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Hearing Of The Subcommittee On Housing, Transportation, And Community Development Of The Senate Committee On Banking, Housing, And Urban Affairs - Helping Homeowners Avoid Foreclosure


Location: Washington, DC

Good afternoon, Chairman Menendez and Members of the Subcommittee. Thank you for this opportunity to discuss the progress we're making through the Making Home Affordable program and other efforts to provide relief to homeowners and neighborhoods suffering from the affects of the foreclosure crisis. I am honored to join you today to see how the foreclosure crisis is impacting Bergen County and hear how our Administration's efforts are being felt across the state.

I want to thank you, Mr. Chairman, for your leadership in making these efforts possible. As we meet, there are indications that the housing market is stabilizing, with the sales of existing and new homes increasing for five consecutive months, homebuyer confidence on the rise, and home price declines slowing -- and in some regions actually increasing.

Yet even as foreclosures fell by one-half of one percent nationwide from July to August, according to RealtyTrac, here in New Jersey they actually jumped nearly 29 percent, leaving the state with the 11th highest foreclosure rate in the nation.

So clearly, while the national foreclosure numbers are beginning to trend in the right direction, they do not tell the whole story -- and that's why it is so important to be here today. While I have submitted lengthier testimony for the record, I'd like to share our efforts with you, and hear directly from you about how HUD can help homeowners here in New Jersey keep their homes.

Making Home Affordable: Progress To Date

Mr. Chairman, from our very first day in office, the Obama Administration has made addressing this crisis a top priority.

As a result of the comprehensive approach the Administration has taken, interest rates have hovered around or below 5 percent for six months -- allowing first-time homebuyers to enter the market and helping more than 2.9 million homeowners refinance, putting as much as $10 billion of purchasing power in the hands of American households.

At the center of our response has been Making Home Affordable, a comprehensive effort to stabilize our housing markets.

MHA includes the Home Affordable Refinance Program, which expands refinancing access to families whose homes have lost value or whose mortgage payments can be reduced, and the Home Affordable Modification Program, which offers incentives to investors, lenders, servicers, and homeowners to encourage mortgage modifications. Since MHA's launch in March, 56 servicers, representing more than 85 percent of the market, have signed contracts. Collectively, they have extended more than 571,000 modification offers and over 360,000 have entered the 90-day trial period. At the current pace, we believe MHA will modify more than a half million loans by November 1st -- in addition to the growing number of affordable non-HAMP modifications we are increasingly seeing industry offer.

Improving Servicer Accountability and Responsiveness

Despite this progress, we recognize more needs to be done. Given the recession, we remain concerned about potential for re-default for modifications -- and believe the Recovery Act is critical to bringing down unemployment and creating jobs so families can stay in their homes. We are committed to improving the responsiveness and accountability of participating servicers. In July, Treasury Secretary Geithner and I sent a strong letter to the CEOs of all participating servicers, asking them to devote more resources to the program, and requiring them to designate a senior official to work directly on MHA implementation. Later that month, HUD and Treasury met with top executives from the servicers to discuss improving the program's effectiveness and efficiency. Servicers in attendance committed to significantly increase their loan modification rate.

We detailed plans to take three important steps to improve the program's performance: publicly reporting results under the program based on servicer-specific performance, working to set more exacting operational metrics to measure performance, and developing a "second look" process to minimize applications being overlooked or inadvertently denied a modification.

As a result of these efforts, servicers participating in HAMP are now held to higher performance standards. Servicer-specific performance details were first published on August 4 and are being made publicly available on a monthly basis.

While this data shows a wide range in servicer performance, we believe we've reached a turning point in our modification efforts and are already seeing evidence that the "peer pressure" being created by a publicly available scorecard has motivated servicers to ramp up their efforts. Indeed, while there's no question that modifications began slowly, as servicers began participating in the program and bringing on appropriate staff, the weekly pace of modification offers now exceeds the weekly pace of new foreclosures.

Preventing Foreclosures and Stabilizing Neighborhoods

HUD also plays a unique role in helping stem the tide of foreclosures on the ground in neighborhoods across the country. First, HUD is working to ensure that the nearly $6 billion appropriated by Congress for the Neighborhood Stabilization Program helps stabilize housing markets and combat blight through the purchase and redevelopment of foreclosed and abandoned homes and residential properties.

Recognizing that concentrated foreclosures wreak havoc on once-stable communities, HUD worked to quickly allocate $4 billion in funds under NSP 1 -- including nearly $64 million to New Jersey. And we will allocate another $2 billion competitively under the second round of funding in the Recovery Act.

Second, HUD is mobilizing its vast network of counselors and other nonprofits to provide critical assistance, free of charge, both on the phone and in person to the record number of homeowners at-risk of foreclosure and seeking information about MHA.

We are encouraging distressed borrowers to go to or to contact the Homeowner's HOPE Hotline at 866-995-HOPE. The 24-hour-a day, seven-days-a-week hotline utilizes many HUD-approved counselors who can also help the homeowner reach and resolve issues with servicers.

As part of the Administration's nationwide campaign to promote the Making Home Affordable Program in communities most in need, we are also involved in a series of outreach events to engage local housing counseling agencies, community organizations, and others to build public awareness, educate at-risk borrowers and help them work more efficiently with servicers. As HUD leverages its relationships with local housing partners on the front-lines, we are also encouraging servicers to leverage their own relationships with nonprofits to expedite the processing and approval of modification applications. With Treasury, we are in the process of establishing guidelines for servicers entering into relationships with trusted advisors -- to guide borrowers through the application process and troubleshoot if the borrower appears to have been improperly deemed ineligible.

Thirdly, we are re-launching the Hope for Homeowners Program. As a result of improvements featured in the "Helping Families Save Their Homes Act of 2009," we believe it should be a more attractive option for many more homeowners. Servicers are now required to offer the option for a H4H refinancing in tandem with a MHA Trial Modification option.

Lastly, we recently unveiled FHA-Home Affordable to give qualified FHA-insured borrowers the opportunity to obtain assistance under terms comparable to those under MHA, without increasing costs to the taxpayer.


And so, thank you, Mr. Chairman, for the opportunity to participate in today's hearing and for your continued leadership.

Collectively, I hope our efforts signal to every family here in New Jersey and across the country that the Obama Administration is absolutely committed to helping as many families as possible avoid foreclosure. While we are seeing progress--and making changes where necessary--HUD shares your concerns about the speed of that progress and are working hard to resolve them.

As always, the Administration stands ready to explore with Congress additional ideas to help homeowners. We are completely committed to the success of this program -- but more importantly, to the families that rely on it.

With that, I am happy to answer any questions you may have.

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