quorum call:

delaware mr. president? the presiding officer: the senator from south carolina. mr. demint: thawrpt. thank you, mr. president. the presiding officer: the senate is in a quorum call. mr. demint: thankou. i ask unanimous consent the call of the quorum be suspended. i ask unanimous consent the call of the quorum be suspended. the presiding officer: without objection, so ordered. mr. demint: thank you for serving in the chair. today marks the 8th anniversary of america's war on terror. today we -- the day we began to fight backut 9/11 was not the day the war began. radical islamic terrorists were at war with the united states ng before that harrowing morning eight years ago. that's crucial to remember now. as the terror and tragedy of

that day recedes into the past. this war did not begin with the 9/11 attacks. or when we sent troops to afghanistan. and it will not end when we defeat terrorists on any battlefield. our goal cannot be merely to end one war but to win the war on terror. we will not win by trying to appease the grievances of our enemies. they do not hate our policies. they hate us. our freedoms. and our way of life. the 3,000 murders on 9/11 were the consequence of a bad bipartisan failure of american leadership to understand that hate. the consequences of forgetting now will be far worse. our enemies' strategy is based on what they see as our short

memory. as the terrifying images of 9/11 fade our enemies believe we will lose our nerve and retreat back into the false sense of security they exploited with those four je liners on 9/11. we cannot let that happen. if we lose our resolve and surrender our vigilance the nex attack might not be in airplanes but something far more devastating and lethal. their plan depends on us forgetting. our challenge is to never forget. we have sacrificed in blood and treasure. thousands of families have lost what can never be replaced. from the machine of flight 93 to the mountains of afghanistan to the sands of iraq, heroes have fallen. today we mourn their loss, honor their memory, and recommit to finish the work they began.

not just in foreign theaters of war but here at home. the challenge of 9/11 is not just to win a war but to pvent the next one. we will do that by remembering that our enemi are still hating and still planning. we must never forget. thank you, mr. president. and i yield back. mr. president, i note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

mr. mcconnell: mr. president? the presiding officer: the senator from arizona. mr. mcconnell: i ask unanimous consent that further proceedings under the quorum call be suspended and i be recogzed. the presiding officer: without objection. mr. mcconnell: mr. presint, there's a lot of things happening in the united states and the world today. there's many issues that -- and challenges that we face. obviously, the issue of health care reform has dominated the news and our attention, and the somewhat interesting joi session of congress the night before last. but there's also other issues that are facing the congress and the nation, and one of them, of course, is our strategy in afghanistan, and my colleagues have been discussing and debating and we will, as the

president continued to debate and discuss, as the president makes some very tough decisions concerning afghan -- i have the greatest respect and regard for my colleague and friend, the distinguished chairman of the senate armed services committee, and he and i are in agreement on many issues. and it's very clear that senator levin wants a larger afghan nation army. i have long mntained that we need a larger afghan a.m., but i think it's -- i believe it is a false choice to try to growhe afghan national army while holding back on any additional u.s. combat troops. i'd remind my colleagues that the lesson of iraq and the one that general mcchrystal wants to nut place in afghanistan is we don't get very far merely by putting individuals through a training course and releasing

them into combat. in fact, when we examine the history, many times very unhappy history, of our engagement and involvement in iraq, there was a time when the iraqi army was billed built up to a very large size; as i recall, around a couple hundred thousands, and then it basically collapsed, just totally collapsed in the face of attacks from both shia and sunni extremists. so i think the buildup of the afghan army is an important component, but remember the lesson of iraq was that our troops went out and fought and lived with and spent 24/7 with the iraqi military and gradually over time they became a far more capable fighting force and one that all of us can be proud of.

it's mentorship at every level ring including partnership in joint orations with u.s. forces that will build a robust and capable afghan military and pave the way for our eventual successful exit from afghanistan. and to do this, we need more u.s. combat troops in afghanistan. there's a lot morehat i'd like to say about it, but there are vital areas that are controlled by the taliban and its allies today. it'll require u.s. military force to shape, clear, hold, and build in those areas and if we wait the day when the afghan national army is increased in size and capable of carrying out all of these operations fully on its own, it may well be too late. we are reaching a decisive moment in afghan history a our own. i believe the united states must commit the decisive force levels

to bring about a significant change in the security environment in afghanistan with the aim of seeing real change over the next 12 to 18 months. this issue will continue to be an issue of mounting concern and importance to the american people, but i also want to point out that in the face of mounting reports of fraud and abuse carried out during the recent afghan presidential elections, i have real concerns about the integrity of the electoral process there. yesterday the electoral complaints commission, a body backed by the united nations, threw out votes from 83 polling stations across three provinces due to fraud. it also ordered recounts at hundreds of other polling stations and is due to examine irregularties in other areas of the country. these and other serious allegations of fraud undermine

the perceived legitimacy of this election. i believe that that perception is key to afghan -- afghanistan's political future. i believe we must urge the electoral complaints commission to complete its work as soon as possle and to present full report with its assessment of the fairness of the election in its entirety. the afghan people desire and deserve a fair ectoral process and a leader that's elected legitimately. this election must be a breakthrough for afghanistan in tes of better governance, more competence, and less corruption. they have sufferered from poor governance for tore too long. we should desire no less and take the necessary steps to ensure that the government we are backing in kabul is legitimate and has the support of the afghan people and the internationalommunity. mr. president, i recall when

there was a flawed and unfai election in ukraine and the united states of america lent its weight in support of the then-orange revolution and a free and fairlection was held. weill wait until the electoral commissions issue their finding, but i am very concerned about alreadyhe information that we have concerning significant voter fraud. ich may have called for a runoff election between president karzai and his leading opponent, abdullah abdullah. all americans take occasion today to commemorate the terrible attacks of 2001. each of us has the cause to reflect on some of the lessons our nation has learned in the wake of 9/11. it is often hard to think clearly about the days before those attacks when the world

seemed at once a safer and more distant place and our country, a superpower in a secure neighborhood. we saw before 9/11 that america had interests across the globe and we believed that our actions must be motivated by the ideals that have made us great. yet we also often assumed wrongly that the volatility that spilled across distant shores would never wash over ours. that instability and repression in remote and obscure places was cause for tragedy but not for alarm. we've learned a lot since that day. we've learned that history is often made in the very remote and obscure places that draw so little of ou attention. we have learned that the degree of freedom and stabili in other countries is connected to the security that we enjoy at home. and we have learned that we mus remain the authors of history, or face becoming its victims.

today i'd like to spend a few moments discussing recent events in one of those places which i bet seems like a periphel concern to most concerns. few of us wake up in the morning scouring the papers for t latest news from lebanon or follow the ins and out of politics in beirut. yet in recent days, we've seen the pour tense of a new political crisis in lebanon and while all of us must hope that it will be resolved easily and peacefully, we know from the history of that country that it very well may not be. yesterday prime minister designate assad hariri stepped down unable to form a national unity government some two and a half months after his election in june. after his mod pratt and relatively pro-western party won the largest number of seats in the lebanese parliament, mr. hariri posed the formation of a broad-based government that would even award a share of the cabinet post to hezbollah. yet hezbollah has been intent on

thwarting these efforts to form a cabinet. despite the fact that the lebanese constitution confers on the prime minister and president the power to make cabinets appotmentsnd irrespective of attempts to form a government, talks have broken down over the demand by hezbollah allied party that it retain the telecommunicatns ministry. this may appear to be a small and insignificant point of contention and surely not one that would prompt any incoming prime minister to abandon his post until we consider that hezbollah badly wants to retain control over telecommunications and surveillance in lebanon. hezbollah, of course, not only possesses a surveillae capacity and an independent communications and broadcasting system but also retains vast weaponry befitting its status as

an iependent maliciousia. along with its syrian and iranian sponsors, hezbollah continues to both exert influence outside the constitutional process and invite foreign medalin meddling. i urge parties in lebanon to form aovernment in a manner that respects the constitutiol process. over the longer term, it's abundantly clear there can be no durable peace in lebanon or long-term stability in the political process there as long as hezboldah continues to act freely as an armed independent militia. according to some rorts, hezbollah remains today the best amended force in the country, better armed, indeed, than even the lebanes armed forces which invites furtherighting at some point between hezbollah and

israel and suggest that hezbollah will continue to use its military power to induce cooperation with its dands at home. sooner or later, oneay or another, and as the united nations security council has demanded, hezbollah must be disarmed. we should also make perfectly clear to syria that better ties with the united states will require no interference in neighbor'r affairs. the administration made a major unfortunate to reach out to syria sending a number of delegations to damascus and making clear that better ties withhe united states are possible if syria changes its ways yet we should recall it has been just four years since there was an emerging on the political stage after there was a suicide

bomber that crossed syrian border into iraq syr maintas its hostility to israel and its close ties to the government of iran. it must be clear there must be real change on these issues in order for syria to enjoy significantly warmer relations with the united state some americans might reasonably ask, why? why should we care about freedom in the democratic a as operatios oaspiration ofthe lebanese peop? don't we have enough problems at home without spendintime and attention on the affairs of a small country far from our shores? answerg this, i'd like to return to the theme with which i t out these brief remarks. we have learned since the attacks of 9/11 the instability in such plas is not often confined to its borders. in lands where repression and

despair are rife and intolerance grows in the hearts of some and violence in theinds of a few. in lebanon, as in so many other places around t world, the population aspires to something better than to be pulled from side to se by a thug-ish and cruel malicious. the vast majority of the lebanese people want only that which we heren america dese: freedom and secure to build through their talents and industry a better life for themselves and their children. a americans, we must demonstrate that we stand boulevard them ine stand beside them in this home. as we cox memorial rate th we ro advaing this noble goal on this commemoration of 9/11.

i suggest the absence of a quorum. the clerk will call the roll.

mr. reid: i ask unanimous consent the call of the quorum be terminated. i ask unanous consent the call of the quorum be terminated. the presiding officer: without objection, so ordered. mr. reid: are we in a period of morning business? the presiding officer: we are. mr. reid: i ask unanimous consent the senate procee to s. res. 262. the presiding officer: the clerk will report. the clerk: senate resolution 262, designating the month of september, 2009, a national awaress month and encouraging efforts to educate the public about certain medical conditions. the presiding officer: is there objection to proceeding to the measure? wiout objection, the senate will proceed. mr. reid: i ask unanimous consent the resolution be agreed to, prmble be agreed to, the tion to reconsider be laid upon the table, there b no intervening action or debate and any statements be placed in the record as if read. the presiding officer: without objection, so ordered. reid i ask unanimous consent when the senate completes its business today monday at 278, sent 14th and following the prayer and pledge the journal of

proceedings be approved to date, the morning hour be deemed expired, time for the two leaders be reserved for their use, and the senate procd to a period of morning business until 3:00 p.m. with senators permitted to speak therein for up to ten minutes each. following morning busiss the senate resume consideration of clm 153, 3288, transportation and related agencies appropriations bill. the presiding officer: without objection, so ordered. mr. reid: roll call votes are possible after 5:30 p.m. monday as previously announced. there will be no roll call votes after 3:00 p.m. on tuesday, september 15. if tre is no further business to come before the senate i ask unanimous consent it stand adjourned. the presiding officer: the senate stands adjourned until monday, at

>> he put it this way, the ccess of the afgn security

forces is ouroal. now the best way to achieve that goal, in my judgment, is that we increase and accelerate dramatically our efforts to support the afghan secury forces in their efforts to become self-sufficient in delivering security to their own nation. before we consider whether to increase u.s. combat forces above the levels already planned for the next few months. the most effective way to retak the initiative in afghan is with a series of steps to ensure that afghan's army and police, that the afghan army and police have the man power, the equipment, and the support to secure their own nation. for a lg time many of us have urged the establishment of a goal of 240,000 afghan troops

and 160,000 afghan police by 2013. i believe it is both possible and essential to advance those goals by a year, to the year 2012. to do that, we're going to need significantly more trainer, including greater contribution from our nato allies, larger afghan security forces, and we will require additional equipment. there must be a major effort to transfer a significant amount of the equipment that isoming out of iraq to the afghan army an police. and finally we should make a concerted effort to separate the local taliban from their leaders. in iraq, large numbers of young iraqis who hadeen attacking us switched over to ouride a

became the sons of iraq. that same prospect exists in afghanistan. and here is when general mcchris -- had to say about that. most of the fighters that we see are afghans, most that we don't see aren't even political motivated, most are operating for p. some are frustrated with local leaders. so general said, i believe, in other words, he believes, that there is significant potential to go after mid and low level leader and to offer them reintegration into afghanistan under the constitution. but this game changing possibility was not apparently factored into general's

assessment. there is no plan yet to put in place a sons of iraq approach in afghanistan. we visited a council of village elders. one elder told us when we ask him w long should american forces stay here said the following:quote, until the moment that you make our security forces self-sufficient, then you will be welcome to visit us, not as soldiers, but as guests. we need a surge much afghan security forces. we have not done nearly enough to put that in motion. to do tt, we're going to need again many more trainers, hopefully including a much larger number of nato trainers.

we're going to need a surge much equipment that is coming out of iraq instead of coming home, the great deal of it should be going to afghan itead. and we need a plan to reentry grate these low level taliban fighters. these local fighters back into the afghan society. our support of this search of the afghan security forces will showur commitment to the success of a mission that is clearly in our national security interest. but we would do so without creating a bigger u.s. military footprint which provides prop -- propaganda for the taliban. and we should do this before we consider an increas in u.s. ground combat forces beyond that

is already planned by the end of this year. yes? >> senator, i'm with the talking about not adding are more u.s. troops, would you suggest that those on the ground leave their mission or are you calling on nato to solely increase and provide. and by how many more trainers do you think we need? i assume this all came up with the secretary wednesday night. what was her reaction? >> first of all, we met with secretary clinton on the hill. but that's n. anyone else have a question. no, i'm just kidng. [laughter] >> of coursehis came up our meeting with secretary clinton and gates and admiral mil linn. and i expressed my view just the way i have expressed it today on the floor of the senate.

and they obviously understood it. they did not react positively or negavely. they welcomed it. the tree of us by the way met senators reid and when we met at i'm saying is, and i'm saying it carefully, but i hope clearly, that we should complete the planned number of additional combat forces that are planned to go in for this year. but then what we must d if we're going to succeed in afghantan is to focus on the strength of the afghan military forces. and do it in a way that we have not yet done it. you know, about 6 months ago or so, the majority of the members of the armed services committee

wrote to the president urging that there be an increase in the coal for the size of afghan ay to 240 or 250,000 soldiers. that was may 19th. th was a fairly long detailed letter talking about the importan of adopting a much larger goal. we talked then about 2003, as i said today, we should not only adopt that much larger goal, the current goal is i thi around 130,000, but wehould do it a year earlier if we're going to succeed in afghanistan without ourselves creating a many larger footprint and target that the taliban can attack and make opaganda use of. and on the equipment sid senator mccn and i back in

march wrote to secretary gates, quoting a general, general barno who is a former commander actively of the combined forces quoting him as saying that the main problem in getting equipment to the afghans is what we called a constipateed peace time system of getting food. we've been pressing this issue, more trainer a larger afghan army more equipment to afghanistan for aut six months at least. these are the steps that i believe thate need to take before we consider additional combat fces in afghan. i want to state that as clearly as i can. but that's the position i take. i think there's a major consensus about strengthening the afghan army. i don't think that's the

question. we haven't adopted yet the new goals. we haven't put in place trainers, nor have nato to help us reach those goals by 2013, much less 2012. we have not adopted a shift, a major effort to get eipment to e afghans instead of much of it comg here from iraq with the great cost involved, i think the american people would support, and i support, and i think most of my colleagues would support getting essential equipment. it's basic stuff, you'realking bullets and vehicles and a few other things to the afghan army so they can take major responsibility for their own security. and what weo not yet have in place, altugh everyone agrees, that the potential is there, a plan to reentry grate and to afghan society those local taliban fighters. that what we must do.

take those steps on an urgent basis before we consider additional combatorce >> sator, are you saying if general comes back and says he needs more combat troops that the president shnuld reject this? >> i'm saying this is my recommend. i hope he considers my recommendation. >> i don't there's a great deal of support to sending more troopsn the country or congress. do you think that's a true statement? >> my recommendation is based on how we can best succeed in afghanistan. i believe that the bt way to defeat the taliban in afghanistan, and they are incredibly unpopular, is for the afghan army to be at large, to be strengthened, and for us to co-op these local taliban fighters. that's what it's based on. my judgmenis how we can bt

suck need in afghanistan. there are a number of things we got going for us in afghanistan. one of them is the hatred of the people of afghanistan for taliban. only 5% of the afghans support the talib by public opinion polls. secondedly, they have an army that is willing to fight, an army that is dedicated, that is motivated, and that army needs to be significantly enlarged and strengthened and that should be our focus. >> separate from that, do you agree as a democrat that -- >> i think there's a significt number of people in the country that have, and i don't kn exact percentages, that have questions about deepening our military involvement in afghanistan. but i am motivated as chairman of the armed services committee, and as a senator and citizen in, inucceeding in afghanistan

what i consider to be an important national goal. which is to make sure that afghanistan is not once gap dominated by the taliban that will harbor al qaeda. that is a major national need. the best way i belve to achieve it is in the way that i've outlined. yes? >> what's your sense behind what the president isn agreement with the proposal given back in june he had already indicated to the military command that they were not going to get excited about increasing u.s. combat troops. what's your sense of exactly what resources anyone in the white hse is wanting to send? >> i know what general will be king for. but the three of us met with him at strength a we did with other commanders and leaders in afghanistan. but he d not share with us nor

do we expect him to the options that he's laying out for the president in terms of additional mbat forces. i think as of right now, it is likely that there will be a request from him for additional combat forces. i think that's likely based on all the stories that we read and from body language that we would get from him. that's the current likelihood. i think it is hopefully useful and constructed f those of us who have spent oo lot of time not in combat but a lot of time from the policy perspective in looking at the complexity of afghanistan and how we can socketed in afghanistan for us tohare our ideas about how best to suck need in afghanistan. >> do you -- >> i don't have a census on what the white house or where the president is thinkg at the moment. let me repeat something that is important. i think there is a consensus not

only among the american administration but in the american people that it should be a goal to strengthen the afghan security forces. i think people willisagree whether we ought to sd additional comba forcewill agree with that point. and that's important. beuse there is not a matter where most people in the congress say no, pull out a of our troops and forget it. i think most people want to say strengthen the afghan security forces as an important goal. as we ought to build on that. and look at what have we not done to strengthen the afghan security forces? why have we not for six months adopted a much higher goal in terms of the level of those forces? why have we not put in place an equipment strategy for those forces partilarly when we are inging back an historic amount of equipment from iraq, great

cost to transport to this country within and why have we not adopted a plan for the cooption of the local taliban fighters. we're told by everybody that the potential is there, that there's rumbling from people who would like to come back and live in a civil society. but they need to do that. they need to be aured that they will not be attacked because of their prior attacks, because their families will be protected. because after they switch sides. and they need jobs. so we have to be able to give assurance to the local taliban fighters that they are going to be able tooin the army and get other jobs. that makes a plan. it has not yet been done. it is urgent that we take these specific steps, if we really lieve as i do, and i think most people do, thathe afghan security forces have to be the mainline of secity for the afghan people. >> you sound frustrated. >> in terms of positive

negotiations with the administration -- >> i'm sorry. >> also, will you be seeking any kind of language to the amendment to any bill or any other legislative? >> i don't have plans for language at the moment. i'm not sure that we need any in order to make this shift to -- in our focus to strengthen the afghan security forces. i don't know yet. prelimary, i don't believe it will take prescriptive language to do it. >> what's the next step? >> next step will be to continue to meet including general jones and hopefully the vice president next week. i h very brief conversation with general jones on the phone. the three of us will be meeting with him next week. and talking to colleagues. obviously this is an issue which

every one of us in this country, much less everyone of us in the congress is dply intereste >> senator, can you describe how you fee about how he's handling this? and can you talk specifically about the official statement going there, do you support that, do you think there will be effort, do you reasons to feel it should be considered? >> on the second question i again will state before we consider combat forces we ought to take the steps i've outlined and other steps to strengthen the security forces. th's my answer on the questio of additional forces. before we consider additional combat troops we have to strengthen the afghan army. >> do you support additional ones that are already in the pipeline? >> tnes that are already in the pipeline i think should go

there. in terms of your second question, i am not frustrated. i am determined that i give my best advice based on the experience i have and based o the resnsibilities that i have to simply give my best advice to the president of the united states and to the people around him. and i am doing that. and thats something which i'm determined to do. i'm not frustrated. as a matter of ft, i've had great access tohe secretary of defense and secretary of state and the security advisor to e president and admir mullen. i couldn't ask for greater access. that's what i will continue to utilize is that access? >> i remember a moment when senator warner returned from iraq. he said the word around was sie war, i wonder if you can say if we are at that tipping poi? what's the situation like? >> par of afghanistan the

security situation has deteriorated. and it can be turned around. so that's my assessment. if we can, if we can get in place a larger afghan army that is equipped, i think this thing can turn around. if we can put in p a plan to reincorporate the society of afghan those lower level taliban people that our open to that, i think this thing can turn around. so that's my feeling about it. it's very difficult sittion. different parts of afghanistan by the way. i do not want to generalize t all of afghanistan but it's clear that in some parts of afghanistan that the security problem is worse >> with the shift you are seeking, what if it isn't made?

if not, what happens? >> and i think it's less likely we'll succeed in afghanistan. >> senator, what's going on with the nomination of congressman johnughes? >> as of yesterday morning there were discussions under way, i think betwee the administration, and i know with those members who have blocked a vote on hiss nomination. so i don't know what happened with those discussions yesterday afternoon. i know if nything came of them or not. hopefully the blockages can be removed so we can get to a vote. there are some senators that have had holds on that nominati n we've done everything we can do to remove the holds. but thedministration had to -- had some kind of conversation that i know the nature of the conversations or the commands

precisly, and whether they, able to be satisfied. i hope we can get to this nomination in the next week. it's long overdue to be voted on. >> senator, how many additional trainers are necessary? would they be included in the -- >> there are 4,000 trainers included inhe 21,000 additional troops that have been previous approved by the president. i don't have a specificumber of additional trainers. but we've bn assured that that assessments will be made for us. regardless of the administration moves in precisely the for example that i recommended, we will get from our people out in afghanistan those numbers as to what trainers, and what else can be done, in order to move these goals forward in 2012 and to goals here being the 240,000 for

the afghan army. we will get the numbers, i don't have them yet. currently though according to the numbers we do have, we're short about 12% of the needed trainers based on the current goal for the training of the afghan army and police. >> could you talk about what u.s. officials about this issue? e did talk with u.s. ofcials. obviously this is a major layer of complications to this process. i don't know if that's an understatement but it's an accuratetatement. >> how will this afct u.s. efforts? >> it complated it under it's straighted out. let me try again. i'll come back. you talk about success in afghanistan, what's your definition and how long? >> a stable country which is not run by the taliban in which has

democratically or democratically as possible elected official and where people of afghanistan feel that they are secure. obviously we hope that we will see a delivery of services to the people of afghanistan, we hope that the nation ca be built there which will gain the confidence of the people that they in fact are having their needs met by economic policies, by develnt policies,hat is all very desirable and will effect i think the ability of the afghan army to provide security. but i focus and chairman of the armed services committee on the security part. security is essential for all of those other gd goals to be accomplished. >> is there a point that you think we should pull out after 5

or 10 years? >> do i think that, i wouldn't sea time frame. >> canou comment on pakistan's role in all of this. you said they need more equipment. could some of that also go to pakistan to help them in their fight against the taliban? >> we visited pakistan briefly, the see of us, we had a day in pakistan and at the end we had a day in iraq. there's actually some progress being made in pakistan. some of the successful attacks on some of the terrorists leader that have had a positive effect in pakistan have given kind of confidence to the paktan government in public that people that they fundamentally don't like are no longer with us. some of those leaders is a network called accounting networ whi is a current major source of people that are going back and forth across that

board. hopefully the pakistani government will address the problems not only to them but to us. we are cooperatingith the pakistan effort and hop we can strengthen them in their efforts, which i think now has some hopes for success in taking on the terroristsroup that threaten their own survival. >> senator, you argued no timetable in iraq. now senator feingol is saying we should n have a timetable in afghanist? >> the situation is different. there's a whole host of differences, including differences in the situation with their army, situaons is very differently in terms of the polical divisions that exist

in iraq. there are obviously divisions in afghanistan, but ty are not the same. i believe in iraq that the only way we can force the political leaders in iraq to reach political compromise on the key issues of revenue, division, royal revenues, the only way we n force tt and get them to do what only they cou do was to tell them there's an end poin to our troop presence. and that was an action forces mechanism in iraq which i essential. at this point i don't see that we need that action forces reck anymore in afghanistan. for me what is needed in afghanistan is to focus on the strengthf the afghan militar and police. >> i'm a little confused. if we put any more trainers, a you saying civilian or envision some military who are task

solely for training? >: there will need to be additional of military trainers. i assume we would be supplying additional trainers and nat will if the afghan army is going to get to even the curre gl of 140,000 much less than to the 240,000 which i believe is likely to be a goal that general mcchrystal will propose. 17 of us on the armed services committee, about 2/3 of the committee, wrote six months ago urging the adoption. to get to there, you obviously are going to need a significant number of trainers. i don't have that number now. t there should be a significant portion of that ming from nato. it's the least they can do, it

would seem to be is to provide the trains that are essential to get the afghan ay up to the point where i think everybo believes they should be. i think you'll find that general mcchryst will adopt that goal by 2013. i am suggesting it is important that we focus on the afhan military strength, that we bring that gl up to 2012, and that's where we will be getting data from our folks in afghanistan as to whawould it take in terms of trainers, trainers, logistics, in terms of infrastructure, leadership that needed, what will it take to get us to that goal? or to get them more accurately to tha goal by 2013 or as i would hope for012. >> another question perhaps a little off the topic. there was an exercise today by

the coast guard on the potomac river. radio traffic prompted concerned about shots being fired, alaris going up, a lot of people were concerned. it was for a while a big media event. question is none of the police here were told about it as far as i can tell. >> back to the fact? or the plan? i'm sorry were not told about what? >> about the plan or the event? >> were not told about the fact that the coast guard was going toave a security event simulating apparently live fire and things o that nature. >> i'm surprised becauset strikes me that kind of coordination should exist. >> pakistan seems to be harboring al qaeda, and some forces for the u.s. military bases. how critical is it for the u.s. to maintain military bases in

afghanistan from which they will send out troops or after al qaeda in fox. -- in pakistan. >> well, that is the reason for r presence, it's not the major reason, but it's a litimate reason for us to have a presence. but the major reason is because of the importance of being partners with the afghans and what they want to do which is to take over responsibity for their own security. they feel very passionate about that. you talk to minister about t need for his own cntry to take responsility for theirwn security, and he is very, very eloquent about that suggest. and i think most afghan leaders are. they want to have the ability to take on the taliban. th hate th taliban, they've lived under the taliban. and the reason, the main reas we're there is to help them

succeed i their efforts because we never again want to see in afghanistan until taliban because they are harbor al qda that attacked us. i know if that answer your questions. but the third reason is the one you just gave. >> what about the basis? it's going to depen upon the circumstances and situation and the progress in pakistan. >> senator, are you concerned about the iran role in afghanistan? >> i am. >> would you talk? >> i'm more concerned about the iranian role in iraq. >> is it the same role? >> no, i think they play games in both ends against the middle. there's actually been some situation where iran has been helpful in afghanistan. it's a mixed bag. >> what's the -- >> what's the what? >> i forget in terms i think

equipment i'm not positive think it was equipment situation where it was equipment coming in from iran that was needed. i'm not posite. i can't remember because it was many months ago where there was another instance where iran was helpful. maybe they are up to mischief. yes? >> a you concerned regarding afghanistan and the allegations supported from iran for the next elections? >> it obviously makes our goals in afghanistan more complicated. because the afghanistan arm right now has great support from the afghan people. they are the number one institution in the eyes of the afghan people. and that institution, however, can only be as strong as it needs to be if it is defending a

government. if it is guided by a government, and it is supervised by a government that has the support of the afghan people. and right now because of the election situation there is clouds abo t results. so those clouds are removed pefully in a way which is satisfactory to everybody that uncertainl is going to be there and that is not healthy in terms of public support in afghanistan and for the government which is in charge of that army. but the army itself is the number one institution in afghan in the mind and the hearts of the people of afghanistan. okay? thank you. >> this week during a special session the supreme court heard oral argument on campaign finance. the first session for justice

nya soto sotomor. >> wouldn't we be doing more harm than good by broad ruling for cas that doesn't involve business or actually doesn't involve the tditional non-profit organization. >> hear the argument in its entirety starting on october 4th the history of the court from its justices during supreme court week.

>> next the house financial hearing committee holding a hearing. representative maxine waters holds the heang. it's just unde 3 hours. >> good morning. this hearing of the subcommittee on housing and community

opportunity will come to order. good morning, ladies and gentlemen, i'd like to thank you oeranging member and the other members of the subcommittee on housing and community opportunity for joining me today for this hearing on progress of the making affordable program. what are the outcomes and obstacle t success? i' also like to thank missa, is she here? she asked to sit in on today's hearing. and i request unanimous consent that representative melissa be coidered a member of the subcommittee for this hearing. today's hearing will revisit the making home affordable program. the loan modification refinance program six months after its troduction. in march we held a heari on the rollout of the program and heard from government officials and hsing experts about how

the program should assist. today we wil hear from witnesses about some of the obstacles and challenging with the program and gain a better understanding of what has worked and what is not working for homeowners. as unemployment continues to soar, reaching a record high in august, the number of homwners entering forclosure has also increased. according to the mortgage bankers association the rate of home loans in the rate of forclosure proce has quarupled. furthermore, foreclosures have only accelerated in twin, with the 7% increase from june to july of this year. in my own home state of california, the foreclosure state jumped from 2.15% in june of 200 to 3.37% in june009.

and the crisis shows no sign of slowing down. with credit estimating that 8.1 million homes will ent over the nextour years. in response to the crisis, president obama established the make it home affordable program to help up to 7 to 9 million homeowners stay in their home. the program consistents of three main parts including the home affordable refinance program and the home affordable modification program. the refinance program is designedo help underwater homeowners do less than the amount owed. however, under 600orrowers higher than 80% have been able to refinance. the home affordabl modification program was intended to help up to 3 to 4 million homeowners with loaned not held by fannie or fredd be using their

mortgage payments. the cost of the program is voluntary. the government provides incentives however, to date only 15% of eir eligible 2.7 million homeowners have received assistance under this program, with 400,000 offs extended and 230 trial modifications under way. however, more needs to be done. i have been hearing about homeowners and counselors waiting months to hear back from mortgage services for the processing of trial modifications. they are also complaints about participanting services who give incorrect information, are unable to answer general questions about the hom affordable modification program. there are even services who continue to initiate foreclosure

proceedis. although i recognize the services are dealing with an unpr sented volume of trouble mortgages, i also recognize that unless more modifications are done, the foreclosu crisis will not end any time soon. it is appalling that after the implemention, some services here today reported enrollment of only 4% of all eligible borrowers in the program. i hop that our witnesses today will discuss the major obstacles with the program so that we may identify potential resolutions to these issues. millions of families are losing their jobs and millions more are losing their homes. we need t know. we have a system in place that will work and keep them in their homes. i would now like to recognize our subcommittee ranking member to make an opening statement, and then i'm going to call on

our chairman to make an opening statement. thank you. >> thank you madame chairwomen. i would like to yield, or have my first opening statement be given by the ranking member of the committee, mr.aucus. >> thank you. chairman waters, thank you for hoing this hearing on the obama administration's foreclosure prevention plan. despite recent encouraging news on the home sales, we're still experiencing an unprecedented numbers of foreclosure and it has become apparent that the number rolled out with great fanfare some six months ago is likely to fall well short of expectations. i believe that the overall approach in the administration's foreclosure prevention initiative was flawed from the inception. i think the best way in fact the

only way that i think to stop this epidemic of foreclosures is to get our economy rolng again. as long as people are losing jobs they a going to lose their homes. and we basically have no alternivether than to -- what i think is get the government out of the spending spree thate're witnessing in washington and accumulation of massive debts and allow the private sector to create those jobs. i think that's how you save these homes. and i think until washington restores its fiscal discipline and stops the spending spree we're on, we're going to continue to just substitute public funds and taxpayer funds for the lack of the private funds and home own who has lost his job is simply, what he

needs is a job. not a government hand out. i can say thi the message that i think our constituents gave us over the august break, and they gave itoud and clear is that they don't want to fit the -- they don't want to pay the bill for another untested government program. i think this is one ofhose programs. :

>> bankruptcy cramdown which was rejected by the senate earlier this year would severely undermine cent measures taken to unfreeze credit in private markets. and i think would prolong our housing recovery by adding uncertainty to the market and increasing mortgage cost for the vast majority of americans. and would precipitate some of the very things that we are attempting to prevent, the administration is atteting to

prevent in its legislation. i know the terrible cost of foreclosure, not only for the families invved, but for the communities. it is a terrible thing that we are all witnessing with these high foreclosure rates, i still think the government has simply got to end its substution of blic debts and private debt. if we don't, not only i think will we continue to drag this economy down and cause greater losses of jobs, but we're also going to pile up unpayable debt on our children an grandchildren. and i'll close by saying i noted in "the wall street journal" that the dollar has hit a new low. i believe iortantly that we've had a strong dollar, and tt that has been aeal benefit for us. but i think all of these spending programs are undermining our currency, and i

think that would be a disaster for this country. thank you. madam chairman. >> thank you very much. mr. chairman. >> thank you, madam air. and i thinkhere is a very stark difference in the approach of the foreclosure issue has been put before us, the gentleman from alabama says the federal government should do nothing to alleviate the specific foreclosures. his proposal is to incase jobs. i will point out that according to the single most important appointment to an economic post that george bush made, chairman ben bernanke of the federal resee, the economic recovery program that the gentlemen voted against and still apparently still lament significantly increase jobs. mr. bunning he said that there would be fewer jobs if we did not have this. in his report to us volunteered several instances in which,

several specifics which had an increase. so i do agree jobs are better but i also think that the analysis we justeard, it lumps together all kinds of foreclosures. yes, unemployment is causing a new wave of foreclosures. these are people who got mortgages that were perfectly nsible for them at the time they got them, but you can't pay your mortgage out of unemployment. but that ignores the fact that the foreclosurerisis is one that was inherited by this administration from the bush administration back in a time when we were not in unappointed crisis. that is a result of mortgages and should not have been made. that as aesult of mortgages that should not have been made because officials like alan greenspan refused to use authority was given to prevent bad mortgages from being made. that is what we are tried to do with what talk about new legislation to st irresponsible mortgages. yes, it would be a useful thing to get more jobs for a lot of reasons. some of the foreclosures are

caught by job losse but a large number of th forecles are not related to job loss. and so what the joneses is he doesn't like this program, he doesn't like the notion of bankruptcy, his only approach is to get more jobs. that is obviously wholly inadequate to the problem of those mortgage foreclosures that are happening because things were not done appropriately at the time the mortgages were granted. the final thing i would say is yes, i do think bankruptcy has become relevant if we are talking about a bankruptcy bill being limited in time to mortgages already been granted. the notion that th would somehow stop the flow of credit is hard to maintain in that case. you have nothing to do with credit going forward. and i will reiterate. i am disappointed at the pace of this program. i also believe that there are legal obstacles here. we have second mortgages. we have a problem with nobody having the authority we are told in some cases to modify the mortgages because the way the

servicing model has gone forward. one of the things we will do next year, i hope, is to change the law so that you will not have this situation in which no one can modify the mortgage. it is very bad public policy for us to allow to exist in law a situation where there are important decisions that should be made in everybody's interest and no one to make the. and we know there are people who say yes, it would be good if we could modify this, if ge could reduce the principal or do this. t no one has the authority to do it and no one should decide who can arbitrate between first and second mortgage. we will do tha moving forward. to cut through that content think bankruptcy a factor. let me just say about bankruptcy. the notion that there are people out there eager to go bankrupt is of course fallacious. bankruptcy is no picnic. we do believe that the possibility of bankruptcy will be an important incentive to getting ings done, and i would say finally to the servicers in particular,any of whom are large banks who don't like the notion of bankruptcy, to a great

extent whether or not that gets done this fall will be up to them. yes, it is true as jim pointed out in the senate, that was defeated. in the house at past. but if we continue to have a situation in which people are so frustrated by the inability to get thmortgage foreclosure modifications that we need, not just for individuals, b for the economy, for all the negatives that the foreclosure rate has o the economy, let me put it this way. the best lobbyist we have for getting bankruptcy legislation passed are the servicers who are not dng a very good job of modifying mortgages. and if they do not improve their performance, then they improve the chances of that legislation. finally, let me just thank the chair of the subcommittee who has bn as effective and dedicated in fighting this as any member, and she was one of the first to say that we need to change the lislation going

forward we don't find ourselves in this tangle. and she will be in major role next year as we do that. thank you, madam chair. >> thank you very much, mr. chairman. >> i would like to thank chaioman marshall holding this hearing this morning and for her continued dedication for helping families in need. this falls up a subcommittee meeting in march. introduced with the promise of helping seven to 9 million troubled borrowers, this program today has assisted approximately 6 percent of the population. while making home affordable has been somewhat more successful, i do have significant concerns wi the potential overestimation of the populations assisted by these programs and the pace as the chairman said. ve certainly americans who receive competent mortgage oducts that they did not completely understand, and now cannot afford. however, we should be good stewards of the taxpayers money to ensure that we help those families who truly need

assistance the most. we need to be fair to the millions of americans who are cutting their family budgets to stay current on their mortgages and monthly expenses, and make certain that we extend a helping hand to those who most neethe help. furthermore, there needs to be strict oversight of these prrams to prevent fraud by both the borrowers who misrepresent financial information, and fraudulent dification businesses that we heard testimony about in this committee that seeks only to coect feesithout modifying the loans. the difficulties in the housing market are not static. ther, they are continually olved over the last several years. initially, the liberty of foreclosures begin increasing because it recessing adjustable-rate mogages. but now we are seeing increases in foreclosures from a more traditional economic events like the loss of a job or excessive debt. and i wouladd to that, falling real estate prices. rapidly approhing on the horizon are new problems like the resetting of interest only and option adjustable-rate mortgages.

the programs that we create must have the flexibility to address the ever-changing issues in the housing market are additionally, we need to fter and the bible for private-sect job growth in this nation. we need the economy to improve dramatically buthe trend on our unemployme has risen drastically. returning americans to the workforce that will allow them to pay their monthly expenses, which they want to do. and return to the road, return us to the road to prosperity. i look forward to hearing from our witnesses today and i thank chairwoman for holding this hearing. >> thank you very much. we are now going to welcome our distinguished first panel. let me jus inform our members areoday that we basically have an agreement that will continue, and i think, we will move

forward with our fir panel. and one of our witnesses must leave, so we will mak sure we get good questions in. thank you very much. our first witness will b mr. michael barr, assistant secretaryor the financial institions, u. department of the treasury. our second witness will be mr. david stevens, assistant secretary of housing and federal housing administration commissioner, u.s. departmenof housing and urban development. welcome. mr. barr? >> thank you very much, chairwoman waters, and members of the committee. thank you for the opportunity to testify today about our comprehensive initiatives to stabilize the u.s. housing market. and to support homeowners. i want to outline the steps that president obama and his administration he taken to strengthen the housing sector, help of homeowners and lay the foundation for economic recovery, d for financia stability. president obama worked with congress to enact the lapgest

economic recovery plan since world war ii, to help the private sector create jobs. as part of the recovery act, we boosted housing by implement a new home buyer credit. we announc making home affordablea plan to stabilize the u.s. housing market, lower interest rate and offer assistance to millions of homeowners by reducing mortgage payment in preventing affordable foreclosures. this plan includes three main elements. first, broad support to fannie mae and freddie mac, to support mortgage refinancing and affordability across the market. we have supported lower interest rates by strengthening confidence in fannie mae and freddie mac, including through an additional $200 billion increase in the stock purchase agreements and continuedupport for market liquidity. second, we have increased refinancing flexibility for the gse's, providing more homeowners with a opportunity to refinance to lower monthly payments. low rates have enabled over 2.7 million borrowers with gsd loans

to refinance since the announcement of the administrations copperheads of housing pl. third, a key part of the administration brought housing plan is a cover his initiatives to lower monthly mortgage payment for borrowers providing modications on a scale never previously attempted. and there are signs the plan is working. 45 servicers have signed up for the program. more than 85 percent of loans in the country are covered by the prram. and a svicers have extended over 570,000 trial modification offers. over 360,000 trial modifications are already underway under the program. we a above our target pace of 20 to 25000 trialodifications started per week, and we are now on track to reach our goal of 500,000 modifications, a half a million modifications staed by november 1. t we can do better. on july 28, we held a meeting

with where we told servicers that they needed to ramp up faster and to treat borrowers better. we ask servicers to comt to doing more. servicers must add me staff than previously planned. expand call-center capabilities, provide a process for borrowers to escalate service through performance and decisions. bolster training, enhance online offengs, and send additional mixte potential eligible borrowers. servicers must report th reason for modification denials, both the treasure into the borrowers. an we are wking with servicers and fannie mae t streamline application documents and develop web tools for borrowers. we are committed to transparency and accountability. on august 4 we began publicly reporting services specific results on a monthly basis. the second publiceport was published just this morning. these reports provide a trsparent and public way of accounting for additional reforms as well as performance under the program as a whole.

second, we're working to establish specific operational metricto measu t performance of each service or, and these methods will be included in our public repts. third, we have asked freddie mac as compliance asia to develop a second look process pursuant to which fddie mac will audit a sample of mha modification applications that have been declined by each service or. a second look process began august 3 and it is designed to minimize the likelihood that bar obligations are overlooked, or inadvertently denied. in addition, we are improving borrower outrage which is essential to success in the program. we have launched a consumer focused website established a call center for borrowers, and launch a series of barware outreach event in cities facing high foreclosure rates across the country. there are a number of challenges to impmentation, but we believe the progr is on track. the program has strong anti-fraud protection. it has strong compliant protection.

it is cosistent with the ranking member's suggestion of flexible enough to handle the set of new problems, new programs, and new kinds of issues coming up. the program is made significant progress in increasing the flow of mortgage credit, breaking down mortgage rates and providing many families with a second chance to stayn their homes. we can and we must redouble our efforts to broaden the reach of these programs. thk you very much. >> thank youery muc mr. stevens? >>hairwoman waters, ranking member capito, members of the bcommittee, thank you for the opportunity to testify on making home affordable program. and other administration efforts to homeowners and neighborhoods suffering in the foreclosure crisis. madam chairwoman, i would like to thank you for your

leership, your commitment as chair ofhe subcommittee, to ensure that the administration's efforts help as many families as possible. that is always important b particularly so important during this difficult time. my colleague has done an excellent job describi progre to date in the making home affordable program. and while i hav't submitted testimony for the record i like to focus my remarks on how to efforts to assist in both in our work and washington and just as important on the ground and neighborhoods across this country. first the neighborhood stabilization program recognizing that concentrated forecloses can recount on one stable communities. hud is working to nature that 6 billion appropriate by congress for nsb helps stabilize housing markets and combat blight to the purchase and read about in a foreclosed and abandoned homes and residential properties. hud worked quickly to allocate 4 billion funds under nsb one to 319 grantees and 55 state and territory than 200 for local government.

and we allocated another 2 billion on a competitive basis to state and local governments and nonprot organizations under the second round of funding authorized by the recovery act. nsb has emeras an essential tool to facilitate the transmsion of foreclosed homes into affordable housing. second, i want to talk about our counseling efforts. which are critica to turning back the foreclosure crisis. with more than half of all foreclosures occurring without servicers or borrowers ever gaging in a discussion, about potential options to prevent foreclosures, hud has mobilized a fast network of counselors and nonprofits to provide critical assistance tthe record numbers of homeowners at risk of foreclosure. armed with his welcome information, hud of counselors provide assistance over the phone and in person tohose seeking help with understanding the mha program. they explainptions available to fha insured homeowners and often work with borrowers eligib for the administrations refinance and modification program to compile an intake

package for the servicers. these services are pvided free of charge by nonprofit housing counseling agencies wking in partnership with the federal government and working in part by hud and neighbor works of america. in addition, hud working with the treasure and homeownership preservation fndation is encouraging distresseborrowers to contact the homeowners help hotline. the 24 hours a day seven days a week outlined utilizes many hud approved counselors who can help the hme of reach and resolve issues with servicers. as part of the administration of nationwide campaign to promote the making me affordable program in communities most in need, w are also involved in a series of outreach events to engage local housing agencies, community organizations and other to buildinpublic awareness of making home affordable educate at-risk borrowers, and prepare borrowers to work more efficiently with their servicers. as hud leverages its own retionship with local housing partners otherontlines, we we'ralso encouraging services

to leverage their relationships with nonprofits to ask that the approval of applications. with treasury we are working to establish guidelines for servers and internet relatiohi with trusted advisors to guide borrowers through the application process and help them complete application packages and troubleshoot if the borrower appears to have been improperly deemed eligibleor the program. thirdly we are launching for a homeowners program as a result of the new legislative improvement featured in the helping families save homes act of 2009. its integration into mha, we believe they should be more attractive option for more homeowne, particularly for underwater browers, in a legal fogse refinancing programs seeking to refinance loans and equity in their homes. servicers will now be requiped to offer the option forn refinancingn tandem with an mha making home affordable trial modification option. lastly, as commissioner of fha, i shouldnow that homeowners

with fha insured loans have long been eligible or a variety of loss mitigation proams to help protect them from foreclosure. lasted more than 500,000 families weressisted through forbearance, partial claim, low modification, pre-foreclosure sale and deed in lieu of foreclosure amongst other state that's in part because the servicers of fha insured loans are required to notified to live in homeowners about the options available to them to help the make their monthly payment and to take such steps before initiating foreclosure proceedings. as a result, we expect another half million fans will be protected from foreclosure in 2009 through benefit abided by fha insurance. we recently unveiled fhhome affordable to give qualified fha insured borrowers the opportunity to obtain assistance under terms comparable to those under mha wiout increasing cost to the taxpayer. by offering a partial claim about to 30 percent of the

unpaid balance, deferring repayment of mortgage principle to an interesting subordinate mortgage that is not due until mortgage is paid off, we can permanently reduce some families mohly mortgage into an affordable devel. hud is also workg with treasury and other administration agencies as we continue to monitor the progress of the making home affordable programs. with home prices clining, the sale of existing and new homes increasing from five consecutive months, and home art of thats on the rise, to build on these initial signed a stabilization. collectively, madam chair one, these are a signal to every american that the obama administrator is absolutely could do to helping as many possles. once again i would like to think of the opportunity to participate in today's hearing and your continued leadership and commitment and while we are seeing progress in the administrations efforts to adess this crisis, and make changes where necessary, hud shares a concerned about the speed of proess. are working hard to resolve issues related to the

application of the core programs and to develop new elements that improve and refine mha. and as always, we snd committed and ready to help and exploreny options that congress or other participants in the industry may have to improve results at this time of crisis. thank you. >>hank you very much. i will recognize myself for five minutes. mr. barr, while 45 servicers signed up for the home affordable program represented 85 percent of the mortgage marketonly 15 percent of the eligible 2.7 millionorrowers have received assistance. at the time the program was introduced, what was the expected rate of enrollment? have many eligible homeowners were expected to be in rolled, and what time period moving forward, what is expected rate of enrollment in t next three months, six months, year? >> thank you, madam chairman.

in the initial dign of the program, our expectation was that 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 toeet in february. >> excuse me one moment. you cannot hear me? okay. all right, thank you. if we were going to get you we would do better things than that. okay. thank you. we willo back to mr. barr. >> in the initial desig of t program, we expected there be a ramp up in the program given the significant time servicers would need to change their basic systems, and for treasury and other participants, fannie mae

and freddie mac, to put their systems in place. we are on track to meet the goal that we enunciated at the being of the program, which is to reach three to 4 million borrowers over the three-year period beginning from initiation of the program. we are on track when we announced t program, i explained that we wanted to be at a rate of 20 to 25000 trial modifications be done each week. we expected to hit that level in august. we actually get it in july. so we are on track, or exceeding the goals that we establish. we are on track now with 160,0 modifications started. we are on track to reach the goal by november 1 half a million modification begun by november 1, and we expect that we will be continuing to ramp up the program going forward. that doesn't mean that there is perfection out there in the

world. there are lots of problems in program implementation that could be done better, that need to be done better. there is unevenness and performance as you can see from our public rorts. and even his in performance between and among the servicers involved. we think all the servirs could do more than they are doing now, and would likeo continue to work with them to s better results. [inaudible] >> how well the treasury responds in refinancing continue to fall short. you say you are on track. >> i think there is more that we can do. we can aontinue to make improvements in thepplication of the program, as i suggested. that are operational metrics that we know that services are trading bars the way we would like them to be treated, that borrowers are getting good

response time at the call centers, that we're doing a better job reaching out to borrowers toe sure we can reach everybody we can under the program. and that borrowers say yes whenever they are contacted. we nee to beure that borrowers are not being inappropriaty turned down, and that is why we have put in place a second look program to audit compliance under the pgram to make sure borrowerr are not turn wn. so there are a number of steps, including the web portal, addional compliance, ditional secular programs that we think and continue to ramp up performance under e program. >> thank you. i am going to -- ranking member? five minutes. >> thank you, chairwoman. secretaryarr, at michigan university law school, you along with harvardrofessor,

elizabeth warren, are wil recogd fothe framework behind the consumer financial protection agency. and i want to ask you a few questions about the reaning behind the consumer financial protection agency becaus i think you probably are best able to give us the answer. you or prossor warren. in 2008 paper, you published behavioral and for financial services rulation. that has been referred to in manyrticles about e new agency. yoadvocated repeatedly for limitingonsumer choice and expressed concerns about consumers having too much choice. is the pror 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 characrize my article at all about behavioral regulation, about limiting choice. is about understanding how people make decisions in the real world, and taking that into account in the structuref regulation. so for examp, if a borrower is going to be offered a pay oion arm, shouldn't they have the befit of knowing what the risks andosts to relationship of a regular. the idea is let's give the people the tools they need to make better financial decisions pixel on the credit cd bill, one of the things that congres did is to require the credit card companies to say what are the actual consequences of only thing the minimal balance. and i think that is an important behavioral tl, tha is good regulation and smart regulation. that is the nd of regulation that consumer financial protection agency would be

empowered to offer. it empowers people to make better decisions. it doesn't limit consumer choi. it provides room for innovation but it provides protection for consumers when they need it. >> you say you wouldn't want to limit choice or that's not what the article says, but in fact, it says product regulation als reduce emotional pressures related to potential bad decision-making by reducing the number of choices. >> right. so in that article, i am describing in distincti to product regulation, which has certain costs associated with it to financial innovation. i offer an alternative to that, that is less rtricted in the marketplace. so the particular provision that you're describing, in describing a form of regulation that is heavier handed than the one that i prefer. and i advocated for any articles

articles. >> syou are advocatin any article a more heavy-handed approach and you are now advocating? >> no. the article is describing a lighter approach to regulation. any particular provision you are referring to, i am contrasting the form that i pfer to the form that you areescribing. >> okay. u say here individuals consistently make choices that they themselves agree diminish their own welldoing and significant ways. >> so the end terkel literature representative bachus, suggest that in many instances consumers make decisio that they later regret, and that if they had en given full information about the financial consequences of their decisions, they would have made different choices. so if we're able to emper them in advance with the knowledge about what those decisions actually wouldean tohem, they are likely to make much

better decisions. >> said the new agency would not even make those choices or suggest certain choices to them? armada established a government proposed solution? >> that is right, mr. bachus. i think there is some misunderstanding, for example, about the idea oftandard products is the idea of standard products ishat i articulated before. so if you offer someone a pay option a, you should give them a basic case comparison. so i pay option arm following the additional risk as opposed to, say, a hybrid arm of what the folling characteristics. it is a way of anchoring consumer decision-making so they can make betr choices. >> so you are not going to suggest a certain choice to them? >> the govnment suggests the choice? no, sir. >> all rig.

i thinc that is all. thank you. >> thank you very much. mr. green? >> thank you, madam chairman. and as a side, 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 another time. madam chair, i wouldike you, if i may, quote what i believe to be a quote from a republican president, todorroosevelt, who reminded us that it's not thecritic who counts. not the person who pointout how the strong stumbled or how the doer of deeds could have done a better. theredit bengs to the person who is actually in the arena, who faces scarred and board dust and sweat and blood. who strives valiantly, comes short again and again, who knows the great enthusiasm, the great devotionspends time in a worthy cause.

who at best if he succeeds knows the triumph of high achievement. and who at worst, if he fails, least shall never be among those tired souls who know neither victory nor defeat. we are in the arena. doctor king reminded us that the greatest measure of a person is not where he stands in times of comfort and cvenience, but where do you stand in times of challenge d great controversy. when you're in this arena, and you have got 46 million people uninsured, unemployment is nine points out in%. where do you stand? i stand with the american people. i stand for augmenthat we are doing today with bankrtcy. we bailed out bear stearns, tens of billions of dollars. we'd bailed out the auto industry, scores of billions of dollars. we bailed outig, $180 billion.

wean bail out people who are having a crisis in their home foclosures, not because they are not har workers, but because of the cascading impact of the financial crisis that has impacted their jobs. they are losing their jobs. i want jobs right now also. but we don't have them right now. so since we don't have them right now, the question really isn't doing what jobs right now, the questn is what do we do right now? what do we do when we don have the jobs foreople to come back and make their own way through life, fend for themselves? what do we do when they are losing their jobs in about 16 percent of all mortgages are predicted to go into foreclosure within the next four years. what we do now i t question? i think what you are doing is admirable. both of you,ecretaries. but i also tnk that there is a place for bankruptcies. that allows the consumer an option that will afford the

consum the opportunity to, when the server should can't serve to go to court and take additional action. action that we should've taken earlier and hanson restructured loans. that i what thi is all about today. whether we are going to restructure loans or simply refinance loans. i cropsey allows for the restructuring of loans in an orderly systematic way when servicers cannot do. when servicers canada, bankruptcy can allow to be done. vis-à-vis american people that will be bailed outf you want to call it aailout. american people who work hard, play by the rules, a lot of them with pride loans that they cannot afford to pay because they are losing jobs because of the fincial crisis. so i see in this an opportunity for us to fashion a bankruptcy bill that is retrospective, not prospect of. we will not have the problem of this impacting new loans because it will not apply to build.

let me repeat that. something worth repeating. this will not apply to the loans. it will not be prospected. it will be retrospective. some things bear repeang. it will be retrospective. it will not be prospective. you can make the argument that this is going to impac new loans because it will be retrospective, not prospective. i risk embarrassing myself by repeating it a third, a fourth time. but you know what? sometimes you ought to embarrass herself to make a point. it will be retrospective. not prospective. ought not make that false choice. let's do something for the american people. we are talking aut a targeted group of loans that were made, many of which forced people into subprime loans when they qulify for prime loans we know what ppened to be empirical evidence is there. it is time to help the homeowners to maintain homeownershipnd protect the country from a loss of homes

that ultimately will drive down prices even more. we've got to do something. we are in the arena we can make a difference. one quick question to each. do you find any adverse impact thatankrtcyill have on the program that you are implemented currently? let's start with you, mr. barr. secretary barr. will bankruptcy adversely impact what you are doing? >> with a bankruptcy -- >> bankruptcy bi that is retrospective. >> no. >> let's move now to the next, mr. stevens. retrospeive bankruptcy. not prospective. will it adversely impact what you are doing? >> not on the retrospective. >> on the retrospect that is what we're talking about. i gould bet we do not talk things come in theisrepair that i am not to or did you pick there are many things we do talk about today that i frankly want to talk about but m time is limited. with reference to retrospective bankruptcy will it adversely

impact what you are doing? >> thank you. i yield bk. >> thank you very much. >> thank you, madam chairman. i would like t ask unanimous consent to submit the statement. >> without objection sack i had a couple specific questions. on your making home affordable, as of august 30, you have the 12 modifications started. do youave any statists on actual modifications that are considered past that trumpery because the trial period is if you are on type of treatment, what are you fighting there people staying on time, have any of these move into what do you, a solid modification? >> the trial modifications are realodifications. they really reduce people's payments down to 31% get into. the queson is when they are finalized, they get finalized if the borrower pays on time for three months. at the end of that time period. because the program takes a while to ramp up and there is a three month time period through

which barbers need to pass that test, there are very few barbers who ve reached that moment in time between the three month trial period and the final period. so we don't have solid enough statistics on those in the final ossification yet. >> so you d't have y preliminary indicatns of the people falling behind or staying on it wrecks. >> it's just too early to tell. i want to be hesitant about using informaon unless i know exactly whathe numbers are. >> i want tosk about the incentives. for instance, ci mortgage here has 191,000 eligible, they have identified eligible to languages. so they get paid $1000 for identifying each one of those? >> no. they don't get paid anything for entifying any mortgage. the list here is eligible and 90 day delinquency is to provide a baseline comparison among the

different service. the determinatn that alone is eligible is nothing more than data point in the chart. once they get paid for doing n't for doing a modificatn that is accessible, tha reaches the status of a finalized modification no payment is made unls the barbers successfully reachedhe point of a final modification. and then they get a -- >> so they've had no final modification to? >> there has been a small amount of payments go to the final amount, but it is too early in the program to assess again exactly those numbers. >> just using citi mortgage -- >> there are no significant dollars out the door yet. >> using them as an example, citigroup g $45 billion in the tar plan, and theave the most to gain. is actually go this direcon. i realize in terms of their bottom line it's probably a nimal thing but it is taxpayer dollars going out. are you finding that servicer

payments are proven to be an incentive for people to get -- servicers to get more involved in this program speak what we believe a combination of two things, are providing strong incentives for servicers to participate. one is having clear progr rules, treasury guidance establishing anndustry standard for modifications. and second, it is the strture of the incentive payments, both to the servicers as ll as to investors. >> okay. the last question is a more neral question. i mentioned in my opening statement that rising unemployments whats contributing now to probably more and more of the foreclosure issue that we're seeing presently. so then we have to 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 a minimal such a minimal income that is going toe very difficult for them to have a loan modification?

what do you see on the horizon? >> services geferally have in place temporary forbearance programs for peopl 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 rules to formalize that was in the program structure. so i do think we need to be attentive to precisely the circumstces he described. >> in some sense, if certain servicer have a program in place, maybe a three month moratorium, if you lost yr job, are we kicki the can down the road here also in some ways to try to help theamily the best way that we can? >> i think there is a balance. ihink that if the program goes on too long or is too generous, it is not going to be helpful to anybody. but if it is confinad within a seteriod of time, a lot of people are going to be able to get back on defeat and you want to give him eight temporary respite do that. >> finally, i would like to ask,

if you could make a committee or me specifically, i am interested in knowing what's that, vacations are made, how many are sustaining modification, i hope it is 100%, that i what we would all want that to seehat you are seen in the train because there coulde something in statistics very quickly there that we could make adjustments to, to tart our dollars more efficiently. >> as soon we have data that we think is robust enough, to withstand empirica testing, we would be of course goi to make that public as part of our regular reporting and make it available to the committee. i just want to say that although our hope would be that everybody would succeed, i don't think that is a realistic measure of success unr the program. we know that some people are not gog to be able to make it, and i think we need to be realistic about our expectations in that regard. >> thank you very much.

clarification, mr. barr. did you say that servicers had forbearance for individuals with no income who are approaching foreclosure, that they were doing somethin to help people who have no income? >> what i said as many servicers have a forbearance programs for people are temporarily unemployed, and i do think it makes sense within our program to try and formalize that more. and that is one of the areas where i think -- >> do you know of any that is doing that now? >> that a temporary forbearance? i would be happy to have mur staff get back with your staff with particular examples. there are such. >> we haven't found an yet. i would ctainly like to talk to you abo that, but meanwhile, let me move to ms. biggert. r five minutes. >> thank you, madam chairman. my questions for mr. stevens. do you believe the resources at

fha are enough, or do you think there is need particularly in the area of administrative funding, staff increases, and more technology, capabilities to accomplish fha's oversight? >> i appreciate the question. i have stated previously and others have as wellhat we do believe that somedditional investment is nded from a resource standpoint particularly in the area of technology as you have mentioned, to help bring our systems io line. >> how long will it take, bcause we have been worried for several years on this technology issue and it hasn't been resolved. or it is not completed yet. >> that is a great question. i think at the end of the day theris some deferred investment into systems, into africa in general. there is a budget request in. buet request i kw they made

in past yea as well, but we're hoping and we have an initiative of transformation initiative right now in hud. we have mped out the specific investment that we would like to see to upgrade the system and perhaps reace systems in tir entirety. it will not happen overnight. these are programs that will stretch out over a number of years in order to get them ful imemented. >> thanks. in the administration plans call for servicers toetermine if borrowers are eligible for meowners program, it requires blenders to write down to 90 percent of the original mortgage, the low ratio to a value ratio. and integrate 3% interest premium. and often i tnk there is need for servicers and lenders to have the flexibility to say go forward to help these borrowers. do you think the hope for

homeowners program is too restrictive? well, we cerinly were not satisfied with results from the first hope for homegwners. we are jt right now rolling out the revised improvent that was just recently legislated, and ose will be introduced in the market in the very near future. whether it has gone far enoh it is too soon to tell. i think there is some improvement to it. i do believe that it's likely that we may recommend some additional improvements to make itore effective. >> thank you. and then mr. barr, coming , i think what we're all concerned out is this loss of job and trying to do something to help those people. and 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 bui gritty ovethe modification terms, can the plan became successful? >> i think the basic structure of the modification is designed to improve the borrowers equity position from the moment modification. it does that in two primary ways. the first is a basic reqment that the structure of the mortgage amortized. and the second is a bac requiremt, basic incentive for the borrower to keep paying on time. as long as a borrower pays on time, the government will provide an aitional small monthly reduction in their principal. so it is a way of keeping rrowers in the program, providing for the incentives, building up equity overime. and i think both those measures are important helmets of the program. >> a borrower thinks they're going to be able to make tse payments. but let's say they do run into

trouble and they get behind one or two or ree months. what happens then and how does that affect the equity? >> under our program, we made a sic decision that borrowers are being a gen second chance under the modification program. and if they don perform under that second chance, they don't have the right to continue to participate in the program. >> so if they fl one month behind, they are out of the program. >> not one mth 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 better for all of the servicers and then? they have to follow that ruled? >> for servicers would prefer a role that is even less generous to the borrowers. >> ideal back. >> thank you very much. mr. miller? >> thank you, madachairm. is nice to be able to hear you into the micphone. very much. benefiting from the question.

i really enjoyed the testimony today. this is an unusual market. have been almost four yrs, and i've never seen anything and i applaud you for what you are try to be because this is like chasing the tail that doesn't exist, trying to find it. we've gone through the first round of foreclosures which were the subprime. and that it still continues. so the second round today, people who have good hes, good loans, business people or having a very seriousrouble or people have lost their jobs or just unable to make theirayments. and negative home-equity has been a huge problem. and i introduced a bill with mr. franken mr. baucus that allow bank to take their foreclosed properties and lease them for up to five years, or give the lease option to buy to a former homeowner, or anyone who wants to try to gat distressed property sales off the mark. the problem you're having aware hang, in calornia, as a

distressed property sales about 82 percent of the houses in the market are distressed. in l.a. county is about 55%. in orange county, and the robust housing market you see about 45 percent ofhem were tried to chase the bottom of a marketace tt you can get to. and the purpose of the bill is introduce the marketplace to find a reasonable bottom and start to work its way up which would help you in your situation, trying to do with individuals who can't meet their payments i applaud you on the loan modification effort you're attempting, but i wan to highlight the fact thap our volunteers on your part. my good friend, and i have great respect for them, talk about bankruptcy applyo the residential market place the prlem i hav with that is lenders in good faith make a loan, which is theender holds at thapoint in time. and allowing a bankruptcy judge to arbitron have a right and go in and restructure that

contractual agreement between the lender and the buyer, i think would have horrible consequences inhe long run because it put the letter in situation where they believe th are making a loan that they can secure, whether commercial or residential. th have a right if they want to voluntarily restructure it but they also have the right to scure their assets that they have made the loan on. and i think, and with great spect to my friendn the other side because i agree respect for him a he knows that. i just think in the long run we're going tcreate great harm to the lending industr because the lender making this loan -- >> would the gentleman yield for the good friend? >> i would be happy. >> we currently allow contracts that are for automobiles to be structured or we currently allow contracts for farmland to be restructud. we currently allow contracts for

yourecond home, there don't, for some, anything beyond your personal to be restructured. i would just add the quality to the equation and allow first homeburs to ha the same opportunity. thank you. >> i respect your comments. i really do. t@ink though that heading this direction could be very dangerous to the marketplace in the long run. but the queion i have for you is wennounced a bill out o the house that allows banks to basically take properties back, it is an oion to buy or they can hold them offo a marketplace and lease them for five years to allow the market to have some form of stability. what is your opinio as to that? >> representative ll, i have it read the legislation. i think exceptionally there a attractive features in the short-rm to the kind of approach. i think in normal ecomic times the basic approach underrated ricky menard is opposite for

reasons that you know, far better than i do in terms of worrying about forebears and manager of an operational capacity and other factors. the question is in the short term doesn't make sense to have that kind of approach. i am attracted conceptuay. i thhnk that -- >> items that you have a firm opinion, but you know how mark toarket applied to banks and they are deali with distressed properties. they have additional set-asides based on principles. if we can get the homesff the marketplace and illegally allow these lenders to take those nonperforming assets and make them performing assets, through leasing them, i think it puts lenders in a much better financial tuation and i think it removes tremeous amount of distress and pressure on a down sliding market. >> agail, i am conceptually attractive given the expert new circumstances we are in. agai not in normal times. in normal times you uld ke that kind of position at all.

>> five years? >> well, i think any particularly strict financial circumstances wee in nowe are considering that kind of approach, and i think the concern would be some financial institutions have the operational managerial capacity, the expertise to do that well. other firms lackuch structures. yo would want to make sure that if you took that approach, it was carefully vetted with the supervisors of thos institutions. and there were no kind of blanket policy permissivenes rather really quite institution focused approach. so i think there is ro for that within the set of parameters. >> thank you. >> i yield back. >> thank you, manager. i appreciate it. it is interesting t note that as foreclosure rates continue to rise and they continue to rise in my community, which haseen

hit so hard by higoreclore tes over the last eight years. you see that continue t go on, and gt to see a very slow pace of the help for homeowners prograbeing implemented inhe district. my district office gets calls on a routine basis from homeowners that have tried to get help from the program, try to get help fromhe banks. and are facing delays or denials or higher payments from the program. i want to know ifour office has any nchmarks or standards that you are holding the morgages due or particularly those who have taken part funds to how many or what percentage of the borrowers 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 also. i say that the outside -- at the outset that we recognize the programs take a good time to ramp up. we are on target to hit the goal for the program tt we set up getting 500,000 mifications, a half a million modifications by november 1. with a service or performance is uneven. it is uneven among service. there is also geographic, lik geographic unevenness as well. servers as needed to a better job of reaching out to borrowers, and in finding the elible borrowers. we have in place a second look ocess that freddie mac has just instituted on our behalf, launched last month, to look at los that are being denied to make sure thatlible borrowers are not being excluded from the pool. and also to check the eligible pool to make sure thaborrowers

in that pool are being offered modifications that there is more at that we could do in this regard, but i think we are on the right tra. >> just, one, that i would add, and i think one of the foreclosure numbers that we gained a lot of publicity is the track numbers. we were looking at the previous month numbers, and whe you break down the numbers, they show an aggregate amount of ck, say, 350,000. homeowrs peceave some sort of notice of foreclosure in that month period in. and if you break it down a large portion of those are first notices. a largerc second notices that received a first of its the previous month. and last month numbers, the number of homeowners who actually had their homes put into reo, into foreclosure, was unr 100,000. and i would say the only, one of the positive signs we're seeing is that the current ramp rate of

the hamp program, those entering the modification period, is exceeding the actual inventory coming into foreclosure on a run rate basis. it isn't dealing wit t enormous inventory issue yet it is not reducing any significant way but we do believe the program is keeping pace with lew foreclosures comg in tohat maet. i think that is a very positive sign about the program. the questions we ask is will the prram to sustain itself, with a cov a broad enough percentage of the pulation to be impact ful will be the impact ultimatel wi some of the other large servicers are slower to ramp up their call-center capabilitie, and as they do so. and we're getting positive signs from some of the larger servicers that give us rson to suspect that the numbers should increase, at least in the short term, as more of the servicing industry gets online here and get behind the hamp program.

. . @ >> we spent about two hours talking about problems that they were having implementing. and in this case, they are lenders and servicers, in many of the loans that they service they make. may have strong incentive to

work these loans out. their overall sense of the program, the drop between the 570 and the 360, 570,000 people have been offered a modificatn . of those only 360,000 had said yes, we will accept that modification. i guess we should know the number of people that tried to enter the pipeline that 560 was derived from. that 1 million, one out of two? they say that they are getting three to four calls and inquiries occur finding a person that actually they can put into the pipeline. that's number one. they find that they have spent far i excess of the $1,000hat they are being offered to modify

these loans. they are also finding out that there is a new phenomenon and dynamic among consumers now. ani heard this discussed a couple of nights ago. i hope -- if the modify payment does not allow them to continue to make sure credit card payments, to continue to make their othe debt payments, they in many instances are making the decision n to make their mortgage payment. and in traditional terms we think that the first thing people are going to make i their mortgage payment. an wha they are finding is when they are recalculating their mortgages their other debt ratios, many instances, 60 to 70%, and the pple simply even after every one of these

modifications that have been offered here, the service decides that there's over 50% chance that eve if we modify in th program, theseeople are not going to make their loans. so thencentive that it appears at ty have to modifyt and get $1,000 and then be paid back for every year, they are looking at the loans a saying, i gettin four phone calls. two of the people get to ste two or three, one of tho two ge into the modification process, and then half of those people aren't going to make their payments under the modification. and the $000 isn't enough. and the incentive programs that are offered in this just aren't enough. because of what they are periencing. w, since their the lender, they may want to modify the

program in spite ofll of that. but these are the major, -- this is the major company. this is what they are experiencing. i don't know if that's what they are telling you, but they are telling their congressman this. the people, and i'll nd on this, the danger that i see in resuecting the discussion about bankruptcy and the ability to mid gait the debt bankruptcy is that we have a great numr of borrowers now that if we begin to send the signal that that is a possibility again, weill have people that ll make the decision to stop making their payments and waitor that soluon. that's mybjection t resurrecting that idea. and i can't believe that it does not -- it wld happen

negligible affect on hud. i can't believe that that answer it would have a negligible effect thank you, ms. chairman. >> thank you madame chairman. thank you for your har work in addrsing one of the me challenging aspects of our fincial crisis. i won't take aot of time. i just want to recount something th i heard quite a bit in the last five wee as i was in districtn between thoseare moments when i get to go off of health care reform, i heard very consistently, what i know you hear as well, which is a great deal of frustration with the pace with which these programs that actually address the real needs of people. and of course you understand as you're targeti with the financiainstitutions 500,000 mortgages start a modifications started by november and of course we all know th estimates are in the next four years we mayee as many as 8 million

properties. the net result of that which has been said b somebody like me is that we are really striving to help 1 in 16 peopl who are in households that are in a lot of trouble. i don't have a question. but i did want to convey the intensity of the health care reform debate of the sentiment of how the government really could do more. i ow youre working very, very hard. but i would just urge big thinking. housing was at the core of t crisis. as much as i applaud the tough and good work that you are doing, the remedy at this point is n adequate to the magnitude of the challenge. >> tnk you. if i could just say a couple words about that. i think that people may lose sight of the housing programs that are out there. the progr making home

affordable that would respect the loan modifications is one important piece of that. the 500,000oans we're going on -- on track to hit by november 1st is papt of a larger pool of 3 4 million loans we have to reach under the program. in addition to that, we've added ded flexibility, 2.7 million households have rinanced since the announcement of tho flexibilities. we have additional funding suppting that capitol base if you will of fannie and freddie and the treasury and the federal reserves purchases of mortgage back securities are ensurgly kidty in the market. together with fha, fannie and freddie, they are providing the only mortgage financing effect ily we have in the country today without the government initiatives from fha and support

we would not see mortgage financing occurring. so there's been an enormous amount of energy fused on intervention in the he finance stem to give people away of staying their homes or refinancing and having affordability. we can do better. we can do more. we need to do mor but let's broaden the lens a little bit. >> thank you, i appreciate the observation. and i kn much is being done. but again, i wanted to report back on what i heard in five weeks in the district, and just remind all of us that many of these institutions, and i applaud the work that was done by everyone in the government to really push the banks over the course of july toeally accelerate this. th is not simple. we don't want to push the banks into do imprudent thing. i come back, they haven't acted quite as fasts we would like them to act, exist solely to

e american taxpayer. i would urge you to deal with respect to really urging them to when prudent act as fast as possible to alleviate the ver real pain that my constituents are feeling. thank you for your efforts. madame chairman, i balance my time. >> thank you very muc mr. clay. >> thank youo much, madame chairman. thank you both for being here today. according to your testimony, mr. barr, your the treasury asked freddie mac to device a second look process beginning on august 3 in which freddie mac wil audit a modification application. ho will the treasury ensure that it w a cross representation of actual borrowers seeking mha modifications? >> we've asked fddie mac to do

a sample audit not only of the denied borrowers but also of the eligible pool that each institution, and it will be freddie mac in the first instance will be doing that analysis. that analysis will be made available to us. we will be ensuring it is appropriately designed, and we will be gathering the information that provide to us to help us reform our relation with individual servicer as well as the spot program design flaws that we need to correct. >> just describe for us the provisns of the second loo process. what does it test for? and how? and what documents are required to be? the second look process i designed to determine whether any of two things happened,

whether first a borrowers that was else available was inappropriately denied a modifition. or a pool of borrowers that ought to be brought in aren't even being lookedt. and in both instances the question is given t characteristics of the borrowers and the loan, whyere they denied or not looked at? if there are individual servicer problems, those will be addressed in an individual servicer level, corrected at thatevel. if there's a systemic problem we we can bring it in to include program desig they'll be looking at using the full range of audit toolso make sure that happens. >> and are servicers being given notice before they are audited? are the given prior notice?

>> there are twoeparate things. there's a second look process th respect to being sure that borrowers are not inappreciately denied access to a modification. there is in addition to that a broader compliance effort that freddie mac has put in place for us that includes both announced and unannounced visitwith respect to the servicers. >> i see. thafk you for that response. mr. stevens, according to yr testimony, administration officis detailed plans that take three important steps to improve the programs performance. including public reporting, setting more operational metrics and developing a second look review process. please dcribe 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 in support of the initiative that mr. barr has already spoken about in the second look process. the reports is the report that actually a copy was issued today. it was released, and it's t score card excuse. >> what -- how will these steps further incent to perform better? >> i think it will have a fresh pact. the meeting that was held some weeks back in washington wit all of the servicer that both mr. barr and i intend, and some people on the next panel intended as well,t clearly highlighted the impact of those that had first applied the modification terms in their operation ainst those had hasn't bes practices were discussed. a car understanding that there would be a strong inspection process and expectations about hitting phe skull.

there was consensus in the rm at the end of the meeting that if there are no more issues on the table everybody is on board to mov these things forward. i'll tell you some of the larger services which will impact the numbers, while they may have been slow to build up their operations, i believe, and i hope the senior executives, i hold them at their integrity and communication to us even in recent meetings their last week, that they are reforming up and concerned about t report cards. i think from an intended effect from this score cd, it has some additional comments. i think it#s having at least at this point a desired impact. and there's a lot moreetails that he came up first, the ocesses they used, some of the issues involved. i think at end of the day this kind of score card helps

nchmark and nobody wants to be a low perform on that score card. >> thank you, ma'am. i yield back. >> we have no more members who wish to raise questions of the nel. and i would like to dismiss this panel and we will reserve the right to ask further questions in writing to you. we will now call on the secold panel. >> tha you very much. >> thankou. >> the first witness will be mr. mark calabria, director of the cato institute, our secod will be mary coffin, and our third witns will be alice cohen,

staffttorney, a fourth witness will be mr. jack schakett, mortgage strategist bank of amera, our fifth witness will be molly sheehan, j.p.morgan chase. our 6th witness will be the senior economist of the federal rerve bank of boston. withoutbjection, your written statement will be me part of the record. you will now be rognized for the five-minute statent. we will now start with mark calabria.

>> you may begin. >> thank you. i thank you for yr invitation. i'm mark calabria. my testimony will address two specific questions. the first of which why has the current and previous administration efforts along with the mortgage industry s little impact on the overall foreclosures numbers. my second question is given what know aut the first qstion what policy options do we look and do we have? my short answer that these efforts are largely misdinosed

the program. the current foreclosure almost exclusively the result of practices and adjustment rate mortgages. the simple truth that the vast mortgage are the same factors. generally the negative equity on the part of the homeowners that results as a substantial shock, job loss or reduction in earnings. until bot of these components, negative equity, will remain at low levels. we will reser most of the thoughts occurred around the time of reset. and that is not what has been observed. with the reset features that are followedhe vast majority have occurred long before the reset. additionally payment shock, the

fixed rate of mortgages without any payment shock would have default patterns below the a.r.m.. when one controlled the equity credit score and other characteristics, they@ largely disappear. >> can you slow down just a little bit slower? >> yes. >> all of us are frustrated and looking for answers. to be effective, ioulduggest first of all that the administration, congress, the gao, cbo should psent detailed estima, what causes, howany of those can be avoided? i would say i'm not sure if we can measure the successful program without having a baseline for what that successful should be. doesn'tly, whatever the number of modifications that are

created, it's very hard to tell whether that is anywhere near the right level of modifications. and i also want to note before discussing specific policy suggestions we shou keep in mind that approximately 50% of foreclosures are currently driven by job loss. i would say the most significant way is to foster an environment that is conducive to job creation. i think it is also important to focus on owners currently in foreclosure is to rch families before they fall behind. for instance, about 4 billion of the jobs that has beenost have been in mass layoffs. theseepresent a double shock to t household, you not only have a job loss, but also have a shock to the housing market because major eloyer is downsizing. but a damaging as they can be, we knowbout them ahead of them. workers get notice, b despite the strong conduction, there's ve little coordination between

the department of labor and hud. one of the things we can do and should do is when you know there's going to be factory closing andhe last day the workers are there, you can get counselors in there. you know some percentage of the workers are gng to have problems withinhe nextix, seven, eight months. yes, there's very little done. i would encouraging the pushing towards factory and workers experienci mass layoffs. i think we could also look at encouraging bank regulators to give lenders the more flexibility to the lease out more homes to the current residents. thankfully to the not to engage in long-term property management and not considered a core function. in addition to many owners who wish to renters we know that approximately 20% of foreclosures are occurring on renter-occupied properties. son many cases these renters

want to continue to pay their rentnd we allow them and keep the income stream going rather thano proceed to a foreclosu sale. i would also stress that i think we need to focus our resources on the household indeed. those households who are for some sort of intervention will lose their home. i make this point to say that broadly lots of our programs, for instance, the gsa finance ograms are aimed at households who are not facing, but simply cannot refinance due to the mortgages. we should be putting downsizing those because they draw off important resources that are limited. those to servicers and lenders. we spent a lot of time focusing on low hanging fruit president wrapping up, i will conclude with my previous observation to the current foreclosure eorts have been unsuccessful because we didn't diagnos the

problem. we need to focus on negative equity, and income shocks via job loss to households. until we deal with those, we wi see very high levels of foreclosures going forward. thank you. >> thank you veryuch. ms. coffin. >> chairman, members of the committee, thank you f the opportunity to come before this subcommittee today to discuss our continued commitmen to doing everything we can to prevent avoidable foreclosures and help stabilize the housing mortgage. wells fargo may be big but we operate to do what's right for the customersnd american taxpayer. since we lastame, much has chged and involved to assist struggling borrowers. first weorked hard to implement the very detailed and evolving home affordable modication programs. which include different guidelines and requirements for fannie, freddie, nongfcs, and

most recently f borrowers. to handle the greater than 200% increase in worsers requesting assistance, including the 35 to 40% who are current on their mortgages we have hired and trained a additional home retention staff for a total of re than 12,000. as of september 3 we have qualified more than 304,000 customers for modifications this year ane. as it pertains to specifically to amp, we have offered the trial modification and we have received the herself payment for 44,000 of these trial starts. we have further enhanced our support systems, ourraining, and our retraining toid our service representative in appropriately commucating modification programs and guidelines as they contie to change and expand to help more borrowers. in addition we have improved the ways we obtain from browers the extenve documentation the

government requires and we coinue to worko ense 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 modifications programs and opportunities to make them even for effective. and mt importantly we continue to conduct final reviews to ensure every optio is exhausted before foreclosure. because when a foreclosure happens, everyone loses. wells fargo h long adhered to principals that guide our business practices. we did not make negative advertising, pay option, adjustable rate mortgages, or subprime stated income loans, despite their popularity. we can attest to the home loans are compa originated are better than the loans we service that@ weave no environment in

originated or underring. more than 92% of our customers in our eire servicing port tole owe remain current. this is the direct result of our customer's efforts and our commitment toesponsibly service all the loans in or portfolio including those formally owned y wachovia, and the servicers we did not originate. they continue to be significantly lower than the average. and the lowest of the nation largest mortgage lenders. and for all of 2008 and 2009 less than 2% of the properties have proceeded to foreclosure sale. these results would not have been achievable without the continued public and private sector to inform custome of their options and introduction of a new home affordable modification program. well we are proud to have been a part of h.a.m.p.s development,

it needs to be acknowledged it will not help all borrowers. for the customer who are ineligible and where we can reach affordable, we offered customized solutions. during june, july, and august, the same time we fully exeted h.a.m.p., re than 83% reduced payments. wells far doe is a company committed to doing what is right for our customers. i have personal psonally spoken tsee the experiences they are having. these discussions have reinforced for me how many americans are struggling with changes including unemployment an underemployment. i've also learned how much they are struggling with the program requirements and docentation. and in the past six months, qome customers have bee challenged with getting clear, timely communication from us. as the guidelines and the requirements for the various programs have continued to

change. we hold ourself to high level of accountability for improving communication and returning all of our customers to a level of service they deser. as servicers we sit between the customer and investor, and we have responsibility for doing modifications the right way. we also have a responsibility to execute the programs well f all americanaxpayer but ensuring t customers gen modifications are truly facing hardships and they can afford and sustain after the modification is completed. in closing, as we have from the very beginning of this crisis, wells fargo will continue to speak innovative ways to address the challenges facing our nation. thank you, and i look forwardo your quastions. >> thank you very much. >> chairwomen, and members of the subcommittee, thank you for inviting me to testify rarding the making home afford policeman and its effect on foreclosures.

i am the staff attorney at the national consumer law center. many any work, i provide training and technical assistance to attorneys across the country representg homeowners facing feclosure. i testify he today on behalf of ncl and behalf of t national association of consumer advocates. for the last few months i have working with colleagues to promote large scale sutions to the foreclosure crisis. during that time, the pleas from help from advocates in the field on the frontline of saving homes have escalated in number and urgency. when the h.a.m.p. program was announced by the administration on mar 4th hopes were high that homeowners would finally have a means to prevent foreclosure. unfortunately, that is has not materialized. in fact, we have heard dhat h.a.m.p. is not the tool it should be. in general, advocates find it's hard to get at all, and when

obtained often are not compliant with program rules. reports from the field indicate that three servir testifying today among others have serious h.a.m.p. compliae problems. reover, even if they operated as envisioned by treasy officials, it lacks the mandated principal reduction that many believe are necessary to stem the foreclosure tides with historic lows, more and better loan modifications are needed to turn around the crisis. h.a.m.p. will reduce foreclosures by 1/3. it is unlikely t shrink to precrisis lev. problems with h.a.m.p. fall into two main categories, implementation and design. participanting servicer violate by requiring borrowers to wave legal rights requing data paymen or other prerequisites. steering borrowers into other loan modification that are less adntageous. moreover, they are placing home

owners in foreclosure or proceeding to a sale without viewing h.a.m.p.. it holds servicers accountable and obtain sustainable modification. the test which is primary basis upon wch the modification is approved or denied is not the availability to the public. they have no ability to question whether it is based on accurate information. while homeowner are seeking modification, service often continue the foreclosure ocess. and pursuing both tracks means servicer have little to prioritize and homeowners face increased fees tt are then capitalized into the loan modification. while homeowners and bankruptcy technically are egiblehe program, the fact that servicers have discretion about whether to offer has resulted in almost total removal of this option. the lack of mandated principal

reduction under a.m.p. raises questions about the mofication. homeowners who could refinance or sell their home are denied both options when they owe more on their home than it is worth. without principle reductions homeowners who lose their job have a death in the family or otherwise experience a drop in income are more likely to experience foreclosure. creating affordable and creatable is labor intensive. it is no surprise in the servicer continue to push homeowners away from modification or delay the process substantially. in addition, servicers profit is directly linked to the principal of mortgages they service and e timing for writing down loans. both motivate servicers away from offering. moreover, advantages paid if i servicers are more easily recovered after a foreclosure rather than a loan, tipping the scales away from modification.

while initial loan numbers are up, compliance with h.a.m.p. is still quite spotty. ma people who appear to be qualifd are not getting a chance to save their home. congress should pass leeislation requiring to qualify home ouncers where such modifications are more profitable to investors than foreclosure. it also should consider further reforms to the servicing industry. lost mitigation should be performed, and as the chairman noted, with loans they never couldffordnd those facing job loss. hr3451 refcts these basic goals of prioritizing, saving homes through loan modifications and reforming how servicers d business. congress should adopt court pervised which would side that many of the structural barriers that today are preventing mass

loan modification from occurring. congress als suld support throh funding and the establisents of standards. congress soon should recognize that voluntary measures on their own by entities that perform from homeowners default even with incentives will not lead us out of thi crisis. thank you for the opportunity to testify before the subcommittee today. we look forward to working with you to addss the challenges at face our nation's communities. >> thank you very much. mr. schakett, that the correct pronouncuation? >> schakett. >> thank you. >> members of the subcommittee, thank you for the opportunity to update you to help the homeowners stay in their home. i am jack schakett, i report a have respoibility for the programs, mortgage services portfolio of nearly 14 million loans.

as the country's largest, we have doi the modification program, and understand the responsibility that come sith us. we are exited to hispanics the administration achieve its goal with the trial modifications by november 1. bank of america is working to transition 125,000 into trial modification as a part of goal. as a donstration of our minimum, in august we doubled the number of modifications that have been started. throughout this historic downturn, bank america is extending credit to work to get soluons for the customers. for example, we are one of the first to thed finance program. to date, we completed to more than 74,000 home ouncer. fo h.m.p. we were one of the first to seat belt the retention program. through our national program and through other efforts bank of america completed loan modifications for 170,000 from

january through july of 2009. compared to 230,000 modifications for all of 2008. we're now working hard to help ensure h.a.m.p.'s success and establish the customer demand and program details. significant resources have been devoted. including expanding to more than 11,000, a 55% increassince the beginning of the year. this is now the first loan modification that we consider in home efforts. for our customer who do not qualify, they still benefit from the multiple programs. our recent rults reflect to the center piece of the home efforts. as previously noted, we have doubled the number of customers with the trial modifiation for 23,000 to more than 68,000. in that same period, we've increased the number of offers.

we placed on hold any forecloure sale for borrowers who maybe egible. those holes remain in place during this time it takes into both contact and throughout the trial modification period. with that said, we continue to critically look at our own loan modification process. three areas of particular fmcus. one how can we make the process more customer friendly and responsive? two, how with question handle customer dk numbation, and third, how can we keep customers better informed thrghout the process. in addition, there are other challenges we continue to confront in our efforts to help homeners realize the benefits. two of the most significant hurdles are customers not providing required informaon, and lack of borrowers respondentiveness. in the effort to improve, we have ramped up aivity through

mail, it was, and participation in community events. since january weave participated in more than 167 comlunity events. we have also partners with tee tional nonprofits in the creation of stabilize communies. we provided 2.5 million and their work to hold 40 housing scue payers in 24 communities hardest hit by the foreclosure crisis. regrettably there are limits, unemployment, lack of interest in the property, and other eligibility issues to qualify. with the unemployment still near 10% even the most ambitious long-term modification program will not be able to assist borrows who have no ability to make the payment. to address thise have began exflowing the methods. we began exploring with the administration methods for allowing us to responsibilitily fer current unemployed borrowers a temporary solution

to stay in their home followed with the long-term solution after they obtain a job. my written statement provide further details o the oppounities wetill have to improve. e entire mortgage services dustry is racing against the clock to stem foreclosures and loss. we ful understand the urgency and will never be satisfied until the country is through. i am certain my colleagues great with this. strong focus is add to the homeowners. yet, we understand, and we have a long way to go. we look forward to contue to work with coness and the administration on these important issues. and i'd beappy to answer any questions that you have. >> ranking members and members of the subcommittee on housing

and community opportunity. we appreciate the opportunity to appear before y today on this most important topic of helping home owner. we recognize that no one nefits in a fore foreclosure. i work for the j.p.margin chase as the executive responsible. chase is one of the largest resideial mortgage services in the ited states serving more than 10 million customers located in every state of the country with mortgag and home equity loans totally of 1.4 trillion. we'r proud to be part of one of this country's preeminent financial institutions with a heritage of over 200 years. at chase, we have investing in new business initiatives, people, and technology,o help families meet their mortgage obligations. since 2007, we have developed and expanded our comprehensive program to keep family in their homes. whh has helped prevent over

130,000 foreclosures. we have ao been working hard to help borrowers through the federal loan modification program. from april 6 when chase began processing trial modifications through the mha program through august 31st, 2009, chase has approved over 144,000mha trial mortgage modifications. of these trial plans offered, 113,000 are currently active as of august 31st and borrowers are making the payments. together with over 88,000 additial chase loan modifications over 230,000 struggling chase, a.m. bah mu customers have received through august 3129. another 125,000 applications are currently being reviewed to see

if they can be consistent with the program terms. we have been able to reach this large number of borrowers b creang many avenues of communication. this year alone we have opened 27 chase home ownership centers in 11 states. to date more than 42,000 worsers have met with trained counselors at the centers. these centers have also mailed over 538,000 invitations t chas customers to come discuss their situation with our coselors. we hav hosd more than 120 homeowners events to edute and inform homeowners about the loan modification process in just the past six mths. we he created a dedicated web site with information about our programs where borrmwers and counselors canownlod the documents needed to apply for a modification. in the last six monthshere has been more than .7 million visits to chase's web site.

we rolled out aedicated customer hotline for modificati inquiries thatas handled almost 1.3 million calls as of august 31, 2009. in addition to reaching out, we have made a number of investment in our systems and pernnel to groove improve the loan modification process. we have added 1700 and 3700 mortgage operation employees as well created additnal training for our staff, nonprofit counseling partners, and borrowers attending hope now outreach events reaching hundreds of thousands of counselors and borrowers. we estimate that as of august 31, we are servicing7,000 loan s that could be modified. with the population 33% tod have been offered a trial plan as of the end of this month.

however, much of the responsibility to complet the loan modification process does rest with borrowers. after agreeing relief, borrowers must document income, hardship, deaths, and other important information to enable underwriters to complete final loan modification offers that conform to mha guidelines. chase's policy to to stop while reviewing a mortgage and other foreclosure prevention steps. in a loan does not qualify for mma loan modification, we next look to a chase modification. if these alternatives do not produce a sustainable modification, the loan is referred for other types of foreosure such short sale. i would be happy to discuss these alternatives as well chase's own loan modification in more detail during t question and answer period. we're pleased to have this

opportunity to be with you today. thank you for your attention. i'll be happy to answer any questions you may have. >> thank you. mr. willen. >> chairwomen waters and members of the committee thank you for your invitation to testify. i am paul willen, i'm a senior economist at the federal reserve bank in boston. i come to you today, however, as a reachers and concerned citizen and not as a representative of the boston fed. the other reserve banks, or the board of governors. over the last two years, we have searched for policies to help troubled borrowers avoid foreclosure. in new england, we have worked with banks to help subprime borrowers refinance. we brought borrowers and servicer together in large scale foreclosure prevention events that have served. in in the recent department we have gathered loan data to help us evaluate to lower the effects

on the crisis on the communities and on the country. in my remarks today i would like to focus on three aspects relevant to foreclosure plans. the first that effective plan must address the problem of unemployed borrowers. long-term loan modifications that yield affordable payment but also provide attractive lenders will help some but cannot help umployed borrows. 31% ioften social 31% of nothing, and that will never be attractive. our research shows that contrary to popular belief unemployment and other life event like illness and divorce have been at the heart of this crisis all alon even before the collapse of the labor market in the fall of 2008. this may seen counterintuitive, life events could not explain because there was no underlying surge in unemployment or illness that year.

but that view reflects the misunderstanding and life events in causing default. when prhces are rising and borrowers have positive equity, it leads to pfitable sales, but with prices followers and cannot pay off hair mortgages they lead t foreclosures. we did not need to see the surge in life events but rather than fallen house prices which is exactly what we saw. is is our research that is unlikely modest financial nudge to servicer will lead to millions that will help millions. in a recent paper we showe that 2005 to 2008 lenders gave payment reducing option to 3%. in addition we show this didot result in issues. lender were just as reluctant to modify when they owned them as when they secured them. we argue that the main reason we

see so few that i simply isn't profitable for lenders. modificaon benefits because it helps to avoid the high cost assochated with foreclosure. but redefault, and the possibility the borrowers would have repaid the loan without any assistance from the lenders can wipe out these benefs. the role of self-cure is 1/3 of the borrowers are current on their mortgages or prepay a year after they become 60 days delinquent. 1/3 result fr our researchs policymakers need to exercise care in designing forecsure prevention that provide the right incentives to borrowers an servicers. a program that offers a monetary incentive to do as many modifications as possible and minimize the possibility that modified loans redefault will not prevent many forlosures. to see why, one must realize that the easiest way is to choose is borrowers that hs

unlickly to default. we could makeots of modification, collect sums, and then collect more as the borrowers continue to repay the loan. taking these results into accounting we believe the mos effective use for foreclosure would involve direct assistance to borrowers rather than to servicer. two recent proposals one authored by the economist including me and the other by researchers target the unemploy to hp them cover their housi expenses until they get their ft back on the ground. either plan would prevent large numbers, and would be a good starting point for war effective relief plan. we hope these findings a insights, and thank you again for the opportunity to appear beforeou today. i wod of course be happy to address any questions that you have. >> thank you all very much for being here today. i'll recogni the five minutes for question. let me just proceed my questions

for the stament about the concern that all the members basically have about the -- what appears to be a lot of substantial loan modification and a lot of unrest by homeowners who are desperately seeking loan modification. we all recogze that many of these homeowners have been laidoff. they may have lost their job an 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's 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, or have found ways to help homeowners who have lost their jobs, laid off, and have rular debt, and have some income to unemployment, very little, but that ince does not appear to be adequate to service the mortgage. who -- which of you have progra to help those who are unemployed? wells fargo? bank of america notes. >> no, in the 12th. >> wells fargo. what do you do with someone who is unemployed, been in their home for 10, 15 years, they nt to keep their home, and maybe need a few months before they can find another job.

how do you help them? >> we help them with the forbearance plan that? >> how does work? >> what happens is the borrowers tells us i'm about to be unemployed. they sometimes want to current and want to protect their credit. they are current and they've lost their job, can you help me? you put them on a forbearance, and set it up fo six months. we'll give you a period o time where you don't have to make your payments whileou are loing for and establishing income again. and at the end of the period, or throughout, we'll communica, and if they do establish income, then we have to work with them to provide help with those payments that were missed during that period. and we can do that capitalizing them, and spending them. would suggest one of the things we will speak to the treasury about tomorrow is actually an enhancement to the h.a.m.p.hichs short-term.

at w believe what borrowers need one they reeablish a job, they need longer term help in gettin past that period where they could not make their payments. and by short-term we can provi a2 to4 month period to the modification to the loan that could then step back up. >> that's admirallable. in helping my constuents i am not found that to be true. i'm in fact -- i can't sit here and say that i have not found it to btrue of wells fargo, because i've worked gn so many different ones. but we have a long list in our office, mostly stating the description of people who have lost their jobs. one of the things we did find was loan modifications in general was the late fees and lawyer fees that are attached to

the loan modifications for those who find themselves six months some of them several months behind. and when they finally get in touch, or finally get to work, then they are confronted with late fees and lawyer fees and some other fs that are attacked on to the learn loan, which increases the amount of modify loan. how do you handle that? let me just mr. schakett from bank of america. >> yes, like the first on the temporary forbearance plan, and how formized its, and how consistently it's ud, there mu wor needed. there's a lot of inconsistent on

what certain qualified. we would target the qstion that had a good pay history in the past and responsible before the hardship and for customers thatho they can handle their back in kept. again a more concerted program that knows exactly who can and couldn't improve the situataon where the unemployed borrowers i up as well mentioned very mentioned they are going to work with the administration to try to build the program. can understand your concern you probably hear a lot of times we are helping those customers. i think it's because we haven't formized the p seases to make sure we offer it consistently from customer to customer. that is improvement needed. and the question that you asked aboulate fees and lawyer fees, i think the table's policy to waive all late fees and -- >> i hav not found that to be

the case. does everyone at the table waive late fees? >> yes. >> yes. >> yes. >> yes. >> that is a requirement of the mha program. >> well, let me just say since you answered, miss sheehani have here a statement, a waiver, and it basically says j pmorgan has offered to try to modification under the make it more affordablelan announced by the obama administration. you have declined to be considered for an mha modification opting instead to go forwardith the modification fer made by the lender to you prior to the march announcemented, the prior modification. had you qualified forha

modificathon, you may have been entitled to the following, and you gon and talk about what ey may have qualified for. by signing the loan, you acknowledge tt you haveeen adviced -- what is this a about? >> that was a formethat was developed at the time prior to implementation or announcement of mha, chase had rolled out a siificant enhancement to its n modification loan modification efforts. we were in process of communicating and qualifying ny, many borrowers for the chase modification program at the time of the mha announcement on mar 4. at that point in time, weave numerous borrowers who have approved to close on a chase modfication. so we wanted to make sure before they made that decision that they were informed that the government program had been a announced, but the details were not yet out. so that waseally a disclosure

form that was designed to advice them tha they had the option to waitor mha to become available and to go thrgh trial process. but if they choice to go forward with the chase mod, they could do that. it was a form of disclosure. it does n mean that anyone who received a chase mod any indication waives any rights in the future to enhanced modification. if they found tir chase modification was not sustainable, they would still be eligible tn to come back to us for a h.a.m.p. modification. >> thank you very much. >> thank you. i'd likeo clear up a i'm hearing two different things here. :

that does notean we don't go through a process of foreclosure. so for instance, we could have a cust that part of the process of foreclosure is to follow on those in default. we still fall of the default so the customer starts seeing activity towards a foreclosu at the same time that we are working on modifications. but we assure no custom actually get for closed on so you see a process of foreclosure

going, you can't simultanesly with the modification but then no customer actually gets foreclosed on. that is the absolute hold to make sure we have a chance to complete the modification first. >> could there be a scenario you are turned down for the loan modification and in a short period of time to shore properties up for sale in a foreclosure? >> yes, given the notice is in the foreclosure process they would realize what the dates are coming up. what the date of the fiction i and the foreclosure sale is so they would be aware of the dates and if the modification didn't complete they would live by those dates unless there is reason to expend. >> bigger said would be rather than holding on for closure u're holding on the foreclosure sale, or modeled on the process. >> we are holding on foreclosure sale. >> may i respond? one issue is with the seals are proceeding and whether the foreclure process is moving forward. the hamp program is very clear that sales should notroceed, and we are getting calls from

all over the country the seals are proceeding anyway for all kind of servicers are now e country. so that's one compance problem. in addition to the extent foreclosure are going forward what happens in a judicial foreclosure state is the homeowner is incurring greater cost to litigate for closure or to defend the foreclosure in court, while they are trying to negotiate a loan modification. there are two problems. one is it's easier for the service are to go to foreclosure because they are close to the sa at that point. for the homeowner because they have incurred greater costs those fees are capitalized and i think that chairwoman waters was asking about this before. the lawyer fees, the valuation feesre capitalized in the principal and the homeowner is lessikely to be positive, ls likely to qualify for a modification because of the costs. as a both of thosare issues. >> does anybody have another

comment in response -- what i think you just told me if i heard this correctly the foreclosure lawyer fees and other things are rolled into the loan modification even though the property is and foreclosed on, is that what you're saying? >> if you're figuring out how much the person owes and with the remaining principal balce ase, that amount is also a road and so if the foreclosure -- >> that amount being the foreclosure fees'? >> right. so any amount that the service are pays the lawyer to pursue the foreclosure is billed to the homeowner and becomes rt of the principal that the person has to pay back as part of -- i also have to tell y attorneys around the country tell me while they are negotiating loan modifications their clients routinely receive foreclosure sales notices. >> with the previous panel set up their particles for transparen and accountability

that should report on that. so that's something we need to look at. >> of customers that have been offered the hamp that haven't made the fst charnel payment. as soon as the first trial hamp payment is made the foreclosure process stops. there are no foreclosure proceedings while they are in a charnel mod. >> that is the question i was asking. in a trialodification, sohe three month trial period if you make your payments for three months then i guess you go to a confirmed loan modificatio-- during that period is that still when you are bringing all your documentation or are you not documenting all of this pre-mporary loan modification? >> it depends on which program becae for mac, fannie mae and government programs have different but in general, yes.

you can verball verify a customer over the phone and get them started to get payment relief to that home immediately rough verbal verification of income so they can starthe trial mod period and they have three payments they have to make under that. during that period you are collecting documentation and then accessing the verification of income matches what you actually receive on the documents that are presented to you. and e completion of the modificationt the end is the timely payment of three payments and also the received end, the verification of income through the process. >> well, it seems to me one of the reasons we got into this problem is because we didn't have any verification of income or documentation as to dent or any of this, you know -- if you look at the diffent loans put forth, one of the reasons, and emplment understandably is probablyhe maj reason right now. i guess i didn't realize this,

i'm kind of -- i am not shocked, but i am kind of surprised that we would -- financial institutions would enter into a temporary situation without having thi documentation. it seems to me that isust as risky as -- it goes back to the question i asked the previous panel. what are we going to find after we get to the trials how many people actually passed the trial and move on to a major loan dification. i don't know. that seems on certain business to be especial if you look at hindsight as to how some folks were able to purchase a home that may be was way beyond the reach when they really weren't asked for the documentation. now they are back may be asking for a loan modification. e price has plummeted or at least is less than what they initially purchased it for. and this is going to assume this economy that they haven't -- unless ty've been lucky or worked really rd a got him althe things that are due to

them that their income isn't going to increase that much over the last two or three years to be able to sustain this. that's just a comment. obviously this sas designed this way, but i find that raer surprising. mean, if y're doing your own loan modification within the ba, your other options, are you getting all this documentation before you do this instead of when you're doing the making home affordable modifition? through a different standard? >> i think hisrically most the servicers do not have a trial modification built into it unless they are requiring whatever documents they require the required for the modification is complete. clear the mha does have a higher documentation standard and traditionally people use for others. we have taxpayers' money at risk of higher documentation standard does maknse. and obviously the trial modification period was compromised to s we want to

get them started sooner, we want trust the customer to go ahead and tell you what they ma and start the trial mod riod, so there is risk it puts investors in a suation they could in that having a two or three months ago where it is actually the documentati doesn't work and you have to start the trial mod period over again or complety but it does allow more customers to be felt sooner by t trial modification period. do that work during thehree month per go versus doing it before. >> a que. ank you. >> mr.reen. >> thank you. ms. cohen, let me ma sure i am addressing the proper person. yes. ms. cohen, you were giving some intelligence on legal fees and perhaps other fees. would you restate that again, please? because i think a point was

missed and i would like, if i may coma to underscore it. >> shore. thank you for your question. during the foreclosure process, the servicer incurs fees to pursue the foreclosure on behalf of the investor trust and that includes hiring an attorney doing valuations of the property periodically. those fees are paid by the homeowner. they are essentially build to the homeowner. if a loan modification happens some time afr those fees have been incurred, the principal of the loan that the homeowner is paying back iludes those fees, and it's harder to afford aoan modification if you have racked up a lot of fees so i've received a lot of concerns and inquiries from folks in judicial foreclosure states saying that their home owns are having a harder time getting modifications because of the amount that is owed extra because this process

>> would you kindly gave a number? and i know you may not have empirical evidence to support a number that would be as pervasive and take in as much as we might want, but some indication as to how much fees' fees' candy, please. >> i would say thousands of dollars, median of $10. it might behe servicers can tell you more about what they charge, t our experience it is maybe $5,000. >> this is a good segue to the servicers. first servicers, do you agree at fees' for our purposes let's call them fees' rhetoric and other tngs we m. do you agree these fees are addeon as principal to the buyer? if you agree -- if you disagree, raise your hand, that will be the person i will talk to. let the record reflect that we

have no hands so i will assume all agree with ms. coh. now, if this is true, if we have these additional fees tacked on, and if we are now proceeding to a restructuring, ms. cohen, do we e 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 paicular individual. one of our concerns is it makes it harder to afford the loan modification if your balan is all you are a low-income rson and live in a low-income area -- explain what does it mean when you say it's harder to afford. what does that mean, harder to affordhe loan modification? >> the lo@n modification payments are based on whatever total amount you owe. anso a few - if you are poor and you own your house and your house is only worth $45,000, and

you incur $7,000 ext, and you sort of ad that on to the 45, your monthly paymentas to cover the 45 plus t seven. and s the monthly payment is greater because the seven was added to the 45. so if you are low-income you don't have the money coming in the door to begin with and so even $7,000 on a small balance makes a huge differenc >> i understand. let me, before i come to you, sir, i know you want to get a comment on this, but have to go tthe doctor from the cat institute and i will ce back to you if i can. is it calabria? >> calabria. >> okay. sir, i've read ur paper and i must tell you that while i may not age with all you have contained therein i think it is well thought through. and the line of logic that's consistent. and i have great appreciation for consistency and logicnd i appreciate the way that you've

dealt with the arms and other aspects of what ostensible causes of the cris. but your conclion is that negave eity an income shock. these are the causes of the current inability to restructure; is that a fair statement? >> i would say they are the predominant -- >> alright, predominant cause is. i can read your exact words if you would like. you indicate -- let me start with the sentence. it is not exploding arms or predatory lending that drives the current wave of foreclosures, but negative equity driven by house prices, the declines, coupled wh adverse income shocks. u didn't use those qualifiers in your statement, but i respect the right that you have to use them n, you would now qualify these statements? >> would predominantly and also add my emphasis there is on the fer closures that are not being addressed.

>> quickly let me ask you this. you indicate these two things must addressed before can be succsful with these various plans; is that correct? dewaal so make this statement? >> if you want to see more in small numbers i would say yes -- >> tell me this qckly, how do you address the negative equity? >> i would be clear diagnosis is not always lead you to very clear treatment. >> i understand what you're with the cato institute, or a brilliant man and i would respect having you give me an opinion. i mean not agree with it. >> one of the things ihink goes on in the housingarket i believe we are through most of -- >> my time is already up so i have to ask you to go to st. to negative equity. how would y address negative equity? >> my point about housing mket is we are turning up in the housing market which gives

homeowners some incentives to stay. you deal with negive equity in terms of whether you do a payment modifation on the part of the owner -- i' not sure necessarily how you deal with negative equity without giving the owner equity. >> and is it your opinion that what we are attempting to do with this program addresses negative equity? >> i don't think it do. you're not necessarily putting the owner in a position they have equity, because even most of -- >> now i'm going to put you in an uncomfortable pition. but you can handle do you agree then that if the loan is modified such that negativ equity is addressed that there a greater likelihood can pay the loan? >> actually i don't think the negative equity situation has anything to do with ability of the borrower to pay the loan. it hac to do with the incentive of the war were t stay in the home. >> than the borrower would have

a greater incentive to stay in the home, you agree? >> yes. >> all right. but your position is this program is not getting us tre. so now if whether you like it or not, if a pern goes into a bankruptcy court and receives a state whicwill deal with all these other concerns that have been addressed, you get an automatic stay. any additional efforts to foreclosures stalled, and then dimmed lomas modified through the bankruptcy court. but in that give the person a greater incentive to stay in the home? ek let me start with an observation that we are talking about cramdown to qualify under chapter ii you need to come up with a payment plan which means you need income and unemployment doesn't count for that. a crandall wouldn't work for people whose primary problem is unemployment -- >> exactly. that's off theable. >> en as the cramdown is structured -- >> let's talk about a cramdowns

-- i don't like the term cramdown. bankruptcy -- a bankruptcy that allows the restructuring, such that a person who can pay, and that's what we are talking about, so people won't get confused and say everybody is gog to run in and get bankruptcy and benefit from it notwithstanding inability to pay. you made a good point. kevin they can pay with this give them greater incentive to make the payment? >> it all depends -- >> well now you just said a person -- negative equity is dealt with that would give the person greater incentive to pay. >> light weit is that modifications up until now whether you lk at second homes or investment properties they do not leave the person with equity, the leave them with the cboe equity because the crdown the amount mortge. even under the previous proposals for the modification there is no equi that is given. i am basing this on the other examples that talked about which is modification --

>> i understd but if th modi such as to raise equity, such as the person can mak payment is the person --his is pursuant to what you have in your paper. >>or t small number of people -- >> any number of people. >> for any numr of people th fall in that category that would provide greater incentive, yes. >> my other question if i may madame chair, my final question to those of you in the modificaonusiness, tell me if you agree that allowing bankruptcy will provide a means by which persons, let's assume they've trd everything that is available without success, and the do file for bankruptcy, with this knowledge that the bankruptcy is an option? with the knowledge of the bankruptcy as an option, and what you, but what it held with some servicers to realize that

maybe i can do a little bit more than i have be doing? and i am trying to be as kind as i can and saying this because i don't want to create problems for people who arerying to do a job, and you are. but let's start with the bank of america representatives. would this help some servicers and some investors to see that may be we do ha a little more latitude and we think we have and trying to modify some of these loans? >> i can't speak for all the other servicers. i can only speak of bank of erica. threat of bankruptcy wouldf't change modifications to keep ople in homes. our best interest, it's in the public's best interest to do everything wean to make the modifications for the people that are able. reasonably able and willing. so why don't think the threat of

bankruptcy would change our posture at all. >> my suspici is your colleagues would say a similar thing. if anyone would defer in terms of the bank's jposton, if you would defer, raise your hand. if you don't i won't bother to raise the question. no hands up. t the record reflect, which gets to the point i would like to mak the bank,he servicers are not going to change. they are going to continue to do what they are doing. and if we know they are going to contue to do what they are doing that may go into foreclosure the next four years, then we have to do something different. we cannot allow all that we have done to try to revive the economy, to stabilize the economy, to become the sole province of servicers who are not going to change their method

of operation. i respect what he wanted to and when you're trying to do. but at se point, those of us who are in t arena who have to make these tough calls, are going to have to make another ll and give people another option. just as you have with your secondome, third home,ourth home, just as you have with your although payment and with your format loan. all of these options are available to people accept the lonely person who cannot afford a second home, third home, fourth home, can't afford a farm, who may not have a fine car to drive that has something called a primary residence that he or she or they are trying to protect. these people need help, too. that's what we've g to look at, and i appreciate where y are and thank each of you. my time is expired. thank you, madame share. >> thank you. before i dismissed pan i would like to share with you --

recognizing myself -- to share with you some of the lessons i have learned as have worked very cloly with m staff in learning how to contact servicers, how to work with servicers, and i g wvers from my constituents who are trying to seek help, and i get on the telephone would servicers and my constituents and walk through the process so i know a lot about it. i have not yet encountered a situation where the documentation of income and debt was not required on a loan modification. and i am that were not handled that way and i will be in contact directly with you about them. since you have testified at it

differently today abo how you are doing some of that. the other thing have encountered is this: some of the big servicers, big banks have bought these loans from other small mortgage companies along the way. and clearly there is fraud. you have lawyers to do foreclosures. how many of you hire lawyers to deal with frauwhen you see it? >> wells fargo, let me just ask, have your seicers encountered some of the mortgages that are clearly fraudulent? where the signatures have been faified? a lot of income falsifitions

that clearly was not true, what do you do with that kind of information when you encounter it? >> well, if we do in counter loans that definitely come to our attention that half had fraudulent behavior, yes, we do bring that to the attention. unfortunately many companies that originated the loans are out of business. and number two, i will tell you -- >> but you bought the loan. when you bought the loan from this mortgage company, you had to look at to see what you were buying, right? well, maybe you didn't. >> not flown by athlone. >> you bought packages? okay. so, if you see fraudulent loans where the homeowner has been basically defrauded what do you do? how can you help that homeowner? >> i think one of the things to

do is determined where the fraud came from. >> well, i found a solid. i know where they came from. it's very clear they came from the persons you bought them from. >> but stated in come, stated assets, which is where some of the loans we acquired, determining the fraud. >> but they have some where someone said that's not my signature. i didn't si that. >> that wotld be hard to determine. >> now we wouldn't. >> all right, so let'sook at another kind of fraud that i have run into. well, it's not for what really. ldt me look at another case. i have conituents who made a loan modification and they are earning the same amount of money at the time they reqst the loan modifation as they were earning when they got into the loan. when you accepted into the loan. it's no different. you accepted them into the low

and what appears to be a lack of adequate income to service that mortgage. they discovered along the way that they cannot service that mortgage. it may be a free set, what have you. but then they are asking for a loan modification and are td you don't have eugh income but they had enough mortgage to the kuran come when they got the mortgage. what do you do about that? bank of america, have you encountered those? have any oyou done perlo modifications? how many people have actuay done a loan modification? what do you do when you encounter somee whose income is exactly the same when they request the loan modification as it was when they signed on the dotted line for the mortgage? and w you are sayg to them you don't qualify. you don't make enough money. how did he make the decision? >> we don't comre with a were making at origination and the

comment about them not having enough money -- >> i beg yr pardon? we don't make comparison back to the origination. you said 31 per cent debt-to-income ratio -- >> let's forget about the 31%. >> okay. >> ms. jones had an income of $3,000 a month. she got a home that cost a half million dollars. she couldn't afford the loan then come and she certainly can't afford it now it has reset. same and come. what do you do? >> canhe not afford the new modified payment if we reduce the payment down to her level of income to make it affordable? >> what you're telling her is you can't modified because she doesn't make enough money to get a modificion. >> since the mha program allows interest rates as lows 2%, 40 year terms with for parents of

to 40% -- >> you think you can work something out forer? >> for the vast majority we certainly can offer something for her. we understand there are circumstances the program has a very nice will floor for interest rates and forbearance that should make the payment affordable for the vast majority of people. >> well, i am going to call you about some that we have worked on tt into that category. e other thing i wanted to ask you about is i fink you did refer to what ms. capito elude it to when you said you do forbearance in order to provide assistance to homeowners who have no income or little in, or maybe just on employment, and they need some time. wells fargo, both you and the bank of america and chase, you guys all say that you help these

people with forbearance; is that right? alright, i am going to call you directly on the ones that we havehat have been turned down. now, one last question i want to ask. it has been said that it is more profitable to not do a foreclosure in some cases and t do it feclosure. i think ms. cohen, you're the one that tried to explain to us how servicers rushed to foreclosure rather than modification because >> sure. thank you. when a homeowner stopped making payments on the loan, the servicer is still required to adnce those payments to the

investors and so one of the challenges for the servicer is to figure out how to finance the advances because they are generally financed and how to get the money back to pay back the financing. and when you have result in a foreclosure in general the servicing agreeme allows the service are to get paid back first from the foreclosure before the investo get any money. so the service are gets paid back faster and in a more sure way from the foreclosure. when there is a modification, the investors sll have priority in general. theyon't get paid fst. the servicer doesn't get paid first and the surface are has a way of recovering insured and it's not as fast. >> oka let me just ask ms. sheehan, chase lending, jpmorgan chase

are your service is advancing payments to the investor? >> yes we do but i will say for jpmorgan chase we do not need -- we do not need financing for advances. we have strong capital base and it is not in our interest to rush to foreclosure. is not economic from net present value perspectives wetherby elma alone or whether we serve as the loan because for investors we have an obligation to do the thing that is best for the investor. >> wells fargo, argue advancing the payments, the mortgage payments to the investors also? yes we are and i would concur with all of ms. sheehan's, and we have a strong balance sheet, we are not looking for refinancing. and foreclosure is never a better option.

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>> the vast majoty of the customers it's better to do a modification but there are cases there is a lotdequate in the property and if the person can afford a very small payment with the cost of the interest, caustic about is greater than the cost of actualoreclosure so it makes more sense for the investor to foreose on the propertynd administers built into the program that it is something in the consumer's interestnd investors interested so it is built in. i would like to come back to the point that m cohen made earlier that i think is an accurate as far as we'rtalkin about capitalizing, third party fees and foreclosure process. that statement was made if you capitalize third party fees it will actually increase the

payment amount that the customer has to make upon modification. it just doesn't work that way. yes, indeed, you can have capitalize third parties but as you are all aware, the program itself forces you to calculate 31 percent of the person's income. that becomes the pment amount. so the payment is the same whether you capitalize 2000 off of your you haven't. the differences interest rate will go down so if you capitalize these, you know, the investor would receive a lower interest rate and the borrower will be in the exact same place as far a the paymentmot on the mha program where the fees have been capitalized onot. >> can i respond? so there are a couple of issues. one is what i said was if the user capitalized and the principle is higher, when the computer crunches the numbers, some homeowners are less likely to get sort of an outcome from the computer that says that the modification is more profitable tohe investothen the

foreclosure. i mean, it is all related to the net present value tech elation. so that is what one issue. i alsoant to say that every time i'm in a meeting in washington, the representatives of the servicers tells what their policies are, they tell us that foreclosures are neve profitable. but i have example after example of these servicers and others saying wells fargo and bank of america, you have to give us a payment before we give you a modification. at bank of america, you need to be in the fall. chase, a person called five times in the last week and could not fi one person to give them a modification and an attorney general attorn called our office and said, cse is the biggest noncompliant hamp service when it becomes the actual responsiveness. wells fargo, we'll give you a six-month forbearance gith a balloon and then we will consider to give you a hamp

modification. over and over again what is happening on the ground is not what these people are saying, and until they are pushed in a mandatory fashion, nothing is going to ce. >> can i make a couple of comments? in the forbearance, and yes there is a balloon at the end of the. what we are looking at the end of that period is that they still ha to obtain a job, as was stated earlier. you cannot do a modification on someone who does not have a job. so there is and that is communicated and it is made clear. i think tre is also a point to your constituents that think is most important, and i will come back to the positive, if we call early and often to these borrowers who go delink what immediately. because we know this when we work with them we can avoid all these these -- >> holder right because i think ms. cohen said something that had bee true in the past. and that some of you have policies, you have to be delinquent before you will even talk to them about a modification. two months, is that still something that you practice?

>> no. >> nobody practice that anymore? when did you stop? >> i don't know that we ever did. >> oh, yes, you did. many times. >> is not in our policy and procedures to tell people to go delinquent. >> just a moment. let me stop you. bank of america, are you saying you never had a policy where you had to be in default, at least by two months, before a loan modification could be considered? >> no, i am not saying that. i am sayilgit mha we now have the default standd that makes it clear if you actually cannot afford your paint and you are current you have to go through a process. there was not a clear standard prior to mha. very uneven treatment of people th were current before. it was much easier to get a modification if you are 60 days liquid than if you were current. we did have a policy of not telling customers they need to go to liquid. that was our policy but it certainly is possible that

somebody would have -- >> find it consistenconsistent with the bank of americahere i work on these low modifications. since i'm talking with you, why n't bank of americ does so few lowodifications? why is your percentage of the loan modification so much lower than everybody else's? >> i think if you're talking about the mha modification -- >> i'm talking about modifications. >> if we were talking about modifications in general i would say our mbs are not lawyers than everybody else. that'shy the numbers i think you are looking at are the mha modifications. one thing i think everyone would age with at this table is a better view of kind of modification activity would include all of the modifications that bks are doing today. ifou loo at some of the written testimonyoming out from chase and bank of america and wells, all of this reference of the modifications to. those are not in the numbers. wells references to hundred 26000 loans,ither qualify for

or modify. they are not mha members. and bank of america as 225,000 modification or people qualified that are not in the mha numbers. we appreciate the committee's focus on the mha numbers because they obviously, that's where the taxpayer money is being spent. that is what oversight is about. if you want of a full appreciation for how we're helping pple stay in homes, we do believe that you should lo at overall modification efforts and our numbers will look mh better if you look at the overall modification versus and we've done so far in mha wrap up. >> i recognize this is a voluntary program, and you can do as few or as many as you would like. why are you doing so few mha's? >> again, as i just tried googling, it's a ramp appead that we have doubled our efforts just over the last month. set a target goal of 145,000. which i think we will make. we got a littleit of -- we had a national retention program which i referenced earlier. we were doing lots of modifications and prior to mha

and we made a cision to continue with the program. kind of ramp over the mha program. versus holding back stomers and putting everything directly into mha. that kind of hurt our numbers because we didn't have the ability, the lift of a new program that we already had an existing program. if you look out six months from now, you'll find as we are fully ramped up our numbers will be comparable to the industry-standard or better. >> how many of you will support the 3451, our lossitigation program that helped to direct servicers a bit more? than they are directed now. are usually without legislation i have introduced? no? not yet? okay. well, i would like to thank you all for being here. we havust got to do better with low modifications. ther are several reasons, not one, people just need help. they want to stay in their

homes. secondly, thamerican citizens have been very generous with the banks. and most of you represent banks and your servicers also. no only ha you gotten in ilout money, but the complaints are just overwhelming about th credit crunch. the decrease in credit card limit. complaints are just ongoing, and we want to do everything that we possibly can to help you to do a better job. we think that you are missing the mark. i don't have the information here tcompare what you are doing with the president's program as opposed to what you may be doing that may be better or worse. i don't know. but i would hope that you would

take care to tell us what we can do to help you to do more, to help more people, to help other growin people, to help people who are the victims of fraud, to make your services even more accessible andore available. itould be great to see particularly the big banks who have locations in so many places to put some of your services on the ground. the menus are still difficult to negotiate when you are on the telephone. people would like to see some of you, your services, face-to-face. you could put some right next to your banking operaons so that services could talk with individuals. i would like you think about some of these thinfs. think about and take seriously what we are saying about our concern. you heard a lot of discussion about bankruptcy here today, and

you heard our chairman who is getting very, very concerned. and i am hopeful that we will be able to do a lot better than we haeen doing. again, witho objection, your written statement will be made part of the record. and the chair notes that some members may have additional questions of this panel, which they mayish to submit in writing. without objection, the record will remain open for 30 days for members to submit written questions to the witnesses and to place their response in the record. if youo have something to enter into the record, that would be without objecti. this is a letter from an id housing council agency. thk you so very much for your patience. we went a little bit beyond our normal time, and i thank you for engaging us and this panel is now dismissed.

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[inaudible conversations] [inaudle conversations >> would we be doing some more ha than good by broad ruling in a case that doesn't invve for business corporations, and actually doesn't even involve the traditial nonprofit corporation. >> hear the argument in its

entirety saturday at 7 p.m. eastern on c-span. and starting october 4, an extensive look athe role, traditions and history of the court from its justices duri supreme court week. $1.7 trillion grant each year have our followers of islam. >> deputy secretary of state jacob recently traveled to south asia for talks with regional leaders on u.s. assistance. his stops ilude iraq, india, pakistan and afghanistan. he talked about his discussions today at this 40 minute state department briefing.

>> welcome to the departnt of state and happy friday to you all. we have with us today deputy secretary of state jack lew who just returned to washington early this morning? >> late last night. >>rom a recent trip to iraq, india, pakistan and afghanistan. so that was good opportuneo have him give you a readout of that trip and some of the vital issues that he saw along the way. and then i will pick up when he is done. >> thanks, pj. i thought i would kind of go chronologically through the trip. partially because it will help me not to forget things and rtially becausgetting in the mile ofhe night it will get me back into it. we started in iraq and i think it was very important to go to iraq right now. we are in the military can se very importantecisions about how to manage the transition

from the military presence as we dbaw down into a new civilian presence that is headed towards a more normal kind of footprint in iraq. had very good meengs with both our military and civilian leadershiphere. we discussed many issues ranging from how to specific programs like police training become effectively implemented in our new construct, to the new -- what we'll be doing in our local presence, after the drawdown. i tnk that in my observation was that it was outstanding, military and civilian cooperation. there's one team there. there is a real unity of ppose and a very clear thinking about the fact that it's not just handing one set of responsibilities over, but rethinking what the u.s. mission and presence is after the drawdown.

we had the ability, in addition to having aeeting in baghdad, go to burkart fo a day and we met with a local governor, talked at length about the economic into the issues. and it was quite heartening to hear the very positive feeling that the local leadership had towards our civilians on the prt, and how much they look forward to working with civilians in the future. were going to figure out how to make that work obviously in the new environment. we went from iraq to india, and in india, really tried to focus on the u.s.-india relationship. we went there with the hopes of discussing our development relationship, particularly food security. and taking the next step in the strategic dialogues that the secretary announced when she was there very recently.

with the disssions but at a governmental level and with leaders of civil society. there is i think a lot of interest in the area of food security. where we had the ability to learn from india, and to help india take the next steps that it needs to take, was quite striking that food security is not thought of as a domestic issue in india. is thought of as a national security issue. and there was a lot of interest in the topic of both how technology transferred, can be affected, and how we can work together to deal with problems in india and not justhregion but around the world. from india we went to pakistan and in paktan, we focused on a number of issues. i think as you all know what t lugar program being worked now in congress and the budget proces working through in terms of the appropriation, we are ready to take the next step and

put the detailed program after that really goes and specifies what forms of assistance will be provided. and the conversations we had with the pakistani officials, we met with the prime minister. we with the finance minister. they are very much focused on not ju the amount of assistance in kerry-lugar bill the fact that is a multiyear commitment here they see it as an eremely importanttatement from the united states tha we are thinking in a multi-year terms, and thinkin about a program that has integrity over a period of time. wead detailed discussions following up on the secretaries interest in the issue that was raised of an energy relationship with pakistan, how we could work together using the assistance that we are providing to help pakistan addressed what is one of its core economi issues. we raise also the fact that it's

not just a question of assistance on projects but pakistan has to take some very hard steps to reform its electric utility sector in order for there to be the real opportunity for sustainable progress. i was pleased that both in a conversation with the prime nister and with the finance minister, they heard that message and they responded very positively. on the qstion of aid, there is as many have you seen the the press release put out would know, they are very much anxious to hav as much assistance as possible flow directly into the pakistani government here we ke clear that we are looking a variety of approaches that we certainly intento be supportive of the pakistani ministries where the programs are ready to accept that support effectively. but that we also needed to look at the provincial level to work with the traditional ngo community. and it wodn't be a one size fits allpproach. the key to us is that for each

of the tndertakings that we agreed upon, and they had to be things that were mutually attractive from the point of view of the pakistani gernment and the u.s. government, we had to choose a method of funding that w most likely to produce results efficiently and effectively. and that the money needs to go for purposes for which it was intended. we were able, while we were in pakistan, to go to thnorthwest frontier province, provinces to push our. we visited the u.s. consulate. i have to say while i was going to say about all of the stat department employees that i met with on this trip, particularly there, you have had enormous respect for our civil service, our foreign service, officers and military who serve in extremely difficult surroundings. on the sure one could find much more difficult surroundings in terms of the conditions they wo in and of the mobility that they have.

and frankly the rest. it is a real tribute to the patriotism and dedication of our staff there that they did a vdry important work that they do so ll. and peshawar we had meetings with our own stadinebut also had meetings with the local governor the governor who hasuthority over both bmw fbn also thought out d we met with the chief minister. there was a great deal of intest there and having a u.s. systems provide a basis for partnership for prudential d not. there also seems to be a fair amount ocapacity at the provincial level. we were impressed that the chief minister had a very good sense of both his budget, his needs, and his limitations. and you hadhe sense that there was the capacity to partner quite effectively.

we discussed at length the issue of idp's, the enormous number of idp's that were in that are over the summer. and many of whom, majority of whom have been able to return home. it was clear that as they see, they were very grateful for the assistance that wasrovided quickly by the united states and international community. but they also sought remaining need and were anxious to have an ongoing sense of partnership that wsaid we were very hopeful we would be able to maintain. the meetings we had op's were both in peshawar and a smaller community that was one of the areas that a great number of idp's move from.

we went to a school, a girl's school, which had close classes a month or in order to become home for 10 plus families. it's hard to deccribe it as a home. it was quite primitive assrooms. limited outdoorlumbing. and there must've been well over 100 people living there, from may until recently. while they closed the classes early in order to assess idp, they open classes on time to get the girls back to school this fall. there was a huge focus on the need to get back to normal and the need to open school year and i just had to say, looking at the faces of the middle school girls, reminded you of the hope that the reason you can think thathere is possibility of things being betr. deal, they are in the school that just weeks o had been home for idp's and they are learning english. they are a little shy of foreigners but not afraid to

engage. and it was really quite moving. we met with families, idp families, that had not yet returned. they were from by scheuer, which is an area that from their perspective had not yet become safe enough for them to go back to. very traditional families. women were wearing full burkas and the men were quite traditional. but they talked quite movingly of how much they wanted to go home. we asked tm in a number o different wayshether the other idp's blood already gone home had gone home voluntarily or not. and they very quicklyesponded, saying they would tell because they wanted to go hoie. we want to go. we only want it saved t go home. they talked about the damage to their communities, their homes, and from their perspective their sense was that the taliban had targeted schools, particularly

girls sools. they targeted police staons. and they didn't know, frankly, whether their homes would still be habitable in the wter. they hoped that they would be. they were still hopefuof getting home by the winter. we met wit ngo, an international organization officials on the ground and asked a lot of questions about what they saw as being the next steps. there is obviously to things that phey are fusing on. one is getting the first round of idp's back home and save for the winter. but they also are aware with ongog military activity there could be new idp's. so they are kind of working on coming to some kind of closure on the current experience while knowing tha there may be more ahead. they were all focing on the need for ongoing food and clothing support.

it was not clear, frankly, the scope of damage to be repaired, apart from the reports that we got from schools and police stations. one didn't have the sense that there had been the ability to do the detailed assessment, the world bank and the development bank are supposed to have an assessment even this week so we will work together as we go thugh that. i guess the conclusion that i drew from the days we spent, where the government of pakistan and the people of pakistan have really done an extraordinary job in june with millions of displaced people, and away from the brief time we spent there seem thave left considerable feeling that people have been taken care of in very difficult circumstances. it doesn't mean that there are not problems. there certainly are problems, but the notion of people taking tens of people into their homes, their small home, on very modest

comes. people tpeople gave you great respect for the outpoing of help that came from just regular people. we went on to afghanistan, and i should say that accompany me the trip were ambassador paul jones and assistant secretary richard berman. and the trip to afghanistan in some ways was the focus of our trip. we're in the process of implementing the civilian increase in afghanistan. we needed to go through in great detail what the programming was. we needed to see firsthand what was happening in areas where the military had complet clearing, and where thd civilian and militaryrograms were coming together, how it was working. we also met with afghan ministers, the finance minister, and e agriculture minter

near and had substantial conversations about how important it was from their perspective and our perspective that the programming that we proceed would really be honed by the afghans themselves. we had -- were able to sign a memorandum of understanding to help develop capacity into business regulatory areas, which is an important step towards building a normalized business environment in afghanistan. and i want to focus on the time we spent with ambassador eikenberry, going to hell monde and two torquemada. where we got a cnce to see what is going on as we implement civilian programming. in helmand that military and civilian elaboration is working extremely well. the is a sense of a single

mission single purpose. the military, and this is both u.s. and british military in helmand thought it w@s critically imptant that as the military operations wer ongoing, the civilians were coming in wi them in helmand and that sent a enormous signal to the people down to what the intentions were. there was an intention of his long-term military psence but it was an intention to clear the area and then have the economic activity start to take over on its own. the challenges in helmand are many. having seen the map of helmand more times than i can count, it is almost impossible to visualize how isolated these places are. you know, there are a bunch of spots of security. spots of people with huge amounts of desert in the middl and what we're doing is putting civilians in both direct u.s. government, local nationals, and

implementing partners. inhese areas as they are cleared to go through the difficulprocess of implementing programs with the afghan local people. th provincial minister that we met with in helmand was extremely grateful for the civilianresident, extra me complimentary of the speed and quality of t people. i must say my own observation, the quality of the people who are signing up f this difficult duty is extraordinarily high. the challenge we're going to have is replicating this over and over again. the standard we are setting as we hit the ground with civilian in these difficult aignments is really quite high. we observed ourselves the challenges of mobility. i think as we look ahead, one of the issues that i think we're all going to focus on is that moving americans around is a challenge because of the security conditions between

areas. and there are limited assets, military assets available. and were goingo have to work together with the military. there was no sense of friction when the militarand the civilians. thereas only a sense of if there were enough assets, that they would want to be as supportive as they could. and i think that isomething we will have to continue working through. an issue that was somewhat of a new issue to me that i think is worthy of reporting on,s we are trying very hard to bring afghans into the process. the leverage of one u.s. direct hire for 10 others is largely a function of bringing local afghans to do the wk. and it has multiple important purposes. one is that they have the relationships and he speak the language. and, too, it does the capacity locally. it doesn't come and go when the u.s. presence please. it is really buildingocal capacity. a challenge that was new to me

is that mobility of the afghans is somewhat lited. and their ability to get from where they are working back home is something that we hav work with. there are lots of people have taken tough assignment, but like most ofs they do want to be able to go home once in a while. banishes an additional challenge. because of secury, because of difficulty of transportation, transportation h an mobility has an unusually large impt on effectivess. i was delighted to be ae to spend the time with ambassador eikenberry. i have spent so much time with ambassador holbrooke here in washington. the team that we have, addressing this problem is really working together from washington and kabul as wanting. and that is visit that ambassador holbrooke makest to make sure spaces don't develop between the policy planning procesand the application proces

d reallyhat they are one. so i was pleased that i w able to make this visit in between his visits. the trip we took to tour coverage is the khyber pass, was actually extmely important becausthe key to long-term development in afghanistans a trade. have talked a lot about the trade to trade agreement between pakistan and afghanistan. and the challenge of the transit trade process he comes very tangible. when you see the challenges of getting goods back and forth across this very narrow passi. u.s. ctoms and dhs officials are being extrema helpful working with the afghan ministries that are. both help them go through the process of clearing goo to make sure that goods are transported safely. and also going through the process of working on making the revenue collection, theustoms,

the duty collection process work moreffectively. it is critacally important for afghanistan to rebuild its tax base, and the leakage of that comes from ineffective t collection at the borr is a big part of a challenge. there is still a lot of worko do, but it was obvious the america we have on the ground there are really making a difference. that is kind of the outline, you know, what we did over this 10 day period. you leave with a great sense of there is much work to don. stanng on september 11 having this conversation really focuses the mind on why we arehere in the first place. you know, we are there because there is a risk to the unid states. when you go there, you realize that thehallenge of you for making the programs one of our people on the ground have a real passion to do right. and a sense of urgency on that mission. >> you didn't mention the issue.

i assume you look at the. had to come to a decision about whether and did you come to some assessment of whether in fact security was compromised or had they restored it completely? >>s you know there is an ongoing investigation of that. we have announced a number of actions that were taken immediately to respond to what were very serious conditions that were reported on. i spent time talking with people there about it. i talk tohe chief security officer about it. i talk to people who work in the industry. i think that, you know, thiss in the embassy is that people generally do not feel that security has been compromised. there is a sense of security at the embsy. there is no doubt that people are taking it very seriously, and are determined, as we

indicated, in the things that were done here while i was there, that action has to be taken, and the circumstance have to not occur in the future. you know, i think it's important as we focus on taking very tough actions to make sure that unacceptable behavior is that with appropriately. to recognize the very hard work that is done by so many diplomatic security offers, and for that matter, so many other contract officers to make sure our people are safe. it was kind of heartbreaking to hear, you know, somebody who didn't behave in that way talk about having to explain to eir teenage children that it was a bad group. i leave it for the investigation to be completed. i am notoing t get ahead of the process, but i did get the sense that it's being taken

very, very seriously as it should be, as we are and the secretary is here. >> on india, can't you be more specific how do we intend to help india food security issue? and the fact that security would india? spec we discussed many other issues in the conversations. in terms of food security, i think the challenge is to figure out how to cooperate and make sure that anything that we provide support for really helps move the production and the farm economy forrd. and to work with the appropriate combination of research and federal and local players there, so that thimpact can be in the food economy. we heard concerns raised fm

the nongovernmental sector that all the assista should be toy. we heard arguments from the governmental sector that the assistant should all be to the government. we need to find a way to make sure that we provide assistance that effectively helps to increase the availility of technogy for the purpose of forming. and i think that we started a good conversation while we were there. [inaudible] >> the civilian surge in helmand. when the truth when anarli this sulmer, the talk of putting vilians, and a range of a couple handful initially and to be built up to a couple dozen by around a. can you tell us hoany you have in place and which were trajectory is on that? >> well, h haven't -- >> and what they are doing as well. >> i haven't checked the numbers in the got back today. we are adding people on a daily basis. we are ahead of the schedule that we committed to in march,

which was to get to roughly 1000 by next march. and the challenge is going to be, we think we are going to get there the end of the year, but it is not the end of the year the very beginning of the year. the challenge is getting the right people in the right place at the right time. and we have to, we are done by will on the initial deployment in people with t right skills to. and we have to keep on not to make sure that we continue get people with the right skill sets. intereingly, the places where we seem to be doing best is in areas with some of the more technical skill areas. we're getting agronomist where they need to go. were getting people with nguage skills were they need to go. i heard a need for us to just up the speed, increased the speed of obit on some of the act office fctions that are critical to making it work right. that is something i am going to turn my atttion to next we.

>> and in which you also say how you're going to address this chalnge of ability so they can actually move around and do the work that they need to do a? >> well, there is multiple levels that have to be addressed. where we are collocated with the u.s. military is a conversation betweeus and the defense departnt. where we are located in anrea that is controlled by the british, it is a little more complicated, and there are a number of potential solutions to increased mobility. but we are going to have to do it working collectively with our international partners. in general, tre was a very good sense of international partnership, both military and civilian programming. it was not a question of whether they wanted to provide more mobility. they thought it was important. they just didn't have enough assets there, and we're going to figure out how to solve that

problem. >> thank you. i have a follow-up question. st to follow on the civilian search. could you kind of illustrat more, although that more of what they're going to be doing and what, you know, we heard a lot about a civilian surge but what ultimately will these people be doing in terms of development? and election fraud investigation noithstanding, there has been rampant corruption in the goment, and you know, the lack of accountability. is tha hurting your civilian efforts? you talk specifically about kind of bad behavior, but were you awar of problems thathe contraor over the last two years, it seems as if these kd of parties notwithstanding, that there has been like a long list of complaints that this contractor was not performing. >> i'm not sure i remember your first question.

[laughter] >> the civilian surge, wh specifically are you hoping to do and is the corruption hurting your efforts? >> let me start with the corruption, it is critically important that the resources we put him be used for the purposes that they are provided for. and corruption is a problem in afghanistan. we raise it in every meeting we have with sior ministers. i have made it clear at every level of the afghan government, richard holbrooke makes éclair at every level of afghan government. although u.s. officials do. i think, i got the sense that they understood that our ability to sustain our efforts was very much dependent on being able to demonstrate that the money was going for the purposes that was intended. the desire that they have for us to move the money through their ministries is obviously something that we have too look at case-by-case basis and loo at where is the capacy to do it in a way that we are comfortable with. we talked about the need to

begin auditing with program disbursement, not afterwards. it is clear that the better they do in terms of dealing with the problem of corruption, the more we are going to be able to work with their ministries directly. we would like very much to be able to work as much as possible with their ministries. ultimately blding capacity there is critically important. but we are very sensitive to the fact that there is some areas where it is more possible than otherso do it. so what are we are going to be doing as a bridge, i've had the opportunity over the last several months to work closely with a number of the afghan ministers. and in a area like agriculture, it's very encouraging when you have a minister who has a very clear minded approach to how to move the afghan agriculture economy forward. he quite correctly doesn't think that we should sit here in washington and tell them what the futur for the afghan economy is. and we're very much listening,

and as we go in, we are working to adapt our programs to meet their policies of what they need . metimes that will mean working with the ministry directly. sometimes it would be implemented partners. smmetimes you'll be working with provincial level. but it has to be an afghan strategy. agriculture is an area where they have history of ing it ite well. and it's what 85 percent of the people do. if we can get right in agriculture, none of the other economic development will work. it is critically important. rule of law, judicial system, we've had extensive discussions about how we can be more effective in that area and as with the people on the ground, how theyanork in that area. it is related the corruption issue. the thd question? i don't remember which question. >> this is not the first problem. it seems tht everybody is singling in on tse wil

parties, but this is just like the latest in a long list o problems. >> there have been a number of actions taken, which we obviously now have gone back before our direct experience and re-create the chronology and have a better picture of it. none of which indicated at the time that there was any security probleat the embassy. i'm not aware that this particular story had developed at the level, with t photographs that came out while i was gone before. you know, the challenge of real one, and you always focus the first objective is to make sure our people are safe. but really regardless of whether work is being done by someone

who is ds or a contractor, they haveo comply with our rules or laws and our values. and if we find cases wre that is not the case, we have to take action. >> just about the political debate in the country never obviously the president will have to make a decision whether or not to send more troops in afghanistan. i wanted is this advocate for more troops to support the work you are doing? >> obvious it, there's going to be a lot of discussion of any recommendations that are forthcoming from general mcchrystal's review. i've been focusing really on civilian implementation and making sure that we have the right people in the right place at the right time. so i'm not in a position to comment on it today. >> we know thatou are losing political support. >> i think in terms of program that we'reursuing tre, we've

got to remember why we are there. we're there because there is a risk to the people of t united states. we're there because of september 11. is not mission that was chosen. the civilian program that we a workin on is very much looking towards how do you eectively work towards building conditions that can become sustainable. and while i am as interested as anyone for the military strategy on its owns, what i've been focusing on is how to make the civilian program goes forward with the military so that we can do the job right and go into areas and leave behind capacity such that we don't havto have that kind of prolonged presence. >> specifically, are you kibitzer civilian effort getting lost and drowned out in all this

talk about whether there should be more u.s. combat forces or more training and more afghan troops in the fight that is building up on the hill? >> i actually think that in both we have to rember decisions were made in the spring. funds were appropriated in july. we are just now saying the program going to play. i thk we have to have a sense of urgency that we don't say look back in the year, we've got to be up to look at it everyday to see how we are doing. we also have to be realistic that we are just implementing the initial plan. is an ambitious plan on the civilian side. bringing 1000 civilians into afghanistan and having them have the tools that they need and the capacity to be effective is a big job. i think we're doing very wl at the beginning of that process. my trip lefte with a sense of a great deal more work to do,

but that doesn't sprise at this stage of the process because we are at the binning. i ink it would be a mistake to look at the civilian program now, a year or two years into it as fully mature. so we've got to stay with it. we got to hold ourselves accountable. but we also have to give it a chance to implement. [inaudible] >> one more. >> you spoke about the state department wrote and police training and that is something at was talked about extensively yesterday. can you tell us what the state department is going to train? >> are you talking iraq? >> where the money com from. >> we are in the process of making the final decisions. so it would be premature for me to answer the question any more detail than ambassador hill did yesterday. but i think, what i would say is it's important to think about the ongoing mission differently than one thinks about the mission that we a now drawing

down. e military presenc in iraq was pervasive and it was all over the country. the area of police training, it was very much aimed at training individual iraqi police in as many parts of the coury as there was a u.s. military presence. with thatow having been done, we are focusing now on the higher level training that is necessary to build capacity in targeted areas. and we are talking about a mission that has a different shape to it than original military mission did. so it's not just a question of transferring responsibility from one agency to another. it's about working together to redefine the mission, and in the mission going forward is getting closer to a normal relationship where we are not -- where there is governess and there are politics at local. there is capacity that is local and to identify the gaps where we can make a differenc andt is this order a drink and we focus on.

[inaudible] >> no comprehensive -- we have police training activities in many parts of the world through the state department. i think that, you know, in iraq is a new rol is an expanded role, highly expandable because we are talking about the withdrawal of the u.s. military troops and hang the civilian program to be run in a more traditional way. so it looks more unusual in iraq than it would in another country. >> one question on pakisn? how well had the pakistani authorities propelled the taliban threat after their offenses, and then there the political issue later. i mean,ome of the idis radicalized? is this delayed risk that they would deradicalize, the taliban comeback in these areas very quickly? >> some of those questions are beyond my brief. you know, my observation is that

it's been a very serio and concerted effort on the pakistani military. there is a sense of securit and important population centers that wasn't there before. and there is a sense of dermination. otrwise people wouldn't be going home voluntarily. that doesn't mean the problem is totally addressed it i think that it's important for the pakistani government to remain focused on it. it's going t be important for the pakistani people to remain patient with the disruption that comes as ty continue to move forward. i didn't have an opportunity to speak broadly enough that kind of questions about what the reaction tt each town has, but through the lens of the group of idp is that we spoke with, there

wasn't a sense i got was that people wante to goome. they did want to have to be afraid of the taliban. thank u. >> today the european union's chief foreign policy adviser announced an upcoming meeting with iran's chief nuclear negotiator on that country's proposals concerning its nuclear program. this com near the deadline set by the u.s. and other world powers for iran to return to the negotiating table. this and other topics were discussed at today's state department briefing. it is 40 minutes. >> just to pick up where depy secretary lu left off, just a handful of announcents before taking your additional questions. a little bit on the secretary schedule today, this morning she put dissipated in a memorial at

an awards ceremony to honor state department employee terence bark who was killed in a bomb attack in iraq on may 25. he was the deputy director of the iraqi transition office in badad. she also had the opportunity to meet befly with cambodian opposition parliamentarian to discuss the current situationn cambodia, with the secretary had met previously through the work of vital voices into thousand five. she was honored as on of three recipients of vital voice awards worldwide for her work in trafficking in human race. th evening, the secretary will be inew york to participate in a 9/11 national day of service and remembrance and deliver a keynote address in new york.

then she will participate in a dinner sponsored by the roosevelt institute where she will accept the four freedoms award which honors a lifetime of stinguished service and a cmmitment to freedom. that will be at the waldorf astoria. ecial envoy scntt gration traveled to the region of sudan, an area where the annual migration is among the most siificant in the world. he is travelinghere to observe conservationfforts and to see an example of thuntappe@ echo tourism and delop a potential in the south of sudan. later today he was to meet with president of the government of southern sudan, and rst vice president of the government of national to discuss issues regarding an limitation of the cpa, comprehensive pce agreement. you will