Panel I of a Hearing of the House Financial Services Committee - Oversight of Implementation of the Emergency Economic Stabilization Act of 2008 and of Government Lending and Insurance Facilities; Impact on Economy and Credit Availability

BREAK IN TRANSCRIPT

REP. MAXINE WATERS (D-CA): Thank you very much Mr. Chairman for this hearing. It's very much needed, and I welcome our representatives from our three agencies that are here today.

I come here very troubled about the direction that Secretary Paulson has taken as it relates to the $700 billion that we made available to him to help stabilize our economy. It is very clear, no matter how the secretary describes it, that we gave him the authority that you identified when you talked with him, Mr. Chairman, to deal with foreclosure mitigation efforts. As a matter of fact, the purchase of toxic assets was at the centerpiece of this program because everybody agreed at that time that the sub-prime meltdown was at the epicenter of the dislocation that we were experiencing in our economy.

So the fact that you, Mr. Paulson, took it upon yourself to absolutely ignore the authority and the direction that this Congress had given you just amazes me. I just could not believe it when I heard that somehow you had abandoned the whole foreclosure mitigation effort.

Now in addition to that I want you to know that I, and some others, worked very, very hard to pass this. As a matter of fact, I was looked at with great suspicion by members of my caucus, and the Congressional Black Caucus in particular, as I sold them this program and told them about my faith in your ability to carry out this program. I was asked over and over again: will the homeowners be helped? What are we going to do about Main Street, not just Wall Street? And we spent and I spent considerable time selling this program to those who were suspicious and did not want to do it.

Now, having said that, again, I'm disappointed that you have not utilized the authority and you have just divorced yourself from dealing with that.

On the other hand, in your testimony today you say, "And we need to continue our efforts to use a variety of authorities to reduce avoidable foreclosures. The government has made substantial progress on that front through HUD programs, through the FDIC's program with Indymac, through our support and leadership of the HOPE NOW Alliance, and through the new GSE servicer guidelines announced last week that will set a new standard for the industry."

Let me just relate to this statement. First of all, the HUD programs, working under HOPE NOW, have not been successful. It's a terrible failure. I convened in my office all of the HUD-backed counseling programs when we went on break, and I sat down and I talked with them to find out what kind of success were they having working with the HOPE NOW program.

And to a person, they have not been able to get in touch with the servicers in many cases. When they get in touch with them, many of the servicers are inexperienced. They don't have the ability to make good decisions. Nobody knows what formulas they're using in order to make decisions about a homeowner's ability to get a loan modification. And so they all work under HOPE NOW.

So HOPE NOW has been a failure. And even though you identify it as a success, I'm not going to challenge you, but I would dare say that you could not cite for this committee the number of modifications that have come through HOPE NOW because you don't know. You probably are not tracking them. And secondly, if you were, you would know that it's not working.

Secondly, the GSE proposal that was recently released you referred to, but it really hasn't gotten underway yet, and it only deals with a small portion of the market. You do refer to FDIC, and you're right. You're right about FDIC's program and what has happened with Indymac and Chairman Sheila Bair.

She has been able to come up with a way by which we could do credible loan modifications, and it's been ignored. Barney Frank and I sent a letter to you and everybody else asking that you should just give her the program and let her run with it, because she's discovered how you can do these loan modifications.

You can't do them one by one, Mr. Secretary, and get it done. I spent time -- I have 26 of them that I'm working on in my office right now, and I spend time, and I get a release from the homeowner and I get on the line with the servicer, and it is absolutely ridiculous.

And I have had to go all the way to the chairman, for example, of one of the banks, Mr. Stump over at Wells Fargo, to tell him about what his servicing company is and is not doing. They own America's Servicing Company. I stay on the line for one hour just trying to get to a servicer. They are understaffed. They don't take this seriously. And then when you talk with the servicers, they don't even know enough to be able to evaluate the income of those persons who are trying to get some help.

With that, I would like, Mr. Chairman, to go to Sheila Bair and ask her to please unveil for this committee what she's doing and what she's shown can be done with Indymac modifications that have been so successful.

BREAK IN TRANSCRIPT

Source