[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
PROTECTING HOMEOWNERS DURING THE
PANDEMIC: OVERSIGHT OF MORTGAGE
SERVICERS' IMPLEMENTATION.
OF THE CARES ACT
=======================================================================
VIRTUAL HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT
AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
JULY 16, 2020
__________
Printed for the use of the Committee on Financial Services
Serial No. 116-104
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
43-341 PDF WASHINGTON : 2021
--------------------------------------------------------------------------------------
HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK McHENRY, North Carolina,
NYDIA M. VELAZQUEZ, New York Ranking Member
BRAD SHERMAN, California ANN WAGNER, Missouri
GREGORY W. MEEKS, New York FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri STEVE STIVERS, Ohio
ED PERLMUTTER, Colorado ANDY BARR, Kentucky
JIM A. HIMES, Connecticut SCOTT TIPTON, Colorado
BILL FOSTER, Illinois ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio FRENCH HILL, Arkansas
DENNY HECK, Washington TOM EMMER, Minnesota
JUAN VARGAS, California LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam TED BUDD, North Carolina
RASHIDA TLAIB, Michigan DAVID KUSTOFF, Tennessee
KATIE PORTER, California TREY HOLLINGSWORTH, Indiana
CINDY AXNE, Iowa ANTHONY GONZALEZ, Ohio
SEAN CASTEN, Illinois JOHN ROSE, Tennessee
AYANNA PRESSLEY, Massachusetts BRYAN STEIL, Wisconsin
BEN McADAMS, Utah LANCE GOODEN, Texas
ALEXANDRIA OCASIO-CORTEZ, New York DENVER RIGGLEMAN, Virginia
JENNIFER WEXTON, Virginia WILLIAM TIMMONS, South Carolina
STEPHEN F. LYNCH, Massachusetts VAN TAYLOR, Texas
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota
Charla Ouertatani, Staff Director
Subcommittee on Oversight and Investigations
AL GREEN, Texas Chairman
JOYCE BEATTY, Ohio ANDY BARR, Kentucky, Ranking
STEPHEN F. LYNCH, Massachusetts Member
NYDIA M. VELAZQUEZ, New York LEE M. ZELDIN, New York, Vice
ED PERLMUTTER, Colorado Ranking Member
RASHIDA TLAIB, Michigan BARRY LOUDERMILK, Georgia
SEAN CASTEN, Illinois WARREN DAVIDSON, Ohio
MADELEINE DEAN, Pennsylvania JOHN ROSE, Tennessee
SYLVIA GARCIA, Texas WILLIAM TIMMONS, South Carolina
DEAN PHILLIPS, Minnesota VAN TAYLOR, Texas
C O N T E N T S
----------
Page
Hearing held on:
July 16, 2020................................................ 1
Appendix:
July 16, 2020................................................ 33
WITNESSES
Thursday, July 16, 2020
Cohen, Alys, Staff Attorney, National Consumer Law Center (NCLC). 5
DeMarco, Edward J., President, Housing Policy Council (HPC)...... 10
Griffin, Marcia, Founder and President, HomeFree-USA............. 7
Williams, Donnell, President, National Association of Real Estate
Brokers (NAREB)................................................ 8
APPENDIX
Prepared statements:
Cohen, Alys.................................................. 34
DeMarco, Edward J............................................ 64
Griffin, Marcia.............................................. 72
Williams, Donnell............................................ 81
Additional Material Submitted for the Record
Green, Hon. Al:
Temporary Hardship Forbearance Plan Agreement................ 84
Written statement of the Mortgage Bankers Association........ 85
PROTECTING HOMEOWNERS DURING THE
PANDEMIC: OVERSIGHT OF MORTGAGE
SERVICERS' IMPLEMENTATION
OF THE CARES ACT
----------
Thursday, July 16, 2020
U.S. House of Representatives,
Subcommittee on Oversight
and Investigations,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 12:02 p.m.,
via Webex, Hon. Al Green [chairman of the subcommittee]
presiding.
Members present: Representatives Green, Beatty, Lynch,
Velazquez, Perlmutter, Tlaib, Casten, Dean, Garcia of Texas;
Barr, Zeldin, Rose, Timmons, and Taylor.
Ex officio present: Representative Waters.
Chairman Green. Thank you very much everyone. I am Al
Green, the Chair of the Subcommittee on Oversight and
Investigations. I would like to call the hearing to order at
this time, and I would like to, if I may, give just a brief
overview of what you can expect. We have called the hearing to
order. There will be an opening statement of the Chair; an
opening statement of the ranking member; an opening statement
from the Chair of the full Financial Services Committee,
Chairwoman Waters; witnesses will be introduced; witnesses will
give their opening statements; and then we will have Q&A of
witnesses, followed by adjournment.
The title of today's hearing is, ``Protecting Homeowners
During the Pandemic: Oversight of Mortgage Servicers'
Implementation of the CARES Act.''
Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time. Also, without
objection, members of the full Financial Services Committee who
are not members of this subcommittee may participate in today's
hearing for the purposes of making an opening statement and
questioning the witnesses.
Members are reminded to keep their video function on at all
times, even when they are not being recognized by the Chair.
Members are also reminded that they are responsible for muting
and unmuting themselves. I think this is something that is
worthy of repeating, because I have made the mistake of not
honoring this responsibility. I hope that I don't make that
mistake today. Members are also reminded that they are
responsible for muting and unmuting themselves, and to mute
themselves after they have finished speaking.
Consistent with the regulations accompanying H. Res. 965,
staff will mute Members and witnesses, as appropriate, only
when they are not being recognized by the Chair, to avoid
inadvertent background noise. Members are reminded that all
House rules relating to order and decorum apply to this remote
hearing.
The Chair now recognizes himself for 4 minutes for an
opening statement.
Let me start by thanking the Chair of the full Financial
Services Committee, Chairwoman Waters. It is always an honor to
serve under your leadership, Madam Chairwoman. I would also
like to thank the ranking member for the participation that he
has brought to this hearing, and I would like to also thank the
staff for the hard work that you have done in obtaining some
4,000 pages of servicer documents, including policies,
procedures, and data on the largest 11 servicers, and their
findings that include the fact that over 2 million forbearance
requests have been approved by these 11 servicers between March
27th and June 30th of 2020.
But we have also found some other things that are causing a
bit of consternation. Often, servicers fail to provide the
borrowers with the 180-day forbearance that has been set in the
Coronavirus Aid, Relief, and Economic Security (CARES) Act. Too
often, borrowers were given but 90 days. I have some evidence
of this failure to comply that I shall share with you. This
evidence is something that emanates from a request by a
constituent. One of my constituents has brought to the
attention of our office, this document that is titled,
``Temporary Hardship Forbearance Plan Agreement.''
I won't go through it in its entirety, but the important
points are these, that this borrower faced a hardship and has
had payments deferred for three of the payments that are due,
three payments. And the amount due is going to be in the final
analysis at the end of the deferment period, the amount due for
all payments within that deferment period and any late fees
that may have accrued from other sources of payments not being
made timely. The point is this, as it reads in this document,
the amount due on the next payment due date, which was 3 months
away from the date that the deferment period started, includes
the amount of payments being deferred under the plan. Well,
this is 90 days of deferments, not the anticipated 180 days
that the CARES Act affords borrowers. In fact, many of the
borrowers are not made aware of this.
And we find, pursuant to some of the testimony that you
will hear today, that many of these borrowers who are accorded
this 90-day period, as opposed to the 180 days, are borrowers
of color. It seems that this is, like many other things, having
a disproportionate impact on persons of color, which causes me
a good deal of consternation, I might add.
I would also say that this program that we established in
Congress has been received by the persons who are charged with
according these first agreements, these servicers--it has been
received by them as an honor system. We never intended for this
to be an honor system that would allow them to decide whether
or not they would accord persons the 180 days initially, with
the opportunity to extend for an additional 180 days. It was my
intent that borrowers would acquire the 180 days, and then they
could opt to have an additional 180 days. The remedy, it seems
to be, that of having to file a lawsuit, litigation, to have to
go out and hire a lawyer, and to have to take this to court, to
have some period of time that might go beyond the period of
time, quite frankly, that you anticipate having your
forbearance.
So, I am very much concerned about this. And my hope is
that we can get a means by which we can deal with this honor
system and bring this under the auspices of a situation such
that they will have to comply as opposed to choosing whether or
not they will comply.
With this having been said, it is my honor now to recognize
the ranking member of the subcommittee, Mr. Barr, for a 5-
minute opening statement.
Mr. Barr. Thank you, Chairman Green. It's good to see you
and all of our colleagues. And to our witnesses, thank you
again for joining us virtually for today's hearing. The
coronavirus pandemic and the associated government-imposed
shutdown of the economy disrupted the lives and livelihoods of
citizens across our country. Businesses shut down. Unemployment
skyrocketed. Workers who remain employed face uncertain
prospects for their long-term stability, and families are at
risk of losing their homes.
As you all know, Congress passed and the President signed
into law the CARES Act, which helped individuals and small
businesses by creating forbearance options for struggling
homeowners. At the peak, approximately 4.7 million families
were in forbearance. Many more families would undoubtedly have
lost their homes or struggled to make payments, if not for the
swift and decisive response from Congress and the
Administration: the implementation of the Paycheck Protection
Program (PPP); economic impact payments; the Federal Reserve
Lending Facilities under 13-3, which opened credit markets; and
other assistance programs under the CARES Act, which made it
easier for homeowners to pay their mortgages, for families to
stay in their homes, and for small businesses to build a bridge
to the other side of the crisis.
Fortunately, we have seen the number of mortgages in
forbearance decrease since the peak, declining a full 13
percent since May. However, we are not out of the woods yet.
There are still millions of homeowners facing hardship and
requiring additional assistance.
I hope to learn from our witnesses today what may be
helpful next steps as Congress contemplates additional
legislation. The far-reaching aid to American homeowners was a
collaborative effort between Congress, the Administration
regulators, and the private sector.
It is important to note that while the CARES Act mandates
that servicers of federally-backed mortgages offer a
forbearance option to borrowers, that same requirement is not
in place for loans held in portfolio or in private label
securities. Despite the absence of this mandate, however,
servicers of those non-federally-backed loans stepped up during
this crisis and offered similar forbearance terms for their
borrowers to those mandated under CARES. This shows that, in
times of crisis, the government and the private sector can work
together, and that the private sector has acted responsibly in
the interest of homeowners without having government mandates
imposed on them.
Unfortunately, my colleagues on the other side of the aisle
believe that a top-down mandate on all servicers would be more
effective. The partisan Health and Economic Recovery Omnibus
Emergency Solutions (HEROES) Act included a mandate for
automatic forbearance for all borrowers struggling to pay their
mortgages. Not only does this mandate appear unnecessary given
the market dynamics we have seen to date, but it actually has
the potential to further disadvantage borrowers by limiting
their options.
On May 4th, Chairwoman Waters and Chairman Green sent
letters to some of the largest mortgage servicers requesting
information about their interaction with customers following
the passage of the CARES Act. The implication of the letter was
that mortgage servicers skirted their responsibilities under
the CARES Act or somehow profited by steering their customers
into forbearances that were not in the best interest of the
borrower.
The data that the Majority received in response to their
letter told a very different story, and demonstrated that
servicers are working well with borrowers in their times of
greatest need. This is a hearing in search of a problem. Now,
that is not to say that there weren't some hiccups along the
way. There were understandable growing pains and bumps in the
road as servicers staffed up call centers, updated websites,
and implemented the necessary technology to help their
customers.
However, given the scope and scale of the forbearance
request and the short timeframe to implement new processes, the
servicers overall should be commended on their treatment of
borrowers in a time of crisis. And I think the creditors, the
mortgage creditors and the servicers have learned from
experience that the expense of foreclosure and repossessing
these properties is not in anyone's best interest. Keeping
homeowners in their homes is in the best interest of all
involved, particularly those struggling Americans who need
help.
I look forward to further exploring how servicers work with
their customers, the efficacy of the CARES Act provisions in
keeping families in their homes, and what additional actions
may be required by Congress in potential areas of improvement
in the servicer-borrower relationship. And, again, I thank all
of you for being here today, and I thank Chairman Green and
Chairwoman Waters for holding this hearing. I yield back.
Chairman Green. Mr. Barr yields back. The Chair now
recognizes the Chair of the full Financial Services Committee,
the gentlewoman from California, the Honorable Chairwoman
Waters, for 1 minute.
Chairwoman Waters. Thank you.
Mr. Chairman, I am so appreciative of you for holding this
hearing this morning. As I took my seat, I heard you read
something where there appeared to be a demand from a servicer,
from an institution that was a demand for what would be
considered a full payment for the months that have been missed.
I just wanted to make sure that what I heard you saying was
that someone had been demanded to pay the full amount of the
missed payments that was about 4 months' past due. Is that
correct?
Chairman Green. Three months of forbearance, yes, ma'am,
and it would be payable upon the end of the 3-month period.
Chairwoman Waters. Thank you very much. I wanted to make
sure that I had the information correct.
Mr. Chairman and members, this is precisely what we want to
avoid. As a matter of fact, I have to say to Mr. Barr, the
experience that we had started in 2004 with the foreclosures
that took place, with the exotic products that were placed on
the market, with all of what caused us to experience disaster
in our communities because of these unprecedented foreclosures
leads us to understand what we must do to avoid homeowners
losing their homes.
I understand that my time is up. But Mr. Chairman, I want
to thank you for the hearing. And I am absolutely committed to
the proposition that this will not happen, that we are going to
have a credible forbearance situation for our homeowners that
will not cause them to lose their homes. I yield back the
balance of my time.
Chairman Green. The chairwoman yields back. At this time, I
would like to introduce our witnesses and thank them for coming
and being a part of this hearing.
We have with us today: Alys Cohen, a staff attorney for the
National Consumer Law Center; Marcia Griffin, founder and
president of HomeFree-USA; Donnell Williams, president of the
National Association of Real Estate Brokers; and Ed DeMarco,
president of the Housing Policy Council.
Welcome, again. Thank you for being with us virtually. You
will each be recognized for 5 minutes to give an oral
presentation of your written testimony. A chime will go off at
the end of your time, and I would ask that you respect the
members' and other witnesses' time by wrapping up your oral
testimony. And without objection, your written statements will
be made a part of the record.
Once the witnesses finish their testimony, each member will
have 5 minutes to ask questions.
With that, Ms. Cohen, you are now recognized for 5 minutes.
STATEMENT OF ALYS COHEN, STAFF ATTORNEY, NATIONAL CONSUMER LAW
CENTER (NCLC)
Ms. Cohen. Thank you very much, Chairman Green, Ranking
Member Barr, and members of the subcommittee. Thank you for the
opportunity to testify today. I am testifying on behalf of the
low-income clients of the National Consumer Law Center, as well
as 20 other consumer legal services and civil rights
organizations. The unprecedented coronavirus pandemic has
brought illness, death, unemployment, and greater economic
insecurity to people across the country.
Communities of color, particularly Black and Latinx people,
have been especially hard hit. Preexisting inequalities are
exacerbated by the current crisis, and Black and Latinx
homeownership is imperiled.
To mitigate some of the harm wrought by the pandemic,
Congress must continue its vigilance in protecting homeowners,
improve transparency for housing relief programs, increase its
efforts to regulate and reform the mortgage servicing industry,
and center relief for Black and Latinx homeowners. The Federal
regulators must act as well, to prevent avoidable foreclosures
and promote sustainable homeownership. Congress must pursue
dedicated efforts to protect and expand Black and Latinx
homeownership and pass additional measures, including
collection of loan level borrower, loan performance, and lost
mitigation data with free public reporting. Representative
Porter's bill, H.R. 6835, is a good start on this. Expansion of
CARES Act protections must include standardized forbearance for
all mortgages, automatic forbearance for borrowers who have
missed two payments or more, affordable repayment options for
borrowers exiting forbearance plans who are seeking to resolve
delinquencies that are available prior to foreclosure, written
notice and in-language information for limited English
proficient borrowers, a moratorium on negative credit
reporting, targeted support for the hardest-hit communities,
including funding for legal services, housing counseling, and
cash assistance for delinquent borrowers, and measures to
prevent neighborhood blight.
Moreover, Federal regulators must increase oversight,
ensure mortgage assistance meets the needs of diverse
communities of homeowners, improve regulations, including
recent CFPB rules that leave homeowners at risk, and consider
future reforms in the mortgage servicing industry, aligning
servicer incentives with those of homeowners and investors. We
commend the regulatory extension of the foreclosure moratoria,
FHA's recent announcement to expand lost mitigation options,
and GSE expansion of post-forbearance options, but more is
needed.
Black and Latinx homeowners are more likely now than White
homeowners to struggle paying their mortgage, seek assistance
from their servicer, and miss payments instead of receiving
forbearance. While all homeowners are more likely to report
missing payments rather than deferring payments with their
servicer, in the Census Bureau's Household Poll Survey at the
end of June, 4 times as many Black homeowners recorded missing
payments as compared to deferring payments. Among Hispanic or
Latinx homeowners, and homeowners who identified as other or
reported two or more races, there were 2 times as many
homeowners reporting that they had missed payments as compared
to deferring. Only about 1.4 times as many White homeowners
report missing rather than deferring payments.
How can we help homeowners who have not yet received
assistance? And what can we do for the disproportionately large
group of borrowers of color facing this challenge?
While we focus today on efforts to contain the fallout from
the pandemic, we should not lose sight of the fact that for
many distressed borrowers, the mortgage servicing industry
remains fundamentally broken. Our ability to prevent another
great loss of homeownership for Black and Latinx families
depends on our ability to have servicers see that performing
default servicing well is in their interest as well as the
interest of financially distressed homeowners and their
communities and the economy.
Our nation is facing unprecedented challenges that present
us with a real chance to look at our priorities and assumptions
and make material progress in how we measure success and
inclusion. Thank you.
[The prepared statement of Ms. Cohen can be found on page
34 of the appendix.]
Chairman Green. Thank you for your testimony, Ms. Cohen.
Ms. Griffin, you are now recognized for 5 minutes.
STATEMENT OF MARCIA GRIFFIN, FOUNDER AND PRESIDENT, HOMEFREE-
USA
Ms. Griffin. Thank you very much. My name is Marcia
Griffin, and I am president and founder of HomeFree-USA, a
nationwide HUD-approved housing counseling organization. I
appreciate this opportunity to appear before you to provide
firsthand insight surrounding the plight of homeowners in this
pandemic.
Allow me to emphasize the importance of housing counseling
organizations, which I like to call nonprofit homeownership
providers. Court-approved housing counseling organizations like
HomeFree-USA are mission-based entities created to provide
everyday people with the tools they need to achieve and sustain
their housing and homeownership goals. We help renters to
become sustainable homeowners and help existing homeowners
avoid mortgage delinquency and foreclosure. We are somewhat
like marriage counselors--when a homeowner has unanswered
questions, needs credit help, doesn't know what to do, doesn't
understand the servicer's jargon, we bring them together with
lenders and servicers to ensure that everyone is on the same
page with the goal, of course, of finding a mortgage solution
that works for both parties.
According to the U.S. Congress Joint Economic Committee,
the average foreclosure costs everyone $77,934. Lenders lose an
average of between 12 and 19 percent of the home's value at
foreclosure, and they spend about $50,000 in the process. If
counselors are able to prevent foreclosure, the value to
lenders, investors, and the country is enormous.
So, what have we seen in the market today? Calls come in
daily from homeowners who are exhausted, paralyzed by fear,
COVID-sick, and have lost their jobs. Everyone is concerned
that they will lose their home.
First, in my work at HomeFree-USA, and with my colleagues
at the National Housing Resource Center, we do believe that
servicers have improved since the start of the pandemic. But
many still need better-trained customer-facing employees. Some
call center employees read scripts that they are not familiar
with, don't have time to answer questions, and are just not
familiar enough with the process or procedures to assist
consumers.
Second, counselors assist homeowners who are probably
denied a forbearance. We have seen a troubling concentration of
this issue with veterans' loans. We are seeing homeowners who
may have recently completed a loan application, who have been
denied, or borrowers who have just missed a payment in March or
February,and they have also been denied.
Furthermore, we help homeowners who have requested a
forbearance but still have questions about whether it has been
approved and how to plan ahead for repayment. There is a
frustratingly large number of homeowners who are unemployed but
are still being told that lump sum payments are due at the end
of the forbearance. Other occurring issues are highlighted in
my written testimony.
Whether right or wrong, too many of our clients are
unfamiliar with the terms in the servicer scripts. This only
compounds the existing sense of distrust and fear of the
banking industry. People of color are particularly vulnerable
to this sense of distrust of lenders and servicers as a result
of their most recent experience in the last housing crisis.
People of color rely heavily on organizations like HomeFree-USA
to advocate for them. What can be done? First, servicers do not
have the capacity to handle individualized support of
vulnerable homeowners. It is essential that housing counselors
are supported so that we do not have to turn away a single
consumer, thus freeing up servicers because we can handle the
most challenging cases.
Second, we feel that the Consumer Financial Protection
Bureau (CFPB), the Federal Housing Finance Agency (FHFA), and
HUD should be more solution-focused and proactive in their
monitoring of repayment issues. We feel the Federal agencies
should coordinate and should identify real-time solutions and
actively update policies and procedures.
Third, we need a streamlined loss mitigation loan procedure
like we had with the Home Affordable Modification Program
(HAMP). The biggest problem we have will be homeowners who
return to work but have significantly reduced incomes. There
will be a need for aggressive and affordable loan modifications
for these borrowers. Housing counselors are capable of helping
homeowners and servicers through these complicated processes.
Last, more outreach is needed. Consumer awareness of
options and processes need to be better distributed.
I very much appreciate this opportunity to illuminate our
concerns about COVID-related mortgage servicing, the importance
of housing counseling intervention, and to sound the alarm that
the worst is yet to home. HUD-approved counseling organizations
can play a huge role in--
Chairman Green. You will have to wrap up her testimony,
please. You have exceeded your time.
Ms. Griffin. Okay. Thank you.
[The prepared statement of Ms. Griffin can be found on page
72 of the appendix.]
Chairman Green. Thank you for your testimony.
Mr. Williams, you are now recognized for 5 minutes.
STATEMENT OF DONNELL WILLIAMS, PRESIDENT, NATIONAL ASSOCIATION
OF REAL ESTATE BROKERS (NAREB)
Mr. Williams. Chairman Green, Ranking Member Barr,
Chairwoman Waters, and distinguished members of the
subcommittee, thank you for the opportunity to testify today to
discuss the importance of protecting homeowners, especially
during these difficult times. I also want to thank Chairwoman
Maxine Waters for calling this hearing.
My time is Donnell Williams. I serve as president of the
National Association of Real Estate Brokers, the country's
oldest and largest Black real estate trade association. Founded
in 1947, our mission, democracy in housing, has guided our
efforts to ensure fair housing practices in neighborhoods
across the country, especially in communities of color. I am
also the owner of Destiny Realty, a brokerage firm
headquartered in Morristown, New Jersey.
COVID-19 is disproportionately affecting Black homeowners.
It is well-documented that the COVID-19 pandemic has had a
crushing and devastating effect on Black homeowners and caused
mass unemployment, putting a deep economic strain on many Black
borrowers who have worked hard to achieve the American Dream of
homeownership. As of mid-June 2020, probably 24 percent of
Black homeowners reported some difficulty making their mortgage
payments, compared to White homeowners. There is a 13 percent
gap between Black homeowners and White homeowners receiving
forbearance under Section 4022 of the CARES Act, which allows
borrowers to apply for a forbearance period of up to 360 days.
Solutions: In order to address the challenges facing Black
homeowners as a result of the pandemic, it is imperative that
Congress take action to ensure that congressional and
governmental efforts to maintain homeownership are equitable
and include Black homeowners. We urge Congress to take the
following actions. One, allocate specific funds targeted to the
preservation of Black homeownership.
Two, provide assistance for mortgage borrowers not covered
by the CARES Act. Private mortgage lenders must be required to
offer government-supported forbearance to their borrowers
comparable to the treatment of government-supported mortgage
loans.
Three, require FHA and all servicers to notify borrowers in
all communications, including mail, electronic communication,
and phone calls, of their rights to apply for forbearance.
Require all servicers to have dedicated toll-free lines,
staffed with representatives who are knowledgeable about their
forbearance procedures.
Four, create a large-scale public affairs initiative. The
Federal Government is allocating resources to building public
awareness around the health risks associated with COVID-19.
Similar efforts should be made to inform borrowers of their
rights.
Five, ensure that FHA borrowers and GSE borrowers continue
to have the same access to mortgage forbearance protections,
financial relief, and assistance.
In conclusion, the National Association of Real Estate
Brokers, whose members are known as REALTISTs, since its
inception has stood with democracy in housing, and we look to
the guardians of the communities we serve. We will continue to
advocate for the preservation and sustainability of
homeownership for Black Americans and all Americans. The
REALTIST organizations are the trusted advisers of our
community and the conscience of the real estate industry. And
we need Congress to align with NAREB'S declaration of a cease-
and-desist on the decline of Black ownership.
Thank you for the opportunity to testify before the
subcommittee today, and I will be glad to answer any questions.
Thank you.
[The prepared statement of Mr. Williams can be found on
page 81 of the appendix.]
Chairman Green. Thank you very much for your testimony, Mr.
Williams.
Mr. DeMarco, you are now recognized for 5 minutes.
STATEMENT OF EDWARD J. DEMARCO, PRESIDENT, HOUSING POLICY
COUNCIL (HPC)
Mr. DeMarco. Chairman Green, Ranking Member Barr,
Chairwoman Waters, and members of the subcommittee, thank you
for inviting me to testify on how mortgage servicers are
responding to the challenges facing homeowners because of the
novel coronavirus.
Many homeowners are in deep economic distress resulting
directly or indirectly from the pandemic. Also, while anyone is
vulnerable to the virus, the health and economic costs have
disproportionately affected communities of color and lower-
income households.
From the outset of this emergency, Housing Policy Council
members and other mortgage servicers have been committed to
keeping individual borrowers and families in their homes.
My written statement covers four topics, which I will
briefly summarize here. First, the challenges facing homeowners
today are not the result of poor underwriting standards or
inappropriate business practices. This pandemic is a national
health crisis, and the steps taken to combat it had enormous
economic consequences.
In response, HPC members and other mortgage servicers have
shifted virtually all of their operations out of call centers
and office buildings to their own homes, and trained their
staffs remotely in modified technology and managed the enormous
inflow of borrower inquiries. They have set up automated online
tools for borrowers to educate themselves and request payment
relief. They began offering homeowners forbearance options
before the passage of the CARES Act. And they have extended
forbearance to homeowners who do not have federally-backed
mortgages. They have executed against an evolving series of
programming and regulatory announcements from various Federal
programs and agencies.
By late May, just 2 months since enactment of the CARES
Act, nearly 4.8 households were on a forbearance plan. That
total has declined 13 percent since then. According to Black
Knight Financial Services, by late May, 12.3 percent of FHA and
VA loans were in forbearance, and 7.1 percent of GSE loans were
in forbearance. Servicers of these loans are required by the
CARES Act to offer forbearance to a customer who asks for it
claiming a COVID-19 economic hardship. Yet, for non-federally-
backed mortgages, 9.6 percent of such loans were also waived
forbearance by late May. These include bank portfolio loans and
loans in private label securities. This is a clear situation
that bank portfolio lenders and other investors have also
responded without a Federal directive, providing borrower
payment relief at an even greater rate than we see for GSE
loans.
Second, I want to acknowledge the partnerships and
information sharing that has marked the last 4 months. Not only
has the industry been trying to work together to develop best
practices, we have been joined in partnerships with numerous
other organizations and stakeholders, as well as numerous
government agencies and regulators. These partnerships
demonstrate a level of common concern for the families whose
financial situations have been disrupted by this national
health emergency. I believe it is because of this communication
and coordination that relief has been provided to so many so
quickly.
Transitioning from forbearance to a longer-term solution
requires dedicated efforts from the borrower and servicer to
ensure the best resolution. The sooner a borrower begins
repaying their mortgage, the sooner he or she resumes the
wealth-building opportunity that homeownership provides. When a
borrower is ready to resume monthly payments, borrower contact
with their servicer is critical to achieve a seamless
transition and to ensure their certainty among all the parties
regarding the repayment of the forborne amount. The options
available are dependent on several factors, some unique to the
loan program and some based on the borrower's own
circumstances. Generally, the options include a short-term
repayment plan, repayment at the end of the loan term, or a
longer-term repayment by adding the outstanding payments into
the loan balance and modifying the loan.
With the forbearance provisions in the CARES Act, Congress
has already taken the cornerstone action to assist borrowers
and servicers. We recognize that the pandemic has negatively
affected many consumers and communities and that some of the
beneficial stimulus provided under the CARES Act is coming to
an end. Thus, we support additional measures by the Congress to
provide fiscal stimulus to hard-hit consumers and communities.
Thank you for inviting me to participate today.
[The prepared statement of Mr. DeMarco can be found on page
64 of the appendix.]
Chairman Green. Thank you for your testimony, Mr. DeMarco.
I now recognize the gentlewoman from California, the Chair
of the Full Committee, Chairwoman Waters, for 5 minutes for
questions.
Chairwoman Waters. Thank you very much, Chairman Green. And
I would like to thank all of our witnesses who are here today.
I know of their worth, I have worked with them over the years,
and they have been counseling and helping our homeowners, and I
am very, very pleased that they are all here this morning.
But here is what I would like to do. I would like to find
out, and I will ask each of our witnesses, in the time that I
have, whether or not the language in the HEROES Act is doing
exactly what we need it to do. We know that we are provided the
right to request and receive forbearance for our homeowners on
their mortgage payments for up to 6 months, with the option to
extend for an additional 6 months, for a total of one year. I
think there was some information shared with us that homeowners
don't necessarily know this. What can we do to make sure that
servicers share this information? And I would also like to
know, should there be additional language about loan
modification for forbearance?
So, let me ask each of our witnesses to share with me
whether or not they think it is sufficient.
Let me start with Marcia Griffin, whom I have met with for
so many years. Thank you, Marcia.
Ms. Griffin. Wonderful. Thank you. Housing counseling
organizations definitely support the HEROES Act. This is great
progress. It also really helps to sort of rein in some of the
issues that we are seeing with private, non-Federal loans. We
are very, very appreciative of the suggestion of support,
supplemental support for housing counseling. It is very, very
much needed.
The focus on repayments and forbearances is good. And we
should certainly continue. We have spoken about our views on
the HEROES Act, also, in our written testimony. So, we are just
applauding you.
Chairwoman Waters. I want to make sure I get to the other
two witnesses. National Consumer Law Center staff attorney, Ms.
Cohen, do you think that we need additional information
following the 1-year forbearance?
Ms. Cohen. Thank you for your question, Chairwoman Waters,
and for being at the hearing today. Your question sounds like
it is focusing primarily on this question of whether people
need more than one year of forbearance?
Chairwoman Waters. Yes.
Ms. Cohen. First of all, the HEROES Act has a lot of
excellent provisions in it, and we hope to see the Senate take
up something like that, look at those issues, and find a way to
get something done.
With regard to your specific question, as you heard Dr.
DeMarco, people need to transition from forbearance to
repayment. And so what we would like to see is legislation and
programming to help people get into repayment. Now, of course,
if the financial situation in the country goes on in an
unexpected way, we may need to reevaluate that. But at this
point, what we would like to see and what is in the HEROES Act
and could be in Senate legislation is more affordable post-
forbearance repayment options that are mandatory.
Chairwoman Waters. Very good. I think we are talking about
the same thing, when you talk about repayment options after the
forbearance period.
Let me ask Donnell Williams, president, National
Association of Real Estate Brokers. I have worked with the
REALTORS, just reconsolidated in L.A., and I appreciate your
work so much. What do you think--you have given us some advice,
and you have pointed out a few things that you think we can do
additionally. Of those four or five things that you pointed
out, which stands out most in your mind that we should do to
make sure that this forbearance and loan modification process
works?
Mr. Williams. I think that the servicers need to get the
information about the borrowers' rights out to the community
and to the borrowers. That can be done by mail--they are not
getting this information or trusting this information in any
other kind of way. If it doesn't come through the REALTOR
organization, and it does come through the mail, that would be
great through email and what have you. We also need to have
data collection. But servicers need to supply this information,
this data to the CFPB and to Congress.
I just had a borrower in Irvington, New Jersey, and another
one in Morris Township, New Jersey, tell me their servicer,
like Congressman Green said, only gave them 3 months, and that
the whole balance would be due in 90 days.
Chairwoman Waters. Well, let me stop you. Do you think we
should have some penalties for servicers who violate the law
that we have in the HEROES Act, and require lump sum payments
like that?
Mr. Williams. I do believe so. They are roadblocking. They
are stopping. They are clogging it up so that we can't have
progress.
Chairwoman Waters. Well, I thank you for your testimony
here today.
And thank you, Mr. Green. I yield back the balance of my
time.
Chairman Green. The gentlelady yields back.
The ranking member of the subcommittee, Mr. Barr, is
recognized for 5 minutes for questions.
Mr. Barr. Thank you, Mr. Chairman. And thank you to all our
witnesses for your testimony, which was, obviously, very
powerful testimony about the vulnerability of homeowners at
this time. And if I may just offer one comment or observation
about the testimony of all of our witnesses, it just speaks to
the very important need for us to avoid any future shutdowns of
the economy. Of course, we need to practice hygiene and mask-
wearing and all of the things to prevent the spread of the
virus, but particularly for minority borrowers, based on the
testimony that so many have offered here today, it just speaks
to the importance of getting people back to work so that they
can provide for their families and meet those payment
obligations.
Let me start with a question for Dr. DeMarco about the non-
federally-backed mortgages. I think your testimony was that for
those non-government-backed mortgages, those borrowers are
actually experiencing a higher forbearance rate than federally-
backed mortgages.
Dr. DeMarco, what does that tell you about the marketplace
and how the marketplace is responding without the HEROES Act?
Mr. DeMarco. I think it is telling us a couple of things. I
think it is telling us that what was in the CARES Act, the
forbearance provisions in the CARES Act that had been
implemented for federally-backed mortgages is a sound approach
to dealing with this kind of situation, and that servicers that
are not required under the CARES Act to provide this support
are still utilizing those same tools to assist their customers
in non-federally-backed mortgages.
I think that servicers recognize in this situation that
payment forbearance is an appropriate response to assist their
borrowers, and, in fact, they are doing that, whether required
by the CARES Act or not. So, this has really developed as a
best practice that it is being utilized by servicers of non-
federally-backed mortgages, very effectively, and as you noted
and as I noted, at a greater rate than we see in the GSEs now.
Mr. Barr. The HEROES Act, which, as you know, passed
without any Republican support, contains some new parameters
around options for homeowners experiencing difficulties. But
apparently, the authors of the HEROES Act believe that
instituting mandatory automatic forbearance for all borrowers
and limiting loan modification options would benefit borrowers.
Dr. DeMarco, how would these proposed sections of the
HEROES Act impact a servicer's ability to work with their
customer, and would they actually help or hurt American
families trying to stay in their homes? And in the context of
answering that question, could you talk about the importance of
communication between servicers and borrowers?
Mr. DeMarco. That is actually where I was going to start. I
understand the intention behind wanting to create an automatic
forbearance opportunity for borrowers. But there is actually, I
suggest, something more important here that actually comes out
of the work that Congress did in the Dodd-Frank Act and has
been implemented since by the CFPB, but it was also part of the
development servicer practice as a result of the Great
Recession.
Now, there is the importance of timely communication
between a servicer and their customer, if the customer is
having problems paying their mortgage. So we don't want to wait
60 days and say, ``Oh, well, we haven't had a check come in; we
put them on forbearance.'' Servicers have to be and should want
to be in contact with their customers before you get to 60
days, and want to understand what is the customer's situation
so that they can, in a timely way, deliver an appropriate
support or opportunity to help get that homeowner back on their
feet. So, for example, the homeowner may have missed 2 months
of payments for reasons having nothing to do with an economic
disruption due to the pandemic, but for some other reason. And
so, the servicer wants to get in touch with that homeowner,
find that reason, and get to solving that homeowner's
particular problem.
That is why we should suggest that the idea of making sure
the servicer is actually staying in contact with their customer
and the customer is staying in contact with the servicer is
going to yield a better outcome for the various situations that
we are going to see here.
Mr. Barr. My time has almost expired, but I think it is
important to recognize that different homeowners face different
difficulties, and a one-size-fits-all approach may not be
better. And if we can get folks into repayment quicker, we
should do that.
And, finally, what we did in the CARES Act or how much
forbearance requirement or forbearance is allowed in these
cases, nothing can replace getting people back to work and
getting kids back in school so people can take care of their
mortgage obligations. Thanks so much, and I yield back.
Chairman Green. The gentleman's time has expired.
The Chair now recognizes the gentlewoman from Ohio, Mrs.
Beatty, who is also the Chair of our Subcommittee on Diversity
and Inclusion, for 5 minutes for questions.
Mrs. Beatty. Thank you so much. It is certainly my honor to
be on this subcommittee, and I thank you and Ranking Member
Barr, and I certainly thank our Chair of the Financial Services
Committee, Chairwoman Waters, and Ranking Member McHenry.
First, let me say to all the witnesses, thank you for your
time and for your testimony.
My first question--I am going to try to get through several
questions, so, if I kind of put my hand up or move on, please
excuse that, it is just because of the timer.
This question is for you, Ms. Cohen. As you know, the CARES
Act is very explicit about the protections Congress intended
for homeowners with regards to forbearance. Borrowers
experiencing financial hardship due to COVID-19 were to be
provided forbearance for 180 days with the possibility of an
extension for another 180 days. Despite this, I have gotten
calls, dozens of calls, and they are confused about what the
law said and what my constituents' mortgage servicers were
offering in that way.
As you know, we passed the CARES Act on March 27th. Can you
tell me, despite the confusion going on in the marketplace that
we all knew about--where was the CFPB, who has oversight of the
mortgage services industry, and why did it take us until June
4th?
Ms. Cohen. Thank you for your question. In terms of the
complaints that you are hearing, we do have some good
protections in the CARES Act. And the Federal regulators only
need to step up their game and do much greater oversight of the
servicers. In terms of the CFPB, they appear to have spent most
of their time relaxing regulations for servicers and providing
advice for homeowners. Homeowners need protection.
Mrs. Beatty. Do you think they should have been doing more?
I get the relaxing part, but people are still hurting, and they
have oversight. Yes or no?
Ms. Cohen. Yes, the CFPB should do more, starting with
making sure people don't face foreclosure until they get help.
Mrs. Beatty. Thank you.
Let me move on to the next question. Mr. DeMarco, this
question is for you. Earlier in the week, and maybe you have
seen this article, ProPublica published a story entitled,
``Trump Financial Regulator Quietly Shelved Discrimination
Probes into Bank of America and Other Lenders,'' which found
that the Office of the Comptroller of the Currency (OCC) halted
or stalled at least six investigations into discriminatory
mortgage redlining against the recommendations of their own
career staff. This was the same time and the same agency that
was working to undermine and water down the Community
Reinvestment Act (CRA), which is supposed to protect against
that type of discriminatory lending. In this article, they
found that the OCC had found patterns of discriminatory lending
against African Americans and Latinos in several lending
institutions, in several areas around the country. It also
listed a whole lot of other things that were shelved.
Mr. DeMarco, many of the lending institutions identified in
the articles are members of those associations you lead. Can
you tell me your response to this, and what are you doing to
ensure that members of your organization are not perpetuating
the social and economic injustices that African Americans and
other minorities continue to face? This is very troublesome to
me.
Mr. DeMarco. Certainly, and I would understand that Mrs.
Beatty. Forgive me, I am not aware of this article. I have not
read it or seen it, so I am at a disadvantage there. But I will
take what you said, and certainly, I would be concerned about
those sorts of issues. I am sure if any of my member companies
are named in that article, that they are looking at what is
going on here, and I would be happy to go and take a look.
Mrs. Beatty. Thank you so much. Let me go to the chairman.
Mr. Chairman, I would like to request that the committee
use its powers and resources if necessary to subpoena documents
from the OCC related to previous lending discrimination
investigations, and seek depositions of senior leaders of the
OCC, including the Director himself, Joseph Otting, to get to
the bottom of these allegations. We have been hearing them. It
has been talked about, and I am sorry that Mr. DeMarco is not
familiar with the article. I will have my staff also send that.
And my time is up. I yield back.
Chairman Green. Your request is duly noted and will be
acted on in the due course of events.
The Chair now recognizes the gentleman from New York, Mr.
Zeldin, for 5 minutes.
Mr. Zeldin. Thank you, Mr. Chairman. I appreciate the
testimony here today.
Thank you to Chairman Green and to Ranking Member Barr and
Chairwoman Waters, as well. I appreciate all of you holding
this hearing.
I have the honor and privilege of representing the First
Congressional District of New York, which covers most of
Suffolk County. Suffolk County is one of the most expensive
places to live in the country, so affordable mortgage options
are essential to my constituents.
We are here today to discuss mortgage servicers who play a
client-facing role in mortgage finance. On April 10th, I
spearheaded a letter to Secretary Mnuchin with 19 other members
of this committee. The letter highlighted the need to ensure
adequate liquidity for mortgage servicing because residential
mortgage servicers are typically obligated to advance payments
of principal, interest, taxes, and insurance on to investors
and municipalities and insurers, whether the borrowers make
those payments or not.
If a homeowner falls behind on payments, it is the
servicer's role to work with the borrower and find ways to get
them back on track through loan modifications. In the CARES
Act, Congress decided that a nationwide, broad-scale
forbearance program was needed, but it was important that steps
were taken to buoy the market if forbearance take-up rates
continue to skyrocket.
Mortgage servicers have a vital role to play in helping
borrowers, but cannot shoulder the entire onus of government
actions to protect the American homeowners impacted by COVID-19
if they do not have access to the needed liquidity to execute
on those government actions.
I am pleased that Federal agencies have focused on this and
continue to work with servicers on how best to serve
homeowners. FHFA and HUD issued guidance and scripts to be
distributed to mortgage servicers. These step-by-step
instructions have helped to guide servicer discussions with
borrowers. Additionally, the GSEs and Ginnie Mae have provided
assistance to servicers dealing with loans in forbearance.
Meanwhile, the New York attorney general, on April 24th,
called for mortgage servicers to, ``automatically waive late
fees and place homeowners in 3-month forbearance as soon as a
payment is missed, whether or not this action is requested by
the homeowner.''
Dr. DeMarco, my question first for you is, should borrowers
be automatically enrolled in forbearance, or is it better for
the borrower to speak with his or her servicer first regarding
the best options for his or her situation?
Mr. DeMarco. I think it is definitely better for the
borrower to speak with their servicer as soon as they have any
issues with making a mortgage payment, explain what those
issues are to the servicer, and the servicer may work with the
borrower to determine what is the appropriate course and the
best course for that particular borrower's circumstances.
Ms. Cohen. May I respond to that?
Mr. Zeldin. Please.
Ms. Cohen. Because the subject came up twice, I will do it
quickly. We agree that people should try to talk to their
servicers, but as I stated before, more borrowers are not
paying their mortgages than are making forbearance arrangements
with their servicers, according to the U.S. Census Bureau.
People who are already late on their mortgages have taken a hit
on their credit, and they shouldn't face foreclosure, and they
should get more assistance. Thank you.
Mr. Zeldin. Thank you.
Dr. DeMarco, forbearance take-up rates seem to have leveled
off for now. What is your assessment of the servicer liquidity
situation?
Mr. DeMarco. I think that, as a result of the
administrative actions that you mentioned, particularly by FHFA
and HUD, as well as some actions by the Federal Reserve and the
mortgage-backed securities market, the liquidity situation has
stabilized. And the interesting thing here is by regulatory
actions that put guardrails around or limits around the
servicers' liquidity responsibility on any given loan actually
enabled the private market to step in and provide additional
liquidity. Once we had greater certainty about what the rules
of the road were going to look like in terms of the answers and
what the duration was going to look like, the markets actually
stepped in. And we still believe that the Federal Reserve and
the Treasury can and should be ready to step in as needed if
the situation turns worse again and liquidity is needed for
nonbank services.
Mr. Zeldin. Thank you. My time is running out, so I just
want to thank again all of the witnesses for being here.
To Chairwoman Waters, Chairman Green, and Ranking Member
Barr, it is great to see all of my colleagues here. I look
forward to seeing you in person. I hope you and your families
are healthy. To all the staff on the call, thank you for what
you do to make this hearing possible and for your service to
the Financial Services Committee. I yield back.
Chairman Green. The gentleman's time has expired. The Chair
now recognizes the gentleman from Massachusetts, Mr. Lynch, who
is also the Chair of our Task Force on Financial Technology,
for 5 minutes.
Mr. Lynch. Thank you very much. I appreciate you holding
this hearing, Mr. Chairman.
I guess, I would like to look further out in terms of, in
January or when we--hopefully when we start to come out of this
lockdown, especially in the southern States, what does the
transition look like in terms of recognizing the inability--
well, recognizing the tremendous pressure that has been put on
individual homeowners, in banks, local community banks, what
does that transition look like in terms of trying to slowly,
incrementally get us back to where there is full opportunity
for people to catch up on their mortgage payments, in some
cases, reengineering some of the mortgage products that are out
there or reconstituting the mortgages that are on property that
are inadvertently falling behind? How does that all come
together? And is it the mortgage servicer or is it--obviously,
the mortgage servicer has obligations to the shareholders. So,
I am little bit unclear on how we can reengineer this in a way
that doesn't put the homeowner or the renter, in some cases, at
severe risk.
Let's say the President pulls off the emergency status, and
by Executive Order might end all of the support and relief that
we have been providing, what does that look like, and how do we
help those people transition slowly back to some semblance of
normalcy?
Mr. DeMarco. I will be glad to take a crack at that,
Congressman.
With 4.8 million households in forbearance, you can imagine
that not everyone is going to come out of forbearance in the
same situation.
Over the last few months, I think between FHFA, the GSEs,
FHA, and I don't want to leave out VA and USDA, there has been
a lot of development about refining for servicers the
guidelines of these programs for what that post-forbearance
looks like, but I think across all of them, it can be simply
boiled down into, broadly speaking, three buckets.
For a borrower who comes out of forbearance and actually
has the capacity not just to continue to pick up their mortgage
payment, but to make a greater payment, they may determine they
want to be on a short-term repayment plan and get caught up
faster.
For a lot of borrowers, if they get back to work, they can
resume their pre-pandemic mortgage payment, but can't pay more
than that. In that case, for most of those borrowers, their
forborne payment is going to get added to the end of the loan--
life of the loan to be paid then and then resume a normal
payment, but for those whose income has been permanently
disrupted, they can't go back to their prior payment, we are
going to be able to do a loan modification where we get a way
of getting them caught back up by redoing the loan using loan
modification terms. That is it, briefly.
Mr. Lynch. Okay. So you don't anticipate any objection on
the part of some of the shareholders that are due payments from
the mortgage servicers, and you don't expect any action that we
would have to take in order to make that happen? It is already
in place?
Mr. DeMarco. Certainly, with the--
Ms. Cohen. I can take that.
Mr. DeMarco. Okay.
Ms. Cohen. Just briefly, what we saw in the last crisis and
what we continue to see is that, as you said, Mr. Lynch,
servicers on private mortgages are beholden to the guidelines
from the investors, and so what we would like to see is a safe
harbor for mortgage servicers from investor liability so that
they can provide loan modifications along the lines that the
GSEs and FHA and the other government agencies can provide that
are sustainable.
I would add that these issues are unprecedented and we
don't yet know whether the loan modifications being offered
will be affordable to enough people.
Mr. Lynch. Okay. That is a perfect answer. That is what I
wanted to know, in case we need to create a safe harbor to
allow the loan servicers to give a break to some of these
mortgage holders. We need to collaborate on that. I think that
would be a win-win all the way around, but thank you very much.
And I yield back.
Chairman Green. The gentleman yields back.
The Chair now recognizes Mr. Rose for 5 minutes.
Mr. Rose. Thank you, Chairman Green and Ranking Member
Barr, and thank you to our witnesses for testifying before the
committee today.
Currently, as we know, approximately 4.1 million homeowners
are in forbearance plans, some due to the uncertainty
surrounding COVID-19. Reports have shown that a large number,
however, have continued to make payments even after requesting
forbearance. That number has dropped sharply between March and
June, though.
Back here in Tennessee, folks are ready to get back to
work, and I believe we need to do so as quickly and safely as
possible.
Dr. DeMarco, why did some people opt into forbearance but
continue to pay down their principal, in your opinion?
Mr. DeMarco. Congressman, I am not sure there is one
explanation for that. In some cases it might have been a timing
issue. Maybe they weren't sure whether they got the request in
on time for that first month. In other cases, I believe, and
this may be the majority, that the consumer wasn't exactly sure
what their economic situation was going to be.
Maybe they had a lot of uncertainty at work, and they
wanted to get on forbearance quickly, so that they had that.
And then once they realized that, in fact, their circumstances
were okay, they may have ended the forbearance or others may
actually have needed it and have started to take advantage of
it since, so I think there are multiple reasons here.
Mr. Rose. Are there any adverse consequences to asking for
forbearance being approved, but then not taking advantage of
it?
Mr. DeMarco. You have to have an economic hardship
resulting from the pandemic in order to ask for the
forbearance, but if you ask for forbearance and continue to
make your mortgage payment, no, there is no adverse consequence
for you.
Mr. Rose. Do you believe, Dr. DeMarco, that getting
Americans back to work would decrease the number of borrowers
who actually need to be in forbearance?
Mr. DeMarco. Certainly, Congressman, the more people we get
back to work, the more they are going to be able to pay their
mortgage, and the fewer are going to need forbearance, yes.
Mr. Rose. The CARES Act required unconditional forbearances
of voters experiencing trouble due to the pandemic. However,
those provisions only covered federally-backed loans.
Dr. DeMarco, how have the private mortgage servicers
changed their practices to help keep families in their homes?
Mr. DeMarco. They are generally doing the same thing as the
servicers of federally-backed mortgages. They are offering
mortgage payment forbearance to their customers who contact
them and declare they are having a financial hardship due to
the pandemic. As a result, the rate of those loans in
forbearance is actually greater than the GSE loans.
Mr. Rose. Interesting.
Ms. Cohen. Mr. Rose?
Mr. Rose. Yes.
Ms. Cohen. One thing I wanted to point out is that most
private servicers, if they have an investor that they are
servicing for, they are advancing payments, so at about 120
days of forbearance, they are much more financially strapped.
And we are concerned that 90-day forbearances aren't going
to go to 180 days in the private market and that is going to
present a significant problem.
Mr. Rose. Thank you, Ms. Cohen.
Mr. Williams. And, Mr. Rose, excuse me, the National
Association of Real Estate Brokers, in our statement, we have
addressed that as one of our five solutions that private
servicers need to adhere to the GSE and FHA guidelines--
Mr. Rose. Thank you.
Ms. Griffin. I would also like to add--
Mr. Rose. Let me go ahead to some other questions--
reclaiming my time.
Dr. DeMarco, what other efforts have you seen industry
stakeholders make to protect homeowners?
Mr. DeMarco. I think that they have done a great deal to
set up on their websites clear information for borrowers to
understand what their options are. They have made a tremendous
effort to shift all their servicing operations to the
individuals' homes. They had to do the technology and the
security around that to make that happen. I think those have
been terrific efforts that servicers have made.
And the other is, they are proactively reaching out to
their customers to find out what their situation is and to make
sure that they are getting the right tools to help them in
their situation.
Mr. Rose. Thank you.
Throughout the pandemic, I believe, that the Trump
Administration has continuously rolled out updated guidance for
industry stakeholders.
Dr. DeMarco, in the few seconds we have--well, it doesn't
look like we have enough time, but I would, if time permits
later, love to hear your assessment of how the agencies have
assisted with the implementation of the CARES Act.
And with that, I yield back, Chairman Green.
Chairman Green. The gentleman's time has expired.
The Chair now recognizes the gentlewoman from New York, Ms.
Velazquez, who also happens to be the Chair of the House Small
Business Committee, for 5 minutes.
Ms. Velazquez. Thank you, Chairman Green, Chairwoman
Waters, and Ranking Member Barr for this important, quite
timely hearing.
This question is for the panel. Recently, companies and
organizations like the Center for Responsible Lending, the
National Association of REALTORS, and Quicken Loans have all
come out in opposition to the Trump Administration's plan to
weaken the disparate impact rule; thereby, making it harder to
pursue housing discrimination cases. Several other groups have
come out in opposition to the proposed changes as well.
So with a quick yes or no, does anyone believe now is the
time to weaken housing discrimination rules?
Ms. Cohen, let's start with you.
Ms. Cohen. No.
Ms. Velazquez. Ms. Griffin?
Ms. Griffin. No.
Ms. Velazquez. Mr. Williams?
Mr. Williams. No.
Ms. Velazquez. And Mr. DeMarco?
Mr. DeMarco. No, we don't want to weaken housing
discrimination rules.
Ms. Velazquez. Thank you.
Ms. Cohen, while the FHA has provided some guidance to FHA
servicers regarding the implementation of the CARES Act related
to the forbearance, a recent HUD OIG report found that, ``about
90 percent of FHA loans provided incomplete, inconsistent data,
and unclear guidance to borrowers.''
Do you think further guidance from the FHA to servicers
regarding forbearance is needed?
Ms. Cohen. Yes. FHA should provide further guidance and so
should Congress include it in the next package, both about
websites, written notice, and oral notice.
Ms. Velazquez. And why do you think the FHA hasn't issued
such guidance?
Ms. Cohen. I can't answer why FHA has not done that. I will
say that I agree with Dr. DeMarco that they have done a really
incredible job of putting out a lot of guidance and they just
put out a lot of new rules, which, hopefully, will make loss
mitigation more affordable for more people.
Ms. Velazquez. Thank you.
Ms. Griffin, what has your organization seen in terms of
servicer communications to borrowers about having to pay a lump
sum payment at the end of the forbearance period?
Do you feel misinformation about repayment options is
discouraging borrowers from accessing the forbearance relief
afforded to them under the CARES Act?
Ms. Griffin. Absolutely. The people that we talk to are
frazzled about this lump sum payment. Few of them have actually
even heard of the 180 days, let alone a year.
So, it is causing really a lot of undue headache in these
communities, and the borrowers are really concerned about their
ability to pay, even at some point, let alone after 90 days.
They are concerned that when they are going to work and,
yes, the question earlier, yes, when employment increases,
things will be a little bit better, but right now these
homeowners are frazzled--
Ms. Velazquez. Thank you.
Ms. Griffin. --despite everything with the servicer--
Ms. Velazquez. Thank you.
Ms. Griffin. --they are not getting the right information.
Ms. Velazquez. Thank you, Ms. Griffin.
Yes, Mr. Williams?
Mr. Williams. Just to dovetail on what Ms. Griffin said,
that we basically need more awareness, the borrowers need to
know that their rights are protected. We need to promote on TV,
on the radio, and even email. They need to know they are
protected because it is folklore right now.
Ms. Velazquez. So whose responsibility it is to get
information out? Who is failing?
Mr. Williams. The servicers and the government right now.
We are spending a lot of money, as we said in our statement, a
lot of money on--
Ms. Velazquez. Thank you.
Mr. Williams, many individuals with mortgages currently in
forbearance might still be unable to make their payments when
their forbearance protections under the CARES Act expire.
Based on what you have seen over the past few months, are
you concerned about servicers' ability to work with borrowers
to keep them in their homes after their forbearance period
ends?
Mr. Williams. I am very concerned. I have two witnesses,
two people that I know who said that--one servicer said they
didn't work with the program at all. It is a variable note. So,
that is what they told this lady, that they didn't work with it
at all; they would not be able to.
Another servicer gave the person, the borrower, 90 days, 3
months, and they have a payment of $17,000 at the end of that--
Ms. Velazquez. Thank you.
Mr. Williams. --so I am extremely concerned.
Ms. Velazquez. My time has expired.
Thank you.
Chairman Green. Thank you. The gentlelady's time has
expired.
The Chair now recognizes Mr. Timmons for 5 minutes.
Mr. Timmons. Thank you, Mr. Chairman. It is good to be with
you all, even if it is on a conference video. I appreciate you
having this hearing. We need to get this right.
Just in January/February, we are experiencing some of the
lowest unemployment in the history of South Carolina, in the
history of our country, and COVID-19 has just changed
everything.
So, the Federal Government did what it could. The CARES Act
had a lot of great things. It was hurriedly put together, and I
think overwhelmingly, it was in the right direction. We are
going to make sure we get the next package right. Phase four
needs to be tailored to those who need it and people who are
still struggling from unemployment or with other economic
challenges. We need to make sure that we get them the help that
they need.
We are expecting a vaccine here in December, January,
February, March, April, the sooner the better, in my opinion. I
am sure we will all agree on that. I am probably going to be
one of the first people to get it because I am in the National
Guard, so I hope they get it right the first time.
Mr. DeMarco, I am concerned that in October/November, we
are going to hit our 6 months and we are going to have a lot of
people who are still unemployed who are going to continue to
have challenges making their payments. What policies do you
think we should be considering to address that?
Mr. DeMarco. For those in federally-backed mortgages, which
is the majority of homeowners, if they get to 6 months and they
still are experiencing an economic hardship because of this
pandemic, then they should be in touch with their servicer
requesting an additional extension of their forbearance period.
In that sense, the answer is already there. The larger
question is getting people back to work, and balancing and
dealing with both the health issues our country is facing as
well as the need to get the economy going.
Mr. Timmons. We are dealing with that exact issue here in
South Carolina. And the issue is, if you are older or have an
underlying health condition, we need you to protect yourself
and we need to make sure that you are able to protect yourself.
You are not worried about having your credit ruined or
risking your safety going back to work, but if you are healthy
and you have a lower risk factor, we need you to get back to
work, because ultimately, getting the economy restarted and
getting the vaccine is what is going to get us through this.
Ms. Cohen. Mr. Timmons?
Mr. Timmons. Yes, ma'am.
Ms. Cohen. I just wanted to supplement what Mr. DeMarco
said. We do want to see people get back to work when it is time
to do that and they are healthy, but one-third of the mortgage
market is not government-backed loans and so we want to make
sure that those people can get affordable loan modifications if
they need them after their forbearances so that we can see
increased employment and decreased foreclosure, including in
the upstate where you live.
Mr. Timmons. Yes, ma'am. I appreciate that.
Honestly, it was remarkable to me. I had so many
individuals calling and talking about this issue we are
discussing of a balloon payment at the end of the forbearance
period, and I had a call with the bankers and the credit unions
immediately the next day, and I just wanted to make sure that
was not going to be the case anywhere.
Obviously, it is unacceptable. And I think the adverse
impact on the perception of any entity that is not providing
the forbearance necessary to those who need it is sufficient,
the PR hit would be not worth the rub.
But on to a different subject. As you all know, the FHFA
and the GSEs have adopted temporary origination policies for
the largely remote and virtual environment we find ourselves
in. This has applied to appraisals, underwriting, and remote
online notarization. This has been hugely helpful, in my
opinion, to help maintain the health of the housing market
during the pandemic.
I would like to ask each of you, yes or no, do you think
these remote policies, which are set to expire August 31st,
should be made permanent?
I will start with Dr. DeMarco.
Mr. DeMarco. These policies have certainly helped keep the
mortgage market going, and yes, in one form or another, we
would like to see some of these--certainly things like the
remote online notarization be made permanent.
Mr. Timmons. Mr. Williams?
Mr. Williams. I believe some of those programs, some of
those options should be made available and be made permanent.
Mr. Timmons. Thank you.
Ms. Cohen?
Ms. Cohen. Yes. We think those are important programs, but
we need to make sure they are only used in certain
circumstances and we need to make sure that appraisals are
still reasonably accurate.
Mr. Timmons. Absolutely. I think we can agree on that.
Mr. Chairman, again, thank you for having this hearing and
I look forward to working with you on this issue.
I yield back.
Chairman Green. The gentleman yields back.
The Chair recognizes Mr. Perlmutter for 5 minutes.
Mr. Perlmutter. Thank you, Mr. Chairman.
And I have to say, I subscribe to much of what Mr. Timmons
had to say, and a pretty realistic view of what we are facing
in the questions that he asked. And I had taken some--not
offense, but I differed with Mr. Barr as he started off his
remarks in saying this economic situation we are in is as a
result of a government-mandated shutdown.
The bottom line is, this is COVID related, and we don't
have it under control. This thing is going to continue to
evolve. It is going to be difficult in we don't know how many
different ways. And as Mr. Timmons was saying, and I think all
of us believe, each of us has to provide some kind of latitude
to others for all of us to get through this thing.
So, 37 States in this past week have seen increased numbers
of infections and hospitalization, so we are not out of this by
any stretch of the imagination, and I think that the housing
industry, the mortgage industry is going to continue to be
roiled by this for some time. So, I think this is going to
evolve.
I would ask Ms. Griffin and Mr. DeMarco, there are
provisions in the HEROES Act that contemplate the fact that we
are not out of this virus yet, and at the end of this month,
the pandemic unemployment insurance runs out. We see a lot of
the funding for the PPP loans will have been exhausted by
individual businesses. We haven't done another stimulus or
stability payment.
If this virus continues to roll as it has, and I will start
with you, Ms. Griffin, are we going to need to implement some
things in the HEROES Act so people can pay their mortgages?
Forget about forbearance for a second. I think we would all
like them to pay their mortgages.
Ms. Griffin. Absolutely. The reality is that the more help
we can give to homeowners, the better. They are going to
absolutely need it, as you just said. This situation is not
getting better. It is getting worse.
Certainly, consideration to helping homeowners, helping
organizations like ours, and others that can help these
homeowners get on their feet and work with these servicers,
this is really critical.
Our homeowners do not have--many of them, at least, don't
have a grasp for what is next. And so the work--and I will just
certainly say with the counseling organizations, that we can
just kind of settle people down, give them direction, even help
to provide advice and guidance about working with their
servicer as well as how to enhance their own lives. This is
what we want.
And we certainly need to think about a HAMP-like program
that was very affected the last time. I think that this will be
very effective going forward, and this is something that we
would really, really encourage.
Mr. Perlmutter. And I thank you for that. Ms. Griffin, I
think, you hit the nail on the head. When you have uncertainty
and you have fear in an economy, it slows the economy down. No
ifs, ands, or buts. There needs to be some level of certainty,
and to try to hopefully, get a vaccine as soon as we can or
make some technological breakthroughs in therapeutics to take
away the fear.
But Dr. DeMarco, what do you think we are going to need,
assuming that this virus isn't extinguished or isn't fought off
by a vaccine for 5, 6, 7 months?
Mr. DeMarco. Mr. Perlmutter, I agree. This is a big-picture
question about our economy. It is about small businesses, and
even large businesses that are suffering because of how the
pandemic intersects with those industries and those businesses.
It is causing great hardship among families because of the
furloughs and the unemployment that is resulting from that.
So, this is a big macroeconomic challenge and that is a bit
outside of my scope, but I would say that I understand that
Federal Reserve Chairman Powell has been up before Congress
recently, talking about the need for continued fiscal support
in face of how the pandemic and the economic response to it is
affecting our economy, our businesses, and our workers.
And so, I don't have a particular prescription, but to say
that I think Chairman Powell certainly identified that as a
role for Congress.
Mr. Perlmutter. Thank you.
And I yield back to the Chair.
Chairman Green. The gentleman's time has expired.
The Chair now recognizes Mr. Taylor for 5 minutes.
Mr. Taylor. Thank you, Mr. Chairman. I appreciate this
hearing. I think this is a very important topic and I think we
have been--I get a lot about the individual impact and I think
all of us, as Members of Congress, see that every day in our
districts.
I was at a food bank this morning in Allen, Texas, and just
watching the real need in our communities has deeply affected
me. I want to take a second and kind of step back and talk
about the macro for a second, talk about the big picture.
Right now, about 8 percent of the home mortgages in the
United States, according to the data I have seen, are currently
in forbearance. And just thinking about what that could mean if
there wasn't forbearance.
Let's just kind of take that for a second, and say if there
wasn't forbearance, my guess is that would mean about 8 percent
of the homes in the United States would be foreclosed within
the next year. And then, when they go to sell those or
liquidate those, it would basically collapse the real estate
market.
So, home values would collapse across the country because
you have a tremendous amount of foreclosures, and I am saying
that based on the experience that Dallas, Texas, went through,
and Texas as a State, during the 1980s.
I remember the savings and loan crisis and you watched a
tremendous number of foreclosures with the Resolution Trust
Corporation (RTC), what are referred to as the RTC days in
Texas in the 1980s and early 1990s.
And the liquidations were such that things were literally--
office buildings were trading for $10 a square foot, people
literally could take retail properties just by paying the
taxes.
So I just wanted to know if any of you have any thoughts
about what if we didn't have forbearance, how bad would it be
for the housing market in this country, when the valuation side
in 12 or 24 months, once you had a bunch of liquidations, then
collapses in values?
Mr. DeMarco, do you want to speak to that?
Mr. DeMarco. Congressman, it certainly would be bad. I
don't know how to size it any differently than you just did. It
would be bad. It would also--one of the things that forbearance
has accomplished is it has assisted in the response to the
health crisis by allowing people to be able to stay home to
quarantine, or whatever the particular standard is in a
community to help suppress the virus. It is helping combat the
virus, recognizing we are providing economic support to that
household or those workers because they are not going to be
able to pay their mortgage.
So, there is not just the economic toll and what happens in
the real estate market, there is also the question of the
health impact, and we create an incentive where people feel
they have to go back to work, even if that is not coinciding
with good health practices in this environment.
Mr. Taylor. Sure.
Mr. Williams, do you want to talk about what we are trying
to stop from happening here?
Mr. Williams. I do. It would be horrific. But what happened
to--when I went to school, they taught me the three important
necessities in life were food, clothing, and shelter. Well, how
did we get to bailing out the airline industry before we look
out for the homeowner?
I just feel that if we don't do something, if we don't act,
if we don't get everyone involved and get on the same page in
the program, if we don't move quickly, then we are going to be
in for a huge, huge problem.
Ms. Griffin. Absolutely. If I could add to that--well,
first of all, the forbearances have provided a profound help to
homeowners. Without it, we would be inundated with foreclosures
where there is a possibility we are headed towards that and we
certainly need to work together.
But without question, for people of color, for these
vulnerable communities without the forbearances, without the
work that we are doing together, there would be a whole other
generation of loss of wealth. It is bad now, it appears to get
worse, and hopefully we can sort of work together to stem this
tide.
Mr. Taylor. Ms. Cohen, do you want to make any comment on,
again, the macro situation? It seems like there is consensus
that we are avoiding a macro catastrophe by trying to use
forbearances and mechanisms to get to the other side.
Ms. Cohen. I agree with that, Mr. Taylor. I think what we
should also keep in mind in this macro situation is, who isn't
making their payments and doesn't have a forbearance, and what
is that going to do to the economy and to property values as
well, and how can we collect enough data that we understand
what is going on so we can prevent a catastrophe?
Mr. Taylor. Sure.
And in my final few seconds, I will just point out that I
am working with a lot of members on this committee on both
sides to try to work on forbearance or trying to help within
the commercial real estate space because we have done a great
job. We have heard that on the home side. There is much work to
do, but we are headed in the right direction, but in commercial
real estate, I am very deeply concerned that we are about to
have a foreclosure crisis--
I yield back, Mr. Chairman. Thank you for indulging me.
Chairman Green. The gentleman's time has expired.
The Chair now recognizes Ms. Tlaib for 5 minutes.
Ms. Tlaib. Thank you so much, Mr. Chairman, and thank you
so much for this really critically important hearing.
I know Chairman Al Green has come to my district and
actually deeded tower of housing justice tour and saw that,
even in the last recession, just how much communities are still
suffering. So many of my residents, especially throughout Wayne
County, have been in survivor mode.
They have been living paycheck to paycheck, and in just one
of my cities, in the City of Detroit, 88,000 people were
evicted out of their homes. So, for this to happen in a
pandemic is not in control of any of us, right? This is very
much something that came about, that I don't think any of us
could have truly been able to truly prepare for, especially in
the housing mechanism. I don't know about the healthcare, but
especially with housing.
And so, I want to talk about this. I think this is really
critically important, and I think my colleague, Mr. Taylor, was
talking about this. Forbearance and these kinds of moratoriums
on water shutoff, utility, student loans, mortgages, they are
just band-aids, because all of that money is going to be due
when the forbearance is up.
So, what are we going to do then? I want to start with Mr.
Williams. You know from many of your clients and even in your
membership, because what I hear from my residents is, why
aren't we doing recurring payments? Why aren't we doing
something as aggressive and bold as we are doing for airlines
and other industries?
Why aren't we having a peoples' bailout where we are
looking at recurring payments so that people can pay all this
debt down because, again, some of these jobs won't come back,
but even if the jobs come back, they are not going to have the
lump sum ready to go to be able to pay it off. They still might
end up losing their homes.
Can you talk a little bit about that?
Mr. Williams. Sure. You are absolutely right, but that is
why we asked for that five-point plan. We had some serious
solutions that we want you all to really seriously take a look
at, because that is the direction we feel we should go in.
We have been decimated. This is a critical time. It is time
for action. It is really time for action.
Ms. Tlaib. No, no. I appreciate you bringing up my Black
neighbors, because we lost more Black home ownership in
Michigan than any other State, about 40 percent.
Ms. Cohen, you have been very thoughtful in how you have
talked about these issues and the fact that we still are
leaving a lot of our neighbors across the country, homeowners,
behind in the way we are approaching this.
I don't know if you are familiar with the Automatic Boost
to Communities Act that I introduced, but it would be recurring
payments of $2,000 per month on a recharged debit card.
Do you think that will help with some of the issues we are
seeing with people possibly losing their homes because of this
pandemic?
Ms. Cohen. Thank you for your question, Ms. Tlaib.
I am not familiar with it, because I live in my little
universe of housing legislation, and I can talk to my
colleagues about it, but the biggest problem with financially
strapped people is that they are financially strapped. And so
they are living on the edge and they need cash in addition to
needing help from their servicers and from all of their other
creditors. And so, anything we can do, to do that, will move
things in the right direction.
People should also look closely at legislation around that
Homeowners Assistance Fund, because States can also administer
programs to hit the hardest-hit areas in ways that might be
constructive.
Mr. Williams. Also, Congresswoman, getting the word out so
that the homeowner or the borrower is knowledgeable enough
about the program. This has the same effect as the PPP, where
huge companies got all this money and then we didn't get it,
because we weren't--
Ms. Tlaib. Mr. Williams, even with the PPP and my
incredible colleague, Ms. Velazquez, has been so much on the--
bringing the voices of small businesses, but it is so
cumbersome. Let's be honest, the servicers are playing games
with peoples' lives.
With some of them, if you are not actually saying the
correct word, if you do not request it in a certain way--as a
Member of Congress, myself, and I know I am new, but I have to
pick up the phone and call a servicer and say, why did you tell
my resident they don't qualify, when according to the
legislation we passed they do qualify?
Well, they need to say it this way. This is not a game.
They obviously can't pay, so let's put that as an option and
stop playing games with people who really--they are going to
lose their home. These are not people who want to lose their
home. They just don't have the capability of doing it, and I am
tired of people pretending that it is because of economic
shutdown or all these other--we did this to them. We put them
in survivor mode. They have been literally one emergency away,
and now the pandemic has happened, but they were one emergency
away from going into poverty.
So I think it is our responsibility to put people first,
and I thank all of you so much, but I think we really need to
talk about it--we talk about this program and, of course, we
need all of those programs in the five points, but we need
recurring payments. Enough.
Other countries are doing that. They are giving people
human dignity. Let them choose what they needed for their
family and recurring payments, I think, is going to be key
here.
Thank you so much, Chairman Green. It's always a pleasure
to work with you. Thank you.
And I yield back.
Chairman Green. The gentlelady yields back.
The Chair now recognizes Ms. Dean for 5 minutes.
Ms. Dean. Thank you, Mr. Chairman, for calling this
important committee hearing. And I thank Chairwoman Waters as
well.
I also thank Ranking Member Barr, and Mr. Barr, you and
your family are in my prayers, and you have my sympathies on
your recent grievous loss.
I am really pleased to be here to talk about this and know
that the lens that I am looking through what we are talking
about here in terms of folks and their mortgages in precarious
places, is one from what lessons did we learn from the past?
What did we learn from 2008?
I was not in Congress then. Like Representative Tlaib, I am
a freshman, but as Representative Taylor talked about, we have
4 million mortgage loans in forbearance, as our witnesses have
told us. Many people are not in forbearance and are missing
payments, so we have a gaping hole there and we put together
information and important protections through the CARES Act and
we want to do even more through the HEROES Act. We need to get
people the protections they need to keep the roof over their
head to protect their credit, and protect their family.
Mr. Williams, I would like to start with you. You have
already talked about this, but you are concerned about what
mortgage servicers are and are not doing to protect borrowers
in terms of whether it is communication or reaching out when a
payment is missed to find out what is going on to see if
actually they should be put into the forbearance.
What other things do you think need to be done in order to
get protection, forbearance to as many borrowers as possible?
Mr. Williams. I think we need to have some communication
going out from the servicers. They need to put it in their
mailings, emails. Hey, this should be a commercial on
television, getting this information out. I think that we
hinder ourselves. I think that they are limited in giving
information for the servicers like diversity as well.
So, those are the important things, I think, right off the
bat that we need to increase our communication to the borrower.
Ms. Dean. Absolutely.
Ms. Griffin. And I would like to add in there also, get and
complement. The outreach is critical. What we have found from
the past foreclosure crisis was that people are--they really
need some guidance, they really need some help.
And even if the servicers send out information, it needs to
be clear, it needs to be simple, and without question. We
really need to have some advocates in the mix that can be able
to explain things to these borrowers whom, as you said,
Congresswoman, they are on the edge and really just need some
guidance.
So the outreach is certainly critical, and the hand-holding
is also critical.
Ms. Dean. I appreciate that.
Ms. Cohen. Ms. Dean, can I just say one other thing? I
agree with Mr. Williams and Ms. Griffin, but the servicers
don't have the capacity to do the level of default servicing
that we are going to see. They didn't do it well in the last
crisis; they are not doing it well now. It is great if you can
get onto a website and you don't need much from them, but if
you actually need something from them, it is more complicated.
So, we can't put the onus just on the homeowner to
understand and reach out. We need automated systems and we need
to make sure that people are offered what they need without
having to go through a lot of red tape.
Ms. Dean. Ms. Cohen, that is a perfect segue. I wanted to
ask you next, what are the lessons that we learned in the past,
that I desperately hope we do not repeat in this economic
collapse? What are some of those lessons?
Ms. Cohen. Thank you for the question.
The first one is, people need affordable options when they
can't pay their regular mortgage payment. That is one of the
good things that came out of the last crisis, was the general
understanding about that, but we don't know whether the
programs we have now will be affordable.
Second, when you have a crisis in Black and Latinx home
ownership that has been exacerbated by the current crisis, you
need to look freshly at what the problems are and what the
solutions are, and to ask yourself whether we need to start
something new.
Ms. Dean. Let me ask you, in my final seconds here, you
talked earlier in your testimony about the CFPB and that they
need to help people avoid foreclosure.
What is the responsibility of the CFPB? What could they be
doing proactively, because we see the number of complaints just
going through the roof with the CFPB? What should they be doing
to help people avoid foreclosure?
Ms. Cohen. I had a pretty long list in my testimony, but
let me give you two. First, work with the Federal Housing
Finance Agency on the Borrower Protection Program, provide
transparent data, learn from the consumer complaints, and take
action against companies that are misbehaving.
Second, right now they have an interim final rule that they
put out. They need to protect people against foreclosure, which
they haven't done.
Thank you.
Ms. Dean. I know my time has expired.
Thank you, Mr. Chairman.
Chairman Green. The gentlelady's time has expired.
The Chair now recognizes himself for 5 minutes.
I will tell you, friends, I was here in 2008, and I saw how
we treated the big banks. The truth is this: They were
overpaid. Overpaid in this sense: There were banks that said,
we don't want that money. We don't want it to appear as though
we need the money, but we imposed upon them billions of
dollars. They were overpaid, but when it comes to the consumer,
the consumer gets short-changed. The consumer has to jump
through all kinds of hoops to try to get what Congress intended
consumers to receive.
So I am just appalled, to be quite frank with you, at the
fact that the consumer always seems to find himself or herself
groveling to a certain extent to get something that these big
banks get as a matter of course. I am not opposed to big banks;
I just want everybody to be treated fairly.
This program, in my opinion, has no consequences. If these
servicers misbehave, there are no consequences. It seems to me
that we, in the future, will have to find a way to impose some
consequences.
My constituents, who have actually received this notice
that is according them 3 months of forbearance when they are
entitled to 180 days, now have to hire a lawyer if they want to
pursue this.
They can't get it done simply because they have made a fair
and just request. They will have to go through some other
extenuating circumstances. I would like to note that this would
be submitted into the record, without objection.
Without objection, it is so ordered.
It always seems that people of color are having to account
for themselves. We have to prove that people of color are being
discriminated against, and this is not just as it relates to
the financial services industry, it is across-the-board. People
of color always seem to be at the bottom.
At some point, we have to have a system, a justice, such
that people of color will get the same treatment as other
persons in this society. I think that what happened to George
Floyd is exposing the underbelly of what is happening to people
of color, and other people are starting to realize that it will
take more than our hues and cries to get this done. It is my
belief that there is systemic discrimination.
Let me go to you, Mr. Williams, if I may, please, sir. Do
you agree that there is systemic discrimination taking place in
lending?
Mr. Williams. I do. I totally agree. I see it often. We
have some resolutions. But there is no better time than now to
address the Black home ownership program.
Chairman Green. Let me do this. Time is of the essence.
Ms. Griffin, do you agree that there is systemic
discrimination in lending?
Ms. Griffin. Yes, there is.
Chairman Green. And let me go next to Ms. Cohen. Do you
agree that there is systemic discrimination in lending?
Ms. Cohen. Yes, I agree. The CFPB found that for people
with the same credit scores, Black borrowers were rejected for
mortgages at higher rates.
Chairman Green. And Mr. DeMarco, do you agree?
Mr. DeMarco. I agree that we have certainly had a history
of this and there seems to still be areas where it is an issue,
yes, sir.
Chairman Green. Well, if you agree that there is this
systemic discrimination, I have proposed that we have a
department of reconciliation with the responsibility of dealing
with racism and invidious discrimination in this country. And
it would deal with financial services, it goes into policing,
and many other areas.
If you agree that we have this problem, and we have had it
for hundreds of years, isn't it about time that we do something
other than what we have been doing?
Would you agree, Mr. Williams, that it would be appropriate
to have a department of reconciliation, which has as its
responsibility to look out for people who are being
discriminated against, and this would include the protected
classes, look out for them and report to the President, through
a Secretary of Reconciliation? Would you agree that such a
position should exist, sir?
Mr. Williams. Yes, sir, I agree wholeheartedly.
Chairman Green. Ms. Cohen, where do you stand, please?
Ms. Cohen. Yes. We think that is important and we think it
is important to change--
Chairman Green. Let me move on. My time is of the essence.
I am so sorry, Ms. Cohen.
Ms. Griffin, where do you stand, please?
Ms. Griffin. I fully agree that it needs to be monitored
and there needs to be penalties.
Chairman Green. And Mr. DeMarco?
Mr. DeMarco. I have no opinion on a position like that,
Congressman. I do believe we all have a responsibility to act.
Chairman Green. Well, let me do this now that you have said
this, Mr. DeMarco. All persons who are in agreement and you
think that systemic racism and invidious discrimination as it
relates to people, including the protected classes, should be
handled with a department that specializes in this, kindly
raise your hand, please. Raise your hand so that we may capture
you all on screen.
Okay. I see everyone's hands, save Mr. DeMarco. Would you
do a screen shot of this please, staff? Thank you.
My time has expired, and I would like to also include for
the record, a statement from the Mortgage Bankers Association.
Without objection, it is so ordered.
Friends, if I may now bring this to closure. I thank all of
you for appearing today, especially the witnesses. Thank you
for your testimony and for devoting your time and resources to
share your expertise with the subcommittee.
Your testimony today has helped to advance the important
work of this subcommittee and the U.S. Congress.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
This hearing is now adjourned.
[Whereupon, at 1:50 p.m., the hearing was adjourned.]
A P P E N D I X
July 16, 2020
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[all]