. . that ensures the lender has is complete picture of the borrower's financial situation as possible. to this end i was very troubled to learn some modifications are being performed with minimal documentation.

after all it was this practice of no or low documentation that helped create a housing crisis we face today. we should not be in the business of perpetuating this practice. according to the treasury department, 375,000 trial modifications are set to convert to permanent modification by the end of the year however, jpmorgan chase recently disclosed in november, close to 25% of the trial modifications' failed to meet the first payment of nearly 50% of borrowers field to mccaul three payments. furthermore federal reserve bank of boston sites 30 to 45% of borrowers who received modifications in up in default within six months. this raises some significant concerns i think about the ability of these programs to meet while a long-term expectations outlined earlier this year. these trenches are compromised by a shift in the root cause of foreclosure with the downturn in the economy as the chairman mentioned we are now facing more

traditional causes of the foreclosure manly the loss of a job. as the program's progress we must have a realistic understanding of the capability and we need an obligation -- we have an obligation to our taxpayers to focus efforts first and foremost on families who truly need assistance. i look forward to hearing from our witnesses this morning and went to thank the chairman for holding this hearing. >> the gentlelady heels backend the gentleman from georgia, mr. scott is recognized for two minutes. >> thank you, mr. chairman. i can't think of it are pressing issue to deal with at this time than the foreclosure situation. it is alarming. we ought to track for example reports that in feathered quarter of 2009 in my state of georgia had a 25% increase in home foreclosures over the third quarter and 2008. that is a total of over 36,000 foreclosure filings. that means one for every 98

households. that is absolutely devastating. but i want to turn just for a moment about what i think is an even more devastating situation. perhaps the most insidious side of the foreclosure process and one modification process and that is the unfortunate saddam of vulnerable homeowners in desperate need of assistance and saving their homes. it is one of the most tragic aspects of human existence in my opinion that whenever and wherever people are downtrodden others will move in and prey upon them and worsen their condition. i was just contacted last night by a constituent who had contracted with a group called prodigy law group, a firm an urban california just to help him navigate the loan modification process else. and unfortunately what my constituents did not know,

that's this firm had a reputation as being scam artists. in fact the better business bureau of california as well as other numerous people had the prodigy law group as a known as gemmer. as well as we debate this issue not only must we deal with this before us and we are doing but we have to find a way to put these predatory beasts that are prebon people who are already in bad conditions out of business. i yield back the balance of my time. >> the gentleman yields back. mr. hensarling is recognized for three minutes that actually i think a little bit more than that. i'm not sure exactly how much time is left. three and a half. >> thank you, mr. chairman. by any standard of measurement the foreclosure mitigation programs of this administration and this congress have been abject failures. hope for homeowners $300 billion authorized at least as of some

of the latest data available 1,000 applications, 50 loans closed by july. , affordable modification programs 75 billion-dollar cost supposed to help three to 4 million homeowners, 650,000 modifications' trial modifications. home affordable refinance program supposed to help four to 5 million homeowners, the latest numbers available 116,500. yet, we know that for closure rates and delinquency rates continue to rise for 9.9% in the third quarter of 082 now 14.1% in fluff third quarter of phone line. the government tax payer funded foreclosure mitigation programs have been an abject failure. on the other hand, those who actually hold loans have a

financial incentive for the borrowers who can work out to make modifications. and of the hope now program, as of the latest available datacom 4.7 million have been afforded workout plans since august of 07 with no cost to the taxpayer. there is no better foreclosure mitigation plan them a job. and unfortunately, the job creation program of this administration has also been an abject failure as we suffer through the highest unemployment rate that we've had in a generation. 3.5 million fellow countrymen having lost their jobs since the president took office. the best way to foreclose, to have a foreclosure mitigation plan, again, is to create a job. and the best way to create a job

is to tell job creators that they are not going to have to contend with the trillion dollar nationalist takeover of our health care system. that a 600 billion-dollar threatened energy tax to our economy will not take place. that the tax relief in this decade that brought upon one of the longest period of economic prosperity will not be allowed to expire so that tax rates on income and dividends, on capital gains increase. that some certainty will be brought to the market and the bill that chairman frank would bring to the floor tomorrow, which will be a job crashing bailout bill that too will not become law. that is a plan. that is a recipe to create jobs in our economy. to take away the looming storm clouds of obamanomics and with this economy create jobs, and if you create jobs, then people can keep their homes.

nothing short of that will work. we have to signal to those who will ultimately have to pay the bill that this is a congress, and this is an administration ultimately that is going to be serious about the debt and deficit. throwing more money out programs that do not work is absolutely insane and they do not work. why we are reconsidering more money to the same program is beyond me. i yield back the balance of my time. >> the gentleman's time has expired, and i recognize myself for two minutes and then i will go to mr. klein as our final opening statement. let me just say that it is obvious that we have a serious foreclosure problem, default problem and that has come home to all of us with the nature of the calls that have come into

our offices generally before this economic meltdown was to intervene with the federal government on behalf of constituents to get social security checks or va benefits or travel documents. the bulk of the business that we are now doing calls for people trying to get credit and get out from under and survive the credit they were already extended disproportionately calls of that and i have an even greater appreciation for that this past weekend when mr. marks group, the neighborhood assistance corporation of america bought their road show to my congressional district in charlatan and well over 45, 50,000 people showed up from all

over the country seeking to have their loans modified, and we are in a serious problem, and the programs out there even when they are working are not working on a scale that's large enough to have the impact that needs to be had, and then on top of that the loss of jobs has added a whole another wave of foreclosures and defaults that made the problem worse. so i welcome this opportunity to hear from the witnesses today and my time is expired and i now recognize the gentleman from florida, mr. klein, for two minutes. >> thank you, mr. chairman and for putting this important hearing. i am from south florida and we face serious problems with housing market as many other parts of the country do. and i think we all understand

its essentials for banking and services as well as federal government to implement effective programs to increase loan modification and prevent foreclosures where they can be prevented. i'm pleased to see increase focus on foreclosure prevention from the obama administration and they've taken some steps in the right direction but we have a long way to go. one of the problems with the home affordable modification program, and other initiatives is incomplete paperwork and we hear this over and over again. documents are submitted and for the loan modification and we keep hearing it's not the right documents and that for the borrowers side we hear that they've asked over and over to prevent the same documents. it's a communication problem tracking of the feet problem and some cases problem of the services and banks not having adequate personnel. quantity and quality to service these loan modifications and address the problems. i also concerned about the process of short sales, and i appreciate the new treasury guidelines that have come to

play to expedite the closings on short sales. but i still have concerns that don't go far enough to address some of the issues complicating execution of short sales particularly secondary limbs and investor interest which my attitude is where there is a will there is a way. i think these are things that can be worked through. another issue is appraisals. this seems a constant issue working for difficulties in loan modifications because some properties will overvalue on the we have and because there's little activity at the ground level right now the appraisals are coming in while and not necessarily reflective of the value. again this is something that is deepening the problem and prolonging the agony. last i want to point out that in many cases banks are also sitting on foreclosure proceedings. so they don't have to miss a surly right on the acid or take title and step in the shoes of the bar and that is creating another problem in the communities because people are not keeping up with mortgages, not keeping up with taxes and with their homeowners'

assessments and condominium assessments and it's creating a whole problem in terms of the market ability of properties in those communities and value of the properties. so, i just want to say we have a lot of work to do and i appreciate everybody coming here today giving their thoughts and ideas and we need to move expeditiously on this important issue. i thank the chairman. >> chernow recognizes ms. sheehan. i'm sorry. >> good morning. my name is moly she can. i work for the home lending division of jpmorgan chase. as the executive responsible for housing policy. at chase we have been working very hard to help prevent foreclosures and keep families in their homes. since 2007, under a more expensive programs we have helped prevent over 885,000

foreclosures. since january 1st, 2009, chase has offered over 568,000 modifications to struggling homeowners for a value of over $100 billion in mortgage loans. we have approved or completed over 112,000 permanent modifications under hamp comegys proprietary modification programs or other programs offered by the gse is and fhfa. we did give some specific details of all of that activity in the written testimony for you to review. this year alone we have opened 30 chase home ownership centers in 13 states. over 60,000 struggling borrowers around the country have been able to meet with trained counselors face-to-face. we plan to add additional 21 sites early next year. we have added over 2500 loan modification counselors in 2009

bring the total number to 5200 loan modifications counselors and 15 sites across the country. we have haulier over 2800 additional mortgage operation employees to handle the unprecedented volume so we now have nearly 14,000 home lending employees at chase dedicated to helping homeowners. we have handled over 12.8 million inbound calls and our outbound foreclosure prevention calls increased to 4 million in 2009 at from 400,000 a year earlier. and we have had 3.6 million visits to the dedicated website for love modifications where the borrowers have been able to download 1.6 million modification packages they can provide to chase. through hamp alone we have offered trial plans to over 200,000 homeowners and are working hard to make those modifications permanent. based on our experience for

every 100 hamp plants initiate from april for september, 200929 borrowers did not make the required payments under the trial plan making them ineligible for a permanent modification under hamp. 71 for worse made all three payments under the trial plans. of the 71, the 24 worst did not submit to get all the documents required for underwriting. 31 customers have submitted the required documents but the documents do not yet meet hamp underwriting standards. 24 hours had completed all required documents and are eligible for underwriting and out of those 2016 will likely be approved or have already been approved for permanent hamp modification. to the extent of our was not approved for permanent hamp modification we have other alternatives available to them and purchase what action programs and programs offered by the gse east and fata.

right now we are focused on helping 51% of borrowers paying any help completing documents. and have implemented aggressive new initiatives. a coordinated program to call the customer is 36 times reach of by mail 15 times and make at least to home visits if necessary to help complete documents, ordering key documents earlier in the process so they are ready with the border was documents come in to exploit underwriting, targeting outreach efforts to the borrowers that live near the chase home ownership center so they can come and in person to get help completing the document. assigning specific pools of accounts to the loan modification counselors to provide continuity in dealing with the customer and end processing. under this program, recently launched have completed over 400 million calls, letters and home visits on average of 27 activities per borrower toward the end of november to help the

conversion process to permanent. we are also paying special attention to the 31% whose documents are in but don't meet hamp requirements. and we will be working on very specific initiatives to get that process completed with the treasury in order to simplify the documentation for the barbers to the-borrowers. thank you very much. i would be happy to answer any questions you have. >> the chair next recognizes jack schakett, risk mitigation strategies. >> chairman, congresswoman capito and members of the committee, thank you for the opportunity to update you on bankamerica's loan to the kalona modification on areas where we can work together to help homeowners still in their homes. i am jack schakett, bank of america risk mitigation and i've been working for the mortgage servicing portfolio over 14 years. bank of america is a proud

partner in the administration's, affordable program, hamp, with more than 160,000 customers currently active in the charnel modifications hamp as provide valuable tool to that complements aggressive loan modification programs that bank of america already has in place. over the last two years, bank of america with combined effort of hamp has offered help to 615,000 homeowners. and over 100,000 calls a day we hear from customers. the concerns and frustrations. we believe we have improved significantly ability to handle large volumes associated with calls. we also believe much more is meeting to be done. we fully share the treasury commitment to convert a successful trial modifications to permanent as quickly as possible. in support of that commitment bank of america is focusing on assisting customers providing the necessary documents for the underwriting process. otherwise homeowners are at risk of missing this opportunity to obtain a hamp loan modification

and out, that none of us want. as this committee knows from prior hearings, in addition to the customers making three timely trial payments, the servicer must fully underwrite the permanent modification. this includes verifying income, occupancy status and tax returns. specifically, bank of america has approximately 65,000 customers who've made more than three trial payments on time. these modifications are set to expire on december 31st. of those customers 50,000 have either not submitted some or all the required documents or the documents they have submitted revealed discrepancy the need to be followed up on with the customer. for these customers, bank of america last week sent by overnight mail an urgent request for the documents needed to be completing the process and set up a time frame required to avoid losing the treasury modification program benefits. we included a return prepaid express mail envelope to make the process as easy as possible.

this is addition to the previous reminder calls and baling at temps. we have dedicated substantial resource to these efforts in concluding the expansion of the fault management staff to nearly 13,000. all the customers that have now submitted documentation we are confident we can meet the treasuries requirement to fully underwrite 100% of these loans before the trial expiration. but despite these efforts it was clear that some portion of these customers were facing a similar expiration would not be able to complete the process and would miss the deadline. late yesterday after meeting the treasury department where we discussed our concerns about the expiration date the treasury released new guidance to prove to be very helpful and relief to the customers that have submitted all of their documents and where the servicers are still working on completing the underwriting or the process. we think that this new guidance will go a long way to a limit fallout on technical ground and

we appreciate the assistance from the treasury board. today i also like to offer several areas of consideration where hamp can be enhanced to help our customers. based on the treasury survey data, the total customers eligible today for assistance of the program is estimated to be 1.5 million. bank of america's share of that is about 340,000. bank of america has made offers to 74% of the population and has started the trial modifications with nearly half. this compares favorably to the latest treasury report for all servicers participating in the program. we believe this demonstrates hamp is an effective program in reaching certain bars however the program was not designed to assist borrowers who vacated homes or no longer occupy their home as a principal residence. nor as a program structured to assist for the unemployed or those already over relatively affordable housing payment of less than 31% of their income. we encourage treasury to expand hamp to assist meeting some of

these challenges. specifically including a program for the employed and allowances for housing ratio less than 31% for the low to moderate income borrowers. and in any case, bank of america will continue to provide solutions to these customers that fall outside the reach of hand. at bank of america, our goal is to keep as many customers and their homes as possible. we understand the urgency of solutions not only for the customers we serve, but to further encourage the housing recovery that has begun to take root. we appreciate the continued strong support and partnership from the head and attrition and congress on this very important issue. thank you. -- before, mr. schakett. the chair next recognizes for testimony mr. gordon for the responsible lending. you have four minutes. >> good morning mr. chairman, ranking member capital and members of the committee. thank you for inviting me to talk about stopping foreclosures. without stronger policy intervention, not only will

millions of families lose their homes and necessarily, but foreclosures will continue to destroy communities especially minority communities. hampered housing market and slow or prevent full economic recovery. ye serve as a senior policy council of the center for responsible lending and non-partisan research and policy organization dedicated to protecting home ownership and family wealth. we are affiliate's of self-help, nonprofit financial institution that makes mortgage loans and lower income neighborhoods and is consequently grappling with many of the same issues encountered by other lenders. and my testimony is informed by this experience. the government's principal antiforeclosure program, hamp, has not reached its potential. one obstacle impeding hamp's success is the private service industry as a whole is either unable or unwilling to do what it has agreed to do.

to address this problem, congress should mandate lost mitigation prior to foreclosure. for many servicers, only a legal requirement will cost and to build the systems and safeguards necessary to ensure such evaluations occurred before the home is lost. one relatively simple way to improve the hamp program would be for treasury to require servicers to stop all foreclosure proceedings while borrowers are being ivan related fer hamp modification. right now foreclosures may proceed to the point of sale on a parallel track with lost mitigation discussions. as a result homeowners receive a confusing mix of communications from their lender. some of which tell the bar where they are being considered for modification but others of which warn of impending foreclosure

may fail to send in their documentation comedy called early on a trial modification, may not answer the phone when their service or calls or they may leave the home which makes them ineligible for hamp. it's also crucial for treasury to make the npv model public so that homeowners can tell whether the hamp evaluation was done correctly and for treasury to provide full public access to the hamp database to encourage evidence based program creation and ideas similar to the way that we get full data under the home mortgage disclosure act. only that data will be able to tell what works and what doesn't, what servicers are giving the best job and other minority homeowners are being held to the same degree as white farmers. the foreclosure problem has evolved and we must expand hamp to meet new challenges such as negative equity and unemployment. others on the panel will talk more about the importance of

principal reduction, something we believe would be enormously useful under this program. and we also should expand hamp to assist homeowners who've lost their jobs and may not have the nine months of guarantee of employment income that the need to be eligible for tar and this is what would be done through chairman frank's t.a.r.p. for mean street. we must left one person to the principal residence mortgages. this solution costs nothing to the u.s. taxpayer. it's the only solution that cuts through the gordian knot of second liens, securitization, negative equity and backend consumer debt. it would also serve as a stick to the carrot of the hamp incentive payments. finally, we commend this committee for its work on legislation to create the consumer financial protection agency, and we urge the full house to pass the bill this

week. we now know it is much less expensive and much easier to prevent these problems than to clean up after them. thus if p.a. would gather in one place consumer protection authorities currently scattered across many different agencies and would remain fully focused on the sole mission of protecting our families and economy from the dire consequences of predatory lending and consumer abuse. thank you for inviting me today and i look forward to your questions. >> thank you very much for the test and, as gordon-reed next is anthony sanders distinguished professor of realistic finance school of management at george mason university. you are recognized for five minutes. >> mr. chairman and members of the committee, thank you for the invitation to testify today. according to the treasury service performance report through october, 2009, 920,000 charnel modification plans were offered to borrowers and 651,000 trial modifications have been made.

given the fall off the cliff of housing prices of many states the surge of unemployment and evaporation of liquidity for banks and institutions in the second half of 2007i am frankly surprised at the servicing industry has moved so quickly to make the loan modifications in such large numbers. with 14.4% of the border was in foreclosure or delinquent on their mortgages this creates incredible challenge to the servicing industry. it is a challenge to the server serves to make loan modifications succeed when 70% of loan modifications that have already interest rate cuts have gone into default after 12 months. if the loan modification affordability calculation is done under hamp only use is firstly mortgages the failure of these modifications is not unanticipated. and as i mentioned in the house t.a.r.p. hearings of november 2008 to negative equity problem in the states of california, arizona and florida is we to be very, very challenging for the servicing industry, loan modifications must take into account

consideration for the negative equity position of households to determine the likelihood of success when making these payments why are so few loans expected to be permanent? for several reasons. first is the reason for the projected failure rate is a great to which many residential loans of the united states or in a negative equity situations. according to the age of bank research report they are expecting 25 million homes to be a negative equity position. the second reason is unemployment rate while 10% of unemployment rate is bad enough, the truman played including the wage and salary curtailment is closer to 17.5%. this is a very challenging obstacles to overcome for the servicing industry. third is the documentation problems we've heard about. to qualify for trial loan modification to hamp progress file in state income approach that does not require documentation like student loans qualification for temporary loan modifications is ground for moral hazard problems or

borrowers some applicants that are insulated from the risks they may be it differently from the way they would have if they were fully exposed to the risk. in this case borrowers may not want to submit the required documentation. since they may be denied for permanent modification. this is not to say that some borrowers have not experienced from documentation problems, which will consist with dramatic growth and demand for applications throop hamp servicing efforts to meet the demand. the fourth reason is that many borrowers are having trouble making the three consecutive pennants because they either have to match income, not enough income or a house this fall into much in value. the making home affordable program provides a service performance reports that frank orders the servicers in terms of active trial modifications as a share of eligible 68 plus delinquencies. the higher the better. the problems accounting for success does not control for servicers servicing loans in particular hard areas such as

bubbles dislike california, arizona, nevada and florida servicing these states where housing prices have collapsed by as much as 50% in some areas are going to be heavily challenged performing these modifications. when you add the already high unemployment rate in the states these are indeed a great challenges. in addition the highest on in planning rates by the metropolitan area as of september or detroit, 18.5%, bordon the suburb come 17%, riverside, 14.1%, less vigorous, 13.7%, and los angeles, 12.7%. while arizona has only a month when a rate of 9.1%. the difficulty of the modification to consider when combined with the crash of the housing prices that have occurred. the states and metropolitan areas of highest unemployment rate should be taken into consideration when determining the loan modification success rates. my recommendation is for treasury to account for loans surfaced in the bible states and

midwest economic states such as ohio and michigan. in short of calling in loans and nebraska's likely to be far easier than modifying loans in arizona, nevada and empire. one reason we should consider is allowing financial institutions rather than take immediate hits to the capitol when we have a modification or default about them to amortize their losses over five year program that would enable sales in some of these distressed assets as t.a.r.p. was originally intended to do and allow other participants jumped into the market to be more innovative programs like short pay off a short sales, foreclosures, conversions to leases which fannie mae is considering and brought loan modifications that a particular sense. particularly in the vacancy rates in many states in the housing market conversions make some sense when the comparatively low rental rates compared to mortgage payments. i welcome any opportunities and appreciate the opportunity to speak with you.

>> thank you, sir. the chair appreciates the testimony and next recognizes for five minutes mr. goodman -- ms. goodman. the senior director of securities llp. >> mr. chairman and members of the committee i maundered to testify today. my name is lori goodman senior managing director at amherst securities, leading broker-dealer specializing in the trading of residential mortgage backed securities. i am in charge of strategy and business development. to keep abreast of trends in the residential mortgage backed securities market we do an extensive amount of data intensive research. i will share some of our results with you today. as a result of my testimony, i hope to leave you with two points. first, the housing market is fundamentally in very bad shape. the largest single problem is negative equity. second, the current modification program does not address negative equity and is therefore dustin to fail. and there is no single solution

the arsenal measures must include principal reduction and must explicitly address the lost allocation between first and investors and secondly and investors. in order to place today's topic in this context let's look at the housing market. the mortgage bankers delinquency survey for q3 shoes 14.1% of the borrowers are not making their mortgage payments. this is 7.9 million homeowners. this dramatic increase from several years ago is the result three things. first, borrowers are transitioning into delinquency at a rapid rate, second, rates are extremely low and feared the time between when a borrower first goes in delinquent and when the hamas liquidated has lengthened dramatically. given the current introductory we estimate approximately 7 million of the 7.9 million homeowners will be forced into vacating their properties and this estimate of 7 million units includes only the borrowers that have already stopped making

their mortgage payments. it does not include the 250,000 new borrowers per month for going delinquent for the first time and modifications they can't help considerably as their success rate has been low. the real problem is many borrowers have negative equity in their home. most borrowers don't default because of negative equity alone. generally bar were experiences a change in financial circumstances, this is a payment on their mortgage and then reevaluate their financial priorities. if the home has substantial negative equity they will choose to walk. if you numbers will help illustrate this point. at and hearst we did a study looking at all prime borrowers 40 days delinquent on their mortgage six months ago. six months later, we found through the prime borrowers with 20% equity only 38% had become 60 plus skilling quit. for the prime borrowers with substantial negative equity, 75%

had become 60 days delinquent. there is a substantial group of people who've argued that the primary problem is not negative equity, it is unemployment. this is not supported by the evidence. first, the increase in delinquencies for subprimal, alt-a began to accelerate in 2007. bye contrast we did on begin to see a large increases in unemployment on till q3, 2008. further evidence of the importance of negative equity comes from another study we've recently completed. we found evidence the combined loan-to-value ratio or cltv please a critical role. fer alt-a in a prime loans and low unemployment areas the default frequency was at least four times greater for the bar was under water by 20 per cent and it was for the borrowers with at least 20% equity position. we also found if a borrower has a positive equity unemployment

plays a negligible role. we found that all borrowers with positive equity perform similarly no matter what the local level of unemployment. indeed negative equity is the most important predictor of default. when the borrower has negative equity, on employment act as one of many possible catalysts, greatly increasing the probability of default. hamp modifications or, as you are aware primero the payment reduction plan. hamp has three false. first, the gentry team to make the modification is a mortgage servicer rather than originator. second, it only considers the first mortgage payment taxes and insurance. it does not consider the bar were still financial circumstances. a third and most importantly the program does not emphasize the three amplification of the bar were. what can and should be done? here are some imperatives. first there is no one-size-fits-all approach to the modifications.

second, moving principal reduction hi year in the hamp modification waterfall will be the most natural way to raise the success of the modification program. what investors support this type of program? absolutely. all for the pleasure is devastating to a more work is also devastating to investors because recovery rates are low. the interest of the first we investor and of our work are totally aligned. third, any principal reduction program requires the had been attrition to address the second week problem head-on. fourth, we endorse three hamp bouck for homeowners programs. fifth, we need more transparency on the data. we are concerned if policies continue to kick the can down the road working with a modification program that does not address negative equity, delinquencies will continue to spiral with no end in sight. thank you very much for allowing me to testify today. i am happy to answer any questions. it has been an honor. >> thank you, ms. goodman.

we recognize mr. marks, corporation of america you have five minutes. >> thank you very much. it is very good to be here. my name is bruce marks, ceo and founder of naca, neighborhood assistance corporation of america. we have an interest in pan also want to respond to legally binding agreement with every major servicer and the two major investors in the country to do foreclosure prevention. so we have be of a custody, saxon, fannie mae, legally binding agreements, with him, p.m. ac, freddie mac, one west, chase, wells fargo, we've got american homes, hsbc -- again, every one of the major servicers of the country and every one of the major investors in the

country we have a legally binding agreement. there's only two real solutions out there. one is to restructure the mortgage for someone with a stable income to make a mortgage affordable, not to refinance, to restructure by permanently reducing the interest rate or the outstanding principal and make it affordable. and i say permanent. that means not a free set in five years to make the payment affordable. and we agree with what laura and some of the other people from the panel say. we should do more principle reductions so you can keep the interest rate at the market rate, make it affordable by doing principal reduction that clearly hasn't happened. when you do the other option is when someone does not have stable income because they are unemployed is a forbearance agreement and lenders have been doing for parents agreements for many years and continue to do that. certainly we have homeowners here and some of them, dena holmes in the audience as well

as paul roberts, dena went to the same the treen event, we've done 12 eatonton of the country each one has about 40 to 60,000 people come. and he has reduced his mortgage payment by $1,400 a month. he said in a fixed rate of 3% locked in. paul has gone to one of the save the dream even seating $183 to read again in the audience with interest rate of 43% fixed as well. we have to of the major servicers year, bank of america and chase. but the things we've heard about was what's not working. let's take the hit singles of what we have here. we've got think of america. what they've done at the scene of the dream even to is they are doing on-site mortgage restructures, that means they get all the documents. the verification of income, they get that piece donner and they

actually have homeowners signing of the legal documents signing then at the fence so people in one place or walking away with the restructure saving $500, $1,000, sometimes $2,000 a month getting a job done. and they are close to almost 50% of the people who are coming through doing that. then you've got chase come out of all these servicers here is the worst. the fact of the matter is when you look at the documentation and what they are doing they are playing you. the fact the matter is when they say they are doing these trial modifications and all that and all of a sudden it is the borrower's fault because the homeowners can't get the documents it's because why? the our underwriting then after three months. so, they are all -- the refuse to do onsite permanent restructure's. they put people through the process. they are impossible to work with. talk to the homeowners about that. so i think it is an interesting contrast that you've got the one

who does the best and that's bank of america and the one who does the worst and that is chase. so when you get jaime dimond up here asking for the facts of that. let's talk about what the solutions are and what they should be. the m. h. es, the administration has to stop pleading, begging and bribing the server servers to do the right thing. because the fact of the matter is a lot of business models don't work. they are in the collection business. they are in the business of remitting that money to the investors. they are not in the hour origination business which is where we are now. the fact of the matter is where is the occ and the federal reserve? they should be requiring to surface to do the mortgage restructure's, to do with the should be doing. that's the job, if that does not require t.a.r.p. money. clearly when we had a financial crisis we've required the lenders to take the t.a.r.p.

money because there was a safety and soundness issue. we could have the same standard to say let's require the servicers, lenders to stop foreclosures to restructure the mortgages and make them affordable without the use of the tax payer money out there. thank you very much. i would be glad to answer any other questions. >> thank you. i thank the witnesses for their testimony today and i start with you, is sheehan, representing chase. you just heard mr. marks testimony. what you have any response or reply to some of his comments? >> we have been working with mr. marks organization for quite awhile. we think the great job in their outreach events and bringing home owners to talk we have the process we have established in terms of how we do our intake for our defense. it is a different, slightly different process perhaps than bank of america and ensure each of us have different process

these we've worked very hard to make sure we get the documents in, we have a dedicated portal, the image documents, put them together and then they go through the qualification process. i know that there have been bumps along the road up simply particularly building up the capacity to manage the outreach process with mr. marks but we continue to work very, a very hard and we will certainly follow up with him after this hearing and talk further about how we can do better. >> thank you. other witnesses have a comment on my question? anybody else? when it comes to foreclosures i continue to be troubled by stories of mortgage fraud and individuals trying to make a quick buck by scanning innocent people. to any of the witnesses what steps, ms. sheehan or others, is chase or others seeking to ensure customers are not taken

advantage of? is there enough information to be provided about what a legitimate foreclosure mitigation plan is as compared to a scam? is their litigation to be taken to make sure others are of scant? >> there's a lot of work that is to be done in the scam process. we've made a lot of process. we work with the ftc making sure we are getting information to them when we learn about scams going on. we have, you know, put together a booklet with the ftc we include in all of our conversations with our customers. we continually remind them they don't need to pay for a modification. >> thank you. other witnesses on to answer the question? mr. marks? >> yes, the answer is if you consider those out there doing the fraudulent activity you have to consider them as religious and the only way you can't kill off all of the roaches by stomping them out you've got to

cut off the food source. and the food source is the lack of ability some homeowner goes to the servers are to get a solution right then and there. so the focus should be on requiring the server service to get the job done because if you do that then you're going to prevent all of the fraud. clearly it should be outlawed no one should charge anybody to save their home because they should be working with the server servers and nonprofits who don't charge to do that. we have got to focus on hundred% getting the job done. everybody comes to the save the dream has tried to work with the servicer and failed. so we have got to put these players out of business and the profits out of business because our job should become irrelevant if the surface are required to do these restructure's and forbearances. thank you. >> any other witnesses? >> i just want to add to what he was saying.

i disagree with part of what he's saying because against opposing a bar where does not like what they are hearing from the surface or they may want to get legal representation to push the envelope. you have to be careful about regulating people out of these industries. it sounds good but there might be people that want additional representation. >> and we certainly agree with that because of these events we do a forensic audit of cologne's so on the picket people that you find 80% of all of the pain in the country there's something that was done illegally so when we do the forensic audit we find the violation and then gives the bar were a better opportunity to get the long-term solution absolutely. >> thank you to the witnesses. my time is about to expire. i'm going to recognize ms. capito. >> there are two things troubling me. first of all is i guess the

conflicting information. but the information that -- when i learned the last hearing in order to go to a trial modification you don't have to have your documentation before you. you can go to the charnel modification for three months without documentation. but according to what ms. sheehan is saying after you are requesting these documents they are not forthcoming with a large percentage of the folks that are trying to modify their loans what is the principle reason people are not forthcoming as the gentleman said they don't like what they are seeing or they are postponing the inevitable. what is the reason for this? >> certainly the situation is that, a lot of the situations that we see or where they have submitted some of the documents but not all of the documents. and --

>> income tax -- protivin planet. >> it may be documents they don't have easy access to it like supporting death certificates or divorce decree. this is -- mr. marks made the point is a true origination process. it's truly underwriting alone so we are looking at as you said all of the different financial aspects of the situation and so it is a challenge for the borrowers trying to help them overcome the challenge. >> do you have the same situation at bank of america? >> it is true. when they were first setting up hamp there was a lot of discussion whether or not we should require full documentation, parcel documentation or no documentation to start the period. over that time there was a general consensus that we supported that we have a lot of pent-up demand right now. we need to get the customer started as soon as possible so people here on the ec side of the program.

they get no documentation or commitment to what you make, start the trial period, use that to get the documentation. hopefully you what actually solve the documentation problem at the same time in parallel with the three month trial payments. clearly we now look at the height of folly ratio to change the process slightly. we would advocate to make some documentation at least two documents, the hard ship affidavit which is a fundamental program, it also has language making sure everything when you are saying is truthful and the true 46 ot, that is pulling a tax return for some point in the future so if there are customers that potentially are going to try to gain the system that might rule -- rutka stores up front and eliminate the conversion problems we have today. so, our view may be a good time to challenge what documentation we are requiring up front to get in the program. still allowing the time to finish the process to send them to the trial because that process still is a good idea

because there are a lot of documents to get in trying to get them out front with what may be unnecessary delay to start the process. >> if i could add one thing to what they're saying it is not a difficult process. it is a simple process. if we can do it in the same day, seemed a solutions, all you need is three documents. you need the hardship affidavit, 4506t authorization and verification of income. so we do not believe he should do the no documentation. we believe in the trial of but you should underwrite on the one and get it done after three months of mckelvie on time payment it gets done. the other problem is that homeowners have lost confidence in the servicers. and that, you know, so the process doesn't work, people don't trust the servicers out there and somehow we have got to reestablish the trust between homeowners and servicers but just get it done at the beginning, get the verification. i think the fact of the matter is the required more documentation at the beginning

of the process. the administration made a simple process -- >> i would certainly say to have up front door irritation, like i said i was astounded to hear there was no documentation in the beginning. we had the problem when we started. i'm talking we back. the other thing i think ms. goodman brought up is the negative equity situation when challenged whether it was on a plane and driving a lot of this now, no, not really. it is negative equity or people underwater i don't see how you solve that problem. luckily i from a state where you don't really have that problem, the states like california, florida, nevada, they are under water in amounts more than the median home price where i live and people have got to feel just desperate that there is no way they can get out from under. so, you know, with -- i think

that is a huge hurdle to overcome and it is one you cannot do overnight. it's not like you've lost your job, you've got a new job. it's like you have time here and i think my time is up but any way that is just a comment. >> is it possible to respond to that? do you mind if i can do that quickly? >> we do have other people that want to ask questions. you can respond in writing in fact the chair encourages anyone who would like to provide additional testimony to give written testimony. it will be provided to the members appear. thank you. the chair next recognizes ms. waters for five minutes from california. >> thank you very much, mr. chairman. i apologize for not being able to get here earlier today. let me just say i have spent a lot of time trying to understand why we can't get loans modified faster, quicker. i don't buy the white house latest attempt to prod servicers

and duke load modifications. i don't think the trying to embarrass the services into doing this works. i think we need stronger legislation. i understand a lot about the lone service and mr. marks, you're absolutely correct. i see no reason why you cannot do a loan modification in the same day that you are contacted with limited documentation. i'm not saying no documentation but, you know, this business of the trial for three months, and then the request for six months worth of pay and statements and on and on, in my office we are helping people 75 and 80-years-old try to put together requests from servicers the professionals' work every day can't put together easily. and the other thing is many

services, what do you lose so much? i mean, most of the time i'm getting calls about people having to submit a second and third time. further, i get the feeling that some of our companies have just brought in servicers and gave them a two and a half hour training and put them out there to try and do loan servicing and then tell my constituents they can't take into account certain kinds of incomes, that's not valid. i don't care where the money comes from. child support, on employment, social security, all of that should be taken but i'm talking to services and get on the phone with, and i get on the phone with my constituents, i get a waiver. my constituents talk directly to the surface is to assist them. i am just amazed what appears to be incompetence. i am amazed at the request for all of this documentation, the bank statements, tax filings on

and on and on. it is not necessary and they are not getting done. we know that they are not getting done. the white house is embarrassed about this and people are losing their homes who could remain in their homes and the recovery bill that's going to be on the floor tomorrow we are going to try to get something for the unemployed. because we have reverse mortgages where people get reverse mortgages, get money up front and then when the house is sold or what have you the money is paid back. we can do that with unemployment when the house is sold we can lend money upfront and they can pay it back with a house is sold but i tell you there is not a real effort by the mortgage companies or the banks or the servicers or whoever. banks' own most of the servicing operations to do loan modifications. that's the bottom line. you don't want.

and so not wanting to do them, you don't care about hamp or anything else. you just don't want to do them. so i am looking for stronger legislation to force these modifications. i'm looking for ways to expedite as mr. marks is explaining, and i didn't hear some of the other testimony. it isn't a lot that can be told to me about the can be done that people are not getting their paperwork in that somehow people signed on the dotted line and now they don't want to take the responsibility. i have been looking at if i may negative looking at some of these mortgages where they readjust in perpetuity. the readjust every here for the rest of the loan up to 20 34, 2035 on and on. those should be modified on the spot. it has nothing to do with

anything excerpted is a predatory loan. and for those servicers and those companies who have those bad products that are out on the market, and they have people in trouble and they are saying they can't modify those loans i am coming after them with some real legislation to do so. some of the loans are predatory some of them people have been defrauded and i wanted those loans modified even if they work every day and they can afford to pay the loan. those loans have to be modified along with people who don't have the money because they've lost their jobs cetera. i yield back the balance of my time. there is not a lot to be said of this mess, mr. chairman. >> thank the gentlelady for questions and comments. ..

now the administration and some of the members of congress would like to change the bankruptcy code so that bankruptcy judges could write down principles. this doesn't just have to do with writing down an interest rate. it has to do with reducing principle on a loan.

and if the borrower understands that if they wait and don't renegotiate because we might do these huge write-downs of principle. why would the borrower continue to work at the table to try to stay -- try to work out an abridgment for lower interest rate. that would be one of the questions that i would ask. mr. schakett, do you have a thought on that? what would happen "after words" to our efforts to restructure, to continue to restructure your loans should that kind of legislation passed. >> circulate there is risk. went to work with a mortgage company in existing programs like camp to modify or judicial process you get a utter deal judicially. you're right there some risk that undermine the program. our view is that the congress

and the administration determines we should do more for certain we better work i've been. i think there could be some more segments very high ltb, delinquencies, because there's a large problem. i think there should be some portents participatory program. it would be best served idly by putting out through a process that works for everybody and actually kind of sponsored by the administration itself versus the judicial process. >> one of the concerns i have here is having caught in the past against some of the policies that encouraged fannie mae and freddie mac to do some of the types of lending they did with zero down payment loans, subprime loans, half of their portfolio been subprime. my concern is that we now go to a situation where if this crammed down concept goes through, it's going to have an

effect in the future on mortgage rates. and i want to ask for faster sanders about this. what's going to be the effect going forward on the secondary market? are lenders going to have to reprice their consumer mortgage project or their consumer mortgage product in order to adjust for the risk to investors presented by something like bankruptcy creamed down? is that the likely consequence of legislation like this? i remember the justice department court justice john paul stevens comment that there's a reason why the bankruptcy code does not treat residential mortgages like it treats credit cards or auto loans and basically what he said was we want to enjoy investment in certainty and encourage the flow of capital into this market. if congress keeps making mistakes, errors in judgment that blends the market like what was done with fannie mae and

freddie mac and then comes back with crammed down our legislation like that, do we drive the private capital out of the market. i mean at the end of the day i don't think congress did any favors or disadvantaged people i pushing fannie mae and freddie mac in mandating that half of their goals mandated that has to that be subprime. that was a huge mistake for congress to make. zero down payment alone by fannie and freddie was a huge mistake. for now living with the fact that people took advantage of that, obviously. as everybody would. if you can get capital at those rates and with no money down, if you could flip homes 30% of the homes in 2005 were flipped in this country. so we knew what was going on. let me ask you, professor your observation. >> well first of all i think you responded at the beginning that the write-down of principle law is desired by anyone that's in that position has serious moral

implications about weeding and actually going to default. if you know you're going to get a principal write-down. but secondly on the secondary market fits. andy davidson knife votes a paper for the anti-macarthur and what we said was if we want to get the whole securitization market which is really, but important for the mortgage market and the housing market to recover we have to establish trust. so investors around the world, the united states pension funds have to trust that the securities market is going to work etc. and the problem is if we go to cram-down. they will send kind of a shockwave through the international markets that's all my gosh were going to haven't entered judicial intervention and probably not going to be consistent. they will vary by jurisdiction. they are a terrible signal that were sent into the capital markets around the world if we pursue that. as they nobly intended as it is. >> thank you professor.

>> pitcher will next recognize mr. clay from missouri for five minutes. >> thank you so much mr. chairman. i guess along the same lines as mrs. waters, some of the strategy that we see now deployed by mortgage holders and banks does not make good economic sense. why haven't we seen an effort to keep people in their homes instead of removing them? and then leaving the home vacant and reducing the value do you of the surrounding property in the neighborhood. if it is about the bottom line and profit motive, would it not be a better business strategy to keep people in homes? doesn't the mortgage holder or

the bank have to maintain utilities and to keep the water on in those facilities? let me ask someone on the panel and may be ms. sheehan or mr. schakett could take a stab at this. what is more cost effective for banks and mortgage holders, to evict and/or foreclose on a home is that more cost effective or would it be better to work out some arrangement even if it's the homeowner been reduced to paying rent in order to keep them in that house? what's would be more tears to the banks? >> i would say that obviously when we look at our distressed

borrowers, the first thing we do is make a consideration about whether or not we can achieve an affordable and sustainable monthly payment for their housing under their -- under a modification program. that's lower trying to do because generally speaking that is going to be more of from an investor or blender to them a foreclosure. so absolutely that is part of the process that we follow. >> well, but think about the difficulty when you remove a family from a home. then it's vacant. then you drop the overall value of the homes in that neighborhood. your profit is reduced when even if you're able to sell that home. i mean, it's just a strategy mr. schakett you may chime in. >> there's no question we make that calculation versus take the

home away from the customer. it recognizes that to take it away you have to pay the bills while he is not there. there's an eviction cost. it takes a while to market the property. that makes it even worse for us. so all of those calculations are a part of mass which weighs heavily in favor of the consumer. as long as we get a reasonable payment it is almost always better to keep the customer in the home. that is exactly right. >> but we are not seeing that trend now am on mortgage holders who are saying let's make every effort to keep people in their home. we're not saying that. >> sir, if i could respond? >> gas. >> there's two separate pieces. servicer does nothing ago stu foreclosure. they do nothing. the other is the investor that we always here for the service is to say we'd love to do it but the investor says no. the fact of the matter is they virtually never ever contact the

investor. what they do as they go to the trustee who tends to be the same entity who the service areas and say what does the agreement by the contract between servicer in the investor? so while they say it's the investor's problem, it's not. when you talk to the biggest investors out there that day we want to these modifications. we actually want to do the principal reduction that we are not being not. for the fact of the matter is the servicers lose very little if ago stu foreclosure. the investor loses and they very seldom ever talk to the investor and then the lawyers for the servicers as they take a conservative approach so they find a reason to say no as a reason to say just by reading and pulling the service agreement the psa and a very conservative manner which hurts everybody as you say, sir. >> will dump the servicers have a fiduciary recyclability to the

investors? >> and that's right. from our opinion we think they're in violation of their fiduciary responsibility because they find a reason to say no when their protest on the opposite when they should be saying yes. >> let me just make one more point and that is that many borrowers are so far underwater that they don't want -- but the current modification program doesn't work for them. you need to go to some sort of a principal reduction program. they still legally owed the money even if your mate in a lower payment. >> gentleman's time is expired. anyone else wants to make a comment is welcome to do so in writing for the record because that's helpful. the chair recognizes mr. baca for five minutes. >> thank you mr. chairman. in my area we probably have the third of the fourth highest in the nation in foreclosures and it's really impacted the inland empire and almost in my neighborhood the homes that basically are vacant or i've just been rented.

and it seems like many individuals who have lost their homes or are in the process of losing their homes are stating, why should i continue to pay the high rates that are currently there right now when the property value has even gone down so much so they end up vacating their home and then renting which is a problem that we have been trying. but my question pertains to the hamp program and its inability to help families whose breadwinners have become unemployed because of the current economy. in many of these situations, it's actually better for the lender to foreclose on the property in a state is better for the lender to foreclose on the property. however there is evidence that permanent for unemployment for

individuals and up hurting the taxpayers because of the government ownership of fannie and freddie. because of this there has been planned that actually call for limited modification for unemployment and actually call for housing vouchers or grants to be used. could you comment on the feasibility of such approach addressing what's possible pros and cons that may be and i address this question to mr. martin. >> thank you. one is that for someone who is really unemployed, services have done this for many years. whether they do for bear and four to six months. and they should be doing that. so you don't need mha. he donate the subsidies to help the servicers to do that. so it's really an enforcement part. the other problem i think it's a very good point is that we are getting people locked down at a 2% interest rate for life. while that's a nice piece, but that shouldn't be the answer across the board. what should be the answer is

let's put someone on affordable payment at a market rate and reduce the outstanding principal because that's better for the economy, better for the homeowner, better for the community. in other mha and understood when we see virtually no solution when there's a principal reduction or forbearance. everything is interest-rate reduction. we don't think that's the right answer across the board. we agree with the investors out there who say that's not the right answer across the board. they'd rather have a significant principal reduction closer to the current value of the property and keep the edges straight at the market rate and we think mha and hamp should be reconfigured to re-encourage that. >> and you're saying that the current market today, not what it was before the foreclose, is that correct likes >> it's all about the affordable payment. so what to look at 31% of the gross income or you take the net cash flow and to determine an affordable payment, whichever is

less. then, how you get there is up to the servicers and the investors and while you can reduce the interest rate to 2% or 3% like you've heard here to get to that, maybe you can keep it at a 5% interest rate and reduce the outstanding principal by $50,000 or $100,000 to get a closer to the current value of the property. >> mr. sanders would you like to tackle this? >> the whole issue of the interest rates is very fascinating. i think it's, you know, we are priced stressing it too much. and the one thing i want to add to that that was i'm hoping everyone considers the fact that if we do in fact move to 2% of loans for a large segment of the population who are in financial difficulty etc., which is again very noble sounding. i want to point out that somebody is going to be holding those notes and when high inflation and high interest rates suddenly go kaboom in a few years which they will

whoever is sitting on that paper is going to have catastrophic losses. right now it's the fed. danny, friday, is ensuring this. we have to again be very careful in the long-run implications for what we're doing here. >> the people who are holding those notes really are being the ones who took advantage of those individuals, right? why not make them lose? if those are the ones only in the notes, had all my losing because they got greedy in the first place. >> if pension funds and the federal reserve are the greedy ones then i don't think so. i mean, this is going to hurt a lot of people. and it's just not what you call the greedy folk. it's going to the folks around the world who suffer when we get inflation and interest rates going up. >> okay, thank you. >> next the chair recognizes mr. miller for five minutes. >> thank you mr. chairman. i was puzzled by mr. royces

questions that would have on voluntary modifications. the congress did something very similar in 1986 to what we've proposed with respect to how mortgages. to allow modification of mortgages on farms. and it would reduce the amount secured to the value of the collateral, the value of the forum which is all that really is secured anyway. treating the rest has been secured and then set a term and interest rate that's a little bit above prime. my impression from that. is that the modification voluntary modifications took a huge spike and that the total number of modifications by courts with a relatively small percentage but it provided a template for other modifications. ms. morgan was very tip and volunteer modifications? >> no, there was not a dip in

volunteer modifications. in a number of states around the country, until a supreme court decision on this topic ministates permitted the right, the so-called koran down a principal residence mortgage debt and bankruptcy court and those states didn't have any different situation with respect to the cost or availability of credit in the states that didn't have it. bankruptcy is a very difficult process for an individual or a family. chapter 13 bankruptcy is onerous. you have to live under very strict plan. you are monitored by the court for five years. this is not a choice that anybody chooses lightly. we have two situations now. we have the situation and that the voluntary modifications are not happening and that it is all utterly out of control of the home over. they have no last resort that they can initiate themselves which can serve kind of as a backstop to the servicers responsibility to help them try

to address whatever problems they are facing with the mortgage. so on the one hand, having the ability of the bankruptcy judge to help a homeowner out if a homeowner a last resort. we have another situation and that many of these distressed homeowners are distressed generally and already are filing for bankruptcy. they are already in bankruptcy court. it's just that the judge doesn't have the power to do the main thing that will actually ultimately make them successful and chapter 13 and able to continue to pay back all of their other consumer debt that they owe. which is that the judge doesn't have control over their principal residence. for those homeowners, one thing that's especially important is right now most hamp participating in servicers aren't permitting folks who are already in bankruptcy to do a hamp modification. so they are really stuck. they can't get the voluntary

modification because the servicers don't want to do it for people in bankruptcy. but the bankruptcy judge can talk them out to there so those people are really locked out of the process. >> ms. gordon, you mentioned studies based upon the differences from jurisdiction to jurisdiction between 1978 and 1994. there was a study by a fella named ludington at georgetown and i think he is a co-author who i think was that columbia. i think they were both economists and lawyers, bankruptcy lawyers that looked at the differences and found no difference in the availability of terms and creditors. were there other studies? >> there are not that many studies on this particular issue, but there are a number of studies, some of which we've done at the center for responsible lending, some of which have been done at unc and other research institutions. on related issues, the fact is that every time there is a

program -- there's an idea to help homeowners, the mortgage industry will come back and say, well this program is going to impact the cost and availability of credit. and for every one of those -- every time that's been asserted, studies have demonstrated it's not the case. >> and in eighth grade math class, we had to show our work. we just couldn't give an answer. we had to show how we got there. and i understand that the graduate level that's referred to as peer review. you have to set forth what your assumptions are, which are methodology was, what facts you allowed and then and walked to the analysis. and other scholars in the same spirit can look at it and test those assumptions. mr. sanders, can you give me a citation to a published peer reviewed study that shows judicial modification makes volunteer modifications more difficult? >> that's a very good question. and i will send it back to you saying that we are, as laurie

has testified to, such uncharted waters that all that matters is that a 50% decline in house prices will see how this works. no, i have no evidence that ms. gordon was referring to that this was going to be terrible. however, when we are with high unemployment and this far upside down then ministates or ten states in the united states believe that when i'll see it. >> professor sanders, isn't it true that on the bankruptcy laws every other kind of that is exactly the same way that the legislation we talked about last year would modify how mortgages? every other kind of secured debt? >> that is true. >> thank you. >> but there's a reason why mortgages were not included in knots. >> that's the only reason? >> i didn't say that's the reason. i'm just a mortgages are not included here that the statement did not a reason.

>> okay. >> gentleman from georgia. >> thank you, mr. chairman. let me start with this because we are in just a terrible situation here. i have had difficulty since we've been in this crisis understanding why there has not been the sense of urgency. now, we moved in good measure to save wall street. i had no argument with that. the credits were frozen up, we had to do that. but we did it with urgency. we did it with abundance. we did it with $700 billion. the fed came in with another $1.2 trillion. but when we get down to the homeowner, we cringe and we crunch and we worry about these

things. we got outside the box to save the american economy, focusing on wall street. and did a good job with that, no question. but when it comes down to rescuing the homeowner, which in large measure was the core cause of the problem, we stay in this box. why is it that we can't intelligently look at what i think is the foremost issue here? and that is reducing the principal. why is it, what is it about this? here we are at the end of this year. we will lose 2.5 million homes to foreclosure. right now two out of every nine homes are in foreclosure or default. this is a problem of catastrophic means. why can't we do that?

why can't we stop the foreclosure procedures while the modification process is going on? these are simple things. i just have a problem understanding why we can't do this. why can't we look at this whole modification program affordability program and understand that maybe 31% is too high, especially when people are losing levels of income. can somebody help me with this? let us start with the reduction of the principal. i'd like to know from each of you why we can't do that. what is the problem here? >> and i just ask one thing. i think the question to servicers in the model when they look at the affordable payment do they have the process in place to do the principal reduction as well as the

interest rate reduction and then when it comes to be a major pro-program or hamp, why don't they encourage the principal reduction versus just the interest rate reduction because we see very few of those up there. >> well, there are a few structural reasons of interest why servicers may not do this. one is that the biggest servicers than the one the service the vast majority of the loans are owned by the same banks of those who own the leaves of these homes, so they have a conflict of interest in terms of writing down the principal. servicers are generally making most of their money from their monthly servicing fees, which is a percentage of the outstanding loan principal balance so they don't want to write on the principal balance. there are a number of other financial conflicts, to that have to have a right to residuals or buybacks or any number of structural things in the servicing industry that push

against this. and so the real question is why have we not been willing to require that this happens if we just leave it up to the bank's interest, the banks have different interests. congress is going to need to require that this happens. and you are completely right that we have not put the energy into this issue, you know, the foreclosure crisis has basically been something of a 50 state katrina. you know, money out of the communities and leaving husks of neighborhoods in its way. >> ms. goodman? >> i want to second what julia gordon said. the conflict of interest between the borrower and the second lien holder is huge in terms of writing down rentable. and in order before you can have a successful principal reduction program, you have to explicitly address the second lien.

and there's no other option other than extinguishment. you may want to pay the bank to distinguish the second lien. you may want to let them take a loss over a period of time, but that simply has to be done. another problem that is often come up in terms of installed reduction is the moral hazard or strategic default problem. how do you keep borrowers who otherwise could afford to pay their mortgage from strategically defaulting or trying to take advantage of the principal reduction plan? and there's no single option here, but we have to think outside the box as you mentioned. yet you think in terms of shared appreciation features reducing all principal mortgages to be made with recourse. introducing an impact on credit scores, limiting future access to credit or ability to borrow against the property. you have to consider a wide range of ideas, but certainly strategic default ratio plays a very prominent role in people's minds. >> thank you. my time is expired. >> gentleman from texas.

>> thank you mr. chairman. and the witnesses for appearing. the 327 and 228, are we still having a significant number of them to come to the process? >> the bulk of those payment jocks are behind us. it's a pay option arm payment shocks that are left to come. >> and are we now finding that persons who had conventional loans, reasonable rates, are also starting to default? >> absolutely common negative equity is just a huge problem at this point. >> and is the problem one that you can with some degree of anecdotal evidence indicate that certain communities have experienced to a greater extent than others? >> absolutely, when you go to the satish of events -- >> let me take your absolutely is the answer.

can you identify communities by way of empirical and anecdotal evidence that have had a greater shock then some others? >> yes, but i would also add that this has become more across the board in virtually every community and in every state. >> given that it is embraced every community in every state but some more so than others. kindly identify communities that have extensively been hit harder than others. >> the minority communities -- >> defined minority communities. >> the communities where the majority of the population are african-american, hispanic, and other ethnic minorities and low and moderate communities. where the income is 80% less than the median.

>> what about accident or design, this impact on these the communities that have simply been hit harder than others. what will happen in terms of recovery for these communities without some intervention? >> absolutely devastating. i mean, you see the foreclosures -- >> tell me about the loss of wealth for these communities. >> it is massive. i think they're other people on the pl who can actually empirically identify that. >> is there another who can do some empirical evidence. >> yeah, our research reports show what they call a spillover effect of the foreclosure, really in the hundreds of billions of dollars. and there's two types of spillover effects. there's a general reduction in everybody's property. >> are you talking about the communities that were referenced by mr. marx? >> gas. >> for the record, i need for you to identify the communities that you are talking about.

>> largely communities that are african-american or latino communities are of lower income communities. the more lower, middle -- >> will these communities recover without some specific intervention? >> absolutely not. >> is there an opinion -- to someone else have an opinion that you'd like to give with reference to this? anyone else? this is the moment. this is the moment to speak truth to power. you hear that phrase used quite a bit. people fear speaking truth to power. somebody has got to tell the truth about what's happening to certain communities in this country. this is your moment. ms. sheehan? speak truth to power.

>> we have established our motor ship in the most hard-hit communities and are there to help people through those centers, in person, and address their needs. and that's the process we have used to think about how we can best be useful. >> do you agree that certain communities are being devastated if not obliterated by virtue of what happened? whether it was by accident or design that this is happening? >> i don't have that kind of data here. >> without data, you do have anecdotal evidence. you are involved in this process, true? >> we are involved in the process. >> what is your anecdotal evidence connote? >> what are evidence and experience has taught us is there a communities where we -- >> are you afraid to say it, ms. sheehan? our minority communities being devastated more?

>> minority communities are having problems. we know that. >> are there problems? >> i'm going to yield three of my minutes to the gentleman from texas so he can continue. >> thank you, mr. president. ms. sheehan, let us not be euphemistic about this. let us not let our addiction prevents us from telling the truth. this is a moment in time when people need to hear the truth because we have people who are suffering. some are suffering more than others. if the minority community suffering more than some other communities? >> we know that we have an obligation to all of our communities including our minority communities. >> so you subscribe to the notion that a rising tide all votes? >> we have an accountability to help our customers. >> i assume this is true. let me ask you this, if a rising tide raises all boats and i'm putting these words in your mouth you can extract them if

you so choose. why is the titanic still on the floor of the ocean? a rising tide -- i'm bringing this up because this is a prevailing theory that if we do across the board to write a, we will help everybody and we don't seem to understand that some are being left behind, even with the best of intentions. we are leaving people behind. and this is something that i think god the nn are going to monitor and report on. because the way for peace persons to tell the truth we may not get the entirety of the truth. for whatever reasons we don't want to face the facts, whether by accident or design, some communities are suffering more and they are not going to recover without some sort of

specific intervention. that's the truth. anybody different without truth, raise your hand. let the record reflect that no one has raised a hand. my final comments, mr. chair, if i may as this. i beg you friends, let's get beyond splitting hairs and let's talk about how we are going to save this country. it's really weaker than any one group of people. it's about this country and we've got to do better. we've got to do better. all of these banks have got to do better. if you don't do better at some point you're going to force congress to drastic action that some would call an moral hazard because we have to have some means of having these servicers take the responsibility and do something to help people who deserve and merit health. thank you, mr. chairman. >> i just want to take ten seconds on this. it's also been my view that

while the rising tide may raise goes for those people who can't afford a boat the rising tide is very bad news, in fact. the gentleman from missouri. >> thank you, mr. chairman. thank you, mr. green. i am interested in order that i can read it and become more familiar with it, professor sanders, was there an administrative order or some kind of congressional vote that directed fanny and freddie to make bad loans? >> no, i don't believe there is any administrative order in asking them or requiring them to make bad loans. >> the only reason i ask that is

because earlier you in responding to one of my colleagues accepted in your comments that have happened and went on to describe how troublesome it was. we can try to get it read back. it was a question from i think mr. royce. you don't remember? >> i don't believe i would say that. i don't think danny and freddie purposely went out and made bad loans or were ordered to do so. is that what your question is? no, i wouldn't have said that. >> so that has to come up today since you've been here? >> i think danny and freddie were only mentioned and that's what i said. i think the comment was that mr. wirth said something like they had obligation with 50% of their product and subprime nep data problem. that's the comment i believe he said. i think it was to give subprime

and all that if i remember right. >> and we did not have a chance to rebut the ongoing incorrect assertion that's been rebutted by everyone from the board of governors of the federal reserve on down that the toxic loans that cause this housing crisis were primarily private loans that were securitized and the private securities markets. >> yeah, and are seen that. i hear over and over and over again that somehow either congress or president bush or somebody forced sani and freddie to bundle and securitized some bad mortgages. >> actually sir we had testified on september 12 of 2005 in front of congress saying that fannie

and freddy should not be allowed to get in those products right there. no one forced them to do it and certainly the entities you don't see are the new centuries, the first franklin, in all those who abandon the forefront forefront of the predatory lending. >> it doesn't matter how many people get thrown that notion that people are going to continue to say it. is that what ms. gordon, is that what you believe? >> yeah, it's hard to know how to stop that from coming up over and over when it's just been clearly debunked as a reason. >> mr. schakett, you know this whole term halo, another word hail it actually originated because west side of jerusalem for the landfill where they burned the trash the

interpretation comes out of hail that is the first feel of what humans would be, burning and constant burning of the trash. and there are people who tell me they go to phone tree hell when they are trying to talk with someone about, you know, their mortgage and trying to you, you know, get some kind of modification that they actually go to phone tree hell and that they are being their concerns their interests, their desire, their frustration of being burned standing on the phone. do you believe that we have been able to read out the fire in hell? >> no, i don't agree that we've put out the fire yet. our customers have had the

ability to give the right answers. so i could appreciate your constituents being frustrated with that process. we continue to add resources and training and try to improve -- >> let me give the additional one minute and a half for biblical exegesis. [laughter] >> thank you, rabbi. i'm just concerned -- i'm wondering if the phone tree hell is one of the reason that 25% of the borrowers who come in for modification end up losing their homes. they can't even go through the three payment trial. and they lose their home right off. is there a reason for that or can the phone tree hell be part of the reason, either you or

ms. sheehan. >> i certainly believe the phone tree problems are clearly frustrating for our customers. the only good news about that if it doesn't take them through foreclosure so although we may not answer the phone timely, although we may have frustrated him, all those people are on foreclosure hold so no one is getting foreclosed because of it. that doesn't undermine that there's not huge frustration and we need to improve that. our most recent mailing that were mentioned earlier was we sent out 50,000 letters to try to say exactly what worse a missing from his customers and what it did to comply. so we took an attempt to make sure customers who didn't handle it knew exactly what we needed to down and give them an easy way to respond back to us to get these modifications complete. so again i appreciate that we frustrated our customers that we have not foreclosed on them in the meantime. >> gentleman from florida. then i'll just take my last minute i

have to say this. we are terribly frustrated by what's happening. we will move forward on the unemployment. amassing a fossil of problems but i do think this is helpful and a bill that comes to the floor will have $3 billion to be advanced to people who are unemployed to help them avoid it. we will continue but the most important thing is the point that the gentleman from california has consistently made. i went forward, this committee will make a very high priority has been legislation early next year that will prevent us from being and trapped in this again. it will have to be for any residential mortgage one-party that is solely, fully regally responsible for these decisions and people who want to invest in mortgages, people who want to make secondly in love, people who want to invest in the securitization will do so going forward, knowing that those rights are subject, whatever

they have, to the responsibility of one individual to make those decisions because it is a terrible example of our violating a principle that to exist in the law. you should not have important decisions to be made in the society that cannot be easily made by somebody. and so that is something the gentleman from california was an early -- identified that early. and that doesn't get us out of this current thing. we worked with many of you going forward to make sure that we have that, so that we will not have this shifting of the blame and forth. beyond that, we appreciate this hearing and we will continue to press people in the administration as we will do in the next panel to act on some of the suggestions. i also have a package of statements to put into the record without objection. the ranking republican asked me to put in a statement for the homeownership.

and the pico network of community organizations. and i know that one comes from people in massachusetts and new bedford. so without objection, they will be part of the record and a panelist dismissed without thanks for a very useful discussion. [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] >> we need people to leave take their conversations outside so we can get the panel going. no one should be standing still. they should either be walking or sitting. we will now turn to our second panel.

we appreciate the attendance of the public officials who are responsible. and i did not follow you who are proceeding to asking the public officials to testify first. it is not out of any lack of respect for their commitment and integrity of which we are appreciative but it did seem to me today would be very useful if we had heard from some of the questions, criticisms first and then could have them respond to them. and i ask people at the door to please leave. and we will now begin with herbert allison was the assistant secretary for financial stability at the apartment of treasury. >> chairman frank and members of the committee, thank you for the opportunity to testify today about the treasury department comprehensive initiatives to stabilize the u.s. housing market and support homeowners. the administration has made strong progress or

anti-mapmaking home affordable programs. but even though the number of homeowners being halt continues to grow, we recognize that home affordable modification program or hamp faces challenges in converting borrowers to permanent mortgage modifications and in fostering effective communications between servicers and borrowers. our most immediate challenges converting trial mortgage modifications into permanent modifications. services reports that about 375,000 trial modifications will be more than three months old and due to the decision before december 31. treasury has launched an aggressive conversion campaign to increase the number of permanent modifications. we have streamlined the modification process and required conversion plans from the seven largest servicers. treasury and fannie mae have assigned teams to work with each service are and to report daily on their progress. we are engaging all anyone

hunted field offices and hundreds of state and local governments in the effort. we have enhanced our website to provide borrowers with a simplified way to navigate the modification process using instructional videos, downloadable forms, and an income verification checklist. next week we will hold our 20th borrower events connecting servicers, housing counselors, and homeowners. in addition, we have brought in executives from the servicers four times to washington on including just yesterday to discuss ways of accelerating conversions. another challenge is helping unemployed homeowners. hamp is designed to enable many unemployed homeowners to participate. borrowers with nine months or more of unemployment insurance remaining are eligible to include that income for consideration in their modification request. we recognize however that some unemployed borrowers will have trouble qualifying.

treasury is actively reviewing various ideas to improve program effectiveness in this area. while remaining focused on helping borrowers as quickly as possible under the current program. a third challenge is preventing foreclosures of homeowners eligible for hamp. during the modification trial. , any foreclosure sale must be suspended and no new foreclosure proceedings may be initiated. we prohibit foreclosure proceedings until the borrower has failed the trial. india's been considered and found an indelible for other foreclosure prevention options. we are working with stakeholders to review, improve, and monitor compliance with our roles so no borrower being evaluated for hamp is subject to foreclosure during that process. a fourth challenges transparency. on august 4, our public monthly reports began including trial modifications by each service

are. october's report added data on trial modifications by state. upcoming reports will show permanent modifications by servicers and measures of servicers responsiveness to borrowers. we are requiring servicers to send notices that clearly explain to borrowers why they did not qualify for a hamp modification and how they can ask for a second look at their application. we will also provide additional transparency of the net present value or npv model and key component of the eligibility test. we are increasing public access to the mvp which includes the methodology. we are also working to increase transparency of the npv model itself so counselors and borrowers can better understand how the model works. hamp is on track to provide a second chance for up to 3 million to 4 million borrowers by the end of 2012. based on a recent survey of

servicers we estimate that as the beginning of november at 21.5 billion homeowners are eligible for the program meaning they are both 60 plus days the link went and likely to meet the hamp requirements. to put the current stage of hamp in context, we should compare the 1.5 million eligible homeowners to the more than 680,000 borrowers who are in active modifications and are included among the 900,000 borrowers who have received offers to begin in trial modifications. on average, borrowers and trial modifications have other payments reduced by over $550 per month, down roughly 35% from their prior payments. hamp has made great strides since modifications began in may, but we have a long way to go. we will continue to work closely with housing counselors, state and local governments, servicers, homeowners, investors

to enhance the programs performance and to help keep americans in their homes. thank you. [inaudible] >> chairman frank and members of the committee thank you for the opportunity to testify in the ftse and government response to the mortgage foreclosure crisis. mortgage is going to discuss and declining prices have been fundamental causes of absurdity. structurally unsound mortgages and historic were recruited financing has led to unprecedented increases in mortgage foreclosures. chairman bayer recognize the problem early on and strongly advocated for a program of systematic modifications in 2007. her proposal rested on a central premise. simply foreclosing would involve

loans and would only add to the excess supply of housing, push down home prices and making mortgage credit problems worse. for a sustainable modification can be achieved, they reduce loss compared to foreclosure. it is only good business to modify the loan. unfortunately, the crisis is shown that the large-scale modification that we need is hampered by contradictory and adequate resources and far too often a failure to take action as we approach to working with borrowers. in 2008, the fdic needed to implement these proposals advocated by chairman bayer when it was the federal bank which had tens of thousands of delinquent mortgages on its books. the goal of the fdic is modification program was to achieve the best recovery is possible by converting distressed mortgages into performing loans over affordable and sustainable over the long term. today, almost 24,000 borrowers have received ossification due to this program. the problem nationwide however

is missed. while some servicers have been affected much more have been done. last fall the fdic in the gated we call mod in a box. earlier this year the fdic applied as practical experiment and low modification and working with treasury and other agencies on recommendations for the home affordable modification program or hamp. the fda supports hamp as part of the solution. in addition, we continue to remain open to new approaches that may be necessary to respond to the scope and changing character of the mortgage problem. our loss share and agreements for failed banks require either the fdic model program or we have to continue to push for responses. for example, we burst temporary forbearance for borrowers that lose their jobs in recession. we also will provide gloucester in finance to support principle breakdance to the guys that

values. the ftse's experience has provided a number of lessons learned that we would like to share with the community. i would like to emphasize one key points. laws that make good business sense and help consumers maximize recovery on troubled mortgages. first, and foremost early communication and modification efforts give the best chance of success. success is much for likely if you contact the borrower earlier, give a mod offer and give them on for an experienced delinquency. effective communication with borrowers acquires an effective technology infrastructure, thorough staff reading and a consumer report or consumer service focus. second, the more affordable the modification below were the default rate. until recently, far too many mods actually increased the monthly payments. no wonder they often failed. we also matched must address the lanes as part of the problem. third, close working

relationships includes borrowers bonds and modifications to success. not surprisingly, counselors have much more credibility with our worse. fourth, lenders and servicers must be flexible to address new challenges, problems caused by job loss or water loans, we will employ new approaches. finally modifications should be kept as simple as possible so that servicers can apply a streamlined approach and borrowers can understand their options. throughout the financial crisis, the fdic has worked with consumers and many others to reduce unnecessary foreclosures in the devastating consequences they impose on our communities. low modification, refinancing, temporary forbearance for over borrowers and principal reductions are all tools to achieve these goals. we continue to support treasuries hamp as a major part of the solution but we all know we must remain open to new approaches for unemployment and increasing numbers of under water loans.

above all, the fdic remains committed to achieving our core mission of protect the the policies and maintaining confidence in our system. thank you for the opportunity to testify today and i would be happy to take any questions. ..

to performance of mortgages and various foreclosure mitigation strategies including detailed information, regarding loan modification efforts. it is a valuable tool that helps us focus our supervisory actions based on quality the data. for example, march of 2009 in response to higher redefault rates on modifications we directed the largest national banks servicers to review their modifications. and policies for future modifications to improve their sustainably. subsequent to that direction we have seen both the volume and quality of loan modifications in payment plans improve. during the second quarter homeland retention actions. plans a and loan modifications

increased by more than 20%. we are still finalizing our next report that expect an even greater increase in nearly 70% in the third quarter. actions taken under the administration's, affordable modification program represent a portion of the homeowner assistance provided to date. national banks also help homeowners through programs that do not require taxpayers supporting incentives. between january 1st, 2008, and june 30th, 2009, national banks and thrifts is implemented more than 1.8 million helm retention actions. of these less than 115,000 were made under hamp. hamp numbers increased in the summer and fall of 2009 but still represent only a portion of national banks homeowner assistance efforts. in addition to the increasing volume the character of comb retention actions is changing.

more than 70% of modifications made in the second quarter of 2009 reduced the borrowers monthly principal and interest payments. as a result delinquency rates subsequent to modification are improving in more recent vintages. improving sustainability of modifications and returning far worse to a positive cash flow reduce the eventual foreclosures , provide homeowners and opportunity to keep their homes and minimize losses to banks and investors. the occ fully supports service participation in hamp and administration secondly modification program, but regardless of the types of programs implemented, national banks have an obligation to ensure that the regulatory ports and financial statements accurately and fairly represent their financial condition. on monday we issued guidance to our examiners stating that we expect banks to follow generally accepted accounting principles

and maintain adequate allowance regardless whether a loan is modified. adherence to the sound underwriting practices including adequate documentation of the borrowers qualifications for and ability to repay modified mortgage is essential. while home retention actions are improving we hear too many consumer complaints of lost paperwork, bad guidance, long waits and difficulty simply contacting servicers. the volume of complaints is unacceptable. we have directed national banks to improve operational efficiency to keep up with volume, improve their internal process these and answer the customer's concerns accurately and promptly. is part of our ongoing supervision, our examiners assess banks complaint resolution process these and require corrective action for identify deficiencies. at the same time, server servers need to improve operations other factors contribute to the low

number of hamp charnel plans being converted to permanent modifications. servicers report consumers often feel to the kafeel to provide necessary verifiable documentation of ability and willingness to repay their debt. in some cases loans are already considered affordable under hamp's debt to income guidelines and in other cases cannot demonstrate a valid financial hardship. increasingly the financial condition of many borrowers has deteriorated. so far that is not possible to modify a loan and meet hamp's net present value requirement. while hamp and others show progress we must be realistic about the continuing effect of high unemployment and depreciated home values. these macroeconomic factors weigh in on the performance of the residential mortgage portfolio and drive delinquencies and foreclosures. in these difficult economic conditions effective loan modifications will be an important tool to help responsible homeowners applied preventable foreclosures, but

they will not help everyone. as a result, we will see further deterioration, low performance in the months ahead. my written testimony provides additional detail on these issues. again, i appreciate the opportunity. >> we will now take a recess and returning to the gentleman from california will preside and we will have the chance for questions. i appreciate your staying with us. [inaudible conversations] >> the committee will come to order. i haven't heard from our witnesses. i will recognize myself for five minutes for questions. mr. allison, the honorable herbert allison, jr., assistant secretary for financial stability used part of the treasury. i did have an opportunity to

hear your testimony, and i heard you describe the efforts that have been put forth by the treasury to talk with the servicers and to encourage them to do better. mr. secretary, don't you think that is a waste of time? >> well, congresswoman waters, thank you for the question and tremendous interest in this program. no, we don't think it is a waste of time. we have seen first of all let me say again as i said my testimony we are not satisfied yet with how this program is unfolding. we still have a lot of work to do. the server servers have a lot of work to do and we are holding them accountable for their performance. i think we have to look at this program in stages. in the early stages, our main emphasis was bringing in as many

people as possible to this program to help keep people in their homes. now the real challenge is to migrate them from trial modifications to permanent modifications. >> excuse me, if i may. but you have not been doing that. we have people who have been in charnel modifications and somehow we can't get them into permanent modifications. it doesn't appear to be working very well. >> and to date you are absolutely right, we are not satisfied with that either. we have a relatively number in permanent modifications. that is why we brought the servicers -- >> and again if i may interrupt because i've got to get this out of my head -- >> please. >> -- to have modifications going on. you have foreclosures going on while people are supposedly in modifications. what are you doing about that? >> will actually, as i mentioned, the servicers are prohibited under this program from foreclosing on people -- >> but it's a voluntary programs if they don't what to do?

>> we can take action such as -- >> such as? >> such as bling back prior panics -- >> the $1,000 will be a deterrent? >> rediker also helps, congressman waters, and we agree we have to take whatever action we can to ensure they are going to meet these modifications permanent. so we have right now a program where we are in with the servicers, in their offices where they are doing the modifications to watch exactly what they're doing. we have freddie mac auditing the process. we are publishing monthly reports on each servicers performance. we are going to be expanding those reports to deal with how rapidly they are achieving modifications. we have targets for every one of them which we outlined again yesterday to make sure where they have all documentation they will complete those modifications or at least the decisions on the modifications by the end of this month, and about one third of these trial

modifications are ones where the servicers already have all the documentation so there's no excuse for them -- >> we appreciate that. however, these foreclosures have been going on a long time now. an awful lot of people have lost their homes. and while we appreciate the stages of people out of their homes, and so we are concerned about principal reduction flexible. what have you done about printable reduction? >> why isn't widely understood and i think we have to do a better job of communicating this is from day one last month in our guideline for the servicers we allowed them to reduce principal as the first step in a mortgage modification. >> but they don't do it. >> we are dealing with that now and talking with the servicers about the need to take a broad view of what is the best solution for each homeowner and for some it can be a principal

modification at the outset or a combination of principal modification and interest reduction. so, that's another area that we are going to be looking at is are the servicers looking broadly enough at what the potential solutions are for each home owner. >> quickly let me say to the fdic, mr. krimminger, we, barney frank and i signed a letter to the administration because we were very pleased when you took over andy and the way you do flow modifications, and we thought at that time somehow it should be organized ways you should be in charge of loan modification program. can you identify for ross would you have discovered that really works? don't you have some ideas about how we could do this better? i know that -- i hope all the agencies are talking to each other and you have had opportunity for input, but it is not evident.

what would you advise? what have you done to make these loan modifications real? what should be done? >> thank you, chairman waters. we appreciate your support on this. we do support the treasury's following that with the hamp program to make sure that it works. certainly there are times and i think this is one of them and treasury agrees for innovations and innovative thinking. we provided recommendations to the treasury and the development of hamp as you know the hamp itself includes a waterfall of options which were modeled on the ones we used in andy. i think the lessons we learned that andy and i believe we are working to implement even more so in hamp include things like early on getting a dollar amount of modification to the borrowers hand, making sure that if possible you are able to get the information to begin the your vacation and come immediately. the first payment from the bar were house was a signed agreement so the bar were knows what their obligations are.

we think it's very important to have very continuous and early contact with the war worse to make these programs work. one of the things i think that servicers are learning now that they may not have understood fully is the need for a kind of refocus of the lost litigation process away from collections much more to a consumer oriented type of process so you reach out to bar was the you should be utilizing much more of the counseling groups, 100 counsellors we found that to be very effective tool at andy -- >> let me interrupt you for a moment. as i understand one of the things you did was use intel notices to the borrower and showed them in the notice what you could do for them. rick symbol, when some of these services, when the notices went out early on, when we first started doing the modifications i would ask people to come in. we want to talk to you and people said no i'm not going in

because i know they want to tell me they are going to take my home the when you said the analyst says he will x amount of dollars on your loan and we have a load modification program that helps you reduce that by some percentage and this is how it works something you get more people responding. is that true? >> that's absolutely true. we've had a response rate with providing the types of but assist people with an actual dollar amount of the new modification amount of from 70% which is very high for the industry and that is one of the biggest lessons learned we had at andy. >> has that been adopted by the administration or the banks or the servicers or anybody else and we live which to get people coming in to talk to you about a loan of vacation and not being afraid that this notice is only simply to take away their home? >> i have to defer to psychiatry allison but i believe a number of services have begun to adopt that approach but some have not.

>> mr. secretary, why haven't you included something like that? >> actually, the servicers are reaching out in a much more effectively today -- >> i asked something specific. the notice they learned to use at the fdic that said this is what we can do for you, has been adopted as a practice, we of encouraging participation? >> they send out more than 900,000 offers to homeowners with the terms in many cases indicated and therefore people have an opportunity to see what the benefit for them will be from participating in the modifications. i think that the outreach is going much better than it was. the challenge now as i mentioned this to convert these trial modifications where people are benefiting. we've got almost 700,000 people who have received reductions in

their monthly mortgages on average of $550. so, we've got all those people benefiting today. the issue now is to convert them to permanent modifications of the benefits continue. >> you're right, that's a big issue, a huge issue. i want to thank epi more than used up my time, and i am now going to yield to the gentle lady from west virginia. [laughter] >> i should know that, ms. capito. >> i would like to thank the panel. i'm sorry if i missed your testimony but i certainly read through most of it. one of the questions that i think is complicating this issue that we haven't really come and i interested to see what innovations you're working or how you are addressing the issue of a second lien. most people who are in danger of being foreclosed upon have probably run their credit cards up as high as they can to keep the payment going.

these got a home-equity loan going, they've got other issues with their finances, and i know the second theme issue has been complicating these loan modifications. but maybe secretary allison talk about that, or any of the rest of you interested to hear your ideas on how we get through that issue. >> thank you very much, congresswoman capito. yes, that is a real concern, and i know that this week and perhaps mr. roeder can talk to this, the occ is issuing guidance to the banks on how to deal with the accounting for a second means, and that is a major step we think to were coming up with a more comprehensive solution for homeowners who have both first and second lien. and obviously there's when to be need in cases where one bank may hold the first and another below the second for some type of a clearing house so that banks can find out who has the other mortgage on a particular home owner's house.

so that they can come up with a unified solution for that particular homeowner. >> is the bar were -- when the documents they are required to bring into the current modifications, do they bring in the documentations for the other liens they would have on the property? certainly there would be part of that. is that correct? >> i don't know that in all cases they are at least initially. the requirements for hamp are to provide information about income, about residents, the hardship affidavit and so forth. but i think that the servicers doing a thorough job are inquiring about the overall financial position of the homeowner. >> mr. roeder did you have a comment? i'm sorry. >> a couple of points to deal with your question. first of the examiner guidance we set the guidance to examiners. we didn't send it to the industry. the reason why with this modification effort being some

significant week many times will go to examiners with guidance. we've asked the examiners to share with their banks but it's not a broad distribution we are dealing with a very focused group of institutions. so it was a seminar guidance, not banker guidance but we did share it with bankers so we are aware of expectations and the guidance was simply to remind and clarify for the examiners blade gap and the existing supervisory policies should be followed and working with bankers to ensure the accounting and the asset quality assessments being done are done in accordance with safe and sound banking so that's one piece. as it relates to the second initio one of the things we don't hear from a servicer is there is an inhibition to modify the first mortgage when there is existence of a second.

so early on in what i would say crisis you heard that more prevail let comment we don't hear that from the surface are starkly. the focus in most cases is getting that first mortgage mod donner and not worrying about the second. to mr. allison's point, there is a complication here. sometimes the surface are doing a dimond on the first and then the bank that's holding the second may be different parties and there isn't a good mechanism to clearly, unless it is serviced by the bar were or some other means to know that the servicer has a mortgage and servicer be has a second lien and they should hook up. what we have asked examiners to be mindful of is that everything they should do if they are

holding that second lien and they are not in a position where the bank is also the first lien holder doing the modification, they have got to do their best in the process to ensure that they have done diligence to seek existence of the first clean and appropriately account for that second mean in the risk in that, assuming that there was a moderate done on the first. if there isn't a lot done on the first, they still have the responsibility to make sure that the accounting and the reserve and provisioning is accurate, given the potential risk in that portfolio alone. so, but we don't see the servicers complaining they are inhibited to do a first when there is existence of a second. >> thank you very much. mr. green? >> thank the witnesses for appearing. france, i sincerely believe that

dr. king was right when he said although the ark of the old moral universe is wrong it bends toward justice. and i believe president kennedy was right when he said here on earth god's work must truly be our own. you 35 and then in my opinion are doing god's work today. and as such, you have an opportunity to make a difference in the lives of people that you will never meet and greet. so i start by asking you this are you familiar with a term disparate impact? and i will ask you, mr. allison, just for the record tell us what this term means. >> its impact more on some segments of society and others. for example. >> that is an acceptable definition i believe. now, with reference to the foreclosure crisis, is there a

disparate impact? >> yes, sir, there is. >> tell us the sector of society that is experiencing the disparate impact, please. >> people who are in lower income communities i think have been more devastated by this crisis evin -- >> the fine for me who are these people most likely to be in the lower-income communities? >> they are minorities -- >> design minorities, please. say again? >> african-americans, latinos flexible. >> called that point for just a moment. let's go to the next person who is going to bend the arc of the morrill university torch justice. do you agree with what mr. allison said? >> there are quickly indications, there's evidence that there is disparate impact on lower-income and minority communities.

>> defined minorities. >> i would define it in terms of ethnic minorities such as african -- back defined -- >> african-american, latino -- >> let's go to the next forger of justice. do you agree with your colleagues? >> yes i agree. >> there is a problem. >> assuming that we do 100% of what has been called to our attention that we are as efficacious as humanly possible will this mitigate the disparate impact we are discussing currently? >> i don't believe that these programs by themselves are going to negate the disparate impact of those communities. >> thank you. >> no because when we were doing brackett indy mac i've seen communities through southern california that are already dramatically impacted, so even what we did in the future won't

affect those that have already been impacted. -- before. >> i would agree with that. there's much more work that needs to be done. we are not anywhere of the solution. >> if we are going to bend the art of the moral universe toward justice, and if here on earth god's work must truly be our own a would you agree that we must and should do more to negate the negative disparate impact, the invidious and packed that is being felt on some communities? do you agree that we should do more? >> iphone we agreed. >> i would concur. >> yes, sir. >> i agree. >> do you agree that there -- a we can be forged if we have the will -- if we have the will to do it, that a we can be found to negate this disparate impact, mr. allison? >> yes, sir. i do. >> i do.

yes, there are difficulties but there are ways to overcome difficulties. >> and i agree. there are challenges, but you've got to keep going after it. >> now the ultimate question becomes this: given that we acknowledge the conditions if we use a scientific approach, given that we acknowledge the condition, and given that we know that a solution can be forged what are we going to do about it? what will we do beyond using the rising tide raising all boats theory, which we find fatally flawed as it relates to some who don't have boats and to have boats that are not water were the? what do we do? mr. allison? >> congressman green, i think first of all we have to recognize that this is a real problem. >> yes, sir. >> and we have to focus on it.

speaking sir. >> and depot ingenuity -- >> do this for me -- your excellent and i appreciate what you said all three of you, but when you say week, to read you said we have to focus, not putting you on the spot but we need for the record to define these things. who is wheat that should focus, please? >> i would first start with the american people as a whole. also there are government representatives and people in the ad penetration for its simple working very hard to make sure with this program we are reaching people who needed the most and that is why we are working with state and local officials and also community groups as well as counselors to reach the areas most affected and many of those of course our minority communities. >> my time is expired. thank you, madame chair. i will not be in polite and in encroach on time. thank you. >> thank you very much. mr. cleaver? >> thank you, madame chair.

to mr. allison and mr. krimminger, i don't think either one of you were none of the people at the table are the villains. i think you represent agencies that -- i think you represent agencies that are probably not fulfilling their responsibilities. do you believe that the mortgage companies and banks are doing the best they can? >> congressman cleaver, i think the banks have a long way to go to get up to their full potential to help alleviate this problem. they have been making progress, to be fair. we have people from the treasury and from san eni in the offices of the top seven servicers right

now. they are stationed there working with them, finding the facts about why this program isn't working even better. we are not satisfied by any means. we intend to publish more and more information as fast as we can for reliable and information about their performance so the public and congress can judge for themselves. much more has to be done. >> we have which is legally and administratively forced them to work with homeowners in trouble. we forced the line and to lie with the lamb. but if you look closely when the line and gets up the lamb is missing. and we are seeing here, kitty kitty. but i think needs to happen is something needs to happen to the line and. we are seeing we are -- one of

you said we are reaching out to the banks. you know, you're reaching out most of us are outraged if a homeowner does not comply with the requirements of the mortgage company, they lose their home. if the mortgage companies don't comply with the requirements of congress what do they lose? any of you. >> if i may try to respond to your question, congressman braley for first full we do have financial remedies that we can apply to the surface sirs one as we can deny them payments, we can pull back prior payments if they are not seeming to be following the rules of the program. i think what is extremely important is to shine a light on the performance of each one of these banks. and that is exactly what we are

doing. one has to also recognize that the server servers until this year were in the business of collecting payments and for closing on people. they are having to change their entire business model. they've got to engage with homeowners and help homeowners. this requires them to change their systems, retrain people, hire more people. they have moved in that direction. they have to do much more. and we are constantly pushing them in every way possible to do the best possible job. >> but maybe the system of pushing is not working. i have twin boys and found out early on if i spend one of them when they were doing something the other would straighten up, the other one -- it had an impact on the header. i just think in this situation we have in this think anybody so

i think they've come to the conclusion spanking or not on the agenda. i don't miss hearings. i'm here. we are here. i've been to a lot of these hearings. we've asked a lot of these questions over and over again. we have had a table packed with witnesses and witnesses sitting behind them. we go through this over and over again and i've got to tell you as we move through this holiday season this will be the second holiday season i've been asking these questions, we've been asking these questions. nothing is happening. why can't something happen to these lending institutions who took tax payer money? they took our money. and we are talking about, you know, we are issuing guidance and reaching out to them, giving them cokes and water. why can't we do something to one of them and i think everybody --

excuse me, you know i was approached last night by somebody about to lose his business because the bank is now requiring more -- and i'm frustrated and i get even more frustrated because you guys can't say the next time we find somebody that is not doing their job we are going to come back and recommend the money be taken from them, the t.a.r.p. money. thank you, madame chair. >> may i answer you, congressman cleaver? let me talk very st about this. we have worked with them to try to get them up to speed. we have freddie mac auditing their performance. are they following the rules? are people being denied a mortgage modification who should get one under the plan? and as before we are putting them on notice and then we will exact penalties of them and be publicly outspoken about who is

performing well and who's not and you are absolutely right. we are going to move to the point where we are disappointing the bank's -- discipline the banks if they don't perform better than they are today while they are getting better it isn't good enough and fast enough to believe and clear targets for how many modifications they have to make permanent by the end of this year and every case the existing documentation there's no excuse for not getting that mod them by the end of the year at least from their standpoint deciding to make the mod or not. >> mr. scott? >> yeah, let me ask a couple of questions. in the program why can't we stop foreclosure proceedings while the modification is going on? >> congressman scott, the way

the program works today is the servicers are prohibited from for closing during this process. and we are enforcing that and we are auditing that to make sure that they do comply. the question you're asking the white think goes beyond that which is why don't we simply stop the entire foreclosure process. we've formed a group, council, composed of foreclosure attorneys as well as government officials and others with an interest in this problem to try to see what more we can do to help avoid people being frightened by foreclosure process under way at the same time they are being considered for a modification. and there's no doubt that this is confusing people and scaring them unnecessarily. so i think we have got to find a better way of dealing with the problem you are rightly pointed

out. >> to be cleared, my information system me that the foreclosure proceedings are continuing to go ahead even while the modification is going forward. that's not an accurate statement? >> i think that is the case that there may be a procedure under way at the same time as a person is being considered for a mod. that is the issue we need to engage further about, and to see whether more can be done to provide assurance to the homeowner that the first priority is to modify that loan. >> here are the major complaints with the program. first of all it includes one lack of transparency about the

criterium, the net present from you test used to evaluate the barzilla ability, the lack of capacity at servicers to process loan modifications requests on a timely basis. there's nobody to respond in the person of a live person. there is no, in this most critical and essentials of need a family going through the process of losing their home even at the extent of calling they get a computer. and the people most affected are people at the middle to lower

economic stream and they get a recording. no life person. and in cases where the foreclosure action is taking place while the homeowner is going through the allison -- hamp program. that is an area that we need to address. do we need to address that area in at least stopping the whole foreclosure procedure until we are going through? does that require legislative action on our part? is it something that you all can do? this program in order to be effective should do that. now my other question. another area. we used the 31%.

how do we arrive -- 31% of monthly income is the criterion for this program. in these tough economic times soaring on a planet where in fact that monthly income in many cases goes to zero is in practical want to be able to have an adjustment factor where we can lower the 31% threshold. >> thank you for those questions, congressman scott. let me try to go down the list one by one. in terms of lack of transparency with the program we are making more information available every month in our monthly reports. we are also publishing information on making, portable.gov. with regard to the npv test, we intend to make the npv model

available to counselors and first quarter of next year which is coming up very soon. so that they can see how model works and work with homeowners to see whether they would qualify. this is a complex issue, and we want to make sure that people are properly acquainted with how to use the model but we intend to make that model available to them and i think there will be a big step forward. in terms of the capacity of the servicers we are looking at the root of capacities of the difference servicers comparing them seeing who's doing the better job, with their capacity is, how many people they've devoted per eligible mortgagee so that we can work with them on best practices to ramp up capacity and have standards for what the capacity needs to be. in terms of noeth life person answering the phone i think that has been a real problem. people can go to making,

affordable.gov, they can call our hotline if they need a person on the phone to work with them and we can work with the servicers to make sure they are being heard. in terms of facilitating foreclosure actions, taking place while the person is still up in the air with your going to have a mod of, as i mentioned before, we have convened a group to work on that issue. now foreclosures cannot take place before people have a decision about their m ha modification. nonetheless, they are concerned the process may be going forward while they are being considered. that is the issue we want to work with servicers and see what more can be done to provide more insurance to people that they are quick to be considered. and lastly and very quickly on foss 31% debt to income ratio, and the fact many people now are unemployed, they don't have an come today. the program today provides that if they have at least nine

months of on a plan that insurance coming their way they can qualify for a mod if all of the other qualifications are met. nonetheless as i said in my testimony there are many people who won't be able to qualify because they've lost their jobs. so, what can we do and what can the servicers do for them? that is something we are looking at now and we are scoring different alternatives such as pennsylvania model and others to see whether there is more that might be done. some of this might require legislation, however. >> thank you very much. i request unanimous consent for one minute foreclosing on this because it is very important that you gentlemen of the table understand we are very unhappy. our constituents are in pain. our communities are at great risk. treasury, you were just too slow. you talk about all of the things you are going to do, how you are

going to improve. we've been listening to long. fdic, we are appreciative for what you have shown can be done. i don't know who is talking to whom, but it appears to me that some of the advice that fdic should be given to others involved in trying to deal with this foreclosure issue is advice that needs to be shared. it doesn't appear that it's being looked at. and for the occ, i just i don't get a real sense of what you do. you do advisory's. you look at what is or is not being done and then you issue information that says what should be done and what can be done. this is not good enough. and we did not hear a lot. do you know about the legislation tomorrow that we have, h.r. 4173?

the wall street reform and consumer protection act? you know about what we have for the unemployed? do you support that treasury? mr. allison? >> this man, in fact we are working closely with the staff of the various leadership members in the congress on that legislation and others. >> what about you, mr. krimminger, do you support that? the legislation that deals with that portion that deals with the unemployed? >> i have to apologize and get back to you because i am not familiar with that specific provision of the bill. >> mr. roeder? >> more am i familiar with that bill so i cannot comment. >> we are taking a strong look at what we do for people in the emergency medical problems, the unemployed. but what we want to hear from you is what you are going to do to penalize. we bought some specifics. we want to know what you are doing to encourage face-to-face

involvement with the bar were and servicers. we want to know what you are doing about principal right down. we've really do need some creative proposals. we did not hear that. what we hear is a lot of talk about how you were going to encourage the banks. the banks from their nose at all of us. they don't care about what you're saying. we bail them out. they turned around and reduced credit limit, and increased interest rates, said we will pay money back, don't worry what we do the bonuses and payment practices, and so we are not encouraged at all when you talk about working with them and the services to kind of mix and do the right thing. having said that, the chair notes some members have additional questions for the panel which they wish to submit in writing. without objection the hearing will remain open for 30 days for

members to submit written questions to these witnesses and to place their responses on the record. the thank you and this hearing is adjourned. [inaudible conversations]

senate to democratic leaders announced tonight that they have agreed to the changes of health care bill that would expand health care to millions of people. although few details were released, news organizations are reporting the so-called public option will be dropped in favor of a private insurance arrangement overseen by an existing federal agency. we spoke to a capitol hill

reporter about the changes. after that, remarks from senate majority leader harry reid. >> alex swain of congressional quarterly, senate majority leader harry reid announced a compromise in negotiations amongst democrats on the health care bill. what's the agreement? >> well, to listen to harry reid you have no idea what the agreement is to read he didn't share many details in fact he didn't really sure any details other than he said i think it would be good for the american people. it would introduce competition to insurers and would ensure people shopping for insurance march recess. so with the agreement is we know this because the centers have been talking about all week pretty much is that liberals agree to drop the public option how to help the senate health bill. in exchange, they will get a provision that will allow people 55 come age 55 to 64 to buy into

medicare. in addition there will be a new insurance plan created. they are calling it a national plan. it will be national health insurance plans run by private companies one on profits that will be supervised by the office of personnel management, which is the same government agency that administers health benefits for federal employees. >> does this mean we are getting a whole new bill? >> it's not going to be a whole new bill. it's we to be part of the bickel managers' amendment, which is a package of final changes to the bill that the ad just before they pass it. succumb a lot of the bill is quite be the same. there's still going to be health exchanges, new marketplaces for people to buy insurance. there's still going to be tax credits to help people buy insurance. there's still going to be regulations on insurance companies like prevented them from denying coverage of pre-existing conditions. a lot of that is still there but it's very controversial issue the public option has been removed and it's going to be replaced with this new policy. >> you write that senators both on the left and right sides of

the negotiation said they were relatively comfortable with the plan but they are on certain about the cost. where does that stand? >> the reason they didn't get very many details tonight is because they want to be able to send the proposal to the congressional budget office. which is kind of budget scorekeeping agency for congress. they want to send the proposals to cbo in secret and get a score back cost estimate in secret and then if they don't like the estimate they can we write the proposal in secret again and sending back to cbo and keep doing this on till they have something they like. if they disclose the details of the proposal now according to the rules the operate under, cbo would be obliged to make public their cost estimate. >> when are we likely to see any of this on the senate floor? >> that's a good question. i would say probably not before next week. >> alex wan of congressional quarterly, thank you. >> thank you. there's been kind of a long

journey. we've confronted many hurdles and have taken big steps in a lot of little steps. but tonight we have overcome a real problem that we had. i think it's fair to say that the debate to this stage has been portrayed as a very divisive one. many have assumed people of different perspectives cannot come together. but i think that what we were able to work out the last few days as culminated tonight believes that fact. we have a broad agreement. now i know people are going to ask give me every detail of this. i talked 20 minutes ago to doug elmendorf. i told the head of the cbo that we were going to send him something tomorrow that he would have to score.

and the reason i mention that to you, i also went over in some detail about what we were authorized to say about what we are going to send him. we know what we are going to send him. we have to write it up in legislative language. and he said the same as when you said over the merged bill. we have had a rule for 40 years or however long we've been in existence, when you start talking about the plan and start shipping it are now there will be made public and we want that not to be the case because we want to know the score before we start getting all the details even to our own members. so you're not going to get answers to those questions. i asked senator schumer and prior to work together with a group of moderates and progressives. everyone thought it is an impossible job. but these two have done an outstanding job of leading these two groups of people.

everyone knows who they are, they've worked very hard for days now. this is a consensus that will help ensure the american people win in a couple of different ways. bonn, insurance companies will certainly have more competition. number two, the american people will certainly have more choices i already know that all 60 senators in my caucus don't agree on every perk to the copies of the bill. i know what we have sent over there to the cbo, will send tomorrow, not everyone is going to agree to every piece we've sent over there but that doesn't mean we disagree on what we have sent to them. i applaud and congratulate the ten senators led by schumer and

prior carper, fingar, nelson, rockefeller. as i indicated, we can't disclose the details of what we've done but believe me, we've got something that's good and that i think is very, for osset moves that bill way down the road. >> is there a deal -- >> senator schumer you gave details earlier today. can you just got least tell if any of those have dramatically changed? >> we are not going to talk about what we are sending to marlo for the reasons that leader makinghomeaffordable.gov said. >> [inaudible] >> let me just say this: we see all current articles in the newspaper that senator schumer, senator pryor, i have said things other than parts of the ten. as doug elmendorf and i talked tonight, all the things you've read in the newspapers, all the things you've read in the newspapers, flexible one of our people, and i won't mention which of them, the news out that said the public option isn't

going to work. it's not true, everyone understand that. we are not going into detail but what you have heard to this point you could be surprised what we have sent to cbo. >> you said you would reach broad agreement -- >> we've reached agreement. >> would you please share just the broader plot points what is in there and not the details? >> i did that. i did that. i said we are going to have more choice for consumers, competition for the insurance companies. >> the numbers you end up with are positive when you expect the magers -- [inaudible] >> have you talked with senator snowe? >> i have not talked with her? to me today, i've talked with her lots of times today. >> on the proposal. >> we just finished it. she is at a dinner now with staff. >> a couple more questions than we are going to quit. >> is the end in sight for the passage of the bill? >> why don't we talk to some of the people that led the charge

here. the question is with this having been done is the -- what was the question? >> with the end in sight. i guess -- >> the answer is yes [laughter] [inaudible conversations] the senate voted to remove an amendment that would have barred federal funding in the health care bill for most abortions. here is an hour portion of that debate. madam president, i rise today to talk about another amendment that is pending, the nelson-hatch-pc amendment, and this is the amendment i think has been discussed in the last day as well that is the amendment that would assure no

federal funds are spent for abortion. that was unclear. it is unclear in the underlying bill. and i think it is very important that we talk about, that we make sure it is very clear exactly what the nelson hatch casey amendment does and that is it would bar federal funding for abortion which is basically a point in the hyde amendment to the programs under this health care bill. since the hyde amendment was first passed in 1977 the senate has had to vote on this issue many many times, probably just about every year and i have consistently voted to prohibit federal funding for abortion as i know my colleague and friend from utah has done as well as the democratic sponsors of this amendment. and yet, it seems some members were on the floor last night misconstruing exactly what the hatch k.c. nelson amendment

does. specifically, their claim was the language only bars direct funding for elective abortions while the nelson hatch pc amendment bars funding of an entire benefits package that includes elective abortions and therefore is unprecedented. so i would like to ask the distinguished senator from utah what exactly did the hatch -- did the hyde language say? let's clarify what it was so we can then determine if your amendment is the same. >> thank you. the current language contained in the fiscal year 2009 hhs appropriations act says the following, section 5078. none of the funds appropriated in this act and none of the funds in any trust fund which funds are appropriated in this act shall be expended for any abortion. become of the funds appropriated in this act and none of the funds in any trust fund which

funds are appropriated in this act shall be expended for health benefits coverage that includes coverage of abortion. >> so that this federal funds prohibited from being used, and abortions in that particular bill. what about programs like schip? that was created in the balanced budget act and in 2000 mind was realized by congress and signed by the president earlier this year. so what about this program? >> i know a little bit about this, it was hatched kennedy bill. i was one of the original authors and insisted the language be included in the original statute, limitation on pay for abortions. in general payments sean be made to a state under this section for any amount expended under the state plan to pay for any abortion or assist in the purchase in whole or in part of health benefit coverage that includes coverage of abortion. second, exception. sob a shall not apply to an abortion oif