Capito on the Federal Response to the Mortgage Crisis

Congresswoman’s Opening Statement to Financial Services Committee Hearing

WASHINGTON – Rep. Shelley Moore Capito, the ranking Republican on the House Financial Services Subcommittee on Housing and Community and Opportunity, made the following opening statement at this morning’s full committee hearing to discuss the status of federal efforts to address the mortgage crisis:

“I would like to thank Chairman Frank for holding this hearing this morning. As the Chairman is well aware, we had a similar hearing in the Housing and Community Opportunity Subcommittee in September of this year on the very issue of tracking progress with the Administration’s foreclosure mitigation programs. Introduced in early 2009, the Making Home Affordable program was rolled out with the promise of assisting 7 to 9 million troubled borrowers, yet the program has thus far assisted only a small fraction of this estimate.

“While the Administration’s plan has been somewhat more successful than the troubled Hope for Homeowners program, I have significant concerns with the over-estimation of the populations served by these programs. Although there are many Americans who are struggling to pay their mortgages, it has become clear that these programs simply may not be capable of handling the volume of borrowers, nor is it realistic to suggest that every struggling borrower will be able to benefit from a modification.

“Furthermore, there should not be a push to achieve these targets at the expense of ensuring that modifications are being processed in a manner that ensures the lender has as complete a picture of the borrower’s financial situation as possible. To this end, I was very troubled to learn that some modifications are being performed with minimal documentation. After all, it was this very practice of no or low documentation that helped create the housing crisis we face today. We should not be in the business of perpetuating this practice.

“According to the Treasury Department, 375,000 trial modifications are set to convert to a permanent modification by the end of the year. However, J.P. Morgan Chase recently disclosed that in November close to twenty five percent of their trial modifications failed to make the first payment, and nearly fifty percent of borrowers failed to make all three payments. Furthermore, the Federal Reserve Bank of Boston cites that thirty to forty-five percent of borrowers who receive modifications end up in default within six months. This raises significant concerns about the ability of these programs to meet the long-term expectations outlined earlier this year.

“These challenges are greatly compounded by a shift in the root causes of foreclosures. With the downturn in the economy, we are now facing more traditional causes of foreclosure, namely the loss of a job. As these programs progress, we must have a realistic understanding of their capability and we have an obligation to taxpayers to focus our efforts first and foremost on families who truly need assistance the most.

“I look forward to hearing from our witnesses this morning and thank the Chairman for holding this important hearing.”