Transcripts For CSPAN2 Mel Watt Testifies On Housing Finance Policy 20170511

And freddie mac is in the conservatorship of veneers september 2008 and paulson describe the conservatorship as a timeout. Today fannie and freddie continued to dominate the market approximately 70 percent of the mortgages are back for the federal government while fannie and freddie with the Housing Market experiences a downturn the status quo is not a viable option. The Housing Finance system with two Government Enterprises in conservatorship as not a sustainable solution. Taxpayers today have to much risk with to a bigger role in the Mortgage Market. Those that have released proposals including the i see the day in several coauthors and many others. About what the future system should look like. In the meantime continuing to serve as a conspirator in regulator and as the Federal Home Loan Bank fhfa has undertaken a number of initiatives including those that began prior to the directors 10 year. One significant undertaking is the securitization platform that was originally intended to work independent from the enterprises to issue both agencies security is in private label securities. Instead it has been developed specifically for securities issued by fannie mae and freddie mac. One important question is whether we should utilize to consider other alternatives such as expanding the ginnie mae platform. Also the increased risk to the private sector. They will continue to experiment with different forms including frontend and back and. Transferring credit risk away from the government is essential to protect taxpayers with a more robust and sustainable market that credit risk is a critical rest of Housing Finance reform. Regardless of which direction they ultimately decide to take. I encourage director watt to consider other policies for to help facilitate a transfer to a new system. Housing finance reform is the most significant piece of Unfinished Business and it is important to build bipartisan support for a path forward. Three years ago seven republicans and six democrats voted in support of a comprehensive Housing Finance reform bill. Hickey priority is to build on that legacy and pass legislation to create a sustainable sustainable system for future generations and afford to working with hugh director watt with your staff at fhfa the process. Welcome back director watt 84 Public Service for so many years i appreciate the chairman to call this hearing to establish a process to consider the conservatorship claiming Housing Finance reform is easy or easy when for the trump demonstration restructuring that the economy. The federal Housing Finance Agency Requires the sponsored enterprises to reduce their capital cushion each year until the reserve reaches zero in january 2018. Then gses will be prohibited from retaining any capital at the end of each following quarter to despite the fact that the Companies Back 5 trillion in the Mortgage Market. Director watt has been raising his concerns for some time. We should remember he was one of the first members of the house of representatives to warn about predatory lending prior to the housing crisis. Unlike those warnings which the administration largely ignored at the time, i am hopeful we can protect taxpayers from what is an avoidable situation created by an agreement entirely within the executive branch. Some argue any adjustment to the retained levels is equivalent of supporting a return to the old structure to the gses. As arguments go, this is surely a strawman. There is no reason we cant protect taxpayers and homeowners. Protecting taxpayers should be a shared and bipartisan goal. The committee should continue its work examining the gaps in the Housing Market that were exposed. Exotic products that put prime borrowers at risk, private label securities that were not backed by gses and a near complete breakdown in Mortgage Servicing and the ability of insurers to fulfill their commitments. Gse certainly made mistakes too, chasing the market to purchase pls, providing pricing discounts to lenders based on volume, using price advantages to achieve shareholder gains rather than passing those benefits on to borrowers in or lenders that serve underserved communities. The mission is to provide a stable, liquid, National Mortgage market including world, under served communities. Thats something we should all want in any Housing Finance system. The goals for singlefamily and multi Family Housing along with the duty to serve rule that was finalized in december are key tools that pretend continue prioritizing to safely reach underserved borrowers. All the changes they make will impact how expensive or affordable the 30 year fixed rate will be in the future and who has access to it. Our decisions will impact how easily and quickly a growing family could sell the current home and buy a more expensive one. It will impact who has access to the system and whether a homebuyer can get a mortgage from the Small Community lender in her town. These decisions are not just about back offices or faraway markets. They will have impact on households across the country whether renters or homeowners. Thank you for joining us as the Committee Seeks to understand the current status and how we move forward without harming homeowners and buyers or putting taxpayers at greater risk. Thank you very much. I welcome you director watt. We appreciate the service you have given and continued to give as we deal with the Housing Finance policy. I want to remind the senators to honor the five minute rule so senators in line can get their opportunities. Director watt i ask you to give your full statement. Would you please proceed at this time. Chairman, Ranking Members and members of the committee, thank you for inviting me to testify. The hearing topic confirms you are well aware that the conservato conservatorship of freddie mae and freddie. Have been unprecedented considering these Enterprises Support over 5 trillion in mortgages. Of additional importance is taxpayer backing under the preferred stock Purchase Agreement is limited to 118 billion for fannie mae and 141 billion for freddie. Additional draws will reduce these further. I will focus on three points in my Opening Statement. My first point is f hfa has made numerous reforms to the enterprises during conservatorship which are beneficial to the Housing Finance system and reduce risk. My written statement discusses these reforms and provides links to detailed reports. Despite the reforms i regularly hear that fannie mae and freddi freddie. Are the same today as they were when they were placed into conservatorship. Its important that these assertions are recognized as false and to recognize the reforms already made are not disregarded. Despite reforms already made f hfa is fully aware that housing reform will involve crucial decisions that go far beyond these reforms. The second point i want to make unequivocally is that it is the role of congress, not f hfa to make the decision that chart the path out of conservatorship and to the future Housing Finance system. Among the important decisions for congress are the following. How much backing if any should the federal government provide and in what form . Two. What transition process should be followed to avoid disruption to the Housing Finance market, and who should implement that process . Three. What role if any should the enterprise play in the reform Housing Finance system, and what statutory changes will be required to ensure they play those roles effectively . For what Regulatory Framework are needed in a reform system and who will have that responsibility . I reiterate, it is the role of congress to do housing reform and i encourage you to do so expeditiously. My final point is to identify and discuss the most significant challenge f hfa faces as Congress Moves ahead on reform. The challenges that a additional draws would reduce the taxpayer backing and the foreseeable risk that uncertainty could adversely impact Housing Finance market. Unfortunately, this challenge is significantly greater today than it has been and it will continue to increase if not addressed. When i first discussed this in 2016, each enterprise had one point to billion dollars as a buffer to shield against having to make additional draws of taxpayer support in the event of an operating loss in any quarter. On january 1 emma the psp a buffer reduce the 600 million and on january 1, 2018 it will reduce to zero. And neither point neither enterprise will enter a quarterly loss without drying further taxpayer support. Gap accounting for any number of noncredit factors in the ordinary course of business, regularly result in large fluctuations in enterprise gains or losses. We also know lower Corporate Tax rates under tax reform would reduce the value of the enterprise tax asset and resorresult in shortterm losses. The Enterprises Need some buffer to shield against shortterm operating losses. In fact, it is especially irresponsible for the enterprise not to have a limited buffer because a loss in any quarter would result in an additional draw of taxpayer support and reduce treasuries fixed our commitment. As conservator, we reasonably foresee this could erode Investor Confidence and stifle liquidity in ways that could increase the cost of mortgage credit to borrowers. As conservator we cannot risk these consequences and meet our statutory obligation to ensure that each enterprise fosters liquid, efficient, competitive and Resilient National Housing Finance market. Consequently, in our conservatorship role, f hfa take action as necessary to prevent additional draws of taxpayer support. Neither this committee nor anyone else should view such action as interference with the prerogatives of congress, as efforts to influence the outcome of Housing Finance reform or as any step toward recap and release. We will take only such actions as necessary to avoid normal operating losses that would trigger a draw during conservatorship. Thank you again for the opportunity to testify, and as always, we stand ready to assist the committee in any way requested to do so. Thank you very much director watt. I appreciate that commitment. My first question, i would like to focus on credit capital. Among the reforms listed, you discussed some of the efforts that the agency has undertaken to increase the participation of private capital in the market. Since fha first started publishing a scorecard in 2012, an important component has been reducing taxpayer risk by a attracting investment in reducing the footprint. You have seen a significant increase in the Risk Transferred to the private sector which i applaud and i encourage you to continue to work to increase. In addition to the Risk Transfer deals, what can f hfa and the enterprises do to attract more private capital to the market. The first thing we would do regularly is to not take loans that people cannot afford to pay. We have a defined credit box, and we try to encourage lenders to use the credit box, but we will not take alone outside that credit box. The second thing we have aggressively done is have the Enterprises Innovate in the Risk Transfer space, moving first to second loss positions or intermediary positions and moving to first loss position when it is financially feasible to do so. I think the objective is to make the whole system as responsible and not move back to the kind of practices that were taking place prior to the crisis. Thank you. Achieving this objective will be one of the important things we seek to do as we work on legislation to resolve Housing Finance policy. Has my final question in this round, id like to address capital at the enterprises. On january 1, 2018, the Capital Buffers at the enterprises will draw down to zero. That requires fannie mae and freddie. To draw on their lines of treasury if they have a loss. This appears to me why conservatorship is not feasible. The government is taking all the risk. While i understand you have concerns with the gse operating with zero Capital Buffers and want to work to address the issue, adding a small capital buffer does not change the need for a longterm solution to Housing Finance reform. Unfortunately, suspending dividends will lead some to believe reform is not urgent and maintaining the status quo is sustainable. I would encourage you to work with the committee so that does not occur. Could you please respond. First of all, let me say i agree with you, we will avoid a draw at all cost because we do believe there are risks associated with it. As conservator, our position is a little different than everyone else. I like and not to a situation when i went home and had a letter in my mailbox and it said my car was subject to recall because of the airbag. There were a number of people who said the risk of you driving the car is minimal. I absolutely agreed with them, but i was the responsible party, and my family was going to have to ride in that car, and so in this situation the cause that you have already given us a fannie mae and freddie. , its all responsibility to keep them safe and sound, to make them efficient while they are in conservatorship and its your responsibility to change cause if you want to after that or whatever you decide to do. Let me ask this question. You believe they have the authority to withhold dividend payments. I do. I also want to assure you that my first option would be to work with the secretary of treasury. These are contractual agreements. The not legislative agreements. Its a contractual agreement between us and the secretary of treasury. Modest changes to the psp i would be the first to most prudent way to address this issue, but if that fails, the responsibility falls back on me as the conservator of these enterprises and we cannot afford to run that risk. Thank you. My time has expired. I would like to ask if you and your staff can provide us with a legal analysis as to why you believe you have the Authority Without getting agreement from the secretary of treasury and dealing with the third amendment. Centered around. Thank you mr. Chairman and director watt, thank you again. You talked about potential impending concerns on tax reform and shortterm losses. The president s proposed tax reform plan that would cut the tax rate from 35 down to 15 of the finance committee and others would come to that, we dont know. Moodys estimates that would cost fannie 15. 6 billion and freddie 5. 6 billion. Since the stock Purchase Agreement and the limit of the retained capital and prohibits retained capital next year, talk to us about the impact it would have on the gse and their financial ability and what it would do to impact access to mortgages in the broader Housing Market. You spoke about the general, but if you would dig down deeper with tax reform and where that goes. We are monitoring these discussions about tax reform because they would have, if they are adopted, and depending on what is adopted, would have impacts. It could range in our analysis from a low of like 5 billion up to 25 or 26 billion, and obviously the extent of those tax reforms and thats a shortterm impact. This is not a commentary on the value of the reduction in the Corporate Tax rate. We are talking about the shortterm impact of that Corporate Tax rate cut on deferred tax assets which then has a shortterm impact on the enterprise losses. One of the things we are regularly doing is talking to treasury monitoring what is happening in that tax cut space. If we wait until that happens, it may be too late or its possible they could phasein the tax cuts or its possible something could be written in to protect the enterprises in conservatorship. All of those are possibilities , but we have to be realistic about them and evaluate them so we are constantly making that kind of evaluation. The other regular kind of fluctuations that lead to quarterly losses, cap accounting principles and how you count hedging against risk. Those are things that have nothing to do with whether youve extended good or bad credit. They are noncredit related factors but they balance the enterprises and losses around regularly. Going to zero in a buffer could, in any quarter, put us in a situation where we could end up having to make a draw. Thank you. Lets switch to an ohio specific question, but one that could have impact moving forward in other places. In ohio, investors used land contracts, known as contract for deed to generate income. They offer none of the protections of a mortgage because theyre not a mortgage. They leave borrowers with properties that are uninhabitable. It happened in cincinnati and cleveland. You have the authority to be able to do something and my question is pretty simple. Do you prohibit bidders from using deed and on singlefamily rental deals Going Forward. We will certainly look at that. We have changed the requirements a couple times but we never change them retroactively. We always change them prospectively because people who have bought these non performing loans have bought them on a set of fixed assumptions and criteria that we have imposed on them. It would have to be on a go forward basis. We are actively looking at that issue right now. Thank you. Senator corker. Thank you mr. Watt for being here. Congressman, what do we call you now. Meal. Thats what ive always called you but i didnt want to do so in front of people without your permission. Thank you for coming and thank you for the job youre doing. I know weve had some conversations and its your belief that the future of Housing Finance reform is totally congress job to do and you are relying on this to make that happen. There is a left and right thing take and some in the middle folks that appear to be coming together and they may wish to take that up in the near future. From your perspective, thats our job to do and thats how we determine these entities and their future. I agree and i hope you heard me loud and clear, its that role of congress we have made some changes to the enterprises and i dont want them disregarded because they are important. I have outlined a number in my testimony. I didnt have a chance to do it in the short time i had and given an Opening Statement, but they are outlined specifically in my longer form written testimony, with links to the details about them. In a sense, you could think of that is gse reform and think of the committees responsibility and Congress Responsibility as Housing Finance reform. I dont want to get into semantics. We dont have any issues with the steps youre taking and we appreciate you informing us of those. We honestly had a recent conversation at the end of last quarter regarding the building up of capital within the entities, and the reason we did that is that was a pretty big change from where weve been. The two entities have 258 billion worth of capital available to them. This whole notion of them running out of resources is a baseless issue. I dont know why thats being discussed because what it does is it changes the dynamic of whats been happening. It makes it appear theres a different approach thats being taken by the administration. The administration is working with us and others to move ahead with reform. All of a sudden a unilateral step by you when theyve got 258 billion in capital available, i iran a Pretty Big Company i started and our money went into overnight repose and we cap no cash. Each day when we needed that we drew it out. In essence you have exactly the same type of thing available to fannie and freddie, 250 billion worth right now. To act as if drawing on this made available credit when the taxpayers already are one 100 the backing of these entities, it just creates a Different Directions which sends a signal to the world that Something Different is occurring when its not. I hope weve established theyve got 258 billion available. Thats what its for if you draw upon it. It doesnt affect the credit for anyones perception of the securities that are being put out. Senator, i tried to address that as forthright as i could in my Opening Statement. I have addressed it repeatedly , but i hope you heard the analogy i used. He well gave me these cause to drive for five years. He said keep them safe and sound. He said make them efficient. If there is a risk that a draw or a reduction in the commitment that backs these enterprises would interrupt the market, it is small. I acknowledge that. Im not trying to overstate it. But, if it happens, and what we say is reasonably foreseeable could happen, it wont be you they come to and talk to it about it, it will be the conservator because we are the responsible parties for this, during conservatorship. You are the responsible party for it Going Forward. Why dont you go ahead and draw 10 billion on it and see. Im telling you it will have no effect. I dont need to draw 10 billion on it. Do it anyway. I would not do that and run that risk because it would expose me to the same risk that in trying to avoid. I just dont understand weve had this conversation before, but believe me i cant afford to take that risk any more than i could afford to drive a car that has a recall on it with an airbag with my family in it. I tried to make that analogy for you. That is my responsibility and i have to live up to that responsibility. Thats why you all approved me in this committee to do this job and thats why the Senate Confirmed me to do this job. I dont know what else i can say about the. I cant afford to assume that risk. You can afford to say its theoretical. I cant afford to say i will assume it. Well its one of the most baseless arguments ive ever heard. Any company in america that had access to 258 billion line of credit from the u. S. Government, backed by the u. S. Government, i dont think would be concerned about market fluctuation. Something has happened recently. I dont know what it is. Could get you into a discussion whether its adequate or not adequate for a 5. 6 trillion portfolio. Im not saying this is a large risk, im just saying i cant afford to take it as conservator because i have a responsibility for it. Thats the point i keep trying to make to you. Thank you. A number of things you talked about in your opening comments that youve been moving toward sharing with the private sector, and you have. Do you have a figure that would be appropriate as to how much of the portfolio should be put into the private portfolio versus taxpayers . We have a goal of risk sharing on at least 90 of the singlefamily new loans that fit our criteria. Thats a substantial part of our portfolio. The goal, obviously, would be to transfer as much as i of it as you can. You think 90 is attainable. In normal times, actually we have exceeded that goal, but the problem is, if you require it and theres a downturn, and investors walk away, you have made us have to adjust the price down so we are subsidizing the transfer and we dont want to do that. it really is an imposition into the market that is neither justify nor, in our opinion, reasonable to do that. So, i dont want to speak for everybody, i think folks want to see private capital take the risk off the taxpayers. So the question is, we want to make sure that you, or whoever in your position is as active as possible to give private equity into the entities. The question is, how should it be written so as not to tie your hands, but yet make sure you maintain aggressiveness. I think it would be appropriate to set a goal and to give us flexibility based on the criteria that we talked about. We shared the goals of doing that, but you could easily get into a situation where you are requiring us to make non economic decisions if you say you must do it regardless of the economic circumstance. Do you think it is possible to have a 30 year note without an explicit government guarantee . I think that is probably more into the Housing Finance reform area than it is for me to say, because i could just give you my personal opinion which is not worth much. It is worth a lot. I really try to keep from doing personal opinions. As opposed to expressing an opinion on her agency and we have not developed an opinion on that. Okay. I think your opinion does mean a lot, quite frankly. You are in the business a lot more than we are. We are depending on you in that regard. Let me put it like this, i have read a number of experts in this area who do not believe it would be possible to do. I presume there are credible arguments on the opposite side, but i do not know. I want to talk about the buffer a little bit. The buffer is an agreement through treasury. It is, yes. You said it will be down to zero by 2018, which is coming right up. By your Opening Statement you indicated that you didnt think you needed to have you think yu needed to have a buffer. How much . It could very. Because the objective is not to make a draw. We want to cover first the normal fluctuations in operations. We want to monitor what is happening on tax reform because that could have a major impact, shortterm, on our law situation. So give me a ballpark figure of how much . It is just hard for me to do that, senator. So let me ask you this, as the secretary minutia and or anybody from the Trump Administration have they approached you are them about a buffer amount . We have had conversations of the secretary of treasury. And i think would be more appropriate for him to talk. Did he give you a number. As opposed to buffer at all did they talk about it all. Thank you senator scott. Thank you for holding this very important meeting. And thank you for coming out and sharing your thoughts and views with the agency you may know that South Carolinas estate were about 1. 4 Million People live in distressed communities. That is one of the reasons why i spend a lot of time on my opportunity agenda, looking for ways to help folks experience their economic potential and much like climbing the economic ladder in this country, most would even suggest that living the American Dream means owning your own home. I think the reality of it is getting there is incredibly important to not think there is a way to help folks get there and do it in a way that is logical and responsible. I know there is a lot of conversation around the fact that today we are seeing the lowest firsttime homebuyers since the 1970s. We have seen a decline in firsttime home homeowners and we know those who are living in Distressed Community of those who are disproportionately represented those who cannot climb out and express homeownership for the first time. We know the difference between the net worth of americans can often times be seen in the equity of their home. The renters net worth is somewhere around under 10000 according to this Consumer Finance report. For those who o on their home it is around 200,000. At least 20 times more. The question is, how do we help those folks were paying the rent and utilities on time, use that data in evaluating their desire to own a home . About 26 Million People who are credit invisible because the models that some use have not been updated to the latest model. I know that you have i understand been considering updating the credit scoring model, except can you tell me how much progress you have made in that direction . And what your thoughts are ongoing from what is for the most part an antiquated system that leaves so many millions of americans without the creditworthiness to start the process of buying a home, what you think about heading toward that newer model sooner than later. Senator, we have set as an objective to try to get through this process by the end of this year, but i will also tell you that we thought it was going to be a lot simpler than it has turned out to be. The primary reason for that is anytime you Start Talking about changing the credit scoring models, you set off a sequence of events that are very costly for people to change. Changing back and forth between competing models is very difficult for the industry to do. So, we have spent a lot of time trying to figure out how, what impact there would be to going to a new model. We know new models will take into account different considerations. The enterprises themselves and their automated underwriting systems are trying to take some of those factors into account because unlike what most people assume, the enterprises do not always rely on Credit Scores to make these decisions. They are factors in making these decisions, but they have independent evaluation called automated underwriting systems that can make these judgments. We have been aggressively asking them to do the innovation necessary, but not be irresponsible because part of the reason a lot of people are having this problem is that their credit was so damaged by bad loans they got involved in before that they have not been able to dig out. Its a multifaceted problem. The chairman help me realize that five minutes is still five minutes. Im gonna try to stretch that a little bit here. Ill say two things. Number one, the fact of the matter is if youre paying their rent and utilities on time, that is necessary information for making a credit decision. The primary dominant way that someone buys a home is their credit score. About 76 of south carolinians can be scored. If we were to go to the new model we would see 16 of south carolinians being scored. Since the gses have a large footprint in the market space, if youre not using the most current model its very difficult for 16 , nearly 900,000 South Carolina to be scored. Senator cortes. Thank you im going to shift gears a little and talk about servicing standards. How are you . Its great to have you here. So servicing standards. They have done a lot to improve servicing standards but i remain concerned that we have not cut to the core of the problem driving service or misconduct. In 2011, fh a released a paper talking about how to overhaul it but did not complete work in this space. The legal settlements have raised servicing standards. Services still prophet from default and foreclosure. While modifications are costly. Services have been incentive to extract fees from both homeowners and investors. Homeowners are powerless to fire their service or if they are not satisfied. Do you agree that we still need to address the way servicers are paid so they do not profit more from foreclosures than from keeping families of their home . Let me follow up with a second, are you going to do for their work in the space or is this up to congress if we are undertaking housing refinance reform . Your first question, i agree that something needs to be done in the space and its a serious concern. We cannot do it alone as the enterprises because lenders have servicers and the bulk of the people who compensate services. If we tried to do it alone we just would not be able to get there without their consultation. I do not know that legislative that there is a legislative solution to it, but we are working aggressively with the industry to try to get through this problem. Servicing used to be collecting mortgage payments. During the crisis it became a much more difficult exercise and the compensation did not necessarily follow the complexity of it. So, the industries got to catch up on that. Now were moving back to a more normalized time where might not be as work intensive as it was during the crisis. All of the factors go into evaluating how much youre gonna pay a service or for servicing alone. Thats a collection of the money which is the easier people paid on time. Its just an accounting thing. I get it. I will tell you services are more interested in fees and costs they can get from the foreclosure then they could get for making sure the loan was performing. I think we need to address the compensation structure. I hope youre committed to helping us to that. If you can find a legislative solution i would certainly work aggressively with you to try to help. Theres definitely movement needed. Let me ask another question, community banks. Some of the upfront credit risks undertaken in recent years have benefited law large banks. In other words, the big banks originate the loans secure them and then sell the risk off to the market. One concern thats been raised as if it is scaled up too much you might end up choking off small lender access to the Mortgage Market. In other words they cannot compete because they dont have largescale operations or secure affiliates. As congress contemplates the next phase for gse reform, do we need to be mindful that credit risk sharing deals with up front risk sharing dont box out small and communitybased lenders question. We need to be aware of that and we are aggressively working on making sure that doesnt happen. One of the things we try to do during conservatorship is make sure large and small lenders are treated alike. That should also be true in the credit Risk Transfer space. Thank you. Thank you mr. Chairman. Welcome. Its good to see you on the side of the capital thank you for your service and being here this morning. We recently discussed the issue of Residential Property assessed clean energy loans. Commonly referred to as case loans since they get super lean status and how they affect the Housing Market. Arkansas does not have these residential pace loans that other states do. The loans are unusual not only because their liens, but also because lenders are not following truth in lending disclosures. As a result their often high interest, they enclos include he lanes even though they come after a mortgage, they containing no federal disclosure or underwriting. Weve seen several examples of abuse. For example am aware of a case of an 86yearold widow on Social Security dealing with severe dementia. She was given a pace loan without federal disclosure from her than 100,000 and she may now lose her home. To address this scandal, we have introduced legislation that will clarify the truth in lending act applies to pace loans. Im like to discuss with you franny and freddies positions on these type. Do they purchase or refinance mortgages with baselines attached . We have a policy against doing that. The problem is the liens are put on after our loans are made. Then they jump ahead of franny and freddies lien position which is been our primary concern. Also they show up in the tax office not in the Land Registry office. Even after their put on after we have bought the loan superior to them, they jump ahead. We dont get notice of that so that we can adjust for. There are multiple problems. Your bill would address some of those problems but our primary concern is the socalled tax liens, most people think of attacks that benefits a larger, wider group of people, not a single homeowner. This runs counter to that theory because it treats the is a superior tax lien which we have already taken into account any time you make a loan. Then you come back in my put a 25 or 30,000 renovation for efficiency. It may be worth that, it may not be worth it but we dont have control of that. It has created a serious problem for the Mortgage Finance industry. We prohibit it but there are limitations to how we can find out about it. Thank you for that. My legislation represented shermans legislation would address the problem that you have oftentimes vulnerable consumers being exploited by applying the truth in lending act. Youre saying even if that act passed you would still have separate issues because a super super lean takes over and its retroactive and then you say it even occurs in a separate record system so even if we address the consumer abuse you still have the problem of your system which could create brought him water problems. You are right. I will give you another little piece of information. There is no rational reason if you think about it why a superior tax lien would be having an Interest Rate of ten or 12 when a lien subordinate to it is going at four or 5 . Thats the market rate. So theres preferences here that is not something working in the marketplace. Thank you very much for protecting the taxpayers for what is a scandalous program. Were trying to protect consumers. But there are problems the system creates for taxpayers. I talked your counterparts about this program to see what we can do. I thank you for your time. Thank you and welcome. Its a privilege to serve with you in the house on your service is exemplary. As the ranking democrat i wanted to take the first opportunity the full committee has had on the question of Housing Finance systems to layout key principles that are important. One is to have a system that ensures a broad affordability and access including homeowners in highcost states like new jersey. Strong Mortgage Servicing standards that work to keep people in their homes in foreclosure options that provide sustainable modifications. The protection of taxpayer dollars come back double access to lenders of all sizes so we do not overly concentrate the market and the largest institutions and clear obligations to serve low and moderate income borrowers. I look forward to work towards those goals with those who have similar views. New jersey continues to struggle with underwater foreclosures. From 2007 until 201,685,000 new jersey residents lost their homes to foreclosure. 3. 2 million homes run the country still have underwater mortgages including more than 9 in new jersey. In 2014 they announced that freddie mac and freddie mae would sell off the lonesome bulk to reduce risk to taxpayers and help families stay in their homes. They have sold off more than 11000 months in new jersey and plans for more. I was pleased to see the new jersey capital when the did of 158 loans. In my mind the Community Oriented organizations like new jersey committed he capital with vested interest in the neighborhood and they can achieve outcomes to benefit borrowers, and the enterprises themselves. What i want to know is what enterprises can do to provide greater access to loan sales for Community Oriented who are better positioned to help our stay in their homes i understand there into direct sales of assets, but it could offer pools for nonprofit bidders. Given the proven track record of an entity those pools would ensure Greater Community benefits than outcomes sold through the program. I like to hear what could be done better. This is an area weve done a lot of work in and to be clear one purpose was to get risk off of the inner price books but more important purpose was to get the loans into the hands of people who have more ability than we had because of our statutory work. We have always had as an objective trying to get these loans to people who are responsible which is what we have gone back to change the criteria for bidders to write in certain requirements they have to comply with whether they are communitybased or big purchases. So we reduced substantially the size of the pools because the biggest impediment to nonprofits is that nonprofits are generally nonprofits, they dont have money. So, you need money to buy these nonperforming loans off of our books. We are statutorily obligated not to give them away. We cant do that. Thats not what im arguing for. I understand. Reducing the size of the loan pool is very critical, in fact i think eight or nine of the Community Loan pools have been won by the organization in your state. Ill tell you what else we have done. We have met with local governments who are writing to us, state governments were saying you should quit selling these loans to big wall street firms in our response to them is, okay. If you would buy them you have a vested interest in communities stabilization, youre closer to the community, we can identify the loans in your state and you could help the nonprofits or u. S. The stater look local government could get into the space and we are close to dealing with the state of new york because the bulk of these loans are really in florida, new jersey, new york in five states. Or where the bulk of them are. We are trying to be as aggressive and innovative as we can be. We share the objective of having these decisions about stabilizing communities made us close to the neighborhoods as the decisions can be made. We look forward to working with you and suggesting ideas to achieve that. In many cases is also about the reality of communities of color being able to have a place to call home. Thank you. We will work through the [roll call] thank you senator brown. It is good to see. You would not remember this or know it but the first congressman i ever met was you in 2004 when i was a cornelius commissioner. You are gracious and i remember that well. I remember year indulgence there and now. Im still one of your constituents. I know you are. I think you are right in the position that you took that we have got to come up with a solution. But i have to believe that the work that you have done and you mentioned a response to one question of enterprise reforms that the best way to get to a bipartisan something that ultimately comes out of congress is to be very much instructed by the views of the white house and the views of your organization in terms of boundaries or priorities. To agree with that . And what would you vision is a good first step . We seem proposals not move forward, to get a universe of what the good ideas are and things that will would be based on your on the ground experience. Ive gotten a lot of criticism because i took fh on a out of the housing because it feels like our role is to manage of what i actually call the here and now. So, we have never developed an Agency Position on these things. But i agree with you. If somebody asks us to do the we have a lot of experience, just not in our statutory mandate and i have not wanted to, if people get critical when i get out there to start advocating for certain principles and Housing Finance because i havent been asked to do that. It is not part of my statutory mandate. I admire the fact that youre staying in the lanes. Its not necessarily the case of every agency. In this case you have expertise and i think it would be helpful. Rather than drilling down on the details in the time we have left. If you asked me to do it, i would try to be a lot more aggressive. I think it would be helpful particularly as it relates to discussions about where do we go forward. The in state of fannie, freddie or some newly combined institution. Those things would be very helpful to get your insights in the role you played over the past few years. We will need that hell. I have one question that just relates to the recent delay in pushing back i think its the underlying css system under csp. Its been pushed back into 2019. There are some who have expressed concern that there may not be a commitment to moving forward with that. I think in your written testimony said when not if. So your intention is its just a matter of working through technical difficulties. Absolutely. This is a major undertaking to build that platform. We have learned a lot and we have tried to stay on a schedule, but nobody should read that we are not committed to the csp. With the delayed you feeling the pushed back to 2019 is an achievable . How would you rate the soundness of that implementation . As you know the industry and stakeholders have to invest time in it and planning. So just trying to get an idea of whether that needs to be re looked or if thats a sound a moving forward. I think it is sound. I think we built a little leeway into the timeline because we did not want to go back and re expend again. So we built in some time. We just added six more months. So i think we will be ready. It is critically important and necessary to get to a single security which will save the taxpayers money, will help support the tba market and increase liquidity in the market. No question about that. We are committed to it. Thank you. With the chair and Ranking Member we will discuss and how we can engage you to get you to a point where we are fully harvesting your knowledge and expertise on how to move forward. Will be critically important if we want a bipartisan solution that fulfills what we feel is our obligation to move forward. Thank you senator tillis. Thank you mr. Chairman. I want to say to my dear friend congressman watt how pleased we are to have you here and what a fine job you have done. We are grateful for your service to our country. I want to ask you the quarterly dividends to treasury and i know youll start putting a buffer in as well that you had talked about earlier. Do you expect that that flow will be positive for the foreseeable future as you look at the markets . I expected to, yes. But there are some factors that outlined in my Opening Statement that could adversely impact that. Especially when a stem of a quarterly basis. Those fluctuations can be exaggerated. One of the areas from a state that is important is manufactured housing. Having kercher agency to finish the duty to serve rule because i believe it will increase affordable homeownership. Particularly in rural areas. The program for manufactured housing is a good start but i encourage you to expand those efforts. How do you see that rule impacting manufacturing housing . I think having a duty to serve rule and approaching it in the way we are approaching is a responsible way to do it to do policy in this area. It is an area that fannie and freddie have not been involved in, certainly not in the last eight or ten years. Doing conservatorship. So it is a specialized market. We have to get involved in in a responsible way. I believe if we do that the standards for the industry will be raised and so we are just pushing the two enterprises to look at ways to do this responsibly. Dont just weigh in their xm people want us to do and try to do the same thing in the channel space that we do in the fixed housing space. Because there are different challenges and different obstacles and different risk associated with it. We have to responsibly assess those risks and meet them and price them appropriately. When you look at affordable homeownership which has always been one of your cornerstones, various legislative proposals have changed the gf sees from the current status. One of my fears is that if the wrong changes are made it can endanger the dream for middleclass families who could be priced out of the mortgage loan. To share concerns over the 30 year fixedrate mortgage that those changes can make it more difficult to lead to higher Interest Rates make it harder tomorrow . I think a 30 year interest remortgage has been a standard for american homeowners. Its important to retain that. How it gets retained, or what is necessary to retain and i think is a subject this committee in congress will have to address. But i do think it is an expectation that American People have because it has always been there. What are the changes to the Current System that were you the most in terms of maintaining accessibility and affordability that you have heard . I think a lot of the plans i have seen have some elements of trying to protect affordability. I do believe that is important to do and i think the American People believe it is important to do so how that gets done in structured and Housing Finance reform is more in the housing reform space than in the conservatorship. I want to commend you for your leadership. For your steering this into a very stable, solid position that you have done a strong job in trying to follow the mandates that are there any of taken atrophic leadership position. Again, i want to say how grateful i am for your friendship as well. Thank you, so much. You may have seen everybody disappear here, theres a vocally non i was aware of that. I expect senators to return. While we are waiting out will take another turn at questions. I want to return to the issue that senator corker discussed with you. As i understand it, according to the preferred stock agreements the treasury has committed to buying senior preferred stock to ensure freddie and fannie maintain a positive net worth. Theres currently 250 billion of treasury assistance that can be accessed. Senator corker, i dont want to speak for him as i understand his point. His saying that the markets know that this agreement is in place and this option for the conservatorship is available if there is a problem as you have described. I understand you to have concern, i guess what are your concerns about using that option to deal with the problem if there is an issue that arises . Senator, i think when you say the markets know, i think if u. S. Most people out in the public, there is actually the opinion that there is an unlimited guarantee to the space. That is not true. If you continue to erode the amount of the backing, i think that becomes more apparent to investors and it runs the risk that i could start to have an impact. That is all i have said. I think it is important not to draw more because if you draw more it will reduce that explicit dollar amount of backing. It is already out of whack because if you look at it freddie is substantially smaller than freddie but freddie has more backing than fannie does. In the context of an, what is the solution . Is it to stop sweeping as much . Would you recommend the treasury agreement for the sweet be adjusted . What would you think would be the appropriate way to protect against this problem . There are several options we can look at that are not legislative options because the psp a is a contract role agreement. I think the appropriate conversations about those options really need to take place between us and the secretary of treasury. The problem is that if the Committee Sends to the secretary of treasury the message that this is a nono, to have those discussions were to try to resolve this in a cord needed way, then it leaves us, leaves it to us to have to unilaterally deal with it, which is something that i would prefer not to do. Packets back to the dividend question. There are ways to adjust this to minor a justic adjustment to th. Thats not an invasion of the prerogatives of this committee or renovation into Housing Finance reform, but we have to have that leeway to do it. If the two of us dont have an its a bilateral agreement, if the two parties can dance, then i may have to dance by myself. And thats not a pleasant position to be in. And it may not be pretty but i have the ultimate risk is the point that i keep trying to make, which is why i made the analogy to my automobile and the collision somebody has to assume that ultimate risk. Right now, unless we can assume it together. When you say we years talk about treasury . Thats correct. I appreciate what you have reiterated that any of the moves that you ultimately make which might be agreements with treasury or unilateral move which i do not believe you should make, those are not moves toward recap and release. It i made one rip important point today. I also believe this conversation puts a highlighter on one of the other points you have made today which is that we need to move expeditiously to resolve this issue here in congress with appropriate Housing Finance reform. I think this highlights that concern. That being said, i want to go deeper and clarify, im hearing you say that you feel and tell me if im understanding wrong, that you feel an action into the current agreement to sell additional preferred stock to treasury and keep that buffer in place should we end up in her problem is a less preferable option or be received less favorably than an adjustment to those agreements entered into mutually between you and the secretary of treasury. It seems to me that we have preferred stock agreement purchases in place. If accessing those is going to create market unease when adjusting those create marketing unease . Not to deal with a shortterm loss situation. This is just about dealing with a shortterm possibility i do not think the market would react to that. From everything i have heard senator this reducing buffer was designed to put pressure on congress to do housing reform. It was a threeyear, 3 billion. If it gets to zero there is no buffer there. Theres no operating reserve we can rely on. We would have to make and that would be, i think it could be and i, say it would be, but it could be unsettling to the market and we can, as conservator afford to have that happen because then he starts adversely affect the pricing of mortgages. You run the risk of having liquidity issues in the market. It may be farfetched, the people can talk about it in theoretical terms. Youre concerned about the actual ability of it. I tend to agree with senator corker and perhaps the conversations you had with us today can help to allay that were in the marketplace that the utilization of the terms of the existing agreements should not create any undue concern. That being said, i understand your point and i think it highlights that both you and the secretary of the treasury need to work at this and we in Congress Need to get a permanent solution in place. You do need to understand that a term of the existing agreement gives us the authority to either declare or not declare dividend and thats not what im lobbying to do. I think a better solution to this would be a joint solution. I agree with that. Thank you for that senator had im going to go back to the 30 year fixedrate. I just want yes or no questions, do you believe a federal backstop is necessary to ensure 30 year fixedrate mortgage . Am fine because our agency has not developed a position on that. Any opinion i give would be my personal opinion. Since i took this position ive just talked to the notion that i should not be expressing my personal opinions as opposed to agency opinions. I will tell you one of the greatest challenges we have in my states housing. Whether rural housing, Affordable Housing across the board. Have done economic roundtables, number one is housing. Access to housing, Affordable Housing, we cannot have Rule Development without housing. We can have economic Development Without housing. We need a workforce and they need to make sure they can afford their house and a place to live and live in good neighborhoods. So i understand the sigh, and i probably know what it means but in the absence of a federal backstop, what options with the middleclass family have for getting access to home loan . Again, i think this committee would have to define those options and i want to go back and reemphasize my position again. My responsibility as conservator is to manage in the state that we have now. That is what i try to stick to my knitting as they try to say. When you get into defining will be necessary in the future, thats Housing Finance reform and i think it is Congress Responsibility to do that. I do not mean to sound like i am avoiding the questions youre asking, i just do not want to be criticized and once i Left Congress i did not think it was my prerogative anymore to express personal opinions about how legislative things needed to be done and especially when i am a director of an agency which has not developed an Agency Position on it. When will you develop an Agency Position on this . We would and unless you all ask us to do it because it is not in our statutory mandate now to do future state. Maybe we can get to this in a different way. I would ask whether your agency has conducted any analysis of what complete privatization would mean for access to mortgage credit and corresponding impact on middleclass families . I do not think our agency has conducted research on that. We are aware of literature and where people in our agency who have probably have great expertise. I think thats the point. The point is your agency does have expertise. No one in government knows what is happening in the market each or in Affordable Housing and i include hud in this. Nobody knows what you know. You see it everyday and you have the metrics. We need advice and information. You have a choice on whether will take that all part provision of the American Dream which is homeownership to make it completely and inaccessible to middleclass families. That is a Major Initiative and concern for us. At some point we do need to have some analysis using the data you have on what works and what would work. We can listen to the Mortgage Bankers in the Lending Community who expressed great concern about complete privatization. Weve had a proposal maybe starting out corker warner, but i think we have got to have your advice. You cannot play coy on this. We are not being coy. Im not saying that, im just saying you have to engage and give us advice and data that will help us. We regularly give Technical Advice and a proposal that comes out. We will say look, if you do this it will have this impact. So, just asked if we completely privatize what is the impact . Well, if that is the proposal out there. Im not sure its outside out there on the side of the capital. I over my time. Thank you. I apologize, i skipped over you. Its your turn a. Thank you mr. Chairman. Director, i want to talk to about the role of fannie and freddie and financing multiFamily Housing and and providing Affordable Housing. Its a multifamily is often overlooked. Im aware that youre making an effort over the past two years to realign for any of freddies activities with the core mission under the law of helping underserved communities such as lowincome and Rural Communities. This week includes the work on financing. Have you seen progress in motivating gses for more Affordable Housing for lowincome families . Yes, when we cap the amount we could do and said you cannot do anymore because you would be taking money away from the private sector, they turned a substantial amount of attention to the affordable space. So, yes we have seen substantial progress in that area. I think youll continue to see progress. Glad you focused on this. A lot of the questions sometimes assume that our responsibility it is only in homeownership. It is actually an access to Affordable Housing and were supposed to be agnostic really about whether its homeownership or rental. Obviously because most people think the American Dream involves homeownership there is more emphasis on that. But were playing an active role in the affordable rental space and the private sector is playing a very active role in the other part of the rental space. We controlled the amount that franny and freddie play in that space. Theres talk on this committee and elsewhere will talk about reform the macro aspects of this. I want to drill down to what we can do to build more multifamily units, permit buildings, rentals, whatever it may be. It strikes me that heidi and i have the same problem get her states are so different. This is a problem in every state, rural and urban and in every part of every state. Is there more that you can do administratively to push in this direction and reorient your agency and then the other question is 30 statutory impediment that we might be able to work on as we do reform . I dont think we have statutory impediment in this area, the one thing we have done to get more aggressive in the space especially in Rural Communities is the duty to serve rule which obligates the enterprises to take aggressive steps to serve underserved areas. A lot of the problems in the space are in underserved rural areas because franny and freddie have not been backing manufactured housing they do not do channel lending. So the duty to serve rule is forcing them to look at in a responsible way how they might be able to do more with manufactured housing. That is a major part of the housing especially in rural areas. If we dont do something in that space where doing something were missing something to support people in rural areas. The legislation was out there since 2008. The run was made that putting a rule out there in 2010 and put on the back burner. We have finally finalized the duty to several hundred first proposed plans for the gses have come forward and last two weeks. Thank you. Thank you mr. Chairman. It is great to see you. Thank you for your service and the congress had a good stewardship. I want to thank you for exercising good and prudent judgment on behalf of the mission that you have been entrusted with. We know families across the country are devastated by the financial meltdown. 5 million americans lost their homes. The recovery has been uneven. If you look in my state of maryland and Baltimore City and some of our rural areas, they are still not fully back on their feet. Theyre facing challenges of access to credit, neighborhood blake, can you talk about the tools you have it your disposal to address these issues and if you could take a moment to discuss the progress we might be making with the Neighborhood Stabilization and Baltimore City. We started Neighborhood Stabilization with detroit, chicago and one other. Then we expanded it substantially in one place we expanded to his baltimore. And we just went down the list of the most vulnerable neighborhoods. We didnt do a just off the top of our head. It is done scientifically. What that does is give franny and freddie more latitude of how they this was the properties unbearable neighborhood. He gives them the opportunity to work with nonprofits in the community. In some cases where will cost them more to go through a foreclosure process it gives them the opportunity to contribute housing. It has to be a financial decision obviously. I think were making progress in all of the cities, and they are primarily cities because they were high concentration areas that got hit very hard in the crisis. Thank you. I look for to working with you and your team on that. Especially maryland. A question about the National Housing trust, one of the things the state of maryland and some of our counties have used effectively is the idea of Housing Trust. To be effective Housing Trust require source of dedicated revenue so they can make decisions with their Development Partners and allow projects to be capitalized in a timely manner. Last year we saw the first installment of funds for the National Housing trust on dollars. Can you talk about the importance of the font and give us a sense of how you think it is going to be capitalized Going Forward . Its on the statutes and when it was suspended administratively. I took a lot of heat for reinstating it but it was a statutory mandate. I did not see a reason to not follow the statute as i told this committee when i be appear before them in my confirmation process. Since that has occurred in 2016, 382 billion, million, im sorry not billion. Has been contributed to the trust fund in 2016. 455 million has been contributed based on 2016 earnings because it is always one year behind. So we do not have any control at fh fa about what happens with the funds after they go over there. So we dont have any control over the decision being made with those funds, but we did have the authority to make the decision to reverse the decision that has been made. We made it and hopefully it served a useful purpose. I want to thank you for making that decision. As you pointed out it was consistent with the statute. I appreciate you moving forward. Maryland is using its allocation of those funds effectively. Thank you. Thank you. Good to see you director. I am glad this committee is tackling Housing Finance reform again. I will push the same point i push since i joined the senate in 2013, we need to end the Government Conservative ship freddie may. And we need to do it in way that has government guarantee. [inaudible] on that question, as you know. [inaudible] offer lenders legal immunity for loans that meet the qm standards. But cf pb also grants a status to any mortgage elbow for purchase by fannie mae or freddie mac. That means the underwriting criteria of franny and freddie help define the scope of the qms rule. Accordingly they have a huge impact on the cover families that can get access to mortgage credit. Despite all of this, franny and freddies underwriting algorithms and criteria are kept secret. Can you explain why it is reasonable to keep this information hidden, given its importable to the economy and to appropriate oversight of the Mortgage Market . I dont know that i can explain that to you. But i can have your agency explain it to you. , as we understand it. I dont think we have focused on that is an issue. I think it is an issue and instead of explaining it to me, what i would really like to do is get a commitment as soon as we can that we would make this information public. I would not make that commitment without knowing why its not public, that would be part of what we would answer. I want to be clear, as long as these entities are in conservatorship and their standards are setting the boundaries of our consumer federal protection issues, i think its important that they be public. We can exercise oversight without them. Let me ask another question, thats about principal reduction. In the 2008 bank bailout, congress required fhfa to seek to minimize foreclosure. Congress specifically required fhfa to consider principal reduction to achieve those goals. That was in 2008. For years, fh fa did nothing and people kept losing their home. When you are nominated to run the agency in 2013 you said he would tackle reduction. For two years after your sworn and you did not move an inch. Finally, in april 2016, you announced a Principal Reduction Program that is eight years and literally millions of foreclosures later. Even then you use criteria so demanding that by your own calculations only 33000 borrowers in the entire nation would qualify for principal reduction. Worse, you didnt require services to reduce the loan principal for those borrowers, you only require them to solicit borrowers eligible no later than october 15 of 2016. Nearly seven me months pass that deadline. I have looked at the quarterly foreclosure report. I cannot find any information about how this program is working. I just want to know, how many of those 33000 eligible borrowers as of today, have gotten a principal reduction . I cannot give you the exact number, i can tell you its a small number. 33000 is a small number. Ive tried to explain why that is so. What portion of the 33000, can you give me a ballpark . Are provided to you i just dont have it at my fingertips i dont think its half i think i projections indicated it would be more in the range of 15 or 20 would be who would likely be able to do this. So after Congress Mandated the plan. We did mandate that. We did come in 2008. Its written in the statute. But theres also a statute in the provision that says we cannot do certain things that are not economically feasible. So the analysis i did to get to the 33000 got to the people that we could do with it justice to both statutes. For years, people lost their homes because fh after a would not enforce the part of the bill that says, give some relief to homeowners. Study after study showed it was economically feasible to do that. Instead, millions of people lost their home. That is just not true. What we didnt do was principal reduction. There are millions of people we provided really for whose homes are in jeopardy. To say we didnt do anything in that space just because we did a modest Principal Reduction Program is not true. You did not to the Principal Reduction Program. We did not do it and i have explained it multiple times. Actually its interesting, you did not start out explaining it. You started out saying you would do it. I asked you in this hearing room over and over and at your confirmation hearing, and at followup oversight. You did not say we have already done something. You said you would do principal reduction. Since i do not believe if you go back and look at the record my confirmation hearing or any point in this hearing where we discuss this that i made that commitment to you. I said i would look at and would do it in accordance with the statute and thats what ive done. 90 down to a few thousand people. After the crisis the money flew out the door to the banks. Billions and billions as fast as people could sign a check. But many for people, many who had been ripped off by the banks there is one message of know and we have to balance this other thing out, handwringing excuses. I certainly hope you not blaming me for that. I did not create that situation. I tried to stop it when i was a member of the house by getting people to quit making loans to people who cannot repay them. I was the original author of the bill. I agree all of those things have taken place. But to make it sound like for some reason i am responsible for the i think is unfair and untrue, and unjust and all of the owns that i can think of. The people who preceded you certainly share the blame. They did nothing. But when you came in, you been driving this bus since 2013. A principal reduction by your own numbers at best, a few thousand people have gotten help. I think that is shameful. We need to move on. Ive let this go on a bit see you could get out. But its out, and out senator reid stern. Thank you mr. Sherman director, and your testimony state like any business the a price need some kind of buffer to shield against shortterm operating losses. Insert responsible for the enterprise not have a limited buffer because a loss could result in additional taxpayer support at my additional taxpayer support what i hear you saying is you want to prevent further taxpayer bailouts, is that accurate . There is that risk. That additional dross could be misinterpreted by and we have to guard against that risk, yes. So what you want to do is have a buffer in your organization so that you can respond to changing conditions and market . Thats correct. Not even changing conditions in the market, we monitor closely changing conditions in the market. These are noncredit related actors that are driving losses that have nothing to do with whether we are responsible and not. Theyre basically an accounting the way you have to come from things and the timing of the accounting process. So its really not about losses, its more about accounting things. If tax reform were done depending on the extent of the Corporate Tax reduction there would be a dramatic impact and we can calculate that. That would be one of the factors that weve been monitoring regularly. And you werent here earlier when i used the example of when i got the notice that the air bags on my car needed to be replaced, and everybody was telling me, oh, no, thats not a problem. But i was the responsible party in my family, and now i am the responsible party. Im driving these cars until Congress Changes the cars im driving, i have to drive these cars and i have to make them safe and guard against those kind of even remote risks we have. Thank you. There was a discussion obviously of principal reduction but a number of loans, im told 59,000 nonperforming loans, which fanny and freddie have sold private sector and subject to some type of either remediation or some efforts. Could you tell us what you have done to improve the borrowing neighborhood outcomes . Principal reduction is one. I wish senator warren were still here to hear this. One of the reasons we did nonperforming loan sales was that the private sector, who buys these loans, has substantially more flexibility than fannie and freddie have statutorily to do principal reduction, and as part of the waterfall in the nonperforming loan sales program. Theyre required to consider that as an option if it would improve the ability of the borrows to perform on their loans and get those loans rein stated at some reduced Interest Rate or longer term or reduced principal amount. All of those things in the nonperforming loans requirements that we have adopted. We couldnt do any more than we did as fannie and freddie, but we could transfer the loans to the private sector and they have substantially more flex exhibit that was one of the bases on which we did that. So just a final point, mr. Director. But there is we get all of us get feedback from borrowers they have not been helped. Can you i presume you have sort of a some metrics about the different types of measures that have been taken, and as you described, a lot of it is within the pursue purview of the banks or the holders of the notes because they have mo flexibility. If you can give us a completer picture that would help news terms of if its not principal reduction, it could be interest reduction, it could be but the ultimate number is how many people are still in their homes and can stay in their homes even though they have had difficulty thats the objective. We keep metrics because theyre required to report the buyers of the nonperforming loans are required to report to us on the outcomes because they are requirements they assume when they purchase the loans, and the only way we can monitor compliance is to know what they what the actual performance is, and their result substantially better than the results that we would have gotten had we maintained those nonperforming loans on the books of fannie and freddie. That could be helpful. You may not keep this metric and i dont require response but if you have data that shows what happens when they foreclosure because if theres an incentive to foreclose but a you can sell the same property we have removed that incentive but we can provide that. Thank you. Senator reid. Director watt. Thats the end of the questions. You have been here two hours, and given us your time and responded openly and honestly. Before we wrap it up, let me just say to all senators, there will be some additional questions in writing asked you to responsibility to promptly, director watt, one of which is i already asked though, legal justification for believing that you have unlattally can issue dividends. We interested in and engaged in this issue and will continue to work with you moving forward to develop the best housing policy for the country. This hearing is adjourned. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] heres a look the primetime schedule. The senate has finished for the night but earlier today members confirmed the nomination of robert light heister to be u. S. Trade representative, 82 14. The chamber returns on monday to begin the debate on more nominations. Follow the senate live here on cspan2 2 when members gavel back in on monday at 3 00 p. M. Eastern. Earlier today minor leader Chuck Schumer came to the floor to discuss the firing of fbi director james comey. Heres his comments now. No now, before the Senate Adjourns for the weekend, id like to address a few things related to dismissal of fbi director james comey. The story coming out of the white house about why mr. Comey was fired continues to changee and there are no good explanations for the change. For two days the white house implied the decision to fire mr. Comey either originated or was largely influenced by the recommendations from the Deputy Attorney general and the attorney gener