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PROGRESS IN ADMINISTRATIVE AND OTHER
EFFORTS TO COORDINATE AND ENHANCE
MORTGAGE FORECLOSURE PREVENTION

HEARING
BEFORE THE

COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION

NOVEMBER 2, 2007

Printed for the use of the Committee on Financial Services

Serial No. 110–79

(

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2008

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HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania
MAXINE WATERS, California
CAROLYN B. MALONEY, New York
LUIS V. GUTIERREZ, Illinois
´
NYDIA M. VELAZQUEZ, New York
MELVIN L. WATT, North Carolina
GARY L. ACKERMAN, New York
JULIA CARSON, Indiana
BRAD SHERMAN, California
GREGORY W. MEEKS, New York
DENNIS MOORE, Kansas
MICHAEL E. CAPUANO, Massachusetts
´
RUBEN HINOJOSA, Texas
WM. LACY CLAY, Missouri
CAROLYN MCCARTHY, New York
JOE BACA, California
STEPHEN F. LYNCH, Massachusetts
BRAD MILLER, North Carolina
DAVID SCOTT, Georgia
AL GREEN, Texas
EMANUEL CLEAVER, Missouri
MELISSA L. BEAN, Illinois
GWEN MOORE, Wisconsin,
LINCOLN DAVIS, Tennessee
ALBIO SIRES, New Jersey
PAUL W. HODES, New Hampshire
KEITH ELLISON, Minnesota
RON KLEIN, Florida
TIM MAHONEY, Florida
CHARLES WILSON, Ohio
ED PERLMUTTER, Colorado
CHRISTOPHER S. MURPHY, Connecticut
JOE DONNELLY, Indiana
ROBERT WEXLER, Florida
JIM MARSHALL, Georgia
DAN BOREN, Oklahoma

SPENCER BACHUS, Alabama
RICHARD H. BAKER, Louisiana
DEBORAH PRYCE, Ohio
MICHAEL N. CASTLE, Delaware
PETER T. KING, New York
EDWARD R. ROYCE, California
FRANK D. LUCAS, Oklahoma
RON PAUL, Texas
STEVEN C. LATOURETTE, Ohio
DONALD A. MANZULLO, Illinois
WALTER B. JONES, JR., North Carolina
JUDY BIGGERT, Illinois
CHRISTOPHER SHAYS, Connecticut
GARY G. MILLER, California
SHELLEY MOORE CAPITO, West Virginia
TOM FEENEY, Florida
JEB HENSARLING, Texas
SCOTT GARRETT, New Jersey
GINNY BROWN-WAITE, Florida
J. GRESHAM BARRETT, South Carolina
JIM GERLACH, Pennsylvania
STEVAN PEARCE, New Mexico
RANDY NEUGEBAUER, Texas
TOM PRICE, Georgia
GEOFF DAVIS, Kentucky
PATRICK T. MCHENRY, North Carolina
JOHN CAMPBELL, California
ADAM PUTNAM, Florida
MICHELE BACHMANN, Minnesota
PETER J. ROSKAM, Illinois
KENNY MARCHANT, Texas
THADDEUS G. McCOTTER, Michigan
KEVIN McCARTHY, California

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel

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CONTENTS
Page

Hearing held on:
November 2, 2007 .............................................................................................
Appendix:
November 2, 2007 .............................................................................................

1
51

WITNESSES
FRIDAY, NOVEMBER 2, 2007
Longbrake, Bill, Anthony T. Cluff Senior Policy Advisor, The Financial Services Roundtable ....................................................................................................
Marks, Bruce, Chief Executive Officer, Neighborhood Assistance Corporation
of America .............................................................................................................
Miller, Hon. Tom, Attorney General, State of Iowa ..............................................
Montgomery, Hon. Brian D., Assistant Secretary for Housing–Federal Housing Commissioner, U.S. Department of Housing and Urban Development ....
Samuels, Sandor, Executive Managing Director, Countrywide Financial Corporation .................................................................................................................
Steel, Hon. Robert K., Under Secretary for Domestic Finance, U.S. Department of the Treasury ...........................................................................................
Wade, Kenneth D., Chief Executive Officer, NeighborWorks America ...............

29
27
22
8
31
5
24

APPENDIX
Prepared statements:
Longbrake, Bill .................................................................................................
Marks, Bruce .....................................................................................................
Miller, Hon. Tom ..............................................................................................
Montgomery, Hon. Brian D. ............................................................................
Samuels, Sandor ...............................................................................................
Steel, Hon. Robert K. .......................................................................................
Wade, Kenneth D. ............................................................................................
ADDITIONAL MATERIAL SUBMITTED

FOR THE

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91
111
116

RECORD

´
Hinojosa, Hon. Ruben:
Statement of the National Association of Hispanic Real Estate Professionals ............................................................................................................

127

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PROGRESS IN ADMINISTRATIVE AND OTHER
EFFORTS TO COORDINATE AND ENHANCE
MORTGAGE FORECLOSURE PREVENTION
Friday, November 2, 2007

U.S. HOUSE OF REPRESENTATIVES,
COMMITTEE ON FINANCIAL SERVICES,
Washington, D.C.
The committee met, pursuant to notice, at 10:06 a.m., in room
2128, Rayburn House Office Building, Hon. Barney Frank [chairman of the committee] presiding.
Members present: Representatives Frank, Sherman, Hinojosa,
Green, and Moore of Wisconsin.
The CHAIRMAN. The hearing will come to order. Are two members a quorum for a hearing? I don’t know. I will ask the Parliamentarian.
Mr. GREEN. Is that a quorum or a quarrel?
The CHAIRMAN. Two members constitute a sufficient quorum.
This hearing is called as part of a cooperative effort between the
Legislative and Executive Branches on dealing with the subprime
crisis. As we have made clear, the subprime crisis has required us
to take a two-fold approach. On Tuesday this committee will be
marking up legislation that will, we hope, if enacted diminish the
likelihood of a crisis such as this recurring. But we are constrained
when we are dealing with existing mortgages and existing contracts from legislating in most cases. We don’t want to advocate existing contracts by law. We are prepared to encourage negotiations.
So it is a two-track process.
I would like to say that I very much appreciate the cooperation
we have had from the Administration, particularly the bank regulators, but also Commissioner Montgomery going forward, because
this committee has already responded in substantial part to the
Administration’s request in the FHA. So we have a collaborative effort going on, some differences, but essentially a collaborative effort
on the FHA. And the bank collaborators, the FDIC, the OCC, the
OTS, the Credit Union Administration, and the Fed have been cooperative in working with us and drafting legislation. Again, we
won’t have 100 percent agreement, but we are within, I think, a
generally agreed upon framework.
So that is one part of it. The other part is the ongoing effort we
have had to try to persuade people to do modifications of existing
contracts, although there has also been some legislative cooperation. The President has supported, and the House has passed, leg(1)

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2
islation to make sure that there is no tax liability for mortgagors
who are given some kind of flexibility.
And one other one that I would mention that I think has been
a very good example, and a necessary example of cooperation here,
members of this committee wrote to the Securities and Exchange
Commission earlier this year and asked them to intervene with the
Financial Accounting Standards Board to encourage them to make
it clear to the servicers that if the servicers of mortgages in the secondary market could demonstrate that it was in the interest of the
holders of the paper to do a workout, namely, that it would be better for them from the economic standpoint not to foreclose but in
fact to do some reworking so there would be a steady income
stream, that they could do that. We got the permission of the Financial Accounting Standards Board, which was responsive.
Now the reason I cite all these things is this: A lot of pieces have
been put in place, and the bank regulators have also made it clear,
to their credit, that forbearance will be allowed, that—we have
done a great deal to encourage the holders of the mortgages to
show flexibility. We have provided some tax help. We have a number of very useful organizations, neighborhood organizations, and
citizens groups who are trying to work with the borrowers.
What seemed to some of us a few weeks ago while the pieces
were out there, they weren’t meshing, that we had put a number
of individual policies in place but we needed to overcome the inertia of everybody in their separate sphere. A lot of efforts like that
have been going on. One was this HOPE NOW that the Administration has proposed, and we thought it would be very useful to get
a report on that. We have two panels: First, some representatives
of the Administration; and second, some neighborhood and citizens
groups and also some of the businesses.
One of the things we do want to make clear is that we are not
talking about legislation that compels anybody to do anything. I
also want to repeat this: We are not talking about any kind of bailout in the sense of public money. No public money is going to go
either to mortgagors or mortgagees. No public money is going to go
to pay off people in terms of the loan. Public money is useful for
helping to make sure the advocates are available, that we can
reach out.
Secondly, I want to again deal with those who claim that there
is a moral hazard involved here, namely, that we are going to be
so effective in alleviating problems that a number of people will
say, ‘‘Boy, that was fun, let’s do it again.’’ As anybody involved in
this knows, that is not remotely true. We are mitigating pain, we
hope. We are diminishing terrible consequences. Nothing we are
doing, if we are 100 percent successful, is going to make anybody
on either side of this transaction, I believe, want to go through it
again. We are talking about losses to the lenders that they deserve
to have because they made, in some cases, bad decisions. We are
talking about pain on the borrowers that we cannot avoid, but we
can diminish.
There is one last point that I would make, and that is the justification for all this energy on the part of high officials of this Administration from HUD and Treasury, and from Members of Congress. One of the arguments is, well, why should we help these peo-

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3
ple make bad decisions? Leave aside compassion, and the fact that
some people were misled. Leave aside all of those reasons. There
is a very good reason, I think, in economic terms; the externalities
of this crisis are severe. That is, the negative economic effects on
people who by nobody’s definition did anything remotely unwise or
incorrect are severe.
In particular, we have a large number of people in this country
who are making what, $30,000 to $50,000 or $60,000 a year. They
took out mortgages. They are working hard to pay their mortgages.
And they are among the victims of a widespread foreclosure pattern. Because if you own a home, and you are paying your mortgage, but the house across the street is foreclosed upon, and other
houses in the neighborhood are foreclosed upon, then you get a deterioration of the neighborhood. You get vacant housing, which becomes a source of difficulty, and you get a deterioration of property
values. So there is an excellent public policy reason for us trying
both to alleviate this crisis now and make it less likely in the future.
Are there any further opening statements from my colleagues?
The gentleman from Texas.
Mr. GREEN. Thank you, Mr. Chairman. And I sincerely thank
you for holding this hearing today. I am also appreciative that we
have such outstanding witnesses here today—Mr. Steel and Mr.
Montgomery. I am very grateful that you are here.
I would like to also, if I may, simply thank the staff because the
briefing material on this has been absolutely excellent. I really look
forward to hearing the testimony, but I can tell you that what I
have read so far has been very impressive, and it is going to, I
trust, allay a lot of concerns.
We need not go into the statistical information about the impact
of the subprime concerns on the broader market. But I do want to
let folks know that we know that there is a lot of consternation and
a lot of people are very concerned about what is going to happen
to them. I think that a project or a program like the HOPE NOW
program is going to give people just that, hopefully.
Hope: It will cause people to understand that the government
does care, and that it does want to be involved in a way that is
permissible and acceptable so as to help people to extricate themselves from a most difficult circumstance that many people find
themselves in. And for those who are of the opinion that this does
not impact them, I think that what the Chair said bears reiterating. There are a lot of prime communities with subprime home
loans within them. And because we have this circumstance, every
neighborhood ought to be concerned, every school district ought to
be concerned. The counties ought to be concerned because they collect taxes and all of this can have an impact. But I think that we
are making the right move to give the public some assurance that
the government does want to be involved in the solution. We want
to help people to come to a solution.
And finally I would say this, as we move toward finding a solution, I think that we do want to make it very clear to people that
we are not interested in changing the dynamics of the marketplace
in some sort of irreparable way. We understand that there are dynamics in the market, and we want to let the market do what the

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4
market does. But by the same token, we want to try to save as
many people who are in foreclosure as we can because some of the
circumstances were created in an adverse way that were not—they
didn’t have all of the information and intelligence such that they
would have made different decisions. There was a market that was
booming. Everybody thought that housing prices were going to go
up forever, I suppose. And when that turned around, it caught a
lot of people without the ability to extricate themselves.
So I am honored that this hearing is taking place, and I do look
forward to hearing from the witnesses. I thank you again, Mr.
Chairman, and I yield back the balance of my time.
The CHAIRMAN. Are there any further opening statements? The
gentleman from Texas.
Mr. HINOJOSA. Chairman Frank, I want to thank you for holding
a hearing on such an important topic. Hopefully this and subsequent hearings will shed light on what needs to be done to help
curb what is predicted to be a tidal wave of foreclosures. The drop
in the Dow has put the fear into investors throughout the country.
I received some information from an association that I want to discuss with you. The National Association of Hispanic Real Estate
Professionals predicted that foreclosures in the Hispanic community alone are expected to reach nearly $25 billion in 2007, and almost twice that—$52 billion—in 2008.
I ask unanimous consent, Mr. Chairman, to insert into today’s
record a letter from the National Association—
The CHAIRMAN. Without objection, it is so ordered.
Mr. HINOJOSA. Minority homeowners, particularly Hispanics, receive a disproportionate number of unscrupulous loans, and in the
past have been preyed upon by several entities that I won’t mention here today. Those companies paid hefty fines as a result of
their misdeeds. I believe that those entities have paid their dues.
I imagine the regulators will impose similar fines once they determine the entities that have once again preyed most upon the Hispanic community and other minorities.
At this point in time, I believe that it is crucial that we set aside
our differences and focus on the task at hand. As Chairman Frank
and others have noted, it is time to examine the recent progress
by the Administration and others in coordinating the lenders, mortgage servicers, nonprofit organizations, community-based organizations, and others to assist at-risk homeowners; encourage modifications of troubled loans; and prevent as many mortgage foreclosures
as possible. Working together, I believe that we can accomplish
these goals.
Having said that, Mr. Chairman, I yield back the remainder of
my time.
The CHAIRMAN. The gentlewoman from Wisconsin is now recognized for an opening statement.
Ms. MOORE OF WISCONSIN. Thank you, Mr. Chairman. I can tell
you that before coming to Congress, before being an elected official
at all, I worked for the Wisconsin Housing and Economic Development Authority back in the 1980’s, and one of the first things that
I looked at was securitization of loans, really wanting decent people
who are not necessarily ‘‘A’’ borrowers to have an opportunity to
move into their homes. And for sure, some of this has occurred be-

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5
cause borrowers were not impeccable. But clearly many of the problems are not just based on life’s circumstances or life’s changes—
deaths, divorces, a loss of income—but some of them have been because of some of the products that we all have created.
I hope that today is more than just a love fest of our talking
about our HOPE NOW project and really trying to create an environment where lenders will, in fact, redo these mortgages, will in
fact come to the table and realize that it is more cost effective, in
many instances more than they have stepped up to this point, to
work with consumers to try to keep them in their homes because
it is not just that borrower who is losing their home. It has a rippling effect on tax revenues for our cities, for declining property
values for other residents who live in the community, and just really open season for criminals who see a checkerboard of foreclosures
and boarded-up homes.
So I thank you for coming, and Mr. Chairman, I yield back.
The CHAIRMAN. I just unplugged the microphone with my foot, so
I will disappear for a minute to plug it back in. But we will begin.
Let me express my appreciation to our two Administration officials,
and we will begin with Mr. Steel.
STATEMENT OF THE HONORABLE ROBERT K. STEEL, UNDER
SECRETARY FOR DOMESTIC FINANCE, U.S. DEPARTMENT OF
THE TREASURY

Mr. STEEL. Chairman Frank, members of the committee, good
morning. I very much appreciate the opportunity to appear before
you today to present the Treasury Department’s perspective on efforts to coordinate and enhance foreclosure prevention. As you
know, we are experiencing a period of adjustment in the credit and
mortgage markets. Fortunately, this market stress is occurring
against a backdrop of healthy U.S. fundamentals and a strong global economy. Yet as Secretary Paulson has said, the housing decline
is the most significant current risk to our economy. And additionally, as others have said, a significant number of homeowners will
experience strain and could face foreclosure.
The issues of foreclosure are complex and nuanced. In truth,
thousands of homes end up in foreclosure every year, even when
housing markets are strong. Between 2001 and 2005, more than
650,000 homeowners began the foreclosure process every year. This
baseline foreclosure rate can result from events such as job loss,
credit problems, or changes in family circumstances. These foreclosures, although unfortunate, are largely unavoidable.
Over the course of the next 18 months, we expect the foreclosure
rate to remain elevated and above its historic level. A rising foreclosure rate during a housing downturn is not surprising but largely because of lax underwriting in recent years, especially in the
subprime market, a higher number of homeowners will face delinquency during the next year-and-a-half. In total, over 2 million
subprime mortgages are expected to reset in the next 18 months,
but not all will end up in foreclosure.
Some homeowners will be able to afford their new payments
without trouble and many others will qualify for a refinanced fixedrate mortgage on their own. Others, however, have been stretched
too far beyond their means and unfortunately foreclosure is inevi-

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6
table. Our challenge is to identify the group of homeowners who,
with a bit of assistance, can stay in their homes.
On August 31st, President Bush announced an aggressive comprehensive plan to help as many homeowners as possible stay in
their primary residences. The Department of Housing and Urban
Development and the Treasury Department have been working
closely with leading servicers, mortgage counselors, lenders, and investors to understand the causes of foreclosures and the very best
ways to help people keep their homes. We are continuing to learn,
but have reached two early conclusions.
First, it is clear to all that the earlier we identify struggling borrowers, the more likely it is that servicers and lenders will be able
to refinance or modify their mortgages into something more sustainable for the long term. If we wait until borrowers miss several
payments, their credit profiles will be tarnished, and they will have
far fewer refinancing options.
Second, once identified, the method and technique of contacting
borrowers is quite important. When contacted by lenders, many
borrowers mistakenly believe that the lender’s goal is to repossess
their homes in foreclosure. In almost all cases, lenders would rather find a way to help homeowners stay in their homes than foreclose. Yet we understand that up to 50 percent of those who lose
their homes to foreclosure never contacted their mortgage servicer
or mortgage counselors for help.
From our review, it became clear that while many product market participants are working hard on their own trying to help
homeowners, they are not having as much success as they or we
would like. In addition, mortgage securitization has brought many
benefits but has also led to complexity in finding solutions. Treasury and HUD encourage servicers, lenders, investors, and counselors to work together.
On October 10th, they announced the formation of an alliance
called HOPE NOW. To date, the HOPE NOW Alliance consists of:
4 counseling organizations; 17 mortgage servicers and lenders,
comprising almost 60 percent of the U.S. market for mortgage servicing; 3 investor groups, including the American Securitization
Forum, which represents 370 members; and 10 trade associations.
Since their launch, they have been developing and implementing
an aggressive plan. Earlier this week, the Alliance announced a national direct mail campaign to contact at-risk borrowers. Servicers
have been mailing letters to their at-risk customers, but have had
limited success because borrowers in trouble do not want to hear
from their lenders.
In contrast, independent counselors have reported a significantly
higher success rate. This new letter campaign, which will come
from the HOPE NOW Alliance rather than from the servicers, is
expected to increase their effectiveness at reaching at-risk borrowers. The Alliance will send over 200,000 letters by the end of
this month alone.
Let me take a moment to emphasize the importance of these letters and ask for your help. When you are at home in your districts
over the weekend or for the holidays, please tell your constituents
about this mail campaign. Tell them it is okay to contact HOPE

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7
NOW for assistance. The organization is ready to lend a hand, but
we need your help in making their message known.
The Alliance is also working hard to develop strong working relationships between servicers and counselors. Some servicers already
have dedicated teams and contacts for counselors to call. Others
don’t. And as a result, counselors can spend hours trying to find
the right person to contact. Servicers and counselors who joined the
Alliance have agreed to adopt a standard process model that will
strengthen and speed work flow, productivity, and communication
between them.
The Alliance is working to expand the capacity of an existing national counseling network to reach borrowers. Most borrowers feel
more comfortable speaking with independent, not-for-profit counselors than with their lenders. While there are already many conscientious HUD-certified mortgage counselors, their efforts could be
enhanced through a uniform message and adopted best practices.
The servicers have also agreed to work toward cross-industry
technology solutions to better serve homeowners. Some major
servicers use sophisticated software to analyze borrower situations
and determine if workouts or modifications are appropriate. The
Alliance is taking this software and making it Web-enabled so that
other servicers and counselors can access it. This will speed the
loan modification process where appropriate.
Today the industry does not have a thorough, standardized set
of metrics to evaluate servicers’ loss mitigation performance or
evaluate counselors’ effectiveness. The Alliance is developing standard performance measures to identify categories of borrowers who
can be helped, determine successful treatments and measure the
rate of successful outcomes.
The efforts of this private sector alliance alone will not prevent
all foreclosures but is a critical first step. By better identifying
those borrowers in need, we hope to see more loan modifications
and refinancing.
Just as lenders, servicers, and counselors have come to develop
metrics and standards that will measure the most effective way to
make counseling accessible to troubled borrowers, we have also encouraged them to come together in a similar way to develop an efficient methodology for offering suitable mortgage solutions, such as
loan modifications, where appropriate.
We are optimistic about the effectiveness of our current initiatives. Yet given the size, nature, and implications of these current
challenges for homeowners, we need to continue to work to find additional solutions without compromising our shared ambitions to
not bail out lenders, speculators or those who have committed
fraud. Mortgage providers must offer clear, transparent, and understandable information on the mortgage products they sell, and
the homebuyers have a responsibility to use that information and
understand their mortgages. Buying a home today is a complex
process but that in no way excuses homeowners from their obligation for due diligence.
Finally, the Administration has requested that Congress do their
part by focusing on three initiatives: First, Congress should pass
Federal Housing Administration modernization to make affordable
FHA loans more widely available; second, the President has asked

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8
Congress to temporarily eliminate taxes on mortgage debt forgiven
on a primary residence; and third, the Congress should enact comprehensive government-sponsored enterprise reform, or the GSEs.
The tax relief proposal has cleared the House of Representatives
and awaits action in the Senate. In large part due to this committee’s hard work, FHA and GSE reforms have passed the House of
Representatives and await action. Congress should enact these bills
as quickly as possible.
Mr. Chairman, in conclusion, let me thank you for holding this
hearing. Under the President’s leadership, the Administration is
working diligently to help mitigate the impact of rising foreclosures
on homeowners and the economy. We pledge to keep you apprised
of our efforts. Thank you, and I look forward to your questions.
[The prepared statement of Under Secretary Steel can be found
on page 111 of the appendix.]
The CHAIRMAN. Commissioner Montgomery.
STATEMENT OF THE HONORABLE BRIAN D. MONTGOMERY,
ASSISTANT SECRETARY FOR HOUSING–FEDERAL HOUSING
COMMISSIONER, U.S. DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT

Mr. MONTGOMERY. I want to thank you, Chairman Frank, and
distinguished members of the committee, for the opportunity to
talk about the HOPE NOW Alliance.
Homeownership, and more importantly homeownership retention, have long been a priority for the Federal Housing Administration. We believe borrowers with FHA-insured mortgages have unparalleled access to loss mitigation alternatives to help them
weather personal financial crises. In fact, in Fiscal Year 2007, we
provided this support to 91,000 borrowers; 86,500 of them cured
their defaults and stayed in their homes. While not every one of
these borrowers will be successful in the long term, historically 89
percent of all borrowers who benefit from our loss mitigation program still have active loans 2 years after the assistance.
This success is responsible in part for a reduction in both the
number and percentage of FHA foreclosures, with the foreclosure
rate dropping from a high of 1.74 percent of insured loans in Fiscal
Year 2004, to 1.45 percent in Fiscal Year 2007.
Throughout this year, HUD staff and senior officials nationwide
have sponsored and participated in more than 125 separate homeownership retention events, including town hall meetings, fairs,
and joint task forces. They have reached the combined actual audience of more than 25,000 people. While these events allow us to
reach borrowers in critical need of supportive services, the number
of homeowners being affected by current housing trends continues
to rise.
As we know, it has been reported that more than 2 million
subprime ARMs are expected to reset to higher interest rates by
the end of 2008. And many of those borrowers unable to afford the
higher payments will be forced into foreclosure unless the industry
takes immediate and aggressive action to provide alternatives.
In September, FHA announced one such alternative. FHASecure
is one of our refinance options designed specifically for conventional
and subprime borrowers who default on their mortgages solely be-

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cause they can no longer afford the payments on their ARM loan
after the interest rate resets to a higher rate. Though still a very
new program, 575 FHA-approved lenders are already using
FHASecure to rescue borrowers from the potential loss of their
homes. And since early September, more than 70,000 conventional
borrowers have applied for FHASecure refinance loans.
Additionally, we are proactively reaching out to approximately
1.2 million at-risk homebuyers whose subprime loans are scheduled
to reset between now and this time next year, and by the way,
whom we can reach under our current loan limits. Through a comprehensive direct mail database, we are able to contact these borrowers, the majority of whom are 3/27 or 2/28 ARMs, and provide
them alternatives to their current loans.
Current trends suggest that there may be over 1 million foreclosure starts this year alone. If the industry works together, it is
possible to reinstate or refinance many of these loans, but only if
borrowers respond to offers of assistance.
Industry sources reported that more than 40 percent of delinquent borrowers fail to respond to any contact from their lender
until it is too late, and that is why Treasury and HUD, at the direction of the White House, have encouraged companies and organizations that historically do not share this information, business
practices, or resources to join in together to create a unified, coordinated plan to reach and support these borrowers.
All of the Alliance partners are contributing staff resources and
millions of dollars towards a number of specific goals, including
outreach, staffing, and funding. And as Under Secretary Steel just
mentioned, the most critical of these goals are communication and
access.
Adopting a standardized service or counselor communication
model to ensure that borrowers who contact the network get consistent, accurate, and timely access to workout strategies will be
extremely important. And there will be equal stress placed on the
industry’s adoption of systematic protocols for identifying sustainable mortgage products for eligible borrowers.
All of these actions are under way; some can be implemented
quickly while others will take longer. The toll free line is up and
operating with 122 experienced counselors nationwide; another 50
are currently being trained; and more are being recruited. And just
this week, Secretaries Jackson and Paulson endorsed the first
major deliverable of HOPE NOW, a nationwide mailing of HOPE
NOW letters to at-risk borrowers.
The Alliance’s technology group is completing development of a
Web-based loan workout tool that will provide a common decision
platform for both servicers and counselors that will significantly
streamline default resolution. We have been told this tool should
be available for general use in early 2008.
Senior staff from both Treasury and HUD are participating on
Alliance working groups and working behind the scenes to broaden
participation to include all major lenders and a greater number of
qualified housing counseling organizations.
This is a multi-year project and we remain committed to ensuring that the HOPE NOW Alliance lives up to the promise of deliv-

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10
ering significant and measurable results for families struggling to
hold on to their piece of the American dream.
Thank you for your time this morning. I look forward to answering your questions.
[The prepared statement of Commissioner Montgomery can be
found on page 87 of the appendix.]
The CHAIRMAN. Thank you, Commissioner. And we do want to be
very cooperative on all this. Let me ask, are the pieces getting put
in place? Where are we in terms of actual restructuring? What is
the timetable? Has that begun to happen? Mr. Steel, when does the
actual—because we are told the resets are happening and they are
coming soon. Do we have any kind of results yet? Or when can we
expect some?
Mr. STEEL. Well, I think, sir, that the original results are to
make contact, and that is happening right now. We are also having
individual meetings with large lenders and servicers; we have had
two in the last 2 weeks. They are describing to us their increased
efforts for modification and for refinancing, so it is happening in
the field, and we are providing encouragement to that.
I think that what we want to do, though, is to develop metrics
so that we can really report back and understand. And we are not
there yet on that ability to provide specific feedback, but we are
pursuing that, and in the interim we are just doing our best to—
The CHAIRMAN. As you develop the metrics, I hope someone is
asking for raw data to come in so that when we get the metrics,
you won’t have lost that.
Mr. STEEL. Absolutely.
The CHAIRMAN. Let me ask one question. FDIC Chair Sheila Bair
has proposed a more general approach. There has been some question about whether doing it case-by-case is enough. Where are we
on that, in your judgment, now? What do you think of what Chairman Bair has said?
Mr. STEEL. Well, I think that Chairman Bair has provided a very
good perspective on this issue, and we have met with her several
times to understand the way in which she is thinking about it. I
believe that she is exactly right, that this model is by nature distributed with lots of different players. And given the size and the
scale of the challenges that we are facing, a more systematic and
standardized approach is needed. We have brought that same systematic and standardized approach to the idea of contacting borrowers, and the Secretary has indicated just this week in his public
comments that we need to have a more systematic and standardized approach to the idea of modifications and refinancings. Now
the exact formula for that we are still working on, but the idea of
a more systematic and standardized—
The CHAIRMAN. Obviously speed is important, too. And I do think
it should be noted that when the Chair of the FDIC says that, it
is coming not from an advocate for neighborhoods but from a regulator; indeed not just a regulator, you, but the woman in charge of
protecting the integrity of the Deposit Insurance Fund. So I would
think if she takes that position, nobody ought to say this is in any
way jeopardizing safety, soundness, etc. This is very impressive
coming from the chief protector of the Deposit Insurance Fund. So

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we will be encouraging people to in fact rather than go one at a
time to do some across-the-board kinds of approaches.
Mr. STEEL. Well, I think the idea of systematic and standardized
are the words we are using to tell people that while decisions are
made in essence in some ways on a case-by-case basis that having
broad guidelines—
The CHAIRMAN. Within the framework. Yes. It really—time is obviously an issue.
Mr. Montgomery, one other thing, I was pleased and gratified
that the Under Secretary mentioned that in two of the three areas
the committee has worked—FDIC and FHA—and we collaborated
with our friends at Ways and Means, in fact all three of those
pieces of legislation that you have talked about have passed the
House. The FHA one is well along, but that is my question, Commissioner Montgomery. I am disturbed by one thing. You asked for
some FHA legislation. We responded. We responded in this committee last year. Under Republican leadership, it was blocked in
the Senate. We are doing it again. I understand there are some policy differences, but it is again within the framework of agreement.
It has passed the House, it is passed the committee in the Senate.
Given that I was disappointed to read that the FHA is now in effect acting in that area, not waiting for the legislation, and there
are some areas where there is difference, that is not helpful in my
judgment in our working together. You know if there was nothing
going on, I would understand your needing to move. But the raising of fees and raising them in ways that differ in some ways certainly from the bill that the House passed, is it not possible for the
FHA to hold off on that until next year when we hope the Senate
may do something when the bill is out of committee? Particularly
since the bill may very well differ in some respects from what you
are doing. You would then be required, I would assume, in compliance with the law, absent a signing statement, to comply with that.
So why—having asked us for legislation, and having us well
along in the legislative process, pass the House, pass one committee—pass the committee in the Senate, why are you acting
without waiting?
Mr. MONTGOMERY. I would assume you are referring to the MIP
increase on the multifamily.
The CHAIRMAN. Yes. Was it multifamily? I thought it was—
Mr. MONTGOMERY. If it is the MIP increase—
The CHAIRMAN. No. I am talking about the most recent proposal
we saw for an increase with regard to people with weaker credit.
Mr. MONTGOMERY. There is a risk-based pricing proposal.
The CHAIRMAN. Yes. Yes. That is the one I am talking about. Because risk-based pricing is what is in our bill. It is the risk-based
pricing proposal.
Mr. MONTGOMERY. Ours is only within current statutory limits.
The CHAIRMAN. I understand, but they differ some with what—
Mr. MONTGOMERY. There is not a lot of difference. But as you
know, sir, yours actually goes to 3 percent. Ours can only go to 2.25
percent on the up-front premium. And as you are aware, since we
are an insurance company, because of a certain type of gift downpayment assistance we have been using for many years, we have
been moving closer toward a positive credit subsidy, in fact, peril-

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12
ously close to a positive credit subsidy. Risk-based pricing helps answer that question.
The CHAIRMAN. I understand that. We are passing legislation
dealing with risk-based pricing at your request, and you are now
moving without us. There is one fundamental difference—and I
want to stress this again—it really troubles me that we continue
to have it. Our notion of risk-based pricing says that if you are
someone who is high risk and weaker credit, but you work hard
and make your payments, you should not be the one to bear the
brunt of people like you who could make payments. And your proposal says no, we are going to treat all those people in that category the same, and the people in the lower income—because that
is by and large where the weaker credit is—that they are going to
have to make higher payments for the insurance than I would,
even if they make their payments.
And I understand why a private insurance company might have
to do that. I do not understand why the Federal Government does
that. I do not understand why we say to some hard-working woman
who has made every payment she was supposed to make, you know
what, there are other people who didn’t make their payments, so
you have to make up for that and I don’t. So why do we not say,
as we have said in the bill, if you make your payments, we will not
charge you more?
Mr. MONTGOMERY. So then the alternative to that is that we
raise premiums on everybody.
The CHAIRMAN. No. Yes. A little bit. Commissioner, absolutely
right. So here is the choice. We raise them higher on a relatively
small number of lower income people, but we raise them more on
everybody, so you and I share in that as opposed to putting it on
the woman making $45,000. Isn’t that an easy question for us to
answer by any model standpoint?
Mr. MONTGOMERY. Sir, I will say there is this much difference
between them. Currently we cannot help the higher risk, lower income borrower under our current pricing structure. By doing the
risk-based structure and moving from 1.5 percent to 2.25 percent,
which on our average mortgage of $130,000 a year, sir, is less than
the cost of a Domino’s pizza every month, then higher risk, lower
income borrowers—
The CHAIRMAN. Okay. As you know we are not talking about
whether or not—that is not a fair answer. Because we are not talking about whether or not you should reach those people, but who
should bear the cost.
Mr. MONTGOMERY. We can’t reach them today, sir, is my point.
Subprime loan.
The CHAIRMAN. Yes. But we are very close to passing the bill.
Then let me ask you, you are doing it now. What do you think we
should do in the bill in this regard? And let me say, by the way,
when you are talking about a low-income family, please don’t scoff
at the cost of a Domino’s pizza a month. It may not be a big deal
to me and you.
Mr. MONTGOMERY. That is all we help are lower-income families,
sir. We want to help higher risk, lower income families.

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The CHAIRMAN. Mr. Montgomery, why would you say that? You
know I agree with that. The question is not—I guess there is a fundamental philosophical divide between us that troubles me.
Mr. MONTGOMERY. I don’t think there is.
The CHAIRMAN. We agree that we should help people with weaker credit. The question is, should the people with weaker credit
have to subsidize each other? Or should all of us subsidize the people with weaker credit?
Mr. MONTGOMERY. Right now the only choice is subprime—
The CHAIRMAN. What about in the bill? Mr. Montgomery, you are
not answering the question. Don’t pull this again. You do this, and
it troubles me. I am asking you a question. I understand the current law.
What do you think about passing a bill which says that to the
extent that there has to be some bearing of a higher risk for people
with weaker credit that we share it for all of us who might get
FHA rather than making only the people with weaker credit subsidize each other? What is your position on that?
Mr. MONTGOMERY. Absolutely, sir. As we have done all along
through this process, we have been very deliberative—
The CHAIRMAN. What is your answer to the question?
Mr. MONTGOMERY. Sir, I think we are doing that today. If I am
a low-income, high-risk family who cannot use FHA today, if someone says by paying $8 or $9 more a month, I would say, where do
I sign up?
The CHAIRMAN. Mr. Montgomery, please answer my question.
Mr. MONTGOMERY. That is all I am trying to do, sir.
The CHAIRMAN. No, no, no. You know better. Here is the question: Assuming we are going to help people who are of weaker credit and assuming that means that somebody has to pay for a higher
default rate, should that cost be borne only by all the people in that
subcategory of weaker credit? Or should that cost be borne by all
of those getting—
Mr. MONTGOMERY. It is borne by everyone, sir.
The CHAIRMAN. No, Mr. Montgomery. Please answer the question.
Mr. MONTGOMERY. Everybody pays premiums, sir. That is the
beauty of this program. It is not a handout. Everybody pays premiums.
The CHAIRMAN. Yes. And Mr. Montgomery—
Mr. MONTGOMERY. It will attract some lower risk borrowers. And
all of these people are low income, sir. The average income of our
borrower is $55,000 a year.
The CHAIRMAN. Mr. Montgomery, you know I know that. You will
stop filibustering. This is appalling. We agreed on all of that. We
agreed that we are going to reach people. We are going to stay here
until you answer the question ‘‘yes’’ or ‘‘no.’’ This is appalling to me
that you would try to evade the question. We agree to all of that.
We agree there has to be somebody bearing the cost because more
people will default when you get lower down the credit thing. You
say, let those people with weak credit subsidize each other because
it is only a Domino’s pizza a month to them. I say, no, let’s not
even do that. Let’s share that subsidy among everybody. Which do
you prefer?

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Mr. MONTGOMERY. Well, as current practice—
The CHAIRMAN. I am not asking you current practice. Which do
you prefer?
Mr. MONTGOMERY. Since I run an insurance company, sir, I have
to be mindful of not coming to Congress and asking for money,
which as you know we get—
The CHAIRMAN. Mr. Montgomery—
Mr. MONTGOMERY. I also want to help higher risk lower income
families.
The CHAIRMAN. You know you are not answering the question.
I agree that you need more money from the premiums. You accept
that, right? We are talking about, how do we allocate the higher
premiums? Do we allocate it only to the people in the weaker credit? Or do we allocate it to all people who pay the premiums? So
please don’t filibuster with extra money from the Congress. That
is not an issue.
Given that we have to pay for this with higher premiums, should
they come entirely from the people in that same category of weaker
credit or should they be spread throughout the universe of people
getting insurance?
Mr. MONTGOMERY. Sir, I would say the flip side of that is some
of the lower income—
The CHAIRMAN. Are you answering the question?
Mr. MONTGOMERY. —borrowers will pay lower.
The CHAIRMAN. Will you answer the question?
Mr. MONTGOMERY. Some of your constituents will pay lower
under this. And I think that is a good thing.
The CHAIRMAN. Mr. Montgomery, would you answer the question?
Mr. MONTGOMERY. Some people—
The CHAIRMAN. Mr. Montgomery, will you answer the question?
The question is, given that we have to have some increase in premium income to accommodate the fact that we will have a high or
low loss rate for people with lower credit, should that be applied
only to the people in that same category, which would be a lower
income category, or should it go through all the borrowers?
Mr. MONTGOMERY. It should be spread out among all borrowers.
The CHAIRMAN. And that is what is in our bill. Fine. So you are
not opposing that provision in the bill?
Mr. MONTGOMERY. Sir, that risk is spread out today.
The CHAIRMAN. No. But it is not spread out. No. You know that
there is a difference.
Mr. MONTGOMERY. Sir, your premium goes to 3 percent. Ours
only goes to 2.25 percent.
The CHAIRMAN. Oh, I am sorry—wait a minute. Excuse me.
Mr. MONTGOMERY. Under your bill 3 percent—
The CHAIRMAN. Do you want us to change that to go back to
2.25?
Mr. MONTGOMERY. No, sir.
The CHAIRMAN. Excuse me, Mr. Montgomery.
Mr. MONTGOMERY. You can help our borrowers. We do support—
The CHAIRMAN. You are changing the subject again on this issue.
Mr. MONTGOMERY. No, sir. I am supporting that part of your bill.
The CHAIRMAN. Oh, you are? That is the first time.

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Mr. MONTGOMERY. That is what we had in the bill last year. You
know I support this legislation. There is a little difference.
The CHAIRMAN. No, but you differed to that particular provision.
So I accept your support of it now. But let me ask you—
Mr. MONTGOMERY. The different approach is to helping the higher risk borrowers.
The CHAIRMAN. Mr. Montgomery, I want to follow up on this.
You said you are only at 2.25 percent, was it?
Mr. MONTGOMERY. 2.25 percent.
The CHAIRMAN. And we are going as high as 3 percent.
Mr. MONTGOMERY. That is correct.
The CHAIRMAN. It sounds like you think we are going too high.
Do you want us to go back to 2.25 percent?
Mr. MONTGOMERY. No, sir. I think that 3 percent goes to help
higher risk lower income borrowers. It is more than I can do currently—
The CHAIRMAN. When you say we are going to 3, we are doing
that at your request. It did sound like you were contrasting us at
3 percent.
Mr. MONTGOMERY. No, sir. I wish that we could go to 3 percent.
The CHAIRMAN. You do want us to?
Mr. MONTGOMERY. Yes, sir. Absolutely.
The CHAIRMAN. Well, when you said that we were 3 and you
were 2.25, it sounded like you were kind of putting that responsibility on us.
Mr. MONTGOMERY. No, sir. I can’t go to 3 percent today.
The CHAIRMAN. I know you can’t. Mr. Montgomery, please refrain from telling me today is Friday every third sentence because
you don’t want to answer another question. I know it is Friday. I
know you can’t go to 3 percent. It did sound to me like you were
suggesting that we wanted to go higher than you wanted. So the
3 percent is at your request?
Mr. MONTGOMERY. Yes, sir. We worked together on this bill for—
The CHAIRMAN. Well, sometimes yes and sometimes no. But let
me just—again, you do agree with the provision in the bill that
says the higher subsidy for the weaker credit people should be
shared throughout the universe rather than limiting it only to the
other people with weaker credit?
Mr. MONTGOMERY. So it is spread among all borrowers, correct.
The CHAIRMAN. Thank you.
Mr. Hinojosa.
Mr. HINOJOSA. Thank you, Mr. Chairman. In listening to the
first presenter, Mr. Steel, you spoke about some solutions in your
prepared statement: the first, second, and third parts that are recommended by your organization. But you also said that your attempt to reach out to the borrowers through the letter or mail campaign that you put out was not successful, and, in fact, it was probably the independent counselors who had experienced better success and the loan servicers.
What is the difference between the message that the independent
counselors and the loan servicers are communicating to the borrower?
Mr. STEEL. Thank you, sir. I think that the key issue is that
when homeowners are challenged, that there is a trepidation on a

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contact from the actual lender servicer, and whether they are uncomfortable, that it is a foreign feeling relationship, whereas having community-based organizations and professional counselors
reach out, that it is a more friendly face. And the message might
actually be the same, but the person who is delivering it is really
the success.
And we see that the success rates jump significantly. When that
message of wanting to contact and begin a discussion comes from
the counselor, then you get a much higher response rate than if it
comes from a servicer or lender. And so I think it is the idea of
someone who is the agent who is not part of the servicer per se,
but instead is an independent agent and often part of communitybased organizations.
Mr. HINOJOSA. Okay. Well, let’s take that—and I accept that it
would be friendlier and certainly better received.
But if I were a borrower, and I was making $500 a month payments under the ARM’s rate, and then it suddenly jumped up to
twice that, $1,000, I don’t know that just reaching me and having
this communication is going to be able to allow me to keep my
home because I have a salary, my wife has a salary, and together
we have to come up with the $1,000, and that is not possible. What
other solutions are there?
Mr. STEEL. Well, I think that we have to look at this contact as
the first step and then, when appropriate, begin discussions often
with a counselor helping the homeowner contact and discuss these
options with the servicer and to see, where appropriate, whether
refinancing or the modification are tools and whether new products
can be organized. But I think having the counselor in the middle
to represent and to be the agent of the borrower is a crucial part
of it.
And so that is really a first step, to begin the engagement. When
a homeowner goes into foreclosure with never contacting the lender
or the servicer, there is just no chance of success. So this is the
first step to begin the discussion and understand the actual situation.
Mr. HINOJOSA. I agree. But there has to be some solution for the
borrower, and I am using myself as the example. Have you all discussed the possibility that a second family share the home and
share the payment? I have seen that in many minority families
where they buy a home, which is a little bit more expensive than
one family can buy, and two families then wind up sharing that
home, even though they are crowded.
Mr. STEEL. Sure.
Mr. HINOJOSA. Has that been discussed and what the consequences would be?
Mr. STEEL. I think that on the second panel you will have the
real professionals who work at the face of this issue, and they can
answer that with more specificity than me. But the counselors are
trained to walk through all the alternatives with the actual homeowner. And so I think they are the right people.
Mr. HINOJOSA. Time is running out for me. I want to ask the
question on financial literacy education, how far have you gone?
Because I have not received any information as to what the success
has been by these counselors and loan servicers you are using, even

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after the mess that they are in. It should have happened before the
loan was made. But now that they are, how is the financial literacy
component being utilized?
Mr. STEEL. Well, I think that there is really the immediate issue
of HOPE NOW dealing with the challenges that have been described of what is happening right now with regard to mortgage
resets and things of that nature. There is a second and quite important financial literacy effort that Treasury and the Administration have been working with. And that has been going on all along,
and we are talking about ways to raise that focus on financial literacy in the broad sense, of which homeownership is a part. And
so we are committed to that, and I think you will be pleased with
the progress that we are making there.
Mr. HINOJOSA. My time has expired, Mr. Chairman, and I yield
back.
The CHAIRMAN. I thank the gentleman. The gentleman from
Texas is recognized.
Mr. GREEN. Thank you, Mr. Chairman. Again, I thank the witnesses.
I am still impressed with the concept of HOPE NOW, and I want
to do all that I can to make what is ideal real. It is a great ideal
circumstance that you want to create, but I would like to see it become a reality. And for it to be a reality, I have to ask a couple
of questions and make a few recommendations. So if you would,
let’s remonstrate for a moment, as opposed to demonstrate.
First of all, what are we doing to go beyond the Internet and go
beyond what I would call the traditional methodology of communicating the message? Because many people who were victims of
predatory loans, some people who were in subprimes who should
have been in primes, they don’t use the Internet. They really are
not—the Internet is not a friendly vehicle for them. So beyond the
Internet and beyond what I would call the traditional means, what
are we doing to get to them and let them know that we have this
product? And Mr. Montgomery, if you would like to start, I would
be grateful.
Mr. MONTGOMERY. Absolutely. As we have referenced this quickly, direct mail with all the data and all that we are able to literally
surgically look at a community and a neighborhood and see where
a lot of maybe concentration of these types of loans. And that will
be one of the—enable the HOPE NOW Alliance to use that tool. Because you are absolutely right, a lot of families do not have access
to the Internet.
There is also a toll free number that has been up and running
for some time now where families can also call and talk to a counselor, maybe even through a loan transfer be connected to a
servicer, to their particular servicer.
I would also say to FHA’s part, this is a challenge we have every
day, which is why we have been using those tools for some time,
both the call center and certainly we are now going to start doing
a more direct mail approach as well.
Mr. GREEN. Let me recommend this, and that is all good. But
somehow we have to get to the small newspapers, the community
newspapers. And I am not sure that you have an advertising budget. I don’t know. So perhaps I should ask. Do you have—I suspect

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I know, but I will ask. Do you have any money budgeted for advertising in newspapers?
Mr. MONTGOMERY. Sir, I can’t give you an exact amount. But yes,
marketing and outreach, consumer awareness is certainly a part of
this effort. And we also obviously do that through the partners. We
have broad tentacles into the communities they represent as well.
Mr. GREEN. Well, let me suggest this based upon my experience,
which may not be the experience of every Member. But when I talk
to my small newspapers, they continually say to me that they don’t
have the opportunity to help with programs like this because for
whatever reasons they are not contacted for the ad buys. And they
can really perform a great service because they reach an audience
that—while I respect the larger news outlets—the other outlets
just don’t reach.
So I think it is important to give some consideration to the smaller newspapers, to get them involved. Also, some of the smaller
radio stations that cater to a certain audience, they really penetrate that market. And they are going to get to the people who really need to hear this message.
It is unfortunate that so many of the people are minorities who
find themselves in this position, who have language concerns. With
reference to what Mr. Hinojosa said about financial literacy, we
have some people who need to hear this in Spanish, and Spanish
radio is a good way to do it.
In my district we have the ballot printed in English, Spanish,
and Vietnamese. I would assume that we ought to at least go to
the Vietnamese radio stations as well, the Asian radio stations because we can identify the market that has been hit.
So I would strongly recommend that we use some of these other
sources.
Another point, with reference to the statement, Mr. Steel—and
I understand totally what you mean. But you indicated that there
is no chance of success when a homeowner goes into foreclosure. I
understand the present circumstance, but I think that is where we
have to find some more flexibility. Because a lot of the people who
are in foreclosure if given this opportunity, I believe they too can
do a re-fi, a modify and/or re-fi, and they can succeed.
So I am going to beg that you encourage the people that we are
working with in this project to be a little bit more flexible and give
those people who are in foreclosure, some of them the opportunity
to look into this product and benefit from it as well. It is a good
product, but it can only be good if people take advantage of it and
if it is used effectively.
Finally, with reference to the rule on bailouts or not, ‘‘rule out
bailouts’’ is what I made a note of here. We have to rule those out,
and I think most of my constituents would agree with you. But
they also—some people are saying that we should literally freeze
foreclosures now.
I want a professional opinion. Mr. Steel, give us your sincere
opinion, your well-thought-out opinion of the impact of freezing
foreclosures. I would like to hear your answer on freezing foreclosures, and then I will yield back. .
Mr. STEEL. Thank you, sir. I think that the housing market in
the United States in many ways is viewed around the world as an

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icon or something that has worked well. And when you look at the
growth in homeownership in our country over the last few decades,
it has worked quite successfully.
I think the reality is, as Representative Moore suggested in her
comments, that there is some level of foreclosure that seems to be
consistent in the normal marketplace. A function of change of circumstances were her words and things like that. And I think that
the issue from my point of view, sir, is that we need to make sure
we understand that activity.
But then in addition, what foreclosure is a function of these other
circumstances that are not natural and do what we can first to
help those people in the second category. I think the idea of a
freeze doesn’t seem to be the right way. We should have a target
approach trying to help the people where with some flexibility—
and I used this expression at a previous hearing—where we can
put a thumb on the scale on behalf of some people who with some
help can stay in their homes. That should be the focus of what we
do.
Mr. GREEN. Thank you, Mr. Chairman. I yield back.
The CHAIRMAN. The gentlewoman from Wisconsin.
Ms. MOORE OF WISCONSIN. Thank you, Mr. Chairman. I would
like to start with Mr. Steel and sort of follow up on other questions
that other members have already asked.
Starting with what Mr. Frank said, you know, you have been
urging institutions, I think, to work with borrowers to mitigate
losses and really issued clarifications, regulations, and guidelines
that have reassured institutions that their safety and soundness
will not be affected if they forbear. But I suspect that our second
panel is going to tell us that even though that is the case, many
of these institutions have been reluctant to not just go on and foreclose. So I am wondering what you all are doing in terms of using
the bully pulpit or the chutzpa, if I could borrow that term, to get
these institutions more on board with, you know, and the suggestion of perhaps of Mr. Green that they sort of stop these foreclosures when they are—you know because what makes me nervous is your discussion of how you have to develop these metrics,
how you have to sort of evaluate how the counseling works. And
I am looking at data that indicates that these foreclosures are fast
upon us at the last quarter of this year and first quarter of next
year by the time you put all these pieces together.
So what exactly are you doing to incline these institutions to forbear?
Mr. STEEL. Thank you. I think that the first thing I would point
you to is that the bank regulators issued a notice encouraging this
flexibility, which I think was quite effective, the four key bank regulators, and I think in the month of July, that basically gave voice
to this idea of increased flexibility. Point one.
Point two, at Treasury, as early as earlier this week, Secretary
Paulson specifically suggested this idea of flexibility, understanding
and that servicers and lenders should work to this end. And we
have had multiple meetings of the HOPE NOW Alliance basically
trying to also give voice to this issue.
I, like you, am aware of the timeliness of our action, and I can
pledge that everyone at Treasury and others in the Administration

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are working flat out on this issue, recognizing the importance of
the timing issue—200,000 letters are going out in November, that
is not the end, that is the beginning, letters will go out and we are
focused on this to bring bear as fast as we can.
Also, in response to Chairman Frank’s comments, we have to
have the ability to measure our success and see how we are doing,
but it is challenging to bring disparate people together, who, until
we brought them together, were competitors and now we are saying you have to take off your own jersey, and instead, wear the
HOPE NOW uniform and work together. And that is what we are
doing and encouraging with HOPE NOW.
Ms. MOORE OF WISCONSIN. Let me follow up with some questions
that Mr. Green and Mr. Hinojosa have asked about advertising. It
has been my experience that—number one, we have these mortgage rescue exams out there, and so your letter doesn’t look any
different from anybody else’s letter when they get it in the mail.
And one of the characteristics of someone who is going into foreclosure is the completely do the ostrich and not open their mail. So
that is just a dumb idea to just mail to people.
Why aren’t you using television advertising, use the prestige of
the Treasury Department to say this is the number, the toll free
number to call, this is the legitimate number, these are the legitimate institutions in your community to call, because this would fit
right into my mortgage rescue scam, because all I can do is send
out a letter. I have seen letters that look like they are from the IRS
or the Federal Government, and this is a waste of advertising, as
far as I am concerned. Why don’t you go on TV? I see TV for other
things the government wants to promote, when they want to promote Medicare Part D or ending Social Security or anything else,
so why can’t we use TV?
Mr. STEEL. Brian?
Mr. MONTGOMERY. Yes. Congresswoman, that is not the way we
should look at it. I would say NeighborWorks America, who has
been out in front of the this issue for some time, has been doing
exactly that. They have been running some foreclosure prevention
ads, they are part of the Alliance. And Mr. Wade, who is on the
second panel, can discuss that. They are in English, they are in
Spanish, they also have radio spots.
Ms. MOORE OF WISCONSIN. Do they have a HUD logo or a Treasury insignia on them?
Mr. MONTGOMERY. They have the NeighborWorks logo on them
now, but the thought back to Under Secretary’s previous point, if
it is a name of a nonprofit that is probably well-known in the community, a homeowner in dire straits is more than likely to open
that letter.
Ms. MOORE OF WISCONSIN. No, they are not going to open the
letter.
Mr. MONTGOMERY. If it has the name of the bank on it, or maybe
even the U.S. Government’s name.
Ms. MOORE OF WISCONSIN. They will not open the letter, let me
reassure you.
Mr. MONTGOMERY. I agree with you on the point about the advertising, absolutely.

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Ms. MOORE OF WISCONSIN. Don’t do it on the cheap—this is a crisis, we have to use TV. I know how much it costs, because I had
to get elected, so use TV.
Mr. STEEL. If I could, since it was originally directed to me.
Ms. MOORE OF WISCONSIN. If the chairman would yield? My time
is up.
The CHAIRMAN. Yes. I am in no position to hold anybody to 5
minutes this morning.
Ms. MOORE OF WISCONSIN. Sir, you can respond.
Mr. STEEL. I think your points are all good ones, and I pledge
to follow up, but you should also know that there’s a bit of handto-hand combat, and the people from these organizations are going
out door-to-door also, because that is the most effective. When
someone from your neighborhood knocks on your door and says,
you know me from our neighborhood. I am part of a group that you
know from a community-based organization, then that can be the
most effective. And so we have the radio, TV, and other spots, but
we will keep what you have said in mind.
Ms. MOORE OF WISCONSIN. Thank you.
Mr. STEEL. Thank you.
Ms. MOORE OF WISCONSIN. I yield back.
The CHAIRMAN. Let me just reiterate, I understand the need for
metrics, and I am not suggesting you said there would be, but that
can’t interfere with the ongoing work, the resets are coming, we
really need results and will be talking to Mr. Longbrake, but I
would hope by now we would have some of these actually happening. And the metrics are important, but we need to move and
we need to generate data, keep the data, and then we can figure
out how to work it.
Thank you, and—
Mr. HINOJOSA. Mr. Chairman, since you are being so generous
with time, I would like to let the record show that I have also listened carefully to Ms. Moore’s questions about the lack of using television to advertise the services that are available through the government. But I would also like to let the record show that I have
not seen PSAs or public service announcements being used by the
government to get the message out.
Members of Congress use it very effectively when we want to let
our constituents know of an event that is coming up or whatever
the message is. And I don’t understand why, if we are losing billions of dollars because of this mess that we are in, why you aren’t
using PSAs with individuals who are well-known in the regions of
the State where we have these greatest numbers of foreclosures.
Can you tell me why that is not being done?
Mr. STEEL. Well, in fact it is. At foreclosure prevention TV, PSAs
have run on the Tonight Show, the Today Show, CSI Miami, Dr.
Phil, and Oprah already. In July, the campaign reached 2.28 million households. So while I am sure we can go a better job, there
is effort in this behalf. And I can give you more data on exactly
what networks, what communities and things like that. So there is
work in process and that doesn’t mean we can’t do better, that in
defensiveness, it is an invitation to perspective from you.
Mr. HINOJOSA. I have been informed by staff that the law requires, under the FACT Act, to do this. Evidently, you are doing

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some, but you are not making much of an impact, so you need some
marketing people to see if you all can improve that and the frequency. And possibly I heard you say you had it in different languages, and certainly, that is important. But again, there needs to
be some improvement on getting the information out and giving
them some alternatives. Thank you, Mr. Chairman.
The CHAIRMAN. The gentleman from Texas, for one last comment.
Mr. GREEN. Yes, I will be very brief. I appreciate all of those that
you announced, but a lot of people who are having this problem are
not watching those programs. They may be looking at Good Times
or they may be looking at The Jeffersons. And they relate to what
is happening to those families to some extent. So I would just encourage to you broaden the reach to some of the nontraditional—
The CHAIRMAN. I appreciate the gentleman’s request. Let’s not
forget all of those households that are tuned into C–SPAN this
morning, both of them. I thank the Under Secretary and the Commissioner.
Next panel.
We will get started, if the witnesses will all take their seats. And
we will begin with an occasional and very welcome participant in
our proceedings who often speaks for himself and for his fellow attorneys general, the Attorney General of Iowa, Mr. Miller. Mr. Miller, please begin.
STATEMENT OF THE HONORABLE TOM MILLER, ATTORNEY
GENERAL, STATE OF IOWA

Mr. MILLER. Thank you, Mr. Chairman. This is a daunting problem, as we can tell from the comments and the questions just a few
minutes ago, but there is a precedent for success and that is the
farm crisis in Iowa in the 1980’s, which was a horrible experience
for us. But through required mediation of all those farm foreclosures, we saved a number of farms and saved the fabric of rural
Iowa in a lot of ways. The principle is a simple one, difficult to implement, it is what I call enlightened self interest.
There is a point at which in some of the loans, not all of them,
but many of them, that the borrower can pay a certain amount less
than what the contract requires, but a certain amount is affordable. That amount will realize for the investor more than foreclosure, so it is in both parties’ interest to modify the loan to get
there. The problem is, how do you get there?
We have been talking about working on this problem since at
least July. The attorneys general and the banking regulators, the
Conference of State Bank Supervisors. We had a meeting in July
of 37 States, and some of the people in the industry. In September,
we had a meeting with the 10 largest servicers in the subprime
market, five servicers 1 day, and five the next day in Chicago. We
have another meeting with the next 10 next week, and the first set
of meetings were very good meetings. We had direct conversations,
no defensive attitudes, no obstacles placed; it was a terrific meeting. And what we found was there are some obstacles, but we knew
that to begin with.
The chief obstacles that we found are these: One is the issue of
contact, that was discussed considerably this morning, how to get

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in contact with the borrowers, and State officials can help there,
community groups, not-for-profits can help there, HOPE NOW can
help there, but it is a daunting task and a major obstacle.
Another obstacle is what we call the disconnect within the servicing company. At the top level, they believe that enlightened selfinterest, this equilibrium should be reached and those should be
modified, but for those that are actually doing the modifications, it
is counterintuitive. It is counterintuitive for someone whose experience is in collecting money, collecting as much money as they can,
to give a break like this. It is counterintuitive for a collecting mentality to become a modification agent.
Another problem is the staffing level. The servicing companies
have to staff up, these are individual transactions for the most
part, although there are some alternatives that I can discuss later,
if you want. They have to be adequately staffed.
The other set of obstacles would be the agreements with the investors. And to our surprise and a pleasant surprise, the top 10
servicers told us that recently, as of early September, they had
worked through most of those pooling arrangements obstacles and
that they think they have the authority to make these modifications, as they should, because it is in the interest of the investor
to get more money through modification and less money through
foreclosure.
We in Iowa have tried something, and so far it is working, it is
called the Iowa Hotline. I went on before the press in early September and announced the Iowa Hotline. We hired the Iowa Mediation Service, which coincidentally was the organization that did
the mediation for us in the farm crisis, to be the facilitator, to answer the calls from the hot line. If you are in danger of foreclosure,
you call this hot line. We work with them and support them and
at least for a while, we fund them. The reaction was enormous.
Keep in mind that there are 30,000 subprime loans in Iowa, they
say about 8 percent are in foreclosure, that is 2,400. In less than
2 months, as of yesterday, there had been 2,700 calls. Not all of
them are in subprime, some of them are prime, but we, sort of, at
least for now, have dealt with the contact problem in Iowa.
When we got done in September with this good discussion, we
said, well, I quoted Ronald Reagan, ‘‘trust but verify.’’ We wanted
to develop a way they would give us the numbers that indicated
that this is working and we are pretty close to coming up with a
system of reporting to us that won’t be onerous, but that will be
effective in terms of demonstrating that this is being done, because
we are very serious about this. I mean, we have done very little
press on this project, as AGs and banking regulators, we put an
enormous amount of time in. Our whole goal is to save the avalanche of foreclosures, much like we did in Iowa with farm foreclosures in the 1980’s.
Let me tell you what we are doing is complimentary with what
HOPE NOW is doing and what everybody is doing, the basic reason
for that is there is more work for all of us. HOPE NOW can’t do
it all, we can’t do it all, the community groups can’t do it all. In
fact, together we maybe can’t do it all, but we at least have a
chance because of the contact problem, because of the working
through the modifications. The Iowa Mediation Service wants to

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get in contact with people, get the information and then work with
the servicers to achieve this modification, to achieve that equilibrium that I talked about.
We have developed this great relationship with the banking regulators. We are working very closely with them and we are working with the servicing industry. We are getting feedback privately
from them that they are glad we are doing this, it is helpful, it is
helpful with the investors and with everybody.
So what I am saying is that this is something that can be done,
we have seen it done before. It takes an enormous amount of work;
it takes everybody working together. One little word of caution, one
or two of the servicers started to say to us well, maybe we don’t
want to be part of your project because we have HOPE NOW. That
is a big mistake, these are complimentary operations, we should
work together, we should share information. We have already
shared a lot with the Feds as we have gone along. At our July
meeting the FDIC was there, and we gave them information from
our September meetings. We are in this together, we are in it for
the long term. We know the obstacles and we want to work with
everybody and want to avert this foreclosure avalanche.
[The prepared statement of Mr. Miller can be found on page 70
of the appendix.]
The CHAIRMAN. Thank you. Next is the chief executive officer of
NeighborWorks America, Mr. Wade.
STATEMENT OF KENNETH D. WADE, CHIEF EXECUTIVE
OFFICER, NEIGHBORWORKS AMERICA

Mr. WADE. Thank you, Mr. Chairman, and distinguished members of the committee. We are pleased to be able to be here and
share with you some of the things that we are doing to help address this critical crisis out here on the foreclosure issue.
NeighborWorks America has been working on the foreclosure
issue for well over 4 years now. We saw the problem coming principally because we have this network of community based organizations that were telling us that they were beginning to see people
show up at their doorstep in various stages of foreclosure.
These, by and large, were consumers who did not have the benefit of pre-purchase counseling by anyone, let alone members of our
own organization. And in many cases, were in loans that were
originated by nondepository or nonconventional lenders. And so as
we began to look at the problem, we decided we needed to do something in a more concerted way to respond to that challenge.
We have submitted testimony in written form that outlines all of
the things.
The CHAIRMAN. Without objection, it will be made a part of the
record.
Mr. WADE. Thank you. So rather than go through that in detail,
I want to concentrate on three of the main things we are concentrating on in order to make a contribution to this problem.
Now I would want to say that clearly we feel that the best solution is getting consumers good pre-purchase counseling on the front
end. By and large, more than anything else, we have seen that
make a critical difference between consumers who can do well with
homeownership and create a sustainable opportunity for them-

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selves and their families, versus those consumers who don’t have
the benefit of that.
We have helped over 150,000 families achieve the dream of
homeownership over the past 12 years. When we look at the loan
performance of the consumers that we have helped, and by and
large, these consumers are nonconforming customers, low- and
moderate-income people in all the neighborhoods that we care
about, those consumers perform 10 times better than subprime
loans on average, 4 times better than FHA loans, and on par with
prime loans. So I think we can serve this customer base and we
can serve them well if we do a lot on the front end.
But that notwithstanding, obviously we have this crisis ahead of
us, or that we are in the middle of, and we felt we had to respond
to it. So we have stepped up to train counselors in foreclosure prevention and delinquency prevention.
In 2006 and 2007, we have trained more than 2,429 housing
counselors from all over the country, some at our national training
venues, but in many cases, we have taken our foreclosure prevention training on the road and gone to local communities all over
this country working with State housing finance agencies, lenders,
and the like in order to deliver counseling to community-based organization who are out there on the front line working with consumers everyday. And we expect that in 2008, we will probably be
able to train an additional 4,300 counselors from community-based
organizations.
In addition to that, we are supporting local coalitions and efforts,
we are working with folks in Ohio, Maryland, Illinois, Georgia,
Missouri, Massachusetts, Wisconsin, California, Texas, South Carolina, New York, New Jersey, Alabama, Florida, Connecticut, Pennsylvania, Michigan, Tennessee, Arizona, Washington State, and
Kansas. And we are looking for more opportunities to support local
efforts. I think, as Mr. Miller said, there is a lot of activity going
on at the local level, of people responding to address this crisis and
we are doing all we can to support those local efforts.
Then in addition, we are very pleased to be able to have a national public awareness campaign that we are doing in collaboration with the Ad Council. That effort is being supported by a number of lenders and services that we have been working with over
the past 4 years. And we are pleased to be able to say that we
launched this public awareness campaign precisely because of the
challenge of being able to reach borrowers who go to foreclosure.
As you know, you have heard the data, over half of consumers
who go to foreclosure every year have no contact with their lender,
they don’t respond to the letters, the phone calls, and all of that
outreach. We thought a more targeted outreach effort to reach
those consumers would be one way that we can make a contribution. So we have worked very closely with lenders and servicers to
identify when the ads were developed at risk borrowers, we fieldtested the ads, and they were developed by a professional ad firm
in order to reach the consumers who are in trouble.
In addition, we partnered with the Homeownership Preservation
Foundation, which established a toll free hotline. We felt that was
a great call to action in order to support a public awareness campaign, because obviously you need to call them to do something.

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And so the 800 number, the 1–888–995-HOPE number that the
Housing Preservation Foundation developed is what we are supporting.
We launched our public education campaign in June. We have
had since that time 3,576 broadcasts on broadcast TV, 8,119 radio
spots, and again these ads were both in English and Spanish. In
July alone, we feel that these ads have reached almost 3 million
households, and we are very optimistic that the numbers that we
are going to get for August and September and October will even
exceed these.
We know that clearly is not sufficient, given the scale and scope
of the problem, and so we are working with a broad range of community-based and other national organizations. We had a meeting
the other day with Fannie Mae and Operation Push with Reverend
Jackson. He has agreed to customize some of the ads and distribute
them to the thousand churches that he has in his thousand church
campaign.
We have local elected officials who have been able to customize
the ads so we would offer that opportunity to reach consumers in
their markets. And we are working with well over 193 community
groups in total all over the country doing the grassroots outreach
to reach consumers through churches, door knocking and all other
kinds of means, including the media outlets that I think the consumers who are most affected with this problem utilize.
We are very encouraged by the HOPE NOW Alliance, we have
been participating in that effort. We think the Treasury Secretary
and the HUD Secretary adding their voice and their good office to
bring us together and operate in a more coordinated way is going
to go a long way toward helping us make more impact and to have
more success in addressing this very challenging problem.
So let me stop there and I thank you for the opportunity for allowing us to just share a little bit about what we are doing.
[The prepared statement of Mr. Wade can be found on page 116
of the appendix.]
The CHAIRMAN. Thank you. Let me interrupt at this point. Something has come up, and I have to leave a little bit early. I had previously asked the gentlewoman from Wisconsin, whom I knew was
going to be available this morning, to take over for me. She will
be doing this at some point.
I do want to make one announcement at this point. We work
closely with the Conference of State Bank Supervisors on a number
of issues, and also work with attorneys general, and they inform
me that they are also trying to develop measurements, metrics and
that they have found some of the people in the industry not responsive to their effort to get together. I would like to urge people in
the industry who might on a slow Friday be paying some attention
to this to work with them.
We have found the Conference of State Bank Supervisors to be
very important. And I should note that if the legislation that we
are going to be acting on, on Tuesday goes through as we intend,
there will continue to be—in fact, there will be an increased role,
we hope, for State bank supervisors. One of the things we are trying to do is to encourage the States to step in, all of them, and regulate mortgage originators who, in many cases, have not been regu-

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lated. So we see a vigorous role for the States and we think it
would be very helpful.
Mr. Marks, I have to tell you, I read over your testimony, and
I will not accept the testimony in which you make remarks about
other institutions. The reason I say this, we will be glad to take
that in writing, after they have a chance to respond. As you know,
we had some conversations with Countrywide, we welcome what
you have accomplished, you and Countrywide, it is a very important model for people and we want that there. Criticisms of other
institutions are currently legitimate, but I would ask you to hold
those off until we can get responses and put them in the record at
the same time. So we are going to focus on the very significant
positive accomplishments you have.
We get contradictory views from other institutions, so I would
like to hold those off at this point, focus on that. Clearly, there is
an openness here, but before we put it in the record, ask the institutions that you criticize to give their response, you can respond,
we want to promote that dialogue. So please let us have your testimony on the work that you and Countrywide and other policy recommendations that you have, please go forward.
STATEMENT OF BRUCE MARKS, CHIEF EXECUTIVE OFFICER,
NEIGHBORHOOD ASSISTANCE CORPORATION OF AMERICA

Mr. MARKS. Thank you for allowing us to be here and for having
this hearing. I am not going to talk about the process or the outreach, but I do want to respond to one thing that you said, Congressman, to start out is that I think what the issue is is that you
need to hold all the entities out there accountable. And so you hear
a lot of things about we are modifying this or doing that and we
can name names, and I respect what you are saying so we wouldn’t
go through naming names.
But clearly, we hope you will follow through and make sure you
will ask these institutions that we have identified to say how many
loans are they modifying and what the interest rate is.
The CHAIRMAN. Let me give you an example, when you last testified, you did have some very critical things to say about Countrywide. Countrywide responded and said well, some of them weren’t
accurate. I assume you have now been working with Countrywide
and maybe that helped. I don’t want to do that again where we do
it seriatim.
As far as following up, yes, that is why I asked Mr. Steel and
stress we are beyond the point where we want to hear about what
people plan to do. We want to hear some numbers and we will continue to ask for those in a specific way, so why don’t we proceed
now.
Mr. MARKS. Let us talk about real solutions. Let us not just talk
about process. Let us not talk about outreach, let us talk about real
solutions that are going on. And so let us talk about the most effective real solution that is out there and that is the NACA Countrywide agreement.
And as good as it sounds, it is extraordinary in what it does, because it is a solution that is based on the borrower, not on the
lender. It is based on what the borrower can afford and that is
what has to happen. All the focus needs to be on you have to look

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at the borrower, what they can afford and to adjust their payments
accordingly.
We have heard a lot of discussions in the past about the answer
to it is the refinancing of loans, but the fact of the matter is is that
prices are not there, the loan-to-values are not there, and prices
are plummeting. So that is going to knock out a lot of people to refinance.
Debt-to-income ratios, that is going to knock out a lot of people
in terms of what they are able to in terms of refinancing. And lastly, the payment history will eliminate a lot of people. So the answer to this huge crisis is not that we are going to be able to refinance a lot of people out of their subprime or predatory loans, we
should try to do our best, but that is not going to be the answer
or the solution.
The fact of the matter is the other piece we keep talking about
outreach and getting a hold of the homeowners, if there is it no
real solution out there, we are not doing a favor to those homeowners. We are not really providing a solution if the lenders are
not willing to do the right thing to restructure the loans to make
them affordable over the long term.
Let me talk about specifically the NACA-Countrywide agreement. Homeowners would go through the NACA process, where we
look at the individual characteristics of the borrowers and we provide a framework and standardization to provide an unprecedented
Home Save solution for tens of thousands of homeowners.
Step one, they complete a mortgage questionnaire on our Web
site at www.naca.com. Step two, they attend a workshop to learn
about the process and the options. Step three, most importantly,
they meet with a mortgage consultant who works with the homeowner to see them through the process. Step four, the homeowner
is referred to a NACA underwriter, who then takes over their application. Step five, it is completed, and it is submitted to the lender. It is through a state-of-the-art Web-based software program
that is a purely paperless process.
Now let’s talk about the options for the homeowners. This is
based on the terms of the loan and what the homeowner can afford.
And there is a cascade of options that are as follows.
Option one, the payment plan, and that is appropriate for people
who have an affordable loan, affordable terms, and they have a
short-term crisis. So you put a payment plan together where someone becomes current over 12 months.
Option two, modification. Modification is where there are affordable terms, affordable interest rate, a more serious crisis, and the
loan can’t be resolved in 12 months. The arrears are put onto the
loan, and it is reamortized over the existing term.
Option three, refinance. People can refinance through the NACA
program, and it is the best deal out there, bar none. It is 100 percent financing. There is one mortgage product. There are no fees,
no prepayment penalties, and no points. And it is always at 1 percent below the best rate. So today’s rate, 30-year fixed, is 5.375 percent. We have committed a billion dollars, $1 billion, to refinance
people out of their subprime or their predatory loan.

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Option four, and this is the incredible aspect of the NACA-Countrywide agreement, is the restructuring of loans. This is the most
powerful tool for homeowners to save their homes.
We evaluate what the homeowner can afford. First, you look at
the net income. Then, from the net income, you deduct the required
liability payments, the homeowners’ housing expenses, and $200
for unforeseen expenses. The result is a payment that the borrowers can afford, so you fix that payment. And then you have two
variables: You have the interest rate; and you have the outstanding
mortgage amount. You reduce those back into that affordable payment.
And what has happened is that, on the first day, the first day
of the NACA-Countrywide agreement, over 25 homeowners, just on
the first day, their loans were restructured to an interest rate between 5 and 6 percent. They were saving $300, $1,000, $2,700 a
month for that. And we didn’t have the problem with the investors.
I want to finalize or talk about the investors. We keep hearing
that the investors are saying no, that they can’t do it. The fact of
the matter is that Countrywide will look at the pooling-of-servicing
agreement, and we will say, ‘‘What is the most favorable interpretation of the pooling-of-servicing agreement for the borrower,’’ and
then we interpret that. And if the investor says no, they give us
the specific information to allow us to have a discussion with the
investor. And, clearly, we would want to make it clear to them that
it is better to restructure than to foreclose.
And the fact of the matter is—one final thing—
Ms. MOORE OF WISCONSIN. [presiding] Mr. Marks, I am sure that
the question period will be an opportunity for you to—
Mr. MARKS. And we have not had one time where an investor
has said no.
[The prepared statement of Mr. Marks can be found on page 62
of the appendix.]
Ms. MOORE OF WISCONSIN. Okay. Thank you. I am unable to yell
like Mr. Frank. So thank you very much for your testimony.
Mr. Longbrake?
STATEMENT OF BILL LONGBRAKE, ANTHONY T. CLUFF SENIOR POLICY ADVISOR, THE FINANCIAL SERVICES ROUNDTABLE

Mr. LONGBRAKE. Thank you, Mr. Chairman. My name is Bill
Longbrake, and I am pleased to be here on behalf of HOPE NOW
Alliance to talk about this significant joint industry and nonprofit
national initiative that has been organized to reach out to at-risk
borrowers to help prevent foreclosures.
I would like to thank all the members of the committee for your
support for the national 1–888–995–HOPE hotline counseling program of the Homeownership Preservation Foundation. And since
we are on C–SPAN, I am advertising this number, so I will repeat
it one more time: 1–888–995–HOPE. This is part of our expanded
HOPE NOW Alliance. The hotline is available to any homeowner
today, and it will be promoted more in the future by efforts that
the Alliance is putting together.
HOPE NOW brings leading servicers, counselors, investors, and
other mortgage market participants together to create a unified, co-

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ordinated plan to reach and help as many at-risk homeowners as
possible. HOPE NOW builds on the active individual efforts that
are being made by servicers to contact and assist their borrowers,
as well as the ongoing work by nonprofits such as Mr. Wade’s
NeighborWorks of America and the Homeownership Preservation
Foundation, which runs the HOPE hotline.
HOPE NOW will maximize and expand on all outreach efforts
that are currently by made by servicers and will work to reduce obstacles and to create solutions to help homeowners in trouble. We
will do this through enhanced efforts to contact at-risk borrowers,
increased access to nonprofit counseling, and better coordination
between servicers and nonprofits to increase positive outcomes for
borrowers and avoid foreclosures.
Our members are working on six initiatives, and we are doing
this collaboratively. This is not something that is limited just to the
organizations that are listed; we are open to all comers. And we
take to heart Chairman Frank’s remarks about working with
CSBS, with attorneys general, and with other organizations.
Our first initiative is outreach. You have heard quite a bit. There
is a poster over here that is the letter that will go out on November
the 19th. I have an updated number; we expect now to send that
to 250,000 homeowners. And we expect to repeat that letter at regular intervals after that.
Why the letter is important—it is not going to be the be-all and
end-all. There is no one solution that works for everything; there
need to be multiple solutions. But what we know is that when a
servicer sends out a letter, the response rate is only around 3 to
5 percent. When it comes out under a not-for-profit organization’s
logo, that percentage goes up to a 25 percent success rate, so a very
significant improvement.
As Mr. Wade mentioned, we are continuing public service announcements through the Ad Council and radio spots, and that will
continue.
The second effort is to build capacity for counseling. We are
working to increase the capacity of the national 1–888–995–HOPE
hotline and in-person counselors to receive, triage, counsel, refer
and connect borrowers to servicers.
Now, we haven’t advertised that number as aggressively as we
would have liked to, because we were concerned that we might get
a flood of calls before we had trained counselors in place. As Mr.
Wade said, there are 122 currently. By the end of the year, we expect that number to have been increased to 250. And we certainly
would welcome participation in advertisement of that number.
The third effort involves improving coordination and cooperation
between servicers and counselors. We are developing ways to make
it easier and more efficient for counselors to reach the right people
and servicing in loss mitigation departments and to facilitate decisions to assist borrowers and to improve the information counselors
have to give servicers, so that they can make more informed decisions about what options would work best for each at-risk borrower.
The fourth effort includes better measures to report on progress.
The Alliance is establishing methods for reporting on the number
of borrowers reached and the outcomes of this outreach, how many

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people we are helping, and how they are being helped. We will
measure outcomes, for example, refinancings, reinstatements, and
other types of resolutions, so that we get a good sense of the types
of things that seem to be working best.
Fifth, we are working on improving technology. We will use existing technology tools and software to develop new means to improve the interaction between counselors and servicers to assist
borrowers. So all of this is intended to shorten the timeframes for
turnaround.
Finally, the sixth effort has to do with funding. We are working
to develop a sustainable funding model that will provide support
for telephone and in-person counseling efforts. It will require funding contributions from servicers, investors, and funding for counseling from the Federal Government to cover those borrowers
whose loans were not originated or serviced by a member of the Alliance. And that includes, now, some bankrupt companies.
All of these efforts are intended to assist borrowers who have the
willingness and wherewithal to remain in their homes but need a
little help to do it.
Modifications, which have been mentioned frequently, will not always be the best solution. As Mr. Marks pointed out, there will be
cases where a work-out is not feasible. Possibly a short sale or a
deed in lieu might be the best solution, but even those alternatives
may not be optimal.
Mr. Chairman, we believe this national cooperative effort will
produce positive results and will help more at-risk homeowners.
In closing, I want to reiterate the most important message of this
effort. It is critical for homeowners in trouble to reach out for help.
We are going to do all we can to encourage that and make that
easy to do. Studies have found that 50 percent of borrowers who
go into foreclosure never contact their lender. We hope to reduce
that substantially.
The HOPE NOW effort is intended to contact as many at-risk
borrowers as possible, but we need help from leaders like Members
of Congress to do that. Anything you can do to get the word out
that borrowers should contact their servicer or resources like the
HOPE hotline would be valuable and welcome.
[The prepared statement of Mr. Longbrake can be found on page
52 of the appendix.]
Ms. MOORE OF WISCONSIN. Thank you so much.
Mr. Samuels?
STATEMENT OF SANDOR SAMUELS, EXECUTIVE MANAGING
DIRECTOR, COUNTRYWIDE FINANCIAL CORPORATION

Mr. SAMUELS. Thank you, Madam Chairwoman.
I am executive managing director of Countrywide Financial Corporation. We have been a consistent and long-standing leader in
developing innovative approaches to foreclosure prevention.
Experience tells us that successful efforts to avoid foreclosure are
the result of partnerships. One of the most essential partnerships
is between the borrower and the servicer. We encourage our borrowers to call us the very first time they anticipate problems. We
can work with the borrower and offer real solutions.

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We recently announced the major expansion of our foreclosureprevention efforts, a $16 billion home preservation program to assist as many as 82,000 Countrywide customers who are facing or
have had a payment reset, with affordable refinance and loan
modification options. This is an extension of our robust home preservation program and investment in borrower outreach.
Let me quickly summarize some of our more notable efforts.
Countrywide has expanded our capacity to contact and be contacted by borrowers. During 2007, we increased the number of employees in our home retention division from 2,000 to 2,700. Total
operational spending in the home retention function is expected to
grow by more than 45 percent between 2006 and 2008.
In September alone, our home retention division made almost 9
million call attempts to reach delinquent borrowers, had nearly a
million phone conversations with borrowers about their payment
difficulties, and mailed over 700,000 personal letters and cards to
borrowers. We include helpful information in borrowers’ monthly
statements and repeatedly attempt to reach our borrowers both by
phone and by mail.
We provide notices 180 days, 90 days, and 45 days prior to the
payment reset, reminding borrowers that they have an upcoming
rate and payment adjustment. The notice provides an estimate of
the new payment based on current interest rates and encourages
borrowers to call us or a counseling agency if they anticipate financial difficulties.
Also to reach our borrowers, Countrywide has sponsored homeownership preservation seminars in 30 communities across the
country, and we plan to expand those efforts in 2008. There is, in
fact, one coming up this weekend in Los Angeles.
Partnerships with nonprofit organizations are critically important to expanding our ability to deliver home retention solutions to
our borrowers. We recently entered into a ground-breaking partnership with the Neighborhood Assistance Corporation of America,
headed by my friend here, Bruce Marks. By working together,
homeowners will have a waterfall of options, as Bruce described,
ranging from payment plans to modifications to restructurings. We
are excited to work with NACA and their unique counseling model
that, as Bruce said, focuses on what is affordable for the borrower.
We are a founding sponsor of the Homeownership Preservation
Foundation’s HOPE initiative, a national foreclosure prevention
counseling program that assists borrowers in all markets. I am
proud to serve on the board of that organization. And we also work
with Mr. Wade’s organization, NeighborWorks America.
We are also partnering with more than 40 other community organizations across the country. We are co-branding joint communication letters and advertisements to our borrowers with many of
these groups. Finally, we have joined with others in the industry
to increase our capacity to help borrowers avoid foreclosure
through the HOPE NOW program that you just heard about.
Countrywide’s initiatives are producing results that help borrowers avoid foreclosure and preserve their homes. So far in 2007,
Countrywide has refinanced more than 31,000 subprime borrowers
into prime, fixed-rate loans. In addition, we have helped nearly
40,000 borrowers stay in their homes through loan modifications,

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repayment plans, and other home retention solutions. We are currently working with more than 63,000 customers in various stages
of the work-out process.
Even better evidence of the progress that we have made comes
from our home retention division, a phone call I got last night.
They told me that in October, over 11,000 home retention transactions occurred, almost double the previous monthly high. These
are transactions that keep people in their homes.
In September 2007, loan modifications accounted for more than
60 percent of our completed work-outs, compared to 28 percent of
all work-outs in 2006. In short, unlike what you may have read in
the press, loan modifications have become a primary tool for keeping borrowers in their homes.
Countrywide readily acknowledges that these are dynamic times
and that additional initiatives may be needed as events unfold.
I want to take this opportunity to thank Chairman Frank for his
leadership in clearing barriers to helping our borrowers stay in
their homes.
I have offered a lot of statistics in my comments, but we understand that this is a human problem, as we saw at our press conference last week when we announced the NACA-Countrywide initiative. It is the stories of the borrowers that we heard from at that
press conference and many like them that keep us focused on our
commitment to preserving homeownership.
Thank you very much.
[The prepared statement of Mr. Samuels can be found on page
91 of the appendix.]
Ms. MOORE OF WISCONSIN. Thank you.
Boy, have I been waiting for this moment for a long time.
I would like to yield to my colleague and friend and very active
member of this committee, Mr. Green of Texas.
Mr. GREEN. Thank you, Madam Chairwoman. And I must say
the chair looks good on you, or maybe you look good in the chair.
Friends, Mr. Marks has presented what I consider to be the most
effective means of helping that I have heard so far. Now, if there
is something better than what he has said available—and I don’t
mean to single him out—I just want to tell the truth. You know,
there is something about the truth; they say it can get you free.
Maybe we can free a lot of people here with this.
Is there anything better than what Mr. Marks has said, in terms
of restructuring to affordable homes, affordable loans? Is anything
better than that concept?
Okay.
Now, Mr. Samuels, you said that at Countrywide, you have $16
billion committed to helping people. Is that correct?
Mr. SAMUELS. Well, it is a $16 billion initiative, yes.
Mr. GREEN. Okay, now, would this $16 billion initiative complement what Mr. Marks has talked about? Because he said he had
$1 billion, and you said $16 billion.
Mr. SAMUELS. They are two different things.
Mr. GREEN. Yes. Right. So you are $1 billion into helping the
way Mr. Marks would like to have it done and $15 billion someplace else?

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Mr. SAMUELS. No, those are two different things. I think Mr.
Marks’s $1 billion relates to refinance programs that he is involved
with with other lenders.
Our $16 billion is focused on people who are either facing resets
or have already faced the resets and how we are going to help them
if they are facing financial distress.
Mr. GREEN. How much are you committing to the kind of restructuring that Mr. Marks—
Mr. SAMUELS. The fact is that, you know, we haven’t put a dollar
figure on it, because it is simply going to be the borrowers that Mr.
Marks and NACA refer to us. We don’t—
Mr. GREEN. I have a better question. Here is a better question.
Mr. Marks refers to you, correct?
Mr. SAMUELS. Yes, sir.
Mr. GREEN. If he refers people that have been vetted, properly
vetted through his channels, and they need restructuring to an affordable loan—
Mr. SAMUELS. Yes. Yes.
Mr. GREEN. Do I need to define ‘‘restructuring to affordable
loan?’’
Mr. SAMUELS. No, sir.
Mr. GREEN. Okay. If they need restructuring to affordable loans,
will you restructure each of these persons vetted through his process into an affordable loan?
Mr. SAMUELS. Yes, that is the agreement that we have.
Mr. GREEN. Sir, I want to compliment you, but before I do it, I
have to ask you one more question.
Mr. SAMUELS. Please.
Mr. GREEN. Because sometimes what I hear isn’t always what
people say.
Are you saying that 100 percent of the people vetted through his
process who need restructuring into an affordable loan will receive
that restructuring? And sometimes when people finish, I don’t
know whether they said ‘‘yes’’ or ‘‘no,’’ so could you kindly say ‘‘yes’’
or ‘‘no?’’
Mr. SAMUELS. That is going to be difficult because I do need to
explain. It is ‘‘yes,’’ with an explanation.
I just want to make sure that you understand that, as a servicer,
we have investor requirements, so that any reasonable restructuring that Mr. Marks brings us—and so far, we have seen only
reasonable restructurings—we are going to do those.
If somebody has brought to us—and we don’t expect this to happen—where they have a $200,000 loan and it is 8 percent, and Mr.
Marks or his group comes to us and says, ‘‘We need to restructure
this loan by cutting the loan amount in half and reducing the interest rate to zero,’’ that is not a loan that we are going to be able
to restructure.
Mr. GREEN. Let’s assume that Mr. Marks maintains his sanity,
and assuming that he does and that he continues to be the same
Mr. Marks, who appears to be quite cantankerous if you want me
to be honest with you—really.
Mr. SAMUELS. We have not found that to be the case.
Mr. GREEN. I happen to like cantankerous people, because they
provide a certain vision of reality that some folks just don’t provide.

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So, now, assuming that he maintains his current disposition, you
are telling me you will be refinancing—or you will be restructuring
to an affordable rate all of these loans?
Mr. SAMUELS. Yes.
Mr. GREEN. Sir, I compliment you on what and your business
folks will be doing. I compliment you. But I also want to assure you
that I plan to hold your feet to the fire.
Mr. SAMUELS. I understand.
Mr. GREEN. Now that you have declared. Because, I assure you,
if this does not come to fruition as articulated, I would be among
the avant garde to call to your attention that you have not honored
your comments that you have made today, your commitment that
you have made today.
Mr. SAMUELS. I would look forward, sir, to coming to you and
having you shake our hands because we have had such a successful
initiative, such a successful partnership with NACA and Mr.
Marks.
Mr. GREEN. Thank you.
Now, Mr. Miller—
Mr. MARKS. And if I can add, sir, just one thing?
Mr. GREEN. All right, but I am going to have to let you add with
the caveat that I may intercede. Go right ahead, sir.
Mr. MARKS. Yes, Countrywide needs to be complimented, because
they stepped out front when no one else would step out front.
But there are three things that I think you need to add to what
they are doing: They don’t look at the loan-to-value, so these loans
could be under water. They don’t look at the debt-to-income ratio.
And they don’t look at the payment history.
So you are able to get to very low fixed rates without having to
deal with those limitations that prevent the refinancing of loans
out there. So they should absolutely be complimented, and we
should focus on getting other people, other lenders to get to the
Countrywide standard.
Mr. GREEN. All right.
Now, Mr. Miller, is what we have just heard the kind of enlightened self-interest that you were calling to our attention earlier?
Mr. MILLER. Exactly. Exactly. It is certainly one way to get
there.
Mr. GREEN. Now, hold on, Mr. Miller. I have to ask you a question. You said ‘‘one way.’’ Earlier I said, is there a better way? Is
there a better way than having the opportunity to restructure into
an affordable loan? Because those are some important words that
Mr. Marks used and Countrywide has adopted. So is there a better
way, a sensible, better way to do this?
Mr. MILLER. Not that I know of. Not that I know of, that is out
there.
Mr. GREEN. All right. So we are clear that this seems to be the
best paradigm that we are aware of that is sensible.
Now, Mr. Wade, you have been involved at the grassroots level
helping a lot of people. My question to you is, have you had access
to the NACA-Countrywide paradigm? Have you had access to that
paradigm?

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Mr. WADE. No. This program was just announced the other day.
So, other than what I have seen in the press, I don’t have any
other information on it.
Mr. GREEN. All right.
Then, Mr. Samuels, is this paradigm exclusive? We have a contract here, but is it exclusive such that it cannot be embraced by
others who would want to help with this enlightenment process?
Mr. SAMUELS. We know that our competitors are really of like
mind with us, in wanting to keep people in homes. And I am very
confident that many of them would embrace—
Mr. GREEN. Well, I don’t see Mr. Wade as a competitor. I want
to talk about people like Mr. Wade.
Mr. Wade, is it fair to call your organization an NGO?
Mr. WADE. Yes.
Mr. GREEN. Okay. You are with an NGO. Are you for-profit or
not-for-profit?
Mr. WADE. We are a not-for-profit, created by Congress, actually.
Mr. GREEN. Okay. So what I am trying to find out is—and not
to the detriment of what Mr. Marks is doing, because he has
worked out something that I think is great, if he is the person who
actually worked it out.
But what I want to find out is, is this something that an NGO
can work with you on, as well? If not, I understand. But I want
to find out how far can we go with this, because we may be on to
something.
Mr. SAMUELS. We could certainly work with them. The question
is—well, let me just compliment NACA and say that one of the reasons we entered into this agreement is because we were very impressed with their capabilities. And a lot of what they do is similar
to what we do: How we evaluate the borrower; how we see what
they can afford; how we look at investor requirements; and things
like that. It is a process.
The thing that we don’t do that they do is the counseling component, which is very critical to this process. We liked what they do.
The question is whether the other groups—
Mr. GREEN. Can replicate it.
Mr. SAMUELS. Yes.
Mr. GREEN. And there is also a certain level of trust involved in
this. You work with people, and you get to know them.
Mr. SAMUELS. That is correct.
Mr. GREEN. Now, Mr. Marks, are you amenable to sharing your
knowledge and your technique with NGOs and working with NGOs
to bring others into the fold?
Mr. MARKS. Absolutely. Absolutely. The goal is the NACA process; it is not NACA. And that is exactly right, we want to create
this as a standard for other lenders and other not-for-profits. And
we are a not-for-profit, as well.
The need is tremendous out there. The devastation is huge and
is getting worse. Absolutely, sir, we want to work with all the organizations out there to get everybody to that level, to that standard.
Absolutely.
Mr. GREEN. Well, the chairwoman has been more than generous
with the time, so I will yield to her now. And if there is a second
round of questioning, I will be here for it.

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Madam Chairwoman, I yield back.
Ms. MOORE OF WISCONSIN. Thank you, Mr. Green.
I can see that the committee has been joined by the distinguished gentleman from California, Mr. Brad Sherman. And the
Chair would now yield to him.
Mr. SHERMAN. I thank the gentlewoman, the real Gwen Moore.
I would like to address this to all the panelists. When a lender
forecloses, is that usually a profitable transaction, good for business?
Mr. MILLER. The short answer is no.
Mr. SAMUELS. It is a very unprofitable transaction, yes.
Mr. SHERMAN. Well, let’s get everybody to chime in on this one.
Go down the line.
Mr. WADE. Absolutely, it is not.
Mr. SHERMAN. Mr. Marks?
Mr. MARKS. No, it is not. But it is much more profitable and reasonable if they can restructure loans and get a reasonable return
after the no return that would happen on a foreclosure.
Mr. SHERMAN. So, generally, the foreclosure is one of the worst
options?
Mr. MARKS. Absolutely the worst option.
Mr. SHERMAN. The worst option.
Mr. MARKS. And a short sale and a deed in lieu of is not a workout. It is just working someone out of their home; it is not a solution.
Mr. SHERMAN. In effect, a deed in lieu is a foreclosure by another
means. And you just said it is not profitable. I guess a deed in lieu
saves a little transaction cost, so it is infinitely better than a very
bad solution—no, not infinitely—infinitesimally better than a very
bad solution.
Mr. MARKS. I see it as the same thing.
Mr. SHERMAN. Okay.
Next witness?
Mr. LONGBRAKE. And I would say foreclosures are never the best
solution. Sometimes they are a solution, because there will be a circumstance that a homeowner simply does not have the financial
means or wherewithal to be able to be a homeowner. They might
be better off as a renter.
Mr. SHERMAN. Mr. Samuels?
Mr. SAMUELS. Yes, I agree. I want to make clear that the numbers that I gave about our work-out process, our transactions, do
not include deeds in lieu and short sales that we have done.
The numbers that I have given are what we call home retention
solutions. These are solutions that allow people to remain in their
homes. That is what we are focused on.
Mr. SHERMAN. Moody’s, I believe, issued a survey that most
servicers had modified only 1 percent of their service loans that experienced a reset during the early months of 2007.
Mr. Samuels, does it make sense to say that a certain percentage
of all loans that are resetting should be adjusted, when, many
times, the loan is working just fine? The person can afford it. I
mean, there are some ARMs out there. There are some people who
are not losing their jobs. There are some people out there able to

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afford their mortgage payments. Not everybody is calling my office
and saying they are about to lose their home.
Mr. SAMUELS. That is true, Congressman Sherman. The 1 percent figure is very misleading. By using as the base all hybrid
ARMs facing a reset in January, it assumes that most borrowers
are going to go delinquent shortly after the payment reset. And
this is far from accurate. For example, we tracked all of our 2/28
hybrid ARMs that were still outstanding and due for reset in January of 2007. In September, a full 9 months after the initial payment reset, 43 percent of those borrowers had paid off their loans,
fully 82 percent—
Mr. SHERMAN. So you are saying 43 percent have either sold
their homes or refinanced and paid you off. Okay.
Mr. SAMUELS. Correct. And 82 percent had either paid off or
were current. Of the remaining loans that didn’t pay off, 70 percent
were current. Only 11 percent of those loans were three or more
payments behind. So if we use these loans as the base, and then
look at our modification data, the loan modification percentage
would be closer to 20 percent. So you can do a lot of things with
numbers.
Mr. SHERMAN. I thank you, sir. The Moody’s report says basically
1 percent are being renegotiated or recast. And if I understood you
correctly, about 11 percent of the loans are delinquent?
Mr. SAMUELS. Sir, 11 percent of the loans that were in our study,
the 2/28s that reset in January that were still on the books, about
11 percent of those were 90 days or more delinquent.
Mr. SHERMAN. So basically, then, of the pool that are significantly delinquent represent about 11 percent of the pool. The renegotiates represent about 1 percent of the pool, and if I do the
math right, it is very roughly 1 out of 10 loans that are significantly—
Mr. SAMUELS. It is actually 20 percent.
Mr. SHERMAN. I am missing the math here somewhere.
Mr. SAMUELS. I am a lawyer, Congressman. I don’t do math. But
it is 20 percent. The modifications were 20 percent.
Mr. SHERMAN. There must be a number missing from this. But
in any case, it is a significant portion of those that are seriously
in arrears.
I will ask the other panelists whether—Mr. Marks, do you see
the other major servicers recasting 10 or 20 percent of the loans
where there is a reset of the ARM and a serious delinquency, or
do you see them doing a much smaller portion of that?
Mr. MARKS. It is a very good question because we have to redefine our terms. When you hear the word ‘‘modification,’’ I think you
have to ask the question: Are they reducing the interest rate and/
or the outstanding mortgage amount to what the homeowner can
afford? Because when you hear ‘‘modification,’’ many times across
the board, what that is, it is increasing the mortgage payment by
taking the arrearage, adding it onto the outstanding mortgage
amount and recasting the loan. So—
Mr. SHERMAN. They are counting it as a modification if the
monthly payment goes up?
Mr. MARKS. Yes. A lot of times that is how they are counting it.
So we need to be very clear on the question: Are you reducing the

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interest rate, are you reducing the outstanding mortgage amount,
are you reducing the payment to what the homeowner can afford?
Because a lot of times, across the board—I am talking about the
industry, not any one particular lender or servicer—that is how
they are defining that. So it is very important.
Mr. SHERMAN. I understand what you are saying. What if you
had a circumstance where they lower the payment but not the interest rate? That leads to negative amortization. It occurs to me
that we may have boom economic times. We may have a new President, a new economic policy. And we may see a circumstance where
a lot of people are talking about the decline. All of a sudden they
are selling their homes for half-million-dollar profits 6 or 7 years
from now. And one wonders whether that bonanza should be
shared with the lender or not, and there are good lenders and bad
lenders.
Where do you come out on a recast that does not cut the interest
rate but does cut the payment?
Mr. MARKS. One other question that has to be asked is if the interest rate is reduced, is it going to be permanent or just for a
short term? The answer to the second part is that we encourage a
soft second. If the lender is going to do the right thing and reduce
the outstanding mortgage amount or take a hit on that, then you
can put on a soft second so they share the equity if the prices go
up and someone sells that house for a profit. So we are in support
of that.
The other question that you asked was, are the other players
doing it? And while the chairman asked us not to name names—
even though we will put it up on our Web site at NACA.com—the
other players out there, the bottom 10, the fact of the matter is
very few—the biggest servicers out there are not adhering to the
Countrywide standard on the restructuring, and we see it as a responsibility of Congress and the regulators to force those other
lenders to do that, because they are playing you. They are playing
you because they are saying they are modified, they are saying
they are doing it in large numbers, but they are playing you out
there, because they are not telling you the truth and you have to
ask, with all due respect, the specific questions of each one of them.
And just like when the oil company executives came to the Senate
and they swore they were going to tell the truth, you should get
them up here to give you specific answers. Thank you.
Mr. SHERMAN. Thank you for your shy and retiring approach. I
think it is Mr. Miller who seems to be indicating a tremendous desire—
Mr. MILLER. Let me just jump in here for a second. It has been
the experience of the attorneys general and the banking regulators
that the whole modification restructuring process has gotten off to
a slow start. There are a lot of reasons for that. I discussed some
of those obstacles earlier. Now is really the crucial time. We sense
in our discussions with them, we sense the results from our hotline
project that I described earlier, that the companies now are starting to make at least a little progress, some companies, certainly on
modification. This is the crucial time.
And that is why it is so important—the data that the attorneys
general and the bank regulators are in the process of getting from

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the major servicers in the subprime market. We want to make sure
that we know that this process is taking place on a significant
scale, not just on a few examples. So we are in this for the long
haul, the HEs and the banking regulators. We are working with
the company, we have good relationships, we have good dialogue,
we have the Iowa experiment to sort of show if it is working or not,
and we will stay on this and try to make sure it works and try to
make sure that everybody knows whether it is working or not.
Mr. SHERMAN. It is a little more difficult than it looks to sit up
here and figure out what questions to ask, and this hearing isn’t
as much fun as the hearing that Mr. Marks has suggested, in that
we only have one lender and he is the guy that you are saying
some nice things about, and you envision something more akin to
the fun Representative Waxman had with the tobacco executives.
In order to have that work most effectively, we are going to need
to frame the right question.
Representative Waxman could ask the question: Does tobacco
cause cancer? This is a murky area. And it seems to me there are
two or three different ways to phrase the question: How many of
your borrowers are in trouble? And the question: What percentage
of those are you really trying to help?
So I would ask each of you to try—and I know Sandy has—I
mean, this involves numbers, Sandy, but you have lots of help—to
come up with a question first: What should be the denominator?
That is to say, how should we define the number of folks with
ARMs that are resetting or other difficult to deal with loans and
then, more importantly, the numerator. Because some of you might
say, have you cut the interest rate by at least 50 basis points?
Some of you might think it is okay if they just cut the interest rate
25 basis points. Have you cut the principal by at least 10 percent?
Or have you cut the principal to only a de minimis amount?
I would see these questions go in writing to the lenders before
they come here, because these are such complex questions that if
we had the executives here, they could say, gee, I don’t know, I will
get back to you. And that deprives us of all the fun. So I would
hope you would work with us, and I think there might be different
approaches. One of you might take a definition of working with a
borrower that says, cut the interest rate by at least this, and no
soft seconds, and no participation; others of you might have a lower
definition.
But what the country wants to know is, of the folks who are in
trouble, how many are getting significant help from the financial
services industry and how many are being told to pay or move?
So I look forward to that—I see one witness with his hand up.
Mr. LONGBRAKE. Congressman, may I make a comment? I am
representing the HOPE NOW Alliance that brings together
servicers, not-for-profits, and other entities, and we are there to accelerate doing the right thing, to bring the best ideas to the table,
and get the industry to follow through. So we would welcome Mr.
Marks’ questions being directed at the HOPE NOW Alliance as
well.
Mr. MARKS. If I can add just one more thing, there is too much
discussion on outreach and process. There is just too much. We

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know the solutions. We don’t have to create more solutions. We
have the solutions.
But you are exactly right, Congressman. Exactly right. Ask the
very specific questions, very specific. It is really straightforward, it
is very straightforward: What interest rate did you reduce the borrower’s interest rate to? Is it fixed? And how many have you done?
Because if you look at the denominator—because with a Countrywide NACA agreement, we are not limiting it to subprime or whatever, it is everybody out there who has an unaffordable mortgage.
Because if we get into a debate around what is considered
subprime or predatory or whatever, we will be here for—
Mr. SHERMAN. When you say ‘‘unaffordable,’’ somebody could
have gotten a 5 percent, fixed 30 year loan, but they lost their job,
or they are in the hospital, and it is now unaffordable for them. It
is hard to blame the lender for that.
Mr. MARKS. And those are separated. But when the mortgage
pushes someone into a point where they cannot afford that payment, those are the people who would go through the NACA process. What we stayed away from was a long discussion on how we
define different types of loans because different people, well-intentioned people, have a different determination or valuation of that.
But what you are saying is exactly correct. Get those executives
here, please. Get them to stand up, under oath, and ask them those
specific questions. How many have you done? And please don’t let
them get away with process. Don’t let them get away with best of
intentions. Hold them accountable.
Mr. SHERMAN. I do want to agree with you that sending out a
letter to every borrower saying, ‘‘We love you, please call us,’’
doesn’t do any good unless that is the first step in a good process.
Mr. MARKS. The people don’t trust the lenders.
Mr. SHERMAN. I saw Mr. Wade with his hand up. I realize I am
taking more than my time, and the chairwoman will cut me off
pretty soon.
Mr. WADE. I just want to add, the whole focus of the call center
hotline is precisely to create solutions at the borrower’s ability to
pay. Historically, that is how we have created homeownership for
over 20 years, at the borrower’s ability to pay. You use a variety
of tools. You have to use a variety of tools to get there. And in some
cases, local jurisdictions have developed rescue funds to help people
who have been temporarily out of work. People use those as a way
to bridge that gap.
So there are a variety of things that you can do to help address
that, and I think, clearly, loan restructurings are a key part of
that. I would agree with Mr. Miller that the industry has been not
as quick to come to that as they could have.
One other thing about the short sales and deed in lieu, again if
we are doing this in a way that serves the consumer, there are consumers who make the decision that they no longer want to live in
that house, so we help them facilitate a graceful way out of that.
As you know, there are many consumers who are in situations
where there has been job loss, their jobs have been exported somewhere else. They want to move somewhere. Other than giving them
a graceful way to avoid a foreclosure, oftentimes a deed in lieu or
short sale is the best way to do that for a consumer.

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So while it is not a panacea, it is one tool that consumers opt
for when they make the decision that they no longer want to be a
homeowner in that house, in that community.
Mr. SHERMAN. Yes, I would comment that when the borrower is
in trouble, that may have something to do with the loan or it may
have something to do with other things in their life. There are people who had terrible loans, who were ripped off, who were steered
into the wrong thing, but they just got a couple of promotions, and
they can afford to make the payments. And there are people who
got great loans, but they lost their jobs, and now they are troubled.
It will be difficult for us to define what are the troubles that we
regard as the financial services industry is responsible for and
which are the ones we should hold the rest of the economy in trouble for when we don’t have health coverage for people, when so
many jobs are being exported, etc.
One last question, and perhaps only a couple of witnesses will
comment on this, is how effective has this committee and this Congress been already in jawboning the industry into doing the right
thing? You have been on the other end of that jawbone so you are
probably the best person to respond.
Mr. SAMUELS. That is correct. As I mentioned in my remarks and
the written testimony, I wanted to thank and commend Chairman
Frank and this committee for doing a lot to remove many barriers.
They have been very helpful on the investor issue, on the accounting issues with FAS 140 and there has been a lot of discussion
about how to be better in terms of solving this problem. I think
that a lot of what you have seen recently is a direct result of those
efforts, and I think there was a meeting last week in Boston where
there was a lot of good discussion, again a lot of good ideas. And
it is not just this committee it is other governmental agencies. General Miller convened groups of attorneys general, very constructive,
very good discussions. And we are not just talking process at these
meetings, we are talking solutions, we are talking about ways to
make sure that if we can, we will keep people in their homes.
Ms. MOORE OF WISCONSIN. I think this is really a good sign it
is time to move on. Any time we start thanking the chairman—
Mr. SHERMAN. May I add one thing?
Ms. MOORE OF WISCONSIN. Thanking the chairman and complimenting the chairman, that is a good sign that we need to move
on.
Mr. SHERMAN. Some of us want our provisions included in the
bill and should not fail to take this opportunity to praise the chairman again and again.
Ms. MOORE OF WISCONSIN. As I said, we are praising the chairman. I think that is a good demarcation line, because he would not
tolerate it at this point. All right.
I would yield myself time right now and I would like to start
with the attorney general from Iowa. I was in Waterloo last weekend and I saw board-ups of these gorgeous homes and I felt very,
very sad about that. You said you had some success in reaching
consumers by reaching out to them.
I want to ask you, number one, did you do it via television, and
then using the bully pulpit of the attorney general’s office? You
talked about a tremendous success rate in getting people to re-

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spond to your 800 number. Is it because you used television and
you used the insignia of that office rather than, say, these mortgage rescue folks that people may have encountered?
Mr. MILLER. Well, we used the insignia or credibility of the office,
plus, as you would describe in your terms, the free media. What
happened, I think, is that over time—and I think I am right—the
Iowa Attorney General’s Office has developed a good record and a
lot of credibility in the consumer area generally, that we are seen
as the fighter and protector of consumers.
When we came forward with this hotline, after having done a fair
amount of work generally on this issue in Iowa and with other
States, and having a good reputation, and the problem being severe
when we came forward and did basically a media announcement,
a lot of TV coverage, newspaper coverage, that this hotline was
available, what the purpose was, and we had this enormous response.
Ms. MOORE OF WISCONSIN. Thank you, sir.
Mr. Wade, you have indicated that you have done a lot of outreach, a lot of media, and you are a congressional creature. So I
am asking you now, do you feel that you have enough resources to
meet the challenge of reaching out to people? Do you need more
money from Congress, or are you in a position to galvanize these
resources from other partners in the Hope Now Initiative?
Mr. WADE. We are looking for resources from all quarters in
order to, obviously, support this work.
Ms. MOORE OF WISCONSIN. So what amount of money do you
think you need in order to meet the challenge? Can you come up
with a number that you would need in order to meet the appropriate outreach goals?
Mr. WADE. Well, we have supported what is currently before
Congress, and that is anywhere from an appropriation of—and I
guess it is in conference—but anywhere from maybe $50- to $200
million more dollars to go towards community-based organizations
that are there working with consumers every day. We think that
would be a great contribution there.
But we also think the lending community needs to be a player
as well. And as you heard, they are looking for a way to develop
a method where they can compensate community-based groups on
a per-customer basis for those consumers that are being assisted.
So we think those two sources will go a long way toward solving
the challenge of—the resources needed—
Ms. MOORE OF WISCONSIN. $50 to $200 million.
Mr. Longbrake, do you think with the Financial Roundtable, that
this would a really good starting point for jump-starting what has
been a slow start in doing this, just go and get the roundtable together and say, you know, you can start out by anteing up? Or
have you done that?
Mr. LONGBRAKE. Madam Chairwoman, that is exactly what we
are doing. We actually had our members ante up many, many
months ago for the public service advertising campaign that is both
radio and television. We are asking all the members who are listed
in the 17 members are being—signing contracts to reimburse for
counseling.

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Ms. MOORE OF WISCONSIN. Are they reluctant to do it? Because
we hear, like from Mr. Marks, for example, that there are some
recalcitrants in the community.
Mr. LONGBRAKE. We are talking to them and strong-arming
them.
Ms. MOORE OF WISCONSIN. All right. My time is waning, so I
really want to—Mr. Samuels, I will have to tell you that I am so
disappointed that you aren’t a numbers person, that you are a lawyer, because I am not necessarily a numbers person either, and I
went to bed with this beautiful colored copy of your chart.
Mr. SAMUELS. Yes, ma’am.
Ms. MOORE OF WISCONSIN. And I was reminded of the testimony
that we had earlier from the Treasury Department that when you
consider stuff like divorce and death and loss of income, that usually accounts for 1.7 percent of baseline foreclosures that occur
every year.
So, you know, I have to wonder when you say that you have put
an extra $16 billion into dealing with this catastrophe, but in looking at your testimony, I can only account for, like, $16.2 billion
worth of loans that you say were in trouble. I have to wonder, really—and I think Mr. Sherman sort of pointed to it, about the numerator and denominator, what exactly was your exposure with
loans? You claimed that only 1.3 percent were due to payment adjustments.
Mr. SAMUELS. Correct.
Ms. MOORE OF WISCONSIN. What does income curtailment mean?
Mr. SAMUELS. It is loss of job, your income is reduced.
Ms. MOORE OF WISCONSIN. So 59 to 60 percent of the loans that
Countrywide was servicing were due to job loss versus these horrible products?
Mr. SAMUELS. That is right. I mean, the foreclosures—this is a
chart of reasons for foreclosures. Okay? So the universe is for loans
that are foreclosed upon.
Ms. MOORE OF WISCONSIN. Wait a minute. Back up. Help me understand this now, because I am not—because like I said, I went
to bed—this chart was so confusing to me. Are you looking at the
chart I am looking at?
Mr. SAMUELS. I am not sure which chart you are referring to,
ma’am.
Ms. MOORE OF WISCONSIN. This was mind-boggling to me. We
have heard that foreclosures are just a fact of life, that some people
are just deadbeats, whatever reason, that people lose jobs all the
time, they are divorced all the time, that you underwrite knowing
that 1.7 percent are going to fall into this category. And you are
telling me that Countrywide had 59 percent—well, including income curtailment was 59 percent. Illness was another 13 percent.
Divorce was 7.3 percent. Somebody help me with the math. What
are we up to so far? And so—
Mr. SAMUELS. Right. That is right.
Ms. MOORE OF WISCONSIN. So most of these things were not due
to Countrywide offering products like these resets. Because according to this chart—
Mr. SAMUELS. And most people up to now have not been foreclosed upon because of resets. We haven’t seen a lot of resets. I

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think we are going to see more in the future. We are going to see
more in 2008—we are seeing some in 2007. We will see some in
2008 and 2009.
Ms. MOORE OF WISCONSIN. So Countrywide did not offer predatory loans or seriously subprime loans. And you put $16 billion in
and you have helped—$16.2 billion, and you have serviced—
Mr. SAMUELS. No, no, no. The two numbers don’t foot.
Ms. MOORE OF WISCONSIN. I know, because I went to bed thinking this doesn’t make sense.
Mr. SAMUELS. They are not related. Because of the $16 billion,
they fall—as the written testimony explains, they fall into three
different brackets. One is to help refinance people who can refinance, who are facing resets. And a lot of these loans, the hybrid
ARM loans, the 2/28 loans, what happens with many of these people is that they get into these loans, they make their payments,
and then we refinance them into prime loans.
One of the things I describe is that we did 31,000 of those up to
now, this year, where we took subprime borrowers who were in
subprime loans, these 2/28s or 3/27s, and we refinanced them into
a prime fixed-rate loan.
Ms. MOORE OF WISCONSIN. These were only 1.3 percent of your
portfolio, right?
Mr. SAMUELS. 1.3 percent of the portfolio?
Ms. MOORE OF WISCONSIN. These subprime hybrid loans. I mean,
because what you said was—the illness was 13 percent.
Mr. SAMUELS. No. This is the number of foreclosures. These are
the reasons for loans foreclosed upon. What I am talking about are
loans that are still out there, current. They are still making their
payments. Those are not—
Ms. MOORE OF WISCONSIN. Okay. All right, all right. Okay. So,
Mr. Marks, you work very closely with Countrywide and, you know,
from your perspective, they are just the greatest or most honest
brokers in this. And I am not asking you to disclose any proprietary information, but as you work with restructuring these loans,
is it your experience as well that most of them are due to the—
really, incompetence of the borrower as opposed to terrible products
that Countrywide put forward? And I apologize that you are the
only lender here, but, you know, according to you, Mr. Marks, these
are—you know, from what I can gather—and I did read your testimony until I just couldn’t stay awake looking at this chart any
longer. Is that your experience, that Countrywide just was an unlucky lender, and they didn’t have these terrible products for the
most part?
Mr. MARKS. No. In the industry, the industry, you have many of
the players out there, whether it is Citigroup, Wells Fargo—
Ms. MOORE OF WISCONSIN. No, you are not supposed to name
names. The chairman told me that.
Mr. MARKS. If you are saying that these products are out there
in the industry but you tell me, Congresswoman, that if you have
a lender out there who is willing to restructure loans at 5 and 6
percent, whatever it takes for that homeowner to stay—
Ms. MOORE OF WISCONSIN. Mr. Marks, here is what I am asking.
Stop. I am not Mr. Frank. Let me ask you this, because I am not
going to yield myself much more time. What I want to know is in

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your work with Countrywide—the only lender that is here and I
feel that this is fair game because they are in a position to talk
back—has it been your experience that they joined a group of lenders, joined people in the industry that had yeoman numbers of
products that were horrific, bad, these 2/28s for consumers that has
created these problems—and, you know, to their credit, they are
putting money into solving the problem, they are working with
NACA to do it—that, in fact, there is some culpability on their
part, even though they are addressing it, for putting these products
out in the first place? Is that your observation?
Mr. MARKS. There is culpability on all the lenders.
Ms. MOORE OF WISCONSIN. Including Countrywide.
Mr. MARKS. Every one of them. Every one of them are out there.
This was the industry. People in the industry 3 years ago, 4 years
ago, knew that it was only a matter of time when these loans
would go into default. This is not news.
Yes, it came up in February, but this was known. These loans
were structured to fail across the board, and that, yes, Countrywide
is doing the right thing. We think the job of Congress is to get the
other lenders to step up—
Ms. MOORE OF WISCONSIN. Okay. Well, good. Because I was misled by this chart. And you have just confirmed for me, Mr. Samuels, that I was one of the people misled by this chart thinking, my
God, 60, 70, 80, or 90 of these people who are in trouble are in
trouble because they had bad circumstances in their lives versus
terrible products.
Mr. SAMUELS. May I? First of all, this chart involves reasons for
foreclosures. So we are talking about the universe of people who
have been foreclosed upon, not a large number, okay? This is just
percentages of people who had suffered foreclosures.
I want to address a couple of points if I may. First of all, the people who have lost their jobs or got sick or, you know, one of the
borrowers passed away—
Ms. MOORE OF WISCONSIN. 1.7 percent of baseline of people that
this happens to every year? According to the Treasury. I am just
going by—
Mr. SAMUELS. Our experience is that it is obviously a lot higher
number of people who face foreclosure, who suffer foreclosure because of those reasons. It is not because of their incompetence, it
is because of life events.
What happened is now you have a life event and you have no
way out because your property value has gone done. It is tough—
you know, the loan-to-value ratio that you have is too high or credit
has tightened. So there is an inability now to fix a problem—or
there is less of an ability to fix a problem than there may have
been 4 or 5 years ago. But 5 years ago, if somebody took out a 2/
28 loan and made those payments, then 3 years ago we would have
refinanced them into a fixed-rate prime loan. And that happened
all the time. There are thousands and thousands of borrowers for
whom that was a success story.
Ms. MOORE OF WISCONSIN. Okay. So I am going to yield now to
Mr. Green, because I have gone on now too long and I just—so I
heard what you said. You don’t necessarily see a 2/28 loan as a

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47
predatory loan. You are just saying that stuff happens, and so now
kind of the stuff hit the fan.
Mr. SAMUELS. What I would say is if somebody was put into a
2/28 loan and told, this is your interest rate for the next 30 years,
yes, that is a predatory loan. But the 2/28 loan by itself is not a
predatory loan.
Now, I will say also that one of the things that we have discussed with NACA and with other groups and that we are doing
ourselves is that if somebody finds that they cannot afford that
reset, they need to come to us; we will work with them so that they
can keep their home. That is what the $16 billion is for. We will
be working—
Ms. MOORE OF WISCONSIN. Thank you, Mr. Samuels. I will yield
to my colleague, Mr. Green.
Mr. GREEN. Thank you. And might I just remind the chairwoman
that the Chair can never exceed the time limit.
Quickly, let me do this. For edification purposes, so people will
understand that Countrywide may not be unlike other lenders, did
Countrywide engage in a no doc loan process? Did you have some
no doc loans?
Mr. SAMUELS. Yes, we did.
Mr. GREEN. Did you have some interest only loans?
Mr. SAMUELS. Yes.
Mr. GREEN. 3/27s?
Mr. SAMUELS. Yes.
Mr. GREEN. 2/28s?
Mr. SAMUELS. Yes.
Mr. GREEN. Prepaid with penalties coinciding with teaser rates?
Mr. SAMUELS. When you say coinciding with teaser rates—
Mr. GREEN. A teaser rate for 2 years, prepaid with penalty for
2 years?
Mr. SAMUELS. Yes. Prepayment penalty for the time of the introductory payment, yes. Not extending beyond that.
Mr. GREEN. Right. No escrow accounts?
Mr. SAMUELS. We have escrow accounts.
Mr. GREEN. But did you have some loans with no escrow accounts?
Mr. SAMUELS. We have some loans with no escrow accounts.
There are some States that don’t allow it.
Mr. GREEN. These are all of the things that have created a great
amount of consternation for us here in Congress.
Look, there are some more. I just wanted to give you a short list.
But here is where I am with you. You know, sometimes we see the
error of our ways. There are times when we approach this thing
called ‘‘enlightened self-interest.’’ And I am just assuming that you
have now had the benefit of seeing that there is a better way to
do business as it relates to this market at this time. And I again
salute you for it because you have made a giant step in what I believe to be the right direction.
I think that there is some argument that can be made that a 3/
28 or a 2/27 is inherently invidious. There is an argument that can
be made for it, especially when you get into the subprime area, I
think there is an argument. But that argument aside, because I
think these debates are things that are at a more lofty level, and

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48
what I want to do today is find out how we can replicate what you
are doing, because I see this based upon what you said.
Now, everybody has said to me that there is, you know, no better
way to do this than to have affordable loans—to restructure to affordable loans. And I think this is a great paradigm. So let me
come back to it.
Other than will, is it the general consensus of this group that the
way can be found to do what Countrywide is doing? Is it a matter
of will or is it a matter of way? Countrywide seems to have found
the way and seems to have the will to implement this.
Is that pretty much the case in the industry as you see it, or do
we have some other—we don’t want to get into names—but some
other financial institutions that may have some other circumstances? For example, maybe they have tranches that are different from Countrywide’s tranches. I haven’t done any kind of
comparative analysis, so maybe I don’t know. Maybe they have investor contracts that differ greatly from the ones that Countrywide
will have.
So maybe this is something that our member from the Financial
Services Roundtable can address, because you have a survey of information that you can share. Do the other members of the industry have problems that Countrywide doesn’t have? Are they in a
position different from Countrywide, such as they cannot do what
Countrywide is doing?
Mr. LONGBRAKE. Congressman, let me just respond to that, if I
may. There should be no reason why any member in the industry
should have different responses than Countrywide has had. That is
what the Hope Now Alliance has had. It is to bring members of the
industry together to come up with these kinds of shared solutions.
Mr. GREEN. Yes, sir. If I may coin a phrase, the ‘‘hope now’’ is
great. But I hear Countrywide and NACA talking about ‘‘help
now.’’ And help now is really what a lot of folk are looking for. And
by the way, I am extracting from the pool of folks who need help,
those who will just want to refinance where they can get a better
rate they really can afford to pay.
My assumption is that the paradigm we are talking about is one
that will vet out persons who are just trying to take advantage of
what appears to be an opportunity, when they can afford to pay
what they committed to pay. No one should be allowed to simply
avoid a deal that they made. If you made a deal, you ought to
honor your commitment. You really should.
But now if you are in a position that you can’t afford to do it,
and we have a large pool of people who are in that position, then
maybe they can get some consideration. I assume that these are
the people that Mr. Marks is finding a way to vet and get to Countrywide.
So with that said, the ‘‘help now’’ model is one that—the one I
am talking about, Mr.—is it Mr. Longbrake?
Mr. LONGBRAKE. Yes, sir.
Mr. GREEN. Mr. Longbrake, what about the Help Now model that
I assume that the Hope Now will metamorphose into?
Mr. LONGBRAKE. The Help Now model is—first of all, you have
to get—remember, Mr. Marks, step one was contact with the borrowers. You have to get them in, and then you go ahead and begin

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49
to assess, and ultimately you get to a solution that works for their
situation. So we are working on the first step right now. This is
to get contact, get them to the servicer, develop a solution.
What Mr. Marks has developed is a very sophisticated solution
that is a case-by-case that goes right to the specifics of each individual borrower and their capacity to pay. It is an affordable solution. And that is a worthy end point to get to as quickly as possible.
Mr. GREEN. Thank you. And by the way, I want to thank you for
being here on behalf of the Financial Services Roundtable. I understand that there is a desire to be helpful, and what I am trying to
do is find out if we can replicate what Countrywide has given us
today. We don’t have the other lenders here to ask them personally
or directly. So we speak through you, and I appreciate what you
have said.
Coming back to Countrywide now, the 3/28s and 2/27s, do you
plan to continue with that product to the same extent that you
have had it in the marketplace, or is this one of those questions
that you are not in a position to answer?
Mr. SAMUELS. No. I am in a position to answer. Underwriting
guidelines have tightened significantly, as you are probably aware.
And so these products are generally not available anymore.
Mr. GREEN. Good. I will tell you—
Mr. SAMUELS. Sir, I really would love to have the opportunity to
meet with you and to discuss this issue at greater length.
Mr. GREEN. I appreciate it. And I promise you, we can have that
opportunity. I am amenable to the discussion. Mr. Marks?
Mr. MARKS. Sir, if I can ask—all your questions are right on. The
one thing that is in the agreement that has had a tremendous impact, even more than we had recognized when we initiated the
agreement, and that is the transparency issue. And the transparency is that you hear from a lot of servicers out there, ‘‘I would
love to do it but the investor says no,’’ because it is all in tranches
and all that.
So let me read to you what we are doing: If a NACA home safe
solution is denied by Countrywide or investor insureds or other
third party, Countrywide shall provide the following in writing:
The specific investor agreement reference identification, investor
trustee contact information, investor reason for denial, the relevant
sections on the investor pooling servicing agreement, and the opportunity to appeal the investor’s decision based on the borrower’s
risk of default without adhering to the NACA home safe solution.
If the denial is not based on the requirements of the applicable investor, the justification for such denial.
Because Countrywide is doing the right thing out there and they
shouldn’t be held responsible when an investor says no. But that
gives the transparency out there that says, who are these people
pulling the levers behind the curtain saying no? And our experience to date is that they really don’t exist, that these investors are
very willing to restructure the loans, and that they are used as this
excuse by a lot of other servicers out there not to restructure the
loans. And that transparency has had a huge impact.
Ms. MOORE OF WISCONSIN. That is a great place to end the hearing.

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Just a moment. The Chair notes that some members may have
additional questions for this panel which they may wish to submit
in writing. Without objection, the hearing record will remain open
for 30 days for members to submit written questions to these witnesses and to place their responses in the record.
And with that, this hearing is adjourned.
[Whereupon, at 12:49 p.m., the hearing was adjourned.]

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APPENDIX

November 2, 2007

(51)

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