of the things that we accomplished there. upon my serve as mayor, i received a call from president-elect them, president bush, to serve as the first cuban-american to serve in the president's cabinet. theall to serve as h.u.d. secretary was unexpected and not only a source of pride for me and my family, but emfor the entirety of -- especiay for the entirety of the cuban american. my service in the cabinet was puncated by theerrorist attacked of september 11, 2001. these were sober be events, these were events that caused up to that time a fairly carefree, focused on domestic issues kind of time to focus on the reality of what h occurred in new york and pennsylvania 8 and right -- and right here.

it was part of my job as h.u.d. secretary to work in the reconstruction of lower manhattan and that and a number of other things were added as responsibility for us who are -- were in the administration at that time. and forever more i will remember those dayss having been a significant part of my life in public service. there is no questn that it was a privilege to serve the president, but there is no greater honor than to have the people of florida send me to washington to serve them as a member of the united states senate. and aside from the debates and the speeches and all the work that goes into turning ideas into law, one of the most rewarding experiences has been helping floridians resolve issues that they have in their every day lives. in the short time i have been here, my office has assisted more than 46,0 of florida families through casework and written correspondence and countless more efforts. we made tremendous progress in many of the issues that face our state including efforts to develop the natural energy resources while protecting the

environment, seeking to modernize the military to increase shipbuilding and meet the navy's goals of strategic disbursal and working to protect our nation's home bers from bad loans and bad investors. it has been rewarding to know that our work often impact the lives of those outside the borders fighting for freedom. i brought my work to -- to my work the belief that it is always necessary to provide a voice for those that are silenced for attempting to adnce the cause of freedom. having lived under cuba's oppressive dictatorship, i have always recognized the struggle of those who fight for freedom. that it as you has been and will continue to be a life long passion. i have taken every opportunity to recognize those engaged in cuba's peaceful civic struggle for democratic change and stand up for human rights. their names lik dr. oscar

bessett, or the ladies in white, and the victims of the black spring government crackdowns. it is my hope that one day in the not too distant future that the people in cuba will live in freedom with dignity and the hope for a better tomorrow, that is their god given right. even though i will no longer hold public office, my passion to work to see the day when people in cuba will live in freedom will continue. the preservation of all freedoms whether in cuba or around the world, call us to stand up whenever an wherever it is threatened. one series of events will stand out in my mind. a constituent of mine was in prison while visiting her family in vietnam. this is a lady who fled vietnam, lived i florida. went back to vietnam to a family wedding. and while she was there, her

views about the government of vietnam were clear and well known and so she was for no particul reason thrown in jail in vietnam when this matter came to my attention, she had been in detention for over a year. she was denied any of the basic rights that we understand and know. she had had no opportunity to ha contact with home. and she had had no real hearing and no fair trial. but she was, yet, still in prison. and one of the wonderful opportunities that i've had in my time here waso work for her release. and it so happened that working with president bush and secretary of state rice at the ti we had before the senate the vietnamese free trade agrement and presint bush was planning a visit to vietnam upon the completion of that agreement. utilizing the resources that all of us have in the senate to ensure that the consideration of that free trade agreement was

somehow connected to the freedom of this innocent woman, i was able to work with, again, our state department and secretary rice leading it at the time, as well as our president, to ensure that she was free. and i've never been more proud than the day we were able to get a phone call that she was on her way to san fncisco and then have a wonderful reunion with her a her family in orlando, florida, is something that i will never forget. we did also stride mightily in this body to seek a solution to immigration reform. something that i felt very strongly about. and being the only immigrant in this body, i felt i was duty bound to try to advance that cause. and i'm proud to say that our efforts for immigration reform gave me the oppornity to work very closely with senador ted kennedy, who we're also honoring today. here nearly a half century of service in the united states senate.

i can recall one day near his desk, reminiscing with him, he he came steent in 1962 -- to the sena in 1962. it washe same year i came from cuba. it was the same year that we had been or immediately right after wead had a serious confrontation that involved cuba, the cuban missile crisis. and i remember discussing with him howed -- how tied his family had been to cuba during that period of time and how deeply that had obviously touched my life as well. but in addition to that many opportunities to reminisce about things like that with him, i really hold dear the opportunity to have sat at the table and negotiated with him what i would have thought would have been a very good immigration reform package. good for our country a good for many people in the country. we didn't alway agree we didn't always have the same point of view. but we aays find a way to get along and be very civil about our differences. and i admired his ability to put

differences aside and his ability to find consensus. the most telling about working with senator kennedy is that he was comtted to reaching an outcome. he really wanted a solution, which then might -- and this might be a lesson for current issues today, that he could put aside the whole banana in order to get what he could. and so i believe in that working with him and then some other colleagues that have become such good and dear friends like senator graham and senator mccain and many others, senator kyl, who made an effor to get this legislation done, i leave with a sense of regret that that's not completed. but i do know that that is an issuehat will have to be addressed at some point in the fruifuture. president bush said that america remains a brickon of freedom to the world when h ske about the shining city on the hill. in his farewell address, he talked about the contributions of all individuals making our nation great. he said, "if it had to be city

wallets, the walls had the words and the doors were open to those with the will and heart to get here." i believe those words to be as true today as the day he said them and i d hope that in the not-too-distant future this congress address them to the very important issue. whether it is immigration, budgets, or supreme court justice, i'll also miss the debates, and i want to thank my fellow senators for their lliality and their friendship. i know these friendships are going to be the hard of the thing to leave here, on both sides of the aisle, and i must sa that i've been very touched by the warm and gracious phone calls and other expressions that i've received from my colleagues, and as i sarges on both sides of the aisle. thatakes me feel good about my relationship with awful you, and i hope -- with all of you, and i hope many of those relationships will continue. i want to tnk senator kyl and senator alexander and other members of the leadership time

for their kindness in working with me and give me opportunities to participate in our great debates. i want to thank senator reid and senator dbin for their friendship and willingness to work with me as well. i have had a very special relationship with my colleague from florida, senator bill neon. we have known each other for a long time, long before we came to the senate. and it has been a real privile and pleasure towork with him. i think we've work together well naff to give florida and really pleased to not only have had this fine working relationshipithim but also our staffs have worked tother well, and i want to thank his chief of staff pete mitchell and others in this office for the wonderful way in which they've worked with us. all of you have extended great kindness to kitty and to me, a understand i -- and i hope that we will have an opportunity to see you in florida where we'll continue to make our home much i want to especially recognize some people from my staff who

have really made my office go and as all of you rely on these folks to make us look good at times and always be dedicated to us. my state director has been kevin doyle, he's done a magnificent job. senior director, kate bush, michael zaire, terry couch who has been bouncing with me from mayor to secretary to senator, and i dare say my even continue to hang around with me in some way. my chief of staff and lon longte friend tom wineberg. he worked with me when he was county administrator and then came to join me here. there were a few folks who were in my staff, john lilly, my first chief of staff, and my former state director matthew hunter were also very important in my work and ippreciate them very, very much. i have to say one of the most

singular honors that i have had in my service was to work with the men and women who serve in our armed forces and to get to know, whether it is team people h. nem their leadership, like geral petraeus, who is now a florida the cenal command in tampaer or, or just some floridians serving in the national guard and having lunch with them in kabul or baghdad or other places here in washington or around the world, they are an amazing group of people. they have my respect and my deep-felt grat feud for the work that they do as they serve our nation in foreign, distant placesnd their famils with them are part of serving as well. while saying "thank yous," i also want to say a thank you to my wife kitty. i promise you, if it wasn't for kitty, i would not have done half what i've done in life. and so i am eternally grateful to the good lord for the blessing of having a wderful

life companion. i want to tell you all that vula very fine -- that you will have a very fine person here in my place. i think he will serve the people of florida well. he want t extend a warm lcome to george as he joins this wonderful body. i am humbled by the trust the people of florida hav placed in me. i have made a decision to move on. i do it with a heavy heart. i also want to address myself to the cuban-american community through our countryut especially in florida who have had such great pride in m and have put so much of their faith and hopes in my public life and i want to say to them that -- [speaking spanish] -- which meansism appreciative of the pride we share together and what we have accomplished.

yournthusiastic support has touched my heart and i will always carry that w with me. the opportunity for someone like me to serve speaks volumes about the promise they made and one our nation continues to keep even to this day. i want to close with a quote from jose marti, a patriot, uho strived for freedom. "he said liberty is the essence of life whatever is done without it is imperfect." with that, i have tried e enjoy the fruits of liberty but have also tried to extend it to others in every way i could. i am immensely grateful to have been able to serve in this body. i am humbled by this momentnd i am grateful for your friendship and support. mr. president, i yield the floor. mr. kyl: mr. president? the presiding officer: the senator arizona.

mr. kyl: as senator martinez mr. president, i yield the floor. mr. kyl: mr. president? the presiding officer: the senator arizona. mr. kyl: as senator martinez snows, senator mcconnell could not be here this morning. i made some brief remarks yesterday but let me just say, kick offome comments that i know others of my colleagues will want to make, that in addition to the other attributes that senator martinez has brought to the senate representing the people of florida, his personality, his engaging wit and his love of people, his spirit, his friendliness and his genneness all have been appreciated by all of us, i know, very much. and so it's even more difficult for us to see him leave because in addition to being a good colleague and a great senator, he's been a wonderful friend. and i think all of us appreciae

that friendliness which is not always the order of the day when it com to politics. with kitty and mel march te mare knees, we appreciate it very much and will miss them. mralexander: mr. president, the best stories in the united states senate are not the political stories. i see the aistant democratic -- i would rather defer to him and come next, if i may. -- you -- you mr. president? the presiding officer: the senator from -- mr. durbin: mr. president? e presiding officer: the senator from illinois. mr. durbin: i want to say a few words about my friendship. i didn't know him before senator martinez came to the senate. i think the first time iad an intersight into what he brought to the senate is was at a prayer breakfast when he explained to us how he happened to be in mencht he was one of the fortunate few who escaped from cuba under the tyranny of the castro regime, given a chance to

come to florida. and he told me and others how difficult it was, struggling with the language he didn't know, and he explained that one of the real saviors for him was the fact that he was a good athlete. so he was able to play my sports and make many friends, lerner english in the process, and become not only an integral part of at cmunity in florida but an integral part of america's political future. his story of growing up i florida, his family, his wife kitty, his children really mean the world to him. when i heard that he was retiring, i called from i wil is to reach him and to wish him the best and isked, as everyone would, why? he said, it's all about my family. i want to salute you for that.

it takes an extraordinary person to give up the adulation and the head did i atmosphere of the senate but t remember what's most importa in their lives. i also want to than him for his extraordinary courage and helpfulness on so many issues, particularly when it came to issues of immigration. as i snow, senator martinez, you feel this personally. this is something that you've been through yourself. and you know so many others like you who are just looking for that chance to prove to america that they can make a contribution. senator martinez has been an outspoken supporter of the "dream" act, which is an opportunity for younger people to have their chance in america. and i thank you for that. i know it wasn't easy because there were many critics -- you told me -- who would ce forward and tell you what a bad idea it was. but your courage in standing up for that is an dication of the kind of person you are. floida going lose a great senator in mel martinez. america is going to lose an

important voice in the united states senate. but i don't think we've heard the last of mel martinez. i thnk his contribution whether as a private citizen or in some other public service is in the future. i wish you and your family the very, very bevmen best. mr. alexander: mr. president? the presiding officer: the senator from tennessee. mr. alexander i often think about how the best stories in the juic united statesenate aret the political stories. senator inouye's bravery in world war ii leading to a congressional medal of honor; the former majority leader, bill frist, operating on -- performing open-heart surgery on general petraeus when he was accidentally shot at ft. campbell; ben nighthorse k bell on the judo olympic team; jim bunning in the hall of fame; jim inhofe circling the world in a plane; ted stevens flying the first cargo plane into beijing

at the end of the world war ii, thenn 19 dpsh after the elections of 2004, we have ken salazar from colorado, 15th generation american -- his family; we have barack obama with his incredible story, and then we had mel martinez in the same year. despite the emotion of all of those stories, mel martinez's story stands out to me. as the senator from illinois said, imagine growing up in cuba -- a good life -- not a rich life but a good life. he recounted in this book a sense of belonging that senator martinez wrote, "suddenly the castro regime comes, it's 1958 and one day your parents put you on airplane, send toou miami, not knowing if they'll see you again." then going to florida state,

meeting kitty, bome the first hispanic lawyer, i guess, in orange county and then the mayor and then a cabinet member, then senator, then republican national committee chairman. i mean, what a terrific story. so well-told in this book p one thing about our country that is unique is that we believe that anything is possible. the rest of the wld looks at us and tnks we americans are very nig naive. but constantly we prove that over and over again, usually with the election of a president from unusual circumstances, as we just had. but mel martinez's story, his escape from cuba's communism, his coming from that, speaking no english, what he has already accomplished and now moving on yet to another career in private life is an inspiration for our country. he has enrimped this body.

he says in his book, "my journey has taught me it is not an empty cliche that this countris a land where dreams can and do come true." his life sws that. we've enjoyed his friendship. we appreciate his examp for the country. we wh him and kitty and his family well in thejectio the ner of their lives. the presiding officer: the senator from south dakota. mr. thune: i want to join my colleagues from congratulating my friend from florida who are his serce to our country and he has served in so many dierent ways, as has already been noted. but truly an example of the american succe story, someone who came here, established himself, and has risen into the very highest -- i guess you'd call it echelons of this country in terms of public service and his contributns to the private economy in ts country, and so it's with great regret that we say goodbye to him as a united

states senator but continue to maintain the strong friendships that we have built and developed during his service here. you know, they say that someone is measured not by the days in their life but the life in their days, and while senator martinez has maybe not served here as long as some other senators -- and he and i came into this senate together back in 2005 -- but --o he may not be measured by his days of life in the senate, but he's certainly measured by the life in his days in the senate because he has added mightily to the debate here. he is an incredibly thoughtful senator, someone who i have to say i have lernered a lot from, and not just in our personal friendship but professionally because he brings so my insights and such a -- and such a thoughtful way in the way he looks at issues. domestic policy issues, foreign issues.

i have lernered a lot about florida, a lot about cuba, a lot out the hispanic community in this country p. those are insights and contributions that he has made that no one else could make. it is very rare indeed to have intusomeone of his experience to serve in the united states senate and be able to rub shoulders and lerner every single day from those experiences. and so i want to congratulate senator martinez and his family, as he said, "like myself and many others of us, mel married over his head." he has a wonderful wife and family, and i hope that n that he is not a member of the united states senate that we'll get to see a little bit more of him in the state of south dakota because his son john married a south dakota girl. and i've been trying for sometime to get him to south dakota to hunt if he is ants and he is he's 345eud trips up there i think, but it's always a little bit later in the season and the climate tends to change in south dakota. but i hope now that he has a

little bit more time to enjoy those types of things we'll get that chance. i just want to express my gat appreciation, mr. president, to the senator from florida for an extraordinary run hin the united states senate. he truly is the kind of person that what you see is what you get. that's rare in politics today. a genuine, thoughtful, sincere, kind, generous, the kind of person that serves -- that i want to see more ofn public fe. and so it's been a pleasure and an honor to have the opportunity to serve with him in the united states senate and to call him a colleague, but it's even a greater privilege and honor and opportunity to have been able to call him my friend. so, mel, best wishes. whatever you do you're going to do well. we are a proud of you and thank you for your great contributions to our country. god bless you. mr. graham: mr. president,

this is the time in a person's crier a supposed to lay it on thick. but there's really into "no" need to do that in mel's case. i think everybody here speak on both sides of the aisle are trying to say thank you for your friendship. and there's a million ways to say it and to kitty, thank you for being part of our lives here and we're going to ctinue this relationship. i think all of us have got stories about mel. i first heard about mel by reputation. he was a republican trial lawyer. that intrigued me. there are not many of us. we can meet in a phone booth. i got to know him during his campaign and go some events for him. think that experience of representing people really made him a good senator. understands there are two sides to every story. sometimes a person need the best advocate they can get even though their cause may not be so popular at the moment. but i really the g.a.o. to know mel during the immigration debate. that's a hell of way to meet somebody. you'll lerner really quickly about a person when you talk about politics at that level,

that emotional. and mel was going to be part of that debate whether he wanted to or not because of who he was. i mean, you just could not talk about imand not think about mel martinez. but he was the first one to show up and he was the last one to leav and we'll get that bill passed one day and it will be a tribute to medical and senator kennedy that -- the guts of that bill will b the solution that will be embraced down the road. but that was tough politics. wed reminisce at night. you know saxby was involved and meet every morning in the president's room with senator kennedy and mccain and try to figure out where we're out based on and what the night before. usually we lost ground, but we kept plugging. but a lot of stories was told about what was going on in mel's life. there was a lot of hatred out there, quite frankly. there should be a lot of people upset about the immigration system not working and broken

borders and legitimately concerned, but there are some people who were quite hatul. i think that mel took the brunt of that more than anybody ee. it didn't get a lot of publicity, but inow what he an kitty went through to try to fix a broken immigration system. i will be forever gful for their efforts. it vas personally very difficult. when mel left a repressive place, he came to a hopeful country and during that debate he never lost sight of what america was really all about. america will never be defined by the people who hate. america will be defined by the people who lovend care. i never met two people who loved and cared more than kitty and mel who will be missed. a senator: mr. president the presiding officer: the senator from kansas. a senator: mr. president, i too want to join my colleagues in recognizing mel martinez and his great contribution to this body and his friendship. i think most of those things ve been said.

mr. brownback: one of the things i learned from a leader in your state was a saying he gave to me was that we get into tuble when we look at pple as problems and not as people. and i thought about that for a long time because you could go back in our history and generally when we looked at people as problems and not people is when we've gotten in trouble. when you look at various situation that's we've had and even the immigration debate would be one. well, this is a problem. , this is a perso or you can look at our debate on abortion in this country and sa well, we've got a problem here. no, we have a person here. and the consistency of what i've seen in mel's policy position has been very much, no, this is a person. and it's not just a person, this is a great person. and not just at great person, this is a -- this is an unusual individual and that he celebrates that with everybody, and that's a beautiful thing to do and it's a beautiful thing to

have and it's a beautiful thing to see because then that carries over into his friendships. so whenever he's talki with somebody else, it may be a colleague or another individual and normallyou're sitting there and you're going, ok, i need to get something done through this person. but i don't usually find that in a conversation with mel. normally what i find is well, yeah, i need to get something done, but what i'm really interested in is you and what you're thinking and who you are. and this isn't an opportunity for me to get something. this is an opportunity for me to celebrate another beautiful soul that's standing righthere and staring at me and talking to me. i have this unique opportunity to engage them and how much better we all are when we look at people as people and not as problems or as opportunities or obstles to get through, and that's whe i find what he embodies and the way he works. we're going do miss you mel. we're going to miss you an awful lot. we appreciate you.

and i appreciate the lesson that you taught me by the way you lived and the way you served. god bless you. a senator: mr. president? the presiding officer: the senator from florida. mr. nelson: mr. president, it is with a good degree of regret, and i'm going to wait until i get the attention of my colleague because he knows the heartfelt sentiment that's i'm going to express because i have tried for now the better part of three months to talk him out of this particular day. i didn't want him to resign because it's been goodor florida the way the two of us have worked together professionally because it is built on aersonal friendship

that goes backver 30 years. there wasn't a day that we were in session here that mel and i did not talk and, of course, this floor of the united states senate is the place that you can get away from the other distractions and, in fact, can come together and have those conversations that you want and that was s important in us looking out for the intert of florida. so it is with a great deal of regret that this day has ce. i think it's important that the two senatorsm a state get along and that is particularly

true of the two senators from state who happen to be from different parties. and it is my hope that the kind of relationship that we had, both privately and publicly, as the two senators from florida set a -- sent a message to our people that you can transcend partisan differences in order to get things done. i believe that that's the relationship tt we've had now going on in the senate for a little over 4 1/2 years, and i just wish that relationship were going to continu for another year and a half to the remainder of senator martinez's term. but for personal reasons he has made this decision.

it is incumbent upon me as t senior senor of florida inhe newly appointed -- and the newly appointed senator to have the same kin of relationship with him for the good of our country, for the good of our state to transcend polidicalifferences, to have a good personal relationship so that we can get stuff done in a bipartisan way. i intend to do that. and i assume that the new senator will d likewise. let me say that a lot of you don't knowith regard to senator martinez tt 30 -- now going on 31, 32 years ago when we were a lot younger, i was --

he was already, back then, a very prominent trial lawr. i was just a pup state legislator trying to run in a congressional district that included the east coast of florida and the interior, including orlando. and mel was one of those high-profile very respected attorneys in central florida. and lo and behold, mel and his wife, kitty, as i campaigned for that congressional seat in 1978, went out door-to-door for me. and we have kept up that relationship over the years. and so it has been my privilege to have had that personal relationship turn into the professional relationships as

colleagues and the united states senate. and so i say to mel martinez and to kitty, godspeed.

provide a process for borrowers to escalate servicer performance and decision, bolster training and enhance online offerings

and send digs mailings to potentially eligible borrowers. servicers must report the reason for modification denials both to treasury and borrowers. we're working with servicers and fannie mae to streamlinecation documents to develop web tools for borrowers. we're also committed to transparency and accountability. on august 4th we began reporting servicer results on a monthly basis. the these reports provide a transpent and public way of accounting for individual servicer performance as well as performance under the program as a whole. second, we are working to establish specific operational metrics to measure the performance of each servicer and these metrics will be included in our public reports. third, have asked freddie mac as compliance agent to develop a second look process pursuant to which freddie mac will audit a sample of fha applications

declined by each servicer. this second look process began august 3rd and designed to minimize the likelihood borrower applications are overlooked or inadvertently denied in addition we're improving borrower outreach, essential to success in the program. we launched a consumer focusedeb site, established a call center for borrowers and launched a series of outreach events cities facing high foreclosure rates across the country. there are a number of challenges to implementation but we believe the program is on track. the program has strong anti-fraud protection. it has strong compliance protection. it is consistent with the ranking mber's suggestion of flexible enough to handle the onset of new problems, new programs, and new kinds of issues coming up. th program is made significant progdress in increasing flow of mortgage

credit, bringing down mortgage rates and providing many families with a second chance to stay in their homes. we can and must redouble our efforts to increase these programs. thank you very much. >> ranging member, thank you for opportunity to testify on making home affordable program. and other administration efforts to homeowners and neighborhoods suffering the foreclosure crisis. madam chairwoman i would like to thank you for your leadership and commitment as chair of this subcommittee to insure the administration's efforts help as many families as possible. that is always important but particularly so important during this difficult time. my colleague has done an excellent job describing progress to date in the making home affordable program. while i submitted lengthier

testimony in the record i would like to focus on hud's efforts to stem the tide, and just as importantly across the ground and neighborhoods across the country. concentrated foreclosures can wreak havoc on once stable communities, hud makes sure $6 billion appropriated by congress come bats blight, repurchase and development abandoned holes and foreclosed properties. to 309 grantees in 55 states and territories and 254 selected local governments we allocated another 2 billion on another competitive basis to states, local governments and non-profit organization under the second round of funding under the recovery act. nsp has been essential tool to transform foreclosed homes into affordable housing. second i want to talk about your counseling efforts

which are critical to turning back the foreclosure crisis. with more than half of foreclosures occurring without servicers or borrowers without ever engaging in discussion to discussion potential options of foreclosures. hud is mobilizing vast network of counselors and non-profits to provide critical assistance to record number of homeowners at risk of foreclosure. armed with this wlth of information, hud approved counselors provide assistance over the phone and in persono those seeking help with understanding mha program. they explain options to fha-sured homeowners and often work with borrowers elibleor the administration's refinance and modification programs to compile an intake package for the servicers. these servicers are provided free of charge by non-profit housing counseling agencies working with partnership with the federal government and working in part by hud and neighbor works o america. in addition, hud working with treasury and homeownership preservation foundation is encouraging distressed

borrowers to contact the homeowner he is hope tline. 24 hours a day, 7 days a week hotline using many hud approved counselors who can help homeowners reach and resolve issues with servicers. as part of the administration's nationwide campaign toromote the making home affordable program in communities most in need we're in series of outreach events to engauge local housing counseling agencies and others to build public awareness of making home affordable and prepare borrowers to work more efficiently with their servicers. as hud leverages relationships with local housing partners on of the front lines they encourage to leverage their relationships with non-profits to approval of applications. with treasury we'reorking to establish guide wh servicers and relationships with trusted advisors to guide borrowers through the application process and help them complete application packages and troubleshoot

the borrower appears to be properly deemed ineligible for the program. we're lawn ofing hope for homeowners program with the improvement help families save their home act of 2009. with the integration into the mha we believet is more attraction option for homeowners particularly for underwater borrowers inhe willable for gse refinancing programs to gain equity in their loans. servicers will not be required to option for h for h refinancing in tandem with mha mang home affordable trial modification option. lastly as commissioner of fha i should note that homeowners with fha-insured loans have been eligible for variety of loss mitigation programs to help protect them from foreclosure. more than 500 families were assisted last year with forbearance, preforeclosure seal and deemed in lieu of for colors sure amongst others. because the servicers of

fh-insured loans are required to notify five delinquent homeowners about options available to them help make the mo monthly payments to take such steps before initiating foreclosure proceedings. as a result we expect another half million families wille protected from for closure in 2009 through benefits provided by nha insurance. we unveiled,ha home affordable to give qualified fha-insured borrowers the opportunity to obtain assistance under termsable to those under mha without increasing cost to the taxpayer. by offering a partial claim of up to 30% of the unpaid balance defering repayment of mortgage principle through an interest-free subordinate mortgage that is not due until the mortgage is paid off we permanently reduce a family's monly payment to affordable level. hud is working with treasury and other administration agencies as we continue to mon -- monitor the progress of making home affordable

programs. with price of homes declining and sales of new homes increasing five consecutive months and confidence on the rise th administration is focusing on programmatic options to continue signs of stabilization. this should signal to every american that the obama administration is absolutely committed to helping as many famili as possible avoid foreclosure. i once again thank you for opportity to participate in today's hearing and your leadership and commitment. while we've seen progress in the administration's efforts to address the crisis and make changes where necessary hud shares your concern about the speed of progress. we're working hard to solve issues reled to implementation of core programs and to develop new elements that improve and refine mah. and as always, we stand committed and ready to help and explore any options that congress or other participants within the industry may have to improve results at this time of crisis. thai. >> thank you very much.

i recognize -- for five minutes. mr. barr while 45 servicers you described signed up for the home affordable mortgage program representing nearly 85% of the mortgage market, only 15% of the eligible 2.7 million borrow have received assistance. at the time the program was introduced what was the excted rate of enrollment, how many he will homeowners were expected to be enrolled and within what time period moving forward, what is expected rate of enrollment in the next three months, six months, a year? >> thank you, madam chairman. the, in the initial design of the program our expectation was there was going to be a period of ramp up in the program. we are on track to meet the goals that we designed the program to meet in february. >> excuse me one moment

please. you can not hear me? oh okay. thank you. let's. no, if we were going to get you we would do better things than that. thank you. all right, we'll go back to mr. barr. >> in the initial design of the program we expected that it would be a ramp up in the progm, given the significant time that servicers would need to change their basic systems, and for tasury and other participants, fannie mae and freddie mac to put their systems in place. we're on track to meet the goal we enunciated at beginning of the program which is to reach three to four million borrowers over the 3-year period binning from initiation of the program. we're on track when we announced the program. i explained that we wanted to be at a roll rate of 20

to 25,000 trial modifications begun each week. we expected to hit that level in august. we actually hit it in july. so we were, onrack, or exceeding the goals that we established. we are on track now with 360,000 modifications stted. we're on track to reach the goal by november 1st of a million modifications begun by november 1st, and we expect that we will be continuing to rampp the program going forward. it doesn't mean that there's perfection out there in the world. there are lots of, lots of problems in program implementation tt could be done better, that need to be doneetter. there is unevenness in performancas you can see from our public reports, unevness in performance between and among the servicers involved. we think all the servicers could do more than they are dog now and with w we

would like to continue to work with them to see better results. >> [inaudible]. how wl the treasury respond if the rates of loan modifications and refinancings continue to fall short you you're on track. >> so i think that there's more we can do. we can continue to make improvements in the implementation of the program as i suggested. better operational metrics so we know that servicers are treating borrow, the way we would le them to be treated. that, borrowers are getting good response time at call centers. that we're doing a better job to reaching out to borrowers to be sure we reach everybody we kang under the program and borrowers say yes whenever they're contacted. we need to be sure that borrowers are not being inappropriately turned down. that's why we have put in place the second look program. to audit plyance under the

program, to be sure borrowers aren't tupn down the are a nember of steps including the web portal. additional second lk programs that we tnk can continue to ramp up performance under the program. >> thank you i'm going to, ranking member? mr. bacus y're going to take five minutes? >> thank you. chairman waters. secretary barr, as professor of, at the university of michigan law school, you along with harvard professor elizabeth warren are widely recognized as the chief architects of the conceptual framework behind the consumer financial protection agency. i want to ask you a few questions about the reasoning behind the consumer financial protection agency because i

think you're probably best able to give us that answer. you or professor warren. in a 2008 paper, you published behavioral informed financial services regulation. that's been referred to in. articles about the new agency. you advocated repeatedly for limiting consumer choice and expressed concerns about consumers having too much choice. is the proper role of the government to limit consumer choice, or is that a part of what this new agency would do? >> mr. chairman, i would not characterize my article at all about, about behavioral regulation as about limiting choice. it is about understanding how people make decisions in the real world. an, taking that into account in the structure of regulation, so, for example, if a borrower is going to be fer ad pay option arm,

shouldn't they have the benefit of knowing what the risks and costs of that are in relation to a regular arm? the basic idea behind the approach is, let's give people the tools they need to make better financial decisions. so on the credit card bill, one of the things the congress did is to require the credit card companies to say, what are the actual consequences of only paying the minimum balance? actual consequence i terms of additional time and cost to pay off a credit card bill? and i think that's an important behavioral tool that is good regulation, that is smart regular. that is the kind of regulation that consumer financia protection agency would be empowered to offer. it empowers people to make better decisions. it doesn'timit conmer choice. it provides room for innovation but provides protection for conners when they need it. >> you say you wouldn't want to limit choice. that is not what the article said but, in fact it says

product regulation would also reduce emotional pressures related to potential bad decisions-making by reducing the number of choices. >> right. so, in that article, i'm describing in defendi shun to product regulation, which has certain costs associated with wit, to financial innovation. i offer an alternative to that that is less restrictive in the marketplace. so the i can particular provision you're describing is describing a form of regulation that is heavier handed than the one that i prefer and i advocated for in the article. >> so you're advocating, in the article a more heavy-handed approach than you're now advocating? >> no. the article is describing a lighter approach to regulation, in the particular provision you're referring to, i'm contrasting the form that i prefer, to the form that you're describing. >> okay.

you say here individuals consistently make choices that they themselves agree diminish their own well-doing in significant ways. >> so, yes the empirical literature, representative bacu suggest that in many instances consumers make decisions that they later regret. if they had been given full information about the financialonsequences of their decisions they would have made different choices. so if we're able to empower them in advance with the knowledge of about what those decisions actually would mean to them, they're likely to make much better decisions. >> so the new agency would not either make the choices or suggest certain choices to them or maybe establish a government-proposed solution? >> that's right, mr. bachus. i think there is misunderstanding about the idea of standard products.

the idea of start products is i articulated before. if you offer somebody a pay option arm give them a base case comparison. a pay option arm proposes following kinds of additional risks as compared to say a hybrid arm of five-one arm with the following characteristic it is a way of anchoring consumer decision making to make better choices. >> you're not going to suggest a certain choice to them? >> the government suggest the choe? no, sir. >> okay. all right. i think's all. thank you. >> thank you very much. mr. green. >> thank you, madam chair. and, as an aside, madam chair, i would like to thank you for the hearing that we held in louisiana over the august break. it was very enlightening and perhaps worthy of a topic of discussion at anoth time. madam chair, i would like to,

if i may, quote what i believe to be a quote from a republican president, theodore roosevelt, who reminded us that it's not the critic who counts. not the person who out how the strong once stumbled or how the doer of deeds could have done them better. the credit belongs to the person who's actually in the arena, whose face is scarred and marretd with sweat and blood strives valiantly, comes short again and again. knows great enthusiasm, spends time in worthy cause, who at best, if he succeeds knows a triumph of high achievement. and who at worst, if he fails, at least shall never be among those tired souls who know neither victory nor defeat. it we are in the arena.

dr. king minds us that the greatest measure of a person is not where he stands in times of comfort and convenience, but where do you stand in times of allenge, and great controversy? when you're in this arena, and you've g6 llion people uninsured, unemployment is 9.7% where do you stand? i stand with the american people. i stand for augmenting what we're doing today with bankruptcy. we bailed out bear stearns, 10 of billions of dollars. bailed out the auto industry, scores of billions of dollars. we bailed out aig, $10 billion. we can bail out peopl who are having a crisis in their home foreclosures, not because they're not hard workers but because of the cascading impact of the financial crisis that has impacted their jobs. they're losing their jobs. i want jobs right now too.

but we don't have them right now. so since we don't have them right now the question really isn't do we want jobs right w? the question is, what do we do right now? what do we do when we don't have the jobs for people to come back and make their own way through life, fend for themselves. what do we do, when they're losing jobs and about 16% of all mortgages are predicted to go into story sure within the next four years. what do we do now is the question? i think what you're doing is admirable. both of you secretaries, but i also think thathere is a place for bankruptcy. that allows the consumer an option, that will afford the consumer the opportunity to, when the servicers can't serve, to go to court and take additional action. action that we should have taken earlier and hence restructured loans. that is what this is all about today. whether we'll restructure loans or simply refinance

loans. bankruptcy allows for restructuring loans in a orde systemtic when servicers can not do. what servicers can not do, bankruptcy allows to be done. these are american people will be bailed out if you want to call it a bailout. american people who worked hard, played by the rules, a lot of them were prime loans they can't afford to pay because they're losing jobs because of the financial cris. so i see in this the opportunity for us to fashion a bankruptcy bill that is retroactive, not prospective. we won't have the problem of this impacting new loans because it won't apply to new loans. let me repeat that. some things bear repeating. this will not apply to new loans. it will not be prospective. it would be retrospective. some things bear repeating t will be retrospective. it won't be prospective. you can't make argumt will impact new loans because it will be retrospective, not

prospective. i risk embarrassing myself repeating a third and fourth time. sometimes you ought to embarass yourself to make a point. it will be retrospective, not prospective. we ought not to make that false choice. let's do something for the american people. we're talking about a targeted group of loans that will be made, many of which force people into subprime loans when they quafied for primeoans. we know what happened. the empirical evidence is there. it is time to help t homeowners, to maintain homeownership and protect the country from a loss of homes that ultimately, will drive down prices even more. we've got to do something. we're in the arena. we can make a difference. one quick question to each. do you find any adverse impact that bankruptcy will have on the programs that you're implementing currently? let's start with you, mr. , secretary barr.

will bankruptcy adversely impact what you're doing? >> would bankruptcy reform? >> bankruptcy bill that is retrospective? >> no. >> let's move now to the next, mr. stevens, retrospective bankrupy, not prospective, will it adversely impact what you're doing? >> not on the retrospective book necessarily. >> on the retrospective what we're talking about. i would beg we not discuss things, no disrespect,'m not calling to you attention. there are many things we can talk about today i quite frankly want to talk about but my time is limiting. with referce to retrospective bankruptcy will it adversely impact what you're doing? >> no. >> thank you. i yield back. >> thank you, madam chair woman i would like unanimous respect include statement from the housing coins. >> without objection, so ordered. >> i have a couple kind of specific questionsoing to ask a general question, making home affordable graph as of august 30th you have

e trial modifications started. do you have any statistics on modifications considered past therial period? because the trial period if you're on time for three months. what are you finding there? people staying on time? have any of these moved into i don't know, what are you going to call that a solid modification? >> the trial modifications are real modifications. they really reduce people's payments down to 31% debt-to-income. the question is when they're finalized, they get finalized if the borrower pays on time for three months. at the end that time period. because the program takes a while to many a up and there is a three-month time period to which borrowers need to pass that test, there are very few borrowers who reached that moment in time between the three life month trial period and the final period. so we don't have solid enough statistics on those in the final modification yet. >> so you don't have any like preliminary indications

of peoplealling behind or staying on it or? too early to tell. >> just too early to tell. i want to be hesitant about using information unless i know exactly what the numbers are. >> okay. i want to ask about incentives. for instance, citi mortgage here has 191,000 elgible, they have identified, eligible delinquencis. they get paid $1,000 for identifying each one of those? >> no. they don't get paid anything for identifying any, any mortgage. the list here is eligible 90-day delinquencies to provide a baseline of comparison among the different service. the determination that a loan is eligible is nothing more than dataoint in the chart. >> okay -- >> what they get paid for doing, doing a modification that is successful. that reaches the status of a finalized modification. no payment is made unless

borrowers successfully reach the point of a final modifition. >> so none of those then because we've had no final modifications. >> there has been a small amount of payments going to the final amount but it's too early in the program to assess again exactly those numbers. >> just using citi mortgage -- >> but there are no significant dollars out the door yet. >> using them as an example, citi group got $45 billion inhe tarp plan and you know, they have the most to gain, if they actually go this. i realize in terms of their bottom line it is probably a mall thing but it is taxpayers dollars going out, are you finding that servicer payments ard proving to be incentive for people, for servicers to get more involved in this program? >> we believe a combination of two things are providing strong incentives for servicers to participate. one is, having clear pgram rules, tasury guidance establishing an industry

standard for modifications. and second, is, the structure of the incentive payments both to the servicers as well as to investors. >> okay. last question, this is more general question. we've heard and i eentioned in my opening statement too, rising unempyment is what is contributing now to probably more and more of the foreclosures issues we're seeing presently, then we have the question, if you're going to look at loan modifications how do you modify a loan for somebody who has no income, and or, maybe, has minimal, such minimal income that it is going to be very difficult for them to have a loan modification? what do you see on that horizon? >> servicers generally have in place tempora forebearance programs for people who lose their jobs to give them an opportunity to get back on their feet. and i think there are measures we could take, consistent with the program ruleso flize that within the program

structure. i do think we need to be at tentative to presely the circumstance you describe. >> in some sense, if certa servicers have a program in place, maybe a three-month moratorium, if you lost your job are we kicking the can down the road here too in some ways to try to help this family the best way that we can as a -- >> i think there's a balance. i think that if the program goes on too long, or too generous it is not going to be helpful to anybody but if it is confined within a set period of time, a lot of people are going to be able to get back on their feet. you want to give them a temporary rpite do that? >> finally, i would like to ask, when, if you could make the committee or at least me specifically i'm interested in knowing, once the trial modifications are made, how many are sustaining their modification? i hope it is 100%. that is what we would all want but to see what you're seeing in the trend. there could be something in statistics very quickly

there, you could make adjustments to, to target our dollars more efficiently. >> as soon as we have data we think is robust enough to withstand empirical testing we would be, of course, going to make that public as of our regular reporting and make it available to the committee. i just want to say that, although, our hope would be that everybody can succeed, i don't think that is realistic measure of success under the program. we know that some people aren't going able to make it. i think we need to be realistic about our expections in that regard. >> thank you. clarification mr. barr. did you say that servicers had forbearance for individuals with no income who are approaching foreclosure? that they were doing something to help people who have no income? >> what i said is many servicers have forbearance programs for people who are

temporarily unemployed. and i do think it makes sense within our proam to try to formalize that more. that is one of areas i think -- >> do you know of any that is doing that now. >> that do temporary forbearance? i would be happy to have our staff get back with your staff with particular examples. >> we work with them every day. we haven't found any yet. i certainly like to talk to you about that. let me move to miss bigert for five minutes. >> thank you, madam chairman. my question is for mr. stevens. do you believe that t resources at, at fha are enough for, or do you think there is a need, particularly in the area of administrative funding, staff increase, and or expaed information technology capabilities that to accomplish fha's overght needs? >> i appreciate the question. we've, i've been stated

previously, and others have as well that we do believe some additional investment is needed from a resource standpoint particularly in the area of technology as you have mentioned to help bring our systems into line. >> you know, how long will that? because we've been worried for several years on this technology issue and it hasn't been resolve in hud. it is not completed yet. is this going to be in time to do all things that are necessary to do now? >> i think it is a great question. at end of the day there is some defered investment into systems in fha in general. there is budget request in. budget requests have been made in past years as well. but we're hoping and we have an initiative, transformation initiative right now in hud. we've mapped out the specific iestment that we would like to see, to upgrade the systems and perhaps replace systems in their entirety. and, it won't happen

overnight. these are programs that will stretch out over a number of years in order to get them fully implemented. >> okay. thanks. then, the administration plans call for servicers to determine if borrowers are eligible for the hope for homeowners program. it requires the lenders to write down to 90% of the origin mortgage, the loan ratio to value ratio. to pay a 3% insurance premium. off then, i think there is a need for servicers and lenders to have the flexibility as they go forward to help these borrowers. do you think that the hope for homeowners program is too restrictive? should there be more flexibility? >> well we certainly weren't satisfied with the rests from the first hope for homeowners. we are just right now rolling out revised improvements that was just recently legislated and those will be introduced to the market here in the very near future. whether it is gone far it's

too soon to tell. i think there are some improvements to it. i do believe it is likely we may recommend some additional improvements to make it more effective. >> thank you. and then, mr. barr, cing back i think what we're all concerned about is this loss of job andhen trying to do something to help those people. i think that is going to grow as we see this. by what standard should we judge the effectiveness of the administration's making home affordable plan if a borrower receives a loan modification and has lower payments but builds no equity over the modification terms, can the plan be deemed successful? >> well, i think the basic structure of the modification is designed to improve the borrower's equity positionrom, from the moment of modification.

it does that in two primary ways. the first is there is a basic requirement that the structure ofhe mortgage amortize, and the second is, a basic requirement, a basic incentive for the borrower to keep paying on time. as long as the borrower pays on time, the government will provide an additional small, monty reduction in their principal. so it's a way of keeping borrowers in the program, providing further incentives, building up equity over time and i think both those sure are important elements of the program. >> you know what, borrower thinks they are able to make the payments and let's say they do run into trouble and get behind one or two or three months, what happens then and how does that effect thequity? >> under o program, we made a basic decision that borrowers were being given a second chance under the modification program. and if they don't perform that second chance, they don't have the right to ntinue to participate in

the program. >> so that, if they fall one month behind they're out of the program? >> not one month behind but if they fall seriously delinquent then they are not in the program and not eligible to receive these further reductions in equity. >> is that true for all the servicers then? they have to follow that rule? >> the servicers would prefer a rule that is even less generous to the borrowers. >> yield back. >> thank you very much. mr. miller. >> thank you, madam chairman. it nice to be able to hear you too on the microphone. very much benefiting from the questions. i really enjoyed the testimony today. this is an unusual market i've been in it almost four years as developer and i never seen anything like this i applaud you for what you're trying too like you're chasing a tail that esn't exist trying to find it. we've gone through the first round of foreclosures which were the subprimes. that still continues but

you're having a second round today you're having to deal with. that is people who have good homes good lopes. they're either business people who are having serious trouble or people who lost their jobs and unable to make their payments. and negative home equity has been a huge pros. i introduced a bill that i think chairman frank and expense backus for -- spencer backus lease properties for might have years and former homeowner to try to get the distressed property sales off the market. problem you're having, from california, on distested property sales about 82% of the house stressed n l.a. county are 55%. even in orange county california, robust housing market you see about 45%. we're trying to chase the bottom of a marketplace that you can't get to. and, the purpose of the bill i introduced to try to allow the marketplace to find a

reasonable bottom to work its way up which would help you in your situation trying to deal with individuals who can't make their payments. and i applaud you on the loan modification effort you're attempting but i want to higight the fact those are voluntary on your part. my good friend and i have great respect for him talked about bankruptcies applying to the residential marketplace and the problem i have with that is lenders in good faith make a loan to individuals and encumber it by a deed of trust, which the lender holds at that point in time. and, allowing a bankruptcy judge to arbitrarily have the right and two in and restructure that contractual agreement between the lender and the buyer i think could have horrible consequences in the long run because puts a lender in situation where they believe they're making a loan that they can secure a residential structure or whether commercial, industrial, doe't matter and if that default occurs they have a right if they

want to voluntarily restructure it but they have a right to secure their asset they made the loan on. and i think, with great respect to my friend on the other side, i have great respect for him and he knows that i just think in the long run we're going to createreat harm to the lending industry because a lender, whether mortgage broker or bank, making this loan, -- >> would the gentleman yield out of respect for his good friend? >> be happy to. >> i will be and lacoic we currently al contracts for automobiles to be restructured. we currently allah contracts for farmland to be restructured. we currently all contracts for second home, 30, home anything beyond the first home to be restructured. i would add quality to equation allow first homebuyers that same opportunity. thank you. >> i rpect your comments. i really do. i think though that heading this direction could be very dangerous to the marketplace

in the long run. but a question i had for you is, we unanimously voted my bill out of the house to allow banks to basical take properties back, option to buy or hold them off the marketplace and lease them for five years to allow the market to create some form of stability. what is your opinion as to that? >> representative miller, i han't read the legislation -- >> but conceptually. >> i think conceptually there are at tiff features to, in the short term to that kind of approach. i think that in normal economic times the basic approach -- >> would ever consider -- >> regulatory community is the opposite for reasons you know far better than i do in rms of worrying about forbearance and managerial and operational capacity and other factors. the question is in the short term does it make sense to have those kind of approachs? i'm attracted conceptually. i think that the -- >> i don't expect you to have a firm opinion you know

how mark-to-market applies to banks and their dealing with distressed properties they have additional set-asides required based on principles. if we get homes off the marketplace and legally allow these lende to take those non-performing assets and make them performing assets through leasing them i think it puts the lenders in much better financial situation and i think it removes tremendous amount of stress and pressure on a downsliding market. i let you connue. >> so i think again, i'm conceptually attracted given the extraordinary circumstances we're in. not in normal times. in normal times you wouldn't take that measure at. >> five years until the -- >> well, i think in the particularly strict financial circumstances we're in now it is worth considering that kind of approach. and i think t concern would will be, some financial institutions have the operational, managerial, capacity, the expertise to do that well. other firms lack such.

>> i agree. >> such structures. you want to make sure if you took that approach it was, it was carefullied with the supervisors of those institutions and there were no kind of blanket policy permissiveness. rather really quite institution focused approach. >> [inaudible]. >> i think there is room for that within those set of parameters. >> thank you. i yield back. >> thank you, miss kilroy. >> thank you exmadam chair, appreciate it. it is interesting to note as for closure rates continue rise and they continue to rise in my community, which has been hit so hard by high foreclosure rates over the last eight years, to see that continue to go on, and yet to see a very slow pace of the help for homeowners program bng implemented in the district. my district office gets calls on a routine basis from homeowners that have tried to get help from the

program and tried to get help from their banks, and are facing delays, or denials, or higher payments from the program. i want to know, your office, has any benchmarks or standards that you're holding the mortgagors to or particularly those that have taken tarp funds how many, what percentage of borrowers who qualify for this program should be getting help from this program by this point in time? what is the standard here? >> let me say a few words about that and maybe mr. stevens would like to add a note too. i said at the outside, at the outset that we are, we recognize that programs take a period of time of time to ramp up. we're on target to hit the goal for the program that we set of hitting 500,000

modifications, a half a million modifications by november 1st. but servicer performance is uneven. it's uneven among servicers. there is also geographic, likely geographic unevenness as well. servicers need to doll a better job reaching out to borrowers and finding eligible borrowers. we have in place a second look process freddie mac instituted on our behalf, lached last month to look at loans being denied to make sure that eligible borrowers are not being excluded from the pool and also to check the eligible pool, to make sure that borrowers in that pool are being offered modifications. there is more that we could do in this regard but i think we are on the right track. dave, do you want to? >> just, one comment i would add. i think one of the common for closure numbers that gains a lot of publicity are

the realtytrac numbers. we were looking at the previous month's numbers and when you break down the numbers they show an aggregate amount say of 350,000 homeowners received some sort of notice of foreclosure in that month's period. if you break it down, a large portion of those are first notices. a large porti of those are second notices that receivdd a first notic the previous month. and in last month's numbers the number of homeowners that actually had their homes put into reo, into foreclosure was under 100,000. i would say the only, one of the positive signs we'ring is that the current ramp rate of the ham program, those entering modification period are exceedinc inventory on a run rate. it isn't dealing with the enormous inventory issue yet. it is not reducingt in a significant way but we believe the program is keep pace with new foreclosures

coming into that market. so that i think that's a very positive sign about the program. i mean the questions we ask is, will the program sustain itself? will it cover broad enough percentage of population ultimately in real numbers to be impactful? what will be impact ultimately when some of the large servicers slower to ramp up call center capabilities as they do so? we're getting positive signs from some of the larger servicers that give us reason to suspect, excuse me, that the numbers should increase, at least in the term, as, as more of the servicing industry gets on line and behind the program. there are lot of issues. unemployment is a real concern in concerns of the hamp process, activity, we believe it is showing positive signs at least exceeding slightly the actual foreclosure rates. we'll see if continues.

>> madam chair i yield back. >> thank you very much. mr. -- >> thank you, madam chairman. during the recent work period i have a major servicer lender in my district and i had the servicing department come in to talk to me. and we spent about two hours about the problems they were implementing this program. in this case thex are, they are lenders and servicers, in many of the loans that they service, they made. so they have, they have a strong incentive to work these loans out. their overall sense of why the program, the drop between the 570 and the 360. 570,000 peoe have been offered a modification. of those, only 360,000 have

said yes, we will accept that modification. i guess we should know the number of people that tried to enter the pipeline, that the 570 was derived from. is that a million? is that one out of two? they say that they're getting three to four calls and inquiries per finding a person that actually they can put into the pipeline. that's number one. they find that they have spent far in excess of the $1,000 that they are being offered to modify these loans. they're also finding out that there is a new phenomena and dynamic in among consumers. i heard this discussed a couple nights ago. if the modified payment does

not allow them to continue make their credit card paymts, to continue to make their other debt payments, they in many instances are making the decision not to make their mortgage payment. and, in traditional terms, we think that the first thing that people are going to make is their payment, and then all other. what they're finding is, that when they're recalculating these mortgages, their other debt ratios, many instances are 70, 60, 70% andhe people sily, even after everyone of these modifications have been offered here, servicer decides that, there is over a 50% chance that even if we modify in this program, these people are not going to make their loans. so the incentive that it appears that they have to modify it, get $1,000 a

then, be paid back for every year, they're looki at these loans and saying, i'm getting four phone calls. two of the people get to step two three. one of those two gets into the modification process. and then half of people aren't going to make their payments under the modification. and $1,000 isn't enough. and the incentive programs that are offered in this just are just not enough to the experience. since they'red lender they may want to modify the program in spite of all that. but these are the major, this is a major company. this is what they're experiencing. i don't know if that is what they're telling you but they're telling their congressman this. the people, and i'll end on this, the danger that i see

in resurrecting the discussion about bankruptcy, and the ability to mitigate the debt in bankruptcy, is that we have a great number of borrowers now that, if we begin to send the signal that that is a possibility again, we will have people that will make the decision to stop making the payments on their homes, and wait for that solution. that's my objection to resurrebting that idea. an i can't believe it does not, it would have negligible effect on hud. i just can't believe that that answer, it would have negligible effect on hud. thank you, mr. chair. >> thank you very much. mr. hines? >> thank you, madam chair. and thank you to the assistant secretaries for being with us today. thank you for your hard work in addressing one of the

more challenging aspec o our financial crisis. i won't take a lot of time. i want to recount sething i heard quite a bit in last weeks as i was in the district, in between those rare moments when could turn the discussion off of health care reform. i heard very consistentl what know you hear as well, which is just a great deal of frustration with the pace with which these programs have actually addressed the real needs of people. of course you understand this here. targeting with the financial institutions, 500,000 mortgages started, modifications started by november. of course we all know that the estimates are in the next four years we may see as many as eight million properties enter into foreclosure. the net result of that which is felt very keenly and pointedly by somebody like me, we're really striving to help one in 16 people who are in households in a lot of trouble. i don't have a question but i did want to convey intensity again amidst the intensity of the health care

reform debate of the sentiment in my district of how the government really could do more. i know you're working very, very hard but i would just urge big thinking. the housing was at the core of crisis. as much as i applaud the very tough and good wor you're doing, the remedy at this point is the not adequate to the magnitude of the challenge. >> thank you. if i could just say, a couple words about that. i think that people may lose sight of the breadth of the house programs that are out there. the programs, making home affordable, with respect to home modifications is one piece of that. the 500,000 loans we're on track to hit by novdmber 1st is obviously part of a larger pool of three to four million loans we hope to reach under the program. in addition we added

fwlexability to fannie mae and freddie mac to do refinancing. 2.7 million households have refinanced since the announcement of those flexibilitis. we have additional funding supporting cap base of fannie and freddie to insure market stability. treasury and federal reserve purchases of mortgage-backeds are insuring liquidity in the market. together with fha and fannie and freddie, fannie, freddie and fha are providing the only mortgage financing effectively we have in the country today. without the government initiatives from fha, and in support for fannie and freddie we would not see mortgage financing occurring so there has been an enormous amount of energy focused on intervention in the home finance system, to give people a way of staying in their homes or refinancing of having affordability. we can doetter. we can do more. we need to do more.

but let'sen the lens a little bit. >> thank you. i appreciate the obsarvation. i know much is being done but again i report wanted to report back what i heard in five weeks in the district and just remind all of us that many of these institutions, and api applaud the work that was done by everyone in the government to really push the banks over the course of july, to really accelerate this. this is not simple. we don't want to push the banks to doing imprudent things. i come back to the fundamental truth that many of these banks have not acted quite as fast we as we like them to act, exist solely due to the my any of sense from the american taxpayer. we when prudent to act as fast as possible to alleviate the very real pain that my constituents are feeling. thank you for your efforts. and madam chairwoman, i yield back the balance of my time.

>> thank you very much. mr. clay? >> thank you so much, madam chairman. thank you both for being here today. according to your testimony, mr. barr, the treasury asks freddie mac to devise a second look process, beginning on august 3rd whic freddie mac will audit a sample of mha modification applications. how will the treasury insure that the sample is a cross representation of actual borrowersing mha modifications -- seeking mha modification. >> we asked freddie mac to do a sample audit, not onl of denied borrowers but also of the eligible pool at each inches station -- institution, and freddie mac in the first instance will be doing that analysis. that analysis will be made available to us. we'll be checking it.

we'll be insuring that it is appropriately designed, and we will be gathering the information they provide to us to help us inform our relations with individual servicers as well as to spot program design flaws that we need to correct. >> just, describe for us the provisions of the second look process. does it, does it test for and how? and what documents are required to be submitted? >> the second look process is designed to determine whether any of two things happen. whether, first, a borrower that was eligible was inappropriately denied a modification, or, second, that a pool of borrowers who ought to have been brought into the modification system for a look aren't even looked at and in both

instances the question is, given the characteristics of the borrower and the loan, why were they denied or not looked at? if there are individual servicer problems, tse will be addressed in an dividual servicer level, corrected at that level. and if there is a systemtic problem we can bring it in to improve program design overall. they will be looking at using the full range of audit tools to make sure that happens. >> and are servicers being given notice before they are audited? are they -- prior notice and how much? >> there are two separate things. there is a second look process with respect to being sure that borrowers are not inaropriately denied access to a modification. there is an addition t that, a brader compliance effort that freddie mac puts in place has put in place for us, that includes both

announced and unannounced visits with respect to the servicers. >> i see. for that response. mr. stevens, according to your testimo, administration officials detailed plans to take three important steps to improve the programs perfoance, including public reporting, setting moreperational metrics, and developing a second look review process. please describe each step and how it will help improve quality control, and performance of the program. >> congressman, the steps that were outlined in my comments were inupport of the initiatives that mr. barr has already spoken about. it is the same second look process the reporting is the report that actually a copy was issued today. it was reased and it&s the scorecard that's used.

>> what, how will these steps further incent servicers to perform better? how do you think it will function? >> i think it is having a direct impact. the meeting that was held some weeks back in washington with a the servicers that both mr. barr and i attended and some people will be on the next panel attended as well. it clearly highlighted the impact of those that had first applied the modification terms in their operations, against those that hadn't. best practices were discussed. a clear understanding that there would be a strong inspection process and expectations about hitting this goal. there wasonsensus in the room at the end of the meeting that you know, if there are no me issues on the table, everybody is on board to move these things forward. i will tell you for some of the larger servicers will impact the numbers while they may have been sw to build up their operations, i believe, and i hold these

senior exetives who have spoken to us, and i hold them at their integrity and communication to us even in recent meetings this past week that they are ramping up and they're aggressively concerned about the card showing them in a worse light than their pier. i think from -- peer. in intended effect. from this scorecard, mr. barr may have additiona additionalments i think it is having at this point a desired impact. there is lot of detail who came on, the processes used. i think at end of the day this kind of scorecard helps benchmark servicer against servicer and nobody wants to be low performer on that scorecard. . .

>> staff attorney, national consumer law center. our fourth witness will be mr. jack jacket, bank of america. our fifth witness will be missed molly sheehan, senior vice president, chase homeland, jpmorgan chase. our sixth witness will be

mr. paul willen, senior economist and policy adviser, federal reserve bank of boston. without objection, your written statement will be made part of the record actually now be recognized for a five minute summary of your testimony. we will start with our first witness, doctor mark calabria. >> yes, you may begin. >> thank you.

distinguished members of the subcommittee, i think you for the appointment for today's hearing. my testimony today will address to specific questions. the first of which is why have the current administration and thprevious administration evarts along with those in the mortgage industry to reduce foreclosures have so little impact on the overall foreclosure. my second question is what policy options to look at, what policy options do we have a. my short answer to the first question though, whyrevious efforts have not worked well is that these efforts are largely misdiagnosed the causes of mortgage defaults. the assumption behind the hope program, behind the current administration evarts isn't that the current foreclosures are most exclusively the result of predatory lending practices where payment shocks on the reset cause mortgage payments to become me unaffordable. the simple truth is that the

vast majority of mortgage defaults are being driven by the same factors that have always driven mortgage defaults. generally a negative equity position on the part of the homeowner coupled with the life that resulted in substantial shock jocular income, mostly a job loss or reduction in earnest. until both of these components are addressed for closures will remain a highly elevated levels. the payment shock alone we would observe most of all to occur around time of resets. specifically just after reset. this is not what has been observed. additionally, a payment shock for the driver default with a fixed-rate mortgages without any payment shock would display default pattern significantly to those those of adjustable-rate mortgage. the differences in these mortgage products largely disappear. this high level -- >> slow down. speech is a little source we can

keep up with you. thank you. >> this high level of pro closures is left out all of us frustrated and looking for answers. to be effective, i think these answers have to be grounded and solved in analysis. and so i would to just first of all that the administration and congress, the gao, cdo, present detailed estimates of how many foreclosures are driven, by what causes, how many ofhose foreclosures can be reasonably avoided. i'm not sure if we can measure a successful program without hang a baseline without success. d currently whatever the number of modifications that occurring is very hard to do whether that is anywhere near the right level of modifications. i also want to know before discussing specific policies and suggestions, we should keep in mind that approximately 50 percent of foreclosures are currently driven by job loss. so i would say the most significant way we could reduce foreclosures is to foster an environment that is conducive to

private-seor job creation. i think it's also important in addition to focusing on owners currently in foreclosure is to reach families before they fall behind. for instance, about 4 billion of the jobs that have been lost since the start of the recession had been in mass layoffs. these represent a double shock to the household because you not only have a job loss you also have a shock to the housing market because a major employer is downsizing. as damaging as that is they do have an advantage. the department of labor collects data on mass layoffs. workers get noticed, but despite the strong connection between mass layoffs and foreclosures there is very little coordination between the department of labor and hud. one of the things we can do and should do is when you there's going to be a factory closing in a town, you know the last thing the workers are there, you can gecounselors into because some percentage of workers at will have problems within the next six to eight months. yet there is very little about us i would greatly encourage the

pushing of appropriate dollars already on housing council funds towards factories and workers by experience in mass layoffs. i think we can also look at encouraging bank regulators to give lenders work flexibly to lease out foreclosed homes in their current residence to a typically banks come under pressure not to engage in long-term property leasing or management as these activities are not considered a core function of banks. so in addition to many owners who may wish to say, in their home as renters, we know that approximately 20 percent of foreclosures are currently on nter occupied properties. in many ces if these renters want to contue to payhe rent and we allow them to stay in, many bank may occur to keep as rennert and keep the income stream going, rather than to proceed to foreclosure sale. i would also stress that i think we need to focus our resources on household most in need. those household who but for some intervention would lose their home. and i make this point is a

broadly lots of our programs, the gsa refinance programs are aimed at households who are not facing foreclosure, but simply cannot refine us due to the underwater on their mortgages. we should be pting, you know, downsizing because they drop according to resources that are limited both to servicers and letters. so you spent a lot of time in terms of the programs focusing on low-hanging fruit rather than putting our resources on those most in need. wrapping up, i will conclude my previous observation that the curren foreclosure efforts had not been successful because they have stuck in the problem. we need to focus on negative equity and some sort of income and shocks to job loss to households, and until we al with those we will both see very high levels of foreclosures going forward. thank you. >> i do very much. ms. coffin? >> chairman watt is, ranking meers and members of the subcommittee, i have mary coffin, have wells fargo home

mortgage. figure for the opportuniopportunity to come before you today to discuss our continued commitment to do everything we can to avoid unaffordable for closures and help stabilize the housing maet. wells fargo may be a big corporation, but we operate with the conscience of the company determined to do what is right for our customers, and the american taxpayers. since we last came before the subcommittee much has changed and evolved in our economy and 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's and most recently fha borrowers. to handle the greater than 200% increase in borrowers requesting assistance, including the 35 to 40% who are curnt on their mortgages, we have hired and trained an additional 4600 us-based home retention staff for a total of more than 12000

asf september.com we have qualified more than 304,000 custers for trial and completed modifications of this year alone. as it pertains specifically to hamp will opportunity a thousand customers a file modification and we have received at least a first payment for approximately 44000 of these trial starts. will further enhance our support systems, our training and our retraining to eight hours service representatives and apprriately communicating modification programs and guidelines as they continue to change and expand to help more borrowers. in addition, we have improved the ways we obtained from bar with the extensive documentation the government requires for its programs, and we connue to work to ensure all documents are processed in a timely manner. to this point, we have asked the treasury to meet with us tomorrow to discuss challenges with the home affordable modification program, and opportunities to make an even more effective. and most importantly in this dynamic environment we continue

to conduct final reviews to ensure eve option is exhausted before property moves to foreclure sale, because when he forecsure happens everyone loses. wells fargo has long adhered to responsible lending and principles that guide our business practices. we did not make negative amortizing pay option adjustable-rate mortgages, or subprime stated income loans. despite her popularity. and as a result, we can directly attest to the fact that the home loans our company originated perform better than those loans we service but had no involvement in originating and/or underwriting. despite widespread decreases in home values, more than 92 percent of our customers and our entire servicing portfolio remain current on their mortgage payments. this is a direct result of our customers efforts and our commitment to responsibly service l the love in our portfolio, including those formerly owned by wachovia and a lovely service we did not originate. in addition, our building was in

foreclosure rates continue to be gnificantly lower than the industry average, and the lowest of the nation's largest mortgage lenders. and for all of 2008 and 2009, you today, less than 2 percent of the owner-occupied properties in our servicing portfolio have actually proceeded to foreclosure sale. these results would not have been achievable without the continued collaborative public efforts to inform customers of their options and introduction of the new home affordable modification programs. while we are proud to have been a part of enhancedevelopment, it is an iortant option, but it needs to be acknowledged that hamp will not help all borrowers in need of payment relief. for the customers who are not eligible f hamp and where we can reach a portability we offer customized solutions. during june, july and august, at the same time with old executed hamp, more than 83 percent of our customized modifications reduced payments. wells fargo is a company

committed to do what is right for our customers and to that end, i have personally spoken with many of our borrowers to better understand their situation and the experiences they are having with wells fargo. these discussionsave reinforced for me how many americans are struggling with changes in the personal and financial circumstances, including unemployment and underemployment. i also learned how much they are struggled with the various program requirements and documentation. in the past six months, some customers have been challenged with getting clear, timely communication from us. as the gdelines at the requirements of various programs have continued to change. we hold ourselves to a high level of accountability for improving communication and returning all of our customers to the level of service they deserve. as servicers, we sit between the customer and investor, and we are responsible for doing modifications the right way. we also have a 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 whole payments after the modification is completed. in closing, as we have from the very begning of this crisis, wells fargo will continue to seek innovative ways to address the involving challenges facing our nation. thank you and i look forward to your questio. >> thank you very much. >> thank you for inviting me to testify today regarding the making home affordable program and its affect on foreclosures. i am a staff attorney at the national consumer law center. and my work at enzi lci provide training and technical assistce to her attorneys across the countryepresent homeowners facing foreclosure. i testify here today on behalf of nclc's low-income clients. for the last few months i've been working with colleagues at

nclc and other organizations to promote large-scale solution for the foreclosure crisis. during that time, the pleas for help from advocacy is on the frontlines of saving homes has escalated in both number and an urgency. when the hamp program was announced by the administration on march 4, hopes were high that homeowners would finally have a need to prevent foreclosures. unfortunately, that reality has not materialized. in fact, what we increasingly hear is that hamp is not a core tool it should be for saving homes. in general, advocates find that hamp modification are hard to get at all, and when updating often are not comply with program rules. reports on the field indicate that the three services to testify today among others have serious hamp compliance problems. moreover, even if hamp opera at its full capacity as envisioned by treasury officials hamp's a loan modification like a mandated printable reduction that many believe are necessary

to stem the foreclosure tide. with curates at historical ls, more and better loan modifications are needed to turn around the crisis. hamp will reduce the foreclosures by onehird is unlikely to join foreclosure numbers to precrisis levels. problems with hamp fall into two in categories. implementation and design. participating servicers violate hamp guidelines by requiring borrowers to waive legal rights, requiring down payments or other prerequisites to hamp review, and by steering borrowers away from hamp into other loan modifications th are less advantageous. moreover, servicers are routinely placing homeowners in foreclosure or proceeding to sa without redoing the homeowner for hamp. the design of the ability to hold servicers accountability and to obtain sustainable modification. and net present value test which is the primary basis upon which a modificaon is granted or denied is not available to the public. homeowners have no ability to

question whether a servicers analysis is based on accurate information. while homeowners are seeking modification, servicers often continued the foreclosure process, and pursuing both tracks, means that servicers have little incentive to prioritize modifications and homeowners face increased these better than capitalized into any eventual loan modification. while homeowners and bankruptcy technically are eligible for the program, the fact that servicers have discretion about whether to often modifications to these homeowners has resulted in an almost total removal of this option. the lac of manted printable reduction under hamp raises questions about the long-term sustainability of the modifications. homeowners who could normally refinance their way out of a lost job or sell their homes in the face of foreclosure are denied both options when they all more on their home than it is worth. without printable reduction, homeowners who lose their jobs have a definite family, or otherwise expect a drop in income, are more likely to

experience default or foreclosure. creating it is into the. is no surprise that the servicers continue to push homeowners away from hamp modification or delay the process substantially. in addition, servicers profit directly linked to the printable of mortgages they service and the timing for writing downloads. both motivate servicers away from offering printable reduction. moreover, advances de by servicers are more easily recovered after a foreclosure rather than a loan modification. tipping the scales away from modification. while initial loan modification numbers are up, complies with hamp by l reports is sti quite spotty. and many people who appear to be qualified are not getting a chance to receive the only type of help that may save their home. tonga should pass legislation requiring loan modification offers the qualified homeowners were such modifications are more profitable to investors than

foreclosure. it also should consider further reforms to the service industry. loss mitigation in general should be preferred over foreclosure. and as the chairman noted, that is needed for homeowners with loans they never could afford and for those facing job loss. h.r. 3451 recently introduced but chairwoman waters reflect these basic goals of prioritizing loss mitigation saving homes through loan modifications and reforming how servicers do business. congress also should adopt a court supervised mortgage loan modification which would size that many of the structural berries and the servicing industry that today are preventing mass loan modifications from occurring. congress also should support mediation through funding and the establishment of standards. congress soon should recognize that voluntary measures on their own by entities that profit from homeowner defaults on even with incentives, will not lead us out of this crisis. thank you for the opportunity to

testify before the subcommittee today. we look forward to working with you to address the challenges that face our nation's communities. >> thank you very much. mr. schakett? is that the correct pronunciation of her name? >> madam chairwoman, ranking member and numbers of the subcommittee, thank you for the opportunity to update you on bank of america's efforts to help responsible homeowners stay in their homes. i am jacket jacket, a report homo president and have responsible for mortgage servicing portfolio of nearly 14 million loans. as the country's largest ursa were a major part in the administration home affordable modification program and understand the responsibilities that come with a. we are committed to helping the administration achieve its goal of 500,000 modifications by november 1. bank of america is working to transition 125,000 at risk loans in the trial applicaon as part of that goal.

as a demonstration of art going in minimum, in august we doubled the number of applications that had been started. throughout this historic downturn, bank of america has extended driving economic growth and work to develop natural solutions for our customers. for example, one of the first letters to leverage administration refinance program. to date we have completely financing of the program to more than 74000 homeowners. before hamp we were when the first of a national home retention ship program. our national program at other efforto bank of america completed loan modifications for approximately 170,000 customers from january through july of 2009. compared with 230,000 modifications for all 2008. we are now working hard to help ensure hamp's success and havi havi. significant resours have been devoted to this effort including expanding our develop staff to more than 11000, a5% increase

since the beginning of the year. the hamp program is now the first blow modification that we consider in our efforts. for our customers who do not qualify for at least a bit of funding availability of multiple programs that bank of america continues to offer. our recent result with our conversion to hamp is part of our efforts. as previously noted, we have double the number of customers with a trial modification in one month for proximally 20000 in july to more than 68000 through the end of august. in that same period will also increase the number of offers under hamp to more tha135,000. importantly, as we ramp up we place on hold any foreclosure sale for borrowers who may be eligible for hamp. those polled remain in place during this time that takes us to both contact and evaluate the borrower and throughout the trial modification period. with that said, we could did you to critically look at our own loan modification process.

three areas of particular focus. one, how could we make the process more customer friendly and responsive? two, happily more efficiently handle customer documentation? and third, how can we give customers beer informed throughout the process? in addition, there are other challenges we continue to confront in our efforts to help as many homeowners as possible, to realize the benefits of hamp. in an effort to improve our outreach and close this gap we have ramped up activity through traditional avenues such as mail, telephone and participation in community events. since january, we have produced a more than 167 community events. we have also partnered with three national nonprofits in the creation of a life's for stabilizing communities. we provided two and half million dollars to support his coalition and a workable 40 housing rescue fares over the next two years

and 24 communities hardest hit by the foreclosure crisis. regrettably, there are limits to what the current programs can achieve. unemployment, lack of interest in the remaining property, and other eligibility issues are current impediments to qualifying for hamp. with the unemployed and still near 10%, even the most ambitious long-term modification program will not be able to assist borrowers who have no ability to make a repayment there to repayment there to assist as we've been exploring new methods -- we have been exported with the administration methods for allowing us to responsibly offer current unemployed borrowers a temporary solution to stay in their homes followed with a long-term solution after they obtain a job. my written statements provide further details on the opportunities we still have to improve the effectiveness and the program. the entire mortgage servicing industry is racing ainst the clock to stem the tide of foreclosures and home loss. we fully undstand the urgency and will never be satisfied that we have done enough until the

country is through this difficult cycle. i insert my colleagues agree with this statement. a strong focus for administering is substantially to our homeowners. yet we are have a long way to go on these very challenging circumstances. we look forward to continue to work with congress and administration on these important issues and would be happy to answer any questions you have. >> thank you very much. >> chairwoman waters, ranking member, and members of the subcommittee on housing and community opportunity. we appreciate the opportunity to appear before you today on this most important topic of helping homeowners. we recognize that no one benefits any foreclosure. my name is molly sheehan romme i worked at albany division of jpmorgan chase as the executive responsible for housing policy. case is one of the largest residential mortgage services in the united states serving more

than 10 million customers located in every state of the country with mortgage and home equity loans totaling about one point for trillion that we service. we are proud to be part of one of this country's preeminent financial institutions with the heritage of over 200 years. at chase, we are investing in new business initiatives, people and technology to help families meet their mortgage obligations. since 2007, we have developed and expanded our comprehensive program to keep them in their homes which has helped prevent over 730,000 foreclosures. we have also been working hard to help borrowers through the federal government loan modification program, from april 6 when chase began processing trial modifications through the mha program through august 31, 2009, chase has approved over 144,000 mha drive

mortgage modifications. of these tri plans offered, 130,000 are currtly active as of august the 31st, and borrowers are making their trial plan payments. together with over 80000 additional chase loan modifications, over 230,000 struggling jays, whammo and emc customers have received a proven trial modification through august 312009. another 125,000 applications are currently being reviewed to see if they can be modified consistent with this program turns. we have been able to reach as large a number of borrowers by creating many avenues of communication. this year alone we have opened 227 chase homeownership centers in 11 states. today, more than 42000 borrowers have met with trained counselors at the centers.

the centers have also mailed over 538,000 invitations to chase customers to come discuss their situation with our counselors. we have hosted more than 120 homeowner events to educate and inform homeowners about the loan modification process. in just the past six months. we have created a dedicated website with information about our programs where borrowers and counselors can download the documents needed to apply for a modification. in the last six months, there have been more than 2.7 million visits to chase's website. we rolled out a dedicated customer hotline for modification inquiries that has handled almost 1.3 million calls as of august 31, 2009. in addition to reaching out to borrowers, we have made a number of investment in our systems and personnel to improve theoan modification process. we have added 1700 loan

counselors and 3700 mortgage operations employees, as well as as well as create additional traing for our staff, nonprofit counseling partners, and borrowers attending hope now outreach events. reaching hundreds of internal and external counselors and borrower we estimate that as of august 31, chase's is rvicing a profit of 413,000 loans that are potentially eligible for modification under the mha program guidelines. of his eligible population, 33 percent to date have been offered a trial plan as of the end of this month. however, much of the responsibility to complete the loan modification process does rest with borrowers. after being granted relief through a trial modification, borrowers must document income, hardship, death, and other important information to help underwriters complete loan modification offers that conform to mha guidelines.

chase's policy is stop foreclosure sales while reviewing a mortgage or loan modification and other foreclosure prevention steps. if a loan does not qualify for mha loan modification, we next looked to a case modification. if these alternatives do not produce a sustainable modification, the loan is referred to loss mitigation for other types of foreclosure prevention techniques that are more traditional such as short sale and deed in lieu of. i would be happy to discuss these alternatives as well as chase's own loan modification programs with the subcommittee in more detail during t questi and answer period. we are pleased to have this opportunity to be with you today. thank you for your attention. i will be happy to answer any questions you may have. >> thank you. mr. willen? >> chairwoman waters, ranking member, and members of the committee, thank you for your invitation to testify. my name is paul willen and i'm a senior economist and policy adviser 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 austin fed, the other major banks or the board of governors. over the last two years we have searcher policies to help troubled borrowers avoid foreclosure. in new england, we at the boston fed have worked with banks to set up a living facility to hep subprime borrowers refinance into prime mortgages. we have brought bars and services together in large-scale foreclosure prevention events that have served as a national model. in the research department we have gathered and analyzed detailed low-level data to help us evaluate policies to familiar the effects of the crisis. on our communities and on the country. in my remarks today i would like to focus on three aspect of the foreclosure crisis relevant to foreclosure prevention plans. the first is that an effective plan must address the problem of unemployed borrowers. long-term loan modifications that you affordable payment for borrowers but also provide attractive payment stream to lenders will help some but

cannot help unemployed borrowers. 31 percent of an unemployed person's income is often 31 perce of nothing. in a payment of zero will never be attracted to a lender. and it is important because our research shows that contrary to popular 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 2008. this may seem counterintuitive, like event could not explain the default in 2007 because there was no underlying surge in unemployment or illness that your. but that review reflects a misunderstanding of interaction of house price depreciation and a life events in causing default. when prices are rising and borrowers have positive equity, detriment of life events lead a profitable sales when prices are falling and borrowers cannot pay off the mortgages, those like eventually to foreclosures. does we did not need to see a surge in life events to get a surge in foreclosures, but

rather a falling house prices which is exactly what he saw. the second policy related finding from our research is that it is unlikely that a modest financial nudge to servicers will lead to billions of modifications that will help millions of worthy borrowers. in a recent paper we show that in the period 2522008, lenders gave payment producing modification to only 3 percent of seriously deliberate borrowers. in addition we sure this did not result in contractual issues related to securitization. lenders were just as reluctant to modify loans when they owned them as when a service and for securitization trusts. we argued that the main reason we see so few modifications is that it simply is not profitable for lenders to modification benefits of lenders because it helps to avoid the high cost associated with foreclosure, but we default risk the possibility of a barber receives about the patient will be fought again and they would have repaid the loan without any assistance from the lender can wipe out these benefits. the role of self care about a third of the bars in our large

sample are current on their mortgages or prepay a year after they become 60 days of the liquid. and investor would review this has wasted money. a third result of our research is of the policymakers need to exercise care in designing foreclosure prevention policies that provide the right incentives for borrowers and servicers. a program that offers a monetary incentive to do as many modifications as possible and to minimize the probability that modify loans 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 readable is to choose a borrower who is unlikely to default in the first place. a service could make minor modifications to millions of close to perfect credit worthy borrowers, collect a large sums from the government and intellect even more as the borrowers continue to repay the loan. taking these research results into account, we believe that the most effective use of government money for foreclosure prevention would involve direct assistance to borrowers rather than to servicers. to recent proposa, what other

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 feeack on the ground. eith plan would prevent large numbers of foreclosures and would be a good starting point for an effective foreclosure relief plan. we hope that these findings and perhaps unexpected insight to your work as policymakers and thank you again for the opportunity to appr before you today. i would of course be happy to address any questions you have. >> thank you all very much fo being here today. i recognize myself for five minutes for questions. let me just proceed my questions with a statement about the concern that all the members basically have about what appears to be a lack of substantial loan modifications, and a lot of unrest, by

homeowners who are desperately seeking loan modifications. now, we all recognize that many of these homeowners have been laid off. they may have lost their jobs, and they don't have the kind of income that could assist in getting a loan modification. what i have found is if the income is -- appears to be too low, that there is just no way for them to get help. i am told that it was basically stated earlier by the assistant secretary that some servicers are finding ways that you have found ways to help homeowners that have lo their jobs, laid-off and have regular debt and have some income through unemployment, very little, but that income does not appear to

be adequate to service the mortgage. which of you have programs to help tse who are unemployed? >> we do. >> wells fargo. nk of america? no. >> ms. coffin. what do you do with someone who is unemployed but in a home for 10 or 15 years, they want to keep their home, and maybe need a few months before they can find another job. how do you help him? >> we help them with the forbearance plan that was spoken to our. >> how does that work? >> what happened is the barber tells us i'm about to be uninflected date come to a sometimes when and wants to protect their credit also. you put them on a forbearance plan and you may set it up for

six months. say we'll give you a bit of time where you don't have to make a payment while you are looking for and establishing income again. and then at the end of that period or throughout that we will communicate and work with them. and they do establish income, and we have to work with them to provide help with those payments that were missed during that period. and we can do that by capitalizing them onto the loan, spreading them over a long period of time. i would suggest to all of us here and probably other servicers, one of the things we'll speak to the treasury about tomorrow when we meet with them is actually an enhancement to the band for which it a short-term modification. because what we believe borrowers to need, they reestablish a job, they need longer-term help in getting past that period where they could not make their payments. and by a short term obligation would actually provide a 12 to 24 months turn to the modification that would then step a. >> that is admirable

i am talking with my constituents have not done that to be true. i can't sit here and say that i have not found it to be true of wells fargo because i've worked on so many different ones, but we have a long list in our office, mostly fitting that description of people who have lost their jobs. one of the things we did find with the loan modifications in general was the late fees and lawyer fees that are attached to loan modifications for those who find themselves six months, some of them are behind many ionths, and when they finally getn touch and finally get to work, then they are confronted with late fees and a lawyer fees and some other fees that are attached on to the loan, which

increases the amount of the modified loans. how do you handle that lex let me just ask mr. shack at from bank of america. >> i was first on the temporary forbearance plan to do discussing, just what are they to follow up on that also. because i do think the industry, everybody has in the toolkits and a temporary forbearance for unappointed but how formalize it is, how consistent it is used thin there's much need of improvement in that area. just like we were before in mak came out for modifications and love inconsistencies on what person qualified. i think we are, bank of america, are assessing exactly to make it easier for our counselors to know who to offer it to end what i heard that the customers who have a good day history in the past, have a reasonable debt to income before the hardship and for customers to ask a show they can handle there back into debt. so again, a more conservative program that does exactly would offer to into a good and i think

would improve the situation for the unemployed borrowers. as well a mentioned, asberry.com we're going to war with the administration to try to build a program. i can understand your concerns, and you probably hear a lot of times we are not helping those customers in a. i think it is because we haven formalize a process to actually make sure we offer a consistently from customer to customer. that is an improvement needed. a question about that you asked about late fees and other lawyer fees, etc., i think everyone at this table's policy is to waive all late fees and there is no charge associated with the actual modification itself. >> i have not found that to be the case. does everyonat the table way that late fees? >> gas. yes. >> yes and that is a requirement of the mak program. >> ms. sheehan from chase, i have your a statement, waiver

and it basically says j.p. morgan chase bank national association successor interest to washington mutual bank has offered for a modification mha modification under the make it affordable plan announced by the obama administration march 4, you have decided that back you had declined to be considered for an mha modification opting instead to go forward with a modification made by lender to you prior to the march 4 annocement, the prior modification. had to qualify for mha modification, you may he been entitled to the following. and you go on and talk about what they may have qualified for. by signing below you acknowledge that you have been advised and understand the above. what is this all about? >> that was a form that was developed at the time prior to the invitation or announcement

even of mha, chase had rolled out a significant enhancement to its own modification, but modification efforts. we're in the process of communicating and qualifying many, many borrowers for the jays modification program at the time of the mak announcent on march 4 at that point in time we had numerous borrowers who had acally been approved to close on a chase modification. but we wanted to make sure before they make that decision that they were informed that the government program had been announced but the details were not yet out. so that was really a disclosure form that was designed to advise him that they had the options to wait for mha to become available and to go through a trial process. but if they chose to go forward with that cheesemonger, they could do that. and so really it was a form of disclosure. it does not mean that anyone who received a chase modification

waved any right in the future to a hamp modification. i have heard that statement made. is incorrect. if they founded their chase modification was not sustainable, they would still be eligible than to come back to us for a hamp modification. >> thank you very much. >> thank you. i would like to clear up, i inherit two different things here. from ms. coffin, i heard that -- no. ms. cohen, that while the modification are going on, the foreclosure clock is ticking at the same time simultaneously. isn't that part of what her testimony was? >> gas. >> okay. but then i thought i heard from some of the other services that that is not the case. could you clarify that for me, mr. schakett we can start with you. >> we have customers on foreclosure on hold.

i think the difference is the distention of the process versus the sale. every customer that we are working, any kind of workout process we put on foreclosure holds which means that we will not have a foreclosure sale until we complete the process. it does not mean that we don't go through a process of foreclosure. for instance, we get a customer that part of the process of foreclosure is to follow-up on those in default. we wou still fall those in default of the customer starts using activity toward a foreclosure. at the same time they are working on modifications. but we assure that no customer actually get foreclosed on so you see a going. simultaneous with the modification but to no customer actually get foreclosed on. that is an absolute hold to make sure we have a chance to complete the modification first. >> good to be a scenario where you are turned out for the low modification and with a short period of time your property is up for sale in a foreclosure? >> gas. by giving them all of the note of the notices.

what the actual foreclosure is so they would be aware of those to date and it would be aware if the modification did not complete they would live by the state. >> so i guess better said would be rather you are holding on for closer you are actually holding on foreclosure sale. your really not holding on the process? >> that is correct to. >> so there are two issues. one issue is whether the sales are proceeding any other issue is whether the foreclosure process is moving forward. the hamp program is very clear that sale should not proceed and we are getting calls from all over the country that the sales are proceeding anyway i'm all kinds of services around the country. so that's one compliance problem. in addition to the extensive foreclosure processes are going forward, what happens especially in a judicial foreclosure state is the homeowner is entering greater costs to litigate the foreclosure or to defend a foreclosure in court, while they

are trying to negotiate a low modification. there are two problems there. one is it is easier for the service or to just go to foreclosure because they are so close to the sale at that point. for the homeowner, because they have incurred greater cost, ose these are capitalized, and i think chairwoman waters was asking about this before. the lawyer fees, the valuation fees are capitalized into the principal and the homeowner is a less likely to be positive, less likely to qualify for modification becausef those costs. for both of those are issues. >> does anybody have another comment in response? because what i think you just told it was, if i heard this correctly, is the foreclosure lawyer fees and other tngs are rolled into the low modification, even though the property does not foreclose on. is that what you are saying? so if you are figure out how much of the personnel is a sensor outstanding principal balance is, that amount is also

out. and so if the foreclosure speed asked that amount being? >> right. so any amount that the service or pays the lawyer to pursue the foreclosure is a bill to the homeowner, and becomes part of the principal that the person has to pay back is part of the amount of alcide today that attorneys around the country coming while they are negotiating for the modifications, their clients routinely receive foreclosure sale notices. >> i would imagine that somethin in a previous panel, when they setup their protocols for transparency and accountability should be something that would come forth with a report on that so that is something we need to look at. >> let's make sure that is really clear. as you saw today there are many customers who have been offered the hamp that have not yet made the first trial payment. as soon as that first trial mummification payment is made that foreclosure proceedings not. there is no foreclosure proceedings while they are making their trial modification

and turning their documents into a. >> that was another question i have. on the trial modifications during that three months, it is a three-month trial period, if you ma your payments for three months, did you go to i guess a confirmed low modification. during that period, is that when you are still bringing all your documentation, or were you not documenting all of this free temporary low modification? >> and from which program because freddie, fannie and a government program all have different guidelines so you have to pick the particular one. but in general, yes, you can verbally doubt thought a customer over the phone and get them started to get payment related at home immediately through verbal verification of income so they can start a trial modification period and they have three payments they have to make under that. during that period you are collecting the documentation, and then assessing that e verification of the income matches what you're actually received on the documents that are presented to you.

and the completion of the modification at the end is the timely payment of the three payments and also the receipt and of the verification of income through the process. >> well, it seems to me that one of the reasons we got into this problem was because we didn't have any verification of income or documentation as to debts or any of this, you know, if you look at the different loans that were put forward, one of the reasons, unemployment understandably is probably the major reason right now. i guess i didn't realize this, and i am kind of, i am not shocked, but i'm kind of surprised that financial institutions would enter into a temporary situation without having the documentation. it seems to me that is just as risky. so it goes back to the question i asked the previous panel, what i'm going to find that we get into the trials how may people

actually passed the trial and move on to a major low modification? i don't know. that seems uncertain to me especially if you look at hindsight as to how some folks were able to purchase a home at maybe was way beyond their reach when they really were not asked for the documentation. now they have asked, maybe asking for a low modification, the price has plummeted or at least is less than what they initially purchased it for. and this igoing to assume in this economy that unless they have been lucky or worked really hard and gotten all of the things that are due them, that their income is not going to increase that much over the last two or three years to be up to sustain this. that is just a comment. obviously this was designed this way but i find that rather surprising i mean, if you are doing your own low modification within the bank, your other option, are you

getting all of this documentation before you do this instead of a when you're doing the making home affordable modification? is very different standards because i think a store to most of the servicers have not had it, vacation built into it unless they were requiring. they required it for the modification is complete. that is a true statement. the mha program does have a much higher documentation standard. people use low modification. obviously we have tax payers money at richer so i think the higher documentation standard does make sense. the trial modification period was a compromise to say if we want to get started sooner, if you want to trust the customer to go ahead and tell you what they make and start the trial modifition to. so there is some risk that actually puts the investors in a situation where they could end up having a two or three month period were actually been the documentation does not work and you have to start the trial modification period overdid. but it does allow more customers to be held sooner by the period

and it allows you to do that more during the three-month period during it before. >> okay. thank you. >> thank you, manar. ms. cohen, let me make sure i'm addressing the proper person. yes, ms. cohen. ms. cohen, you are giving us some intelligence on legal fees and perhaps some other piece. wod you restate that again, please, because i think the point was missed and i might, if i may, underscore it. >> sure. thank you for your question. during the foreclosure process the servers are in curzon visa to pursue the foreclosure on per half of the invest or trust, and that includes a hiring an attorney general to pursue the foreclosure, doing a wishon periodically.

those fees are built to the homeowner. at a low modification happens sometime after those feet have been occurred, the principle of the loan that the homeowner is paying back include those fees and. and as it is harder to afford a modification if you phrack up a lot of fees so i have received a lot of concern come in quarries from folks in traditional state the same that their homeowners are having a harder time getting modifications because of the amount that are owed extra because of this process. >> will you kindly give a number, and i know that you may not have empirical evidence to support a number that would be as pervasive and taken as much as we might want, but some indication as to how much these fees can be, please. >> i would say thousands of

dollars. maybe not 10000, b it might be that the servicers canter you more about what they charge, bup our experience is tt maybe $5000. >> this is a good segue to the servicers. first servirs, do you agree that the fees for our purposes called in fees rather than many of the other things that we may, do you agree these fees are added on as principal to the buye if you agree, if you disagree fraser and. that will be the person i will talk to. let the record reflect we have no hands so i will assume that all agree with ms. cohen. now, if this is true, if we have these additional fees attacked on and if we are now proceeding to restructuring, ms. cohen, do we end up restructuring and having payments that are near or about the same as they were

before we restructured? >> i think it really depends on a lot of factors for any particularndividual. one of our concerns is that it makes it harder to afford the low modification if your balance is paul, you're a lowncome person -- >> explained what does it mean wh you say it is harder to afford? wh does that mean to affordable modification? >> the low modification payments are based on whatever total amount you owe. and so if you are poor and you own your house and your house is only worth $45000, and you incur $7000 extra, and you sort of add that onto the 45, your monthly payment has to cover the 45 plus seven. into the monthly payment is greater because the seven was added to the 45. so if you are low income you don't have a lot of money coming in the dort to begin with, and so even $7000 on a small balance makes a huge difference.

>> i uerstand. let me before i come to you, sir, i know you want to give a comment on this but i have to go to the doctor from the cato institute and i will come back to you if i can. is a caliber our? calibrator. sir, i have read your paper and i must tell you that while i may not agree with all that you have contained therein, i think it is well thought through, and the line of logic that is consiste. and i have great appreciation for consistency and logic, and i appreciate the way you have dealt with arms and other aspects of what art stencil causes of the crisis. but your conclusion is that negative equity and income shock, these are the causes of the current inability to restructure. is that a fair statement? >> i would say they are the predominate.

>> predominant causes. i can read your exact words if you would like me to. you indicate after -- let me start with the sense. it is not exporting armsr predatory lending that drives the current wave of foreclosures, but negative equity driven by house prices, declines coupled with adverse income shocks. you didn't use those qualifiers in your statement, but i respect the right that you have to use the now. so you would now qualify these statement? >> i would stick predominantly and add my aunt of foreclosures that are not to be addressed. >> quickly let me ask you this. you indicate that these two things must be addressed before we can be successful with these various plant comment is that correct? >> if you want to see small numbers or marginal success, i would say yes. >> great.