Kevin Matthews calls himself an example of everything that can go wrong when lenders abuse the system and aren't held accountable.
Matthews, who testified Tuesday before the U.S. House Committee on Oversight and Government Reform, was a contractor at Fort Meade with a good income when he bought his home in Baltimore. After he was injured in a 2008 car accident and lost his job, he knew he would have trouble keeping up with the mortgage.
"I wanted desperately to save my home or find any other alternative to foreclosure," he said.
Matthews said he called his servicer 50 times over a year to try to work something out. He fell behind on bills and drained his 401k to pay the mortgage, but eventually he went broke and his home was sold.
While an exception to the sale was pending in court, Matthews said he came home to find a lockbox on his door and all of his belongings gone. He eventually got his home back, but he still hasn't seen his belongings.
The field hearing was held in Baltimore at the request of ranking committee member Rep. Elijah Cummings, D-Md.
Maryland saw a drop in foreclosures last year, due in part to a new law that requires lenders to communicate with borrowers before foreclosing and exhaust mitigation remedies before selling a home. But if Maryland is still having problems despite these efforts, Cummings said, other states could be worse off.
"I wanted the committee to hear what kind of impact this has on neighborhoods," he said. "I just don't think that we can afford to act like this is not a major problem. This is an issue that can totally undermine any economic recovery we can have."
Baltimore has seen more than 18,000 foreclosure filings since 2007 and more than one-third of the neighborhoods have had more than 5 percent of the homes go into foreclosure, Mayor Stephanie Rawlings-Blake testified. Since about 40 percent of the city's foreclosures were rentals, the problem has affected more people than just homeowners.
"People are being lied to, they are being given false hope and they're depending on the word of these financial institutions to the detriment of themselves and their families and as a result to our communities and our city," she said.
Gov. Martin O'Malley called on the committee to create national servicing standards and avoid cutting funding for homeowner counseling and the Emergency Homeowner's Loan Program. The Home Affordable Modification Program, meant to help modify mortgages to avoid foreclosure, may have significant problems, but it should be retooled, not thrown out. There were about 22,000 modifications through HAMP in the last year in Maryland, he said.
"I think we're only now starting to get on top of this wave that had mortgage companies so utterly underwater themselves in terms of servicing this problem that I think it would be a real mistake to back away right now," O'Malley said. "I think HAMP probably can be improved."
HAMP hasn't lived up to expectations and even left most people who got modifications paying more than they did before, said state's Department of Labor, Licensing and Regulation's Financial Regulation Commissioner Mark Kaufman.
"I will say one of the things it did do was begin to standardize a completely unstandardized process. It was the wild West of modification," Kaufman said.
Borrowers should have a single point of contact with servicers, backed by adequate staffing and training, and there should be more oversight, Kaufman said. But he questions the profitability of the entire servicing model, so lawmakers will have demand these changes, not ask for them.
"None of this will be easy, none of it will be free," he said. "I believe that the invisible hand of the market will not fix this _ at least not in any near term and not without a lot of continued human cost and economic cost."