[Senate Hearing 110-812]
[From the U.S. Government Publishing Office]
S. Hrg. 110-812
KEEPING FAMILIES IN THEIR HOMES: HOW TO PREVENT FORECLOSURES
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HEARINGS
before the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
OCTOBER 17, AND OCTOBER 24, 2008
__________
Serial No. J-110-123
__________
Printed for the use of the Committee on the Judiciary
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Washington, DC 20402-0001
COMMITTEE ON THE JUDICIARY
PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts ARLEN SPECTER, Pennsylvania
JOSEPH R. BIDEN, Jr., Delaware ORRIN G. HATCH, Utah
HERB KOHL, Wisconsin CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California JON KYL, Arizona
RUSSELL D. FEINGOLD, Wisconsin JEFF SESSIONS, Alabama
CHARLES E. SCHUMER, New York LINDSEY O. GRAHAM, South Carolina
RICHARD J. DURBIN, Illinois JOHN CORNYN, Texas
BENJAMIN L. CARDIN, Maryland SAM BROWNBACK, Kansas
SHELDON WHITEHOUSE, Rhode Island TOM COBURN, Oklahoma
Bruce A. Cohen, Chief Counsel and Staff Director
Stephanie A. Middleton, Republican Staff Director
Nicholas A. Rossi, Republican Chief Counsel
C O N T E N T S
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FRIDAY, OCTOBER 17, 2008
STATEMENTS OF COMMITTEE MEMBERS
Page
Specter, Hon. Arlen, a U.S. Senator from the State of
Pennsylvania................................................... 1
WITNESSES
Casey, Hon. Robert P., Jr., a U.S. Senator from the State of
Pennsylvania................................................... 2
Griffin, Barbara, Pro Bono Coordinator, Allegheny County Bar
Foundation, Pittsburgh, Pennsylvania........................... 11
James, Joseph M., President Judge, Court of Common Pleas of
Allegheny County, Pittsburgh, Pennsylvania..................... 3
McKeever, Michael T., Partner, Goldbeck, McCafferty and McKeever,
PC, Philadelphia, Pennsylvania................................. 9
Mullen, Sheriff William P., Allegheny County, Pittsburgh,
Pennsylvania................................................... 5
Sullivan, Dan, Mortgage Foreclosure Prevention Specialist,
ACTION-Housing, Inc., Pittsburgh, Pennsylvania................. 6
Williams, Dawn T., Director of Housing, Urban League of Greater
Pittsburgh, Pittsburgh, Pennsylvania........................... 8
A SUBMISSIONS FOR THE RECORD
Griffin, Barbara, Pro Bono Coordinator, Allegheny County Bar
Foundation, Pittsburgh, Pennsylvania, statement................ 22
FRIDAY, OCTOBER 24, 2008
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STATEMENTS OF COMMITTEE MEMBERS
Specter, Hon. Arlen, a U.S. Senator from the State of
Pennsylvania................................................... 25
prepared statement........................................... 54
WITNESSES
Carmona, Hiram, Assistant Contract Administrator Housing
Counseling..................................................... 47
Casey, Hon. Bob, Jr., a U.S. Senator from the State of
Pennsylvania................................................... 26
Dodds, John, Director, Philadelphia Unemployment Project......... 44
Gould, George, Managing Attorney, Housing and Energy Unit
Community Legal Services, Philadelphia, PA..................... 38
Harrigan, Tania, Homeowner....................................... 36
Henderson, Cynthia, Homeowner.................................... 37
Hudson, Brian, CEO, Pennsylvania Housing Finance Agency.......... 40
Jackson-Smith, Deborah, Homeowner................................ 35
Jones, C. Darnell, President Judge First Judicial District of
Pennsylvania Court of Common Pleas of Philadelphia County...... 28
Jones, Curtis, Jr., Member, Philadelphia City Council,
Philadelphia Pennsylvania...................................... 32
Rhaney, Eric, Homeowner.......................................... 34
Rizzo, Hon. Annette M., Judge, First Judicial District of
Pennsylvania Court of Common Pleas of Philadelphia County...... 29
Seldin, Stefhanie, Managing Attorney, Philadelphia Law Works/
Philadelphia VIP............................................... 42
White, Michael, Pennsylvania Bankers Association city of
Philadelphia................................................... 45
SUBMISSIONS FOR THE RECORD
Carmona, Hiram, Assistant Contract Administrator, City of
Philadelphia, Office of Housing and Community Development,
Philadelphia, Pennsylvania..................................... 54
Dodds, John, Director, Philadelphia Unemployment Project,
Philadelphia, Pennsylvania, statement.......................... 56
Gould, George, Managing Attorney, Housing and Energy Unit
Community Legal Services, Philadelphia, Pennsylvania, statement 61
Harrigan, Tania, Homeowner, Philadelphia, Pennsylvania, statement 67
Hudson, Brian, Sr., Executive Director and CEO, Pennsylvania
Housing Finance Agency, Harrisburgh, Pennsylvania, statement... 68
Jones, Curtis, Jr., Member, Philadelphia City Council,
Philadelphia Pennsylvania...................................... 73
Rizzo, Hon. Annette M., Judge, First Judicial District of
Pennsylvania Court of Common Pleas of Philadelphia County,
Philadelphia, Pennsylvania, statement.......................... 77
Seldin, Stefhanie, Managing Attorney, Philadelphia Law Works/
Philadelphia VIP, Philadelphia, Pennsylvania, statement........ 82
White, Michael, Pennsylvania Bankers Association, City of
Philadelphia, Philadelphia, Pennsylvania, statement............ 85
KEEPING FAMILIES IN THEIR HOMES: HOW TO PREVENT FORECLOSURES
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FRIDAY, OCTOBER 17, 2008
U.S. Senate,
Committee on the Judiciary,
Washington, D.C.
The Committee met, pursuant to notice, at 9:35 a.m., in
room 321, Allegheny County Courthouse, 436 Grant Street,
Pittsburgh, Pennsylvania, Hon. Arlen Specter, presiding.
Present: Senators Specter and Casey.
OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM
THE STATE OF PENNSYLVANIA
Senator Specter. Good morning, ladies and gentlemen. The
Senate Judiciary Committee will now proceed with this hearing
on the unique programs here in Allegheny County to try to keep
homeowners in their homes when faced with potential eviction
under sheriff sales through a mediation program which has been
devised by the Court of Common Pleas under the direction of the
distinguished President Judge James and implemented by Sheriff
William Mullen and supported by quite a number of pro bono
groups in the community.
I am pleased to be joined by my distinguished colleague
Senator Casey, and we thank Judge James and the sheriff and
others for coming in today on relatively short notice. And we
have scheduled this hearing because of the problems faced
nationally and, of course, locally on this eviction issue.
It is a win-win proposition if we can structure these
matters so that people can stay in their homes. The homeowner
obviously is benefited by not being evicted and by an
arrangement to save the home. The lender has the potential for
benefit to avoid a lot of costs of eviction and to repossess
property which may be reduced in value and in a very difficult
housing market, and it is something to be avoided if it
possibly can be avoided. And, of course, it has the benefit of
protecting the taxpayers from welfare programs and other
support programs.
There are a number of agencies which are at work here.
Pittsburgh and Allegheny County both qualify under the
neighborhood stabilization grants and the Housing and Economic
Recovery Act of 2008, and there are a number of programs both
on the Federal and State level which are potentially helpful.
In discussing this issue with President Judge James, one of
the critical points is to acquaint the homeowners with the
availability of the program. And when foreclosure proceedings
are initiated, they are swamped with a lot of legal papers,
which many people cannot understand and they discard. So it has
to be a proactive effort to reach these people and tell them
that they can get a 90-day stay and they can get assistance.
Senator Casey and I are also looking at the issue of
legislation at the Federal level. Legislation has been pending
since last November to give bankruptcy courts some authority to
move in, and we included in the economic recovery program some
provisions to protect lenders who enter into these
arrangements.
We have a relatively tight timeframe here, and we want to
proceed with dispatch, and in accordance with Judiciary
Committee procedures, we have allocated 5 minutes to each
witness to reserve some time for Senator Casey and me to ask
some questions at the end. And now I am delighted to yield to
my distinguished colleague, Senator Bob Casey.
STATEMENT OF HON. ROBERT P. CASEY, JR., A U.S. SENATOR FROM THE
STATE OF PENNSYLVANIA
Senator Casey. Senator, thank you very much.
I want to thank Senator Specter for gathering us together
today to talk about an issue that confronts not only Allegheny
County and southwestern Pennsylvania, but the whole State and
the country, and that is the issue of foreclosures and the
strategies that many communities, including this county, have
begun to put in place to prevent foreclosures, to keep people
in their homes and thereby to stabilize neighborhoods and keep
our economy moving in the right direction.
Senator Specter has been kind enough to invite me here and
to bring us together, and I know that he appreciates, as I do,
Judge James and the sheriff and others who are here with us and
spending the time with us to begin to hear some of the ideas
that you have been implementing here in Allegheny County to
prevent people from being thrown out of their homes.
When you think about this in real terms, when we think
about the economy that we are living through right now, the
terrible financial crisis that has gripped the country, as
complicated as it is, at its foundation it is rather simple.
This started with the foreclosure problem, and that remains, I
think, the central challenge in our economy. You could make a
case for the freezing up of credit being another major
challenge as well, but it did start with foreclosures. We have
to keep our eye on the ball to bring that number down, which we
see over and over again growing. The number of people in the
United States, the number of families in the United States,
every single weekday, the days that the courthouses across the
country are open, almost 10,000 people every single day fall
into foreclosure, begin that process of foreclosure. We have
got to bring that number down.
Here in Pennsylvania, even though we have been in a
relative sense not as bad off as some States, like Nevada or
California or Florida, for example, recently our numbers are
getting worse. You know the numbers here in Allegheny County
are getting higher. I know in the other end of the State, in
Philadelphia, the numbers are getting higher. But statewide, in
the month of August the foreclosure rate went up by 60 percent
over August of 2007, and that is statewide. That is a statewide
number. So Pennsylvania is going to be faced with this
challenge for a long time, and we have got to put in place
steps that will work, and a lot of those steps don't come from
some smart guy in Washington. They come from people in
communities like this and counties like this that have begun to
take steps to deal with foreclosures.
So I am happy to be here, happy to listen to the testimony
and to ask questions, because we can learn a lot from you from
having dealt with it directly, in a personal way and in a
community-focused way here in Allegheny County, and I am
thankful for that opportunity.
Senator Specter. Thank you, Senator Casey.
Senator Casey says the answers do not come from a smart guy
in Washington. We are still trying to find a smart guy in
Washington.
[Laughter.]
Senator Specter. If we are successful in finding one, maybe
we will do a little better. But what is happening here on the
county level is very encouraging, and our lead witness is the
distinguished President Judge of the Court of Common Pleas,
Judge Joseph M. James. I talked to Judge James last week, and
he has expedited the organization of this hearing.
We are very appreciative of your presence here, and as a
general matter, it is 5 minutes, as I have said. And there will
be time cards held up to give you notice when the time narrows
and when the time ends.
Judge James, this is an unusual procedure for you to be in
the witness box and Senator Casey and I to be promoted to the
bench, but thank you, and we look forward to your testimony.
STATEMENT OF HON. JOSEPH M. JAMES, PRESIDENT JUDGE, COURT OF
COMMON PLEAS OF ALLEGHENY COUNTY, PITTSBURGH, PENNSYLVANIA
Judge James. Thank you, Senator. Senator Specter, Senator
Casey, being a witness is something I have tried to avoid in my
29 years of being a judicial officer, but I am pleased to
testify here today.
When Senator Specter says that it was on short notice, we
pulled this together in less than a week, and I would like to
thank the staff of the Court of Common Pleas--Ray Billotte, the
Court Administrator; Helen Lynch, the Deputy Court
Administrator--who put this together working with Senator
Specter's staff. It was quick. I guess when you are a United
States Senator, you can get things done in about 5 or 6 days.
I would like to start off. This summer, I had a meeting
with Bill Mullen. The sheriff of Allegheny County and a long-
time friend of mine came to my office concerned with the home
foreclosure problem within Allegheny County. We were well aware
that the city of Philadelphia had started a program under the
supervision of President Judge Darnell Jones, and I had spoken
with President Judge Jones on a number of occasions. So we were
looking to see what the problem was in Allegheny County, to
identify it, see the magnitude of this problem, and then
determine what type of project, if any, we should endeavor to
start here to deal with the particular problems of Allegheny
County.
So after the meeting with the sheriff in June, I endeavored
to start to meet with various people who were involved in this.
I met with Katherine Martin of the Neighborhood Legal Services;
Tom Riley, Esquire, who is the chairman of the Real Property
Section here in Allegheny County of the Allegheny County Bar. I
met with ACTION-Housing and the members of their Mortgage
Foreclosure Conciliation Collaborative. I met with lawyers
representing numerous banks and lending institutions. I also
met with Dan Onorato, the County Executive, and he gave me full
support to deal with our Director of Court Records. Under our
home rule, the Director of Court Records, most of you
practicing law remember them as prothonotaries. We no longer
have one here. But Kate Barkman is the Director of Court
Records. And I also spoke and met with John Goryl, who is the
Director of the Pennsylvania Housing Finance Agency.
And so after these various discussions, we have decided
let's identify how many cases we actually have, how many home
foreclosures are taking place. We started by identifying that
we had approximately 400 actions in foreclosure taking place a
month. The sheriff and I consulted, and the number is fairly
stable, if not slightly down from 2007 numbers, which is unique
to the Allegheny County housing market. So we looked at the
magnitude of our problem.
The problem we had initially was that of those 400
foreclosures a month, we were unable to identify which ones
were owner-occupied residences and which were commercial, which
were non-owner-occupied residences, and the other group, which
would have been tax delinquencies.
So meeting with Kate Barkman, she and her staff have
agreed, first of all, that we will have an official designation
for owner-occupied mortgage foreclosures, a separate
identifying suffix MG; as opposed to general docket, it will be
mortgage docket. We will be able to create a data base and know
exactly how many of these are homeowner-occupied mortgage
foreclosures.
Now, the second thing was where along this continuum of the
legal process is the best place to intervene, and, obviously,
the further up the stream, at the very initial beginning is the
place where you can intervene and create a workout, if you
will, and the lender has not incurred additional costs--the
legal costs, the costs of posting the property, and, of course,
of legal advertising.
So our plan here in Allegheny County, after meeting with a
number of people--in fact, as recently as yesterday afternoon
in my courtroom--we have created a program as follows: At the
time of the initial filing of the complaint, the case will be
identified as a homeowner mortgage foreclosure. It will have an
important notice on it which will identify a single phone
number, which is what you alluded to, Senator, that, in fact,
the people are confused by getting papers, a central repository
where they can make a call and ask for counseling. The existing
counsel program created by the Pennsylvania Housing Finance
Agency have agreed to provide counselors and pay for those
counselors, and counseling will be made available.
If an owner avails themselves of the program, a 90-day stay
in all proceedings will take place. Counseling will take place.
A workout will be proposed, and they will go before a judge of
the Court of Common Pleas for conciliation. The Allegheny
County Bar Association, where the defendant qualifies, will
provide pro bono, free lawyers for them to attend in a special
appearance to appear before the conciliation judge. If it can
be worked out, the case will be settled and discontinued. If it
cannot be worked out, the stay will be lifted, and the case
will proceed. So it is a simple solution to a difficult
problem, and we think we will be much more effective by dealing
with these cases at the very earliest stages of the legal
proceedings.
The banking community welcomes this and looks forward to
it. The 90-day stay is not as disruptive as other stays, and it
is not a stay across the board. The defendant must avail
themselves of some counseling.
Now, as you said, they get bombarded with literature, so by
having a single number that they can call, an 800 number, then
they can get help immediately, and people can explain to them
what their rights are and their ability to get additional
financing, get the HERO program set up by the State of
Pennsylvania and the HEMAP program, also available for funding,
and hopefully some additional funding available from the
Federal Government which will be made available in the future
as this bailout helps us.
So thank you for coming, and thank you for calling
attention to our efforts here in Allegheny County, and people
here to my left can explain it a little bit further. But that
is the outline.
We have one last thing to do, and that is to centralize
where we are going to have the single phone number. We have not
decided where it is going to be. It could be the sheriff's
office. It could be the prothonotary's office. It could be the
bar association. We are finalizing that, and when that is done,
we will put this plan in place.
Senator Specter. Thank you very much, President Judge
James.
We turn now to Sheriff William Mullen, who has exercised
unique sensitivity on a very, very difficult issue over and
above the ministerial job of evicting people. So we appreciate
what you have done, and we thank you for joining us, Sheriff
Mullen, and the floor is yours.
STATEMENT OF SHERIFF WILLIAM P. MULLEN, ALLEGHENY COUNTY,
PITTSBURGH, PENNSYLVANIA
Mr. Mullen. Thank you, Senator Specter, Senator Casey, for
coming here. I can give you a little bit of a historical
perspective how we have come to this plan.
Shortly after I came from Pittsburgh Police over to the
sheriff's office, I noticed that the sheriff sales had
increased from 2006 to 2007. At that time, reading about what
was being forecast for the housing industry and how the bubble
was going to burst, and reading some FBI publications about the
fraud and corruption within home sales and getting mortgages, I
thought that we should do some things to be proactive in case
that would come here.
The first thing that we did was when we served the writs,
the foreclosure notices, we would send an informational booklet
which was ``Prevention of Mortgage Foreclosure, Tax Sale, and
Other Court Action.'' That gives them financial and legal
assistance by listing phone numbers and areas where they can
contact people to try to save their home. There were several
organizations included in that: ACTION-Housing, ACORN, the
Urban League.
There were other issues that we started. We started a
website where people could come to the website, go through the
various links to find help and maybe some ways to save their
homes and stop the foreclosure process. We instituted a
mortgage foreclosure hotline for people to call, which was
manned between certain hours for people to call, where we would
not be able to give legal advice, but certainly give them
information on where to go to once they received the notice.
What we did next was, you know, the sales sort of
stabilized from 2006 to 2007. They actually decreased a little
bit. But then I met with the Federal Reserve, I think in March
of this year, to try to determine about the ARMs resetting. And
I talked to them, and they told me that the ARMs would be
resetting in Allegheny County between the next 5 and 12 months.
I then checked to find out that the foreclosures and ARMs, or
the adjustable rate mortgages, were 28 percent where the
standard mortgage at foreclosure was 8 percent. So at that
time, I thought there was maybe something else we could do to
try to stay ahead of this curve and try to prevent people from
losing their homes. And that is when I sat down with my staff
and some of the lawyers, and actually some people from the
mortgage business, and tried to come up with a plan to try to
do something about maybe getting ahead of the curve and prevent
some of these--you know, give these people some options.
So then we came up with a plan about the conciliation
process, and then, you know, I do not have much to do with this
other than to be able to set the sheriff sales. I did not want
to have a moratorium on sheriff sales because of the problems
it would cause with the banking industry. I did not want to
postpone them. I just wanted to try to get a conciliation
process in place.
So that is when I went over to see Judge James. He said to
make a rough draft, put it on paper, and that is what we did.
We put it on paper. We took it to Judge James, and he carried
the ball from there.
Thank you.
Senator Specter. Well, thank you very much, Sheriff Mullen.
We turn now to Mr. Dan Sullivan, a mortgage foreclosure
prevention specialist with ACTION-Housing, Incorporated, in
Pittsburgh. Thank you for coming in, Mr. Sullivan, and we look
forward to your testimony.
STATEMENT OF DAN SULLIVAN, MORTGAGE FORECLOSURE PREVENTION
SPECIALIST, ACTION-HOUSING, INC., PITTSBURGH, PENNSYLVANIA
Mr. Sullivan. Thank you, Mr. Specter and Mr. Casey, for
arranging this. I just want to let everyone know that I am
merely now just a representative of 12 different organizations
that are working in Allegheny County. We represent advocacy,
housing counseling, and legal services. We had met back in the
beginning of September to discuss some of the conversations
that we had had with Judge James and Sheriff Mullen previously
regarding mortgage conciliation to see where we could best fit
into the solution.
The organizations that I am representing cover the
community outreach to get scared borrowers or borrowers who are
not sure what conciliation means to them, to try to get them to
answer the paperwork, to call up the 800 numbers. We represent
the counselors who will help the borrowers provide financial
documentation so a successful conciliation can be had. We also
represent groups that provide legal services, pro bono
attorneys to represent these borrowers at the actual
conciliation so they get fair and equal representation at these
discussions.
I think when I look at certain economic projections of
Allegheny County, this mortgage conciliation proposal is going
to have an effect not just with the folks who are falling
behind now, but, you know, for years to come in certain cases.
We are going to see, based on estimates right now, an increase
in foreclosure filings from 2007 to 2008 if the numbers keep
up. If they keep decreasing, we should be fine. But averages
right now show that they are going to be higher than they were
last year.
I think within the last 10 years, there has been a 131-
percent increase in mortgage foreclosure filings in the county.
We are looking at a lot of subprime mortgages that Sheriff
Mullen had just mentioned that are going to reset, have not
reset yet, and there are about 52,000 subprime mortgages in
Allegheny County that are going at a delinquency rate of about
30 percent, which is significantly larger than prime mortgages
as a comparison.
We are also looking at unemployment rates that are going to
increase in Allegheny County. Last year's unemployment rate was
about 4 percent. This year's projections could be up to 6
percent. So when you are looking at the borrowers, the citizens
of Allegheny County, those projections are going to suggest
that those subprime mortgages that they have, regardless of
whether or not they are ARMs, they are going to start falling
behind. Borrowers are very tight on their budget. You have got
a lot of folks who are living paycheck to paycheck, week to
week, to keep their mortgage affordable. And a conciliation is
really going to have a positive effect with borrowers working
out reasonable payment plans with mortgage companies.
I think the largest issue that counseling and advocacy
groups see now currently is getting timely responses from
servicers regarding a modification request. Financials have
been collected from the borrowers, income statements, debt
information, and sent to these lenders for them to propose some
sort of modification adjustment--either a rate decrease or
principal balance reduction, something to that effect to help
them out.
We are looking at a turnover of somewhere in the range of 2
to 3 months now for mortgage companies to come back and give us
an adequate modification proposal. And that is just too long.
It is after the Act 91. It is after the complaint has already
been filed. The legal costs are escalating. And a mortgage
conciliation at the time proposed by Judge James and Sheriff
Mullen is perfect in that we can get these folks in before
those fees have been assessed, and it is forcing everyone at
the table to provide documentation up front and expedite the
process so that we can get quicker turnover and get more people
to stay in their homes.
I again want to thank both Judge James and Sheriff Mullen
for how they have taken on this issue, and they have really
sort of pushed it to the forefront, because we have an issue
just currently, but there is going to be a continual bubble
burst in Allegheny County. I do not think we are halfway
through the woods. I think we just got to the beginning of the
woods. And we are going to see foreclosure rates go up based on
some of the data I shared.
Senator Specter. Thank you very much, Mr. Sullivan.
We now turn to Ms. Dawn Williams, Director of Housing for
the Urban League of Greater Pittsburgh. Thank you for coming in
today, Ms. Williams, and the floor is yours.
STATEMENT OF DAWN T. WILLIAMS, DIRECTOR OF HOUSING, URBAN
LEAGUE OF GREATER PITTSBURGH, PITTSBURGH, PENNSYLVANIA
Ms. Williams. Thank you, Senators. Thank you for this
opportunity.
As Dan stated, I represent the Urban League of Greater
Pittsburgh, and we are one of the collaborating agencies
seeking to have some input into this conciliation process,
wanting to express our support for this process, and to just
outline the vital need for this process in this area, and even
to advocate for that, for something like that across the
Nation.
Because of the inequity of bargaining position between
lenders and homeowners, as Dan alluded to, it is vital that a
third party, an impartial party--in this case, the court--step
in to mediate favorable results that will make nonperforming
loans perform and homeowners that are threatened with
foreclosure able to hold onto the American dream of
homeownership. If processes like these are not implemented--and
we would even argue nationwide--there is going to be forum
shopping on the part of unscrupulous lenders, and there could
be possible negative business consequences for cities and
municipalities that have the courage, as Allegheny County has,
as Philadelphia County has, to address this issue systemically.
The Government's role in this crisis has already been
recognized by Congress and the executive branch, and so the
country knows that decisive action is required and has been
taken to begin to avoid and to avert this meltdown.
The action that is needed is for Government to step in also
in the form of legislation to mandate that the two entities
crucial to our economy--lenders and homeowners--sit down at a
table with a level playing field. And that is what the
conciliation process does. It brings the two entities together,
the lender and the homeowner who may be afraid, who is most of
the time afraid, who does not have enough information, does not
know in a lot of cases how to represent themselves in a way
that would get them the best benefit and be able to create a
situation that is affordable for them over the long term.
Once brought together, we would advocate, legislation this
process, that parties agree to terms that will ensure long-term
affordability for homeowners and a consistent income stream for
lenders uninterrupted by foreseeable disruptions in performance
caused by too high interest rates, adjustable interest rates,
balloon notes, and principal balances that far exceed fair
market value.
There are many things to recommend a conciliation process,
but I just want to outline the importance of some of the ideas
that were already raised.
It is crucial that the process rely upon a centralized
hotline so that people can call and know exactly where to call.
There must be a network of counseling agencies to assist
clients in reviewing documentation, proposing affordable loan
modifications to lenders, with the ultimate goal of home
retention and decreased foreclosure. And, finally, the
significant role of volunteer and legal services attorneys
cannot be underestimated in the success of this process and the
production of meaningful results for constituents.
Because of the many benefits for the homeowner, we would
even advocate that this be implemented on a statewide level and
that even it could be undertaken across the Nation. However, if
the strong network that I have mentioned earlier, including a
crucial role for housing counseling agencies and pro bono legal
services, does not exist, this process becomes merely a sham
and just one more hoop to jump through before foreclosure
becomes a reality.
If these underpinnings cannot be mandated, then another
solution would be a nationwide moratorium on sheriff sales in
order to for Congress to flesh this matter out and pass
legislation that would give incentives to mortgage companies to
negotiate meaningful workouts with borrowers and penalties for
the failure to do so. Such legislation would need to provide
substantive defenses for homeowners to foreclosure actions and,
similar to the Truth in Lending Act and other consumer
protection statutes enacted under the Commerce Clause, would
have to penalize lenders that fail to comply with this
provision.
Now, these ideas I know seem ambitious and probably beyond
the pale, but these desperate times are calling for decisive
action and action that needs to be taken immediately.
I thank you for your time.
Senator Specter. Thank you very much, Ms. Williams.
Our next witness is Michael McKeever, Esquire, a partner in
the law firm of Goldbeck, McCafferty and McKeever, from
Philadelphia.
Thank you for traveling here today, Mr. McKeever, and we
look forward to your testimony.
STATEMENT OF MICHAEL T. MCKEEVER, PARTNER, GOLDBECK, MCCAFFERTY
AND MCKEEVER, PC, PHILADELPHIA, PENNSYLVANIA
Mr. McKeever. Thank you, Senator Specter, and thank you,
Senator Casey, for the invitation. I look forward to presenting
at least some of the lender response, as our firm represents a
number of mortgage lenders in foreclosure, bankruptcy,
eviction, and related proceedings.
We, too, share the desire to resolve loans on an effective
basis and in a cost-effective and efficient manner. The program
that has been proposed in Allegheny County is similar to the
program that is in place currently in Philadelphia. I want to
take some of what the other witnesses have stated.
Judge James and I think Mr. Sullivan and Ms. Williams have
indicated, you know, we need to go out and acquaint the
homeowners with their rights and with their responsibilities
that are available to them. There is a lot of fear. There is a
lot of concern and embarrassment. Homeowners are scared. That
is why Sheriff Mullen's office gets the brunt of the calls and
the letters and the contact from homeowners. That is at the end
of the foreclosure process. By the time a sheriff sale is
scheduled, you are 14 to 18 months delinquent in your account.
That is too late. It is not too late for everybody, but it is
too late for a lot of the homeowners. That is not to say we
will not work with them, but it is very late at that point to
come up with an effective plan based on their current income
and expense statements.
One of the frustrations that we deal with on the lender
side is that income and expense statement and those payroll
records. I am not aware of many of the resolutions that our
clients have entered into over the last year or more that could
not have been entered into whether or not there was court
intervention or legislative activity. The fact of the matter is
effective communication among the parties is absolutely
necessary, and every homeowner out there who is near
foreclosure, in foreclosure, or threatened with foreclosure
should sit down today and work through their financial plan--
forget financial plan. That is too wordy. Work through their
family budget. What do they make each month? What do they pay
each month? Look to cut those costs. Take that responsibility.
Then when they meet with a housing counselor or an attorney who
specializes in foreclosure defense, they have a much better
idea of how they can advocate for themselves and use those
advocacy groups to push their plan ahead.
It may be that those numbers show that they cannot afford
where they are living, with or without the rate increases.
Lenders are dropping interest rates. They are not doing it
across the board. It has to be on a loan-by-loan basis, at
least now under the current environment that we are in. They
are dropping principal balances in certain cases. And I think
we are going to see that increase as time goes on.
It is clear that lenders lose money when a house is
foreclosed upon, but they also lose money in delaying that
process unnecessarily. The amount of time, money, and expense
that lenders have put into creating programs and reaching out
to borrowers over the last year is unprecedented. And,
unfortunately, whether from fear or lack of information or lack
of counseling, homeowners still are not stepping up as soon as
they should. They are a couple of months down: ``Oh, I can
handle this.'' The next thing they know, the foreclosure
complaint is filed. It is moving along on a pretty quick track.
It still takes 10 months in a State like Pennsylvania, but it
moves quickly, and the costs continue to increase.
One of the other elements of the Philadelphia program--and
we have made the offer here in Allegheny, and we hope that it
is embraced here--is to provide contact information for each of
the law firms that represent lenders in foreclosure matters
throughout the Commonwealth. The idea behind that is to avoid
exactly what Mr. Sullivan had stated earlier, that idea that
lenders are sitting on perhaps effective workout agreements,
and meanwhile the foreclosure is proceeding.
I can tell you that our office will take that to our lender
clients, and we will try to avoid the incurring of additional
costs and expenses because the goal is the loan resolution
first. And foreclosure is one of the alternatives, but
certainly not the chief alternative for lenders.
That communication is of paramount importance. The
Philadelphia program is a pilot program. This program I assume
will be a pilot program as well. Constant communication among
all the stakeholders throughout the process is really, really
important. And to the extent that that is part of the framework
of the program, we look forward to supporting it.
We also, again, will--I am glad that most of the--that the
witnesses today, all of the witnesses today, were not engaged
in the blame game. And it would be easy. We could spend hours
talking about who is to blame. I have my views on that, and I
think, frankly, everyone has a piece of this puzzle. And that
does not solve the underlying issue. The underlying issue is
how do we resolve this loan, and we resolve it through
effective communication--a court-annexed program such as this
is very important to promote that effective communication--and,
again, to stress that the homeowners are their best and first
advocates. They are the ones who need to step up, find that
counselor that can help them, find that attorney that can help
them, and put together a plan of action to resolve their loan
delinquency in partnership with their lender.
I thank you for your time.
Senator Specter. Thanks very much, Mr. McKeever.
Our final witness is Ms. Barbara Griffin, Pro Bono
Coordinator for the Allegheny County Bar Association.
STATEMENT OF BARBARA GRIFFIN, PRO BONO COORDINATOR, ALLEGHENY
COUNTY BAR FOUNDATION, PITTSBURGH, PENNSYLVANIA
Ms. Griffin. Thank you, Senator Specter and Senator Casey,
for having me here today. I am the pro bono coordinator for the
Allegheny County Bar Foundation, which is the charitable arm of
the Allegheny County Bar Association, and I want to talk to you
just for a few minutes about the role of volunteer lawyers and
other lawyers on behalf of the borrowers in this process that
has been proposed by Judge James.
First, let me say that I am very proud to work for and be a
member of one of the most active and involved and strongest bar
associations in the country, I would say. The Allegheny County
Bar Association has almost 7,000 members, which means that
about 80 percent of the lawyers in Allegheny County are members
of the bar association, and out of that number, about 750
attorneys regularly volunteer for one of the many pro bono
programs that we operate here in Allegheny County under the
umbrella of what we call the ``Pro Bono Center.'' We have about
24 or 25 programs that provide a number of types of legal
services to low-income people in need of legal help. And these
programs also call upon volunteer law students, paralegals,
legal secretaries, and in all we have about 1,000 volunteers
who are doing pro bono services for low-income individuals here
in Allegheny County every year. So those are the volunteers
that I feel very confident we will be able to call upon to help
address this problem and participate in this very important
program.
I also want to say that luckily we are a close community
here in Allegheny County, a little smaller than Philadelphia,
so the bar association--I and really the bar association as a
whole--enjoys a very good working relationship with members of
the local bench, including and especially Judge James. And we
also work very closely with other legal service providers,
including our local Legal Service Corporation entity, which is
called Neighborhood Legal Services Association, and along with
organizations like the housing counseling agencies that are
present here today. We started meeting with everyone very early
on in this process, and I think that these relationships
greatly facilitate the implementation of this kind of project
here in Allegheny County.
As Judge James described, what we envision is that
volunteer attorneys will work very closely with the housing
counseling agencies early on in the process to look at how a
loan might be worked out. And as you know, by the time you get
to foreclosure, there have been many attempts and notices to
get these loans worked out. And you might think that all hope
is lost, but what we have found in similar programs that are
offering lawyers to low-income borrowers is that once there is
a lawyer finally on behalf of a low-income borrower, who at
this point has, you know, been barraged with information and
really has not had anyone on their side, finally when this
person that is finally there for them, the dynamics of the case
change. The borrower is able to feel more comfortable. That
fear factor, that shut-down factor often goes away. So we
really think that lawyer participation on behalf of the
borrower is essential to the success of this program.
We have already laid the foundation for this type of
project. We have something here in Pittsburgh called the
``Pittsburgh Pro Bono Partnership,'' which is a sort of
consortium of mostly larger law firms, corporate legal
departments, and even governmental legal departments and legal
services entities. And we have had for the past couple of years
an anti-predatory lending clinic, and that clinic has been
focused just on loans that we have identified predatory lending
practices. And that project has been staffed entirely by
volunteer lawyers from the U.S. Steel Corporation and from the
firm of Pietragallo Bostick & Gordon. And we will talk to them
about expanding that project not only to loans where there is
predatory lending, but to all of these loans that are
participating in this conciliation process.
We will represent the very-low-income borrowers. We can go
up to--borrowers who have up to--whose incomes are up to 250
percent of the Federal poverty guidelines. Borrowers who may
not qualify, who still have a higher income even though they
are in trouble with their loan, we can use our lawyer referral
service at the bar association to steer them to hiring a
lawyer, maybe doing the conciliation on a flat-fee basis or
something like that. So we are very confident that we will have
the resources to mobilize an army of attorneys and get this
process moving forward. And we are looking forward to continue
working with everybody here.
Thank you.
[The prepared statement of Ms. Griffin appears as a
submission for the record.]
Senator Specter. Thank you very much, Ms. Griffin.
We now turn to 5-minute rounds of questioning by Senator
Casey and myself, and we will begin with you, President Judge
James.
Where the conciliation efforts do not work, the question
arises as to what could be the next step. Last November, I
introduced legislation which would authorize the bankruptcy
courts to take a look at the situation and not to affect the
principal sum but to deal with the scheduling, with a heavy
focus on variable rate mortgages. For example, people take out
a mortgage not knowing that the rate is going to change. They
may have a schedule of $1,200 a month, and then shortly
thereafter, they find it balloons to $2,000 a month.
What do you think about the authorization to the bankruptcy
court to take a look at a misunderstanding or perhaps
misrepresentation, or perhaps even fraud, to rearrange the
schedule of payments to elongate them so that the lender gets
the principal repaid and the agreed-upon interest but on a
longer period of time to try to keep the homeowner in the home?
Judge James. The answer to your first question is that at
the conciliation, if they are unable to reach an agreement, the
case would go back onto the trial list, and an answer would
need to be filed. The stay would be lifted.
However, under our rule, the trial judge would have the
opportunity to extend it. If the parties were close to
settlement or needed an additional piece, the stay can be
continued for a reasonable period of time for the workout.
As to the question of bankruptcy, I would suggest that
anything that makes the payments--or makes the ability of the
borrower--gives them a greater ability to make payments that
are reasonable would be helpful. But I have to confess to you,
Senator, not only have I never practiced in bankruptcy law, I
did not even take bankruptcy in law school. So my knowledge of
the bankruptcy laws is slim and none. Perhaps someone here who
practices would be better able to answer your question. But I
would suggest that anything permits the homeowner to be able to
make reasonable payments would be helpful for the conciliation
process.
Senator Specter. Well, Judge, you may not have been
practicing in the bankruptcy field, but you might be appointed
to the Federal bench. Then Senator Casey and I might recommend
you.
[Laughter.]
Judge James. I would have to do some studying, wouldn't I?
Senator Specter. Well, I am glad to hear you are not
summarily turning it down. But that would put you in the
bankruptcy field.
Sheriff Mullen, if you had to give specific advice, say, to
Ms. Williams and Ms. Griffin, who will be helping out the
people who are threatened with foreclosure as to what to look
for and how to be proactive--because there is a significant
hurdle here, as I understand the practice, in acquainting the
homeowners with their rights and their opportunities--how would
you lay it on the line most effectively to see to it if the
homeowners have not seen this on the evening news--and we
appreciate PCN and the coverage here to try to get this word
out. That is always a tough job. When they go out into the
field in a proactive way, what would your suggestion be as to
effectively communicate opportunities to the homeowners?
Mr. Mullen. I think the biggest problem from what I have
been told is that people refuse to look at the notices that
they are receiving before this goes to foreclosure process, and
it is difficult to get that information out. You know, we have
advertised in the Pittsburgh Post Gazette when we do the
sheriff sales about where to go. We take these brochures to
each person that we serve. There is a Rule 91 that when we
serve the papers to them, it tells them their rights.
I think we may be able to do some public service
announcements to try to get that message out before it goes to
foreclosure. And I think we have been doing a relatively good
job at that, but from what I have been told from these
advocates to try to intervene, you know, people just are
reluctant to admit that they are in that situation, much like a
lot of people are reluctant to look at their 401(k)s nowadays.
Senator Specter. Judge James, do you have a comment on
that?
Judge James. Yes. Through the use of the defined number
that will be owner-occupied home foreclosures, we will be able
to create a data base. And meeting with a number of the
advocate groups, they were asking for this because they would
like to do outreach to actually be able to contact people who
have not responded to the 800 number.
I have also discussed this with the two law schools in
Pittsburgh concerning use of clinical students, law students,
to try to reach these people and explain to them that all they
have to do is avail themselves of counseling and some help will
be there.
So the data base is really important to identify these
people so that we can share it with various agencies that want
to do outreach, which I think is a big part of this.
Ms. Williams--and before turning to Senator Casey, one
final question for the panel at this moment--you talk about
mandating conciliation, and that can be done with State law.
Why do you think a mandated conciliation would have a better
opportunity for success than voluntary conciliation?
Ms. Williams. Senator Specter, because of the inequity of
bargaining position of the two entities, the lender and the
homeowner, we are finding, as Mr. Sullivan had mentioned, that
it takes awhile for the lender to get back to a mortgagor when
they are trying to work out an agreement, even if they are
represented by a housing counseling agency.
So the mandate for the two entities to come together is
necessary because both parties need to be present and both
parties need to be able to negotiate the terms. When that does
not happen, someone needs to step in--and in this case, it
would be the court--to say that this is what must happen.
And just to go back to your point that you asked Judge
James about, I am a bankruptcy practitioner, so I was kind of
sitting at the edge of my seat when you mentioned what you
mentioned, because I am a former legal services attorney. And I
would say that your proposal is right on point. The Bankruptcy
Reform Act took away Section 1322(b)(5) of the Bankruptcy Code
which gave the court the ability to modify mortgages. So to
proffer that legislation at this point I think is right on
point, although I would differ with you on the principal
balance issue. I think we should be able to reduce that as
well, because many properties are underwater and a lot of
properties are also in the inception of the loan; the fair
market value is inflated.
Senator Specter. Senator Casey.
Senator Casey. Thank you very much.
I wanted to focus my initial question on implementation. I
realize that you are beyond the point of just talking about
this and theorizing about it, that you are actually
implementing. And I guess I wanted to get a sense, after having
listened to each of you and having listened to individuals in
Philadelphia and actually having gone into a courtroom like
this, about this size or a little larger maybe, full of people
discussing and negotiating and trying to work things out
between lenders and borrowers and advocates. And it was a
roomful of--gosh, it must have been 150 people packed in,
talking and working things out.
But I think they are pretty far along in terms of
implementation, and I wanted to get your sense, maybe starting
with the judge, with regard to impediments to implementation,
problems you are seeing, and things you might need help with.
Judge James. Well, actually, we are very fortunate,
Senator, in Allegheny County--and Attorney Griffin pointed this
out--that the relationship between the bench and the bar is
very close. I serve as an ex officio member of the Board of
Governors of the Allegheny County Bar Association, and a number
of my judges are also active in the bar. So we are ready to go.
One problem might be the funding of a central call system.
We are trying to find out where we are going to place that.
That seems to be the sticking point. The sheriff has offered
the use of his offices. However, we think it should be closer
to a counselor. It should be someone who actually has legal
expertise and can discuss the matter and talk to the person. We
would like to make it as simple as possible; that is, one call
triggers the whole thing, rather than having people go to two
or three different places. I think someone used the words
``jump through hoops.'' Under these circumstances, once they
contact us, we want to bring them immediately into the
conciliation, let them know that we need their financials, we
need them to come to a conference, and that it is free of
charge.
So financing or where we lodge the central call system is
the only sticking point, and that is the only thing we need
right now for the implementation of it. Once we resolve that--
and we hope to have that done, I think, by the first part of
next week. Once we resolve that issue, we intend to create
this. We need to do some training. We need to do some
explaining to the counselors, the existing counselors.
I should point out, Senator, we have decided to use the
existing framework because we think it works fairly well.
Philadelphia created some infrastructure and did some training,
and the only training we are going to do is voluntary training
of the lawyers, the pro bono lawyers, and some explanation to
the debt counselors of who these people are and what is going
on. But the communication and the linkage is already in place,
and so I think we can kick this off within a few weeks.
I have been happy that we have not had a lot of roadblocks.
Everyone seems to be trying to resolve it, including Mr.
McKeever, I believe, whom I spoke to in June, I think it was.
Mr. McKeever. Yes, that is right.
Judge James. And the banking industry is also cooperating,
and they think that this is worthwhile for them.
So the answer to your question is if we could get some
funding for a central call center or something like that, that
is the only thing we are looking at.
Senator Casey. Well, let me say that I think when it comes
to what the Federal Government has done and can do, in the
``has done'' category, there has been a substantial effort at
the Federal level just in the recent past where we passed and
the President signed into law Hope for Homeowners, which is a
major initiative, that the legislation that dealt with Hope for
Homeowners and other aspects of housing policy is the most
significant piece of legislation of its kind in a generation.
That was a very positive step forward. And in the recent
Emergency Economic Stabilization Act, there was even more help
and focus on Hope for Homeowners. So that is a good thing.
Part of that, of course, is what you have all touched on,
and some more than others: the issue of counseling. I and
others pushed very hard in 2007 and 2008 to get $180 million
into housing counseling, which we have already deployed. I
think that money is already spent, one of the best expenditures
of Federal dollars in recent American history. We got another
$150 million for that same purpose.
So I think in terms of what the Federal Government can do
to help, counseling is a very significant part of that, but in
the last minute I have, is there anything very specific, in
addition to the funding on counseling--because I think that I
and others have said to Secretary Paulson and Secretary Preston
at HUD, you ought to make this a national program, or at least
focus on it and experiment with it as a national program.
Anything else that the Federal Government can do that it is not
doing right now to make your program even better?
Mr. McKeever. Well, if I could speak to that, I will go
back a little bit to the testimony I gave about the frustration
that the lender side has about gathering the information from
the bar. And I think that there probably are available
technologies today among lenders, whether they are proprietary
or shared systems, that maybe could be provided--or access
could be provided to housing counselors and housing advocates
so that you could gather the financial information
electronically and work through a decision tree of available
options that might be available from that investor or bank. And
I think that that is something that perhaps would be a
beneficial use of the Federal Government's power in this
situation.
It is likely that the Treasury Department is looking at
something like that, I would imagine. But in terms of
streamlining the application process for loan resolution, I
think that might be an avenue to pursue.
Mr. Sullivan. If I can echo Attorney McKeever's sentiment,
as frustrated as I know the lenders are about getting
financials, it is as frustrating for counselors not getting
their hands on financials. We cannot do our job successfully if
borrowers cannot get us the documentation. So his suggestion
would be really key for us, too.
Senator Casey. Thank you.
Senator Specter. Thank you, Senator Casey.
We have time for another round, and let me turn to you, Ms.
Griffin, from your position as pro bono counselor for the bar
association. How will you be proceeding to try to take this
program that the President Judge and the sheriff have outlined
here to make the maximum effort to get through to these
homeowners who are frightened, have a lot of legal papers, do
not understand them, but persuade them that they have to focus
on it and come forward with the unique opportunity to save
their homes?
Ms. Griffin. Right now, whenever a defendant is suited in
Allegheny County, their notice has the phone number of the bar
association, the lawyer referral service, and it says pretty
clearly, you know, you have been served, you need to call--you
know, you need to get an attorney. And often the bar
association is the first stop for many defendants in these
kinds of actions. And so what we do at the bar association, we
sort of do a triage when they call that number, and if they are
able to afford an attorney, then they go to one of the
attorneys that is a member of the panel of attorneys at the bar
association. And then if not, then we send them to the
appropriate legal service provider in the community.
So we have a lot of experience of steering folks in the
right direction. I do feel that we are already a pretty well-
known resource for the community. When I answer the phone calls
at the Pro Bono Center, I often ask, ``How did you hear about
us? How did you get to me? '' And it is amazing that they say a
variety of ways. Sometimes they find us on the Internet.
Sometimes it is a State senator or a State rep.
Senator Specter. So you think you can get through?
Ms. Griffin. I think we can get through. We have a
marketing department. We can get out and do public service
announcements also. But I think a lot of it is just going to be
our network, our existing network of providers, and getting the
word out and kind of referring people to the right place.
Senator Specter. Mr. McKeever, let's turn to the
perspective of the home for the lender. I was concerned to see
this morning's USA Today saying that the bailout pushes
mortgage rates up, and it has a couple of consequences from the
legislation. One is with the Government borrowing $700 billion,
it is going to tighten up the credit market, and the rates are
already going up. But a second matter of greater concern to me
is the report that bankers are looking for the Federal
guarantee of up to $1.5 trillion on senior credit so that they
can loan money to provide liquidity, which is very important,
but they are not going to be looking to mortgages which do not
carry that kind of a guarantee.
What can Senator Casey and I do to make some modifications
perhaps at the Federal level to see to it that all the money we
are putting up goes to the homeowner? That is the man or woman
in the chain which really needs the help the most. And the
subprime loans got us on this crazy spiral so that we cannot
tell the banks what to do, but we can come close. And we have
to be concerned that we do not nationalize the banks and
destroy our free enterprise system. But what can we do to get
that money out there to the mortgage market?
Mr. McKeever. Well, I think it is a very difficult problem
that we are in because the mortgage service company, the
lender, has some rights to make adjustments to the amount due
and owing or change the payment schedule. But wholesale
reductions create issues with the investor that they are
servicing that loan on behalf of. They have a fiduciary duty to
those investors, and, unfortunately, those investors are many
of us. Almost all of us have a piece in that investment,
whether you have a pension plan, a checking account, a savings
account, or even an interest in a company.
So to change that investment expectation--and, of course,
that is one of the biggest issues regarding a bankruptcy
cramdown or resetting the investment expectation--is that you
may solve the problem temporarily, but what you may well create
is a market--or reduce the market of the ability to sell
mortgage securities in the future.
It is not quite my area of expertise, but that is my
understanding of why lenders find themselves in this difficult
position of while it may make sense to make that reduction in a
principal because the house price has dropped so dramatically,
the investor has requirements, and the investor requirements
require that the foreclosure be completed and the loss be taken
at some other time.
Senator Specter. A final question to Mr. Sullivan, with 30
seconds remaining. You commented about the successful mediation
projects that you have been involved in. Could you give us the
critical elements which have led to success, maybe some
guidance to the mediators who are going to be looking at this
on a much broader scale?
Mr. Sullivan. I think the most important piece was early
intervention. Most of the successful modifications that I have
been part of were borrowers who were 30 to 60 days delinquent
and not, you know, 5, 6 months. It was key for the borrowers to
get the financial documentation over to the counselors as
quickly as possible and then us turning it over to the
servicer.
The longer the delinquency occurs, the harder it is to just
work it out. It is just that simple. If I got someone who is 12
months in with all the legal fees and everything else that has
piled up, the workout is almost unattainable. So the key is--
and that is what I like about the conciliation proposal, is
that it is early intervention. You are getting folks who would
be 2 to 3 months behind. The filing has not been issued yet, so
the attorney fee has not been attributed. Those are the kinds
of workouts that I have seen most successful from my counseling
perspective.
Senator Specter. Senator Casey.
Senator Casey. Yes, two questions. One is--or I should say
one follow-up on what Senator Specter was asking about before a
question. Yesterday I sent a letter to Secretary Paulson which
highlighted a number of concerns I had with the direction that
he is taking now, and I have been very complimentary of his
work, but I have real concerns now that in the midst of this
focus now on getting direct investment in banks, taking 250 of
the 700 and directing it toward banks, which in concept is a
good idea, but there is nothing in there for modifications of
mortgages. And I said in part in the letter that financial
institutions receiving significant benefits from Government
investment or guarantees should agree to modify loans which
they hold in their portfolios. And this is not some theory. The
FDIC has done just that. The FDIC implemented a loan
modification program that Treasury should look at in this
context. It should adopt a lot of the same ideas that each of
you have been not just talking about but advocating and
implementing here in the county.
I guess the one question I had was one of numbers, and I am
not sure--a number of you have these numbers in mind or in
front of you. But what is the projection for Allegheny County
when you look at foreclosures or just default, mortgages
heading in that direction? But let's just talk about
foreclosures, 2007 versus 2008, and then the projection for
2009, if any. Does anyone have that information?
Mr. Mullen. The figures I have, our figures are based on
those foreclosures that actually are listed in the paper, which
we have to do by judicial rule. I can give you the figures from
the end of the year: from 2006, they were 4,727; and then 2007,
they were reduced to 4,632; and for this year--and keep in mind
that these have to be posted 2 months in advance, so this is
for the entire year--4,450. So those figures have gone down
consistently for--
Senator Casey. And 2008 is what?
Mr. Mullen. 4,450.
Senator Casey. Okay. To date, right?
Mr. Mullen. Yes, that includes the entire year because they
have to be posted 2 months in advance. So, actually, they have
gone down, you know, from 2006 to 2007 and continue to go down
in 2008.
Senator Casey. Any projection for 2009?
Mr. Mullen. I do not know. Like I said before, you know,
after consulting with their--talking to the Federal Reserve,
they said that the ARMs resetting would be increased within the
next 5 to 12 months. And like I said before, those show a
higher figure of foreclosure than the regular mortgages.
Judge James. And to amplify that, Senator, we are not able
to differentiate how many of those are commercial or how many
of those are tax defaults. They are all lumped in one group,
and that is why it is really important that the Director of
Records has agreed to identify owner-occupied structures. As
this program goes forward, not only can we identify them, but
we can actually see if it starts to go up, because we are going
to be able to track the owner-occupied foreclosures, which is
really important. I think it is an important factor.
Mr. McKeever. And although those numbers are large, I do
think it is significant to look at the decrease from 2007 to
2008 in the--now, we are talking about sheriff sales scheduled,
which I think is an indication that lenders are working with
borrowers and borrowers are stepping up to work with their
lenders to resolve things and taking them out of the
foreclosure process, because we saw similar things in
Philadelphia where there was an increase in the foreclosure
filings, but the number of sales has stayed relatively
constant. And I think, again, it is an indication that there
are--that these programs are working.
Judge James. There is about a 10-percent shrinkage from
actual foreclosure filings to actual foreclosures, so about 10
percent of the complaints are being withdrawn. Either they are
being settled or there is some procedural defect, and we think
that there is 10 percent of the ones that they are settling
early on even without court intervention.
Mr. Sullivan. I would just suggest this as a concern: that
in 2001 and 2002, there was about a 1-percent national and
local increase in the unemployment rate. At that time, the
foreclosure filings--not sheriff sales notices, but the actual
filings itself--increased by 25 percent. So if projections by
the Bureau of Labor are accurate, and we are going from 4
percent to 5.5 to 6 percent locally and nationally, you are
also going to see a spike again in the foreclosure filings.
But, I mean, both Judge James and Attorney McKeever, who
represented, correctly I think, that there is at least more
workouts being attained early on, because the sheriff's own
numbers are decreasing while, generally speaking, we are still
on pace for about 4,700 filings for the year.
Ms. Williams. And I would just submit that because a lot of
times in Allegheny County it has been touted that there are not
as many foreclosures as compared to the other areas across the
country, I would just caution that we realize the population
density and compare that to the number of foreclosures; and
when you look at those two, you will see that it is still
significant, and that we should really be moving toward getting
these issues worked out. And there will be some that will have
to go to foreclosure, but our goal would be to eliminate those
numbers significantly.
Senator Casey. Thank you very much.
Thank you, Senator.
Senator Specter. Well, thank you very much, President Judge
James and Sheriff Mullen, for initiating this program, and I
thank all of you for coming in. I believe this has been a very,
very important hearing because it goes to the core problem of
keeping people in their homes, and that is where the full
problem got started, and that is the critical factor.
We have moved a great distance from there when Senator
Casey and I very reluctantly backed this $700 billion bailout
program, and we did not do it to save Wall Street. We did that
to save the ripple effect which would have drastic consequences
for the economy on credit to small business, student loans, and
more evictions.
In a free enterprise society, people have the right to take
risks to make money, but if they use bad judgment and those
risks turn out to produce losses, they ought not come to the
Federal Government for a bailout, which ends up with the
taxpayers. And we have seen a critical situation on Wall Street
with highly sophisticated kinds of commercial paper which no
one understands. You have these derivatives, which are
extraordinarily complicated, and you have these credit swaps,
which are even more complicated. And there is talk about some
$62 trillion involved in these derivatives, which makes $700
billion look like a small sum of money.
So we are wrestling with this issue, and there is going to
have to be some regulation on operations like Fannie Mae and
Freddie Mac. And, again, in our line of work in the Congress,
we have to be careful we do not overregulate as we did with
Sarbanes-Oxley. So it is a delicate matter.
But to the extent that there is action at the local level,
that is best. If you take the matters right here to the county
level, it is best--not to Harrisburg and not to Washington. So
what is going on here is very, very important, and Senator
Casey and I have an eye out to what we can do at the Federal
level to supplement what is going on here.
A wrap-up, Senator Casey?
Senator Casey. Well, thanks, Senator Specter, and I want to
thank the panelists here, especially Judge James for the use of
your courtroom, the use of this courtroom, as well as your
participation in leading this effort at the county level in a
big county like Allegheny County, taking on a tough issue and
not just waiting for some solution to arrive from Washington,
but helping us to point to good models at the local and county
level that can be, I think, replicated not only throughout this
region but throughout the State and throughout the country. So
we are grateful for your advocacy and for your willingness to
take on a tough problem and try to solve it.
Thank you very much.
Senator Specter. Well, that concludes the hearing. Thank
you all.
[Whereupon, at 10:45 a.m., the Committee was adjourned.]
[A submission follows.]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
KEEPING FAMILIES IN THEIR HOMES: HOW TO PREVENT FORECLOSURES--PART II
----------
FRIDAY, OCTOBER 24, 2008
U.S. Senate,
Committee on the Judiciary,
Washington, DC
The Committee met, pursuant to notice, at 10:00 a.m., at
the Philadelphia Court of Common Pleas, Courtroom 653,
Philadelphia, Pennsylvania, Hon. Arlen Specter presiding.
Present: Senator Bob Casey, Jr.
OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM
THE STATE OF PENNSYLVANIA
Senator Specter. The hearing of the U.S. Senate Judiciary
Committee will now proceed on the program at issue at the Court
of Common Pleas in Philadelphia County to try to keep people in
their homes and not to be evicted through sheriff's agencies.
I am joined by my distinguished colleague, Senator Bob
Casey--to courtroom--spend so many days a few weeks ago as an
Assistant District Attorney, and then as--walk down the hall--
which had for years been the District Attorney's office, and
walked through the corridor where there had been a sheriff's
cell room which went upstairs. This was before the--and all of
the big--murder cases were tried there, where they had a lot of
security problems.
In 1968, there was a beginning program on CBS. You may have
heard about it: it was called 60 Minutes. I would--Mike Wallace
was the coordinator and we had a major investigation that year
about--young boys in the sheriff's cell room at--taking them to
Holmesburg. Mike Wallace was in that back room filming, and an
Assistant D.A. named Allen Davis and myself. It was the first
investigation into brutality in prisons conducted in the United
States and it was featured on 60 Minutes. Later when they went
back for the highlights, they chose that as one of the
highlights.
Well, ex-D.A.s are allowed up to 3 minutes to reminisce in
this room, but only 3 minutes.
This hearing involves a matter of great importance to the
city of Philadelphia and has very serious application on the
national level. Last year, there were over--was higher than the
national average. Under the very effective leadership of--
Darnell Jones and Judge Annette Rizzo, a program has been
initiated here which I think has--national model. The--in some
detail, but it is what I would characterize as a win-win
situation where people can stay in their homes by--mortgages
and that obviously helped the--and the lenders are assisted in
not having the cost of foreclosure and taking over property
which is greatly depreciated in value, and the neighborhood is
benefited by not having a house foreclosed. The tax rolls
remain--the city is not confronted with greater fiscal--cutback
in services.
The program received considerable national acclaim. There
have been inquiries on it from Miami and Chicago and Prince
George's County, Maryland,--Texas, and Florida, and New Mexico,
and is quite a tribute to the working here of our colleagues
who have come up with this kind of a program.
Senator Casey and I had a similar hearing last week in
Pittsburgh and Senator Casey, I, and others in the Congress
have been prepping the Treasury Department--to--authorized to
the most basic level to keep people in their homes. We've taken
steps for $250 billion of infusion of capital into banks. Well,
that's fine. We've worked through bailouts of major companies,
Bear Stearns and AIG.
But we think we need to deal with the people who really -
and we're making some progress. The FBI--are now starting to
look at the issue of guaranteeing mortgages. That would be a
big step forward. The current fiscal crisis started with the
mortgage problem and it ought to be addressed head on. But in
the interim, it is really very gratifying to see a community
like Philadelphia and the leadership of the Common Pleas Court
digging into this issue with very--program that can keep people
in their homes.
I now defer to my distinguished colleague, Senator Casey,
who has many important committee assignments in Washington. He
is--as an ex officio of the Judiciary Committee, which is not
too bad for a first termer.
[Laughter.]
Senator Specter. Senator Casey.
STATEMENT OF HON. BOB CASEY, JR., A U.S. SENATOR FROM
PENNSYLVANIA
Senator Casey. Senator Specter, thank you very much. I want
to thank Senator Specter for having us here in Philadelphia
today and to be, as he mentioned, a member of the Judiciary
Committee for a brief period of time. He's allowed me to do
this every couple of weeks and then I have to go back to my
other committees. But I am grateful for this opportunity.
I wanted to thank the witnesses who were here with us today
who have been, shall I say, in the trenches: Judge Jones, Judge
Rizzo, and so many others, whether as part of the Court of
Common Pleas, Mayor Nutter and his work at the city at the
municipal level, the people who are advocates who are in the
lending community, advocates for homeowners, so many people
coming together and working night and day to make sure that
this program works.
What we know is the Philadelphia Residential Mortgage
Foreclosure Diversion Program is now becoming one of the best
programs of its kind in the country, as Senator Specter
mentioned. And I'll tell you, we need it. When you look at the
numbers just yesterday, when you look at third quarter 2007 to
third quarter 2008 nationally, foreclosure filing is up 71
percent. In Pennsylvania, third quarter 2007 versus third
quarter 2008 is up 73 percent.
So Pennsylvania as a whole has had a real spike in the
number of foreclosures from last year to this year, so we need
it badly. We know the challenge here in Philadelphia. I saw a
chart today where Philadelphia was number 68, I think, out of
the top 100 Metro areas. I hope that number continues and I
hope we keep getting closer to 100, which means we're not as
bad off. But we know the numbers here are too high, as they are
in lots of parts of Pennsylvania.
This program is already succeeding. We know that. We also
know that a lot of counties have been trying to replicate this
program throughout Pennsylvania. We want to push that very
hard. Back in July of this year, I wrote to Housing and Urban
Development Secretary Preston and I sent a copy to Treasury
Secretary Paulson, urging them to consider this program as a
model for other cities and regions in the country to replicate
and to emulate.
In August of this year, we had a roundtable session here in
this building with Judge Jones, Judge Rizzo, and other
participants from across Pennsylvania and throughout
Philadelphia about the program and how to replicate this in
other counties in Pennsylvania. Since that roundtable in
August, we've had a great response from counties from western
Pennsylvania, from Allegheny County out in the west, to my home
county, Lackawanna County, throughout the Lehigh Valley, and
throughout the region.
In September of this year, again, I urged Secretary Paulson
and also urged Chairman Bernanke, chairman of the Federal
Reserve, to consider this program as a model nationwide for
foreclosure prevention efforts. I'm happy to be here again
today to listen to important testimony.
Here's the final point I'll make. We are now at a point
where there are 10,000 foreclosures every single weekday in
America. We have to do everything possible to do more at the
national level to prevent foreclosures, and this program is one
of the best ways to do that. Thank you very much.
Senator Specter. Thank you very much, Senator Casey.
We will now proceed with our very distinguished panel of
witnesses. In accordance with Judiciary Committee policy,
witnesses will be allotted 5 minutes. We ask that everyone
observe the time because we have many witnesses and we want to
have some dialogue with Senator Casey and myself asking some
questions. So, the light will signify green when 5 minutes
begin, yellow when there's a minute left, and red on the
interdiction to stop.
We will not bang the gavel--Chief Justice Rehnquist--
President Judge Ed Becker had once commented that Chief Justice
Rehnquist so enjoyed interrupting lawyers, that he'd interrupt
someone in the middle of the word ``if''.
[Laughter.]
Senator Specter. Short of that, we do want to keep on time
because we have time constraints and we hope to conclude the
hearing by 11:30.
It is a pleasure to be in the courtroom of President Judge
C. Darnell Jones. He's had a very distinguished career and is
not long for these premises. He is--soon to the Federal
courthouse, where Senator Casey and I had recommended him to
the participant. Judge Jones was so warmly received, that he
had--on Tuesday. The Judiciary Committee--confirmation on
Thursday. The Senate, which hasn't confirmed any judges in a
long time, confirmed him on Friday.
[Applause.]
Senator Specter. Thank you for your hospitality today in
his courthouse, and thank you for your innovations on this
important program. We look forward to your testimony.
STATEMENT OF HON. C. DARNELL JONES, PRESIDENT JUDGE, FIRST
JUDICIAL DISTRICT OF PENNSYLVANIA, COURT OF COMMON PLEAS OF
PHILADELPHIA COUNTY
President Judge Jones. Thank you very much. Good morning,
Senator Specter and Senator Casey.
As President Judge of the Court of Common Pleas and Chair
of the Administrative Governing Board of the First Judicial
District, I welcome you and the Committee as you continue to
supply much-needed support to help an ever-increasing
population in our communities.
Senators, your presence signifies that we in the First
Judicial District are on the right track locally and
nationally, and most assuredly underscores the need for us to
continue what we have begun.
Senator Casey, we sincerely appreciate your letter to the
Secretary of Housing and Urban Development acknowledging and
praising the First Judicial District's program and urging them
to support its implementation nationwide, as well as chair the
roundtable to which you referred earlier. Senator Specter, that
you would bring this Committee to this venue to investigate
this problem and find solutions therefor is truly magnificent
and well and deeply appreciated.
The genesis of our program was a resolution introduced in
our City Council, supported by our sheriff, and made legal,
feasible, and highly effective through the diligence of Judge
Annette Rizzo, Administrative Judge D. Webster Keogh,
Supervising Judge Esther Sylvester, and a number--a large
number--of court support personnel.
The First Judicial District recognizes how vital home
ownership is to the stability of any city. We know that
neighborhoods and lives, locally and nationally, are on the
brink of social and financial ruin due to the problem of the
growing number of residential foreclosures.
We are acutely aware of what does and what does not work.
In this instance, the foundation of our successful program is
the cooperation between the court and the private bar, public
interest bar, lender bar, and social agencies. Our program
simply could not work without them.
Last night, I attended a town meeting in my neighborhood in
East Oak Lane. More than one resident lamented that the by-
product of having a home next door in foreclosure would be
broken windows, and undesirables using it for crime and other
illicit behavior. Add to that, when this occurs, other
residents on the block and the blocks on either side abandon
their homes. The tax base and vital services decline, and the
downward spiral of once vibrant cities becomes uncontrollable.
We thank you, Senator Specter and Senator Casey, for your
valiant efforts to assist the Nation in this much-needed and
very successful program, as evidenced, by the way, Senator
Specter, by your op-ed letter which appeared this morning in
the Philadelphia Inquirer. Again, on behalf of the First
Judicial District and the citizens of this Commonwealth and
this country, we sincerely thank you.
[The prepared statement of Judge Jones appears as a
submission for the record.]
Senator Specter. Thank you very much, President Judge
Jones.
We have just been joined by a distinguished visitor, the
Chief Justice of Pennsylvania, Ron Castillo.
Chief Justice Castillo. Good morning, Senator.
[Applause.]
Senator Specter. The Chief Justice has been heard to say
that his most distinguished position, among many others,
including the elected as District Attorney of Philadelphia, was
his service as an Assistant District Attorney.
Chief Justice Castillo. Absolutely.
Senator Specter. I'm glad to have that admission on the
record. Thank you for joining us, Chief Justice Castillo.
Chief Justice Castillo. It wasn't under oath, though.
[Laughter.]
Senator Specter. But it was said in open court.
[Laughter.]
Senator Specter. Our next witness is Judge Annette M.
Rizzo, who has been the driving force behind this very unique
and important program.
Judge Rizzo, we welcome you to the hearing. The floor is
yours.
STATEMENT OF HON. ANNETTE M. RIZZO, JUDGE, FIRST JUDICIAL
DISTRICT OF PENNSYLVANIA, COURT OF COMMON PLEAS OF PHILADELPHIA
COUNTY
Judge Rizzo. Thank you. ``Build it and they will come! ''
Senator Specter, Senator Casey, Councilman Jones, elected
officials, Chief Justice Castillo, judicial colleagues, and
distinguished members of the bar and community. A special
thanks to you, Senator Specter and to Senator Casey, for
bringing to the forefront our actions in Philadelphia to stem
the burgeoning rise in residential foreclosures in our local
community.
Our efforts here have been publicized in a variety of media
outlets which span the country, and even the world. Just
yesterday we were in conference and there was a TV crew there
from Sweden for their national TV to film what our activities
were. Requests have come in from numerous jurisdictions within
the Commonwealth and across the Nation, which see us as a
national model for early and direct resolution of foreclosure
matters.
Senator Specter, Senator Casey, our mission here in
Philadelphia is very simple: early intervention in the legal
path to foreclosure and ultimate sale of owner-occupied
residences, with the hope that homes may be saved one address
at a time.
First and foremost, I want to share with you what the First
Judicial District's Pilot Mortgage Foreclosure Diversionary
Program. It is not about entitlements, it is not about give-
aways, support of delay tactics, unwarranted breaks, abuse of
legal process, coercion to make deals, or the abrogation of any
legal rights. What it is about, is about setting the stage to
promote good-faith negotiations for parties to come to the
table responsively, with the hope of borrowers remaining in
their homes.
Our program was established in the spring of this year in
response to our Sheriff, John Green, canceling the entire
Sheriff's list in April of this year. He really was the
catalyst for this program to kick off. His actions came on the
heels of our City Council passing a resolution to request that
our sheriff and President Judge Jones declare a moratorium on
residential sales. In quick response, Judges Jones and Keogh
took affirmative action by establishing our present program.
To understand what we are now in the present, one has to
understand what we were in the past. The true genesis of our
current program, which became fully operational in just 7
weeks, actually began in 2004. At that time, Sheriff Green had
taken the step at that point to also cancel the sheriff's sale
list for a given month. He then came to the court to seek
injunctive relief to have a moratorium declared by the courts.
I was the judge sitting in the program at the time which
heard the matter. It was before me, and though I did not grant
the direct relief sought, I did establish what would amount to
be the prototype of the program we now have, taking time to
look at cases and homeowner situations on a micro basis and
foster the opportunity for lenders and homeowners, through
counsel, to negotiate favorable resolutions. Success was seen
with many of the homeowners based on newly available State
funding criteria, being the HEMAP program.
Now the Sheriff--came before me and argued to the court
that the Sheriff's sale system was ``Fundamentally broken'' and
needed to be fixed. I challenged them and the consumer and
lender bar to work together ``to fix it! '' Such was the birth
of the Mortgage Foreclosure Steering Committee, which has been
in force for some 4 years. During that time, meeting on a
monthly or bi-monthly basis, the group has come together to
tackle several procedural fixes to the local foreclosure
process. Though advocates on opposing side of the issue, we
have come together to make the process work, such as working on
the reduction of advertising costs in the foreclosure process.
Now, let's fast-forward to 2008. This group was primed to
face the present challenges and move swiftly to form our
diversionary program. It has been chaired by counsel to the
Sheriff, Ms. Lasia Kuzma, with member stakeholders who were on
all sides of this issue, including representatives of the
consumer bar, the lender bar, housing counselors, the Office of
Housing and Community Development, our Sheriff's office, the
Philadelphia Bar Association, and other related community
groups, some of whom are present today. At this point I would
just ask them to stand and be recognized.
[Members of the audience stood to be recognized.]
Judge Rizzo. Thank you.
[Applause.]
Judge Rizzo. Senators, I never miss an opportunity to
openly acknowledge their efforts.
There are two major criteria of our program, and they're
simple. That is, only cases in foreclosure which deal with
residential owner-occupied properties are part of the program.
The regulation put into force by Judge Jones and Judge Keogh
indicate that no property of that like, owner-occupied
residential, can go to Sheriff's sale without the scheduling of
a conciliation conference.
The intent of our ``Day Forward Program'' is, at the moment
a complaint in foreclosure is filed, a notice comes from the
court to have a conciliation conference scheduled. Our hope
then is to put the homeowner in what I affectionately call
``the chute'', to get them into housing counseling as quickly
as possible so when the conference comes up with the hope and
help of pro bono counsel, the conciliation conference can be
fruitful, that is, with the lender bar. That is our intent. Our
intent has always been early intervention so that there are
less arrearages that we're likely to find for homeowners, and
that the property will be in a better state.
The program as well, just from a statistical standpoint,
has seen, from April to September, some 1,500 cases coming
through, with about 63 percent of homeowners participating, and
of that, successes in approximately 490 properties where we
have seen some type of settlement of the case or resolution
wherein they did remain in their property, a postponement so
either deals can be worked out or deals have been made out.
With that, we have to give great credit, of course, to the
fact that creative solutions are given to what would be
standard problems. We will have the opportunity to hear from
several homeowners today about their stories and how they have
been impacted in a positive way from our program.
The most frequently asked question to me is: how did you
get the lenders to ``buy in'' to the program? The question is
most simply answered: because they helped create it. I do
believe, Senators, in this discussion of a national model,
there has to be the suggestion that those who live under the
rules of a program must have buy-in to help develop it. That, I
believe, is a key success of the program we have here.
In addition, to stage such theater in the courtroom
requires coordination of housing counselors, volunteer lawyers,
and our beloved judge pro tems, extensions of our court who are
senior members of our bar who volunteer their time and have to
this point given in-kind services which amount to almost
$50,000 of fine legal advice from retired judges, senior
chancellors, and other very, very prestigious members of our
bar.
It's a collective effort and the true spirit of the
program. Senator Casey, you got to see that energy. I believe
you even were pushed aside to make sure that some particular
counsel got to his client. It all takes cooperation and
coordination, both among the bar, the courts, and the local
officials, but also our Mayor, our City Council, and, of
course, leadership within our courts and our wonderful,
wonderful court administrators.
In sum, we continue to be a pilot program with a capital
``P''. We are evolving as a living process as we gain more
experience with these cases. Our mission, however, never
waivers. We are here to provide the micro focus to citizen
homeowners and lenders in the hopes of achieving as many
performing mortgage agreements as possible for the sanctity of
these individuals, their families, and our community.
With the continued support and input from our valued
stakeholders and the commitment of the wonderful members of the
court and our First Judicial District staff, we are encouraged
that our efforts will continue to be fruitful. We invite other
jurisdictions within our Commonwealth and across the country to
partner with us in this endeavor, and we avail ourselves for
that purpose.
Senator Specter, Senator Casey, we appreciate the radar
that you have placed on our program. Your interest and outreach
to other jurisdictions has put a real face to the current
national--no, let's say international--debate. We applaud you
for not forgetting that the undercurrent of the mammoth
financial challenges now facing us as a Nation begin with a
Tania Harrigan, a Jean Ruffin, an Arlene Richardson, an Eric
Rhaney, individuals who you will hear from, and the countless
others like them.
Senator Specter, Senator Casey: build it and they will
come. Thank you.
Senator Specter. Thank you very much, Judge Rizzo.
[Applause.]
[The prepared statement of Judge Rizzo appears as a
submission for the record.]
Senator Specter. The next witness is Councilman Curtis
Jones. Thank you for joining us, Councilman Jones. We look
forward to your testimony.
STATEMENT OF CURTIS JONES, JR., MEMBER, PHILADELPHIA CITY
COUNCIL
Councilman Jones. Good morning, Senator Specter, Senator
Casey, and members of the Judiciary Committee. My name is
Curtis Jones, Jr., and I am a member of the Philadelphia City
Council, representing the Fourth Council District.
I actually represent Senator Specter; he is one of my
constituents, and I am honored to serve you, as well as share
with this Committee my perspective of how the city of
Philadelphia has been able to help stop mortgage foreclosure
sales in a process of helping to create a Mortgage Foreclosure
Diversion Program. This is the first of its kind in the Nation.
I have also shared this information on our program with all
of the Presidential candidates. The importance of the
Philadelphia experience is two-fold. First, it is provocative,
and second, it is collaborative. In January of this year, I
introduced a City Council ordinance that passed unanimously,
Resolution 08-90095, which authorized the Council's Committee
on Housing, Neighborhood Development, and Homelessness to hold
hearings on the issue of foreclosures.
This resolution anticipated the scheduled re-set of over 2
million subprime adjustable rate mortgages, ARMs, over the
ensuing 18 months, which would create an economic tsunami of
foreclosures, if not preventive measures taken.
The hearing was held February 21, 2008 and brought together
advocacy groups such as the Philadelphia Unemployment Project,
ACORN, Community Legal Services, bar--and representatives from
our courts and our sheriff's office. The one weakness in the
hearing was that there were no representatives from the lending
community present.
In the--weeks, that led to a second council resolution,
number 08-0331, which called upon the sheriff and the Court of
Common Pleas to impose a moratorium on residential foreclosure
sales in Philadelphia. Thus, this began a meeting of the
lenders that brought them into the process. It was our belief
that if lenders and borrowers could agree to convert
unaffordable loans into performing ones, it would create a win-
win scenario. This would occur by keeping homeowners in their
homes, preventing deteriorating neighborhoods, and sparing
lenders the cost of both time and money for mortgage
foreclosure sales.
I view this action taken by the Council as the beginning of
a relay race. I would be remiss if I did not acknowledge the
groundbreaking work of my colleague, Councilwoman Marian Tasco,
who has been a champion against predatory lending practices,
who recognize the role of these unscrupulous loans, and how
they created a crisis in both her District, my District, and in
the city of Philadelphia.
The race was run, and vigorously run, by those who are in a
relationship with us. Also, the courts, the sheriff's office,
the mayor's office also were--at the time. The court was
successful in creating and implementing a residential mortgage
foreclosure diversion program, which I believe can be
replicated throughout the Nation.
The pilot also, in most cases, has brought reworking loans
back onto the books. The--of our city, if replicated, could
pave the way toward rebuilding communities ravaged by
foreclosures in our country. The biggest problem we face,
Senators, is fear. People won't open the mail, won't realize
that they're in trouble, and won't seek help.
Congress recently passed legislation that will deal with
this pilot program in Philadelphia and could be replicated on a
national level, bringing bar owners and lenders together in a
court-ordered process that could re-work loans that could not
only help Main Street, but help to save Wall Street.
Other financial mortgage foreclosure diversion programs
should be expanded to a Federal level. I would suggest that
there be a national suspension of foreclosures throughout our
Nation for the next 90 days. This would allow the agencies to
develop help, to allow the agencies to develop programs that
could be brought to local levels and create a win-win scenario
for citizens in this country.
The bottom line is that if we do help create this win-win
scenario, it will help Wall Street and help Main Street. I
believe that what was done here today can be replicated
throughout the Nation, and I urge you to bring that process
forward.
Thank you.
Senator Specter. Thank you very much, Councilman Jones.
[The prepared statement of Curtis Jones appears as a
submission for the record.]
Senator Specter. At the suggestion of Judge Rizzo, some of
the homeowners have been invited in today. Judge Rizzo
suggested that this would be a good spot to hear from them, on
a limited basis, trying to adhere to a one-minute time limit.
So, Judge Rizzo, you may proceed.
Judge Rizzo. Yes. Thank you. Thank you, Senator Specter.
We are blessed with the attendance of certain homeowners
who have been through various conference phases of our program
in this early offering, and want to share with you and the
Committee some of the successes that they personally have
experienced, but not only that, what had brought them to the
point of having a situation such as this come into the court.
Before we go to our witnesses at table, I'd like to
reference a Jean Ruffin in the audience, who is accompanied by
Ian Phillips from ACORN. Jean was one of the true success
stories when--Senator Casey visited. The mortgage commitment
that she had from GMAC, based on a hearing and understanding
the underpinnings of it and her situation as a senior in a
residential home, which she had been in for many, many years,
GMAC took the step to forgive the entire loan.
So, it is a success story to keep a woman who has had her
homestead for many, many years there in residence with her
family, so for that we always like to talk about Ms. Ruffin.
She likes to come and participate, due to her gratefulness for
the program. Ms. Ruffin.
[Applause.]
STATEMENT OF ERIC RHANEY, HOMEOWNER
Judge Rizzo. We have at table some other homeowners who
have gone through the recent process, and I would like to start
with Eric Rhaney, who is first, to speak just briefly about his
experience.
Senator Specter. Thank you for joining us, Mr. Rhaney. We
look forward to your comments.
Mr. Rhaney. Good morning, Senators, panel. My name is Eric
Rhaney. I'm a union construction-laborer for Local 332. I've
been a member for some 20 years. I live on West Oak Lane. I've
been in my home for 40 years. My mother brought me in, raised
me there. Later, we purchased the property. I assumed the
property in 1986. How I got behind in my mortgage, I was hurt,
job-related, unable to collect Workman's Comp.
During the same period of time, I went through, and
continue to go through, a separation with my wife. That kind of
messed up my funding. I'm also getting custody of my two
children right now, so I'm having to pay a lawyer as well.
Also, I didn't qualify for unemployment until February of 2008,
and by that time it was too late for me to try to talk to the
mortgage company.
Eventually I did manage to borrow some money and I
approached my mortgage company, Citicorp, with $15,000. They
refused the $15,000 because they wanted $16,000. During this
time, I was working with the housing counselor, Tony Grant,
from the Housing Association Information program, and he
introduced me to this court and got me through all the hard
work and late nights. He just got me through with this.
Judge Rizzo. Mr. Rainey, just to assist in this, you were
in conference just recently, as of yesterday. Is that correct?
Mr. Rhaney. Yes, Your Honor.
Judge Rizzo. Yes. Okay. And actually a deal was struck
yesterday with the help of a volunteer lawyer from Philadelphia
VIP, Dan Siegel.
Mr. Rhaney. Dan Siegel, yes.
Senator Specter. So Mr. Rainey, you came into the program
that Judge Rizzo administers. Then what happened?
Mr. Rhaney. Well, we struck a deal and I'm supposed to
start my mortgage payments in December.
Senator Specter. You say you struck a deal and you're still
in your home?
Mr. Rhaney. Yes.
Senator Specter. Okay. That's a good story.
Judge Rizzo. Yes.
Senator Specter. Next, Judge Rizzo?
[Applause.]
Judge Rizzo. Again, with the competent help of our housing
counsel and our volunteer counsel. But let's hear also from
Cynthia Henderson.
Ms. Henderson. I'm sorry. Can we go to the next witness?
Judge Rizzo. We can. Deborah Jackson Smith. Please.
STATEMENT OF DEBORAH JACKSON-SMITH, HOMEOWNER
Ms. Jackson-Smith. Good morning. Good morning, Senator
Casey, Senator Specter.
Senator Specter. Good morning.
Senator Casey. Good morning.
Ms. Jackson-Smith. Thank you very much, Judge Jones, and
especially Judge Rizzo. I want to thank you for being here. I'm
a homeowner as well. I've been in my home for approximately 20,
25 years. I am now in foreclosure. I originally started, in
1999, to have home repairs done and there was so much paperwork
that had taken place, I was signing this, signing this for the
home repairs, that I really and truly was not told what I
really and truly was signing. I was just happy with getting the
home repairs done.
Down the line, the home repairs fell through. The roof
collapsed. It just was a disaster. I tried to make arrangements
for them to come out to repair the home. Throughout the years,
things just escalated, and escalated, and escalated. I'm paying
them. I'm paying them. Before you know it, now I'm being told I
have, now, another loan, another banker that has now taken over
this loan.
Originally it started with the home repair service, then it
became a bank. Then from the bank it became another bank, and
then another bank, and during this time the interest increased,
increased, increased. During this time I became a single parent
of two, divorced. My job. I no longer had it after 13 years. I
became in arrears. During this time, I'm trying to still pay,
trying to still struggle and pay. Before you know it, boom. Now
I have a letter that is sent out to me that--
Senator Specter. Did they then proceed for eviction?
Ms. Jackson-Smith. Yes.
Senator Specter. And you became part of Judge Rizzo's
program?
Ms. Jackson-Smith. Judge Rizzo's program. And I want to
say--
Senator Specter. And what happened?
Ms. Jackson-Smith. And from this I've had--thank goodness,
I was introduced to PUP, which is the Public Unemployment
Project, and I was introduced to a counsel by the name of
Pamela Kinnebrew and Thurston Hymen, and the director, John
Dodds. They have now introduced me to Judge Rizzo's program,
which is the Foreclosure Diversion Program, which now has
helped me.
Senator Specter. You're still in your home?
Ms. Jackson-Smith. I'm still in my home today because of
this program.
Senator Specter. And you've worked out arrangements through
Judge Rizzo's program to work it out?
Ms. Jackson-Smith. Yes. We are now in the process of that.
I've had one--I've come to one conference. I've had one
conference. Now what has happened is that, from that
conference, we're going back again and we're going to be
handling this outside of court because the bank did not have
all of their paperwork correct on the day.
Senator Specter. But you're on your way to solving it?
Ms. Jackson-Smith. Yes. Yes. It's a good program and I want
to say thank you.
Senator Specter. Judge Rizzo, let's see the next witness.
Ms. Jackson-Smith. Yes.
Judge Rizzo. Okay. Thank you. All right.
Tania Harrigan.
STATEMENT OF TANIA HARRIGAN, HOMEOWNER
Ms. Harrigan. Good morning, Senator Specter and Senator
Casey. Thank you for taking time to hear our testimonies. My
name is Tania Harrigan, and I'm also a member of the
Philadelphia Unemployment Project. I reside in south Philly and
I've been in my home for 8 years. I refinanced my mortgage
because I needed renovations done after we bought the home. The
broker came to my home and my interest rate was 9.75 percent.
Our trouble began when my husband got laid off of work. We
became behind in our mortgage and filed for bankruptcy. Our
bankruptcy was dismissed because we could no longer afford the
bankruptcy.
I came to PUP and my counselors were Pamela Kennebrew and
Thurston Hymen, directed under the fellowship of Johnny Dodds.
I've learned about the Foreclosure Diversion Pilot Program,
which afforded me to have reconciliation with Judge Rizzo and
able to obtain and stay in my home.
I was able to get a modified low interest, which went from
9.75 percent to 7 percent. The mortgage payments were reduced
from $437 to $411. If it wasn't for the diversion program, I
would have been facing a sheriff's sale on November 4th.
Senator Specter. Were you able to come to a figure that you
could pay and stay in the house?
Ms. Harrigan. Yes.
Senator Specter. And you're in your house now?
Ms. Harrigan. They were able to work out a figure which
would afford me to stay in my home, to have a place to live,
and still continue to pay my mortgage payments.
Senator Specter. So you have a place to live and you're
paying your mortgage payments, and it's all because of the
program you've worked through with Judge Rizzo?
Ms. Harrigan. Yes. I thank God for Judge Rizzo for having
great compassion, taking this in her bosom and just being able
to live it.
Senator Specter. Thank you. Thank you very much for your
testimony.
Is there another witness, Judge Rizzo?
Judge Rizzo. Our last witness, just briefly, would be
Deborah Jackson-Smith to share her comments. I'm sorry, I
apologize. Cynthia Henderson. I apologize.
STATEMENT OF CYNTHIA HENDERSON, HOMEOWNER
Ms. Henderson. Good morning, Senator Arlen Specter, Senator
Casey, staff officials, and staff. I'm honored, first of all,
to have the opportunity to speak on behalf--on my own behalf,
as well as for some others, particularly my friends and family
who find themselves in this very challenging position. Thank
you for taking the time to listen.
I'm here to share with you the benefits and/or advantages I
received from the HACE program, H-A-C-E, which, after some
research I did, which was begun by ACORN, which is another
housing counseling agency in this city, helped me to navigate
some of the bill, if you will, with the foreclosure program.
As a teacher, I had an inkling to do some research and got
it. This is what was given to me by LeAnn Washington--couldn't
really understand all of the bill that was supposedly passed.
After several encounters with the helpful people at HACE--
beginning with Marybell Rosario, I was able to unravel some
things concerning my home after facing the ARM.
I'm sure you're familiar with the adjustable rate mortgage.
My home became problematic--divorce settlement and using my
TSA--tax sheltered annuity--my mortgage changed from Challenge
Financial Investors in Florida to Wells Fargo M&A Bank, which
did not include, by the way, the tax and insurances.
Judge Rizzo. Ms. Henderson, could you share with the
Senators your experience in our program?
Ms. Henderson. Yes.
Judge Rizzo. That would be great.
Ms. Henderson. I was allowed to propose--help to have a
proposal written for me from Brendy Lopez and I was able to
come down and meet with the attorney and Judge Anne Rizzo, who
was phenomenal in helping to sort through some of these things.
I'd still have to get a fixed rate and the adjustable ARM,
we're still negotiating. I am still in my home.
Senator Specter. You are? You say you are still in your
home?
Ms. Henderson. Yes, sir.
Senator Specter. And have you worked out an arrangement
through Judge Rizzo's program to stay there?
Ms. Henderson. Yes, sir. We're still working on some things
because--simply because--
Senator Specter. You're still working on it, but you think
you're on your way to getting it worked out?
Ms. Henderson. Yes, I do, sir. I'm very confident of that.
I'd like to have this not as an option, but mandatory for--
situation that have had catastrophic effect on their lives--
illness, medical situations, because if I did not seek the help
that's there, I may not have known. I'd like to see something
in place for people who are--
Senator Specter. We're going to come to that in our--Judge
Rizzo, do you have one more final witness here?
Judge Rizzo. Not at this point with respect to our
homeowners.
Senator Specter. Let us proceed with the final witness from
the people who have been helped.
Judge Rizzo. Thank you.
Senator Specter. Who is the witness, Judge Rizzo?
Judge Rizzo. We will then go to George Gould, who is with
Community Legal Services. He's managing attorney.
STATEMENT OF GEORGE GOULD, MANAGING ATTORNEY, HOUSING AND
ENERGY UNIT, COMMUNITY LEGAL SERVICES, PHILADELPHIA
Mr. Gould. Thank you very much, Senators Casey and Specter,
for holding the hearing here today. My name is George Gould. I
am the managing attorney of the Housing and Energy Units at
Community Legal Services in Philadelphia.
Our office has been substantially involved in the problems
of mortgage foreclosures for many, many years. In addition to
having represented thousands of individuals in mortgage
foreclosure cases, our office has also been involved in
numerous broader issues to try to confront the serious problems
that foreclosures cause in this country.
For example, in 1983, working with the Philadelphia
Unemployment Project, PUP, John Dodds, sitting next to me, and
the local sheriff, we were able to obtain through the Common
Pleas Court a postponement of sheriff sales on owner-occupied
properties for almost a year until our State legislature passed
the Homeowners Emergency Mortgage Assistance Program, HEMAP, a
program which provides substantial foreclosure relief to
homeowners facing financial problems because of the country's
economic recession.
In 2004, we again petitioned the Common Pleas Court with
the sheriff to postpone foreclosure sales, which Judge Rizzo
mentioned, which again led to the resolutions of hundreds of
cases. Out of that case, the Honorable Annette Rizzo, Judge of
the Common Pleas Court, instituted the Mortgage Foreclosure
Steering Committee which created a court-supervised dialog
between foreclosure attorneys and consumer attorneys and
advocates.
In March of this year, President Judge Jones and Judge
Rizzo convened an emergency meeting of the committee and
informed the committee of the framework of the proposed
residential diversion program. The committee has since had
substantial input into the formulation and implementation of
the diversion program.
Our office, along with the Philadelphia Legal Assistance,
PLA, our sister agency, which also provides legal services to
low-income persons, have continued to play an important role in
the program. We have been actively involved in the training of
the counseling agencies, private attorneys recruited by VIP,
and JPTs, judge pro tems, who preside over the conciliation
conferences. Our office also represents individual homeowners
involved in the process and we continue to play an active role
in the steering committee's involvement in the implementation
of the program.
The Residential Mortgage Foreclosure Diversion Program is a
bold and creative measure taken by our local Common Pleas Court
under the strong leadership of Judge Jones and Judge Rizzo to
address this most pressing problem.
There are numerous problems in communication between
lenders and homeowners. Homeowners have often had great
difficulty in trying to communicate with lenders or mortgage
loan servicers regarding their mortgage problems. Under-staffed
servicers of mortgage loans also had difficulty in trying to
communicate with the homeowner, who was often overwhelmed by
their circumstances and sometimes not able to adequately deal
with the problem on their own.
The project created by our court helps to resolve many of
these issues. It brings together both parties in a structured
and organized way to help bring about a resolution of the
issues. By postponing the sheriff's sale and setting up a
conciliation conference presided by a judge pro tem, it gives
the homeowner an opportunity, with the help of professional
counseling and attorneys, to try to resolve their problems.
However, unlike the past where many of the problems were
solely related to the financial circumstances of the homeowner,
today we are faced with situations where the mortgage itself is
often predatory and unaffordable, one that must be modified to
become affordable and a performing loan.
The pilot created by the diversion program is a major step
forward, however, it is not one without cost. Monies are needed
to fund the counselors and foreclosure hotline operated by PLA
that takes calls from homeowners and connects them with
counseling agencies to help them prepare a financial analysis
and suggested modification or work out other loans, VIP, and
our office and PLA to help provide individual representation.
While the Housing and Economic Recovery Act of 2008
provided $30 million for legal assistance to homeowners facing
foreclosure, the law had been recently interpreted to preclude
any funding for legal assistance after a foreclosure action has
been filed in court. This must be changed.
In addition to these resources, what has also proved to be
extremely effective is outreach to the homeowner. What we have
found is that the time the person is in foreclosure, they
receive numerous mailings and are often very confused. If
someone can literally go to their door, knock on it, and
explain the program, this has been extremely helpful. Many
groups, including ACORN in this city, have been extremely
effective in getting people involved and getting people to
participate in the program.
The program has been successful because it brings people
together who often would have great difficulty or not even
communicate with each other, but the program has some limits.
For example, while clearly it is in the lender's interests to
modify the loan so as to create a performing loan, situations
occur because of the mortgage servicer's contract where
resolutions are not achieved even though--
Senator Specter. Mr. Gould, how much more?
Mr. Gould. Just about a minute.
Senator Specter. Thank you.
Mr. Gould. Where resolutions are not achieved, even though
it would be in the financial interest for the investor to do
so. This is so because some of the servicers' contracts create
incentives for servicers to foreclosure--they will be
reimbursed their fees--rather than to modify a mortgage, which
will create no additional compensation for them.
The recently passed financial rescue plan provides the
Federal Government with the tools to make major inroads in the
foreclosure problem. The Federal Government must take steps to
obtain some of these mortgages and modify them to become
affordable. By obtaining these mortgages, the government has
the ability to make these loans affordable by reducing
principal and interest rates and turn them into performing
loans.
Another alternative would be for the Federal Government to
take over the servicing of these loans, or the Federal
Government should require any bank it invests in--this is under
the recent bail-out-bill--it adopt procedures that
systematically modify loans.
Senator Specter. Mr. Gould, your additional minute is now
up.
Mr. Gould. Excuse me?
Senator Specter. Your additional minute is now up.
Mr. Gould. Okay. Anyway, we strongly urge the passage of
legislation also allowing the modifications of mortgages within
the bankruptcy process. Thank you.
Senator Specter. Thank you very much.
[The prepared statement of Mr. Gould appears as a
submission for the record.]
Senator Specter. Our next witness is Mr. Brian Hudson, the
CEO of the Pennsylvania Housing Finance Agency.
Welcome, Mr. Hudson. You have 5 minutes.
STATEMENT OF BRIAN HUDSON, CEO, PENNSYLVANIA HOUSING FINANCE
AGENCY
Mr. Hudson. Thank you, Senator Specter and Senator Casey.
Thank you for the opportunity to speak to you today, and thank
you for your support of affordable housing. I applaud your
efforts to keep Pennsylvanians in their home. I also want to
applaud Judge Rizzo, Judge Jones, and Councilman Jones.
PHFA was created in 1972 to provide safe, decent,
affordable housing for Pennsylvanians. I would like to talk
this morning about our foreclosure preventions. You heard the
acronym HEMAP, Homeowners Emergency Mortgage Assistance
Program, which was created in 1983 as a result of the downturn
in the steel industry, which quickly spread throughout the
Commonwealth.
HEMAP is funded by the general assembly. The requirement is
that the homeowner has to be in default or in foreclosure
through no fault of their own. In most cases, the homeowner
receives a foreclosure notice after they are 60 days
delinquent, which is known as an Act 91 notice. Applications
may be made at any of the 100 counseling agencies that we have
throughout the Commonwealth. If approved, the Agency will pay a
partial or full mortgage payment on behalf of that homeowner
for up to 24 months, and HEMAP would also serve two separate
mortgages, if need be. We can be in no less than a third lien
position.
Homeowners are only required to pay, at a minimum, $25 per
month. Act 91 specifies that the home has to be the principal
residence, and it has to be through no fault of their own. The
qualifying criteria is that the homeowner must show the ability
to resume its mortgage payments within 24 months. The average
HEMAP model is about 11,000. To give you a comparison, the
average cost of foreclosure runs about $35,000.
The Homeowners Emergency Mortgage Assistance Program is an
example of how State government has, for a quarter century,
successfully put its financial resources into helping
homeowners, having saved 41,000 Pennsylvania homes from
foreclosure, which is 170,000 separate individuals, to avoid
the loss of their home.
The Commonwealth has appropriated $239 million since
inception of the program. We have lent $430 million under this
program. Repayments total approximately $240 million. HEMAP is
recognized by Harvard University for two consecutive years as a
top innovation in American government. A number of places have
begun to duplicate the HEMAP program, Delaware and North
Carolina, to name a few; 19,500 have fully repaid their loan to
the Commonwealth.
But HEMAP was not designed to deal with our current crisis
that we find ourselves in now, so I want to talk about some
initiatives that we launched over a year ago: two refinance
products to refinance homeowners who were in trouble.
The first one is called REAL, Refinance Through an
Affordable Loan. That's for those homeowners who are just
beginning to slip in their mortgages. They are no later than
two late payments, just realizing that they're struggling with
their mortgage. We have over 80 lenders' networks throughout
Pennsylvania that will help underwrite that loan on behalf of
PHFA, and then we will service that loan in-house and we will
buy that loan from that lender.
We will do up to 100 percent loan-to-value for the REAL
program. But REAL doesn't cover all of the problems that we're
having, so we created another product called HERO, Homeowner
Equity Recovery Opportunity. Now, this is for those homeowners
who are clearly upside down in their mortgage, they were loaned
more than the property's value. In that case, PHFA will
negotiate on behalf of the homeowner with the lender to do a
reduced mortgage and assign that mortgage to PHFA.
Again, we will do 100 percent of the loan-to-value. We do a
new appraisal for the property and then have that loan assigned
to PHFA. Over overriding criteria is, can we improve the
financial situation of that homeowner? PFHA is going to the
table with HERO to negotiate on behalf of that homeowner. In
some cases, we are just beginning to see some of the lenders
step forward. If not, lenders are willing to do modifications.
We just want to make sure that homeowner stays in their home.
PHFA has put aside about $21 million so far. We've helped
170 homeowners in both REAL and HERO stay in their homes, and
we are doing a direct mailing to over 20,000 Pennsylvanians
that have adjustable rate mortgages, to have them come in and
seek the help of either HERO, REAL, or get through the
counseling network. We have a state-wide counseling network of
over 120 agencies designed to analyze these loans and see if
they fit for REAL or HERO.
What are the issues? A recent survey showed that
Pennsylvania has 194,000 subprime mortgages. Of those total
subprime mortgages, 132,000 were fixed rate that are at 15.3
percent delinquent, and 63,000 are adjustable rate mortgages,
or ARMs, at 24 percent delinquent. So we're targeting those
ARMs to get those people into our counseling network to see if
we can get them refinanced into a HERO or REAL loan.
Many services or lenders are very slow and reluctant to
negotiate and restructure their loans for fear of being held
liable by investors. The service will allow them to modify
their loans and--
Senator Specter. Mr. Hudson, how much more time will you
need?
Mr. Hudson. I'm just about done, Senator. Thank you. We
will help restructure them. Establishing a reserve fund as a
National Housing Trust Fund that the Senators have endorsed
would be helpful to conserve the lost reserve. I hope this
brief review of the programs being offered to the citizens of
Pennsylvania will assist Congress and the members of the Senate
in its efforts to hard-pressed homeowners.
Thank you very much for the opportunity today. Please, my
best wishes, and your continued service is needed and
appreciated. Thank you very much.
Senator Specter. Thanks very much, Mr. Hudson.
[The prepared statement of Mr. Hudson appears as a
submission for the record.]
Senator Specter. Our next witness is Ms. Stephanie Seldin,
managing attorney for the Philadelphia Law Works/Philadelphia
VIP.
Thank you for joining us, Ms. Seldin. We look forward to
your testimony.
STATEMENT OF STEFHANIE SELDIN, MANAGING ATTORNEY, PHILADELPHIA
LAW WORKS/PHILADELPHIA VIP
Ms. Seldin. Thank you for having me. Good morning, Senator
Casey, Senator Specter, and distinguished witnesses and
audience members. As the Senator said, I am managing attorney
at Philadelphia VIP, and a member of the Mortgage Foreclosure
Steering Committee.
VIP's mission is to promote equal access to justice for the
poor. We work to secure pro bono civil legal services for more
than 1,000 low-income individuals and families annually, and
have done so since our inception in 1981.
We created the Philadelphia foreclosure rescue effort to
recruit, train, and provide private lawyers to represent low-
income homeowners attending the conciliation conferences.
During the conciliation conferences in June, July, August, and
September, VIP attorneys assisted 233 clients. VIP volunteers
provided approximately $325,000 in free legal services to
homeowners in just four months.
One hundred and fifty private practitioners from mostly
small- and medium-sized law firms or solo practices are helping
homeowners negotiate affordable workouts to avoid foreclosure
through the diversion project. I want to express my
appreciation to the Philadelphia Bar Association, Chancellor
Michael Pratt, Business Law Section Chair Steve Foxman, and
Mike Balent of the Real Property Section for their untiring
efforts to promote and support this effort.
However, VIP needs help to continue to provide that
service. Our volunteers are representing two, three, or four
clients and cannot take on any more. Even with 150 volunteer
lawyers, we still need more attorneys to sign on, particularly
from the large law firms.
VIP enjoys extraordinary relationships with the large law
firms of this city. They have told us they want to participate
in the Mortgage Foreclosure Diversion Project, but their hands
are tied by conflicts of interest because many large law firms
represent lenders, or they want to represent lenders.
The American Lawyer magazine reported that pro bono efforts
across the country are stymied because of the conflicts issue
mentioned by Senator Specter in your op-ed in today's
Philadelphia Inquirer.
The New York Federal Reserve recently asked 10 banks to
provide conflict waivers to their outside counsel to allow them
to participate in a New York City Bar Association Mortgage
Foreclosure Pro Bono Project. Five of them said yes and sent
their firms' waivers, only five, and only for the New York City
Bar Association effort.
We need all banks involved in residential mortgage lending,
especially those receiving bail-out money from the Federal
Government, to not only allow, but to encourage, their outside
counsel to participate in pro bono opportunities to negotiate
affordable work-outs everywhere in this country.
I am asking the Senate Judiciary Committee to help make
this happen, and I am encouraging the Pennsylvania Bankers
Association to endorse my proposal today.
The second way you can help grow this pioneering project is
to invest resources. First, we need money for the attorney
experts who are providing valuable expertise and mentoring to
VIP attorneys. Those experts are the legal services attorneys
at Community Legal Services and Philadelphia Legal Assistance.
Most of the VIP volunteers knew nothing about mortgage
foreclosure until they came to a training led by CLS's Beth
Goodell.
Second, I want to endorse more funding for housing
counselors who work hand-in-hand with our volunteers to help
keep homeowners in their homes.
Third, VIP wants to measure the success of this program,
but frankly we do not have the expertise or the staff to do it.
I request funding for an evaluation of the diversion project to
be implemented by the Fels Institute of Government in
collaboration with VIP and the Court of Common Pleas. VIP
reached out to John Kromer, an expert in neighborhood recovery,
from the--Fels Institute at the University of Pennsylvania to
help us not only measure the impact of our work, but also to
summarize and promote this effort nationally.
Finally, VIP's management of this new initiative is a
significant investment of time and resources on an already
tight budget and overworked staff. With the 233 mortgage
foreclosure clients, we have increased our capacity by over 50
percent with no new staff.
Please consider using some of the new money that was spoken
of at yesterday's Senate Banking Committee hearing where
Senator Casey was to support the Mortgage Foreclosure Diversion
Project and to implement new projects across the country so
other jurisdictions can benefit from Philadelphia's success.
I conclude by applauding President Judge Darnell Jones and
Judge Annette Rizzo for their extraordinary vision and hard
work on this exceptional collaboration. Also, thanks so much to
the amazing staff at the FJD, and to my colleagues on the
Mortgage Foreclosure Steering Committee, including the lenders'
representatives. Together we are doing groundbreaking work.
Senator Specter. How much more time do you need?
Ms. Seldin. That's it. I'm done.
Senator Specter. Okay. Thank you.
[The prepared statement of Ms. Seldin appears as a
submission for the record.]
Senator Specter. We now turn to Mr. John Dodds, Director of
the Philadelphia Unemployment Project.
Thank you for joining us, Mr. Dodds. We look forward to
your testimony.
STATEMENT OF JOHN DODDS, DIRECTOR, PHILADELPHIA UNEMPLOYMENT
PROJECT
Mr. Dodds. All right. I've been asked to be brief, so I
will be brief.
This program has really made a difference for homeowners in
the city of Philadelphia. Our organization has been doing these
cases since the inception. Just real briefly, of 55 cases that
we have handled since back in June, 27 of those have had their
mortgages modified, 13 have had the modification in process,
which is 73 percent of these homeowners that have programs--
modified loans.
These are all homeowners who were severely behind on their
mortgages, were already scheduled for sheriff's sales, so we
think that's a fairly incredible solution but it will be
difficult to become a national model. The only concern that we
have is that the interests of the servicers of the loans are
not the same as the interests of the investors or the
homeowners. Very often, financially, they do not have that same
financial interest.
I think what's key, and I think Sheila Bair from the FDIC
is starting to talk about this, is that we somehow step in and
do the modifying of these loans. If we're going to go to a
national program, I don't think the services are set up to
handle the volume we'll have. I think we really need the
government to take a step to say that it's in the interest of
the investors of the financial institutions, of the families,
and the homeowners to have performing loans.
It's very unlikely that with the current situation with
loan servicers in this country that that will happen. It's
working in Philadelphia because we're the first, but I don't
know that it'll happen nationally. I think it's very important
that the Congress and the government find a way to modify these
loans, make them performing loans that work for everybody.
That's going to be a step that we need to take beyond the
current program. So, I thank you very much.
Senator Specter. Well, thank you very much, Mr. Dodds.
[The prepared statement of Mr. Dodds appears as a
submission for the record.]
Senator Specter. We now turn to Mr. Michael White from the
Pennsylvania Bankers Association.
Mr. White.
STATEMENT OF MICHAEL WHITE, PENNSYLVANIA BANKERS ASSOCIATION
Mr. White. Thank you, Senator Specter and Senator Casey,
for this opportunity to meet with you today. My name is Michael
White. I'm a senior vice president at VIS Financial, a
financial services company that does bank insurance investment
and mortgage services, based in Wyomissing, Berk's County,
Pennsylvania. I'm here today in my capacity as a member of the
Pennsylvania Bankers Association's Credit Access Task Force
Committee.
The PBA's members include 186 commercial banks, savings
institutions, trust companies, and their affiliates in
Pennsylvania, from the smallest to the largest. Elected
officials, regulators, lawyers, financial institutions, and
homeowners share a common goal in preventing home mortgage
foreclosure wherever possible.
Effective home mortgage foreclosure prevention starts long
before a homeowner ever misses a single payment. In fact, it
starts long before a home is purchased. Home buyer and
financial education are key components to any mortgage
foreclosure plan. Many loan programs that require home buyer
education have seen favorable results in reducing mortgage
delinquency.
As a member of the board of directors of Neighborhood
Housing Services of Reading, I have seen firsthand the benefits
of budget counseling. October 16th was ``Get Smart About Credit
Day''. Twenty-five hundred bankers visited schools across our
Nation to teach credit management skills to elementary and
secondary students.
Since 2003, over 400,000 students have been reached through
this volunteer banker program. Bankers invest their time to
educate kids because we firmly believe that good credit
management is best learned early in life. That being said, the
values of living within one's means, guarding assets, and
saving for the future are best exemplified at home.
Other witnesses have outlined foreclosure prevention from
their perspective as judges, attorneys, government
administrators, and housing advocates in their communities. I
speak from my 23 years as a commercial bank mortgage lender. I
lend through federally and State regulated financial
institutions. My institution and other members of the PBA are
highly regulated and examined at either the State and Federal
levels. Strong and solvent banks are critical to the health of
our local communities. Bank officers and employees live where
they work.
The banking industry has every incentive to treat our
customers and our communities well, and has absolutely no
reason to do otherwise. As commercial banks and savings
institutions, we depend on our customers' financial well-being.
Risky lending or mistreatment of borrowers would expose us to
negative scrutiny not only from our regulatory agencies, but
also from our shareholders and the communities in which we
operate.
My institution is not a mortgage loan investor in the sense
some investment banks were, nor are we a stand-alone mortgage
loan company or broker. Non-bank lender-brokers or investors
are primarily interested in selling mortgages to generate fees
or commission and that has differed markedly from commercial
banks and savings institutions.
Bankers understand that some of our borrowers will face
tough financial times and need our assistance working through
them. If there's one message I could leave here today, it's
that homeowners who foresee difficulty coming their way must
contact their lenders immediately.
If they wait until they have missed one or more payments,
their lenders' ability to help them has been greatly
diminished. Some lenders will reach out to customers even prior
to the assessment of late charges, while most lenders will make
contact by phone and mail upon payments exceeding the grace
period, which is typically only 15 days. Reputable lenders such
as PBA members are anxious to work with their troubled
borrowers to avoid foreclosure and will actively continue to
attempt contacting the borrower through available avenues.
Those customers that have made contact and responded to
lenders will often begin the process of evaluation of their
particular situation and potential solutions. Some strategies
that banks use are skipping payments, extending payments,
accepting reduced payments, refinancing the current loan,
modifying the current loan rate, or terms.
In addition, an additional solution to avoiding foreclosure
may be the liquidation of the home. Although we would always
prefer to keep the homeowner in the property, there are
situations where selling the property and benefiting from the
equity do make sense. Most lenders will work with borrowers who
are actively attempting to market their homes in an effort to
satisfy their mortgage.
If the home value exceeds the amount remaining due on the
mortgage, the homeowner may want to ask the lender to agree in
writing not to seek further collection remedies and grant a
reasonable period of time to find alternative housing and
vacate the premises in an orderly fashion. Some lenders may be
able to work out an orderly exit, even where proceeds of the
sale will not cover the amount of the remaining mortgage.
There is other assistance available. Borrowers who
anticipate payment issues can also work with reputable local
credit counseling organizations. Pennsylvania Housing Finance
Agency is here today and discussed the longstanding and highly
regarded state-wide Homeowners Emergency Mortgage Assistance
Program, known as HEMAP, which can provide relief for many
homeowners.
A newly launched--
Senator Specter. Mr. White, how much more time will you
need?
Mr. White. Thirty seconds. The newly launched Hope for
Homeowners program, which was created by Congress to help those
at risk of foreclosure to refinance into more affordable,
sustainable loans, is also available.
Although mortgage foreclosure is a bank's last source for
repayment of a loan, banks would prefer to work toward a
solution that avoids the foreclosure process. That said, banks
also have an obligation to follow safety and soundness
regulations and make attempts to limit their losses that may
negatively impact the institution, its depositors, and
shareholders.
Foreclosures not only affect borrowers and lenders, but
also the community. It is in everyone's best interests to have
a program that provides an equitable solution for all parties
in a cost-effective and expeditious timeframe.
Thank you very much for the opportunity to appear before
you today to share the banking industry's perspective on this
critical issue, and I stand ready to answer any questions you
may have regarding my testimony. Thank you.
Senator Specter. Thank you, Mr. White.
[The prepared statement of Mr. White appears as a
submission for the record.]
Senator Specter. Our final witness is Mr. Hiram Carmona,
Assistant Contract Administrator, Housing Counseling, for the
city. Thank you for being here today. The floor is yours.
STATEMENT OF HIRAM CARMONA, ASSISTANT CONTRACT ADMINISTRATOR,
HOUSING COUNSELING, CITY OF PHILADELPHIA
Mr. Carmona. Good morning, Senator Specter, Senator Casey,
and members of the audience. My name is Hiram Carmona and I
oversee the city of Philadelphia's Housing Counseling program.
I want to talk briefly about the costs associated with this
program and the resources that the city has put into it. First
of all, as you may know, the city of Philadelphia funds the
largest and longest-standing housing counseling program in the
Nation, for over 30 years. This year, the city supports 29
housing counseling agencies, with $3.6 million of CDBG funds.
In order to meet the additional number of homeowners facing
foreclosure, we have put an additional $700,000 of City funds
into the housing counseling program, for a total of $4.3
million. Even though we might think that's a lot of money, to
tell you the truth, we need more.
The city of Philadelphia has established a hotline. It's
called ``Save Your Home, Philly'' hotline, which is managed by
the Philadelphia Legal Assistance Corporation. The number of
the hotline is 215-334-HOME. It's an easy number to remember.
We have put additional resources to fund the hotline--the way
that the program works, homeowners will get letters from the
court telling the homeowners to contact the hotline. Homeowners
must contact the hotline. They will get an appointment with the
housing counselor. The housing counselor then will meet with
the client and they both attend a conciliation conference. So,
the hotline is a crucial part of the whole program.
Another important part of the program is the outreach. The
City has been able to do outreach through our Neighborhood
Advisory Committees--we call them NACs--through housing
counseling agencies, and other City agencies. The outreach
program has been very successful in making sure that homeowners
attend the conferences. In fact, we did a comparison of the
successes and we found that 73 percent of the people that are
contacted door-to-door attend the conferences; 43 percent of
those that were not contacted attend the conferences. So face-
to-face contact with the homeowner is definitely an important
part of the program. We've heard some stories of all the
successes, so I really don't want to get into it for lack of
time. But in conclusion, I do want to recommend that the
diversion program be replicated throughout the country.
Now, on the resources for the diversion program, I want to
say this, that unfortunately the Housing and Economic Recovery
Act of 2008, as it stands now, cannot be looked upon to assist
with the implementation of the programs throughout the country.
I would recommend, and the city of Philadelphia would like to
see, an amendment to the Act to allow funding for the
implementation of diversion programs throughout the country.
I know that Judge Rizzo mentioned over 200 home have been
saved. We had 4 days of conferences last week. We had another
day of conference yesterday. It's over 300 homes saved since
the inception of the program. Just to let you know, the crucial
role that housing counselors have with the program, we have
over 700 cases still being negotiated. So the housing
counselors are doing a lot of work and that's how we're going
to make the program successful. We just want to make sure that
we replicate it. I would ask you to provide funding to
replicate this throughout our great Nation.
Thank you.
Senator Specter. Thank you very much, Mr. Carmona.
[The prepared statement of Mr. Carmona appears as a
submission for the record.]
Senator Specter. President Judge Jones, we will now turn to
the questioning by Senator Casey and myself. We will have 5
minutes as well.
President Judge Jones. Yes, sir.
Senator Specter. The suggestion was made by Councilman
Jones about having a national moratorium legislated by
Congress. I think Congress does have the authority to do that.
But the question that Councilman Jones raises in my mind is as
to whether it's better to have an act that came out of
Washington or to rely upon State governments where States may
have different kinds of problems, or even beyond that, to rely
on innovative programs like the one which was initiated here in
Common Pleas Court. What do you think?
President Judge Jones. Well, initially, Senator, it has
been our experience--and I say ``our'' meaning Judge Rizzo and
myself--that we would not want to interfere with the
contractual relationship between parties, recognizing that the
mortgage is a contract, on a scale that would allow or would
encourage the undermining of the intent of the two entities to
bargain for a mortgage.
That having been said, to me it is most important that the
local municipalities and the State-level governments be
sufficiently funded to be able to implement the kind of program
that we have, and we know, frankly, by reason of our budgets
here in the city of Philadelphia, and perhaps the one state-
wide, we simply don't have enough money to be able to do that.
That's why I think there's a call upon the Federal Government
to put some funds into this process.
But in terms of control, I, frankly, think that no one
knows better what needs to be done than those of us who are at
the local level.
Senator Specter. Judge Rizzo, a big issue has been bringing
the homeowners to the table. They're inundated with letters,
documents, and legal papers in a very, very confused state.
What is the best way to approach this? To what extent have
you structured proactive matters so that people like Mr. Gould
and other counseling services, Ms. Seldin, will go out and look
for them and sort of bang on their doors, to grab them by the
scruff of their neck and bring them in to help them help
themselves?
Judge Rizzo. Well, in that situation I think there's been a
description of the process. To get the people in the chute, the
outreach is critical. I call it hand-to-hand combat, people
going into neighborhoods, knocking on the door, handing a cell
phone to a homeowner that--
Senator Specter. In a lot of neighborhoods, it is hand-to-
hand combat. How about that?
Judge Rizzo. I can tell you, that's right. But we
appreciate the fact that when people come in befuddled and
hopeless on many occasions, we have an infrastructure that can
address those issues through our wonderful housing counselors,
through our Community Legal Services groups, and other
volunteer lawyers. But we have to get them there. That's my
point: build it and they will come.
We have to do the outreach that actually gets the process
started, and it's one of education and hopefulness that may
lead to some success of them remaining in the home, or, as I
may affectionately say, a graceful exit, where there is control
of how they will leave the property in a dignified manner and
then have to look forward to what that next phase will be in
terms of their living relationship. In many respects, Senator,
I call that a success as well.
Senator Specter. Councilman Jones, there has been a concern
about predatory lending practices, people being loaned money
which they cannot afford to repay. The bankers have not been
concerned to get a down payment, at least to some extent, to go
through the financial status of the individual with other
obligations to see to it that they can make the payments.
Bankers have relied upon the guarantees of Fannie Mae and
Freddie Mac.
To what extent do you think that this has arisen because of
over-reaching by the lenders?
Councilman Jones. Well, clearly, I think I wouldn't say
either party was trying to be overtly predatory. It's by virtue
of rate of return that people saw an opportunity, where people
had bad credit, they could charge more, and took advantage of
that in a business model.
Where we are now, however, is where can we get to a win-win
scenario. When you mentioned about the moratorium on the
sheriff's sale, what that moratorium did was bring all parties
to the table. That is why we suggested that maybe a national
moratorium--and also, Senator Obama agrees with that notion and
has said it publicly, because what it does is get all parties
to the table earnestly to work it out. So no matter how we got
there, it will take good will to work it out. That's what I
hope to do, whether at a Federal level or at local levels'
discretion.
Senator Specter. Before turning to Senator Casey, on the
same question, Mr. White, I appreciated your comments about
education, letting people have information and instruction as
to what is realistic. What do you suggest should be done in the
future to guard against even the semblance of a predatory
practice, where the lenders--and you represent lenders--would
be under some sort of a code, or perhaps even a statutory
obligation, to see to it that the borrowers are counseled so
that they know what the realism is on repaying the loans.
Mr. White. Yes. I think that there are several programs out
there that have home buyer education required based on either
credit level, income level. As I say, my work with Neighborhood
Housing Services, which we work with low-and moderate-income
people, our delinquency rate is less than 1 percent because of
home buyer education and specific financial budget counseling.
Senator Specter. If yours is less than 1 percent, where are
these foreclosures coming from?
Mr. White. Well, that's just for the loans in Neighborhood
Housing Services of Reading. That's a fairly small pool of
loans. Obviously, the foreclosures are coming from a national
level. But we have found that education has definitely made an
impact on the performance of loans, at what level that's going
to be implemented.
A lot of the credit criteria have been established by, and
are established by, the GSEs, so Freddie, Fannie are
establishing the credit criteria under which most of the
lenders operate, even in the conforming sector. Those credit
criteria may have to tighten up, and a component of that I
would recommend would be the educational criteria.
Senator Specter. Senator Casey.
Senator Casey. Thank you very much. I was listening to
Judge Rizzo and was reminded of the day we were here for the
roundtable in August. We had a roundtable, which was very
productive. We had people from all over the State. Then we went
across the hall, or on to a different floor. We went into a
courtroom. Judge Jones, I'm not sure what courtroom that was,
but it was yours. So we went in and I was watching this program
live. I mean, with all the intensity of courtrooms across the
country, except a lot more people gathered in that courtroom.
The reason I'm telling the story, to give you a sense of
the intensity, I was in the back, or to the side of the room. I
sat down, or I was standing there--I forget which--and there
was a counselor, I think, there. She was very intense about her
work. She wanted to make sure that they had a modification and
had it coming together. I was standing there. She looked at me
and said, ``Sir, I have a counseling session going on here.
Please move.''
[Laughter.]
Senator Casey. So it gives you a sense of the intensity of
that effort. That's good news. I didn't mind being shoved aside
for the good of the order.
But I wanted to get a sense of the numbers. My numbers--I
want to read this so I get it right. Judge Rizzo and Judge
Jones can correct me if I'm wrong. But to date, nearly 230
properties have been saved from sheriff's sale, and an
additional 200 properties have been postponed after
conciliation conferences due to reasons--and then it lists the
reasons. Is that right, the numbers that I--
Judge Rizzo. Basically, going through September--we didn't
crunch our numbers yet for October--of the 1,500 homes, 230 we
note as being saved outright by having the sheriff's sale
stayed.
Senator Casey. Two hundred thirty out of 1,500?
Judge Rizzo. No, it's more reduced. It was the people who
came in, which would be another 700; 230 were saved, but
another 330 homeowners were permitted to remain in the
household because postponements were by agreement of lenders to
have a window of time in which further loan modifications or
other agreements could be worked out. They could be forbearance
agreements. They could be forgiveness for a brief period of
time.
What we found in these conciliation conferences is that, on
a micro basis, again, creative ideas are brought forward that
really are pertinent to this particular home situation. So,
various things are crafted, whether it's a down payment and
then there's, say, a lapse of a couple of months before they
catch up, or waiting for certain benefits which would kick in
for the certain homeowners. So, creativity abounds. But we do
consider homeowners who have postponements of sale as a success
and an opportunity to give time to work things out.
Senator Casey. A really simple thing for me, and I think
for others who aren't as involved in the work day to do, what
percent would you categorize as successful? I realize that's a
broad term. But can you put a number on that, an estimate?
Judge Rizzo. Well, I believe, Senator Specter, in your
outreach letter to the other jurisdictions, to president
judges, for which we're ever grateful, it's a figure of
approximately 80 percent. That figure constitutes success in
various forms. Of the homeowners who availed themselves of the
program--we did have those who failed to appear for whatever
reason, had vacated the property, gave up hope, or did not
avail themselves for whatever reason or follow through--those
numbers reflect an average of approximately 80 percent, 78
percent, who have gotten some success from the program of
either outright sale, loan modification, or postponement so
that deals could be worked out. There is that small percentage
as well, which I mentioned, of graceful exit, which I do see as
a success in situations which really means that the person has
got to move on.
One, in particular I think of, there were two disabled
adults in the property. The lender gave a significant amount of
time in which they had to vacate, and also provided $4,000 in
moving costs for them, to assist them in that graceful exit
with dignity and compassion.
Senator Casey. I couldn't help but note in the testimony,
the word kept coming back over, and over, and over again, and
I'm glad it did because it's getting to the point: counselors,
or counseling. Counseling, counseling, counseling. It's so
successful across the country.
I was one of the leaders in the Senate to insist upon
getting $180 million of Federal money that's already been
spent. I think it was spent this spring. We got another $150
million. We've got to keep getting money, tens, if not hundreds
of millions more, for counseling because it works. It's a good
an expenditure of taxpayer money as you can think of to keep
people in their homes. The Treasury Department told us that
even in the subprime context, if you get counseling even in
subprime, don't have a problem. So for those who are making
policy in this country, whether it's us in the Senate, whether
it's the House, or whether it's State government or municipal
government, counseling dollars work real well. Councilman
Jones, I appreciate the fact that you've been an advocate for
that, as well as Councilwoman Tasco, and so many others who
have pushed hard on this.
Finally, my time is up, but I wanted to to commend--I won't
ask them a question, but I did want to commend the people who
were here giving personal witness. You are courageous to be
here and to tell your own stories. I want to make sure I got
all the names right: Jean is here, We met Jean in August. Eric,
Deborah, Tania, and Cynthia. Anyone else? Any first name that I
missed?
[No response].
Senator Casey. Thank you very much for your personal
witness and telling your own stories.
Senator Specter. Thank you, Senator Casey. I believe that
you're really on to something here, Judge Jones, Judge Rizzo.
We appreciate your coming in. I think Senator Casey is exactly
right. When we've heard from the people who have gone through
the process, the expression is widely used, it puts a human
face on the nature of the problem. We are wrestling with this
at the national level.
Senator Casey is on key committees, Banking and Housing &
Urban Development, and I'm on the Judiciary and Appropriations.
The proposals that we're talking about now to have the FDIC or
the Federal Government come in and guarantee mortgages, I have
some doubt about because it just may encourage what happened
before with the guarantees of Fannie Mae and Freddie Mac, where
people didn't take the individual responsibility, as you are
doing here. You're putting the people who loaned the money and
the people who borrowed the money into a room and you're trying
to work it out.
If the Federal Government is going to solve all the
problems by saying we'll take care of it, there is no incentive
to try to work it out. There may be, and doubtless are, some
cases where you can't quite close the gap. It's very close, but
you can't quite close the gap. Now, there, I think the Federal
Government has a role. But I believe we ought to operate out of
Washington only as a last resort.
We are all concerned about the national debt and the
deficit, but we put greater emphasis on the daily problems of
people being ousted from their homes, evicted, just very, very
seriously. So we thank you for what you're doing here. I am
enormously impressed with all the inquiries that have come to
you from all over the country. Senator Casey and I can give it
some greater publicity. There are people here from Financial
Times in London, I understand, Reuter's, and--like dropping a
pebble in a pond and it spreads out. It's really very
encouraging to see this kind of innovation coming from this
courthouse and our State.
Senator Casey, closing comments?
Senator Casey. Very briefly. I want to thank Senator
Specter for bringing the Judiciary Committee to Philadelphia
for this critically important issue to our Commonwealth and our
country.
[Applause.]
Senator Casey. I do want to thank Judge Jones and Judge
Rizzo for having us here in this courtroom, and all of our
witnesses.
[Applause.]
Senator Casey. Judge Rizzo, you had mentioned, and I failed
to mention in my opening comments when I was summarizing all of
the parties that are represented here, and I probably missed
some, but I failed to mention Sheriff Green and his early
leadership on this. We are grateful for his work.
We have a long way to go, but today it is clear that a lot
of the good ideas come from communities across the country. All
the answers are not, everyone knows, in Washington. So we're
grateful to be here to learn more and to hope that this becomes
the model for the rest of the country. We're going to work hard
to make it so.
Thank you very much.
[Applause.]
Senator Specter. Thank you very much. That concludes the
hearing.
[Whereupon, at 11:36 a.m. the hearing was adjourned.]
[Submissions for the record follows.]
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