Panel II of the Hearing of the House Committee on Financial Services

Statement

PANEL II OF THE HEARING OF THE HOUSE COMMITTEE ON FINANCIAL SERVICES
SUBJECT: LEGISLATIVE AND REGULATORY OPTIONS FOR MINIMIZING AND MITIGATING MORTGAGE FORECLOSURE

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REP. SHELLEY MOORE CAPITO (R-WV): Thank you, Mr. Chairman. I look forward to serving in that new capacity. I'm excited to work with Chairwoman Waters and with the chairman of the full committee.

I wanted to just say to my colleague that there is a 1-800 number. I found it in my notes. It's a national hotline, 1-888-995- HOPE, which is run by the Homeownership Preservation Foundation in partnership with Neighborworks. It's along the lines of what the gentleman was referring to. So I guess getting the word out is the important thing there.

You know, I've been sitting here listening pretty much all day, and I was thinking about what Secretary Paulson said about telling borrowers when they feel that they're in trouble that they should get with their lender; don't pull away, but try to get with the lender to find out if they can have some help. And I know that's a push nationally, communication.

And I actually said that on the radio the other day in a local talk radio scenario, and I started thinking to myself about that person who's drowning in debt probably. It's not just their home that their having trouble making payments; it's their credit card, it's their insurance, it's their water bill, it's not just this thing. And if you have to prioritize what you're going to pay first, you're probably going to pay your home first, hopefully after you pay your taxes maybe.

But anyway, you know, and this is very, very difficult for people. So it almost goes against the grain because you're getting dunned by all of these other credit organizations to say the best way you can help yourself is to call your lender and find out where you can get help. So I think we really need to -- we need to get that message out, and I'm not sure if we can do it.

But the other question I have is, in this day and age, who really is your lender? It used to be you walked down the street, you knew your neighborhood banker, and, you know, you -- because you owned the local grocery store or whatever, and you knew who they were. Now I'm not so sure people -- it's a 1-800 number in a lot of cases you have to call; there's no personalization. And that, I think, makes it more difficult when you begin to drown in debt for you to be able to pick up the phone and call an unknown person to say: I need help; help me.

So I think we have to be really creative with the way that we promote this right now, and I would like to know if anybody knows of any national scenarios where lenders really are going out to the people that are starting to fail, and instead of dunning them or aggressively trying to recover, trying to lend a hand to them.

MR. ROBBINS: Yes, I -- let me --

MR. : If I can respond as well.

MR. ROBBINS: -- let me respond to that. Being chairman of the Mortgage Bankers Association, I've had the opportunity to talk to the major servicers within our organization, which probably cover the vast majority of loans serviced in this country.

And I would tell you that all of them have put programs into place, including early intervention, where if their security allows that they will contact borrowers up to 90 -- 120 days ahead of time before their loan recasts and start to talk to them about, "Do you think you're going to have a problem? Is the loan reset going to be a problem?" The -- not all securities permit that early intervention but we just recently got a ruling from the SEC that reinforces that we can do that.

So the industry is utilizing that technique remembering that the vast majority of borrowers do not respond. We have a very hard time getting borrowers to respond to our inquiries, and so we have gone and hired and are using counseling services -- consumer organizations to intervene in our behalf and help us do that ahead of time. As you well know, the industry loses $40,000 to $50,000 for every mortgage that goes into foreclosure -- money that just walks out the door. We are highly motivated to try and help that borrower be successful over a long period of time.

MR. MARKS: Can I please respond?

REP. CAPITO: Yes.

MR. MARKS: Now, let's talk about the reality. That's nice in theory but that's not what's going on. Here you have -- let's take two examples. You seeing it dumped to a certain extent the restructuring and it's really crucial that we understand what it is. That means the lenders have to restructure the loan -- reduce the interest rate or reduce the outstanding principal. There are few that are doing that. HSBC is doing that on a limited scale.

But then on the other hand, you've got Countrywide who says that they have assisted 35,000 people. Well, now they say of that half of those people they've assisted by deed in lieu of foreclosure or short sale, so they've pushed them out of their home, and now what Mazule (sp) has said yesterday was his answer is to hire more people in India where their loss mit (ph) to foreclose on American homeowners. So those are nice theories but the reality is it's not getting done and it's clear why people do not call the lender -- because the lender -- all they want is more money on a loan that's unaffordable.

REP. FRANK: Mr. Robbins, do you want to respond?

MR. ROBBINS: Yes, thank you. They're a great deal more than theories. I mean, it -- at Countrywide there is no bank and organization that wants to own a home -- take it back in a foreclosure, try and refurbish it, put it back on the market, and resell it.

MR. MARKS: No, they want more money for the home --

REP. FRANK: (Sounds gavel.) Mr. Marks, please. Go ahead.

MR. ROBBINS: -- the net loser. To the ability they are able within the structured security that that loan is embedded, they will use early intervention programs. They will use all of the techniques that are at their disposal. Short sales are certainly one of those techniques. A deed in lieu is certainly one of that, but so is forbearance, which is being used to a major extent in the loans today. So are loan modifications where the loan is recast, either in term or in interest rate or a combination of both. There are a number of tools that mortgage bankers -- mortgage servicers are motivated to use. The last thing in the world that we want is that loan to go into foreclosure.

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