minority with and turn this country around. i think this country is dying from a thousand cuts. guest: i think the caller is expressing a really common view among folks in this campaign season. they just don't view years in congress or incumbency as any sort of endearing trait. they think it is the opposite. if you have been in congress, you are part of the problem and you contributed to the national debt. if you have helped put this country in the current economic situation. so, the majority of our poll respondents in our final week said, no, they don't you experience in congress as an asset and i think that is why we are seeing a lot of businessmen, candidates with private sector backgrounds making bids in areas such as the northeast and new england, southern virginia. we are seeing a lot of folks who are not coming out of the

farm leagues of politics. they are really just coming straight into it from a private sector background that i think they are being supported by folks who, they want to take a new direction to congress. host: gulfport, mississippi. go ahead, penny. caller: how are you doing today? i am calling because my congressman taylor, i am telling you, i just love this guy and i would like to hear more said about him because this guy has been true blue as far as conservative. he has always supported the veterans. host: he just announced recently that he voted for john mccain, didn't he? did he have any opposition down there? caller: i love the tea party, but this guy that he is running against, he has been a state congressman. host: we have to leave it there.

we are out of time. sean miller, does he have any worries? guest: he does. normally taylor is a guy who wins with considerable margins. he was caught and but flatfooted in terms of fundraising. he is trying to turn it around. as the caller said, he is very likable and charismatic guy. well liked in the district. he will have to work for this one. i do not think he is in as precarious position as the freshmen, but it definitely has a race. host: travis -- how far is he down? guest: about 12 points, and that is a district republicans have typically help. childers was a successful in a special election two years ago when the republicans were quite divided. they ended up shooting themselves in the foot.

and when he won the full term in november he has the power of incumbency and now he is running hard against nancy pelosi and the national party but he is really up against it. host: sean miller, "the hill" reported. this was the front page of this morning's "the hill." thank you for being on "washington journal." now we will go live to the congressional oversight panel hearings for tarp foreclosure mitigation programs. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> all these goals, offering of these is hardly a goal of all for it the measurement of

success from his ultimate aim as expressed by the president to keep homeowners in their homes current in many ways, it is like a major league batter pledging to swing at every pitch. it is not how often use when, it matters how often you get on base. i hope the treasury takes the hearing today as an opportunity to define more concrete goals for success for foreclosure prevention. most fundamentally, here are my main questions -- how many foreclosures must be prevented? what re-default rates can we expect? how many modifications will revert to permanent status? clear answers are important for treasuries on ability to measure and improve its results. i have evidence that the foreclosure picture improved dramatically since the panel's last examine the issue yet all evidence seems to be to the

contrary. of particular concern are reports that banks and loan of the services may have rushed their foreclosure service by relying on affidavits which was signed by employees with no knowledge of the underlying facts. these reports are underlying investor confidence in the mortgage market and they threaten to undermine american'' fundamental faith in due process. if these reports reflect the disregard of banks, that alone would be unconscionable. it is conceivable the banks' problem is even worse for the bank said it failed to follow the legal steps necessary to ensure clear title. as investors lose confidence in the ability of banks to document their ownership of mortgages, the finance industry could suffer staggering losses. the possibility is especially alarming coming so soon after taxpayers spent billions of dollars to bail out these same

institutions. i do not want to prejudge what we will hear from the witnesses. i am concerned. i am concerned in part because it is the panel's mandate to oversee treasury's foreclosure program and the overall stability of the financial system. much more critically, i am concerned because across america, our mothers and fathers, sons and daughters are losing their homes. i do not pretend that every foreclosure in this country can or should be eliminated. even so, every foreclosure is clearly a tragedy. every time a family is kept out of their home, their future is cast into doubt and a neighbor of its home prices plummet and their town's ability diminishes. the american dream takes a step backward. treasury cannot and should not prevent every foreclosure in this country, for sure, but it can and must too far, far better. before we proceed, i would like to hear from my colleague. >> thank you, senator.

since this panel last addressed the treasury foreclosure mitigation programs funded under the tarp, questions have arisen as to the identity of the legal owners of countless morgan's loans that serviced residential mortgage-backed securities or what i refer to as rmbs. whether the alleged donors' deliver clear title upon foreclosure or other transfer of the mortgage property. although the securitization trust organized with respect to each rmbs should hold clear legal title, such assertion is not free from doubt. it is possible that some of these special purpose entities may be divested of their putative ownership rights in their mortgage loans or are required to incur substantial fees and expenses so as to reflect the proper chain of title to the promissory notes, mortgage lanes, and security

interest in accordance with applicable law. investors in rmbs are asserting that mortgage loan originators breached warranties provided in their rmbs securitization documents and the securitization trust and their service errors should undertake to put individual residential mortgage loans back to their loan originators. these investors may also initiate claims against the securitization trust and their sponsors and servicers for breach of contract failure to apply with applicable law and fraud for individual mortgage loan borrowers or class of borrowers may initiate wrongful foreclosure and other actions against the rmbs securitization trust and services. such claims may be compounded as the rights and obligations of a party to collateralized debt obligations and synthetic collateralized debt obligations are considered.

since dark recipients acted as mortgage -- since tarp recipients acted as sponsors, credit defaults what protection buyers and sellers under a they couldnd rmbs, suffer substantial losses and impairment from the exercise of these legal rights and remedies. since fannie mae and freddie mac also acted as rmbs sponsors and given treasury's on limited support, fannie mae and freddie mac may serve as targets for aggrieved investors in mortgage loan borrowers. conversely, the gse's acting on behalf of the rmbs securitization trust may undertake to put individual residential mortgage loans back to his heart recipients and other financial records as -- representatives or cancel the

guarantees issued for the benefit of the rmbs holders. the rights would create much uncertainty for tarp recipients and other financial institutions as well as for the residential mortgage lending and rmbs markets. the operating cost of many tarp recipients are rising due to commercial and consumer loan defaults and foreclosures while operating revenues remain relatively tepid due to weak loan demand and an overall sluggish economy. if another liquidity or solvency crunch falls during these events, it is not inconceivable the rating agencies may downgrade the rating of certain mortgage loan originators. this is noted above and includes tarp recipients and noted

financial institutions. this action could adversely affect the broader economy. in my view, the administration's foreclosure mitigation program including all the programs have failed to relieve stress to homeowners. the administration has inadvertently created a sense of false expectations among millions of homeowners who reasonably anticipated that they would have the opportunity to modify a troubled mortgage loan under the hap and the harp. the best foreclosure mitigation tool is a steady job. at a fair wage and not a hodgepodge of government subsidized programs that perpetuate more -- and hazard risk. i question why the taxpayers should subsidize mortgage lenders and rmbs participants when it is most often in the best interest of such parties to

forgive principal, to forgive principle and to modify a refinanced troubled mortgage laws without government assistance. why should the taxpayers provide incentives when they are neither needed or merited. as such, i would strongly recommend that each mortgage loan holder and rmbs investor and servicer work with each of their homeowners in professional good faith, transparent, and accountable manner to region economically reasonable resolution prior to proceeding with a foreclosure remedy. in my view, foreclosure should serve as the exception to the role that only follows from the transparent and objective failure of the parties to modify or refinance a troubled mortgage loan pursuant to market-based terms. thank you and i look forward to our discussion.

>> thank you. >> thank you, mr. chairman. good morning, before i begin with my statement, i just want to say that i want to associate myself with the comments of the chair. and i have not heard the comments of my other colleagues. the fourthring is this panel has held addressing the foreclosure crisis. congress explosively required in the emergency economic stabilization act of 2008 that the powers it granted the treasury department in the act be used in part to reduce the incidence of foreclosures. in response, the treasury department in the spring created the hamp program and the treasury has created other programs. i am pleased to welcome ms. caldwell as the director of those programs on behalf of the

treasury department. as i have said on every hearing of this panel, foreclosing on a families, is not a matter of mere financial transaction. it marks a profound financial loss for the family and often devastating emotional defeat for the adults in that family trips psychological trauma for the children, falling property values and destabilized committees for the, as neighbors. foreclosures are a sure sign of a failing economy and a society that has been unable to provide basic economic security to its citizens. mass foreclosures should no more be encouraged by our public officials then should contagious diseases or catastrophic floods or crime. these reasons alone would justify aggressive government action to prevent foreclosures in the wake of the housing bubble and the academic of exploited lending practices by

our financial institutions. the social impact of foreclosures is not by any means the full story of the harm done to our country by the foreclosure epidemic. a mass foreclosures drive down real-estate prices, you can see that in the numbers that were announced in this way. they shrink the wealth of american households, not of the people being foreclosed but of all homeowners. mass forecloses weaken consumer confidence which underlies whether or not our economy will recover from the economic crisis and mass foreclosures threaten the solvency of our financial system through their effect on the strength of the real-estate market. it has been cleared since the beginning of the financial crisis that bar wars, lenders, and the public at large had a profound interest in restructuring loans to enable homeowners to have the ability to make lower payments to stay in their homes.

by the way, for those who are concerned that somehow there is something morally suspect about restructuring loans, i should note that every day on wall street, people of power and privilege in this society restructure their debt. it is commonplace for everyone but the port. or. as the financial crisis escalated, the banks simply did not restructure the loans. the treasury department creative hamp offering $50 billion in incentive for the banks to restructure loans. yet a year-and-a-half later, we have only 467,000 permanent modifications, genuine restructuring, compared to 7 million homeowners in the process of foreclosure. let me know and perhaps this is a slight different emphasis that i think that helping 467,000 families avoid foreclosure is a good thing.

it is a very good thing. it is substantially better than not helping them. it does not appear by any means, by any measure, to be good enough. now we have learned that the foreclosure process itself and our system of property law is cracking under the strain of bible and a bust in residential real-estate market. there appears to be strong evidence being investigated by 50 state attorneys general and a federal task force that servicer banks have improbably executed and filed with the court's a large number of affidavits in the pursuit of foreclosures. worse yet, since the affidavit revelations, evidence has mounted there are expensive problems with the liens that produce securitized mortgages. today, i hope we can shed light on whether 467,000 permanent modifications plus another 20,000 or so per month is the best we can hope for from hamp. i am puzzled and mystified as to

why one community that i am familiar with with a budget of less than $20 million, less than a 1/1 thousandth of hamp, they seek mortgage modifications. i have seen the community group do this. i watched 20,000 people come through the washington convention center not six blocks from a year in one way. i don't understand what is going on in terms of balance. i would like to know whether hamp has paid out money to make sure they did not foreclose on homeowners in situations with -- where the servicer did not have a ballot lien or filed a force affidavit with the corporate what plans the treasury department has for finding out whether this thing has occurred and whether public moneys have been paid out effectively under

false pretences or based on false affidavits. i would like to know what plans the treasury department and the occ have for dealing with the possibility that either the major servicer banks will be held liable for their failure to properly serviced $7 trillion and mortgages or that the collateral for significant amounts of mortgage loans turn out to be invalid. these possibilities what appeared to produce systemic risk. in particular, it would appear to have grave consequences for the very institutions that tarp initially capitalized and were allowed to exit qatar on the theory they were now healthy. this hearing involves some of the most important issues facing our country today. i look forward to the witness' testimony. i thank you for your indulgence. >> thank you. >> thank you. the issue before us today is foreclosures and the government's efforts to mitigate foreclosures remains quite contentious and fraught with

strong feelings among the people debating this issue and making policy. when considering the effectiveness of programs designed to mitigate forecloses, in my opinion, it is important to keep in mind that the primary goal and one of the goals of the original legislation is to return the economy to a place where it can begin to grow at a pace that helps everyone currently in this -- in distress. all of us like to return to world where we have steadily rising home prices, low on an, rights, and an economy that is growing at 4% as of 5% per year. this is not the world the current 11. we are in an economy where housing prices nationwide have fallen by 14% from their peak enterprises and the large metropolitan areas have fallen by 1/3 and annual sales have plunged by over 40%. the housing market has been in this equilibrium four years before the recent discovery of

the problems of foreclosures. the important question is what are the best policy for helping the housing market return to stability. until we achieve stability in the housing market, the economy will continue to limp along at 1%-2% growth and unemployment will remain unacceptably high. one of the main problems is that during the 2004-2006 period, many people borrowed money to purchase houses or took out home equity loans predicated on the belief that housing prices would continue to rise. as long as they kept rising, investors could refinance these loans at lower race-based -- based on the accumulation of equity. when housing prices climb, these people were left with homes that were valued at less than the amount they owed. they're unable to refinance their lawn and face loan payments beyond their means. the question is what can we do about this probe -- problem now? one of the government's response as is the program we are

focusing on today, the home affordable modification program or hamp. this is presumably designed to help borrowers stay in their homes. the question is whether the program is effective and how the program of tax the broader economy. it works by reducing the monthly mortgage payments of bar wars and a term extension and/or a reduction of up to five years. then the program and send interest rates can gradually return to the prevailing rate in place of the modification that was made. it seems unlikely that bar wars especially those with negative equity will be able to keep their homes unless we see dramatic improvements in the housing market which seems unlikely at this point. the monthly debt payments are equal to their income and it is hard to imagine any government program putting a significant dent in this number. this program is focused on borrowers who cannot make their

monthly payments even though they are currently employed and not under water. this despite evidence from researchers at the federal reserve bank of atlanta and boston shows that workers who have experienced a temporary shock such as losing their jobs is much more likely to result in the honors keeping their palms. it appears that for most participants come hamp will only postpone the inevitable. despite all the attention they have received, homeowners with mortgages were not the only report by the financial crisis. millions of homeowners who did not have mortgages saw the value of their homes plummet and this is devastating for those who want to use the equity for their retirement. their retirement savings declined significantly and families lost significance in their college savings accounts. for all of these people, relief

will only come once the economy starts growing again. that growth will only occur once the housing market is stabilizing and that stability will not develop until people moved out of homes with mortgages they cannot afford an into housing they can afford. to the extent to hamp takes the can down the road, it ends up hurting all these people who are desperate for the economy to start growing again so their lives can return to normal. i recognize that some borrowers may have been misled in taking out loans they could not afford the perpetrators need to be prosecuted. i also recognize there have been serious mistakes and perhaps fraud committed by servicers and lenders in the landing and foreclosure process and any illegal activity needs to be fully prosecuted. i recognize the tremendous pain that accompanies any foreclosure. it is devastating for families. it needs to be avoided whenever possible. there's $30 billion and dedicated hamp and i think we

have to ask whether it is being used affectively. in other words, perhaps the start to examine a hamp is a program that will bring stability to the housing markets of the economy can start growing again. >> thank you. >> ms. caldwell, you and the department of the treasury does are substantial credit for pushing an industry toward more -- mortgage modification and preventing avoidable foreclosures in a standardized format when the industry itself failed to properly act. in this way, the treasury program has shown great potential. thanks to your work, we have a new industry standard that has kept more people in their homes that otherwise would have been able. certainly more thanhamp's monthly report demonstrates. this has been a major

disappointment that the public and the panel have no way of meaningfully measuring success pertaining to the alternative non-hamp modifications. the available sources of data are simply inadequate for anyone to meaningfully assess performance among servicers board determined that these proprietary modifications are in deep helping successfully helping people. in addition, the current report does not provide the public and effective means to assess performance among servicers or to serve as an effective supervisory tool. own havetrics on their stated that they have fallen far show -- far short of our hope. we have 700,000 families who trialbeen killed hqamp's

modifications -- who have been fileed a hamp's modifications. these 700,000 families far exceed the 500,000 families who remain in the program with modification. the future also looks somewhat bleak. the number of newcomers entering the program each month is now near its lowest point. there have been more than a r ae-defaults after a long-term modification has occurred. this may be our last hearing on treasury foreclosure medication initiative. it is not as critical that we help the public fully understand success and failure is, but we must get to the bigger question -- is this the best the government can do to demonstrate a way for? ms. caldwell, for whom i have a greater respect, knows better

than anyone that unemployment and deep negative equity have been the driving -- have been driving foreclosures in a wayhamp simply can't address. this will continue to his family started treasury announced several new unemployment and negative equity programs in response but again, it is disappointing that six months later, the public still has no meaningful way to ascertain how these new initiatives are performing. as a final manner, i intend to explore with all our witnesses the issue of confidence. given many of the mortgage records, poor track how do we continue to look homeowners in the eye and asked them to continue to work with their servicers given the latest news about fraudulent affidavits. the servicer is at a minimum now have even higher burden of proof

in demonstrating they are serious about their stated efforts to work with american families. i am grateful to you for being here today and want to thank you and highlight not just your public service at treasury, ms. caldwell, but through a long career of work for the underserved. i look forward to speaking with our other five knowledgeable witnesses today. >> q. thank you. i am genuinely pleased to welcome our first witness, phyllis caldwell. thank you for joining us and thank you for your truly great public service for it we will ask you to keep your oral testimony at 5 minutes so we will have adequate time for questions. please proceed with your testimony. >> members of the congressional oversight panel, thank you for

the opportunity to testify before you today on progress the administration is making on helping responsible homeowners stay in their homes and stabilizing the housing market. my opening remarks will focus on three things -- the administration's response to recently reported problems in the foreclosure process, efforts that treasury is taking to ensure service to comply andham is withp guidelines, and and really look ha impactmp has had to date. we expect banks to follow bowl loss for any bank that has not done so should be held accountable and should pay prompt to correct its mistakes. the administration supports the efforts of the 50 states attorney general's curre. we have been working closely with a broad range of federal

agencies and with the state attorneys general to get to the bottom of these problems as quickly as possible. last wednesday, secretary donovan and guide our met with representatives from 10 different regulatory agencies for the latest in a series of meetings to coordinate reviews on this issue. these state and federal agencies and regulators are requiring major banks to look at their servicing across the board, not just on this issue. there have been recent calls for a national moratorium and i would like to address that. an important part of assuring a longer-term stability in the market is to enable properties to be resold to families who can afford to purchase them. president obama has said that we cannot stop every foreclosure and he is right. we are making progress. i would like to turn to the relationship of these foreclosure problems to the administration's making home affordable part hamp is a part credit is intended to help eligible for homeowners before

they are in foreclosure. it does not require a judicial process for homeowners to receive a modification nor does it require affidavits to be filed with the court. airha 4,mp is not -- there for a h,amp is not directly affected robo signers. should i honor not qualify for hampton or the homeowner falls out of the program, participating services are required to evaluate that homeowner for alternative foreclosure prevention programs such as one of the servicers proprietary modifications or even the administration's short sale program are if all of these efforts are unsuccessful, hamp services may not proceed to foreclosure unless they issue a written certification to the foreclosure returning or trustees setting that all avoidable lost litigation

alternatives have been exhausted and a non-foreclosure auction could not be reached. only after the steps are taken and the certification is delivered made the foreclosure process proceeds. to date h,amp has achieved a three critical goals. it has provide immediate relief to homeowners, used taxpayer resources efficiently, and helped transform the way the entire mortgage servicing industry operates. hamp established the university -- a universe -- a universal affordability standard. more than 640 -- 640,000, others have expressed a 30% median reduction in mortgage payments for more than $500 per month. in the year following initiation, home retention strategies changed dramatically. in the first quarter of 2009, nearly half of mortgage modifications increased

borrowers payments or left their payments unchanged. by the second quarter of 2010, 90% of mortgage modifications lower payments for the bar wars. this means homeowners are receiving better solutions. ham uses taxpayer resources efficiently. they utilize a trial. to ensure that taxpayer funded incentives are used only to support homeowners who are committed to staying in their homes and making monthly payments. while the housing market is showing signs of stabilization, it still remains fragile and too many homeowners are suffering. the nature of this crisis has changed and will continue to focus our efforts on stabilizing the housing market and preventing avoidable foreclosures. thank you and i will look forward to taking your questions. >> thank you. i am trying to get at these hard objectives. it is hard to run a department if you don't have part

objectives. just like when john kennedy said we would get to the moon by the end of the decade, it worked out. hamp was announced 18 months ago. how much do you think he will spend on the program? >> ha for themp program, we currently have $20 million dedicated to the program which includes the modifications and some of the enhancements for principal reduction as well as a little bit fh thea short 3- finance program, $29 billion. >>, the programs involved this? >> our goal remains to help up to 4 million homeowners avoid foreclosure. we continue to expand and

enhance the program to respond to the changing housing crisis. our program is targeted unemployment and negative equity and they are just under way and we continue to focus on reaching as many homeowners as possible. >> and what about the 4 million homeowners? the objection was that you are making offers. >> as you said, there is an objectivet. he gao last year confirmed that the goal was offers and while we at treasury agree that offers do not always translate into modifications, we can measure the offers because that is something we control. we also measure how many of those offers are accepted and how many offers perform and then those that don't perform, where they go. we learn from us and continue to expand our program with the

overall objective of assisting 3 million - 4 million people. >> where the default records over a five-year period? >> it is still very early to tell. we have had very few modifications in the program more than one year. early indications hamp modifications will perform better than historical modifications which have been up to 70 for a -- 75 percent re- default. over 90% of the people remain in the progressthe occ metric report confirm h thatamp modifications are performing well and attributive the trialperiod program that, as are committed to staying in the program. >> to have an projection on what

the default rate will be? >> no, we don't. we are watching it very close to the early signs are that hamp modifications will perform well. >> i recommend you come up with an objective to what you are shooting for. you have data on it now. we're looking forward to what the default rate is. how many temporary modifications become permanent? >> during the first year of the program, less than 40% of temporary modifications became permanent. that was because in response to the crisis, we gave servicers the ability to offer homeowners a trial modification and submit documentation. those services that collected documentation up front experienced conversion rates to permanent modification in the 75%-80% rate. the treasury reprogram requires

the same. it will slow but the conversions to permit will be much higher. >> how you think the widespread problems of foreclosure documents will impact the stability of financial markets? >> that is something we are following closely. at this point in time, there is no evidence that there is a systemic risk to the financial system. we are making sure that our program is focused on foreclosure prevention and services are doing everything they are supposed to do. second, we are making sure that we are coordinating with agencies across the federal government's and the state and local attorneys general to make sure that those services breaking the law are held, -- held accountable. we're looking at the mitigation risk to see if there's any systemic risk but at this point there is no indication that there is. >> thank you. for appearingv

today. when you consider these factors, the foreclosure documentation irregularities is one and two is the failure of some securitization sponsors to assign properly notes and to record transfers of mortgages and deeds of trust according to the law as well as the exercise rights to buy back the loans, and given that a lot of a mortgage loan originators are tarp recipients and other financial institutions, his treasury concerned, given these three factors and particularly the put rights, rm at thebs

investors are corp. -- that they rmbs investors, a t bad dateoo big to fail th --at the too big to fail institutions going to lead to a capital crisis over the next few years? >> thank you for the question. we are still very early in this issue and we are monitoring closely guarded as you suggested in the question, there are three separate issues. termsro of thebo-signing, that is one we are following closely. we need to fix those problems they need to be held accountable when they do not follow the law. the second when you discussed is the litigation. i am not a lawyer and i don't want to go through the legal structure but it is something as

a practitioner that has been in the industry for a long time and the courts are used to dealing with that and they will continue to deal with that. because of the affidavit issue, it increased in visibility but it is not an -- a new issue but it is one we are following closely. third, a put back rest to large institutions, we are looking at this situation closely and we will be following the institutions to make sure. at this point, there is no evidence of a systemic risk. >> is this being discussed within treasury? there was a lawsuit filed the other day of a put back rest of the bank of america loan. that was one lawsuit and i suspect there'll be many more to come. hi suspect that on panel 12, one of the panelists rejected $2.80

trillion of subprime loans. a small percentage of those and if the banks have to buy them back at face value, this could be a substantial problem. also, considering that this is not just a one-shot deal, when a mortgage is originated and put in an rmbs, it may be multiplied by some pettittecdo's. he may have those problems going back to the banks. it sounds like treasury as of today has not done a back of the envelops sketch as to what the potential put back rights would be to financial institutions. >> @ treasury, we are monitoring the situation daily. the news continues to have a wide range of projection and

numbers. i am not prepared to say there is a particular scenario but it is something that treasury is working closely with all of the federal agencies involved with these institutions including the regulators and including the reporting agencies. to make sure the risks are are properly disclosed and measured and we have a better understanding of what the potential risks would be. we are monitoring this daily. >> ok, i would encourage you to continue to do that. one of the problems is the inability of some of these securitization trusts to deal with local land title records trustto assign deeds of and mortgages. when an american homeowners sets down at the kitchen table to write the monthly mortgage check, how does that homeowner know that he or she is paying the correct letter?

>lender? >> that is an important question and it is important to separate the legal process versus the steps that individual services are taking to make sure they follow below. as i said earlier, we have a group of federal agencies and state attorneys general in with these entities making sure that they are following the law and those entities not following the law should and will be held accountable. it is important to separate the legal structure from what is actually >> >> thank you. my time is up. there are state courts that have held the mortgage electronic registration system and they say they do not work. the deeds of trust and mortgages are signed m underers and they

said -- are assigned under mers and they say it does not work and that could create a problem, thank you. >> mr. silvers. >> i would like to pursue the previous train of thought i am concerned about treasury making representations about no systemic risk. it was referred to a demand letter sent by a number of bondholders including the federal reserve bank of new york, one of the institutions that is encompassed by list of regulators and the like the treasury ordinates with. are you familiar with that letter? >> yes, i am. >> that letter asks for $47 billion of mortgage-backed securities to be repurchased at par. do you know what those -- do you know the market value of those

bonds today? >> at this point, i am not prepared to comment on pending litigation. >> ok, fine. let me tell you what the fed says they are worth. they tell us they are worth 50 cents on the dollar. to bank ofs request america is honored, bank of america, assuming they are carrying -- assuming when they buy them back, they marked them to market, bank of america will take a $23 billion loss. the federal reserve further informs us that there is nothing particularly unique about that particular set of mortgage- backed securities. that means they have not been chosen because they are particularly bad. they believe they are of a common quality with the rest of bank of america's underwritten mortgage-backed securities. there is $2 trillion of

underwritten bank of america securities. five such talk deals, five such requests to bank of america will amount to more than the current market capitalization of bank of america which is $115 billion. do you wish to retract your statement that there was no systemic risk in this situation? the word is risk, not certainty. i would urge you to do so because these things can be embarrassing later. >> my statement earlier was that is still early and we are working very closely with 11 states -- a 11 regulatory and federal agencies. we are watching this every day. at this stage, there appears to be no evidence of a systemic risk but again it is early and it is something we are monitoring daily. >> let me suggest to you that it

is still early is perfectly acceptable. the notion that there -- is it your position that bankamerica honoring five of these things would not present a systemic rest? five of these requests, the first of which was made by the federal reserve is bank of america not systemically vulnerable? >> i am not prepared to comment on a particular institution but i think as we look at the put back risk, the litigation involved, the severity, the probability and the time it would take to go through these, those are all important factors to be considered in looking at the risk. we said -- we did not say there was no rest. there does not -- evidence of a systemic risk. >> if the treasury comes back to us and is discussing whether we need to deploy further public

funds to rescue bank of america or such other institutions as might be affected by these events, i hope we get a similar kind of indifference to their fate after it is too late. it strikes me that in light of the mathematics, it is not a plausible position that there is no systemic risk here. a want to take of two other statements that are not plausible. you suggest at the beginning of your statement and i cannot repeated verbatim, you say is a good thing that more homes be put on the market as a result of foreclosure. is that the administration's position? >> when you look at the current market for sales >> do we want more homes but a market now as prices are falling? >> we want homes to be sold to homeowners that can afford them

and stay in them. >> that is now my question. do we want to increase the inventory now in the marketplace and drive down home prices? is that the public position? is that the position of the administration as to what is good for our country now? >> the position is that we want houses to be sold to home owners back enough for them -- >> and do we want more or less? i'm asking you a binary question. more houses on the market right now, less houses on the market right now? >> i would say that if you have a home whether -- >> you are not answer my question, more or less? >> we need to have the homes on the market to go through and be resold to homeowners who can purchase them and afford to stay in and stabilize neighborhoods. many of the homes that are -- >> you still have not answered my question.

do we want to drive housing prices down? would we rather drive housing prices down? >> again a -- >> have a possibly be in the interest of the united states government to drive down housing prices? thank you. >> i will change gears a little bit. it is not because i'm not concerned about these issues but they raise them quite strongly and i have other concerns about the program. your stated goals or the goals you have articulated is that he would likehamp to help a three - million 4 million borrowers.

1.3 million people have entered into modifications so far? many of these people and debatehamp program when 150,000 borrowers were entering the program per month and now we are at 20,000-30,000 per month and the program has 24 months to run. if my math is correct, we are at 1.2 million and we are getting 20,000 deaths and 30,000 per month, we will not get 4 million. can you tell me how you can judge this as a success if we are not going to make the minimum standard? >> that is a question we talk about very regularly and my office. the numbers that you stated are correct about li firsten

modifications. about the first lien modifications. as the crisis has moved to unemployment and principal reduction, our programs have changed and so the numbers you are discussing relates l the firstien modification. we have the unemployment forbearance program which became effective in august. we have a partnership with the fha program on a refinance program that became effective in september that allows principal reduction and refinance into an fha mortgage we also have additional incentives for principal reduction along with the hardest hit on the initiative. we look across all of those programs and respond to a changing housing market in our efforts or originally, your calls for a stay ha it for hamp program.e

we are trying to help additional people but the goal we set a h for theamp program, should be lower that? what is your goal for the hamp program. ? >> the other programs for unemployment and principal reduction are in fact part a of thehamp program. we have a dat debate -- we have th havee hamp program to adato . we took money and out of the hamp allocation and moved to state finance agencies to provide tailored assistance to unemployed homeowners and work

with principal reduction in those markets. >> re about--- you talked about are-defaults. the permit modification under these programs is for five years, it is not permanent. when that five-year period is up, you will return to the previous payment levels. presumably, if something has not changed in the housing market like a significant increase in prices, these will be bar workers who are seriously under water with rates reset back to making payments that they cannot currently afford. why do we think in five years they will be able to afford the payments that they can afford now? what will change between now and five years that will result in something close to a success? >> let me first just make a

clarification to the permit modification and the recess. after five years, the rates adjust to the current rate. , the current freddie mac rate so they will adjust. there will be a just and up from 2%, it will still be an adjustment up to a rate that still consistent with today's historic low rates. in terms of the five years, the homeowner has gotten some principal reduction because of the amortization at a very low rate. they have played -- they have paid them more principle than they otherwise would have. homeowners to stake h on theiramp ma -- homeowners who stay close to their hamp modification will get benefits.

there is time for the employment situation or other hardships in that family circumstance to improve and certainly over 60% of homeowners in hamp modification have lost a job or had a loss of wages. >> thank you. >> thank you as i stated in my opening, treasury often in its defense of hamp in defense of to non-cess, referred no ton hamp modifications. it is positive that these borrowers are not in foreclosure, the question remains on sustainability of the proprietary modifications of whether homeowners are better off. the occ and ots reports

notwithstanding, we note -- we need to know this is a the terms of these perspiratory modifications to prepare -- to compare among servicers. well treasury be providing additional data with respect non-hamp mods? >> this is something we have discussed and we spend time thinking about within treasury. in terms h of theamp contract to services, our contractual relationship with services goes to the modifications where we are paying tax their incentives. we don't have a supervisory authority over those modifications outside of hamp. because we are focused and concerned about that, we have asked hamp services to

participate in a monthly survey about what happens to homeowners who are either not approved and not expected for hamp and what happens to, as who are in a trial modification that gets canceled. we publish those results. in addition, we work closely with occ-ots metrics to use that as a valid letter or reality check. >> so going of the last few days, the reports issued by treasury, hope now, and the ots --each of these reports continues to expand. it is still not that easy for the public nor for the oversight panel, or for congress to really assess the effectiveness of these proprietary modifications. c reportcases in the ot

you cannot understand the actual terms of some of the modifications. there are often groupings of all, and another term -- so the numbers are not always brought out to determine whether these reductions are for one, two years, and to understand the impact of them. do they include lump-sum payments for late fees? how sustainable are they in the borrower?f the bar were >> we are committed to transparency in the program, and committed our survey in the spring to include the disposition, and as we continue to follow this position we will continue to expand requirements of servicers because we do realize within the program we have contractual relationships with servicers regulated by a

number of different agencies. this is one place to put it all together. >> i think we all support those provisions in the treasury's monthly report that breaks down performance by services. you do not see that in the occ report. it does not provide the public a means to distinguish servicers' performance. we do support a greater ability for the occ to provide a breakdown by servicer with respect to proprietary mods? >> i can speak for the treasury programs and say we're very committed to transparency and continue to expand reports every month and put demands on servicers for more information such that they would not save this overload. >> because your reports are only

with those contracts did and because covers only 65% of the market and because it's only a survey, we do support our recognize the need for national reporting requirements similar to what banks are required to provide in mortgage origination? again, we support transparency in the modification business to make sure the taxpayer dollars are going to servicers for programs meeting guidelines and falling all applicable laws. >> thank you, and i intend to follow up with members of the following panel. >> can you tell me how many second liens have been modified? >> in terms of, if i understand, one of the second liens modified through relevant programs --that did it we do not have for all

institutions. we're beginning to collect the data on the treasury programs seconding modification program which is an enhancement to hamp that has major servicers and some others. we do not have data to report yet. the program really began at the beginning of october. >> send it to us as soon as you get it. >> it will be in a public report. >> [unintelligible] --carrying a on the books at 90% of value? >> we hear that particular thing a lot. the impact of such killings and the modification market is something we are very concerned about. -- of the second liens. it is why we put together the enhance.rogram, and han

that program has a platform that matches the first and second, and the second lien holder has to write it down. as part of our program for refinance into fha we offer incentives to reduce the second lien to allow homeowners to refinance. while we do not mandate second lien writedowns, we are indifferent to it in a first lien program, and try to provide incentives for second liens. >> i think you are right in terms of your model, hamp. but isn't it standard industry to write down the second marines first, then move to the first liens? >> from building party, yes, that should be the way that it operates. >> should and we put an emphasis

on that? it seems the only reason they're carrying the second inning is because they don't want to write them down. but they're not anywhere near worth 90% of the value. >> and important pieces to make sure the first and second are matched. >> you say every person gets a significant benefit. can you explain? if a temporary modification fails, the person must pay the money back. what is the significant benefit? >> let me first talk about the permanent modifications now, beginning june 1, a homeowners provide a friend documentation. a homeowner is expected to convert to a permanent modification with the only reason to not be failure to make

payments. they are getting a second chance to qualify. if you return to where we were at the beginning of the program, there was a huge backlog of homeowners severely delinquent on mortgages, struggling to find a servicer, and struggling to get a modification. by coming into the hamp program, the homeowners got an immediate reduction in payments and the opportunity for additional time to figure out if remaining in the home would be sustainable, or time to make other living arrangements. to have bought some time. >> a follow-up on the question from mr. silver. gmac so has over $17 billion in taxpayer funds. what are you doing to make sure that institution supported by taxpayers are not acting improperly in? >> as i know that the panel

knows, treasury has an investment in gmac --but immediately upon learning of the alleged robo-setting issues, we continue to be in touch with gmac management. they have reported back that other than the time to correct some of those the documentation problems, they don't see it a major risk in their system, but we are watching that very closely and take it very seriously. >> so they are not sending out anyone to find out who actually holds the mortgage signings? any type of physical follow-up on the fact of their mortgages out there? that they have them and actually have title to the land that they are trying to foreclose on?

>> at this time we are supporting all the agencies that are doing investigations of those then are monitoring closely. y is not doing anything independently? you just take the word of the institutions and banks that they do have documentation? it is important for all the other people to look into it, but it seems these are programs where treasury has a direct involvement as an organization, and this seems to be a critical part of the process. >> that is an important issue,

and something that at this time we're looking at foreclosure prevention, that process separate from the foreclosure sale process. to modify a mortgage there is not a need to have clear title. you need information from the net, but not a physical but to modify the mortgage. the focus of the hamp program is to make sure homeowners day in their homes, and on good to foreclosure sales. to the extent it is not successful, we expect all hamp- participating servicers to follow the law. >> thank you. let's say that i want to buy a house, and it is foreclosed. how the one know when i buy that house i will receive a good, legal [inaudible] on that house? there are all sorts of questions about whether or not the

securitization trust or the servicer can deliver. >> homeowners buying a house get title insurance mingo one of the things we're very concerned about -- a title insurance. one of the things we're very concerned about in housing market is making sure that the miners have trust in the system and continue to buy homes, and do not have a lack of trust in that. reading the news, homeowners would have reason to be concerned. >> you anticipated my next question -- are title insurance companies issuing a clean policies? where the property liens were recorded into the system?

>> i think we have to separate the mer system which has a lot of discussion in court compared to the way servicers are following the processes under mers. to the extent the home has gone through foreclosure, whether for closed with a judge or otherwise, the judge has granted title and the title has been insured. the homeowner should be able to purchase the home and have a title insurance. to the extent there is litigation with mers, as i said earlier, i am aware of the litigation around mers. it is still in the lower courts. so, i cannot really imagine the outcome, but we're watching the uncertainty in the market. >> i read in the paper that one

of the too big to fail in churches went through title insurance companies that were balking at issuing policies, and offered to indemnify them. if the two big to fail indemnifies and it blows up, guess who pays for it? we have tarp ii unless the dog frank bill liquefies them. it is not a good answer. it is in play, but a little bit frightening. speaking of frightening, i will move on to fannie and freddie who are also co-owners of mers and apparently did billions of dollars of securitization space upon it. certainly someone at fannie and freddie thought about mers. what diligence did they do? did they receive legal opinions, and if so, could we see them as to the efficacy of the mers

program? >> cannot testify as to what fannie mae and freddie mac did in reference to mers. mers has been part of the mortgage securitization system for a long time and there have been many legal cases on it. >> is it the opinion of the department of treasury that mers system works to deliver a good legal title to property? that it properly allows notes to be endorsed, and allows for proper sign hinges-- signages. >> we are continuing to dig deeper on this, but at the early stage it does not appear to be a fundamental legal issue, but

rather how mers is used based on a different state and local laws governing the real estate transactions across the country. there is still more work to be done there. >> ok, let's say that in the ceo of a too big to fail, and i made a lot of second mortgage loans. i know that people are encouraged me to write this off, but if i do capital will be impaired, and will be a substantial loss, and i will be hurt, possibly put out of business. so, my response to people ask me to write them off is that i may have the money today, but in another couple of years, the housing market may recover -- so if i write them off today, the my shareholders will sue me.

the to the same economists who tells them in two years to get 40 cents on the same economist -- they go to the same economists to says that. so, what will i do? >> principal forgiveness -- summarize why it is one of the most complicated parts of the mortgage modification business. once you take it you lose the opportunity to get it back. in a principal reduction alternative we have under hamp require services to run two net present value copulations, one with principal production, one without. in those cases where it is net present value positive to reduce principal, is there justification there to reduce it? >> what if i decide to write these things down, imagine it will solve the problems -- but i

want an equity kicker here so that if the house appreciates over the next few years, i will get a piece of that. we will share it in three ways. give some to me because i read it off, some to treasury because it extended taxpayer funds, and give a substantial portion to the borrowers because i want to keep them interested in remaining in the house and keeping the neighborhood up. is there a problem with that approach? >> there is not. the principal reduction of some stood under hamp does not appreciate shared principal approaches him. i'm not sure the industry has the capacity to do it, but it is not prohibitive. we but the guidance out with the expectation that could be something that will change. >> i can send them the one-page document. >> mr. silvers?

>> i want to explore the question of the relevance of irregularities in the title system to hamp. i accept your testimony earlier that you are not in foreclosure when you get hamp assistance, but hamp does make payments to servicers, correct? up front. isn't there an assumption that that servicer is representing someone with a good clean? why would we make the payment if that were not true? >> there is the assumption that the servicer is following the loss. that is required in the contract. if we learn something after the fact that contradicts that, we can call that the incentive -- that they are following the laws. >> how we know in light of all

the discussions, and i think mcwaters and the chairmen have summarized the issues. in light of all the state law issues, had we know that people who do not have buildings are getting federal money? >> we do not. >> hold it. that is the issue. the issue of the treasury would be diligent at looking into -- you said that we do not. these are complicated questions. in view of what is potentially a play as some researchers in banks getting public money under false pretenses, we ought to figure out whether it is true or not. i take from your answer that you are looking into it? >> that is right.

>> i have been clarified that there is the relevance between the two. i look forward to your findings. let me shift to something i'm very supportive of the treasury's direction --i got an opening statement response that you want to expand the reach of treasuries, the mitigation for closure programs. you field of numbers of permanent mods should be expanded. you want to reach the unemployed. did i hear you correctly? what you see as the major obstacles to that? are we having difficulty reaching an evolving people? >> there are few points. a couple of things to say about

unemployment -- it differs across markets. hamp is a national, one-size fits all program. one of the changes we made to respond to the local nature of unemployment was the hardest hit funds so different states could create programs to better target the unemployed there. one, just making sure that we can tailor programs to local market conditions. second is our reach. this is from a struggling homeowners are scared. they're getting bills. they are not sure who to respond to. we run our reach events. we have a fat 40 across the country in the past year. >> how many people attended? >> i do not have the number of hand, but i would estimate about 30,000. >> are you familiar with the

neighborhood assistance program of america? >> yes. >> in a letter to our panel they have said in 23 our reach events of there's they have had approximately 700,000 people attend. do you have any reason to doubt that is true? >> i have no reason to doubt it, but am not familiar with it. >> can we learn something from that? is there a way that the treasury with its vast resources can get to that level of participation? just getting people and the door, not talking about outcomes. >> the work with the number of housing counselors and state and local mediators to figure out the best way to have about out to reach.

>> i'm not very focused on the mods, but on the intake. you said 30,000 people for all your events around the country. naca did more than that in a single event in the see a couple of weeks ago -- in washington, d.c. that was on a friday night at 10:00 p.m. at the convention center. we should be able to learn something from that. >> thank you. doctor? >> help me here was something i don't understand about the program. i was not involved in the last report. if the mvp model shows the net difference is positive, it suggests is in the best interest of borrowers and lenders to modify the mortgage.

if that is the case, why do we have to pay them to do it? why people to do something that seemingly is in the best interest? what prevents them from doing it on their own? >> that is an important question. two things. one on the hamp program, part of the incentives for servicers is compensation for moving to an affordability standard and certain protocols that require the full change in their business model. it is compensation for things they have had to do in a different way. second, within the hamp program there are some cases where the investor incentives are an important piece of the modification being mvp positive.

>> your first response was there seem to be things outside the mvp model not being taken into account -- the cost of changing the business model, they must pay them because the mvp model does not include all the costs? >> no, when you look back to the beginning of the program, hamp is a voluntary program, getting the servicers, investors, and homeowners to the table, and to change the business model to do that required some incentives. even with those incentives there were some doubts servicers would sign up. it took a full year to get close to 100 non-gse servicers signed up for hamp. >> let me build on that. ish of your comclean about hamp that it has set a standard.

it changed the way people are doing business in the market. -- much of your claim is that. you have shown servicers there's a better way to do business. what you need to keep doing anything? what are you accomplishing now? everyone recognizes a standard you set. great. but we still need treasury involved in this once you have set the standard? >> the hamp program does a couple of important things. one because of a service that participate are required to about a week homeowners first four hamp. it keeps consistency across the industry. second, as this panel has indicated to treasury a number of times, there is intense as this and see -- and consistency

in reporting, and this during the time of crisis provides a standard platform on which other modifications can be based. >> once the standard is established, the platform, i'm struggling to understand what there is left to do? everyone should be doing it like the treasury says. >> for the firstling program we can talk about the change in the industry standard. as you have indicated, it is important that there is the unemployment program still becoming new in treasury. the entire platform for the way short forms are handled. having the standard of form can change a number of things beyond firstling modifications. >> i want to build on the

question from my fellow panelists. in written testimony which we have not yet heard, julia goldman hamp makes borrowers worse off because they're reported as being delinquent to credit bureaus and have the late fees and interest continues to accumulate. you have said it makes them better off. she says that makes them more soft. is she correct? >> with the trial. it come and try modifications -- it is important to refer to early in the program when people could come without documentation -- with the trial modifications -- and just get immediate payment relief. when i say better off i'm

talking about program-wide, on the whole, having that many homeowners at that time in crisis receiving immediate assistance and get time with an overall benefit. certainly when you provide time to a large number of people there will be cases where, d ing to both counselors and individual borrowers it was clear there are many individuals there who were in financial difficulty because of unemployment or under- employment. you referenced the it treasuries and one of program that provides three months of forbearance. how do you contemplate providing data to assess the results of that program the? >> the program became effective in august and we will be incorporating data into the public report once it is available and validated. >> recognizing many individuals

us put to work out of work for between six and 12 months, behind on mortgage payments for a similar terms, who is the population that this three-month forbearances intended to help? >> a couple of things to think about. it is a very important issue, unemployment, in terms of modification. first, as was said earlier, you need a job to pay the mortgage. unemployment forbearance is really intended to provide temporary suspense for the unemployed to enable them to find a job. >> people who are just unemployed and expect to find a job within three months to six months? >> and provides a minimum of three months. services can go as long as they want. many go up to six months. that is expected that some will

not find a job and may end up in a short sale. some may become quickly be employed in become current on their payment and have some benefit. some may become reemployed at a lower income level and be eligible for hamp. that is a one-size, national program. in those markets 18 states with higher than average unemployment rates. we have tailored programs for each of the housing finance agencies can do something that works in the market. those include anything from anythinghfa targeting certain professions that have been hardest hit and share in the mortgage payment, some combining them with job counseling and retraining. >> we look forward to the data on the effects and success of the program. in the remaining minutes i want to shift to the web portal.

this is something we have talked about for a long time at the panel. we have been urging treasury to get that with the portal up and running so there is an effective means for borrowers and housing council is to reach servicers to facilitate the approval process. can you give me some indications as to where it stands? how many borrowers, how many loans are being processed process, butct co can hpsseme nts e ckages. we are very supportive of that effort. in addition, as we have streamlined documentation within treasury, we have tried to make sure all forms are available to be down loaded on the web at. >> will the treasury used the system or its compliance agents

to test for compliance, to reach out to borrowers? my understanding is that it is not currently available for access by regulators. >> our compliance is focused on the documentation issues more broadly across all of the channels, whether loan port, or mail. >> thank you, ms. caldwell, for your service and for your testimony. will the second panel please come forward?

>> thank you, this panel is made

up of the senior advisor for help lines, had it of the office of the control of currency, catherine, from the university of iowa college of law, julia gordon, senior policy council center for responsible lending, gy, ceo and publisher of inside mortgage finance. >> thank you for inviting me to speak today. my name is guy, and i'm the ceo of mortgage finance, a specialist firm that publishes a variety of products related to the mortgage market. we are not affiliated with any blunders per say, or consumers. we're just objective observers of the facts. at any opinions expressed they are my personal opinions and do not represent the views of

inside mortgage finance publications. in my written testimony i have responded to nearly every one of the questions you have asked. but i will summarize some major points from a that testimony. i like to provide a reality check on what is going on the mortgage market. sometimes that gets lost. first of all, the mortgage industry is divided into two separate businesses, one is the production side, the other the service in side. first of all talk about the publishing said. good and bad news when we look at that site of the mortgage business these days. good news, long-term mortgage rates are extremely low. there is plentiful supply of mortgage is to with good credit and down payments. the bad news is about 90% of all the funding is coming from the government and not many people qualify for that government funding.

what of the private sector to be there is is pretty much related to home equity and high balanced jumbo mortgage lending, was a good places without government activity. to make matters worse, we seems that the world for most funding will continue to come from the government. there is no secondary market or investor demand for mortgages or mortgage-buy securities the do not carry the guarantee from the u.s. government. private lenders cannot compete with the government for mortgage customers, as a result. we seem to be afraid to reduce the government's massive support for fear of disrupting a very fragile housing market, so leaves us in the state of limbo. unfortunately, matters are probably worse in the servicing business. to talk about the success or failure of recent mortgage modification efforts or the scope of current foreclosure problems it is necessary to look at the massive problems we are

attempting to deal with. between 2005 and 2007, the housing boom peaked. and the mortgage them heat. of the last few years, about one third of the mortgages made -- during the peak period -- roughly 13 billion loans could be recognized as non-profit. they're made to subprime borrowers, with little or no documentation, little or no down payment, or some other high risk of default characteristics. his roots of mortgages made up the bulk of defaults and foreclosures we have seen for the last three years. nearly one-third of the homes sold during the three-year boom was sold to investors for people buying second homes. factor in the back of high unemployment and the sharp drop in home values, and you get a good idea of the scope of problems we're facing. it is literally a perfect storm of mortgage problems that are

difficult to resolve with loan modifications or any other foreclosure avoidance measure. right now we have a situation where the average barr were facing foreclosure is somewhere around a year and a half behind on their mortgage payments borrowers -- where the payments is that far behind. by traditional standards, six months is the point of no return. i want going to the hamp numbers. needless to say, the number of hamp on vacation or overall modifications has been dwarfed by the number of increases in defaulted mortgages or for closures of the past year. the record how problems in the mortgage market continued to take their toll on housing market. last month 40% of the transactions of purchase and ball distressed properties. namely foreclosures or short sales involving properties headed for foreclosures.

that was up from 45% a year earlier. the ongoing flood to consider modification on a loan bonuses has taxed the industry used to dealing with one quarter of the number. is it a surprise mortgage services have been overwhelmed and have tried to take shortcuts? no, it is not. it is a development that can only slow down a housing recovery moving at a stale pace, if at all. thank you. >> good morning. thank you so much for inviting me to address you today. i served as senior policy council at the center for responsible lending, and non- profits it research and policy organization.

as we are here today, mortgage servicers are in the process of foreclosing on over two million families. 3 million or more are weeks away from receiving a notice of default. over the next several years the talks a combination of high unemployment and under water loans could mean a stunning total of more than 13 million foreclosures. the african-american and latino families are more likely than whites to lose their homes. we estimate that communities of color will lose over $360 wealth. of guelp so far the major government response to the crisis has been hamp. it has fallen far short of its initial goals. even families who did not convert were left worse off than before. few new trials are beginning each month, replaced by a trend of servicers moving modification

activities outside of hamp for there is little transparency or accountability. the principal reductions we need are not happening in hamp and not really happening out of hamp either except in some small part falling as, usually those mark down on acquisition. servicers need to close quickly in the volume to make money -- that is the real problem. that is why people get foreclosed on even if they are in the middle of review. it has led to unacceptable but routine practice of falsifying court documents when it is sometimes impossible or too expensive to conduct a process legally. it is increasingly clear that one incomplete payment or counting mistakes can land you on and apparently unstoppable conveyor belt to eviction. the crisis did not need to be this bad.

if government had acted quickly and forcefully at the beginning, we could have significantly limited damage. instead our government believed in the early assurances of services that they would handle the crisis. when that turned out to be wrong, we provided legislative tools such as investors safe harbor, cajoled, begged, and threatened -- none of the strategies worked. it is clear servicers will not do what needs to be done unless someone makes them do it. the fact is, the hamp program has never had the tools it truly needed to succeed. a key part of the original administration foreclosure prevention plan was to involve the bankruptcy courts to serve as the nation's comprehensive resolution authority when the debt goes bad. the field subprime lenders got bankruptcy protection, and so did lehman brothers.

bankruptcy homes can deal with foreclosures on vacation homes, and other luxury properties, but homeowners have no alternative than to rely on the voluntary health of servicers which had no intention of doing anything other than business as usual. those laws should be changed. let's broaden and enforce a common-sense practice requiring servicers to review all loans for alternatives to foreclosure. it alone modifications when they make fun into cents, or short sales. it did when they find that they make sense. the so-called mandatory loss mitigation standard already is supposed to be in place and the government-backed housing programs. to make it work in practice,

homeowners need a chance to stop their foreclosures if their cases not been properly reviewed. in many cases the homeowners will need access to legal help. congress should appropriate the $35 million authorized in the dodd-frank act. it will make a meaningful difference for homeowners who cannot afford an attorney. we recommend regulators of banks use all the power to let servicers know they can't fly under the returradar. this is the perfect opportunity for the new consumer bureau to show what it can do. there is no silver bullet strategy to fix every mortgage, and not every foreclosure is avoidable. but even one unnecessary for closure is devastating to the

family and their neighbors. multiple ones are devastating to us all. once and for all let's make sure that the system works. thank you. >> professor? >> my name is catherine porter. i'm a law professor doing research on consumer credit, protection, a regulation, and a mortgage-servicing the debt in the last months allegation about widespread errors in the process triggered moratorium's by a few of the nation's largest servicers. these along with this behavior that led to them are the most recent and visible symptoms of a chronically sick industry. in 2007, released in empirical study showing 40% of the mortgage companies' the court in bankruptcy cases did not include

a copy of the note. that is despite the clear legal requirement that it be included. sadly, the problems that we're hearing of today are largely demonstrative of those that both i and others have described for years now. to summarize, the key problems with the foreclosure process are, first, the industry is a high-volume, cost-cutting industry. it relies on staff with insufficient train. it provides a weak oversight of that step. it operates with an adequate quality control. it is not transparent about its profit structure and affiliations with related entities. these problems are at the heart of the robo-signings scandal. that practice is entirely consistent with the industry's business model and standard of ethics. robo-signings erodes confidence in the rule of law in this country. second, the paper work on the troubled securitized loans often does not seem to comply with

legal requirements. the primary concerns are first that some people work is missing. evidenced by the increasing use of loss and the affidavits to try to remedy past mistakes. secondly, some transfers of loan simply did not occur -- occur, or not properly conducted. the proliferations of signings in, the widespread use of mers that eroded public property records, and confusion about the physical paper for these loans all exposed the industry to attack from investors and from homeowners. at the core is whether the securitization trust has the center for clothes, and whether investors have been defrauded. contrary to what ms. caldwell suggested, i think the title is primary to a good process. the third problem, the minister

of miscellaneous problems you see, including primarily the bloating of homeowners accounts with bogus or suspected default fees, and the continuing difficulty with the server serves finding and sleeping under the rug the fact that the originations were not documented correctly in did not meet standards. if these practices are allowed to continue, we will see several kinds of harm. an increasing number of homeowners will challenge their foreclosures in court. the will be class actions by homeowners if problems are identified to exist across entire pools of securitized loans. in a non-judicial foreclosures it was the intense public frustration about the lack of access to a court to adjudicate these problems. second, investors will see mortgage companies to force them, try to force them to buy back the loans. one cannot easily put the genie

back into the bottle with regard to litigation. notwithstanding the servicers protest titian's that everything is basically all right. the banks'argument that the foreclosures and not faulty because of homeowner is in default should be given zero wait. regardless of whether a homeowner cannot pay, the mortgage company must comply with the relevant law to exercise their right. due process does not bend in the wind. it is a fundamental principle that protect all americans, consumers, and businesses as they invoke the law to their help. finally, i think regulators will have to devote substantial resources to investigating problems with faulty foreclosures. it is crucial the government investigation be transparent. american taxpayers need to be shown up in concrete terms what concretedodd-frank act would change how regulators intend to carry out their promises about consumer protection -- will have

to show in concrete terms that the act would change the. >> chairman, my name is joe evers. i work in the office of the comptroller and currency. in the role i oversee that collection -- leading to the performance of firstling residential mortgages. i appreciate the opportunity to share in cites the data provide some mortgage modification activities. consistent with the panel's letter of invitation, my written testimony includes data and charts to demonstrate trans we see pertaining to loan modifications and delinquencies on them for mortgages serviced by the largest national banks and federally regulated bodies. beginning in 2008, the data began to be collected, and then

published in quarterly reports. the most recent report from last month reflects data at the end of june 2010 and represents almost 34 million firstling mortgage loans, or 65% of all firstling mortgages outstanding in the country, killing nearly six trillion in outstanding balances. early in the mortgage crisis servicers were generally relying on traditional measures. typically, various informal payment plans, they allowed a borrowers to suspend the mortgage payment for some time. typically is successful in normal times, a give billy clinton borrowers -- gave delinquent borrowers the chance to catch up. as it increased to unprecedented levels, it became clear more permanent models would be needed. the data provided evidence that

loan modifications completed in 2008 were experiencing high re- default rates. as a result the commission had banks implement a program to make more sustainable modifications. when taking these actions, mortgage servicers are taking into account both needs and of borrowers and interests of investors. the report provides data on health modification action affects monthly payments. and hal modifications performed over time. it allows us to evaluate the effect on long-term sustainable. over the past several quarters we have seen more sustainable modifications offered. they now represent over 90% of all those provided.

modifications made during the second quarter 2010 reduced monthly payments by the average of $427. it resulted in a 62% reduction in monthly payments from one year ago. further, 56% of the modifications made during the second quarter reduced the monthly payment by 20% or more, and represent an average savings of $690 per month. our data also illustrate the rate of which previously- modified loans become delinquent again, or default. [unintelligible] our data show that while all modifications experience re- default --excuse me --more

recent modifications performed better than earlier ones did. those that resulted in lower monthly payments consistently perform better over time than those that increase payments or leave them unchanged. the better performance directly correlates to the amount of payment reduction. i not ask large institutions to make more modifications? our data show that servicers have. these actions are resulting in more sustainable modifications and fewer re-defaults. >> thank you. >> tinder for having me here today. i'm currently a senior adviser to the hope now alliance. it was formed in 2007 to expand

and coordinate industry response. to reach borrowers at risk, counsel them, and work towards alternatives for for question. we have supported the hot line which has today demand over 4 million calls, operating 24 hours per day, seven days per week. it is supported by over 600 counsellors. we have had over 90 out reaches throughout the county. it does not mirror the hundreds of thousands through other out -- vince, this is targeted. they are least 60 days or later past due, or non-contact borrowers.

the majority who come to these events have never contacted their servicer. we have a web-based system that allows for the uniform and take of applications for all types of loan modifications. that allows it stakeholders to see the same information in a secure manner. it delivers the package to the server server which is actionable, and and has information back and forth until a decision is made. 14 have signed up, some insurers, agencies across the country, it in 48 states. we welcome more endorsements and use of this portal. " now has also collected data across the industry for three years, monthly, to report on loss mitigation results. in august year-to-date we have nearly 900,000 non-hamp mods

may. another year to date foreclosure sales are 775,000 sales. here are the takeaways. loan modifications combined far exceed that of a loan sales to foreclosure. it is important to note that interventions are raking in should continue. the vast majority of the non- hamp modifications, in august, 91% had a lower principal- interest payment, better than a couple of years ago. [unintelligible] i quite agree that is integral and important that the government step for to put a protocol in place for modification and this protocol would have been difficult to put into place of the west. i have been three years on this project. it has been a good step forward.

the most important contribution of hamp is said the process offers homeowners a first line of defense to avoid foreclosures. the second is the importance of the waterfall. there is a uniform map of the activities that is necessary to ensure delinquent homeowners who seek help are being considered for solutions prior to foreclosure. have offers uniformity of foreclosures which is fair and systematic. there are many challenges around the program, and i will tell you a few of them that have been addressed by treasury. the challenges have impact of some of the uptake of the program. clearly, there were a lot of changes as this was being rolled out. it is a complex effort. the changes required a

retraining, hiring of staff, and changing of legacy systems. execution made it difficult quickly. it is a complex program. definitions are not clear. there is not agreement on imminent default. there are differences on at right attribution. while we are addressing the first, there is a broader debt issue. that has been cited today. the lack of uniformity for of the processes -- a cookie cutter approach would be a lot easier if everyone would accept the same documents. the servicers have legacy systems. they have to train, and get things in process. also, affordability and eligibility -- everyone thought the start was good, after years

of looking at the ratios. 31% seemed aggressive. many came in under 31%. they do not qualify. lots of people do not qualify, yet they are having trouble staying in their homes. high vacancy rates -- 30% of the market. those do not qualify. it is hard to get people to contact if they are not in their homes. when you look at the uptake of hamp, you need to accommodate for some of the foreclosures not going through. all of us need to do a better job communicating about what the processes and what the options are for all borrowers. whether it is hamp, or not, i believe it is a huge process. you have asked me to speak a little bit about the current documentation issues in the

market. >> could you bring it to close shortly? >> yes. the market issues are such that hope now works on the foreclosure process. no bar or should go to foreclosure without due process. that sets up confidence that companies are working for documentation issues. thank you. >> thank you. i would like to ask a question of all of the panel members. based on the fact the president said three or 4 million say it was a realistic projection for hamp, what do you think the realistic projections are? >> i think if you look at those solutions and those and not hamp solutions, you're looking at 1 million solutions.

>> at the end of the program, what you think they're realistic objective is after we are finished? >> for the modification program? >> the number of homes protected from foreclosure. >> i think we have systems and protocols in place across the market to look at foreclosure against the modification that was not in place in four years ago regulators will work with their banks and their -- and the investor community. >> mr. evers? >> i do not have a clear view on it. all i can tell you is that over the last five quarters, there has been 900 two thousand modifications completed, and that compares to about 476,000 completed foreclosures. i agree with faith that you have

to look at what is happening with hamp to get a better sense of how many borrowers are being helped. >> i apologize, but i will turn your question a little bit and say that what concerns me is that what i am hearing is we have gotten up to speed with hamp slowly. what is the timeframe? what is the gigantic learning curve mean in anything remotely approaching a timely and effective fashion? >> realistic objectives -- first of all, we need to fix hamp, not end it. it is the only thing we have out there. if we take it away, we go backward in time. the concept of the test has been

a very useful one to get out there, and serves as a great benchmark for federal legislation, or four states to work on incorporating it into requirements for foreclosure. if there is a lot of use. i have provided testimony on what i call as a list of ways to fix it, and make it work better. until we have something better in place, let's fix it, and not get rid of it. we need much better programs in place. we need mandatory programs, and to the extent possible, we need third-party involvement to make sure everything is going as it should. >> the simple answer is i think the have goals are unrealistic. if there is any good news, i think it is extremely unlikely that tarp or your panel will see

anywhere near $30 billion spent on this program. my understanding is that in the first year and a half, about $400 million has been sent -- spent. that gives you a realistic expectation. >> the next question is, can you comment on the impact these foreclosure problems will have on the mortgage market? >> obviously, that is a tough question to answer. there are a couple of different areas we are looking at. one of them is just the issue of what is the liability in terms of servicers improperly foreclosing on a property? the industry's response is these are paper work problems, and in the worst case, we refile the paper work.

we get to the same point in two or three months. the state attorney generals and other regulators are looking at whether laws were violated. that brings up the question of legal action for criminal behavior, or whatever else. that is hard to quantify, too. the other issue is the losses that are surfacing now regarding mortgage securities, and securities investments. those are interesting to monitor. the losses have been pending on different reasons in the past. the latest reason is to go after them because of foreclosure paperwork. i have been covering this industry for 25 years. i am not aware of any successful litigation involving procedures that have been violated that would require a lender to buy back loans did >> thank you.

mr. mcwatters. >> thank you, senator. in your opening statement, you said there was $8.50 trillion of new residential mortgages made between 2005 and 2007, and about one-third were sub-prime with documentation problems. there are a lot of losses that are beginning, and they're not based solely on foreclosure issues. they are based on misrepresentations and warranties under writing that was misrepresented. what is your estimate -- do you have an estimate of what that -- of when that 2.8 trillion dollars will be put back?

>> it is important to identify what side of the universe we are talking about. there is approximately $6 trillion worth of mortgage securities outstanding. $1.50 trillion is what we call non-agency, which is basically guaranteed or insured by fannie mae or freddie mac. we're talking about a universe of $1.50 trillion. a disproportionate amount of the volume has involved sub-prime mortgages, or mortgages with default characteristics, and clearly they performed worse than anyone expected. the normal recourse at the mortgage industry uses is to require by? on those loans, and to go at the mortgage originator. if it is bad in six months, they are required to buy back the

loan. that process began in 2006. by 2008, all the major sub- prime mortgage originators were put out of business in this country. what we have left our major banks that acquired sub-prime loans, either through servicing, or another capacity. bank of america was one of the few major mortgage lenders that steered away from the sub-prime market. nevertheless, it is the target of all the vacation -- litigation. first of all, it is because they are a large bank, and that helps. they acquired countrywide financial, the largest sub-prime lender, and inherited the mortgage portfolio. >> as those loans moved into pools, they may have read out the warranties -- they may have

read-opt the warranties. i am not sure why you include fan it -- freddie and fannie. they were huge secure kaisers. if they took mortgage loans under misrepresentation, why should fannie and freddie not begin to exercise their rights to put back their loans to the mortgage originators? >> they are. currently, they are requiring repurchases by the major banks to the tune of about two billion dollars a quarter. they have the most problem because there are still in business. if you do not play ball, they will put you out of business. that is where most of the action is going on. fannie and freddie have been aggressive, but they are getting pushed back from the mortgage industry. the most is in the non-agency

area, because the parties are not around anymore. you have no leverage over the lenders, other than legal action. >> in your view, will this present a systemic problem? we have a lot better going to need to buy back loans. >> this has been going on for two or three years. if the amount of buybacks were to increase significantly, which i do not think will happen, however if these claims, particularly the recent ones involving foreclosures gained traction, it will increase the liability. it is not factored into the system. >> one new development is that the investors are beginning to

work in concert. they are suing the securitization sponsors and the securitization trust to force them to put back loans, which they have been on willing to do thus far because of conflict of interest issues and otherwise. how do you see that changing? >> it has been very unsuccessful to date. there were a lot requiring mortgage repurchases, but there were a lot of non-agency investments. freddie -- fannie and freddie have been successful. the original offending party is no longer around. they are going after people who acquired. it is hard to make a legal claim that bank of america is really liable for the quality of loans made three years earlier. >> yes, but if bank of america put those into a securitization

trust, and renew the warrant is, they're the same. i have read there is an increased use of statistical sampling, as opposed to having to approve each individual loan. ok. my time is up. .> thank you, mr. silvers >> mr. cecala, or any other member of the panel, in view of the exchange mr. cecala just had with mr. mcwatters, i remain deeply puzzled to what the federal reserve bank of new york is up to. do any of you have a theory? why is the federal reserve bank of new york asserting the sorts of claims we were just discussing? >> i will take a quick shot.

the federal reserve board of new york inherited a bunch of non- agency mortgage security investments as a result of the merger of j.p. morgan chase. bear stearns is the most obvious one. part of the agreement required the government to take over the worst assets because no bank wanted to acquire the bad ones. basically, the federal reserve board of new york is in position, having acquired a sizable amount of these assets, to try to get any money they could get out of anyone. they helped lead the effort to reclaim losses the investors served on. that is the motivation. >> they could have a good enough claim to put their name behind it, which is not trivial.

two other members of the panel have a theory? ok. secondly, i know your testimony was limited to matters of data. if you were in the room when i was discussing with miss caldwell bank of america's finances, but i make any mistakes in that analysis? >> well, i heard parts of it. my sense is what we are doing is working with banks to assess the put back rest, and make sure it is properly the mentioned, the banks have the reserves for that, and we are making sure they do a very full, complete analysis. >> how many 47-billion dollar by? could they do before they blow through their capital? >> that --

>> is that not mathematical? >> you could do the numbers toward >> is less than 10. it is probably less than five before you guys would be pulling the fire alarms. >> well, like i said, the banks have to assess and dimension the risk. we are making sure they do that. i do not sure whether the estimates throw out in terms of exposure -- >> i understand that. i wanted to make sure i was not making mathematical mistakes. we have heard from different members of the panel and what this is two stories that are in the public interest with respect to what to do about the very large number of homes and families that are facing foreclosure.

i think there are two stories. one is something that andrew mellon said early in the great depression -- liquidate everything. let's get the homes out of the hands of the homeowners, and into the hands of the banks and sold onto the market as fast as we can. the second theory is, and one could look back at how bad advice worked out for him and mr. hoover, but then we can look at the other inclination, which is to try to keep as many people as possible in their homes. those are the two basic ideas of flight. in view of what we know of housing prices, and there affect on consumer demand, which of these ideas is right? which is in the national interest? i ask any member of the panel to

respond. >> i will start all responding. -- start out responding. there is no question that to resolve the housing crisis such as it is, you need to the limit or reduce distressed properties. the question is the time frame. it would be painful, there is no question, to try to burn through all of the foreclosures as quickly as possible, and get over the mess in two or three years, but recover. the worst case is you take action that drags it out for five or 10 years. >> my question is is it a better idea to throw people out of their homes and put the homes on the market, where keep them in the homes, paying something. which is better for the economy, housing prices, the viability of the financial system, for the country? which course is better?

>> i am happy to provide a straight answer. it is better to save the homes. what we want to do is keep homes from being sold in foreclosure. once the homes are sold in foreclosure, and the family is gone, you want a family living back in them. i would like to see the original family get to buy that home right back at the same price they kick them out for. before you get to the foreclosure sale, we should be doing every single thing we could do to keep people in their homes. once the sale is over, putting home to dump the back together again is difficult. >> my time has expired. see what. -- thank you. congressman troske?

>> i have a question for several of you. several of you, in your written statements, indicated that the rules under hamp were inappropriate, or overly onerous and did not address the problem directly. you also indicated the rules might be pushing servicers to modify mortgages outside of the program. can you respond? do think the rules are private, and if not, what should we do to modify it? >> one of the significant things we have seen with the hamp program was people put in trial modification without having paperwork checked. one of the most significant results of that is a lot of the borrowers were unable to make the payments at a reduced amount, but were later kicked out because they could not meet the paperwork requirements. keep in mind, we have a huge

number of borrowers that had blown out there with no paperwork -- no documentation of income. now, we are asking them to produce tax forms to qualify. i think that makes it very, very hard. there are other things talked about. we talked about the present value test. i think that is a good idea. it basically favors people that are under water on their mortgage. there are a number of borrowers who have come to me and said they had equity in their home, and that immediately almost disqualifies them because you can get more out of them with a foreclosure than you can with a loan modification. there are basic flaws in the program that discourage a lot of people. >> ms. gordon, would you care to address the question? >> complexity is never our friend. with the kind of business model

the servicers have, having relied on them alone to take on the task of read-underwriting all of these mortgages, we did not do the necessary things to make sure they stack up and increased capacity to make it right. for people who use non-profit housing counselors or attorneys, many of those borrowers submitted all of their documentation at the beginning of a trial modification, but the servicer did not necessarily want to bother looking at it, or was not sure what to do with it. in my written testimony i get a lot of reasons why i think there have been problems with hamp, but ultimately the problem is we

are offering carrots, apples, and oranges, but we have no stick. there are so many different cross-cutting incentives. so many entities are worried two or three different hats. it is difficult to untangle without involving neutral third party is in some way. >> ms. schwartz, i love to hear your response third >> sure. -- your response. sure. these are taxpayers' dollars. if they do not qualify, and there is a like solution outside of hamp, we should not necessarily say it is a bad thing. people that do not qualify could go into foreclosure. if the person wants to stay in their home, and has the capacity, the servicer and the investor can accommodate that.

i think it is a complicated issue. i would say that the lost documentation -- we also recognize that, and that is why we developed a safe and secure way for counselors to be involved. i really like the third party help in having a trusted adviser as they submit things. >> you talked about mortgages that involved a larger reduction in payment. do you know, for those modifications, what the average increase in payments is going to be when the permanent modification ends in a five-year period. how much will it go up, and you look at the numbers, can you speculate what would happen at that point?

>> the modifications are permanent changes in contractual terms. the reductions in payment are permanent. you are expecting the bar were to have lower payment. -- the borrower to have lower payments. when you look at hamp, you're seeing a reduction. >> in some way, it resets. the payments will go up. at the end of that time, the interest rate will reset. presumably, they're making higher payments at that time. is that not true? >> when we are tracking right now is basically when the contract will change in payment, and basically saying that the time of the modification that is being done, and we are comparing what it was before and after. we are doing that for hamp and

non-proprietary modifications. we have not looked out further by seven or 10 years. >> that seems like something worth doing to me, i guess. i would encourage that. >> it is something we could look at. >> thank you. i would like to direct my first question to mr. evers, and ms. schwartz. you probably heard my dialogue with miss caldwell around the sustainability of modifications, and i want to point out that this call will has remained for this portion of the panel. we have often asked treasury representatives to stay for the second panel, and it has not been a practice in the past. i think it is very helpful for her. we appreciate listening -- her listening to the dialogue. you may have also heard ms. gordon, who shared my concern

that borrowers in proprietary modifications might be worse off than they were before. my question really close to the data, and do you share our frustrations in being able to assess the actual sustainability of the proprietary modifications. though you point out in certain sections that proprietary modifications would be the reduction in payment, maybe half of what they are a four hamp modifications, we still do not know the terms. in hamp we know there will be for five years. how comfortable are you, and how can we improve these reports, so we really can get our arms around the sustainability of proprietary modifications? mr. evers?

>> it is a great question. it is something that we have looked at and have been trying to track data. in the second quarter report, where we are at right now is knowing that change in payment for a hamp modification against a non-party, as well as the default rate. the hamp is half of what it is for a proprietary modification. >> it is an important question, and one we need to address. we have been attempting to track, in addition to how many loans have a lower interest payment, which is a good step forward, and we have asked for a five-year duration, and a 10% or more reduced payment, so you can measure that as well.

we have been working to collect that. it is probably this month or next, that we could report that. all of the government agencies have looked to us. >> mr. evers, could you share our interests in getting that data by servicers so we could actually compare performance as well as provide a more effective supervisory to pull -- tool for regulators? >> we could cut to that in just about any way possible. >> is there a reason you are not sharing that information by servicer in the public reports? >> it is confidential, supervisory information. >> why do feel that is supervising information, while the factual data included the the treasury's mother reports do not present similar issues -- monthly reports do not presents

similar issues? >> we are collecting all-level data, and using it as a part of the supervisory process. under our legal authority, we deem it to be confidential, supervisory information, and our approach has been to disclose accurate data, but not bank- specific data. >> you are using that with respect to the supervisory responsibility. >> right. when we saw a high default rates, we calculated that for each of the reporting institutions, and criticize each of them using their data asking them to fix the rates, and put in modification programs. >> thank you. we have a registry of mortgage loan servicers in new york for the first time. we have oversight responsibilities. we have adopted duties of tears and business conduct rules that are enforceable, including the

requirement to receive quarterly data regarding the modification efforts and performance data. our ability is limited because of the visit for real powers we would be restricted in receiving data. i also assume the industry would not necessarily like to see different reporting structures among 50 states, even though we do believe this is a model that could be adopted nationally. would the industry support the national reporter in -- reporting requirement? ? >> i am not spoken to them for that specific question. there have been some calls in the dodd-frank bill to have a data base created. >> thank you. >> miss gordon, to continue my other question, what you think the present foreclosure

problems have on hamp? >> the problems with robo- signing, these are not a technical problem. also, these are not allegations. these are things we know. it is symptomatic of problems throughout the serving -- servicing industry. what is interesting, as mr. damon silvers used the term "call the fire alarms." they only get pulled one of the bank's solvency is threatened. when the systemic threat is to the american people, and we could have one-quarter of homeowners with mortgages lose their homes, that seems to be worth a few fire alarms.

the problems we are seeing now just demonstrate how broken the system -- these problems are not a cause, they are a symptom of a broken system. >> i felt that. -- i at kodak. any foreclosure program that permits servicers to craft the system around their choices, their preferences for how to deal with homeowners is going to fell largely. one of the leading problems with hamp from the very beginning that we have seen treasury try to repeal is putting the servicers front end center in charge, saying you steer the ship, and we will just sit there and shout everything -- something that you once in awhile.

the other thing i am concerned about in getting people to the defense, and doing outreach, the -- to the defense and doing out reach, i am concerned that the homeowners are discouraged by hamp. there is a community contagion aspect here. even as things improve, there is a lag in getting the word out. i am concerned that the result is people not coming into a program -- the program, and instead their new plan is they will sue in court, and they have -- they do not have the legal capacity to do that, and with all due respect to the court system, they do not have the court capacity to litigate these things. people are clinging to a life

raft, looking from one to the other, and falling in between. >> thank you. >> mr. mcwatters. >> thank you. i look at this problem as a lawyer, and i am mystified. when i take out my foreclosure mitigation at, -- hat, and if someone says to pay more for something that is worth less today, what do i do? the first thing i do is ask them if it isn't not recourse debt. if it is not, i have an answer. if it is recourse, but i'm broke, and now we have the facts. in a commercial setting, you

would write alone down. he would not fool around. guess what? that is what the property is worth. if you for cloche -- if you for clothes, no one will pay a dime over that. first and second lienholders are not chomps. they will say that if a marked turns -- what if the market turns? then, you give them an equity kicker. you cannot write them down to zero, they will extort something. you give them 10 cents on the dollar, 20 cents on the dollar, and equity kicker, you write it down. secondly, you refinance the loan. refinance the loans to a market rate of interest. you take it down to a 3.75%

rate. what am i missing? why does that not work in this environment? yes, ms. schwartz? >> you have investor contracts that will not let you write down mortgages. you have fannie mae and freddie mac that will not allow for a write down like that. >> those rules need to be changed. >> the test requires something the north of what it is work -- what it is worth. one thing the program has done is target affordability. it is not negative equity, per say. >> so, you are saying there are rules that would inhibit a common-cents, market-oriented response. that is encouraging. anyone else? >> i am a bankruptcy lawyer. >> i am try to keep everyone out of bankruptcy.

>> would you describe is exactly right, and consistent with where parties get to when they do not want to go into bankruptcy court. they know that is the deal the judge will give them if you like what you described, and you think it makes sense, and i do, and the servicers are not doing, you sort negotiating with someone that hung up on your. >> i have been honed up on a few times. >> the basic idea was there was not this intermediary, and it was the net. >> up until then, it was a personal problem. they caught a bad deal in 2004. i'm sorry, but if they turned out to have a good deal, with a call secretary dieter and --

secretary tim geithner and give him more money? >> this is what we have pushed. our sense is servicers will not reach the rational conclusion. a negative equity is important. they will not get there on their own. we need a system to force them. baker to courts are not a perfect system. -- bankruptcy courts are not the perfect system for this. we need a state, because people have gorged themselves on a buffet of carrots, and we need something stronger. >> i'm way over my time. >> i just want to get some relative pieces of data on the table. mr. evers, or other panel members, testimony today was there has been 600,000 national foreclosures this year. do we know what portion of those

were on homes whose mortgage was held by fannie, friday, or another agency, as opposed to what percentage were in the private label market? >> i do not have that data available. >> if you could please follow- up. does anyone have a guess? >> sure. it has to be close to half, particularly if you throw in the fha. the whole government shares market is 60%, even assuming the mortgages perform better than non-agency mortgages, it has to be close to half. the answer is fannie mae, freddie mac, fha d.a. have a large role. >> to you think that is correct? i would have thought, given the problems about the balance of quality, that it would not be. >> i do not know, but i am sure

someone in my office does. i think there is no doubt that some of the foreclosures happening art agency loans. >> it is just the percentages. mr. evers, you probably have the definitive information. secondly, in your written testimony, i believe you said that approximately 2% of modifications involved principal reductions. is that correct? >> correct. >> ms. schwartz, does that make sense to you? does that sound right? thinking about the testimony and what your members are doing? >> early indications show that investor rules and the hamp waterfall is using the three tools until the market has a

standard test that includes the principal right down first, which i think is coming through treasury. we can then see more activity, where applicable. >> i have a final question. i think one could characterize the testimony and remarks of my fellow panel members, particularly mr. recorders remarks, which i -- mr. mcwatters remarks, which i fully believe -- agree with, we are faced with a choice here. we could have a rational solution to the foreclosure crisis, or we could preserve the capital structure of the banks. we cannot do both. what should we do? [laughter] >> i think we can do both. >> i am not surprised. any other panel members?

>> i am not sure. i think either way, down the road, -- these homes are worth what they are worth, no matter what anyone is carrying them on their books as. we are not going to change that. the best hope of changing that is fixing the foreclosure crisis, and stopping the death spiral led the housing sector is in. so, if we do that right, maybe e can help make the banks' books closer to reality. if we do neither, everyone can lose their homes, and banks will lose money anyway. >> my time is up, you favoring keeping people in the homes have to deal with bank balance sheets as a result? >> yes. >> we had too much leverage.

they got their chance to dump some of their bad stuff on the fed of new york. >> the fed wants it back. >> i know, but the american family is still very highly leveraged. we are still at a point of debt that is unprecedented in the history of america, even with them making a little more savings, not using their credit cards, they are still vulnerable going forward. that effects the ability of the financial sector to be stable. there is some benefit, and pain in the short term. it's a whole pool is risky and unstable, you run the risk of more blowups on very poor lending. >> thank you, dr. troske.

i would like to preface my question a little, and i am actually going to answer the question my fellow panelist has asked before. to the previous witnesses, i am actually an economist, and understand a little bit about supply and demand, and dynamics. mr. silvers is correct. if we push homes on the market, prices will go down. why would that be rational? of course, there are trade-offs. we are at a point where house prices are worth less than they were. banks need to write that off, and people do as well. there are lots of actors in this

economy, many of whom were hurt, and many who will recover when the economy begins to grow. there is a trade-off between short-term growth -- losses in the short term, for the potential of the long-term growth. we are looking at the best way to get to a long-term solution where we have people in affordable housing situations. ms. gordon, you seem to be the one that was willing to address this question. i will ask you to expand on what you talked about. should we not take any of the rest of the actors in the economy well-being into consideration when thinking about this trade-off? we are where we are. part of the question is how did we get here, but the other question is how do we move forward in a way that gets us

back to a growing economy as quickly as possible. >> i do not want to pose false choices. there are four cultures that are not avoidable. we need to figure out a reliable way to separate. we do not have that reliable way. that is the system in which the public has lost confidence, and the buyers have lost confidence. we are in a pickle as a result. foreclosures that are not avoidable, i agree -- let's do them, and get the home sold, hopefully to someone in the community and get the community rebuilt. for the ones that are unavoidable, as mr. mcwatters pointed out, it makes no sense to go through these very costly for closures when -- foreclosures when both the investor and the homeowner and

up worse off. that is not an optimal scenario perplexed as an economist, i agree 100%. what mr. mcwatters said it is correct. if it is -- if it is in the interest of the buyer and the lender, that should be done. >> we want that to happen in all of those situations. >> thank you. >> superintendent neiman. >> one of the main frustrations has been issues regarding lost documents. that is why i have been so strongly interested. what is the level of usage? when will we begin seeing data regarding access and volume from counselors and borrowers using the system? >> we just left our pilot phase

in june of this year, and signed on some of the largest servicers over the summer, which is what you need. you need housing counselors to direct that volume. we have work to help endorsed the system for counselors throughout the country. we have thousands of loans on at that entered the system. >> thousands meaning? >> up to 6000. what is most important, is we tested it thoroughly. it was banks and counselors together. we have good agreement on how to operate and tell each other what is going on in a timely manner, and the guidelines. we are working closely with industry groups, counselor groups, as well as the banks and services geared >> plans for direct access by borrowers?

>> we would like to see that happen. one of the state parliament agencies already has direct access. we would like to see that more broadly offered. we think third parties should be helpful to the bar or in document retrieval and scanning -- to the bar or in document retrieval and scanning. >> by last question is also directed to you. you heard mr. evers talk about the limitations on sharing data regarding the proprietary modifications. however, the same restraint that was not applied to the industry itself to voluntarily share that information by servicer. >> we went to a long process to get all of the servicers to agree to share data.

i do not seek individual data. i have aggregate information. i would leave it up to the regulators and supervisors to work bank-by-bank. >> ideally, treasury, hope now, and the regulators, if they could find a way -- ms. gordon, how important is it to get that data out? >> our goal is to make evidence- based policy. when you cannot see the evidence, that makes it harder. we have been frustrated by the fact we have been -- we have yet to see the public release of the loan-level data that has been promised for months and months. the people of my organization, who do their research using this data, really, really need it. >> great. my time has expired. >> thank you very much.

i also want to thank ms. caldwell, for staying behind. i thought this was an excellent panel, and we all learned a lot. thank you. with that, the hearing is adjourned. [captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute]

>> as this hearing comes to a close, there is a story that is just breaking -- most americans worried about the ability to pay mortgage or rent.

a new "washington post" poll says 53% of those polled are concerned about having the money to make their monthly payment. against this backdrop, just over half of americans say the obama administration shouldn't pose time in which banks can not for " -- should post time in which banks can not foreclose. you can read more about the story in the "washington post." we continue with our debate lineup. we have just added the rhode island debate for governor. that gets underway at 7:00 p.m. eastern, with the midterm election is just six days away. each night on our debate lineup, we bring you the dates from around the nation. 8:00 p.m., we will continue with

the candidates to be florida's next senator. when hour later, it is the first of three house races, with new hampshire, west virginia, and texas. in political news, a new poll in california in of the good news for the democrats running for governor and senator. the attorney general, and former governor, jerry brown, leads ninth whitman, the former ebay ceo. that is 52% for jerry brown. barbara boxer is ahead of the former hewlett packard ceo in the same poll. by the way, the associated press reported that the republican candidate was sidelined after

being treated for breast cancer, forcing her to cancel campaign appearances. her chief of staff says her doctors expect her to make a full and quick recovery. we have dozens and dozens of debates, speeches, and rallies available for you to watch any time at our website. also, political ads and links to other public -- politick related issues. >> with just days until the election, follow the candidates on c-span, with debates every night, and go online. visit our politics