[inaudible conversations] [inaudible conversations] this hearing will come to order. Today we are joined by the leading voices within the administration on reforming and strengthening the housing and finance some. The secretary of the treasury and the secretary of housing and urban development, both of whom have justice at Housing Finance reform proposals to the president as well as the director of the federal Housing Finance agency who serves as the regulator and conservatory of fannie mae and freddie mac. I want to thank each of you for coming to the committee this morning. Last friday marked 11 years since the government bailed out and put fannie mae and freddie mac in the conservatorship, where they remain today. Prior to 2008, the two governmentsponsored enterprises helped 45 cents in capital for every 100 in mortgages they guaranteed. Now, they hold just 19 cents. After a historic 200 billiondollar bailout from the taxpayers. 11 years later, the systemically Important Companies continue to be too big to fail and are even more leverage than they were before the financial crisis, and taxpayers inevitably remain on the hook in the event of a mixed market downturn. In march, President Trump signed a president ial memorandum directing department of treasury and housing and urban development to develop a plan for administrative and legislative reform of the federal Housing Finance system. Many of the legislative recommendations in the plans that were released on thursday are consistent with my outline to fix our Housing Finance system including attracted attracting capital, protecting against future bailouts and promoting competition. As well as preserving certain important incremental reforms that have already taken place during the conservatorship including a robust transfer of credit risk, single security and securitization platform and low pricing that doesnt very based on the lenders size. The status quo is not and has not been acceptable and my preference remains to fix it through comprehensive legislation to. Five years ago the committee demonstrated that is possible. We came together to advance a comprehensive solution on this topic. This year i released my housing reform outline which builds upon many of the same principles of the previous efforts. It sets not a permanent sustainable new housing financing, a system that protects taxpayers by reducing the systemic too big to fail risks posed by the current mortgage guarantors how it preserves the existing infrastructure in the Housing Finance system that works well while significantly increasing the role of private capital. It establishes several layers of protection between mortgage credit and risk and taxpayers and a level Playing Field for originators of all sizes and types while also walking in uniform responsible underwriting standards. And it promotes broad accessibility to mortgage credit including in underserved markets. Ultimately only congress has the tools to necessarily provide a holistic comprehensive reform to the system that will be durable through any market cycle. However its important for the administration to begin moving forward with incremental steps that move the system in the right direction. After 11 years of conservatorship, it is long past time to make the hard decisions and address this Unfinished Business of the last financial crisis. Senator brown. Thank you mr. Chairman. Welcome to the witnesses and welcome to my colleagues. We are going to hear from the Trump Administration today about the next steps on Housing Finance reform. Its clear from the plan they put out last week with President Trump thinks the steps should be. The plan will make mortgages more expensive and harder to get. We shouldnt have to tell the president we have an Affordable Housing crisis in the country. We all know it and see it. I see it when i talk to residents of the manufactured Housing Community on the verge of losing their home because they cant afford the rent increase imposed by wealthy private Equity Investors from outside their states who just bought their community. I see it when i drive past the houses that belonged to the victims of predatory lending in my city of cleveland and my neighborhood and it happens across the country. I see it when i talk to young people in their 20s and 30s who want to buy a home but are drowning in Student Loan Debt and cant save for the mortgage. These are the crisis facing families all across ohio and across the country. They are renters, homeowners and they all have one thing in common, they cant afford a place to call home. Weve had a productive hearings in the committee where we talk about what it would take for the Housing Finance system to actually work for working families. In march we held two hearings with representatives from the home builders, realtors, mortgage bankers, civil rights communities and multifamily lenders. We heard during those hearings that affordability and access are not just components of Housing Finance, they are the whole reason we have a Housing Finance system. They cant be an afterthought once weve answered other questions about the structure of the system. They have to be built into the system. We need a system built on a mission to serve borrowers and renters no matter who they are, what kind of work they do or where their lands seems we need policies that focus on increasing service for underserved markets like the rural areas and homeowners and borrowers that have been locked out of the market for decades because of the discrimination and a system with a wide variety of participate so that they can meet all of those particularly those that have been left behind for generations. In a march hearings and hearings since, we have heard housing stakeholders remarkably coalescing around a few foundational principles for reform. They have consensus they have said reforms should protect access for the fixed rate mortgages. Dave said reforms should provide a catastrophic government given tea. They said we should structure the guarantors like Public Utilities providing a regulated rate of return. They said we should serve a Broad National market and we should serve lenders of all types and sizes equitably and we should maintain the duty to serve all markets and borrowers and we should maintain Affordable Housing goals and we should expect it to expand with Affordable Housing and they said we should maintain the successful multifamily Business Models into better access for financing of affordable rental housing. Yes unsurprisingly, President Trump and his administration missed the point whether we create a system that addresses the needs of the working families and has put out halfbaked proposals that will make the mortgages more expensive and harder to get. In addition to increasing cost of the plan would make it harder for the small lenders to compete and it would gut the tools we have two health the families find an Affordable Apartment or to own their first home. The plans would also roll back the Consumer Protections and investor disclosures to put in place following the financial crisis and as we know theres been a collective amnesia on the committee and in the administration to prevent the loans and toxic security from building up the Financial System so lets be clear whether you are renting or want to buy a home or somebody wants to sell it, President Trumps plan to you all to funnel, no surprise here, to funnel more money to the same wall street system that corrects the Housing Market and families lives in 2008. I was encouraged when i saw the plan had nine separate proposals advocated as leveling the Playing Field. I thought this might mean leveling the Playing Field for communities of color, young households, trapped by student at four renters who cant afford to save for a down payment so you could imagine my disappointment when i saw that all the puzzles, every last one of them is about leveling out oe Playing Field for wall street which is to take more money off of working families. Its about making it easier for wall street and the president s home city making it easier for wall street to profit off of the hard working families. These come in the midst of a flurry of other troubling proposals to weaken the housing and lending protections added to gut the bedrock civil rights law and the community reinvestment. Taken together the president once again decided to betray working families in youngstown and cleveland and baltimore secretary carson, the city that the president sound is so beloved once again they decided to side with wall street over the dignity of work. We dont need to make it easier. We need to close secretary carson, newsflash, people are going to get richer. We need to make it easy for every family to find an affordable place to call home. Housing should be optional. Its a basic need no one should go without it in this great country. Thank you mr. Chairman. The Witnesses Today are the honorable Steven Mnuchin, Benjamin Carson secretary of housing and urban development, and the honorable mark. I am pleased to be with you today to discuss the Treasury Department Housing Finance reform plan that will protect taxpayers and foster competition in the market. Id like to thank the chair man and the committee for your work on this important issue. The outline that you released was a step towards ensuring the safety and stability of the Housing Finance system. In september of 2008, the governmentsponsored Enterprises Fannie mae and freddie mac were placed into conservatorship by fha and treasury provided them with over 190 million in taxpayer assistance. Assistance. 11 years later, they remain in conservatorship and continue to be supported by a treasury commitment to keep them solvent. The continued conservatorships have perpetuated the farreaching government influence over the Housing Finance sector. The lack of reform has left the taxpayers exposed. Treasury housing plan includes almost 50 recommended actions. These measures would reduce the role of the federal government, enhanced the Taxpayer Protection against bailouts come increase private sector compositio compe. As required by the directive, the treasury plan shows that they can and should be reformed to ensure the safety and sadness. Although no law provides a specific endpoint for the conservatorships, no conservatorship is meant to be private and that includes fhfa. It provides a roadmap to release them from conservatorship. The reform plan takes great care to preserve what works in the system. Each of the treasurys recommended reforms is incremental, realistic and balanced. In particular, the treasury plan would preserve the longstanding governmenGovernment Support of 0 year fixed rate mortgage. That support should be exquisitely defined, taylor and paid for. The treasury recommends congress authorized an explicit paid for a guarantee by the full faith and credit of the federal government that is limited to the timely payment of the principal interest on qualifying securities they currently have a competitive advantage over other participants under the patch to the Consumer Protection finance bureaus ability to repay. In july, 2019, they announced that the impact would expire in january 21 or after a short extension. Treasury supports the plan expiration of the impact and also supports further revisions for the ability to repay their rule to ensure that mortgage lenders continue to have a bright line safe harbor after the impact. Legislation could achieve the structural reform that taylors exquisite Government Support of the secondary market and repeals the congressional charters and other statutory privileges that give them a competitive advantage. At the same time, we believe that reform can and should proceed administratively. Pending legislation will continue to support the fhfa administrative actions to enhance regulation and promote privatesector competition and satisfy the preconditions set forth in the plan for an end to conservatorship. Under the leadership of the president , im proud of all the work weve done to create conditions for greater economic growth, more and better opportunities for working families and higher wages for all americans. Today i look forward to discussing the Critical Issues of Housing Finance reform. I truly hope the committee will work with us on a bipartisan basis to move forward with legislation. Thank you very much and i look forward to answering your questions. Secretary carson. Ranking member brown and members of the kennedy thank you for the opportunity to appear before you today to discuss how the department of housing and urban development will support this administrations efforts to reform the nations Housing Finance system and i also want to thank the team but we have assembled. They say we have the Ugliest Building but th that the best pe and a special shout out to mike kelly whose birthday is today. In the years since the financial crisis, the government has continued to play an outsider role in the Housing Finance system. Its imperative that we act to refocus the system and that we support appropriate and responsible access to credit and ensure Government Programs do not overlap with and crowd out private capital. Im pleased to present an overview of the plan that we set it to the president last week. We support millions of families with affordable homeownership opportunities to the federal Housing Administration providing access and liquidity in the mortgage market. During the financial crisis, and because of the policies of the previous administration, fha Balance Sheets grew to approximately 350 and 400 respectively between the gears of 2007 and 2018. The outside role in the Housing Finance and taxpayers and to that end i ask the congress to work with the administration on the four key pillars. Return to the core mission of serving including firsttime homebuyers who cannot be served through conditional underwriting the Housing Finance reform contains many recommendations but for the sake of my oral testimony today, let me focus on just a few. We ought to allow the private market to work and in those areas where it cant or wont, we must make certain that we target the programs to the bar goers and noborrowers and not sy traditional underwriting. Historically this has been the fhas most important contribution to the american Housing Market facilitating early entry into the Home Ownership particularly firsttime homebuyers. Millions of lower income and middle income families with the black access to affordable mortgage credit. Refocusing on the mission was strengthened the ability to help credit worthy borrowers build equity and avoid foreclosure. Second the principles of the plan is federal mortgage credit policies should be better coordinated to allow for qualified borrowers access for the credit options. Our plan proposes a well coordinated to ensure fannie mae, freddie mac served their roles in the marketplace. We recommend congress establish the department of Veterans Affairs and the department of agriculture as the sole source of the down payment financing for the borrowers not served by the conventional mortgage market. To better protect the taxpayers we need to strengthen Risk Management systems. They currently inshore 1. 4 trillion of mortgage debt and take a 2 trillion of mortgagebacked securities. It is imperative that the fha conduct their business in a manner that protects american taxpayers. Fha must maintain an appropriate level of capital reserves. It is unacceptable for the agency to ever again require a draw up on the taxpayer funds to sustain its book of business as it did in the previous administration. Our plan strengthen and build its capital ratio well above the statutory 2 minimum to safeguard agencies against episodes of market decrease. To fulfill this duty to the taxpayers and ensure that it provides access to the mortgage credits for the mission focused borrowers, they need some independent vents from broad protocols that governing, staffing, procurement and technology. Therefore, the plan has recommended Congress Enact legislation to restructure as an autonomous Government Owned Corporation and in accomplishing the president ial manner in him provides an opportunity for the congress and the administration to Work Together to ensure they served their missions effectively, responsibly and sustainably. I welcome the participation and this administrations reforms these agencies better able to fulfill their responsibilities to borrowers and to the american taxpayers. Thank you, and i look forward to answering your question. Thank you, secretary. Distinguished members of the committee, thank you for the invitation to appear at this mornings hearing. I can think of few issues deserving more attention. Our nations Housing Finance system is an urgen in urgent nef reform and the status quo poses a risk to the entire Financial System. I want to thank the secretary for their efforts to develop comprehensive Housing Finance plans they lay out a responsible roadmap to build a system that protects the taxpayers and maintains access and i want to thank the secretary for the opportunity to offer commentary during its develop it. These plans are broadly consistent first of all to submit is a worldclass regulator and second, to restore fannie and freddie to save sound condition by building capital to match the risk profile. This would also begin the process to end the conservatorships which have lasted for more than 11 years albeit by comparison the longest was 18 months. The root cause of the financial crisis within the mortgage lending backed by insufficient capital. I believe this fundamental problem remains unresolved today. Average scores have modestly improved the enterprise down payment hide it to income mortgages are backed by the 2004 levels with easy mortgage credit from the system is a mistake and will end in disaster. Disaster. In the current Financial Condition thcondition of the ene not equipped to withstand the Housing Market and they guarantee the combined 5. 5 trillion in singlefamily and multifamily mortgages out t of a 12 trilliondollar market. Yes, with 6 billion of allowable capital, the enterprises approach in the combined leverage ratio of nearly a thousand1. In comparison the largest Financial Institutions o have a leverage ratio of 101. The most recent stress test for the gse illustrates this example. And it declined by 27 . Its total to 25 decline and under such conditions, the enterprises lose over 40 billion in capital. Given that the housing supply in the finance become interlocked since the crisis, we should expect more Going Forward. Let me also emphasize the current is to undercut the sustainable homeownership and the enterprises have expanded with the economy gets maintained levels that ensure that they will fail in a downturn. This pattern harms the borrowers making it easier to extend credit when the economy is strong but harder to keep those when the economy has weakened. The Housing Finance system is supposed to serve while protecting taxpayers and it might view it does neither. The plan aims to address these problems and i applaud them for their efforts. The congress, however, is the only body that cannot structure of the reforms needed to fix this broken system compared to the duopoly of the enterprise the fair competitive market would better serve the borrowers and renters by ensuring no firm is too big to fail. The Ranking Member mentioned increasing service access. I think we have witnessed one industry after another that the best guarantee for increasing access and forwarding the prices is an open competitive market, not a monopoly or a duopoly. Some would argue that they should wait for a crisis. This would be shortsighted and we found the last is difficult to the reform in the midst of a crisis to paraphrase president kennedy the time to prepare the roof is when the sun is shining. Now is the time because the economy and Housing Market are strong kerry this will not always be the case. Of course im not forecasting a downturn i do believe its my responsibility as a regulator to hope for the best but prepare for the worst. Therefore i in hand to strengthen fhfa to end the conservatorships. These are critical to build resilient mine of ecosystem that delivers the Housing Options at affordable prices. In the interim the modest reforms can help me do my job better. For instance in june i asked the congress for the authority were two other regulators to develop Broad Capital and enterprises. These commonsense proposals other financial regulators have these powers need not wait for broad reform. Far too many areas of the nation we face an Affordable Housing crisis and too often this has been the result of misguided regulations and other areas it remains constrained to the lack of construction labor. For the enterprise to play an Important Role in addressing the crisis, they themselves must be fixed adding more weight to an already cracked foundation is to invite the collapse. Thank you again for the opportunity to testify and i look forward to your question. Thank you, director. My first is to all three of you. This can be a yes or no answer but feel free to elaborate if you would like to clarify. Do you agree fannie mae and freddie mac are systemically Important Companies and that they continue to be too big to fail and are even more leveraged now than they were before the financial crisis . Yes, in their current form i believe they do. I would agree as well. Thank you. I think i heard you say this but i want to ask again do you agree that the ideal outcome is for congress to reach a comprehensive solution . I absolutely support that. That would be the best permanent outcome he i believe only congress can reach a comprehensive solution so by saying that director colabria, that doesnt mean the administration and appropriate regulatory agencies cant make significant steps. Absolutely correct. That leads to the next question. As we work to get a solution here in congress, do you also agree that its time for the administration to act and Start Building the foundation in taking the necessary steps that it can take in order to address the issue and also help Congress Gets to a comprehensive solution . We feel its our responsibility to work both tracks but the priority is to work with congress on a bipartisan basis and we will do everything we can to achieve that. Housing is obviously very important to everybody across any political spectrum. And anything we do is going to be questioned so yes, working with congress is going to be the best way to do it. Absolutely, mr. Chairman. The administration should move forward. I will tour you when i look at the 3 trillion or institution that leveraged 1,001, i 1,001, s me up at night so my focus is fixing that. I will answer at the same question back to you. I also believe that while it is the proper rule for congress to solve this and only congress can get a comprehensiv the comprehen that is needed, there are significant reforms that can be accomplished and can help move us in the direction of the reform that ive outlined and that i believe we need to achieve here in congress and i encourage you to act and help us get to that point. In that context, this question is probably more specifically to the treasury and i would like to talk about what the next steps taken showed he and in that context it seems to me a couple of the important ones ive identified in the report reporte discussion over amending the psp a but whatever your answer to the question is, what do you believe we should start seeing prompt action on . Our priority is to make sure they have more capital. We are in active discussions with the director about renegotiating our agreements with them which would allow for removing the net worth to allow a significant amount of capital to be accumulated that in return for that, to make sure the tax payers are compensated for the treasury support and that is something the director and i hope to achieve very quickly. Secretary carson. The most important thing is refocusing on a primary mission choose providing opportunities for capital and credit to the extended nontraditional markets. Also providing the tools that are necessary to deal with the various risks associateserious e management providing liquidity to the Worlds Largest Financial Market in protecting the taxpayers. That is what this is all about and what happened last time around should never be allowed to happen again. I didnt mean to leave you out, director. Thank you mr. Chairman. My primary focus is going to be building capital but also making sure as an agent ebay are ready for the postconservatorship world in terms of supervision function and the power we have and that we may need. I needed with 102nd is to go. The memorandum that directed the agency to complete the plan we discussed today said they would work to be submitted to the president for his approval. A question to the two of you has the president approved your plan, secretary . We briefed the president and he has accepted the plans. I dont know if he approved the plan. We will get back to you. He accepted the plan. So you handed it to him and he said thank you for the plan. We briefed him. We went through and briefed him. Is it possible that he didnt approve the plan with all things government that makes it more expensive and harder to get . If they cut out the most profitable lines that still have to cover the cost they have to raise the rate on the borrowers that are left. It seems to me you cant see the president approved it although the whole process was to be somebody approved it because the whole argument comes down to just trust wall street. The majority of new households formed between now and 2030 will be headed by people of color. We already have a 30point gap in Home Ownership between black and white households, 25 plus gap between hispanic and nonhispanic households. This doesnt mention either of the plans in your press release you said the Treasury Department met with a wide range of stakeholders including Affordable Housing advocates. How does your plan reflects the priority of the civil rights organizations and need for Affordable Housing and community thats what discredits access . We disagree that this is going to raise mortgage rates. We are very careful and support the mortgage and we are not going to do anything to jeopardize that from hardworking americans. Also, we very much support the duty to serve as well as Affordable Housing goals if we looand welook forward to workinh you. We specifically say in the report we believe in Affordable Housing but we think that they should be replaced with something that has more transparency and we want to make sure Affordable Housing goals are met and the money is being used carefully and i look forward to working with you so if you have ideas how we can do this in a better way we look forward to working with you. Was a consensus your staff certainly small this among the panels and industry that we could do these things and pretty much ignored that. Go back to the question why no mentioning of people of color in this gap . I think we referenced the duty to serve that is an important issue that youve outlined and this is something we look forward to working with you on. Our priority is to maintain Affordable Housing and also to make sure the tax payers are not at a continued risk and we dont have another bailout on entiti entities. Your plan calls for shrinking the role in the Housing Market opening up the systems for anyone else to use giving away the data an date and price adva. You also say they need more capital and suggest raising capital through the public offering. You grew up in the private investor world if he were a private investor. With you in juswould you investb administrations plan to give away their asset . I would. And to raise the capital they need you have to raise more money than any other in history right after the Trump Administration shrunk their business and gave away their most valuable assets in the privatization scheme that we havbut we haveseen in other pare government . It strikes me as highly unlikely that they can raise that kind of comedy can have thought successful money considering what youve done and i would like to enter into the record from 20 to civil rights in Affordable Housing organization for the urban league and the center for responsible lending and reinvestment coalition, National Capacity and Leadership Conference on civil and human rights. Its what they see as the essential elements of the sustainable, equitable Housing Finance system and fewer of these priority since weve seen from the answers are not answers to appear in the president s housing plan. Thank you very much mr. Chairman and thank you to the witnesses. Thank you for launching this conversation with your thoughts recently about how to move forward on reform. I think once the treasury report has laid out its a very constructive set of ideas that we ought to consider very seriously and i want to thank all the witnesses for contributing to that. Let me start by saying that its clear to me that it is a lack of Housing Stock more than subsidy that is the primary cause of an affordability problem but if the government inflicted problem not typically state and local. Housing is not immune to the physics or economics if there isnt sufficient supply to meet the demand then it becomes more expensive and vice versa. And i never cease to be amazed by the jurisdictions with the most severe problems like San Francisco blocking in Affordable Housing development because it casts a shadow on a park. Its going to make Affordable Housing more expensive. Or requiring all new houses have to have solar panels installed thereby raising the cost of houses and rent control which obviously exacerbates the shortages so i want to thank the course in for the work that you have been doing for the delivery of new Affordable Housing stock and i guess i would like to direct to the director if there are things we can be doing in the reform, acknowledged most of these are things we can do to go to the fundamental underlying problem which is inadequate supply. But they say i couldnt agree with you more that it is an adequate supply and primary driver of that is the local regulations and it does concern me to be a affordability to access it is causing affordable housintheAffordable Housing crin many parts of the country so we have to recognize that while the Mortgage Finance does play a role but cannot fix the problem by itself. The extent that we could encourage and work with localities to try to bring some focus on trying to reform the local land use and regulation. As i understand the treasury acknowledges that there is a statutory role to support affordability. But as i read, the report identifies a small in the mechanism and as i think about it, it seems to me it uses an indirect subsidy. In other words cut the subsidy doesnt go directly to people that have a low income to be at the subsidy tends to go to high credit risk loans a person of modest means could have a low risk loan so isnt it true that we could design the subsidy ineffectually targeting low income folks rather than distorting and encouraging more highrisk transaction and that is for doctor colabria as well as secretary Steven Mnuchin. A handful of studies have looked at this and the correlation its positive and weak so you are right there are plenty of people that have poor credit and low income people with good credit. I do believe we can better target the resources we have in a more efficient manner to get people Home Ownership that wouldnt be there otherwise. The absolutely support wanting to make sure there is Affordable Housing but we want to do it in the most effective way. We all agree the previous system did not work and that is part of the reason why they got into trouble, so i would hope that this committee would work with us on a bipartisan basis to find the best way to deliver the support in Affordable Housing. Thanks very much. I dont have enough time to get to my next question so i will yield back my last 13 seconds. I would like to start with an important issue for new jersey and many of the counties represented by members on both sides of the committee as a part of your plan, the treasury is recommending that they solicit information on whether to tailor support for the higher principle balance loan, which any reasonable person would interpret to mean the treasury is seeking to lower the loan limits. Doing so would have a seriously negative impact on the Housing Market in states like new jersey. So, secretary, why would you recommend that they solicit information on whether they should effectively lower the conforming loan limits if they do not have the authority to administratively change the conforming loan limits . Congress has the responsibility on the limits in having any changes would require the congress to say that. We always think its important to solicit information. On the market and specifically in new jersey we dont want to do anything to jeopardize the Housing Markets. In the tristate area the cost of living is significantly higher. There are many places in the country i was just referring to new jersey. You do agree an as set in the testimony and nomination hearing that he hasnt had the authority to administratively change those conforming loan limits . I want to defer to him but the legal analyst us is the same as when you testified. Thank you very much. We have established that. Now let me turn the rental housing which is a critical part of the Housing Market in new jersey and across the country more than 18 million households in the United States live in the rental housing including a million new jerseyans. They play a vital role by ensuring that the multifamily housing is widely available to the Economic Cycle and as you know, the multifamily businesses like freddie and fannie performed quite well and remain profitable during the worst of the financial crisis. The time that wat the time thatt private investors exit the segment of the market entirely. Secretary Steven Mnuchin, the treasury recommends that the fha should consider limiting support of the gse multifamily business. We heard from witnesses before this very same committee in the industry in march that the private capital alone cannot fill the void for the left and that would mean aggravating the crisis that existed in the states like new jersey and across the country. Im not sure that w we thinkt is curtailed but we need to look up a contact and there are people that thought they should get out of the multifamily business. They were given exposure in the multifamilies and they were obviously certain rent control rules and others that i am concerned are going to limit the Housing Stock. You didnt conduct an analysis let me ask you another followup what makes you confident that they can fill the void or do you not believe that they can fill the void . Im not saying that they can or cant. We will continue to do more in analysis we just want to make sure they have the appropriate risk, so we very much support the multifamily lending. On a different urgent matter come in the previous cases where lead was found in the Drinking Water systems, federal assistance was critical to remediate the systems and reduce lead exposure. The city discovered the levels from some limited water samples but i believe hud needs to be part of the solution as well. They assigned a fulltime staff member to assist the residences in the greater region and provide assistance for the city and state agency. Its affected you will assign a staff member to assist both residents and agencies looking to tailor their funding to mitigate the risk. Weve placed a great deal of emphasis on the communities affected by it, so i will commit to continuing to do that and continuing to raise the profile of this issue and in new jersey and elsewhere. My specific question to commit to have a person that is designated for the surrounding communities that are affected by this to assist them to the flexibility that has been shown in the past in the funding. I will commit to doing everything we can to alleviate the problem and if that involves a specific person we will do what is necessary. We have an agreement between the senator on a wellknown conservative mind when it comes to housing and finance policy to get your response to these into the particular secretary carson and mr. Colabria. For the new Healthy Development that includes beneficial environmental protections or wellintentioned permitting processes or Historic Preservation rules but also ball designed for the multifamily or Affordable Housing. Local parties acting as barriers to Health Supply include landuse restrictions that make the developed land much more costly than it is inherently and the zoning restrictions and requirements, arbitrary or antiquated reservations and slow permitting processes. They have the greatest Affordable Housing needs of the largest number of homeless people. We have the largest number of restrictions. Its about 1. 6 million if you look at los angeles where the requirements are for the solar paneling, a lot of this quite frankly is because of nimby ism. Its actually based on thinking the federal government still act the way that it used to building these gigantic complexes within intermedia thought and that is and what is done anymore. We are talking about publicprivate partnerships, multiple incomes, conforming to the architectural and cultural issues in the area. In the middle of the singlefamily neighborhoods people have the wrong impressions of what we are doing. We actually care about what people think so that the firemen and policemen and nurses can work in the same neighborhood wherwhere the work i they work t actually enhances. Part of the problem is places like california the process has multiple vetoes are people can object construction senator smith is aware theyve recently zoned and have done a smart move on the local level that will help Affordable Housing in the area so there are good lessons to learn as well as lessons that dont work. I hope now we have an agreement between barack obama, colabria, ben carson and that to me that we can look at additional grants of more Affordable Housing programs and other local policy of course is education policy. A few quotes from the book of stress on middleclass families. A bureaucrat kicks the Childs School not the parent. The way to exercise the new choice is to buy a different home. It isnt only a crisis of reading and arithmetic that a crisis of middleclass family economics and at the core of the problem is the timehonored ru rule. Between location location and school for the price of a home just because it happens within the boundaries of the desirable School System. A welldesigned Voucher Program would fit the bill deeply. Fully funded vouchers would relieve the parents from the terrible choice of leaving their kids on bankrupting themselves to escape the schools. If a meaningful system were instituted, the School System would change forever. Closequotes far from senator warren spoke, 2003 in support of a school Voucher Program. I noticed you dont do education policy, but do you agree that local education can negatively impact Affordable Housing prices . I would encourage members of the committee to take a look at. I know my time has expired but perhaps you can find an ally on another side of the aisle along with the secretary to improve the quality of education in america and Affordable Housing. Thank you. Its good to have you in front of the committee and i wish we had you in front of the committee more often. It doesnt happen enough we have folks in the administration to visit with us. Doctor carson, you are always welcome back in montana. You have had a chance to see the Rural Housing and i dont have to talk about separate sentencen francisco, miami, houston. I want to talk about housing in my own city. Quite frankly we are talking about large cities and we have just the bigges a biggest crisin america. I want to start with you, secretary Steven Mnuchin. When the plan was developed, how much effort was put into getting the information from rural and frontier america on Affordable Housing. I envisioned many of the places to the president s campaign. And even during my campaign. [laughter] this shouldnt be a big city housing plan. The question is how much information did you gather it was there between baltimore, washington, d. C. And in some peoples eyes we dont have that kind of population in the most isolated areas. So how much information was gathered . I think that we solicited from a variety but im going to get back to you on the specifics. I am sure you point you are trying to say this should very much help the people in montana, not just the people in new york and california. Its critical, and i will get into that in a second when it comes to regulation and shadows in the solar panels and rentcontrolled otherrentcontros to talk about here, but my own city in montana, the only regulation is you cant build in a floodplain. And we still dont have housing. So, thats the point. And in your plan, i just want to get an idea, you talked about they need to surf a national market, but then its also suggested that congress should not require guarantors to serve a National Plan that individual markets. Where are you on that, and i assume what youre saying is you want to have you ruled that supports national service, but the congress should underline that and make it individual markets. No, thats not the case. We support the national concept, but we are looking at that and saying it cant just be national. It has to have specific plans as you said that impact places like montana and make sure that they are not left behind. Said the intent was to promote for access for the rural frontiers. Could it be used to do exactly the opposite . It is to work with congress so that there is clarity in these issues. We want to make sure whether it is the director o this directorr future director. Let me talk a 30 year fixedrate mortgage. In the report, it suggest maintaining the 30 year fixedrate mortgage but it also says, it is possible that the 30 year fixedrate Mortgage Loan could remain available at the similar price that does not depend on Government Support. Can you tell me why this line is in the customer. First of all again, we very much support the 30 year mortgage and the 30 year mortgage might not be for everybody. I got it. When i hear that saying, a 30 year fixedrate mortgage could exist without government backing . Do you believe that . Annoyed dont, there could be part in the large jumbo market do not need government guarantees and will have a 30 year mortgage. That it would have a pretty negative impact whether its regardless. We need a implicit or explicit backing which is why wed rather have them have an explosive. I use both. So thank you. Thank you. Senator rounds. Thank you, mr. Chairman. I want to think you and our panelist, hard work on the proposals. In helping finance reform is a difficult issue with ending the decadelong conservatorship. Theres Something Else i like to add up. There are challenges within the United States and rural areas that my colleague on the other side has indicated a give an example and secretary carson, we had a discussion on the other day, native americans tell a real challenge, and trying to find a way to move forward so they can also purchase houses, that is something that is real important in south dakota. Just as example, they do ba loans for native americans were veterans the back on the reservation. Minneapolis office received recognition because they had the highest number of those mortgages that were issued in the previous year. Five in the entire region. Not acceptable. As we look at this i dont think its republican issue or democratic issue. Its a case of where we have to find a way forward to fix the challenges. Id like to say to all of my colleagues on both sides of the aisle there should be a door working on a pathway for the gse. How to unwind conservatorship and build passed out of committee and a bipartisan vote. Theres no reason we should be able to navigate the same concerns today today should serve as a warning as the determined to bring the conservatorship to an end. In a really defined way that it can do so. While my colleagues might object to certain parts of the ministration, these objections are no justification for testing to find a path forward within the committee. This Common Ground that could be had been very fortunate if were not able to hold a markup on this approach. It has been 500 days since his committee has held a market. If your concerns are genuine in this committee and the Committee Members are serious about doing something, this is the time in which we can find Common Ground. My first question id like to direct to secretary carson, with great interest, the proposal to transfer from the federal Housing Administration to ended pendley corporation. I agree with hud that this would provide fha with the economy it needs for serving first time homeowners. In allowing for hud to have oversight and regulatory authority. And like to point to my colleagues on the other side of the aisle, this is not an idea that comes from the radical right. President obama commissioner has proposed the same reform. I have drafted legislation that would do just as you proposed but some of my colleagues have expressed reservation that reforming the fha into a Government Corporation would impact huds funding for other programs. My view, the receipts from fha mortgage insurance would be available to offset the other hud spending. Ive authored to get my colleagues to rewrite or have input in the section in the bill but so far i have not received any takers. My question is, could you briefly discuss how to achieve an independent fha without jeopardizing huds funding. Thank you for the question. I did very much enjoy the time i spent in your state. Interestingly enough, we have not said anything about the receipts all begins swept into a particular area. That obviously is not going to be a particular problem. The reason we want to separated out into a corporation. They could have the flexibly of doing their own hiring and being able to respond quickly and with agility to Market Conditions that occur. They would still report to the fed secretary and we could still align our missions. Consider the fact that the commissioner has to deal with Housing Assistance also. Those require their own separate entity so we can really concentrate on Public Housing on a multifamily. And in a way that it should be concentrated on. Thank you, mr. Chairman. My time is expired and ive asked for the opportunity to ask several questions that i shall respond to. Thank you, mr. Chairman. Senator warner. Good to see the witnesses. I have spent a lot of time on the subject over the last many, many years and what i want to focus to say on what you inspire legislatively but what might happen administratively. In the outset, im a little concerned on your Ministry Proposal that we couldnt up with a system that does not feel and does not increase Affordable Access to credit in a grave concern to me. First of all i will associate missile for senator mendez who is not part of the crisis. And the component of your proposal, you are trained to lower it means fully support for multifamily. I am concerned about that, also in your proposal, lets talk about legislatively, we continue to see this around trying to lower gse footprints, if we have a lower gse footprint and higher capital requirements, the logic of that would mean you would have a much smaller revenue base and under the assumption one that mean the gses would deliver less concept in the system. I want to acknowledge the work youve done on legislation and i truly hope you will work with us because i know you spent a lot of time on this i know more about the subject than ever wanted. We hope not to lose all that knowledge. Again i want to comment on multifamilies. They have gone from 25 40 of market share. Which i think is fine, were not looking to take effect after 25 . We dont want to see it i thought you said you wanted to lower the cap. Again, go to my other question, if youre lowering thing smaller. If youre raising capital which appropriate, isnt that going to mean and decrease the take place. Not necessarily. Again, the cross subsidy is something that we have and as we talked about it, some is efficient and some inefficient again, our priority. I like to see more detail. I dont respectably see how you make that happen. Let me ask you this. If you end up on your ministry to it in the network sweeps, will you continue to fund Housing Trust fund yes or no. As long as the conditions, yes. Sweep all the prophets and try to build up capital but youre still committing and continue to fund the Housing Trust. As long as the conditions and statues are meant for funding that then yes, absolutely. That the discussion im bound by what the statue says. My sense is, i know you talk about potential for different coming into the market. My concern that your ministry to proposal that youre really talking about a fannie and freddie recap and release which will keep us with duopoly. Even with higher capital standards which are put us right back to where we were prior to 2008, i dont know how thats a too big to fail issue. One of the things you answered. Its currently constituted that these are too big to fail and if you go forward, if you go ahead and go through on the recap and release plan. Would you both recommend the gses be designated we would make sure that we understood is enough capital to make sure will not be designated. I would degree with the secretary of state. So neither under recap and release that the gses will be designated . Is a member, i believe there is more than sufficient information to begin a process. I think its important to never start the presumption that any entity is necessary until you run the process. I would point out, we had a helpful hearing on this, i believe every witness a crossed the stop from the gses should have received that and begin this concern that we can somehow in the pinna scheme where we end up with a dua dol senator kennedy. Thank you, mr. Chairman. Mr. Director. As an american to believe that i have a right to own a home even i can afford it . I think you have a right to own property, yes, own a home, whether you can afford it is opened up to whether you come by the home, its in terms to say im not sure where you are going. Do you think as an american if i cant afford a home, i have a fundamental right for other americans subsidized me . Thank you for the clear purgation. The short answer would be no. I think everybody on this committee, everybody on the panel we are to do Everything Possible to make homes and mortgages affordable. We can agree on that. Absolutely 100 . Why would they make a loan without verifying . Agreed. Why would they . The only reason it would reduce is because they can past the risk alone. They can sell it to you guys. Absolutely. Isnt that the fundamental problem. How we got in trouble with underwriting standards. Absolutely. We are the ones holding the bag at the end of the day after everybody else in the process has made money and walked away, its a taxpayer holding the bag. What have you done to fix that . We have begun, tomorrow five months on the job we have started doing Due Diligence to make sure we have the regulator what did your predecessor do to fix that over 11 years . I think to me, im looking what needs to be done Going Forward, obviously i wouldve preferred to inherit a different situation. Excuse me for interrupting but have you gotten any more realistic . Its gotten worse not better. Certainly at the gses we saw a massive expansion lost where a whole lot of high dti loans that were not previously done. Thats what i thought. And it concerns me greatly. This is just one point of view. This whole thing is a car wreck. Its a dumpster fire. We spend 190 billion of taxpayer money and were in worse shape. Heres what i think we ought to do. I am not in love with every aspect of your plan. But i would encourage you to get somebody to put in form of a bill if you have not already, get introduced and lets market up on this committee. Lets put it in front of the committee and lets let senators be senators and try to put out the fire. What we have to lose . How long have we been talking about that. Doing nothing is hard, you never know when youre finished. I cannot agree more. If that does not work, and im not going to mislead you. It will be like trying to slam a revolving door. I would encourage you, to saddle up and go. Tell me what you can do with your ministry to authority to put out the dumpster fire. And by that i mean encouraging people to make loans to people who clearly cannot afford to pay them back. Senator we will be risking the gses. What does that mean . That means on one hand if you leveraged 1001 you cannot make loans that are guaranteed to go back so we have to improve the quality and way that is sustainable. I 100 agree, if we do nothing this will end up very badly. We will have a recession at some point. Absolutely. Nineteen cents for every 100. Thousands on fannie mae. Let me say it again, lets put this bill in front of the committee mr. Chairman and mr. Ranking member and lets see what we can do. He made some good points. I dont agree with all of them but i think we ought to flush it out. But if were not, congress will sit on his butt and do nothing and you need to get started trying to fix this car wreck. Thank you, mr. Chairman. Thank you, mr. Chairman and thank you to the witness. I want to follow up with kennedy. I completely agree. We need to get in front of the committee and hashing out. But with all the respect of the senator, we need to go further and housing issues in this committee and get things to the floor of the United States and talk about gun violence in healthcare and talk about Election Security and a lot of things that the congress in the United States and the senator need to act as independent body that the constitution set up and not just somebody that is there only if the president of the United States is going to sign a bill. Thank you and i apologize if i took it further than what you anticipated. I completely agree. Second thing, i will follow up to the record, i believe you earlier testified, i could be wrong but i thought i heard you testify the duty to serve the very low and moderate family in this country was maintained. I dont read it that way, i see on page 23 and 24 of the report where youre talking about reforming and replacing it with something that would involve assessments and congressional appropriations. Its a really slippery slope to try to do as much as i like senator leahy and shelby approach to appropriation that may not always be the case heard i followup with a question for the record. One area i do want to talk to with doctor carson, mr. Secretary a pursue ministration effort to move forward on housing reform. I believe overall they will make harder for workingclass families to achieve ownership. And potentially with the dream of ownership out of reach. My view open the discussion on that. More importantly while these reforms are being discussed, i think we also have to talk about other socalled reforms that the administration is making housing in america. We have not seen you here in a few months, i dont know if well get to see you again and anytime in the future. I want to ask you about a recent hud proposal regarding dramatically undermine the ability to enforce the Fair Housing Act. I have taught time and time again in this committee and others the housing discrimination is persistent, but often, not always direct in years of legal document including the Supreme Court made it clear that policies and practices of businesses unintentionally discriminate against racial minority and the cause for impact in the new rules make it nearly impossible to bring forward a disk termination based on impact. Fair housing is only esperanza can be and if we cant ring Impact Housing by nature and im concerned that the rights and civil rights advocate this rule introduces new hurdles and new fivepart test. Mr. Secretary, i think we can all agree the housing discriminate in still exist in this country. Walk Home Ownership rates are down 40 and that is not because of discrimination, i get that, we are still point out recession. The fact is there still down 40 in their now lower than it was in 1968 when the Fair Housing Act was passed. I would also like to point out, you have the ability to bring secretary initiating complaints, president obama did it ten times a year, president bush did it five times a year. But in the two and half years of the chopper ministration, we have 0 that you have initiated. So a cynic would say that the new rule is in part to justify the action of hud in bringing these complaints whether we know that they exist. My question to you, it is simply explain this to me. Explain why we need this role, why its important and why we need this when we know it exists. Give me an opportunity to explain why youre going to make it nearly impossible for people to bring desperate impact statement. You mention the fact for the record stands for itself the fact that the matter is, weve initiated facebook complaint, we got an agreement of los angeles of almost ten years of not taking care of disabled people, housing needs. We have launched one against San Francisco for discriminating against low income people for housing and if you look at our list of suits that have been brought. I think they would compare favorably with anyone else. As far as desperate impact is concerned, we are trying to bring it into alignment with the Supreme Court ruling. Come on mr. Secretary, im a lawyer, that dog is not going to hunt. The Supreme Court barely ruled back this. What you are doing i been practicing law for 40 years, what you are doing it is making impossible for a plaintiff to bring a desperate impact statement. It is not in line with the Supreme Court,. We have brought a complete against San Francisco on desperate impact. You should take a look. But the fact of the matter is, of congress were to raise the rate minimum wage rate to 15, who would be affected . Low skill or unskilled workers. Primarily minorities in the area. That becomes a desperate impact against congress. You begin to see what im talking about. What we want to do is clarify the way that it is done and help save taxpayers a lot of money. My time is up at all followup. It is been offered for Public Comment and i want to make sure my public, is recorded right now if i need to do it in writing with a black sharpie i am happy to do that. This is wrong. This is absolutely wrong. This discrimination still exists in this country. We need to be affirmatively doing something and not making it more difficult. Id be happy to discuss it with you. Chairman, thank you. Both the hud and treasury proposal suggest thered be a separation between the bars that use fha financing and that that use gse financing. How would this be achieved and how would the separation help homebuyers. Thank you for the question. I think the objective which doctor carson talks about is to try to reduce the competition at the margin which has driven down credit standards, we saw before the crisis where the gse has tried to grab fha market sharing and did so by reducing their standards and many of those loans turned out unsustainable and left homeowners in a position where they lost their homes. Trying to encourage responsible sustainable homeownership is the objective. To echo what doctor carson has said, fha has focused on the firsttime homebuyer low down payment, part of the market and i think i will emphasize, the objective is not to have gaps but to reduce the competition which is eroded standards in the past. So it seems to me our goal is to have a multiple system and that is to boost the accountability of taxpayers and i assume you can all tell me there are things that go one at the gse that deserve our attention into accountability to taxpayers. We want financial intubation, we want Greater Consumer choice through competition. When we separate the gse in the fha, does that help achieve those goals . Whoever has the answer and one i can understand. [laughter] i speak for the fha. What our goals are and what her principal focuses in the reorganization. It so we can concentrate on the firsttime homebuyers on minorities, on people who frequently dont have access to traditional credit markets. And this plan actually facilitates that rather than takes away from it. One of the things it seems the gses have been able to keep millie in this timeframe that we are in is greater access to technology and information and if we have a new system, how do we force the sharing of the benefits and data and technology that those already established in the business half. I tell you that the gses were able to significantly upgrade their it performance while they were in conservative ship thanks to the taxpayer. Therefore, what they have achieved in the area they should be willing to share and i think they recognize that and i think congress should recognize that. So you would see an increase transparency in sharing the data and other information with the industry, could that be a precondition to release from the conservatorship . I think that is a question for the fha. These are one of the issues that we should be looking at. Tell me, where we are in regard to capitalization. And where we need to be. What level capitalization do you see as necessary, maybe this is for you mr. Sec. At the gse to operate efficiently and most important we to withstand any future significant downturn. I think they need a lot of capital. Let me just say. We are looking at 3 billion in each is irresponsible in terms of the amount of capital that they have and theres no way they can operate for the fact that they can draw on the treasury lines. Which in essence is a capital backstop today. We see two things, one retaining earnings, one late to accumulate capital and we will have to raise thirdparty capital. Again if i were to give you a range of a number, its more like 100 billion then is 6 billion. What is the capitalization today compared before the crisis of 2007 in 2008. Its a minuscule today. Were in worse shape going to significant major downturn and we were only had the catastrophic the gse can operate today if it were not for the treasury lines. Thank you. Senator smith. Thank you, mr. Chair and Ranking Member. Thank you all for being here today. My office has been doing a whole series of meetings around housing all across minnesota, small towns and rural areas and big cities two. I want to do a note to senator browns and senator kester for bringing up the issue and how it affects rural areas and tribal areas. What i have heard in these meetings, if you dont have a safe affordable place to live, nothing else in your life works, your job does not work, your schooling does not work, your health does not work, your companies do not work because your employees do not have a place to live. That is the way that i am looking at these complex questions about what we do the gses. I want to start with this, you and i had a chance to talk about this in july when he came to visit my office. In july you indicated you thought that the Treasury Court might be flex will enough to accommodate the gse operating like utility with a regulated rate of return. You even thought that you would be open to consider that utility model rather than a multiguarantee model. And you make sure that we got the equity in all the places in all the families that we need equity for. My question is, after reviewing the plan, do you think a utility model would work . Firstly under certain circumstances it could work, i think it would be helpful for members who want to see to start fleshing it out. They take away when people suggest utility, they need rate of return and pricing and we do regulate the pricing of the gses and i would welcome having such regulatory flexibility. As senator brown said, weve been working on this in looking at this idea of the utility model has emerged and there seems to be a lot of consensus around. I think its important that we continue the conversation. What we are seeking is a way of making sure we get the equity that we need to fulfill the dream and the people in this country can own a house. Absolutely. I just want to, as well, weve had very specific conversations with the chairman about this and the director myself. We support working with this committee on what you may consider to be a utility model. There are plenty of utilities where the pricing of the utility is regulated and we do think that fhsa should maintain regulation oversight of the pricing of the guarantee. We look forward to working with this committee on meeting objectives. Id be interesting and continuing the conversation and i think thats good. I just have to take the opportunity since every chance to see you, i dont think weve had a chance to meet before. I just got back from minnesota, i spent august in minnesota and as you probably know, minnesota agriculture is the bedrock of our economy. As agriculture goes, so goes smalltown and rural area. I talked to a lot of farm families. All over the place. Minnesotans dont like conflict. Were not like my colleagues from louisiana. We are pretty lowkey. But minnesota farmers are telling me that they are devastated. That is their word. Devastated by the president s tariffs. In gary who is ahead of the Minnesota Farm Bureau says it is already driven some farmers off the farm which not only hurts the Farming Community but rural smalltown communities. Its been devastating to rural america. So, mr. Sec. Yesterday on fox news, you talked about the chinese terror for and you said, we have not yet seen any impact on the u. S. Economy. I just dont see how you can say that. In 2017, china imported a little over 19 billion and add products in a 2017, and 18, ninepoint to billion, a 50 drop. It minnesota farm families, they dont want to be told to be patient, theyre afraid to going to lose their farm. Do you really believe that this tariff war that the president tariff war has not had an effect on the economy. Let me say i look forward to spending time with you still have my office reach out. My comment was on a broad impact on a 22 trilliondollar economy. I went on to say there are specific situations somewhere weve given waivers and i want to acknowledge on the farm area, we spent a lot of time trying to get an interim agreement to have china by agriculture. I very much appreciate what is going on, i never thought id become an expert on soybeans and other Agricultural Products ive been accused of just wanting to sell soybeans, thats not what were trying to do but we want to make sure china treats our farmers fairly and does not retaliate against the farmers in an unfair way and the way we have been doing, thats top of the agenda for the conversations this month. I think this way being farmers have seen sales drop by 75 . They dont have any place to store the beans. They feel like their collateral damage. I think its urgent. I understand that and i can tell you there were specific commitments made from the chinese that they did not follow through on and that has been a concern on us for u. S. Farmers. Thank you, mr. Chairman. Thank you gentlemen for your testimony. Im from arizona in the last housing crisis, i was serving in the military and i will to share, so many of my neighbors lost their homes. In a middleclass neighborhood, hardworking families, this crisis hit arizona really hard. The home cost in home prices dropped 56 after 2006 in the five years before that home prices had nearly doubled and today, it sounds even more dangerous than the conditions prior to the last crisis. I have not been here that long. Thank god. But im honored to serve arizona. As im in the new world looking at this. People are expecting the government to look at them, we had so many people lose their homes in the modification and changes will be made to make sure we prevent this from happening again. What you are describing, if we do nothing and the changes you are offering and what Congress Needs to do, a similar or higher risk, i dont want to put words in your mouth. So how is it we did not learn things from the last crisis that brought us to a better place as far as how the government is functioning for homebuyers and hardworking arizonans. How do we get here. The thousand and one capital ratio is scary. It absolutely is. And let me say i very much recognize arizona was ground zero for the crisis and we want to avoid that. Let me assure you, i have gone internally i review of servicing practices into me the real problems in the last crisis, these things change weekly in a very little guidance to borrowers and im committed to making sure when we do have a next downturn, i hope its a long ways away but when we get there i want to make sure borrowers, lenders, government we all know the rules of the game and the people will be treated fairly. Perhaps emma glass halffull, having been on the staff before the crisis, if you were in 2006, 2007 to suggest housing prices would decline you would get locked up. I think we have made progress, a least a broad recognition across the committee that we dont want to repeat the crisis and we can repeat it if we dont make positive efforts. Having tried to do this once before, i feel like were in a better spot. Those are trying to get through crisis, but the point is preventing in the first place. Were in similar conditions, how is it reforms have not been made to prevent us being in similar conditions . Thats what mike and scituate would hope the government would do. I share that frustration is noted tomorrow in will be five months for me. Im frustrated there were 11 years later still have fannie and freddie conservative ship. And this is not a safe situation to be in. But i commit to you we will work as fast as we can to turn the ship around. Any other . I would say, at fha, delinquency rates that default at the lowest rate that they have been. Changes have been made and we recognize what happened before with the manipulation of debt to income ratios and credit scoring possibilities. And here is a key factor. Putting people in a home that they cannot afford does not do them a favor. If they lose the home, they lose their credit, future possibility. That is plain into what is going on today. For instance the Minority Community particularly in african communit community, becr credit is ruined. In some of the cases people who had good credit before. Were looking at that to see how we can help with that situation but we want to make sure we learn from those things and we have made substantial progress. I want to share that all 15 counties of arizona my first 90 days in Affordable Housing the one associate myself with my college. A portable housing for the workforce whether rental or buying is something that is a real challenge for many communities in arizona to include Rural Communities and i know its not all a federal issue for something that is impacting the people i represent. Breaking down as many barriers as we can to provide access is critical. Thank you. Senator reid. Thank you director. Thank you for being here today. Weve all talked about Affordable Housing and this is the most unanimous sense Affordable Housing ive heard in this committee. Theres two programs that directly aid Affordable Housing, as a Housing Trust fund and their funded through assessments on the agencies and will you commit to ensure that these are fully funded and will continue to support. Within the constraints of the statute. Absolutely yes. I like to direct a question to all the panel. Allstar first with the secretary of the treasury. Secretary mnuchin. Youve done an analysis and i presume, can i ask you in a general sense, who will not be able to get a mortgage under your proposal . I dont think there is anybody who will not get a mortgage other than there may be certain people who should not get mortgages which they really cannot afford them. But affordable mortgages are what we want. You have not identified any group of individuals that would be disadvantaged by the proposal . The only thing the director has said he is looking at the gses which are his responsibility, there may be high risk loans the gses are making that they should not. But thats his responsibly. I will ask him. Secretary carson, new seen a group that would be left out . Certainly there some people who probably should not be mortgage holders. And in many cases, very disabled people, elderly people, people who are drug addicted, who are not going to be able to make the payment. We have other programs for individuals like that. And doctor, urinalysis . I noted the ministration plan and be an independent regulator we have not done an analysis of the ministration plan. Again going back to the analysis underlying the proposal. Will it cost more to get mortgages on your analysis . Have you done runs to show that relatively we dont think it will cost more. On the first question, there may be people who have giant cash out mortgages today that are creating big risk to the gses but there should not be. Thats what i was implying when there are people who will not get mortgages. Is not an analytical analys analysis. We would do analytical analysis as part of this but no we are not done that today. We do not have any analysis to dictate or that suggest that prices will be raise. Were doing things to lower the price working with the services and making sure to do the appropriate things before foreclosures. If i get offered commentary i think its important that they suggest and ive called for competition and again, its been a few years since i was in grad school but the economics i learned with competitive markets provide lower cost, more access to monopolies into anopheles. Its hard for me too believe that competition of this market will result in lower prices. I think its a strong amount of evidence again theres pretty good evidence for that. Again conceptually you make a point, if you get the evidence in a fashion, we would love to have it. And another question, how about Community Banks and credit unions, will they be better or worse in your view or analysis . We will make sure they did not fare worse. We want them to be treated fairly and thats an important part of any future plan. Absolutely key, and working with them. In their ability to provide education to people about housing financial managers essential. It was mentioned earlier the control over pricing such as utility model. One of the things weve done is eliminate the volume discounts that fannie and freddie gave to large lenders and as you know precrisis countrywide paid a lower price than Community Banks and fannie and freddie drove consolidation in the origination side. I think its important post conservatorship tab the authority to limit branding and freddies to drive consolidation. If i can, theres a discussion of the lack of capitalization of the fannie and freddie in the fact they reallyn the treasury to survive. I was here, senator creep was here and since this crisis began, we have invested 9,100,000,000,000 and fannie and freddie in the treasury has received about 400 million i believe excuse me, 300 billion in terms of dividend you have taken out. Couldnt you correct the capitalist discrepancy by relenting on the dividends youre taking out . The taxpayers should be and have been compensated for the risk that theyve had historically and the risks Going Forward. So have the tech pair put the money in the stock market they would earn multiples of this. This is not just about if we took away tomorrow if we say we got her money back will rip up the guarantees in these entities could not exist. As long as taxpayers are at risk we expect the taxpayers to be compensated. Isnt your motto Going Forward to allow these individuals in these entities to keep their capital and keep the dividends . Two different things. From a cash flow and capital standpoint yes. Our intent is they will keep the cash and increase their capitalization. What we are negotiating with the director right now is in return for that, we do expect that the taxpayers are compensated, one way to increase the liquidated preference and maybe commitment but thats what were discussing now. Thank you. Thank you, let me think chairman and Ranking Member with Affordable Housing in this discussion. It is something we have been talking about but is a major issue that we need to address in this country. Nevada outside the cost of healthcare is the number one issue and i appreciate you being here. Let me introduce you, some of the discussion is not pertinent to what im hearing and the impact when it comes to Affordable Housing. Ive had roundtable discussions for the last two years in urban and rural area. In the 17 counties, 15 are rural. I can tell you right now, rent control is not causing affordable rent housing. It does not have any type of laws that mandate rent control. To my understanding theres only five states have rent control. Id also like to point out, streamlining state and local zoning will help but it will not solve the problem. It is not the main impact to the Affordable Housing issue in our state. I promise you this, around Affordable Housing roundtables have been at the table with the private sector. As well as other people and the folks that work for you as well. Please know im looking for answers and i think we can come together to address this issue if we Work Together. Let me start secretary carson with you. Im curious, does have support the continuation of the trust fund . The purpose of the Housing Trust fund, we certainly support that. You do . So you would support keeping the hugHousing Trust fund intact the readers now . I dont know if i would be happy with some changes to it. What changes would you make . We really want to take a more comprehensive look when it comes to how do we get people into Affordable Housing situations, that includes everybody in our society and id like to be able to provide a little more flexibility, not only for the agency but for localities. Im not sure what that means, right now the changes you are making, how will of affect the 3 million or more the states received for nigh housing needsr extreme low income families. We may have Better Solutions for extremely low housing. In low income people. You have those numbers yet . Or is that something you will work with congress. Of course we want to work with congress. But i want to make it clear, traditionally throwing money at the problem has not solved it. This is gone on for several decades and we want to look at the deeper issues that cause the problems and address those. I absolutely agree this needs to be addressed. But we have to have substance. We have to have detail. That is what we are looking for. I was going to, one thing that is clear, there is bipartisan support on the issue of Affordable Housing. There may be difference in views on how to get there. I want to be clear in the report, maybe there should be more money put for Affordable Housing. When we talk about the Housing Trust funds, i would say if theres a more efficient and accountable mechanism in congress wanted to put more money for Affordable Housing, that something the ministration would be open to working with this committee. I agree theres bipartisan report. It does not apply less money for Affordable Housing. What your definition of Affordable Housing . How do you define that . Its depending on the market with affordable in one market is not affordable and the other market. Both joan and to rent. If youre sitting parameters of how the funding will go towards Affordable Housing. Define the first. We would have to work with the committee. So you have not defined yet. Theres a traditional whats a traditional. You should spend less than 30 of your Household Income on housing. If you spend more than 50 that severely distressed. And so that is a parameter youre looking at when you decide how you will focus on the needs of those that fall within the Affordable Housing definition . That is generally are there any other identifiers for Affordable Housing . You certainly have a number of formulas. The cbd has a different formula and i would allocate it based on property. And obviously one is done on per capita basis and that is probably not well targeted. We have a number of formulas across the state. Let me change, i just have a few minutes, manufacture housing is very important to nevada in particular Rural Communities. Since a tree carson, let me ask, hud includes facture unterman affected housing without specifics. What homebuyers will you ensure remain in any change policy. Manufacturing housing has changed dramatically in a most 10 of single families are in the manufacture housing. People think about trailers and double wide, were talking about tremendous Technological Progress that has been made in the area. In what remains is a removal of a lot of the regulations, i know you dont think regulations are everything but they have severely impeded the ability to utilize this very excellent solution. Regulation at the federal level . State and local level. If the state and local level are willing to address issues which are working on in my state, to what extent are you looking at having an impact on manufacturing housing . Hud is a regulator of the rules regarding manufactured housing. And we have not taking any fractured housing and made a separate entity with the designation. We have paid a lot of attention to this, this is an area where we can solve a lot of the problems. You agree to preserve the protection for manufactured housing as we move through the process of looking every changes . Thank you. My time is up. Thank you, mr. Chairman and i think all of you for being here. Secretary, he asked with respect to the proposed rule the hud put forward in august that it would get the ability of people who are victims of housing discrimination to prove that discrimination using the desperate impact analysis. In your response to hud, that purpose of this rule was to bring the rural in alignment with the Supreme Court decision. Is that your testimony . That is correct. Im confused because i have in my hands april 27, 2017 filing where you are the defendant in the case, hud is being sued in the u. S. District court of the Northern District of illinois, Eastern Division and the plaintiff is alleging that the existing role 213, is not compliant with the Supreme Court decision. In this pleading, you took the opposite position, i quote from her own brief stating the Supreme Court holding in an Inclusive Community is entirely consistent with the rules reaffirmation of hugs longstanding interpretation that the fha authorizes desperate impact claims. Which is it sec. . Were taking the position in a court filing. That rule 2013 as is is consistent with the Supreme Court case in your testimony today is just the opposite. No it is not. We uphold the principles of this impact and as i anticipated early today, we use that in a recent complaint let me ask you this. Is your testimony today remain that rule 213 is consistent with the Supreme Court holding in communities which is a position that you took in this filing in april 2017. Is your position today on that question the same as it was in 2017 . Yes or no. This is a simple question. I dont do yes or no. My position is that we want to be consistent with the idea of the Supreme Court which is not to have and be so overly burden that we drag discrimination to virtually you took the position in this filing that the existing role complied with the Supreme Court decision and inclusive communities. Now i understand youre using that as a pretext to rewrite the rural and make it much harder to file a discrimination claim. What i am saying why are you rereading rule that you said earlier with the Supreme Court decision if your purpose was as you testified earlier, to bring the rural in line with the Supreme Court decision. You wanted to bring it in compliance in the Supreme Court decision, which you already stated the previous rule was compliant. So i question is which one is it . There are aspects that can be reinterpreted in many different ways, and it depends on which circumstance you are talking about. You know that. Mr. Secretary, you are clearly going way beyond what the Supreme Court required in terms of proving discrimination. In fact, you took the opposite position in 2017. So, it does i can show you a proposed rule change that is consistent with Supreme Court position but does not make it as difficult to file a discrimination case. Would you accept that change as part of your new rule . Lets talk about what makes sense and what is logical and help solve the problem. What we are trying to do is allow people to prove discrimination where it exists and we are happy to the Supreme Court has upheld because they understand that discrimination can be subtle. People dont jump up and say i am denying yoimdenying you thif your race. So, thats the whole purpose of this, mr. Secretary. You took a position in support of the earlier rule in 2017. You appear to have slept on it. Today i hope we can Work Together. During this comment appeared on i would be happy to work with you, and i would ask you to look at our record in pursuing cases against people with this committee against protected you brought some of those cases under the existing rule, now you are changing that. [inaudible] i do not disagree with disparate impact. Its the way that you interpret it. Lets interpret it anywa in y that still allows people to be able to bring discrimination cases where it exists. That concludes our clustering. Before we conclude the hearing the comment about removing regulatory barriers to care and Affordable Housing like zoning rules, i was pleasantly surprised because several years ago you cosponsored appropriations further funding the rules because you said it would give too much say in the local zoning. That amendment failed. Secretary carson recently suspended that rule to help communities identifie identify e those careers. We will ask him joining you, secretary carson to reinstate that rule. The other comment i would like to make is secretarys piece Steven Mnuchin and colabria i look forward to working with you on this to find ho define how wh out details. I will ask the staff of both of you to provide Technical Assistance on the utility model with a regulated rate of return. Thanks mr. Chairman. That does conclude the hearing. For senators wishing to submit questions for the record, those questions are due in one week on tuesday september 17. As for the witnesses we ask is always that you respond as promptly as you can. Again, we want to thank all of you for being here today and look forward to our continued work on this topic. The hearing is adjourned. [inaudible conversations]
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