Congressman Edolphus Towns (D-NY), 10th CD, former chair and now ranking member, of the House Oversight and Government Reform Committee on mortgage servicing practices and the foreclosure crisis, obviously dismayed over the rising number of foreclosures in Brooklyn – 16,000 in the past year – convened a field Congressional hearing at Brooklyn Borough Hall, Monday on March, 19.
Towns seemed unconvinced by what turned out to be a rather lengthy infomercial by bank representatives that had been summoned to the hearing – Wells Fargo, CitiMortgage, Bank of America, Chase Bank, Capital One, Freddie Mac and Fannie Mae (now known as FHFA), Chairman of the Federal Reserve were represented.
Present from Congress were Congressman E. E. Cummings (D-Md.) Maryland’s 7th CD, this is his 14th year serving on the House Oversight and Reform Committee; Congressman Darrell Issa (R-Calif. and Todd Platt from Pennsylvania.
The standing-room-only hearing had as many protesters on the outside of the chamber doors as there were inside, and as many more on the steps outside Borough Hall. Clearly, this is a subject of great concern and frustration in Brooklyn, as in other parts of the U.S.
It was clear, from his tone and demeanor, that Congressman Issa (though a Republican) was as dissatisfied with the testimonies on the part of the bank representatives as the Democratic representatives were. He took several personal privilege opportunities to cross-examine statements made by reps from Bank of America, Wells Fargo, CitiBank and Chase. The focus was primarily on using principal reduction as a means to alleviate overly burdensome monthly payments. He also queried why it was “okay for a homeowner whose house was ‘under water’ to walk away without penalty, but not okay for a person who was trying to hold on to their home to apply for a refinance to give them a better rate and a lower monthly payment.”
Both Issa and Congressman Towns attempted to get the bank representatives to commit to distinct, people-friendly rules, amd consider those homeowners who would prefer to refinance their homes and stay in them.
Issa also stressed that they had selected these particular panelists to represent their banks because their current CEO’s lacked the wherewithal, capacity, interest or will to comply. “Some of you banks have been trailing in refinancing homes for those who want to continue paying for their homes, they just need a more reasonable monthly payment. How are you rationalizing turning them down?”
Each bank gave glowing testimony about how much they were doing to accommodate the homeowners; how much they were their top priority in getting attention and assistance, and saving their mortgages. Even Chase Bank proudly cited their cooperation with NACA in fast-forwarding assistance to homeowners in distress. Each touted programs they had designed to speed up and streamline the refinancing program. It prompted both Congressman Towns and Congressman Cummings to query, “If this is true, why are we getting so many complaints from our constituents?”
Congressman Cummings asked: “If you’re doing so much to help, why am I getting so many complaints. It appears that many of our citizens are going out of their way to comply with your requests – they’re gathering their required documents, faxing them over to you, but for some reason you don’t seem to be receiving them. They continuously ‘get lost.’” He further queried as to whether “there was some sort of hole that all of these documents are falling into?”
Cummings spoke of the time it took to reach the bank servicers, and how long it took to process all the information, get a decision; all the while the bank continued to harass the homeowner, heaping penalties and fees on them while they are trying to rectify the situation. “My constituents go to the library, fax their papers to you, and then are told they were not received. And then they come to my office, and we send them, and the company still claims they never got it. So we are saying that it is something like a big machine eating up the paper. I’m very serious about this. Have you been able to resolve this? These are hardworking people. They don’t have a lot of money. They have to take off from work. They don’t have a fax machine at home. They’re trying to get stuff done, and they are subsequently being fined. It’s like a deep hole that everything is falling into. So, what’s going on here?
Towns was particularly perplexed about why it was that banks seemed now more than willing to do principal reduction to help the homeowners, yet FHFA refused to do so. He queried: “ Even the chairman of the former special inspector general have all called for a principal reduction as the best way to help homeowners and save taxpayers money. But with FHFA, any loan guaranteed by Fannie Mae, Freddie Mac, is ineligible for principal reduction modification. When Mr. DeMarco appeared before this committee last fall he said he lacked authority for principal reductions.” In 2008, Congress passed the Emergency Economic Stabilization Act. “We directed FHFA to maximize systems for owners, and we explicitly authorized the use of principal reduction as the chief method for FHFA. And are you now abandoning the legal obligation of principal reduction as a method for helping constituents on the part of FHFA?
Issa backed Towns by stating, “You are hearing the question again and again because we’re not getting the answer we want, which is do you have the authority to provide principal reductions? And if the answer is yes, why aren’t you doing it? And it looks as if we have to raise it again.”
At the end of the panel Issa declared, “The chair will stipulate that it is within congressional authority, and permission is granted for FHFA to provide the principal reduction method as a way of saving homes from foreclosure to those who have FHFA loans. We are stipulating at this point!”
While the question was never answered, the partial reason FHFA is not providing principal reduction may be because they are still trying to make the HAMP and MAP programs work. The guise of saving taxpayer dollars was shot through when they were asked which was more damaging: providing $100 million dollars in subsidies to save homes, or allowing all the homes to go into foreclosure with no assistance, and losing $600 million dollars in housing stock, not to mention traumatizing millions of families and demoralizing whole communities. The juggling act that it takes to formulate a 31% ratio in terms of debt to income to determine whether or not a family is eligible for subsidy could be mitigated by just doing a simple principal reduction from the outset – particularly on those homes that were sold for overinflated prices to begin with. The mental, social and emotional deterioration, moral and spiritual fiber of thousands of American families for having to endure such a traumatic situation. So the cost in human and spiritual coin is monumental. They also claimed it would not be fair to the taxpayers.
Congressman Towns countered by asking, “If your agency could be saving Maryland taxpayers $500 million today by doing principal reductions, why are you refusing to do so?” Still no intelligible answer from FHFA. Chairman Issa stated, “We want to hold you accountable for not being cognizant of the harm you cause to the American family. We want to make sure that people don’t come here and make nice statements, and then leave and go back to doing the same old thing. We want you to be able to inflict suffering with no accountability.”
The FHFA panelist stated, “We will make an announcement of our quarterly foreclosures for the first time on a state-by-state basis. We will announce the numbers, amounts, frequencies, foreclosure prevention activities; properties and refinances; key states Calif., NY, Florida, Illinois; servers’ reports, etc.” To which Issa offered to hold open the congressional report to include it. Concluding, “We don’t want just words, we want results.” Congressman Towns has called this hearing to Brooklyn just to make sure that it is clear to all of us that this problem is happening coast to coast. “We have to all be aware of the cost in human coin.”
The field panel cited increased assistance for veterans and those who are on the war front protecting the nation, stating it was unconscionable to evict soldiers and their families from their homes while they are away trying to protect their country. Forensic measures to review any homes that have been foreclosed upon while the soldier was on active duty and restore the home to them will be enacted, or they will be financially compensated. Those guilty of such acts may well find themselves on the wrong side of the law.
The second panel consisted of New York State Supreme Court Judge Meaghan Faux, of the South Brooklyn Legal Services, and a marketing specialist.
Faux cited the dire situation in Brooklyn: “One in three families are going to lose their long-time homes, and long time communities will lose longtime members. Homeowners who are trying to make ends meet, to homeowners who are barely coping. The problems with many of our homeowners is financial hardship. We are not alone – the fundamental problems with mortgages now is the need of a reduction. In Brooklyn alone ,27,000 mortgages were in default in 2011. And a possible 14,000 in Queens. That means 1 in 3 homes is at the risk of being vacant and deteriorating in Canarsie, Brownsville, Bedford-Stuyvesant, Crown Heights, Flatbush. Every day I see the stress, the terror these foreclosure threats have on the families. We employ 45 attorneys and paralegals, and we have assisted more than 6000 homeowners in the past years. Our Bedford-Stuyvesant office alone has assisted 300 homeowners since Congress enacted this legislation. Yet and still with all our efforts people in Brooklyn are struggling more now than ever before.”
Sitting Supreme Court Justice testified as to the kinds and numbers of cases as well as the inequities: currently 16,000 foreclosures being heard in the Supreme Court. In 2007, the foreclosures went from 3500 per year in Kings County to about 7500. Problems include shoddy paperwork submitted by lenders for foreclosures, disproportionate number of foreclosures for (the same) properties. “For a client to receive a debt from a foreclosure he must demonstrate three things in court: existence of mortgage note, the plaintiff’s ownership of the mortgage and note, and the default of the defendant (the homeowner). It might sound relatively simple, but in this age of mortgage securities, and numerous assignments of mortgages and notes, it’s not easy to demonstrate at this time who has the ownership of the mortgage and note. Such techniques as robo signers, or people disguising themselves as different representatives, have been a major problem. Another problem is when the issue has been adjudicated, but the bank’s lawyer won’t accept it without the approval of the investor (who is usually unknown to the buyer in the first place).
Towns called for mortgage servers to be prosecuted for any wrongdoing in the case of homeowners where undue pressure, continued loss of documentation and other egregious acts against homeowners who were earnestly trying to rectify their problems. Servers should not be above the law in these instances. He called for a means by which documented evidence of any wrongdoing can be brought to the attention of Congress as well as other federal entities that have jurisdiction over these issues.
The panel is open to additional commentaries via e-mail for the next five days, and will take time to deliberate over their findings and report back to Congress.