HOUSE

COMMITTEE FERNAND

ON

BANKING,
GERMAIN.

FINANCE
Rhode CHALMERS

AND Island,
P.

URBAN
Chairman

AFFAIRS

J. ST

HENRY
FRANK WALTER

B.

GONZALEZ,

Teias

WYLIE,

Ohio

ANNUNZIO, E. FAUNTROY,

Illinois
District of

JIM
NORMAN

LEACH,
D,

Iowa

SHUMWAY,

California

Columbia
"

STAN
L

PARBTS, McCOLLUM,
C.

Virginia
Florida

STEPHEN CARROLL JOHN

MARY

NEAL,

North

Carolina

BILL

HUBBARD, J. LaFALCE,
ROSE F. New

Jr.. Kentucky
York Ohio Minnesota

GEORGE
MARGE

WOBTLEV,
New

New

York

ROUKEMA. BEREUTER. DREIER, HILER,

J.

Jersey

DAKAR. VENTO.

DOUG
DAVID

Nebraska
Calilornia Indiana

BRUCE
DOUG

BARNARD, OAROA,
E.

Jh,, GeorBia
New

JOHN
THOMAS York

ROBERT CHARLES
BARNEY

York
New

RIDGE,

Pennsylvania
Texas

SCHUMER.

STEVE TOBY
AL J,

BARTLETT, ROTH,

FRANK.
H. A.

Massachusetts California Connecticut

Wisconsin California North Carolina

RICHARD
BRUCE

LEHMAN.

McCANDLESS,
ALEX

MORRISON, Ohio
Alabama

McMillan, SAXTON,
L. F,

MARCY
BEN

KAPTUR, ERDREICH,
R.

JAMES PATRICK

New

Jersey

SWINDALL, SAIKI,
Hawaii

Georgia

THOMAS
ESTEBAN GERALD

CARPER,

Delaware TORRES,
Wisconsin

PATRICIA

EDWARD D. KLECZKA

California

JIM
JOSEPH

BUNNING.
J.

Kentucky
DioGUARDI,
New

York

BILL
PAUL

NELSON.
E.

Florida

KANJORSKI J.

Pennsylvania
New York South

THOMAS
ELIZABETH THOMAS

MANTON.
J.

PATTERSON,

Carolii

McMILLEN.
P. H, KENNEDY

Maryland
II, Maseachusetls
New York

JOSEPH
FLOYD

FLAKE,

KWEISI
DAVID

MFUME,
E.

Maryland
North

PRICE,

Carolina

NANCY

PELOSI.

California

SUBCOMMITTBE
HENRY

Community Texas,
Chai,

Development

GONZALEZ, Island

FERNAND WALTER Columbia

MARY BRUCE

J. ST
E.

GERMAIN,

Rhode
District of

MARGE CHALMERS GEORGE

ROUKEMA.
P C,

New WYLIE,

Jersey
Ohio

FAUNTROY,

WORTLEY,
Florida

New

York

ROSE
F,

OAKAR, VENTO,

Ohio Minnesota New York New York

BILL

McCOLLUM, BEREUTER, DREIER, HILER,

J.

DOUG
DAVID JOHN THOMAS

Nebraska
California

ROBERT CHARLES BARNEY

RICHARD

GARCIA,
E.

SCHUMER,

Indiana RIDGE,

PRANK,
H.

Massachusetts
California

Pennsylvania
Texas

LEHMAN,

STEVE
TOBY

BARTLETT, ROTH, SAXTON,

L,

BRUCE
MARCY BEN THOMAS

A. MORRISON. KAPTUR, ERDRKICH,

R. Ohio

Connecticut

Wisconsin

JAMES
PATRICK

New

Jersey Georgia

Alabama CARPER,
Delaware

SWINDALL, Hawaii

PATRICIA
Cal fo
n a

SAIKI, BUNNING,
J.

ESTEBAN GERALD
PAUL E.

EDWARD
D.

TORRES
W
scons

JAMES

KLECZKA,

n an a

JOSEPH
STAN

Kentucky New DioGUARDI, Virginia

York

KANJORSKI.
J L.

Pennsyl
New
North Yo Ca Kentu Massa k

PARRIS,

THOMAS STEPHEN CARROLL JOSEPH FLOYD KWEISI NANCY

MANTON, NEAL,

k ol
na

HUBBARD,
P. HKENNEDY

Jr
II New Yo

ky
huse
Is

FLAKE,

MFUME, PELOSI,

Maryland
California

.bv

EMERGENCY HOUSING ASSISTANCE AQ

OF 1988

yH.fta;)L/i:/oo-4t
HEARING
BEFORE THE

4
ON DEVELOPMENT
NT

SUBCOMMTTEB HOUSraO ANB COMMUNITY

"^n
AND.

COMMITTEE

ON

BANKING,
AWAmS

FINANCE

URBAN

HOUSE

OF EEPEBSBNTATIVES
CONGRESS
SESSION

I
TQm

ONE-HUNDREDTH
SECOND

H.R
A BILL TO

4292
OF

BEQUIRE
TO

THE

SECRETARY EMERGENCY

HOUSING MORTGAGE

AND

URBAN

OPMENT DEVEL-

PROVIDE

ASSISTANCE

HOMEOWNERS

Printed for the

use

of the

Committee

on

Banking,

Finai

Serial No.

100-

HOUSE

COMMITTEE F^RNAND

ON

BANKING.
GERMAIN,

FINANCE Rhode
CHALMERS

AND Island,
P.

URBAN Chairman

AFFAIRS

J. ST

HENRY

B.

GONZALEZ,

Teiaii

WYLIE.

Ohio

PRANK WALTER Columbia STEPHEN CARROLL JOHN

MARY J.

ANNUNZIO,
E.

Illinois
Distriet of

JIM
NORMAN STAN

LEACH.
D,

Iowa SHUMWAY.
California

FAUNTROY,

PARRIS, McCOLLUM,

Virginia
Florida
New

L.

NEAL,

North

Carolina

BILL

HUBBARD, LaFALCE, OAKAR. VENTO,

New

Jr.. Kentucky
York Ohio Minnesota

GEORGE
MARGE

C. WORTLEY, ROUKEMA, BEREUTER, DREIER. HILER.

New

York

Jeraey

ROSE F.

DOUG
DAVID

Nebraska California

BRUCE
DOUG

BARNARD. GARCIA,
E.

Jr., Georgia
New York New York

JOHN
THOMAS

Indiana

ROBERT
CHARLES

J, RIDGE,

Pennsylvania
Teiias

SCHUMER,

STEVE TOBY
AL J.

BARTLETT, ROTH,

BARNEY
RICHARD

FRANK.
H. A,

MaesachuaettB Calirornia
Connecticut Ohio Alabama

Wisconsin
California North New

LEHMAN.

McCANDLESS,
ALEX

BRUCE
MARCY BEN THOMAS

MORRISON,

McMillan, SAXTON,
L,

Carolina

KAPTUR, ERDRBICH,
R.

JAMES

Jersey Geoi^a
Hawaii

PATRICK Delaware PATRICIA

California

SWINDALL. Kentucky

CARPER,

F. SAIKI.

ESTEBAN GERALD
BILL PAUL THOMAS ELlZABEra THOMAS JOSEPH

EDWARD D. KLECZKA Florida

TORRES,
Wisconsin

JIM

RUNNING,

JOSEPH

J. DioGUAKDI.

New

York

NELSON,
E

KANJORSKl
J.

Pennsylvania
New York South Carolina

MANTON.
J,

PATTERSON,

McMlLLEN.
P,
H.

Maryland
II, MasBachusetla New York

KENNEDY

FLOYD
KWEISI

FLAKE,

MFUME.
E.

Maryland
North Carolina

DAVID
NANCY

PRICE,

PELOSI,

California

SuBCOMMirrBB HENRY

ON

Housing B. GONZALEZ.

and

CoHHUNirv

Development

Texas,
MARGE CHALMERS

Chairman

ROUKEMA.
P C,

New WYLIE,

Jersey Ohio
New

Columbia
MARY ROSE F.

GEORGE

WORTLEY,
Florida

York

OAKAR,
VENTO,
New

Ohio

BILL

McCOLLUM, BEREUTER, DREIER, HILER.

J.

BRUCE
ROBERT

Minnewita York New York

DOUG
DAVID

Nebraska California Indiana

GARCIA.
E

CHARLES
BARNEY

SCHUMER.

JOHN
THOMAS

FRANK,
H.

MaBSachusetta

RIDGE,

Pennsylvania
Tenas

RICHARD
BRUCE MARCY BEN THOMAS ESTEBAN GERALD A.

LEHMAN.

California
Connecticut

STEVE
TOBY JAMES

BARTLETT, ROTH. SAXTON,

L.

MORRISON.
Ohio Alabama

Wiaconsin New

KAPTUR. ERDREICH,
R.

Jersey
Georgia

PATRICK
Delaware PATRICIA Califom

SWINDALL. Hawaii

CARPER.

SAIKI, RUNNING,

EDWARD D.

TORRES.

JAMES
JOSEPH

Kentucky
New York

KLECZKA.

Wisconsin

J. DioGUARDI, PARRIS,

PAUL
THOMAS

KANJORSKl.
J L.

Pennsylvania
New North York

STAN

Virgjnia

MANTON. NEAL,

STEPHEN
CARROLL

Carolina

HUBBARD,
P KENNEDY

Jr., Kentucky 11, Massachuset

New York

JOSEPH FLOYD
KWEISI NANCY

FLAKE.

MFUME. PE!X)SI.

Maryland
California

.bv

CONTENTS

Hearing

held

on:

May
Appendix:

24, 1988....

Tuesday,

May

24,

Butler, Carlton,

JameB
J.

P., president.

Housing

Ekiward,
...

Jr.. secretary/treasurer. Dallas,

TX

PA Inc., McKeeBport. Opportunities. Insurance Companies Mortgage

of America

Cogburn.
Feiran,

Barbara. J., Rene

president. Home

Builders

Association

of

Greater

New

Orle-

Karaczun. New

Joanne,
Orleans

Dormont,
vice

PA

Killinger, Paul,

executive

president.

Home

Builders

Association

er of Great-

APPENDIX
statements: Prepared A Abbott, James

Butler, Carlton,

James

P Jr

J. Edward,

Paul J., and Perran, Rene Gasteyer, Phil B Hon. Henry Gonzalez,

Killinger

Pelosi,

Hon.

Nancy
Additional Matehial

Submitted

for

the

Record

Doehler,
Mr

Steven
Hon. from from from from from

Carlton

and

Gonzalez,
Letter Letter Letter Letter

between to discusaion P., letter dated July 6, 1988 in response Wortley Representative B.: Henry June Dale 10, 1988 Stuard, dated dated R. Maloni. William May 23, 1988, with attachments 24, 1988 Nestor R. Weigand, Jr" dated May dated O, Zuver. 25. 1988 Charles May the

Pages
Tent

Congressional
letter Association and

Record

of

March

31, 1988
1988 with statement
to

of H.R. Burton

4292

Wood.

C,
Bankers Abbott

cover

dated of

June America

8,

of

the

Mortgage
Mr.

in

response

discussion

tween be-

Representative

Bartlett

"iii"

.bv

EMERGENCY

HOUSING
1988

ASSISTANCE

ACT

OF

tuesday,

hav

24, 19ss

House Subcommittee
on

of

Representatives,
and

Housing

Community

Development,
Committee
on

Banking,

Finance

and

Urban

Affairs, Washington,
a.m.,

DC.
room

The

subcommittee

met,
House

pursuant

to

call,
Hon.

at

9:30

in

2128,

Raybum
of the

Office

Buildup,

Henry

B.

Gonzalez

(chairman
Present:

subcommittee) Gonzalez,

Chairman

presiding. Representatives
and
Roth.
on

Vento, Housing

Kleczka,
will

Kennedy,
Chairman
come

Pelosi, Wortley,
Gonzalez. order. has

Bartlett

The

Subcommittee

please
ule, sched-

to

The

hour and
we

arrived,
have few minutes

and
some

we

are

about
members

3 minutes
of
a

behind

will
a

of
and do

the
some

the

subcommittee

in in coming I thoii^ht

after
be
out

few
to

minutes.
some

the

such record who At should have

so

that
come

we

thing to the as opening can proceed

many

best

would

get
of the

of and the

the
on

remarks,
with order

way

preliminaries, the

have the

miles in

in
many to

dispatch and to testify.

of the families families
or

hear

witnesses

present
ever

time,

parts

Nation,
and

more

than dreams

we

have

allowed

been
not

shattered, because

happen, literally. These

have been

their

homes

they
been

careless

losii^ their are cause irresponsible, not bebecause

been

they have cai^ht up

whatsoever.
occurrenceB

foolish, but
economic

in

an

only simply which cycle over

in
our

they
have
no

have
trol con-

they

These of
our us

have

transpired
era

country
had
sworn

before.
to

Those
all in
to
our

who
power

are never our

depression
to
see

]dda
we

recall
went

and

do

what

children,
The

grandchildren today focuses hearing

that
I

and
on

great
H.R. As

through happen grandchildren.

4292.
many

again

This

is
you

bill similar

to

the
1983
an

one

introduced
the
measure

in
in at

1983.

of

remember,
I

this
it as of that

bill
emergency

passed
It

House

May,

even

thoi^n
of the

introduced

the

beginning
if I recall

formation around

Coi^ress.
that
we

wasn't
out

until

May,

correctly

May passed

15,
the

passed it Unfortunately, House strictly on

and
and that
was

of the

House. it

it
a

some passed with opposition, and Senate to the partisan vote, went

where

it languished

died, but

the

record
year

should

show

that

the

Senate
even so m

for 6
i

years,

the

third

of those
(1)

six, didn't

.bv

as

have of

way

hearing on housing, either legislationborne

a

much in the

less consideration

in a
over

formal
from ilies famthe

Senate

or

brought

the

House.

If we able to enact had been a who are today losing their

proposal
homes

and

in 1983, many who lost

of the
them
of 1983

in

Pueblo, CO, by April aa were of 105 a month, and this was of the at the rate one losing homes introduced the legislation. why we compelling reasons had that estimate is approved and the Coi^ress approved we My into and had the President law, which signed by all indications was dim that at least 10 of Uie homeless that we percent hope, a pretty borne of that of hoto out be^n unique form publicized now see so interim, such
in

families

who

melessness

this

subcommittee that
alcoholic the

first called
the

attention

to

in

1982, in
do

December,
the

and

is families, not
or

traditional

"ne'er
our

well",

mentally ill wanderii^ their to head, but families, father roof, no place no lay in children with automobiles, living parked under
under town,
in the
passes
or

unfortunate

streets, and mother viaducts or

own

in

parks
of San

as

one

family
the frost

saw

in but

my

home
even

and

this

is not

isolated

to

belt

happening
Antonio,
enacted of

bsilmy

weather

Diego,

California, San
that
at

Texas,
into the

had Florida, and I feel just statistically and law administered, just minimally
families It
was

bill been
10

least when the

percent
we

homeless ironic

later that in there

years

would

have in the
I

been

averted.

in

1986,

autumn,
visited

had

hsu-d,
were

unusual
lined
young up,
man

freeze
and 88 the

San
were

Antonio,
about

homeless
two

that
kids
in

207

that
his had

particular evening.
wife,
his with lost home

One his

in-laws

in had

State
a

of age had of Missouri

parked
and

Pueblo,

steel worker, and Antonio there he v/aa in San shelter that because he had night seeking temporary migrated in kind of didn't of employment, and, hopes of finding some course,
He been find To
me

CO.

it in San
me, to
a

Antonio.
was more

that

than
was was

ironic; it
not
a

weep,

because
te

this

that caused somethii^ had 60-year old, somebody who

was

man 38-year-old voung willing to hsid have done if he been to work, willing given some anything kind of ability to do so, to have stayed in Pueblo, except his home. So these are the things that we are our addressing today, because statistics show that the continues. We know from problem past witnesses hearings, and I think today will also share with me our the impact on the family when they lose their homes, they are not the roof their heads, but a lot of other things: Selfover just losing and the of security, and that which esteem, sense stability goes with the sense don't think is integral of home I which a ownership. home well of achievement as stability and a sense represents as

had

chance

live; this

control
I

over

one's
it is time

life.

think
to

for

our

government

to

take

sUmd

and

offer

help
up

caught economic not are r^onal depressions who only losing their homes and savings but everything that goes with family integrity and and live in a more the pride. We cynical age than even unity in the had faith in llie this depression, Congress depression enough backbone and so they offered the home, the old Home of America Owners Loan did essentially what we Corporation, which are
in

thousands

of loyal,hard-working

American

citizens

.bv

trying
on

to

do, and
I
was

in

fact the bill I introduced

two

in

1983

was

patterned

that. books

Eirguing on
which
we we

the

but
"

really
FHA,
We called

been but
were

enacted

that we had le^lation on bases, one will produce during the hearings has never it in 1978, but all within the context of
"

it

much really hasn't been administered had receilling that Congress going back
of America and without whose

anyway.

fsuth
health

in

what and

the
were

backbone

bility sta-

it paid off because nothing. And by the time the HOLC the time before the of World out by about b^inning War n, 1941, it brought to the U.S. Treasury close to $400 million. are a By those standards today, we talking about couple of billion of doUsirs equivalent.
was

closed

This

is what in the

was

meeint

to

have
had

heid
a

faith

in

that

American
that

family
part their

19308.

Yes,

we

have

lot of changes, societal, but

harshness and
front con-

of the the

due to the changes are couple wanting to average

in
a

economic form

families
H.R. It is

stable
some

environment kind

of home

keep a home, raise ownership, and so

life line
progreun. to

today
was

4292
a

offers
loan

of

a was

minimal
a

those

families.

pn^am,

HOLC
I can't had faith.

loan

If there

anything
and

more

dismal,

recall
In

era,
more

yet the
and
it would to

Congress
faithless.

the

that it, them 1980s, we

depression
seem

to

be

cynical
that
the have

So until
must

Federtil

loan

permit bring their

can

family
on

of average
up to

means

to

receive
to

mortgage
income

date, keep

famUy
a

get back
in

its feet. The due

to

it up eligible home

date

owner

involuntary unemployment lenders have talked to me Many sonally perbear foreto doing everything they can are in fact, I had visit by a group, meaningful a a very erful powvery in Texas, who that they lending group were coming to tell me t^is kind of legislation this year, would favor and under the environment which different in 1983 I will admit, and they were was out a trying to work voluntary industry plan provided they could Ginnie institution, known Mae, to get the secondary mortgage as some r^ulatory relaxation, and they would through go along with
or

reduction

under-employment. that they to say

"

mortgage
as

modification
in

allow
are

feimily that

through

no

fault of its

going through today, see their ability to many that mortgage meet payment disappear. So even their doubts of the industry who in 1983 had segments toward the thrust of this this, some are today expressing sympathy
own,

Texas

legislation. And
where
many

so

as

far

as

we

can

tell, in
it is

State
rates

such
are

as

Texas

know the
rest

the

market

foreclosure

50

percent
for ers lendin

higher
to

than handle

of the

Nation,

extremely
this

difficult

these 1983.

problems

alone.

And

is

difference
the

1987-1988 A

with

Federal
to

role, I believe, is needed.

that
we

I believe

in
to

words

of

Franklin The before

In would

Roosevelt
this witnesses
us.

can't allow of Americans.

ourselves

be

frozen

in indifference

basic

need will

today

bring

their

experience
had
in

and

expertise they
taining de-

view be

of the
here
at

fact that
9:30 and

some

of the Members haven't shown up,

we

indicated
to

order

avoid

the

witnesses

unnecessarily

will

proceed

with

rect^niz-

.bv

time

I understand ing them. problem in his need of [Opening statement

that
to

at

least
a

one

witness later
in

to

follow

has

catch

plane
Gonzalez

the morning.

Chairman

follows:]

.bv

AT

THE

PItGSEHT

TIME,

IN

HAHV

PARTS

OF

OUR

HATIOH,
THEIR

FAMILIES

DREAMS

ARE

BEING

SHATTERED.

THESE

FAMILIES

ARE

LOSING

HOMES

HOT

BECAUSE

THEY

HAVE

BEEN

CAREIfSS,

NOT

BECAUSE

THEV

HAVE

BEEN

FOOLISH,
CYCLE OVER

BUT

ONLY

BECAUSE

THEY

HAVE

BEEN

CAUGHT

UP

IN

AN

ECONOMIC

WHICH

THEY

HAVE

NO

HEARING

TODAY

FOCUSES

ON

H.R.

4292,
AS MANY

BILL

SIMILAR

TO

THAT

HAD

PROPOSED

IN

1983.

OF

YOU

REMEMBER,
UHFORTUMATELV

THIS

1983

BILL

PASSED

THE

HOUSE

IN

MAY

OF

THAT

YEAR

BUT

WAS

NEVER

ACTED

OK

I"

THE

SENATE.

IF

WE

HAD

BEEN

ABLE

TO

ENACT

THIS

PROPOSAL

BACK

IN

1983,
THEIR

MANY

OF

THE

FAMILIES

WHO

ARE

TODAY

LOSING

THEIR

HOMES

AND

DREAMS

WOULD

BE

ELIGIBLE

FOR

THE

TEMPORARY

FINANCIAL

ASSISTANCE

THAT

MY

MEASURE

PROVIDED

FOR.

IHG

OUR

NATION.

WE

KNOU

FROM

PAST

HEARINGS, US,
THE IMPACT

AND

AM

SURE

OUR

HITNESSES

TODAY

WILL

ALSO

SHARE

WITH

OH

FAMILY

WHEN

THEY

LOSE

THEIR

ENSE

OF

CONTROL

TAKE

STAND

AND

UGHT

UP

IH

THEIR

HOMES

AND

SAVINGS

BUT

PRIDE

AS

WELL.

.bv

4292
.

OFFERS

LIFE

LIMB

TO

THESE

FAMILIES.

IT

IS

LOAN

THAT

HOVLD

PBRHIT

FAMILY

OF

AVERAGE

HEAHS

TO

RECEIVE

FEDERAL

LOAN

TO

BRING

TBEIR

MORTGAGE

UP

TO

DATE

AND

KEEP

IT

UP

TC

DATE

UNTIL

THE

FAMILY

CAN

GET

BACK

ON

THEIR

FEET.

THE

ELIGIBLE

HOMEOHHER

MUST

HAVE

REDUCTION

IN

INCOME

DUE

TO

INVOLUHTARY

UHDIPLOYKENT

OR

UNDER

EMPLOYMENT,

MANY

LENDERS

HAVE

TALKED

TO

HE

PERSONALLY

TO

SAY

THAT

THEY

ARE

DOING

BVERYTKIHC

THAT

THEY

CAM

TO

FORBEAR.

BUT,
FORECLOSURE

IN

STATE

SUCH

AS

TEXAS,
FIFTY

WHERE

MANY

OF

YOU

KNOW

THE

MORTGAGE

RATES

ARE

PERCEKT

HIGHER

THAN

THE

REST

OF

THE

NATION,

IT

IS

EXTREMELY

DIFFICULT

FOR

LENDERS

TO

HANDLE

THESE

PROBLEMS

ALONE.

FEDERAL

ROLE

IS

HEEDED

AND

KNOW

THAT

THE

WITNESSES

TODAY,

THROUGH

THEIR

EXPERTISE,
AS ANY

HILL

PROVIDE

US

HITH

IMPORTANT

COMMENTS

OH

THE

BILL

AS

HELL

5DGGESTI0H8

FOR

IMPROVEMENTS

THAT

HILL

MAKE

THE

BILL

WORK

AS

INTENDED.

BC:

JR.

(A)

(S-HR4292)

.bv

Chairman
who in and is known

Gonzalez.
as

Our

first

panel
with

consists the

of Mr.

Jim

Butler,

Mr.

Project Hope,
and
he is of Dormont,

McKeesport,
Joanne

PA,

accompanied
PA,
Butler
and

Karaczun

housing opportunities famili^, Dan hy two Ms. Barbara Cogbum

so

of Dallas, TX. I guess we introduce Mr, Butler. like the should

our

recognize
witnesses.
you,

Mr.

first

that

he, in turn,

can

Thank
to
on

Mr.

Chairman.
our

I would you

behalf
for

of

families
us

today and
our

myself thank
I would of

and
to

committee
our

like

begin
and

inviting presentation with

we

to

tell

story, and
her

Barbara about
our

then

later
with

will

talk

telling ences experiexperiences as an

I v/ani the
on

agency

dealing
Mr.

this

problem.
me,
we

Chmrman

Gonzalez.

show
H.R.

Butler
so

has

If you will yield to here been before when the

OF

record
our

to

worked
that.

first

1983,

I think

record
BARBARA

ought

to

reflect

Ms.
TX

Cogbum.

STATEMENT

COGBURN,
I am

DALLAS,

Ms.
TX.

CocBURN.

Thank
a

you.

Barbara

Cogbum
there
are

from

Dedlas,
of stances circum-

My

story is not
that
are

single
the
our
was

isolated
or

family,
similar
and

thousands

fsunilies going
I held for from that

through

same

circumstances,

beyond
which I

control. laid off fi-om It took find

was

a a

job, job

being employed
3
or

there

only

brief period
before that

of time.
1 could

maybe
out

months

laid off
At
on

that

another

form after
not

of

employment.
I went

point, in time
for

unemployment working history, it

of

phased a period of time, didn't last long. We went

brief
of 1986 where
we

job

6 weeks.

time
to

in

the

fall
our

went

order

make

mortgage

payments.
hours

cutback.
could
meet

They
their

called

it manpower

having a very lor^ through a brief period without electricity in lost a job then due to a so being set back they

payroll.
a

maintain to period of employment my cut out from more mortgage payments. job again was once under and left me me looking. 7 Within months of entering a community collie in Dallas to form of employment, I found a job that study, to try to find another I just was notified last Friday that they are filingChapter 13, and I once again will be facing the same fears, the fear of losing the home that I used raise children three to on a single own, my sure parent that has paid 15 years 30-year mortgage facing forecloon a and that losing a home represents our family to us. I don't The think that but
are so

I tried

after

9-month

it
I

was

very in

convenient
was a

time

for

me

to

come

to
me.

ington, Wash-

feel like it

many

people
it, and

the
are

hard

to

make

they

important situation trsdng same short just when feilling

very my

time

for
so

There

desperately they thought

I have gone
up

they
I
am

had 6

it made.

months in
my

behind

in
now

mortgage

payments,
in order
to

without

gas

home
to

since

April 15
payout
them

save

for
my t

mortgage

payments
firm.
to

mortgage
even

When

a n^otiate approached

settlement last

with

week,

they

didn

want

consider

that

I would

have

the

abilities.

.bv

is very breakup of my

This

trying
like you
care

very

devastating. If family. I know hard to keep the

I lose that house

my

home
am a

now,

am

facing
but I
to

the
am

single parent,
it
seems

because

represent,

all go and take earlier, it is a pivoting point, we all return still part of home, and we are things, but we doesn't unit. Without husband, that, maybe our home represent a a all under the same roof. Please do that we are a fsimily and we are

stated

of our

what

can

be
you.

done

for

our

sake

and

the

sake

of all the
Ms.

rest

of

us.

Thank Chairman will

come

Gonzalez. back when

after
we

Thank hear

you

very

much,
families

Cogburn.
faced

We

irom Dan
are

the

other

witnesses. that
ployment unem-

Mr.

Butler.
to

Joanne Dan
in
our

and
-was

two

laid off from

progrEun,

the

able

enroll

home

and

steel mill, but they were I would like them to share

their situation.
STATEMENT OF JOANNE

KARACZUN,
to

DORMONT,
chronicle
went
our

PA

Ms.
with

Karaczun.

I would

like

quickly
how
we

involvement

Housing
August

Opportunities

and

about

saving
to at

our

home.
In
we

of 1983, sifter raising

our

family
are we

"

oh,
a

wanted

state

have

three
son

children, and
is and

their be

ages

very

point. Our going to be

After In

going

to

21, and

have is
to

important daughter
to

this
is

that

20

anodier

raising the
of

daughter that back femiily,I went

my

going

be

17. of 1983.

work

in

August
U.S.

Jfuiuary
years

1983,

husband
to say,

was we

Isiid off from

were

Steel

after

18.5
never

there.
his
meager

Needless it would

devastated.

I personally

felt that

We

lived
to my

on

without work. happen, but there he was and sub in tion addiunemployment compensation pay I at was salary. working Duquesne University in husband
went

Pittsburgh. In September of 1984, my the college, under

words his It education
was was

back

to

school,

to

munity com-

Displaced
and he that
was we we

Worker

free that

design.
our

during

year

other Program, and art studying graphic with starting to slip were
in three
grown

mortgage payments. and trying to feed them

You

figure ready
was

have and

all their
son was

needs

September
In in

of 1985
my

our

for
a

everything, college.
the
were

and

children, then in

1985,
f^l

husband's that
we

income

little over
with
as we

the

of 1985 the

got involved
company,

I think

mortgage

$7,000, and it was Housing nities. Opportuwere nearing, we

eral sevfalling behind and nearing foreclosure, they had recommended with. of them cial finanOne was a organizations we get in touch not went counseling kind of thing that we to, and they were able to help us because the circumstances what we they said under little money had fantastic, they said, were we was doing with what wasn't weren't know, we great, continue, but that enough. You

making

the

house

payments.
went not to was Housing only helped us
we

So, the second

organization that we and they were fantastic. They that we weren't really aware
we

tunities, Opporwith
was

formation inwe

of; what
had
an

did do and

went

to

and HUD, else, and HUD

met

with
over

them,
our

interview
and that

thing everyour

took

mortgage

lowered

.bv

payments
were

enoi^h
the the

that

we

were

able lowered
to

to^I it to

think

our

house
was

ments pay-

like $273, and

they
we

$150, which
on our

really
was

good at making
But that Here their
in
a

time, but
full $273 but
to to

as

started
even

get back
ub

feet, I
to.

anyhow,
the

Housing
we

Opportunities
human here
realize

not

though we only gave

involvement
a

didn't
there

have

this
was

information

needed,
have

fantastic.
to
we even

you

is

family

who

was a

used sudden didn't

paying
were

bills,used
situation
to go

having
we

where

their home, and all of didn't have food, and we

if there
to
was

know

how The

about

getting

food
came

food
us

available.

social worker

that
so

visit
we

food, ajid also it wasn't

much

that

counseling
each
to

or

"inything. We
are

are

other,
listen
to

we

us,

you
an

strong know,

that
to
on

way,

and come bring necessarily needed psychological close family and we a port supbut we body somejust needed this
esteem

would

help
our

us"

whole and

thing

was

so

humiliating,
but this
woman

it had
was

impact
she
us.

there, and
food

there,
the We Act

through
had
a

the

everything, helped us through just being and also brought, the help that way,
she

self

information

she gave
is
a

second

mortgfige
State loan

that
took

we

were so

able
that
was

to

get help through

set

91, which
all took
in

program,
over

This

place, HUD
and

the

January of 1986 school at that point and continue from to let him
STATEMENT OF

my

husband
to

decided there.
DAN

tfike

right. gage mortassignment of our finishii^ his year of was job. I would like summer

KARACZUN,

DORMONT.
the

PA

from the microphone laid off from ever strongest person being job my at United States and Steel, I naturally sat down began to write a and wasn't I saw. I recognized the resume pleased at what very fact with flnanciftl the that would be avmlstble our obligations jobs to me would not be able to and home family our simply keep our I I decided chance take and do to together, so something a Eilways
Mr. Karaczun.
am

just inheriting
met.

I have

After

wanted

do anyway, and because Unfortunately,

to to to go to

that
I

was

to

study

fine

art.

Pell Grant So I went

took and
a summer a

already held a degree, I could not get a Cornell-Mellon University and study fine art.
and took college a year only art courses, store in Pittsburgh a Pittsburgh computer
that
new

community

job
new

with

met

friend, and
is very I don't like
was a

friend and

was

called
to

Mcintosh
me

Computer
I
am an

that

graphically
to

based

appealed
manustls,

diately imme-

because artist

read

computer
kind for

and

besides
art

and

it

natural

of marriage

between

and

technology. period we had HUD Shortly thereafter,

who with
very
was

I sold

computers
over was our

9 months,

during
my

which

that

take
I

mortgfige.
a

offered
in 8

also very
for

interested

approximately divergent opinions about

went

him

of job by one and high technology months and began to

customers

art, I worked
realize
we

had

where

this

business

was

headed.
store

partnership with a computer and and art firm to market an try put this all together and I differences into of technology. Again, ran opinion on where it and how should be accomplished. was going
a

I then

into

very

brief

the this

.bv

10

Being
decided

rather that
it

single minded
was

and
to

time

for me

having b^in

my

own own

vision

my

business.

in life,I In the

of my make business, I would early months anywhere from $200, {300, $400 a week on a good week, until we reached the period of I am 1987 October of 1986, or it was ary through early Janusorry of 1987, my income $1,000 and it v/aa very d^cult to keep was
" "

the

wolves

from

the

door

at

that particular time.

in Pittsburgh, WesFortunately, there is a rather large compemy tinghouse Electric Corporation, that was looking at this technology and reedized to learn to although it wasn't a very eeisy computer the cinch not to necesuirily a leam, and applications were use, needed felt the network and to also to someone they they support been associated with train their people, and I have Westinghouse Electric as a primary graphics Mcintosh consultant since then and continuing to do that today. am is actueilly of it is Pubproprietorship,the name a My company lassist for publishing assistants, and since then I have consulted with other teresting, companies, as well as Westinghouse, but it is inmany in August, 1987, we made that month thfin more money
we

made other We

in 1985

for the

whole
be

home.
our

Without

it,we
offer

would

Our business year. out of business. We

have
a

is located low

in

our

need, because
very
head. over-

of

flnemcial
can

to responsibilities,
more

very,

attractive

rates

for

the

services

that

we

of our home. I would not just like to say we are totally out of the woods yet, have a long way to go. We have accumulated to our estimation we worth of unemployment additional $37,(K)0 of debt because and an don't buy new niture, furstoves, we under-employment. We don't buy new

provide

because

we

don't

buy

new

anything. What
United
with who with that
anyone to do

we

buy
and

is computer

equipment.
I took and would vision
my to
severance

from
our

States
had their I

Steel
a

my

pension
and clear I

invested like of what that Not

it in believe

future that

computer

equipment, single minded

do

they
that I
am

wanted is true.

lives could in

this, but
a

I don't believe I think

lucky, I think
I would
can

saw

technology

way

to

make
with
can

things work.
you.

everyone

much rather be a sculptor,to be honest embrace high technology, not everyone

not everyone
can

work I believe

in the
everyone
we

government,
is the

be

special, although
we

We special.

do
our

need

bus

drivers,
make

need

steel And and the

workers,
we

need

people
our

in

society to
on

it work.

just can't simply

I would Rita

turn

like to thank

Jim

backs Butler
us

them.
program

personedly for his

as our case

also Mr.
Mr.

Randall, who

helped

worker

through

tough

times. BuTLEB.

Chairman

Thank you, Dan. Thank Gonzalez. you,

sir.

Butler.
STATEMENT OF JAMES P.

BUTLER,

PRESIDENT,
PA.

HOUSING

OPPORTUNITIES,
Mr. the

INC., McKEESPORT,
eis

Butler.

Mr.

Chairman,

you
are

mentioned,
all steel

Monongahela

Vetlley, which

the situation mills which

in
are

.bv

boarded home

up

and

incredibly high unemployment,

in the

it is very
our

similar
has had

to
a

the oil patch problems

southwest,
many

well,
years
are

agency
with

ownership
to
on

program

for
owners,

dealing
based,
one on

helping
our

people family
In staff that

become
a a

home

and

we

all of
one

grams proa

in

or professional council working close working relationship with very

witii
the

the

lenders.

1982,
and
we we

with

the of

permanent
home

shut

down
we some

of

our

mills

and and
a we

credible inour

number
our

foreclosures,
volunteers
a

got
we

together designed

with

board

and

and
with

lenders

utilities
new use

have

developed
for the
to

rapport
name

and

gram pro-

called, Home
HOPE

Ownership
it.

Protective

Effort, and
and with
with

the
some

acronism
very

of that

program,

it haa

unique features

to

The professional counselors make stick with them until they

to
cover

a
are

commitment

the
15

family
to

re-employed
date that
with

suMcient 16

income months

their

obUgations.
counselors

To

has
those

taken

professional working families individuals who or only take into the pn^am are their because of under on or delinquent mortgeige unemployment We have been able to charge the institutions with a employment. these in vested families for our interest services, unemployed insurers and namely the local lenders, the utilities, the mortgage because when successful in investors, we are mortgage helping
of

families.

We

these So found

feunilies

to

keep

their

homes,
for

those

institutions the

with

vested

Interest
we

benefit.
felt it made of the
were sense

them
crisis

to

pay

freight, and
a

we

because

level

of the that
now

and

the

amount

of millions chance
on our more

of dollars

they

losing
We
have

particular
than who

program. program 5 years and we have list of lenders and insurers growing a have made public testimony as to the cost effectiveness of our the feunilies that in

they would operated

take
that

for

particular effort.
On
income
average,
come our

pn^eun

have
than And
up

gross
once
a

that
enter

is insuflicient the
program

for mortgage,
are

food
a

and

but utilities,
more

they

they
month

averaging
back other with
rate. to

little lenders.

full

mortgage
and

payment
we

each

the

less thfin
in
a

approximately
perspective
income We also from that

have that have

3 percent been

of those
told

families

have

ended
that with

sure, foreclonational
a

by they in dealing is a high success

established from

groups

have

tliatgroup
loan funds
we

such

tive nega-

revolving
have
in

which been

we

have
able
to to

gotten
use

contributions
pn^ams.

foundation,
been

have

public aid
more

We
million
to

able

to

secure

than

{1
able

aid, which
water

is level is
an

help our a large

below

families
reason

the^ have
until the
on more we was

been

keep

the

their assist

why mouth part of them

they become
program,

re-employed,and
five counties
down
no

that

important
as
we

is to
careers.

to

new

above keep ^eir head After operating the

in to

water progriun

success

in

southwestern HUD in for

anticipated, we went cold call,there a was

them the

and achieving Pennsylvania, then, Washington, DC., and it

we

request
cost

proposals, but
and
so

shared

with these
our

results
with
we

and the
were

the

effectiveness
interests
were

the

fact that
to pay
were

institutions

vested

willing
even

freight because

able

to

get results,Eind they

.bv

13 which
more

be able to service so already there, we in fact would many and bring aid to those families, neighborhoods and lenders which and then are losing such a fortune requiring public bail outs. So I would that I would be happy to just like to express in utilizingour work with this committee experience and gaining "rom it and also would just like to again thfu^ you for inviting us and allowing us to share our experiences. of James P. Butler can be found in the [The prepared statement appendix.]

is

families

Chairman
we

Gonzalez. will
to

are

solicitingyour
and
we

Thank you, contribution

a

made,
flexible
pn^am

find make
very

way room,

enough
you

Mr. Butler. You be assured can and the su^eetions have you to provide that H.R. 4292 becomes cdlowance and recognition for the
out.

have the

successfully carried

question, which was money like to point out that in 1983, I would us proved $1.5 million a day for El Salvador. $1.5 million a day, and we are not asking
As far
as

we

the big issue thrown at in the Congress ap"

is

That

just one
much

country,
in this
thorization au-

for that

for amendments.

meanwhile, we but Mr. in, coming would stay here because

Roth

In

the

had he
sure

both has he

Bartlett

Representative Bari^lett and Mr. to leave and I was hoping he the Dallas and Ms. Cogbum is area
had have
man some

from
some

Dallas
eHKWure

and
We

am

would

commenta.

also
to this you

have
want
at

young to say

from

Wisconsin

observations who

and has

type of thing.

Mr.
Mr.

iCeczka, do
Kleczka. the that Frank.

anything?
he is from the northeast, has been his here, it was in 1983. Mr. Frank.
man,

Not
Gonzalez.

Chairman
not presence

this time. Another young

but Mr. from if difference

midwest,
made Theink the
you,

anybody
Chairman.

Mr. A because commend

staff
a

member
bill that
once

of the
came

Judiciary
my

Committee

just wigwagged
is you up.
are

me

subcommittee
role leadership

I want

to

will come

again for you back, I apolc^ize.

Gonzalez.
real
soon

the

taking.

Chairman
it

Our
come

loss is Judiciary's gain. I hope you

back.
statement you

get

throi^h
Mr. Mr. Roth.

and have
to

Roth, do
find

you

any

wish
I
am

to

make?
to

Mr.

Chairman,
listen the

I think witnesses

that
we

going
here

statement want
one

have

forego any today. I too

I know it is

to

commend

of the
in

leading

because your leadership in this area that is goii^ to be discussed issues

year.

but
want

the
to

fall of this

I commend

you

for this

only now, hearing. I also

not

take time to say I thank for inviting me day birthto your you party, it is probably the greatest bash I have ever been to emd I appreciate being invited. Thank for lettingme make that personal comment. you Chairman Gonzalez. Thank for coming over Toby. It is an you annual event. We will bring the food from San Antonio, the up music and drink. Mr. that you have Butler, I understand opened activities in
Dallas. Mr. Butler.

We

just leistweek
in the

the home

program

opened two agencies that will operate County of Dallas, and in the County

.bv

14 of Tarrant,
a are

local

the that their the

Fort Worth is located. They didn't have had the to operate our so we capacity pn^am agency of incubating a new in the process lo"^lybeised non-profit,and has recently Housing Finance Corporation of the city of Fort Worth made commitment of $257,000 to this effort. So I think a
that and if you look at the investors find
money

which

is where

growing list of lenders city agencies that are

effort, it shows
how that

emd the

mortgage
to

ers insurof

willing

leverage

into

this

components

and the able to HOPE involve the Pr(^ram they are way in the community stretches the money vested interest ly, tremendoussuccessful with more which enables you to be more families, and if the resources could be growing made at a faster we were pace at your there available, and as you mentioned opening conunents, is no question as to the level of the need that this crisis exists. Gonzalez. Chairman I noticed you were the Mr. How did careful

municipality
Butler.

of

Dallas?

tion? organizapoint County? Is that What find in organization did you

you
or

locate
out

find

the

to

Dallas

Dallas?

using two organizations, the Dallas we are find the Urban Agency League, and they will Counseling HOPE the entire The our operate Pn^am throughout program. I wanted is the program service to point that out reason can larger than simply a city.Our particular organization services five counties.
Consumer So crisis crisis
as

In Dallas

the and

program

grows, your

you

would

be

able

to

blanket
is

any
on

areas
areas

gain
the in

bill,I think
is great, and

rightfully so, focuses

I think I that
a

where

need

mendable com-

approach
Chairman the reason Mr. Butler.
Chairman

addressing this problem.

Thank you very Ms. Cogbum.
I

Gonzalez. why we have

Pardon Gonzalez. witness.

much.

imagine

you

are

me?

imagine

you

are

the

reason

we

have

Ms.

Cogbum
Mr.

as

Butler. Yes. What I wanted that Ms. Chairman Gonzalez. to make sure was without did leave the this not premises Cogbum morning having from that her us problem is going to be resolved some assurance and that she can You that, I am keep her home. are working on
sure.

Mr.

BuTLEH. will in Dallas.

Since
be
one

we

just opened
our

at

the

end

of last

week, I think
HOPE gram Pro-

Bfu-bara Chairman

of

very

first consumers
to

in the also offer

Gonzalez.

Well, I wanted
to

some

tions, sugges-

hearii^ here, and I don't know if you have the time, Ms. Cogbum, but if you could remain here after the panel has been discharged, I would like very going
take the time of the much

I wasn't

leave
your Ms.
Mr.

get the staff together. I want this premise without having problem is going to be solved.
to

to
some

make

sure

that

you

binding

assurance

don t that

CoGBURN. Butler. do

Thank

you,

so

Chairman

We wUl Gonzalez.
We have

be

happy

very to

much.

stay.
the

If you the

have

time, I

am

asking

you

to

please
Mr.

so.

Butler.

time.

.bv

15

Chairman Gonzalez. I was going to either ask Mr. Kleczka' or Mr. Roth if they have any questions. Mr. Roth. Mr. Chairman, if I may, I would just like to say I have I know heart is in the some questions about your legislation. your concerned about the cost. Five hundred lion milri^^t place but I am dollars is a pretty good price tag. I would like to ask Ms. C(^kind of relationship did you have with your lender? bum, what 1 come business and it seems if you from the real estate to me

approach your usually try to

Ms. CoGBURN. Mr.

lender work
I have

and

explain
for you. has

problem

to

him

or

her, they

it out

Credit seling, Counworking with Consumer been to negotiate working with me with and the periods of employment weren't mortgage compsiny my the times of unemployment, in lasting long enough in between that were order for a long to cover making mortgage arrangements lasting effectiveness.

been

Gene

Arnold,

The week

last and
to

time tried hear

Mr.
to

Arnold
a

negotiate
15 years

the middle called, which was pay-out arreuigement they no

of last

longer

wanted

of it at

all. They
on a

wanted
30
year

earlier, I have

paid

foreclose. As I stated and they would mortgage

to
are

prefer
The
a

foreclosure

now.

three

payments bedroom,
me

I make
two

on

my

mortgage

$265

month,

and
me

for
to

rent

for

and
way

is

no

other Roth. Roth.

my to afford

bath house, it is almost im["os8iblefor three children in any other way. I mean
a
"

there

place
that

Mr.

Fifteen It These

years

for us to live. is htilf of the life of the

mortgage?
Is

Ms.
Mr. Ms.

CoGBURN.

certainly is.
15
years,

have

you

been

delinquent before?

this the

first time?

hand.
three
to

It began in 1984 when I had accident to my an working as a secretary at the time, and I heid the back fingers of my left hand almost severed and I lost my ability
I
was em

CoGBURN.

make

income it

at

that

point
to

in go
no

time. and find

You
form have
Mr.

know, was employment. plasticsurgery

of Roth.

like

I had have
you

retraining,some
for that with

And
to

I had
my
mive

insurtince

other zind had to

lender want
to

fingers repaired.
been

Since
come

1984

working
has said

your

and

it has

continue Ms. Mr. Ms. Mr.

I many

the point where he to foreclose? this, they want

to

they don't

COGBURN. Roth. How CoGBURN.

Yes.

much

in
now

arrears

are

you?
6 months Mr.

Right
you. each with
my

I stand

behind

in

my

gage mort-

payment.
Roth.
to

Thank
Gonzalez. thank
to

Thank
Thank and
us

you,

Cheurman.

Chairman
wEuit

you
every

very
one

much,
of Mr.
to

Mr. find

Roth.
for

you

coming
words

these
wifli

miles
to
cares

be
that and

whidi who

express

and

today, and gratitude to you, is what it is going

if you

I can't take.

the

Butler,
So

are a nlan you I want to thank

come

you very to you after

much,

have

the

time, I would

like to

back

awhile.

Mr. Butler. Thank you. Chairman Gonzalez. We have James of the Abbott, Chairman

our

second panel consisting of Mr. Legislative Committee, Mortgage

.bv

16 Bankers Association of America, Mr. Phil Gasteyer, executive of Mr. J. Edwcu-d Institutions, League Savings of the vice-

president, U.S.
America. I understand
so

ton, Carlof

secretary/treasurer
you
no

Mortgage

Insurance

Companies

if there

is

have here with an airpleine schedule, a problem objection,we will recognize Mr. Abbott first,
MR. JAMES A.

STATEMENT

OF

ABBOTT,

CHAIRMAN BANKERS

OF

THE

ISLATIVE LEGOF

COMMnTEE,
AMERICA

MORTGAGE

ASSOCIATION

Mr. Mr.

Abbott.

Thank

you.

James

officer of First president and chief executive Union North man Carolina, and chairMortgeige Corporation, Chfirlotte, of MBA's Committee. me Legislative Accompanying today are Burton C and Sharon Wood, MBA's CanaVan, legislativecounsel MBA's Frank, director of deputy legislativecounsel, and Janet Relations. the We

Chairman A. Abbott.

and I am

Members

of the

subcommittee,

my

name

is

Government

appreciate
our

opportunity
current

to

appear to

views

on

the

situation and

delinquencies
on

and

foreclosures

before today to express you mortgage regarding home offer our specificcomments

Act of 1988" and Housing Assistance our general views on mortgage relief legislation. Foreclosure is but a symptom of the overriding cause-sustained Lenders high unemployment. possible, are forbearing whenever the borrower shows particularly where instate. promise of being able to reH.R.

4292, the

"Emergency

For forbearance should conto be most effective, borrowers tact lenders as soon as a problem develops to allow a lender workout and forbearance before serious to formulate a a pr"^am
their

delinquency
In
some

has

set

in and

substantial

arrearages

have refinance
or

ed. accumulat-

balance

loans

borrowers cases, to recover with

an

might
some

be

able

to

older, low
lower
the

of

their

equity

to

monthly
Lenders property
sale

payment
and

interest

rate

reduction.

also suggest look at the value of the that borrower a consider be sold, the curmust selling it. If a home rent is far more housing market congenial to quick and profitable
markets

than the depressed by the borrower 1980's,except in localities suffering from

during the early turns. downregional economic

a

However,

it is

prohibitivelyexpensive

for

lender

to forbear

on

period of time. When voluntfu-y basis for an extended a mortgage bank does not receive borrower institutional investor a s payment, and seller/servicer requirements of the secondary mortgage market require lenders either to repurchase the loan or to forward ments paywhether not they have been received from the borrower. or
Lenders funds for extended to advance periods where unlikely, and this is particularly true for lenders who of loans in localities experiencing are servicii^ large numbers high unemployment. believes that the problem of mortgage MBA delinquencies and foreclosures is regional in nature and, therefore, we question the need for broad-scale relief this We at time. greatly are emergency
cannot

afford

reinstatement

is

.bvGoogli

17

concerned offer
of
a

about is

the

deficit, which

impact of assistance programs Nonetheless, already excessive.

on

on we

the
would

Federal

constructive comments our should be. relief program

mfuor

what

we

believe

like to the framework

MBA's

concern

regarding foreclosure
in many

relief is its potentiftl

there is In
no

cost, particularly because borrower will ever that a

we

instances
to

chance

be
relief

able

catch

up

again.
limited

this

light,
in
rowers bor-

recommend
most

that

program,

if enacted, and

be
to

limitod

owner-occupants, tainted only from the program's assistance. likely to beneHt should and to VA Such conventional apply only a prc^am FHA borrowers because covered are already by the gages,
nature,
to program, or,

those

mortr

ment assignas

in

time, the

TMAP

program.

Furthermore,

provided
are

in H.R.

4292, relief should

of

be extended

only
the
not

to

those
too

who

deemed
The

capable

resuming

payments

in

distant be

future, and
based Recent
on

of repaying the assistance extended. for foreclosure relief progreun activating a trigger

should

regional
foreclosures

or

local have While

data,
been

rather

than

on

national
areas

statistics.

concentrated statistics assistance

in

high unemployment.
an

national

might
program,

not

experiencing trigger activating

local conditions er's borrow-

emergency

foreclosure

in many regions could warrant implementation. relief progreun foreclosure should only supplement limited

abilityto
from whatever
on accrue
are

pay,

by requiring
income the

borrower is

payments
should

borrower

partial receivii^. Interest

to cost

make

also

the assistance
so

payments.
to

These
the

not indicate

designed
a

much

reduce

borrower of the
to

tributions con-

gram pro-

as

to

borrower's

ability and
payments
be secured
ensure

willingness
should

work

out

delinquency problems.
MBA

believes that any assistance ble. The assistance should payments second trust ageunst the property to
MBA fdso should borrower of
ui^es not be

by

be recapturasecond lien or
relief

repayment.
a

that

Eissistance for too

under

foreclosure
a

gram proa

extended

has a significantamount reinstatement. The most

be
to
are

lengthy of equity

time the

period, unless
home
or

in

is capable

efilcient
cover are

use

would
who

limit
most

assistance

to

arrearages

able

to

reinstate

those

of assistance funds borrowonly. The ers with approwho can, priate

the
current

financial but who

mfuiagement
are

unable that have

counseling, to bring the

accumulated.

make loan

monthly
because

ments, pay-

of

payments
Procedural be should

in

arrears

foreclosure delays during the application process lenders will be subject to carefully restricted. Otherwise ance significant potential delays, beyond their own voluntary forbearthe borrower period, if itssistancs is ultimately denied because is deemed H.R. 4292 not to be capable of reinstatement. by HUD does for forbearance not, in fact, address compensation to lenders is denied. Because during the application period if the assistance VA and conventional loans covered innot are by mortgage fully time significant delays during which mount, aureuice, arrearages

will result

in

greater

losses

for

lenders, which
will be
rates.

will

have

direct
to

impact on the cost of servicing, which via increased interest mortgage

passed along

rowers bor-

.bv

18
In these while H.R. 4292
as

summary,
concerns

introduced
the

addressee

many

of

and of

improves
assistance be

upon

House
over

in the

1983, MBA
cost
an

is nonetheless
program

le^lation passed by compelled to voice its concern

and
on

the

to

urge

in strong be best

terms

that

assistance

should

focused

localities suffering extreme

should
shalled mar-

economic

distress.

Furthermore,
it to and who

assistance who A.
are

by limiting
forbearance

individuals of James Thank

strong
can

candidates be found
in

for

assistance

will reinstate.

[The prepared appendut.]

Chairman

statement

Abbott much.

the

Gonzalez.

you

very

Mr.

Gasteyer?
OF U.S. PHIL

STATEMENT

GASTEYER,
OP you,
SAVINGS

EXECUTIVE

VICE

PRESIDENT,

LEAGUE Thank

INSTITUTIONS

Mr.

Gasteyer.

Mr.

Chairman

and

members

of the

subcommittee.

My
the

name

is Plal

Gasteyer, and

president for
The

U.S. is

pate particithis on hearings of national housing policy. important aspect very the general support of our I am here to indicate organization for the legislationdealing with the problem of mortgage delinquency resulting from economic hardship. The League and its members well aweire of the economic calamity that cem befall individuals are and institutions alike when side of they are caught on the wrong economic an pendulum. H.R. 4292 would gible create a mandatory HUD Program to assist eliof their own, in homeowners fault who, through no are of their home foreclosure. While do the to we danger losing support
League
to

League of Savings pleased to have this opportunity

and
to

I am Institutions

executive vice here in Washington.

in these

work

with

the

subcommittee

approach
ti"ms I which

taken
we

in

the

bill, Mr.
will

Chairman,

we

have

some

sugges-

believe that

might

add

I think

improve on this pn^eun. that it is wise to be prepared

often
we

in advance

these on catch up
and

types of situations. Too with periods of economic

find ourselves
that been last
aware. come on

trying
our my, econo-

to

distress

indeed,
stood the
in

might
The

have

if your in us

legislation had good stead in the

as

enacted

in

1983

it

couple
biU

of yeetrs,

ticularly par-

Southwest,

you

are

well

Assistance

Program

authorized

by

this

would

become

Home Loan Baoik district where the 60available in any Federal 2 for 3-month ratio default is a day percent or higher period. We don't object to the use of this measurement, but we want to Federal out that include loans held by point monthly reports only

Home
needs

Loan
to

Bank
under

Member the

assistance

biU
this

for institutions. Sipce the loans eligible all non-FHA subcommittee the loams, are is not
a

understand

perfect match.

that the 12 bank We also want to point out to the subcommittee of mortgage districts vary volume in total size, population, greatly of States. The State may be very much in lending and number need but may the of the pn^ram, happen to be in a district where economic data is dominated conditions are by a larger State where favoi^le at the moment. more

.bv

19

We
to

individual State to allow an suggest that the bill be amended for of the to HUD activation when it can strate demonprogram appl^ if the district at large to which its qualificationeven it is
cannot.

signed
There progTEun the are

have with the Chairman, one concern we msgor and it stems from the budget limitations of the bill which of political product ing reality no doubt. Hopefully, the revolvfund will be sufficient to assist all eligiblehomeowners in all districts and
some

is, Mr.

bank

at

particular point
not,
we

help
remote

do
to

do

not

way

be

put in the
of

If not, if some get the the lender in even the most position of deciding who gets ^e assistance
want

in time.

and

who

This

problem
of the

does not. arises out

the
to

provision of
The

the

bill which
in

quires re-

the lending institution

assist the

homeowner

the

ration prepa-

application to
lender
not.

HUD. the

be and

that who Some

the

will be

practicalreality of determinant deciding who

this could

qualifies

does
of the with

ascertain
or

requirements are beyond the capability of lenders to has lost a job degree of certainty why someone any
in

had

reduction

income the

and

what
Two

their and law

are prospects

cial for finanis a

recovery

within

future.

one-half
such

years

tive subjec-

type of judgment.
Given other

provisions
we

of Federal

Act, length
ments. to

feel it is imperative

that

eliminate
of the

subjectivity in

making

portunity Equal Credit Oplenders to go ^at these kinds of ju"teas

The keystone legal contractual

and

private conventional relationship that exists

concern

mortgage
between in this lender

market the

is the is in section

mortgagor

mortgagee.

Our

with

H.R.

4292
for

regard
find

6, Stay of Foreclosure
While which foreclosure is
WEint
a

Proceedings.
last resort
a

something

aU
must

lenders
be

to

maintained

sure avoid, the lender's legal right of forecloin order for the whole fabric of private
a

mortgage
to

finance, including

successful

secondary

market

system,
.

function

properly.
our

Here,
How

again,

concerns

are

practiciil,rather
time
an

than

theoretical.

application is sent to HUD start flowing to the lending institution? Our experience with Federal agencies is not always encouraging on these types of points. We foresee the borrower is free significantdelays during which of any make while foreclosure is to the obligation payments process will be situations where There or stayed suspended. undoubtedly the progTEun will cease in an while ing, area applications are still pendin which the foreclosure has been suspended. cases
Section what the

long will it be between euid the monthly payments

the

8 of the
relative HUD.

bill raises

another will be does

concern.

It is not
a

at

all clear
lien

position
Section
7

between

private
liens and

sector

holder
to

and

provides that
This

HUD's
liens

are

nate subordithe
sibility pos-

existing mortgages.
of other kinds form
in

not, however,

address
so

of liens, mechanics
a

forth, which

are

not

the

of

mortgage.
8 suggests HUD.

The dinate

provision lien position

the

in section for

lien

on

property

something other than a suboiv There than one may well be more in question before the HUD is apassistance

.bv

21

[The prepared pendiz.]

Cbainnan

statement

of Mr. Thank

Gasteyer
Mr.

can

be found
and

in

the

ap"

Gonzalez.
for

you,

Gasteyer,

the

heagae
in these

their continuing and sustained represent support you emd for your very wise obsorvations. vital matters, very Mr. Carlton?
STATEMENT OF MORTGAGE J. EDWARD INSURANCE

CARLTON,

JR., SECRETARY/
OF AMERICA

TREASURER,
Mr. CAiUiTON.

COMPANIES

J. Edward Carlton, Jr., president of Int^on and Corporation, Winston-Salem, NO tary/treasurer secreof the Mortgage Insurfuice Companies of America. MICA appreciates thia opportunity to discuss the foreclosure problems fac^ by people in many sections of the country. We applaud the spirit and intent of H.R. 4292 and recognize the need to deal with the personal trauma eind financial stress that families go underbut we cannot during foreclosure support the approach taken in believe that many of the problems can be dealt with by the bill. We private sector initiatives. Few industries understand the problems of foreclosure better and thein the insurance 1983 1986 mortgage industry. Between insurers mortgage paid over $3 billion in claims benefits to lenders I
am

Mortgage

Guaranty

and

investors.

E^ch

claim

represents

borrower

who

heis gone

through foreclosure. Mortgage insurers

in
an

into
many
are

continually anfUyze their clfums experiences the number of lotms that go to reduce develop ways fareclosure. Mortgage insurers in unique are a position from
effort
to

members of the mortgage finance industry because we side of the mortgeige transfiction the borrower. as When insurers underwrite loans, we that mortgage try to ensure the home will remain affordable for that borrower far into the future. If unforeseeable ty problems develop with the borrowers' abilito continue to make to find solutions to payments, attempt we those problems.
on

other the

same

I would

like has

to

share

with about

the how

committee
to

today

some

lessons
once

my

industry

learned

reduce

foreclosures

borrower has developed a problem with his or her the mortgage will be considered These lessons within payments. the context of H.R. 4292 in order to better evaluate why this initial be revised. must approach in the legislation The first lesson we have learned is that the finfmcial problems of the borrower be discovered and must addressed at early a very in before the borrower loses realistic time, a point ability to restructure his tinemcial dif^culties. This that problems must means be discovered much earlier than when the loan is in foreclosure or 90 days delinquent. Mortgage insurers generally require lenders to

the ability to make

notify

them

when

loan

is 30

days

in default

and

to

take

steps to

determine

the

reason

for the is
to

default. borrowers
to it enables determine

detection Eiarly

important also because

counsel

mortgage
CEm

insurers be resolved. in

key

factor

insurers

Mortgage insurers consider and preventing foreclosure many to work nave counseling programs

lenders and if the lem probcounseling to be a lenders and mortgage

with

delinquent

.bv

22
borrowers. assistance. The

bill, however,

early stage in the

One
must

does delinquency and

not

mandate
to

prior

counseling at receiving government

an

is rela" and insurers that counseling by lenders note the opportunihad have not ty subcommittee this and may tively be advisable as improvements to study the new developments. It may
new

in

this

important legislationare
insurance
financial insurers

sought,
had

to

study existing
with
viding pro-

pr^rams. T^e mortgage

borrowers

industry has
assistance have
in

experience
their

in

making

mortgage

payments.
a

Some
the them

developed
some

loan
to

to

borrower
have be

or

help

bring
been reduced

their done

ance,
on a

however,
that
cannot

either to make programs assistinstances provide direct ance of eissistBoth kinds loan current. and limited circumstances in very insurers look
at
a

case-by-casebasis. Mortgage
to

tors variety of faccan federal regulations,nor they be believe

generalized.Mortgage
a

insurers
financial have also

they
on

borrower

deserves insurers
to

assistance found

Mortgage
progriun. to

that

eveiluate whether individual basis. very the borrower's ness willingmust

to continue

H.R. make

workout is vital in amy build equity in the home to continue does not require the borrower 4292, however,
even a

small
to

portion
exceed

of his

payment.
from the

likewise, we
any

would program

caution
not

that be

it is essential

that the

funds

allowed

equity

borrower

assistance ready has ala

that of the strong possibility because put into the house that his exceed assistance for borrower, faced with repayments default. will the her equity in home, MICA also does
not

or

believe

that

Federal
The

law

should

permit

closure fore-

foreclosure laws of the 50 postponed. proceedings States handle. In some to difficult States are already exceedingly foreclosure proceedings can be instituted quickly and easily and in
to be

other without In

States

the

borrower
any

can

live

6 months the the

to

year

in

home

making
for

mortgage
bill does
not

payments.
address situation where
an

addition, the
been

plication ap-

assistance

has
the

stayed,
finds

is denied, yet resulting in increased

we

foreclosure proceeding costs to several parties in

transaction. MICA

that while

agree

with

the

spirit of the bill,it has

which
to
we

significemt overall
We
distress We

public policy impUcations effort believe that the key to any

is reliemce
upon

cannot

port. sup-

relieve the

the

personal

of foreclosure
a

the

private
to

sector.

believe invites

uniform,

federal

approach
incentive

foreclosure
borrower

lem prob-

on

to focus abuse. It provides an not and him assistance for tions acwill meike that eligible actions the default. This is not to say that the intent of that will cure

for the

the

bill is to is
no

there

support these unscrupulous to prevent them. way

MICA
is

practices,but

we

believe

sure supportive of improvements in forecloFederal have difficult supportii^ a relief,the industry would additional t^at would $500 million, thus appropriate an program deficit. Historical experience has shown contributing to the Federal is a strong b^t for cure that the delinquent mortgage parents economic ery recovin factor lone-lastmg ensuring A primeu? economy.

although Finally,

is

determined

effort to reduce

the

budget

deficit.

.bv

23 Thank
answer

you any

for

this

opportunity
of Mr.
Thank

to

comment.

I will be
Mr.

be

happy
in the

to

questions.
statement

[The prepared
Chairman Let
me

Carlton

can

found

pendix.] ap-

Gonzalez.
say your

this.

I know

Mr. well that

you very Abbott

as

much,
is

Carlton.
have
to

Both
income

in

that

remarks, as the borrower,

Mr.

going to Carlton's, the

no

leave.
vide pro-

bill does what

homeowner,

matter

his

38 percent of it, not less. However, contribute is, must you bad some other, I think, very substantial suggestions, and I would work ameliorate like to think together and see how we we can can
some

of the

made, I think, would and the thrust of the legcontradictory objective islation for relief and that the help. I think in ^our observation close what Mr. Gasshould be pinpointed. You to are area commg the regional approach that we have relied saying about teyer weis loan bemk districts statistics, and in the home that, perhaps a upon However,
be
with the main

reluctance here. the of suggestions you some

have

stotewide
We

pinpointing

would

be

advisable.

certainly
or

modification
on

welcome your of the bill. I don't

in

help
hold the

and
any

your

su^estions

in

the

bill to he

proclaimed from

high

written the

script and
and that take
your

this Mr. f u^ We
we

is what

give

of the

Carlton, I realize
weak. would

is that beauty of our process provide. eunendatory process spiritis willing,but the fle^ is aw-

like to avail ourselves of some of your suggestions, and certainly are eunenable to suggestions. I, for one, am ful gratevery for your tive. construcpresentations. I think they have been most I am also veiy and the time grateful for your presence you taken staff
to

have the

be here.
Mr. Abbott interested

Yes, before

leaves, we
in. That

have
has

one

question
with
as

here
to

that
to

is most

to

do

how

with rates high interest provide relief to delinquent borrowers is What through the GNMA mortgage-backed securities programs. permitted at the present time, and what mend? recomchai^ea would you
Mr. Abbott. the I

apol(^ize. I

was

listening to

my

itssociate

"ind

didn't catch Chairman

we

first part of the question. Gonzalez. Well, this is a very

important question that

you

wanted

to

get
whose

on

the
be

record
offered is
a

before

left. That

is, what

method interest

of relief
rates

could

mortgage

witii high delinquent borrower in the GNMA MoH^age-Backed

asked
her. that

Securities

Program. Mr. Abbott. Coincidentally, you the subject I was discussing with
the
prc^am

question, which
very

weis

We

are

that

has

been
we

mentioned

mortgage
where It
a

lenders,
loan could

and
be in

would
out

by one whole-heartedly
a

fEunilieu- with of the major Texas

support
pool
and

that,
could

bought
a

of Mae

Ginnie

Mae

be recast

and

put back

Ginnie

pool.

be able to be insured not probably would by FHA or teed guaranby VA, but nevertheless, since the issuer of the security is responsible from the time of payment of principal and interest, we in the Ginnie feel those that participate Mae nancial Program have the fithose payments and would be very much in abilityto remit

.bv

24
favor these of such
a

modification

to

the

Ginnie

Mae

Program

under

circumBtances. would be most in favor of something like that. We have with Gonzalez. been in touch this particular of Dallas that had sought out to do this without kind any

Certainly, I
Chairman
out group of statutory

provision or l^islative action, by seeing what GNMA and that is a modificatiDn could, through its rule-makmg processes, within the 1 year the is there that change. And or reason any couldn't be done, because I have heard back from the Lomas not people. They were Surely private
Mr.

going throi^h
sector than

the

process.

Abbott. other Mae

I can't

Pn^ram,
Ginnie

speak to the technical aspect they will not allow a loan to

over a

of the be

GNMA
in
a

placed

pool

Etfter it is

it could be done modification or the technical aspect of it. Chairman Gonzalez. it could be My understanding is,of course, done without with the administrative necessarily l^islaprocess tive action. I just wondered if you idea if there had an was any reason why that couldn't be done.

old. It may take some minor at their discretion. I can't speak to

year

Mr.

Abbott.
have

We
met

understand that the executive officers of the association with Ginnie Mae's officials and they are actively
process.

considering
Chairman have introduced

this

Gonzalez. Mr.
a

Very
Wood,

good.

am

glad

to

hear

that. take
a

You bow

here. been
He record here Mr. I

He
so

is such

familiar

but I think he ought to face here and for so many

years

has

helpful to
a

the

committee.

is

should

wonderful representative of your very that. Well, we note have Mr. Roth, I will recognize you first, Mr. Thank Mr. Chairman. you,
we

industry. The
believe
came

in

first, so
Roth.

Roth.

had here this morning. I think it I question of Mr. Gasteyer, however. inclined to interpret his testimony as am saying that you don't what kind of a bill we care as long as the lender gets his pass, and doesn't have Is that right? much notice. money Mr. I hope Gasteygb. it artfully than that. I we more phrased think it is important, you to maintain the opportunity for know, the lender to perform its function within the community. I think that when do have of economic distress, we a severe period high in a particular region of the country, that effects unemployment the entire fabric of the economy, including the lending institutions and their abilityto function, and that we need the flow of interest and principal payments to continue, despite the distress of particular

appreciate

the

testimony
have

we

was

I do illuminating.

homeowners. Mr.

Roth.
we

Even that

the Mr.

League
all be

bfis

civic

eis responsibility

er. taxpay-

I think

should

I noticed
very

cit. concerned about the huge budget defiCarlton alluded that is a to that. I believe doUeu^ We are

good point.
half
some a

Another
our

billion
more.

deficit
as

well Just to problem.

will increftse spent for this purpose told by people in business and government these that deficits terrible economists, as are a "I don't care what kind of bill you paaa, as say,

.bv

25

long as my problem.
In and borrower.

lender

gets his
there

money

back", is
an

not

going

to

solve

our

between the lender Here protect this borrower? is family "A" working, and the family "B" doesn't have a job. We goii^ to use Family "A's" tax dollars to pay for family "B's" are

homeownership,

is

agreement

Should

the

government

to add As for political philosophy, that doesn't seem up. weak have 113 million cans Ameribeing today, we bo got economy have had employed in we ever employed. lliat is the most American what is going to history. If we have got problems now, Sure you have soft spots in happen if we have a real Boft economy. You are re^onal areas. always going to have that, but you have to look at a nationwide view of this when are passing legislation, you and I think the league and others have a responsibility.

By

my

the

I mean,

we

are

all citizens The

of this country.
"

League Congressmeui, the League insured represent federally depository institutions course, in and of themselves also represent a potential exposure Federal Government as part of the psirtnership between
sector

Mr.

Gasteyer.

does, of
and
to

they
the

the
matter

vate priof

and

the

Federeil

establishment. that

certainly concur to major concern

too.

with

you

the Federal

deficit is
our

I think

if

we

all Americans, don't take a back

concern

certainly including

attention
suppose, you

imd

about

Members, in trying to stimseat to anyone ulate the magnitude of the deficit, I

to responsibility set

know,
our

it

falls to your

of priorities
our

how I have

we

fdlocate

government's
underestimate

resources

and

honor

ment's govern-

commitments.

certainly don't
before
you

the

difficult choices

that

you

in that

regard.

Mr. Roth. Thank I have other time, but one only so much you. of this legislationis one of the best liked people thing. The author in Congress. So, you don't want and I to put it on a personal basis don't. Iwant to keep it on a philosophical basis. I have to ask one question. I want a simple question. Do you think this bill is fair to the Americcm taxpayer? Mr.

Gasteyer.
standard and

I think I think

it is. I it is

answer

in

the

affirmative.

It is

carefully targeted
Mr. Mr. would

bill that

attempts
a

to

establish

meaningful eligibility

uiir

balzincing.
comes

Roth.
Abbott. be
as

Fsiir to the We
as

lender.
any

hope

legislation that
is eligibility
our

out

of

this with

fair

pcHsible.
that basic

Mr.
the

Caslton.

I think

problem

bUl.

Roth. Pardon me? Cablton. That is our basic problem. It would be very cult diffiC^e to make the determination who qualifies for assistance. make all efforts to honor their obligation whereas family "A" may the likelihood that foreclosure not family "B" may try and reduce We vrill occur. whether it is fsdr to give the money not question only to family "A" but to family "B" as well. Counseling is needed in aeterminir^ to this assistance. eligibility Mr. Roth, "niantyou. I appreciate that.
Thank
you,

Mr. Mr.

Mr.

Chairman.

.bv

Chairman

Gonzai.ez.
aotnewhat

Thank

you,

Mr.

Roth.
pass

I appreciate the
on.

cchd-

pUment,
Mr.

though
I

qualified.I will

Vento?

apologize for being late and I haven't had time to I noticed that some of it read testimony of our witnesses. in terms is quite lengthy. The hasic point and I don't really know of reading it, hut I get the impression that Mr. Carlton opposed the
Mr. Vbnto. all of the

legislation.

Gasteyer and Mr. they agree problem, when is the impression I get
Mr.
forth.

Abbott

with
from

in working on I don't know. specifics, listening to the questions back

are

interested

this
That find

all the

What

about

"

you

know,
here
to

there

is discussion

about

the

that is authorized

help with
that have

these
been
bo

mortgage
tied
are

lion $V^ bilpayments,

temporary
There What is
a fire

assistance. various
programs up

in court, forbearance
not

prc^ramB

Uiat

have of the

existed,

they

is the

magnitude
wim is

problem

Mr. would

Gasteyer.

regards to Yes, I believe

more

problem that we this issue, is there

so.

have?

workable. Isn't then

"

not, Mr.
chairman

Gasteyer?
of the I

Perhaps
with the

the

subcommittee

conversant

precise details
in

than west, South-

be, but

it is my

understanding
around
at rates very
one

that

much have

of the

certainly the area delinquencies nmning

1930'b Mr.
so

Houston,
in
excess

you

mortgage

loan
the

of those

experienced in
we

there

are

some

severe

Vento.

You
we

know,
go to

of the
an

problems. things that

individual
if
we

intend

to to

go

"

the
the and

big picture,
economy

helping
and

homeowner
to

the

entire

and

the
we

deficit

want

help this. I heard

overall and

expression maybe
somehow the
in
some

ought

to

deal

with

the

of this is going to trickle down

is that of any
we

economy change this

financial
are

around. But real problem

we

have

with

regards
and

to

institutions,

have

insured

those

institutions
an

today we
in those

talkii^

tjiemeignitude
way up to

type of

assistance

grams pro-

all the

^1
about

the

insurance that
not

borrowing
whether
Isn't that
or

ation $50, $60, $75 billion, taking into considertional funds that we paid in, and the extra addithe discussion will go plus, of course, on

there

will be

direct when

infusion
you agree

of Federeil

lars. dolreal difficulty?

right, Mr.

Gasteyer,
the

with is
a

all the

specificsof the GAG reports and possibilityof a substantial number

Mr. and
Mr. Gasteyer. Vento, I That

others, there

very

of institutions

that

have

the commercial

is certainly true, both in the thrift industry banking industry. is think the appropriate question to the committee
we

part of this, before

at

go

off to the

entire

economy,

at go
an on

least

to

look

the

immediate

and

dynamics picture, but one

know,
what
out
can

that

effects, some take place in

is do
a

of the

things
of

that
not

in between
macro

terms

entirely
to

that
we

little more
enable

than
these

micro; that

is to say,

you

to

homeowners be

work
some

there stance ina

way

of these
not

particular problems that

be

it may lot of other

we are eu%

workable,

but

it may

in good faith in that when we the

dump
ess, procvery

properties on the market through actually suppressing the real estate

we

foreclosure
of those

values

markets,

not?

.bv

27

Mr.
Mr.
as

Gasteybr.
Vento.
as,

well

That is right. the problem for the S"L's and Compounding of course, to say nothii^ about the heart-break
or

banks

and
that

homeowner hardship on the individual might be affected; is that correct? Mr. Mr. Gasteyer. Vento. You
Mr.

mortg^e

lender

Yes.

I just think that it is fine to get up and, is fine and made about the deficit, comments you but the fact of the matter of the mechanic is, it reminds me that says for an oil change now back and can or come you i"ay me have the entire engine replaced later.

know,

know,

Carlton

Mr.

Carlton? Cahlton. That is what

Mr.
are

I
many

am

retuning the engine for

the other hand We Mr. Vento.
are

afraid is happening is that families when don't need we

we

to.

On

prudent, common dealing with the

indeed.
Mr. the than Mr. Carlton.

just trying for the oil change. We are the practical,tight-fisted Henry Gonzalezes sense, federeilpurse strings here, very stingy fellow,
Mr. Vento's realization as this legislationprogresses, we
to

Insofar continue I would

that

we

support

hill's spirit, as

happy
Vento.

to to

participate in
from from the
see

be more its development and we

discussion.

would

don't vrant

withdraw
our

ourselves
like to

these

mortgzige lenders, Mr.

participants,is we vrant to solve the problems before they become serious problems is what we are trying to more do to provide stability. of the things, and have mittee, subcomOne we a the Banking Committee called economic stabilization, and of the programs, we talking about how we can in our role in terms have provided a greater degree of stability. We don't object that there are the jobs in society,but Congress has tried to recc^izehow we can provide an additional degree of We don t want to misuse extend or privileges or stability. certainly
Chairman,
and

forbeaiHnce,
in some and we
want

but
to

we

see

lot of institutions that the We

we

and

the and

entire

process

sectors

of the is

country

prevent that, if
what retilly
own

fragmented possible.
chairman
have have had had

is

deteriorating
as

I think
more come

that

is after
it in
some

he

sees

this

keenly
from
in

in his

area.

it in various

pockets. I
rural

Minnesota

and

of the

areas

the

past. VA
the

has

isn't just the

I understand

private sector
concerns

put
rate

out at

some
an

bonds

and

we

problems with their loan problems. It that face this. mortgage portfolios have of the mortgagors saying that we interest have people that provided an
a

assumption

of

certain

condition

and

treatment

in

So we and predictabilterms of that paper. have to have reliability ity there. You can't change the rules in that particular sense. the other that if everyone is going to, you On hand, I think I suppose, have have forbearance. You to iissume, know, we some indicated in your testimony with regards to these types of loans in the teixpayorder this work, if it is all going to come from to make these dollars don't want it tough. We want we er, obviously, it makes
"

or

these
to

types

of

words,

supplement,

programs not to

to

be

in

addition

to

"

in

other
are

supplant, the

good

efforts

that

going

on.

.bv

Chevrolet

will

run

forever.

You

are

going

to

find
issues
some

out

that
and

doesn't

happen.
I think it is a funds Mr. The It Roth. have

realis^c c^ut

Question what the and

the from

fiiture their

of facing i^ to those of FSLIC and

to ability

now

being
surance in-

of the

other

are,

solve 30

their

problems.
brilliant Members
never wears

Will
in

gentleman
Minnesota and he billion

yield
is
one

seconds? of the
most oil

gentleman

we Congress only gets dirty. If $10.8

realizes

that
too

out.

Mr.

VENTO.

You

have

been

listenii^ to
a

many

Mobil

ments. advertiseeither.

Mr.

Roth. you.
VENTO.

I have

an

inklii^ that
I rest

half

billion

more

won't

Thank
Mr. from which Mr. of the

Mr.

Chairman,
I
am

my

case

after

that

illustration.

Chairman
Minnesota

Gonzalez.

would
to

have
an

surprised that my esteemed from at that curve swung

curve

coUeeigue
Mr. has Rotii
ing noth-

happens
to do

be

unconnected

because

this

with

Vento.
seeison,

bailout or anything like that. Well, things aren't going too well. Wait Mr. Chairmem.
or

F^IC

until

the end

Chairman Ms.
Ms.

Gonzalez.
Thank
to

Thank
Mr.
to

you.

Pelosi.
PEL08I.
want
on
am

you,

Chairman.
our

I, too,
blame it
I

apologize
airlines
have
us.

witnesses

for my
the

tardiness. blame
the

I will

the

because
your

that

is where

placed.

sorry you

I missed

it. I know

testimony. I look provided great insight to

our

should be ing forward to readcommittee

on

this issue would

before

I commend

chfiirman

for H.R.

4292, which
forth
on

prevent

more

feimilies from
my

losing their homes.

go

It is interesting to hear issue. It getfi right to the Tlie Banking Committee,

colleagues
of the

back

and

this

heart

purpose

of this

committee.

especially the
what is the

brings
we

into and

focus
soundness

questions of
the
of which
our

Housing Subcommittee, do public interest, how

how
my

protect the

consumer,

taxpayer, and
as

do

we

sustain
from

the nesota Min-

safety

institutions,
is the for

colleague
as

pointed out,
I commend the

public

interest

well.
it

chairman
to

this bill because

homeowners
not

rary provides tempoare

the

financial assistance tiireat of foreclosure and

but

certain

who the

faced

with
cost
ciety, so-

and the

will human the

only
to

reduce

financial
to
our

of homelessness
who I would will be

other
suffer

byproducts
cost

of this

foreclosure

also reduces
otherwise

individuals
homes.
to

and
the

families

loss of their of the

hope that
the

these

statements out.

support

work

on

tion legisla-

carried

I believe
to

this is very

important

legislation,

considering
I think

alternative

it is necessary and conmiittee because it gets Are creative we enough

it makes

taxpayer and to the homeowner. me pleased to be on this subthe

right
to

to

heart

of the

matter.

problems by bringing the avetilable cial finanto us resources through our agencies, throi^h our institutions and through our meeting the needs of people and
the taxpayer. {trotecting that. toward
ong way

solve

these

I think

we

are

and

I think

this

bill goes
with

I look Thank

forward
you,

to

reading

Mr.

Chairman.

testimony tmd working your I have queations. no

you.

.bv

Chairman
Mr. Mr.

Gonzalez. Thank
and I

Thank

you,

Ms.

Peloel,very
Mr.

much.
'

Wortley.
Wortley.
you very very

much,

Chairman.

You

are

great humanitarian hieb respect for.

1 must say

compassionate skeptical
Act
add billion

friend, whom
about

I have
to

that

am

little bit the

the

plans

corporate inpartisan bias

H.R. As
we

4292 I

into the

bomelessnees

authorization

tion. legislastrong

all know,
am

McKinney
if
we a

does
this

ery'oy very
as

support.
you
are

fearful the

an
on

amendniKit
it could

suggesting,
the

that

hfilf

price tag

ardize jeop-

With understand

of the McKinney for the reauthorization bill. support like to ask Mr. that being said, I would Abbott a question. I that
on

report

Mortgage delinquency and

the

the

just
in the
record Mr. number
to

Federal
we

for you. Can Home

are

MBA
this

Bankers ing provide a quarterly trackforeclosure, so I targeted this question tiie number of mortises estimate in wis
a

Loan

bill that

discussing

of the

estimated The

districts targeted for assistance morning? Can you furnish us of bringing these mortgages costs up
economics

with
to current

beUance?
Abbott. of MBA

department
and VA in

problem unemployment 90 days or as

in arrears, cost

loans, conventional
or more

each

estimated State
were

the
due fined de-

underemployment,
delinquent.
would We

problem
assumed

loaas
an

average

of 8
forth.

months,
The Bank Mr. Mr. Mr.

that

include

forbearance,

and

so

Home reinstating these loans in the five Federal Board districts was currently eligible for the program to be $2 billion to bring
Wortley. Abbott. Wortley. Two Two

of

Loan
mated esti-

billion dollars?
billion is
a

dollars.
rather

That

healthy
I meant

amount.

We

are

t^illcing
ny, testimoif it

about
Mr.

half

billion One other

Abbott.
to

point that

to

note

in my

I referenced
v/as

targeted

That targeted areas. the targeted areas. Just

To
to

figure could
or

be

reduced

Mr. areas?
Mr. Bank Mr.

Wortley. Abbott.
or

the

Southwest

high

unemployment high
un-

emplownent
Board
Wortley.

the more targeted areas rather underemployment Thank

of than

s^ificantly
the

five Home

Loan

districts.
you. any
are.

I don't

know
none

whether
of is
you

of you

gentlemen
may

are

economists

and The
denced evi-

hopefully
U.S.
economy

That

be
In
a

to

your

advantage.
memner,
as

presently performing
of the economic

healthy

by we see. even see in the Southwest is bottoming out. signs that the recession This for this being the case, is there really a compelling need action Federal smd inters a requiring large expenditure, emergency foreclosures vention is being proposed in H.R. 4292? to abate as I might ask and this is for each and of you there one are every less less intrusive that of would costly or options ommend? recany any you
most

indicators

We

some

"

"

Start
Mr. We
at
a

with We

Mr.

Carlton. be

Carlton don't have

go

on a

this

end

of the

line.

would

happy

to

back

and

specific recommendation today. study the issue and report ba^

later time.

.bv

31 Let add

me

that
That We How

was

impressed with
any

the
must

presentation
involve back. would

HOPE
Mr. Mr. Mr.
tis
or

programs WoRTLBY. Caxlton, WoRTLEY.

"ind believe
was

solution

by the counseling.

very

impressive.
come

would
soon

be very glad to come will it be that you

back

to

advise ub? A couple of weeks. Mr. Carlton. Could send that to all of us Mr. WoRTLEY. individually as you well as to the chairman? Yes. Mr. Carlton. be found in the appendix.] can [The referred to information Mr. WoRTLBY. The Postal Service sometimes has a slight lag on the Hill. I would appreciate it very much.
How Mr.

about you, Mr. Gasteyer? Gasteyer. Congressman, if I just understood

there is a correctly,1 guess of the broad-brush we way it would Home

Mr.

Abbott's

sponse re-

significantneed.
categorize this
be
a

Though,

again

because Bank districts, perhaps Abbott just computed.

For

by

smeiller
Bank
to

number

Home Loan them Mr.

instance, in the
great, but

Seattle in

Loan

district,things

are

information in Oregon, according my the home lending business. Certainly I don't think this needs to be exclusive other approach imd maybe there are some options and an of the approaching problem. wa^ But in my oretl testimony or in my I pointed statement, summary there is some merit to setting the framework in out that I think downturns, too, that this place in case we do have future economic is a bill that originated back in 1983, the need for it tended to fade

going

terrible

away

or

at

least the
come

interest

in

it faded

away,

and 2Vz

yet I think
years

it

would

have

in very

of the

So

problem areas maybe the need isn't compelling be to governmental purpose

helpful during the last of our regional economy.

but there served

in

ets pockstanding longa

may

be

by

structuring

framework here. WoRTLEY. think Mr. Do this is a better approach than it you would have been called for a larger recapitalizationof to have FSUC? Mr. GAffFEYER. I don't see the connection there, the direct connection. Here
very you
are

talking
FSLIC
there. Abbott. think
or

about

help
was

to
on

families
the
are so

and

home

rowers, borIn the

poignant testimony
with
entire oranges
our

that

first

other

situation of and

the

FDIC,

you

panel. talking about

1 think it is

int^rity of apples
Mr. Mr.

banking structure,

and

the bit

WoBTLEY. Abbott. there is

a

Mr. I do

it is

important
individual the

that

we

do

that
amount

lot of that

private
was

and

initiative

understand in this forbearance

process

saving

taxpayer

significant

Under after a loan

that

of money. the FHA the

becomes

explains
may

they

contact

the subcommittee knows, Program, as I am sure 60 days delinquent, we send out a pamphlet to whom canceling procedures and those persons about canceling. It explains the assignment process

with

HUD.

.bv

32 The
and
on

veteran

has

the

right and

op[K"rtunityto

contact

local VA

office for the

loan, refunding or assignment, so to speak, of the VA amount of ingenuiconventional loans, there is a significant ty

creativitythat is offered by the lenders in working with tlie particular borrowers. in our I know particular case we offer to forbear on the arrearages with slow and perhaps maybe take a second a mortgage very
and

repayment
I want
to

process

should that
to

the the avoid

property
committee
some

be sold.
understands of these
"

be

sure

that
some

lot of initiative
cost.

taken

costly

there is a of this
in
graphically geoon

Again,
and

I would fcx:uB Do

suggest
on

that

we

be

more we

strat^ic
focus just
we

targeting the
we

assistance,
those have

that

borrowers data

who

do

the arrearages feel have the

abihty
Mr.
are

to repay,

reinstate.
you any

how on people who many by comii^ to the institutioD first and saying, "Hey, I am laid off on my job, I have an unusual "Cfm circumstance. I be illness," or some extenuating granted forbearance?" often? of Does that some d^ree happen very the department Mr, Abbott. Yes, it does. We have a significant collection, within
arrears

WoRTLEY.

take

the

initiative

I come

from,

as

well

as

most

of the and

other

mortgage

panies, com-

counseling, you might when the loan becomes 30 days delinquent. say, process In some under Fannie Mae the loan is requirements when cases, in the 15 days delinquent, there is a dialogue that begins early on when the 30and So reach level of delinquency process. 60-day you there has been in detei" to already delinquency, dialogue trying mine the abilityof the person the arrearages. to repay One final question, i I may, Mr. WoRTLEY. Mr. Geisteyer.Is passage try of this piece of legislation actually giving license to the indusless than to continue to be something prudent in their loan denly not techniques? I mean, everybody we are talking about here sud^me fell upon hard times, of these I question whether tliey sd\ gocm loans to begin with. were Mr. Gasteyer. We are talking about single-family owner-occupied home loan amounts, loans, modest working-class Americans,
and
at

and

they

b^n

that

collection

least

making they want

form

that

be my observation that most families consider that is the last payment that mortgage payment in responding to their obligation. to get slow
"

it would

home Single-family of investment. that have

mortgage
The such

loans
in

have

been

very,

veiy

secure

problems

the banking

and

thrift

tries indusI

don't think

to the Federal exposure it is attributable to single-family home

given

Government,
mortgage

ing. lend-

Mr. WoRTLEY. called to my that the bill It has been attention that we ings. are discussing today is not limited to owner-occupied dwellA considerable
you,

number of you,
to

of these recommend

are

involved

in
it to

speculation.
pied owner-occu-

Would

all three
as

limiting

speculation? Mr. Abboit. In our testimony we strongly recommend to owner-occupied dwellings. Mr. Gasteyer. That is a good idea.
Mr. Mr.

dwellings

opposed

it be limited

Carlton. WoRTLEY.

Yes, sir.

My

gosh, we

have

unemimity

on

that subject.

.bv

I have Thank
Chairman

exceeded
It has
you,

my
a

time.

Thank

you

very

much

for your

vations. obser-

been Mr.

good hearing.
Thank
Yes. you
very

Chairman.

Gonzalez. Mr.

much.

Mr.
Mr. Mr. I do

Vbnto.
Bartlett.

Chairman? have
the

Chairman

Gonzalez. We

heard
you,

from

Mr.

Vento.
this

Bartlett.

Thank
able

Mr.

Chairman. of both for in

appreciate
which I I
was

testimony
to

panel, panel.

be

here

the

panel and testimony of

I

the the

previous previ6us
for

reviewed this

this

testimony
with another

writing.

do

apologize

having
I Bankers and

mifsed and
the

firet want

meeting this morning. the to ask, in reading testimony of the Mortgage first question is with tion others, my regard to the direcpanel
type
of

legislation this is. This

was

is in

mftny

ways

old,
gress Conculty, diffiit sets

worn-out,

legislation that for quite good and valid of desperate situation

tired
and sends them
in

not

adopted
that takes who

by
a

the
very

1983
real

reasons,

individuals

lose That
to pay

their is to that
say,

ment, employmortgage

the

wrong

direction.

up

new a new

Federal Federal
and
to

bureaucracy
program.
or

of

payments

with

However other from

it is structured,

whether

it

applied
seems

owner-occupied
me,

kinds, it discourages

to

home

buyers
when
the in

doing

what

needs

lenders, it to be done,

to

n%otiat"
It further

forbearance
could

forbearance
believe

is called

for.
to

deny new be stopped essence they irom maintaining security on their property. to discoureige what is a very Last, it tended helpful development of private sector, nonprofit organizations such heard before, as we such as Project HOPE, other things. and could tell us directly, My question to the three panelists, if you and your for or against this type of are organizations, are you you l^i^tion as a way who of dealing with this problem of persons can't pay their mortgages due to employment loss? if you could dress Leaving aside how you dress up the legislation, think it up, do you ought to do something like this? we
loans because
would

have

efi'ect of causing

lenders

they could

Mr. Mr.

Abbott.
Abbott. One

key point

in

the much

chairman
as

earlier, it also

this legislation,as mentioned requires that the borrower pay

by
aa

of their income towards this possible, up to 38 percent So it requires that they buy into this reinstatement payment. ess, procallows you and it reeilly to focus those that are terested on sincerely inin keeping the house. Mr. Bastlett. Do lenders do that already?
Mr. creative Abbott. We in fact do. We and
come

up

with

number prc^ams,

forbearfince
are

programs

reinstatement

of very and in

fact

we

doing
We

lot of these
you

types

of things.
the

Mr.

Bartlett.

Are
are we

for

or

Mr.
Mr. Mr.

Abbott.
Bartlett.

for

the

against this bill? general concepts of

in
our

bill with

the

recommendations Gasteyer. and

we are

included

written

and

oral

statement.

1983

Gasteyer. for the bill in we were Coi^ressman, for the bill today. Again, fine tuning and tergeting
Likewise,
maximum
amount

Mr.

to encourage

the

of forbearance

on

the

part of

.bv

34 institutions institutions with them their

meeting
to

responsibilitieB as
in

financial
al the

and

particularly interested

the

cooperation

That

r^ulatory is particularly important

stated Mr. have it very Carlton. harmful well. We
are

agencies' incentives

of loans. restnicturins encourage Mr. lenders. to Abbott portfolio the

bill,in that it couM efibrts to deal with the foreclosure to see the bill problem. For example, we wouldn't want adversely affect the eflbrts of professional counselors such as in the basically against
the
a

eflect

on

private

sector

HOPE Mr.

Pn^ram.
Babtlett. I will Thank
you,

Mr.
you,

Chfiirman. Mr. before.

I I

yield back
am

my

time.

Chairman

Gonzalez.
say

Thank what

Bartlett. very

Again,
your

again
your

T said

cooperation,
you

hope
Mr.

don't miss Abbott. Thank

Gonzalez. look forward

contribution, the time plime, Mr. Abbott. your

you. I will We will
to not.

you

have

grateful for given, and I

Chairman
we

in touch witii you cause bebe, of course, working on improving the language of tiie

bill. of looking at this, and it is one of the main that reasons at this point, is I look thought of bringing up the matter it as a homelessness prevention bill. We have gotten into this upon of institutionedizing the emergency homelessness ance. assistcycle now I think that is the worst thing that can happen, not this other groundless fear. I think should have, as we we attempted in 1983, to do those that would and therefore things prevent a crisis and particularly antidote

One

way

even

homelessness.

This

is what

I call it. I call it

of the
we

ness homeless-

prevention
I

act.
some

certainly do intend to try to give it an aspect and five months to as was given a year ago I think that hate to legislation. just emergency
this
as
we

cy emergen-

homelessness
would
very
even

accept
lar simia

accept

all of these
issued in
same

rosy

economic of 1983. statistics

statements,
But don't which

to

the

careful

being ones scrutiny of these

how

May

veiy

reveal

that

well-

being.
No
matter
over

much

we

want

to

still have

6.5 million

Americans

brag about employment, we unemployed. That was totally

unacceptable just
The
real

15 yetuB That is what the official count is. ago. that have the unemploycount, those disappeared from ment rolls because exhausted is mudi they have unemployment, that.
you

more

than in

have a problem, a probunderemployed, we lem in 1983, the Dallas adopted this legislation for instance, wouldn't the targeted trigger,because have met area, in 1983 the 60-day default 1.42 percent, compart to rate was as 6.18 that is regional. I mean, includes tiian today. That more Dallas Louisiana, Mexico, Texas. But it wouldn't Mississippi,New When add the

which,

if

we

had

"

have targeted them. So the position I am reference to taking is that Mr. Vento made the fact that, yes, my Texas, but that particular area. Southwest I am wasn't a problem in 1983. It is today. What saying is that we
have
to

look

beyond

our

own

parochial

interests

"

we

are

acting

in

.bv

national is
an

capiicity here,
urgent
we

and

thia

there
Of

course,

need to consider don't driift a perfect 1983.

As
a

onW this type of

is the
meeisure.

reason
an

that

I feel

approach.
Tlus
is somewhat
my way,
we

modified

from

the
more

matter

of fact, if I had
rate

would
one

have
has

far

liberal

interests

repayment.
we we

But there wait

act

ly, naturalis eilso a until it

a

moral

again to be reeilistic, but I think that question of responsibility.In other words, do

our we area

is just
way not

that

is effected that

until
same

we

act,

or

do

in such of

that

emticipate
in

this
but

only
the
of
our

other

regions

thing in maybe
us

is

possible
entire

ing happento

the is

cause nation, beus

specter that
own

is really

riding
in

and the

causing

lose

control

economic

destiny

are

external

forces

sented reprecount. ac-

by this $160 billion deficit

We had that

the

international

trade

again
there

saying
crime
rate
a

reduction

of crime
of

has

presentation of statistics just Ifist week like the trend, but that was big downward of the 1970s when statistics they were saying the decreased 6 percent, but they were talking about
a

false
a

is

decrease

the

rate

of

increase.

The

rate

of

increase
to

had
a

creased deyear
strous mon-

ago,

6 percent. We had a 6 percent less when but that is meaning we

drop

as

compared
the

consider is those

overall

proportion
affect of
our

and

what

that
are as

means no a

us,

interest
powers,

institutional Federeil overall

of the

rates, such

mately things that intilonger subject to the control Federal Reserve. do something
that the
are ones now

The
but
an

Reserve
external Federal We

Board
Reserve
are

maybe
Boeird

CEUi

impact

of forces
are

temporeirily, beyond the

are

control

that the

ing dictatmental funda-

interest

rates. "my

saying let's
has, and

not

sacrifice

most

wetdth can't
with

country

that

is its stable

there because we helping hand a perversity, I will point that out, we are Salvador that is just Salvador. right now, a day in El in prioritiesif we Now, certainly that is a reverse say

extend

the

family. If we overwrought are lion spending $1.5 milof

we

our

inability
extend
you to

to

find

the

same

source

of

money one,

because for Americans

very

can't
think

this kind
do show
exact your

of program.
concern.

So, I, for
I understand of the

am

grateful, I
is some
luctance re-

if

there

certainly if the spirit be able to forge the is willing, we should right kind of legislation until now and with the understanding of our colleagues which up has certainly been there, we hope to be able to do so.
the
contents

bill, but

Mr.

Vento.

Mr.

Abbott
want to

has

to

go

"

I could

ask

the

other

members
is free
to

questions.
Chairman leave Mr. and
so

I don't

keep

him.

Gonzalez.
any time

Mr.

Abbott

has

been

told that overall

he

at

after raised

his

Vknto. if
"

He

presentation. the question of

the

an

for the
in

record,
had the

point is the
If it
severe were

appUcable
where that Mr. Bank bevond

certain
you

districts.
most

l^^lation applicable problem, that

$2 billion cost would only be in just the districts

would

reduce
Loan

cost, is that
Abbott. Board

correct?
that
was

I understand districts.

estimated

in five
weis

Home

Our

recommendation

it

be

targeted

that. Vento.
as

Mr. insofar

That
to

was

I think where

trying

pinpoint

good suggestion, the problems are.

Mr.

Chairman,

.bv

87 Mr.
can

Vbnto. subdivide
the

We

would

like
up

to

have

some

guidance
than

as
"

to

how
to

we

the

dietricts

if there had

is natural

lines
to
"

try

to

focus
these

dollars where

they

are

needed, rather

Chfurman

Mr. Gonzalez. Gasteyer districts State by State.

suggested breakii^ down

Thank

Our Home

gentlemen, very you, next panel consists of

Builders Association

much. Mr.
Vice We

Rene

J. Ferran, New Home

President Builders
this

of the ciation Asso-

of Greater

Orleans,
informed

accompanied
great

by Paul

Killinger, Executive
of Greater
New of

President,
have
been

Orleans.

great Member
is and
on

her
she

way. will be

Orleans, Mrs. Boggs, Coi^ress, the lady from New at 11:10, so she is on Her airplane landed her way, We ask her to introduce with to the were going us.
will

witnesses, but
her In

we

defer

for

her

arrival, and
would

then

we

will

have

give
the

ua

late introduction.

meantime,
is
OF
no

If there STATEMENT

thought objection,we
we

we

proceed
with Mr.
HOME ORLEANS

with

your

mony. testi-

will start
PRESIDENT NEW

Ferran.
BUILDERS

RENE

J. FERRAN, OF GREATER

ASSOCIATION

Mr.
Emd

Ferran.
the

First

of all, Mr. for

Chairman,

I would

like to

thank

giving us the opportunity to testifyhere you Act of and Assistance today in support of the Emergency Housing of 1988. My local Association, New Orleans, has been in the midst economic since the Great pression. Deupheaval that we haven't seen some
committee

Our
in

there is in sluunbles. One of the big probhousing market lems marketplace is delinquencies Emd foreclosures. our
are

There

many

attendant

problems

with

foreclosures

in

our

marketplace, the main one being it is hard to get back into a normal market steady consistent long as the foreclosures as are taking place and at the rate at which they are taking place. When loss that have a foreclosure,you have not only the attendant you in that but what also has end up with particular loan, someone you diminution in of and when that entire is a value neighborhoods, takes have loans which become place, you good performing ized. jeopardthat are less than People are sittingthere with loan balances what the street sold for, and the ssde so they down greater than what of the houses these foreclosed prices hapon properties, so from their mortgage They have the tendency to walk away end up with a well, and that keeps feeding the issue. We as ms dog chasing its tail,and we can't get out of it. When have extreme appreiisalproperwe go to sell properties,we ties, these foreclosed in properties are coming appraisal up every
"

Kns?

for a property. So even t get a value on new certain dollar amount to build, in many cases can't recover the actual cost of construction. you So what because is happening, basically, lenders of these now, irom high foreclosure rates and the fact people Eire walking away
we

have, and
that

homes

you cost

can

loans,

cial gun-shy in the community, and so our finanan upheaval. It is strange that you could have buyer who is not capable of a due to the economic condimaking monthly mortgage payments,
are

bediming
are

markets

edl in

.bv

tlons and least

upon,

that

we

are

in

right
the
but be

now

with

record work
will loan

high unemployment
with then
at

joblessness, and
that the fund home

lender

will not

that be
then

buyer,

at

owner,

yet that
foreclosed

foreclosed
to

property
and will
go

will
up

upon,

it will

the

for foreclosure 7 percent loans and

sale, where
with

go back that time

the

lenders

are

and
a

dealing with re-n^otiating

sale of the

loans

3 percent

rates, taking not

foreclosure
are

ments down-payonly that, but

loss

on

actual loesee
for
a

property.
in that
one

So loan

the

inherent

losses

that
loss

one

loan, they
are

also

not are just the readjusting interest

on

rates, taking

there, they
losses
is in

property system, which

out

and

fill these
I believe it

are

need

taking a loss being dumped of $35 billion

bill is that markets faced in
a

the into

sale the
to

of the PSLIC bail it

or

more

and So
our

make

healthy again.
of this
our

position in support
order
have

it could

put

some

orderly, some
in
as our we

back
as Em

in you

financial

and

home

ship owner-

State. We,
had

know,
we

are

similar

situation
on
us

Texas,
not

economic and

of this oil
or

industry,
because

depression bestowed have not just people not

cause be-

working,

homeless
earners

they
worked

wage

that

have

have we vagrants, productive of economic all their lives, because

are

forced into situations where times, are they can longer make no those monthly tirety mortgage payments. We support this bill in its enin order to do somethuig to address tlus problem in our munity. comI would like
to

call

on

Paul

Killinger.
Ferran

He

may

have

some

tional addi-

comments.

[The prepared
Chairman
succinct and

statement

of Rene Thank

can

be found
That

in the

pendix.] ap-

Gonzalez.

you

very

much.

was

very

the probto-the-point statement. Sorry to hear about lems Louisiana our neighbors are having. Th^ are very similar to the been have ones we undergoing in the Southwest portion of described been Texas. You have the situation that we have trying for about a year-and-a-half to cope with in my home town Mr. Killinger.
STATEMENT HOME OF BUILDERS PAUL

KILLINGER,
ASSOCIATION

EXECUTIVE
OF

VICE NEW

PRESIDENT,
ORLEANS

GREATER

Mr. thank issues

Sunbelt

KiLUNGER.
you

Thank
to

you,

Mr.
to

Chairman.
here San

I, to, would

like to these
is Mae

for the

opportunity
New

appear

today
Antonio

to

discuss

of importance communities
to
our

Orleans,
to

and

numerous
means

related

oil. The the 25

problem
restrictions
so as

by
on

no

limited
earlier
even

areas.

I understand
as

Fannie

financing
so

in

part

of

many

as

States,

eloquently,
affected

in

1983, the
Antonio,

have
our

San

l^islation and maybe

at

you

pointed out you proposed wouldn't

that
we

it is time

look

beyond
areas

parochial, selfish
what
we

interests in these
us

what

is occurring

in these in of

and

is

happening
before
I can

economies.

The
amount

bill
of
in

have

today
tell you

would
that

provide relief
the

the real

$500
New

million.

valuation
not

estate

somebody

totals several Orleans alone losses. Those is suffering those

billion
are

dollars, and
paper

losses.

.bv

Those

are

losses

by

Federal

inBtitutione, by ffunilies.

agencies, being sufTered being suffered by Federal fered being suffered by individuals, being sufgoes

If

family
to

home

in

value
a

from
paper

$150,000
loss. That

to

$100,000,
is $50,000

that less

family lost
they have
have
We We what
were

$50,000. That
educate their

is not

for their
very

retirement,
interested
in
our one

children, that is $50,000 less that they and seeing that kind of problem. we are
in the that
areas. we

testimony
don't
Without

found

it instructive

believe

hearings
under

in is going on like this, no the

would
to
we

know.
sweep
can

We

panel before us. people know willingness to hold your would be sweeping this
of the
msmy

carpet. We

wanted

this

under
on

the
our

carpet
own,
we

for
are

long time ourselves tough guys.

I
own.
"im

and

say

get better
are

not

sure

these heard

communities the
statement

going
are

to

get better

on

their

We

have

lenders

possible. liiat is
can

not

the

fact. In the

We
case

have of
our

heard

er forbearing wherevthe private sector

handle

this it is.

situation.

the
is

mortgage

insurance

companies,
say,

They
us,
so

have

abemdoned

market,

red-lined

the

private
the

sector

tively effecthey have I have to it, handling

for

unfortunately.
would like
to

We

thank

Savings
a

League
the

endorsing
to

this issues
can

legislation.I think tt^

find
some

they

have

greater
find

sensitivity

these

other

We oi^anizations.

for troubled

debt
were

restructurii^

only guidelines we published anywhere in the

the
a

eral Fed-

Government
on

published by
What constitutes been

Federal

Home what

Loan

Rank
tute consti-

12-31-87,
a

on

TDRs.

TDR,
to

doesn't

TDR.

These the
to

have members

instructive of the

savings emd
far
more

loans, and

quite frankly
with
We borrowers
to

try and
some

work League bring relief, to try and

in

closely
their

understand

situation,
are

have

told

lenders

compassion. participating
are
are

HUD's

Assignment

gram, Pro-

to

many cash in

of the the loans.

larger lenders
We
we

uninterested

hear
are

we

coming
only
the
ones

for
to

instance, and
the

not

the

looking out, here asking for a bailtive that may be insensiare

or

and

this

purse legislation is this in section

Federal

strings here.

Whether form of

not,
the

Mr,
Em

man, Chairpriation approhave

ciations, asso-

for

adopted in would problem, we

2 in

making
that

encourage

promotion

of forbearance
to

bring these
we

Federal
have
to

and

legislation be expanded. We quasi-F^eralagencies and trade

the
everyone

bring
to

to

the
our

table

somehow,
on

Mr. these

Chairman.

We

have

issues, if you will, and Without that, unfortunately

to

unite try and and recognize them the home Thank Mr. situation. Thsmk
you,

differences

work
owner

is

together. going to

continue

bear

the

brunt

of this

you.

Chairmem
I will
say

here, and

Killinger. New this, the distinguished colleague from make to her in order to was going recognize
Gonzalez. We have announced
gone you
were
on

Orleans
a

is troduction inpreciate apsay

late
we

here. all

your

way,

and

you
what

through
consider doled

to

be

here.
any

just
of

WEmted
a

to

this, Mr,
more

Killinger.I
we

don't
have

this

kind

bailout and
tax

any
lions, bilpenditures ex-

than

out,
in home

billions

and

billions

for the

richest
the

institutions affluent

this

enable

land, and through buyer to get subsidized

by the

.bv

40 This is

taxpayers.

taxpayers' bill, because

want to

home

owners

pay

taxes, and that is what we So I just WEint to dismiss

it is
own,

hold
who

onto.

this notion for those

can

that

this is of be

bailout,it isn't,
no

just
with of that
on.

helping
a our

hand

because
to

fault of their

little bit of I think

help

continue

that

country, home

and
I to

is what
to

owners, is the most

taxpayers,

raisers
we

strong yeomanry of families,

can

important thing
here, because
I
see

do to

target
be

just had
a

get that
distinct

off my

chest

"

very

personality
or

from

New

York

about

War about World I, by the name self-proclaimed socialist of that day, he was a lone member in the Congress and used to be very outspoken, and of the colleagues to yell at him and tell how he he would get some "The tween trying to socialize, and he would only difference bewas say for socialism for the poor emd bojrsand me is that I am you all are for socifilism for the rich." I happen to believe in socialism you after the

World

War,

there used the time of Meier

London,

and

he

was

for both. had the testing during the Depression, we unacceptable because ^nerican citizens faith in these and the Congresses had said earlier, it yielded at the end of trnd it pmd off because, as we the program close to $400 million that to the Treasury. That meant little help enabled the people to stay strong, finally get employa ment,
I is pay

So, you think,

know,

the

notion

that

this

would

be

considered

bailout,

With

back, hold onto their homes that, Mrs. Boggs, Thank you
We

and
very

pay

taxes.

much.

I will

be
you

very very

formal.
much It Mrs.

for
means

always returning
a

love

to

cadi
way

you

all the

from

Lindy. But thank the airport, from

Mr. Chairman.

New
It means
to wait

ans. Orle-

lot. Thank
you you
on so

Boggs.

much,
for

great deal for The plane me.

Mr.

me. was

Thank
almost I
was

being gracious enough

I

for

Chairman, of working with

the the the so-called

time, but not quite. sitting here thinkingthat

this

committee of New York both

during

the and

bailouts

City

had the honor which had we years the so-called bailout of

in
course,

Chrysler Corporation, loans and are thoroughly that them were placed upon
does indeed
envision
a

of wluch, of in accord with in the of

pmd
kinds

back

on

the

of restrictions

loan

arrangements
owners
are

will

be
on

paid back
their feet.
I

type when
am

both

This legislation. tion legislathe loan operation where the industry and the home that pleased you very, very

have recognized that this is so important to the those in the so-ceilled Southwest Region, your
where the
we

people, particularly region and mine,

been suffering so disastrously from the problems of until this industry and the shipping and farmlands It is a very Mr. to hear Chairman, encouraging word so year. you, in favor of this type of legislation. of the During the considerations Appropriations Subcommittee sit on the HUD and Independent Agencies bill,as you know, I now of Appropriations where and the Federal Subcommittee both HUD Home Board I did ask HUD to study the Loan Bank funded. are foreclosure current policiesand to report back about what could be That was done. before I was of this legislationwhich doveaware have
enei^

.bv

41 tails with that Mr.

you

my

interest allowed I
come

and
me

have

my to

request; and
come

am

very,

very

honored You can't

here
two

today.
stalwart citizens. situation

Chairman,
has find in my

here

with
to

imagine what
here

happened
not

the

homeowner

ana in Louisi-

home
but

representing
Association
are

district of the city of New Orleans. They fire New Orleans Home ers Buildonly the Greater
the Louisiana Home Builders The Association. Rene fine

also

They

very,

very

representatives.

President,

family business. It is a distinguished old family that has a record of fine citizenshipand of good business enterprise, and tactics all of these years for a they have been employing the proper in difficulty successful operation. Certainly if they are and if their in difficulty, it is through no homeowners fault of theirs and are
Ferran,
a

is in

their
state

business of the of association

enterprise
in
our

practices. It is the
area.

fault

of

the

terrible

economy

largely deals in single-family homes, and it is family operation owned by a family promoting home it is sort of the bulwark And ownership in single-family homes. so of our citizenry that is represented by Mr. Ferran. Paul Killinger is no stranger to this committee, Mr. Chairman. served as Director He of Crovemmental Affairs for the Pennsylvania
that

His

type

"

Builders of Home is
an

Association, and
for the

then

he

served

for of the

coordinator

training division

3 years National

as

the

tional na-

tion Associa-

known Builders Home Institute. He BuilderB, now as consultant and he worked here in Washington, experienced politicfil DC. for a politicEil several consulting firm and coordinated of

political campaigns
wise in the
ways

It shows,

because
firms hard
to

congressional candidates. So he is very congressional politics and of legislation. in New tion's during his tenure Orleans, his associahas in doubled the New in 6 years, and
we now

for U.S.

membership
1,000 member

have

over

Orleans

Association. and

So

he

has
he that

fought
has

very

for

and legislative

governmental

projects, and

helped fight against over-regulation regulation to the industry. really is inhibiting So we well represented here are today by two excellent very members of our district and that whatever State, and I know our from testimony they give is well founded good experience and of affairs. I thank much longstanding interest in community you very for having them here, Mr. Chairman. Chairman Gonzalez. Thank Mrs. much, Boggs. As I you very have said before, I am deeply grateful, emd it is inspiring and very helpful to have you here.
Mr. Mr. Bartlett. Babtlett.

also

Thank Mr. Chairman. Mr. I don't Chairman, you, questions. I think the witnesses provided good testimony bad bill. This legislation, in fact, was idea in 1983 when on a a bad the House of Representatives adopted it by a slim 20-vote margin.
have
any

No

further
who

consensus are

has Under

developed that
difficult

somehow

the

solution

to

persons

very

circumstances

the

unable to make mortgage payments Federal those or mortgage bureaucracy to make for some 36 months. No further consensus in Congress country has developed that is somehow a good idea.
reason

for ever whatis to insert a Federal

ment payor

and

program

.bv

42 It does if it were efiect

seem

to

me

to

be
the

passed and
cost

which
it could

is rather
well

unlikely,given
the

both

and

other

signed into law, factors,that

try
to

have

of hurting

the very

we jpeople

help in that it would clearly discourage lenders from of and to they ought to be doing more doing now are that is n^otiating forbearance with home and buyers to imd likely to get back on their feet. If those home
not

doing
some

what able
are

extent,
are

who

owners

"^le to do
an

so,

well, then
36 months

to

have

the

Federal

Government

loan

them them
I
am

additional
a

of mortgage

payments

only pushes

into
in

from Texas, with the problem, but Federal to loan to more program money eutd unable home in difRcutt circumstances to are buyers who without make regard to how they got into the mortgage payments circumstances is frankly the opposite direction of what we ought to the solution of
a new

deeper hole. great sympathy, being

be

doing.
If this committee chooses
to

act, I would

hope

what

we

would m"ide in that

do

along the lines of a proposal that was around Ohio, Mr. colleague from Wylie, last time my which had be further ahead, and we adopted, we would
would be

something

by 1983,
is to

instruct

supervisory agencies to do a better job and go further in instructing in providing forbearance for single-ffmiily homes, allow the home financial institutions tA to single-family owners, between home buyer a provide that kind of n^otiat^d forbearance who has lost his or her job and is going to be back his feet. Had on have been adopted that approach in 1983, it would passed and we of home hundreds thousands and signed into law, and owners would in fact have been helped by that. If this committee chooses be to proceed, I would hope that would the approach we other would take, because, frankly, no approach is becomes to be enacted this and it possible so a just simply litical poyear, if we choose other approach. some game Federal set up Second, if we bureaucracy, in the end ve a new would end while of people, we to some providing money group up would end discouraging those forbearance negotiations from up of other groups of people. So I hope we don't prolarger numbers ceed down this road, I hope we down road of a proceed having the make better, a greater recognition of the a regulatory institutions need for negotiations with home who buyers trying to make are their payments and allowing financial institutions and encouraging
"

the

financietl If any the form Mr.

institutions
of you
a

to do

so. can

would

like to respond to that, you

choose. is
a

put

that

in
timony, tes-

of and

if you articulating what

question

But

very to

appreciate difficult problem.

you.

I did

your

KiLUNGER.
like
to

Yes, Congressman.
free markets
of
us

Thank operate

I think

we,

too,

would
you

allow

in this

situation, and,
be
sary. neces-

know,
You
to

if

they did, perhaps

those when
a

this

l^islation wouldn't
would
barrel Free

know,
to pass

in
was

Louisiana

have
and the

liked

free

markets then.

operate

oil

$40

Congre^

didn't have
We
to

windfalls

profittax.

markets that

We
the

believe
way
are

don't believe they are operating now We believe there has been red-lining.
a

in New

didn't operate Orleans.

that is not

make

healthy
to

real estate

economy,

You

not

going

restrict

the

use

of

by limiting capital. capital with any kind of

.bv

43 sick

company you

and,
"

know,
our

I guess is Ferran. when

we

industry and have it ever get back on its feet, don't believe these Federal supervisory agencies how mort^iges very well. to handle they don't know
or

sick

we

That Mr.
"

problem.
Also, when
are we are

in

situation
an

where
that
can

the has

my econoa

in

situation without in
our

with

economy

few be

foreclosures

in

the marketplace,

those

foreclosures

normally
a

borne
area.

by the
What
now,
a

marketplace is happening
a

diminution

in value is it is
can

of the entire little past out de"il a

community
a

there with
seem

it is not

situation
many
some

where

lender
will
not

work

borrower.
to

In for

cases,
reason

they
or

do
to

it, and
the
as

they just
we

benefit

another
many

back emd sell it at a loss. With itself cannot absorb the market
what is nice
areas

as

take foreclosures
we

property have,
and nancing fi-

it and

what

end of

up

with,
whole

about

this

bill is that

and, therefore, in those markets areas

the of the foreclosure If I could add

it targets these helps the structure

tressed economically disthe

by avoiding
a

these

properties from activityin

who

getting
Mr. the
are sense

on

rolls.

Bartlbtt.

follow-up question. This

mortgages
would block what the be the
a

actually paying for the

for individuals that the

in difficult

ty under
New

circun^tances I believe community development

"

permitted activi* city of

City
sucn

grant
New

Orleads could adopt. I wonder Council, Dallas or the otiier cities

have
New

Orleans cities considered

l^islation? liey receive actually adopting it in

the

large sums city of

of money in block grant funds, Orleans itself? Would you

advocate Orleiins use the city of New the money they are getting in block grant fiinds to achieve that? Chairman Gonzalez. I was Excuse going to ask the gentleman me, from Dallas to yield here, because he is asking you a question
that said Mr.
we

is impossible that

for

you

to

Emswer,

because

I think In
a

it should the block tee commit-

be

this is not attempt

say

Bastlett.

a permissible activity for CDBG I assume the chairman is correct.

fimds.

to

make the

community
cities
to
use

development
it
as

grant,

that

it

they would, and sometimes both and HUD fall short of that. Perhaps what this comwe mittee should achieve is to make this a permissible activity. Chairman Gonzalez. but The gentleman submit legislation, can would be impossible to ask them with their city autiiorito check
is to
allow
it is not

tiea, because
Mrs. BoGGs. Chairman

within Yes.
I

the

allowable

activities.

Mr.

Chairman.

Gonzalez.

Mrs.
Mrs.

BoGGB.
BoGGS.

May
Gonzalez. In

respond?
I Absolutely. bill that
we

Chairman

wanted
be that

the

wUl

Appropriations
up

Committee

tomorrow
a

to interject marking up in the full have we already mfu*ked

in subcommittee, confronted we discontinued had were or programs

situation

where that

again several
tion administranot

zero

funding
Block monies

in the
were

budget. Also,
but
This added
to

there
not

were

some

progremis

funded

the

Community
one

Development
loan fund

Grant

Program.
to go

activitywas

of them.

Also, tiie section

the Community Our committee
has

312

revolving

were

into it.

Development Program help always felt that 312 revolving funds should
to

Block

Grant

mnd

be

.bv

45 It is one

thing

to oppose

Congress spending

money

on

something,

I think

thing for the Congress very legitimately quite another to talk about the management of Federal agencies. Chairman Gonzalez. Exactly. For example, in 1978, we passed the equivalent of a home TMAP, assistance, known mortgage as court that still has yet to be im^emented. Why? Well, there was a fit to do anything. On has not seen the intervenUon, and HUD case I don't know of a mortgage that mortgage assignment program, the statistics from Mrs. haa had is a proHUD Caldwell, who we fessional
it is
"

staff member who has gathered the to the subcommittee isn't doing anything there HUD either, and I statistics, indicates said yourself that in New Orleans there wasn't any dence evithink you HUD doing anything on the assignment program. was
Mr.
many

KnxiNGER.

In their

case,

they don't get the cooperation

for the

from
same

of the lenders Gonzalez.

you
are

for the

loans

services,
thine.

so

it is the

thing.
Chairman

That

is the same
are

So
the
we

that

right, we
"ire

not not

"

financial
are

institutions for. It is

in
to

somebody talked about chanty, well, that is not

even

"

well,
what
cause be-

asking
it is
a

insulting

consider in

it that

way,

question

of whether

the same faith as of all,economically speaking, the Depression. of this same bill was I said earlier the 1983 version But pat^ temed research that I and some of the staff did, but particularly on I remembered I can I am HOLC. old enough where I, because member. reAnd it. did some we digging and we tried to structure The extent are only thing I see is that to what helping with you
can

manifest

day and time our our Congress the Congress in the harshest period

the
not

inter^
to
even

rates
even

we

are

asking
of the
we

on

repayment?
subcommittee
it out
on

But find

then

we

are

going 1983, but

vote,
nature

get it out

with
it has

that,
out

yes,

passed
House,
the

but

passed

of the

and House

it is

especially in a strictlypartisan the only bill of

the

that the

that

been So
"

passed by
that
we

since

advent
indication

of

Reagan
yes,

administration.
Gonzalez.

Chairman

ought
have for who the
was

to

give

you I

an

that,
heard

there

is still

and

had

changes
So
our

in the think freshman

tion composithat least

are
we bers, mem-

of and

tiie House
she has

since

1983,

better.
one

Miss

Pelosi, for instance, spirit of the

hard
as we

of their wish

certainly demonstrated
legislation, so
know have
a

her with

thrust
to

and
as

approval, at help, we
you. to

the

going

push
Ms. Ms.

how

and

again, I thank
you

Pelosi, do
Pelosi.

you

stetement

make? of the and

a

Just

Mr. briefly,
your

Chairman.
comments

Thank
in terms
a

you.

I would of
our

like to endorse Of
our

testimony
learning
terizing characI appreciate

witnesses. when

course,

it is

always

pleasure
of
our

experience
and
I would

from colleeigue the

Louisiana

is there

and

placing in context their testimony.

also
a

testimony
you

witnesses. in

like to

say

that,

as

have

indicated

the

sence ab-

also as Congresswoman is a reduction in community block Boggs has indicated, there will readministration is underway. Hopefully a new verse grants which I hate these needs in competition with that trend. to see for limited other needs resources.

of

Federal

housing

policy, and

.bv

46 If
to
see
we

we
us

deem

this

necessary

and

see

pursue

what
are

happens

your next.

bill,rather
for the
same

than

worthy expenditure, I would put it in competition.

and
it gets and

like
I
can

It is all there

reduced should

more we

and take needs

all competing

dollar

how

problem of homelessness, by meeting the emergency of people in the street or by keeping people in their homes. avoid that strategy in our I hope we can planning of our It is interesting to see asked minority so staggered when our the size of the problem and they hear $2 billion. That is We of targeting down to try to speak in terms money.
on

the

policy.
about
a

lot of

lower
dollar

amount.

But
than

it doesn't

seem

to

occur

to

them

that

the

problem. saying we can't do that, it is too much, they should witnesses. It is a staggerunderstfmd and gain knowledge from our ing problem and it needs a specificsolution. That is why I was ticularly parwith which Mr. Killinger and pleased with the specificity addressed the problem. Thank Ferran Mr. for Chairman, you, Mr. holding these hearings. of Ms. Pelosi can be found in the appen[The prepared statement dix.]
amount

is the size of the

Rather

Chairman
Mrs.

Gonzalez.

Thank

you

very

much.

Thank

you,

again,

Boggs and gentleman. unless The subcommittee,

you

either

one

of you

has

some

additional

statements
Mr.

wish
I

to

make
like

for the
to

record. you

Febban. here

would

thank

for the

opportunity
will stand

to

speak

today.
subcommittee
in

Gonzalez. Chairmfui Thank The you. until further cfillof the chair. recess

[Whereupon,
to

at 12:20 p.m., the the call of the Chair.]

subcommittee

was

adjourned

ject sub-

.bv

APPENDIX

.bv

UanA

it. IHt

CONGRESSIONAL

RBCORO-

HOUU

UN

"""!"(" IP

tha

kv

IHUr,

[n

AbvIb"

titiu

unlortunBKtr

!^

Hi

bsc

muwlaa.

TK

Uiar

CONGRESSIONAL

RECORD

"

HOUSE

Uarzfl

SI. 'l"88

ra

SD

luah

Uilni,

TMr

tai

l"nA

SI, ItSt

aJNGXESSIONAL

RECORD

HOUSE

.bv

CONGRESSIONAL

RECORD-

HOUSE

Mlanh

31.

ifS$_

.bv

H.R.4292
To

require the Secretaiy of Housing uid

emergency

Urbui
Ic

Development
bomeownerB.

to

provide

mortgage

asgishmce

THE

HOUSE

OF
Uabgh

REPRESENTATIVES
so,
1988
was

Ur.

OONZALBZ

iDlfoduced
on

the

(ollowing bill;which
Finance and Urban

referred Affairs

to

the

Commitlee

Banking,

A
To

BILL
Urban
to

require the Secretary of Housing and provide

emer^ncy

Development
homeowners.

to

mortgage

assistance

Be

it enacted

by the Senate
States

and

House

of Represenla-

ttDes

of the United
1. SHORT

of America

in

Congress assembled,

SECTION

TTTLB.

This

Act Actof

may

be cited

as

the "Emergency

Housing

As-

sistance

1988".

SEC.

2. nNDINGS

AND

PURPOSE.

(a) FnmiNOS." (1) the existed

in

The

Congress
economic

finds that" conditions Nation that have

uncerttuD

various

parts

of

the

during

the

past

.bv

several
of

years

have

contributed

to

continuing high

rate

delinquencies and
many

foreclosures;
are

(2)

homeowners
economic

suffering from
in then*

the
and

impact
are

of the

downturn

regions

strugglingto
(3) many

meet

their mortgage homeowners

obUgations;and
retain
their

such

could

homes

if

they received
conditions

temporary

financial

assistance

untU

economic

improve.
of this Act
to

(b) PuBPOSB.
that

"

It is the purpose
and

establish

10

program
to

will

preserve

promote

forbearance

with
relief

1 1

respect

mortgages
prevent
of homes

and, through

emergency

mortgage and

12

payments,
tress

widespread mortgage resulting from

the

foreclosures

dis-

13

sales

temporary

loss

of

em-

14

ployment
SBC

and

income.

15

3. DEFINITIONS.

16

For

purposes

of this Act:

17

(1) District. Federal Federal

the

"

The Bank Bank

term

"district"

means

any

18

Home Home
Home

Loan Loan

district established Board

Act.

by the
3 of

19

under

section

20

Federal

Loan

Bank

21

(2) Federal
"Federal

supervisory

agency.

"

The

term

22

supervisory agency"
of the Federal Reserve

means

the

Board
the

of

23

Governors
of Directors

System,
Insurance

Board

24

of the

Federal

Deposit
the

Corporathe

25

tion, the

Comptroller

of

Currency,

Federal

.bv

3
1

Home Loan Union

Loan

Bank

Board, the

Federal
the

Savings

and

Lisurance

Corporation,and

National

Credit

Administration.
(3) Fund. The
term

"

"Fund" Fund

means

the Homein section

owners

Emergency

Belief

established

9.

(4)
term

Monthly

net

effective

income.

"

The

"monthly
gross

net

effective income" of

means

the month-

ly

income

mortgagor,
or

less

any

Federal,
due with

10

State, or

local income
income.

employment

taxes

respect to such

12

(5) MOSTGAGB.
a

"

The

term

"mortgage"

includes
for the

13

land

contract

or

other
of

instrument

providing
to

14

sale

and

purchase
the

property

referred and

in

section

15

5(aHl", and
include the

terms

"mortgagor"
to

"mortgagee"
of sale

16

parties

the

agreement

and

17

purchase.
(6) Secbetaby.
the
"

18

The
and

term

"Secretary"

means

19

Secretaryof Housing
(7) State.
"

Urban "State"

Development.
means

20

The

term

each
the

of the

21

several

States, the District of Columbia,

of

Common-

22

wealth American Trust

Puerto

Eico,
the

the

Virgin Islands, Guam,

Mariana

23

Samoa,

Northern

Islands, the
any

24

Territoryof

the

Pacific Islands, and the United States.

other

25

or territory possession of

.bv

(8) Total
term

monthly

housing

expense.

"

The

"total

monthly housing expense"

means

the

sum

of"

(A) the monthly

est, taxes, assessments, and

payment

of

principal,interhazard in-

ground rents,
insurance

surance,

mortgage
with

premiums
a

due

by

mortgagor

respect

to

property

assist-

ed under

this Act;
the

(B)
costs

reasonable with

monthly
respect

maintenance the

10

of the

mortgagor

to

prop-

11

erty; and (C)

the

12

the

reasonable
with

monthly
to

utilitycosts

of

13

mortgagor
MORTGAGE

respect

the property.
RATE.

14

SEC.

4. EFFECTIVE

DELINQUENCY

15

(a) Availability
(1) Genebal and
in

op

Assistance.

"

16

authority.

"

The

Secretary
to

of

17

Housing approved

Urban

Development

shall,
out

the

extent

18

appropriation Acts,

carry

the program

19

established (2)
For

in this Act.

20

Conditions
of

ebquibinq

implbmenta-

21

TION.

"

purposes this

carrying

out

the

program

es-

22

tablished

in

Act,

the

Secretary shall
available under

contract

to

23

make,
any

and

make,

assistance

this Act

in

24

district when,
of 3

on

an

average

monthly basis for

for the

25

period

consecutive

months

the district,

.bv

67

5
1 amount

of funds that

represented by mortgage
accounted

loans and

contracts

are

for in the 1- to

4-family
by

permanent
the

mortgage Home been

series delinquency Loan Bank

maintained
and

Federal

Board,
60

for which

5 6
7

payments
exceeds

have
2.0

for delinquent

days

or

more,

percent of all funds representedby mortcontracts

gage

loans and (3) Months

accounted For

for in the series.

purposes of de-

8 9
10

conbidebbd.

"

when lennining
suant

assistance is to be made

available purtake into

to

shall paragraph (2), the Secretary all months

11

account

bediming

with

or

after the

third

12
13

month

before the month

in which

this Act
With

is enacted.
to

(4) Initial
initial occurrence,

assistance.

"

respect

the of

14

after the date of the

condition

enactment

15 16 17
18

this Act, of the delinquencyrate

described in
contract
to

shall begin to paragraph (2), the Secretary

make, and

make, assistance available

after the

at

the

beginning
the mort-

of the first month

month
to

in which
m

19

gage

delinquency series

referred

such

paragraph

20

indicates that the condition has occurred.

21

{5) Availability

of

data.

"

The

mortgage

de-

22

Unquency
made

series referred to in paragraph (2) shall be

23
24

available the

by

the

Federal
the

Home

Loan
on a

Bink
month-

Board

to

and Secretary
contfun

Congress
on

25

ly basis and shall

data

the mortgage

delin-

.bv

"

6 month for

quency
trict.

rate

during the previous

each

dis-

(b) Tbbmination (1) In

able
qbnebal.

of

Assistance.

"

"

Once

aasUtance

is made

avwl-

under
to

this Act

in imy
to

the Secretary shall district, and

continue

contract

make,
on

make,

the assistance
delin-

available

until

the

date

which

the mortgage

quency

series referred to in subsection

of funds

(aK2) indicates

that the amount quent the

for

represented by 60-day delincontracts

10

mortgage

loans

and

accounted

for

in

11

series has

declined,
3

on

an

average

monthly

basis

12

period of
1.9

consecutive
of all funds

months

for the district, to mortgage

13

below

percent
contracts

by represented

14

loans and
that"

accounted

for in the aeries, except

15

16

(A) the assistance shall continue

available

to

be made

17

pursuant

to

contracts

entered

into before

18

such

date; and
CB) the

19

Secretary shall

reinstitute the
in the

pro-

20

gram
ever

established in this Act

the

district whendescribed in

21

delinquencyrate
(aK2)
reoccurs.

condition

22

subsection

23

(2) Reinstitution
in which the

aftbe

teemination.

"

In

24

any

case

program

is reinstituted

in any

25

the Secretaryshall begin to district,

contract

to

make.

.bv

and

make,
the

assistance

available

beginning
mortgage

with

the

date

after
series

date

on

which the

the

delinquency
condition has

indicates

that

delinquency rate

reoccurred.

(c) Notification
shall

of

Moetgaobbs.

"

The

Secretary
other
mort-

promptly notifyeach
holding
the
a

financial institution
in

or

ga^e

mortgage

on

property
to

any

district

in

which

Secretary has
of assistance

determined established

institute

or

reinstitute

the program

in this Act.

10

SEC.

6. EUGIBILITY

FOR

ASSISTANCE.

11

(a) Eligibility
made with

Conditions.

"

Assistance
this Act

may

be

12

respect

to

mortgage
conditions:

under

only under

IS

the

terms following

and

14

(1) Eligiblb

peopeetibs.

"

The

property

secur-

15

ing

the

mortgage
in

(or other
or

security interest
condominium
home

in the

case

16

of units the

cooperative
any

projects,or
and the lot

in

17

case

of the

manufactured
is situated) is

on

18

which

home

one-

to

four-family

19

residence

(including one-familyunits
membership
interest

in

condominium

20

project, a
ment

and

occupuicy

agree-

21

in

cooperative housing project,and

and the lot
on

any

manu-

22

factured

home

which

the home

is situatin-

23

ed) and
volved.

is the

principalresidence

of the mortgagor

24

25

(2) Impending

fobbclosuee.

"

Either

"

.bv

which

reduction

in

income

renders

the

mortgagor
a rea-

unable sonable

to

correct

mortgage
resume

delinquency

within

time

or

to

full mortgage The

the

paymeBts.
amiual
of the

(5) Income
income of the

limitation.

"

aggregate
members

mortgagor

and

family of the mortgagor

for the 12-month

residingwith

the

mortgagor,
ap-

period preceding the date of the

mortgagor
exceed
for assistance under

plication of
Act,
does

the

this

not

whichever

of

the

following

is

10

higher:
(A)
income Abea
BfEDiAN INCOBIE.
"

11

The

median

12

for

family of
area

persons

in the metropoli-

13

tan

statistical

involved.

14

(B) National
tionaJ

median

mcoME.

"

The

na-

15

median

income

for

family of
payment

persons.

16

(6) Establishment The

op

plan

with

17

mobtoaobb.

"

Secretary has
by
the

determined
has

that the

18

mortgagor,
ated
with

if contacted
the

mortgagor,
to

cooper-

19

mortgagee
the

in

attempting
of

establish

20

reasonable
the

plan for
due

making
the

partial payments
or,

of

21

amounts

under

mortgage

considering
any

22

the financial
reasonable

circumstances

of the

mortgagor,

other

23

plan

to

correct

the

mortgage

delinquency of
under this

24

the

mortgagor

without

Gnancial

assistance

25

Act.

.bv

10
1

(7) Pbospbct
QAOE PAYMENTS.

op

bbbuhption

of

full

MOET-

"

The

Secretaryhas
are

determined avoid

that
fore-

payments

usder

this Act

necessary

to

closure and

that there is wiD

be able to

reasonable

prospect that the

mortgagor

"

(A)
36

resmne

full mortgage

payments

within

months

after the beginning of tJie period for

under

which

payments termination

this Act

are

provided or
this Act; and
the

upon

of assistance under under

10

(B) make
in

the payments

mortgage
later date

11

full by
to

its

maturity date

or

by

12

B^eed

by

the mortga^r
OBLIGATION

and

mortgagee.
MOBTGAGB."

13

{8) PBlNCtPAL (A)

GATION.

OF

14

Maximum An

obioinal

pbincifal

obu-

15

"

amount

equal to

the original princidoes

not

16

of the mortgage pal obligation

the
amount principal

exceed

17

that could be insured, at the

18

time

the

mortgagor

appUes
to

for

assistance

under

19

this Act, with

under

respect
section

the property of the mort-

30

gsgor

203(b) of the National

or

Hous-

21

ing Act (or

Act with

under

section 203(n)
to

234(c) of such

22

respect

unit

in

cooperative hous-

23

ing project or

condominium
PBINCIPAL

project,respectively).
OBLIGATION.
"

24

(B) CUBEBNT mortgagor

may
not

25

be determined

to

be

ineligible

.bv

11

for assistance

under

this Act
the

on

the basis of the

value of the

between relationship

fair market

home

and

the

of outstandingprincipalobligation

the mortgage.

(b) Eliqibilitt
that the conditions
met

Limitation. of

"

Upon

determination

in subsection eligibility

(a) have

been

by

mortgagor,

the mortga^r in section

shall become 7, to the

extent

for eligible
amounts

the assistance avulable

described

are

under

section 9 for the assistance.

10

SEC

6. APPLICATION

FOR

ASSISTANCE.

11

(a) Submission
in which the program

of

Application. estabhshed

"

During

any

period

12

in this Act

is in effect in

13

any

each district,
than

financial

institution

or

other

mortgagee forecloin

14

not less shall,

30

days prior ta instituting any

to

15

sure

proceeding with respect

any

property described

16

paragraphs(1),(3), and (8) of

gor

section 5(a), assist the mort^asubmission

to

17

involved

in the preparation and

the SecreThe

18

tary of

an

apphcation for assistance under

not

this Act.

ap-

19

plicationshall
waiver
her

be

required

if the

mortgagor

executes

20

of assistance under

this Act

after full disclosure of his

21

or

possibleeligibility.
op

22

(b) Postponement
INGS.

Fobeclosube

Pboceedassist-

23

"

If any

mortgagor

submits

an

apphcation for
institution
or

24

ance

under

subsection

(a), the
not

financial

other

25

mortgagee

involved

may

institute foreclosure proceedings

.bv

12
1

with respect
tion

to

the mortgagor

prior to the receiptof notificasection

from

the

Secretaryunder

7(g) with

respect

to

for approval or disapprovalof the application (c) Stay

of

assistance.

Fobbclosuke

Peocebdinos.

"

mort-

gagor
sure

may

submit

an

for assistance after forecloapplication been in which instituted,

event

6
7

proceedingshave
be

the

proceedings shall
tificationfrom
the

automaticallystayed until receiptof

section 7(g).
In States that

no-

under Secretary CoBiPLiANCB.

(d) Pboof
dicial

of

"

requireju-

10

approval

of foreclosure,

comphance
a

with

tins section

11

shall be pleaded and

of any

proved

as

preconditionto foreclosure
under section
5.

12

mortgage
to

for eligible

assistance

In all

13

States, failure

comply
an

with

the
to

of provisions

this section

14

shall be the basis of

action

a enjoin

foreclosure. Proof of

15

the refusal of the mortgagor

or plication

involved under

either to submit
this section

an

ap-

16

to

execute

waiver

aball satis-

17

fy the burden of proof estabUshed

SEC T. ASSISTANCE

in this subsection.

18

PAYMENTa

19

(a) FoBH
shall be

OF

Assistance.
the

"

^Assistance under

this Act
relief

20

providedin
made The

form

of emergency

mortgage
on

21

payments

by

the

Secretaryto
shall

mortgagees made

behalf

of

22

mortgagors.

payments

be

using
Fund.

amounts

23

available in the Homeowners

Emergency
"

ReUef

24

(b)Amount

of

Assistance.

.bv

13
1

(1) In mortgage

gbnebal.

"

Payments
shall be

with
in

respect
amount

to

any

mider

this

Act

an

that,
in-

together with

the

contribution the amount

of the

mortgagor

volved, is equal
est, taxes,

to

of the principal, interrents, involved under due under hazard insur-

assessments,

ground

6
7

ance,

expenses

of the mortgagee

in connection

with

payments

or

repayments

this

Act,

and

mortgage
and the

insurance

premiums
shall

the mortgage,
amount
neces-

initial payment
make

include the

an

10

aaiy

to

the payments
amount.

on

mortgage

current.

11

(2) Maximum:
Act shall not exceed

"

Payments
the

under

this

12

amounts

that

Secretary deterthe

13

mines

to

be

necessary

to

supplement
is

amounts,

if

14

any,

that

the

mortgagor

involved

capable of

contrib-

15

utingtoward

Ike mortgage
amount.

payments.
"

16

(3) Minimum
any the

Payments
shall
that
not

on

behalf
leas

of

17

mortgagor
amount

under

this

Act

be

than

18

required

to

ensure

the

total

monthly
38

19

housing expense
percent of the

of the mortgagor

does

not

exceed

20

monthly

net

effective income

of

the

21

mortgagor.

22

(c) DtmATiON
(1) In
be

OF

Assistance.

"

23

oenebal.

"

Pa3'ment3 under
not

this Act
18

may

24

provided for

period of

to

exceed

months

25

plus any periodof delinquency.

.bv

14

(2) Extension. for

has

"

The

period shall be
18

extended

period

not

to

exceed

months

if the

Secretary
to

determined

that

the extension

is necessary

avoid

foreclosure.

(3) Change (A)

in

fenanoial

oibcdmstancbs.

"

Review

pboobdttbbs.

"

The

Secretary

shall estahUsh

procedures for

"

ti) each payments

the
are

mortgagor,
made under

on

whose

behalf

this Act, to inform

or

10
11

Secretary of

any and

increase significMt

decrease

in income;

12

(ii)periodic review, to be conducted less then

once

not

13

of annually,

the financial cirof the purpose

14

oumstances

of the

mortgagor

15

of

for continuation, determiningthe necessity

or

16

termination,
the payments.

adjustment

in the

amount

of

17

18

(B) Discontinuation payments

op

payments.

"

The
if the

19

shall be discontinued
determines

at

any

time

20

Secretary

that, because
of the

of changes in

21

the financial circumstances

mortgagor,
to

the fore-

22

payments
closure.

are

no

longer

necessary

avoid

23

24

(d) Teems

op

Assibtancb.

"

.bv

(1)

Security.

"

All lien

payments
on

under

this

Act

shall be secured

by

the property

involved

and

by
The

such
lien

other
shall

obligation as the Secretary may

be subordinate
to

require. existing

all mortgages

on

the property

on

the

date imder

on

which this Act

the initial aasistbehalf of the

ance

pajnnent

is made

on

mortgagor

involved.

(2) Repayment.
(A) In shall be
scribed

"

ognebal.

"

Payments
terms

under

this Act

10

repayable upon
by
the

and
the

conditions
and

pre-

11

Secretary,and

terms

con-

12

ditjons may
amount

include

requirements for repayment

the

of

IS

any

paid by
a

Secretary toward
with

the

ex-

14

penses

of

mortgagee

in connection

the pay-

15

ment

or

repayments

made

under

this Act.

16

(B) Intebest.

"

17

(i)Rate.
interest

"

The

Secretary may
payments the
made

estabHsh

18

charges

on

under

19

this

Act, except payments

shaU be

that

interest

charge

on

20

the

made

on

behalf

of any that

mortgadoes
not

21

gor

set

at

single rate
the

22

exceed
less:

whichever

of

following

rates

is

23

24

(I) 8.5

MiBCENT.

"

8.5

percent.

.bv

17 1

payment
the

and

the total monthly houaing expense does

effective
not

of

mortga^r
net

exceed

38

percent of the

monthly

income

of the mortgagor.

(B) Incbntivbs
The

fob

bably

bepatment.

"

Secretarymay,

at

the option of any

for

mortga-

gor,

establish appropriate incentives

of the
amount

early

re-

payment under

owed

to

the

Secretary
part of the
on

8
9

this Act,

forgivenessof including
the payments
made

interest

charged on

behalf

10

of the mortgagor.

11

{C)
STANCES.

Review The

of

fwanciai,

cibcum-

12

"

Secretary shall

establish

proce-

13

dures

for

"

14

(i) each
under
this Act

mortgagor
to inform

making
the

repayments
any

15

Secretaryof
in

16

increase significant

or

decrease

income;

17

and

18

(ii) periodicreview,
less than
cumstances
once

to

be conducted
the financial

not

19

annually, of

cir-

20

of the mortgagor

for the purpose

21

of determining the
in the amount

necessity for adjustment

22

of the repayments.
becbiptb m fund.

23

(4) Deposit

op

"

All

re-

24

ceipts horn

repayments

made

to

the

Secretary

under

.bv

70

18
1

this Act

shall be depositedin the HomeownerH established in section 9.

Limitation
on

Emer-

g;ency Belief Fund

(e) Aqobeoate
ments

Assistance.

"

Pay-

by

the

under Secretary the

this Act may

be made

without action

regard to whether
under
ments

has previously taken Secretary

a

this Act
not

on

behalf of

mortgagor,
behalf of
a

except

that pay-

may

be provided on than
an

mortg;"^r under

8
9

this Act for

more

aggregate of 36 months.
"

(f) CouNBELiNO

Assistance.

The

Secretaryshall Housing
coiin-

10
11

provide,in
and Urban

accordance

with

section 106(c) of the

Development Act of 1968, homeownership

on

12

selingto mortga^ra
under this Act.

whose

behalf payments

are

made

13
14

(g) Pbocbssino
shall process
a expeditious

of

Applications. assistance

"

The

Secretary
in
as

15

for applications
manner as

under

this Act

16
17

is

In carrying out this practicable.

not
more

shall provide that, within Act, the Secretary

45

than

18
19

calendar days from under

the

of an receipt

for assistapplication mortgage involved

of the

ance

this Act, the mortgagor

and

20 21 22
23

will be notified by the Secretary of the determination

to Secretary

approve

or

for assistdisapprovethe application

ance.

(h)Allocation
(1) In this Act, the

of

Assistance.

"

24
25

obnebal.

"

In providing assistance

under

shall Secretary

"

.bv

71

10 1 2 3 4

(A) seek
of funds among

b)

ensure

reasonable

distributioii

districts in which is in

the program

es-

tablisbed in this Act

and effect;
rates

(B) take into consideration the

dential mortgage
foreclosure

of resi-

5
6 7 8 9 10
11

and

unemployment in
in which whether the the

local government the units of genera,!

propertiesinvolved
units of

are

located

and
are

generallocal government
section 119

for eli^ble

assistance under

of the Housing and of

Community

Development
to

Act

1974,

giving

consideration particular

units of general local of

12

government

that have

rat"8

unemployment
are

ex-

13
14

ceedingthe

national average

or

for eligible

as-

sistance under

such section 119.

most becekt data.

15

(2) Use
out

op

"

In

carrying

16
17

the

provisionsof this subsection,the Secretary

recent

shall utilize the most

the

information
with

avdlable
to
rates

from of

18
19

Secretary of

Labor

respect

unemployment.
SEC B. AUTHORITY OF THE SECRBTARY.

20
21

(a)Rbottlationb.
that regulations and
are

"

The

Secretary may
the

make

rules and
this Act

22 23 24

are

consistent with
to out

of provisions

necessary

carry

the

of provisions

this Act.

(b)Additional

Authobity."

"HB

4"i

in

.bv

(1) Powers
ance

upon

default.

"

In

the

performand

of, and

with

respect
the

to, the functions, powers, this Act, the

duties vested

in

Secretary by

Secre-

tary shall

"

(A)
other

have

the

power,

notwithstanding
before
or

any

provision of law, whether

to

after defor the

fault,

provide hy

contract

or

otherwise

extinguishment upon
equitable,legal, or
gage,

default other

of

any

redemption,
mort-

right, title in any

instrument

10

deed, trust,
on

or

other

held the

hy

or

11

held

behalf

of the

Secretaiy under

provi-

12

sions of this Act; and

13

(B) have erty

any
or

the power

to

foreclose

on

any

propenforce

14

commence

any

action to protect
the

or

15

right conferred
or

upon

Secretary by law,
and bid for and gale any
pur-

16

contract, chase
at

other

agreement,
or

17

any

foreclosure with

other

proper-

18

ty in connection

which

assistance

has

been

19

provided pursuant
(2)
Uanaobmbmt

to

this Act.

20

and

disposition

op

ac-

21

QUIBBD

PBOPEBTY.

"

In the event

of any

such

acquisiother

22

tion, the

Secretary

may

(notwithstandingany

23

to the acquisition, provision of law relating handling, or

24

disposal

of

real

property

by the United

States)

com-

.bv

21

plete,remodel
erwise

and

convert,

dispose of, lease,

and

oth-

deal with, the property.

of

(c) Collection
other

Claims.

"

Notwithstandmg
have power

any
to

provisionof law, the Secretaryshall also

to

pursue

final collection

by

way

of compromise

or

otherwise with

all claims

acquired by

the

Secretaryin

connection

any

subrogation,or security,
tary in admimstering

other

rightsobtfuned by
Any
funds

the Secre-

this Act.

collected

by

the

Secretaryunder
owners

this section shall be deposited in the HomeRelief

10

Emergency
9. HOMEOWNERS

Fund

established in section 9.

11

SEC.

EMERGENCY

RELIEF

FUND.

12

(a)

Establishment.
the United

"

There

is

established

in

the

13

Treasury of
as

States

fund, to revolving
Kelief Fund.

be known

14

the Homeowners

Emergency
"

15

(b) Assets. (1) any

purposes of

The

Fund

shall consist of
in

"

16

amount

approved

appropriationActs

for

17

carrying out
amount

this Act;

18

(2) any payment

received
made

by

the

Secretary as

re-

19

for payments
amount

under

this Act;
the

30

(3) any
section

collected

by

Secretary under

21

8; and
amount

22

(4) any
subsection

received

by the Secretary

under

23

(d).
AMOimTS.

24

(c) Use

op

"

The

Fund

to shall,

the

extent

25

Acts, be available approved in appropriation

to

the Secretary

.bv

74

22
1

for

purposes

of

carrymg

out

the

provisionsof this Act,

2 3
4

including
"

(1) the making of emergency

ments to

mortgage
of

relief payunder

mortgagees

on

behalf

mortgagors

section 7; and

6
7

(2) the adminiBtrative expenses

out carrying

of the

in Secretary

the

of this Act. provisions

op

8 9
10

(d)
amounts

Investment
in the Fund

Excess

Amounts.

"

Any
in

determined

to be by the Secretary

excess

of the amounts

currentlyrequired to

carry

out

the

11

in of this Act shall be invested by the Secretary provisions

12

of, or obligations obligations guaranteed as

and interest

to

both principal
agency of

13

by,

the

United

States

or

any

the

14

United States.
SEC. 10. AUTHORIZATION OF

15
16

APPB0PRIATI0N8;

LIMITATION

ON

BUDGET

AUTHORITY.

17
18

(a) Authorization authorized to be this Act

of

Appropriations.

"

There

is

to appropriated

cany

out

of the provisions

19
20

$500,000,000

for fiscalyear

1989.

Any

amounts

so

shall be deposited in the Fund appropriated

available until

and shall remain

2 1

expended.
on

22 23 24
25

(b)Limitation gate
amount

Budget
made

Authoeitt.
available
over

"

The

aggre-

of assistance

the duration of
may
not

the contracts

entered

into under

this Act

exceed

$500,000,000.

.bv

SEC.

11. ACTIONS

BY

FEDERAL

SUPERVISORY

AGENCIES.

(a) Pbomotion

op

Fobbbabancb.

"

Each

Federal

su-

pervisory agency,
to

with

respect to financial institutions subject

the

its

and jurisdiction,

Secretary,with

respect
14

to

other

approved mortgagees,
the date of the enactment

not later than shall,

days following

of this Act
in

"

(1) communicate
tion
or

writing with each

it to

such

institu-

mortgagee

encouraging
acceptance

exercise

forbear-

ance

the {including
maximum
extent

of partialpayment), to respect
to

10

the

possible,with

residen-

11

tial mortgage

foreclosures;
or

12

(2)
orations

wEuve

relax limitations pertaining to institutions mortgagees the extent

with

the

op-

13

of such

or

respect
or

14

to

mortgage

dehnquencies,
the limitations

to

the

waiving
with

15

relaxingof

is not

inconsistent

laws

16

relatingto the safetyand soundness

or

of such

institutions

17

mortgagees;
(3)
take

and
such actions be

18

as

may

necessary

to

19

ensure

that

each

such

institution

or

mortgagee
in section

com-

20

phes with the requirements established

(b) Special
EECISING

6.

21

CoNaroEEATioN

fob

Institotions

Ex-

22

FoeBEABANCB. (1) Fedebal

"

23

home

loan

banes.

"

In

consider-

24

ing applicationsfor advances, the Federal

Banks
that shall

Home

Loan

25

give special consideration

forbearance

to

institutions

26

have

exercised

in residential

mortgage

.bv

77

25
1

(2) the

extent

of,and prospect

for continuance in such

of,

forbearance Toluntaiy

by mortgagees

housing

3 4 5 6 7

market

areas;

(3) actions being taken

to encourage

by governmental agencies
in such

forbearance

by mortgagees

houa-

ing market

areas;

(4) actions

taken

and

actions

likelyto

be

taken

8
9 10
11

with respect to making assistance under this Act available to alleviate

rates

from hardships resulting

any

serious

of delinquencies and foreclosures; and (5) the current

default
status

and projected default

12

trends with

respect to mortgages

covering multifamity
to

13 14
15

with special attention properties, under the various of provisions

mortgages
National

insured

the

Housuig

Act
and

and

with

recommendations

on

how
or

the defaults avoided

in
a

16
17

defaults prospective

may

be cured
to the

manner

that,whUe
of the United urgent needs

givingweight

Bnancial inter-

18
19

ests

States,takes into
of the
many

full consideration and the

the

low-

moderate-

20 31
22

income

families

that

currentlyoccupy

multifamily

properties.
(b)
Sbbies.
"

Alteenativb

Mobtgagb

Dblinqubncy

23 24
25

(1) Study.
to

"

The

Secretary shall

conduct

study
other

determine

if

mortgage

aeries delinquency

.bv

than

the

mortgage

delinqueno;
be
" more

series

referred

to

in

section
series

4(aK2) would
to

effective and this Act,

efScient

utilize in

carryingout
"

(2) Repobt.

Within

year

aft"r the dat"

of the

enactment

of this Act, the the

Secretary shall
conclusions

transmit

to

the

Congress
with

and flndings

of the

study

along

any

recommendations legislative
in this Act.

concerning

the program
SBC. 13. REPEAL OF

established

EMERGENCY

HOMEOWNERS'

REUEF

ACT.

10

The

Emergency

Housing

Act

of 1975

is amended

by

1 1

title I. striking O

.bv

oPfoRtUMITlES,

.rtunlty

'loss

of

vorHers

and other

their heavy

families

out
are

ol not

Hork.

'These
out ot

individuala
a

in but out

sto of

and

industry

simnly jobs
th

Job,
slowly,

veirwith

the

se^ioe-sector
new

but

surely

nauBted

and

no

efflployuent

found,

loss

of

arklng

pti^fak
I

called
Pro

vome

Ownership

Protective

Effort,

naps

progrBB

is

unique

in

nunber

e(

ways.

th"t

aiy

nortgaq

unemployed

fanily

unti

.bv

that

adi^it ravolvlnq

familial loan

and

subsld
a

fund,

devalop

natltutlonal

dlln

unlqu.
incecaac in thaaa

unaiaployad
tuv

fa"ili*a, counaellng

mely
AKtAniAfi

t and to "lactric

conpaniaa,

tha

provida

this

service.

InaCituCiona

an

joining
oUr
our

Eh*

proqca

Aftar

oparatlng
ve took

HOPE

Progr t

Pennsylvania

concept

ba ^

prograa

Is

ratsrrad

the liot

thirty
91

counseling
Haa had

agenciaE
atata-vlda

that contra

and

.bv

"ga would

Its

resourcas

son

within ban

"
-

eoMVjnity
-

noc

Hioply

I HOPE

have

included,
Hill
nore

in than 113

ay double

written tha dollars

ceport,
nunber in

an

analysis
(amiliea aector

of serviced

how

t
a

model
mora

of

provide

than

nillion

private

funding

klao

included,
and
ara soon

la

the

list

of

naoes

of

individu

Phil comnittee Federal

Abtana

to

be

chaired froDv the

in

June

by
of

John the Fannie

Kna
cu

individuals
Loan

control

Home

Bank

Board,

trade

associations,
in the This tha vested HOPE
HOPE

meeting
where la another

with

appropriate
of need of institutions has

participants
been the demonstrated.

Progr
group model 1
o

degree

example
and

spirit
which

that have

individuals

intereat

rag

MMICatM.

MWISOBV

eiMOIIlTO

OH

HOW

iaory
Jans Niitlar Aaaist

Conltta*

Alan

HI 1

son

[Mputy

Edlaon

Elactrle

Haabingtani

DC

10

vie Vlca

BlBUch Praaldant

Flcat

Fadaral

c It

pittaburgh

19233

ETuquesne
Mail

Lighr n-S Drop

Richard

TueKac,

Ditactot

Federal

Hone

Loan

BanK

Board

comiunity

Attalrs

coordinator

Haahington,

DC

20S51

SouthwBstarn

Hagional

oteica

Pater

E.

Knight

1615

Street

Masblngton,

ftmarioan 1515 HI

Gas 1 son VA

ABBOCifltior aoulavard 22209

Arlington,

.bv

Adalnlstrativ*
and progran

Adulnlatcatlva
and progran

HUD

Counsaling PcocesBing AppllcBtlona

EIUD

Counssllng
FEOceaaln

Agency
Loan

Agency
Loan

Application

providing

noctgaga

subsidy

et

W2

of

Hoctgage

subsidy

Allegheny

Housing

Opport

Haohington

HcKe"*port,
I-1S90

carl

J.

MUEswslci,

Exec.

Dir.

a,

Exaoutlva

Dlcae

David

H.

Dugan.

TIKBTABLBS

FOB

HOPE

START-U

suBinij

cocporatlon

to

laplsne

Oparatoc:

Sinilar

incubating

procaa

naClonsl

rapllcatlon.

As

w*

and

HOPE.

Wa

are

planning
end

to

do

"o

in

the

Stretching

lavcraglnf)

linitsd

1 -.a

to

and

ny

pcaBSntation
v"i"' ay thanks
over

with

aaaiat

coiulttaa for home

in

La. your

Again
concern

youE

wlllingnaaa addcessing Hlllingnasa

ny

to tha te h"Br

ahara
ho"e
our

forecloauE*

uhlcb

BR4Z92

STATEMENT

OF

JAMES

A.

ABBOTT EXECUHVB OFFICER

PRESIDENT FIRST
UNION

AND

CHIEF MORTGAGE
NORTH

CORPORATION CAROLINA

CHARIjOTm,

MORTGAGE

BANKERS

ASSOCIATIOS

OF

AMERICA

SUBCOMMTTTEE

C"J

HOUSINO

AND

COMMUNITY

DEVELOPMENT

COMMmSE

ON

BANKING,
HOUSE

FINANCE

AND

URBAN

UNITED

STATES

OF

REPRESENTATIVES

HR

4292, the -Emergeiicy Housing Miy2't.

19SS

.bv

Mr-

Chairman
and

and

Memben
Executive Chainnan

of

the

Subcommittee,
ol

my

name

James

A.

Abbott.

im

Pfesideni
North

Oiief Carolina, and

of
and

ORker

Fim

Union

Mortgage

Corporalion,
C.

Charloite,
Bankers

AjJOdation

America."
Sharon

Counsel Legiilative

of the of the Legislative CommiltEC Burton me Accompanying today are Canivan. MBA'i De]HityLepslalivB CounaeL

Mongage Wood.

MBA'S

We

appreciate
situation

the

cuitent
our

opportunity regarding home

on

to

appear

specific cnmments
our

HR

mongage 4292. the

relief

and

general viem
are

on

mortgage
the

loiiay (o yon delinquencies and "Emaggnof Housing legislation.

forma of

before

oui otpteu forecloiuiei

viewi
and Act
to

on

the offct 19BS'

Assistance

of

Mortgages,
delinquency
percent
able of

among
foreclosure

most rates

secure

Investment.
defaults

Even much
most

al

the less

high
1

and all

of
a

19S2. mortgage
favorable

affeded

than

outslanding
mongage

loans,

very

record.

Moreover,
the loan.

of

the

loans

are

to

bring their

paymentscuneni

and

reinstate

facing

those

economically

dtstresaed

families

who

are

having

trouble

keeping

their

Lenders

are

promise

of to

subject

the poBsible. particular^ where forbearing whenever reinstate the loan to being able by beoiming current, the of meeting and preserving their contractual pressure

borrower but
lenders

shows
are to

obligalions

by
a

lenders
foreclosure

in

improving properties prior

on

the

borrower

as

well

great
on a

in difficulty

selling foreclosed
fees" the

Lenders (iiUyrecognize the Further. lenders community. in weak markets. properties,particularly

to
as

sale.

impact
often
Not

of

the

"ce

only

loan,

servicing

bread

and

butler

income

for

mortgage

banking

In

addition,
and

if

"

honn

muil

be

lold. the
borrowi

qiiii"
\9S0s.

proSobte
foe
deteriorated

sale

by

tbe

etcepi
of
in

those

regiona

operienuiiK
and
from

d^uuiuk.

uij^iluhi

..ui.

uic

impact
decline

agricultural

oD-based
1983
to

economiea.
the

Moreover,

the

lul
i

oppoTtunitiea for will funber retultini

However,
oleoded it it

inlcresi ratea mortgage reGnaDcing mortpgea

ease

and

die

krwcr

has created prescnl interest rate mortgages

bomwen.

[he

^brdability proUenu
(or
a

plaguing many
to

p^ment, paymemi

(wohibilivelyeipenaive When a period of time. often require the inveatora

whether
or

lender

forbear does

on

voluntary
receive Uie loan
or a

basis

imrtpge
lender either been

banker
(a

not

borro
lo

repurchase
from

forward Under

not

they

have

received

the

borrower.

of the Government adkr/aemcer recjuiremena for morlpige-backed setwrilies programs the Federal Home Loan Natbiiiil (GNMA). Mortgage Corporation Mortgage Aasociation National Assocdalion lenders forward die Federal must iDd (FNMA), Mortgage (FHLMC), These iDterol all loans, bodi on princqnl and including delinquent loans. payment lender. financial strain on a investor requirements put an enornious

Leaden (uads
to

prefer
investors

to

forbear
to
cover

lor

the

reasons

noted,

but

lenders

cannot

afford

to
no

advance

rEButatemein.

lUt localities

laans

in

there is for attended tinpaid bans perioda where is pirtiojlarly true where lenders are servidng large is a limit Tliua. there high unemployment etperieocing

hope

of
of

numbos
to

lenders'

For The
meuures

Federal

Defiartment

limited Aasistance HUD

Adminislration insured loans there is already some relief (FHA) and Urban Housing Develi^menl (HUD) currently en^jloys two avoid FHA These used in only to are foredosures-recasllng and assignment. and another to dicunatancei, however, provide Temporary Mortgage program has been aulhorizid but not unplemented. Payments (TMAP) However. yet

Housing
of

approves

only

about

aisigrmient uitiroale^
ment

program.
reinstate.
are

20 percent 2f Approximately ab" Thus, only

cure

of

the

loans

applymg

for

coverage

under

the

able

to

the

delii

of the

origina]mortgage.

EMERGENCY

FORECLOSURE

ASSI^ANCE

PROGRAM

Micern

regarding

foreclosure

relief

is

light, we

recommend

thai

relief

apply
"vered
des FHA

only by
and

to

VA

and

conventional program,

the
Tide

assignment
V

(rural housing) Ic

.bv

indkatioi]

of

bonowei'9

HR bcome

4292

bolh

borrowec

make provide thai bortowen during the assistance period as is 'calching up' with sssiitance repaymenL
doa

pinial paymenia
well
as

after

aisist

borrowers

to

rely

prcwram
a

_.^

_.

..._^

focbeataoce This

plan.
is
not

MBA

urges
-

Congress
'--

to
""-"

impose privite
Fedenl
Dieani

payments.

iniended
would itially

delinquency
be
in

by

nther

(ban HR

simp^
4292

inlereit-free

loan.

WhilB

also tbrbearinfr ate Congress ei^^re the other those

often

secured

by

liens

ot

second made

mortgages.

MBA
to

"

possibilityof

iniuring
or

loans

by

lenders

cover

amounts

in

for possibilities workable within

expediting recasting

other

forbearance

mechanbms,

and

making

the market

Fn program
current

biluice.
for market
rales,

[here

ii

real
to

providing
interest
then

relief
rates.

the potenlial within delinquent bomiwen such

GNMA whose

Securities Mortgage-Backed louii cany higher than ONMA would

to be VA

If
new

loans

were

allowed
the
on

by
FHA

be able

recast to

with

lower their have FHA-VA

re-pocled
the thai
as

into

sccuridca.
avoid of

homeowners

stay in
We
rate

homes estimated loam

and

government
many
as no

would 50
cost

losses

these

and

monpgee.
whh

percenl
to the

delinquent

lamilies

in

Texas

high

might benefit, at
MBA extended
in for the may [n
a

government.
assistance
time

AssKtance

Term. not be

also
too

urges

that
a

under unless
occur

a a

Ibredosure borrower

relief has
a

program

should
amount

lengthy
Most little

period,
up in

significant
of
a

of

equity
when
was

home. be

foreclosures
built

within

raortpge.
.

there

equity
case,

the

home,
should

the early years particular^ where

be [hat

the of
will

downpaymenl
Ihe

snuU.

such

foredosure

relief

limited,
exceed

because

strong

possUiilily thai
away

borrower,
the

faced
has

with
run

tepaymenls
out.

equity,

simply walk
The lack

and

default

after

assistance

of

equity
to

invested
as

in

home

is of

as

great

reflection is

of
a

borrower's

future of
thnt

willingness
borrower's
Doi

pay

the

prospect

future

employment

reflection

future the

exceed

the assistance should Therefore, ability to repay mortgage. payments the chance of above Ihe purchase equity, because recapturing assistance

inths.

To

go

much

beyond

this

employment

or

job retraining,a

cover

arrearages make

only.
the

Many

lenders

have

informall

financial

management

counseling,

monthly

paymenls,

but

who

at

Lenders other counsel borrowers or parties shoukl periodic have Ihai Ihe borrower changed, either no positively so longer that further assistance would be wasted because th negatively, so of chance should be regaining solvency. There penalties im| misrepresentations by a borrower or concerning present employmeni While HR 4292 applicaiion or periodic review provides fo stage. and
conduct

duriiw

this

period

.bv

prindpil.
. ,

interest
expenses

laiet
ui

h""rd
,

insurance,
or

mortgige repaymeals,
in HR 4292

iaiunnce,
and
coven

with
cuiTSii.

piymenls

Tlie assistance

provided

sny these

ground cbuges
items.

rents, neconry

lenders'
to

bring

mon^ga

4292 Section i5(b),(c), and (d) of HR delay foredonire proceeding The" sbouM be application {H-ocedural delays careful})i process. limited siiould be circumscribed. of fwedoflure to no more Postponemenl proceeding assistance. of than 45 HUD an Secielaiy application fix dayi afler receipt by the their be OtheiwiM lenders will am subject lo Bgnificanl poleatial dclayi. beyond is ultimatety denied becanM the borrower ii period, if assistance voluntary forbeaianca be The in fact, deemed not to not. capable of reinstatement. proposal doa by HUD lenders for forbearance address lo during the ap(dicition period if the compensation is denied. Because VA and convenlioiial louu assistance not ire fuUy covered b/ lime wiD rewit in insurance, mount, significant delays during which mortgage irrearaga
Foreclosure Delavs.

during

tbe

greater losses for lenden.

In tbis

vein,

the and

Section

6(c) prescribed by
Furthermore,

stay of forcdosure covet (d) should

assistance prngrarn

and proof only mortgage* in Section

of

compliance
that fall

wiihin

requirements imposed by the criteria eligftilily

the

i.

In HR 4292 Section recogiriies the importance of voluntary forljearance where i" offered to by requiring the borrower voluntary forbearance by cooperate assistance should be filed Ihe lender. The as application tor program early as possible eflbnt of lenders as not lo during Ihe delinquency, so discourage voluntary lorbeannce who be ibe borrower to not want reasonably do sutijecl lo further ddayi while applies considers Ihe assistance tor and HUD applkation.

3(a)(6)

If

the

program

i" it

enacted,

its

requitemenu
in
lenders
""
-

should

imposed
funding

inity
is

regulations
and

are

force,
will
'

available.

Otherwise,
will vii
""
-

be ita procedural triggered and ddays and authorized, appropriationi are program be siAject to significantdelayi. that will be
"""~

enremely

cmtly
to

-'

"---

-^"-'
-

"""

"

passed along

borrowers

hat

the

best

medicine
rate,

unemployment
determined
ssive

A
on

effort deficits

budget

delinquent mortgage payments primaiy factor in ensuring longthe of and the Congress part that Federal now us. hang over

for

the

entire

FedernI

track

and

resolve

TESTINONY

OF

PHIL

GA"TEYER

ON

BEHALF

OP

THE

U.S.

LEAGUE

OP

SAVINGS

INSTITUTIONS

BETOBB

THE

SU6C0M4ITTBlt
ON

ON

EI0USIN8 HOUSING

AMD
AND

COMMUNITY

DBVBLOPKENT

COMHITTBB

BANKING.
REGARDING

URBAN

AFFAIRS

H.R.

4Z92

HAY

24.

i9ae

Ht.

ChalEHJD.
and of I
am

BsabBCB

of

th"

BubeoaBictaa,
Pieeident
hece of

wv tb"

luia*

la

Phil
States The

Gastayar
League

Executive Inatitutione*
to to

Vice

Uoitcd

Savings

in

League
tbese
boaes

pleased beacings and

aipect togetbec
as

is

bave
work

Che

oppoEtunltr
the

HaBbiogton D.C. to patticipata

on

In
vecy and

with

subcoBBittee

the

laportaDt

peEspectlve first place.

Subcoaaittee
and boae

housing policy. Is as just iapoctant taailiei into gsttlDg vant He to coapliaeot

of

Keeping
froa hoae the the

faallies

thelc

public ownecshlp
oC and
to

policy
in the
the

Chairaan issue

foe

his
as

coaaitaebt
a

to

this

housing

ownecsbip

national

priority.

The than

U.S.

League

of

Savings savings
of types and autual.

Institutions which
bank

ssrvea

the $1.3

aoce

aeabet 3.000 association savings

iDstitutions
and all

a"ke

up

the

tcillion

businesses.
"

League
tedetal oCIlcere
B. B.

aeabership
State-chaiteced. include: Beeksaa. Executive

Includes

institutions The

and

stock
Theo

principal
N.C.: Phil
D.C.

Pitt.

Chairaan.
Oak

Rocky
Harbor.

Mount. NA:

Vice Vice

ChaiEaan,
Pcesident.
are at

Gasteyer, Illinois
Yock ")7-S900.

Washington,
Bast MacksE

headquaitecB
"0601. The

111

DEive,
located
at

League Chicago,
1709
New

Avenue,

Haehington N.H.. Washington.

Office
D.C.

is

20006.

Telephone

(202)

.bv

I toe

also

want

to

lodlcat*
IntEoducad
ot

tba

the
tba

laqislatloQ
problaK

by

genatal Chalcaan

at sup^rt Qontalai

tha
to

Lcagua
daal

with aoonoaic ot
the

aoctgaga
Tha

dalinquancr
and
can
aca

laaultiog
"BKbara
aca

fcoa

haidshlp.
ecsnonic allka pandulua.

Laagua
that

ita bafall

wall
and

awac*

calaslty
whan

indlvlduala
on

institutiona tba ot
would
ownecB

tbay
It

cangbt
to

tba tbat

acoDoaic
tba

ia

safa

say

aid* ot WEong In lagloa avacy

tbia wbaro countEy pcograK inatitutlona tbEltt find

-

would

bacona
aaaa

opacativa,
aa

wa

in

tba

iKiat foEcaa.

tba

boaa

botb

victina

of

tba

aana

aeononie

H.R.

4293
bona of

would
ownera

cEaata

nandatocy
no Co

hud lault

allglbla
in
ohe

wbo. thaic focuaad

tbEougb bona
and

progran of their
Tba

to
own,

aaaiat
w*e"

dangaE vlaw.
that

loaiag

totacloauEa. tasgatad
raflact to tba
to

bill

la,
to

in

pEoblana.
aaauca

caEafully eligibility
aaaiatanca Hhlla
wa im

pactienlac
aftoEt

ccitaEla ia do
bava

pEovldad
aona

" thanghttvl boM daaarving

boCEOwaEa.
Ke.

auppoct

appEoach and

takan
aoKa

in

tba

bill.

Chaicnan,
wa

do will

EaaaEvatlona
tba

avggaatione

whlcb

baliava

inptova

pcogEan.

PHOGRMl

ACTIVATia"
Tha

aaaiatanca Id
any

progian
PadaEal Bona

autbociiad
Loan

by Bank
foe
a

U.K.

4393

would
whara tba

bacon*

availabi*

Diattict tbcae-aontb

60-

day
Ha
to

datsult do
not

ratio

ii
to

3.0
tha

oc uae

highOE
of tba Loan

p*Eiad.
but
wa

object
out

this

aaa*UE*n*nt,

do

want

point
bald tba

tba

fact

that
Hone

nontbly
Bank aaaiatanca
naada

rapotta
n*nb*E undac to

includa inatitutiona.
tba

only
ar*

loans

by
loana

FadaEal

Sine*
non-mA

aligibl*
tba
natch.

(oe

bill
that

nil

loans,
a

aubconnittaa

undaratand

tbia

ia

not

paEfact

Me twelve voluna

also

want

to

point
vary loans,
of tha

out

to

tba

Bubconnitta* in
ot

that

tb*

bank
of nueh data

diatElcta nortgage in need

greatly
and nunbar but

size,
Statea.
ba

total
A

population,
State

aay wbara

ba

vary
the

progran by
a

aay
state

in

dlatElct

are ar*

doainatad
nora

larger
at an

where Ha Stat*

econoalc auggast
to

conditions
the HUD

favorable
to

tha

aoaent.

that
to

bill
for

be

amended of
*v*n

allow the tba

individual
whan

apply
ia

activation

progEaa
PHLB

It
to

can

danonatcata it

ita

qualification

if

Diatrlct

which

assigned

GEMBRAL

RBSERVATIIffl
There

te.
that HR of

Me.

Chalrnan,
4393 would bill which

on* ccaate

naJoE
and
are, tha
no

concern

we stans

bava fEon the

with

tb*

progran

it

budget ot
ba

linltatlone

the

doubt,

the fund in

product will
all

political
.-r-' ".
,

reality.
...--irt
But
not the want

Hopatally
-"-

revolving
h"-."un",,

""'"(".!,. not

eligible
and
reaota sona

Bank do
Co not.

Districts.
we

it

it
...

aona

gat
even

tba

help
noac

do

the

land"E, of

in

Ch" gets

way, and
who

be

put

In

position

deciding

who

tha

help

This bill
owner

whicb in

practical
detaiKinant

aii""B of out problflB roquiCBB tbe IvDdinq tba preparation at tba laality ol conld tbia

th"

piovislon
to to

in

S"c

G(a)
tb* Tba

ot

th*

Inacltution

aasiat
HUD.

boa*

application
be

tbat
aod
ctie

the who

lendac
doee
not.

will Tba
tba

b*

tba

deciding
aleaanta

wbo botb 5
are

qualiltaa
aa to

qualification
"oEtgagoi caepacta.
not be abuaad

pc"iperty
and
ao

and

in
Ho

Section
doubt

axtenslva ia
tba
caaa

quite
that the

precise
pcoqra*
usad
to

in

aany

this
that the

will

and
moat

limited Howevec,
ot
landeEa

tunda
bob* to

will of aacactain lost

a

be tb*

benafit
at*

tha

bayond
of

daqra*
caduction cacovaty

daaacving. the capability cactaioty. Why

ot

[*qiiii*Banta
with
oi

any
a

sDineoiie

baa

job
ara

had

incoaa
the

and

what two

theic
and

pcoap"cts
one-halt

fot

financial

within Given Act. The

that

future

yaaca federal Act,

to

ia
law-ate"

highly
tbe

"nbjactlva. Houaiag iapeiatlv*

othai Equal
landaca

of provieiona Ccadlt Oppottnnicy go

to

faic it ia

gcmat
pcogtaaa.

langtba
aia

*li*in"ta avaiyona
aa

aub}*ctivity
tbat agree In deciding
ant

in

their

id IsceImI

aoctgage nation
a

atandacda
aa

Socaly Juat
a

will

iaportanc
In
the

whs

kaapa

bouae

who

gata

houaa

ticst

placa.

pecCotBlng
would have

an to

adalniatcativ*
ba

lol*

In

auch

pcogra*.
AC
a

tbece

ceitdin
have

EatequaEde
to beac the

pcovldad.
full

Binimw.
tb*

tba
accuracy

boccowec
and

would

validity
no a koe*

of
tban

Infocnation
tb*

Eaepooaibility foE "atabllahtng eligibility. Ealatlonahip

In
tha that

Tbia
at

ia th*

coally
tla*

legal
fOE

"ziata

aottgag*
tha
the

la
fact

applied
that turns Euna aoaa

tiEst will
HUD aay ahoald

piac*. be "in

Bacondly,

glvan
when bacauaa vlth
to

appllcationa
oft. out, tbia
oe

peocaaa*
payaanta haiHlaaa cespact

program the aoney to

that landaE

euapand
be

tha

held

Eespect

all

antidiacElainatioo
ot pEogtaa.

lava

witb

th*

adalniatEation

COMTBACT

BEpATIOMSaiP
k*yatone
of contractual tha

Tb* is
th*

I*gal.

convaatlooal ptivate, that Ealatlonahip

Abaant tha PHA and tadeial
VA

aachet aOEtgaga eziate between tbe guaEantaee

the

and "OCtgagOE insurance and should ba

aottgagee.
such
aa

govarnaent
ptogEaaa.

Congtaaa with

cautloua with In this

In

eapaclally
HB 4193

tegaEd
cegard While which

with taapaEing to eziating Is io Section Is

want

this
contracts.

Eelatlonahip.
Out
conceEo

"(c)
a

"Stay
casoct

of

PoteclosuEe foe
a

Pcocaadlnga".
and

foEeclosuE* all landeEs

aust

laat
to

lendsE.

aoaathing Eight legal

fabric

avoid,

tbe

landeE'a

of of

focecIosuEa

be

maintained finance,
to

in

OEdat
a

lot

tb*

whol*

pEtvate
market

noctgage system,

including
function

aucceastul

ascondaEy

piopeily.

Hece thBoietical.

ag"iD
is
to

ouc

coticatns

aca

practical
b"
eh*

cathai tbe

than

Hov sant

I0D4
to

will
hud

it
and

batwaan

tisa

an

applicatioQ flawing
federal

Monttily
Oar
on

paywanta

atatt

tba

landing
i"
not

inaticntion?

azpaciBaca
this

wltb
Ha ftaa CoEaaaa of

agsacisa
delays
to

ancoutaging
wblch pay"enta
tha

point.
is ia

aignificant obligation
Buapanded.
prograa
casea

duclng
any vill in
an

moctgagot
focacloaoEa be

any

aake Thece

wbila

undoubtedly
acea

aituationa

wtiaca
aca

tba

vlll
vheEe

cease

wbila
been

applicationa suspended.

pending

on

foEecloauca

baa

A tbe

lat

bettec batote

appcoacb,
lotacloBora

in

oac

pcogtaH

view, procaadings
ftoa could

ia

tg

get tiB" Inatitntad

to

paopla
No could

into

begin.
tbe
be HUD

a accept pechaps application befgce

limited
any of Ma

tlaa patiod pcocaedinga

tha

o(

by
Ita
to

tba

landac. wofk

Sac.

7(g)

bill
tbat

Eaguicas
tbe
ao"a

coaplata
Bboctanad

In

4B

days.
to

suggest
lendecs

ti"a
of

ba

10 th"

days
piogcsB.
and

la
start

Otdec

glva
if

dagcee
approve

conlidenca

in

Frankly,
tba payaanta than successful

HUD In In

cannot 10

daya,

tbla needed

less

delivering
the
contract
"ore

coaplated la prograa asaiataaca

applications

going
anyway-

to

ba

In

saaking
wo aca

to

protect

rlghta
than

oC tba I
""

lendaca. tbat

He. tha
to

ChaltMan,
bill
Sac.

soaking
as

nothing
a

eights
HUD

conveys
a

(b)
to tha

RUD upon and (1) (A)

enter
saaa

lendec-insncec. of
aaaa

latactlng
tha

(B) the

KB

t293

wblcb

gives
of tha

authority
to

into
toroclosuca

contractual
aa

calatlonshlp private

and

have

tight

that

Section
clear
sector

S
tha

raises relative
snd

yat
HUD.

anotbac

concern.

It ba 7

is

not a

at

all

what

position
to

will

between

private
BtrD'e lliB

lien
be

holder

Section

provides
Tbls
as

that

will

subordinate
our

existing
institution's boa*

aortgagea.

language
bolder of
tba

clatlfioa first
that

Manber

mortgage in aca

and
tha form

any
of

poaition laproveHent or
Tbla

boae

agnity
not.

loan bowavat.

mortgage.

does

addc"e"
tocm

th" of
a

poaalbillty
Bortgage.
othac Eban be
aora
"

of Th*
a

othsc

liani in 11" lien

wblcb Section

ara

not

in

tba

provialoa
subordinata
ttian one

auggeata Cot
HUD.

"OMWthing
Thaca nay

in
iin

position
the

well

propetty
a

In
Ttiete

HUD

assiataaca llene aaBlBtancB

also batween ot

tb*

poaalbillty
tbe

ol tbat

being

ii for. ippliad filed against

and
the

ptopeccy

time

begins

actual

filing

HUD'S

lien.

1.

that

it ahead

is

not of

tbe any
o"

intent tbosa

of

tbe

Ivqialation
on

to

put
ai

itecest
1

already
tbe

cacocd.

Tbis in Seccloi

be

ceaadied

by

tightening

Languag*
BOLB OP

FIHAMCIAL

BBgULKTOBfl

SactioQ rwgulatocy cagulated b"liave

tbat

II

of

the
to to

bill adopt
focbeac

Inattt ittucti
a

aacb

of

cba

financial theic
loans. Me

agencies
lander*

on

of policy delinquent

encoucaglng
aoEtgage essential
lender

tbis
of

section kind.
Absent

is

absolutely
it
the clsat
aaa a

la vill

any be

legislation
"no

this

Hltbout

in

win"
tha wbac

situation. top,
would

pco'forebaaiance

directives
loan

fro*
and

axaBineia
appear
to

will
ba

only
of

the

"nonpacfocHing"
In

lack

diilgeoea

pcoteeting

the

inatltution'a

intaiasc.

Hhlle
out

we

endorse

this
assure

aaction.
forbeacance

Me
oi

CbaicHan,
inly
and .
"
on

wa

auat

point
held
Aa
.

tbat

it

will

Bortgage unlona Inecease In

loans

in know,

tbe

poitrolios
tbete oC but aucb
aea as

oC been

thrllts. in
recent

banks.
ysai

credit steady
not

you
tbe

bas

In

paccantage

poettolloa
holdets
loans

Boctgage in the Insurance

loans

being
aatkat

bald,

tEaditional
ot

eacondary

agencies
and

otbec Tbasa

coapanies
aottgage
base bankera
cases to

pension
and

funds.

aarvicad
Boat that

by
HB tbe

savinga
the

laatitutioaa
of In

Cot

the

pact

it
tatber

la

aacvlcec
tha boldac.
to to

aoetgagaa ocdac
to

peaks
I

than

assuce

fotbaacance tbe

oppoctunitiaa
bill
to

all
be

conventional
to

loan tha non-fedoEai: forbei

mi

:tgagoca,
ance

would
PMMIB
Here

bava MAE

aaended

extend

language
of ot

and

FREDDIE tbece ba

mc

and

[elated

Investocs. which
eacb of the tbe

again
Kuat

is

contractual

telatloni
In tbe
ci

hip
se

lagislatloo
sscondaty servicaa

cognisant. pEovided

Backat
toe the agency and wbaca

sBEvlcer"
I

perfocBs
(and vary

by

theic

itandard

detailed)

contcact "Itarad

p"Et
OoM* th"

or Loan

tb" Bank

PSLIC Boacd

caeaplt"lltactoa
to

bill.
a

die"ct"d

that
prograa

Fadvcal
to

initlcuc*

totbaacaoc*

etc

tlMB.

LagialatioD
st"p.
and or

aocb

a*

HR

4392 iDvaataentB
du*
to

eao

ba

saau

aa

It

addiaaaaa

tb"
aonod

spaQitto

Ilnaoolal
wblcb
a Dot to

aaaata

logical wtilcb
to

a"xt

ata.

in

thaaaalvaa. la tiaa.

bappaa aconoalc Intandad

aa

ba

tvBpotaclly
OB*

noBparlooing
Hbila

ganacal
ba

ellmata ancb, stcaln

point
will

it

may

thia
on a

bill
til*

halp.
caah

howavei

dapoaic
oC
an

Inaucanca flow inaacad

too loc

"arglnally. aganciaa.
what trauid

caliava
ao

tha by
ba

It

doaa

cantinuad
aisata

otttacwlaa
Tha

guacanteaiDg nonpactoiaing
in tba Loan

InscitucioD.
to

plan Ownaia
ata

pEopoaad
to

bill
n*"4

Is
vaiy

not

dlaaiailac
In

tha

Hoaa

Corpocatioa

auccaaaEully
on

tha hoa*

dapcaaalon
loana.

ptavant

focacloBucaa

dalloquant
dlttaraaca

Tha ao4 tha

aaJoE appioach

batwaaa

tha
tha cuttant
wata

HOLC

ot

ptopoaad

In

bill
that ahould tot

tha la

dapcaaalon
that and tha bacaaa HOLC

ara

took tha loana ovac aotnally llan Kbm pilaaEy holdac. Ha aconoale cagional at attaaa.

that baliava

dallnquanc
tha

aKtEaB*

caaaa

Coagcaaa
tha

axplota
Coi

tha aataca

posalblllty

ot

ralnatatlng

HOLC

concapt

raal

In

CMMCLUSIOII

In altocts "aalatanca
aa
a

concluaion. aad
to

Mc. oC tha

Chalcaan. Subcoaalttaa

tha

U.S.
to

thoaa

Laagua ptovida
loaa tbalc

auppocta ditact
of

your

ladacal boaa Tha

hoaaownecs
of

facing
condltiona facad tha
to

tha

poaalbla bayond
alcuatlon naad.

tbalc

caaiilt

aconoalc
haa baa

conCcol.
on
a

Cadatal acala foE

govarnaaDt
bafora and

aaaa

larga
no to caaaon

raapondad
tha Ha
aaaa

tha

Thaca

la
not

paopla it

caught aaalataDca.

in

elEcuaatanca hovavac.
of
ata

slailai 4292
no ""

cannot, Hany and

va

today atcicCly
wa

axpact
HR can.

andocaa

atanda ba

now.

tha

laauaa

hava

talaad with yon

doubt, ataCt

ra"adl"d
that

prepaiad

to

wock

and

youE

towacd

and.

Of

ptograa
tha aoat tha

gcaatac will

lapoctanca.
be fat
too

howavac. llaltad
to

la
aaat

ouc

Eaac naad

that
that

tha

tha tba

axlsta Coabinad

Id

aavacaly

dapraaaad

caglona
thla will tha gat landac
I
ara aa

of bill
tha

countty.
of

with tandaia tba

To ba ba
ao

pclaary
In

telatlonahlp datacainlng who

caaouEcea

daaanda

coDvantlonal will
not,

aid
ao ansa to

and

who

llaltad vaty

put
Mi.

in
do

untoDabla thla tcy.

poaltlon.
pEoblaa
can

candid.
caaolvad.

ChalEaan,
But
wa

aaally
Thank

willlog

with

tha

foe you Subcoaalttaa.

you

giving
hava.

quaationa

aay

Co"

ltt"

OB

BiBklBg,

aoDslBg

"

Tuaidty.

Kar

"Bd

flninclal

"of

focacloiura

batter

Uims
m
__ _

baneftts In clalu In 19S1.

to

landtcs In 19 86

an xa i

pild
each

paid

elatn

ougb

foiaeloaure.

itlnuallr

analyia

thait

claiM

eipari

My

to"M.!

:oDpaniaa }[lgln*to
pcotactlni]
laCault.

vhlcM and hese

Trie

iBpcasent

tha naka

actlva
fund* tiam
" B

fiiat
availalite

that

halp
to

loan

Investocs
Ingtitutions
MICA

hciiietiuirei
at Wl Che i"m

major
re

poitlon

current

oftlce

President

.bv

shate

witb

tbs

icouac

haa

davaloped

leliaf

MICA

financial

problaoiB

IfCicultiai.

feiilblB

plan

toction

to

tha

piobabllltr

pievantinq

toracloau

ailitinq

couaialiog

ptoqiaa

Jith

the

lendsc's

aeecoval.

lendei*

and

"ca

laplcmantad. tv

TtM ttwli could

Bobco^lttaa

rvlca
"

kay

ttudrlDS that changat

"Cfaotlvana
aalw K.B.

The

moctfrage
Eoaa th" Chaa boiEomc

iniuca

rnanta.
an

Intutac
or

to

halp

biing

thai

'ary

ijiffetant

fiom

rot

Maapla,

that

Clatnclal

ara

not

piovidsd

toe

inambat*

ol

hH

{"mlly

nakln

r lia talaEotcaa

Individual

baaia

Hoitgaqs

Inau ital In my

Equity
y

in

dBtairalnsnt

has

alieady

be has

.3 fticult

to
31

enfo the

only
It

bBsn

bu

up

the

hoinc

beyond

any

future

capability

nC* fotsclOBuie the

(Ito

do"

not

ballava to be

that

fadaral the

1*h

"hould

paralt
laus

proceedings
atatea
sea

postponed,
e.ceedinqly

foceclosuca
to

fifty
ana

already
states the

difficult

hindle.

easilT

othai

hnciowBt

can

live

sii

Tnnnths

to'

thus
nannai

intecfere
(ot that

xith

the

ibi

Itj

to

daal

nich

probiena

in

tha

be

individual

"ItuatlOB.

qeneiallr
the
One

-see

flBaDciatlr
in tha

leiponiibla
Bill nuat iddiaaa

fai

portion
to

of

the

pcopoaed

wavt

daal

with

tnaquitr.

MICA ballava
HS

finds it has

that

ichila

agiae overall

with

ai^nlllcant
He believe

public
that the

cannot

support
eapec

apiii policy ac ]"er to

tha of with

sector
must

ally
on

the front

enthusiastic
line ot

euppott
contact

tha"laBdBi.'
delimjuant
assistance boi

remain

the

to

an

appfope

ate

aettleraent

Any

counsel

ng

or

nca

of

tha

landet.

Ik,

thaiafoia,

ballava*

It

fundanwntally

vrong

to

provide

because

decisions

on

bou

and

xhether

to

reatiuctuca

Buch
inannec

as

those tbat

dese

ibed
cannot

above, ba

miit

be

-alghed
for

individually
ragulationa.

simply

provided

in

Bndly,

beliava

unttotn,

fsdei

foreclosure

tat program

ef that to

the

industry
appropt tedecal

would
te

hav
^A

Eadeial
thus

muld
the

contributing

deficit

:e

the

budgat
to
to

deficit. kind ot

:hisiC ity

tha

alleviate

.bv

r*duc"

tbt

fsdaril

dalldt.

Think

you

for

this

appaitualty

Te"tlmonv

In

Support

of

H.

R.

4292.

The

ftMrqencv

Houalnq

AaalBtapce

Act

of

"

Farcan,

Pr""ldant

Homing
of

and
tha

conmunltv

Devnlecmeot

Banklna,

rtoeitc*

and

Urban

Atfalea

Hr.

chatniian, Developawnt
to

Honorabla

I laiiili n i
""

"

of oould

ttw

Boualng
to to

and
thank

Coofiunlty
for
tha

aubccenltt**,
appear naad

Itka

you

oppOEtuolty concarning 'Bmergancy

And
Ha

bafora
for tha

you

today
JUit

provide
of H. R.

taatlisooy
4192, the

tha

pronpt

enactment of
ises.'

Houalng aapacially
courage of

Aaalatance

would
your number the you

Ilka

to

thank in

you,

Mr.

Chaimian.
of
our

tor

and
hoRielBBS of Haoibera six

forealght
and your of

brlaglng
and tha

the
famlliea

plight
In

tha

growing
to

diepoBseaBsd colleaguee
tha

nation

attantloD and
some

Aneclcan

public. began
that
theaa

When

the

Housing hardly

Subcoimittaa anyone
were xas

efforts and

years

ago.

aware

homelaaaneii serious

hone

nortgaga problsns.
in tha

foeeclosurea

fast

becoming

national

Those

of of

us

residing
for these run-up

Sunbelt,
wars

including
unaware our

your
wa

hoaa would
the Sunbelt

state
ever

Taxes,

Instaoce, tragedies
in like worldwide
Haw and

blissfully
in oil end

experience
of the

comiunitleE. oil-r"latad
Antonio
.

As

result

prices,
Sen He

municipalities
record honaa
demand of and for

Orleans full

were

experiencing
build
increased hundreds
naw

growth housiag
of

aoiploynent enough
the

couldn't the

apartnanta
individuals

quickly
caused

to

setisfy
national

by
our

in-olgratlon
the

of

thousands

fleeing country.

recession

still

gripping

Bucb

at

Thla

SS.ODO
hoM

la

"ingla propacty

a paltry Um through

aiM

ralatlva

to

tlM

coat

of to

bclnglng
nantlon valua of

focacloauca

"ubaaguaot
aoce

loaaaa it

auataload
la

by
to

tha
a

oat pcoc"aa, dlOLlniahsd nan, forcad aala.

the the

aubjactad
aavaial

But

tbaca

ara

other

attendant that a"a(i undertalcen woraS.

aapacta
Hill
cauae

to

this thla
a nan

dUaoxna,
entita concerted

ahculd
unfoctunato

they
coDCdiooted

remain

unaddressed
to effort

altuation

gifSw
is

Unleas
to

and

develop by
tha

unique

clrcumBtanees

now

prevailing
and and

in

our

region
Institutions

plethora
i^depOiUlble
won

of

federal
for nuitCer
or

agencioa
Mbethar

private

presently
It

administering
tba
not

managing
paaaaa

home

much

Congraaa

mortgages. this Important

legislation
la tbaaa

fact,

as

tha
now

raault
In

of

tha
our

managsitit

pcecticaa
s

of

institutions

already
agencies

much

worse

than

place It need

bo.

situation present The failure of

Codaral

tsderally

chartered

institutions

private

mortgage

foreclosure
and timely aarvad only

pollclaa
sansible to

dispos
and

tion

of

real this

estate crlala.

owned

(REO)

has

daapan
incceduloua
can

prolong
to

It

la

us

that

hmerlca-a of

largaat
dollars
in

cial finanloans

Institutions to entlte
foe countries

reschedule
but that
our

billions
those federal
a

agencies
programfi
a

sible responcannot

administering
a

notion

mortgags
to

davalop
to
a

coherant
off

workable
worker encourage

policy
in those Kouma

raatructuca
Louialana. ble for

homa

loan

laid

oilfield
can

Perhaps
aueh

thla

Comnlttee to
to

reepons

activities

offer

broadened,

specific
homeowners, asset d

mortgage
and

refinancing
pursue
the to

optlona
dawalopmaot

troubled potentially coordinated of a

aposltion
foreclosed estate

facility
pcopettlss
markets in

preclude
our

further which

random
baa

'dumping'
left
these

of real

in

region,
.

tattara

TO haa

our

pufaliahed
iOay
sort

any of

tha only Icnowladga. cciteria objective

Padaral and

Hona

Loan

Bank Instructions

Board

specific
debt too

for
KUD'a

comprehensive
program' of
as

'troubled is

restructuring

""assignment

helpful
FHA and
can

eiieept
sometimes observe

that
don the
on

sOme t

of

the
of

larger
ea

sezvlcers

these

mortgages only
later t

cooperate
the law

fully
to anaura

might they dataulta

la need

-letter thalr

be Involved

blamed
in to

Inaction.
unfortunate this
s

The

point
and should details
our

that
to

all
woric

parties closely

thla alleviate

dilemma

together
with
as

tuatlon,
area

that

federal and

agencies
disseminate

responsibility widely
oa

in

this

publish
of programs

possible
have

the
across

preaantly
them of
after theli:

In what

place
Co do

to
when have

owners home-

region

advising
not

Uwy

flnanciol become

caverasla.
dlstreaaed.

mortgegaa

already

playing
futuir*"

thaa* In
cue

typai
and

of

'shall
""

gMws*
"ound

trltb

paopla'a

financial

raglon,
""

n*"d than

polielas

fairly

adiiilnlst*E"d,
But

n*"d

quickly. single
ot tbla "!"example dollar loan mortgage
Hae and PHI -redllne
sense

parhapa
of thoaa the in

tha

beat l-

Mnaganant portfolloB doing making bluab,

has buatneaa

mult
decision
out

Bill
of

Ion Fannie
to

la

compsnies
pective prosto

region
while it
-manlmum'

effectively

homebuyers.
loans

may

providing

malte seemingly roottgage financing

stop

to

home-

thin only
made

shortslgnted
matters
Horse,

and

111-concalved and

atanagamant
served to in
we re

dacialon addl-

simply
in
6iir risk.

put
not

tional

performing pools
anyone
a

home

loans at

region
And

theae

huge talking
uat

mortgage
about

unnecessarily
ooelal

responstbll

ty

hare,

-wo

re

polnt-

lona

and/or

This atill with force

la

not to

to certain

aay

tliat

aoaia

imrtgaga

financing
criteria

Is

not

availsbls
lot la
a

'goldplsted'
However

prospective undsrurlting
prove unworliable.
account In

haaiebuyers
In Items the credit And
a

downpaymanta
often
so

the
ve a^

reatrict

to
a a
an

Ilka

single
are a

O-doys
to

lata-

on

charge mortgage

report
should

enough mortgage
loan

disqualify
-approve
this

applicant
for

lender

applicant
forced

'maximum' credlt-

mortgage
HOrthinese.

despite they
are

so-called
to
can

'questionableto

aubject
Hae. Tou

being Imagine queliflad

repurchase
effect

the

mortgage
loans to

by

Fannie

the

chilling

even

the

moat

clearly

and

credituorthy

applicenta.

the

Builder'

Homeowners, untenable situation.

on

the Not

other

hand,
jble to

bear afford

the

brunt to aell

of

this

being
reaidences
timee not

their

them,

owners

of
have results

eiiating
to. In
or

don't the

sell

unlesa
of sell fallen

they
at

abaolutaly properties
the

Often their their

-dumping'
able to
now

foreclosed

being
the

all,
tens

as

appralBod
of

value

property
than

has amount

of

thousands

dollacs

lower

of

thelc

mortgage.
restrictions for would

Me
now

believe

thot

scrapping Has end

these

"special"
instltutiona
in
our

being
owner

making

imposed by -occupied

Pannie home

other
loans

mortgage

region

grMitly
haitan aallara.
values

saslat
our

qualified
iretura
to
a ooce

booabuyars
ordecly
"cononle

to

purcbsB*
sines
It
as

honwa
for

sod

msEkstplacs
""AsA and Hould
we

buysca
decline
s

and in

This of to these hamvn

makes has

good largely

the
send

ended,
inaurecs to first

positive request
where

algoal
that value

pc

vate

moitgage
be
as

well

would
loan-to

parties

eneoucaged
a

underwrite

9St

15-year
In other

mortgages
markets

step
America

In

nalghboFhoods
we

urltten

across

suggest
this

that

many

vide
aeceaa-

homeDunerahip
to

significantly financing.
needn't take In

impaired

vlthout

"equal

mortgage gentlemen
aire

Tou

our

ifocd

foe
and

the

econonlc state caused New

problems by this

wa

experiencing
of

our

comiunlty

shortfall

adequate,

available

mortgage

credit

Juat the Hbole

looking story. By
would

at

these

numbera. these
to believe

hoHaver, dramatic
that

doaan't declines the that

in
out New
no

tell
in Orleans
one

thamsslvas,
lead
s severe one

housing
economy

starts is

suffering
mind would

depceasion.
a

and Loan

In

thaic

right
ThlB

make

mortgage
numbers

community.
The

goes

to

prove

that

can

be

deceiving.

worsening
ment area, local
was

downturn up

in

residential last to economic

construction. In the
New

Net Orleans

new

snployOjr

slightly
has of continued

year make

iretcopolltan
this

and
set

further
indicatora of Hew every

gains
Orleans

spring by
sector Tir

leading
of the

developed
has

Timothy
reg ater

Byon

University
in

continued
of

to
our

gains

too,

virtually

important

improving

this

vital

aector Institute

of

cue

aeon

according
for

to
Estate

the

Massoehusotts

of
and Ind

Tet
t
xe

Real

Development,
ISt of

directly
workforce,
There la

astonishing
economic

the

U.S.

would certainly

prospects homebuyer
contra t

fucthar.

prospective
and

remodeling

pects
don't tlald

they
quite
-soeclal

can

secure

tinonclng
for
a

lo
or

either

because under
or

they
the because value aided

-qualify

first In

second in the
our

auidelines shellahocked
r

force

Mortgage region
of
now

ty
economic
lack

erosion

housing being
of

Initial

downturn,
of

our

regionalized
credit.

availability

rtgega

problen,
the

obviously.
and

Is

that

our

industry
ills

larga
comeback

auto

manufacturer,

symptoms

cure

for

our

by
to the

the

patient

were

good,
for

we'd
relief.

have

going

capital
is

narkets

Ours

parallel
flows

situation. of

Those

administer

ing

capital

mortgage

fine

ara

puUliig
baliavB eaiult of

back that in caaidentlal

e

at

tha aalaetiva

vary

tlBa

va

nsed

additional

liquidity. policial
board in tha
the

llberalliatlon

of
across
our

these

"ould
valuaa

alga

if leant
laal

impcoveinent
aetata in

commkjnlty.
Inatltutlona
are

ScMtiRtaa,

It tbalr find

even oua

SMOii

these

bant

on

contributing thayra
Hhan
thia abla

to
to to

danlaa. how 1 ttle

By

auctioning
estate

pcoparCy
can
as a

out

real

be

Moctn

BUbJact 'dumping"

focced
of

sales.

CorreBpondlngly,
properties,
t bacli

result
to

of

depreaaed

they've

managed

aubaequent
lah

Appralaoli. ptopatty
""

Suddanly.
values

competable loans, moctgaga

And foe
more

Hall.

the

unique
aatata Thraa

financing

plane
federal

balog

provided

buyara
is
even

troublad
ludicrous rates cf

raal

by
percent
uncommon.

theae

institutions
and told
sense

downpflymenta
We're make
more

Initial

InterIs

8St

7*

aca

not

lOOl
to "nd

financing
this
those

not

liTipossible.
resorting
In this to

Wouldn't

it

lunacy
ed contain-

by

BhallO",
to

temporary keep
financial

aubaldlas

li}te

legislation
short
term

mortgages
reversals? and

performing
The

desplta savings
""(
In this tha

homeownars
coats of

ceposBesaing financing
being

propBtties
borne

in

the
federal

ceasation

giveaway paid
for

by'thaia
Hould
be

agencies

and

by
ThlB

American

taxpayers
to that

enonnouB.

IB

not

say

there that
aten

aren

t t

Boms

part*

of

our

l.l-million

resident

community
of But this
we are

truly

enpertenclng
In Mnaclca

terrific
since the

enamplea
lS30'e.

Kind
hove

hardly
other

,9een

aoyHhece
some

neignbochocds
eUen the

too, values
years.

many
tiave

-ahere
continued

housing
to

prices appreciate

stable

and
over

where
three

modestly
is that those
out

past
end credit

The

problem
discern

tedarel

private
In
our

inatltumunity com-

tiona

ceaponaible
can't

:for

meting
where

mortgage
can

thay
then,

credit

and

mortgage
cecatlon,

insurance

provide and prudently,

is not to

"manimum' wliare any.

mortgage they
can't.

Thalr

typical

provide

STATEHENT

07

THE

HONORABLE

HANCY

PELOSI

SUBCOMMITTEE

ON

HOUSING

AND

COMMUNITY

DEVELOPHENT

HEARING

ON

HR

4292,

THE

EHERGBMCY

HOUSING

ASSISTANCE

ACT

OF

1988

MAY

24,
ON

1988

HB.

CHAIRMAN:

TODAY'S

HEARING

H.R.

4292

WILL

HIGHLIGHT

THE

SIGNIFICANT

CONTRIBUTION

THAT

PREVENTION-ORIENTED

APPROACHES

CAN

HAKE.

HE

TOO

RARELY

SEE

ACTION

IN

CONGRESS

ON

INITIATIVES

THAT

ARE

DESIGNED

TO

STOP

PROBLEMS

BEFORE

THEY

BECOKB

MAJOR

CRISES.

HR.

CHAIRMAN,

WANT

TO

COMMEND

YOU

FOR

YOUR

LEADERSHIP

IN

THIS

REGARD.

H.R.

4292,
BECOMING

YOUR

LEGISLATION,

WOULD

HELP

TO

PREVENT

KORE

FAMILIES

FROM

HOMELESS,

THEREBY

REDUCING

THE

FINANCIAL

COSTS

OF

HOHELESSHESS

TO

SOCIETY,
FAMILIES

AS

WELL

AS

REDUCING

THE

HUMAN

COSTS

TO

INDIVIDUALS

AND

WHO

MOULD

OTHERWISE

SUFFER

THE

LOSS

OF

THEIR

HOMES.

H.R,

4292

WOULD

PROVIDE

TEMPORARY

FINANCIAL

ASSISTANCE

FOR

CERTAIN

HOMEOWNERS

WHO

ARE

FACED

WITH

THE

THREAT

OF

FORECLOSURE

DUE

TO

INVOLUNTARY

UHEHPLOYHEHT

OR

SUBSTANTIAL

LOSS

OF

IHCOHE.

BELIEVE

THAT

THIS

KIND

OF

PROGRAM

WILL

HELP

TO

REDUCE

THE

RATE

OF

HOMELESSNESS
.

IF

WE

CAN

PREVENT

PEOPLE

FROM

LOSING

THEIR

HOMES,

WE

CAN

REDUCE

THE

NEED

FOR

THE

WIDE

ARRAY

OF

SOCIAL

SERVICES

THE

HOMELESS

POPULATION

REQUIRES,

BUT

DOES

NOT

OFTEN

RECEIVE,

IN

ORDER

TO

RE-ESTABLISH

THEMSELVES.

AT

THE

SAME

TIKE,

HE

CAN

REDUCE

THE

SUFFERING

AND

TRAUMA

WHICH

WOULD

BE

CAUSED

BY

IMPENDING

HOMELESSNESS.

.bv

Ml

SURE

THAT

TOEAV'S

HITHBSSES

HAVK

SIGHI7ICAHT

IMSIGHT

TO

077ER

THE

KEHBER8

OF

THIS

COMMITTEE

ON

WAYS

TO

FBEVENT

HOHELESSHESS

LOOK

PORHARD

TO

THEIR

TBSTZKONY.

THANK

YOU.

.bv

Hay

23,

1963

The

Honorable

Henry

B.

Gonzalez

Chaitman
HouBe

Banking i Housing
Sayburn

Subcommittee

on

Community
House

Development
Office
20515

2132

Building

Washington,
Dear
Hr.

D.C.

Gonzales:

Based

on

our

ongoing
role of Fannie and

conversations
Mae

with in
both the

your
area

staff of home

regarding ownership
estate
Hae's

the

counseling
owned" activities
or was

foreclosed I
,

property
an

sales of

("real
Fannie

"REO")

thought
at

update
time.

appropriate
areas

this

Our

record

in the to the stake

these very local

is

very
we as

strong place
as on

one,

and

demonstrates

high

priority
Fannie

balancing
in substantial reach belt"

responsibility addressing
economic

economies

well
Hae

efficiency
a

REO

issue. any and

most

has

in

region
the
recent

where

foreclosures In the

significant provides
presence commitment their

levels, only
in to the that
serve

situation

"energy
Our

example.
reflects
of the

continued fundamental

region
all

regions
cycles.

the

country

throughout

individual

economic

When in that

the

Southwest
we were one

experienced
of 1986

severe

economic
that
Hae

downturn remained in

1986,
market.

the and in

few

companies
1987,
Fannie in homeowners

In

purchased
in

approximately
over

S7
Texas

billion home
We bonds

mortgages
and

Texas,

107,000

buyers
also in

assisting financing
of

their

mortgages.
revenue

purchased
Texas

$136 1987, 1,720

million which

mortgage provide
first-time

during

will

financing
home

for

approximately

predominantly

buyers.
faith
over

We

have
our

not

lost

in the
areas

these last in

markets,
two
or

and
three

we

believe years recovery

that will

support
us

tough
when

stand

and

these

good

stead

The

Honorabis 23, 1988

Henry

B.

Gonzalez

Hay

He

also

instruct
for of

our

lenders

to

consider
a

any

reasonable

request
cases

loan

modification

that
we

borrower

presents.
modifications the home while

In

special
the

hardship,
borrower

will remain

provide
in

that

permit
a

to

paying
Other

reduced

interest

rate.

types
of

of who

Mortgagors
because

relief special delinquent are beyond

1

provisions
or

to may

help

lAo tbeir

beccme

qualified delinguent

circimstances

control

Include:

Special specified
natural

forbearance

periods
disasters,
circumstances
.

in
,
. .

unavoidable

reductions the control

in

income of the

and

other

beyond

mortgagor Temporary
the

property

in indulgence is pending,

cases

where

sale settlement

or

rental is

of

insurance is additional

being
or

negotiated,
other

agency circumstances

assistance where

being
time

arranges, is needed.

Modification
of

that

may

the

mortgage
or

reamortization,
In
our

in for provide changes extension permit relief. other justifiable

to

the of

terms

time,

experience,
losses,
as

such
and
are

work-outs far

are

the to

best

way

to

minimize
He

preferable
this balanced

foreclosure.

believe
to

well minimize

that

approach
borrowers. distress
other

is

appropriate And finally,

and of loss the of

in

view in

of
some

individual for hardship the economic widespread

jobs
to reduce

regions
we

in
a

Texas

and

parts
is
area's

"energy Although
short
run,

belt,"
this
we

believe

balanced

approach
in
an

preferable
economy. in the
be

collateral
program

deterioration has it will

"

been

expensive
the

for prove

us

believe
for and the all

eventually
markets.

to

quite

beneficial Fannie Mae,

parties
local

homeowner,

the

lender,
Another

housing
to
our

integral
foreclosure

part
includes

of

our

strategy
to

prevent
servicers
borrowers

default
to
on

and
offer

requiring

loan

counseling
and with
'

procedures

advise
Our

avoiding
familiar

curing
the programs

delinquencies.
terms

servicers

must

be

of
can

our

special
assist

provisions, mortgagors In
that

government resolving help

In with tbat services

that and debt

delinquencies
with

counseling
management.
has been

agencies

might

mortgagors
this
HO^

vein
,

Fannie

Hae

working
Effort)
counsel

very
a
,

closely
program

{Home
a

Ownership
full rtuige and

Protective of

provides
to

ing
families

and

support
irtio
are

unemployed

underemployed

The

Honorable

Henry

B.

Gonzalez

May

23,

1988

in HOPE'S

dangar
clients

of

losing
are

their referred

hMWS

througli (and
their and is

foreclosure. teea

by
No

mortgage
investors cl ients
.

lenders,
like Fannie

utility
Mae.

companies,
charge

paid by) mortgage

to the

made

At have
seven

present,

our a

role contract in

in

the for

HOPE client

program Ohio and finance

Is referrals

manifold. to
Texas. We
new

We

signed
franchises
a

HOPE'S
have HOPE made
a

Pennaylvanla,
to

made

$50,000
In

commitment
Texas.

help
Hae

the
has

franchises

The

Fannie

foundation

$25,000
Inc.
,

Texas.

to donation philanthropic it Fund for Loan Revolving continuing we are Lastly,

Housing
for

Opportunities,
families contacts Investors In
on

needy
make

to

HOPE'S

behalf
.

with

other

major

mortgage

and

agencies
Another communities

very

Important

effort

to

experiencing
SEO and

high
our

preserve foreclosures efforts

and

stabilize
includes wotic reduce Nith the This
of

linking
state cost prgram of

sales
local

to

general
finance vith

to to

housing
financed Includes
revenue

agencies
taie-exei^t placement
which them

mortgages generally mortgage

bonds.

private
bonds,
thus home

purchase
reduces to pass

tax-exempt

the

agencies'
the

Issuing
to

costs,

allowing
buyers.
Houston

along

savings
this

first-time

Through

Corporation
million
interest families. program, for
a

and

program, Fannie
revenue

the
Hae

Housing
announced
to

Finance
a

recently
bond issue for

$50
low

mortgage
rate For

provide
1
,

mortgage
the first
of ttae

financing
tiae
bond

000
revenue

Houston bond aside

in

portion
of

mortgage any issued will

in the
area.

be

set

financing

foreclosed

homes

Recognizing
institutions, potentially
lower-income below-market bond
and the

that and
valuable home

REO

held

by

Fannie

Mae,

other

financial
a

government
source

agencies
of
we

represents

affordable have combined the

housing
both
revenue

for the

buyers,
offered
these

financing
sale of

by $50

mortgage
will be

of

REO

properties.
million homes.

Specifically,
dedicated

$16
to

million the Kike

the
of

aggregate
foreclosed
Press

purchase
Andrews

(See

attachment:

Rep.
We
resource

Release).
other ways
.

also

are

exploring
the REO

to
a

use

the of

valuable cities
we

of
we

property

In

number programs,
REO to

in
are

which

operate
the for sale
use

community
of
as some

lending
of
our

encouraging
authorities

public
housing.
problems
Hae

housing

scattered

site

public
to the Fannie

While borrowers

giving
in its

special
distressed efforts

attention
market

of has of

areas, aid the

also number

ei^wnded

to

growing

The

Honorable 23,
1968

Henry

B.

Gonzalez

Kay

lower-lncone

fasilles affordable
Hae

faced

vlth To the increase

shrinking
this
of Office

supply

of

adequate,
Fannie
Modez-ate'IncoMe

housing.
1987

addresB

situation,
Lowand

in

created to

Housing
neediest citizens.

housing

opportunities

for

our

Fannie

Mao

specifically
and this
of

designed
affordable Fannie
.

this

office

to

create,
its
a

support

preserve
new

housing.
unit of
of has

Since

inception,
repertoire
attacks families needs. authored "Fannie the in

Hae

developed
Hae to
'

basic

programs

Each

Fannie low-

housing
a

problems
way,

moderateit to suit
the

programs income local

different attachment;

tailoring
Fannie
Mae

(See by
Hae

Opens

Door,
1986; low-end

Lynne
becomes

Ballew,
a

Hortgage
in 20,

Banking,
mortgages 1988).
several local for

Hay

leader

buyers,"
In
assume

Chicago

Tribune.

May
Hae

each

of

the

Fannie

significant

roles.

programs, Private the it.

players
with the

nonprofit

corporations
work and and federal

and

community
that

groups will
as

develop
occupy

housing
State,

and local

families

agencies
lenders.

act

Lenders

equity funders, guarantors, construction, provide

as

secondary
and

permanent,
low-income

bridge
initiatives.

financing

well

as

eq[uity

Cor

housing

He

are

also in

actively
which with
we

proqraBS, in connection

expanding our provide primary

secondary

ccnmunity
mortgage financing buyers,
market
,

lending

financing,
provided
these would obtain
and
"

subsidized

by

state,

city
lowbe
We houses

or

noi^rofit
moderateout the
VA We

organization.
income of the rehabilitation
and have FHA home

Through
who
can

programs, otherwise

and

mortgages.
abandoned

priced emphasize
"

of

vacant

often

foreclosures

in

targeted
million
to

neighborhoods.
these programs

committed the

nearly
of 1987.

SlOO

since

beginning

5"xi?(^'-^"^"
WRH/pa
Enclosures

Fannie in

Mae

becomes

leader

mortgages

for low-end

buyers

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The reach

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programs
income

of families

within the bring homeownership earning less than 80 percent of the for their
areas,

median

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the

risks

are

reasonable.

Feinnie AAae Opens the Door

I
Um

putnenhiii

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lUta.

loaJ'

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c

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produced bji fn-frotil 0

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couiuelingigeDcies
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or

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find

jw

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and lenders.

nciibborhoods mrhere V b To a irnpiDvui(. Ihe leBbOitir""] cmlivily It a len^ng dentindi. olh tmnunity
be in
I

lUble

IF

...To
the

Reap

ONLY YOU

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Hidden

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from its polcniia] as
Ihe hidden
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ui

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oppoRumty,

today

it:

1-800-662-2240

I^Lear McNally Corporation

.bv

DallM

Ft.

Worth

Thaaa

taaturaa

Includsi

rMIuead

Intaraat
tha first

rata

of

parcant
balow

balow

ttia

aarkat

rata

for

yaar; and

parcant
1

tha

market

rata

for

tba

sacond

yaari

parcant

for

tha

third

yaar. for the

Tha

buyar

will

pay
tha

tha

aarkat

Intaraat

rata

fourth

through
market

thirtieth
Intaraat
rata

years
la

of

tha

aortgaqe.

Tha

current

announced

vaakly

by

rannie

M"a.

percent
up to

down

peyaence
OOO
;

on

hoaee

with

"

purchaaa
of
tha

price
f irat

of

SSO.
and
5

otharvlae
of

percent

SISiOOO

percent

the

raaainlng

"

a"ount,

for

ownar-occupanta

IS

percent

down

pay"anta

tor

invoetora.

ona-tlaa

aasuaabillty by
Fannie first
48 13

ot

the

aortgage, will
b"

subject permitted
miet

to

approval during
place
tha

Ha*.

No

assuaptlon
and any

months,
of the

assuMptlon

take

within

aonthe

Kortgage

origination

data.

OMlu

rt.

North

"nils
Fannla

financing
Kaa

prograa,

avallsbl*

only
an

whan

purchaaing
valua for

foracloaad
avan

hoaa,

aakaa
aald

axcallant Dadaon,

ba*a

buyara
of

battar,"
Kaa'a

Judy

aanlor Otflca

vice

praaidant
Dallaa.

rannio

Southwaatam

Raglonal
low

in

'CoMblnad
and
tha

with

today

'a

*ectgaga
thaae

intaraat hoaaa,
tha

rataa

attxaotiva

prlcaa
Fannia
Maa

on

financing
vitbin raach

of

farad

by
aoro

placaa

hoaaownorahlp

of

tSMlllaa.'

D"d*on

axplalnad
workai

bow

tba

;i

ooo

dlacoimt

on

aalactad

propartiaa

"kdvartlaad
Ft. worth

Pannla

Kaa

foracloaad

hoaaa

In

tha

Dallaa

araa

ara

prlead

at

or

balow

ourrant

aarkat

valua.

Tha

proapaetiva
a

buyar
raal

aakaa
aetata

an

ottar

on

tba

property
Kaa

through
that

local

agent.
deducts

Once

Fannie

accept*

offer,
aalactad

tha

coi^any

tl,000
offer la

from

tha

price
on

of

tha

propartiaa.
faetwaan

Tha

valid

only
cloaad

contract*

algnad
la,
1988.*

Kay

and

June

3,

and

by

July

Rod*

buyer*

and

Invaatora
for

can

obtain part
of

Hating
tha atata

of

Pannla

Kaa

propartiaa
of the

aala

in

any

"

or

any

area

country nunber,
s.n.

"

by

calling

Fannie Honday
Central

Mae'*

toll-free

telephone
froa
9:00

l-aOO-9Sl-4S3t, until
aleo be 6:O0 p-n..

through

Friday
Tisa.

Daylight
iaaaenta

Propertlea
in

will

Hated

In

advert

appearing

aajor

dally

nawapapara.

DKllU

Ft.

North

Fannla coapany

Haa,
ia

congraaaionally
tha

charcarad,
Invaator

aharaholdar-c

largaat

In

Aaarican

U.S.

CONGRESSMAN

Mflce Andrews
NEWS RELEASE

Mboiah

Nitthaw*

April
HOHTGAGB REVENUE BONDS

II,

19SS

"nnounecd

placing helping

n"H

fiml]

these
a

unoccupied
property Koney
that tan

piOpe
base.
a

ties

and

re.tore

ity
irogran

"rtgag( The Mays

is
is

part

of
to

lie

scheduled

tiix~exeapt at etpire
on

and

Means

Conuilttee,
a

which

:ars.

Andrews haa program the bonds the

is

co-aponsor

of
a

which
,

support

of

majority
tax

of

The
?Bt on

beneficial enjoys is tax-eienpt.

Flnanc* Houatng Paally NoitfBg*

I

Corpoial
H*T*na" I

Fact

Sb""t

Id

"illlon fSO rlnanc* Houilng

In

"octgag* Corpoiatlon
lODD

r*v*nu"

bonds

lisuvd balow'i"rliat
at*

by

tli

to

provlda
ubo

"

Laa

financing hoaabuytra.
of the

for

aoM

faallloa

piadonlnat

lllion
la "t
a

bond

pioceada
of 1,615

Hill landeta

be for

lancdlatcly
fiiat-tlu hoae

thiough
noctgage
11 B-oonad

part

clpatlng
rata

paicant, taigatad
In Houaton for at

b*

apaeifically pcDpvitlaa
Thl*
of aonay Pannla

buyeca
a

of

(RRO)

Mirtgaga

12!
RED

parcsnt. propeitiai

li Nae,

Isaiadiataly
FUh,

avaltabla
FSLIC, tha landac

/K, VK,

icipatlng

Hill

pay

ainlBUB

of

point.
b"

Etlclpatlng procaada
h

landara
aca;

Hho

will

oilglnatlnq Conapny
and judaon

Is
c

Coaaomiaalbh

Hoctgaga Coapsny.

totttcan
Inc.

Hottgaga

Bona.

/-depcaaaad

tacgat

acaaa

of

tha

city

and

f!Di3S0

In

iieaa

and

$74,7)0

buyaca
call
a

Intataatad
Bouaton laal

in

purchaalng
oatata

RBO Bone

agent.

lly
l-aoo-'j"S-

intaieatad
C36
ot

in any

Fannia

Hae-OHned
real aetata

piopecC
broker

llcenaad

Elty

of

Houaton.

In

April

of

19BT,

lie
I

Hae

pucchaaad
late of

fSO

mtereat been

T.S25

percent provided by
Fedeci

]y

utiliivd.

(tnforiMtion

.bv

NATIONAL

ASSOCIATION

Of

REALTORS"

.bv

Iiov "ortiM* tithe

"ocll

"

"orttaca tytttmt cradle

"""IitancB "111

procriH

vlll Itadcr* raqulreBanta

affect

other
to

KBpteti such
a

of

tb*

fiAuce

iiortKMe

reipond
or

ptoiria price

bjr
of

eiiln4
tb"t

tbalT

mdarvrltlnc

ralalDft

tlu

peoplo

tlilB

IciialAtlTe

pro^ial

li

AlA"d

At

belpinjf

Thia

la

riully,

Br.

paT*fliic"

during

"72~M
Vtlfai(Jli.

.bv

CradK

Union

National

Association, Inc.

4b

Th"

Honorable

Henry

B.

Gonzalez

DevBlopiKnt
Comnlttee and U.S. Urban House
on

Banking,
Affairs

Finance

of

ReprBaantacIvcB
20515

Washington.

D.C.

Da"r

Hr.

Chalmsn:

Thanlt

you

for
to Act

aftocding
coiment
on

the

Credit your bill

Union H.R.

National

Assoclacloo,
the

Inc.. Housing

the

opportunity
Assistance

4292,

Emergency

o"

1988,

As
a

you

nay

know,

credit

unions

are

fairly
overall

new

to

hone

mortgage
and of

lending
therefore

as

significant
Input
on

percentage
this

of
is

their someHhat

lending
limited. In 1979 this

activity By
was

our

subject by
number remains credit

way about

background,
5.31 of the Is the total

firnt assets.

raortgngs

lending
that still

credit

jinlons
While

Today
It

Is(l01,
facT)ehind
unions.
'

Is

almost

double
which

activity. primary

consumer

lending

focus

of

Another

statistic first

which

may

be there

useful
are

concerns

the

nunber credit such

of unions

credit

unions

offering
In

nortgages.
12X about

about
were

16,000 offering
of all

overall.

1979,
has

approitlmataly
doubled
and

(1,900)
25X

loans.
unions

Today
nake

that

number

(4.000)

credit

first

substantial thelt
nature

amount

of

delinquencies
member with owned their

nor

foreclosures. member which

Credit exercise

unions
a

by

of forbearance

being

and members

controlled
most

degree

of

likely

exceeds

that

.bv

of
nho

acher
are

lenders.

Credit

unions

luke

practice
an

of
to

working
sea

vLth
then

nembecs
an"

expeEloncIng
back
on

difficult Chelr feet

tliui

In

effort

through

get

then

financially.
efforts
tine

Therefore difficult

ve

certainly
and at

auppoIC
the theaselves.
same

which
ensure

will the

"E"Ut continued

consuaars

In of

tines Institutions

viability

landing

Sincerely,

Senior D 1 eect

Vice

P
ve

or/Go

.bv

National
ISth Telex

Association
bikJ
M

of Home
Waihineton.
DC.

Builders
20005

Slreet*.

N.W.,

89-2800

1202)

S22"SO0 Jvin"

1800)

368-5242

10,

1988

The

Honorable

Henry

B.

Gonzalez

Chaiman

Housing
Comnittee
U.S.
House

and
on

Comnunity Banking
of House
D.C.

Development
Finance
and

Suboonmlttee
Urban

AfCairs

Representatives
Office
20515

2129 Raybum Washington,

Building

Dear

Hr.

Chairman:

am

writing
Development

with

regard
Subcommittee

to

the held

hearing
on

the

Housing
24
on

and the

Community Emergency
Association
and taXe
has not

Hay

H.R.4292,
the at

Housing
of
Home

Assistance Builders
a

Act

of

1988.

Although
not

National
the

(NAHB)
on

did

testify
ically,

hearing
wish
to

adopted opportunity

policy
to

H.R.4292 to that the

"peclf
Subcommittee this
letter

1 NAHB's

this this

convey
to ask

interest

in
the

legislation,
record
on

and the

be

made

part

of

hearing
While

bill.

NAHB

has
on

not

taken

an

official

position
ite views

on

H.R.4292, vlth regard

the

Association
to the n""d

has
for

past

occasions
to forebear

expressed Instituting
in
a

lenders

foreclosure

proceedings
areas.

against
Host

defaulted
NAHB

homeowners

economically
on

depressed Hay
6, 19BB, in
forebearance

recently,
VA

adopted
develop
a

resolution program
have able the
to

urging
order
source

the to
of

and out

FHA

to

broad who

of

help
income The to

those until

homeowners

lost make FHA to

their
full take

primary
mortgage
the

they
the

are

again
urges

payments.
necessary

resolution

further Temporary by

steps

implement
authorized
on

Mortgage
I that
am

Assistance

Program
a

(THAP]
NAHB's

previously
resolution
record.

Congress.
and ask

enclosing
be made

copy of

of

this

point

it

part

the

hearing
Prior

to
Treasurer

the

adoption
Martin
for

of

our

Hay
had to

resolution,
written
to

NAHB

Vice
Burton to

President/
express their

Perlman
efforts

Rep.
veterans

NAHB's

support in their

keep

those the

who
of

lose

jobs
e letter

homes, place Rep.

thereby
in

miniaiEing
Perlman

number
areas.

foreclosures

taKing
to

economically
Hr.

depressed suggested

In

his

April

Burton,

several

possible
from

solutions their

for

keeping through
rates

tenporarily
foreclosure. for
veterans

unemployed
These who
on
are

veterans

losing
and

homes

suggestions
in financial
of

included
trouble

interest reducing imposing a

short-term

moratorium

foreclosures

As

the

Hay full

resolution with
the
an

and the

the

April
intent
of

NAHB

la

in

agreeaent
when

proposals suggest, legislation your

is
area.

to of

prevent
income
are

foreclosure
or

homeowner's

default

due

to Not

loss

employment
foreclosures

in

economically
to the

depressed
individual
one's home

only

such

devastating
tragedy regions depressed
lender many the restored.
to

tamiliea is
of the

to subjected in particularly homeowner

or

then,

the

of

losing by
the

compounded
either
the

inability
another

the

get

fair

foreclosing employment
NAHB

for
has

possibility

for price of buying

home,
home

thereby
once

been

commends
means
no

the of

Subcommittee
those
own

for homeowners from then dream.

considering
who lose the

H.S.4292

as

possible through remaining recognise

and its federal
the called this

keeping
of of

their
one

jobs
last

fault
to

their
the

losing
At

vestige
we

them

American
coat
on

the

same

time,

must

the

potential impact
NAHB

unintended deficit. in
under

would further
or

Subcommittee
for

full scale a Implementing interest thus rates, adding welcome the to opportunity either the of exploring type
any be other addressed.

of

program the to
work

with

program

H.R.4292

feasible

approach

by

which

devastating
Thank

problem again
for

might
the

you

opportunity

to

comment

on

H.R.4292.

sincerely.

nV

6-U,

19SS

WBIOB,
bilk
of

tor nut

K)st

Marican

fmlll"

invaata

thsir

wccthi

ars

unabla

to

ha^
dalsult

ttiair pniiliBa
S IT

MlESEKB,

cauaa

"lyiltloant
that Cha

losaiB

to

tlM

Fm

and

Ul

progna,

mH,
vataiana txoad to BakB

IHSOCfS, hUniatzaticn,
of

RESCXWH)

Ftadatal

Suaing
until

Jhteinistratlm

and
a

tlw

In

anjmctlai
to

with
hcBB ttMai

ttialr
(xnara

tf-'O''''^ landara,
r"

danlcp
tlia

pregtaa

Cocttoarans* ana

aaalst

fiill payawit,

t)wr"bp

paradt

to

iln

In

Qiay re^ln poaaaaalcn

ability
t})slr

of

BE

IT and

PURlHHt

RESOIWH)

tlHC

iHh

talia

all

iiai"

iiij

aU^

to

aalea

KsliBbls, (wtp)

"xpand

affactlvaly

liniTiaiiilUm

natEniy

HxTtqaga

kaaixtonD*

Rrograa

BQAID

(7

mSECICBS

JtcnCH:

APITKNH)

The

Honorable

Henry
on on

B.

Gonzalez

Subcommittee Committee United States

Housing 4 Community Development Affairs and Urban Banking, Finance

of Representatives
J0515

House D.c.

Washington,

Dear

Mr.

Chairman:

At

the

hearings May
of

on

HR

4292,

the

"Emergency
Steve
the number

Tuesday,
Association Loan Bank

24, Representative
America
to

Bartlett

Housing Assistance requested the

of
HR

Act

of 1988",
Bankers

on

Mortgage
in the would

estimate

districts, targeted currently

report,
for and the in response

for assistance
estimated
to that costs

in

4292,

mortgages that

Federal

Home

qualify for
current.

assistance The enclosed

of bringing those mortgages question, has been prepared by

MBA's

Economics

Department

inclusion

in the

hearing

record.

Id be

happy

to

furnish

/i^,,^ (1-. A-^-f-

dittrict"~Cindiuuti, Do December, 19S7,

the 60

Moinei,

DiBai,
rate

Topdu.

and

SeBttle--inet

thii CTilerkni.

(By

day delinquoKy

for the Seattle diilrict fell bekiw2perceiiL)

The

MBA

Economics

Department

wax

asked

to

estimate noted

the dollar volume

of loans that

potentiallycould
under

be

requested under
can

this program. into

two

Aa

above,
the

the

assistance

provided
to

thi$ program the

loan

be

divided

categories
to

paying of arrearages
the loan
current

reinstate

and

income

usittance

thereafter

keep

The

estimates

provided in this paper

arrearages
on

are

of

the

first categoiy~the

poienlitldemand
due
to

for funds

to

pay

homeowner

mortgages made
(o

delinquent
estimate the

unemployment

or

underemployment.
assistance
to

No

adempl
current

was

potential demand

for income

keep loans

after they have

been

reinstated.

In the tl3

five FHLB

districts referred

to

above, the potentialloan

billion for VA loans"
a

demarul

could

reach billion.

billion for

conventional

loaru

and

%02

total of $1.5

Based

on

the

same

assumptions,
loans
and

the demand S03

for the

nation

as

whole

could

reach

51.7

billion for conventional

billion for

VA

loans-a

total of S2.0 billion.

The

remairrfer

of this paper

discusses how

these

estimates

were

derived.

The

first step
Stales

was

to

estimate

the

number

of

mortgage

loans

by

loan into

^pe. FHLB

geographically.

were

used

as

the

geographical

units, then
number

combined

districts later in the analysis. Table the end of 1987.

I shows

the estimated

of loans

outstandiog by
this

Slate

al

Although

FHA

loans

are

not

included

in

proposed

lhe\' legislation, information

are

irtcluded in this attd several

subsequent
loans

tables

to

serve

as

background
e

to

round

out

the

picture of

total

outstanding

The

stale

FHA

and

VA

loans

were

obtainal

from

llw

reqieclive agencies.
aource

Hiwever.

cxnivemional

loans

by

stale

are

nol

availaUe

fnxn

my

kncnni

and

so

had

to

be

estimated.

The

numben

in TaUe

1 reflect the

aDocalioo

of

an

estimate

of total conventional

loans

in the

U.S.

on

the

basil

of

the

distribution

of

the

noninttitutional

population
"nth

by

state.

The

assumption

is

that

the

hoiuing
loans
are

ttock

hi^lly correlated
with the

population

and

that

outstanding conventional

high^ correlated

housing stock.

d that

this allocation

procedure
thai have

may

not

yield precise results.

subslanlial

For

example, it is likely the

econcmic

case

that

states

operienced

population
have

and

growth

in

recent

decades,

such

as

California. Florida,
states

and

Texai,

more

outstanding monpge
have

loans

per

capita than do

in the

Northeast

and

Midwest

which

experienced

long-term

trend

of population

out-migration.
conducted
to

Analysis
determine

was

undertaken

to

examine

this proposition.

Statistical

tests

were

if the

turnover

of the

housing slodc
in

(measured by the ratio of population

states

to

existinghome
grtwth
stale

sales)
rates.

w"

significantly hi^ier
results

with

higjter than
do
not

average

population

The

suggested

that

turnover

rates

vary

syslematicatlywith
on

growth

rales; shares

therefore, the
to

allocation

of

conventional

loans

the

basis

of

the

population

appears

be

reasonaUe

firstapproximation.

and

Foredomres

Due

to

Economic

Distress

Once

the

number

of

loans

by loan

type

and

lUte

was

estimated,

the

next

step

involved

determining
status

how

many

of these

loaru

are

in default

or

foreclosure

and

how

many

were

in thai

due

to

eeononuc

distress.

Tables

2-4

show

delinquency and

foreclosure

rates

by
VA

state

from

MBA's

National

I!"elinquency Survey for

for 19S0:Q4 and 198T:Q4

conventional

loans, F^HA

loans,

and

loans,

respectively.Rates

are

presented

for

60-

and

90-

.bv

day

delinquencies
and

and

for

foredoiures

in process. increased since

The

data

suggest

Ihat, in goieral,

detinqueoqf
shown

foreckisure

rates

have

19S0.

The

60-day delinquencies are

in the

for reference

since

the

FHLS

6(kiay
be

default

rate

series is used

triggering
aeries
ate

medianisni

noted

earlier.

It should

noted,

however,

that

these

two

conceptually diSereitt.
while the FHLB

The

MBA

series

refers

to

percent of the number

of mortgages.

of mortgages

series refers

to

percent of the dollar volume

The

proposed

legislationfocuses
the "up of

on

loans

Ihat

are

90-days
rate

delinquent
and the

or

in

forecdiuure.

Therefore,
in process
loan
rate

the

QO-day delinqueixy
of the cverall

rate

of

foredosurei this problem estimates

provides an
by loan
type

indication

^iroldem* loan

rate.

Applying
I

and

Mate

to

kiaiu

outstanding from
type and state,
as

TaUe

provides
in Table

of the

total number

of problem in TaUe
S

loans

by

loan

shown

5.

Note

thai the

estimates

reflect all

problem loans,

not

just those

associated

witbec

Some

of the

mo"l

important assumptions of this analysis concern problem loans into those due
based
on

the

methodolos'
those due

for

the number splitting other factors. The

of

to

economic

distress and

to

i" split

the

observation

that

state's unemployment loan

rate,

as

shown

in Table

6, is

crucial determinant

of that state's

problem
presents

rate.

Appendix
the methods

provides statistical evidence

used
10

supporting this contention

of

and

details

on

estimate

the number

problem loans
described

due

to

economic

distress by loan that the

^pe

and

slate.

In

short,

the

methodology
type
4

in

the

appendix
rate slates

assumes

average with

proUem

loan

rate

by loan
below

for low

unen^loymeot
in 1987:12)
due

(those

13

slates

an

unenqjloyment
loans in these

rale

I/Z percent

letvtt

bencJunaric

The

problem
or

states

are

likelypredominately
the

to

divorce,

disability,death,
The

other

such

events

rather

than

mortgagor's

to find employment. ittability

problem

loan

r*l"

b) loan problem
to

type loan

and

sUte

minux

the benchmulc

rale

provides

an

estimate

of the pan

of

the

rale

auociited

with

economic

diitren

in eadi

uate.

Applying

this

percentage of problem

the oumbei

of

problem loans from

economic

Table

5 gives

an

estimate

of the number

loans

associated

with

distress.

Table

7 ihowt

these

estimates

by loan

type ccnnbined

into FHLB

districts.

IV.

The

Cost

of Reinstatement

The

final step

of the

analysisii

to

estimate

the

potential dollar

vnliune

of

loans

to

pay

arrevages

on

the mortgagei

in Table

7.

To

do

this,the avenge
in Table S.

loan

amount

by loan
and
VA

type
amounts

is estimated

by

stale.

These

eiiinutes

are

abcwo

The

FHA

are

based

oa

respectiveagency
lource

data.

State be

data

on

conventional

loans

are

not

available

from

any

known

and

so

had

to

estimated.

Tbe

conventional

loan

amounts

are

estimated

by using the
VA loan
amouni

VA

amounts

as

an

indicator loan

series.

For

each

stale

the

ratio

of the

average

to

the

U.S.

average

amount

is applied

to

the

US.O

Once

the average

mortgage

amounts

were

estimated, the arrearages

rate
on

per

loan

by

suite

were

estimated

by assuming that:
5

1) the interest

the loan

is 12 1/2 percent 2 percent

(the
of the

average loan

of the past and

years); 2) property taxes, insurance,

loan is B months in
urears.

etc

amoimt

to

amount;

3) the

Using

these

assumptions
in TaUe

in

conjunction with provides

These

the number

of loans

in Table

7 and

the average
Ihe

loan

amounts

an

estimate

of

the

potential
FHLB

demand

for

pnqxwed
Nole

program

by loan
estimates

type.

estimates

are

shown

by

district in Table

9.

thai these

assume

that

alt of the

proUem

loans

due

to

economic

distress would

be

and eligible

would

seek

Ai

the

discussion

abOTc

illuitntes,

these

estimates

of

potential demand
are

depend
but

oiticaUy
we

on

the

underlying

assumptions.
that the

We

believe

these

UHunplions

reasonaUe,

would

like

to

emphasize

estimates

are

inherently

'rough.'

Several

specific

points should

be

noted:

I.

The

analysis

does

not

account

for

the

fact

that

the

proposed
maximum

legislation is
FHA loan

to

be

targeted
To do

to

loans

with

an

original balance
distributions of

al

or

below

the

amouM.

so

would

require

loan

amounts

by

state

which

wc

have

been

unable

to

obtain.

The

analysis
would

assumes

that

all mortpgon

in the

proUem
would seek

loan

status

dt;

distress

be

dibble

for

the

program

and

aisislance.

It

seems

likdy apply
loss

thai

many be

of

those

eligiblewould
be

not

apply
the

and

that

many

of

those

ii^ui would

would

found

to

ineligible due

to

drcumstinces

surrounding
the

their

of

income

and

due

to

an

assessment

of their

ability

to

keep

mortgage

current

while

3.

The

assun^tion

concerning
the

the

avenge

ntunber

of

months

in

arrears

is

quite
the

important.

Changing

eitimate

from

months

to

months

would

reduce

potential demand
10

estimate

for the

5 FHLB

Districts

by about
million.

S37S

million.

Raising it

to

months

would

raise the

estimate

by about

S3T5

4.

Precise

numbers

are

presented

in

the

tables, but

it should

be

understood

that

the

enimaiei

reallyreOecl

midpoint*
could

of range*. be

Beoiue do

Ibey
not

ire

only e"inute) eoou^

IM

of uDceniinty,

the range*

luge. We

have

tiy exactly bcm

larse.

Tb"

Relationship Between

Unemploymenl

and

Problem

Mortgage

Loant

One

of

the

most

importani
For

factors

affecting mortgage
the
most

loan

delinquencies
potential
Iheir

and

foreclosure

is unemployment.

homeowners,

obvious

hardsh^)

associated

with

the

loss

of

job Is

thai

Ih^

may

become

unable

lo

meet

mortgage

obligations, which, through foredosure.

in

turn,

greatly increases

the

risk

that

they

will

lose

their

homes

Unemployment
rise in

often

arises

for

reasons

beyond
result

worker's

control

For

example,
thai
stale

unemployment facing

in

any

given

state

may

from

concenlralion

in

of

industries

declining

markets.

In

such

ecoitomically

disadvantaged

states,

rise

in

unemployment
rates

relative

to

national

trends

will result

in higher

delinquency and

foreclosure

relative

to

national

averages.

The

regression

equations below

examine

(his

relalionshqi

using data
based
on

from

the

MBA

National

IDelinqueni^ Survqi.
stales

the equations Specifically,

are

observations

from

the 30

with

the largest number

of conventional

loans

serviced.

In

the

first

equation,
function

measure

of problem

com^ntional

loans

by

Rate

in

1987;Q4

is

estimated

as

of

measure

of

problem
Problem

kians

In

1"S0:Q4

and

the

change
90

in

relative

ecoiK"mic

conditions

in

each

state.

loans

are

those

that

are

over

days

delinquent
of
two

or

in foreclosure;

the

measure

of

problem
numerator

loans

used

in [he

equation is the ratio

loans

percentages.

The

percentage

in the

is protdem

conventional

by

loans

in

1987.

The

(URSB7/URUS87-URS80AJRUS80)
lUte

term

ii

hi^

lignifiant and

iDustralei

the

importance of relilive

oconomk

distress.

llie

second

equation estimates
1980
lo

the

change

in the

dependent

variable

in the

previous

equation from

1987

as

function

of the

economic

dinreas

term.

In etflECt, the

equation coiutrains
which

the

coefficient

of the SRS0/URS80 of changes

lenn

in the

equation above
ec

to

1.0,

helps highlightthe ejqplanatoiy power

in relative

Mate

r2

0.63; D-W

2.1; SE

0.62.

The

equation shows
deal

thai

the

economic

distress

term

is

and highly significaat loans

rrirliiint a by
state

great

of the variation

in the

difference

between

the

problem

measure

in

19S7 and

the

same

measure

in 1980.

Given

the

role unenqjloymeni pity'sin determining problem loans by significant ask is: How much of the

state,

an

important question
be attrilMlted
to

to

current

proMem
is
to

kwn

rale

in

state

can

unemplaynient?
for
stales

The

approach used

here

determine

the average
states

problem

loan

rate

with

relatively low
in

unemployment
to

rates

(13
the

with

unemplc^ment
between

rates

below

1/2 percent
state

1987:12), then
to

attribute

difference

proUem
the

loaji

rates

by
a

and

this average
rate

relative economic

distress.

The

idea

is that

portion
rate

of

state's

problem loan
about because

that

is above

the

average

for the

low

unemployment
slate.

states

comes

unemploymmt
state

is relativelymore

severe

in that

The

number

of

proUem

loans

bf

by

loan

type

(conventional

or

VA)

attribulaUe

to

relative economic

distress is calculated

as

follows:

PLU-

{R87-LOWR87)

"

L87

PLU

"

number

of

problem loam
rale

"tlribuUble

la

relative

ec

RS7

"

problem k"n
avenge

by

Male

in 1987:Q4; in

LOWRS7

problem

loan

rate

1987;Q4

for

Matei

with

rdativ^

low

uitemployinent ralel;
L87
'

number

of loans

ouUtanding by

Mate

at

the end

of 1987.

The

average

problem
0.43

loan

rale

for

low relatively

unemploymral
and
1.48

rate

Nala

(LOWRS7
loaoa

in the

equation) wai

percent

for conventional

loans

percent (or

VA

in 19S7:Q4.

M.U6

tn.ii

M,3S

cumiu

jn,

n.IM

U.

169 .007

"5 16

O.U 1.2i

1.H I.M

t.H l.U

T* n U

D." I1.M O.Jd

1.1J e."7 I.U

1.M DM 1.7*

D.It

0.S7

D.ID

1.0

t.ZB

U u

D.U o.is

B.U a.n

QJi i.it

i.u

i.a

i.K

u K

B.ii DJS

a." t.M

cJi g.w

M M 7" rr

I.M ".is a.H s.jr

1.M 0^7 i.)" i.m

I.M tm )." ".m

11

"." 0.J7

1." 1."

0,7? 1."

"1

5J

1.H

I.M

1."

D.M

O.M

l.li

D.S

1,17

i.M

M M "D M

i.Di o.u "."1 a."t

i.n e.w 1.H ".(i

i.n o.n 1.U d.tr

"S

D.U

1.1"

1.(1

it

n.a

n.n

a.c

.bv

.M

I.W

tM

fl.jr

,n

D.oo

."

t.u

.bv

111U

11*19

MM "1"

im MTt

ui UK

.bv

Conventional

negative problem
below

niuiber

indicates
rates

that the states

Che

weighted
in
a

of
are

loan
the
or

in

FHLB rates

averages district

appropriate
VA

benchaark

(i.e.,

conventional

benchnarks).

HS.wa

la.*)

CUI'MHIl

n,i"

"*,ll

M.W

M,1"7

n.m

M.W

U,7U

H.m

51 .M

.bv

Estiaatcd Kith

Cost

of

R*inatata"ent

of Fsdsrsl
of

Problaa
Hoaa La

EconoBlc

Distress

by [Thousands

Dollars)

Conventional

states Only appropriate

with
bsnchaark

problea
rates

loan
are

rates

above in
two

the
the FHLB

included the

estinates Districts

in in

this Table
show rate

table.
7 saall exceeds

Consequently,
that
costs the states.

have in

negative
this
bencbBark

nuabers table
rate because

of

loans probloM the loan problea

or Bore

in

one

of

the

constituent

The
2413 United

HaoorabU

Henry
Haiae HauMt

B.

Goiualei

Raybam
Slalta

Office of Rtp

BidbUnt

Dear

Represaitattre
On

GtmaUei:

May

24, 1988, Edward

on

J. Carlton,
on

Subcottmdiiee
America

H.R.

4292 the

Jr., leitf^ed before the Housing behalf of the Uortgage huurenee Companlea

(M!CA).
to

During

hearing
term

provide the of families

than the
response to

Subcoirmdliee maintain loan

with their

homes

of MICA Wortlej oAed tc Ultat tt "*I{"vu WOtdd invrvvc the ability In a faMon that '"eal4 be tea bilnujve

CentrUMimm

temporary

assistance

tnitUaedbiH.R.

4292.

This

tetter

Is In

his request. believes Is

MICA homeowaen

that

key

to

easing

the

foreclosure

burden

or

indivufuiil

the stress In-depth fbumelat counseling te those undergoing of tMs members default. Our written are testimony empha^eed point. MICA piivate Insurers which have a yetted Interest la seeing that potential nortga^ We testified, as ^d default* and foreclomre lossit are njrdndied. that foreclosure losses eon be representative from leader organlzatlom, reduced when counseling Is provided after the defauU occurs. An established and alters can help unen^Hoyed workers program get through their IndlvUiui/ and insurers have proMem regitin self aifflclency. In this regmd, mortgage a

long standing
ultimate HOPE claim
program

record tosses

of

speiling funds
at

at

the

time

default

aeeura

to

reduce

and

least

one

losurer
at

is activety

participating

In the

described

by Jim

Butler

the

hearing.
the

We initiative

believe

counseling

program

must to
so

place
meet

greatest

reliance

upon

the

of those
be
to

fatitilies struggling foster opportunities

have
a

goal should
on

obligations. The mortgage that distressed families can get back

to

their

their

feet

and

realistic

chance

retain

their

homes.

In addition

we

believe

that

counseling
The

program

rmst should

involve

the

private
some

and

public
the

sector

working
establish be determined

together.
counseling by
a

government
based agree

help provide
its experience.
carry
as as

of

funds
should

to

but facilities

eligibiliry for this counseling

on

program

private entity families

nsist cannot

This

generally
load
as

means can.

that
A

participating successful

to

much

of the

they

program

be

operated

if the assistance

Members
progmm who
ore

of MICA
HOPE

have

been

'
, .

HOPE.

aaaists

untmfioyed

and

even an

eiperienelng mortgagt fiatiion. By design l[ has been

prasram

in deHn^uendeM targeted lo serve, whose needs

are

iitideremployed fannies efSicient and ecenemic almg

with lu

companion
utilises maxbmm

EHOP,
other

these

tamitlet

tht

peatest.
to

HOPE the

Jacal conDMudlici' local and

injtittitlons.
It has

resources

and

la based

upon

levera^ng

nqiport oi well as the support from private adopted Job trobijnj efforts but mm In^rtantl; provides that Mps consumers couiueliiw and other bistnietion prioritjie tMr It is a program be refllauad nationwide and help needs. that eoiild budgeting resolve foreclosure difficulties. many govemnient
The become Initial success Involved.

of HOPE Presumablf

will other

private

other mortgage encourage entitles wilF also be

inairers interested

to

In

participating. MICA
mere

would
WMle

recommei^
we

that

the

Subcomnittee

explore
at
a

the

HOPE
we

concept
do

fully.
an

do

not

advocate be
to

beliavt HOPE

Inmedlate

step mndd

throwing money facilitalegndaal

progrxim,

expan^on

of the

A test program could be estabUshed where borrvwen with concept. insured loans that ga Into default eeuld receive HOPE cnimeUiig. government The woUId be su^artedflnanelaay eomaelling by the BBvemment. Ultimately MMIF then the FHA's a siAetantIM some if HOPE amount, of the can save eoidd to pro"^^ng fbundal of FHA counseling resources go support to HOPE'S could be directed to use of Its desipuited some effort*. M addition, HUD in srveral the HOPE to establish key eounieHiig funds as seed money program counseling is found to help conlriDl foreelanire regions. Likewise, If HOPE Mac's Mae's and Freddir lora, then perhaps some of Fannie fimmciat resources coidd supporting the program. voluntarily go toward We

would

be the

happy

lo

participate
to

in

further dialogue
HOPE
as a

on

this issue, but program with

urg/e action
an

by

SuAeommlttee level

support

practical

already

demonstrated

of

achievement.