[House Hearing, 111 Congress] [From the U.S. Government Publishing Office] THE IMPACT OF THE FORECLOSURE CRISIS ON PUBLIC AND AFFORDABLE HOUSING IN THE TWIN CITIES ======================================================================= FIELD HEARING BEFORE THE SUBCOMMITTEE ON HOUSING AND COMMUNITY OPPORTUNITY OF THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED ELEVENTH CONGRESS SECOND SESSION __________ JANUARY 23, 2010 __________ Printed for the use of the Committee on Financial Services Serial No. 111-99 U.S. GOVERNMENT PRINTING OFFICE 55-242 WASHINGTON : 2010 ----------------------------------------------------------------------- For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800 Fax: (202) 512�092104 Mail: Stop IDCC, Washington, DC 20402�090001 HOUSE COMMITTEE ON FINANCIAL SERVICES BARNEY FRANK, Massachusetts, Chairman PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama MAXINE WATERS, California MICHAEL N. CASTLE, Delaware CAROLYN B. MALONEY, New York PETER T. KING, New York LUIS V. GUTIERREZ, Illinois EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York FRANK D. LUCAS, Oklahoma MELVIN L. WATT, North Carolina RON PAUL, Texas GARY L. ACKERMAN, New York DONALD A. MANZULLO, Illinois BRAD SHERMAN, California WALTER B. JONES, Jr., North GREGORY W. MEEKS, New York Carolina DENNIS MOORE, Kansas JUDY BIGGERT, Illinois MICHAEL E. CAPUANO, Massachusetts GARY G. MILLER, California RUBEN HINOJOSA, Texas SHELLEY MOORE CAPITO, West WM. LACY CLAY, Missouri Virginia CAROLYN McCARTHY, New York JEB HENSARLING, Texas JOE BACA, California SCOTT GARRETT, New Jersey STEPHEN F. LYNCH, Massachusetts J. GRESHAM BARRETT, South Carolina BRAD MILLER, North Carolina JIM GERLACH, Pennsylvania DAVID SCOTT, Georgia RANDY NEUGEBAUER, Texas AL GREEN, Texas TOM PRICE, Georgia EMANUEL CLEAVER, Missouri PATRICK T. McHENRY, North Carolina MELISSA L. BEAN, Illinois JOHN CAMPBELL, California GWEN MOORE, Wisconsin ADAM PUTNAM, Florida PAUL W. HODES, New Hampshire MICHELE BACHMANN, Minnesota KEITH ELLISON, Minnesota KENNY MARCHANT, Texas RON KLEIN, Florida THADDEUS G. McCOTTER, Michigan CHARLES A. WILSON, Ohio KEVIN McCARTHY, California ED PERLMUTTER, Colorado BILL POSEY, Florida JOE DONNELLY, Indiana LYNN JENKINS, Kansas BILL FOSTER, Illinois CHRISTOPHER LEE, New York ANDRE CARSON, Indiana ERIK PAULSEN, Minnesota JACKIE SPEIER, California LEONARD LANCE, New Jersey TRAVIS CHILDERS, Mississippi WALT MINNICK, Idaho JOHN ADLER, New Jersey MARY JO KILROY, Ohio STEVE DRIEHAUS, Ohio SUZANNE KOSMAS, Florida ALAN GRAYSON, Florida JIM HIMES, Connecticut GARY PETERS, Michigan DAN MAFFEI, New York Jeanne M. Roslanowick, Staff Director and Chief Counsel Subcommittee on Housing and Community Opportunity MAXINE WATERS, California, Chairwoman NYDIA M. VELAZQUEZ, New York SHELLEY MOORE CAPITO, West STEPHEN F. LYNCH, Massachusetts Virginia EMANUEL CLEAVER, Missouri THADDEUS G. McCOTTER, Michigan AL GREEN, Texas JUDY BIGGERT, Illinois WM. LACY CLAY, Missouri GARY G. MILLER, California KEITH ELLISON, Minnesota RANDY NEUGEBAUER, Texas JOE DONNELLY, Indiana WALTER B. JONES, Jr., North MICHAEL E. CAPUANO, Massachusetts Carolina PAUL E. KANJORSKI, Pennsylvania ADAM PUTNAM, Florida LUIS V. GUTIERREZ, Illinois KENNY MARCHANT, Texas STEVE DRIEHAUS, Ohio LYNN JENKINS, Kansas MARY JO KILROY, Ohio CHRISTOPHER LEE, New York JIM HIMES, Connecticut DAN MAFFEI, New York C O N T E N T S ---------- Page Hearing held on: January 23, 2010............................................. 1 Appendix: January 23, 2010............................................. 51 WITNESSES Saturday, January 23, 2010 Amos, Richard, Director of Housing Services, St. Stephen's Human Services, Inc.................................................. 35 Anderson, Marion, constituent, and renter displaced by foreclosure crisis............................................. 37 Bartholomay, Hon. Daniel M., Commissioner, Minnesota Housing Finance Agency................................................. 14 Dahl, Michael, Public Policy Director, HOME Line................. 31 Davnie, Hon. Jim, Member of the Minnesota House of Representatives................................................ 10 Dorfman, Hon. Gail A., Commissioner, Hennepin County, Minnesota.. 11 Halbach, Chip, Executive Director, Minnesota Housing Partnership. 30 Higgins, Hon. Linda, Member of the Minnesota State Senate, District 58.................................................... 8 Ireland, Mark, Staff Attorney, Housing Preservation Project...... 33 Louden, Christina, constituent, and Section 8 Voucher resident... 39 McCorvey, Cora A., Executive Director/Chief Executive Officer, Minneapolis Public Housing Authority........................... 28 Poethig, Erika, Deputy Assistant Secretary, Office of Policy Development and Research, U.S. Department of Housing and Urban Development.................................................... 6 Streitz, Thomas, Director, Housing Policy and Development, Minneapolis Department of Community Planning and Economic Development.................................................... 16 APPENDIX Prepared statements: Amos, Richard................................................ 52 Anderson, Marion............................................. 75 Bartholomay, Hon. Daniel M................................... 77 Dahl, Michael................................................ 83 Davnie, Hon. Jim............................................. 87 Dorfman, Hon. Gail A......................................... 92 Halbach, Chip................................................ 95 Higgins, Hon. Linda.......................................... 101 Ireland, Mark................................................ 106 Louden, Christina............................................ 111 McCorvey, Cora A............................................. 115 Poethig, Erika............................................... 127 Streitz, Thomas.............................................. 137 Additional Material Submitted for the Record Waters, Hon. Maxine: Written statement of Leslie Parks............................ 149 Written statement of Rebuilding Together Twin Cities......... 151 THE IMPACT OF THE FORECLOSURE CRISIS ON PUBLIC AND AFFORDABLE HOUSING IN THE TWIN CITIES ---------- Saturday, January 23, 2010 U.S. House of Representatives, Subcommittee on Housing and Community Opportunity, Committee on Financial Services, Washington, D.C. The subcommittee met, pursuant to notice, at 12 p.m., in the Minneapolis Central Library, Pohlad Hall, 300 Nicollet Mall, Minneapolis, Minnesota, Hon. Maxine Waters [chairwoman of the subcommittee] presiding. Members present: Representatives Waters and Ellison. Also present: Representative McCollum. Chairwoman Waters. This hearing of the Subcommittee on Housing and Community Opportunity will come to order. Good morning, ladies and gentlemen. Audience. Good morning. Chairwoman Waters. Welcome to the Subcommittee on Housing and Community Opportunity's Minneapolis field hearing on, ``The Impact of the Foreclosure Crisis on Public and Affordable Housing in the Twin Cities.'' I would like to begin by thanking the Minneapolis Central Library for graciously allowing us to use this space for today's hearing. I would also like to thank Congressman Ellison's staff for their effort and assistance to ensure a successful and productive hearing. Of course, I must also mention the leadership of Congressman Keith Ellison, a very engaged member of the Housing Subcommittee and the Congressional Progressive Caucus. Mr. Ellison has been a champion for individuals and families bearing the brunt of this foreclosure crisis, particularly for renters displaced as a result of foreclosure. As many of you know, he was the author of the Protecting Tenants at Foreclosure Act of 2009, which was signed into law by the President in May. Go ahead, you may applaud. And Mr. Ellison has been my ally on the subcommittee as we work to preserve public and assisted housing during this severe economic downturn, and to rid our housing of the hazards caused by lead paint. Give him a round of applause for that too. I would also like to thank Congresswoman Betty McCollum of the 4th District of Minnesota, a strong supporter of labor and working families through her role on the very important Appropriations Committee. Ladies and gentlemen, without her work on the Appropriations Committee, no matter what we authorize, we would not be able to get it unless it was funded. So give her applause for being able to do that. And she is a Member who has taken the lead in confronting the global AIDS pandemic. Thank you for making it here to support and engage in this important discussion. And I would, because we have to do it according to our procedures, request unanimous consent that Congresswoman McCollum be considered a member of the subcommittee for this hearing. Without objection, it is so ordered. The foreclosure crisis has devastated neighborhoods all across the country, from the district I represent in Los Angeles to here in the Twin Cities. In Hennepin County, mortgage foreclosure sales have increased by nearly 800 percent in 2008 compared to 2002. In the next 5 years, the Center for Responsible Lending predicts that there could be as many as 13 million additional foreclosures nationwide. Because the foreclosure crisis has created so many vacant homes, one would think that the silver lining of this horrible situation would be lower prices for renters. Unfortunately, this is not the case, primarily for two reasons. First, the growing number of low-income households far outpaces the amount of available affordable housing. With long-term unemployment at its highest levels since 1948, affordable housing production can't keep up with need. Second, we know that foreclosed housing doesn't necessarily become ownership or rental opportunities. Often, banks unload foreclosed properties for pennies on the dollar to speculators and flippers, who frequently fail to do basic maintenance or rehabilitation. As a result, the neighborhoods in which these homes are located remain blighted, and communities are deprived of a potential renting housing resource. We have all heard the stories of boarded-up houses stripped of their piping and sinks, ignored by their owners and attracting crime to neighborhoods. These trends are putting strains on our public and assisted housing system. I know that in L.A. County, there are about 17 times as many families on the waiting list for public housing as there are units. This is the case in Minneapolis as well. One of our witnesses today, Chip Halbach, noted in an article that 12,000 households applied when the public housing waiting list was opened in 2008. If our housing resources remained as they are today, the 12,000th person will not be able to get assistance until July 2034. Nearly 2 years ago, I drafted the Neighborhood Stabilization Act, recognizing that we need to connect the foreclosure crisis with the lack of affordable public and assisted housing. After a hard fight with the previous Administration, I was able to secure $4 billion in Neighborhood Stabilization Program funds in the summer of 2008. The following February, we were able to get an additional $2 billion in funds through the economic stimulus bill. Last week, we were very pleased to announce and to learn that HUD made their grant announcements for the second round of NSP, and both the City of Los Angeles and the Twin Cities had winning grant applications. With over 300 grant applications scored by HUD, and only 50 or so grants granted or awarded, it's a testament to both the work of people on the ground, and to the magnitude of the problem in our communities. I know that over $100 million in NSP funds were awarded directly to public housing authorities under the second round of funding. Other housing authorities are working with their cities and States to pair NSP funding with other funding sources such as project-based voucher assistance to expand the number of units for the most vulnerable citizens. Besides NSP, we have been fighting to preserve public housing. In the stimulus bill, we worked to secure $5 billion in public housing capital funds, which are now being used to make critical repairs and keep units in the public housing stock, along with additional homelessness prevention grants and project-based rental assistance. We realize this problem isn't over and the need for resources hasn't been satisfied. That's why Congressman Ellison and I, along with seven members of the Congressional Black Caucus who serve on the Financial Services Committee, worked hard to get an additional $1 billion in Neighborhood Stabilization Funds in the Wall Street reform bill that passed the House in December. We also worked to secure $3 billion in assistance for unemployed homeowners threatened by foreclosure. We still need to get this bill through the Senate. The fight isn't over and it won't be easy. But Congressman Ellison and I will be advocating for this funding over the coming months. I'm eager to hear more from our witnesses about both the foreclosure crisis, and the shortage of public and assisted housing. Again, thank you for welcoming me to Minneapolis today. I would now like to recognize Congressman Ellison to make his opening statement. Thank you very much. Congressman? Mr. Ellison. Chairwoman Waters, let me thank you for coming to Minneapolis, and let me offer a very hardy and warm welcome to you and your staff who worked so hard to make this hearing a reality. Let me also thank you, on behalf of our State and our Nation, for all the work that you have done, not just in the area of housing, but on the critical issue of Haiti relief, which is something you have been working on for many, many years, and on the issue of Hurricane Katrina relief, which is something that you have been absolutely relentless on, and also your work over the years for equal opportunity for women, communities of color, and all Americans. Thank you very much. Let me also thank my twin sister from St. Paul, Congresswoman Betty McCollum, for joining us today as we address regional efforts to increase affordable housing. Congresswoman McCollum is an appropriator and on the Appropriations Committee, and therefore is an essential partner for us as we move forward to try to make sure that our policy and our resources match up together to serve community. Also let me thank State and local leaders, many of whom are here today, for their excellent work. It's an honor to serve with you, in partnership with you, and I would like you to know that over the time that I have been able to serve as a Member of Congress, your assistance and your information has been indispensable to our overall program, and so thank you very much. I would like everyone to consider also that the advocates and the citizens who keep us informed are essential players, and that we think that you are essentially the most important component of our efforts, and we thank you for coming and all of the work that you do. Please continue to keep us informed and please keep your ideas coming; they are essential to our success. Please consider this hearing today to be an important information-gathering hearing, just like any other congressional hearing you might have on Capitol Hill, but unique in the sense that it is in our community and gives us an opportunity to talk about some of the unique challenges that we're facing as residents of the Twin Cities, but also things that may apply generally throughout the country. Many ideas gathered at field hearings make their way into national legislation, and I hope that we'll be able to honor some of the important details that can lead us in that direction in this hearing. According to data from RealtyTrac, 3 million households received foreclosure notices in 2009. While the national foreclosure rate has slightly decreased, Minnesota posted a 56 percent increase in foreclosures from 2008. Last year, 6,000 households in Minneapolis alone received delinquency notices. These displaced households are looking for help to find safe and adequate housing that they can afford. That's why Representative Waters and I fought for increased funding for the Neighborhood Stabilization Program, to get help for our communities. And as I indicated earlier, I look forward to working with all of you to make sure that the legislative intent of the NSP program gets carried on through right to the end user, and so I look forward to working with members of the community and local and State officials to make sure that this happens. NSP was created to allow local communities to purchase and rehabilitate foreclosed property and create affordable homeownership and rental opportunities. Before the foreclosure crisis, our communities experienced intolerable rates of housing insecurity. Now the need has grown even greater. Federal rental assistance programs are facing unprecedented requests for help. Shelters are seeing as many as 10 percent of their clients directly linked to foreclosure displacement as affordable rentals disappear. Today, we seek input from a broad range of witnesses on how to promote affordable housing in the midst of this mortgage foreclosure crisis. To our witnesses, I would like to extend a hearty welcome and my appreciation for taking time on a Saturday morning to come to this committee to testify. I want to thank you each for your time, and I know we are looking forward to hearing from each of you. Chairwoman Waters. Thank you very much, Congressman Ellison. Now, we will hear from Congresswoman Betty McCollum. I thank you so very much for joining us today. I know today is a busy day and you won't be able to stay for the entire hearing, but we welcome you, and I would like to offer you time for your opening statement. Ms. McCollum. Thank you very much, Madam Chairwoman. I am pleased to have the opportunity to be here with you today, but I'm really pleased to welcome Congresswoman Maxine Waters to Minnesota. She can really walk on water when it's hard, as she found out today, because she wore her boots. So she's smart. She's a national leader on housing issues and a long-time advocate for the needs of the most vulnerable in our Nation and throughout the world. She has been one of the great advocates in Congress, as Keith pointed out, for American response to the earthquake in Haiti. She is a woman I admired greatly before coming to Congress, and I was thrilled that I had the opportunity to serve with her my first term, and she was a mentor. But there's a song that says it all, I wish all of our daughters would be like Maxine Waters. And it's always great to be with Congressman Ellison. We work together on a lot of issues, and people see our heads together on the House Floor with great frequency. We are twins; I'm the eldest, however. I'm also a history teacher, social studies, and I think it's important, in order to move forward positively into a future, we have to reflect on the past to see where we are in the present. So our community is doing that, and we're doing that today in this hearing, like so many other communities across the country struggling to meet the basic needs of housing for our neighbors, for our friends, and for our families. You all know that there's a housing crisis today, and it's because affordable housing and the needs of low- and middle-income Americans were neglected for most of the past decade. The Bush Administration also failed to properly regulate the housing market, which led to reckless loans and high-stake gambling on Wall Street. When those bad debts all started to unravel, American families were left with a housing crisis, a financial crisis, and the most painful recession since the 1930's. The victims of this current crisis are working families and those families who want to work but have no job opportunities in this tough economy. We're committed, our party is committed as Democrats, to work towards solving these problems. We are fighting in Washington for the attention and the resources this housing issue deserves. The Recovery Act, which passed in 2008, was an essential step toward stabilizing the housing market, but there's much work to be done, there's much retooling to be done to the legislation. Many of our panelists this afternoon were responsible for putting those Federal dollars to work in Minnesota, and we look forward to hearing about what worked well and what can work better. I want to, again, thank Congresswoman Waters and Congressman Ellison for the opportunity to be with you here today, even though briefly, because I have to go back to the other side of the river, but I want you to know that we stand united in working for you, and Keith and I are putting the needs of our districts, Minnesota and our country first. Thank you. Chairwoman Waters. Thank you very much. And I'm pleased to welcome our distinguished first panel. Our first witness will be Ms. Erika Poethig, Deputy Assistant Secretary, Office of Policy Development and Research, U.S. Department of Housing and Urban Development. Our second witness will be the Honorable Linda Higgins, member of the Minnesota Senate. Our third witness will be the Honorable Jim Davnie, member of the Minnesota House of Representatives. Our fourth witness will be the Honorable Gail Dorfman, commissioner, Hennepin County, Minnesota. Our fifth witness will be the Honorable Dan Bartholomay, commissioner, Minnesota State Housing Finance Agency. Our sixth witness will be Mr. Tom Streitz, director of housing policy and development, Minneapolis Department of Community Planning and Economic Development. And I would like to say to our panel here, I thank you for appearing before the subcommittee today, and without objection, your written statements will be made a part of the record. You will now be recognized for a 5-minute summary of your testimony, starting with our very first witness, Ms. Erika Poethig. STATEMENT OF ERIKA POETHIG, DEPUTY ASSISTANT SECRETARY, OFFICE OF POLICY DEVELOPMENT AND RESEARCH, U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Ms. Poethig. Thank you, Madam Chairwoman, Congressman Ellison, and Congresswoman McCollum for inviting me to testify before you today. It's great to be in Minnesota. While I will focus my testimony on the national housing market and the new challenges we face as a result of the foreclosure crisis, I also want to talk about the housing conditions here in the Twin Cities and Minnesota. Preserving the affordability of rental housing, especially for low-income households, is a crucial challenge for the Nation and its many housing markets. Under Secretary Donovan's leadership, HUD has reasserted its role as a catalyst for expanding the availability of decent and affordable rental housing. If this crisis has taught us anything, it's that the Nation needs a balanced comprehensive national housing policy, one that supports homeownership, but also provides affordable rental opportunities, and ensures nobody falls through the cracks. Rental affordability is a key priority of Secretary Donovan, but HUD also remains focused on restoring stability to the Nation's homeownership market. In my testimony today, I will cover three issues based on the questions submitted by the committee on this important topic. First, I want to cover the trends in rental affordability across the Nation and here in the Twin Cities. Second, I will discuss the relationship between the foreclosure crisis and dynamics in the rental market and steps that have been taken to address the displacement of renters. Third, I will highlight HUD's efforts to stabilize communities affected by the recent foreclosure crisis. First, you probably have seen in the press national indicators citing high vacancy rates in the U.S. rental market. But I think it's really important to understand that while some new renters have benefited from this softness, drawing concessions from distressed property owners that have resulted in lower rents, many, many more low-income renters, as Chairwoman Waters pointed out, whose incomes have fallen as a result of unemployment and lost hours worked, have difficulty affording their housing. I want to stress that this softness in the broader rental market has not substantially eased affordability concerns for low-income renters. So in 2008, there were 8.7 million renter households paying more than 50 percent of their income for rent. This is up from 8.3 million households in 2007. But let me dig under these national statistics and describe how this plays out at the local level. In tight markets such as New York, Los Angeles, and San Francisco, constrained supply and strong demand creates real affordability challenges for renters up the socioeconomic ladder. In other markets, low- and moderate-income renters have an easier time finding affordable options, but they are often located in neighborhoods with high concentrations of poverty and the least opportunity. A shortage of rental housing affordable to extremely low- income renters is a problem across virtually all housing markets. The American Housing Survey indicates that for every 100 extremely low-income renters in the United States, there are only 44 units affordable and available to them. In the Minneapolis/St. Paul metro area, extremely low- income households--households earning approximately $25,000 for a family of 4--face a similar challenge. However, for low- and moderate-income renters, the Minneapolis region does remain considerably more affordable than similarly sized coastal metros, which brings me to my second point, and the central focus of this hearing, what is the impact of the foreclosure crisis on the access to affordable rental housing in the Twin Cities region? Although it is really difficult to untangle, there is anecdotal and some quantitative evidence suggesting that families are doubling-up with friends or relatives, which has depressed demand for the rental market and contributes to some rising vacancies. The impact of the foreclosure crisis on the rental stock is still unclear. In the same way that the foreclosure crisis has taken single-family properties off the market, foreclosures on multifamily properties have also removed rental housing from the available supply. At the same time, though, there have been some additions to the rental inventory because newly built multifamily units that were intended to be condominiums are now converting back to rental housing. This problem of displaced renters from foreclosed properties is particularly acute in the Twin Cities area, where 20 percent of the rental stock is in single-family homes and another 12 percent is in 2- to 4-unit buildings. Research from the Humphrey Center at the University of Minnesota suggests that in Minneapolis, nearly 60 percent of foreclosed buildings in 2006 and 2007 were renter-occupied, nearly 60 percent. Recognizing the tumultuous experience these renters faced during foreclosure, Congressman Ellison introduced, and President Obama signed, as Congresswoman Waters said, the Protecting Tenants at Foreclosure Act in 2009. This Act protects renters in foreclosed properties by allowing them to fulfill their lease unless the property is sold to someone who will be the primary resident, and importantly, requires that tenants receive 90 days' notice before eviction. What is HUD doing to mitigate the impact of the foreclosure crisis on neighborhoods and renters across the Nation and this region? Under the first round of the Neighborhood Stabilization Program funding, jurisdictions in Minnesota received just over $57 million to buy, rehabilitate or demolish properties and help homeowners finance the purchase of foreclosed homes. A quarter of this money must be spent to assist households earning less than 50 percent. In Minneapolis, about 52 percent of the units that are expected to be preserved or produced with this funding will serve very low-income households. Last week, Secretary Donovan awarded just under $2 billion in the Neighborhood Stabilization Program funding through this, a competitive process. The City of Minneapolis was awarded $19.5 million in a consortium agreement with the City of Brooklyn Park Community Development Department, Hennepin County Housing Community Works, and the Transit Department. In addition, the City of St. Paul was awarded $18 million. This region's approach to neighborhood stabilization is a model of coordinated, cohesive community development that makes sufficient use of existing housing development capacity and sets a high bar for providing jobs and other benefits for members of the affected communities. Working in partnership with the Twin Cities Community Land Trust LLC, these jurisdictions have launched an innovative approach to using NSP funds. The Land Bank acts as an intermediary to identify, purchase and coordinate the disposition of foreclosed properties to a pre-identified group of nonprofit developers. [The prepared statement of Deputy Assistant Secretary Poethig can be found on page 127 of the appendix. ] Chairwoman Waters. Thank you very much. I did want you to get the part in about how much money they got, that's why I didn't stop you at 5 minutes, but I'm going to have to move on to Ms. Higgins now. Thank you very much. STATEMENT OF THE HONORABLE LINDA HIGGINS, MEMBER OF THE MINNESOTA STATE SENATE, DISTRICT 58 Ms. Higgins. Chairwoman Waters and honorable members of the committee, my name is Linda Higgins. I am the Minnesota State Senator from District 58, and I proudly represent north and downtown Minneapolis. For several years, I have carried and passed legislation related to foreclosures and the devastation that results. Visitors to my office are used to seeing maps showing the foreclosures by year in Minneapolis. Jaws drop when they see, graphically displayed, the density of foreclosures in my district and the change from year to year. Many comment that there are so many dots overlaid on the other dots, that you can't see the base map. Clearly, we are ground zero for foreclosures in our City, our County and our State. Our mayor says it this way: ``When Minneapolis gets the sniffles, North Minneapolis gets pneumonia.'' I would like to describe the state of my district after years of foreclosure. Thousands of families have lost their homes. They have moved away or they have moved in with their friends or families. They're still hurting from the loss of that family home, and the opportunity to purchase another home seems a distant dream. The foreclosed-upon properties are being repurchased for considerably less than the previous price that was paid. Some families have been able to purchase great houses that are in pretty good shape. Others are buying homes that have been rehabbed with NSP funds. Others are taking a chance and buying a house that could kindly be called a fixer-upper. Many homes have been vandalized, had copper stripped, sometimes had fires, and many of those are now demolished. Other homes are being snapped up by investors. Some of those investors are clueless about how to rehabilitate a house and get good tenants. Others think that the laws really aren't meant for them. They buy a house for pennies, paint some of the walls, maybe they'll scrub the appliances, and then they rent it out. They forget the small details, like maybe the house was condemned, and that there are requirements for lifting the condemnation and getting a new certificate of occupancy and a rental license. A case in point is a condemned fourplex near my home. It was bought by a consortium of investors from North Dakota. The consortium has bought about 50 properties in North Minneapolis, and they hired someone local to get them in shape to rent out. It has now been 8 months since this gentleman started having work done on this building. A couple of weeks ago, he failed what was to have been the final inspection, so it's still condemned. He lied about being an asbestos abatement contractor, and illegally and dangerously removed the asbestos himself, and he got caught. I understand, unfortunately, that his work at his other properties is equally shoddy. There are still many blocks in North Minneapolis with more than one vacant house. This proves challenging in the winter especially. The sidewalks might go unshoveled, the pipes will freeze if they haven't been winterized. Sometimes people move in. If the house becomes open to trespass, it will get boarded- up. And according to a 2001 study in Philadelphia, houses within 150 feet of a vacant or abandoned property experience a net loss of $7,627 in value, making it more of a burden on the neighboring residents. In addition, a study in Austin, Texas, found that blocks with unsecured vacant buildings had 3.2 times as many drug calls to police, 1.8 times as many theft calls, and twice the number of violent calls, as blocks without vacant buildings. In 2007, I carried and passed a Predatory Lending Prevention package in the Minnesota Senate which: requires mortgage lenders to verify the borrower's ability to pay the loan; prohibits refinancing that does not benefit the borrower; requires the mortgage lenders to act in the best interest of the borrower; requires that people receive mortgage financial counseling before refinancing a special mortgage, like those no-interest loans from Habitat For Humanity; bans financial penalties for early repayment; requires a mortgage originator to orally inform a borrower of the additional taxes and fees that are associated with the loans; allows the borrowers to sue if they are harmed by predatory lending or an overinflated appraisal; and finally, it makes mortgage fraud a specific crime all on its own. Minnesota has also passed several progressive measures to address protections for renters affected by foreclosures. In 2008, I carried a bill that requires landlords to tell prospective tenants that the property is in foreclosure, and to waive any penalty if the tenant in the foreclosed property withholds the last month's rent. Another bill in 2008 provided for mandatory expungement of an eviction if a tenant vacated a foreclosed property before the expiration of the redemption period or if the tenant never received the required notice to vacate. We will continue working on renter protections in 2010. Minnesota appreciates the Federal resources that have been sent out to the States to address the foreclosure crisis. However, some Federal policies actually impede our progress here in the States. For example, Federal legislation preempts the State control of federally-chartered lending institutions, making State efforts less effective than they would ordinarily be. Our 2007 bills were called the strongest in the Nation, but in actuality only State banks were actually affected. Since most State legislatures are considerably more nimble than Congress, removing the preemption would allow us to do what needs to be done in a more timely fashion than waiting for a Federal solution. Thank you again for being here today. We really appreciate your interest in this issue, because it affects all of our constituents. Thank you. [The prepared statement of State Senator Higgins can be found on page 101 of the appendix.] Chairwoman Waters. Thank you very much. Our next witness will be the Honorable Jim Davnie. STATEMENT OF THE HONORABLE JIM DAVNIE, MEMBER OF THE MINNESOTA HOUSE OF REPRESENTATIVES Mr. Davnie. Thank you, Madam Chairwoman, and members of the committee. I'm grateful for the opportunity to testify before you today. I don't need to review for members of the committee the details of the foreclosure crisis that has swept our Nation for the last number of years. While Minnesota did not lead in experiencing that foreclosure crisis, I do like to think that we have led in responding to that foreclosure crisis. And I would like to stress that I believe we did that by working collaboratively across jurisdictions, as this panel reflects, as well as in ways that are broadly inclusive of the multiple stakeholders in our community and across our State. In 2007, as the foreclosure crisis was first being recognized, we established a working group led by our Attorney General Lori Swanson and a group of stakeholders that she had assembled, and proposed and passed an aggressive platform of foreclosure prevention and mortgage lending reform proposals. I was privileged to author the lead piece of that legislation in the Minnesota House. Senator Higgins, my colleague and friend on this, has explained the critical elements of that proposal in her testimony. Additionally, to the work that she has described, we worked that year to close loopholes in State law that were being exploited by equity strippers to the detriment of challenged homeowners. The following year, as our recognition and understanding of the foreclosure crisis evolved and received wider acknowledgment, a broad array of stakeholders was brought together, and drafted a robust package of reforms aimed at easing the fallout, not just for homeowners, but, as has been discussed, the large number of renters who are being caught up in the foreclosure crisis, as well as owners of manufactured homes. Those initiatives prioritized increased emphasis on foreclosure prevention outreach, to provide assistance to struggling homeowners earlier in the foreclosure process, strengthening and protecting the position of renters swept into the foreclosure crisis, and providing owners of manufactured housing greater rights and protection. Additionally, that year both Houses of Legislature bipartisanly passed the Minnesota Subprime Borrower Relief Act, a narrowly targeted proposal that would have allowed lenders and borrowers more opportunity to work together to create mutually agreeable loan modifications based on the ability to pay of the borrower. Unfortunately, that legislation was vetoed by Governor Pawlenty. Over the same time period, Minnesota Legislatures have increased funding for housing programs and capital investment in affordable housing. We have created the ability for renters to take over the payment of utility bills that are in arrears and deduct those payments from their monthly rent, and fashioned a mechanism for the automatic expungement of eviction records where a renter is a victim of foreclosure. Looking forward to the 2010 Minnesota Legislative Session that will begin in just a few weeks, we're looking at a significant proposal for bonding, for affordable housing, and proposals to streamline the foreclosure notification process, to, again, get to those challenged homeowners as early in the process as possible. Looking forward to Federal assistance, we are, as has been stated, extremely grateful for the $19.5 million that Minneapolis has received and other communities from the American Recovery and Reinvestment Act. In speaking with advocates in preparation for this hearing, what they called for, and I hear their voices, is a 1-2 punch from the Federal Government. Punch 1 is additional resources for affordable housing, and punch 2 is aggressive reforms of our financial system in ways that create more responsible lending and protection for consumers, so that they can go into the homeowner process secure that their investment in their families and communities will remain. Again, I want to thank you for the opportunity to testify before the committee today. [The prepared statement of State Representative Davnie can be found on page 87 of the appendix.] Chairwoman Waters. Thank you very much. Our next witness will be the Honorable Gail Dorfman. STATEMENT OF THE HONORABLE GAIL A. DORFMAN, COMMISSIONER, HENNEPIN COUNTY, MINNESOTA Ms. Dorfman. Chairwoman Waters, on behalf of the residents of Hennepin County and my colleagues on the County Board, I am pleased to welcome you here today to Minneapolis and Hennepin County for this important field hearing. Our own Congressman Keith Ellison has been at the forefront of efforts to effectively respond to the foreclosure and housing crisis both nationally and here at home. We are thankful for his leadership and representation, and we know that we're lucky to have this strong congressional team of Congresswoman McCollum and Congressman Ellison. I want to say up front that the most important and effective action we have taken is to come together as a community to collaborate and innovate as partners through the Minnesota Foreclosure Partners Council. We have a coordinated plan focused on data collection, counseling and outreach, community recovery, and legislative and legal strategies, some of which you have heard about. And while the pace of new foreclosures slowed a bit in 2009, and our prevention and revitalization efforts grew, in large part due to the influx of Federal support, we cannot say yet that we have turned the corner on this crisis. Instead, we have seen the foreclosure problem shift from the city to the suburbs, and from being caused by mortgage products to now being impacted by job loss and unemployment. Hennepin County is the largest unit of local government in Minnesota. There are 46 municipalities, with a population of just over 1 million people. The number of annual mortgage foreclosure sales in Hennepin increased from over 3,000 in 2006, to 5,600 in 2007, to more than 7,300 in 2008, and went back to the 2007 level this past year. That's just shy of 22,000 foreclosures in 4 years, representing 4 percent of our overall housing stock and particularly devastating urban and suburban communities with the highest concentrations. As a result, home values have fallen dramatically in the neighborhoods with the most foreclosures, with a 14 percent decline in home values in North Minneapolis, and 10 and 12 percent declines in the Cities of Brooklyn Park and Brooklyn Center. Let me just touch briefly on what we have been doing at the County. We have provided prevention counseling resources for at-risk homeowners and renters through the Minnesota Home Ownership Center, HOME Line, and Legal Aid that have been accessed by more than 3,200 households. We have held 25 foreclosure workshops at our libraries, like this one, and distributed a workshop video seen by thousands more. We have stepped up efforts through the Sheriff's Office and community partners to make sure that both owners and renters facing foreclosure understand the process and their rights under the law. We have been aggressively prosecuting mortgage fraud cases through County Attorney Mike Freeman's office. To date, 24 persons and companies have been convicted, and charged cases involve 210 properties with over $60 million in fraudulent loans. Hennepin County was awarded $8.6 million in NSP funding to work with 7 targeted suburban cities, along with Habitat and the Land Trust, to acquire and rehab abandoned and foreclosed homes and to primarily assist first-time home buyers, with our NSP goal of providing affordable homeownership for 200 households this year. We have invested an additional $2 million through the County Affordable Housing Capital Fund and Federal HOME Program to rehab another 79 foreclosed and vacant properties in 2009. And since 2000, the County has provided over $35 million in local county funding to assist in the preservation and new construction of over 3,400 affordable units. We are targeting some of our Homeless Prevention and Rapid Re-Housing (HPRP) funds to help renters at risk of homelessness due to foreclosure--65 percent of the foreclosures in the City of Minneapolis involve rental properties, and approximately 10 percent of the families who showed up in our homeless shelters over the past 2 years are renters coming from these properties. HPRP, frankly, is the best tool we have right now to address the problem of renters impacted by foreclosure, through our City/County HPRP partnership and our contracts with community agencies. Legal Aid is providing the legal assistance that buys the family a little more time, and St. Stephen's provides the relocation assistance so that families never have to even enter a shelter to get help. Just since October, these two agencies have served over 130 people and 40 families. Let me share just one story to illustrate how well this is working. Legal Aid has been working with a single mom with two children who has rental housing with a Section 8 voucher. She moved in last year, and was notified just before Thanksgiving that she had to move out within 48 hours because the house was in foreclosure. Despite the requirements of State and municipal law, the landlord had not disclosed the foreclosure. Legal Aid attorneys were able to get the 48-hour notice retracted. The bank then issued the 90-day notice, but Legal Aid informed the bank of her Section 8 status and was able to extend the family's stay to when their lease ends this summer. Legal Aid is now working with the family and St. Stephen's to make sure the utilities stay on and that the family is resettled into a new home next summer. Without this help, this family would surely have ended up in a shelter this winter. So in Hennepin, we're tackling the foreclosure and housing crisis from every angle we can, but we're still falling short. For every family who gets out of a shelter, there's another family in line to take their place. For every family we work with to prevent foreclosure or find alternative housing, there are new families walking away from their homes because they owe more than their home is worth. NSP is working to leverage other public and private resources, to stabilize our communities and provide affordable housing, but it's not a model that works well for renters and for households of 30 percent or below the average median income. We're also struggling with NSP dollars in competition with private investors and speculators who put cash down and can move much more quickly to acquire the properties, because they don't have to comply with environmental assessments, appraisals, discounted prices, and inspections. We worry that we'll not be able to meet the September 30th deadline of having all our NSP funds committed. We are thankful for the new Federal assistance, but Hennepin County and our local governments cannot solve this problem alone. We have stepped up to fill the gaps, to help our neighborhoods impacted by foreclosures and families who have lost their housing. And for Hennepin, responding to the foreclosure crisis, frankly, didn't fit neatly into our organizational structure or mandated services, but we did it anyway. But we don't see the financial sector doing that. It's time for the financial sector to do what the rest of us are doing, step up and help us turn the corner on this crisis. Thank you. [The prepared statement of Commissioner Dorfman can be found on page 92 of the appendix.] Chairwoman Waters. Thank you. The Honorable Dan Bartholomay. STATEMENT OF THE HONORABLE DANIEL M. BARTHOLOMAY, COMMISSIONER, MINNESOTA HOUSING FINANCE AGENCY Mr. Bartholomay. Madam Chairwoman, members of the committee, Representative Ellison, and Representative McCollum, thank you so much for the opportunity to testify today and for holding this hearing in Minnesota. As Commissioner of the Minnesota Housing Finance Agency, the State's affordable housing financial institution, my testimony relates primarily to finance issues. It is Minnesota Housing's mission to advance affordable housing opportunities to low- and moderate-income Minnesotans. And since 1971, Minnesota Housing has invested more than $8.7 billion and assisted more than 750,000 households. Every other year, we go through a process to develop an affordable housing plan that describes the Agency's sources and uses of funds. For the 2010-2011 biennium, the Agency will invest about $1.4 billion of Federal, State, and agency- generated funds to finance new affordable housing opportunities, preserve existing affordable housing, end long- term homelessness, and address foreclosures. A large portion of Minnesota Housing's resources are dedicated by law to specific purposes. Of the Agency's discretionary budget of about $180 million, the Agency has specifically allocated 18 percent for addressing foreclosures. Our Agency has used both the State and Federal resources through the Neighborhood Stabilization NSP 1 mortgage revenue bonds and home funds to address foreclosures in the areas with the highest need. Mortgage revenue bonds represent a large portion of the resources available to Minnesota Housing and other State housing finance agencies and local governments. It's important to note that earnings on the loans financed with bond proceeds are used flexibly to create more affordable housing. They constitute 15 percent of our 2010-2011 affordable housing plan and have enabled the Agency to dedicate $50 million to end long-term homelessness. As a result, a well- functioning bond market has implications well beyond affordable mortgages that the HFAs provide. The impact of the foreclosure crisis on bond markets is not well-known. Access to bond market capital is critical to financing affordable housing. So turmoil in the market has a significant negative impact on HFAs' ability to meet their missions. Because Minnesota Housing and other HFAs did not participate in the exotic mortgage-making practices, their portfolios have fared significantly better than other lending institutions. Despite this performance, the market did not differentiate between predatory and subprime mortgages and HFA mortgages. The foreclosure crisis drove bond investors away for two primary reasons. First, the disintegration of the subprime mortgage portfolio was generalized to all mortgages because investors either were not able to differentiate between subprime mortgages and healthy mortgages, or they didn't trust the information that would have enabled them to do so. Thus, housing bonds in general were tainted overall, and some corporate investors went so far as to prohibit the purchase of any housing related bonds, regardless of the credit ratings. Also, declining profits due to mortgage-related losses meant investors had less money to invest, and yields on housing bonds were higher. During some portions of late 2008 and early 2009, yields were so high that the debt issuance was infeasible, effectively shutting down lending by public entities. Matters worsened for HFAs once the Federal Government intervened to subsidize the broader housing market by purchasing mortgages at artificially low interest rates without extending the same benefit to public bond issuers, thus the most powerful tool available at housing finance agencies, the tax exemption of the mortgage revenue bond, lost most of its value. As a result, many of the housing finance agencies and virtually all local housing authorities ended their mortgage lending programs. Potential borrowers, our clients and customers whose access to credit was already strained by the broader economic forces, had lost yet another source to support housing. The recently implemented Treasury/HFA initiative will help restore some lost funding capacity, which will improve earnings potential prospectively as we look ahead. This new one-year program will provide about $275 million to Minnesota Housing to finance both homeownership and rental housing. Despite this, however, the Agency has and will continue for some time to have fewer funding resources due to two factors related to foreclosures: First, the significantly reduced 2009 lending volume has had a long-term impact on our ability to internally generate flexible revenue to plow back into housing; and second, losses in our existing loan portfolio, due to the declining real estate values of foreclosed loans, impaired our earnings in both 2008 and 2009. Both of these factors reduce our ability to provide housing assistance from internally generated resources, which, as mentioned earlier, are our most flexible resources, and constitute about 15 percent of all of our resources. So I urge Congress to continue funding foreclosure remediation, but in addition, to look at ways of improving the current NSP resources, which could move houses from the foreclosure inventory to homeownership much more effectively with temporary waivers of statutory requirements regarding processes of the Uniform Relocation Assistance and Real Property Acquisition Policies Act, URA Act, and also the National Environment Policy Act. These changes would permit final purchase offers to be made when acquiring foreclosed properties before completion of an appraisal and environmental review, putting the NSP purchaser on a more equal footing with investors who are not obligated to improve substandard housing or to make homes available to lower-income households. I also urge Congress to continue providing funding for foreclosure prevention, and Congress should explore new approaches to avoiding foreclosures. Providing relatively short-term financial assistance to homeowners in certain circumstances so they can continue to make loan payments during their economic troubles, may be less costly both to the homeowner, lender, and neighborhood in the long run, rather than foreclosure. The Tax Credit Exchange Program that permits States to exchange low-income housing tax credits for grants from the Treasury should be extended to permit continued development of low-income housing for families, including those who have lost their homes through foreclosure. Before closing, I would just like to thank you again, and Congress for the financial support provided to both State agencies but also local governments over the last few years. The Tax Credit Exchange Program and the Tax Credit Assistance Program have both been essential to continuing to support and develop affordable rental housing. The NSP 1 and now 2 are invaluable to turning around foreclosure-impacted neighborhoods. We take pride in our partnerships with the Federal Government, the State government, and with local government, but also the private sector, in providing and preserving affordable housing in Minnesota. Thank you very much. [The prepared statement of Commissioner Bartholomay can be found on page 77 of the appendix.] Chairwoman Waters. Thank you very much. I believe the correct pronunciation of the last name of this gentleman, I have missed. It is spelled ``S-t-r-e-i-t-z.'' Would you please tell us the correct pronunciation of your name? Mr. Streitz. Madam Chairwoman, it is ``Streitz.'' Chairwoman Waters. All right. I knew I was saying it wrong. Mr. Tom Streitz, you are the next witness. STATEMENT OF THOMAS STREITZ, DIRECTOR, HOUSING POLICY AND DEVELOPMENT, MINNEAPOLIS DEPARTMENT OF COMMUNITY PLANNING AND ECONOMIC DEVELOPMENT Mr. Streitz. Madam Chairwoman, Representative Ellison, Representative McCollum, thank you, first of all, so much, and welcome to the great City of Minneapolis. I just want to take a moment to say thank you for your efforts. I am the former deputy executive director of the Minneapolis Public Housing Authority. I spent 7 years working in public housing with this great agency here and Executive Director Cora McCorvey, and I'm well aware of your long record to support the public housing residents, and the work that you all do, I really, really appreciate, so I wanted to say that right out of the gate, so thank you. I would like to express my appreciation on behalf of the mayor and the council members of the City of Minneapolis and our partners for this opportunity to share our viewpoint and recommendations on the successful implementation of the Neighborhood Stabilization Program. I would also like to thank the Subcommittee on Housing and Community Opportunity for bringing NSP implementation issues forward. Finally, I would also like to thank the United States Department of Housing and Urban Development, not only for awarding funds to Minneapolis, but for the changes they have made in developing a Neighborhood Stabilization Program in response to our program suggestions to improve the feasibility of carrying out the program in our local housing markets. The NSP resources that you have provided have proven critical to addressing the foreclosure crisis in our neighborhoods. However, the current allocation is only a first step when looking at the challenges faced by our communities most highly impacted by foreclosures. The stability of these Minneapolis neighborhoods is significantly and uniquely impacted by the high percentage of decline in property values, the level of fraudulent mortgage activity, and the disproportionate effect of foreclosures on people of color. One notable manifestation of the high level of fraudulent activity in Minneapolis was the investment company known as TJ Waconia which purchased and flipped more than 150 homes in North Minneapolis. The City, with the assistance of the County, was successful in prosecuting the principals who are now in Federal prison. The homes that were--thank you. It's a huge victory. The homes that were a part of this scam have now been recovered and are being rehabilitated and sold to homeowners. It should be noted that low-income neighborhoods in our community have also lost hundreds of millions of dollars of equity, stripped from the neighborhoods. Residential mortgage foreclosures continued to rise in Minneapolis until 2009, when we have detected a slight downturn in foreclosures. The decreases are partially due to lenders' voluntary moratorium on foreclosures and the increase in foreclosure prevention loan modifications or short sales. In 2006, 1,610 homes in Minneapolis went to foreclosure sale, over half of them in North Minneapolis. In 2007, 2,895 homes went through foreclosure sale, 54.7 percent of these were in northside wards of the City. In 2008, there were 3,000 foreclosures. Foreclosures, as I mentioned, decreased slightly in 2009, with 1,896 through the end of October. Many of these foreclosures are investor-owned properties that we have heard about from various panel members. Minneapolis neighborhoods hardest hit by foreclosure are in South Central, Northeast, and North Minneapolis, as discussed. My testimony now will address the following specific issues or questions raised by the committee. The first question asked how the NSP program in Minneapolis is tailored to address the foreclosure crisis in the City. Well, Minneapolis, as mentioned earlier, has some unique strategies that we have put in place, and they are focused on: number one, prevention; number two, reinvestment, purchasing and rehabilitating homes; and number three, repositioning these neighborhoods for market recovery. Minneapolis received $14 million in NSP 1 resources and has dedicated an additional $3 million in non-Federal funding to the Minneapolis Advantage Program to assist low-income households with downpayment and closing cost assistance in the purchase of foreclosed properties. Minneapolis, through a consortium agreement with Hennepin County and the City of Brooklyn Park, was awarded $19.5 million in NSP 2 resources to be allocated to eligible activities. With the additional funding, the City of Minneapolis and our community partners, many of whom are here, will be poised and able to purchase and rehab and get back in the hands of homeowners over 700 homes in our hardest-hit neighborhoods. The City is putting NSP 1 dollars to work. Over 43 percent of the funds that we received in the first round have been obligated. We have nine nonprofit developers that are in the neighborhoods buying homes for closing them, and people are moving into the homes, so I want you to know that we're acting responsibly, we're investing quickly, and the money's being obligated. In response to question two, Minneapolis has located and been able to purchase REO properties, real estate-owned properties--I didn't know that word 2 years ago, REO, but I have learned it now--and ensured the participation of banks and other owners of REOs. As was mentioned earlier, Minneapolis uses two novel concepts in its efforts to purchase REO properties. As has been discussed here today, the major issue confronting many of our neighborhoods are investors coming in from outside of the community with no connections to the community, and we're in a race against cash investors in our City. And one of the unique things that we have been able to do, working through the First Look Program, part of the National Community Stabilization Trust, we formed something called the Twin Cities Community Land Bank. The First Look Program, in combination with the Land Bank, has been central in our efforts to get our properties out of the hands of banks and back into the hands of homeowners. The Twin Cities Community Land Bank is a public-private venture with a focus on community re-building efforts. The First Look Program is coordinating the transfer of REO properties from financial institutions nationwide to local housing organizations in collaboration with State and local governments. A key component of recovery efforts is to gain control of properties and then manage the disposition and redevelopment of those properties at a scale large enough to build confidence and stimulate investment. Finally, the third question asked of me was, what challenges are we facing when dealing with NSP 1 and NSP 2? As mentioned earlier, I think there are three areas that we really need to focus on in our future efforts. Number one is, again, a recognition of the fact that we're in competition with investors. As the commissioner pointed out, there are regulations in the NSP program that are very burdensome, and when we're competing against cash investors, we have willing buyers who are told to wait 30 days, we have other requirements, such as the environmental, etc., that are simply making our efforts to purchase these homes extremely challenging. I encourage HUD to look at these regulations and work with communities to make changes. Finally, I would like to advocate that the definition of eligible properties under NSP 2 be redefined to include short sales. That is the new--the new foreclosure is a short sale. So we have a one-month inventory of foreclosure properties in the City of Minneapolis, Twin Cities area today, and we have a 12- month inventory of short sales. Cities, communities, our partners who are trying to purchase these homes are stymied every step of the way by incoherent recordkeeping at multiple banks, and servicers fighting, and the homes remaining vacant and a nuisance to the adjoining neighbors. In addition, we recommend some changes to address limited funding. I hope NSP 3 will come forward, and I would encourage whatever future efforts we have, that they be more focused on being upstream. As has been mentioned here today, we have larger issues, and if we can keep families in homes, mortgage foreclosure prevention counseling is key, emergency crisis repair funds to help low-income seniors and other low-income people who are choosing between paying mortgages and their roof or a boiler, employment services to increase household income, and foreclosure-related assistance to stabilize renters in particular who have been very hard hit. Finally, I commend the subcommittee today for focusing on the impact of foreclosures on low-income renters. In Minneapolis last year, over 50 percent of all foreclosures were rental properties, many of the tenants affected paying their rent and given no notice of the default of the landlord, and many ended up homeless, as described earlier. Finally, I want to thank you again for this opportunity, and I look forward to working with you and stand ready to answer any questions you may have. [The prepared statement of Mr. Streitz can be found on page 137 of the appendix.] Chairwoman Waters. Thank you very, very much. I would like to thank you all for appearing before the subcommittee today, and without objection, your written statements will be made a part of the record. I would now like to begin our question period. Let me-- there's so many things that I would like to discuss, but let me just kind of gear in on these foreclosed properties, these REOs. And since we have HUD here today, I want to talk about FHA a bit. Before I say that--are you getting ready to leave? Ms. McCollum. I'm going to have to leave in a few minutes. Chairwoman Waters. Well, I have to yield my time to you to raise your questions first before you leave. But let me just say that we are so pleased about HUD. Secretary Donovan is like a breath of fresh air. We have gone through a period of time where we had a Secretary who did not care very much or know very much--that's a bad combination. And so Secretary Donovan is working very closely with us, and I'm very pleased, and I just want to say that. I'm going to yield the first 5 minutes to Ms. McCollum to raise her questions. I know she must depart very soon. Ms. McCollum. Madam Chairwoman, that's very generous of you, and I thank you and Congressman Ellison. I'm going to go back and ask a question on something that I mentioned when we were talking together earlier, and that was short sales. And thank you so much for bringing that up. I have been working with Realtors who have been trying to do short sales and paperwork, they think they have it done, time on hold, and they're up against a crunch. One of our financial institutions here is actually sitting down and working--I had people get together in the room to try to address it, because the financial institution, quite frankly, it wasn't getting up the food chain, for them to know that there was a problem. And so they're also working to address it. Because this is kind of new for them, too, to be involved in this. So if I could just maybe--the only question I would have is, to educate us a little more about your experience with short sales and what we can do. Some of it's not governmentally, some of it's going to be leadership, in getting people at the table to talk. Would you just give us your background on short sales and what you think we can do or should do? Mr. Streitz. Madam Chairwoman, Representative McCollum, thank you for that question. Absolutely, short sales are what I call the new foreclosure. And as I mentioned earlier, we have a one-month inventory of foreclosures, 12 months of short sales. I can give you one example. A home became vacant in North Minneapolis and was caught in the short sale process, and it took 22 months, working with 7 different servicers, banks, to determine even who owned the property, because of confusion with paperwork, etc. Now that may be an extreme example, but I also talk to Realtors, and we meet on a monthly basis with local Realtors, who encounter significant issues of getting the banks to respond. Now there are multiple reasons for that, I believe, and the one is, of course, we have many, many banks, particularly locally, that act as servicers. Wells Fargo, U.S. Bank, Bank of America, are some of the biggest servicers of mortgages. However, as you know, because of the investor- related sale of these mortgages, often determining who the investor buyers are and getting their consent to the short sale is extremely problematic. I would like to suggest that we engage in what I like to call--we introduced the First Look Program to foreclosures. I think we need something that I'm terming the ``Last Look Program'' for short sales, and that is to incentify, as the banks and servicers, like we did with HAMP and our First Look efforts, to sit down with communities and Members of Congress and others, to have an expedited short sale process. I understand that the Obama Administration has proposed something like that, and maybe one of our other panelists from the Department of Housing and Urban Development can talk about it, but I think we do need to sit down with lender partners, we need to pilot a new program that would allow us an expedited access to these properties. As you know, Congresswoman, the properties sitting vacant attracts crime, it declines further the property values surrounding the properties. So getting banks and servicers to sit down together and, frankly, figure this out, is something that I think we're going to have to encourage very strongly, from Congress, from our regulatory agencies. Otherwise, our communities are going to continue to have negatives impacts of foreclosed and, well, frankly, vacant homes. Ms. McCollum. Maybe that's something Congressman--while we work congressionally, Congressman Ellison and I can do. Because I do know two of the financial leaders that you mentioned here, both Wells Fargo and U.S. Bank, want to turn this tide around. They have been very receptive. We have been very fortunate with the leadership here with both of those banks. When we sit down and talk to them about something, they're very open to address it. And I see you're nodding your head as well. Maybe sit down with Realtors and some of their folks to look at it. And, Keith, we could do that together while we work on a congressional solution, because many people--I don't think the right people necessarily were aware of what the problem was, with even faxes just sitting because there was so much stuff going on. A dedicated fax machine for short sales might even be a solution in some areas. So thank you, Madam Chairwoman. Chairwoman Waters. Thank you very much. I would like to address my question to Ms. Erika Poethig. Pronounce your name for me also. Ms. Poethig. ``Poethig.'' You said it wonderfully. Chairwoman Waters. Oh, thank you, I got that one right. I'm concerned about the FHA foreclosed properties, the REOs, and not just as relates to FHA, but for the other banks and mortgage companies also. I'm hearing a lot about what is happening and what is not happening with these properties. First of all, before I came here, I heard in Los Angeles about the speculators and the investors who have an edge up, who have the possibility of getting access to these properties in ways that compete with legitimate would-be home buyers, often who are bidding on these properties. And they are not just underbid by the investors, sometimes these properties are going for less than they could be sold for because there's some kind of special relationship between something called the Association of REO Brokers, who have an organization where they get access to these properties, and not everybody can even join the association. They have cut out people from being able to join the association by saying they're limited to only a certain number, which I think may be questionable. It may be something that needs to be looked into. But with the FHA properties, how are they being disposed of? Do we have the same kind of problems of speculators being able to have access to these properties over others and would- be buyers, etc., etc.? How are the listings done? That's another problem that I'm told by some of the Realtors in the communities that have been targeted by these institutions that have caused the foreclosures to begin with. But many of the local Realtors who work in these communities don't have access to the listings, because the Association of Real Estate Brokers seem to have the first possibility for this. What is going on with this? Are we entering into another problem with these foreclosed properties by the same people who created the problem to begin with? What is happening here? Ms. Poethig. You raised so many important questions, Madam Chairwoman, so let me take the--I think the first one, which is this more global issue of the relationship between HUD homes or FHA foreclosed properties and the NSP program, and tell you what we're doing in relationship to NSP 2. Our office of FHA is mapping our foreclosed properties on to the target areas for the NSP 2 program, to facilitate and help communities target those homes as part of the Neighborhood Stabilization Program. So that's one step we're trying to take to improve the coordination, to ensure that those homes get into the hands of low- and moderate-income buyers. The other thing that I want to say, addressing your question, is that the HUD homes program and the foreclosed program features a priority period for most sales, where the sales have to go--be available only to purchasers who will occupy the home as their primary residence, or to nonprofits, or the local jurisdiction, who will probably turnkey to an eligible borrower. So we are trying to-- Chairwoman Waters. Does this include the housing authorities also? Because they're selling to the Section 8s; right? Mr. Streitz. That's right. Ms. Poethig. To local government? I am not the expert on this. We can get back to you in public record to clarify that point. Establishing this preference, though, is one way we're trying to mitigate this issue related to speculation. The other question you raised--and I actually looked into how many foreclosed homes there are in Minneapolis. So there are 40 HUD homes in Minneapolis, 20 are actually under contract to sell right now, and our Office of Single Family Asset Management is really working with a contractor to improve, to your issue the way listings are done. But I can provide in the public record a more detailed description for you about the more national sort of issues and particularly those in your district. Chairwoman Waters. Let's just talk about here in Minneapolis. Of those 40 homes, who controls the listings on those? Ms. Poethig. We have a contractor who is responsible for the sale of those homes. Chairwoman Waters. Who is the contractor? Ms. Poethig. I'm sorry, Madam Chairwoman, I don't know the name of the contractor. Chairwoman Waters. Probably some of the real estate people know who it is. Ms. Poethig. I'm sure, yes. Audience. Best Assets. Ms. Poethig. Best Assets. Chairwoman Waters. Okay, all right. And what is the contractor's responsibility? Ms. Poethig. To manage the REO process, to, on behalf of HUD, put forth those properties for sale. Chairwoman Waters. So they actually do the upkeep on those properties also? Ms. Poethig. (nods affirmatively) Chairwoman Waters. And they're also involved in the sale of those properties to individuals who want to buy them or to speculators or investors also? Ms. Poethig. Well, we have a priority period, and that priority period is intended to, of course, guard against speculation. However, after that priority period, those properties are available for sale. Because we have to--of course, FHA, as an insurance program, has to try to recover any losses. But we are trying to protect against speculation. Chairwoman Waters. Do you feel that your contractor here in the Minneapolis area is carrying out the program in ways that would be consistent with your rules, your laws, about how to do this? Ms. Poethig. Madam Chairwoman, I am not the expert on this issue, but our Office of Single Family Asset Management can certainly provide something for the record that speaks to the contractor's capabilities. Chairwoman Waters. Is the contractor doing a good job here, audience? Audience. No. Chairwoman Waters. Okay, thank you so very much. Ms. Poethig. You're welcome. Chairwoman Waters. Congressman Ellison, please, for as much time as you would like. Mr. Ellison. Madam Chairwoman, I love the way you run a meeting, because we get real participation. I'm a little bit embarrassed to ask this question, but I have no pride, so let me just put it out there. How do you think we might improve NSP legislation? What are the barriers to participation for city- owned or State-owned entities that might help us acquire properties that we can then turn around and try to sell? I have been picking up earlier, before today, and also today, that there are certain institutional advantages certain cash investors have over public entities. What are those? And are these advantages in the Federal legislation, are they in local implementation, are they--is it statutory, is it regulatory? Who feels that they could sort of hit that pretty hard? Ms. Dorfman. Congressman Ellison, I can start. I think they're in the NSP rules. In order to acquire property in the suburbs, we have to do an environmental assessment, you have to give a 1 percent discount on the price, you have to do an inspection, and there are probably other regulations. And while we're going through that process, the house disappears right under us, to somebody who can just put down the cash, doesn't have to do any of that sort of regulatory work and can walk right in and take it. And that's happening to us in the suburbs and hard-hit cities like Brooklyn Center, Brooklyn Park, Richfield, over and over again, which is slowing down our ability to really use NSP dollars. Mr. Ellison. Commissioner, to your knowledge, is this something that the Feds sent down to you? Is it in the statute? Is it in how HUD has promulgated rules? Mr. Bartholomay. It's embedded in the statutes, I believe, that govern the process overall that are applied to NSP. So some of these regulations existed pre-NSP, but then NSP has to comply with them. And that's why in my testimony I talked about waivers, short-term waivers for NSP programs. There is more detail in my testimony on that, but that's--the nub of the issue is that potential buyers cannot sign a purchase agreement or make an offer without first having an appraisal and also going through these hoops, if you want to call them, the environmental assessment. And so what happens is that a private investor is able to sign a purchase agreement, go get an appraisal and then do their work, and our partners have to do all the work before they can make an offer. And that essentially makes it really difficult for them to compete with the private sector. Mr. Ellison. In your testimony, which I did read last night but apparently not thoroughly enough, do you lay out how we can put the NSP buyer on equal footing with the private cash investor? Mr. Bartholomay. Not in detail, but we could certainly put something together that would allow us to lay that out in a much more thorough and detailed way. Mr. Ellison. If we were to be able to put folks on equal footing--NSP buyers on equal footing with the private--and it's the cash investor, it's the person who doesn't need to worry about a bank loan; am I right about that? Mr. Bartholomay. I think it's the cash investor, but it may actually relate to other investors as well who would get a loan; right? Maybe you know more about that detail, but-- Mr. Ellison. Let me ask this one question. This is a congressional hearing. If we could get the NSP buyer on equal footing, what kind of a difference would that make? Mr. Bartholomay. I would say it would make a huge difference on a couple of fronts. One is, they would be able to buy properties that were in better condition, so they wouldn't have to buy the worst of the worst. They are going to get the better properties. And the money and the properties are going to move faster. Mr. Ellison. Okay. Mr. Streitz, do you want to elaborate on that? Mr. Streitz. Yes. Congressman Ellison, I think this is exactly getting to the issue that's very much a phenomenon in the City of Minneapolis and Los Angeles as well, and that is the cash investor. I can give you numerous examples, and I'll submit additional testimony with the examples, if you would like, where we have had a buyer who wants to invest in the neighborhood, live in the home, and we were told by the selling agent, no, we're not going to accept your offer because we have a cash investor, you don't have to go through the environmental, we don't want to wait for the FHA approval of the loan, which was a big, big issue, so you wait 30 days, and the people say, I'm going to take the cash. And that happens repeatedly. I think the default under the statute, Congressman, is that it adheres to CDBG regulations. And so--and I see our HUD representative here shaking her head. CDBG are the default regulations under the NSP program, and therein lies the problem, of the environmental and--I see Alfred shaking your head. Thank you, Alfred, because if I'm getting this wrong, tell me. He's our guy on the ground. But those are the main issues we're facing. And when you're in a climate where every house is being bid on, and you have a buyer--once again, I'll submit additional testimony--who is looking to invest in the neighborhood, live there with their children, be a neighbor, and they have multiple hoops to jump through, the environmental, the historic preservation, the waiting period for FHA, and then you have a guy standing there from outside the community, typically a lot of them are working with REO agents who have hundreds of listings, and they come and they offer cash, and the seller takes the cash. Mr. Ellison. Can you all help get us a little bit more up to speed on the problem here? It seems to me that we could--if it's a Federal statutory issue, we might be able to really weigh in on that front. Would you all mind putting some things together? Mr. Streitz. We would be happy to. Mr. Ellison. That's a good one. The other thing is-- Mr. Streitz. And, Congressman, could I just make one more point on that? Mr. Ellison. Sure. Mr. Streitz. And then the result is, when there's a cash investor--not all investors are bad, but most of them are from outside the community, they don't live here, and the difference is this: The home becomes, in many cases, very minorly repaired. I call it the caulk-and-paint job, unlike NSP. In NSP, our developers, our nonprofits and for-profits, we require them to meet green community standards. So here's the difference. A family walks into a home with a new roof, new windows, essentially a new boiler. They're going to save thousands of dollars in utilities. They have gone through foreclosure prevention counseling. They're working with a counselor actively. So we're creating sustainable homeownership. Compare that with the outside investor who buys a home in cash, does the paint-and-caulk job, moves a family in, often without adequate ventilation or heating, and mold in the basement, we see that repeatedly, and then when things go wrong, you call them, and that person lives in Florida or North Dakota or South Dakota. We have people in North Minneapolis sending rent to Puerto Rico, for example. So when problems occur with the property, and the neighbors try to contact someone, there's no one to be contacted, because they have no connection to the community. Thank you for indulging me. I just wanted to share the difference and what happens to the community in one circumstance versus the other. Mr. Ellison. And my thought is, all these things that NSP regulations seem to require are good. Of course, we want some kind of environmental assessment; of course, we want to make sure these things are done. But if these requirements are essentially disadvantaging that NSP buyer, then what we're doing is we're defeating our own purpose. We're like the dog chasing his own tail. And I think we have to find a way to preserve those considerations without--but still be able to operate with the kind of speed that we need and get through that red tape. So that would be a great thing, if we can work on that, and I appreciate any input you have, and so, good. I knew something good was going to come out of this hearing. Ms. Dorfman. And, Congressman, those dollars have to be committed by September of this year, and that causes a crunch. Mr. Ellison. Right. Well, I was going to go to you next, Commissioner. Commissioner, you're actually the next on my list of questions. Because if we're having trouble meeting our September deadline, September 30th, can you tell me, are you getting the kind of technical assistance from HUD that you think that you need? And what more can be done in Hennepin County? Ms. Dorfman. Congressman, thank you, that's not the problem. The problem is, we're having trouble acquiring homes. We're doing a really good job of identifying families who are ready to move into homes, and giving them the downpayment assistance through NSP. We have done over 100 already that we're processing. But the actual acquisition and rehab, that's where we're slowing down. It's just tougher to get those properties. And so we'll have to turn back any money that we don't spend, if it's not committed. Mr. Ellison. Can you guys talk about what we're going to do to make sure we don't have to turn back money? Ms. Dorfman. Well, we are scrambling. Mr. Ellison. Right. But what can we do, perhaps, to help you? Extend it? Extend the deadline? Ms. Dorfman. Extending the deadline would help. It's tougher in the suburbs. The average acquisition price is considerably higher than in North Minneapolis or in the City. It makes it tougher. Mr. Ellison. Okay. All right, good. If there's anything else you think of--extending's a good one. Anything else, Tom, you want to-- Mr. Streitz. Congressman, can I mention one other thing, since I see you making a list over there? I appreciate that. The discount requirement is a very large impediment. When you have cash investors who are willing to pay more than the discounted price, the seller's not going to sell to you. And so that is a major issue for us as well. So if we--since we're taking notes here, I would be hopeful that we could address that issue as well, the discount requirement. Because we're simply not seeing discounts in an environment where you have multiple investors and purchasers willing to buy the home. Mr. Ellison. All right, good. Another question for the Commissioner of our State Housing Finance Agency. The housing finance system is something that the Financial Services Committee has identified as a priority in this upcoming year. Can you expand on what types of policy changes would be most beneficial to Minnesota with regard to housing finance? Mr. Bartholomay. Well, there has been a lot of work done this last year, year-and-a-half, to put some pieces in place that made a big difference for us and agencies like ours to be able to finance affordable housing in this market. Ultimately, the market is going to have to change, for things to progress. But we do think some of the recommendations or things that I was urging you to consider, extending the Tax Credit Exchange program, will--provided the economy continues to be like it is, and it doesn't seem like it's moving as fast, the recovery, as anybody would hope, that's going to be very important. I could certainly follow up with additional information for you on that too. My policy director is an expert in that area, and I could have her put together a list. We did submit a list to HUD of some ideas. I'm not sure that we shared that with you, but we could certainly do that. Mr. Ellison. We would appreciate that, thank you. Representative Davnie, I was interested to hear about your bill. As you know, you and I have talked about it before, and I thought it was a great bill, and I mean now the Minnesota Subprime Borrower Relief Act, which would have required lenders to make a good-faith effort to restructure mortgages before foreclosure. I'm working on a similar bill, H.R. 3451, which I introduced last year, which would require the lender, upon default of a federally-related mortgage loan, to engage in loss mitigation activities that provide for: one, long-term affordability of the loan; and two, maximum retention of home equity. The bill I have in mind, I hope to move forward in the coming year. Could you tell me, from your perspective, what's needed to move forward on mortgage servicer reform? Mr. Davnie. Madam Chairwoman, Representative Ellison, thank you for the opportunity. I think you know, through your conversations in the community, Congressman, the frustration experienced by many homeowners who are in trouble and foreclosure prevention counselors in engaging the financial institutions who hold the loans on modifying those loans. In my real life, I work for one of the major social service agencies in the State, and have frequent contact with some of the housing counselors there, and repeatedly get stories of the difficulty, first, of identifying, as has been identified here, who is the lender? They may be able to identify who the servicer is, but who is the lender? And then the issue we come to of the secondary market and the securitization of mortgage loans making identifying who gets to make the decision on modifying the loan more and more difficult. Any efforts that could be done to simply bring the transparency that's needed to the process, from the Federal level, would be a great help, I think, to those both as borrowers and to the folks who are trying to assist them in that. The work that you have done on looking to create a Federal system of consumer protection, I think, where we can get on the front end of assisting homeowners, as I spoke to in my earlier testimony, so that when they make the commitment to homeownership, they are assured that the product that they're using to get there for them and their family and their community is a stable product that will allow them to continue in homeownership, is critical as well. Mr. Ellison. And this question is both for you and Senator Higgins. I know that you all were working on mandatory mediation programs in the last session, which I was really excited about. But we're not the only State looking at a mandatory mediation program. I think in Pennsylvania, Connecticut, and Florida, they were looking at these programs. Can either one of you talk about the mediation bill that you all worked on? And please explain why, if you can, the governor vetoed the bill--Governor Pawlenty vetoed the bill. Ms. Higgins. Madam Chairwoman, Representative Ellison, I can't say it kindly, so I won't say it at all. I'm probably-- were you the author of that bill? Mr. Davnie. No, Representative Hillstrom. Ms. Higgins. Oh, okay. So you have two people here who were not authors of the mediation bill, so we probably don't have the detail that we should have. But it would have set out a process where there would have been a 6-month, 7-month period where mediation would have been required. It was a serious and honest attempt to get the lender to the table, which is something that we heard and continue to hear from one and all, that is the piece that we just can't get compliance on, is getting the lender to the table to have an honest discussion on how a mortgage can be restructured, how both parties can win in going forward. Mr. Ellison. I'm all done with my questions, Madam Chairwoman, so I yield back. Chairwoman Waters. Thank you very much. I'm very appreciative for the presentations that have been made by this panel, and the Chair notes that some members may have additional questions for this panel, which they may wish to submit in writing. Without objection, the hearing record will remain open for 30 days for members to submit written questions to these witnesses and to place their responses in the record. Thank you very much, panel, for your very informative presentation. The panel is now dismissed. Ladies and gentlemen, I'm pleased to welcome our distinguished second panel. We're going to move forward with our second panel. Please take your seats. We have a lot of good information for you. Our first witness will be Ms. Cora McCorvey, executive director, Minneapolis Public Housing Authority. Our second witness will be Mr. Chip Halbach, executive director, Minneapolis Housing Partnership. Our third witness will be Mr. Michael Dahl, public policy director, HOME Line. Our fourth witness will be Mr. Mark Ireland, staff attorney, Housing Preservation Project. Our fifth witness will be Mr. Richard Amos, director of housing services, St. Stephen's Human Services. Our sixth witness will be Mr. Marion Anderson, constituent, and renter displaced by the foreclosure crisis. And our seventh witness will be Ms. Christina Louden, constituent, and Section 8 voucher resident. Without objection, your written statements will be made a part of the record, and each of you will now be recognized for a 5-minute summary of your testimony. We will begin with our first witness. STATEMENT OF CORA A. McCORVEY, EXECUTIVE DIRECTOR/CHIEF EXECUTIVE OFFICER, MINNEAPOLIS PUBLIC HOUSING AUTHORITY Ms. McCorvey. Chairwoman Waters, Representative Ellison, I am Cora McCorvey, the executive director of the largest Public Housing Authority in the State of Minnesota, with over 6,000 units of public housing and 5,000 housing choice vouchers. I am honored to be here on behalf of the Minneapolis Board of Commissioners, our staff, and over 21,000 residents and housing choice voucher participants. I welcome you, Madam Chairwoman, to Minneapolis. I am personally delighted you have decided to visit our great City today, as you are one of my role models. I proudly watched you on television over the years, regimenting comments in the newspapers, and know you have spent over 30 years of your life being a fierce and tenacious advocate for women, children, people of color, and for the most vulnerable among us. I applaud you, Chairwoman Waters, along with thanking you for your leadership, courage, and service to humanity. Chairwoman Waters. Thank you, thank you, thank you. Ms. McCorvey. Representative Ellison, I have worked with you on many important issues during your career, and I am grateful for your steadfast support of affordable housing programs. I want to talk a little bit this afternoon about some of the need. The Public Housing Authority is a bastion of safe, decent and affordable housing for our community. This resource, while critical, is woefully inadequate, when measured against the need that we see. A family waiting list has been closed since 2007, and we have almost 3,000 people on that waiting list now, as I speak. And Chairwoman Waters mentioned that there are 12,000 people on the Section 8 waiting list. There were 15,000 who actually asked for applications, and, yes, there are 12,000 who are on the waiting list today. At our central office headquarters, we have a resource room where people can come in off the street or just call and request information. We have 900 contacts each and every month. That's nearly 12,000 people, desperate people, in need of housing who contact us that we can't serve. The Public Housing Authority turns away literally thousands of people each year because there are no vacancies in our operations, either our public housing programs or our Section 8 programs. Those programs were often a step up and out of homelessness and out of transitional housing. We literally have no room. Families are forced to choose between food and shelter, shelter and medicine, medicine and school needs for their children. Wilder Research estimates that on any given night in the metropolitan area, there are 4,700 people who are homeless. And of those 4,700, 45 percent of those are children. The Public Housing Authority is working hard and is committed to respond to these needs as best that we can. We have established seven assisted living and housing with services and programs for our elderly. These supports help our seniors to live more independently and remain in their homes longer. We have worked with our partners in the community to develop two women's shelters, a youth shelter, a transitional housing program for chemically dependent women that is funded through a program called Publically Owned and Transitional Housing (POTH). This is funded by the State of Minnesota. We have two self-sufficiency programs, one through our public housing programs and one through our Section 8 program. We have pursued very aggressively and won nearly $32 million of ARRA funds, that's American Recovery and Reinvestment Act funds. With these funds, we are developing a senior center on the north side of Minneapolis in our Heritage Park development and a 48-unit memory care development. We believe this is the first in the country where public--it's a public housing development we're envisioning we will develop, providing comprehensive support for vulnerable elderly who have Alzheimer's or suffer from forms of dementia. We're investing $12 million in significant injury improvements in our over 700 scattered site family units. We have obligated 96 percent of the $18.2 million of capital ARRA funds that we received last year. With those funds, we believe that we will be creating nearly 300 jobs in our community. We have entered into a second energy performance contract, this is with a new provider, Honeywell International, which is going to upgrade our energy infrastructure. And we have structured this deal so that Honeywell guarantees a savings that will be enough to pay for the cost of the improvements that are going to be made in our facilities. We are responding in small but we think very important ways to the foreclosure crisis. We have created a Section 8 foreclosure prevention demonstration program, and it's called Saving Homes, for families in North Minneapolis who are under threat of foreclosure. The same prevention strategy is available to the 185 families who have previously purchased homes through the Public Housing Authority's homeownership programs. We have partnered with the City of Minneapolis and a nonprofit agency to project base some of our Section 8 vouchers in foreclosed properties. These properties are being purchased and they're going to be rehabbed and made affordable for low- income families. We have used ARRA dollars to purchase 20 foreclosed townhomes in North Minneapolis, and those townhomes will be created for a rent-to-own program for low-income families. The Public Housing Authority has many strategies to respond to these needs, but we don't have the resources to do so. Madam Chairwoman, thank you so much for the opportunity. [The prepared statement of Ms. McCorvey can be found on page 115 of the appendix.] Chairwoman Waters. Thank you so much. Our second witness will be Mr. Chip Halbach. STATEMENT OF CHIP HALBACH, EXECUTIVE DIRECTOR, MINNESOTA HOUSING PARTNERSHIP Mr. Halbach. Thank you, Chairwoman Waters, and Representative Ellison. Thank you both for the emphasis of today's hearing on rental housing. As was said by the HUD speaker, there is a need for more balanced housing policy in this country. I'm going to speak about the urgency for providing affordable rental housing for the lowest-income residents, and I'm going to put it in the context of the economic problems this country is facing. Certainly, there has been a recent substantial downturn in the economy, but for many low-income households, this economic challenge has been around for at least 30 years. So with Minnesota, we have now 7.4 percent unemployment. And an equal number of households, percentagewise, are also underemployed and have faced job losses or partial job losses. That's over 200,000 people in this State. And that economic challenge facing the State has manifested across the housing continuum. For instance, for the homeownership we have seen over the last 2 years--or since 2005, that is, a default rate, people 60-plus days in default, that has gone from under 2 percent to just about 8 percent; 8 percent of people with mortgages in this State now are 60 days behind in their mortgage payment. And while there have been reforms that have been discussed earlier, that trend is continuing upward. With rental housing, we have, of course, the cost burden placed on many low-income families. But one of the things that we have been able to observe, in partnership with nonprofit developers across the State, is that many of the households that are in affordable housing now are falling behind. In fact, it's about 23 percent of the residents of the 3 largest nonprofit affordable housing developers in the State are now at least 1 month behind in their rent payment. We have an economic situation where our policies and programs have helped a lot, but they're still not reaching people, particularly as the job losses continue. And, of course, there's homelessness, which is the trend, which is the ultimate of people not being able to afford housing. Looking at family homelessness in Hennepin County, where we have the best records, over the last 3 years, there has been a 70 percent increase in family homelessness here in Hennepin County. Focusing more on renters, what we have here is that about 1 in 5 renter households across the State are paying more than 50 percent of their income for housing. And that is particularly burdensome on those who are called extremely low-income, those with incomes at 30 percent of median and below. That is about $21,000 or less in annual income for a family of four. In the State, we have 85,000 households who are in that situation, who earn $21,000 or less and are paying over half of their income for housing. That's a number that continues to increase. And as I said before, this is a long-term trend. Since 1980, rents across the State have increased by 19 percent, while at the same time, renter incomes have declined 10 percent. We need help for people now in being able to afford rental housing, but also we need to be able to prepare for our expanding population, and more low-income people, we expect, will be residing in Minnesota. For instance, the Metropolitan Council projected, for this decade we're just beginning, we need about 5,100 affordable housing units per year added to the stock, whereas our current ability to provide affordable housing is about 1,000 units per year. Where do we go from here? Well, of course, our primary need is to be able to transcend that gap between what it costs to create and maintain housing, and what people can afford. NSP, which has been talked about here, is a great program and extremely important. However, it is not a good program for helping people at the bottom end of the income spectrum. There are four areas where we need help. I'll just list them quickly. The Low Income Housing Tax Credit, which has been mentioned, our State uses that tax credit program, not only for the $700 to $1,000 apartments, but also for chronic homeless, extremely low-income. The tax credit needs to be preserved. The National Housing Trust Fund, which if we get--that has been authorized in the Housing and Economic Recovery Act, and we're hoping to get it capitalized. We're looking at a billion dollars. The two of you have been leaders in doing that, seeking that fund. The two of you have been leaders in seeking that fund. But a billion dollars will only bring 140 units to Minnesota. And then vouchers, SEVRA, and then preserving existing affordable housing, including public housing, where the economic stimulus has been able to provide important resources but less than 20 percent of the resources needed for Minnesota's public housing backlog and needed repairs. Thank you. [The prepared statement of Mr. Halbach can be found on page 95 of the appendix.] Chairwoman Waters. Thank you very much. Our next witness is Mr. Michael Dahl. STATEMENT OF MICHAEL DAHL, PUBLIC POLICY DIRECTOR, HOME LINE Mr. Dahl. Madam Chairwoman, it is an amazing honor to meet with you, and, Congressman Ellison, you have been an unparalleled leader on affordable housing, and I'm thankful that you are having this hearing. Thank you for the opportunity to testify. My name is Michael Dahl, and I'm the public policy director with HOME Line. HOME Line is a statewide organization that provides free legal, organizing, education, and advocacy advice to tenants, so they can solve their own problems, and we work on public and private policies that advance that goal. As a part of our work, we operate a statewide tenant hotline. The hotline provides renters with legal advice. And it has grown from suburban Hennepin County in 1992 to serving the whole State except for Minneapolis, which has its own tenant and city-funded service. Last year, we took 11,000 calls, setting an unfortunate record for the number of tenants who are seeking our advice in troubles with their landlord or help in affording their rent. As you would expect in today's market, the number of tenants calling us because of foreclosure has increased. It has gone way up. In 2000, we received 18 calls from all of Minnesota from renters who had a question about foreclosure. This year, the number was at 1,265. We're seeing a dramatic increase, and that increase is seen in Congressional District 5 as well. Last year, we received 273 calls from tenants in Congressman Ellison's district. That's a fourfold increase in just the past 3 years. So obviously we are very happy, Congressman Ellison, that you took a leadership role on this and got the Protecting Tenants at Foreclosure Act passed. Since that legislation went into effect, HOME Line's work has changed in two ways. One, tenants have more time to move, which this is something that's--prior to the change, a bank only needed to give someone 60 days, now they have 90 days. And that extra time gives them time to save up for a move, and not choose just the first place that comes available, but, instead, the place that works for them. Next, holding owners to the tenant's lease is a good change as well. When a property is transferred normally, the new owner steps into the shoes of the old owner, and the new owner must respect the tenant's lease. That had not been the case in foreclosures. And making one rule that applies throughout the market is a good one. The increased call volume for foreclosures is one that shows no sign of abating. And so we ask that one of the first things you can do is make the Protecting Tenants at Foreclosure Act permanent. Its sunset in 2012 is something we would think-- we need to extend this forever. It's a good idea--it was a good idea before, it's a good idea now, and I think that in 2012, we'll be seeing that it continues to be an issue that we need to address. More, however, needs to be done in this for extremely low- income households. And I'll leave NSP to Mark Ireland's testimony, to talk about that. I just want to focus on some of the issues that Chip had tried to bring up towards the end of his testimony that we agree with. America's affordable housing crisis predates the foreclosure crisis. And we have people who were on the Section 8 waiting list in 2005. They still haven't gotten to the top of the list. And that's before all of this foreclosure thing sort of hit the media screens and became the thing that we're all talking about. There are two things that we need to do, basically, to address the crisis that we're in: We need to increase the supply of affordable housing; and we need to make more rental assistance available. In the 5th Congressional District, if someone needs help right now, all of the waiting lists that they could be on are closed. Minneapolis, Richfield, St. Louis Park, Metro HRA, all the lists are closed. And if you manage to be lucky enough to need help the day that a list opens, maybe you'll get on the list, and 17,000 people will be ahead of you on all of the lists that are out there. So we need to do something to increase the stock and the availability of rental assistance. Chip had talked about the need for our Nation to recommit to a production program, and that's why Congress needs to pass significant funding for the National Housing Trust Fund. There are two steps that can be taken for this. One, the United States Senate needs to put, like the House did, $1 billion into the National Housing Trust Fund through the jobs bill, and that's something that can happen in short order. The next step, and this is an area where we're happy for leadership from Senator Franken, is asking for the President to include another $1 billion for the Trust Fund in his annual budget. But these two steps are just partial steps, because we need $5 billion annually for each of the next 10 years. And so we-- that's one request that we have, is to find a way to provide permanent funding, at least for the next 10 years, to the National Housing Trust Fund. And then lastly, we need more money for vouchers. Nothing will reduce the waiting list better than providing more money for vouchers. And housing vouchers--it was already stated that we have thousands of people who are waiting for help. There are 230,000 renter households who cannot afford where they live. Chip talked about the 85,000 who are extremely low-income and are paying more than 50 percent of their income. Congress needs to make the HUD budget reflect the number of eligible people who need a voucher. Madam Chairwoman, Congressman Ellison, we will stand with you and provide whatever you need to reach these goals. We know that you have the vision to make them happen, and we're there with you. [The prepared statement of Mr. Dahl can be found on page 83 of the appendix.] Chairwoman Waters. Thank you. Thank you very much. Now, we will hear from Mr. Ireland. STATEMENT OF MARK IRELAND, STAFF ATTORNEY, HOUSING PRESERVATION PROJECT Mr. Ireland. Thank you, Chairwoman Waters, and Congressman Ellison. Thank you for inviting the Housing Preservation Project to come here and testify today. You can really break down the proposals and the ideas into two broad categories. One is opportunity, and one is need, and they certainly overlap. But I think the first is that we have an opportunity here. It is a financially smart move to invest in rental property, to expand our voucher programs, to expand the availability of affordable housing tax credits. All of these programs, now is the time that we can do that. And we have a lot of community development agencies, nonprofits, that want to do that, but they need access to capital, they need access to funding, to do it. We have the potential today to access houses and bring multifamily units, single-family units, into these affordable housing programs in areas that are close to jobs, close to transit corridors and other areas where people want to live, and where you come and you raise that standard of living for people who are renting property in Minnesota and the country. So this is an opportunity. It's financially a good move. The second, and this was touched upon a little bit by the first panel, is that by expanding these programs, we're going to create standards and oversight. And sometimes standards and oversights are a little bit too much and they impair the ability to expand these programs and make them work. But we have right now that competition between speculators and the nonprofit affordable housing organizations. And we found that 81 percent of the foreclosed properties in the City of Minneapolis had 911 calls. The median--and these were properties that were foreclosed upon 3 years ago. The median number of 911 calls related to that property was five, and the average was eight. So by bringing these properties into the Federal programs and putting them in the hands of responsible owners, responsible lenders, we're going to increase the standards--the standard of living for our renters, we're going to--and we're also going to help strengthen those neighborhoods. The fourth is--or the other opportunity and need is to subsidize scattered site rental. Our community development corporations, our Public Housing Authority, they have experience. And that experience has taught them that it is time consuming, it's expensive, but the opportunity, what it provides for the renter, far outweighs that, but we need that need. We need the management of scattered site housing to be subsidized in a greater degree by Congress, and Congress could provide that. So we meet up that opportunity and that need, and we access that. And then the final is to loosen some of the restrictions on NSP, and we talked about that in the first panel. And lastly, it's an issue that hasn't been raised by any of the panelists, but I think it relates both to where we are and where we're going, and that's the issue of race. Nobody seems to really talk about it all that much, but in every study that I have seen and every article that I have seen, the disproportionate impact of the economic crisis, the foreclosure crisis, on renters, on homeowners, has been on communities of color and people of color. And so, therefore, as we develop these programs for scattered site rental housing, expanding vouchers, expanding tax credits, we have to talk about race, and we have to talk about those issues and see it as an opportunity to have a conversation that's long overdue about race, both in Minnesota and the Midwest and then in our country. Thank you. [The prepared statement of Mr. Ireland can be found on page 106 of the appendix.] Chairwoman Waters. Thank you very much. Next, we will have Mr. Richard Amos. STATEMENT OF RICHARD AMOS, DIRECTOR OF HOUSING SERVICES, ST. STEPHEN'S HUMAN SERVICES, INC. Mr. Amos. Thank you, Chairwoman Maxine Waters, and Congressman Keith Ellison. Thank you very much for giving me the opportunity to share what we're seeing at St. Stephen's. The mission of St. Stephen's is to end homelessness through effective collaborations and programs, and we do that by serving over 6,000 people, and we serve them with street outreach, shelter opportunity, transitional housing, employment services, support services, shelter, a free store, and multiple programs that we believe people need. Because you can give people a job or you can help people fill out resumes, but the populations we work with never really had a job or an opportunity of employment, so they wouldn't have anything to put on a resume. Looking at the foreclosure crisis, we're seeing people who have never called before for services. They are working class people, and they kind of get embarrassed and intimidated when we ask them questions about their personal lives. We're seeing people who were in shelters because they had their houses foreclosed upon, and then when we locate them housing, they go into that housing, only to find out that house was in foreclosure, and we have to rehouse them again. We're working with a variety of people, families and single adults, some have mental health issues, some have addiction issues, some have multiple barriers that prevent them from obtaining housing on their own. So we have a program that's called Rapid Exit. The Rapid Exit Program is funded by Hennepin County through money that passes through the State. One bout of homelessness costs about $5,000. We can save someone from being homeless for $1,000. Now that makes economic sense. An adult without children, it costs about $850 to prevent them from being homeless. But if we pay for them to be in a shelter or to go in and out of emergency rooms, because all they can use is emergency services because they're homeless, then it costs about $2,000. So when we look at the economic issues, we can actually save money by keeping people out of shelters and not being homeless. The Hennepin County Homeless Prevention Program helped nearly 2,000 people, families, and 477 adults between 2007 and 2008--95 percent of those families and 90 percent of the single adults were stable in their house for about 6 months. And it costs--when we look at the costs, again, $875 for family, $610 for an adult without children, that's a cost savings we look at. And those are our tax dollars. Between 2007 and 2008, the Hennepin County Rapid Exit Program prevented people from being homeless. When we look at prevention, we look at saving people from being homeless. Don't wait until they get homeless, because it costs a whole lot more, once they're homeless, to get them back into housing in order to get them back on track. Some people assimilate in the homeless culture, and it's a climate and it's hard for them to get out of. So we don't want to wait until they have assimilated in and they're used to being homeless. Then it's harder to get them back on track and out of that. We have prevention programs, where people can call in who are in a rental crisis. Maybe they have lost their job, they have broken an arm. We say, when you're poor, you can't get sick. Because if you get sick and you miss 2 days at work, there goes your rent money, and you may be homeless again. So we have prevention assistance funds, where we can pay a portion of the rent and help them stay on track and in that housing until they get past that crisis, whether it was a broken arm, whether it was a child sick and they missed a couple days at work and they can't pay their rent. There are a whole lot of issues that contribute towards people becoming homeless. I haven't met anybody who volunteered to be homeless or who would volunteer to be homeless. So we need to think about this when we're thinking about addressing homelessness. It's not just those people over there. I was homeless in my life for 20 years, and people wouldn't look at me, they would look around me, they would look down, because they were afraid I would ask them for something. And sometimes I wanted to ask them for something, but I knew they wouldn't give it, because they already had their minds made up. So homelessness, we look at it at St. Stephen's as a way to reach out and grab a person's dignity, to talk to people and embrace them. Because if you're not going to reach out and embrace someone's dignity, then you might as well not talk to them in the first place. We have all kinds of programs, and they try to address homelessness. But if you don't have that compassion and you don't reach for their dignity and you don't believe that they can make it in the first place, they won't. I sit down at work sometimes and I help people go through the newspaper and look for housing, and I want them to call landlords and talk to them, after I have talked to them and they know how to do it, because I want to teach them to fish, rather than give them fish every day. And I hate to say it like this, but I'm going to say it anyway. Sometimes we can create plantations for the homeless. And I say that because we have mastered trying to show people which way to go, when you can teach them how to go and they can go for themselves, rather than create an industry called homeless providers and keep on serving the populations, and that population just keeps on growing. So we look to the Federal Government to create some subsidized housing, to create some short-term subsidies, not just long-term subsidies like Section 8. And I know that may not be politically correct, but what about short-term subsidies, people who need help for 2 or 3 years, until they can get an education or a skill or something that will help them sustain their housing, rather than just all Section 8s, which are for a lifetime and people just kind of never go off. I think we need both short term and long term. And with that, I will stop. [The prepared statement of Mr. Amos can be found on page 52 of the appendix.] Chairwoman Waters. Thank you very much. Next, we have Mr. Marion Anderson. STATEMENT OF MARION ANDERSON, CONSTITUENT, AND RENTER DISPLACED BY FORECLOSURE CRISIS Mr. Anderson. Thank you. I hope you'll bear with me, I'm not used to public speaking at all. Thank you, Madam Chairwoman, and members of the subcommittee, for inviting me to testify about my experience as a renter affected by foreclosure. My name is Marion Anderson, and for over a year my life has been affected by the foreclosure of my rental unit. Just to give you a little history, it was exactly a year ago, I had just gotten--6 months prior to that, I had gotten a job with a multinational company locally, 3M. I was a machine operator, and I had just bought a car with no notes, paid off in full. Life was looking good. I signed a lease for $900 a month. I said, I can do this now. Well, in November 2008, I signed a one-year lease on a two- bedroom apartment in a fourplex in North Minneapolis. What I didn't know at the time was that my landlord was already in the early stages of foreclosure. In fact, my landlord had two mortgages on the property, and both had gone into foreclosure. Okay, then, one of the sheriff's sales was in August 2009, and the other was in September 2009. In addition, my landlord had filed for bankruptcy. Our first suspicion that something was wrong, as far as the tenants went, was about 4 months into our lease. In February 2009, our landlord started taking appliances out of the property without any explanation. The first things to go were the washer and dryer in the basement. About that time, we got really concerned. The next month, we started getting utility shut-off notices at our building. In our original lease, the utilities were paid for by the landlord, which was--$900 a month, no utilities, I can make it. The next month, April, the building was posted by the City for a lack of utilities, but the landlord was still asking for rent and not addressing the utility issues. So myself and my roommate, we organized, contacted the utility companies, and agreed to pay the utilities at the unit, all--it was a fourplex, so each tenant was supposed to pay their portion of the water bill, the heating bill, whatever. As it worked out, on April 15th, our landlord came by the property and manually turned off the furnace. From April to July, we had no contact from our landlord. In July, our landlord showed up at the property and threatened us with evictions for nonpayment of rent. Well, at this point we knew, okay, as long as we paid our utilities, she really couldn't hold us accountable for the rent, as long as we kept a record, etc., etc . At this point, we were no longer paying rent, but we were paying the utilities ourselves. We had already received numerous water and gas shut-off notices. She continued to strip the basement of appliances and never showed up again. One of the words I became familiar with was ``abandonment,'' I got that notice in the mail. I wasn't quite sure what that was, but it was addressed to my landlord, that she had abandoned the property completely, and wanted nothing else to do with it. So right about this time--well, actually we weren't doing too badly. We didn't have to pay rent; we just had to pay utilities. I was unemployed. And so, you know, I'm a ``cup-is- half-full'' kind of guy. I'm looking--I can see the future a little bit. And, well, right about--in the fall, mostly--right around October, really. It says here in August, but right around October is when they had the shut-off notices and turn-off notices for utilities, especially because of the weather. If you're not from Minnesota, October 15th is about the time it starts getting cold, and the furnaces go on. And so the fire inspector showed up at our property and put up two notices on the door. A really nice lady, her name is Melanie--I can't say her last name, it's Polish, but she's really, really good help; right? I tell you, she was really-- she had a lot of empathy. She worked the north side, nice uniform and everything. She posted these psychodelic posters on our doors saying you had 72 hours to either get that furnace turned on or the building would be condemned. And we had from that time until January 1st to have a new rental license for that property. Evidently our landlord hadn't renewed our old license in August. So by this time, it's, like, fall, October. So we say, well--I had been a little depressed before, but I got a little hint of--with 72 hours, I had a little hint of what clinical depression really was. But like I said, she was really empathetic, told me they were changing some of the laws and some of the rules as far as what they did for condemnations. And we were able to get the furnace turned back on with help from their contacts with CenterPoint, with, I'm saying, the fire department, Legal Aid. A woman in particular, Genevieve Gaboriault from Minneapolis Legal Aid, she was on it from the minute I called her. These are resources I really wasn't aware I was eligible for. So she contacted them. They made an agreement with CenterPoint. We got the furnace turned on by that Saturday. We could still stay in the building. That means all the tenants who were still in there could still stay there. I'll hurry up. And Legal Aid also--Genevieve, she also tried to get the City of Minneapolis to allow the tenants in our building to pay for our rental license ourselves, so that we could stay throughout the winter--well, at least throughout the redemption period. There is a 6-month redemption period if the old landlord doesn't buy the property back, you can stay there, just pay the utilities. I'm, like, yes, I can make that too. March 29th would be the end of the redemption period. Well, that didn't look like that was going to work out, because the City wasn't really willing to do that for a fourplex. Maybe more with a single ownership, a single-family home, but for a fourplex, I guess they weren't really able to do that. Legal Aid then connected me with St. Stephen's Housing Human Services, and their housing advocate, her name is Susan Dunn--I mean Sara Dunn, I'm sorry, she helped me greatly. She-- as soon as she got wind of what was going on, and her contact with Legal Aid and Genevieve, they had their own assistance program for renters who were affected by foreclosure. I didn't know this program was available. And since we found out the property had been in foreclosure and had been in--had numerous utility shut-off notices--this is about the time when I found out from Sara that, yes, I was eligible for some financial assistance, if the property was foreclosed on, that maybe she could help me with relocation fees, relocation money, that kind of thing, which was a great burden off my mind. Since it was in foreclosure, the old building manager left the unit, and some of his family moved in upstairs. No lease, they were basically squatting. Another unit up above me, who were receiving Section 8, they moved out to another Section 8 property, once they found out about the foreclosure. And they left and allowed their friends and family to move into their unit. There have been three or four squatters in the vacant units and in the basement, which does not have a secured door, and it has been hard or impossible to get the squatters there to contribute to the utility payments. In fact, what just happened last week was, the new owners-- the new owner--and I just found this out from Senator Higgins. What happened was, the new owners bought this property from one of the banks, one of the mortgages--okay, I'm finishing. Chairwoman Waters. Your time has expired; however, we want to hear the end of this story. So, please, keep going. There's unanimous consent to grant this gentleman additional time to finish this story. Mr. Anderson. Well, to make a long story short, the squatters made it impossible to--they brought other problems to the building. We actually had police come out last week to take one of the squatters out. The new landlord, I think he's a landlord, he came in and asked to see the apartment, and the guy opened the door with a wrench and said, ``You're not coming in my house, white dude; you're out of here,'' and he closed the door on him. And this is one of the squatters, I don't even know his name. And the guy left, the supposed new owner, and the squatter came out of the house with a wrench and followed him to his truck, and they got to scuffling out there. To make a long story short, it's not safe for us or any other tenants who are qualified to be there or supposed to be there. And they told--the fire inspector came back out and told us that the building was at risk of being condemned again for suspected meth use by this person upstairs. At any rate, from March to December, our building had virtually no management or ownership. This has created an unsafe environment for the remaining tenants. There's no accountability, and we have no one to address our safety, utility, and maintenance concerns. Right now, as of December 28th, we have a new owner who is selling it to another owner, an Irishman from Australia named Bernie O'Brien. And he says--he promises he's going to close by September 20th and we'll get a new stove. That's a wrap, and thank you for your time. [The prepared statement of Mr. Anderson can be found on page 75 of the appendix.] Chairwoman Waters. Wow. Ms. Louden? STATEMENT OF CHRISTINA LOUDEN, CONSTITUENT, AND SECTION 8 VOUCHER RESIDENT Ms. Louden. I want to say thank you for giving me the opportunity to testify. My experience is with Section 8 and the waiting list. My name is Christina Louden. I'm a 31-year-old single parent of two daughters: Ruby Rose, age 9; and Danista, age 5. I am currently unemployed but pursuing my bachelor's degree online in business administration while actively looking for employment. When I first applied for Section 8 assistance in May 2003, I was a single parent of one child and paying more than 50 percent of my income towards rent. During my 6\1/2\ years on the Section 8 waiting list, I had another child and managed to make my rental payments, however rarely on time. On February 12, 2009, I lost my job due to health concerns. I recently had a pacemaker put in and have suffered significant injuries in an automobile accident. I was on the verge of losing my apartment and was unable to pay my rent. I did not receive child support or any childcare assistance, and my income was significantly reduced to some welfare for my children and unemployment insurance. I called the Section 8 department in March 2009 and was informed that I was near the top of the waiting list, and was finally approved for the Section 8 voucher in July of 2009. I found an apartment and was leased up in November 2009. My two-bedroom apartment rents for $960 per month, and my share of the rent is $432 per month. And this is more than half the rent I would be required to pay if not for my Section 8 assistance. This housing assistance allows me to make sure my children have adequate food, clothing, and shelter, as well as being able to provide them with what is needed for school and other day-to-day requirements. My lower rent also enables me to be able to prepare for a better future. I'm attending the University of Phoenix online, and I expect to receive a bachelor's degree in business administration in 2011. I hope to be able to use this degree to find a better job and put myself in a position where I will no longer need Section 8 assistance, and someone else who needs the help can have the same opportunity that Section 8 has brought to me. I am not an expert in what Minneapolis needs, nor in affordable housing. I can tell you that waiting 6\1/2\ years to receive assistance is not a realistic way to help people who so desperately need assistance. If I would have lost my job 2 years ago, or experienced any other kind of setback that would have impacted my income, my girls and I would have been homeless. I think of all the families that I hear about who are homeless, and wonder, knowing that the miracle I experienced may not be there for them. The waiting list is closed, and I'm told that thousands of other families have to wait as long as I had to wait to get help. Thousands of others can't even apply for help at this time, and Minneapolis needs more Section 8 vouchers to help families. They need more landlords willing to accept Section 8, and they need more just plain old affordable housing. There is an economic crisis, and so many families are impacted by it. I know, from my 6\1/2\ years on the waiting list, that for low-income people working or on welfare, there has always been an economic crisis. Rents of over $1,000 per month, car payments, insurance, food costs, clothing costs, medical, and other day-to-day costs associated with just living, are almost impossible to meet with a low-paying job or welfare benefits. It is hard to even have to ask for assistance. And I want you to know that assistance should be viewed as an investment instead of a handout. With the investment you are making in me and my family, you will see a big return. I will graduate college, find a good paying job, and help my children, so hopefully they will not have to experience the difficulties that I have had to face. [The prepared statement of Ms. Louden can be found on page 111 of the appendix.] Chairwoman Waters. Let me thank all of our witnesses for being here today. Each of you, in some way, has touched on what we work for and about every day. And the issues that you raised are at the centerpiece of our legislative agenda, serving on the Financial Services Committee and the Subcommittee on Housing and Community Opportunity. Let me just briefly say, this Nation is a little schizophrenic about public housing. On the one hand, we have a lot of people who are supportive of public housing, yet we have people who want to see public housing not as an opportunity for the least of these or people who really find themselves in a position where they cannot afford to live anyplace else but public housing. But they want to change the requirements and the makeup and a lot of things about public housing to basically eliminate trouble, rather than providing the resources and the money to assist people to change their lives and to be able to manage their lives and be given opportunities. And we have some people who want to just eliminate public housing altogether and maybe deal with the Section 8 and scattered housing, and who just believe that there should not be a public housing kind of footprint. I support public housing. I support the upgrade of public housing, money for renovation, repairs. But I also support money for services. And I appreciate what you described to us today and what you're doing. You certainly are innovative in creating that center that you referred to. So some of us, despite a growing call for almost getting rid of public housing, some of us are supportive. And even when we are not so sure, we know that some public housing in some cities would like to renovate and to downsize, but we're going to insist, for the time being, one-for-one replacement on all public housing. We're going to do that because we are not going to go down this road of getting rid of units. You have heard described here today so passionately the need for low-income housing. The Housing Trust Fund, yes, we had $1 billion. We supported--Barney Frank has put his life on the line for it, and we have passed it, I believe, in the House. And we don't know what's wrong with the Senate, but the Senate never can seem to get its act together. But, yes, we intend to get that billion dollars. And, you're right, we should have the goal of having a permanent funding Housing Trust Fund for years to come, whether it's $5 billion or whatever. That's an ideal, that's a goal that we would like to reach, we would like to support. We worry about it when we have more and more people crying about the deficit and talking about cutbacks, but we're going to fight for not only the billion that we have already passed out of the House, but we will continue. Because, you're right, there is a need for low-income housing that has never been met in my career, my time in public service, and we have to continue to work for that. Know your rights. I can remember, I guess in civics classes when I was young, that there was a program called Know Your Rights. And they always talked about how it's important for people to pursue justice and how it was important to have agencies that would assist people in knowing their rights. And you're absolutely correct, we're not against the landlords. We need landlords to provide housing. But we need landlords who are fair and who will treat the tenants right and who will invest in the properties. And sometimes the landlords forget that they have lease contracts and arrangements, and they just overlook that and they try and do whatever they want to do. We have to make sure that we deal with this business of cutting off utilities and pulling out the washing machines and all of that stuff. But I'm so pleased about the work that you do in helping to assist people with legal services. For homelessness, we reauthorized the homeless program. And one of the things we are focused on is permanent supportive housing for the homeless. We want--and we will continue--I think we put some money in to--we authorized money for permanent supportive housing, and we're going to have to expand on that. The idea that somehow homeless people cannot manage an apartment or do not want permanent housing, they kind of lack the way that--we have to get rid of those notions. And we have to show that with supportive services, most of the homeless can be put off the street, and you don't even need a transition period. You can go right into permanent supportive housing, if you have the services to go along with assisting people who need some assistance. So we're going to work toward that end. We have $1.8 billion--$1.5 billion we put into the stimulus package, above and beyond what's in the budget, we have additional money. And so--the City that I come from is perhaps the homeless capital of this country, and it is heartbreaking to walk through downtown Los Angeles and see what is going on there. And I'm committed to it, Congressman Ellison is certainly committed to it, and we're going to do everything that we can with this Administration to do what has not been done for far too long. Thank you for dedicating your life to this work; we really do appreciate it. I want you to know, it was just today that someone, and I forgot who it was, asked what were we going to do about tenant ownership of some of these foreclosed properties. Who was it that asked me that? Mr. Dahl. (raises hand) Chairwoman Waters. That was you who asked me that. What was just described by Mr. Anderson, where the tenants were abandoned and you were left in this property and all that you described, I was just sitting here thinking, what can we do, with the kind of proposal that you alluded to, that would provide the opportunity for tenants to have taken over that building and to own that property and manage that property? There needs to be capital, there needs to be well-thought- through programs about how you do it, but it's certainly, certainly needed. So you have put that on our radar screen, and we will do everything that we can to pursue examining those possibilities. And thank you for just hanging in there. You could have just said, well, let me just go on and try and find some shelter to live in until--but you--you're pretty tough. And so for those squatters, you can handle them. Yes, that's going to be great. And I'm appreciative for the testimony that you were able to give about Section 8. I appreciate--well, first of all, you frightened me, when you first started to talk, about being 31 years old with 2 children and without a job, and then further, about the medical problems that you had. But you evidently are in control, no matter what. And you have said, in so many ways, to people, that they, too, can be in control, no matter how difficult it gets. You have to pursue opportunities and stick with it. And I'm appreciative for the testimony that you gave for Section 8. We need so much more. And the reauthorization, I have asked for 150,000 more vouchers. That's just a drop in the bucket, but we have to fight for that. And I think--did we get that off the Floor? It's out of committee, but it's not off the Floor yet. But we're going to fight, and I'll do anything I can to try to increase that and keep increasing it. But we know how important it is and how it certainly saves families. Let me just say to all of our advocates and all of our panel who have made their lives and their careers a part of this housing struggle for all of our people all over the country everywhere, I certainly appreciate you. I'm certainly dedicated to the proposition that we can do a lot better than we're doing, creating housing opportunities, maintaining sustainable neighborhoods, utilizing and expanding resources that make good sense, and we're going to keep working toward that end. And I believe that we're going to be able to do more under this Administration than has been done in many years, and so just keep working with us. Keep working with us. I like advocacy on the ground. I like people to act up a bit and to make noise and to keep saying to their elected officials, these are the things that you have to do. Because politicians tend to get nervous around election time, particularly when they talk about deficits and we can't spend any more money and the government's getting too big and all of that. You have to help back them down, and talk about our need as a free and prosperous country to be able to supply a safety net for the least of these. And so the more you act up, the better we'll be. Thank you very much. Congressman, please, please, go right ahead. Mr. Ellison. Can we have another round of applause for our chairwoman? My first question is for you, Mr. Anderson. When did you first get notice that the building that you had just rented a unit in was going to be under foreclosure? Mr. Anderson. Actually, we signed the lease in November, got laid off in January, and got a foreclosure notice in March. And they sent the mail--I don't know if it was supposed to come to us, but we got it addressed to the landlord. But we got two foreclosure notices, first and second mortgage, at our address. Mr. Ellison. So it was never sent to you? You were never told directly, this building is in foreclosure? Mr. Anderson. No--well, not until later on. But in the mail, it came addressed to the landlord, the foreclosure. Even the bankruptcy mail came to us. That's the only way we knew what was going on, really, because she never contacted us again after that. Mr. Ellison. Well, I think there should be an affirmative duty for somebody, perhaps the landlord, but somebody to tell you as soon as they know. Mr. Anderson. Right. Mr. Ellison. I think that that's something that we might want to start working on. Because it certainly would put you in a better position pursuing this idea of, perhaps, tenant ownership. You could, perhaps, get busy working on that the earlier you know. Mr. Anderson. Right. Mr. Ellison. Let me also say that, Ms. Louden, I think your point about investing, together with the point that Mr. Amos made--Mr. Amos made the point that it's actually fiscally responsible to prevent people from getting into the homeless situation, because it costs more to get a person out of homelessness than to prevent somebody from ever becoming homeless. And then your point about investing in people. Here you're going to--about to be a college graduate, significantly increasing your earning potential. This program, which you almost--it seems like it's just a blessing that you were able to take advantage of. Ms. Louden. Absolutely. Mr. Ellison. How do you all respond to this? Do you think that it is fiscally responsible and actually saves money and actually increases wealth in our community by investing in people, by keeping them in homes and avoiding homelessness? Could you all--anybody on the panel address this issue? Ms. McCorvey? And everybody is welcome to answer. Ms. McCorvey. Absolutely. Absolutely. Because it's providing a stable environment, not only for the parent or the parents, it's also the environment for the children. The children cannot prosper in chaos and confusion. Children need to be stable, they need structure, they need to have a base, like we all do. And so having the Public Housing Authority, Section 8 or those kinds of programs be there for people, it's critical. And I have built my life--spent my life with these programs for over 30 years in various levels, and I have seen how Section 8 and our public housing programs have not only stabilized families, but also seniors and people who are disabled. I know people who have had serious health problems and felt that public housing allowed them to live for as long as they had to live in dignity here. And they ended up dying, but they were very grateful to have that dignified place to live, where they didn't have to worry about their rent and whatnot. So, yes, absolutely. Mr. Ellison. Well, what about this issue--I know that Ms. Louden has--go ahead? Mr. Halbach. Just to add a quick note to that, I know it was 4 to 5 years ago, there was a study of Minnesota's TANF program, a welfare program. And one of the conclusions of the study was that people who had stable housing did much better economically than those that didn't. So in addition to what Cora was saying, in terms of her experience, there is documentation of that, at least in terms of recipients of TANF. Mr. Ellison. Well, when you think about housing instability, how does it--do any of you have any either personal experience or secondary experience on how it impacts children? I do know that--I'm not sure which one of you said this, but I heard somebody say, about 4,700 people are homeless and some major percentage of that are children. Ms. McCorvey. 45 percent of those are children, yes, based on the Wilder Research, yes. Mr. Ellison. Now, Ms. Louden, you are a mom? Ms. Louden. Yes. Mr. Ellison. What are some of the challenges that a parent might have when--for raising their kids, and how does it affect the grades, how does it affect all these things, when a parent is facing housing instability? Ms. Louden. Yes, and moving. There should be--they do thrive and grow on stability. It's--they have a place to call home, they have their bedroom, whatever, their area. It's very important. Getting them back and forth to school, extracurricular activities, they have a routine, but they always have that home to go to. And when we have moved and had to move--I see, like, my oldest, she's nine. Now my five-year- old's starting to come into it and notice what's going on. And, like, my nine-year-old will start--she asks a lot of questions, starts acting up and just kind of goofing off because there's no stability. She doesn't know what we're doing from one day to the next, so-- Mr. Ellison. And how do the kids--how does it affect the kids? I am curious to know, maybe Mr. Amos can share, if a child is living in a shelter, and they go to school, and the other kids say, where do you live, how does that impact the kids? Mr. Amos. When I first started as a case manager, it bugged me to death that--I heard one of the children say that, when we were looking for housing, that they hated to be dropped off at a shelter, coming from school, because the other kids would tease them about where they lived, so they couldn't wait to get out of there. And that just made me want to get them out of there a lot faster. But now they have different buses that go to the shelter and drop them off. But there are studies that have shown that if a family is homeless, if the parent is homeless for a long period of time, that child will grow up to experience homelessness also. So we don't want to start a pattern of homelessness within families. We want it to be as short as possible, back in housing, and stable as possible. As she said, having your own room, your own toys, your own place to go to, is stability in life. We all want that. And shelter should be a basic right. Mr. Ellison. I guess my last question is for Mr. Ireland. You ventured out into that unsafe water of race. And I was going to say that I thought that was a courageous thing for you to do. I think I can speak for people of color generally. When we hear people who are White speak about systemic racism, it makes us all feel a little bit better, because we know what's going on. And when it's like--and it makes me feel like, look, we're all Americans. Some have--we have different ethnic backgrounds, but we're all Americans. And you really can't totally maximize your resources as a society if one part of it is sort of relegated to the side, because we're not getting maximum production from that part because it's not fully included. What do you think we should do, and how do you think we might communicate the message of racial justice and inclusion as we pursue this work? Mr. Ireland. I think that any discussion of race, particularly from some 6-foot White guy like me, has to be done with humbleness and done very carefully. Because race is a conversation, a discussion, about racial justice. And just the historic draining of resources and assets and money from communities of color, it's just something that has to be done very carefully. But I think that it was--we just celebrated Dr. King's day. And in his last book, ``Where Do We Go From Here, Community or Chaos?'', he set out a structure for that conversation to occur. I think that it would be in the best interests of everybody to follow that structure. First, you identify, where are we at right now? The second thing is that you assert the dignity and worth of all people, and assert that vigorously. And then you identify the structural impediments to moving forward, and then you fight like hell, in a nonviolent way. And so, for that to occur, and with race underpinning and being the unspoken issue in the financial crisis, in the foreclosure crisis, you have people like Ann Coulter who blames the Community Reinvestment Act for the financial crisis. So you're stepping into a dangerous environment where a discussion about race could, if done incorrectly, backfire. But I think it has to be done, because that's going to inform how you target the resources. Because every initiative, it seems like, over the past 50, 75 years, you start out with the intention that you're going to improve communities, improve neighborhoods, and then all of a sudden those resources start getting split off, and the people who are most in need of those resources, it doesn't quite get to them. Somehow all of a sudden you're building a stadium or a prison, instead of infill housing in North St. Louis or North Minneapolis. And so those resources start being peeled off. So as we talk about expanding Section 8 vouchers, as we talk about expanding affordable housing tax credits, now we have the point where we can do that--if we have that conversation about race, we can target those, to make sure that affordable housing, low- income housing, is put in communities where it's going to provide that ladder. Leveraging mass transit, good schools, located near jobs, all those goals that have been there all along, but making sure that it happens. Mr. Ellison. Well, I think it's important to be able to discuss issues of race in a non-polarizing way that brings people together, as opposed to just sending people into their corners. And so I want to thank you for introducing that important topic into this congressional hearing. Let me tell you, it's not often that congressional hearings have that element of the conversation brought up. And so I just want to, again, give praise and honor and thanks to you, Madam Chairwoman, and also all of our witnesses who have testified so eloquently. I just want to remind people, if they want to get something into the hearing record, I think we can accommodate that. And this is a real congressional hearing, just like one we have in Washington all the time. Before I yield back, I'll hand the floor to Mr. Anderson. Mr. Anderson. Well, since this is on the record, down here on the ground, I really would like to see how we're going to get jobs back into the community. From where I stand, if I can't work, I can't eat, and I can't afford affordable housing. And so laying off--I have never been laid off twice in one year before, and it happens. And so I'm just saying, most of the jobs that pay anything in the Twin Cities--I'm originally from New York, but in the Twin Cities now, most of the jobs that pay any kind of money, whether skilled or semi-skilled, are out. Transportation is an issue, the weather's an issue, all of that. But there was a time, when I first came here, where you could practically walk to your job. The good paying jobs were right in the community or close enough to it. Is there any way--is that going to happen, infrastructure coming back, monies, anything? Mr. Ellison. Well, let me just tell you, it's funny, because actually both Congresswoman Waters and I are very focused on issues of jobs. And I can tell you that based on my--what I hear in our democratic caucus meetings, that most members of our caucus are very focused on jobs. We have the Senate issue to overcome, but a lot of members really, really want to see a jobs--we passed a jobs bill right before the Christmas break. It included some extensions of unemployment insurance, COBRA--COBRA, when you lose your healthcare, and then--and some food stamps and then some infrastructure investment. Many of us are still focused on a jobs bill. We're trying to figure out how to get the Senate to come along with it. But I think we need--but jobs are our front strategy. I have told more than one Member of Congress, if we don't figure out how to get some jobs, we're going to be looking for them ourselves. And let me just tell you this. I have a jobs bill that calls for--we put $40 billion that would create 1 million full- time jobs, with nondisplacement procedures, like prevailing wage, stuff like that, together with an infrastructure investment, because all the--not only do we need the jobs, but we need the work done. Our roads and bridges are crumbling. You all know, we could walk to 35W from here, where the bridge fell down, Madam Chairwoman. And so jobs are a key focus element. We want to put money into State and local government, so that we can retain essential city and county and State services, which you know are being cut. And with the LGA cuts, they're really hurting locally around here--39 States are facing a deficit right now, and are cutting. So with that, I'm going to yield back to our chairwoman. Thank you very much. Chairwoman Waters. Thank you very much. As we wrap up, I would like very much to thank all of our panelists for participating in this hearing. We were not able to talk about all of the public policy work that we're involved in. In this conversation that was held just a moment ago about race, we just had a hearing on a piece of legislation that was initiated by Congressman Al Green, where he's asking now for $20 million, and I'm suggesting that he increases it to $50 million, for what is known as the PIP program. This is a program, fair housing program, where the testers go out. And I was kind of surprised to discover, in that discussion, that there are many cities that don't even have this at all. So we're going to increase that. We'll get that legislation passed out of our committee. In addition to that, we're going to talk about appreciation for Secretary Donovan. St. Bernard Parish down in New Orleans had developed local laws to prevent multifamily housing, because they didn't want those people in their neighborhood. And it had gone into court and to the court system, and the courts had ruled against them, but they defied the court. Secretary Donovan came in and said, you're not going to get any Federal money unless you change these local laws. And so they began to understand that they have to eliminate those laws, reverse themselves, in order to get any Federal money to have in their parish at all. So sometimes it doesn't take legislation or litigation, it just takes a person with the power to exercise it. And I'm very appreciative about the way that Secretary Donovan is moving in that way. And another little story is this. As you know, there was a lawsuit that was filed against Wells Fargo, because they were accused of targeting minority neighborhoods in the subprime meltdown. I think the NAACP Legal Defense Fund and some others were involved in that. They didn't win. But I called the CEO of Wells Fargo, Mr. Stumpf, to talk to him about the lawsuit. And he seemed very humble, and he said, yes, but they were going to do more. He said, I remember you told me that we weren't doing well in these loan modifications, and I need to get our servicers on the ground, I need to get more storefront operations, I need to be available to the people. He says, I'm going to do that. He said, I think that we can do more. And so I was appreciative to hear the CEO, even though they won that lawsuit, really in many ways acknowledge that they needed to do better. So we are all working on some of these issues. And as you said, the discussion must take place. And those of us who have the power to do something constructive about these issues, must use their power to do so. So I want to thank you all for the issues that you have brought up today. And I'm reminded by my staff that the memorandum that you just gave me about what Chairman Barney Frank wanted to do on preservation in relationship to the first refusal memorandum, there's more going on than I knew about. Right of first purchase, it seems that Barney Frank is now in the process of trying to work out how to put it in his preservation bill. And it's not easy, because we have a lot of the owners of multifamily properties who threaten to drop their support of preservation if the right of first purchase is in. Now I want you to know that sometimes the wheels of progress move very slowly. And when you're moving something like preservation, which is extremely important, and you have the support of the multifamily owners, that's good support. But when you start to lose that support, it threatens the legislation, and sometimes it takes time to keep working on it, and it may have to go beyond, certainly, this legislative session. But it is on the radar of Barney Frank, and we will talk with him about it when we get back. Thank you all so very much for your participation. Also, the Chair notes that there may be additional questions for this panel, which we will submit in writing. And without objection, the hearing record will remain open for 30 days, so that we will be able to submit written questions to these witnesses, and place their responses in the record, and this panel is now dismissed. Before we adjourn, however, I'm told the written statements will be made a part of the record of this hearing. We have some written statements we're going to insert, from the City of Lakes Community Land Trust and Mr. Robert Roedell. We will make sure that their statements are included in the record. Thank you all so very much, and this panel is dismissed and the hearing is adjourned. Thank you. 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