Transcripts For CSPAN2 Tonight From Washington 20110915

in the terrorism cases. these people will say hateful things about americans wanted to do violence to the united states. things that when you hear, it makes you not want to like the person. that affects the ability of the jury to find entrapment. was the person predisposed to committing the crime were not for the fbi providing the means to do so? that is what the real question is. people say they want to commit these crimes, but they lack the means to commit these crimes. if the person says he wants to do, then the department of justice is able to meet that predisposition bar. mitt romney cases -- entrapment exclusives is not a to terrorism. it is difficult to win an entrapment defense. you have to admit you committed the crime. so you're losing sympathy with the jury. host: trevor aaronson is a contributing writer to "mother jones" magazine. you can find the store on our web site, c-span.org, as well as >> republican presidential candidate texas governor rick perry spoke to students at liberty university in lynchburg virginia. liberty university was founded in 1971 by jerry falwell and is the nation's largest christian university. governor perry is introduced by university chancellor jerry falwell jr.. this is 30 minutes. >> this bring my friend and i were discussing the upcoming elections by e-mail. david is a texan -- . [laughter] david is a texan and a political junkie and a community organizer. he successfully organize hundreds of events from pastors and discuss national issues. he once worked for my father organizing pastors policy briefings all over the country. i told dave how much i admired his governor or having the guts to say things that one exactly politically correct like, when governor perry handed the texas -- from the union and how i would love to have him speak at liberty university. we talked about how it was too bad he was not running for president in 2012. a few weeks later i learned their vice president for executive projects johnny moore and david laing had collaborated to make the governors visit here possible. david flew all night to be here with us today so welcome david laing, few would stand up wherever he is. [applause] we have many visitors and guests today here in the center and watching by television so i want to give them a little bit of the history of liberty university. my father founded this university in 1971 and it was a monumental task to start university from scratch in lynchburg virginia 1971. as a result we went through decades of struggle, financial and otherwise, but now liberty we find it in turning a new era of excellence and prosperity like we have never seen before. earlier this year we began celebrating our 40th anniversary. at the same time it became apparent to us that we really were entering a new era of our history and so many ways. in recent years the university has achieved all that our founders thought that would take another generation to attain. our student body is more than doubled since 2007 and the last academic year over 72,000 students were enrolled. that number will exceed 93,000 this year with more than 80,000 studying on line and 12,500 on-campus. the campuses have tripled inside in the past decade and the only university with a year-round artificial ski slope. not that has anything to do with education but it is fun. liberty is the largest university in virginia, the eight largest of all colleges in the united states and the world's largest christian university. [applause] this is fitting for liberty because from the beginning division was not to create another bible school but instead to become free evangelical christians with notre dame and brigham young university czar for their respective faiths. division was to provide academic excellence, world-class facilities ncaa division i athletics, all the programs and student activities that would be available at any major university but to provide it all in the distinctively christian environment with a faculty and support staff committed to biblical trends and morality. the goal here has always been not only to teach students how to make a living but also how to live. to dream for liberty university is noble because it really has never been accomplished in quite the same way anywhere else. we are thankful not to watch that goal in that dream unfold before our very eyes. liberty's net assets have increased by over 600% since 2007, allowing us to continue to provide over $100 million a year in scholarships and an institutional aid for students keeping quality christian education affordable for as many as possible. as a result of these financial vans men's we are also transforming our campus over the next few years, over a dozen of the oldest buildings will be replaced and in a couple of years of campus will look nothing like it does today. in the last few weeks forbes and u.s. news have ranked the best colleges in the united states and liberty has ranking has increased over previous years. last november liberty entered the capital markets for the first time by completing its first public bond issue percolate in the liberty was a brand-new credit on wall street liberty became one of only 78 universities in the nation to receive a the credit rating of aa or higher from standard & poor's. liberty's double a rating is one notch below the united states of america's recently lower rating of aa plus, but standard & poor's gave liberty a positive outlook and they gave president obama and the united states of american negative outlook so we are proud of. [applause] today's speaker has an a+ rating but it is from the national rifle association. [applause] he said recently in south carolina he believes in gun control. he said he believes that you should hold a gun with both hands when firing it. [applause] governor rick perry participated in a debate earlier this week with seven other republican candidates for the nomination for president. by the end of this month five of those candidates along with his surrogates and by then candidate obama, we invited him to speak to me, five of those candidates will appear here at liberty by the end of this month over the last two years. your privilege to hear first-hand from so many of our nations leaders of this critical juncture in our history. rick perry is a fifth generation texan whose extraordinary life is let him from the tenant farm in the rolling plains of west axis to the governor's office of our nation's second-largest state. terry grew up in this mall can unity of creek texas and attended a small school. he was a boy scout and later became an eagle scout. he was among the first generations in his family to attend college at texas a&m university in 1968 and be attained a degree in animal science. i learned yesterday that. i have much more in common than i realized. i learned he was a prankster in college and at one at that one s most famous pranks was wanted played -- place live chickens in the closet of an upperclassman during christmas break. when i was a student at liberty i was well-known for releasing live chickens in a crowded cafeteria. i spent several months washing dishes in the kitchen because of that, but we have more in common than i realize, governor. perry after college was commissioned as an offering in the -- officer in the united states air force where he flew a c-130, flew a c-130 tactical aircraft in destinations around the world productive being honorably discharged in 1977 with the rank of captain perry returned home to the family farm where he grew cotton, wheat and he married his high school sweetheart and governor perry and his wife anita have two children griffin in sydney, ages 28 and 25. perry's life has been one of public service. he spent two decades in elected office, although while remaining a reputation as a staunch physical -- fiscal and social conservatives. c. as control spending and taxes and balance its budget and has the distinction of being the only governor to cut state general revenue spending since world war ii. he instituted historic lawsuit reform, creating a loser pays tort law that resulted in a lowering of medical malpractice premiums for doctors in texas by about 21% and historic tax cut for property and a tax cut for small businesses with less than perry has been numbered among the most pro-life governors in american history. [applause] on august 132011, governor perry announces candidacy for the presidency of the united states. that was months after we invited him here to speak and we are honored to have you here today, governor perry. 31 years ago this fall as a liberty freshman i sat mesmerized as a conservative governor from a large state gathering about his vision for america. at that time america was mired in an economic malaise that seem to be waning in its standing in the world, reaching government control and double digit interest rates and inflation. as young college students we feared as many of you do now that our nations future was in jeopardy. ronald reagan was that governor. he was elected president -- . [applause] he was elected president soon@ thereafter and over the following eight years, he returned america to prominence in prosperity and became one of the greatest presidents in the history of the country. i have a feeling today history is about to repeat itself. join me in welcoming to the stage iv the first time, 47th much. honor to be here. chairman falwell thank you and it is a distinct honor to be on this campus that your father founded 40 years ago. when you think about -- think of him 40 years ago as it walked across this barren mountain and the magnitude of the campus that has risen from that soil at that particular point in time. it is truly a testament, testament to his vision, for he saw the possibilities of what could be built here, university that would educate the masses and the university with plus 60,000 students a year when you include those that are on line and mr. chancellor i want to applaud you and your family of supporters that are on this campus for continuing that vision, for shepherding this modern university into the future and for reserving those unique christian origins and. [applause] david blaine thank you for coming out here today. actually david is what we call a -- he lives in california but we claim him in texas so thank you rather for coming out here. we have been involved in some great battles together and standing up for the values that are important for this country. one of those, and i just want to mention this, a powerful message that we brought pastors together across the state of texas, sharing with them the importance that they need to stand in the pulpit every day and defend the value, the christian values. america is going to be guided by some set of values. the question is going to be, whose values? david lane and i and i would suggest most of the people in this audience believe it is those christian values this country was based upon. [applause] so i got my webster's out, and i just looked up the worá convocations so i would make sure i kind of understood what i was walking into here. it refers to this large formal assembly of people, which i agree 10,000 people in one spot is a large formal assembly, but i was most intrigued by the definition in the living dictionary. that is kind of the cousin of the living bible i guess. and it is a term of art used on freshman, where terrance conned them into thinking a vacation i4 what@< is going to get them outf thea$ú0 house. i learned early on that college wasn't a parent sponsored vacation as the chancellor shared with you. my unit was squadron six and they made sure that we understood at texas a&m that being a freshman in the corps cadets was not going to be one big fraternity party. they shave their heads and they put on khaki uniforms and they stood us up against the wall for inspection each morning by our superior officers. they would look around for those minor offenses that we might have, whether it was a scratch on a belt akel are insufficiently shined shoes and they told us when they found which was on a regular basis to drop down and give them 72 which of course they meant 72 push-ups in honor of our graduating class of 1972. and they wore us out so that not a single member of my freshman class managed to stay awake in class for the first few weeks, which i was hearing from my parents was kind of the start of why my grades were what they were. you know managing to balance that between being a cadet in being a student, that life in the military while trying to keep a focus on the variety of subjects that would prepare me for life after the military, it wasn't always easy. quite frankly i struggled with it. i fully admit that. the second semester of my sophomore year that dean -- i actually went to college to be a veterinarian, and the dean of the veterinary school advised me that i actually wanted to be in animal science major, and that i really didn't want to be a veterinarian and i told them a oh no sir that was my hearts content and what i always wanted to do. being a veterinarian i worked every summer to work for that veterinarian and he said son i'm looking at your transcript. he want to be in animal science major. so, four semesters of organic chemistry made a pilot out of me. you see many go to college to discover what they want to be. others to discover who they are. it is a process of discovery at the heart of the higher education mission. for it, is the basis of one of the main pillars of many universities which is university research. universities exist to impart knowledge, to discover new knowledge. they are the reasons we have classrooms and laboratories. something is greater that is going on in the midst of this academic process. we began here -- hearing more about ourselves. we began hearing more about ourselves than even those around us. we began learning about ourselves. awareness of the world around us is an important part of personal growth and it often occurs in the diverse setting of a college campus. now i grew up as the chancellor shared with you, in a small west texas community. it was called paint creek, and with the exception of one trip in 1964 when i left to go to the national boy scout jamboree, i saw philadelphia, new york and washington d.c.. other than that one trip, that was the only world that i knew, that little place called paint creek. a little school out in the middle of this county, 60 miles from the closest place that had a post office. across the market road was a methodist church in a baptist church. your choice. our teachers lived on-campus housing. the entire school building had grades one through 12. i'm very proud to stand before you today and tell you i graduated in the top 10 in my graduating class. [applause] of 13. [applause] oh my goodness. when i wasn't -- when i wasn't going to church or to school, you usually found me obviously on the farm helping my mom and dad on the dry line cotton farm and for me, i didn't worry about the latest fashions. my mother sewed most of my clothes. i didn't know that we weren't wealthy in a material sense. i knew that we were rich in a lot of things that really mattered in a spiritual way. it was texas a&m that broaden that perspective for me as much as i should say as much as an all-male military institution could do in the late 60s and early 70s. it wasn't until i flew around the world as a pilot in the united states air force that i learned about a world that is incredibly more diverse and complex than paint creek or college station in 1972. for the first time in my life, i met oppressed people who didn't take freedom for granted because it didn't exist where they lived. i saw a rulers treat people like subjects who thought very little about the basic conditions or quality of life of those people that they ruled over. i learned what a grand privilege it is to be an american. as students of this most unique university, whose very name speaks to the desire of every human soul, liberty, i hope you were flecked on the blessings it is to live in america. our founding fathers were the first among the nations to declare our rights are endowed by our creator and that among them are life and liberty and the pursuit of happiness come and dwell liberty may be the gift of god, its preservation requires the sacrifice of man. i am mindful today that we are free because generations of americans have been brave. there is no greater force for freedom than the men and women of the united united states mil. [applause] 47,092 of our fellow americans have given the ultimate sacrifice in iraq. another 2711 have done the same in afghanistan. that is more than 7500 families, who sent their loved ones off, wave them goodbye, hugged and kissed them for the last time and never saw them again. you are the generation that grew up in the shadow of 9/11. many of you were children that day that those towers and the pentagon were struck. you have grown up and you know the presence of evil is real and this fallen world. our response cannot be to isolate ourselves within our borders but to engage our allies in the quest to build these enduring alliances around the globe for freedom and we must do what ronald reagan did at the apex of the cold war, which is to speak past the oppressors and the illegitimate rulers and directly to their people. the ones who live behind the walls of oppression while yearning to be free. of the arab spring began when a tunisian street vendor set himself on fire over the oppression of the authorities. and regardless of tribe or tongue, people desire to be free. america must continue to be the world's leading abdicate for freedom, speaking the truth to adversaries and dictators in keeping with our democratic values. you are blessed to live in freedom, but as the scripture says, to whom much is given, much is expected in return. when i returned home after college in my four and a half years as a pilot in the united states air force, i wasn't one of those people who knew at the age of 12 that he wanted to be a doctor or a lawyer or for that matter a governor or a president. i spent many a night pondering my purpose, talking to god, wondering what to do with this one life among the billions that were on the planet. what i learned as i wrestled with god is this, i didn't have to have all the answers. that they would be revealed to me in due time. and that i needed to trust him. my faith journey is not the story of someone who turned to god because i wanted to. it was because i had nowhere else to turn. i was 27. i had been an officer in the united states air force commanding a fairly substantial piece of sophisticated equipment telling men and women what to do, but i was lost, spiritually and emotionally. and i didn't know how to fix it. we each have a desire to live lives of happiness and fulfillment and -- while this world tells of happiness comes from what we can get. i believe it comes from what we can give. our blessings are never fully realized until we give them away and we share them with others. as spiritual beings we are meant to live in relationship with our creator and with one another and the happiest moment moments i have ever experienced are when i am and communion with god and in community with others. whenever we have for ourselves and to the problems of our people the very act in itself has a way of making our problems seem substantially smaller. small acts of love and devotion remind us we are part of something vigor than ourselves. and they teach us the greatest rewards in life, when we are focused on the well-being of others. do not fret if you do not know your place in the world yet, or what you want to be one day. simply trust. trust that god would not have put you here unless he had a unique plan for your life. he who knows the number of drops in the ocean, who counts the sands in the desert, he knows you by name. .. through the linage of his transgressing. paul was a persecutor of christians, but got used them to spread the gospel. to the ends of the universe. god uses broken people to reach . the mistakes of yesterday's san nothing but the possibilities of tomorrow. did not live in fear. live-in faith. don't to the judgment of others are the uncertainty of the future. don't muzzle your voice because you are young. paul wrote to timothy, and he said, do not be ashamed of your youth. you have the right, like every american, to speak your mind. you have the right to insist on change, to tell the people in power that you will not have your inheritance spent for your future mortgage. your voice matters. use it. this country is your country as well. tell leave it to a bunch of washington politicians to tell you how to live your life. [applause] [applause] this is your future that we are debating today. don't be silent. when you use your voice. let your words be characterized by grace and humility and truth and whenever you choose to do with the live, know that the thought and prayer some of my generation go with you, as does the future of this country. god bless you. through you may god continue to bless this great country that we love. thank you. [applause] [applause] >> president obama continues to talk about his jobs program. he was that north carolina state university. the white house has said the president's jobs legislation will be on capitol hill on monday. >> hello, mr. obama. [applause] [applause] thank you. >> thank you. [applause] [applause] >> thank you. [applause] [applause] thank you. [applause] [applause] thank-you. [applause] [applause] thank you so much. how is it going, raleigh? [applause] [applause] it is good to be back at nc state. it is good to have all these walls in my wolf pack. [applause] [applause] i just hope none of the students here are skipping class on account of me. [laughter] [applause] your professors can see you on tv, you know. i want to thank so many people who help set this up, but a couple of folks in particular i want to a knowledge. first of all, the outstanding governor of the great state of north carolina in the house. [applause] [applause] working tirelessly on behalf of the state and obviously helped to guide so much of the emergency efforts that were taking place after the hurricane. we are grateful to her. we also have one of the finest public servants i know, the former governor of the great state of north carolina, jim hunt in the house. [applause] [applause] i want to thank chancellor william woodson, chancellor of north carolina state university. as well as thomas ross, president of north carolina state university. and i wanted thank the power sound of the south. thank you. everybody can come down if you want. i don't -- the folks in the front. [applause] this is the hard-core right here. [applause] [applause] i want the thank her for the introduction. as you mentioned, his small business, down the road. what they do is what a lot of companies here in the research triangle do so well. they hire smart people, give them the best technology, create something of lasting value. that is how this country build a strong and growing economy and a strong and expanding middle-class. that is our history. that is what we have to get back to. that is why i came to raleigh today. [applause] [applause] i came to talk about how america can get back to a place where we are creating good middle-class jobs again. jobs that pay well. jobs that offer some security. jobs that are available for all the young people who will be graduating from nc state. i note that is what the students are thinking about. we can do that this we can finally get washington to act. if we can get folks to stop worrying so much about their jobs and start worrying a little more about your jobs. [applause] [applause] on monday i send congress this piece of legislation called the americans out tax. it is a plan that does two things. it puts more people back to work, and it puts more money back into the pockets of working americans. [applause] [applause] everything in this proposal, everything in this legislation, everything in the american jobs that is the kind of proposal that in the past, at least, has been supported by democrats and republicans. everything in it will be paid for. anything who wants to know more about it, you can read it on white house tough stuff. i know you guys don't have enough to read. every single one of you can help make this bill a reality by telling congress to pass this bill. pass this jobs bill. [applause] [applause] let me tell you why you need to pass this bill. tell them to pass this bill so that we can help the people who create most of the new jobs in this country, and that is small business owners like curve. because while corporate profits have come roaring back smaller companies have not. what this jobs bill does is cut taxes for small businesses that hire new employees. it cuts taxes for small businesses that raise the salaries of their current employees. it caps small businesses payroll taxes and half, and that would help 170,000 small-business owners in north carolina alone. [applause] [applause] if they choose to make new investments next year it's what -- is less than write off those investments. for small-business owners who have contracts of the federal government where going to do more than that. ordering of federal agencies to make sure the small business owners get paid faster than they do now. in many cases it will be twice as fast. that puts more money in their pockets quicker, which means they can hire fox quicker. now, we have to tell congress to do their part. you have some republicans in congress like to talk about how we are in favor of america's jobs creation. you know what, if you are in favor of american job creators, this is your bill. this will actually help america's jobs. we need to pass this right away. that is not all this bill does. passing the jobs bill and companies would get the tax credits for hiring american veterans. we ask, we ask these men and women to leave their careers, their families, risk their lives to fight for us, to fight for our freedoms. the last thing that they should have to do is fight for a job when they come home. that is why congress needs to pass this bill. [applause] pass this bill because it will help hundreds of thousands of young people find summer jobs next year. a tax credit for companies that hire anybody who spends more than six months looking for a job. extends unemployment insurance, which means it is providing health and support for folks out there who want to work but have not found a job yet. that also puts more money into the economy because they spend that money in small businesses and large businesses, and that means they have more customers and will hire more people. but we are also saying that if you are collecting unemployment insurance you're going to get connected to temporary work as a way to keep your skills sharp what you're looking for a permanent job. [applause] half of this bill -- pass this bill and right here in north carolina about 19,000 construction workers will have a job again. this is a common-sense idea. there are a lot of roads and bridges to be taken. a lot of work that needs to be done and schools and airports. all of these things are in need of repair. in north carolina alone there are 153 structurally deficient bridges that need to be repaired. four of them are near here. on or around the bell line. why would we wait to ask -- act until another bridge falls? [applause] [applause] all across north carolina and the country there are schools with leaking ceilings and lousy heating. ventilation is so poor that it can make students sick. how can we expect our kids to do their best in places like that? and the answer is, we can't. this is america. [applause] [applause] i don't know about you. [applause] i don't know about you, but i don't want any of our young people studying in broken-down schools. i want our kids to study in the best schools. [applause] [applause] i don't want the military force with the fastest roads being built in china, what then being built right here in the united states of america. there are construction projects like these all across the country just waiting to get started. there are millions of unemployed construction workers looking for work. my question is, what is congress wedding for? there is work to be done, let's pass this jobs bill right away and get it done. [applause] [applause] let's do it. [applause] pass this jobs bill, and there will be funding for jobs for up to 13,000 of carolina teachers, cops, and firefighters. [applause] i hope some of the and people here plan to go into teaching, education. but here is the challenge. we have incredibly talented young people who want to teach the what places like south korea who are adding teachers to prepare their kids for the global economy reeling off teachers left and right. yet seen it here in north carolina. budget cuts are forcing superintendents all across the state to make layoffs that they don't want to make. it is unfair to let our kids, it undermines their future, our future. it has to stop. if we want our kids ready for college, ready for careers in the 21st century, tell congress to pass the american jobs act and put teachers back into the classroom where they belong. this weekend. we can pass this thing. made congress to help us do it. now, if we pass this bill, the typical working family in north carolina would get up $1,300 tax cut next year. $1,300 that would have been taken from your paycheck will now go into your pocket. that will help local businesses know that they have got customers. if congress does not act, if congress refuses to pass this bill, middle-class families will get hit with a tax increase at the worst possible time. we can't let that happen. as i pointed out last thursday, there are folks in congress to have been fighting pretty hard to keep tax breaks for the wealthiest americans. you need to tell them that they need to fight just as hard to help narrow class families. tell them to pass this jobs bill. [applause] that is the american jobs act. young people, construction workers, teachers, veterans, the unemployed. tax relief for every worker and small business owner in america. it will be paid for. we will pay for this plan, pay down our debt, do it all following the same principles that every family follows. should the government's live within its means, cat would we can't afford to pay for what we really need. we're going to have to cut some things that we would not make if we had not racked up some was that ever the last decade. it does mean that we're going to keep on doing the things that matter like making sure that you guys who are here at nc state are not coming up with all that debt. that is why we have made sure to increase grants, make sure to increase student loans, affordability to make sure that you guys can get what you deserve. [applause] but in order to do that we have to make sure everybody pays their fair share, including the wealthiest americans and the biggest corporations. [applause] ultimately this comes down to what our priorities are. to you want to keep taxes for oil companies or renovate more schools and rebuild more roads and bridges so construction workers will have jobs again? [applause] do you want to keep tax breaks for multi millionaires and billionaires to mac or do you want to cut taxes for small business owners and middle-class families? it would be nice if we could do it all, but we can't. we have to make choices. that is with governing is about. we know what is right. we know what we have to do to create jobs right now. and create jobs in the future. we know that everyone businesses to start here and stay here in hair here we have to be able to help build an out educate and out innovate every country on earth. we have to give workers new skills for new jobs. we have to give our young people a chance to earn a college education. and we have got to follow the example of manufacturing and selling more goods around the world. three proud words. made in america. made in north carolina. made in raleigh. we need to build an economy that lasts. the stores now. >> i love you, barack. >> i love you back. [applause] [applause] [applause] but if you love me you gonna help me pass this bill. if you love me, you have to help me pass this bill. [applause] [applause] it starts with your help. democrats and republicans. affording every kind of proposal that has been the american jobs act in the past. we have to tell them, supported now. that is where you come in. already you have some republicans in washington who said that some of this stuff may have to wait until the next election. maybe we can just take our problems down the road and straighten this thing out rather than work together right now. some of them, some of them were even quoted as saying, even if they agreed with some of the things in this bill, then they don't want to pass it because it would give me a win. give me a wind? give me a break. [applause] [applause] that is exactly why folks are fed up with washington. this isn't about me. this is about giving me -- this is about giving democrats or republicans a win, not about positioning for the election. it is about giving the american people win. that is what it's about. [applause] it is about giving small business owners and entrepreneurs a wind. is about giving students a win. it is about giving working families the wind. it is about giving all of us the wind. i get fed up with that kind of game playing, and we have been seeing it for too long. too long. we are in a national emergency. we have had -- we have been grappling with a crisis for three years. and instead of getting folks to rise up above partisanship in a spirit that had says we are all in this together to, we have folks who are purposefully dividing, purposefully thinking just in terms of how this plays out in terms of this election. now, that is not all republicans. there are some republicans to get it. i was in a higher yesterday, and their republican governor who does not agree with me on a lot of stuff degraded is a good idea to cut taxes for the middle-class. [applause] he said this is not the time for partisanship, but the time to figure out a way in which we can get things moving in this country. he is absolutely right. a faction in washington may be content to wait until the next election to do anything, but i have news for them, the next election is 14 months away. the american people don't have the luxury to wait that long. [applause] [applause] there are a whole bunch of students here who will graduate by then and will be looking for a job. they cannot wait that long. there are a lot of folks living paycheck to paycheck, day to day, they can't wait that long. they need action, and they needed now. so, raleigh, you need to put leaders, you need leaders who will put country before party. >> yes. >> and your jobs and your lives and your well-being and your futures above everything else. so, for those of you who did skip class today -- [applause] [applause] ,. >> i have a home or assignment for you. that's right. i am asking all of you, not just here at nc state, not just you who are in raleigh, but anyone watching, anyone listening, anyone following outline, i need you to lift your voice, making heard. call, you know, tweet, fax, facebook, visit, write a letter. tell your congressperson that the time for partisanship and politics is over. it is not -- now is not the time for it. the time for gridlock and games is over. the time for action is now. [applause] [applause] i just want to say -- i just want to make sure everyone understands their homework assignment. tell them that if you want to create jobs, pass this bill. if you want construction workers back on the worksite, pass this bill. if you want teachers back in the classroom, pass this jobs bill. if you want tax cuts for middle-class families and small business owners, pass this jobs bill. if you want to help our veterans share the opportunity that they have defended, pass this bill. now is the time to act. we are not people who just watch things happening. we make things happen. we are americans. we are tougher than the hand that we have been dealt. we are bigger than the politics we have been putting up with. patriots and pioneers and innovators and entrepreneurs to individual effort but also a commitment to one another. an economy that is the engine and envy of the world. it will not stop that. the time for anthony is over. the time for moping around, we have a kickoff our veterans slippers and put on our marching shoes. we have to get to work. there are people who who were plain as, no, we can't, but i believe, yes, we can. we are a people who write our own destiny, and we will once more. let's seize this moment, get to work, show the world once again why the united states of america is the greatest country on earth. thank you, north carolina. thank you, raleigh. god bless you. god bless the united states of america. [applause] [applause] [applause] [applause] .. ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ >> president obama giving image of a speech in north carolina earlier. house speaker john boehner will deliver his job a speech tomorrow with the economic club of washington. ♪ ♪ the george w. bush institute is holding a global health summit, including remarks from former secretary of state, condoleezza rice she's introduced by the former president. this is about 15 minutes. >> george w. bush, mrs. laura bush and former u.s. secretary of state, dr. condoleezza rice. [applause] one of the great secretaries of state ever. she understands that - we all understand that in order to shield him and suffering america must lead. that means the congress must lead, that means corporate america must lead, that means ngo's must lead, that means individuals must lead and that is what this conference is saying. we understand the obligations and the call. and somebody that understands that as well as anybody is our friend, condoleezza rice. [applause] >> thank you. thank you very much. it's a pleasure to join you hear for this very important affirmation of the importance of the global health crisis that we face and america's role in it. i would like to thank to first and foremost president bush and mrs. laura bush especially the first lady was an amazing partner in our diplomacy, everything from advocating for people for their freedom to the health crisis thank you very much for your guidance and for your role. [applause] the u.s. aid administrator and the ambassador, thank you for your continued leadership on these issues. i would like to very much welcome to the united states madam genet of rwanda, and that is a country that has come through extraordinary difficulty and is still progressing. thank you very much. [applause] to my friend, jim glassman, who is heading the bush institute at smu in dallas where i have the pleasure of serving as the chairman of the advisory board think you for your leadership, jim. the global health summit is very important and it's important that we need here in washington. it's important because the united states of america has always been at its best in international affairs, always at its best in the world in fact always been most successful in the world when its values lead to read in fact, the view that no man, woman or child should have to live in tyranny, in poverty or disease is a moral case. it is a case that we who are fortunate enough to live on the right side of the history divide must make for those still trapped in tierney, in poverty and disease and in despair. it is indeed a moral case, but i want to say to you that it is also a practical case. it's a practical case because places where governments and leaders will not or cannot provide for their people are ultimately dangerous places. we've just come through the tenth anniversary of september september 11th, and we learned the hard way on that bright september day that the danger to us, the greatest danger came not from the marching armies of large states, but from a stateless group of the terrorist network that what it and planned in the world's fifth poorest country, afghanistan and then if launched a devastating attack probably costing about $300,000. we learned the hard way that we're there is hopelessness and despair there is danger. where there are unstable states, there is danger. where people cannot exercise their right to their voice and to their well-being there is danger. we learned on that terrible day that our interests and our values are linked inextricably and we cannot allow poverty and disease and tierney to continue to exist in this world or we in america will pay a price for it. that is the national security case for our compassion. indeed in the national security strategy of 2002, we talked about the three d's, defense, democracy and development. that they had to go together step by step to build a more secure and prosperous world because we're in despair leaders we are not fazed. now that practical case of course is undergirded by the moral case. the proposition that every life is precious, that every individual has potential and that any person left without the access to education come to health care and to freedom is a world we as americans cannot tolerate. now has the secretary of state, i dealt everyday with the world as it is coming and i knew that i had to work in the world as it is. but the great thing about america is we have always been able to imagine and work for the world as it ought to be, not just the world as it is. that shows in our history is history in which germans of a certain age remember food packets, hoover they called them from the american relief effort was the was literally the difference between life and death for so many german citizens. where american soldiers are still remembered for handing out candy to children. that picture emerges where victims of earthquakes and victims of tsunami is remember american relief boxes that stood between despair and hope emblazoned with an american flag. now thanks to the leadership of president and mrs. bush and eight years of the bush administration, and now the commitment of the obama administration to those same goals, often america facing america the beautiful. mr. president, you may remember that we went to ugonda, and i will never forget that moment when literally these orphans sang one of our great national hymns. was a moment that affirmed what it means to intervene in the lives of people who would otherwise only no hopelessness. in saudi arabia and for about the middle east, thanks to the work of the first lady now continued in the current circumstances, women are no longer ashamed to talk about a breast cancer diagnosis. i know firsthand the surge of breast cancer. when i was 15-years-old i will never forget the day at st. mary's academy when my father for is just a little fleet picking me up from school. and in the day before cellphone lagat very worried. i didn't know what to think. when he finally got to me he said he had taken my mother to the doctor and she had been diagnosed with probably having breast cancer. fortunately, my mother lived for 15 years beyond that diagnosis. but i cannot imagine what it would have been like to be unable to express our concerns, our despair, to pray our prayers with that terrible disease to leave my mother and spare my mother, and yet in place is in the middle east that has been the fate of women. now, thanks to a united states of america we are encouraging them to speak about the disease, to get treatment, to be whole again and throughout africa and other parts of the developing world, bed nets not protect children from the totally preventable disease of malaria caused just by a mosquito bite. yes, the united states of america is doing good things in the same tradition of the soldiers in germany who gave candy to a child and the boxes between life and death that dare the american flag. through my time in government, i had many extraordinary experiences. but perhaps the ones i will remember most are those where you see the faces of those children that have been helped. but in my memory, too, the process and the decisions that led us to try to make the difference, sitting in the oval office with president bush on the last day we were trying to determine to launch pepfar the president during the arguments about budgets and what the american people really connect to $15 billion, largest single health program buy any country, listening to questions about whether or not in those days whether or not it was good enough to be able to extend life if you couldn't let yet deliver a cure and again, my mother came to mind. because since she lived that 15 years longer, thanks to good treatment here in the united states she got to see her 15-year-old daughter become a 30-year-old woman, a professor at stanford, a person who would serve in government. she got to see me grow up and that meant a world of difference to her and me. [applause] and so i said to the president on that day you may not be able to cure people but extending their life matters coming and we have extended through pepfar many, many lives. mothers and fathers who will be there for their children. [applause] i remember the decisions about the children's hospital that opened in iraq despite its troubles, a hospital that is dedicated to the treatment of children with cancer and advanced hospital, private partnership with project hope that indeed brings hope to the children of that region and the clinics throughout afghanistan, particularly the women's clinics that finally give health care to those people who were so despised about the taliban that they were executed for challenging the regime. those women, executed in a stadium that had been built by the u.n. to play soccer. it's a very, very tough world out there for anyone. but it's a really tough world if you're poor, if you are living in tyranny, if you don't have access to health care, if you don't have access to education. this is work that must continue. it must continue in the private sector through corporations, through non-governmental institutions, through the angels of mercy of those released organizations that do extraordinary work in the hardest places. i am so grateful that i had a chance to get to know barbara bush, your daughter's, work for global health court. i got to meet with some of the kids from around the world who are going to be involved in helping to bring health care around the world and it's great because the younger generation is now devoted to and committed to this very cause. so, the private sector has a lot to do. but the united states government also has a lot to do. this work has got to continue. i know that we face a lot of challenges. we faced the challenges of joblessness with an education system that is not quite working of immigration policies that are not quite working. we face deficits and debt and uncertainty about our economic future. but let us never forget the promise that our own security is linked to the well-being of others. and let us never forget, too, that out of chaos comes danger. the united states of america must lead. we must lead because it is important that the most compassionate and the most generous and the freest country on the face of the earth would also be the most powerful. we don't have an option to retire to take a sabbatical from leadership in the international community and in the world. if we do, one of two things will happen. there will be chaos because without leadership, there will be chaos in the international community and that is dangerous. but it's quite possible that if we don't lead, somebody else will and perhaps it will be someone who does not share our value of compassion, the rights of the individual, of liberty and freedom, and if someone leaves and does not share our values, the balance of power favors freedom so carefully constructed over the last year's, the balance of power that has favored freedom and has brought millions out of the tyranny of communism, millions out of the tyranny of the authoritarianism, the balance of power that favors the freedom will be endangered, and i can assure you that the balance of power that features the freedom is replaced by a balance of power that favors something else. not only our values, but our interests will be at risk. the united states of america has no choice but to lead. thank you for this gathering that recognizes not only the moral case, the practical case for involvement in making the lives better of those less fortunate than ourselves. thank you very much. [applause] now a panel looks at whether to expand the existing housing refinance program for people who are having trouble making payments on their mortgages with. the head of the mortgage bankers association david stevens to testify in this one hour and 45 minute hearing. the senate banking subcommittee on housing is chaired by senator bob menendez of new jersey. >> we will come to order. trying to get a little time to my colleagues who are going to be on the first panel. i'm sure they are on their way. i will start off with our opening statements and then hopefully by then they will have arrived and we will recognize them. we have a very robust agenda here and want to hear from all of the expertise that we have assembled and try to move it along. so, this hearing of the subcommittee on housing transportation and community development will focus on both of the state of the housing market as well as the ideas for refinancing and restructuring mortgage loans. this is a very important during not only for me, but i think for those of us who are concerned because the housing market is often anchors the broad economy. we need to fix the housing market to get the broad economy moving again to create jobs as well as meet the challenges of the present homeowners as well as keeping the aspirations of a life of future homeowners. on a regular basis i hear from the new jersey homeowners who have trouble with their home loans whether it is being denied the opportunity to refinance at today's lower interest rates because they are under water. our banks not willing to be principled reduction for them when they have hit hard times. it's hard to be optimistic about economic growth if the housing market remains in its present status. for most families in america, their home is their single largest asset and their source of appreciated wealth. so the hearing today is divided into three panels. the first consists of light to distinguished senate colleagues to express their will which i am proud to co-sponsor the holding responsible planners act as 170 which will help homeowners under water to refinance more easily. the second panel will discuss the state of housing market and specifically the state of home sales, home prices, consumer demand, short sales and foreclosures, rent and rental availability and whether the problems will continue to be nationwide in scope or are they becoming more regionalized. the third panel will discuss ideas to refinance or restructure home loans including shared appreciation, will mortgage modifications, refinancing existing loans to take advantage of the historic low interest rates and the barriers to doing so. and allowing the fha short refinance program to be used on the gse inventory. it's my hope to in this hearing and a subsequent one that we will follow up on next week that we can develop a housing policy and promote initiatives that gets to our housing market moving again. with no other members lacy wishing to make an opening statement, let me call upon my to distinguished colleagues for their statements. senator boxer of california and senator isaacson of georgia. i'm happy to welcome them. they both have strong records and housing policy and it will talk about the building's introduced to jump-start the market and help millions of homeowners refinance their mortgages. and with that, senator boxer. >> thank you so much, mr. chairman. i'm proud to be here with senator isakson he has a long, long the profession, a long time in his profession which before he came here he was in the real-estate business so i'm very proud that he is on this bill, and just to say this before i read any of my statement, our bill is based on a very simple premise. if you have paid your mortgage all along through all these difficult times, and it is at a high interest rate or you never missed a payment and the value of your home went down and down and down and you find yourself under water, mr. chairman, and you are still stuck at that seven per cent or 6% rate, you should be rewarded with a program like this. and what we say as you should have a chance if you want to refinance at the current level. but this is such a win-win. number one, fannie and freddie, because these will all be home mortgages backed by fannie and freddie, fannie and freddie actually make money on this. as we look at the cbo analysis about $100 million because it would stop many people from defaulting right away. second, if you are the homeowner you are going to have thousands of dollars in your pocket because you refinanced to read and i remember the years when bill clinton was president one of the reasons there was such prosperity is because the tremendous member of the refinancing is the best way to get money into our economy quickly. so essentially this is what our bill does. it says if you have a loan that is backed by fannie and freddie, and if you have a high interest rate and you would like to to get into of the lower rates than you should have the chance to do that, not to be disqualified because you are under water, and have those ridiculous fees that they have in place now waived so you can take advantage of these rates. we call it a helping responsible homeowners asked we are heartened that the president mentioned something like this in his address to the congress, and we are heartened that you were on the bill, we are thrilled with that, that it's been endorsed by mark zantia, hawaii was going to testify later, the chief economist at moody's analytics, by william gross, managing director and the post co of housing and then thomas, the housing economist. it's been endorsed by the national association of realtors, the national consumer law center and association of mortgage brokers, and many others. so it is a win-win for fannie and freddie. now they can do this without our legislation. and senator isaacson and i are saying today please, if they are listening somewhere out there please, do this. this will save you money. you know, this will save fannie and freddie $100 million. this will help, by the way cbo says up to 2 million homeowners, but when they made that estimate, that's when the interest rates were higher, and we believe that you are looking at perhaps three to 4 million homeowners, 5 million are actually close to 5 million are eligible for this. so, that's our story coming and we are sticking to it and we are strong on this. the fhfb we hope will follow through on some of the nice statements they've been making recently. but this is going to help our economy. it's going to keep people in their homes, and for once, mr. chairman, i beg you, let's get out in front of this crisis. we are, you know, a diamond lead and a dollar short. following this, let's get in front of these folks. these are the good folks who have never missed a payment. let's help them stay in their homes, and i think it will help america when you do it and i think you very much. >> thank you, senator boxer. senator isakson? >> thank you very much mr. chairman and i ask my prepared statement be submitted for the record. >> without objection, it shall be. >> thank you very much for calling this appropriate hearing on the housing industry, and i am particularly pleased to join senator boxer from california on this particular piece of legislation which addresses the new phenomenon that has taken place in the most protective housing recession that america has seen since the great depression. and that caused strategic foreclosure pure there are 10,900,000 american homeowners who are under water right now today as estimated. that's 10,900,000 people making payments on mortgages that the payoff is more than the house is worth. the new phenomenon is something called strategic foreclosure where they are under water looking at the future of the real-estate, looking at the future of the values and walking away from the loans and going and buying a foreclosed house down the street thinking that they will be better off. this has made the market place worse, put more foreclosures in place and continue to contribute to the downward pressure on the home values. what this bill basically says is of the 10,900,000 people who are under water, up to 2 million of them and as the senator boxer stated may be more since the rights of gone down can make a strategic decision instead of walking away from the low number warburg chilean finance the existing balance of the current lower rates put more money in their pocket and make the maintenance of the mortgage better for them in the long run when the housing recovers. that's all it does. it is not a boost to the housing market from the standpoint of creating sales, but it is depressing and more for closers and makes it less likely people will use the strategic for closer as a mechanism to deal with the financial situation and it should help stabilize the home values in the long run and in the short run and i commend senator boxer on her leadership. she originated this and i have been proud to work with her and i think it's something friday and fannie are to do. they will do it tomorrow by policy we are ready for them to do it and it does make good sense in the cbo score is outstanding. let me address a second subject if i might, mr. chairman, dealing with housing. i'm not going to be able to stay for all of them but i want to commend to you in particular mr. richard smith and i are going to testify on the panel. they are to of the best authorities of the industry that i know of and has about 25% market share of the residential housing market in the united states and there's an outstanding consortium of companies that deal with residential brokers and attended the seminar said i know people who she consults with she's as good as anybody i've heard and both of the lake the significant contribution. second i appreciate your leadership on the long limit situation which is confronting us by the end of this month we don't need to do things to make things worse in the housing market we need to make them better with senator boxer's proposal with me and my help to her on this is good for waiting office strategic foreclosures and expanding them after the end of this month is important to maintain the housing market that we do have. it's not the time for the government to construct availability of mortgage capital for people who are qualified to buy houses because of a limitation on the limits and i commend you on your leadership on that and look forward to answering any questions you or senator merckx we may have to read >> let me think you both for your initiative and your insight, and i hope our friends in the agencies did it and don't wait for the legislative action, but we will if we have to we try to have you with me on eddy efforts of ensuring that the present limits are retained before the end of the i think it is critical part of the element of the things we have to do in the market. so i appreciate your long-term leadership in the field and joining me and others in trying to preserve this. i have no questions for either of you but senator merkley? >> thank you very much mr. chairman. i wanted to express my appreciation for the work that you have done on this helping homeowners stay in their homes decreasing the number of foreclosures is absolutely essentials. i would ask a short question in regard to the cbo scores. my understanding is this would save money for the gse but because the fed holds a member of the securities it might diminished in value with the lower interest rates, but that bears some cost the estimated. could either one of you kind of just clarify what the cbo was pointing to. >> fannie and freddie actually gain as we said before from the changes in the bill by at 100 million because the savings realized by the reduction and defaults and foreclosures would outweigh any lost revenue due to the elimination of the risk-based feet and the reduced portfolio income. because of the large holdings, fannie and freddie mortgage-backed securities, the fed will experience reduced investment income of 2.6 million or four points over ten years. so this means there is a net cost. so although this means there is a cost to the change as the federal government shouldn't be profiting and this is my feeling from barring paying high interest rates than they should have to be the fact that the fed holds the security shouldn't create a prefers incentive for the government to keep the bar was trapped in a high-cost loans. so that's the answer. >> that's excellent and i appreciate the work you all have done on this. >> thank you. >> you know you are dealing with what we refer to in business as inside baseball. you have the conservatorship control of fannie mac and fannie mae and buying paper, and yes if you lower the rate or the jeal on a mortgage, will lower the value financially of that instrument. but if on the other hand you are stabilizing the loan that would have otherwise been defaulted on on the dynamic scoring this is the gain to the u.s. housing government there is no question about. >> what is the way of walking away? what is the interest rate of walking around the obligation? >> this a great question. let me tell you the consequences are. you wouldn't be able to borrow money for seven years at best and richard smith can't address that subject but there would be my guess if you walk away from your mortgage and the fault your credit score goes in the tank and every interest rate you pay on the credit cards, finance, student loan, whatever else is going to go up, not down, you will not be able to get a home mortgage for seven years, if not soon come and the destruction it does to your financial statements and credibility as a homeowner goes away so the cost is far greater to the country for somebody that the fault on a loan and has it foreclosed on the and it would be a loss to have them stay in the house. >> absolutely. thanks to the committee. >> thanks so much. >> let me ask the next panel to come up to the table and i will introduce them as they come up to be seated. let me welcome my fellow from new jersey, richard smith who is president and ceo of the corporation, a global provider of realistic and relocation service which is headquartered in new jersey. mr. smith oversees the reali franchise group consisting of many well-known companies such as better homes and garden, century 21, coldwell banker and the international realty among others. he's a member of the business roundtable and the committee looks forward to his testimony today. mark calabria of the financial regulation of the cato institute has worked there since 2009 and before that he was a senior member of the professional staff of this committee and in that position he worked on issues relating to housing mortgage finance and economics, banking and insurance for the ranking member shall be. he has appeared before the committee many times and we think him for his presence this afternoon as well. ivy zelman has over 19 years experience in the housing and related industries. zelman associates which he founded in 2007 delivers research on the housing market has been repeatedly recognized for his expertise. prior to that word does the credit including eight years as the managing director and we are pleased to have your today to discuss the state of the housing market. with that, mr. smith, welcome and we look forward to your testimony. i would ask you each to synthesize your testimony to five minutes or so. we are going to include your full statement for the records, and we look forward to having a discussion with you, mr. smith. >> good afternoon, chairman menendez and distinguished member of the subcommittee and thank you for the kind introductions. to the current state of housing, we will make a bold statement that existing home sales in our view have stabilized on a unit basis in the range of 4.9 to 5.1 million units on an annual basis. however, the average price will continue to move in the range of down 4% of to 2%. we should see a slight improvement in the year-over-year growth for the new homes and the price we think is also going to move in that range. morrill the positive side from the flat at about 2%. we think that the high end and first-time buyers make up the majority of the market, the middle market or the lawyer is noticeably absent. the holly and lawyers are typically pay all cash for the first time financing with fha and less than 20% down. it's important to note 25 to 27% of all homeowners have little to no equity which is a point that you made earlier in the german's opening comments it is a very popular topic in the media these days, so we will run its course however. it's certainly more cost effective today to bone in most markets in the united states than to rent. rent is increasing at a rate of five to 7% annually and new york city as an exit was 10% year-over-year. what is holding back housing? high unemployment, the for closed inventory overhang and the consumer confidence and failed or marginally successful government intervention programs. we are going to recommend some remedies and we would be remiss in not stating the unemployment number that concerns us in housing is not the 9.1 or the nine-point to the bureau of labor statistics standard which is currently at 16.2, underemployed or temporary employees do not buy homes. the foreclosure is a major issue for us and it is depressing prices nationally although most foreclosures occurred in the states predominantly in five it is nevertheless an overhang it needs to be addressed. the continued deily in the foreclosure process is harmful to housing and foreclosures permitted to continue and accelerate the sooner we will see some balance in the average sales price and invest the equity that's in the homes owned by taxpayers. we are very much in favor of the efforts to mitigate or prevent the for pleasure. we are strong proponents of the short sale process. we like in particular the debt for equity program that has been recommended by a number of people were both the lender and the homeowner share the equity of the home. we also like this ability to read in the current environment some measure of the loans can be assumed or have an assumed characteristics of that in a future date a new buyer can be in the position to assume the lower interest rates that we enjoy today. we are in favor of refinancing the programs. we think that again is an effort to mitigate and present foreclosures. so the expansion of h.a.r.p. or any program that makes it possible for the homeowners to refinance at the current rate of four, 4.5% we are very much in favor of. we also are very much in favor of not permitting these loans, these gse loan limits to expire in october. we think it is damaging to a very fragile market. we are strongly in favor of the chairman and senator isaacson's effort to extend those for a least two years. this is not the time to run the risk of upsetting again a very fragile market. the national flood insurance program needs to be extended. it's going to put about 500,000 homes at risk. we would encourage that strongly and i would be remiss in not mentioning for the benefit of the committee and others who may be watching the substantial concerns we have with respect to dodd-frank in particular the qualified of residential mortgage component of dodd-frank which we think is particularly punitive to the low to moderate-income home buyers. gse reform is not something that we feel should be entertained in this environment the market is too fragile and too uncertain. the gse form reform can certainly be handled at a later date. it's working quite well now. the focus on the gse reform that will come its offer for this in this environment. we appreciate the opportunity to decide the issues. we know we will have and opportunities to elaborate on these items when we go to the panel discussion and i want to thank the chairman for his leadership on this important issue and again, we are available as a resource in any manner you think is appropriate to read >> thank you very much. you have actually time left on your five minutes. >> by the way, mr. calabria. >> i will try to be within that. i want to start by saying there's a fair amount of consensus in terms of what's going on in the market at a think the difference would be why so i want to emphasize i'm not going to talk about the things we agree upon with most of my time on the attention i think for some of the disagreements and some of the details that is not to undermine the proximate agreement and i really do want to emphasize jobs as incredibly important, and i can clear the point where the labor market is more so driving the housing market in the labour market although obviously there is a feedback between the two. and i also want to emphasize the point mr. smith made about the foreclosure process really does need to be fixed and spread out otherwise we are continuing to have the huge overhang of homes out there and i think it's important. so i want to touch on a couple fact, the first of which is despite price declines we have seen in many parts of the country, housing is still very expensive relative to income. nationally, we've seen a median prices fall to three times of the median income and that is the average. so overall it looks like housing is back to the affordability that it should be but if we look at places like san francisco used to look at the house price is being about eight times the income, so it's important to keep in mind we are looking at a lot of different markets and different markets daudistel unaffordable by any stretch of the imagination. there's also a number of markets where the home price is still remain about the production cost over the long run in the competitive market prices will fall to meet the price of production until 2003 that was actually the trend they are going to continue to fall in those markets. i think it's also worth noting the total existing home sales in 2010 were only 5% below the 2007 level but if you look at the sales their 60% below the 2007 level and the existing home prices have fallen considerably more than the new home prices and to meet as an economist this illustrates markets work and to let the prices fall volumes will clear and i think we need to not be so concerned about any price declines. i recognize the cost declines but there are also cost to keeping prices above market clearing levels through the months of this year existing home sales are 12% above the last six months of last year and that is on the seasonally adjusted basis, suggests you have seen these declines continue you've actually seen the sales start to go out and i want to echo something mr. smith said which is i think that we are near or about the bottom in terms of the volume of sales and i think we will continue to slowly climb our way out and i do want to emphasize we are years away from seeing anything that looks like the activity of 2005, 2006 so i think it is going to be a slow climb getting their and there's a fair amount of consensus that you have a number of units about 2 million in the pent-up demand that i think once you get to the point people are back in the market and back where people still feel comfortable i think the demand will start to come back but we are a way away from it and i think the borrowers are still very much concerned if they buy today they will continue to see the price declines. my recommendation would be we need to get to the point the buyers believe the prices can go no further and that absolutely risks where we are on the downside but again i think the risks of overshooting on the upside out with the rest of overshooting on the downside i don't see it cheaper as a bad thing so i think the markets and in san francisco of the world i would like to see house prices actually declined even further because i would open up opportunities for middle class families to buy houses that they are priced out of buying today. i'm also concerned about interactions between the unemployment and the mortgage policy that we have for the example of if the carpenter and tampa you are likely to find a job as the carpenter in tampa any time in the next couple of years to help move to someplace like austin where they might be creating jobs and so i do think we have locked people in place that a way that does hurt the labor market and there's a number of statistics in my testimony that shows some of the discrepancies and it's illustrated for instance san jose is a very tight market where is riverside is a lose market so even within the same state, the housing market is very, very different, and we need to target our policy in a way that keeps that in mind. let me talk very briefly about the rental market, which is we started to see some minor declines, but we'll system of about 4 million vacant rental units although that is done about 500 from last year. again these are the titans would tend to mirror the overall housing market we are in, but let me emphasize i think it plays we overlook when we talk about the housing market which are those without homes, and while there are a variety of statistics that aren't as good as what we have on the other side of the market buy any indication this increase over last year, the last two years, several years increased particularly among family homelessness and particularly in suburban areas so i do think the rethinking of the current home assistance programs to see if the assist people in these newer areas instead of the traditional focus on the cities is something that merits attention ms. zelman? >> good afternoon and thank you mr. chairman. >> good afternoon and then she mr. sherman and senator merkley for having me today to talk about the state of the u.s. housing market. as we enter the six years of the worst recession in housing since the great depression, many have suggested that we have become a renting a nation and the american dream of homeownership is dead. i do not believe this to be the case. we believe that or i believe that our great nation is still forming households which is supported by population growth and we expect that population growth and information will translate into nearly triple the activity from today's depressed levels. with that said there has been a disconnect between the longer term demographics and the near-term reality. i estimate there are currently 2.5 million excessive vacancies that need to be absorbed between the return to the building to become a normal building activity before it can be justified. this number has the potential to move even higher given the current pipeline of the 4.000000 mortgages in the foreclosure process or in the 90 days delinquent. i believe the most powerful tool that washington can provide is a rental program to dispose of the vacant future foreclosures and an orderly manner. though most efficient and cost-effective way to achieve the goal is for the gse is to ease the financing terms and expand the financing options to investors the would purchase properties at the low and pursue a single-family rental strategy. the past five years the single-family rental has been the fastest-growing in the class from to the some 52010 the single-family rentals kroyt 21% versus just 4% 4% increase versus the total housing units. in the hardest-hit market such as nevada, florida and arizona single-family rentals grew at approximately 48% with apartment units basically flat or unchanged. the orderly transfer of these units should also be a favorable impact on the pricing. given modest improvements the economy record levels of affordability and reduction of inventory for the first seven months of 2011, price deflation has diminished. and that prices of traditional homes excluding foreclosures and over july according where is the total decline, as the total decline is approximately 5% suggesting the double digit deflationary for the distressed sales which currently account for approximately one-third of the transactions. the second piece of the equation of the demand which remains at all-time record lows measured by the sales activity despite favorable affordability, the historical interest rate this has not been enough to drive more home buyers off the sidelines. nevertheless according to the university of michigan, the consumer sentiment survey 72% of respondents believe that now is a good time to buy a home. furthermore in the recent survey by our firm in 1500 renter's conducted in five markets showed that 67% of the surveys want to become homeowners of the next five years. with 82% of the renters in the key 25 to 34 age group expressing the desire to buy the home. so people want to purchase a home and think now was a good time to do so why aren't they doing it? the answer i believe is twofold. first, the conditions of the consumer balance sheets which are still laden with high levels of debt and negative equity. indicative of these challenges consumers are the renter surveys show just one-third of respondents were able to come up with 3.5% down payment necessary to purchase a median home using the financing. the second issue is the uncertainty which i believe is a nationwide problem negatively impacting the home sales and prices giving volatility created by the prior tax credits, fear of job loss and mixed messages sent by the government are not future housing policy. however, the regional differences are significant with major dichotomies dependent upon levels of unemployment, distrust and then to become a negative equity, delinquencies and vacancies. nationally one of the most significant problems the prospective home buyers face today released the stringent underwriting criteria magnified by the overly is being imposed by banks due to the unknown risk related to cutbacks or other future unexpected government burdens. as a result many qualified home buyers are being turned away creating a business environment that would encourage banks to remove the stringent overlays above and beyond already tight lending criteria would be the catalyst for housing activity. i also believe given the still tenured nature of the housing market allowing the gse and the fha loan limits to look back to lower levels of october 1st significant -- is a significant mistake and should be put off until the market is on solid footing. similarly, any legislation related to eliminating or reducing the mortgage interest deduction should be carefully crafted and only considered with a longer term implementation in mind. in closing, housing has historically been a significant driver of recession and recovery. currently residential investment represents just 2.2% of gdp representing an all-time drop in the well below the long-term median of the 4.4% suggesting that the interest rate has been a significant headwind on economic growth. housing recovery is essential to the overall success of the broad economic recovery and without it, the economy will continue to languish triet thank you again for the opportunity to testify today. >> think you will. you covered a lot of waterfront here and we will continue to do a little bit more the question and answer so we will start a round and then see how time goes i would ask if you have a magic wand and outside the issue of jobs which clearly the president was focused on came to the converse, laid out his vision, and i would hope all of us are focused on that as the number one job before the country getting people to work obviously in an economy of 70% gdp is consumer demand without a job there is no income without an income there is a demand. so that's critical. and i think that we can collectively agree on that. the next question is setting that aside for the moment is something that we have a plan, there are different views how else we might do that. what specifically on the housing front if you had one or two initiatives that could come from the governmental side to incentivize moving this marketplace what would you say would be? .. >> there are about one half million homes. at think the latest s and the estimate is about 80 million homes. that is probably a low estimate. i think ivey and others may be of the view that it is much higher than that because not only those that are in foreclosure, but those that are likely to be in foreclosure. you will see estimates as low as 1.3 and as high as 7 million. the good news is, that inventory is shrinking. the banks are very hesitant to proceed on the foreclosure. the attorney general was it reasons and another teeseven number of other reasons. definitely a major overhang. in fact, and many of our conversations with buyers and sellers, principal buyers have, they are generally of the view more often than not, certainly in those ten states that if they just wait that foreclosure inventory will be released pending pressing down lower, creating better opportunities so that they are literally sitting on the sidelines, well-prepared, perfectly capable of proceeding with the transaction, but they are waiting. that is taking a lot of wind. >> waiting that it would get a lower price. >> much lower price. a common problem. >> so your answer to my question is dealing with the overhang issue. >> i don't know how that we can move beyond that. i think that fundamentally must be put behind us. >> i want to echo that, and i'm sure one of mine. maybe to flesh out the numbers a little bit. my estimate, from the mortgage bankers association, you have about one-and-a-half million loans at least 90 days late. of that my own estimate is you're looking about between four and 500,000 that are over two years late. so those core you can start with the pretty good assumption, someone has not been able to make a payment for two years is very, very unlikely to become current again. what i would say is you need a triage process. we need to decide to inseverable, who can we keep in the home, who can we help and who cannot. we have to be realistic. this is a tree gosh. we will be able to save everybody. for those in which the owner has not paid for a long time, we need to streamline the process, get those houses back into inventory quickly. let the price is adjusted. that would be my number one. number two, which might be echoed, if we -- we need to find a way to get some of the excess and mentor held by freddie in fannie and fha back into the market. the investors, some of it does make sense to use a rental. i would much rather -- i go back to my carpenter in tampa argument. i would rather help pay that as rent in austin where he can find a job than to encourage and to stay in the house he is and because he is not going to have to pay the mortgage. we need to change the dynamics in helping people adjust. so those are my tooth, but i will also emphasize that it is important to keep in mind that first should be do no harm. we need to think through proposals and make sure we send the right signal to buyers and investors and all that needs to be kept in mind. >> first i would say that we need to a and still confidence in the asset class, and the way you do that is mitigate deflation. how? you have demand and supply back in balance. how? you absorb it through rental programs that the government has the ability to implement. that runs the program is appropriate given the consumer balance sheets that are too weak for consumers to purchase homes. households and single-family dwellings by far outpace the magnitude of population living in 50 plus unit apartment buildings. these people that have been displaced, if there were living in a single-family rental with three kids, two cars, and a dog, they are moving across the street to a single-family rental. orderly disposition. by doing so we would mitigate new dwellings on the market which would put pressure on prices, and we would stabilize home prices which would take the consumer sitting on the sideline because he is afraid allow him to be back in the market. the second response would be today consumers that are qualified are being turned away because we have now taken underwriting to an extreme. the stringent underwriting is important and needs to be sound. because of a black and white underwriting process as well as incremental credit overlays, very strong potential home buyers with a down payment exceeding 30 a 40 percent are being turned away in some cases because of a situation where they're self-employed, for example. we have made it very difficult for qualified buyers to have credit scores of 639, it falls below 640, which, by the way, fha will insure a mortgage at 580 or higher, but underwriters will not unless it is 640. we have taken the pendulum has swung it too far to bring in real qualified buyers. i think really twofold, all of which would bring back confidence, and confidence is the biggest impediments. first eliminate deflation three getting rid of supply. >> what about the rental idea. >> well, with the chairman's permission, two points. there is the thought in the marketplace that foreclosed properties are not selling. i would dispute that. one of the largest resellers of foreclosed properties in the united states. 60 percent of our sales are going to individual investors, typically small, not institutional of family-owned and operated. the balance to first-time buyers. the investors are paying cash. a first-time buyers, 40 percent, are generally fha financing with less than 5 percent down. so a very robust market. from the list date to the actual close of the transaction that has taken us 80 days. we are turning our inventory over everydays -- every 80 days. a very robust market. we should not think that in a warehouse somewhere. the move rather briskly. it is an important point. as for the rental, we think rental programs can be effective to the extent that it is not being used to create subsidized housing. subsidize rental programs, in the cases that we are familiar with, which in one case we managed, is an abysmal failure. taking a home that was the gst inventory, putting it into a market, as single-family market place, and there were making those funds available at half the local market rate. that created property value problems, significant problems with the local taxpayers, local homeowners. it just, if that is the intent, that is, i think, a poor strategy and will not help anybody long term. if the intent is to put the marketplace at market rental rates, i think that is perfectly acceptable. >> let me ask one final question. i save my time. only senator murphy at this point. i will yield to him in a moment. urn, 20 percent down is a constant. is that a good idea? >> i think 20 percent is probably too high. we have sound underwriting with 10 percent probably as a more reasonable level along with fha financing today, which is critical to stay at the three and a half percent down payment level. i think 20 percent is too high. >> i get the sense that institutionally there is almost an adoption of the 20% even though there hasn't been regulation. that is concerning to me because it takes a whole universe a responsible borrowers of the marketplace. i think we definitely need to deal with that. >> if i may, mr. chairman, just say that the single-family renter is actually getting the unit made available to him by the purchase of the foreclosure that richard smith spoke up by investors. and so they are rehabing this all and putting tenants and. so the process of this position is happening, but because of rental yield where investors the to be at a certain level, today they're running 6-8%. with leverage, multifamily is providing government funding to do construction and development loans at very attractive financing, yet singlefamily renters have no financing available to them. only the multifamily mortgage renter has government assistance of funding. with leverage the government can get a better return because, as you provide leverage to investors there is significant demand for this type of asset class. he would get a higher bid and the government would get a better return and everybody wins. >> very good. >> thank you very much. i apologize. after i ask my questions i'll have to head to the floor to preside. i would like to be here, but i've won't be able to. i wanted to ask a little bit about if anyone has a cake -- take on how the boxer-isaacson bill differs from what the president is proposing. i have not seen details yet, not sure if you all have. if you had it would be helpful to get some insight. >> i, for one, have not seen the president's bill. >> again, i have not seen the president's bill. and that's sure there is a detailed plan, but it would seem to me to be the difference that the concept is the same. you're going to try to refinance underwater borrowers. certainly a couple of poor questions that go along with that. one, is it voluntary. it seems like the bar or has to come forth and request. the fees will be waived, the ltv. for instance under the boxer-isakson bill there is no ltv. you could arguably have a 300 percent loan to value ratio and still get refinanced. i have a hard time thinking that if hcfa on its own. my understanding is the current discussions are to raise the hundred and 25 higher. again, i have a hard time seeing it removed altogether. those are important details on how it functions, but the core concept is basically the same. >> thank you. i have not seen more specifics other than talking to the president and mentioning something about rebuilding america which would take for closure units through some type of partnership with maybe investors and refurbished foreclosure units. that is the only thing that was mentioned as far as i know and the president's job bill. as it relates to senator boxer and senator johnny isakson bill, today the administration is more focused on improving upon the existing h.a.r.p. program, and the challenges of excusing implementation of a mass refines are significant and could cause some major unexpected consequences. supportive of helping consumers, but i also realize that there could be unexpected consequences, one of which is breaking contract law by waving appraisals. also the mortgage-backed security investors that today would be prepaid could have significant consequences on the secondary mortgage market if they would lose several hundred basis points of what they have in their portfolios. also and more importantly right now, we don't know for certain that these people who are going to be refinanced still don't walk away if they still have a negative equity even though you reduce their payments. so i am not against it. i just think it would be difficult to execute successfully without unexpected consequences. >> thank you. and in that context, that either of you want to share what you think the strengths or weaknesses are of the boxer/isaacson approach? >> well, i will first reiterate something that senator isaacson said, which is this is not really as much about the housing market as it is about trying to create consumption because you're refinancing people already in an existing home. some argument to be said by lowering the rate and reduce the chance that will buy another home in the future because they have to take that into consideration. they might buy a house and the rate might be six of 7%. that is something the law interact with decisionmaking. creating increase consumption by lowering somebody's monthly payment said they have money to go on and spend on other things. the core of this is about getting the economy going to spending. an empirical question. fairly detailed study. mortgage is one person's liability in another person's assets. increasing somebodies wealth by reducing their monthly payment. it's not clear of the effect on consumption that is something that is to be studied fairly significantly. before another is a positive consumption impact. my read of it and senator isaacs' statement is this is all about trying to create a boost to consumption i would raise one concern. will preface. not an economist. the real subordination of second liens within the bill strikes me as coming very close to a taking and i certainly think that somebody, and the investor out there who has a pool of second mortgages is likely to challenge that. i can almost guarantee that somebody will. >> apply understand read this person would be in no worse shape than they are currently. they don't suffer, if you will, a reduction of their position, and it is continued upon as access to future privilege if i understood the bill correctly. >> exactly. depending on how it would be interpreted. we will argue that you would be in a better position with a free not -- refinance, but that would be dried up in courts. we have seen this in the countrywide settlements. >> it gets messy quickly. >> sir, i think he said it well. his statement. this statement was not pointing impact sales. gray stability where stability does not exist arguably it is complex. it will run afoul of contract law in general, i believe. but given the circumstances which are unique and given the possibility of strategic defaults, which is a real event happening on a daily basis, this is an attempt on the part of congress to get ahead of that has senator boxer said and be more proactive and we have been in the past. i applaud that effort and fully recognize there are a lot of details to be worked out, but the end goal is to create stability where it does not exist. >> thank you all very much. >> let me take advantage of one more set of questions before i bring over our next panel. we love having your expertise here. just so i understand well in reference to getting an asset class that would be purchased and then rented, what is the incentive there? is it just a market incentive or is it something that the government will do? what is the guarantee that the person will move toward a rental along the way? >> well, first, very strong demand for the rental product with respect to occupancy right now, in the 90% range. so the incentive to government is to allow for an orderly disposition to a product that is dividing the current market and do so with the rental mitigating that from occurring. so the recovery on the assets would actually stabilize and we would see the cost of holding these are el, the cost of holding every day is annually running about 12%. 1 percent per month to pay for property insurance, taxes, safeguarding the property, all of those mitigating or increasing severities daily. so we would stabilize the losses or reduced the losses on the government balance sheet and put people in homes that they cannot afford to buy through investors purchasing them with provided leverage. >> finally under the guise of do no harm, it seems to me that if we cannot act and have the mortgage loan limits at the end of this month expire it will further destroy -- destabilize the mortgage market. certainly i hope that our legislation, the home ownership bill that senator isaacson and i introduced so that we can keep the maximum loan limit right now for the next two years for fha, viejo, and tnc insured home loans that will take effect. if it does not, what are the consequences of that briefly? >> well, substantially limit the availability of financing in certain markets to a point that was made earlier by one of the panelists. there are certain markets and the united states their high-cost markets. there will suffer, principal of the coastal markets. an environment as fragile as this one. further limiting the availability of credit. not a good strategy. certainly not going to be helpful. the unintended consequence will be a slowdown in sales. again, the restriction of credit which is a bad outcome given the environment. >> as an economist i am reluctant said generalize, but it seemed like an appropriate place to start since i am in the middle of refinancing. as you can imagine, prices are expensive. it is a market in which it will go down. the options that are facing me are getting a loan just below that limit. a higher rate. now, looking at the rates i have been offered, form the core of my first and four and a half for the soft second, that doesn't strike me as terribly onerous. i'm not happy, but i recognize that i think we need to transition at some point sooner rather than later. i do remember in the past when many of us tried to fix freddie and fanny and retold the housing market was too strong. now we are told it is too weak. so those who say we should not ever do anything, maybe they could at least help me detail the market qualifications in which we are able to take reform. we can get there we can know. so i do think that if you look at the segment in the market that is there that we would shift, there is tremendous amount of capacity to do that. we're not talking a very large segment of the market. we are talking fairly high income. i guess my point would be, i think we need to start transitioning away from friday, fannie, fha to the private market. i'm open to ways to do that, but maybe it is a progressive and cited me that says which people of the place to start. >> mr. chairman -- >> anting. >> mr. chairman, the response to the we believe as well. i believe that conforming loan limits should not be able to perform back to their normal limits. looking an fha endorsements, the negative impact at least for fha quantifies for the nation, approximately 3 percent. the hardest hit states would be connecticut and the district of washington at about 8% with respect to fha. i would say when you look at the level of sales activity and put it in perspective, we are running at 300,000 annualized new home sales. an all-time record low since records have been capped. we are at housing starts levels today, approximately 600,000. that level compares to 1982 is trough when unemployment was over ten and a half percent and mortgage rates were 16 to 18%. reread such a depressed level of activity, even though existing home sales have been increasing, if you excluded forecloses to this -- distress sales we are at all-time record lows. supporting that in perspective anything you take away from housing will be negative and further eroding the level of sales and activity putting further pressure on prices. >> i appreciate that. that is my concern. thanks to the panel. we appreciate your insight and look forward to the will to pick your brains as we roll up this process and thank you very much. the me call up our next panel and ask them to come forward. david stevens, president and ceo of the mortgage bankers association in washington and prior to this current position he was the federal housing administration fha commissioner appointed by president obama and confirmed by the united states senate. many members have worked constructively -- constructively with mr. stephens. i'm pleased to welcome him back. marcia griffin is the president and founder of homefree-usa, a nonprofit home owners of development foreclosure intervention and financial empowerment organization. she was moved to found homefree-usa after working at a loan servicing center and witnessing firsthand the abuses that many families were subjected to. their experience will be very informative, and a thinker for her presence today. mark zandi, the chief economist at moody's analytics. some of his recent research is at the causes of mortgage foreclosure, personal bankruptcy, as well as appropriate policy responses. has been quoted widely by major media outlets and has appeared before many of the senate committees as well as this one. we are thankful to have his expertise with us again. dr. anthony sanders is a professor of finance of the school of management at george mason university. previously taught at the university of chicago, university of texas, ohio state. although he is from ronson, new jersey, we wish you would come back and teach somewhere like princeton or rafters. so his research and teaching focuses on financial institutions, capital markets, real-estate, finance, and investment. welcome them. and professor christopher sanders is a professor of real estate and co-director of the richard paul richmond center for business, law, and public policy at columbia business school. i would like to see your business card. must be a lot of room on your card. as research exposed many topics in real-estate and financial markets including real-estate cycles, credit markets, debt securitization, mortgages, and other topics and and advised policy makers in the past. afford to his testimony and expertise. thank you. as i said to the previous panel, we include your statements for the record. we ask you to synthesize a statement about five minutes or so so that we can have a discussion. with that welcome back and look forward to your testimony. >> thank you. the opportunity to be here and talk about ideas for refinancing and restructuring mortgage loans. i am encouraged the focus of today's hearing is toward the future and the role of private capital driving in housing recovery. nba and its members strongly believe that housing will be a key factor to our economic recovery. they recognize the ability to affect change depends on rebuilding badly shaken trust by restoring credibility. we know there are many who share responsibility for the mistakes that led us to this place including mortgage bankers and services. however, rather than pointing fingers all stakeholders need to work deal to stabilize and revitalize the housing industry. grateful for the variety of relief efforts undertaken by congress and administrations, including h.a.r.p., and a variety of other efforts that have been implemented. clearly the challenge is greater than these programs that support on their own. mortgage services have already participated by completing almost 5 million loan modifications and any successful solution must include those entities as part of the effort. additionally any new programs must give lenders adequate time to implement these changes. in searching for solutions' members continue to be concerned with the ongoing conflicting policy objectives and knitting from all stakeholders. the regulatory and legal ambiguity is causing consumers to pay and uncertainty premium in the form of increased costs and diminished access to credit. the nba recently convened a task force to develop new solutions to reinvigorate the housing market by bringing private capital back to lazar of excess supply. we believe any program to help the housing recovery should be prioritized and the following order, and i'll elaborate on each of these in my written testimony. first, we need to help the large number of borrowers unable to refinance at today's near record low interest rates while policy makers have introduced programs to help some distressed borrowers, eligibility criteria exclude significant numbers of our research would benefit from refinancing. some advocates have called for other types of large-scale mortgage refinance programs that would include principal forgiveness in new mortgage rates below current market rates. although such could have a positive impact on the housing market and economy, the cbo and other analysts indicate that programs could into significantly higher costs -- costs. the preferred approach is adjusting the guidelines of existing programs. policy makers should consider reducing alone low-price adjusters on h.a.r.p. eligible loans which would reduce costs to borrowers that are arguably unnecessary because they have already assumed the credit risk of the existing loan. other options include considering streamlining the appraisal process and closing requirements in order to reduce the time and expense of refinancing and raising h.a.r.p. ltv loan to value requirements to enable more otherwise qualified underwater borrowers to refinance to a lower mortgage rate. finally, fhfa should expand alone eligible for h.a.r.p. refinance the loans originated after june 2009. senator menendez and others have suggested a shared appreciation mortgage or a lender agreed to reduce the principal balance of a troubled borrowers mortgage in exchange for the bar were sharing any future increase in the home appreciation what the lender. we look forward to further discussions on this and other possible solutions to help borrowers. second, we encourage local investment in the existing housing inventory. local investors understand the local market and have a long-term stake in the community. existing programs should be modified to support financing and availability for local investment housing. individual sales and local investors cannot provide the economy and skill required to recover, so we support both investors sell property in order to alleviate the inventory. in order for any large-scale program to be successful it must be simple, quick to administer, and attractive to investors. sigrid's must include investor screening, buy and hold covenants, revenue sharing, rehabilitation incentives, though they should not be so restrictive as to sabotage the program's success. we believe that gst should consider a mechanism to allow investors to identify and aggregate properties likely enhancing multiple property sales. thank you, again, for the opportunity to testify and i looked forward to working with you and other members of the committee to find creative solutions to these critical issues as we work to attract private capital. i urge you to pay careful attention to the relationship between housing and the overall economy as well as the importance of certainty for consumers, lenders, and investors. i believe it is important to remember no part of the housing market operates in a vacuum. a series of complex but interdependent systems and well-intentioned changes that may resolve an unintended consequences that could result in increased costs and diminished access to credit for consumers. i look forward to taking your questions. >> thank you very much, mr. griffin. >> senator, i appreciate the up to the to be here with you today. pat homefree-usa we represent the marriage between the interest of the mortgage servicers and the investors and the bars. since this mortgage crisis began in 2008 among our 21 -- we from 66 organizations. but 21 of our non-profit counseling organizations focus primarily on this foreclosure crisis. i am here to say that despite all that is said and heard, and it is good to hear great things from the testimony today, the people, many of the borrowers that we interact with and we, as i said, have worked with over 30,000 today, many of these cannot afford to pay a mortgage. they, perhaps, cannot afford to pay the mortgage that they have right now, but they can afford to pay something. these people are employed, trying to do the right thing. they want to be good citizens. we are here, certainly, on the ground working with -- working between the servicers, investors, and borrowers and are here to say that this idea of the shared appreciation modification is a sound one. we encourage and certainly would be honored, you know, to work with you in any way. the bill that senator boxer, the homeowner a response -- the home owner's responsibility, that bill, because we want you to know that homeowners do want to be responsible. these borrowers, these borrowers need an opportunity, and, you know, it is important, too, that through the work that you are doing and through the work that our government is doing, we have to really bring back a level of fairness, and this is one of the advantages that they shared appreciation modification provides. so, you know, you reduce the mortgage payment for the person for a time so that they can afford to pay the mortgage and, you know, at the back end when they sell the mortgage or the mortgage, or they refinance, everyone would share. the investor would share. the homeowner would share in the appreciation. it is really key, as we move forward, that these homeowners understand that this is a partnership. we are trying to work together. i can tell you that the sentiment on the, you know, on the level of the borrowers is simply that the lender is trying to take my home away from me. everyone we work with. everyone cannot keep their home, but there are a lot of people who can't. this particular shared appreciation modification program not only would minimize foreclosures. it would increase property value because obviously people would not have to move out of their homes. it creates a sense of fairness and gives people an incentive to stay, rather than just walking away because now, you know, there is no incentive when the house is so under water. people need to be rebought -- be brought back. we need to give more consideration to our borrowers and give them a sense of we are all working together. the government, the mortgage industry, you know, the investor. we are all here as a win-win for each other. with that, i think that is the only way that we are going to be able to turn around our mortgage crisis and really improve the economic conditions of our country. i thank you very much and you have my much longer written testimony, and i am certainly open for any questions that you may have. >> thank you very much. mr. mark zandi. >> thank you, senator. >> the technological advantage. >> i do, but these guys have ipads and are a step ahead of me. >> okay. [laughter] >> i have one, but have not got around to working through it yet. i want to thank you for the opportunity. my remarks are my own views and not that of the moody's corporation. a make three points in my remarks. the first is that housing and mortgage markets remained under some. a significant impediment to the thunder of -- housing recovery. broadly speaking it has said bottom, but this is still very unusual. at this point in the economic recovery housing would be contributing significantly to the economic growth. for example, if you looked at the economic recovery since world war ii, two years into the recovery we are not two years into this one, housing would have to read it to about one-fourth of gdp growth to overall economic activity. of course this go around it has not been a contributor and all. there are two fundamental problems. one is excess vacant inventory because of the overbuilding and the boehner. we used to have way too many vacant homes. by my calculation the number of excess usance as close to up one 1/4 million. and that current housing demand, which is depressed, it won't be until 2013 until we work through that. the other problem, by my calculations, there three and a half first mortgage loans in foreclosure or 120 days delinquent. obviously pretty close, and that the current rate of resolving these foreclosed properties it won't be until 2015-16 before we work through those properties. a long haul. given that, getting to point number two, and policy makers should consider a number of steps to help facilitate addressing the excess inventory and foreclosures you. there are a number of these -- initiatives under way that, i think, are helpful. the neighborhood stabilization fund, the president proposed more money for that. the american jobs that. about $15 billion. a very popular program, and it is very helpful for that blighted communities. the administration has also proposed trying to facilitate efforts by fannie and freddie to partner with private investors to move there are real to rental as opposed to selling into the marketplace and driving down prices. i think that is a laudable goal. and then your own effort with regard to shared appreciation mortgages, i think that is a good initiative and, i think, it has significant potential for helping in this regard. i would suggest to other things that could help quickly and meaningfully. first, and this has been proposed already by many of the members of the group, that is i would not allow the conforming loan limits -- the higher performing loan limits to expire. i was of a different view of the beginning of the year. i understand the argument that it was important that government steps out of the market to see if we can't get the private market back up and running in stepping in. that is something we need to do. at the beginning of the year when the house of market and economy look better i thought this would be a good opportunity to take crack at it, but given what has happened i think that would be in error at this point. i would at least extend the limits, the current limits for one more year. the second thing i would do, i would've h.a.r.p., a reasonable program. 850,000 folks have benefited from the program. the president when he proposed a program back in 2009 had a goal of 4-5000000, and i think that should be illegal, and there are a few things that could be done to get to that gold. the most obvious key to their bill is rolling back the loan level pricing adjustments. i think that makes eminent sense, and i think that should be done. i think efforts to streamline the underwriting process is very, very important. with respect to appraisals and income verifications'. they on this risk, and we can work through these underwriting issues more quickly, lower the cost so that closing costs are lower for borrowers. third, i think it would be important for fannie and freddie to think about waving reps and warranties on h.a.r.p. loans, loans under the current program that had originated more than several years ago, january 2009. i think it would be -- it is perfectly prudent to allow that to be waived. a number of other things in my testimony, but i think i would do that. i will end by saying that this will be hard and there is no magic bullet. all of the things we are talking about will take a long time. everyone's expectations should be in the right place. moreover i think it is important not to overreach. uncertainty is an issue in the mortgage market, and i think what lenders and servicers and everyone needs is policy clarity said that they can nail this down. >> thank you. dr. sanders. if you would just put your microphone. >> and i will start over again. thank you for the opportunity to speak to you today and thank you for reminding me that i wish i was a princeton. according to recent data owner equity in the house of real-estate fell around $7 trillion from the peak of the market today. headlining unemployment remains at 9%. real gdp is under 2 percent, and real personal consumption expenditures fell in the second quarter of 2011. we can see that we have a major problem on our hands. one way to jump-start the economy and reduce mortgage default is to streamline mortgage financing. when you add the additional savings to borrowers disposable income they might spend in the economy or reduce delinquencies and defaults, that is a very tempting thing to look at. we have discussed by borrowers have not been able to refinance. degrading credit after the housing market cops, negative equity in servicing industry complex. to be sure, streamlining the mortgage finance process could help american households stimulate the economy and reduce to fall. the cbo, however, using a stylized program estimates that almost 3 million more is would be refinanced, again, not under any specific program, and that would lead to 111,000 fewer defaults. but almost 3 million mortgages being refinanced at 4 percent would generate about $7 billion. depending on the assumptions, that could, of course, be higher and lower. many of the loans we're talking about in some of these programs are located in florida, arizona. the stimulus effect would be more concentrated. the stimulus benefits after the refined, actually relatively small compared with personal consumption expenditures which in the second quarter of 200011 were $934 trillion. again, 74 billion as a percentage of 934 trillion is much less than 1%. i'm not sure it will have the stimulative effect that someone would like to see unless the program is much larger than the cbo is estimating. another way to stimulate the housing market is raise the conforming limits for one year or two years. as i opined in previous testimony, with regard to a drawdown plan for friday in fanny, i felt it was appropriate to reduce the conforming loan limit to allow the private sector back in the market. however, if housing market stalled an alternative strategies to be considered such as lending to stay in place. the housing market what it back on its feet and running. now, cinnamon and this has posed an interesting idea. shared appreciation mortgage solution to try to overcome the negative equity problem. the shared appreciation mortgage has been used in the united states for decades, although in love volumes and has been tried in the united kingdom to permit far worse to have paid down the principal, 50 percent of the share of equity in return for 50% of future gains in house price. the men in this proposal has a similar intention. they need to write down a principle in exchange for giving away a percentage of appreciation and property value in the future. there are problems. twofold. first capital markets have shown very little interest as a product for investment. they generally, if you make it half to keep it on your books. second, there are moral hazard problems relating to the incentive to maintain property once someone receives the capital gain. the third problem is solved about trying to get independent appraisals. so it has issues but it also has tremendous potential. it is one thing i would like to see them do a trial program. whether or not this is done by private financial institutions or the gst is a topic for later debate, but i think it is one of the most innovative ways to try to get out of the negative equity problem because, as i said earlier, the program from isaacson and boxer, when i looked at the numbers and report, i don't think that will get as much, but this one has better legs. thank you very much for the opportunity to testify. >> thank you very much, chairman menendez. i appreciate the opportunity to be here today. 10-year treasury rates are as low as they have been since the great depression. nonetheless, too few borrowers have been able to take the advantage of low interest rates and refinance their mortgage hampering monetary policy in dampening consumer spending, unable to refinance debt the way corporations have consumers are left with week -- weak balance sheets and mortgage payments, often above the cost of renting a contributing to excess delinquencies, foreclosures, and falling home prices. numerous corrections contribute to this low rate of refinancing. up-front fees for refinancing, borrowers with moderate credit and a loan to value ratio of 60% for more. lenders years of litigation from reps and warranties further discourage refinancing. many borrowers are under water. a streamlined refinancing program could benefit 25 million or more borrowers of government-backed mortgages decreasing annual payments by up to 70 billion, about $2,800 per year per bar work. the majority of savings accrued to borrowers whose original mortgage was under $200,000. this plan would function like a long lasting middle-class tax cut without impacting the budget deficit. a copy of this proposal made with tow authors allen boyce and glenn hubbard's is a test of my testimony along with a state-by-state breakdown of benefits under this program. under our plan every homeowner with a gst or fha or viejo mortgage can refinance at a current fixed rate of 40% or less with the rates subject to changes in the marketplace of bonds. fha borrowers would face slightly higher rates. to qualify the homeowner must be current on his or her mortgage or become so from least three months. this plant rewards responsible borrowers. these must be low cost, minimal paperwork refinancings. no appraisals, income verification, tax return, and a minimal title insurance policy. after all, the government already guarantees these mortgages. issuers of new mortgages would be indemnified against other reps and warranty violations, a critical part of this program. under our plan that gses would charge a guaranteed fee of 40 basis points per year, more than offsetting any loss that could be faced. the gses would also benefit c-span.org defaults with borrowers with lower mortgage rates. our plan would pay for the basis points making it possible for originators and purchasers making it possible giving the spin line process. the plan must be attractive to market participants. services should have a short time to offer this to customers on an exclusive basis. existing servicers, including the largest banks, benefit by lower legal liabilities associated with reps and warranties violations. second liens and home-equity lines of credit are safer when borrowers have lower first mortgage payments. banks should find streamlined refinancing and profit and customer satisfaction. secondly and holders should be required to modify policy and plans to facilitate this plan. the housing market benefits from our program. livermore is payments reduce future defaults of destabilize house prices. more free financing activity should improve consumer confidence in the financial liability of being a homeowner. reducing financial pressure on servicers car repairs, and mortgage insurers will help the mortgage market starts to recover, enabling new home buyers to get mortgages. most gains, at the expense of investors who understood and accepted interest-rate risk. private sector or foreign donors hold about two-thirds of gst bonds. agency bondholders have received an anticipated windfalls from any government actions during the crisis, including policies that have lead to extremely low refinancing rates, the decision to leave this in the karen t gse bonds against losses and the federal reserve purchase of one 1/4 trillion of the agency mortgage-backed securities 50. some bondholders such as inco had publicly supported this plan because the benefits to the economy. implementation would have a tremendous effect and make a difference on families. until we fix the housing market, it will be hard for the economy to recover. i have also responded, put forward a proposal to the rf five in a very much support a number of the other proposals the people on this and the previous panel make including the expansion of private institutions and capital for rentals and encouraging such efforts to have local partners and to provide responsible financing for investors who are going to come in and help absorb some of the excess inventory. there are many things that one could do with shared appreciation mortgages, and one idea that i would toss out is the idea of not necessarily tying it to one mortgage that have that payback be across gains from other residential property overtime which might make such a shared appreciation mortgage safer for the lenders who do it and bring it closer to, i think, a cost-effective basis. so i think their is a lot of positives to do, so i appreciate the opportunity and be happy to answer questions. >> thank you all very much. the broad swath of ideas. let me start off taking off of your suggestion and asking the panel in a broader context beyond the specific proposal. isn't it at the end of the date, i look at this and say, well, who is the biggest holder of the major part of the liability year. fannie and freddie. who is fannie and freddie? the american taxpayer at the end of the date. wouldn't it make sense for fannie and freddie to seek initiatives that mitigate the potential of its losses. help it moving in the mortgage market. that's a broad opposition. that is where fannie and freddie are headed. i am i wrong about this? >> like everything we talk about, you're well aware, these questions are often more complicated than the answer. he sees me, the answer is more complicated than the question. the challenges fannie and freddie i still essentially independent companies in conservatorship that have cost the taxpayers $150 billion. it is a gaullist by their conservative that they were underprice in the guaranty fees when they originated these loans. so i think the trade-off we have to consider is utilizing these two agencies which are critically important considering the size and scope and influence on the housing market. clearly recognizing with eyes wide open that anything they would do to participate more aggressively whether it is lowering loan level price adjusters are changing loan to value requirements for all these things being discussed, those bring incremental risk associated with each of those steps. as long as that is a novelist and recognized in the process i think it decisions can be made. it is difficult because they are in conservatorship and there is no clear direct government stability that it makes it much more difficult to direct them to take action, which may not be in their own best interest. especially when they're trying to bring themselves back to level of operating profitability >> i would assume -- understand, but i would consent -- as in the conservatorship polis to limit the scope of the liabilities at the end of the day. it just seems to me that you have this, you know, stated public policy goal of trying to limit the liabilities and yet not doing -- not being able to do some of the things that are essential to limit those liabilities. >> and you're absolutely right. even this cbo, which is, i'm sure, not the most detailed at this point because we don't know what the proposed specifics would be on a refinancing plan, it clearly shows that it reduces risk to the portfolio to make some adjustments at least for the h.a.r.p. program. and after hearing all the panelists so far, jen to make changes. so our collective objective as stakeholders has to be to continue the discussions with fhfa and gse in hopes to make changes on the margin knowing even to tony's point that while it may not have an extraordinary influence on stimulus it will have some impact on almost 3 million families who would potentially benefit. >> and the other observation? >> if you look at cbo work under the assessment of the boxer isaacson plan, fha, fannie and freddie cannot even at least make a little bit of money on the deal, costing the federal reserve, but it is important to point out that the fed is holding the securities to maturity. and they don't mark their books. so this is just an accounting loss and nothing more. i think there are ways to do things here that don't cost taxpayers money and all, any money. this is one of those things. it's true. they're going to take on additional shares -- risks, costs. also reducing their potential for defaults and credit loss. so it looks like it is awash if h.a.r.p. hits its goal of four to 5 million borrowers, another 4 million who get refinanced down and go from the average coupon with a median coupon of five and a half percent. so borrowers over five and a half%. let's say they could refine down to four 1/4%. they save a little over a percentage point. that is $10,000 in annualized interest payments that is not going to solve our problems. many of them aren't very distressed parts of the country. they could use the cash. it's something of can happen quickly. >> we would have to change our for murder is now. >> if fannie and freddie through the ffa would have to make modest adjustments. make some adjustments. reps and warranties. look at the underwriting and the cost of underwriting and appraisals. maybe even, i think, change policy bid and become a little bit more proactive in reaching out to potential borrowers. right now they reach out and say, hey, listen. you could make a real saving on your monthly mortgage payments. they're difficult but could make a substantive difference. >> i do agree with what they've said. it's trivial in terms of percentage in terms of the consumption expenditures for consumers, 2 million appreciate the help of one part of the cbo report, and i have greatest respect for the cbo, there is a little squishy part on the benefit to the gse from this program. i have not heard fanny, freddie, were the ffa, with any positive statements regarding it on the respective periods i am a little nervous that we may be overestimating it. i would actually make it more on the decision of do we really think it will help borrowers avoid default. what it actually helps stimulate the economy? those of the bigger selling points. but, again, would actually helps stimulate i think that -- i still like shared appreciation better. >> i would observe a couple of things. we have referred a little bit to the cbo report. i would cite private sector estimates from goldman, j.p. morgan, morgan stanley, even work mark has done that suggests an appropriately structured program would generate 25-50000000000 per year. the j.p. morgan report came out after the cbo report. they respectfully disagreed. and not sure anybody on wall street thinks that a well structured program would be as small as the cbo estimated. i do think that there is good reason to believe that this would have a much bigger stimulus on the economy than the cbo suggested. i just point out that in 2002 and 2003, the last time rates fell like they have so far this time, about 85 percent of borrowers who could save 100 basis points on their loan took advantage of prepaying over a 2-year timeframe. the cbo estimates that take up rate, even among the most constrained house holds a 30%. i think the cbo estimate predominantly on the take a break has been a bit conservative relative to other folks. i would go out and say, i think, this can be a much bigger effort. the key is appropriately structuring this. you rightly pointed out, senator mendez, that conservatorship is a real barrier to this. i think there are a number of ways to deal with that. one of them is if it does look like this isn't some neutral to the gse as professor saunders has talked about, you could raise the gse feel a little bit. start, the guarantee fee which would ensure that it was a budget neutral program to other programs and still benefit homeowners enormously. so, you know, i think the other thing that we haven't discussed that is really critical is mortgage insurance. there are a large number of people estimated 25 percent of the population that won't even get inside the door without a deal to think about mortgage insurance. they're must be brought into the mix as well importantly. >> what about the races for the previous panel, the q our income of 20%, it seems to me we take out a huge class of individuals in the country who could be responsible borrowers and help us in this process. your view on that? >> i completely agree. i think that the intentions of qrm were very dead on accurate and effective in terms of eliminating products with higher-risk characteristics. so the qrm, as we all know, requires limits to honor occupied, primary residence, fully amortized loans, when you look at the actual default data, if you isolate to those characteristics and not bring in the down payment requirement that is an qrm use of 95 percent of the problem simply by letting those characteristics. the problem with down payment was a tour that variable land, it becomes particularly punitive to families without enough wealth or high income earners. so it tends to hit those that need access to affordable homes the most. ..

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