Following the devastation of the two storms, the 60 damage to the agriculture sector, there is the possibility if not handled well that in a couple of months time there is a food scarcity issue. Food price going up or by simply not being a table. That can create a distraction. Im using a very soft term of distraction because socioeconomic conditions can you terminate deteriorate. So we have to keep that in mind. I think the government is very much aware of that. The holding of the elections. Im very pleased that things have fallen in place, for now. We stand ready to assist in that process. And in terms of the message to the International Community, i think we must be prepared as an International Community to adjust our approach. And to be critical of ourselves. And to learn from the experien experience. There is need for reflection. There is need for an assessment. May be now is the time to assess three years of assistance to haiti and to see what weve learned over the past three years from what is the best way to do things, and how not to do it. And i want to recall there, and i will close with this, they were six parameters discussed on the 25th of january, 2010 in montreal during an industry leading about 80. One was as i mentioned before, ownership. Im very happy to see id like to give content to them. To that objective. Second is we worked together. I think theres a lot that still needs to be done. Building synergies, creating synergies among organizations, jointly operating projects. Between the different units on creating for development. I think those things are important. Then sustainability. That will be there for haiti or a longterm but i think that commitment whether we feel disappointed or not should continue. Effectiveness, there are questions about how effective it has been. Again the positive stories are there but they need to be told. And i think that is what we need to repeat all the time. Inclusiveness, not only from the International Community but also in haiti itself, the different stakeholders, but the trend was fortunate to work with them to organize to conferences to mobilize globally. In the last one is accountability. You know, the process will be accountable. That is one that goes back to the reports which need to be given back. We are very realistic. Obligation i believe. So weve reassess the relationship between haiti and the International Community over the past three years on the basis of these parameters i think we can draw important lessons from which we can learn, adjust our strategy and make life for the haitians much better and continue that process. The oas stand ready to do that and if so need be, our beautiful building is available to Member States to have such dialogue. I thank you very much. [applause] thank you very much, ambassador sir, for your insightful comments and your optimism and your grounding and the realities that face us all. I think we have time only for a few questions before we have to conclude. But i do invite anyone who has a question for either ambassador to post them. Could we have a microphone, please . If you would identify yourself, that would be helpful. Alfred. Thank you for the Wilson Center for holding this. Question to ambassador adams. How are you sir . Good to see you again. In light of what happened last week with the folks in canada with regards to the new outlook, in terms of aid to haiti, and also in light of the fact that you have a new team that is coming in at stake, new budgetary limitations that are coming this year, how do you see the United States government reacting, or how does it plan to allocate these funds, you know, would that have any effect on whats going on in the future . Sure. Is this on . Yeah, you can harry, good. Sorry. Canada is, i talk to canadians all the time here they are good partners, and the new conservative government is reviewing a to a lot of countries, including haiti. But they are continuing projects that have already been approved and funded and they have a long pipeline. So, you know, i think maybe a little too much has been made of, you know, theyre stopping in haiti. Theres no evidence theyre stopping in haiti. I think the are just reassessing their work, which is fine. With regard to the United States, i dont see any real change in keeping haiti a priority. It is a priority of the obama administration. He wasnt reelected. Number one. Number two, its very popular in the United States. Half of all American Families gave money for haiti after the earthquake. Every little town in america sent a group to work down there and have seen firsthand the challenges in haiti and have an appreciation for them, and are supportive of our help. Theres broad bipartisan support, only congress, for haiti over the years. So while, you know, certainly secretary clinton and some of her aides have been very passionate about haiti, i think that will continue. Youll still be stuck with me by the way for a while. [laughter] any other comments or questions . Okay, theres one over there and then i will turn it over for concluding remarks. Thank you very much. And philips again. Just a question. A lot of emphasis, not only in reports about eight to haiti and some of the failures, but in assistance to other countries, really emphasize the deficit of local knowledge on the part of internationals, americans who go there to help. With the best of intention. So its very difficult to practice local ownership if those were going there to work on the ground dont have a fairly sophisticated knowledge of the place they are trying to help. So my question is, what are both of your organizations doing in terms of recruiting people who know the language, know the history, know the culture, et cetera . And getting them before theyre sent to come in this case, haiti. Thank you. Actually my deal with ambassador ramdin is i answer the easy ones and he takes the tough ones but i will take a stab at this. A couple of challenges here. One, we are lucky in haiti a lot of the big organizations have been working, like habitat and that, have been working there for many years. I think there are couple admits here. One is that there is no ngl that works in haiti that doesnt have a reason to build local capacity as fast as possible. It costs an enormous amount of money to keep an expatriate worker in haiti for a year. I mean, thats the reality. Its much, much more Cost Effective to train haitians. One obstacle there though is the fact that haiti is the most brain draining country in the world. The World Bank Estimates living in montreal or new jersey or miami. So that is a challenge. There is in some areas, there is a thin expertise pool in haiti. When usaid and others look for expertise, on the citation americans are active bidders, but so are others. I mean, i do think thats as big a problem to get people down there who know whats going on. The other problem that i think exist frankly until recent is engagement of the haitian side. This is a haitians led reconstruction, you know, its not one imposed by us or habitat for humanity and their imperialism. But, you know, you have to have haitian partners to engage on the other side to give approvals, to give their input. And for a long time we didnt get much of that. I think again recently weve seen great improvements on that. Theres a very good haitians working on this. They still have challenges in that area, you know, fielding a full team on the gridiron. But theyre getting better. And i think one of the results of this is their own government needs Civil Service and other reform and theyre taking a look at that. They need to strengthen own governmental capacity in a number of ways, and thats a huge challenge. And they also need to be centralized and i think that although the. Theres considerable pressure for them to do that with a new parliamentarian. Every parliamentarian wants his home district to be taken care of, and thats a good thing in democracy. So did i answer your question . Very briefly, can you hear me . Two things, in addition to a tom said. One is that when ngos would want to operate in haiti, or with the resources, the different age of coming to know local circumstances. Talk to media, talk to the officers. So many. Thats an ad thats an avenue which should not be underestimated because i think our experts and office in haiti can assist in indicating we are the priority, the government views, work with the already established organizations in haiti. That is i think the best source. Because they are already settled in haiti and habitat and all the others. The other thing on the haitian side, through the new mechanism of dialogue but also coordination, the element of engagement i think its important that the haitian authorities manage that on their own much better. In terms of understanding with who is willing to assist the haitians, but also to direct them, to guide them with the best they could operate so that in that, could Gain Knowledge of situation on the ground. It doesnt make sense to leave ngo to just operate in haiti. Theres good will and there is could use of the money but we have to do in the right way. So i hope that through this mechanism we will get a better registration of ngos how they operate so the haitian authorities can also say we are involved in directing this process. I have some feelings in that sense in the past years. The commitment is there and i think we should appreciate it that we all want to help of the local level to assist the haitian people. Thank you very much. Im sure we could continue for quite a while, but leave them laughing. I really think this has been inspiring and very important discussion. I will now turn it over in front of our beautiful picture of haiti, past hasnt past, present and future. Fifty. Thank you. Its a rich meeting, and with lots of points that have been made to the emphasize, and also were heading over time. Women going to do is get myself 10 minutes, and ill get as far as i can get and then i think we were wrapup at that point. There is i think the number of lessons of what weve heard and what weve seen happen in haiti over the last three years. Lessons for haitis and lessons for all of us in this room. One is in theoretical discussions about postdisaster relief and Economic Development and postconflict, theres a buzz word is making the rounds, resilient. A resilience is clearly important, but i think what we also hear today is resilience of what. Because if its the bad things that are resilient, then are we really moving ahead in the game . And i think what becomes very clear in all the presentations today is that when thinking about postdisaster relief, one needs to think about how to harness the resilience of local societies for change. Its not simply enough to rebuild what was there before, either in the physical structure of a society or in the political and economic infrastructure. Now to do so requires an element which were very bad at thinking about, time. Over and over and over again, i think each of the speakers raise questions about the importance of time. The importance of sequence, the importance of trying to understand what it takes to accomplish something in a very complex situation. The ambassador said we cant sprint to the finish line. If indeed we move to the point that were beginning to address big issues of a stable political system, by improved institutional environment, land rights, rule of law, judicial reform. None of this changes are going to happen overnight. And its very hard for people in mr. Mudd answer to elected officials or have to answer to boards of directors who are saying, show me the results. Its very hard for us to come to terms with the fact that the engagement of habitat for humanity for 27 years in haiti may actually be a really brief moment of time, not a long moment of time. But we need to begin to highlight the time of dimension what is happening. And that links to another theme which came through, throughout the proceedings today. We need to try to develop appropriate untenable standards of success. Are the 10,000 homes and 55,000, people housed in a project that eric talked about, is that an accomplishment . Yes, it is an encouragement but its not necessarily, it doesnt seem like anacondas but if you talk about 2 million displaced people. Like time when we think about what we mean by success, we have to operate at several different levels, and we cant find ourselves despairing, his project only produced 10,000 homes for safety 5000 people, when there are 2 Million People who were displaced. What we have to think about is what has been achieved and what the ripple effects and the accumulation of benefits to come from those homes. And this gets to another point, which is we really need humility. This is probably the most difficult thing for people who become energized to go out and address the problem, have to come to terms with. Humility. The task of rebuilding haiti, by definition, is going to take more than three years your because you are not just building the physical destruction of that moment, horrific as it was, but you are simultaneously having to address a whole range of questions job rooted in place and in context. So to come in and say, you do this, we have the silver bullet, with 10,000 ngos running all over haiti, we have the answers, its all going to turn around at once. Really, i think, goes to an attitude that one experience is not just in the situation but one sees in many places around the world, and leads to all sorts of mischief. And how we come to terms of whats happened. And this leads to a point which has been common by everybody, and this comes to my old soviet experience studying soviets, you cant successfully plan the life of others unless the other people are involved. Whatever happens has to be inclusive. And it does have to be inclusive of the entire society. It has to include those who normally dont have voice, but it does also have to include those who have had maybe too much voice. Because of us with the kinds of huge transformation to everybody in this room is saying is necessary, it cant happen unless everyone is empowered. And that means that theres a long hard slog ahead in terms of institutional and political reform. So should we despair . Do we have to believe in miracles to believe that haiti is going to be a better place . In a generation. I think not that i think this really goes to how we think about it all. If we assume that anything less than having portauprince become copenhagen will be failure, this is going to fail. But if we think out 50 years and think about the kinds of cities and kinds of communities in the world that will be shaping the world in the 21st century, that will be producing answers to 21st century problems, maybe portauprince is actually a much better place to look than copenhagen. We need to understand the true historical events by definition low probability outcomes. But historical events have been. Low probability outcomes happen. And we have to draw upon that knowledge to keep in mind that its not just about rebuilding, its about rebuilding better and rebuilding better is possible. I wrote a history of washingtons in 1960 that neighborhood was destroyed and there were lots and lots of efforts to put together again. There was actually, they came very close to a plan is a dream, a megaproject that would have destroyed and never. And at the end of the day that happened, and when that didnt happen everyone involved had to fall back on little steps with little feet, building by building renovation, the kind of projects we have heard about. Low and behold it we are 25, 30 years later in u street is successful. I hope the accumulation of a small project that we saw, which seem small, particularly when one has to take a look at the scale of the problem, i hope that we are reminded, maybe when some people here gather to mark the 25th or the 30th anniversary of this 2010 earthquake, that what has happened is the accumulation of meaningful small steps to the point of meaningful quantitative change. Qualitative change but if you think about the challenge that what, we can ways in which we can see progress and we can understand that it is possible to rebuild better. Thanks. [applause] that was great. Thank you so much, and thank you, everybody for being such great participants. Thank you. [applause] he could read the president s mood, unlike anyone else. He came as close as anyone to gaining a mix into what Robert Sherwood calls roosevelt heavily force did interior. He, unlike mrs. Roosevelt, he knew when to be still in the presence of the president , when to press him, or when to back off and tell a joke. After he won the election, Wendel Willkie we beat was in his office, and they remained friends. And wilkie said to the president , why do you keep that man so close to you . That man being hopkins. Wilke did not like hopkins. And roosevelt said, you know, you may be in this Office Someday and you will understand. But he asks for nothing except to serve me. Trusted adviser. Trusted advisor, friend and confidant to fdr, Harry Hopkins lived in the Roosevelt White house for three and a half years. David roll on the hopkins touch sunday at 10 p. M. Eastern on booktv on cspan2. Yesterday, the Consumer FinancialProtection Bureau released new rules for mortgage lenders. These regulations include limits on fees and rules to ensure that borrowers are able to repair their lives. Cfpb director Richard Cordray announced a new financial regulations at a public hearing in baltimore. Maryland senator ben cardin and congressman Elijah Cummings also spoke at this twohour event. Whose mission is to help Consumer Finance market work. By making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. I am the acting associate director for external affairs, welcome. Todays field hearing is being live stream at consumerfinance. Gov, and you can follow cfpb on facebook and on twitter at at cfpb. We will begin todays field hearings with remarks from some wellknown maryland luminaries your then you have some cfpb director Richard Cordray. This will be followed by a Panel Discussion on the rules that will be led by cfpb Deputy Director raj date. After the Panel Discussion, audience members will have the opportunity to share their stories and observations with the cfpb. So lets get started. Senator ben cardin is a native of baltimore, a former state legislator, and a member of the house. In 2001, he was named as among the top 100 people who had influenced the way americans think about money. The senator was a strong supporter of the legislation that created the cfpb. So thanks, senator cardin, for being with us today. [applause] thank you very much for the introduction, for being here. Director cordray, we thank you for your service to our country and bringing this hearing to baltimore. On behalf of my colleagues, we thank you for being here in baltimore. Congressman cummings and mayor Rawlings Blake and i have seen firsthand the pain that was caused by people have lost their homes. Weve seen what its meant to their dignity. Weve seen neighborhoods that are been very much negatively impact and caused a mortgage foreclosures. And the tragedy of this, that in many of these cases it didnt have to happen. Individuals in our community were steered into subprime products that they shouldnt have been. They qualify for conventional mortgages. But yet they were steered into a financial arrangement that they didnt understand, they didnt realize the consequences. And as a result, many people lost their homes, and communities were devastated. Today, we have too many abandoned properties, too many homes still in foreclosure, people who are homeless, and still homeowners are uncertain about their future. So we thank you for having this hearing here in baltimore, because we do believe that the people that will be presenting can give you some good information to help form the policies that we accept expect from the Consumer FinancialProtection Bureau. I want to first complement government all malik, secretaries get a, our secretary of housing, for the states that help people. They set up counseling, in ways in which the homeowner, the person who had borrowed the money, could have direct contact with the person who lent the money. And in some cases we were able to adjust to mortgages and key people in their homes. Im proud of the work that our mayor did in helping the people of Baltimore City better understand their options, but the way the Financial Arrangements were set up, people couldnt talk to the right people. And it was in everyones interest to avoid foreclosure, and yet too Many Properties were being foreclosed. Congressman cummings had many foreclosure prevention forums. It was amazing. I have seen some of the people the benefit from congressman cummings work. I held several foreclosure prevention forums, and i was amazed, i expected i would find a 50 or 100 people show up. Hundreds showed up. Because they were thirsty for information. They have the financial ability they thought to save the house but they didnt know how to do it. And thats a lesson i think weve learned over the last five years. We have to do a much better job. And im going to chile, we can put a face on it, all of us have the individual stories of people have come up, homes that weve saved as result of this. One person who lives in maryland would have lost her home. Would have lost her home. She was at one of those forums, and she was able, through a counselor, to find who actually had the mortgage, and through a pro bono attorney, sit down and able to adjust for mortgage for the tools that were made available as a result of legislation passed by the United States congress with the leadership, strong leadership of the obama administration. We were able to use the tools and say this individual. There are many other stories like that. Weve got to personalize this. To me, they key to preserving homeownership in this country, a key to financial success, and i hope the major objective of the Consumer FinancialProtection Bureau is to provide financial literacy, let people understand whats out there, let them understand their own capacity, let them understand the options that are there. Financial literacy is critically important. And access to Financial Products and services that are fair, affordable and understandable. If we can take those steps, we can help empower people to not only own a home or to make the right financial decisions, but to help build our economy. So i just urge you to be bold. When Congress Passed doddfrank, when Congress Passed the establishment of the bureau, we wanted you to be pulled because we dont want a repeat of what weve seen over the last five years again. Want you to be pulled of protecting families from a piece of Financial Products. Get rid of them. And power families the financial knowledge, skills, and resources. Unique resources to help guide them, particularly when the choices are complex or when the terms are unclear, or when the products themselves are misleading. And i think through proper regulation, best practices in leadership, we can provide the financial information, and we can help people in this critical period in their lives when they have to make those kinds of decisions. I think we can guide them. I want to compliment you on these regulations that were just recently issued. Absolutely the right thing to do, and i can tell you, you have friends in the congress of the United States who will support your bold actions. Let us Work Together and avoid what happened over the last five years we dont have to repeat that. And americans can indeed have the American Dream of homeownership, with the right Financial Arrangements at the right time in their life. Again, thank you for being here in baltimore, and i can assure you that our congressional delegation, senator mikulski and our entire team are there to work with you, to make sure we accomplish these goals together. Thank you. [applause] thank you, senator cardin. Our next speaker is congressman Elijah Cummings. Congressman cummings represents marylands seventh congressional district, which includes our beautiful venue today, westminster hall. Representative the cummings is the Ranking Member on the Oversight Committee what he is strongly defended the bureaus independence. We thank him for hosting us today. [applause] good morning, everyone. Come on, we can do better than that. Good morning, everyone. It is certain that on an approach to be here, and i am so glad that the Consumer FinancialProtection Bureau has chosen the seventh congressional district, which i just happen to represent, to hold this forum. As i was sitting there listening to ben cardin, i could not help but think about the last time we were here before my committee. And how some folks tried to tear her apart. Because she simply wanted an organization which is meant to protect our constituents. She wanted to make it work. And i can tell you, i was telling director cordray a little bit earlier, its amazing, the very people who tried to put her down in their actions, elevator. Now shes a United States senator. You dont have to climb. You should, because she is very, shes in a very significant position. Go on, clap. [applause] i want to thank senator cardin. Certainly our mayor whos done an outstanding job and you, director cordray, for being he here. Couldve the Consumer FinancialProtection Bureau is dedicated to protecting consumers, including homebuyers from a piece of financial practices. Under director cordrays leadership, the bureau conducted Enforcement Actions last year that returned about 425 million to consumers who were the victims of deceptive practices. This is about 80 million more than the bureaus and higher budget for 2012. So the american taxpayer is already getting significant bang for their buck. Here in baltimore we have been hard hit by the National Foreclosure crisis. 4 million American Families have already lost their homes. Or during this crisis, ive organize some seven or closure prevention workshops, and were about to have another one on june 15. And in these workshops as ben said a few minutes ago, we have heard first hand about the abuses committed by mortgage services. In addition in my position as the Ranking Member of the House Oversight government reform committee, ive conducted investigations and introduced legislation to expand protection for homeowners, including those serving in the military. Given the enormity of the challenges we currently face, we are looking to you, director cordray, and the bureau to lead the way forward. And america is counting on you to ensure that credit is provided on the terms that are clear, fair, and affordable. Todays hearing will primarily address the bureaus new rule on qualified mortgages, and im pleased that the bureau has sought input from stakeholders on earlier drafts of the rule. We are also waiting a new rule for mortgaging service stand. We will evaluate all of the new rules based on whether they protect consumers from the kinds of abuses they face in the past. As well as whether they present those seeking financial gains from exploiting consumers through unintended loopholes. And as i said you a little bit earlier, director cordray, there are a group of people who are not usually mentioned in these discussions. And that is the children. The children who become displaced because their parents cannot afford the home or theyve been put out of the house. And heaven knows what effect that has on generations yet unborn. You have to say to that child that i will never wouldve bought a house but it doesnt say to that house under in these are questions that never seem to rise up, i know that you are very sensitive to, based upon the discussions that we have had. And so i know, director, you will remain vigilant in monitoring the effects of these new rules on homeowners and on credit. And we urge you to take action whenever a new trend threatens the safety our sadness of our Mortgage Market. And i reiterate what ben cardin said. Weve got your back. I will do everything in my power to back up this organization. It is so very, very, very important. Thats why people like the mayor and i are in government. We want to make sure that people have an opportunity to live the very best life that they can. And so with that i begin welcome to our city and we look forward to hearing from you. [applause] thank you, congressman cummings. Our next speaker is mayor stephanie Rawlings Blake. Mayor blake is baltimores 49th mayor. She serves on the board of trustees to the u. S. Conference of mayors, and was the youngest person ever elected to the Baltimore City council. We would like to thank the mayor for graciously hosting us. [applause] good morning. Im posting it in my city and in my law school. You forgot to mention that, congressman. I want to thank director cordray for holding this hearing here today, and i want to welcome the cfpb adult to Baltimore City. I want to thank the senator and the congress and for being here. Baltimore and maryland is blessed to have a tremendous delegation in d. C. That is working so hard on our behalf, and today is just a small example of the work that they do together. We are always grateful when congressional committees, and federal agencies visit baltimore. And to the and director, youre welcome anytime you would like to come. We believe that field hearings and visits are an invaluable part of the decisionmaking process. Policy as far too often made within the confines of washington, d. C. , but a forum such as this allows decisionmakers to see and to hear whats happening on the ground and how it affects real people. And that can only lead to better policies. Whats happening in baltimore is typical of whats happening in much of america. We have higher than average unemployment and unemployment rates in Baltimore City. This affects peoples Credit Scores, and thus their eligibility for mortgages. Foreclosures also destroyed a persons credit score and baltimore have suffered disproportionately high foreclosure rates throughout the Real Estate Market collapsed. And even though Interest Rates are at record lows right now, there have been significant increases in loan fees and banks requiring higher Credit Scores to qualify for mortgages. This great obstacles to obtaining a mortgage. And this is not even to mention the government regulations with respect to qualified mortgages which is defined to rigidly will only make the mortgage more difficult for minority borrowers to update. These obstacles have diminished a pool of minority, lowincome and for some time buyers who are entering the Housing Market, which in turn has an effect on homeowners who are looking to move up, to move into a larger home. Existing homeowners they are being prevented from financing or obtaining homeequity loans. Here in baltimore weve been suffering from high foreclosure rates throughout the subprime meltdown, and this is continuing. Foreclosure rates in the greater Baltimore Area rose will be on the national average, and even increased from the year before. The foreclosure pipeline late mortgage payments of 90 days or more is also in the rise in the greater Baltimore Areas, increasing from the year before. These are alarming trends, and should cause all of us concern concerned. All combined, this creates a very difficult challenge the Baltimore City as a work to create new opportunities for our families and our neighborhoods. We have set out an ambitious goal of growing baltimore by 10,000 families over the next 10 years, and in order to do so we must improve our school system, reduce crime, create Economic Opportunities for residents. But a vital part of this effort is in making homeownership a priority. In fact, on monday we announced a new Publicprivate Partnership with wells fargo to provide 4. 5 million worth of 18,000 grants to provide homeownership assistance. These are forgivable grants to new homeowners will help families move into the home that they wont. Whats more, the new Program Supports ongoing effort by the light of Elimination Program by providing people with the opportunity to combine various, a variety of incentive programs, and by doing so being able to bring tens of thousands of dollars to the settlement table. Still, without access to mortgages, our efforts, all of these efforts will be for not and will take the job of growing this city, and by extension, our nation economy, that much more difficult. Thats why todays discussion is so important. We need to find ways to increase opportunities for families here and throughout the country. Thank you again for my invitation to speak to you today. Thank you for being in baltimore. I hope you have a fruitful discussion in my hometown. And you are always welcome back. Thank you. [applause] thank you, mayor blake. I may have of the bureau id also like to extend wishes for a speedy recovery to congresswoman donna edwards. She was to join us today, but, unfortunately, sprained her ankle. She hoped the we hope it heals quickly. Next is the bureaus director Richard Cordray. Richard cordray became the cfpb is first director a little over a year ago on january 4, 2012. Director cordray. [applause] thank you. And let me say thank you to everyone, including our elected leaders, mayor Rawlings Blake, senator cardin, representative cummings. Such a strong supporter of the Consumer Bureau and its work. I also wanted to acknowledge Public Officials, leading Public Officials who sent staff to represent in here today, key staff and report back. Senator mikulski, represented with this burger and others, thank you so much for your interest in our work. We appreciate that you take a response was to fulfill the will of congress very seriously, as with the mortgage rules we are announcing today. So thank you for joining us today as we announced our ability to repay rule, a rule designed to ensure that lenders are offering mortgages that consumers can actually afford to pay back. This is a simple, obvious principle that needs to be reestablished in the American Housing market. It is nothing more than the true essence of responsible lending. The ability to repay rule gets at the heart of the lending standards used in this country to sell mortgages to consumers. It comes against the backdrop of two distinctly different Mortgage Markets that weve experienced over the past decade. In the run up to the financial crisis, we had a Housing Market that was reckless about lending money. It was driven by assumptions up by Property Values that turned out to be badly wrong. It had dysfunctional incentives with lenders being able to offload virtually any mortgage into the secondary market regardless of the quality of the underwriting. There was brought indifference to the ability of many consumers to be able to repay their loans. As a result, weve experienced the worst financial crisis since the great depression. The collapse of the Housing Market destroyed businesses and jobs across every economic sector and in communities across this country. The American Dream of homeownership was shaken to its foundation. Household wealth shrank by trillions of dollars. The stock market plummeted. Peoples life savings were devastated people lost their jobs. People lost their homes. People lost their hope and confidence in the future. Now in the wake of the financial crash, we have been expensive Housing Market that is tough on people and just the opposite way. Credit is achingly tight. Since 2008, most mortgages are being priced under attractive terms, but access to credit, many consumers cannot borrow to white house, even with strong credit. Both periods have hurt individuals and families who simply seek to fulfill the promise of the American Dream of homeownership. Our goal with the ability to repay rule is to make sure that people who work hard to buy their own home can be assured of not only Greater Consumer protections, but also Regional Access to credit so they can get a sustainable mortgage. Let me tell you two sets of stories that reflect the problems im talking about. Earlier this year a california man named henry wrote to the Consumer Bureau. His home was in the process of being proposed on, and he was desperate. During the overheated years, atlanta had told him he mortgage for more than half a million dollars. Far more than he could afford on his annual salary of less than 50,000. And despite various provisions in the original loan he was no arriving at the point of financial ruin. Henry said that when he got his mortgage he assumed that the lender knew what he was doing i qualify him for such a large alone. When he wrote to ask him he was worried that only but losing his own, but about losing his familys entire future. As we all know, henry was not alone. People across the country were sold mortgages that were not sustainable. Some have their eyes open, seeking to ride the wave of rising housing prices. Others, like anna, were led astray. For many borrowers the numbers were ignored or fudged to get the loan approved. This kind of reckless lending was an endemic problem but i firmly believe the rule we are announcing today that existed a decade ago, many people like henry couldve been spared the anguish of losing their homes and having their credit destroyed. The events that caused the financial crisis might well have been averted. The tragic reverberations that continue to affect so Many Americans today would never have occurred. In contrast, consider these more recent situations. Anthony from new york contacted us earlier this year to describe how, after usability a strong credit report, he now finds that even with a solid credit score and money saved for a substantial down payment he cannot get approved for a mortgage. After all, those years of carefully managing his money, he found that the current market became so tight he cannot get the approval needs. And the slow down in the Mortgage Market is holding back consumers in other ways, too. We heard from a couple in michigan to Credit Scores in the eight hundreds come and simply want to refinance their home which is now worth much more than a regional Mortgage Loan at the current lower rates. Yet again i get approved because there were no comparable sales in the neighborhood over the last 12 months. Having the ability to repay rule in place, indeed having all the mortgage rules in place and on sound footing is an essential foundation for a muchneeded recovery in mortgage lending. We believe this rule does exactly what it is supposed to do. It protects consumers and help strengthen the Housing Market by rooting out reckless and unsustainable lending while enabling safer lending. In the and the ability to repay rule would help ensure that lenders and consumers should have the same basic financial incentives. Both of them went when borrowers can afford their loans. It also recognizes the importance of restoring reliability to the marketplace. When consumers sit down at the closing table, they should be able to confidence they are not being set up to fail. With this confidence, consumers can be more active participants in the market once again. They can choose the products they believe is best for them from among a wide variety of products, and they can decide what it went to pay to finance the home they seek to own. The court of the ability of the repay rule rests on two basic commonsense precepts. Lenders have to check on the numbers and have to make sure that the numbers check out. Why is this so important . Again, consider where we were just a few years ago in the Mortgage Market. Leading up to the crisis, many lenders sold nodoc and low doc loans where consumers were qualifying for loans that were well beyond their means. A nodoc loans one with a bar would not have to show any financial background or resources, such as tax forms our pay checks or bank statements. None of the critical information needed to evaluate what size mortgage he or she could reasonably afford. Some of these loans were derided as ninja loan, no income, no job, no assets. Yet far too many borrowers found they had no problems getting these loans approved. Taking the actual financial background of the consumer out of the equation was problematic. The rapid spread of introductory teaser rates made a bad situation worse. Low initial teaser rates led many consumers to believe they could afford to take out loans, but the payments proved too much for many consumers and caused a dramatic increase in mortgage delinquency. This led inevitably to home foreclosures. Under our new rule, lenders will have to determine a borrowers ability to repay. They will have to evaluate the barbers income, assets, savings and debts. And this determination will be based on both the principal and interest on the mortgage over the longterm, not just during an introductory period. Under our new rule, low and nodoc loans will be effectively prohibited in the american Mortgage Market and affordability will be determined based on Interest Rate that would prevail in the absence of any teaser rates. In these key respects, borrowers will no longer be sold mortgages that are predestined to fail. Now, while congress directed the. And limit the ability to repay rule, but also directed us to define a category of loans where borrowers would be the most protected. So as part of the road we are releasing the criteria for what is called qualified mortgages. If youre a borrower getting a qualified mortgage, your loan is required to meet these additional criteria and thus barring some unexpected turn of events you should be able to make your house payment. Under our new rules, qualified mortgages cannot contain certain features that often have harmed consumers. They cannot have Access Points and fees, which are the up front costs the lender imposes on the bar at the outset of a loan. They cannot be risky loans with a pencil about actually increases rather than paying down the loan. They cannot be loans that place particularly large financial burden on the borrower. With consumers total monthly debt including the mortgage payment and would housing expenses such as taxes and insurance, generally cannot add up to more than 43 of the consumers monthly gross income. No standard is perfect, but the standard here throughout draws a clear line that will provide a real measure of protection to borrowers and increased certainty to the Mortgage Market. Taken together, all of the ability to pay, repay provisions will help establish the principles of responsible lending for the Mortgage Market as it recovers from the financial crisis. But you cannot have responsible lending unless you have lending in the first place. And the Mortgage Market as it stands today has tightened so much that many consumers cannot borrow to buy a home even with a strong credit history. We can draw up the greatest Consumer Protections ever devised, but if consumers cannot get credit then theres nothing to protect. Our goal here is not only to stop reckless lending, but to enable consumers to access affordable credit. Our ability to repay rule will restore more certainty to a market that was deeply destabilized by the financial crisis, by providing commonsense discipline in the Housing Market, this will create a level of insurance for all participants that will open up more access to credit for consumers. And we are helping this process along in two ways. First with included provisions in the role that temporarily broaden coverage of qualified mortgages to allow us transitional periods while other parts of the government, including the congress, map a path forward toward reform of the secondary market for mortgage financing. Second, we have addressed the legal consequences of a qualified mortgage by conferring the strongest Legal Protection on safer prime loans while permitting borrowers to rebut the presumption of ability to repay for subprime loans. We have limited opportunities for messages litigation however in three ways. One, by drawing bright lines criteria to define a qualified mortgage. Two, specifying the sustained payment over a reasonable period is strong evidence that the bar had the ability to repay the loan when it was made. And three, by specifying the circumstances under which a borrower can rebut the presumption for subprime loans. There has been some confusion about what these Legal Protections actually mean. They do not afford lenders complete immunity when it comes to foreclosures. For example, if a lender does not follow the qualified mortgage criteria, and the lender does not enjoy the Legal Protection of a qualified mortgage. And the protections conferred on borrowers under other laws still apply. Thus, the ability to repay rule does not equate any consumer rights. It adds to them. And for lenders who may qualified mortgage or determine the consumers ability to repay over the life of the loan, this rule will foster Consumer Confidence and improve conditions in the marketplace. While working on the ability to repay rule, we came to another important recognition. Many have said, including myse myself, that Community Banks and Credit Unions did not cause the financial crisis. They are a traditional model of relationship of character that has been beneficial for many people in rural areas and small towns across this country. Including the small town in ohio where i was born and raised. They find ways to make loans that respond to personal situations and cannot be captured by any generic metric. They depend on keeping a good reputation in a community and often hold these loans in their own portfolio. Accordingly, they have strong incentives to pay close attention to the borrowers ability to repay. So today well also be proposing a further adjustment to the ability to repay rule, to create a special category of qualified Mortgage Loan made by smaller vendors such as Community Banks and Credit Unions. This proposal also contains measures to ensure that nonprofit groups and state housing agencies that led to low and moderate income families can continue to play a vital role in the Housing Market. These groups offer a valuable range of financing and support from down payment assistance to firsttime homebuyer credit, the construction programs that build up communities one beam at a time. We look forward to considering your feedback which is been so helpful to us in resolving the many difficult challenges posed by the ability to repay rule. Weve adopted todays rule after analyzing extensive comments and considerable data. We have listened to people with many different perspectives in stakes in housing and Mortgage Markets. Weve met with large providers, small providers, community groups, consumer organizations and Public Officials from every branch and level of government. The work done by our team on this rule has been marked by their tremendous talent and dedication. And yet their work is not done. We have a responsibility not just to write a rule, but you see the lenders put in place effectively so that its promise for consumers become reality. We also want to help lenders implement the rule smoothly and minimize unnecessary burdens. Suite hired a mortgage industry veteran coordinate these efforts. We will also be working closely with industry over the next year to eight and support implementation of the ability to repay rule and all the other mortgage rules. We will publish plain language translation of the rules and booklet and video form for lenders and other key players in the Real Estate Market. We will field questions and offer suggestions to help lenders determine how to implement the rules. Yet it was still possible to finance a home purchase with an exploding mortgage that has the same one in five chance of causing your family to be put out on the street. She advocated that Financial Products should be subject to Regulatory Oversight because the pain imposed by dangerous credit product is even more insidious than that inflicted by a malfunctioning kitchen appliance. Congress and the president took action, and her vision became the Consumer FinancialProtection Bureau. As the american Mortgage Market ebbs and flows, the new Consumer Bureau has been charged with the duty to protect responsible lending in the Housing Market for borrowers, lenders and everyone else whos engaged in our economic life. We have been working hard, and we will continue to work hard to do just that. Thank you. [applause] at this time id like to invite all the panelists to join the stage, and while they are taking their seats, i want to also thank those who are joining the field hearing by live stream. You can follow cfpb on facebook and on twitterer at cfpb. The cfpbs Deputy Director, raj date, will lead the panel of experts through statements and q a. Raj date has had a long and varied career as a strategy consultant, a Bank Executive and on wall street. Previously, he served as special adviser to the secretary of the treasury for the cfpb and as the bureaus associate director for research. In 2009 he founded and served as chairman and executive director of the cambridge Winter Center for Financial Institutions policy, a private, Nonprofit Research b and policy organization that supported reform of the financial system. Deputy director date, you have the floor. Thank you. Thank you all for being here. Id like to start just by reiterating something that was said by senator cardin and then again by director cord can ray. The cordray. Im quite proud about what it is that weve been able to accomplish, but just as important as what we do is how we try to do it. We try to be disciplined and data driven and tough minded, but at the same time we try to make sure that were open and transparent and collaborative with stakeholders around the very important work that were doing. We try to make sure that we hit every deadline, and we never forget who it is that we work for, which is the american consumer. Doing all of that is hard work, and it takes a certain human cost, a human toll on people. And i just wanted to pause and thank the astonishing work of the staff at the bureau led by David Silverman who is our head of research in markets and regulations. But i would like to,ly because i can, run through some of the people. Kelly kaufman, who runs the regulations team, ben olson, tom, priscilla, courtney, jennifer, joe devlin, research economists who do such terrific empirical work that grounds this effort as well as others led by jesse, ron, iowa lex ya, tim clipfield, our Mortgage Markets team is helled by pete carroll and finish helled by pete carroll and, of course, Roberto Gonzales and steven and ann. All have put in terrific work on this rulemaking, and, you know, i personally could not be more proud or more grateful for the work thats been done. [applause] theres always a danger when you just try to come up with even, you inevitably miss someone, and then theyre angry at you. Ive always been very comfortable with people being angry at me, so i dont mind. Let me, let me just talk a little bit about what it is wed like to accomplish during this component of our, of our public hearing. As director cordray talked about, were focused on solving real problem. Real problems that when they manifested themselves had a devastating impact on the Mortgage Market and Housing Market and the real economy. To help us calibrate the impact of this new rule, and importantly, to help us with gleaning a perspective on where the marketplace and consumers interaction with it might move from here, we have assembled two terrific panels which together have deep insight and perspective on the experience of consumers and the experience of lenders and, indeed, the experience of the Mortgage Finance market broadly. Id like to, i would like to introduce that panel and then ask each of our panelists to provide a brief opening statement. These are really terrific people who have joined us, and notwithstanding the fact that theyre so terrific, we will ask them to be quite brief in their opening remarks. Let me first introduce you to all of them. Over on my far lefthand side is mike calhoun, president of the center for responsible lending. Next to him is lisa rice, Vice President for National Housing alliance, then alys cohen, staff attorney for the National Consumer law center. And then if i move all the way to my righthand side, susan walker, whos professor susan wanter in from the university of pennsylvania, David Moskowitz and karen thomas, Senior ExecutiveVice President for Government Relations at the independent Community Bankers association of america. Thank you all for being here, and perhaps we might start with you, mr. Calhoun. Thank you. Today the cfpb announces one of its most important rules, the qualified mortgage ability to repay rule, along with the upcoming Mortgage Servicing rules that will come out next week that address failures in the Mortgage Market that devastated millions of families and our overall economy. The twin drivers of this were widespread, unaffordable loans and a broken Mortgage Servicing system that severely aggravated the ensuing wave of foreclosures. The goal of the doddfrank legislation and the rule today are to redirect incentives so that lenders are encouraged to make loans that are longterm sustainable, not just generators of shortterm fees. And to also deter and prohibit abusive practice such as the infamous 228 exploding loans and broker incentives to steer or borrowers to more expensive, less sustainable loans. At the same time, its noted we need to provide more access to these sustainable loans. The rule being announced implements and reinforces the key protections mandated by doddfrank and appropriately targets the strongest protections at the riskiest loans. It will provide substantial certain orty and protection for lenders in order to encourage ample access to credit. There remains several key provisions as discussioned in comments earlier left for decision including how some additional provisions will be resolved including broker incentives that played a key role in the housing crisis. As this rule and the servicing rule are adopted and implemented, it is critical that we not fall into the false argument that enforceable Consumer Protection mean less access to sustainable loans. As experience in the credit market and other Consumer Markets show, basic rules of fairness that encourage sustainable lending further both Consumer Protection and access to credit. The currentlyconstrained Mortgage Market is not due to borrowers bringing a wave of claims and that discouraging lenders. Indeed, there has been a different of consumer claims er theth of consumer claims notwithstanding the historic recent practices. Rightfully, the market lost faith because of the absence of basic protection which generated a race to the bottom where trickedup loans dominated harming consumers and investors alike. We have seen this in other markets as well such as with credit cards with the adoption of common sense reforms. In the last few years, its produced a more transparent and competitive market that better serves consumers and lenders alike. So in summary, the cfpbs fully implementing the doddfrank mortgage protection and enacting substantial reform to Mortgage Servicing are essential to achieving a Mortgage Market that works well for families, for lenders and for our whole economy. Thank you. Thank you, mr. Calhoun. Ms. Rice. Thank you so much for inviting me to participate in this very important hearing. The National FairHousing Alliance, like mayor rollings, shared that same concern, that the qm market would be very narrowly prescribed, and so were very happy to see that qm is broadly defined and that there are also no down payment or credit scoring requirements for qm loans. [inaudible conversations] were also pleased that the cfpbs intentions in drafting these rules are to protect consumers from irresponsible mortgage lending. There still remains a concern about the possibilities for reinforcing americas dual credit market in which communities of color have been relegated to nonprime markets and higher cost loans. A dual credit market, as we all know, helped to create our nations worst housing crisis. The rules establish a tiered system, one where theres some loans who have the rebuttable presumption and other lopes that have the safe other loans that have the safe hard or boar. The National FairHousing Alliance strongly advocated for a scenario where all loans would have a very strong rebuttable presumption because we felt that that would lend the greatest protections to consumers. Remember that in that por gang transaction mortgage transaction its always the lender that has superior knowledge over the consumer in the transaction. So we have to be very diligent and evermindful and watchful with this system to make sure that the tiering of the mortgages does not perpetuate a situation where we have furtherance of a dual credit market. We, of course, dont have to look any further than right here in the city of baltimore for evidence of the effect of a dual Mortgage Market. One of the nations large arest cases of discrimination was brought by the city of baltimore on behalf of its africanamerican and latino residents who had received subprime and higher cost, unsustainable more gamings when they actually qualified for lower cost and sustainable mortgages. Hud, doj and ore agencies have brought a Record Number of fair lending claims revealing that hundreds of thousands of borrowers were discriminated against, and many of these discriminatory actions, of course, have led to borrowers being underwater or even losing their homes. One of the things we are heartennenned by is the prominence of the office of fair lending and equal opportunity which, of course, is housed at the cfpb. This office is charged with ensuring that rules like the qm rule and ability to repay rule would be implemented in a fair manner and that the cfpbs supervision and enforcement efforts are comprehensive and diligent. Its also important to note that the Safe Harbor Provision does not exempt lenders from discrimination or fair lending claims. Even borrowers who receive a safe harbor mortgage or a qualified mortgage can experience discrimination, so thats a very important point to keep in mind. It would also be important to insure that compensation schemes did not contribute to consumers receiving higher cost mortgages when they really qualify for lower cost products. We know that certain compensation schemes helped to spur the crisis. The cfpb will, therefore, need to be very careful to not interpret this rule or to promulgate any other rules that will allow for a perverse compensation scheme. We commend the cfpb for releasing this rule, and, of course, well do all that we can to insure that the rules provide fair or and equal access for all consumers. Thank you very much, ms. Rice. I, theres, obviously, some audio feedback which at first i thought was either a practical joke that someone was running every time you say qm, the audio system went on the fritz. Im going to use my engineering knowledge, if you were to separate those microphones, i wonder if that would help a tiny bit . In any case, ms. Cohen. Thank you for the opportunity to testify today. I testify today on we half of the National Consumer law centers low income clients and the National Association of consumer advocates. We appreciate the vigorous work of the bureau on this rule. Regulation of the Mortgage Market under doddfrank is essential to our Economic Security n. The years leading up to the economic crisis, pricing replaced underwriting as a risk control mechanism. Lenders relied on securitization to spread the cost of the inevitable foreclosures. Fore close yours devastated communities across the country, particularly communities of color. Congress mandate in doddfrank is clear; lenders must take reasonable steps to insure that every Mortgage Loan is affordable when made, and homeowners whose lenders overreach have recourse. The Consumer FinancialProtection Bureaus new regulations implement important new protections for sustainable lending, but they fail to fully deliver those protectionings. The bureau laudably offers a presumption for subprime boar roar e e borrowers if they receive a qualified mortgage that the lender should have known was nevertheless unaffordable. This important backstop against abusive lending will not be available in the prime market. The safe harbor the because of row has afforded for prime loans provides shelter to lenders who knowingly make unaffordable loans in direct violation of congressional intelligent. While the qualified mortgage definition guards against many abuses, without a rebuttable presumption, new abuses will flourish. For example, a 43 debt to income ratio in the rules is a helpful starting point and may be a reasonable standard for a homeowner we wering 10,000 per month. But for a homeowner earning only 1,000 per month, 43 does not leave enough to pay the utility bills and other essentials. A residual income analysis that looks at the actual cash available is essential in ais accessing loan affordable for low income homeowners. And Adjustable Rate Mortgages with exploding payments can meet the qualified mortgage definition so long as the payments increase after the initial period covered by the rules. The bureau intends to seek further comment on the treatment of yield spread premiums, payments by learneds to broker to upscale homeowners. These payments must be clearly and fully included in the cap as they are in the statute to avoid the resurgence of abuse by brokers. Limits on compensation are not enough to constrain this abuse. A rebuttable presumption does not create significant litigation risk to the market. Few homeowners find an attorney, fewer prevail. Individual homeowners face a heavy factual burden to overcome, and due to the factintensive nature of the inquiry, class actions are not viable. The bureaus qualified mortgage rule invites abusive lending in the prime market and erodes the extent of the progress made by doddfrank. Combined with the hack of a rigorous, marketwild loan modification mandate, this rule makes progress but still leaves homeowners and the markets vulnerable to a future crisis. Thank you. Ms. Cohen, thank you. Professor wachter, thank you for being here. May we have your statement . Thank you, raj. While there is much work to be done to repair our nations Housing Markets, the step that has been taken today is an important, even a landmark one for the future of the Nations Housing finance system. A safe and sound mortgage system must be built on trust; trust that processes of mortgage underwriting have integrity and are known and controlled. Today staff goes a long way to bringing trust back to the Mortgage Finance system. It does so not by prohibiting mortgage products, but rather by establishing standards to insure that underwriting risks in the origination of Mortgage Loans are controlled and known. We have come through a crisis of historic dimensions. Elsewhere i and coauthors have noted that at the root of a failure of the mortgage system were informational problems that prevented mortgage participants from knowing and accurately pricing the risk of mortgage products. At the heart of these problems was the failure to properly assess borrowers ability to repay their mortgages. Only in retrospect can she see how severe this failure was. In realtime Market Participants could not have known how many mortgages were issued to borrowers who did not have the income to repay principal, interest payments, fees, etc. As a result, consumers and market participated underestimated the likelihood of both borrower default and, indeed, the system failure that resulted. The Housing Finance system is more than a market for profit. It is a social contract that can enable safe and sustainable Home Ownership. When we abuse that contract, we do not simply harm the economy, we rob our citizens of their trust in this american institution. Insuring borrower ability to repay is more than a precaution, it is an essential ingredient in the fair treatment that citizens deserve as borrowers, as consumers and as americans. The new rule announced today put us on the path to restoring the integrity of the system. Thank you. Thank you, professor wachter. Mr. Moskowitz. Thank you, Deputy Director date, and thank you, director or cordray, and the entire or talented and obviously exhausted bureau staff for reaching this momentous day. The publication of the ability to repay rule really is of tremendous importance to American Consumers and to help achieve stability in the Mortgage Market and to solidify sustainable Home Ownership. Of we have long believed that a broad and clear qualified mortgage definition under the rule is the best way to support robust originations in the primary Mortgage Market and to enhance liquidity in the secondary market. The qualified mortgage rule codifies a strong nation wild ability to repay standard that went consistency applied will protect consumers and assure the availability of credit. It will also help assure that qualified loans are available across the entire credit spectrum. The release of this rule is an important milestone. The true impact consumers will not be known until the rule is implemented and made operational by lenders over the course of the year ahead, and we applaud the bureaus commitment to the implementation process that will be transparent and flexible and will result in the best outcome. We appreciate the thorough and inclusive approach the cfpb has taken in developing the rule, and we complement the bureaus willingnesses to engage stakeholders to consider new information and perspectives and to develop a balanced rule that protects consumers will insuring home loans remain broadly accessible. The bureaus decision foster ld deeper dialogue about the role of consumers debt to income ratios in defining qualified mortgages, identified issues with litigation risks and related consumer costs. In addition, the bureau has rightly placed significant emphasis on collaborating with other regulators including the Federal Reserve board and the federal Housing Finance agency. We urge the bureau to continue this Important Partnership as other important regulations are finalized, particularly the qualified Residential Mortgage rule. The rule issue today represents a framework for the implementation of the ability to repay requirements, but it wont answer all the questions that will arise during implementation. Other factors that are still outstanding that are important to resolve over the months ahead are the importance of fha reform, credible Movement Towards xse reform and a gse reform. These will help assure stability and certainty in the market. We are looking forward to working with the bureau in the months ahead on the implementation of this rule and commend the bureau and its staff again for its expertise and it commitment to stabilizing the market and assuring the availability of credit across the spectrum. Thank you, mr. Moskowitz. Ms. Thomas, your statement. And i think well probably have better luck with the microphones, im told, if you just pull it quite a bit closer to you. Thank you, raj. Director cordray, thank you for convening todays field hearing on mortgage policy. Im very pleased to be here to represent the views of our nations 7,000 Community Banks. Community banks play an Important Role in our nations economy and in Mortgage Finance. They are locallyowned and operated institutions, and they have very strong ties to their communities and their customers. In many small towns and Rural Communities across the country, the local Community Bank is the only reliable source of credit for home purchases. Community banks have a vested interest in the be economic well being of their customers and communities. Their Business Model is relationshipbased, not transactionbased. They did not engage in the lending and servicing practices that contributed to the recent financial and foreclosure crises. They are responsible, common sense lenders, and the low default rates for Mortgage Loans that were originated by Community Banks bear this out. Icba understands the intent of congress and the cfpb to prevent mortgage abuses from occurring in the future and to stabilize the Housing Market. Never the less, were concerned that the plethora of regulatory changes in the Consumer Market policy could further stymy the Housing Market and Community Banks ability to provide Mortgage Loans to their customers. And for this reason weve urged the cfpp and orr regulators to tailor the rules so they dont inhibit Community Banks ability to provide mortgages. Many Community BankMortgage Loans are held in portfolio, and theyre not sold on the secondary market. So the banks have a vested interest in how the loans perform, and accordingly, their underwriting for these loans has historically been more conservative. Many of these loans are not cookie cutter loans found in the suburban and urban markets, theyre made to borrowers who cannot qualify to a secondary market loan, and not because they dont have the ability to repay, but because their properties may be unique. It may have outbuildings that dont qualify for the secondary market, and like the example the director mentioned earlier, may not be comparable sale in the requisite Geographic Area or time frame to qualify for secondary market loans. But Community Banks are especially adept at making the loans because the bankers know their customers and have Extensive Knowledge of the Housing Market in their local community. The standards and definitions set in the qualified mortgage and ability to repay rule will have farreaching impact in the Mortgage Market. Borrowers on the wrong side of the qm will not be able to get the mortgage they want, or they will pay considerably more for it. Many Community Banks would cease or significantly curtail mortgage lending if there were only a rebuttable presumption of compliance for qualified mortgages. This is because they simply would not be able to absorb the compliance and litigation risks. Therefore, icba has strongly advocated that the rule provide a safe harbor for loans deemed to be qualified mortgages. We have also urged that Community BankMortgage Loans held in portfolio and serviced for the life of the loan receive this legal safe harbor. We are pleased that the bureau recognized these concerns in crafting the final rule and the proposed amendments. We believe that the safe harbor for qualified mortgages, which includes rural balloon payment mortgages, will enable the nations Community Banks to continue to serve their clients in communities while providing safe, sound and affordable mortgage credit. We look forward to working with the bureau as the rulemaking process moves forward. Community banks recognize that Mortgage Finance is now at a crossroads, and we urge policymakers to continue to take the path that will enable Community Banks to provide Mortgage Loans to their customers so that these consumers, too, can achieve Home Ownership. Thank you. Thank you very much. What wed like to do is take a few minutes for myself and my colleagues from the bureau to follow up on some issues that were raised in the statements, and i will take the liberty of beginning. Perhaps by asking our Consumer Panel just to elaborate on one theme, the ability to repay rule and the qualified mortgage definition are meant to solve important rob problems. They are in the intended, nor can one imagine it being some kind of global panacea. But within the context of other protections that already exist or were credited by doddfrank, how is it that you view the impact of this rule moving forward . Ms. Cohen, perhaps ill begin with you. Thank you. The ability to pay requirement is part of the in lending act which has been around for several decades, and it was built on the notion of disclosure being the answer to market issues, something that professor want wither alluded to earlier. This provision is really a ten in a new direction a step in a new direction which is to saudis closure matters. We need better information in the market, but in addition, substantive fairness is a key part of having a functioning market. Having a clear standard like the bureau has issued will enable that to occur, and having it issued by an agency that for the first time has its main goal and focus the benefit of consumers is also a novel set of regulations and a novel paradigm. This is your first significant mortgage rule, and we congratulate you. Ms. Rice . Okay. Lets hope the mic works this time. Raj, thanks for the question, and its a very important one. One of the things that we advocated for in the leadup to the crisis were for regulators to adopt a set of rules that would apply across the market very broadly because we were seeing very grave differences between loans that were being originated in the subprime market or the alta market, the conforming market versus the nonconforming market. And what we wanted for uniform standards that would be applicable across the board to all mortgages so that we could help standardize the mortgage experience for consumers but also insure or basic protections insure basic protections for consumers. And as youve already said, raj, the ability to repay standard is not a panacea. Just because we have this, it doesnt mean we will no longer see abuses in the marketplace. But what it does do is it takes us in that direction of establishing uniform sort of base standards, Safety Standards for all Mortgage Loans in america. Thank you. Mr. Calhoun. One of the reasons this rule will be so important is it sets standards that not only apply to this rule, but are widely anticipated to be adopted in other important ways. For example, there already have been legislative proposals that the Government Agencies that insure loans can only insure qualified mortgages. This rule relates legally is tied to another rule that addresses whether those who securetize mortgages have to set aside extra capital, and they will have to set aside extra capital for those loans who are not questioning m. So it not only qm. So it not only provides the definition for this particular rule, its seen widely as adopting standards that will largely define the market. And it does so, i think, appropriately in three categories. There hasnt been a lot of discussion, but there are actually three categories coming out of todays rule. Its what are prime qm loans. And the idea is the rule is sets up sets up incentives to align those of lend ors and borrowers so that if you make a prime qm loan, the borrower should have a strong likelihood of success in that loan. In the subprime space, i think its important that even before the housing crisis those loans carried very significant risk for borrowers. Our organizations data showed that before the crisis back in the late 1990s, 2000, if you took out a subprime loan such as in charlotte, your chances were one out of three that you would end up losing that home. And so appropriately, there should those loans should be available but with great care. And then, final hi, theres a third category not addressed today. These rules also address the very highcost loans. So in todays market, that would be a loan with more than 10 interest, for example, as compared to the 3. 5 interest that most people get today. And, again, even more so than subprime, those loans should be prohibited, but they should be limited to very extraordinary circumstances, and there should be very, very strict protections there. And i think this is a movement in that direction and comes close to hitting that mark right. Thank you. I want to invite one of my colleagues, pete carroll is our assistant director for Mortgage Markets. Pete, would you like to inquire of the panels . Thanks, raj. This next questions for professor wachter. If the ability to repair rules had been in place in the leadup to the crisis, what might have been prevented if. Borrowers may have assumed that lenders were in the business of offering repayable loans. But in the event too many loans were made which could not be repaid. I believe that this rule would have prevented such loans from being made without appropriate warning to consumers, and that would have prevented much suffering to borrow ors and harm to americas commitment. An important step forward. [inaudible] thank you. This next question is for lisa rice of the National FairHousing Alliance. Lisa, most folks would generally agree that underwriting standards were far too loose in the leadup to the crisis and that theyre currently too restrictive. What does this rule mean for extending access into the nonprime mortgage space Going Forward . Thank you for the question. Im reminded of the first predatory lending case that i worked on. This was in the early 1990s. It involved a senior citizen, a single female head of household who had owned her home in toledo, ohio, for years, for decades. She had a prime mortgage that she had been paying faithfully. She had stellar credit. She was convinced to refinance out of that prime sustainable mortgage, fixed Rate Mortgage with Charter One Bank into a subprime loan to get a debt consolidation loan, and she was convinced to do this because the lender told her youre going of to have just one payment x. That really appealed to her because she was on a fixed income. The lender was going to pay off all her other debt. Well, of course, you know the story. At the closing table, all of the terms and conditions were completely changed on their head. She got a subprime loan that the Interest Rate was more than double the prime rate that she had been paying and, of course, the lender did not pay off all of her debt. So her debt to income, her total debt to income ratio, of course, skyrocketed. And she didnt realize what had happened to her until after the loan had closed. So e relate that i relate that story because it typifies for me in terms of my experience what i have seen with consumers over and over and over again, and that is that consumers who qualify for prime credit got steered into the subprime market, as you heard senator cardin say. The wall street journal commissioned a study not too long ago, several years ago, in which they looked at certain vintages of subprime loans. And one of the vintages they found that over 61 of the folks who had gotten subprime loans qualified for prime loans. So its our hope that this rule will help. Its just one pell. One peg. When i think of access to safe, sound, quality credit, i think of it sort of as a wheel with all of these spokes. And the ability to pay standard and the qualified mortgage standard are two of the spokes in that wheel that are necessary to make sure that we have access to sustainable and affordable quality credit. So i think the rule is a very important one for us Going Forward, and i think that not only is the rule important for making sure that were extending safe credit in the nonprime sector, but also its an important component, its one of the important components to making sure that consumers who really do qualify for lower cost mortgages can get those loans. Thanks, lisa. This next question is for alys cohen, staff attorney with the National Consumer law center. Alys, within the context of the qualified mortgage definition, in your opinion what is a rebuttable presumption compliance mean . Thank you. First, let me applaud the bureau for the detailed articulation of the rebuttable presumption for subprime borrowers that appears to be included in the rule. We look forward to reading it. Including use of residual income as an articulated reason for rebutting that presumption. So the rebuttable presumption is the opportunity to show your loan was foreseeably unaffordable when it was made even if it meets the definition of a qualified mortgage. Its the chance to save your home if you can prove your case. While the qualified mortgage definition promotes more sustainable lending, there are always gaps like there were after hopa and new products develop. The rebuttable presumption helps address those instances. But beyond consumers, the issue also relates to how the market functions. The main goal of the rule is to incent sustainable lending and good behavior. The limited liability in the rebuttable presumption steers lenders away from unaffordable loans. The structure of having a safe harbor for prime loans in a rebuttal principles for subprime loans may also promote more lending in the prime space. But with that full legal insulation of the safe harbor, lenders will also push the envelope on abuses, and abuses migrate to unregulated portions of the market because the homeowner has no chance to show that the loan was unaffordable at inception. The rebut able presumption will provide a more robust set of protections for the most vulnerable boar roar es, those with subprime loans. Credit is tight now. Its tight now because of lender overreaching that caused the crisis, not because of any litigation risk caused by consumer claims. A rebuttable presumption leaves room for Market Recovery while also creating incentives for fair lending thats missing from a safe harbor. Pete . This next question is for David Moskowitz. With regards to ability to repay requirements, how do these requirements fit into how you think about basic Underwriting Practices . Doctor thanks for the question, pete. Thanks for the question, pete. Its entirely consistent with how we think about basic underwriting. We support the bureaus establishment of consistent industry ability to repay standards. In the past lenders were subject to different ability to repay standards or no standards at all or standards that applied only to portions of the market. Too many smaller players who are not invested in the longterm success of their customers who either didnt retain the servicing rights or who didnt keep the loan on their books were able to utilize underwriting standards that were not sufficiently focused on the ability to repay. The market would have been better off if basic and consistent underwriting standards were in effect across the industry that were clear and there was no departure from them. So we think of ability to repay in a way thats entirely consistent b with the bureaus approach and fundamental to sustainable Home Ownership. As director cordray said at the beginning, its a simple and obvious principle that the ability, that an ability to repay would result in the approval of a loan application only when the lender believes that a consumer has the ability to repay a loan in accordance with its terms. Its basic underwriting 101. Ability to repay standards in the final rule that embrace that concept and are applied universeally will help assure sustainable Home Ownership and fulfill the doddfrank requirements for enhanced underwriting. So thank you. Next question is for karen thomas. How are Smaller Community depository institutions viewing the ability to repay rule . Um, thank you, pete. Well, at the outset looking at the proposed rules, the Community Bankers met, frankly, with trepidation and anxiety. Like most or a lot of regulations, the regulations and the Regulatory Burden is kind of born of practices that Community Banks didnt engage in, but then they kind of get the fallout, and they enjoy im using that word sarcastically the Regulatory Burden that goes along with it. So they were very concerned that not about the ability to repay as a concept because, after all, as i described Community Banks make solid loan, and they certainly thats what they do, take into account the ability of their customers to repay. Theyre more concerned about, um, rigidity in a regulation and their ability to be flexible and provide loans to their customers that, like i said, dont necessarily fit that cookie cutter mold. Um, but at the same time in the runup to the financial crisis, you know, they watched customers who would come into their banks and who wouldnt qualify for a loan that that Community Bank would make, they watched those customers walk town the street and get walk down the street and get a loan from somebody else. And those are the kinds of loans that, you know, later on blew up and caused damage to the customer. So they certainly understand the impetus for the rule. Cfpbs door has been wide open to Community Banks during the course of this process, and weve been very grateful for that. Um, you can see that some of the details in the rule, um, take into account the concerns of Community Banks. The full rule itself will come out later today, and we look forward to reading about those details. But, um, on the first look, you know, were encouraged by it. That the concerns of Community Banks will be taken into account. As we move through implementation and understanding of the rule, Community Bankers will let us know sort of where the sticking points are. Um, the definition of theres some special rules for rural lenders, well be looking closely at that definition, and our bankers will be looking as well to see if their operations fit into those definitions. So things will unfold over time. I want to give you an example. A while back this Federal Reserve adopted an escrow requirement will for certain mortgages. There are many Community Banks that have very low mortgage volumes, so they did not have an escrow operation. Now they were required to have escrow. They couldnt provide that to their customers and so they had to cut off the mortgage lending that they do. That is a result that we want to avoid because we want Community Banks to stay in this marketplace and be able to serve their customers. Thank you. Id like to take a couple of minutes to follow up on some threads that were raised by a number of the panelists about the multiplicity of policy initiatives underway with respect to the mortgage business, but more broadly presumably to live to a credit crisis, a financial crisis, the magnitude of which we all suffer through, a great many things have to go wrong. Abusive practices, disastrous decisions, undercapitalized firms, fragile funding structures youre a great deal to fix so naturally there are a number of Reform Efforts underway. This rule clearly does not do everything but within the context perhaps you, mike, within the context how do you view the role or importance of this rule about a recovery in the Mortgage Market . The announcement and implementation of this rule will think profound advanced the recovery in the Housing Market for at least three ways. First, it sets this important baseline of standards for mortgages. One of the things in this housing crisis is, while many other countries have housing bubbles, the United States really stood out as having the worst quality mortgages. People were not only stuck with declining house prices in United States, they couldnt afford the basic mortgage itself except for by refinancing and what was hopefully a never ending appreciating market. So it addresses that which was of course a flaw in the Housing Market in the United States. Second, it provides clarity for the secondary market. Those who provide capital for mortgages have a profound affect on which mortgages, not just the decision of the lender or even a substantial bank itself, its whether they can sell that loan into the secondary market. And most important, what are the risks of that. And in contrast, virtually no borrower litigation, out of the housing crisis. There have been a tremendous number of investor claims from both private investors and government claims, socalled ipad claims, where they are able to force lenders to buy back the faulty mortgages and absorb all the cost of them. Its anticipated widely that those purchasers, the secondary market will require lenders to certify that their loans meet cuban standards. Thats one of the places where the standard will have a big impact. And by having a brighter line standards that are announced today to cover a wide part of the market, it gives lenders the confidence when they originate alone that it meets that standard, and that means when they sell it into the secondary market, they are not at undue risk, that they will have to buy it back one day. And, finally, i think it validates the good work of the cf bp cfpb. The creation of the cpp was a sea change in the regulatory world and it was a good bit of angst and fear in the industry that it would impose unreasonable proposals and not dig into the data into the operational concerns of Consumer Markets. And i think by this rule and by the comment you heard today, its clear that they fully did so and produced a rule that is both designed to help consumers but also to work for industries so that there will be credit available. Thank you. Perhaps professor walker, i could ask a very interesting question to you. Can you imagine the professor to read payroll as a necessary but presumably not sufficient condition for the return to a sensible and more vibrant mortgage lending market, what else has to happen, what are the markers as Market Participants, consumers and regulators should be looking for . Of course theres more work to be done of implementation of this will. Is also important issues to running Mortgage Servicing rules, and, of course, the qrm. Further, we as a nation today remain fully rely on the federal lives mortgage system, and we need to bring private capital back, and their needs, we need to arrive at a consensus of new structure to do so. Nonetheless, the cpp is to be congratulated, a major step forward. Today, todays rule is a major achievement. Thank you. In the spirit of doing hard work and doing it well and doing on time, i think we should probably thank our panelists at this point for joining us and for the proper perspective for today and throughout the rulemaking process. Thank you and we will move to the next phase of our public hearing. [applause] [inaudible conversations] now its time to hear from audience participants here today. I am told that our audience includes community leaders, advocates, industry representatives, and, of course, consumers. The open mic night portion of todays children is an opportunity for the cfpb to hear about your experiences with mortgages and to share your observations. Each person will have one to two minutes to tell the bureau their store and to share their observation. And what we hear from you is invaluable. We want to hear from as many of you as possible. So i strongly encourage you to please observe the two minute limit so that as many folks as signup to share their observations have the opportunity to do so. With that id like to call up our first audience participants, Marceline White. One of our staff will bring a microphone to you. Thank you. Thanks for the opportunity to speak today. Director cordray, members of the bureau, we appreciate you coming to baltimore. My name is Marceline White come on the executive director of the American Civil Rights coalition, ncrc. Ncrc works for maryland consumers for research, education and advocacy. Am also proud homeowner in Baltimore City. Thank you today. I appreciate all the work the bureau has done on these rules. Homeownership as a now is a viable avenue for wealth building, especially for low and moderate income families. We know that these families use homeequity to increase the assets and to borrow against home equity, we know this is particularly true in communities of color. So we know that the work youre doing is incredibly important for all of our families come a special low and moderate income families. Its imperative that the mortgage lending rules adequately balance the needs of Financial Institutions and consumers. And its important it opens up and provides more access to credit as well as clear and transparent standards for borrowers and lenders. However, our concern right now is that as written, the rules are too much to protect banks at the expense of working families. Our concerns are that the safe harbor in the qualified mortgage rose provides too much of the legal field for core Financial Institutions. Our concern is that as the rules defined most mortgages will qualify as cubans and will be shielded from lawsuits. This kind of Safe Harbor Provision serves to protect financial servicers while casting homeowners out to see. We predicted every we also believe the participant rule assumes a Financial Institution has engaged in understand underrunning despite evidence to the contrary over the past 10 years. We understand the impetus of the rule and the motivation, howev however, we know that banks and Financial Institution should have always been engage in sound underwriting policy. That has not been the case. We hope the rule will go further to redress that and we think standard or import for consumers but have very strong concerns about the Safe Harbor Provisions. We are also concerned that the inclusion of the 43 debttoincome ratio may price out low and moderate income families who would like to purchase a loan and unlike you to look at that issue. Thank you, mrs. White. And is going to end, we simply appreciate the work you have been doing and would like to make sure that you engage people on the ground on these issues. Thank you for comments and thank you for the work you do in baltimore. Our next audience participant is janice. Hi. My name is janice. [inaudible] i work for the Baltimore Public School system, and then here to represent not only the latino communities but all americans that have been struggle to maintain the American Dream, to own a house. Actually, in your state and, like you had a you could write it down, i am number 12231003, and i want but today i had a real story, and thats why everybody is here. I had a complaint with the agency because i have a subprime loan with an Interest Rate of 6. 87 . And in about like three years its going to go up to 700. I have i tried to a cane limitation but i was never able to get. I am happy now you have new rules to prevent fraudulent abuses. But now im wondering what actually your agency is going to be doing for people like me that are still struggling. To make their home payments. I think that we live in a great country, and definitely we are here because we can make all dreams come true if you really work hard. We are all accountable for what we do, and i would like to know also how your agency is reviewing all the complaints that you have and how you are making sure you are offering a timely, a timely response to your people. Thank you. Im sure you have our staff in washington, d. C. Furiously looking up your complaint. We have your Contact Information and we will make sure that staff follows up with you. Thank you for your work with the Baltimore Public School system. Our next audience participant is mike moran. Do we have broad stepped rod stett . Thank you but im president and ceo of cq here in maryland and im also here on behalf of credit union National Association. First of all, we feel the agency has to develop approach regarding safe harbor for lower price loans, rebuttal assumption for higher priced ones that should be workable for consumers while avoiding disruption to the Mortgage Market based on flinders fears of increased liability, insulin. We commend your efforts on this particular issue. We also