got a notice amount of media attention, and frankly we sought that out because we are hoping that it would change the atmospherics and be a next step in officials change. but, frankly, as a practical matter now, for a change would really avoid immediate. and it's too bad but i'm not how much difference it would make. i've had filmmakers come here, not since the election, and i didn't put anything on a website. if you've seen our webpage the iran page sort of dropped off a few years ago because it could be problematic to the. if they receive some kind of permission to come, but that permission might change by the time to get back. and you will notice, the international visitors broke ram, that there were many, many, many, different exchanges, and the important areas like earthquake survivor, victims of chemical gassing, health, all sorts of things.

and those did not get media attention because our experience has been that it makes it more difficult to continue the work. and that's too bad. but it would be a full-time job, frankly, to try to curb the shift in that way in terms of the public opinion about iran and whatnot. i think there are others that can use new media and other things to help to do that. and it's really about information. it's about learning more about the other. and that's a long-term process. this is some we're really getting the results of 30 years of no contact and hostility. that's what investment, and it's not going to be overnight to change it. >> your act we started a website? >> yes, it's been in operation since september. and if i could just plug it quickly. it's www.inside iran.org. and it's a website that the material as much as possible is

written by iranian scholars and activists to some degree from inside iran. >> what i hear you saying, especially for news on it, is in some ways a paradox here is that it has to be below the radar. okay. that makes a lot of sense. now in terms of the political debate here which is part of the discussion as well, part of what empowers a funding for these sorts of programs, private and otherwise, and government funding, what do you say, any of you, what do you say to skeptics of programs, citizens programs, et cetera, and the funding for it, who say, well prove it, prove this stuff works. because one of the problems that you've come back to several times is that these are long-term benefits. and this is a problem for public diplomacy general and funding is you have funding cycles are based on immediate returns, and yet public policy are really

fundamentally about long-term goals and aspirations and outcomes that are difficult to measure and difficult to measure in short-term. so what do you say, any of you, to skeptics is a proven, prove it is worth the funding, prove that these things action works to? i think that, that's a really legitimate point, especially because we have all agreed today, this is a crisis that needs an immediate -- that needs to be addressed in more immediate ways. but i was going to sort of suggest that -- i mean, i think of in the political climate in iran, given the sort of u.s.-iranian relationship that maybe the way to approach exchange is used to figure out what sector of the iranian population has interest in having an exchange. i'm and cultural issues aside, but for example, if you look at positions in iran, physicians in iran have a real need for access to medical research that is

being conducted in united states being conducted in europe, and this is a huge problem. they can't travel out that they don't have literature. so if you just look at positions, i think that would be a one way to have some sort of immediate effect if you're going to bring people out. i'm not a sector of the population, scholarly community. i mean, as you mentioned there is now a list that was published three months ago of 60 organizations. their foundations, their think tanks, some of them include the open society institute which of course is led by george and others, and i can say that people now that we contact are terrified. if a scholar is invited to a congress, the first question is is your organization ought on the list? but there's a real need for people to be able to have scholarly exchanges. so it you know, i think that maybe in a very specific way, if

certain professions, part of the population can be identified i would have a great benefit in these exchanges, that that has a more immediate result, that things are more ambiguous or brought. >> i want to welcome you to come to the mic and ask a question. >> i want to draw everyone's attention to what is in iran, engagement is interpreted as between the citizenry and the government, and not within other social institutions that she mentioned the family, for example. it's its own important what she said that someone can be all for democracy outside the home and then come back at home at night and be a dictator. other says here. the question is what -- and i

know this is right, absolutely such a long-term thing, but what can institutions such as search for common ground or think tanks in general, or universities, institutions can do to change that dynamic inside -- in other words, bring back cultural change, if that's at all within anyone's purview. thank you. >> i would be very careful in terms of the organization that i work for to really distinguish between what could be considered as interference and what's engagement. and so that's -- were proceeding very, very cautiously, and going back to what is the aim of what it is why trying to do, and it's really -- our task is to discover and implement ways, practical ways for people to have differences to come together. and that based on their mutual humanity, as there. so i'm careful to say that an organization like the one that i work for could do something about those sorts of things in

iran. and one of the simple dynamics of exchanges is that many people in the civil society are given permission to participate are given permission by the governments. that's part of the atmosphere. in terms of funding these sorts of initiatives and exchanges, we have really been fortunate to have funders of long-term visions. but they don't get the result that they used to have a. it's getting more and more difficult to prove to the question is very valid. so i will turn its on its it. so we don't and gauge, so we just ignore this whole societies which before 1979 we had good relations with? trouble, but good. so we just ignore them? we isolate them? how is that going to work? does that work? >> just remember that the government has reported come out of his something around

$5 billion to deal with this software. to identify, know which organization is doing what, and how that's going to affect the political dynamic in iran. so it is a very, very sensitive a. >> i think the one important thing that's happened is that's related to what mohammed is saying is that the government has cast the net so wide now. i mean, the sophistication on the part of the regime cannot be underestimated -- i mean, overestimated. if you call someone in iran, whether it's an activist or a professor, two days later they could be arrested. i mean, this is how sophisticated they are at monitoring who speaks on the phone to people in the west, what their e-mail to medication is. you know, we've had things

reported in the iranian press that, you know, or business of the website that i run that we have no idea how anyone found us out. it's just amazing that i don't know if they're reading e-mails on a regular basis but it's quite frightening how sophisticated the regime has come. >> unfortunate we don't have time for one more question. >> forgive me if this was race earlier, sonya, at the beginning of your comments. have any of you talk to appeal to the u.s. government to let more iranian journalist come to the united states and travel around the united states to set that bureaus in washington to get out of the 25-mile radius of the united nations where i think there are three iranian journalist, that's all they've got that it would seem to me that even though obviously there would be a lot of propaganda, you get glimpses of american reality in the iranian state media in a way that you're not getting up, and that was certain help the others. >> that's surly son would bring up in conversations that we have.

that and the 25-mile radius of u.n. officials. and i think the state of relations that have always been very emotional but they really are now at and it such that even by giving one little thing, even by letting one person come here it would be likely where getting something too much or nothing. that's very bad from -- [inaudible] >> very shortsighted, and i think every journalist come and see the congress would be really important thing. spent want to make one final point, a point about academia has been brought up. you know, one of the most that we already see just for any student in the world is itunes universe and yale lectures on line. there's probably a way in which the academic unit around the world could do something along, call it a floating university or something like that. part of the cold war efforts as

well. i want to wrap my first of all thanking our panelists and everybody that was here today, and all of you. you know, they talk about how takes two to create a relationship and if once i get the other side invisible, they both suffer. and i think that's really an underlying thing about what we taed tay. so thank you all very much for coming, and thank you. [applause] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] >> federal reserve chairman ben bernanke

>> to prevent home mortgage foreclosures are top executives from some of the nation's largest banks testified before the financial services committee.

the chairman is barney frank of massachusetts. this is an hour and 45 minutes. >> the hearing will come to order. i apologize for the slight delay. the ongoing question of how do we deal with the foreclosure crisis is before us, and i should be clear. our major motivation here is the extent to which the ongoing problem of mortgage foreclosure, damaged the national economy. this is a fundamental problem that we've got, and it is a consensus that one of the obstacles through the fullest recovery that is possible is the overhang in housing area.

we have no magic wand to wave or buttons to push. there are a series of reference. one of the things that came clear is we talk about is the question of the in a relationship of first mortgages and second mortgages. and we have been talking to investors who hold first mortgages to servicers, institutions or have a significant number of second mortgages that they own. and we would like to find out what can be done to help us solve this crisis was resolved to second mortgages, and in particular we would be interested to know what people plan to do about them. and if there are obstacles, how can we even be helpful or maybe persuade people to do more. and i will now reserve the balance of my time and recognize the gentleman from alabama. >> thank you, mr. chairman. i thank you for holding this

important hearing on the issue of modifying mortgages on properties. having multiple debt obligations or second liens. i would also like to thank our witnesses for being here today. we look forward to hearing from her testimony. preventing affordable foreclosures is a series issue for homeowners that has a great impact on our economy, and on the community which those homes are located. a leading credit research provider estimates that the for institutions to sign before the committee today hold $423 billion in home-equity loans, including 151 billion in loans to borrowers who are either underwater or close to it. further research shows that at least 51% of first lanes also have a second or subsequent clean. this presents real promise for homeowners with multiple lanes on their property. as well as for bank balance sheets and securitization

market. it also impacts our prospects for housing market recovery as the chairman mentioned. many other well-intentioned foreclosure mitigation programs have already failed to accomplish their mission. and many believe that this latest attempt by the administration to, quote, fixed the hamp program will do little to stem foreclosures and help troubled homeowners. constant shift have create uncertainty in the market and encourage homeowners and services to wait for the next best offer. rather than take action to address problems related to distressed mortgages. additionally, many americans continue to be concerned about the inherent moral hazards of these foreclosure mitigation programs. it is fair to provide tax -- is it fair to provide taxpayer funds to overextended homeowners who have fallen behind on their mortgages while homeowners who have been struggling to stay current and meet their commitments received no help?

i think not. it also, i think, that ignores the problem that many homeowners do not even have a mortgage or second liens your most do not have second liens. and inherently unfair to ask them to guarantee or participate in programs to help others. critics of the hand program argues it mocks the hard work and foresight of those who have made larger down payment or took out smaller mortgages to buy more affordable homes that now struggle to make their monthly payments. now these responsible homeowners are forced as taxpayers to foot the bill for restaurant their less prudent industry and once again the administration intends to use t.a.r.p. funds to pay for these newly announced and initiatives designed to pressure banks to modify trouble in love.

government interference interventions bailout must in. is particularly troubling to me that banks are being told to forgive principle when many of them have said that they would rather reduce the interest rates when the government gives in to that detail and trying to force banks or coerce them into forgiving principle. i think that's a slippery slope. instead of new programs in the bailout, congress should focus on job creation programs as the best way to help homeowners make their payments, prevent more foreclosure and get our economy back on track. that includes reducing our debt, which will keep interest rates low. the market needs to find its own footing free of government intervention and manipulation so it can revive our economy and get on with a full house market recovery. now i know it won't be easy.

i thank the witnesses against are being here. i yield back the balance of my time. >> the gentleman from north carolina is recognized for three minutes. >> thank you, mr. chairman. the four banks are present today service about two-thirds of all distressed home mortgage loan. the same four banks of between 40,500,000,000,000 in second mortgages secured by the same distressed assets, which we directly us acted by the decision or foreclose or two extend and pretend. it is hard to understand why servicing a first mortgage on the half of investors while holding a second lien on the same property is not an irreconcilable conflict of interest. between services and investors. why is this not a reach of fiduciary duty which is fraud under common law? it makes no sense. the testimony today will tell us that second mortgages are performing better than first mortgages.

that makes no sense for the homeowner. our services don't homeowners to pay the second marks before the pay first if they can only pay one. congress and the industry, investors, should begin by asking whether there is any reason to continue to permit servicers two oh debt secured by homes to secure a mortgage that they also service. hearing none so far, i've introduced with mr. ellison legislation to prohibit one thing, one entity from doing both. thank you, mr. chairman. >> the gentleman from texas. >> thank you, mr. chairman. today we will examine the fifth or sixth generation of the same failed foreclosure mitigation plan. offered by the obama administration and congress. the policy that still throws mud on the wall to see what sticks is very extensive mud. it belongs to someone else. and by the way, none of it is sticking. we still have one of the highest default rates in our nations

history by the administration's own admission the hand and heart program have research 169 permanent modifications out of their stated goal of three to 4 million. both studies empirical evidence to show that at least 50% of those who have their mortgages modified will again we default. deciding how to in effect a program, it is an unfair program. it is yet another chapter in america, the bailout nation, that is co-authored by the present and by speaker pelosi. it takes $50 billion from taxpayer or borrowers the money from the chinese to bail out banks that made bad loans and to bail out many who buy more home than they could afford. speculated in residential real estate or use their home equity as an atm machine. we must remember that 94% of americans own their home outright. they rent over the our current

on the mortgage and they're being asked to bail out the other 6%. it's a policy that says to the citizens who work hard, who live within their means, who saved for a rain date, you are a sucker. when you're struggling to pay your own mortgage, you shouldn't be forced to pay your neighbors as well. the program is unfair to taxpayers, according to the congressional budget office, accountability office, they say that hamp, t.a.r.p., 50 billion-dollar program will lose 100% of the taxpayer investment. although i curious a note under the majority member for this hearing under this subchapter entitled who will absorb losses, curiously the were taxpayer is never mentioned. finally, the program hurts our economy and goes recognize that the only effective foreclosure mitigation plan is a good job with a steady paycheck and a bright future. unfortunately, under the policies of this administration and at this congress, over 7 million of these jobs have now

been lost. by creating an unpredictable artificial market investment capital remains on the sideline, that hamp is hampering economic recovery. finally, as our nations round sea of debt i think will better use the 50 billion to put forth a plan to pay down debt and put the nation on the road to fiscal sanity. that would create jobs, and thus have effective foreclosure mitigation for the naked pic i yield back the bounds of my time. >> i will yield myself 30 seconds and yield for his final statement, the german from texas. i'm guessing that when the gentleman from texas talk about the bailout partnership agreement, i gather he was chronically george bush and nancy pelosi kwok of arrangements it's every single bill it has been described at the request of president bush. although there've been continued by president obama. >> will the gentleman just a? has not the present continue these policies do? i just said continued by

continued by president obama. so i will repeat and give myself another 15 seconds to every single bill in america that is undergoing a was begun at the request of and in some cases unilateral decision of president bush. what we don't have is president obama contending those bills that that's what i'm saying. >> mr. chairman, can i have 30 seconds because i will yield. >> mr. chairman, i think the american people at this time they are not interested in whether it was president bush them weather was president obama, whether it was democrats, what is republicans, whether it was the congress or the at michigan, even whether it was wall street. i think the make and concern is whether we go from here and so i think we ought to focus speed i will yield myself time, i would have been more press with that if the gentleman, the german from texas said president obama in speaker pelosi. yes, i agree. i did not get into it until the

gentleman from texas at this is the present, i assume you made present obama. i appreciate the jones commented it came too late. pajamas time has expired. the gentleman's time has expired. >> having been here, mr. chairman, when the request was made for a toxic asset program to be implemented, and having seen the capital purchase program implemented, i do have some degree of institutional knowledge in terms of what actually occurred. and my hope is that we can get beyond the finger-pointing. but my sincerest thought is that we will not. hence, the truth has to be told. and it is only by telling the truth that we will make it clear to future generations of what exactly occurred. two points. won, we do have a can to concern

itself with what we call moral hazard. but we also have to concern ourselves with the in moral hazard. the moral hazard has to do with the possibility of persons taking advantage of a program specifically designed to help persons in times of need. the in moral hazard has to do with doing nothing after having seen millions, more than six, go into foreclosure, do nothing and watch millions more go into foreclosure. that is and in moral hazard. we have a great challenge before us. if we do nothing, the impact of the economy can be devastating. if we do nothing, the moral hazard will be secondary to the immoral hazard of having done nothing at a time when we are called upon to do much. i think we have to simply understand that we are here for a purpose. we are here to make sure that

moral hazard are avoided, and to make sure that we don't engage in the immoral hazard of doing nothing but i will yield back the balance of my time. >> all time has expired. we will begin with a statement and we begin here with barbara desoer was the present of the bank of america and homeland. >> thank. chairman frank, ranking member, and members of the committee, thank you for the operating to discuss bank of america's loan modification performance. providing solutions to distressed borrowers remains a critical focus and in the past two years with help more than 560,000 customers with a prominent modification including 33,000 under the home affordable modification program. . .

>> and customers with a debt to income ratio less than 31%. for those customers who fall outside the scope, bank of america continues to offer proprietary solutions. to date we've made hamp trial offers to 391,000 customers. however, despite aggressive outreach including face to face visits customers' homes, we have

not experienced the kind of response rate we anticipated. in addition, a significant number of customers in the trial modification period are not completing the requirements to obtain permanent modifications. we continue to look at ways to evolve the programs to achieve higher customer acceptance rates. recent efforts on principal reduction and second liens are examples of those. bank of america is supportive of principal reduction for customers who are experiencing hardship and have extremely high loan-to-value ratios. we recently announced enhancements to our own national proprietary homeownership program which strikes, we believe, the necessary balance between customer and investor interests. we understand that there are questions about the impact of second liens, bless you, on loan modifications and the use of principal reduction.

second liens need to be part of the modification process. however, we believe broad scale extinguishment is not the way. out of 2.2 million second loans in bank of america's held-for-investment portfolio, only 91,000 are delinquent and also behind a delinquent first and not supported by any equity. now, important to note that in our first mortgage held for investment portfolio we have already been modifying firsts including principal reduction regardless of whether or not there's a second lien behind it. we've also modified many second lien loans and written down a significant number of second lien loans as well. now, we recognize that more needs to be done particularly when the first lien is held by a different investor. and we believe a solution is contained within the treasury's second lien program known as

2mp. with 2mp the holder of the second lien is required to forebear a similar percentage as the first lien holder. we would advocate working on a similar industry wide process that would require the second lien holder to take a principal balance reduction proportionate to the first lien holder. bank of america's a proud participant in 2mp, and on april 1st became the first major loan servicer to begin mailing trial modification officers to home -- offers to home equity customers under the program. now, despite these considerable efforts, not everyone will be able to afford to stay in their homes. given the depth of the nation's recession, a considerable number of customers will need to move from homeownership to rental and other housing solutions. bank of america is committed to passionately and responsibly helping our customers make this transition. we recently launched the

treasury's home affordable foreclosure alternatives program on april 5th and have implemented our own expanded short sale program to help customers avoid the stigma of foreclosure and reduce the damage done to their credit. for those not interested in the short sale process as an alternative, we're stepping up efforts to provide incremental funding, excuse me, for our cash for keys program, indeed, in lieu program. we will continue to partner with public policy officials, community group and most importantly our customers to provide a dignified transition where required. at bank of america, we're working to balance the needs of customers, investors, shareholders and the communities we serve. we take very seriously our role in helping customers as well as restoring confidence in the u.s. housing market. we appreciate the leadership of this committee, and we'll continue to work with you to

develop solutions on these critical issues. thank you. >> i have explained that we have asked the four large banks here to send a high-rank officials, and if they wish to bring with them some who can do technical backup, we in this committee are well aware of the importance -- >> [inaudible] >> oh. i'm just explaining that we're going to be calling on every other witness because we have high-ranking executives, and they are accompanied by other executives who have the kind of knowledge that will be helpful together in answering the questions, so our next witness is mr. sanjiv das who's president, chief executive officer of citi mortgage. >> members of this committee, thank you for the opportunity to discuss citi's effort to help

families stay in their homes. joining me is steve hemperly, head of citi's default services operates, and i am honored to be given the chance today to describe our efforts. as citi's ceo has said, we owe a debt of gratitude to the american taxpayer, and we believe it is our responsibility to help american families in financial distress and, in particular, to help families stay in their homes. we are committed to modifying loans to customers facing hardship and helping americans in this difficult time. i joined citi in july of 2008, and in my role as head of 3 mortgage, i managed these efforts to help families pursue their dreams of buying a home, making their homes more affordable, or assisting those families who may be facing financial hardship. citimortgage has a long history of helping home own ors.

just last year we originated mortgages to approximately 336,000 homeowners totaling $80.5 billion. also last year we helped approximately 270,000 borrowers refinance their primary mortgages. and in the midst of this housing crisis, we have put considerable resources towards helping our customers who are facing financial challenges remain in their homes. we describe our lending and foreclosure prevention efforts in detail in a quarterly report that we release publicly and post on our web site. citi has worked closely with the u.s. treasury in developing and executing their making home affordable programs. since 2007 we have helped more than 825,000 families in their efforts to avoid foreclosure. we now have over 1400 new employees dedicated to supporting our foreclosure prevention efforts and have trained more than 4,000

employees to assist borrowers. our focus has paid off. we are pleased to be ranked consistently among the top, if not at the top, of treasury's rankings for h.a.m.p., and in the fourth quarter of 2009 we were able to help families avoid foreclosure by a ratio of 15 to 1. our goal is to work with our customers to find the most affordable solution and to assist those in need. at citi we have addressed affordability with programs which go beyond h.a. p m.p.. we believe these programs are responsible, timely and, most importantly, effective. our programs address core issues which borrowers face such as unemployment, imminent risk of default and the need for alternatives to foreclosure for those not able to afford owning a home. we have used and continue to use

principal reduction as a solution. to date, we have been able to address the needs of our borrowers on a case by case basis, tailoring solutions for a family's unique needs and to deliver an outcome that's affordable and lasting. we do not believe there is a one size fits all approach to affordability. the proof of this is in our low redefault rates which continue to rank significantly lower than industry averages. we caution that applying principal reductions on a broad scale could raise issues of fairness among consumers. we have also signed for the treasury's second lien program and support recent changes to h.a.m.p.'s first lien program. we expect these changes to result in more principal reductions going forward, and we will continue to be thoughtful in how we implement these programs. just as h.a.m.p. is not the only solution for all consumers, we believe principal reduction is

not the only solution for those who are experiencing financial hardship. while we have made progress, i fully appreciate there is more work to be done. we are staunch supporters of treasury's programs to help consumers because we believe that action among all banks will prove to be more powerful and ultimately more effective than individual bank actions in addressing consumer financial hardship. let me credit card by restating -- conclude by restating our unwavering commitment to help american families during these challenging times. all of us at citi remain focused on achieving affordability in a responsible manner while helping families stay in their homes. thank you, mr. chairman and ranking member bachus, for the opportunity to speak before you and the members of the committee. i'd be happy to answer any questions you might have. >> next we have mr. david lowman, i'm not sure which, who's chief executive officer of jpmorgan chase home lending.

>> chairman frank, ranking member bachus and members of the committee, thank you for the opportunity to appear before you today. my name is dave lowman, and i'm the chief executive officer of the home lending businesses of jpmorgan chase. i am joined by my colleague, molly sheehan. jpmorgan chase shares your commitment to helping homeowners and stabilizing our nation's housing market. at chase we are working hard to help families meet their mortgage obligations and keep them in their homes by making their home payments affordable. to date, we have helped prevent over 965,000 foreclosures through h.a.m.p., our own proprietary modification programs and other programs. we have financed at least $16 billion of loans under h.a.r.p.. h.a.m.p. has helped hundreds of thousands of homeowners achieve affordable mortgage payments. at chase we are completing more

than 10,000 permanent modifications per month, and on average homeowners are receiving a reduction of $540 through h.a.m.p. modification. that represents a payment reduction are of, on average, 29%. we are adopting and implementing the home affordable foreclosure alternative program and the second lien modification program to help more borrowers. we actively use temporary forbearance agreements for unemployed borrowers, similar to the program being contemplated by the administration. you have asked us to focus our testimony on second liens and principal forgiveness, and i'd like to make a few points on these topics. we have given these issues a great deal of thought, and my written testimony contains the result of our extensive analysis. there have been many questions about the role of second liens and the process of helping borrowers. we estimate that 70% of the first liens in our servicing portfolio are unencumbered by a

junior lien. 95% of our second lien borrowers continue to pay as agreed. even among loans that are underwater, 95% continue to pay as agreed. more than 90% of the customers with loan to values greater than 125% continue to pay as agreed. in our experience, second liens are not an impediment to first lien modifications. our h.a.m.p. first lien modification completion rate is virtually the same whether or not we are aware of the existence of a second lien. it's important to distinguish between payment priority and lien priority. in almost all scenarios, second lien holders have rights equal to a first lien holder with respect to cash flow. the same is true with respect to other secured or unsecured debt such as credit cards or car loans. generally, consumers can decide how they want to manage their monthly payments. it's only at liquidation or

property distribution that the first lien investors have priority. we routinely modify our second liens. we have offered almost 54,000 second lien modifications over the last 14 months, 1,000 of which -- 12,000 of which have been paid permanent. approximately 45% of these were on loans where we did not service the first lien. there are certainly individual cases or even segments of borrowers where principal reduction may be appropriate. last year we began testing targeted principal reduction programs for certain high-risk borrowers to see if a principal reduction program could be effective. once we see the results of these tests, we will be able to better evaluate the effectiveness of a broader principal reduction program. but we are concerned about large-scale, broad-based principal reduction programs for both first and second lien mortgage loans and particularly for current borrowers with an ability to repay their

obligations. our first concern is that such programs could be harmful to consumers, investors and future mortgage market conditions and should not be undertaken without first attempting other solutions including more targeted modification efforts. broad-based principal reduction could result in decreased access to credit and higher cost for consumers because lenders will price for principal forgiveness risk. less affluent borrowers will likely be harmed disproportionately. there's also an important issue of cost, a broad-based principal reduction program could have an industry wide cost of $700 billion-$t900 billion by our estimates. the costs to -- in addition, let me emphasize that we have contractual obligations to investors including fannie mae and freddie that generally do not permit principal reductions.

responsible lenders and major servicers are offering programs that incorporate principal reduction features for borrowers who most need that type of assistance based on the characteristics of the particular portfolio of loans. we believe these types of targeted solutions are more appropriate. thank you for your attention, and i'd be happy to answer any questions you may have. >> next, mr. mike hyde who is co-president of the wells fargo home mortgage. >> chairman frank, ranking member bachus and members of the committee, i'm mike hyde, co-president of wells fargo home mortgage, and i'm here today with kevin moss, executive vice president of the wells fargo home equity group. i'd like to begin by stating what we believe is an overarching issue that requires constant consideration. while very difficult to achieve, the needs and interests of homeowners in financial disstress must be balanced with those who have remained current in their mortgage payments. while much focus deservedly is

focused to consumers behind on payments, we cannot lose sight on the 91% of our customers current on their loans and the fact that 3% are just two or more payments past due. with that perspective in mind, let me address the assistance programs already underway and the program announced in concept on march 26th. first, for years we've offered a short-term relief option that since january of 2009 has helped more than 100,000 customers who have experienced unemployment or underemployment. it appears that treasury's new tar program is consistent with our own. if that proves to be true when the details are released, we could put this enhancement in practice in a matter of weeks. second, more than a year ago we began using principal forgiveness as an element of our wells fargo loan modification program. in 2009 we completed more than 50,000 such modifications with a total reduction principal of more than $2.6 billion.

granting immediate and permanent principal forgiveness, not an earn out over time. on average customers received a 15% principal reduction amounting to more than $50,000, and when combined with rate reductions and term extensions, dropped their monthly payments by 5%. principal forgiveness is not an across the board solution. not every homeowner with a loan balance that exceeds the value of their home fall behind on their payments. in so doing, they're protecting their credit standing. for this reason principal forgiveness should be used in a very careful and focused manner. through experience we have found that it's best used with customers in areas with severe price declines, where there's little prospect of full recovery of home values. further, they have suffered hardships but continue to have sufficient incomes to afford a lower home payment and want to remain in the home. in 2009 the redefault rates on

these loans were less than half the rate for similar loans in our industry. in 2010 we expect to use principal forgiveness under the same basic tenets. in addition, where available, we will use the h.a.m.p. program details to confirm our understanding absent any regulatory or accounting issues, we plan to implement the enhancements for first and second lien modifications as rapidly as possible. with respect to h.a.m.p. in general, from the very beginning we have said it's only part of the story when it comes to helping homeowners. since the beginning of 2009, we have initiated or completed more than half a million loan modifications, three-quarters done outside of the h.a.m.p. program. wells fargo is now doing three modifications for every foreclosure, and we insure all options are exhausted. with respect to hud's new fha refinance program also announced in concept on march 6th,

implementation will require significant work. as one of the two largest fha lenders, we plan to closely follow the guidelines set by first lien investors including fannie mae and freddie mac. we stand committed to insuring second liens do not prevent such refinances from occurring. in closing, our efforts to assist customers today are very different than they were a year ago. for instance, we have assigned one person to manage loan modification so by june a customer will know who he or she is dealing with from start to finish. we've hired 10,000 home press vegas staff for a total of 17,400, we've expanded 27 home centers, and we've instituted a five-day credit decision turn around for customers who require all of the documents. wells fargo remains commitmented to working with this committee and others on balanced initiatives that consider the needs of all customers, our investors and our country. thank you, and i look forward to your questions.

>> thank you. >> mr. chairman? >> yes. >> prior to the five minutes each, i want to say this and i want to compliment you. i'm not sure it was an intentional thing, but we had this hearing at 12:00 instead of 10:00. you know, the testimony usually comes in at night or late afternoon as it did yesterday. we were able, many of us, to read the testimony this morning prior to the hearing which was a great help, and i think it makes for a better hearing. >> well, i appreciate that, and i don't know if we want to set the precedent of members having to read the testimony -- [laughter] but i was able to, that clearly was something intentional. we were able to do it in part, look, we have a lot of requests for hearings, we have a hard time accommodating them all, and they put a lot of strain on the people who work for us. what i did today, we're not going until 6:30, so that's one reason we were able to do this

at noon, we're not going to be interrupted. members know i feel terribly guilty when very busy people, private sector or public sector, nonprofit, profit, volunteers, when they sit for an hour while we commemorate the winner of some baseball game before the house. and so i was able to move it to that time which, i agree, is a better time, and we'll work together as we have done maybe to pick some other days when members are coming and we start early. that was made possible by the fact we don't have any votes. let me just begin with some agreement that, yeah, not everybody who's in default is going to get help or should be helped. there are people who made mistakes and misjudgments. and i have long felt that we were pushing too many people into homeownership and not doing enough for rental housing, so that was no favor to anybody. i also believe, yes, when we're talking about people who had a loan and then took out a home

equity loan and enjoyed the fruits of that, those are not great objects of sympathy in cases where people cashed out. on the other hand, there are some categories of people -- [inaudible] let me talk in particular, do any of you differentiate based on unemployed? i mean, that's one of the things that i think we should do which is, yeah, you can talk about people who were either because they were persuaded to or they made misjudgments or some combination of fault, that's one thing, but there are people who are unemployed. you can't pay your mortgage out of unemployment. those are people, who seem to me, no one should be arguing. i don't think it's moral hazard, i don't think anybody's going to get unemployed so he can get a mortgage reduction. let me go down the list, do you differentiate at all on whether or not people have been unemployed through no fault of their own sh. >> are -- yes, we do.

>> let me ask you, three months -- i wish i could say up employment was so transitory that three months made a difference. i am disappointed in the administration here, i think that is insufficient. do you take that into account? >> each one is a very customized solution, so it depends on the state of delinquency at the time the request was initiated and that sort of thing, so occasionally we do, but usually it's within that time frame, and also there are regulatory -- >> i understand what you said, but i don't see any reason for being, not being very sympathetic to people unemployed. mr. das. >> chairman frank, you raise a very important point. the unemployed group of people are essentially getting hit by a double whammy here not only with house prices coming down, but also losing their jobs. we have the perspective of a year's advantage because we launched last march, so we learned a few more things prior to the administration's new program.

what we learned, sir, was that three months, between three months and six months to the point that you made earlier, we department want, we didn't want a program to be so long that it would change people's employment-seeking behaviors, and what we've learned is that it actually doesn't -- >> yeah, very hard to find somebody's going to not try and go back to work. >> correct. and that was our experience as well. we found that people looked for work, many of them found work, but more importantly, many of them found an alternative solution in terms of h.a.m.p. with us, so i would strongly recommend -- >> mr. lowman? >> chairman frank, as i mentioned in my testimony, we've had a program that, you know, provided forbearance to unemployed borrowers, it's been a part of our practices for a while, and we, obviously, embrace the, you know, new changes in the h.a.m.p. program

that provide the same. >> mr. hei, the? >> yes. we've done this for years, and i think in addition to what's been said, the key is to make sure the customer has the desire to remain in the home. >> i would think, you know, the question of fairness seem to substantially reseed when you're talking about people who are unemployed. we do other things. i would hope we would be forthcoming about that. let me ask quickly -- [inaudible] if the holder of the first mortgage is ready to do some principal reduction and you hold the second mortgage separately from that, are you prepared to do a proportional reduction? let me start with mr. heid. >> yes. especially under the 2mp program which has been mentioned earlier. >> so you would do -- >> that would be required. the other thing i'd say is in the 50,000 principal

modification forgiveness that we did as a first lien holder, we did not condition that. >> but not everybody's as nice as you maybe. so you would accept a proportional on the second if there was going to be reduction of the first? >> yes. >> mr. lowman. >> yeah. as a part of the 2mp program we would consider the same. >> [inaudible] >> actually we were using the fdic program prior to the 2mp program so obviously we will, but in the fdic program when we modified the first that was on our books, we automatically modified the second. >> my time's expiring, i would ask you all to let me know in writing of any circumstances in which there was a reduction that was going to be made in the first but you would not accept a proportional reduction of the second. i would like to know if there are any category of cases where there is separate ownership of the first and the second, where

you own the second and don't own the first, are there cases of categories where you would resist a proportional reduction because, i'll be honest, if there were, that would trouble me. the gentleman from alabama. >> thank you, mr. chairman. i'll say this to the panelists, what we're talking about is forgiveness, or what we're talking about is a benefit or really a modification of the contract. and i think it's important for all of us to know that anytime you create a benefit or an entitlement and whatever you call it, you create a need. mr. hensarling, congressman hensarling often says if you build it, they will come. and that's one of my concerns here. mr. lowman said 95% of borrowers are current. so my first concern is a social cost.

are people going to say it's not fair to me? you know, i'm, somewhere down the line i have to pay for this, so that would be one of my concerns, you know, equal treatment. is it going to create more really late payments and things of that nature? a second is the cost of mortgages going forward are going to be greater. it's impossible to start modifying contracts without that showing up in subsequent contracts because people are going to protect themselves from the risk that wasn't there before. and a lot of this i actually, jpmorgan chase's testimony, mr. sheehan and mr. lowman, was very good, and i think it was a thoughtful analysis. there is going to be a cost to everyone else in this. the third one, and this is something that we ought to all be concerned about, i think the

greatest cost is going to fall on those with less than perfect credit in the future. because it's going to raise what their down payment, some of that may be good, but some of it may make it very hard for them. it's going to increase the costs to those with less than perfect credit going forward. because sooner or later they're going to have to shoulder the benefit, and these are people that probably would not have defaulted. ..

>> it certainly would be a hazard and a risk that we would have to bear in the future. and as a result, we would either do one of two things. we would increase the down payment requirement to protect ourselves from that in the future. or raise the prices, or both. so i think the cost of homeownership in the future would be really increased as a result. >> does it the other agree with the analysis? >> yes.

>> yes, i would agree. after the wholesale reduction but i think that's a total amount and i do that as hypothetical because constraints that exist that i believe would stand in the way of ever reaching that number of making 100% of the borrowers fall to. >> i would agree with it. i would say the only other issue that i agree with barber it is hypothetical but i would expect it to increase but i think in trying with increased the number default if we do things like this that the cost would be higher. >> they need to be taken into account. >> thank you. yeah, i would also like to hear from the regulars. i don't know that bank regulars would want lenders to take such a risk, you know, some of the risk that may be associate this type of program. it certainly will have an impact on the financial, the finances of the company.

let me ask all of you this in conclusion. roll out of this 2mp program will not be affected until september this year. but under this program, a service or cannot execute a multiple foreclosure and to all available modification options have been dried. and i know the chairman has asked you all to write a letter basically saying that you will agree to that. does this, does this cause, particularly with a september 10 rollout, does this basically really operate almost like a six-month mortgage foreclosure moratorium? >> the 2mp operates as a modification of the second deed of trust after the first mortgage has been modified into a permanent modification pics of the foreclosure event is passed, as long as the first mortgage

modification continue to perform. and then it is just a difference in timing between the modification of the first and the second. >> as a practical matter do you think this will sort of be viewed as a mortgage foreclosure moratorium? >> i don't believe so, no. >> how about the other institutions to? i think the one piece that is getting lost in some of these broad, sweeping delays on foreclosures, there are a number of vacant properties that are also being swept up into the. so communities are being harmed by the fact there is a vacant property sitting there, can't move the process forward. i don't believe that was the intent but that's one of the cash of these of the process that is now unfolding. >> and has a tendency to slow the foreclosure? >> yes. >> would the gentleman yield? i was a car for any -- mine was contingent. that does not impose a requirement to modify the first

where someone -- they can do it in her out of the 2mp program. >> so it still be voluntary on everyone's part, is that correct? >> well, as i understand ,-comit, and less they change the law, yeah, it's voluntary. i voted for bankruptcy but -- >> we have a tendency to all of a sudden say you made a commitment to do something. i didn't know whether these letters, you know, when you say assurances, i don't know what that means going forward. >> the gentleman from pennsylvania? >> thank you, mr. chairman. i'm sitting here asking myself the question why are we here today? it seems you all are very happy with what's happening in 64% of the market that you control. and i haven't heard anybody make a suggestion that you have a plan or you're able to put a plan together better than what's presently being implemented. is that a correct hearing of what your testimony is?

>> iii, i would disagree with that. the kinds of recommendations are to embrace the programs that have just recently been announced and launched 2mp. we started mailing our first from modification under that program april 1. the home affordable foreclosure alternative short so program just went into effect april 5 so there is new performance that will indicate whether, in fact, there is for the impact it back and have. and then finally the principal reduction and things like the fha refinance that has been recommended while go into effect until the fall. so i think there is certainly more that needs to be done. i think that our testimony what we -- >> let me ask the question if i may. i am limited in my time. do we have to do the after work here in the congress, or is the private sector able to come up with the solutions to this? it seems to me just before

institutions at that table can't get together and conspire, but he too came up with good ideas and implement them, would it require congress to take any actions to? i would say much of that is occurring that each of us has stated a number of home on of patients that are happening outside the various government programs, so i would say private sector is already stepping forward. >> very good. the only question enlisting to the testimony it doesn't seem the numbers are very high with what's being done as of this present time. there are a hell of a lot more potential foreclosuforeclosures out there that may because i may come about because we quite haven't arranged things that is that a correct impression on my part? or do you think you are at the absolute optimum level and we have nothing more to do with what you're doing is going to satisfy the market that because i want to make, just the observation, we talked about, we want to help homeowners stay in homes if they want to and are disposed to do so. but let's not miss the fact that we're trying to get the economy stimulated. if we can get home being sold

again and finance again, we can change the recession to a recovery. and we can be on our way to some good times. but i'm getting the impression from the testimony of the witnesses that's far that everything is hunky dory and we don't have to do anything. i'm wondering why the chairman got me back so early today for the searing. >> if the gentleman will yield? because i sometimes find have been called a hearing, things get hunky or and door your between the time the hearing is called and the time that we have the testimony. [laughter] >> good observation, mr. chairman. i heard one part that does distributed mr. miller in his introduction talked about the internal conflict between the service or an owner of a lien position. quite frankly, maybe you are marvelous in your approach in the private sector, that that conflict never arises, but i have a hard time believing that. and i'm wondering, do you see a need for us to address the issue of separating and taking away

that conflict of interest? either you could be an owner of a lien or you could be a service or of a mortgage, but you can be both. can i just had your expressions on that? >> i do not feel that that is required. when you look at our portfolio, first mortgages, about 30% of them have a second lien behind them. about half of those is us, half is another investor. and i think i heard another comforter say a similar statistic. but as i mentioned in my oral testimony and my written testimony, that we are doing modifications. but the issue is that a holder of a first, an investor, would not want to make a principal reduction that could benefit the cash flow of the borrower, if the borrower turned around and use that cash flow to pay his second. and that's why our recommendation in the testimony is to further advance 2mp from

principal forbearance on a shared percentage basis across the first and second, the principal forgiveness, across the first and the second in a similar percentage. would help resolve that. >> i would add to that. we all have requirements on us to service the first mortgage appropriately. so i think that topic and that issue is getting lost in the mix. i do not believe it's appropriate to legislate this matter. and i think the customer choice is really the missing piece in terms of where the cache is being sent. it's not because there is a shifting of cash between first and second import photos or anything the sort. >> do you think the customer is anything to do with the serving of the mortgage? >> no, what i'm saying is the customers choosing which bills to pay. >> on paying the bill. but not under the advice for the service or are not with any coercion or any thought process? >> that's my belief.

>> congressman, i would say that the modification on the first which happens to be the single biggest debt for most consumers has been the one that we have led as opposed to what the investors might want. but i think what we really tried to solve here is solving the greatest source of the stress for people, and to help keep them in their own homes. the issue in separating the two is that, as we know, there's about $440,000,000,000.2 mortgages and it just wouldn't be enough liquidity if we didn't have the same services. so i think there's a certain amount of liquidity that needs to be looked at. but there is no conflict. >> the gentleman from texas. the gentleman from illinois, i'm sorry. the gentleman from illinois. is that -- i go back. the gentleman from texas. >> thank you, mr. chairman.

[inaudible] >> thank you. when i listen to your testimony is you want down the line there, i heard you talk about some of you participate in the h.a.m.p. program and others have done things in house and i think he used the word proprietary. but i also heard was hat program has not been overwhelmingly received, or effective up to this point. so i guess the question, just kind of go down the road there, is, you know, why isn't the h.a.m.p. program working and are your proprietary solutions better than the h.a.m.p. program? >> it very much depend on the circumstances of the borrowers. i think the energies of the h.a.m.p. program and what it's done for the industry in establishing standards that enable us to apply programs across the portfolio has been a real advantage. but there's no question that there are certain borrowers, a

jumbo mortgage as example of that the that, non-owner occupied property, and fha loans where h.a.m.p. was not built to modify those loans, and that determines the need for special fha programs or special proprietary programs. the to work in complement. and i think as an industry where just trying to get the message across that both are effective or whom they are targeted at. we agree that we're disappointed in the poll through rates to permanent modifications under h.a.m.p. of our performance so far and that's what we've been working on are fixing but both are required because the portfolio requires a. >> i have a different view on h.a.m.p. if you recall this time last year there were a lot of proprietary programs that all of us banks and consumers were very confused. this is a large-scale problem, and consumers need to know what options available to them. so i think h.a.m.p. provided the

standard view of what a consumer would expect when they called a debate. and so we took it very seriously and we walked out of the treasure offices out there, and ended up with 52% of our initial portfolio on a hand drum. and what we find was, not compared to the 20% of the rest of the industry. it depends on how you adopted. either give you an example. 33% of all the portfolio loans have been h.a.m.p. by citi. compare that to a foreign office that we have. our experienced on booking rates is pretty good. we have been constantly contacting our customers to make sure that they understood what they were signing up for the document need to come in. and i will say with respect to occupy, that that is our number one priority. we need to keep people in their homes.

and i think that h.a.m.p.'s focus was good. i think it's an unfair share of publicity on it, negative publicity on that it i applaud the treasury for having come up with a program. >> mr. roman? >> we believe h.a.m.p. as a good program. i think one thing that we just need to remind ourselves, we put a program in at lightning speed from the time it was announced to the time implemented, systems, processes, new sites for people to sit in and thousands of people. we had a lot of earnings along the way. and i think we continue to be able to shape the future of h.a.m.p. i think the new requirement that was just announced that require the documentations of the bar with a situation, you know, prior to the commencement of the trial will prove to be, yeah, really effective.

>> mr. heid? >> i think the discussion around h.a.m.p. has also done has encouraged consumers to reach out, make contact with their service or for assistance but i think that's been a very positive vote in addition to the standardization. if anything is getting lost in the discussion i think the piece that is getting lost is the fact industry is doing substantially later number of full modifications and outreach efforts and providing assistance in ways that go well beyond the h.a.m.p. program. >> i think that was part of my point. my final point, my time is going to run out. here's the whole scenario. one, i don't know the government needs to be sending a signal out there when politicians get up and said no one should lose their home, and so that raises an expectation level that gosh, i'll need to do is call my linda because i heard that the president said last night know it should lose their home. when a customer calls you, and he and his neighbor bought the house at the same time, paid the same amount, and that neighbor

started saving some money, put the money behind, and now their neighbor is leveraged up their house, bought a book, charged up a bunch of, put a second loan on the home. and now they're going to get a participation from, reduction in created equity by either a federal program or your lending. and the guy next door is out of a job as well, but he is using his savings to make his payment. and again, we are going down this road where we keep having the government pick winners and losers. unfortunately, in this case the people who are making their mortgage payment are going to be loses. there's something wrong with a system that supports that. >> the gentleman from kansas. >> thank you, mr. chairman. i understand some are concerned about the moral hazard of reducing principle on a mortgage, but it also seems unfair to be blaming those of homeowners for housing bubble they didn't create that artificially inflated home values that many recent foreclosures are due to

unemployment, but we would have millions of unemployed americans into first place if it weren't for the subprime lending crisis that was at the center of the financial crisis. i offered an amendment to h.r. 7020 which was later incorporated in the house passed reg reform built to strength are mortgage underwriting practices. my amendment requires a borrowers income be verified to we can put an end to the dangerous products like no-doc loans that created so much damage in a housing market. what each of the four banks represented here, do you support income verification requirements? and instead of getting on housing prices to go up forever, how have your firms change or underwriting practices to focus more on a borrowers ability to repay? >> yes, we do believe verification is part of the pool documentation process but as you know most of the production being done in the market today is with the gse's or faq which of those records as well but we also do it for our own

portfolio. >> mr. schakett? >> we do the same. verify income and we continue to do that on the origination. >> yes, sir? >> we began requiring full documentation in late 2008 so we have no programs that don't require. we fully support it. >> we published our responsible lending pretzels on her website back in 2004. i believe very strongly and ability to repay and fully support document cases. >> thank you. in an article in american banker lastly, bank of america spokesman said we support the idea of a consumer protection and be consistent with the pretzels of federal preemption and believe that any new regulation should focus on activities that would apply evenly to all rather than to focus on particular entities, and a quote that i should that be which is what i support an independent cfpa and work with represented and others to return us to a pre-2004 preemption standard balancing the need for

state-supported enforcing consumer protection laws and and fair uniform standard that provide some clarity across the country. representing to confirm your spokesman's statement, this is our, does dfa support the house passed and senate banking every consumer protection provisions coupled with a pre-2004 federal preemption state and what stronger consumer protections help mitigate against a future wave of foreclosures to tamp down housing bubbles? >> i agree with the statement that a spokesperson made from bank of america about the support that and i do believe that a level playing field of relations and the consumer space would help avoid problems in the future, yes. >> okay. any other comments because we feel the same way at citi. however, we also feel it's important for us as an

institution, that every institution should do, to take our responsibility very carefully which has been laid out by our ceo, mr. pundit, and the context of a responsible financing within the country. >> thank you, sir. spirit our chairman has also spoken extensively on the need for regulatory reform. and so we would support comprehensive reform. obviously, he's also reiterated the details. >> we believe that national act system of national product is good for. the best way to achieve that is the national standard and well-to-do regulation i think the key needs to be to make sure the regulation of to what state on unrated is the. >> finally, one ongoing concert is some homeowners may not be aware of opportunities either offered voluntarily by financial institutions or to government programs like h.a.m.p.

and i think maybe some of you have spoke to before but to the four banks have been here, what steps has your bank taken? anything you can add to what you are he said, to make people aware of this opportunity. any of you, please? >> extensive contact and creative ways to started that contract using local community, nonprofit organizations were some mighty morphometric and feel more comfortable and responding to someone participating in housing events across the country. would participate in over 250 last year as ways to attract consumers and borrowers to a place where we have representations to support those, telephone contact, e-mail contact, texting contact. were trying to be as great as we possibly can. >> thank you, mr. chairman. i see my time has expired. >> the gentleman from illinois. >> thank you, mr. chairman. i got really two questions. first of all, i would like to

know, you know, we are hearing about the regulars coming in and saying to the banks that you have to write down certain loans because they will not be good in a year or two. and i wondered how this affects -- or if you're hearing from regulars at about the potential write-downs associated with the second liens program. is there concern, to your bank, about how this will affect your balance sheet in the near term? anybody would like to answer that? >> i can take that. i think the concept of writing down our extinguishing second mortgages needs to be re-examined. and i believe it has been. i would say that when we do a

modification we should look at the potential loss of income. that's the piece that we should really be accounting for. i think that we may be going to the other extreme and sank the second mortgages are nothing but, in fact, all those we have also by large second marches are performed well. the reason they are performing well is because he did take a look at them, borrowers did look at them as an important source of cash flow and can not to think about them as in terms of how much collateral they have, the equity in the home. is almost an unsecured line of credit. i think they need to be taken into account. >> do you think that will affect your availability, credit for consumers? will this have any effect? >> no. the way it is structured right now is we are lending would lead to prudent customers. but i think that taking it too far to the extreme could have the potential of limiting the

number of second mortgages that will be available to consumers spent anybody else? >> i was at i think that hotel the of all the programs and all the changes that are happening and yet to happen, i think all that will certainly be factored into credit decisions in the future. >> than just another question. with the fha refinance program and tends to write down the total debt obligation in the primary mortgages and the second liens to 115% of the current value. do you have any concerns about the appraisal of these properties? how are they going to determine what is the current value? it seems like this is kind of an unknown right now, particularly if they use commons. will this require an appraisal? what's going to happen with

that? >> this would be under a standard fha financing that exist today which requires an fha appraisal to do an updated appraisal, and the industry is, we did $378 million of new originations on mortgages last year, all of which had an appraisal associate with it. so we are finding a way to what is a difficult period of time to establish comps and that sort of thing. but it is happening day in and day out and that would be barred under the fha refinance as will. >> is there kind of a percentage of lowering what was originally the appraisal on the how? >> no, it would be whatever the independent appraiser thought the appraised value of that home list today. >> anybody else because the details of that refinance program have been provided. the concept have, but to the extent the ultimate program

details follow the standard fha program as it now exists, there's a an established mechanism for getting property values using designated a praise and i can think it's i would anticipate that being a problem, as long as ultimate role out of new fha program called as closely as it can to stand requires of fha could. >> thank you. i yield back. >> the gentleman from oklahoma? >> thank you, mr. chairman. i know the idea of taking a program to reduction in principle and second to any was supposed to send generous, but firstly hold and secondly those don't have an equal claim. the way the law is supposed to work is that first mortgage holders get paid everything between second mortgage holders can do anything. second mortgage or so is everything for first mortgage holders lose anything. so suggesting that a service or

a green to a pro rata reduction of the second that they hold, that they own, to go with a reduction in principle that they agree to obey have of investors strikes me as evidence of a conflict of interest, not an absence of a conflict of interest. in mr. loans testimony, he said that the pooling and servicing agreements for private label securitization of mortgages mortgages, as well as an and freddie's to a larger extent would require a change in the agreement to make it legal to modify, to reduce principle. and it will be very difficult to agree to get to that kind of an agreement by everybody and everybody's interest, or different -- have been a lot proposal i had to cut to the kind of legal problems. and i have thought that there

had to be something in voluntary to do it, what it was purchasing purchasing, how the government purchase mortgage interest to eminent domain and then modifying ourselves, which is similar to what the homeowners loan corporation in the great depression. or modification in bankruptcy to citigroup came to support of that two years ago, which i appreciated. bank of america went to the brink of but never quite got there. what is your current positions to? thank you. our current position is, as we have gone through the lessons that we have learned with modification and other programs, there probably is some segment of boroughs for who that would be an appropriate alternative. so that is our position at this point in time spent so you would support that in some circumstances? >> in some circumstances, yes. >> thank you. it will have to be modified to have a circumstance. we can't change case-by-case.

>> it would support a legislative change in the bankruptcy law to allow the modification of home mortgages in bankruptcy. >> yes, and i believe there is a sentiment of borrowers for whom that is the a program alternative and subject to than having gone through qualification for h.a.m.p. or something like that and failed, that there is a sentiment for borrowers for whom that might be an appropriate alternative, yes. >> i think there's also, many customers are getting assistance in terms of this programs i think you have to ask yourself whether changing bankruptcy law is the best way and fastest way to achieve assistance for homeowners that i think there's another alternative. >> we are trying other alternatives that have been for three years, and without much to show for it. stress test of a year ago assumed that second mortgages held by the 19 banks were