicers using a score 

grade of A to F, recognizing that this is a first semester as opposed 

to a year end review. I’d be very interested in your assessment of 

how you would grade servicers as a whole. 

Ms. FITZGERALD. My solution, when I heard that question was incomplete. 

Mr. NEIMAN. Incomplete, well that’s fair. 

Ms. GOLDBERG. Well, with some qualifications, I think I would 

have to say a ‘‘D’’ and that’s for two reasons. One is that I don’t 

think we’re in the first semester. This problem has been going on 

since long before HAMP, and servicers for quite some time have 

been saying that they’ve been ramping up and they’re not there 

yet. So, I don’t think we’re in the first semester. 

The second thing is, my kid’s teacher sends home a little rubric 

to grade them by. It says these are the things we’re going to judge 

and effort doesn’t count towards your grade. It’s what you actually 

have mastered and can demonstrate that you mastered and the 

servicers just are not there yet. They maybe making a great effort, 

but they don’t have it mastered. 

Mr. NEIMAN. Judge Rizzo or Mr. Trauss, care to weigh in? 

Mr. TRAUSS. I concur. 

Judge RIZZO. I’m going to refrain from any grading, but I just 

want to say with all parties at the table, we really need simplification and a way to make it an easy read for everyone. That’s also 

going to benefit our borrowers. Sometimes part of the delay is 

caused by them even coming up to get it all together. So, I have 

to, as a Court, balance that. The simplification as easy read will 


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help those wonderful housing counselors and those who assist in 

the process, get it in the chute so that it can be evaluated for the 

servicers. Hopefully, we’re all on the same page. 

Mr. NEIMAN. Thank you. I’m out of time. 

Mr. ATKINS. I want to ask the Panel, especially here in Philadelphia, what you all estimate the percentage of nonstandard loans 

might be as part of this problem—and subprime and no doc loans— 

such things as that. What’s really driving this or do you see this 

throughout all parts of the population? 

Judge RIZZO. I’ll just start. What I’ve seen coming into the program consistently is not necessarily the subprime. Obviously, it exists to some degree, but that’s not where we are. We’re an old historic city, made up of Philadelphia row homes, individuals who’ve 

been in their homes for many, many years. Our demographics show 

that our program really assisted the elderly and single parents, 

moms that were looking into that and we actually have special protocols to deal with their very special needs. It’s the situation you 

read about in law school where someone wants to put aluminum 

siding on your house, they get into some loan situation, nonpayment or they run, it gets converted into some mortgage document, here we have a lien and now here is someone who was in 

a home 35 years and are about to lose it. So, I see some of these 

anecdotal stories, not necessarily of the mass of subprime. We’re 

not the city with these people buying these mansions and being underwater immediately. That’s not what we’re seeing. So, this consistency of need that I’m seeing coming into the room is not that. 

Mr. TRAUSS. I would just have to disagree with Judge Rizzo to 

some extent. 

Judge RIZZO. And he always does. 

Mr. TRAUSS. There’s a combination and it’s been a moving target. 

To some extent in Philadelphia, I think the subprime crisis, which 

was directed much more to low income homeowners, kind of peaked 

in 2004. Subprimes did increase their foreclosures to a level of 

6,000 a year to close to 9,000 or 10,000 a year, perhaps last year. 

At this point we are seeing unemployment as a huge component. 

Unemployment, under employment, people lose their jobs, get their 

jobs back, lose their jobs again, get another job. So, there’s a shifting face in what we’re seeing. Now, remember this is a case, this 

is a program which looks at cases in which complaints of foreclosures have been filed. And, also in Pennsylvania the time to get 

to foreclosure is somewhat long, relatively on a case. So, the foreclosure rush that’s resulting from the unemployment increase, I 

don’t think has yet hit the Diversion Program to the extent that 

it might have hit other places because there’s a lag of probably 

about five months before a case actually gets to a complaint of foreclosure. So, we’re seeing a change in the composition of the majority of what’s causing the foreclosures and it’s moving more towards 

unemployment. 

Ms. FITZGERALD. In general across the country I can’t find the 

percentage, but our counselors serve a higher percentage of folks 

with ARM than are in the general population. So, I think it’s probably 35 to 40 percent. With that said, there are a lot of prime loans 

in this mix and a lot of families in particular. We see each time 

that the percentage increases and problems with income increase. 


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I do think that we have a really big challenge with the Option 

ARMS coming, particularly in California. They are very concentrated, but they only peak in 2010 and 2011 and they’re going 

to present a totally different problem. I do know that Treasury 

seems to be aware of that and is thinking of different strategies. 

Ms. GOLDBERG. I can’t speak at all to the numbers in Philadelphia. I can tell you that in Louisiana it’s a different situation. We 

still see a mix of different loan types. And, thinking of what I’ve 

heard from NFHA’s members around the country, I think it varies 

a lot depending on the particular local market. In the Midwest it’s 

a little bit different than in some of the sand states. I think everybody is seeing unemployment as an increasing factor regardless of 

the loan type. But, we’re also still seeing the troubling loan types. 

Mr. TRAUSS. I was going to talk about the troubling loan types. 

Philadelphia has historically had a high percentage of its low-income population owning homes and that is what was going up for 

a while. One of the problems is it’s not always obvious what the 

loans are. In some of these loans, you look at them look like first 

mortgages, traditional first mortgages. But, if you look closely at 

them, you find out that they are predatory or unfair, they have 

high interest rates, they might be part of a 80/20 loan where a person bought a house with a first mortgage and there’s a second 

mortgage they don’t really understand for 20 percent that’s a high 

interest rate mortgage, which makes the total package 

unaffordable. Unlike normal loans, escrow is not included so that 

when they start getting the payments there’s a shock that happens 

as rates go up and they didn’t realize that it wasn’t a traditional 

loan. So, from the Court’s point of view it would not necessarily be 

obvious that the particular loan involved is the kind that they’re 

trying to breakout. There’s a lot, of I guess I would call them unfair 

loans that are in there along with traditional, prime, credit and 

also these exotic loans with adjustable rates. 

Mr. ATKINS. My time is up. Thank you. 

Mr. NEIMAN. Mr. Silvers. 

Mr. SILVERS. Thank you. When my last time expired I was asking about how the outreach is conducted. Is it your view that having outreach conducted by parties other than the banks has contributed to the success of the program, either Judge Rizzo or Mr. 

Trauss? 

Judge RIZZO. I can tell you, I believe it’s been a significant benefit to have this type of canvassing done by neighborhood groups 

who are known in the community, who have the way to engage and 

actually have a level of trust infused in the dialogue. When they 

knock and it’s not someone serving papers, it’s someone saying, 

‘‘Listen, I know who you are. You’re in foreclosure. Did you get 

your papers? Did you look? Did you see your date? Did you make 

the call?’’ If there were issues with language, we even have abilities 

through our hotline to deal with those types of issues. So, that outreach, that one-to-one human touch by people in the community, I 

think that really started it. Actually, some studies were done where 

we took some batches of our cases coming in subject to canvas or 

not and we saw that the failure to appear rate was higher in those 

which were not contacted through canvas. So, we really have some 


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experience with this to know that it really does make a difference 

and I think it really is a key in terms of our local program. 

Mr. SILVERS. Thank you. I want to shift to a much broader question. There is a certain amount of dissatisfaction on this panel and 

I think on the last one, to somewhat of a more moderate degree, 

with the servicers. Any of you, what is happening here, is this disorganization? Is this intentionality? Do the servicers wish not to 

participate and if so, why? 

Ms. FITZGERALD. I think its really hard to aggregate a group of 

organizations so, we have to be careful at that. 

Mr. SILVERS. Well, then let me help you. I mean, I’m just interested in volume. If you look at the Treasury reports, monthly reports, there’s a half dozen, I think that constitutes almost all of the 

volume. I mean, not just the volume of the modifications, but the 

volume of the underlying loans. Lets talk about them. 

Ms. FITZGERALD. I do think that the mergers have created maybe 

even unanticipated consequences because they have many servicing 

systems. They have different procedures so I think we’ve certainly 

seen probably a decline in responsiveness and just our ability to 

solve escalated problems due to the consolidation, than maybe we 

did three years ago about awareness of the problem across senior 

leadership. Obviously, there’s a challenge in execution. 

Ms. GOLDBERG. One thing I would just add to that, I can’t speak 

to intent but I think we should be mindful of the incentives that 

are built in for servicers to move towards foreclosure and how those 

compare to loss mitigation. Attorneys on the Panel can probably 

speak to this better than I, but the feedback that I get from the 

lawyers that I work with is that servicers get paid more, they get 

paid faster, and they get paid more reliably for all the steps that 

they take to move somebody towards foreclosure than they do for 

loss mitigation. 

Mr. SILVERS. Ms. Goldberg, stop right there. Is that still true 

today with the MHA Program being in place? 

Ms. GOLDBERG. I believe it is. 

Mr. SILVERS. What could be done to the MHA Program—and I 

invite any of you to comment—that would alter that fundamental 

calculus? And, not giving in to the deeper questions of the fundamental economics of the loan, but this questioning of servicing and 

where those incentives are. 

Mr. TRAUSS. There’s a big problem with the incentives. There’s 

four problems mainly, which relate to your question. I think there’s 

a problem with culture, which is very hard to overcome. There’s 

been a way of doing things since the servicers were created, which 

is now about 10 or 15 years ago when it became big. They have 

a way of doing things, they have a mindset that it’s our way or the 

highway and they’re not used to changing that mindset and that’s 

a big problem and that relates to habit. And then there’s the incentive problem. To answer your question, we can’t answer your question, at least I can’t without further study about the nature of the 

incentives. My suspicion is, my gut is that the amounts of money 

involved, even at this level are not big enough to overcome the cultural problems, the habit problems, the disorganization problems, 

and the existing incentives to foreclose. 


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Mr. SILVERS. Can I stop you there for a second? You and I have 

both stated that we think that restructurings and bankruptcy 

would help here. From what you just said, might another different 

approach be to—and this is more like a business approach as opposed to a legal approach—to essentially to get subcontractors who 

do nothing but this that specialize in reformatting loans, if we’ve 

got profound cultural problems with businesses that have been 

built to do something different? 

Mr. TRAUSS. The problem with using subcontractors, as evidenced by the last opinion of Judge Sigmund, the bankruptcy 

judge. One of her last opinions, talks about how theoretically it 

could work depending on how you select the subcontractor. Sometimes if you select somebody to do a narrow thing, they don’t do 

it with the right understanding. 

Mr. SILVERS. Well, they might not have the broader capacity that 

the large banks and their servicing facilities have. Is that what 

you’re suggesting? 

Mr. TRAUSS. Well, what I’m suggesting is the incentive that loss 

mitigation has been farmed out, which it has by these servicers already, even before Making Homes Affordable. It has not enhanced 

the process and I don’t know why that is. But, doing exactly what 

you do hiring a subcontractor to do something repeatedly and efficiently has not made it better, it’s made things worse. 

Mr. SILVERS. Thank you. My time has expired. 

Mr. NEIMAN. Thank you. I want to thank you all for being here 

this morning, but even more importantly I want to thank you for 

what you do everyday and I look forward to the afternoon with 

Judge Rizzo. I will look forward to staying in communication with 

you. Please keep us advised as you update your data and look at 

us as a resource, as well. Thank you very much. 

Let’s try to change panels as quickly as possible because we are 

running a little behind. 

The witnesses—and this is our largest panel so we really do have 

to be conscious of the time—the witnesses in our third and final 

panel include three servicers and an economist from the Boston 

Fed. From the left we have Dr. Paul Willen, Senior Economist and 

Policy Advisor, Research Department at the Federal Reserve Bank 

of Boston who has been writing and researching this for many 

years and well known to many of us; Allen Jones, Senior Vice 

President of Default Management with Bank of America Home 

Loans; Larry Litton, President and CEO of Litton Loan Servicing 

and Joe Ohayon, Vice President in Community and Client Relations for Wells Fargo. I very much appreciate you all being here. 

I know these are tough environments for you all. I know you all 

travel and have come a great distance, but I think this is very important. I am glad that if we couldn’t get Treasury to sit to the end 

and listen, I think it’s even all the more important that we have 

the servicers sitting and hearing those prior panels. So, I look forward to your opening statements and to the questions and answers. 

And please do try to limit those to within five minutes. Thank you. 

Dr. Willen. 


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STATEMENT OF DR. PAUL WILLEN, SENIOR ECONOMIST AND 

POLICY ADVISOR, RESEARCH DEPARTMENT, FEDERAL RESERVE BANK OF BOSTON 

Dr. WILLEN. Thank you. Mr. Atkins, Mr. Neiman, Mr. Silvers, 

thank you for your invitation to testify. My name is Paul Willen 

and I am a Senior Economist and Policy Advisor at the Federal Reserve Bank of Boston. I come to you today, however, as a researcher and as a concerned citizen and not as a representative of 

the Boston Fed, the other reserve banks, or of the Board of Governors. Over the last two years we have searched for policies to 

help troubled borrowers avoid foreclosure. In New England, we at 

the Boston Fed have worked with banks to setup a lending facility 

to help subprime borrowers refinance into prime mortgages. We 

brought borrowers and servicers together in large scale foreclosure 

prevention events that have served as a national model. In the research department we have gathered and analyzed detailed loan 

level data to help us evaluate policies to ameliorate the effects of 

this crisis on our communities and on the country. 

In my remarks today, I would like to focus on three aspects of 

the foreclosure crisis relevant to foreclosure prevention plans. The 

first is that an effective plan must address the problems of unemployed borrowers. Long term loan modifications that yield affordable payments for borrowers, but also provide attractive payment 

streams to lenders will help some, but they cannot help unemployed borrowers. 31 percent of an unemployed person’s income is 

often 31 percent of nothing and a payment of zero will never be attractive to a lender. This is important because our research shows 

that, contrary to poplar belief, unemployment and other life events 

like illness and divorce, much more than problematic mortgages, 

have been at the heart of this crisis all along, even before the collapse of the labor market in the fall of 2008. This may seem 

counter-intuitive. Life events could not explain the surge in defaults in 2007 because there was no underlying surge in unemployment or illness that year. But that view reflects a misunderstanding of the interaction of house price depreciation and life 

events in causing default. When prices are rising and borrowers 

have positive equity, detrimental life events lead to profitable sales. 

But when prices are falling and borrowers cannot pay off their 

mortgages with the proceeds of a sale those life events lead to foreclosure. Thus, we did not need to see a surge in life events to get 

a surge in foreclosures, but rather a fall in house prices, which is 

exactly and unfortunately what we saw. 

The second policy-related finding from our research is that it is 

unlikely that a modest financial nudge to servicers will lead to millions of modification that will help millions of worthy borrowers. In 

a recent paper we show that in the period of 2005 to 2008 lenders 

gave payment reducing modifications to only 3 percent of seriously 

delinquent borrowers. In addition, we show that this did not result 

from contractual issues related to securitization. Lenders were just 

as reluctant to modify loans when they owned them as when they 

serviced them for a securitization trust. We argue that the main 

reason we see so few modifications is that it simply isn’t profitable 

for lenders. Modifications benefit lenders because it helps to avoid 

the high cost associated with foreclosure, but re-default risk, the 


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possibility the borrower who receives the modification will default 

again, and self-cure risk, the possibility that the borrower would 

have repaid the loan without any assistance from the lender can 

wipe out these benefits. The role of self-cure here is key. About a 

third of the borrowers in our large sample are current on their 

mortgages or prepay a year after they become 60 day delinquent. 

An investor would view assistance given to such borrowers as wasted money. 

The third result from our research is that policy makers need to 

exercise care in designing foreclosure prevention policies to provide 

the right incentive to borrowers and servicers. A program that offers monetary incentives to do as many modifications as possible 

and to minimize the probability that modified loans re-default, may 

not in fact prevent many foreclosures. To see why, one must realize 

that the easiest way to ensure that a borrower doesn’t re-default 

is to choose a borrower who is unlikely to default in the first place. 

Thus, a servicer could make minor modifications to millions of 

loans to perfectly creditworthy borrowers, collect large sums from 

the government and then collect even more as a borrower continues 

to repay the loan. Taking these research results into account, we 

believe the most effective use of government money for foreclosure 

prevention would involve direct assistance to borrowers rather than 

to servicers. Two recent proposals, one offered by a group of Federal Reserve Economists—including me—and the other by researchers at the University of Wisconsin target the unemployed to 

help them cover their housing expenses until they get their feet 

back on the ground. Either plan would prevent large numbers of 

foreclosures and would be a good starting point for an effective 

foreclosure relief plan. We hope these findings add perhaps unexpected insights to your work as policy makers and thank you again 

for the opportunity to appear before you today and of course I’m 

happy to answer any questions. 

[The prepared statement of Dr. Willen follows:] 


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Mr. NEIMAN. Thank you. Mr. Jones. 

STATEMENT OF ALLEN JONES, SENIOR VICE PRESIDENT FOR 

DEFAULT MANAGEMENT, BANK OF AMERICA HOME LOANS 

Mr. JONES. Superintendent Neiman, Mr. Silvers, Commissioner 

Atkins, my name is Allen Jones, Bank of America’s Default Management Executive. I appreciate the opportunity to appear before 

you today and provide you an update on Bank of America’s efforts 

to keep our borrowers in their homes. As the country’s largest 

mortgage servicer, we are a major partner in the Administration’s 

Making Home Affordable Program and we understand the responsibilities that are associated with that leadership role. We are committed to helping the Administration achieve its goal of 500,000 

trial modifications by November 1st. Bank of America is working 

to transition 125,000 at risk loans into trial modifications as part 

of its goal. As a demonstration of our growing momentum, in August we doubled the number of trial modifications we started. And 

based on the most recent reporting I can tell you that we now have 

81,000 borrowers in trial modification. Throughout this historic 

downturn Bank of America has extended credit to drive economic 

growth and worked to develop financial solutions for our customers. 

For example, we were one of the first lenders to leverage the Administration’s MHA refinance program and to date have completed 

refinancing under the program for more than 74,000 borrowers. 

Earlier this year, Bank of America began reporting on how it continues to lend and invest in the communities we serve. In our second quarter report we stated that the first half of this year, we’ve 

extended more than $394 billion in total credit, more than $196 billion in first mortgages $40 billion in loan moderate income mortgages, provided more than $8 billion in small businesses and $149 

billion in commercial non-real estate loans. We will continue to provide transparency into our lending and investing efforts and we anticipate our next report on third quarter activity will show continued leadership. 

We understand the decisions we make have broad implications 

even beyond our customer base. Recently Bank of America announced we have created a new position, Consumer Policy Executive, a role which will work directly with our core consumer lines 

of business to ensure that view points from key external stake 

holders, including community groups and consumer advocates are 

taken into account as we address policy issues critical to our customers. We’re leveraging lessons learned from this economic crisis 

as well as input from customers to improve and strengthen our 

products to better meet consumer needs. At the center of that work 

is our commitment to simplicity and clarity, developing straight 

forward products that are easy to use and have clear terms. As described in my written testimony, my teammates on the credit card 

and deposit teams have also recently announced exciting new innovations. The focus of today’s hearing is on what we are doing in the 

market to keep Americans in their homes. Before MHA we were 

one of the first lenders to implement a national home retention 

program. Through that program and other efforts Bank of America 

completed loan modifications for approximately 190,000 customers 

from January through mid-September of this year. That’s in addiVerDate Nov 24 2008 00:44 Nov 14, 2009 Jkt 053159 PO 00000 Frm 00126 Fmt 6633 Sfmt 6602 E:\HR\OC\A159.XXX A159

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tion to more than 230,000 for all of 2008. We are now working hard 

to help ensure MHA’s success and have established a sizeable infrastructure to handle customer demand and program details. Significant resources have been devoted to this effort, including expanding our default management staffing to more than 11,000, a 

55 percent increase since the beginning of the year. Our recent results reflect our conversion to MHA as the centerpiece of our home 

retention efforts. As a result, we have significantly increased our 

trial modifications from approximately 28,000 in July to more than 

81,000 through mid-September. In that same period, we have also 

increased the number of offers extended under MHA to more than 

141,000. Importantly, as we have ramped up, we’ve placed on hold 

any foreclosure sale. With that said, we continue to look critically 

at our loan modification process. Three areas of particular focus 

right now are how we can make the process more customer friendly 

and responsive, how we can more efficiently handle customer documentation, and how we can keep customers better informed 

throughout the process. 

In addition, there are other challenges we continue to confront in 

our efforts to help as many borrowers as possible realize the benefits of MHA. In an effort to improve our outreach and close these 

gaps, we’ve ramped up activity through traditional avenues, such 

as mail, telephone and we’ve escalated our participation in community and outreach events. Since January we’ve participated in more 

than 167 community outreach events and we’ll be here in two 

weeks in Philadelphia. We also have partnered with three national 

nonprofits. I’ve heard earlier in the panel the importance of a trusted advisor. So, we partnered with three national nonprofits in the 

creation of the alliance for stabilizing communities. There are limits to what the current programs can achieve. Unemployment and 

lack of interest in maintaining a property, those are issues that we 

have to consider. And as I wrap up my written oral statement, I’d 

like to focus on the fact that we really understand the urgency 

here. The strong focus from the Administration has added substantially to our collective efforts to assist homeowners. Yet, we understand we have a long way to go in very challenging circumstances. 

We look forward to working with the Administration and the Congress and I appreciate the chance to be here. Thank you. 

[The prepared statement of Mr. Jones follows:] 


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Mr. NEIMAN. Mr. Litton. 

STATEMENT OF LARRY LITTON, PRESIDENT AND CEO, LITTON 

LOAN SERVICING 

Mr. LITTON. First of all, I would just like to thank you for the 

opportunity to be here and if many of you can’t tell, I’m from 

Texas. I’m the funny sounding guy up here. So, I am very excited 

to have this opportunity to kind of share some insights with you. 

I am responsible for running a mortgage portfolio for about 365,000 

loans and about $58 billion worth of mortgage products. We’re in 

all 50 states. It’s predominately subprime as well as ALT–A products. At Litton we’ve been a leader in providing workout solutions 

to homeowners for more than 20 years. We have been and we continue to be a proponent of thoughtful as well as practical loan 

modifications that provide affordable opportunities to struggling 

homeowners and that is very consistent with our obligations to the 

owners of those loans. We are very proud that many of our early 

strategies served as a basis for many of the loss mitigation methods that the industry deploys up to this day. 

Over the past twelve months or in the twelve months prior to the 

announcement of the HAMP Program in February, we had modified more than 44,000 loans over that twelve month period of time. 

That represented about 30 percent of our service to first lien mortgage portfolio that were 60 day or more past due. On average, 

these modifications lowered the homeowner’s monthly principle and 

interest payment by about 20 percent based off of how those loan 

modifications had been structured. 

Since March 2009, when the initial HAMP guidelines were published up through August 2009 when Litton had signed up for 

HAMP, we had extended trial modifications to approximately 

40,000 additional homeowners. These trial modifications were offered in accordance with the broad principles of the HAMP guidelines. Since signing onto the program in early August we have offered another 10,000 HAMP loan modifications. So, when you add 

all that up you get 44,000 loan modifications that we had done in 

the twelve months leading up to February, 40,000 trial modifications over that timeframe from February up until we signed on the 

HAMP and then 10,000 additional loans that we modified under 

HAMP, makes up a total of about 25 percent of our total portfolio 

that we service has been modified over the past 18 months. 

So having said that, I’m here today to kind of offer a couple of 

suggestions as it relates to the HAMP guidelines. HAMP has very 

successfully created substantial momentum in the mortgage servicing industry by providing more loan modification opportunities to 

struggling homeowners. But as with any government program, 

there are some lessons that I think that we’ve learned and there 

are four suggestions I’d like to make here today. 

The first suggestion has to do with debt-to-income ratio. So, the 

31 percent debt-to-income standard is a very reasonable basis to 

calculate a modified mortgage payment. However, I’m going to give 

you an example. There are homeowners who have substantial arrearage that has built up and that arrearage was built up because 

a borrower may have had a prior unemployment situation or other 

life event that may have created an instance where the borrower 


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got past due. Today they may have a front end debt-to-income ratio 

that’s less than 31 percent and then after capitalizing arrearage or 

forbearing the arrearage, you may create a situation where the DTI 

payment may be greater than 31 percent, but those borrowers 

would be excluded from HAMP. So, expanding HAMP to include 

situations where borrowers have less than 31 percent debt-to-income ratios in those instances where arrearage have been created, 

might be a worthwhile way for policy makers to consider expanding 

the program to be more effective. From an income documentation 

prospective, it’s completely understandable for a program that relies on taxpayer funds to require lots of income documentation. 

However, I would say that there are delays that are created by requiring some of the documentation that HAMP requires. The earlier panel made reference that in many instances there is not a lot 

of documentation. I would agree with that. However, I would state 

that it is a problem in many instances getting that information 

from some of these consumers. So, I think a way to streamline that 

might make the program more effective, as well. 

As it relates to the NPV model that the GSEs rolled out, the 

NPV model was based on state averages of home price depreciation 

and is not often granular enough to take into account home price 

appreciation or declines within specific communities and neighborhoods. This will cause some loans to fail or some loans to pass the 

NPV test when they potentially should not. Our experience has 

found that more loans fail than what should actually fail in this 

situation because it’s not granular enough. So, being a little bit 

more specific as it relates to the NPV models might also be something for policymakers to consider, as well. 

The last point I’ll make has to do with option ARMS. Your prior 

panelists made reference to a point—I think they are exactly on 

point—that there’s a coming wave as it relates to option ARMS 

loans and many of those loans will not fit within this program. So, 

policymakers considering ways to expand the program to make it 

more focused on option ARMS product might be something very 

worthwhile, as well. Thank you very much, I’m happy to answer 

any questions that you might have. 

[The prepared statement of Mr. Litton follows:] 


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Mr. NEIMAN. Mr. Ohayon. 

STATEMENT OF JOE OHAYON, VICE PRESIDENT FOR COMMUNITY AND CLIENT RELATIONS, WELLS FARGO HOME MORTGAGE 

Mr. OHAYON. Thank you. Members of the Congressional Oversight Panel, I’m Joe Ohayon, Senior Vice President of Community 

and Client Relations of Wells Fargo Home Mortgage Servicing. 

Thank you for the opportunity to speak before the Oversight Panel 

today. We take seriously the responsibility that comes with Treasury’s investment in Wells Fargo through the Capital Purchase Program and we are committed to do everything we can to assist 

struggling homeowners as part of that responsibility. Wells Fargo 

may be a big corporation, but we operate within the conscience of 

a company determined to do what is right for our customers, our 

investors and all American taxpayers. 

Of course, this year much has changed and evolved in our economy and in our efforts to assist struggling borrowers. First, we 

worked hard to implement the very detailed and evolving Home Affordable Modification Programs, which include different guidelines 

and requirements for Fannie, Freddie, non-GSE, and most recently 

FHA borrowers. 

To handle the greater than 200 percent increase in borrowers requesting assistance—including the 35 to 40 percent who are current on their mortgages—we have hired and trained an additional 

4,600 U.S.-based home retention staff for a total of more than 

12,000. As of September 3rd, we have qualified more than 304,000 

customers for trial and completed modifications this year alone. As 

it pertains specifically to HAMP, we have offered 78,000 customers 

a trial modification and we have received at least the first payment 

for about 44,000 of those trial modifications. 

We have further enhanced our support systems, our training and 

our retraining to aide our service representatives in appropriately 

communicating modification programs and guidelines as they continue to change and expand to help more borrowers. 

In addition, we have improved the ways to obtain from borrowers 

the extensive documentation the government requires for its programs and we continue to work to ensure all documents are processed in a timely manner. And most importantly, in this dynamic 

environment we continue to conduct final review to ensure every 

option is exhausted before a property moves to foreclosure sale because when a foreclosure occurs everyone loses. 

Despite widespread decreases in home values, more than 92 percent of our customers in our entire servicing portfolio remain current on their mortgage payments. This is the direct result of our 

customers’ efforts and our commitment to responsibly servicing all 

of the loans in our portfolio, including those formerly owned by 

Wachovia and loans we service, but did not originate. 

In addition, our delinquency and foreclosure rates continue to be 

significantly lower than the industry average and the lowest of the 

nation’s largest mortgage lenders. And for all of 2008 and 2009 

year-to-date, less than 2 percent of the owner-occupied properties 

in our servicing portfolio have actually proceeded to foreclosure 

sales. These results would not have been achievable without the 


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continued collaborative public and private sector efforts to inform 

customers of their options and the introduction of the new Home 

Affordable Modification Programs. 

While we’re proud to be part of the HAMP development, it’s important to acknowledge that HAMP will not help all borrowers in 

need of payment relief. For the customers who are ineligible for 

HAMP and where we can reach affordability, we offer customized 

solutions. 

You’ve also asked for our feedback on Philadelphia’s Residential 

Mortgage Foreclosure Diversion Pilot Program and I’m happy to 

provide you with a few comments based on our experience. In general, we found that intervention programs like Philadelphia’s can 

be helpful when they allow a servicer to engage in the discussion 

of alternatives to foreclosure with borrowers that have not yet had 

such discussions with us. Anytime we have the opportunity to work 

with a borrower that we have been unable to reach or to have a 

deeper discussion with a borrower, we open up the possibility that 

we can find a way to avoid a foreclosure that otherwise would have 

occurred. 

From our perspective, Philadelphia’s Diversion Program is one of 

the most streamlined and cost effective programs of this kind and 

provides intervention in a way that can be helpful to the borrower 

without being overly burdensome on the servicer. Conferences are 

scheduled in a relatively short time, servicers can participate by 

telephone, key steps in the foreclosure process can proceed in parallel with the conciliation process and the standards for evaluating 

whether or not the foreclosure can be avoided are relatively clear. 

The city also has done a good job of adapting its program and making adjustments as lessons are learned. 

In terms of ways to improve the program, we find that some 

homeowners for whom a conference is scheduled fail to attend the 

conference and a limited number of borrowers come out of a conciliation conference with the potential for a workout solution. If the 

city could provide some means of limiting the conference to only 

those borrowers who have not been fully evaluated for a possible 

alternative to foreclosure and those who are actively engaged in the 

process, the resources required on behalf of the city and servicers 

could be significantly reduced and the customers who can truly 

benefit could still be served. As servicers, we sit between the customer and investors and we are responsible for doing modifications 

the right way. We also have the responsibility to execute these programs well for all American taxpayers by ensuring that customers 

given modifications are truly facing hardships and that they can afford and sustain their home payments after a modification is completed. 

Thank you and I look forward to your questions. 

[The prepared statement of Mr. Ohayon follows:] 


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Mr. NEIMAN. I started off my questioning of the Treasury and 

GSEs by pointing to the success metrics that the Treasury has 

been using to evaluate the success of the program and also to establish performance among the various servicers. As you all know, 

there is great disparity between performance, with some down at 

zero percent with others up in the high double digits. Recognizing 

that some of these disparities maybe due to the timing when some 

servicers entered the program or based on the type of trial modification. Is it based on verbal information or have they waited for 

full documentation? I’d like your views on what is the best way to 

analyze this information and should there be changes in how we 

implement or look at trial modifications? I’m open up to whomever. 

Larry, you seem to be nodding. 

Mr. LITTON. As it relates to whether we start with the verbal or 

a written, I 100 percent concur with the statement that was made 

earlier that the most important thing is to get moving whenever we 

have a customer on the telephone. So, we’re of the view that proceeding with verbal information is critical so that we can stop the 

foreclosure and so that we can begin the process of the loan modification. So, we’re very supportive of that. However, that does bring 

up challenges later in terms of making sure that you follow-up with 

getting the income documentation that we have to have. But I do 

think that that’s one area that could be driving substantial disparity, the fact that some may be waiting for the written information to come in before they start the trial. 

Mr. OHAYON. I would agree with Larry. We’ve done it both ways 

at Wells Fargo. A program has evolved over time now since February and certainly has gotten better and more refined as the 

months have gone on. Things like the roll out of FHA in late July— 

which went live in the middle of August—certainly help a servicer 

like Wells Fargo because we have a strong concentration of FHA 

loans. But we started with fully underwriting, requiring proof of income and documentation upfront. It has since moved to a verbal 

approach. It provides immediate relief to the customer because we 

can grant a trial payment and reduce payments immediately. But, 

as Larry points out, certainly it provides the opportunity that once 

we get supporting documentation it may exceed that level or beyond the level of income that we actually got from the customer. 

Mr. NEIMAN. Thank you. You know, I’m also interested to the extent that the program has restricted your ability to offer loan modifications outside of the program. And, I would particularly like to 

start off with Mr. Litton because he, to my understanding, was one 

of the few servicers that had been utilizing principle reduction as 

a favored loan modification and the fact that HAMP does not prohibit it, but it doesn’t require it—permits it, but doesn’t require it. 

Do you have a view on whether this is making it more difficult for 

principle reduction and is that something that the program should 

be reconsidering? 

Mr. LITTON. You know, I testified back in November in front of 

Congress on this issue. We adopted a policy in November 2008, ran 

that policy up through March 2009 that did support a principal reduction strategy. That was based off the fact that our analysis at 

that time concluded that using principal reductions is a way to reduce payments, create lower loan-to-value ratios, provide more exit 


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opportunities for consumers later on down the road and might provide more motivation. Obviously, under the HAMP program, constructed as the way it is, it is an option. However, the industry 

standard now—most servicers are not using the principal reduction 

component of that, they’re using the principal forbearance part of 

that. The ASF as well as several other entities have, I think been 

comfortable with that and you’ll see most servicers executing it 

within those broad parameters. 

Mr. NEIMAN. Any of the bank servicers care to? 

Mr. JONES. Sure, I’d be happy to address that. Bank of America’s 

perspective is that in certain circumstances principal reduction 

makes sense. I mentioned earlier that we’ve done 190,000 modifications outside of MHA this year. Under MHA the centerpiece of our 

activity today—81,000 loans in trial—what we have found, it’s not 

really the exit strategy as much as keeping our borrowers in their 

homes. And we’ve found that rate reductions, we’ve found that forbearance, we’ve found that extension of term, those are the ways 

that we can keep borrowers in their homes and that’s what is important in communities. 

Mr. NEIMAN. So, even though the affordability may be the same, 

I think it’s your rationale that the motivation to sustain that and 

when we look at re-default rates down the road that may have a 

difference? 

Mr. LITTON. Absolutely. That’s what led us down that road. 

When I said exit, what I meant there is that the borrower then has 

an opportunity if he needs to sell the house in two years or three 

years or if he gets transferred, you’re not carrying a balance that 

is unsustainable at that point in time. That’s what led to that conclusion back at that point in time. 

Mr. NEIMAN. Appreciate that. Mr. Atkins. 

Mr. ATKINS. I wanted to refocus on the re-default aspect here, especially with unemployment statistics as they are. OCC and OTS 

had a study that they also released earlier this year, which pretty 

much—which we were talking about, Dr. Willen. So, I was wondering is this principal reduction really the only type of ultimate 

tool or what are the other types of things that make sense in this 

context? 

Dr. WILLEN. On the issue of principle reduction it’s exactly right. 

What I said before is the problem with negative equity is basically 

the borrowers can’t respond to life events and I think—I don’t 

know if it’s quite the right way to put it—it’s sort of like they don’t 

have an immune system. So, there are shocks that happen to people with positive equity that never show up in the data as foreclosures. They just show up as sales. So, for example in Massachusetts in 2001 we had a big increase in unemployment. We had a 

recession. The number of delinquent borrowers went up, doubled. 

But, then you actually saw a reduction in the number of foreclosures. It was a record low for foreclosures. So, when people have 

positive equity there are lots of different ways they can refinance, 

they can sell, they can get out of the transaction. So, in the long 

run I think one of the things we’ve been emphasizing is that it’s 

not just the re-defaults, it’s the fact that there are a lot of borrowers out there who are okay right now, who are fine right now, 

and who may be fine a year from now. But, until they build up 


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some equity in their house, those are at-risk homeowners. So, in 

that sense dealing with the principle reduction has its virtues and 

the problem is most homeowners with negative equity continue 

making their mortgage payments. So, you run this risk when you 

start reducing principal that you’re inviting all kinds of people who 

can make their mortgage payments, and who do make their mortgage payments, to look for relief. 

Mr. ATKINS. Right and I guess basically, that’s for the rest of 

you. I think that once we go down that road, rather it be cram 

down or whatever, we’re basically changing the whole risk or ratio 

of this entire industry and I was wondering what you might—how 

you would expect that to affect interest rates for everybody in the 

whole way that industrialists look at this industry? 

Mr. JONES. I certainly will agree with much of what Dr. Willen 

said and would cite as an example, negative equity around payment option ARMS. That certainly is an area product based whereon principal reduction makes a lot of sense. A program like that 

existed a couple of years ago, but we eliminated that program. So, 

payment option ARMS prospectively, we will not offer. As it relates 

to improvements to MHA around these same types of issues—keeping borrowers in their homes—we’ve made suggestions and have 

had a good dialogue around what can we do for those who are temporarily unemployed and how can we help borrowers—our borrowers—stay in their homes as they go through a gap in unemployment. But, we predict that they will gain reemployment. So, there 

are opportunities there for us to keep working with our borrowers 

and keep them in homes. 

Mr. OHAYON. Regarding the principal curtailments we do at 

Wells Fargo, depending on a product type that pay option ARMS, 

certainly it may make sense to actually utilize curtailment, just to 

get the dynamics of the product itself. But, when you’re looking at 

a background of what we’re trying to accomplish and one is addressing a hardship a customer is facing and trying to create affordability. To get to affordability, you can get there quicker and 

deeper through rate reduction, term extension, and really the top 

of the waterfall for HAMP and that’s really the approach we’ve 

been taking given the government’s plan. 

Mr. ATKINS. Quickly, part of the bubble produced a lot of questions regarding documentation and now we see that come up in 

some courts as ownership issues, who owns the mortgage. Have 

you all experienced that as a problem? 

Mr. LITTON. No. From a practical prospective, day-to-day, I’m not 

saying that there’s never documentation issues, but in terms of 

being able to demonstrate who the owner of the mortgage is, that 

has not been an issue. 

Mr. OHAYON. Yes, I would agree. 

Mr. SILVERS. I would agree, as well. Like my fellow panelists, I 

want to express my appreciation to all of you for coming and being 

with us today. A person might wonder whether this would be a 

pleasant experience and I want to commend you for being here. Dr. 

Willen, his testimony stated that we really needed to do something 

directly to deal with the consequences of unemployment and I 

think it’s been the theme today that that’s not in the design of the 

original MHA Program. Do the rest of you agree that that would 


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be a good idea for the Administration to address that problem directly in the MHA? 

Mr. OHAYON. We do at Wells Fargo. We’ve had a number of conversations with the Administration around a short-term solution to 

specifically address unemployment and even under employment 

when you can’t create affordability based on that underemployment 

status, so we do. 

Mr. SILVERS. Is Pennsylvania a good model for how to do this? 

The long-standing Pennsylvania program has been in effect for 

about 20 years. 

Mr. LITTON. With regards to the ACT 6 and the ACT 91? 

Mr. SILVERS. I forgot the acronym. Is that program a good model 

for the Treasury to consider in your view? 

Dr. JONES. I think we will continue to look for innovations and 

that is one that ought to be considered. I go back to the earlier 

comments, Mr. Silvers, that we need to continue to refine the program and work very strongly with the Administration to keep our 

borrowers in their homes. 

Mr. SILVERS. Dr. Willen, you said a moment ago that in relation 

to principal reductions that there was a problem of—everyone 

would like a principal reduction, not everyone needs one. Why is 

that not kind of a slam dunk argument given the fact that principal reductions—and I think everyone has said that there are circumstances in which principal reductions are the only solution? 

Principal reductions in commerce are typical. Meaning, in other 

lending relations principal reductions happen all the time when 

people get in trouble in various ways. Dr. Willen, is it the point 

that there needs to be some sort of activity here, not just a slam 

dunk argument for putting this in the bankruptcy courts? 

Dr. WILLEN. You know, the bankruptcy claims I don’t know. That 

may well be. Let me say, I’m no expert on this, but I do question 

how appealing it will be for the borrower. 

Mr. SILVERS. It’s not an appealing place, is it? 

Dr. WILLEN. No, it doesn’t seem at this point that telling a borrower, I got good news for you, you can file for bankruptcy, that 

that’s the kind of solution that we’re looking for right now. 

Mr. SILVERS. But isn’t that a good thing in a way if we want people who really want to stay in their homes to pay a price? 

Dr. WILLEN. Let me say, I think another alternative to this is an 

enhanced short sale program because in a sense a short sale is a 

principal reduction. So, I would guess in this sense I would direct 

questions to Larry in a way about what’s happening. 

Mr. SILVERS. But that doesn’t keep anybody in their homes, a 

short sale program. 

Dr. WILLEN. It doesn’t keep anyone in their homes, but it’s an 

exit strategy for borrowers. And I think in some cases what borrowers are looking for is closure. And I think one thing to keep in 

mind, one of the problems borrowers face is that they’re unemployed and they have a job opportunity and they need to move. 

Mr. SILVERS. That’s a different issue. 

Mr. LITTON. But these are the kinds of problems. When you talk 

to people these are the kinds of problems they’re facing. 

Mr. SILVERS. I think that this seems to me to be the argument 

for having this option available. It’s that you have—as I think your 


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testimony quite compellingly states—certain types of life problems, 

such as needing to move for a job. Being underwater is very problematic and this helps. If you don’t want to move, short sales aren’t 

a big help and short sales put a lot of inventory on the market and 

that may not be what we want to do right now. But in any case, 

I just wanted to get that clear on the bankruptcy court issue. Mr. 

Litton, we heard from Dr. Willen that his financial model is driven, 

I think, by two numbers, re-default rates and self-cure rates suggest that it may not be profitable for people in your position to restructure loans. You’ve just finished telling us that even before 

MHA you had restructured something, I think something like 

80,000 loans in total when you add all the numbers up? 

Mr. LITTON. Yes, sir. 

Mr. SILVERS. You seem like a bottom line focused type of person. 

Explain to me why Dr. Willen is wrong? 

Mr. LITTON. Well, I wouldn’t say it that way, that he’s wrong. 

The way I would phrase it is this, at Litton Loan Servicing, and 

taking into account our prior ownership, we were aligned with the 

holder of the credit risk. So, as loans defaulted and as losses 

mounted it was in our best interest for those guys, in order to modify the loans and keep in their homes because the losses would be 

lower, that’s number one. 

The number two, what I would argue is that it’s clearly stated 

in the pooling and servicing agreements that we are all kind of responsible for servicing loans in that that we have a contractual responsibility to represent investors and make losses as low as we 

can make them. And, loan modification, in our judgment, has been 

one of the ways to fulfill those contractual responsibilities. And 

then there are economic incentives way above and beyond what the 

HAMP program calls for. So, for example, advances. Anytime a borrower doesn’t pay me, our company has to write the check and fund 

those advances to the investors. And in this kind of climate those 

advances add up to a lot of money at the end of the day. So, all 

of those things combined is what I would argue is what led us 

down this road. 

Mr. NEIMAN. During the prior panel a statement was made that 

the incentives under the HAMP program were not enough to overcome the culture, systems, and other incentives that are provided 

to servicers. Do you agree with that statement and would you like 

to comment on it? 

Mr. OHAYON. As Larry mentioned we’ve been doing loan modifications for a long time, even pre-HAMP, because of judiciary responsibilities to our investors. We also do it because we think it’s 

the right thing to do for our customers. So, regardless of the incentives structure, we think it’s the right thing to do. Certainly, I 

want to get back to Larry’s point around the cost of foreclosure. 

The advances made are significant. The reimbursement from investors doesn’t happen until a foreclosure action is taken or the loan 

reinstates through modifications. So, actually we were recovering 

monies sooner by doing a modification. So, you would think the incentive structure is probably a reverse of that. 

Mr. OHAYON. We don’t have incentive to foreclose. 

Mr. NEIMAN. Mr. Jones. 

Mr. JONES. I agree with much of the remarks. 


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Mr. NEIMAN. Okay. Mr. Litton, do you? 

Mr. LITTON. Yes, sir. 

Mr. NEIMAN. Do you think that was overstated? 

Mr. LITTON. Well, what I would say is the following. Most 

servicers, well some servicers—and the reason that that argument 

comes up is that some servicers have historically owned REO outsourcing firms or foreclosure trustee firms, things like that. And 

most of us don’t. so, it is not a profit center I can tell you in any 

way, shape or form in our company and for most of the guys in the 

industry today. 

Mr. NEIMAN. I’d also like to understand—and I’ve asked the 

other panelists—about recommendations for changes in the program design or in the implementation that would improve the process under which you comply with this program. Are there any that 

you would like to highlight for our panel in our work? 

Mr. JONES. What I’d like to offer is number one, a thought 

around the value of uniformity for all of us here. MHA offers that 

uniformity. As far as, improvements we certainly have—— 

Mr. NEIMAN. Meaning web portal documentation? 

Mr. JONES. We’re a strong supporter of that and have been engaged in dialogues around that. That is very helpful. Documentation is one thing, but again there is a segment of borrowers that 

MHA is not able to help today and so our efforts in discussing the 

unemployment issue is something that we’ll see definite value in 

and update. But, I’d like to look at MHA as one part of Bank of 

America’s overall approach to keeping borrowers in their homes. 

We support the Administration going forward and want to continue 

the dialogue that has been very, very positive. We’ll see things 

coming around second liens, around short sales, around deeds 

and—as much as we can make those uniform, the better for the industry, the better for the borrower. 

Mr. NEIMAN. Thank you. Mr. Litton. 

Mr. LITTON. Yes, sir. I had one other thing that wasn’t in my 

written testimony, which is I think more clarity around imminent 

default would be a great, great thing. We have lots of customers 

that are current that call us that need a loan modification and 

you’re right it is absolutely silly to wait for the loan to go delinquent. I think HAMP does allow you to modify, but you have to 

have an imminent default standard. Having a little bit more clarity 

around that, I think would make servicers more comfortable doing 

more loan modifications. 

Mr. NEIMAN. Good practical suggestion. With my last sixty seconds I also asked the other panelists to grade the servicers’ performance recognizing where we may be in this school year using a 

grade of A to F. Since I am used to self-grading and I often feel 

that we are probably toughest on ourselves in grading performance, 

I’d be interested if you would grade—you don’t have to necessarily 

grade your own firm, grade each other or grade the man next to 

you. No, grade all the servicers as to an A to F, I’d be curious. 

Mr. JONES. Certainly. Thank you for the question. I think this 

has been an evolutionary process to get to where we are today. In 

the beginning of the year to summer, I think we were really challenged. I think all of the servicers would say, ‘‘We could do better. 


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We could do more.’’ Today where we are, I would give Bank of 

America a B. 

Mr. NEIMAN. Mr. Litton. 

Mr. LITTON. I would comment on more from an industry prospective. I deal with a lot of people whether it be up from the regulatory side, the advocacy side, or customers, etc., I would say our 

industry given an honest self-grade right now, is at a C versus 

where we need to be. 

Mr. NEIMAN. Mr. Ohayon. 

Mr. OHAYON. I’ll look at it from an industry prospective as well 

and including the Administration and everyone else putting this together. It’s come a long way in six months. 

Mr. NEIMAN. And the grade is? 

Mr. OHAYON. I think the ability to get where we are is pretty 

good. So, I would say a B. 

Mr. NEIMAN. Dr. Willen, you want to weigh in? 

Dr. WILLEN. Just to weigh in, I think that if we’re giving them 

a grade we should take into account that I think what we were trying to say, just to clarify a little is, I think this is an extremely 

hard problem. So, this is like a grade in a CAL Tech astrophysics 

lab. So, I think they’re doing well given what an exceedingly difficult challenge they have. 

Mr. NEIMAN. Thank you very much. 

Mr. ATKINS. Some of the stories we’ve heard today and elsewhere 

sounded like a lot of it has to do with training and internal processes and it sounds like you all have increased the number of people. It sounded like they had 11,0000 people and Wells Fargo 

12,000 and so I was just wondering what your efforts are to recruit, 

train and—internal quality control is my question. 

Mr. OHAYON. We had to adjust quickly given the volume that 

came in pre-HAMP and post-HAMP. So, as I mentioned earlier, we 

increased to about 46,000 team members in home retention just 

this year. The training program is really comprehensive. Its traditional training types, which is more classroom based, but also a 

very practical experience in working with our most seasoned representatives. We’ll actually rotate our representatives so that 

they’re working with the skills that they have. So, less complex 

tasks are given to new staff. And then as they become more seasoned we kind of rotate them into a more seasoned position. So, I 

think between traditional and practical experience is what we’ve 

been doing with our staff. We have an internal QC operation, 

which listens to phone calls. So, everyone of our calls are actually 

voice recorded and we sample that to make sure that what the customer is hearing is consistent with what we’re actually putting 

forth. It’s been a difficult environment, I can tell you that. Just 

look at the HAMP program over the past six months. Things have 

evolved significantly and it’s been really important for us to make 

sure that are baseline employees understand what those changes 

are. So, that’s sort of how we’ve been doing it. 

Mr. JONES. Mr. Atkins, I agree with a lot of what has been said 

around training. I would add that from Bank of America’s prospective the way we look at it really is top down. So, we have our executives all focused on home retention. They are all focused on how 

we train. The mention of call listening, we do that as a practice. 


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We listen to calls, we connect them and then we give them to the 

line and we grade. Here it is, here is where we need to make improvements. It has been a process of bringing that 11,000 folks onboard. It’s not easy as in astrophysics as Dr. Willen said, but it is 

something that we have gotten better at each month. And with the 

commitment of our leadership across the board, I think the focus 

and the urgency around making these programs successful ultimately will win. 

Mr. ATKINS. And then as far as incentives for representatives for 

themselves to show personal success, what sort of motivation is 

there internally as far as benchmarks? How are they themselves 

graded? 

Mr. JONES. We have a standard package for our staff that are 

working and we do not compensate on an incentive basis by x number of calls, this number of outcomes. So, we have a base salary 

that we offer to our staff and we have across the board for all employees at Bank of America a paid performance rewarded depending on how the company does. 

Mr. OHAYON. I would agree. There is team member kind of report cards. There are group goals that we meet and there’s investors score cards that we have that are directly tied to their status. 

So, I think a combination of those report cards is telling how really 

great we’re doing. 

Mr. LITTON. And then, what I would add is, Mr. Atkins, is that 

since HAMP has come out we’ve really enhanced our quality control focus as it relates to that. I listen to phone calls. I talk to customers. I deal with the advocacy groups. I do understand that 

there’s frustration around customers as it relates to making sure 

that we have a consistent theme and message coming out from our 

employee base. That is fundamentally critical so we want to make 

sure incentives are aligned to accomplish that objective. 

Mr. ATKINS. Mr. Silvers this will be our last around of questions. 

Mr. SILVERS. Just, I want to get a couple of things about data 

straight. Mr. Jones and Mr. Ohayon, you both gave totals for temporary modifications offered, temporary modifications entered into. 

Are these totals at the holding company level or are these for your 

primary banking subsidiary? 

Mr. JONES. The trial modification number that I gave you of 

81,000 is for Bank of America. 

Mr. SILVERS. Bank of America the national bank, not for all subsidiaries of the holding company? 

Mr. JONES. This is for all of the operations of Bank of America, 

which for all intensive purposes is the legacy Countrywide company and Bank of America that rolls up to Bank of America National Association. 

Mr. SILVERS. I was told that Bank of America, the parent owns 

a firm called Home Loan Services. Is that correct? 

Mr. JONES. That is correct. 

Mr. SILVERS. Can you explain to me why it is that Home Loan 

Services has zeros on the Treasury Department charts? 

Mr. JONES. Sure, I’d be happy to do that. 

Mr. SILVERS. Let me also say that there have been some other 

statements made about Bank of America by prior witnesses. I 


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would invite you to respond to those, as well if you wish either now 

or in writing. 

Mr. JONES. Sure. I’d rather go to—— 

Mr. SILVERS. Answer this. 

Mr. JONES. Okay. As we have acquired entities, as Bank of 

America has had the opportunity to acquire firms, Wilshire Home 

Loan Services, the transition and the technology and the platforms 

associated with those companies have come into our system. So, the 

number that I gave you is 81,000. I saw the zero for HLS. Certainly understand and would expect that you would ask that question. We are working with our most at-risk borrowers and doing everything that we can to get trial modifications started. So, I think 

when you look at going from 28,000 to 81,000 today, the trajectory 

is very good and that will continue for all of Bank of America. 

Mr. SILVERS. I would invite you Mr. Jones—I don’t want to spend 

all of the time we have on these matters—I would invite you in 

writing to comment to the panel on prior testimony relating to 

Bank of America. Frankly, I don’t understand zeros. I understand 

differentials, I don’t understand zeros. If you want to expand more 

in writing on that, I’d appreciate it. 

Mr. JONES. Sure. 

Mr. SILVERS. Mr. Ohayon, a similar question to you. Are there 

subs of Wells Fargo parent that I need to know about behaving differently than the numbers that you just described? 

Mr. OHAYON. The numbers I described are part of Wells Fargo 

Home Mortgage, which includes loans that we originated directly 

or those that we acquired the servicing. It’s that umbrella itself. It 

doesn’t include like corporate trusts or things with trustees. 

Mr. SILVERS. It includes Wachovia mortgages that you know; the 

Wachovia servicing? 

Mr. OHAYON. I don’t think so. 

Mr. SILVERS. Because again, I think we have an issue here where 

the Wachovia numbers are really not so good. Again, if you could 

just explain why that’s so since that would apparently be a pool of 

mortgages that really needs help. 

Mr. OHAYON. I certainly will. A big part of the Wachovia portfolio 

that we service is the pay option ARMS portfolio. As I mentioned 

would be for a solution on the pay option ARMS portfolio for 

HAMP. 

Mr. SILVERS. We heard you on that and that was very helpful 

testimony to educate us on that subject. I want to come back to you 

Mr. Ohayon, one more time. Wells has a large, I believe, portfolio 

of second mortgages held in-house. Is that right, not laid off on the 

securitized markets? 

Mr. OHAYON. We do. 

Mr. SILVERS. Can you just give me a dollar value of that in number of loans? 

Mr. OHAYON. I believe its $129 billion portfolio size between junior liens as well as the equity lines that we have out there. I can’t 

give you a loan count. 

Mr. SILVERS. That’s alright because it gives us some dimensions. 

What are the circumstances in that portfolio in terms of 60-day no 

payments foreclosures arising out of that, do you know? 


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Mr. OHAYON. I don’t and I apologize. I don’t directly manage the 

home equity group. 

Mr. SILVERS. I would appreciate it if you could respond in writing 

giving us that data on that book and also the face value of that 

book and also what it’s current at. 

Mr. OHAYON. Absolutely. 

Mr. SILVERS. Thank you very much. 

Mr. NEIMAN. I very much like again to thank this panel. As I 

said for our earlier panels, this is not a one time. We hope that you 

can continue to have this level of dialogue with us. I know we’ve 

been in contact with you previously to this public hearing and I 

look forward to continuing this level of cooperation with your organization. So, thank you again and you may leave. Thank you very 

much. Now, we’re going to try to take as many questions or comments—not questions—this is an opportunity for members of the 

public who would like to share any comments with us that we can 

take away with us. We would not like to engage in and it wouldn’t 

be appropriate for us to engage in a dialogue of answering any 

questions, but it is an opportunity for anybody to make a statement. We would like you to try to keep that to a minute. 

Mr. HAVER. My name is Lance Haver. I will encourage you, as 

you do your analysis to think about people like me. I pay my mortgage, but my house becomes worthless as mortgage companies who 

I support through my tax dollars refuse to do the workouts. And 

I encourage you to explain to other homeowners why it’s so important that you force these mortgage companies or you come up with 

the money necessary to help unemployed people pay their mortgages. That you help other homeowners understand that every 

time a house is foreclosed, their neighbor’s house is foreclosed, the 

house across the street is foreclosed, the value of their house goes 

down. And frankly, living in Philadelphia with two houses on my 

block that are vacant, it would be almost impossible for me to sell 

my house now at the price that I think I would’ve gotten two years 

ago. If the mortgage company would’ve helped those families out 

and those houses were occupied, I would be able to sell my house 

for what it was worth. Thank you. 

Mr. NEIMAN. Thank you. Any other comments? Well, thank you 

all. We very much appreciated being here. I think this was a very 

constructive hearing for the panel and for those who are listening 

or who will read about this in the future. So, I thank everybody 

who participated here. I also want to thank members of the public 

who were here for their time and patience. Again, appreciate the 

efforts of the staff that helped put this together as well as the hospitality of the City of Philadelphia and others who contributed to 

this event. Thank you very much. Meeting is adjourned. 

[Whereupon, at 1:01 p.m., the hearing was adjourned.] 


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wwoods2 on DSK1DXX6B1PROD with HEARINGInsert graphic folio 257 here 53159A.098
158 


wwoods2 on DSK1DXX6B1PROD with HEARINGInsert graphic folio 258 here 53159A.099
159 


wwoods2 on DSK1DXX6B1PROD with HEARINGInsert graphic folio 259 here 53159A.100
160 


wwoods2 on DSK1DXX6B1PROD with HEARINGInsert graphic folio 260 here 53159A.101
161 


wwoods2 on DSK1DXX6B1PROD with HEARINGInsert graphic folio 261 here 53159A.102
162 


wwoods2 on DSK1DXX6B1PROD with HEARINGInsert graphic folio 262 here 53159A.103
163 


wwoods2 on DSK1DXX6B1PROD with HEARINGInsert graphic folio 263 here 53159A.104
164 


wwoods2 on DSK1DXX6B1PROD with HEARINGInsert graphic folio 264 here 53159A.105
165 


wwoods2 on DSK1DXX6B1PROD with HEARINGInsert graphic folio 265 here 53159A.106
166 


wwoods2 on DSK1DXX6B1PROD with HEARINGInsert graphic folio 266/350 here 53159A.107