folks in this country or any other country to be subject to deleterious substances, which the fda has our right to take out of the market place automatically. it is not like the laws are not there. the question is, i would suggest to all of you -- this is my last sentence. that to really push the congress to give fda the resources it needs to do this job. the law is there. all we have to do is have the resources. thank you, mr. chairman.

>> thank you, senator hatch. the efforts to give the fda more resources have not been successful. i think there are some things that need to be done here, some real questions. i think the drug enforcement administration needs to answer a question which is not been answered today about why superdrol is not placed on its schedule 3 list after it was identified as being an anabolic steroid. if he needs some revision on your listing, let us know. did not wait for our to come to you. -- do not wait for us to come to you. the business about waiting for us to ban a substance 10 years after the fda issued its first advisory and only after they received thousands of reports of adverse effects, including debts, that is not satisfactory.

-- including deaths, that is not satisfactory. when the senator talks about the legitimate part of the industry, i think that most are bested legitimate. if you have 15 million people who are taking the supplements and steroids. although some of that is legitimate. exposing millions of people to problems. from my view, i think we need to look of some pre-clearance issues. unless we find some way to solve that otherwise. the leagues have a question to answer -- why have you not adopted the anti-doping policy? perhaps the hearing is useful for all the questions which have emerged. thank you, all. we especially thank mr gunther,

and wish you all well. that concludes our hearing. thank you. [captions copyright national cable satellite corp. 2009] [captioning performed by national captioning institute] >> next our interview with the national transportation safety board chairman deborah hersman. then a senate hearing looking into body builders use of

steroids. later, the former british ambassador to the un testifies about the decisions that led to the iraq war. >> this christmas holiday, we have three days of "booktv" on c-span. beginning friday morning at 8:00 a.m., including taylor branch on his newest book "the clinton tapes." you'll see it sarah palin on her latest book tour. the recent miami book festival is included. you can get the full schedule and itbooktv.org -- at booktv.org. follow us on trigger. -- twitter. >> on "washington journal", we talked to the head of the national transportation safety

board about how accidents are investigated. s -- welcome the chairman of the national transportation safety board, deborah hersman. let's talk about the plane that overshot the runway in jamaica. a couple of serious injuries. no fatalities. when you have a situation like this with an american airline on foreign soil, what is the will of the ntsb? guest: we have international agreements that govern how we handle international investigations. the safety board sends an accredited representative and invested it is to help authorities with the investigation. -- and investigators to help authorities with the investigation. there are american manufacturers involved. as a tradition, we send investigators to help the country when the accident occurs. host: typically, they say let's

look for the black box. what does that tell you? guest: the great misnomer about the black boxes that they are not really black, are orange. that is to help investigators find that after an accident. typically are a cockpit voice recorder and a data recorder. it will work with the last 30 minutes come up to two hours, of conversation and the cockpit, and the data recorder records the parameters, pricking, outthrust, directional contzom. -- breaking, thrust, directional control. host: the mid-air collision involving a single-engined plane in new york city over the hudson river, not long after we saw that miracle in the hudson with the u.s. airways jet that landed. in a situation like this, what is the role of the ntsb? guest: this if the board goes to

investigate the accident and we try to figure out whether the outcome is good or bad and if there are lessons to learn. in a situation like the hudson, where we had a fantastic outcome, there is a lot to learn from the accident. with a mid-air collision, it is a little different. everyone in that accident died. we are looking at that accident to figure out how to prevent something like that from happening again, and also what we can learn within three weeks of the act -- what we can learn to hit within three weeks of the accident, we issued changes for air safety on the hudson, coordination between atc. the faa has taken very quick action. charts have been changed and the airspace over the hudson is safer now because of those changes. that is exactly why we exist, to make transportation safer. host: the metro accident that killed nine people over the summer -- what was the cause of

the accident, and what did you learn? guest: that accident occurred in june and it is still under investigation. the safety board will hold a hearing in february on that accident, and we will determine the causes of the accident and issue the final report. we've already issued two rounds of recommendations, not just to wmata, the local authorities, but to transit operators nationwide about looking at the system. we found something with the metro accident that led us to believe that there are concerns not just with this system, but systems around the country. these systems are aging and need to be monitored very well and make sure that the signal systems are working properly and that there are no anomalies that create an accident like this again. host: i cannot generalize this next question, but when i ask this call -- when i asked what caused this accident -- specifically, mechanical, weather-related, man-made -- can

you break that down? guest: in all modes of transportation there are a lot of factors. we do find similarities across the modes. on our most wanted list of safety improvements, our top 10, we of made recommendations about fatigue. we know that human beings that tired, we are diurnal, and people need about eight hours of sleep a day. whether you are a pilot or air traffic controller or ship captain or driving a truck on the highways, we know that fatigue has played a role in a number of accidents that we have investigated. we also look at mechanical issues. i think that the good news there is that the vehicles, whether it is an airplane or a bus or a locomotive, have gotten sicker and sicker over the years, and there are fewer and fewer mechanics -- safer and safer over the years, and there are fewer and fewer mechanical errors.

a lot of accidents are caused by human failures, and it is important for us to understand why people make mistakes. that is probably the most difficult question of all. you have people who are professionally trained, conscientious, and our focus on the duties, and they do something that is out of character for them. every time they fly, they do something one way, the correct way, and then on one day they don't do it thatç way. and you try to understand, with a tired, preoccupied? what was going on, what happened that day? host: our guest is served on the ntsb board for more than five years and since the past summer is now the chair of the national transportation safety board, deborah hersman. our phone lines are open and you can send us an e-mail. whether it is a bus, train, airline accident, what are the first questions your team on the ground will begin asking? guest: we are always looking to gather the perishable evidence first. we get the accident site secured and make sure that all of the evidence is maintained, and look for those black boxes, if it is

aircraft. there are reporters on the vehicles. we that event data recorders on larger vehicles. we are always looking to capture sq%ei+ we don't want it to be written over, recorded over, and so we want to capture witness interviews, or survivors, or operators, that might have been involved. it is kind of a timely and we want to capture that right away. drug tests, drug and alcohol testsok -- these happen every single time we go, trying to go back and construct a history leading up to the accident. it is usually not just one thing that causes an accident. it is a chain of things that actually lead to an accident occurring. we have a very robustç system f safety in the united states as far as transportation goes. it is usually not just one thing. it is several things that occur to allow an accident to happen. host: 1 accident this past

winter just outside of buffalo, new york, a plane that was traveling from new york city to buffalo. in essence, what we have been hearing is that the pilots may be were ill-prepared to fly the plane. guest: thet( safety board looked at that accident with 50 fatalities, and within three months of the accident, we held a three-day public hearing, and there were a lot of issues that came out during that hearing with respect to training, with respect to the flight history of the pilot, with respect to their experience in certain conditions. also, the commuting. these pilots were based on the east coast and the captain was commuting from florida and the first officer was commuting from seattle. i think there has been a lot of attention since the public hearing focused on some of these issues. i think we think that that is very important. the captain was older, the first officer was fairly young. we are looking very closely at

their experience. we are beginning to wrap up that investigation and we will be holding our board meeting on february 2 to release the probable cause an additional recommendations for the accident. host: our guest spent a number of years on capitol hill, a her master's at george mason university. okour first caller is doug from tennessee. caller: i know you put a lot of work into security and everything, but people flying and things -- well, it is not really -- i know it is for the best interests of everybody, fliers, but it is really more of an inconvenience. i am sure a lot of people who fly would just say, "man, if that guy has got aç gun, just t him on the plane, because as long asç that means where i am

goingç quicker -- -- and maybe you should test the pilots and everything. you don't know what they are doing. just recently i saw on tv -- host: i think he is referring to the flight that overshot minneapolis and as a result -- they apparently were on the blog receiver -- the wrong receiver and on laptop computers. guest: for the color, i want to let you know that the safety board is looking at accidents and determine the probable cause so that they did not happen again. tsa is a part of the department of common security. with respect to the overflight of minneapolis, the safety board is investigating that incident, and the pilots when they were

interviewed indicated they were on their laptops at the time. the safety board is looking at distractions at all modes of transportation. host: patty is joining us from r"⌞r >> i understand that the mtsb is up for reauthorization this year. do you have any recommendations? >> it is my pleasure to support these people. they are looking -- they are

deployed to jamaica this weekend. thank you for the complement. i will pass it back to them. we have reauthorization coming up this year. year. i don't foresee any specific challenges. içó think that our responsibiliy is to be responsive to the congress and the american public that we serve. if there are changes that need to be made to improve the way that we do our jobs, i think we are happy to receive that guidance. host: the ntsb was created during the johnson administration. how to fit into the larger picture of the department of transportation? guest: that is a great question, because the safety board was part of the department of transportation in 1967 when dot was created and the safety board was created. but congress realize that it was probably not a great idea for the safety board to be housed

within the department of transportation when one of our main jobs was to do oversight over the department of transportation, the faa, the federal railroad administration. and so we were made wholly independent, separate from the department of transportation, and we exist as an independent investigatory agency, with a separate budget, and we have a dual report to the executive branch and congress. host: our next call from queens, new york, for deborah hersman. good morning. caller: i'm actually jamaican, and i'm very disappointed in what happened in jamaica when i heard about that last night. you are from the safety board, is that correct? you are the director? guest: yes, ma'am. caller: why is it that the plane overshot the runway so much? it has been such a common problem becau.

i do not think you deserve a thanks or a boost for that . the airlines have to take a strong responsibility for the fatigue of the pilots. there was a recent hearing in congress, and one of the pilots testified that there has been a lot of fatigue with pilots. they don't allow -- they don't get a lot of rest time, pfirst of all. something should be done to actually help pilots. i think that has been ignored, a large part. what is going to be done about that, and how are you going to help my homeland, my country, jamaica, with the cleanup and helping to reimburse them for what happened from american airlines? i would really like to know what is going to happen with that. host: thanks for the culprit we should point out -- thanks for the call. we should point out, preliminary

information from the associated press, but what might happen with jamaica -- the caller is indicating that this is not uncommon for the airport. guest: this if the board investigates accidents and make -- recommendations make --fá the safety board investigates accidents and makes recommendations to prevent them. i agree that the safety board has made recommendations about fatigue for pilots, and that is one of the issues that is on the most wanted list for transportation safety improvements. we have asked the faa to revise hours of service for pilots. we think is important for them to get adequate rest, and if they are fatigued, to be able to call in and and report off-duty. we think that fatigue is an important issue, not just the pilots, but for air traffic =i-zez . i think there was another question in that it in their regarding the incident. -- questiohn embedded in their

regarding the incident. excursions are not uncommon. internationally, worldwide, we think about 30% of incidents internationally in fall excursions -- involve excursions. and this did excursions with contaminated surfaces -- we have investigated excursions with contaminated services, and other incidents. we look very closely at the incidence of excursions. that is also on our most wanted list of runway safety. we have looked at incidents and accidents and we try to learn from them and make recommendations. still very early with this investigation regarding the incident in jamaica. our investigators are en route right now to assist the jamaican authorities. host: jack is next on the

republican line from north carolina. caller: good morning, how are you? guest: good morning. caller: i want to complement you, one of the few agencies in the u.s. government that i believe is universally respected. my question is, the black box and other archaic methods -- one i just used transport data through the satellite -- why not just use transport data for the satellite and downlink it to earth? we can capture everything there is rather than that ju -- rather than just the last 20 minutes. guest: that is a great question, and there are a lot of people asking questions like that. there is technology that has existed for some time. some manufacturers, a smaller business jets, are actually doing that direct data link, as

far as looking at the help of the engines and monitoring the aircraft. -- health of the engines and monitoring the aircraft. this past summer, they were unable to locate the black boxes in the ocean. there have been a lot of additional questions about whether or not we ought to have longer life on the transponders, the beacons that are on those black boxes, that they should last longer than 30 days. as well, people are asking the same question that you are, is there a way for us to download or have a data link with information about the aircraft? there was information that was received in the air france incident, and so i think there is a lot of people trying to understand if there is a bandwidth, a capability. we have hundreds of thousands of aircraft in the air at any one time around the world. we of got to be able to have the right kind of bandwidth to get that information from them and to catalog it and save it in a

way that is protected and that we can get access to it. all of these issues are very important, and i think there are folks at our agency exploring that right now. host: your resume includes a certified child passenger safety technician. what does that mean? guest: a lot of people wonder what that is. i am the mother of three boys, and five and half years ago, i want to go take a vacation. people make recommendations about appropriate sizes for children, car seats, and i wanted to make sure i understood this issue and i was doing it appropriately. i have advanced degrees, and after i took this course, i had to go home take out all my car seats and reinstall them after becoming a certified technician. one of the challenges for parents is that there are so many different models of car seats. you might have bucket seats or a

bench seat in the back. we have made recommendations to make it easier for parents to install these seats, whether it is having a sitting stations, a lot of fire stations and police stations do this for free, or to have better designs of these seats. we have in your system in cars that are about 10 years old, and you can just kind of plug -- connect the hook -- that is what those hopes are for. but there are still challenges. i want to look at what was the size-corporate strength for the chop, that i understood the science -- size-appropriate strength of the child, that i understood the science of it. host: and the shoulder belt is often dangerous for toddlers. guest: that was from the insurance institute of highway safety, and they're talking about the models of booster seats. the most important thing for parents to know is that children

are much safer in a booster seat that without one. seat belts are made for adults. but a chat with a seat belt on, it usually comes across -- when a child puts a seat belt on, it usually comes across the neck, and they can get spinal cord and neck injuries, can become paralyzed that way. you want to make sure they are pushed up a little on the booster seat, and that the belt comes across the bony parts of their body. host: and to keep it that way. guest: that can be a challenge. as parents, we have to make sure that we model behavior that is good, because if parents buckle up, kids are much more likely to. host: anthony is next, joining us from long island, new york. caller: good morning, mr. scully, good morning, ms. hersman. i want to wish the c-span people

behind the scenes a happy holiday season as well. i have an important question, pertaining to those orange boxes, or black boxes. it seems as though when they are found, they are sometimes kept from the public eye. i just wondered, why is it that if it is taxpayer-funded, what you don't have full access to those boxes? more importantly, on 9/11, four plans crash, and not one set of black boxes has been revealed. you might say, well, the boxes were never found, but that is not true. the boxes were recovered, and yet they are kept from scrutiny from either the media or from the scientific community to expose exactly, precisely what was on those boxes. host: or the boxes down? -- were the boxes down? guest -- >> found?

guest: in most of those cases they were found. that was actually a criminal investigation. with respect to what is revealed on the boxes, i want to make it very clear that there are two sets of data. one of them is the cockpit voice recorder, and that is the last recording of the voices and the comments of the pilot. the safety board, when these are recovered -- we make a transcript of those recordings and we put those on the public docket. those are available for everyone, published with an appendix or report when we release our report. however, we are barred by law, we do not have the statutory authority, to release the audio recordings. so you will not hear the audio recordings of the last conversations or last minutes of those flights, because congress has explicitly protected those and told us that we are not permitted to release them.

with respect to the flight data recorder and information on that, that is also on a public docket, and that is downloaded. it could be hours, 32 hours of data, and we do put that on our public docket. i think that the good news for folks is that we are becoming much more transparent. since this summer, we began putting all of our public dockets on our website. you do not have to come to our reading room anymore or make a request to get that information. you can search it on the web. since this summer, we have been putting forward all of our investigations on the web site, and we are working our way back through historical investigations to put those public dockets on the web site as well. so hopefully that makes it easier for everyone to see that information for themselves. host: will there be a point when the recordings will be released from september 11? guest: that is really up to the criminal authorities that are looking at them. from our perspective, we don't

have any authority to release them. we are prohibited in our statute from releasing the data recordings -- the audio recordings. there is criminal proceedings, there may be limited audition pursuant to how the judge is going to proceed. but really, that is not our area, and we stay out of the criminal side of it. host: there is a perception of commuter planes that they are less safe than the commercial airliner, a larger boeing jet. true or false? guest: i would not say that is true. what is important to understand is that all of the airline operations -- any scheduled service you buy a ticket for, they come under the same rules and regulations. they're expected to have the same level of safety, one level for everyone. there might be more flights taking place.

if you have a large carrier, a 747, they are going to make one long international flight, or if you have a 757, they might make a coast-to-coast flightb >> if you have a regional flight, they may make six flights. it is a different exposure. it is a different workload. they are flying at different altitudes. the weather conditions may be different in certain circumstances. we have looked at regional carriers. we have had a number of incidents involving them. most of the fatal accidents we have investigated in 5.5 years since i have involved have and vault -- since i have been there, have involved a regional carriers. we want to make sure they have the same level of fatigue

policies. we have done surveys and we have looked at that. . . michael is joining us from detroit. caller: good morning. mrs. hersman, i don't know how long you been with the safety board -- steve, i think you might remember this -- at the end of the clintons administration, president clinton asked al gore to come up with recommendations for improvements in airline for improvements in airline one of the recommendations he came up with was putting locks on cabin doors. this was pooh-poohed by the airline industry and the republican party, who were in charge then print in hindsight, that would have been a great recommendation to do. i am just wondering, when is the

transportations -- what has the transportation safety board done now about blocking cabin doors and improving safety as far as somebody getting into the cabin? guest: i think the focus of that is security rather than safety. i can tell you that there are requirements after 9/11 for cockpit doors to be locked and secured. that is not something that the safety board is responsible for. that is something that the department of homeland security is focused on. host: i want to go back to something -- a ruling by the transportation department that if you are on the one way for more than three hours, it has to go back to the gate. if you are on a plane or bus or train, and you have concerns, you think you could be headed for potential trouble, what rights do passengers have? what can they do? guest: i think that is a great point in very important. a lot of times, in certain

operational environments, when you have a lot of cockpit doors -- we have seen an accident where we have bus drivers who were sleepy, it was actually the passengers who recognized that the bus driver was fatigued, they work try to talk to the driver and were concerned about their own safety. people are taking an interest in their own safety and making sure that the speak up if their concerns, if they're knowledgeable, and to address it is important. we have made sure that there are 1-800 numbers that people can call if their concern. and a slower speed is not just people who are passengers, -- [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] >> tomorrow a "washington journal" will be starting half

an hour early. we will have analysis from drew armstrong. beijing in the program we will talk to general gary e. cheek about the wounded warrior program for disabled veterans. >> next on c-span, and a house hearing examines a treasury department program to encourage mortgage modification for homeowners facing foreclosure. the former ambassador to the end -- you in. washington journal is live at an earlier time for cover for the senate helped -- senate health care boat.

>> c-span, christmas day, a look ahead to 2010 politics. buzz aldrin and the legacy and of apollo 11. later, a former cia intelligence officer on the u.s. strategy against al qaeda in afghanistan. starting at 8:00 p.m. eastern, remembering the lives of william f. buckley jr.. -- and kennedy. but now a hearing on the efforts to cut the rate of form -- of foreclosures. we will hear about the modification program. steve cohen chairs the subcommittee. this is about two hours. >> thank you for your attendance. this hearing will now come to

burgle -- order. and i will recognize myself for a short statement. today's hearing is part dostwo f the modification efforts. for me, the foreclosure price hit home. my home city ranks 15th in the foreclosures. more people have called me and talked to me about their personal foreclosures and anyone else. tonight is the first night of hanukkah. without a house, there is no place to put a menorah. it is relevant that to start today. my home state of tennessee ranks among the top states. fothe extended the foreclosure

crisis is such that even some middle-class areas are affected by foreclosure numbers. with unemployment at 10%, many responsible homeowners find themselves on the brain -- brink of losing their homes. it could just be the laid-off. it raises concerns about the program. that was in july. the government does help family -- it appears not to be working effectively. the government is focused almost exclusively on encouraging lenders to voluntarily modify mortgage terms for distressed borrowers. it might be the same as encouraging president karzai to

root out corruption. mortgage terms. it might be the same thing as encouraging president karzai to root out corruption. encouraging th the program is still relatively new. i am troubled by continued reports from the media and suggesting that the program is simply in effective in stemming foreclosures. my constituents and feel it is ineffective because they're not getting help. this congress has acted earlier. i helped with a be helping families save their homes act which would give authority to bankruptcy judges to modify mortgage terms including a reduction of the mortgage principal. also i sponsored an amendment to

the regulatory reform legislation. it contains language that is substantially identical to the authority of hr1106. this provision has not been signed into law as it has not been passed by the senate. i now give it over to the ranking member. >> thank you, mr. chairman. thank you for being here.

i believe that by allowing mortgage cramdown in bankruptcy poses a major threat to the housing sector and the overall economy. it is completely unfair to future borrowers, it harms lenders and investors and it undermines the stability necessary for recovery. as we have seen, such a proposal does not meet the threshold to pass the senate. the uncertainty that this would create for mortgage originator is what the housing sector does not need to be in the car the volatile housing market. allowing this would be a continuation of the heavy-handed interference that got us into this precarious predicament in the first place. as we know, the political

housing establishment in the name of increasing home ownership significantly contributed to the crisis. this is accomplished through the intention a weakening of traditional mortgage lending standards. these weekend underwriting standards were encouraged by the community reinvestment act mandated by congress. as my friends on the left work so hard to coerced banks into changing their spending practices and even to making loans that were untenable, and now we see them suggesting that the banks should make the loans that failed because of the interference as free as they possibly can. this is a recipe that cannot stand. allowing mortgage cramdown in bankruptcy would be an extension

of the failed government interference in the housing sector. according to today's hearing, we are not here to discuss mortgage sector cramdown. although voluntary loan modification efforts have not been perfect, lenders and servicers are making an effort to keep people in their homes. there are over 650,000 trial modifications under the program and over 5 million as part of the alliance. lenders and services work every day to keep as many people in their homes as possible. their efforts are stifled and complicated by how poorly underwritten mammy of these loans are penned jumped more portly, by an unemployment rate of that hovers at 10%.

-- these loans are. -- their efforts are stifled and complicated by how poorly underwritten many of the loans are. more importantly, an unemployment rate hovers near 10%. i think the chairman and i yield back. >> now i recognize the next gentlemen in order which is the vice chair. would you like to make a statement? >> i will be very brief. my friend from arizona, the distinguished ranking member, he referenced his understanding of how we are rife here in these very very dire realities in terms of the housing market.

i could not disagree with him how more. i think that the facts are that if one examines mortgages issued pursuant to the community reinvestment act that it is surprisingly a performance in terms of foreclosures and troubled mortgages that i only wish it was issued by the unregulated market. that is what the facts are. i think that is going to be determined at some future time by the commission that is bipartisan in nature it will read you how we actually got

here. we did not get here because of government. we got here because government did not do its job. that is how we got here. it did not do its job until the election in 2009. now we are cleaning up the mess from the -- mess of government that did not pay attention to choose funds ability. it is not about government overregulated. it is about government advocating its responsibility to supervise and ensure that the marketplace works and works fairly. it basically scams artists that have put this into this position.

he is concerned about brandeis. if it is a business property coming he can do it. it is interesting, you cannot do a cramdown but you cannot do it if it is a private home. i wonder how that happened. it would be interesting to go back and look at the legislative history to see how that was achieved. it is ok to do it for investment properties, second homes, cars, boats, for every asset but the home of someone lives with their family in. i would just like to say that the consumer should be and treated fairly. that is what i can achieve.

the voluntary programs don't seem to be working. if we continue to go to the root of a voluntary program, you will just extend the pain. the pain will be extended and you know what is going to happen. we are never going to get out of this housing slump. we will see additional foreclosures. if that is what the minority party wants, that is what will happen. with that, i yield back. >> i represenwould like to intre

chairman of the full committee. >> thank you, mr. chairman. we will not go into details as to one of your distant predecessors moved to texas. >> we cannot pull our homeowners out of the crisis. these are made more difficult by high unemployment which has not been reduced by the economic policies. in contrast to these modification efforts, today the house is considering an amendment that gives bankruptcy judge's broad discretion to rewrite and cram down mortgages in bankruptcy.

there is little relief to distressed borrowers. bankruptcy cramdown will lead to higher interest rates and less strenuous borrowing terms. unemployment has been a driving factor behind most foreclosures. it will do nothing for those most in need of employment. additionally, they cannot expect to receive decisions from bankruptcy courts. this really transfers the cost of bad financial decisions to prospective home buyers will find it much harder to get a mortgage.

these investors often include pension funds representing the retirement savings of millions of people. we should not pass the cost of irresponsible borrowing on culture and future retirees. we need to do everything we clan tooth stop the foreclosure crisis. we must not punish the successful and tax irresponsible and hold no one accountable. i hope that there are positive suggestions for voluntary loan modification programs. suggestions that are not will

not git out of our crisis until we have legislation that creates jobs and revitalize the housing market. >> >> it is ironic that the bankruptcy in history that made so many people and so much money based on these mortgage- backed securities that they both sold and purchased, they have made a lot of money. there is a government bailout. when they got to the bailout, they got the money.

they failed and refused to have it people help people on main street. it is ironic that the representatives in congress who care more about the bankrupting industry than doing what they can. it is really an irony it would not support bankruptcy judges.

they can do this on the primary residence with our target money. today will it explore the viability. they are not being exercised in good faith. there is the mortgage modification and the extreme

important. this is today's economy. currently our nation is the experiencing a major foreclosure crisis. many families are struggling to make ends meet. for homeowners who are struggling, losing your home can be devastating. there are many negative side effects. foreclosure not only affects the family who owns the house but also that the neighborhood surrounding the house. this brought down the value of

the surrounding houses creating places where criminals and criminal conduct can take place. this makes the neighborhood look as if no one cares about it. it is a psychological problem that ensues. people in the neighborhood where there is large foreclosure activity and it is not good for people and it is not good for america. they don't want to take meaningful action to help the folks who are struggling on main street. this was intended to help homeowners modify their mortgage payments to make them more

affordable and avoid foreclosure. it was designed to strengthen the housing market and stabilize the overall economy. it has been alleged that the this is a failure. the majority of homeowners have modified their mortgages and stayed in their homes. you have called a hearing on this particular issue.

i think the chairman once again. >> i will be brief. some people on more than the house is worth. -- owe more than the house is worth. the value is not as much as the debt. there is an option to cram down. that can reaffirm the dead at

the value of the property. there is always a better deal for the creditor because they would get more than the distress sale . they might be a situation where >> it may affect their balance sheet. earnings. the might be a situation where it affects their balance sheet

where the modification gives them less and less land and authority. whether there are disadvantages in the accounting authority, there are disincentives from the system to agreeing to modifications. there is also the reason why we should not have cram down, whether or not a that would be an incentive to modification. i will be looking at those two issues, mr. chairman. thank you for holding the hearing. >> i would lik >> i think you should remain chairman in the next congress as well. this is important to us.

the subprime mortgage debacle is what triggered the financial fifth place that we find ourselves in, and not nationally, but globally as well. we chopped up all the mortgages. we sent them out all over the country. now our judiciary committee for supported a simple solution since we have jurisdiction in bankruptcy. it allows the primary crime. they are able to be adjusted. we passed it in the house senate as usual. they were not able to shut up

the filibuster's. faulk we are working again. filibuster so the bill was withdrawn. i just left a press conference for the congressional black caucus, how do we create jobs. there is an economic downturn, there is a lot of work to be done. i am proud of the chairmen.

>> thank you for participating. your written statements we placed into the record. the lighting system starts into a green light. it means that you have a minute to go. you should be finished or in the process of being finished.

456 @#$@432 ^ & >> mr. chairman, ranking member. good morning. i am an associate professor of law at georgetown. i served as special counsel to the oversight panel. the views i expressed today are my own. we are two days into a foreclosure crisis. the picture is grim. mortgage foreclosure rates are at four and half times the historic rate. the cornerstone of federal efforts to mitigate the

foreclosure crisis is the home of the station program which provides tax fair funded incentive payments to services, lenders, and homeowners to facilitate standardized loan modifications. this involves an initial trial modification. after it converts to a permanent status even though the permanent modification is a permanent modification. first, a trial modification must be commenced. there has been around a million trial modification.

there was an increase in the trials conducted suggesting that the enrollment in the program might have already peaked. trial modifications have adapted to promise status. nine months into this, there are 31,382 permit modifications. as of the end of october, less than 10% were converted by the end of the three month trial time. this has improved in recent months but at a politically low- level. this will be quite limited and not enough to have a noticeable impact on the foreclosure crisis. conversion from trial to promise that this is not the only

obstacle for the loan modification to be successful. it must also continue to perform. it is too early to talk about loan modifications but to the baseline prediction is that 40% will defaults in the first five years. that is optimistic. the closest the structural analogue to the loans are the exotic subprime months. and to be fair, the monthly payments on the loans are far more affordable. both of the mons the chair the below market introductory rates has stepped up over time. balloon payments -- stepped up over the time. taken as a whole, the suggest

rate will be exceedingly low. this will have a macro economic impact. treasury seems to be that this can be corrected through some regular fixes. i will submit that the program is fundamentally in capable of helping homeowners with foreclosure. homeowners cannot wait six months to find out if treasury has finally gotten it right this time. the mortgage industry have had multiple lights at the apple to have the refinancing working. -- multiple lines available to

have the refinancing working. there is a voluntary service for needed for request -- success. for a variety of reasons including skewed incentives, contractual restrictions, where orders services are unable or unwilling to perform sustainable modifications in sufficient volume. i would urge congress to explore possibilities that cannot rely on servicer modification. this program is not working. >> our second witness is miss swartz, the executive director of the hope now alliance. a coalition of counselors and other mortgage market participants.

>> good morning. i am the executive director of the hope now lines. i appreciate the opportunity to speak for you today to discuss the mitigation efforts on the lake. we are a nonprofit alliance working to reach an help as many homeowners as possible stay in their homes. many servicers are participating in the program and the alliance is working with the administration in implementing and improving the program. this is an important tool. people are working for homeowners that cannot qualify. also members are continuing

outreach for people who helps the shall meet at we have a new need -- we are working to assist homeowners who want to stay in their homes. first, i want to clarify that this is not a voluntary program the services are required to evaluate all loans for eligibility.

many have been reported a child on -- trial modifications. all these people are making lower payments. we have suggested that some improvements to make the process easier which i might highlight later in the testimony. this is not the only useful tool that services are using. in 2009, 2.6 million servicers presented foreclosures. the number is 5.8 million homeowners. there are a variety of programs. we're looking to work out to give a more complete picture of what is going on and show the

true number of homeowners being assisted and then avoid a foreclosure. since march, 2009, we have gone out to many different events. homeowners are given an opportunity to meet with a servicer. you can call our hotline 24 hours a day, 365 days a year. and there are six agencies and sixth nationwide servicers. they can submit the applications. there is a better system.

we are working with the servicers, attorneys and treasury in creating a solution for hamas and bankruptcy. i -- for homeowners in bankruptcy. there are ongoing issues and struggles for the program. we're working on many of these and i would like to highlight a few i have recommended to treasury. one is to streamline the documentation. the requirements should strike a balance of being less extensive. the document collection is often the cause of delays in turning try modifications to plummet. we believe that treasury should eliminate the requirement for wage earners and allow them to use the most recent w-2. some services estimate an uptick of 20%-30% a permanent modifications. another is to revise the model,

the net present value model should be updated. servicer data indicates that people who are successful in completing three month trial modifications have significantly better performance than those who do not. who do not. would these chang they provide solutions to those not eligible. they continue to expand capacity. i am willing to keep you informed of the progress. thank you for the opportunity. >> thank you.

>> she is an assistant former counsel -- for a third witness. ok. she is still a former system. she handles issues of securitization. second largest subprime mortgage servicer of residential suburb. former district court magistrate of pennsylvania. will you proceed? >> [no audio]

>> you have to a microphone. >> sorry. thank you. my testimony is based upon my word for these families. i also worked with to foreclosure law four months -- with two foreclosure law firms. i will tell you what it means for real people. i really can't see this from both sides. i want to tell you with -- what this means for real people. -- i really can't see this from two sides. i work on main street. -- i really see this from two sides. these are not people who gamble with on affordable mortgages. most part ordinary americans. due to circumstances beyond their control, they cannot get

out. they are frightened, desperate, and losing hope. most of us do not realize that if anbar were becomes more than 60 days delinquent, the servicer rejects any subsequent mortgage payments unless at the same time that the bar workers default. they're still not allowed to resume making payments even if they want to and are able to. the result is that they become trapped in the foreclosure spiral. many would lead to resume making full or partial payments. when they come to me, they're terrified. they have tried to gain entry into the program, try to work with their services, fell victim to loan modification scandals when they were desperate. mcnall became my clients when

foreclosure was filed. -- they all became my clients when foreclosure was filed. i set out to try to find them leverage. this is difficult since our system of forced them none. generally, it is only when i backed the plan if it into a case that any sort of concession emerges. -- generally, it is only one eye back to the plaintiff in to i have filed 60 of these motions. in only two of the cases, because i got a completed package and all oth we're hearing have occurred, all but one granted my motion. not one of my clients who got into a trial modification

received a permit modification even after exceeding a three month trial time, submitting all required documentation and making payments. i take issue with any claims that to the foreclosure crisis is improving. most troublesome is that the owners of many of these homes could and would have made payments. the program and to be purely voluntary programs exist but did not do enough or work fast enough to change the landscape significantly. the real problems are that the mortgage industry players lack the ability, the authority, and the wherewithal to really solve this mess. there is no time to create something totally new and have it moved quickly enough. structural hurdles make it virtually impossible for the voluntary programs to work on any sort of meaningful scale quickly.

what has not worked so far will not work in quantity. allowing bankruptcy judges to have a chance. i think there should be legislation to adopt mortgage modification. bankruptcy judges have extensive experience dealing with problems. the processes rigorous, solutions are formulated in that

the creditors are prioritized. because of the tangled web of interest. we need something more. if bankruptcy courts, this would be a fair solution that would provide mechanisms to save homes. it would be immediate. thank you very much for your time and attention. >> thank you, i appreciate your testimony. our next testimony comes from [inaudible] he has been a friend of mine

since 1982. we worked in the general assembly. is the council for a national law firm and an honorary kentucky colonel and tennessee. he is a fellow at the american college of bankruptcy. he is a highly respected individual. >> i am delighted to be here on the national association of chapel 13 trusties. -- chapter 13 trusty's. chapter 13 is the mechanism and bankruptcy whereby debts are

approximately payback. we are approximately a back 6000 a year. traditionally, chapter 13 has constituted a last resort of a bar or in which to save a home in which the mortgages in default. millions of families have saved their homes through chapter 13 and maintaining conservatives. it has been remarkably successful from where i come from.

they fell into default not even knowing what the requirements were. does chapter 13 from a model from 1979 provide the tools to be abl in providing a tool. chapter 13 trusty's are disappointed that the senate did not agree with the house.

mortgages in the pull that are looked at it resulted in a loss of approximately $12,000 per mortgage. mortgage. in flat for >> they need help doing

it. they did to create a system where documentation can be provided. let's change the program to allow the bankruptcy documentation to fight. does this mean that because it did not work that we stop the process of trying to make it better? nope. we still need to do that. we need to make it work. they would encourage you to continue to look at house and

get the mortgage is back on track. trustees to encourage you to continue to look at how different the tools can make chapter 13 and better mechanism to cure defaults. we think that things can be improved. it does recognize that chapter 13 recognizes that values for mortgages that are being cured are different that are distressed values. we recommend that if the process is stalled, does not work,

results in silence, create a judicial review of the program. if the mortgage modification is not acceptable, at least we should look at the review of the judges. >> you have shown that you are knowledgeable about preserving the leak use of -- preserving the use of liquid assets. >> i recognize myself for five minutes for questioning.

tell me the things that you agree with in this progress? >> i think that we are frustrated that we cannot get this wrapped up in a bow and this wrapped up in a bow and finish every month in a i think what the government has done was put some uniformity into the program that there has not been. i have been involved with this. that is a good thing working with third parties will be a good thing. time is of the essence. we all know that. we should work on all loans that are in bankruptcy and figure out a way to help those people get modifications. >> that is something we are already working on a treasure.

another issue is -- it has not been reviewed. let me assure you all they will get other modifications. they do. >> i'm glad to interrupt you slightly. i know you have many other areas to go to. you are shaking your head. why? >> they are not getting reviewed. i only see people when they have tried their hearts out and have not gutted reviewed. they have not gotten any answer. for while they are waiting for an answer, the process server shows of with the foreclosure complaint. then they come to me. i know they are not getting reviewed. >> the requirement will be reviewed for eligibility on the modification. the rate of foreclosure has gone

down. there is a queue of people and waiting for sale. they have not of been timely reviews. we know that. that is the process. . . there are timely reviews. we have seen the numbers. that is the process that has been prescribed. that is the process within these organizations to do so. maybe it is the lack of communication that is half of this. >> the question on the cramdown, the other says that this will drop the market and raise credit rates and all of these things and make it more difficult for people to get mortgages. people to get mortgages. >> are people getting financing for yachts and vacation homes?

the bill is only limited to existing mortgages anyway. it cannot possibly affect financing. >> they have done this over the plan and it has worked. it does not caused credit to disappear. >> the program does help people. we should try to help anyone who

is in foreclosure. this program is helping some people but it will not ever produce the volume that we need to keep up with foreclosures. >> how many people are in this to 4%? >> we don't know the answer because they are all in the process. this is under the grace period. this measurement is difficult to assess. >> in response to the question, we have a hearing on monday with the domestic policy committee. six under 50,000 are in some kind of preliminary trial phase. today, the numbers that i thought were 1711 at that families, they have had their loans modified. >> 765,000.

>> 650,000 are in the trial phase. >> i have had the number from the treasury report. there are some permanent modifications. you have to have full documentation to get permanent. there are many people current on the payments but not documented. >> i.t. try to get people to apply for this because despite the participation agreements, many servicers will not even allow i have people who have made their three months payments and they're still not getting permanent modifications. i'm talking about people who

cannot get in the door. it is not that i am not trying. when i try, i get a resistance. . . it's not a very good comparison. i understand that there is a partisan disagreement over how this challenge came into existence. but there are a lot of statements on the other side of the aisle but say that rebound going -- rebundling and

other things were the problems. if that was the fundamental matrix of those entrants, if they had performed as one would expect them normally to do so, none of this would have happened. all of the derivatives would have been fine. i am not suggesting it was a perfect system but that the problem, the thing that caused this problem, was that bad loans were made. and certainly the cra but a great deal of pressure on banks to make bad loans, and banks to do their own fault or to the pressure that was in the system did away with the three main legs that hold up loans. one of those as income, one of those is credit history, and of course one of those is the collateral -- how much money

they put into the loan in the first place. when you take those three things out, that is what catalyzed this problem. we should be as a congress looking very hard on ways to prevent that and to face that squarely. i do not really think it is a pardon issue. unfortunately it has become that. impressed with your testimony. we note that will 680,000 trial modifications under hamp. what does it take to turn from a trial modification to a permanent modification and what are the main impediments to make those conversions? >> i can name a few. because there are taxpayer dollars involved with these modifications, what you have seen in the past is less rigorous dotting of the i and crossing the t before granting a permanent modification. it would be performance on pay history that gets them there,

some documentation like a hardship, pay stub, etc. this is more prescriptive. in fact if you need a w-2 and tax returns and a 4506 p and a hardship letter and the other documentation, if it's going back and forth with servicers, counselors, and the borrower 10 times on the same mortgage, it's very difficult to be efficient and effective. with any government program, you're at risk of making a mistake and no one wants to make a mistake if they put them into a mod. a lot of process and friction in the system is these are taxpayer dollars. that's the biggest difference is documentation, streamlining and trying to contact the borrower that don't return calls and 120 days later you start getting into the process. there is all kinds of issues. >> is there any way to eliminate some of these impediments without putting the program in the same kind of challenges that got us here? >> we do think -- we have some

recommendations and to the government that we think there are ways to improve it. i don't know that you're going to get what everyone wants and expects with a program like this. again, the unemployment is one of the biggest drivers. lack of income means you cannot modify a loan. >> that was my next question. how is unemployment affecting mortgage modification efforts, and isn't it or is it the single greatest impediment to these modifications? >> i think it's one of the biggest ones in that we're all in such a changing landscape that was true 120 days before when you start the trial modification, a loss of income of one spouse, maybe overtime being cut changes the dynamics. when the income documentation gets documented, it's different than what it was 90 days ago. this changing landscape, it's difficult to keep the process in place. it's a threat to i think all of the good work going on on all parties whether it's counselors, lawyers, and servicers. the changing landscape is clearly the issue. >> mr. chairman, i guess with

that i will just suggest that one thing we should be able to get together on both sides of this aisle here is recognize the importance of jobs and productivity and solving these problems. it is the only way home. it's astonishing how a lot of the economists can talk in big words, but to fundamentally, the economy is about productivity and that's measured in large part by jobs. i hope that we can get together and face that. i don't know if either side has the answer to how to fix it, we should agree that's a huge, huge issue and i yield back. >> thank you, sir. i now would like to recognize mr. delahunt. mr. conyers? >> you don't pass. you pass everything with honors. you are recognized, mr. conyers. >> you can't chair two subcommittees at the same time.

let's see what we're talking about here. i -- this is a funny kind of hearing. we have two witnesses that say everything is going along well as about as it can and two that are clearly dissatisfied. now, my gator tells me -- invest gator tells me that the whole coalition is made up of community counselors, bankers, and mortgage company officials, true? >> and investors and freddie mac and all of the nonprofit hud approved counseling agencies, that's correct. >> how many bankers? >> well, we have about 34 different servicing

institutions, many of the top banks are members of hope now. >> they're the ones that created the problem. >> tharet once, sir, that need to get you out of it. >> oh, because they got us into it. >> they're the ones in charge of executing modification and helping borrowers through lost mitigation and to help get out of it. >> how many are there? >> pardon me? >> how many bankers are there? >> i don't know the breakout. let me think, maybe it's 18 out of 33 or something. i have to relook at that. >> look at it and we may want to put it in the record. >> sure. >> what about mortgage company people? >> so all of these institutions -- >> all of them are, most of them are. >> we have the resources of people that work with us on all of the committees and help go to the outreach events and send teams of people to meet with

borrowers. they're all walks of life within these companies. >> how many? >> thousands probably working to help -- i don't understand the question perhaps, i apologize. >> that's all right. that's a great acronym, hope, reverend jesse jackson, keep hope alive and how many people have you helped? >> this year alone, the records on 40 million loans which is the majority of the market share indicates that 2.6 million people have had either modifications or repayment plans in addition to the 700,000 government trial plans, 3.4 million people while 700,000 went to actual foreclosure sale, four times higher. >> what am i missing in this question, counsel?

what's the basis for saying -- you're saying millions were saved? how you can identify who was prevented from foreclosure and the numbers you reveal are staggering the numbers you reveal are staggering and raise some questions. >> those are actually records that we get of people in repayment plans or actual modifications with a structural change in the contract, and we have the government actual modification trials. we know how many go to actual sale. there are a lot of people in between. there are millions of people who need help.

so i am acknowledging that. i am trying to share with you data that is very strong data around this. >> help me out here. >> it is important to distinguish between the private modifications counted by hope now and the government modifications and payment plans included in mrs. schwartz's statistics, and hamp modifications. there are several million repayment plans in private modifications. there are a couple of things to know about that. we do not know what the terms of any of those are. the terms actually matter. a repayment plan can be a very helpful thing or useless things depending on the terms. looking at an absolute number does not tell us that much. secondly, there are some elements of double counting in

the payment plans and modification. often a borrower gets into a repayment plan and bales the repayment plans and and is the modification and fails in that modification and gets another modification. we do know -- we do not know how long the sequence of events goes. with foreclosures is not the most meaningful comparison. certainly hope now and its members are trying to do various mitigation actions. how effective those are is another question entirely. >> well, you know, this isn't working out so well, mrs. schwartz. what's the problem here? i mean, what's the difference between what i ask you and what professor levitin responds? does he understand this program clearly? >> we have talked several times and i think what's important here, sir, is a know, you're

right in that if 30% or 40% go back into default and you try another modification, for instance, maybe the hamp modification, you know, that's another bite at the apple before you go to foreclosure. and what i would say with my numbers that are accurate is we count every foreclosure. so they would flow through our pipelines and show you what happened and clearly millions of people are not in the final stage of foreclosure every the effort, that's clear. two out of three don't go to foreclosure and that's historic in the years through these efforts. it used to be one out of two go to foreclosure. more works needs to be done, i totally agree. but every loan should be reviewed for a workout alternative. that is the prescriptive agreement for what hamp is. after they have been exhausted, they go to foreclosure sale. i would like to think that is exactly what is happening, but i don't know every answer on this. >> you say the mortgage bankers

and the mortgage people are the ones that can help us get out of. who is it that helped us get into it? >> i think there are a lot of parties to all of these transactions. we all know that. >> but i'm talking about these two groups. >> we have counselors -- >> don't you want to blame the subprime mortgage thing as triggering this off? >> those have stabilized, we're in the two to three times higher on primary mortgages. >> i'm talking about what started it. you shake your head. that means yes? >> yes, i think that started in the product of subprime. it's negated to a different issue. negative equity is another issue that hasn't been discussed. that's another haunting issue as well as unemployment. the nature of making a modification has changed. >> but the bankers and the

mortgage people are the ones that gave out the subprime mortgages? >> i'm working with the loan servicers, sir, whose job -- >> i'm not talking about that one guy. i'm talking about the industry people. these are the guys that got us into this. now, almost most people recognize and acknowledge that. this is a couple of years old now. so why are we back and forth and modifying all of this? i'm going to have, ms. schwartz, some additional questions for you to submit for the record because of the five minutes and the chairman has been generous, we need to go into this a little deeper and i thank the gentleman. >> i thank the chairman and the full committee. we have a series of votes. let me inquire of the panel. i think this is an important hearing.

it's my understanding that we're looking at probably a 45-minute recess. if your you're willing to come back, i don't want to encroach on your time, but i think this is an important hearing. it might only be one or two of us that might come back, but i think hearing from you at this point with the kind of questions that are being posed by chairman of the full committee, mr. conyers, is important. if it's a significant inconvenience individuals, obviouslyly, the chairman would not be in any way offended if you didn't return, but it would be great to hear from you because i think you all have so much to contribute. can i have a show of hands if

there is a genuine willingness to return around quarter of 2:00? then that's what we'll do. >> mr. chairman. >> yes, mr. scott. >> i just have a couple of questions that i would like to ask before we go. >> of course. >> and what we'll do, we'll end up and give the remaining time as much as he needs to mr. scott. he won't return, but i promise i will and i know the chairman of the committee, mr. cohen, he will be here because he, too, is a kentucky colonel. with that i'll yield to the gentleman. >> i wanted to ask mr. hildebrand in the normal bankruptcy, if you have a yacht , and it's upside down and you owe more than the value of the yacht, what happens? >> the implication in the question is can bankruptcy judges, can a bankruptcy plan

structure and recognize the economic reality that you mentioned in your opening remarks that the collateral is the extent of the secured claim, whether it's a yacht or a piece of business equipment or whether it's an airplane for united airlines or whether it's the plans for general motors. braptsi judges are entrusted with the ability to make these valuations and determine them for everything except the home mortgage. >> on the yacht, you could reaffirm the debt, but you would only have to reaffirm the debt up to the value of the yacht, is that right? >> if i could distinguish reaffirmation would contain a voluntary consent on both sides. on a chapter 11, 12 or 13 plan, it is the value that you provide. as long as the court determines that the value is fair and that it's a fair market value for that, whatever the collateral is, that's the extent of your secured claim that you must

pay. >> now, if the debtor wants to reaffirm, does he need permission from the creditor? >> for a reaffirmation in a chapter 7, yes. >> what about in a 13? >> in a 13, no, that would be part of the plan process. >> in a 13, the debtor can say i want to reaffirm and the debt he has to reaffirm is the value of the yacht at that time? >> the plan he proposes is whatever the value of the yacht is and he can pay -- >> that's probably a better deal for the creditor because it's not a distress sale minus expenses? >> as we got the amendments from 2005 that recognizes that the value we're giving this is not distressed value, wholesale value, auction value, it is retail value. >> now, the reason that, -- the reason that a person would reaffirm at a higher rate on a home is essentially not because a creditor would get any more in liquidation, they would get

less. he is over a barrel if he doesn't reaffirm, he is homeless, is that right? >> to the extent that a borrower agrees to pay more than the economic dictates, the answer would be yes. >> to take advantage of a debtor in that case, is that fair? >> i'm not sure i'm the one to answer what is fair and not fair. >> making him reaffirm to higher economic value than the creditor would be entitled to  in liquidation because if he doesn't reaffirm, he is over a barrel, either he are affirms at the higher rate or he is homeless? >> traditionally bankruptcy law is created to be fair to the most people involved. in the context of putting one creditor entity or any entity having more clout, if you will, more ability to hold somebody over a barrel, that works to the detriment, not simply of the borrower or the debtor, but all of the other creditors in the case. >> i think you hear you saying that's not fair which i would

agree with. mr. chairman, i would ask all of the witnesses, because we don't have time for a coherent answer on accounting incentives and disincentives whether the generally accepted accounting practices give a disincentive to modifications or incentives to modifications? i understand there may be some realization problems that may affect the balance sheet and earnings that would give people a disincentive to modify. and if any of the witnesses can comment on that briefly or in writing, i would appreciate it. >> mr. scott, i do not speak as an expert on accounting principals, but i can say this, accounting principals are a disincentive for doing modifications that involve principal writedowns. when you write down principal, that immediately appears, that has a loss realization event on a balance sheet where as if you

lower interest rates that, does does not affect how the loan appears on a balance sheet, even if they would have -- >> all of that is artificial because the fact that you modified doesn't put you in any better position because you lose even more if you let the thing go into foreclosure. >> that's correct. >> i have been notified -- does the gentleman yield back? i have been notified by staff, that rather than 40 minutes, it's closer to an hour and 15. now you know, i'm sure that some of us are more than willing to come back around 2:15, if that presents a problem and you can't make it, that's fine. i just think your testimony is that important. i'll show up and we'll have a conversation. and if anyone here is significantly inconvenienced or has anything else to do like christmas shopping or whatever, we understand. we don't want to impose, but i

think maybe mr. cobel, myself, and the claim will return. let's see each other 2:15, 2:20. there is a great cafeteria here and we're in patience and can endure, which means that you would make fine members of congress, particularly in the senate. the house waiting for the senate to do something. i think we're going to be joined shortly by the chair of

the sub committee, mr. cohen, but let me proceed. let me pose a hypothesis. i see clear problems in terms of utilizing voluntary modifications. i think it's been articulated by at least three of our panelists and clearly, any particular program no matter how well intentioned would have to be revamped, take into account all of the what i believe to be obviously impediments to success. that requires a sustained

effort and much consultation among the parties. i read something recently in the media about how the treasury department was going to shame those banks who were not or did not appear to be cooperating in terms of helping to resolve this problem. i just don't think that works. i just don't think that works. it's just not ban i just do not think that that works. i do not want to castigate anyone. there are different viewpoints, different obligations -- banks

and other corporations have a primary obligation to shareholders. there is obviously self interest. self-interest is not limited to lenders or politicians. it is not limited to professionals or ceo's of nonprofits. it is what human nature is all about. but there needs to be a balance. in terms of the voluntary programs, does this make sense? if there were -- and this is the hypothesis -- if there were authority conferred on the bankruptcy courts to reduce principal, in your individual

judgment would we find a more -- would we find lenders moving more quickly to voluntary programs? and since you are shaking your head, let me begin with asking you, am i anywhere in the ballpark? would it provide leverage? >> absolutely. that is one of the huge issues now. ank in a foreclosure case that for the first time gets the borrower leverage, we get somewhere. right now in that very limited context, borrowers have no leverage. yes, the possibility of a judicial modification or of a chapter 13 would certainly provide leverage. >> that's what my instinct tells me. programs like hamp and i

appreciate the fact that there is substantially counseling going on through these programs. i think that's a positive. but i don't think it gets us to the point where we're dealing with the issue. i think what we're doing by going the voluntary route is delaying the end. we're delaying the pain and suffering and possibly and potentially exacerbating into a full-scale crisis that at some point in time could really do permanent and serious damage to not just real estate, but to our overall economy. mr. hildebrand. >> mr. chairman, i administer about 600 new chapter 13 cases

every month. and in each one of those cases, there are issues that deal with the valuation of collateral or the interest rate that is an appropriate interest rate, how much debtors have to pay back and what we have seen is that only one or two or three maybe a month have actually litigated because in the back stop or the brac backdrop of the fact that there is a judicial remember addition a judicial response, negotiations take place. as i said in my original testimony, bankruptcy creates a platform on which there is a negotiation, where parties can act in their own economic self-trfment i totally agree with your hypothetical and that is accurate that whether it is a modification of the principal amount or whether it is a judicial back stop to the hamp program, where if hamp is silent or there is no response or the hamp is somehow mysteriously denied, there is some judicial response to review it to see exactly what

is going on. and in that context, which is not the same as the 1106 response, it is something different, which is should there be a judicial back stop which is the purview of this committee. and it would be appropriate. >> the two of you agreed that it would make ms. schwartz' program significantly more effective. >> yes. >> no question. >> and that we would see data that in a relatively short period of time would reflect that. >> there is no question that if a modification was requested and there is silence, and there is a backstop to that whether it's a judicial review, then there will be a heavy incentive to participate in the hope program or the hamp program by the servicers and by the investors. they will exercise that right

and it will facilitate a resolution to the process. >> and in addition, mr. chairman, at this point with the voluntary programs, there is no two-way dialogue. there is no balance of power. so whatever -- and that's why when these voluntary -- modifications are proposed, many times borrowers will accept them even though they know they can't pay them because it's better than nothing in their view and there is no opportunity to negotiate at all. so it's take it or leave it. they say, well, we better take it otherwise we'll lose our house. if there was a way to discuss and to have recourse to a judicial process if need be, it would make a huge difference. >> well, ms. schwartz, you're next. >> my pleasure. >> and we have plenty of time. >> let me first -- i'm sorry. >> so this is going to be much

more of a conversation than is usually the case in a formal congressional hearing because of the fact that i now have the gavel and i chair the europe committee on foreign affairs and i describe it as the committee with no rules because i think it's much more important to be able to engage in a dialogue and fully flesh out these issues and see where there is agreement and see where there is consensus. i think it's clear you know where i'm coming from, but that does not in any way mean that i don't appreciate the value of voluntary programs, particularly counseling aspects and, if you will, think of it in this way. oftentimes courts will refer matters for mediation and those

mediators oftentimes have demonstrate strabble demomsthable effect because it keeps court calendars and it doesn't diminish the significance. it creates a different role for voluntary modification programs. mrs. schwartz. >> the way i think about it and i have spent time with foreclosure attorneys, bankruptcy attorneys, the nonprofit counselors, the bankers, the servicers, i feel like i have spent a lot of time on this. i do need to reiterate, first, there is a requirement for banks that have signed up with the united states treasury and have loans that are owned by fannie mae and freddie mac, it's a requirement as their job as servicers go to hamp, if it

does not comply and they can still be positive n.n.t.p. value -- >> that means what? >> present value, a foreclosure is preferred or a modification or workout and we heard today that modifications are far better for investors than our foreclosures, certainly in this market. and so what whether they're redefaulting or not because of unemployment and other burdensome issues in the economy, those are requirements of the contracts they have in place with many parties in the united states government. the reason i say that is when i hear voluntary it makes me kind of crazy because the agreements for people to look through loans are to work on an n.p.v. test before and after to decide if they go to foreclosure. >> we're going to save you for clean up. >> he'll clean up. we're cleaning up, too.

>> let me interrupt and just, you know, i hear what you're saying and i'm sure that's true, but how many individuals who find themselves in foreclosure proceedings are aware of that contract? it's like when you talk about the credit card contract, there is nobody in this room that's ever read their credit card contract. i mean, i think we're asking too much of people and who, you know, what agency is policing the monitoring the contract? >> well, it's also the communication with the homeowner. so an honest conflict is there are state laws that govern the foreclosure process. remember, i earlier said, 2/3 of the people that start that process have not gone to foreclosure and they get worked out. it's cumbersome that people are working on modifications and

going down the route of foreclosure. that happens a lot because the state laws govern timelines, etc., on foreclosure versus the workout. some of the workouts do not pass the testing and the rigorous testing that goes on, but i might also add many people make 30 or 40 attempts to reach the homeowner, door knockers and don't have any communication, sometimes until after the foreclosure process. again, those are pretty good facts on the grounds of what attempts have been made, but we should do better at measuring that to understand where the breakdown is for the borrowers to call. >> i'm not going to dispute that. i guess my position is we don't have time. >> i know. >> i don't think that the american public is aware nor members of congress are aware that given the data that i see in terms of the increasing

numbers of foreclosures that time is of the essence here. if we continue to drag this out and attempt to perfect all of the pieces of the programs that, again, i'm sure are worthy, we're going to find ourselves in a real serious severe crisis because we don't have anybody -- we get together like this and we have a conversation and, you know, and chairman cohen and i are going to be on a plane going back to our respective districts. you'll be going back to your offices and everybody here will feel that it's been a good discussion, but we need action now. and i get very frustrated because i understand the banks have their role, but in the end, it's self-defeating, i think, for the lenders as well

because god for bid they have a -- forbid they have a total collapse in the real estate market. we're going to be back to where we are in november 2008. there are no more bailouts coming from this congress. that ain't going to happen. it's just not going to happen. and, again, i'm thinking of the authority to reduce principal as a mechanism to that's when you have everybody's feet to the fire, you have the servicer out there and it's somebody else's problem and it's the lender and the investor and how do you find where the mortgage is because it's been securitized and it's off in some never neverland anywhere and you're making calls and the robo call comes and you're

afraid it's a creditor and you don't pick up the phone, these are very real human responses. unless you get -- and these trustees are good. we have a good bankruptcy system in this country, and i just say, mr. hildebrand and his colleagues are not out to punish people including all of the stakeholders as he said in part of his statement, you know, we want to be fair. we understand that bankruptcy is incorporated into the constitution by the founders to give people a chance, but at the same time, there is a balance to insure that the investor and the lender be treated fairly and equitably as well. i think we have gone down a road that could very well bring us back even to a more dangerous and risky situation than what we were looking at

better than a year ago. and here we are today and i really wanted to come back and i appreciate the four of you in indulging me because i want to get it on the record because god forbid, but if i'm correct and my instincts are accurate, i want to be able to refer to this record and say i told you so. i told you so. and all all i hear is the cra and fannie mae and freddie mac and all of this, and that government is the problem. it might be a -- i am not suggesting that government is the answer, but the bankruptcy court system that has evolved

from our constitution has proven to be a very effective instrument of helping people and at the same time being fair and equitable. that is my concern. i want your program to work, i really do. but i think you need a little bit of a hammer hanging out there. go ahead. >> i want to be very clear. we don't have an opinion on what legislation should pass. hamp is the dominant part of what we did. my personal background is the capital market background, for the first 18 years of my career. today we have a broken market still. and the mortgage-backed securities market, and the government is investing in all of those, fortunately for all of

us. i don't know what -- our markets are not acting in a box and away. there are no global investors. the government is buying our assets. i do not know what bankruptcy would do. i worry about that. lot of experts and you know what i've discovered? >> no. >> everybody is guessing, ok. there really aren't any experts. >> i worry that that could be an issue. >> i think the major concern i have is timeliness, ok. and i don't see leverage to create the dynamic necessary to revolve the problem. that is -- i'm not an advocate to go go into a situation with guns placing and tear down -- tear the markets down. i think you're correct.

i don't see right now a rational market. and until it hits bottom and that's i think why people are hesitant because they don't think it's hit bottom. i think i agree with my republican colleagues, it isn't about subprime now, it's about unemployment. but, there is this chicken and egg argument, too. if you go underwater, then you know, you lose your house and people are holding back in terms of expenditures. you create more joblessness. you create this vicious cycle and i don't know. and again, i'm not saying it's a panacea to cram down authority. it's not even a tool.

i would like to think that the voluntary modification programs would work if you just had that sitting over on the side. >> it would help. >> professor levitin. am i making any sense to you? >> perfect sense. >> you must agree with me then? >> of course. this is do you -- should we approach this with a stick or a carrot or both? treasury's approach has been to offer a carrot. taxpayer-funded incentives paid to servicers, lenders and in some cases to homeowners to encourage hamp modifications. a carrot is a good way of encouraging behavior. when it's combined with a stick, it's likely to be much more effective. take the carrot and if you don't, out comes the stick and bankruptcy will be the stick. there are a few things that ms. schwartz said that i want to comment on, not so much to disagree with her but just to expand on her comments.

ms. schwartz rightly noted that servicers who sign up for hamp, it is largely voluntary whether they sign for hamp, they are then under a contractual obligation, they have a contract with fannie mae that as treasury's agent that they will operate under the terms of the program. it's worth noting what's the penalty for a servicer that fails to do this the only thing that is in that participation agreement is regular contractual rights that if trizzri thinks the servicer isn't complying with the contract, isn't giving a proper review to borrowers to borrowers' cases, the treasury's only real remedy is to take the servicer to court and sue them. that is unlikely and what will the damages be to treasury? the servicer might be saving the treasury money. >> is that right? >> i haven't read the legal

terms. the banks take seriously the contracts of the united states. >> i'm sure they do and don't want that on their record. i would know if i'm a banker and i want to keep my balance sheet looking well and be able to hold those assets so that when i have to report to stock holders, you know, and i know how the bureaucracy moves and how often i'm going to get sued, i might take the risk of not disregarding my contractual obligations, but not really giving it my all either if it didn't suit my self-interests. again, i like to put these things in terms that i can understand. and the government doesn't have enough lawyers to bring those kind of suits. go ahead, professor. >> i want to be clear that i'm

not alleging any actual bad faith. >> i understand, nor am i. >> but this is a program with very limited oversight and that's just the nature if you're trying to modify tens of thousands of loans, that there is limited, without tremendous staffing, you can't do serious oversight and in that space where you don't have a lot of oversight and where servicers may have incentives not to do the modifications, it wouldn't be surprising if we saw servicers dragging their feet. the treasury is making incentive payments to servicers, it's far from clear whether the incentive payments are enough to make this -- >> that's my point, too. you know, i look at the numbers, it's $1,000 and i'm servicer, let's say i'm the guy in dwaufment i don't mean the servicer or the corporate entity. if i'm the guy on the phone and how is he getting paid?

is it commission? >> probably. >> what is my piece of the thousand? is it a straight salary? again, and maybe i'm wrong, but i just think of human nature. and when weigh talk about how we got here, i remember talking to mortgage brokers and i say why the subprime? the answer was very simple. well, the subprime because, you know, the salesman that was out there pitching the mortgage, because i saw these numbers, i presume you wouldn't have any great disagreement, but 70% of those that took a subprime loan could have qualified for the traditional 30-year fixed rate which they might have been able to sustain. i said how did that happen? i'm naive, i don't really know. well, because they got $13,000 commission for pushing the

subprime rather than the $3,000 that they would have got for the traditional. and then you get lucy goosey with the underwriting standards and you get -- it was the wild west. that's why i take offense when i hear it's the community reinvestment act that did this. that's baloneyy. that has no data at all to support it. it just doesn't. but we hear it because we want it to be that way because government is bad. government had nothing to do with that. it's human nature. and you have government to kind of keep our demons from, you know, from surfacing and hurt the community at large. that's my sense of government. i mean, i'm a free market guy. i'm a capitalist. you're not recognized yet because mr. levitin had his hand raised.

>> i'll glad ceed to mr. cohen. >> power is machiavelli a long time ago said power is taken, not given. chairman delahunt. >> this has been a good discussion. the problem is the house just voted down, the provision as amendment to the wall street bill we had, the senate has never passed it. and the problem is, you know, you're right about government and the problems and there wasn't regulation and all of these things. if we can't get 218 votes, we passed in the house. if the senate doesn't pass it and we need something to help people. that's reality. that's the same thing as the public option. if there aren't the votes for public option in the senate, the house as good as we can be and florence nightengale wants to be, we have to do something

else. we have to do with the senate. we need a unicamer legislation and it would be in this camera it's a mess. what would you recommend we go about this? >> i would like to pose to the four of you, ok, because the chairman is correct. i was disappointed in the vote -- >> you rallied. >> i'm sorry? >> you rallied and came back to chair the committee. >> but i came back. i'm very disappointed. i think it says something about our system, our political system and how there are powerful interests that oftentimes i believe don't really understand their own interests in the long term. they see it in very -- in a very short window. got to keep those balance sheets there. we don't want to do this and i

understand that -- and i'm not being critical of their self-interests because that's their obligation. at the same time in terms of their long-term benefit, it would be ideal to clean up this mess before the mess continues to exacerbate and brings down those big banks one more time because i don't know how the chairman feels, but i know that the bailout time is over. if they want the market to function in a way where there is no government support intervention, regulation, they will discover it. if there is another september of 2008, it will be a debacle

because there is no political will in the united states congress that i can discern on either side of the aisle for any continued support. if it gets bad again, let's be clear, those that kill that legislation today, kill that amendment ready ones that are going to be responsible and let them face the american people and say, well, we thought it was in the long-term best interests of the market. there is really no data anywhere that indicates that interest rates would rise. that's about a lone -- baloney. that's just the short term view. i would like to think that it's our responsibility here in the congress to take a long-term view and try to understand what the best interest of our free market economy is so that we have at the end of the day a

functioning -- functional capitalistic system. but my question is -- how do we give ms. schwartz the leverage if we can't get the bill through so the voluntary modification programs work without going through all of the bureaucratic gyrations that we no longer have time for? maybe we should lock the four of you in a room someplace and tell you to come up with answers and come back so that we can satisfy those powerful interests on wall street so we can save wall street from itself and save the american economy. professor. >> there are some steps that could be taken to improve the hamp program. i think a few of those would be greater transparency, both on

the overall, the macro level of the program, the data the treasury has been releases has not been particularly granular. it makes it hard for any kind of real outside analysis, but also on the borrower's side that the treasury has not released publicly the details of its net present value calculation. that if i'm a borrower and looking to get a hamp modification, i should be able to have -- go to a website, plug in my data and see the net present value calculation and how it weighs out. there is a fear that if that is made public, that would allow for the system to be gamed. >> do you all -- everybody feel that's a thoughtful suggestion? ms. schwartz, you're the minority witness here. >> i think more improvements can be done to the tests and i believe there is going to be a transparent test put out in the new year. more can be