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tv   Treasury Secretary Mnuchin HUD Secretary Carson Testify on Affordable...  CSPAN  October 23, 2019 3:41am-6:59am EDT

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option. lawmakers heard testimony from the head of the federal housing finance agency and this hearing is under three hours. >> we will come to order. without objection the chair is authorized to declare a recess for the committee at any time. this hearing is entitled the end
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of affordable housing, a review of the trump administration's plan to change housing finance in america. before i recognize myself members, today is [inaudible]'s birthday come back if anyone wishes to sing happy birthday please save it until later. [laughter] >> we all thank you for that. >> happy birthday. we now recognize myself performing it's given soft opening statement. good morning. today we are here to discuss the impact of the trump administration's house and finance reform plan. we are joined by treasury secretary steve mnuchin, hud secretary ben carson and federal housing finance agency director.
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welcome. let me say that the trump administration housing finance reform plan would be a disastrous for our system. the trump demonstration is threatening to end the conservatorship of the government sponsored that is the gse's. would ask national action to provide and expose the government guarantee. it is implement it in this way and is likely create turmoil in the housing market will prevent many americans from obtaining 30 year fixed-rate mortgages and block families across the country from attaining the american dream of home ownership. with this reckless plan reckless plan for administered action on the table the trump administration also recommends that congress make several harmful little slate of reforms. for example, trump plant would abolish the affordable housing goals which help to support affordable homeownership and rental housing and replace them with the mortgage that trump officials have not bothered
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spell out the details for. the plan would also fundamentally undermine the federal housing administration ability to create for double home ownership opportunities. the trump and ministries and has proven again and again that it is not to be trusted. it is consistently pushed off harmful housing policies and slashing and eliminating key housing funding for those most in need. this is administration that is proposed tripling risk for our lowest income households and slashing hud's budget by 80%. this this is in a administration that has illuminated protections for lgbtq individuals, blocked dreamers from fha loans and proposed to make it nearly impossible for victims of housing dissemination to obtain justice.
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this is an administration that reportedly wants to raise homeless camps and roundup persons experiencing homelessness and force them to live into carpet federal buildings by contrast democrats on this committee have put forth measures to approve the affordable ability and availability of housing. for example, we have billed to and the homelessness crisis to make fha mortgages more affordable and protect dreamers. lgbt new families and children with mixed immigration statuses and foster youth when it comes to the financing system with any housing finance report for reform should adhere to keep us both. these pebbles include: maintaining access to the 30 year fixed rate mortgage; sufficient capital is in place to protect taxpayers ; providing
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civility in the quiddity so that we would send the financial crisis; ensuring a new finance system; requiring transparency in the way that ensures a level playing field for all financial institutions. especially credit unions and community banks. maintaining access for all qualified borrowers that can sustain homeownership and serving homeowners of the future and ensuring access to affordable rental housing. it is clear that the trump administration proposal that is not live up to these pencils to date this 20 will examine why were our witnesses today in supporting such a harmful plan. i now organize ranking member of the committee the gentleman from north carolina, mr. mchenry for four minutes for an opening payment. >> thank you, mdm. chair. i want to thank the panel for
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being here today. let me begin by saying this. this is a powerful opportunity for bipartisan cooperation and we have a willing administration who is engaged in a productive dialogue on housing finance reform for the long-term. divided government is not ideal for many things but it is an ideal moment for difficult policies the divide both parties. housing, finance or form divides both parties. there is not a partisan only coalition that can produce fundamental housing finance reform. the mcgrath have tried it and failed and begins likewise have tried and failed and in order to to put it on a sustainable path for our taxpayers and communities. it is important we legislate in a bipartisan way and this is an ideal moment to do it.
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i am in christ that secretary mnuchin and secretary carson have proposed a long-term solution and it's a positive first step on a multiyear path to building a housing finance system that makes the goal of affordable homeownership more cheap and by no means perfect it it sketches a path towards forward and away from the status quo that puts taxpayers at risk and prevents competition within the market let me say that again. in action, alleges that if an action, regular regular tree in action puts taxpayers at risk. i reached out to chairman in waters about a committee hearing that i thought to be bipartisan and this was one of them and 11 months later we are here today. eleven years ago in the federal
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government placing conservatorship and nationalized after the collapse of fannie mae and freddie mac with over $200 billion million dollars in taxpayer bailouts we don't want to relive that. this administration cannot do it alone and put it on a satisfactory path. today fannie mae and freddie mac made in conservative ship without competition. our current economy is strong and this is the time to do housing finance reform because of the economic conditions as well but within inevitable downturn at some point without congressional action in a form of the gse's a bailout of these institutions is more likely than not it in fact, until director took over the gse had capital ratio of 1000: one meaning eating a small that the market would guarantee failure. fouling - housing finance is too
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important to be put at that type of risk. housing market has been trending upward for at least the last eight years so we may reach the top of the housing cycle. we have serious systemic risks at the gse's and federal housing administration. it's important we legislate for a long-term and we know it's not easy but it is necessary and we can't kick the can down the road. i want to highlight a few portions of the ministrations proposal. one of the new housing finance system must first set clear boundaries between the respective roles of the gse's and fha. second, congress needs to encourage competition pollard by leveling the playing field and create an open chartering process to provide a path for other companies to obtain these benefits. i think we can work together and achieve a bipartisan outcome that creates that competition
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and certainty in the marketplace and this can make the american people proud and put us on firm economic standing for a generation to come. with that i yield back. >> thank you. i now organize the gentleman from north carolina. mr. scott. >> thank you. welcome. chair lady this marks the tenth in a bursary of the passing of dodd frank and the financial crisis that we went through. there is no more burning point to show the great failure at this point then at the as we look across the country in every state and every community and it is filled with homelessness so we've got to take a serious look at this and we are hopeful in this committee that we will
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focus on protecting that 30 year mortgage and ensure the sufficient private capital is in place to protect our text failures. there is so much for us to get to the megan people are depending on us and i sincerely hope that you three gentlemen will open our eyes to much of what we are now only dimly aware of. thank you. >> i now organize the gentleman from ohio for one minute. >> as members are aware and he made for the mac now been in conservative ship for 11 years 11 income years and already on the top row and this is a long-overdue process we need to deal with and the committee seemed proposals come and go missing house and senate proposals to mechanic and will begin proposals and they witnesses made it clear that they prefer conference of reform
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imposed by congress but if not the intent to proceed with administrative reforms and it's my hope we can use this hearing as an opportunity to restart our work and we should have completed it long ago. a bipartisan company to perform that ensures americans can achieve homeownership and provide stability for the housing system and prevent future taxpayer funded bailouts. this hearing should be the first of many aimed at proving the skeptics wrong and achieving those goals. i yield back the balance of the time. >> i want to welcome today's distinguished panel. you'll first hear from the honorable steven mnuchin, secretary (-left-parenthesis of the treasury, secretary mnuchin has testified previously before the committee needs no introduction. welcome. we will be here from the honorable doctor benjamin cars carson, sec. of housing and urban development and secretary carson is also testified
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previously before the committee and needs no introductions. welcome. i only we will hear from the honorable doctor mark, director about housing agency. this is his first appearance before the committee and has served as director of the sha is april of this year and in recent years he served on the republican staff of the committee on banking, housing and urban development, work at cato institute and most recently as chief economist with vice president michael pants. welcome, director. for purposes of testimony each of you will have five minutes to summarize your testimony secretary mnuchin were now recognized for five minutes to present your oral testimony. >> thank you.
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chairwoman waters, ranking member mchenry, members of the committee. i'm pleased to am pleased to be with you today to discuss the department of treasury's housing reform plan. last month my colleagues and i testified before the senate committee -- >> will you move your microphone closer speak into it please connect. >> last month my colleagues and i testified before the senate banking committee after the release of the plan and the comments and legitimate of frameworks we have seen from members of both parties reflected bipartisan agreement on the need for legislative action and on the general principles of reform. i am hopeful with good-faith discussions congress and the administration will act in a comprehensive manner to support affordable housing appropriately tailored the federal government's influence over the housing finance sector, protect taxpayers taxpayers from future bailouts and foster competition that will end up with consumers.
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that is why i was surprised and disappointed by the title of this hearing which asks whether the administration's plan is in and to affordable housing. to be clear, treasury does not propose and indeed opposes reducing or eliminating the government-sponsored enterprises long-standing support for affordable housing. i am grateful for the opportunity to clarify treasury recommendations today and explain how our plan will preserve, support for a portable housing and also improve the efficiency, transparency and account ability of the mechanism for delivering that support. treasuries plan advances for continued government backing for widespread availability of the 30 year fixed-rate mortgage lo loan. and that for their success to continue helping to fund multi- camel housing for low and moderate income and other
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renters. in addition to the general support for affordable housing the gse's have at at least four key statutory mandates to promote access to affordable mortgage credit for historically underserved borrowers and renters. a duty to serve focused on three specific underserved markets and manufactured housing, affordable housing preservation and role markets. two, a requirement to make certain periodic provisions to the housing trust fund and the capital magnet funds. three, charter authority authority to promote access to mortgage credit throughout the united states including central cities, rural areas and underserved areas and a requirement for the fh fa specified amounts of single-family and multi family loans that support housing for specified underserved borrowers and renters. treasuries plan does not include specific recommendations to alter the duty to serve the
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specified underserved markets for the affordable housing contribution and treasury seeks to preserve the national service requirement with added protections. with respect to the fourth mandate the affordable housing goals treasury recommends material changes would establish a more efficient, transparent and accountable mechanism for delivering tailored support to underserved borrowers. further, the plan recommends fh fa continue to ordinate with fh a and jenny make her primarily responsibly for providing housing finance support with low and moderate income families that cannot be felt through traditional underwriting to assure an appropriate federal housing. to be clear treasury is not recommending a reduction in support for underserved borrowers. on the contrary treasury is recommending a more effective
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means of delivering the support. i look forward to our conversation here today when i hope to continue after this hearing and we welcome your thoughts and suggestions to address the challenges for cert underserved barbers and renters nationwide. i must recommend that the ministrations preference is to work with congress to enact comprehensive housing finance legislation. legislation can achieve lasting structural reform with competitive advantages over private sectors. we believe reform should proceed and ministry the way pending legislation. under the leadership of president trump i am proud of the work with don to create traditions for greater economic growth, better opportunities for working families and higher wages. i look forward to discussing with you critical housing finance reform and hope the members of the committee from both parties will work with us in passing legislation. thank you very much and i'm pleased to answer questions. >> thank you, secretary carson.
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>> chairwoman waters, ranking member mchenry, thinking for the opportunity to appear before you today to discuss the department of housing and urban development to support this and ministrations efforts to reform the nation's housing finance system. first, like sec. mnuchin was taken aback by the title of this hearing. if we want to examine the end of affordable housing this would be a field hearing in tampa and cisco or los angeles. two cities at the epicenter of the nation's affordable housing crisis. restrictive zoning laws have made the development for affordable housing expensive with driving up rents and prices for the highest in the country and leading to california responsible for nearly half of our nations on sheltered homeless population. in fact, the latest latest data found that california's homeless population increased 16% over the past year alone and were not
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california's increased homelessness would have declined nationally. contrary to what is happening in calpurnia hud housing finance reform proposal addresses how to best serve affordable housing needs while keeping within the prince was outlined by leaders of both parties including chairwoman waters. we look forward to working with congress to move this legislation forward but i'm confident that we are starting from a place of significant common grounds about what the future housing finance system should look like. at hud we support millions of families with affordable homeownership and rental opportunities for the federal housing administration and jenny made providing credit, access and the quiddity in the mortgage market. we ought to allow the private market to work but in those areas where it can't or won't
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work we must make certain we continue to target fha programs to borrowers not served by traditional underwriting. our plan preserves and strengthens fha and jenny mays pivotal roles all improving the delivery of that support and better protecting taxpayers. historically serving unmet housing needs have been fha's most important contributions to the american housing market facilitating entry into financially responsible home ownership. without fha mortgage insurance as an option millions of lower and middle income families will provide access to affordable mortgage credit. for instance, a typical fha borrower last year they were 39 years old and had a credit score of 666 purchased a home for $221,000 and first-time homebuyers represent 80% of fha purchase volume while 57% of the mortgage were for low or
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moderate income individuals and 34% were minorities. in addition to helping borrowers by their first home we also want to stay in their homes in our plan calls on fha to improve its servicing by creating more flexible loss medication process and we are also working to get a more diverse state of lenders with the fha program and the positive rate institutions which represent nearly half of fha lender base in 2010 represent 18%. to provide provide revelatory service to lenders so they will return to off offer fha loans we are revising fha's [inaudible] and annual certifications in clarifying when hud and the justice department will utilize cross claims act to go after allegations of fraudulent lending. another critical piece of our plan is the need to marginalize
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technology. for decades fha was operated on integrated obsolete technology that inhibits its ability to properly manage risk. as part of our proposal undertaking a conference of multiuser marginalization effort to bring its it in the structure into the 21st century. this fha opportunity to move generations ahead for the state of the art system that will fully digitize the mortgage process and align it with industry standards. the plan calls on congress to limit the statutory cap on the rental assistance demonstrate and program which allows public housing agencies and owners to leverage private capital to preserve properties for long-term affordability. since this launch in 2012 it has proven to be an external near a success story. the report we release confirmed what we have long suspected
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stability millions of dollars in capital investments in improving living conditions for lower income residents and enhancing the financial health of these critical affordable housing resources for future generations. madame chairwoman, housing finance reform is the final piece of unfinished business remaining from the financial crisis. is one of our properties and have an administration committed impaired to work with congress to enact campaigns of legislation and let's begin that work today and happy birthday mr. ranking member. >> thank you very much. i now recognize [inaudible]. director you are recognized for five minutes. >> chairwoman waters, members of the committee thank you for the invitation to appear today. chairwoman waters anything you for that kind introduction.
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welcome to the committee and i thank you for meeting with me early in my tenure and found it a productive meeting and hope it's the first of many. let me emphasize for the committee as mentioned in my bio having worked in the staff of senate banking committee and problem the last piece of legislation ever done for the committee over one decade ago was to update [inaudible] where we expanded homelessness protection for families. i would also note that the committee having been one of the primary offers in the health economic recovery act that was last major finance reform i will remind many we do that in a bipartisan way in the bicameral way and i believe we can do that again today. let me and besides it is my belief that far to many maggots today lack what we deserve an affordable place to call home whether it's owned or read into problem across america many but doctor carson pressed upon that is unmanly in many ways a local problem. but mental with local policies that make it harder and more defensive to build housing. zoning, leaning assertions,
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onerous building codes, these policies policies are disproportionately lower income families and affordable problems while they can be addressed to you in part will not be solved by local governments remove these impediments that the supply of formal housing in their committees. we should applaud those committees that are up zoning in a responsible manner that will bring density and areas are trying to assist in calpurnia as well. one part of our mortgage finance played a role in parts of our mortgage finance systems can play a role in the federal home loan banks exist to ensure mortgage throughout the economic cycle. this mission is critical to supporting sustainable home ownership, affordable housing especially with and the economy is weak and nordic mortgage credit tightens. in the current condition fannie mae and for the mac will fail in a downturn. when they fail housing for the billing problems get even worse. together any and freddie
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guarantee 5.6 trillion in single and multifamily mortgages half the bucket and until recently they were limited to just 6 billion. to do the math when i walked in the door the combined leverage ratio opinion freddie was nearly a thousand-one. secretary manage and i allowed [inaudible] this is a significant step forward. within one quarter's net worth has their leverage ratio by nearly half and i'm proud to say in my six months we doubled the capital at fannie and freddie. it still stands the nearly 500 to one in contrast to nation's largest banks in average leverage ratio of 10-1. i may put that put that in perspective. leverage ratios that we see in our largest fannie and freddie are leveraged that the times that. combined with low capital credit
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risk has been increasing in recent years with purchases by the enterprises. some risk factors note the levels observed in the years leading up to the crisis and average barter or credit stores are better today enterprise share of down payment and high mortgages are higher than they were precrisis. this pattern of increasing mortgage risk harms first-time borrowers and makes it easy for them to become highly leveraged at the top of the cycle makes it harder for them be home when the cycle turns. it is bought out and that frank and inversely impact the weak economy when things stagnate and household level status a. between 2006 and nearly doubled the loans of purchases with tactile greater than 40%. marketwide to link with these mysterious rates are low today but they were low before the crisis last time. they were into the support and well into 2007, 2008.
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delinquency rates are stronger market writing house prices and if these were to turn the underlying risks in the system would appear regardless of loan quality when their defaults when the tide turns. let me be crystal clear. anybody will fail in a downturn. in their current condition. it is my objective to get them out of this condition but housing finance system is supposed to serve homeowners and lenders and i believe it's built on both accounts with mcmahon mccalley for coming up with what i believe are reasonable but the plans that present a path out of this limit say the plans are probably consistent with my top priorities which are first up hsa's work last regular as to ensure anybody operate in a safe and sound condition. to an 11 year conservative steps as required by statute to quote foster a competitive liquid resilient national mortgage fund
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- i say are the principles you've laid out and i'll afford to working with this committee as we move forward. thank you. >> enqueue. i now recognize myself for five minutes for questions and director, the recently announced you expect to make a decision very soon about sh of a proposed capital rule. this rule would be a key factor in determining whether pricing of gse loans would work for more broad-based for future homeowners while necessarily creditworthy be blocked out of the dream of home ownership it civil rights advocates have raised concern that this rule would increase incentives for anybody to engage in more risk pricing which would aluminate help minorities and other underserved borrowers obtain mortgages that are at affordable rates and also concerned that you will require up to 5%
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capital which many analysts believe to be too high. will fha's final role role on capital levels address these concerns? >> thank you for that question. where in the middle of a will making and i hope to announce within the coming weeks whether we will have to we propose the rule or not. i would very much agree with you that i be this is perhaps the most important rulemaking i will engage in my tenure and it's incredibly important to get it right. we talked to a number of constituencies and there are a number of factors to balance and we will try to do our best and we are getting to the point where this will be balanced and i feel highly competent where we will get will maintain access and affordability but protect the system. >> thank you. and what level of capital would you build or think it's safe? >> since were in the midst of a rulemaking i think it's appropriate to rain refrain from giving specific answers on the rule making. >> do you believe a higher level of capital would affect the
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pricing of the mortgage? >> i believe it happens for all - let me start, i believe all mortgage systemically financial companies whether citibank or fannie mae should be well-capitalized. >> i understand i want you to understand that you have navigation to the taxpayers but also have an obligation to ensure broad access to credit worthy bars and a job requires you to strike an appropriate balance between these goals. however based on what i can see from your actions and comments to date i'm concerned that you are overly focused on shrinking the gse's footprint even if it comes at the expense of blocking hard-working families out of homeownership. i would encourage you to thoughtfully consider the feedback you are receiving from civil rights advocates and others about this proposed capital rule and ensure that
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these concerns are addressed in final rules. further, we met at the very beginning of your tenure as dir. of fs at eight and in that conversation i stressed the importance of working to increase home ownership, opportunities for minorities. sometimes people conflate that with affordable homeownership i want to be clear that these are two different things we have made important strides in opening up affordable homeownership opportunities but we still have african americans homeownership levels and rates lower than when the fair housing act was passed in 1968 and we have an astonishing racial wealth gap that reflects this gap in homeownership rates and do you agree sh fa has a responsibility to address the racial homeownership gap and not just access to affordable homeownership generally? >> let me assure you that we
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will work with and taken all comments for all stakeholders and i can guarantee we will meet with everyone and talk to everyone will meet with us and do our best those concerns are addressed. i would emphasize one of the biggest drivers of the increase in the wealth gap with minority households had higher leverage ratios going into the crisis and what hurts more in the downturn so i'm committed to make sure we do not see a repeat of what we went through in 2008 and i believe that was a deficit in time on minority committees to make sure that it happened on your watch. >> do you have specific actions that you have taken and actions that you plan to take to increase access to homeownersh homeownership? >> our emphasis on homeownership will be on sustainable homeownership. it's critical that we can
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families that they are able to stay in the home ownership and i don't believe it to anyone a favor they are just tearing through - >> used the word minority. >> i can use the word but we want to look out for all families. >> i know you are but i specifically asked you about the wealth gap in the problems we have with homeownership for minorities. will you address the word minority? >> if it is difficult i will yield my time back in with that i will call on the gentleman from north carolina for five minutes for questions. >> safety and soundness to our financial system to the footprint that the three of you oversee is your primary obligation to us as taxpayers. safety and -- safety and soundness is your primary allegation.
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the financial collapse of these institutions under your watch is nothing that the three of you gentlemen would seek i would hope nor in the interest of american taxpayers. so, let me begin we have 116 items of reform from the treasury and hud. 116 items. they. they fall into two different baskets. one you can do through the ministry of action and within your rights under law that the congress has written. the other requires vegetative action. almost a third of the recommendations of the plant were allegedly the performs. eighteen from [inaudible], 17 from hud. given the sheer volume of the work that needs to be done to build the modern housing finance system with the people deserve how important is that the congress role legislate here? will go across the panel. secretary mnuchin mac it's our first choice. very important.
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>> obviously is very important if we want to have things that are the stained across the administration that help americans. >> absolutely critical. >> director, federal bank membership was reviewed under mel watts directorship and the minute will you seek to add a review of the federal home loan bank membership requirements? >> we are. given there's a large number of membership questions that are banks dealing with cd fis and ensures we decided we will soon be doing a request for information on the membership at large so we can hear from stakeholders and get feedback and if depending on the comes out of that request for information we may or may not do a rulemaking clarifying this but it's important that we try to solve the membership issue holistic league. >> director, there's a new york times piece from september 30 of this year outlining work done at
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johns hopkins and university montréal about flood risk and the portfolio of fannie and freddie outlines that there was alarming trends according to the study that institutions are passing off increased flood risks to serve mortgage properties and they are passing that off to fannie and freddie. are you familiar with that said he? >> yes, i read the underlying site. mdm. chair, i ask in animus consent to submit for the record "the new york times" piece outlining that study. >> without objection. >> thank you. it's an interesting finding that there's a potential 100 billion dollar setup risks that are pushed off to gse's from institutions and are you -- you said you are familiar with this. do you agree with the premise and/or the conclusion?
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>> while i take issue with some of the methodology the overall point of the study is largely correct. it underlines the importance of doing effective reform because i concerned if we don't have a functioning sustainable national flood insurance program much of the risk will be sent to fannie and freddie. >> do fannie and freddie currently run assessment of the underlying blood risks with their overall portfolio? >> not when there's a case of the end of id is covering the risk and is generally assumption but it's something we started to look at them are concerned about the impact of natural disasters on blood especially given the fact that there's 500 to one leverage and in the environment leave them underwater. >> is there a separate assessment done by fannie and freddie using outside data or is it only at 5p and fema provided data?
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>> if i could follow up with committee and get what they use in terms of resources i provide that information back that would be useful and helpful. if in fact there is serious risk. what are you doing to ensure fha runs its risks, especially given the relatively and storm sizes we have had of the last cycle storms? >> were looking at the risks they happen to be coastal areas and many are price in these areas and were trying to make sure at this point given the leverage of anybody that they can stand any storms that may come. >> thank you. >> the dental woman from new york is recognized for five minutes. >> secretary carson, last week or chief financial officer and your visible deputy assistant
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secretary for community planning and development and made it for congress that hud intentionally missed legally requiring that hud made congressionally phones available to poor people. let me ask you, where specifically in federal law is hud empowered to unilaterally withhold cbp dr funds that have been allocated by congress? >> aas you know, congress has specifically mandated that the secretary of hud make sure that funds that are allocated for provided for certain jurisdictions have the resources to manage them. >> reclaiming my time. please answer my question. do your chief financial officer testifying before the subcommittee in housing said
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that you withheld funds that were federally appropriated by congress to frederico. my question to you is where in federal law you are empowered and hud is empowered to withhold money that was supposed to go to frederico. >> i can't give you chapter and verse but it does exist. progress has specifically said to the secretary. >> secretary carson. reclaiming my time since you will not answer my question. >> seemed like an answer to me back your staff previously claimed. >> are you looking for an answer or a soundbite? >> no, let me give you more back on. your staff previously claimed the agency delay agreements related to cbp funds to await an
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ongoing it audit however the specter general wrote to you in mid-september that she stated explicitly and i quote i do not recommend that the department take any specific actions with respect with [inaudible] delayed idolization of grant agreements for delaying publishing federal registered notices. if it was not the inspector general pushing for this delay i wonder if it was politically motivated. did anyone at the white house, including the president or the chief of staff ask you to withhold money that was supposed to go to frederico? >> interestingly enough, a lot of what we do is dated by common sense. if you have a jurisdiction in
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which there are three changes of government within one month in which has historically had difficulty with financial management to put an unprecedented amount of money in there without the appropriate controls -- >> that is not the question here. your it said they have taken oversight set in puerto rico and you withheld the money to frederico. you know what, simple answer to this is that the contempt of this and administration this is an abuse of power. it speaks to this and administration disregard for the people of frederico. the dozen people died in frederico on your watch. i will ask for your administration to send to congress and to this committee every medication related to perrigo we will find out what
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motivated you to hold this money for people (-left-parenthesis rico. if this was about corruption as you claim in the press when you fema officials [inaudible] >> we have nothing to hide site be glad for you to get you that information. >> yeah, one way way or the other we will know the truth. my next question to you -- i will you back. >> madam chair. >> when you accuse somebody testifying of personal corruption is unbecoming of this institution and not appropriate in a parliamentary language before this debate. members should be admonished to keep their opinions and to
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accuse the panelists in a cabinet secretary of personal corruption. >> no. >> will you yield? i'm talking. >> the time belongs to the gentleman at this point. have you finished your point? >> will you yield to the gentle lady of new york? >> sir, i'm referring to two fema officials that were arrested in puerto rico. the excuse that has been used by this administration is they will not let the money to go to puerto rico unless they take steps to make sure that the money is used with the intended goals. however, the ig of hud in a letter sent to the secretary of hud said that the people in the government of puerto rico have
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complied with everything that was asked from them and yet of the 17 states and localities that get disaster relief fund puerto rico was the only one whose money was delayed. enough is enough. >> reclaiming my time. >> the time belongs to the cha chair. the gentleman has noticed his concerns and have been responded to. >> madam chair -- smack the gentle lady was referring to the agency and if you're concerned is about language unbecoming of a member you should address that to all of the members at any given time we have all had language that one could consider unbecoming. >> madam chair. madam chair at the accuse a cabinet secretary of personal corruption which is what the gentle lady did is not becoming of members of this committee. >> the gentleman is out of order. the gentleman from oklahoma mr.
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lucas is recognized for five minutes. >> secretary militant, let's return to treasuries plan that lays out several conditions to meet before ending the conservatorship. we have touched on capital requirements here this morning and i think in an indirect way we will discuss ensuring that there is no market for disruption and can you expand from him in on the timeline and treasury is looking at to meet these conditions into and the conservatorship? >> thank you. pleasure to have a question on this subject. first of all, as we have addressed these bipartisan concerns are something the need to be addressed before you take these entities out of conservatorship. the first step was director and i amended an agreement to make sure the entities could retain capital is a critical part to make sure proper capital before
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we would consider ending conservatorship. >> the plan recommended reforms to protect the taxpayer and would you expand on what reforms are needed to ensure that shareholders, not taxpayers, bear bear the losses during any potential future downturn. >> i think the first issue is again to make sure we have proper capital in the second issue is to make sure that the director has appropriate reforms and that there is proper underwriting and proper allocations. >> again, one more time. you would envision a timeline of this happening -- >> i want to be careful in speculating but i would hope it is over the next one, two years. again it could be quicker or longer depending upon market circumstances. >> thank you, secretary.
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secretary carson, the hud plan indicates action should be taken to remove barriers for further adoption of manufactured housing. like my colleagues here i am sensitive about my constituents to an manufactured housing is particularly important in the rule communities i represent in oklahoma can you elaborate on how hard can move forward eliminating those military barriers? >> thank you. that is been a subject of great concern for us. as you know in rural communities particularly many factored house accounts for 20% of all the single-family housing. and yet, a lot of the regulations that have been in place treat manufactured housing as trailers and double lights. when in fact there has been tremendous progress made with manufactured housing. at this stage of the game many cases you would not be able to decide which manufactured housing from [inaudible] and
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they tend to be much more resilient. therefore it's an updating that needs to be gone and we have concentrated a violent effort on that to make extreme the good progress and i think it's one of the areas where we can make progress for affordable housing because you talk about things that cost considerably less. >> for many of my constituents if the entry-level housing opportunity. >> exactly. >> but that, madam chair i will back the balance of my time. >> the gentleman from georgia is organized for five minutes. >> director following the 2008 financial crisis our financial services committee help to under .-dot frank and i'd like to get an understanding from you of exactly where we are and as i mentioned earlier in my opening
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remarks were now at the ten year anniversary but it's about time we see where we are now after ten years in critical housing areas. what is the current default risk in each of the gse's portfolios? >> first let me say how much i strongly agree with you. think it's incredibly important and important time to take a look back. the most seriously rates for fannie and freddie are respectively 0.67 and 0.61. these are similar to what they were at the beginning of 2008 so again there's an adage that the worst loans were made in the best of times and we should keep that in mind today. >> let me ask. how does that risk compare to
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the default risk in the gse portfolios in the latter stages of previous economic growth cycles. >> certainly overtime there's been a trend increase if one goes back to the 60s or 70s my recollection is the default rates were significantly lower than they were in the last previous cycles so the last was an elevated level of delicacies and are busy in the part of all market participants but in the gse's and hence my concern about it the cycle turns whether the gse is ready. >> it's good to get your point on this as we look back but let me follow that there has been a lot of focus recently on debt to income ratio given the impending expiration of the qm of qualitative mortgage patch.
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so, director, do you feel that the debt to interest deal profile of the dti profile of the gse's portfolio when taken in isolation is a good measure for us to determine the fault risk? >> i will start recognizing that the debt to income ratio was explicitly mentioned in .-dot frank and you mentioned it is perhaps the best measure of ability to pay rather than willingness to pay and so the important factor in i would the first to say that borrower credit and loan value are strong predictors of the fault but we will note that frank specifically was a set of factors to be considered. >> well, you know the very highly respected urban institute found in a recent study that
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borrowers with dti ratios above 45% had higher default rates than those below 45% in buyers before and during the financial crisis but how dti bars add lower default since 2011 as i am sure you know so with that in mind is debt to income the right measurement of underwriting quality? >> certainly with appropriate overlays you can offset that risk and is where the gentleman is going i would certainly be supportive of progress revisiting having that dti mandated within the statute and i would think it's past time to reevaluate the effectiveness of the light mortgage will be back thank you.
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doctor and eckhard terry ben carson, i can't let this opportunity to escape. for you to answer us. do you have, in your own opinion, a full grasp of the impact of homelessness in this nation? do you? if so, what are you willing to say about it? ...
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for holding this hearing today on the administration's plans for reforming fannie mae and freddie mac to not allowing him the time to answer questions by and many think you've done an outstanding job for the country. i've said it before and i don't know why in the world you would take the job with all you have to lose and nothing to gain a
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and how the people live in this country i am eternally grateful to you. i would like to give you a few moments if you prefer to respond to the questions that you are not allowed to answer when asked. if you would like to take time to respond now, you have the time. we need to do everything we can to provide the right kind of opportunities to getting people into programs and on the roof and that is a good thing and getting to the level of self-sufficiency, so we have aimed at that.
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the question that was asked about homelessness, this is a very serious problem and one that is solvable in the country. if a place like tokyo has more people than new york city to solve homelessness then certainly we have the capacity to do so with the regulatory barriers come up hom, the home , apartment crisis and homelessness we can solve this problem by just throwing money at it. we have to look at the ideology of the problem and deal with the zoning restrictions and noise restrictions and density requirements with all of them, the regulatory barriers that caused the prices to go where they are and this is something
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that's a problem for democrats, republicans and independents. we neeindependents. we need to stop making everything into a political argument and fighting like three-year-olds they are the same ones i agree with that we have been working with but yet we haven't been able to sit down and talk about it. i think we need to be able to discuss these things. we are intelligent people and can solve the problems. thank you, doctor. you are also speaking of the word demonize if i understood the words correctly making sure the money spent was as congress intended for it to be.
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you were cut off before you could explain. >> first i'd like to explain in puerto rico they do have access to $1.5 billion, and about 2 million of it has been drawn down. so, i don't want anybody to be under the russian that they are having a crisis that can't be resolved by utilizing the money that is already available. normally it takes between a year and a half to three years to spend that much money. having said that, you know, the money for the unmet needs and litigation will be talking to them as soon as possible in a way that is safe within the federal monetary in place and we would do that for virtually anybody. it's the largest amount of money that has been given to any jurisdiction in the history of todd and i think we have an obligation to the taxpayers to make sure that it is properly
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utilized and to impac interact a positive way the people of puerto rico. >> do we have your assurances we are doing everything humanly possible through your agency to assist the people in puerto rico? >> absolutely and that is one of our highest priority is. >> thank you >> the gentleman from missouri who is also the chair of the subcommittee on national security, international development and monetary policy is recognized for five minutes. >> thank you madam chair. actually, i'm deviating from portable housing issues because i have two people here. i would like to deal with the opportunities on housing because the treasury, hud secretary, but because of what we have on the agenda tomorrow, the examination
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of facebook, i'm going to deviate a bit. mr. secretary, thank you for the response to my letter and thank you for looking at the issue of libra. i want to look at a little section of your letter. it says the working group on digital assets is monitoring developments related to the project is working to identify and assess potential risks and gaps on authority that may require more attention. can you go just a little further on that, secretary? >> absolutely. and thank you for your interest in the subject.
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we told them they thought the launch was premature. we have set up a subcommittee not just to address this and other crypto assets and make sure we have the proper regulatory. iif the working group going to
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assess systemic risks and apply whatever appropriate. it employs the financial participation it may be an avenue through which they regulate libra. is my interpretation correct? do you think they have the tools now to confront the potential systemic risk associated? this kind of frightens me and
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it's unclear whether the regulators will have the ability to require corrective actions if necessary in the united states we have the proper tools but if we need more tools we will come back to congress. my concern is more internationally to make sure they had a simila have a similad that we use within the united states. i was excited about the opportunity zones.
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it isn't coming out at a level that i had anticipated and the need to tweak it to get a greater response? to make known to the individuals that is happening you look at some of the projects going on in miami in your own area is a projects going on madam chair i would like to have this letter from the secretary. >> objections ordered.
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mr. secretary, last week i sent a letter i hope you were able to receive with a group of 28 bipartisan error hours of congrs urging you to request a study from the office of the financial research which is to examine issues that could affect the financial stability. i've discussed this with many members and they tell me they are supportive of that possession. every agency, every federal agency would do a study in order to be able to issue a ruling. it is required by the administrative procedures act but they haven't done that.
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have you received the letter and are you able to request oversight? >> i have received your letter and i appreciate your interest in the subject, this important subject we've talked about several times. we are pleased at least there are certain delays and implementations and i will be discussing your request at the next meeting to see if the committee thinks we should do this as you said but thank you for your interest. >> 57% of the loans to low to moderate income is that correct? what is the total percentage of the loans that are all made this year what is the percentage that fha would be involved in? >> well, the total percentage of
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loans that they are involved with -- >> what percentage of those needs this year would be fha involved? if there's 100 this year, how many would be involved? >> i think that i would maybe the director might have the answer to that. >> by recollection, i don't have the number in front of me, but certainly the first time it's to 50% and probably about a third of the overall market recollection and we can get that data for you. >> what is the percentage of low to moderate income for you? >> if you want a bigger picture you are getting between 80 to 90% and this is a really important point i would emphasize is different from the pre- crisis almost all of the mortgage risks and market today
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is being backed directly by the taxpayers let me emphasize i don't think that they have ever been more exposed in the mortgage market than any other time in history than they are today. >> my question do you have a percentage for your agencies with percentage do you think the total would be? >> 34% of what we do is for minority and as it was mentioned before, low and moderate income about 57%. >> would that be about the totality that you are looking at? >> yes i will certainly emphasize it is much higher than for fannie and freddie. >> what is your source of revenue in come?
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>> mr. carson. >> our money comes from the financial activities the loans are made. to be able to absorb losses in my world when i was a banker white and examiner. it would seem to me to raise the fee ticket additional analysis is that correct?
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>> we have been setting this in the past based on the shadow amounts of capital. >> i would like to pick up on this question prior to the changes. so the shareholders?
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>> if the capital. i will note the obligations in the agreement that we recently signed as an increase in the treasury's liquidity preference at the same time for the successor or any competitors as you privatize. >> first let me emphasize my statute they already are provided shareholders so there is no privatization.
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i am following the instructions that have given my congress conservatorship that is what we are doing. >> had the taxpayer not bail them out during the crisis and during a comparable crisis in the future, these entities or any comparable but you are contemplating will be bailed out simply because this body will have significant time to be able to legislate a different path forward if you so choose. >> my difficulty is in the decision to do this and other
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decisions you're making is having a huge effect on the share prices at which they were trained now let's talk a little bit about those. it was well-documented in the subcommittee investigation that hedge funds and other products and the same for pennies on the dollar and what's more they served on advisory committees to the president on this very issue so what sort of conflict of interest vetting took place to conclude if that was appropriate? >> there is an obligation that needs to be paid back.
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>> with the premise that the shareholders are getting a benefit of a sweep. >> has the price gone up? >> i don't look at is one way or another. >> can you get back to us? >> in the conflict of interest at the treasury and everyone making the decisions abouevery e shareholders sweet i guess that applies. the if the circumstances presented itself to where we have to, we will. >> i look forward to that. i was concerned october 10, you participated at george mason university where you commented
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they were looking at ways for fannie and freddie to increase the return on equities that have been this would increase the amount that was eventually going in. so it is unclear to me who you are actually working for. why are you concerned about the return on equity? >> they are leveraged 500-1 to the capital now before the downturn. >> if you are planning on privatizing them, i agree completely we should still wipe out the shareholders and look forward to working with you on that. i will deal back. >> thank you madam chair. i just want to make sure that
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you are able to wrap up what you thought tha of sort of extendedr the last two. i certainly hope we never see another downturn in the housing market but i believe that it's my responsibility as the regulator to hope for the best but plan for the worst of this impacts the families and communities that i think it is absolutely critical to get fannie and freddie in the position they can decide the downturn and that requires building capital as soon as possible. the fha attempted to grow its way out of some of the problems and displace the private capital and has expanded its taxpayer risk. we are not trying to grow our way out of the risk. the fha acts as an accordion to
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make capital available and credit available in times of economic distress. >> so it should be countercyclical. we are not seeing that right now, are we? >> i think we are at the time of the height of the crisis, fha expanded enormously. >> what i am concerned about is how do we make sure that we get the private risk back into the system? that's what i'm really trying to drive at. one of the things you probably noticed in the plan is having some phenomenon where we make the contracts based on the risk factors involved rather than having a one size fits all model. >> i'm puzzled by some of my colleagues who seem to think we ought to declare everyone has a
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720 scorer and we should treat all debt and mortgages the same and there shouldn't be any sort of risk analysis. it sounds like they have their cake and eat it kind of scenario in many ways and i guess that's what i'm trying to drive at is what are the key components of the infrastructure that need to be in place to incentivize that additional capital to enter into the marketplace. >> the important question that was asked part of this is getting the regulatory playing field level. i think it's also important that they get to work with the securitization. for this reason is gone to
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freddie and fannie is they haven't been exempted from so many of the rules that other market participants have to live under so i think it is critical that we get to the level playing field where they can all compete and that takes a greater standard. >> correct. the its needs to be not only a conservatory regulator. how can you accelerate the goals because i'm worried in a number of areas not necessarily served by the primary mortgage market and not consistent with what congressional charters have laid out. >> with me emphasize historically the agency in the
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conservatorship is used as a substitute for the regulations one of the things we are doing is going through for instance the directives issued in thinking about what we need to be able to do a bit is a natural time to do that review. >> absolutely. >> one last thing and my remaining 30 seconds about the multifamily lending a that has been involved in the lender model which is a tension model and i know you believe you've got some rules that have been proposed. i'm not expecting answers on that, but i'm curious what economic analysis has been performed to justify the capital requirements. >> as you mentioned there is a part of the rule that applies to the multifamily business you're closely looking at that as we
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make fina the final decisions mg forward on what we should do since we are in the rulemaking i can't go into the details. >> on a live life to announce that i intend to adjourn the hearing shortly after the votes are called that will likely occur around 1:15 today. the gentle woman from ohio on the chair of the subcommittee on diversity and inclusion is recognized for five minutes. >> madam chairwoman, i need a five-minute break. >> you are excused for five minutes. we will recess for five minutes. the committee will come to
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order. the gentleman from ohio on diversity and inclusion, recognized for five minutes. >> thank you madam chair, ranking member and the witnesses today. the panelists here today are shocked by the title of the hearing. first, let me say since they have broadly criticized your plan to overhaul the housing finance system especially the proposals to get rid of affordable housing. too many americans lack what we
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call an affordable place to call home. the national problem that exists in communities across the country, affordable housing further say that housing finance system is supposed to serve homeowners and renters. currently it fails on both accounts. the plan will not raise the cost of homeownership or decrease access, but affordable housing experts disagree with that. secretary carson said for too many still can't get their foot in the door. you will have to forgive me for taking the side of affordable housing advocates and experts.
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they almost more than 20% every year since coming into office. so, mr. secretary, mr. carson, when the three of you were on the panel in the senate, you stated you did not believe the plans would increase the cost of homeownership or decrease access to mortgage credit. i have dozens of organizations have called my office saying this would do the opposite of what you believe and what actually raised the cost of homeownership and they get more difficult for the creditworthy borrowers to unlock the american dream of homeownership.
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which studies are you looking for. >> for them to be able to have housing, you know, -- >> let me reclaim my time coming out your belief and not what you feel what did you base it on empirical data and analysis, so talk to me in a way that this is why we are doing it because this is what they portend the data
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shows. it's the same thing that they were saying the opposite they come into my district more often and they give me the data showing that we have a problem here and that is the reason for the title. >> national association of home owners shows the cost of a single-family house 25 to 27%. >> the federal housing administration is responsible as you probably know or should know.
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yes or no, my time is clicking. >> i can't answer yes or no. >> how about you, mr. secretary. >> if he refuses to answer or doesn't have an answer. thank you. i'm sorry. my time is up. >> the gentleman from ohio is recognized for five minutes. >> thank you madam chair. as i said tha at my opening statement 11 years into the conservatorship we have seen the report from the house an house e senate and republicans and democrats to tell me that you
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are okay with the principles that the chair put out. so, all three of you have said that you are okay with the principles the chair put out and again, from your written testimony, but i have seen if your previous comments, do all of you prefer a congressionally worked out bipartisan housing finance reform proposal to administrative action? >> that is correct. >> can you all comment? >> if we have something that is worth a bipartisan basis. since we agree on the basic principles that should be possible.
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that's where i'm trying to go. >> let me say yes and i don't envision myself doing anything administratively other than carrying out the law as it is written today. thank you, director. >> was the three of you and your team be willing to work in a bipartisan working group on housing reform with republicans and democrats from this committee? >> absolutely. not only would we be willing, we want to both across the house and senate so w they can get legislation to the president to sign. we would be delighted to. >> thank you. so, in two minutes we have established that frankly you all three agree with the principles of the chairwoman has laid out on the housing finance reform, and i also don't have any problem with the principles and that you prefer congressional action and that you are going to work with us. i know that's going to you know, make some of the skeptics around town feel like it's not true, but i think really we agree on
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more than we disagree on. we all want to look out for housing availability, affordability, and we all want to protect the taxpayers but if it is republicans or democrats, regardless of where we are from we bring our own unique perspectives based on the geography we represented the people we represent and those economic and housing conditions, but i do believe that we can work together to make meaningful bipartisan reforms of our housing finance system and this is the only piece that is left undone from the crisis. we have an obligation to the citizens of the united states to work in a bipartisan, bicameral process with the administration to actually try to come up with things. like i said i think that the chairwoman's principles are acceptable to me and i'm willing to start there and work and i would ask the chairwoman to
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please take this offering of trying to work together and let's see if we can't do something because it is time to make something happen and not only are taxpayers on the hook right now, but we are doing everything we can to make affordable housing work for people and take away the differences between populations. i know that there isn't some minority communities including the african-america african ame, a lower percentage of homeownership than i'd want and you want, and i think that these witnesses want, so i think that we can and should try to work together and i am hopeful that we can and i'm going to roll up my sleeves as the ranking member on the insurance and housing subcommittee. i know that there is a lot going on but let's focus on the housing peace and let's try to make something happen.
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and i want to work with the three of you and your team to the chair and republicans and democrats, and i appreciate you being here today. i know that there are sometimes tough questions, but i know the three of you believe in making the housing system and housing finance system in the united states the best in the world, the most affordable and available in the world for the american dream, and i want to work with you and the members of the committee republicans and democrats to make that happen. and you for your commitment and willingness to do that. i will yield back the balance of my time. >> the gentleman yields back, the gentleman from california is recognized for five minutes. >> welcomed him and again thank you very much madam chairwoman for this hearing. again i think the general for his words i think they were very appropriate. i do have to say that we have a little bit of a short memory
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around here. i do recall to the ranking member might be instructed that we go back and take a look at the record of some of the comments that were made in the previous years about the director and see if tv on your side of the aisle and take a look at the words that were said. to make it even on both sides stewart it was the gentleman yield in the very analysis, fair and levelheaded analysis something we all should note including me and thank you for raising that. >> then i would like to ask talking about both sides, it is interesting i get to talk to a lot of people and the american dream is still the same. most people want a safe place for themselves, their family, they want their kids to do a little bit better than they did and most people want to own a home i think that has changed in california not a single-family detached home now especially
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melanie also are looking at different types of living arrangements. i think it is all appropriate but still the same, they want a place of their own and they also don't understand when things get a little rough and tough in the economy why it is they have a hard time paying for their home and why they don't get bailed out with the big banks do. why don't they get the help that others got? and they don't think that that's fair and to that point, i am not confident that the administrative changes that you want to make here are fair. director, i do want to ask you this directly, and if you could comment about it, you talked about i that already, but this s with regards to your appearance on cnbc as you mentioned the companies comments and part of the discussion now in a comment that took place were supposed to be present and this is what i would like you to comment on,
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the director's comments on the sidelines major industry gathering were rushed as he tried to engage with the companies that already have shares that were never wiped out whether we can do some kind of conversion whether they would get far it's too early to figure that out and as a reminder of the plan that crushed them into conservatorship as the financial system in 2008 and subsequent amendments gave the treasury department more about 80% of each enterprise as the senior preferred shares in other words they are concerned about who is going to get bailed out once again and that is my concern. could you comment on that and i will give you some time to comment on that. >> would be very strongly say i agree with yo you and none of ts is unfair. i would have preferred to have inherited a fair situation when i walked in but inherited a mess.
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my responsibility of the statute is to fix fannie and freddie and there are two options you either fix them and get them out or take them in the receivership. the option of endless limbo is not an option under the statute. so, i would prefer but i have a fair situation to enforce, but i believe fannie and freddie got bailed out and homeowners did not and that this is me off to this day. and i'm mad about all the other bailouts and i commend to you today about my number one objective is to see that we never, ever have to bail them out again. >> i would also caution that they have allowed many people to own homes that wouldn't have before. we look around the world the 30 year mortgage with a fairly low down payment is what allowed a lot of americans to own homes. every country doesn' doesn't afs unique almost over country and i hope we don't destroy that in the process. i do want to give the secretary an opportunity to comment on it
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if they wish. first of all, you have my commitment-or out of the housing market for 35 years and i can assure you i very much support the market and want to make sure we do this but i've also comment oi would alsocomment on the pre. we have made no decision as to whether they would accept my conservatorship order receivership and i would comment i represent the largest creditor which is the u.s. government, and we would need to be part of any decision. again, we are focused on how to make them safe and sound and capitalize on them and then we can figure out the process of raising the exterior capital. i'm very much against the home bailout issue and too big to fail which is why a lot of the division is being done, but also recognize the importance of the american dream. >> the gentleman from kentucky
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mr. barr is recognized for five minutes. >> thank you madam chairwoman. the title of today's hearing is revealing. the title is the end of affordable housing them in the revie, the reviewof the trump as plans to change housing finance in america. this suggests my friends on the other side of the aisle believe any effort by the administration to reform housing finance will increase housing price prices ao disadvantage low and middle income borrowers. in reality, the proposals set forth by the administration laid the groundwork to protect taxpayers in the mortgage and improved efficiencies in the mortgage market and lower the prices for qualified borrowers. by pushing back against the commonsense reforms to housing finance, the democrats are endangering the very low and middle income citizens they claim they want to protect. unreformed oil bluer americans to buy homes beyond their means and then default width for closure as a result.
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that's not helping low-income americans at all. we have seen this train wreck before. democrats opposition to meaningful housing finance reform will take us right back to where we were prior to the financial crisis. for years the government's policy was to drive up mortgage indebtedness above the market could naturally sustain. for example, let's rewind the tape back in 2003 this committee held a hearing on ways to improve regulatory oversight of the gse's and during that hearinhearing that thenranking d this. i think it's clear fannie and freddie are sufficiently secure so they are in no great danger. he continued fannie mae and freddie mac do very good work and they are not endangering the fiscal health of the country, "-end-double-quote. how wrong he was. let's not let this conversation and in the same way. it is alarming that the
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enterprise share of low down payment and high debt to income mortgages are now higher than before the financial crisis. but i would suggest what is even more alarming is that the democrat majority today is defending the state of affairs. winston churchill said those who fail to learn from history are condemned to repeat it. the administration's proposal seeks to place the housing finance system on a sustainable path of protect us from another housing crisis and i applaud our panel for their leadership. now, my first question that i want to ask you relates to the credit risk transfer issue to the secretary. the treasury report calls on them to engage in a diverse mix of economically sensible credit risk transfers including by increasing reliance on the institution level capital. unfortunately, current capital rules hinder the bank's willingness to take on credit risks. capital rules based on the simplified structure financed
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approach are grossly misaligned in the credit risk. it was intended to cover all lending including unsecured debt as it was trying to make sure that the banks are not making unsecured subprime loans. however the interface makes secure subprime loans and invest capital charges can be as high as five times with the expected thursday to lose in the worst recessions. with charges like that it doesn't often make economic sense for the banks to take on more risk despite the desire to do so. secretary, do you agree international capital rules mostly affect th the private bas willingness to take on the credit risks from the gse is and will you commit to working with the bank regulators to explore ways to better tailor the capital rules so that the private sector they assume more credit risk from the taxpayers? >> yes and yes. >> thank you. secretary carson, private mortgage insurance can help borrowers with small down payment and help them get into houses and stay there without
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putting the taxpayers at risk. what role does your plan contemplated shifting some of the risk from the fha to the private mortgage? >> we very much want a private mortgage insurers to become a significant part, particularly after the gse exit of conservatorship. particularly in the smaller communities and rural communities they can play a very substantial role and we are looking at the ways to make it even easier for them. >> i appreciate that i think it is a good solution for both affordability and protecting the taxpayer. finally, director, private-label securitization, what is the in your mind the ideal portion held versus portfolio lending and private-label? >> i think we need to see more diverse sources of capital. when i study economics they were not good for consumers and i think they keep bringing more competition to this and it's
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critical. i don't want to say an exact percentage but there needs to be a wide range of sources. i think level the playing field on the regulations to encourage more lending and securitization is the right way to go and i applaud you for moving in a direction and yield back. >> thank you to the gentleman from florida, mr. larson is recognized for five minutes. >> thank you, madam chair. and welcome to the committee today. secretary carson. this question goes to you and you probably understand what i'm going to say you have the opportunity to visit in my district with the housing conditions that exist particularly in the jacksonville area. my concern has been one of the things we talked about then and is subsequently follow for setting up housing for our young
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people, deferred so they can save and the tax-deductible until they have enough capital with $20,000 or more so they can use those funds for a down payment, and the reason why i talk about that antalked about y to elaborate on that is so many of the young people today sometimes don't see buying a home as an option. and i live in an area where a lot of them land and get the chance to talk to them and they don't see how they are going to get ahead with student loans and other things that are oppressing on them coming out of school, so what is your opinion on the deferred higher ease for down payments accepting in emergency situations but to be used for a down payment on a home? >> thank you for your interest. that happens to be a great interest of mine as well. i think we need to entertain all
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of the ideals and it's one of the reasons that we are pushing the self-sufficiency programs where people can accumulate money and not be penalized and that can g go into escrow and views for a down payment or other things of that nature. ira, whatever mechanism we can use is very much appreciated because as you know, home ownership is the principal mechanism of wealth in this country and one of the reasons that the wealth gap has deteriorated significantly is because a lot of people particularly in the minority community and african american community have their credit ruined and as a result of the oe committee received a home ownership rate decrease. we are looking at ways to an hourly rate that situation. >> the director wanted to comment on that? >> i absolutely agree.
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in between the government did the work with the consumer federation of america saves initiative, and i'm a very big belief or i would say i think it would be appropriate if there were another reform at some point having a universal savings account i think the very helpful in terms of helping the households save. >> i look forward to continuing to work with you as the legislation is being developed and with that i will yield back. >> thank you. the gentleman from colorado is recognized for five minutes. >> thank you madam chair. i would like to be able to speak somewhat to the issue of the portfolios and guaranteed businesses while they have been in that conservatorship. i do appreciate the comments made by my colleague in regards to the passage of dodd frank where prior to it, we have ones that have been made with no documentation of loans with its key product features such as
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negative amortization. director, could you maybe speak how can we ensure they continue to be able to avoid such products moving forward as fannie mae and freddie mac exit from conservatorship? >> first i think it's important to make sure that they enjoy the same consumer protection others have said that therefore they are allowed to replace it with a set of consumer protections that works for all borrowers. so that is the most critical. making sure there is the capital to support the risk obviously all financial institutions including those that exists to take a degree of risk the real question is having the capital to support the risk so that they can engage in increasing the opportunities but also to try to make sure we have better procedures in place and making sure that the underwriting is there and the products don't come back into the safety and soundness is there. >> that speaks to what this booy spoke about in the testimony on the leverage ratio.
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>> even if every single loans fannie and freddie made were pristine, they would still fail at that amount of leverage. >> thank you for that. the ability of the customer to be able to repay speaks to the health of our financial system and you need to be able to make sure that the borrowers are taking a long only what they can handle in terms of the payment and secretary carson, you mentioned about the loan insurance, to be able to have that as well. when we are talking about your predecessor, you made some fairly risky programs during his tenure while he was in office. how would the administration's proposal make this more risk adverse and also how would they preserve those currently in place over the long-term? >> let me emphasize i believe that any reduction of the footprint can be quite modest
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when we are dealing with any sort of insurance program where it is the tail of the distribution, and quite frankly the story of any sort of reduction of risk for the ones we don't want to get the families into particularly at this point in the cycle. i think it's important to keep going. this has been a long housing recovery and the depreciation is behind us and what we really need to be able to focus on is how we prepare the families and how we prepare damiana freddie and the economy for the potential ter turn in the housig market. >> secretary carson, do you have anything to add to that? >> agreement. >> thanks. we have a love of places in the industry right now and across the aisle that are questioning the timing of the administration's proposal and director, you just noted that right now in terms of the current default rates 0.61. we have a pretty healthy economy right now. they are during good times so
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why is the administration's proposal needed now? >> if i can paraphrase the time to repair the roof is when the sun is shining and right now the housing market and the economy is strong. this is the time to do it and i fear that if we don't do that now we will not be able to make these reforms in the time of stress. >> do you have a comment on that? >> i solely a very. when is a better time to fix it then when things are good, absolutely. >> i appreciate the comments and the administration's position in terms of trying to be able to reform fannie mae and freddie mac some paths are simply not sustainable. i think every individual, we want people to be able to have a home but we also want to make sure we are putting people in homes they afford and make sure we have a sustainable system when we are talking about being able to build up wealth and a
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primary residence is obviously the biggest wealth most people are able to accumulate in their lifetime and it is important that we have a system that isn't going to be punitive and put people into a position to where they will lose those dollars in the event of ultimately what would happen in the business cycles we will see economic downturns. i wholeheartedly agree with six the roof while the sun is shining and i applaud the administration's proposal to be able to try to address this and appreciate the gentleman being here today and i will yield back. >> the gentleman from michigan is recognized for five minutes. >> thank you, madam chair. an investigation in whic investn detroit found that about 40% of people in the protected classes experienced unlawful differences in treatment by housing providers. this unlawful discrimination is usually hidden and it's not like we are going to find sign assigs that are outdoors and homes that
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say don't rent to black families or no muslim families or lgbtq families. yes or no come as a degree course and do you believe landlords or property owners are housing providers anywhere in the united states have ever engaged in the discriminatory practices against protected groups? >> of course they have coming an, and westrongly oppose that. >> yes or no do you believe that there should be some level of protection to prevent or stop discrimination that is rarely explicit nowadays? >> of course there should be. >> under your leadership, the proposal to make substantial changes to the impact standards under the fair housing act the rule would make it harder for families facing housing discrimination to seek justice by shifting the burden of proof onto them. can you explain why the agency charged the fair housing act proposing to make it more difficult for the plaintiffs to bring forward housing discrimination claims under the disparate impact standards?
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>> i can probably give an example if congress decided they want to raise the minimum wage to $15 an hour the people who would be most impacted would be low skilled individuals, and a lot of those low skilled individuals would be in the minority classes and therefore they could bring a disparate impact. we want to make sure that obvious cases of discrimination can still be addressed appropriately. .. complete intention is to showtht is discriminatory against the family. the different impacts help with going after those that are going
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to hide the discrimination. it's not like they're putting signs up anymore. it's not like we will find e-mails. sometimes we do but this impact allows people access to justice to show how the discrimination. i'm disagreed with your example with you showing that most of the claims coming forward, you still had a huge burden to show that impact. it's not as easy as it claims. i had a number of clients and residents come forward and we love more black homeownership in michigan than any other state and we've seen shifting of homeownership away from communities and we do believe it stems around housing discrimination initial be equal access to bring the claims forward. i strongly disagree with and also to bring forward and advise your department to push back against the impact making it impossible secretary carson to
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bring a housing discrimination claim. but director, we know that a quarter of the mortgages provided by government sponsored enterprise -- i know it's been discussed. the treasury department acclaimed in order to protect it making housing more affordable, federal housing finance you should bring private lenders to foster in the financial system. any time fostering competition be brought up or used is resulting is enterprises getting richer than ordinary people. these private lenders also have an obligation to make a quarter of the mortgages they back to low-income borrowers. >> all of the private lenders who every genetic mortgages and the gse are directly impacted by the housing goals because they have to meet the housing goals. let's say you're a lender that sold 100% of your loans to
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fannie or freddie you would on average meet those goals. indirectly it impacts the originators and servicers with fannie and freddie. >> what my residence would ask is about accountability. how can we make sure these private market participants are to the american homebuyers rather than shareholder profit. >> i think that's a great question. i have no ability to regulate the counterparty in a regulate directly fannie and freddie in our accountability is when they meet those goals they can only meet those by the ones that they buy from essentially meet those goals. >> lastly, always remember your creating a structure that allows it. >> i appreciate that. we might thank you so much chairwoman. >> the the german from texas as reckoning for five minutes. >> i think all of you for coming here today. i asked both the secretaries
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when they been here in the past, this is the first time i have had the opportunity to ask, are you a capitalist or socialist. >> , pretty hard in capital. >> thank you for that. i look forward to working with you all over the next few years and housing finance reform. and there is a problem with the affordable housing in this country but not because the recommendations laid out in the last two reports. it's a direct result of local regulation. they validated zoning the laws and parking mandates are just a few dat things developing new affordable housing units and have prevented supply for meeting demand. secretary carson, regardless of the ministry did housing finance system will it make a difference to the affordable housing stock if state and local government do not address the root of the cause of the issue. >> no in order to be effective it will require a combination of
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federal, state and local jurisdictions. a lot of the problems obviously our local regulations, 80% of the regulations are local in nature and many of them archaic. instead of placing one regulation with another one they come up with something better and layer it on top. we become a complex labyrinth to get from point a to point b. each one of those is an expense as well as creating more time-lapse. d&c is the worst financial state now than they were before the financial crisis. even after they retained 45 billion and earning over the next 18 months they will still be drastically undercapitalized for the $5.5 trillion in assets. secretary mnuchin, what do believe is appropriate capital standard for the gse's and do you think they can raise the amount of capital from the
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private sector. >> in regards to the first issue again i different to board of directors analysis before we. i believe the gse's can raise a significant amount of capital from the private sector. we do anticipate the combination of retention and third-party capital raise. there will be sufficient capital to get to the new standards. >> okay. the gse has significant market advantage because of the congressional charge and other statutory privileges. there's also been several things tlc self done with conservatorship that have increased their advantage over private sector participants. you briefly touched on this but as we move forward in this process can we elaborate how their ministration plans to level the playing field to the market entrants can fairly compete with fannie and freddie
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in a reform housing finance system. >> thank you. i think this is critical, i want fannie and freddie to be successful and effective but i want them to be successful and effective because of good business practice not because her help to lower standards and everybody else. imagine the qualified mortgage real i believe there making progress and that was mentioned as a treasure report as well. i have a number of conversations talking to the sec and the bank regulators trying to get -- to get the mortgage market to move again. all the quarter nation is a number of things were working on. >> one last question you say one of the critical changes prior to the end of the conservatorship and strengthening the powers of the regulator. what changes are needed to the fh if a to be equipped as a
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regulator in a post-conservatorship world. >> one of the powers i asked and i know it's being discussed within the committee we all remember post-kaplan the transition to the cloud and the federal reserve and other bank regulators to the bank services act to look up service providers. they are transitioning to the cloud and all the mortgage data, i have no authority to go in and do the same thing that the federal reserve and others to make sure the cybersecurity that made unto me threaten fannie or freddie. like every other regulator i think it's important to bring competition to the marketplace and i'd like greater discussion, if you'd like to know what i like under capital standards look at 38 under the insurance act, if you can give me that i'd be delighted. >> competition is good. >> absolutely. none of you have touched on this but also a astros in six and i yield back. [laughter]
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>> thank you the gentleman from illinois is recognized for five minutes. >> thank you, madam chair. circuitry mentioned undersecrete treasury department sanctioned the targeted strategy believed to be close to prudent and designed to punish for western emergencies the treasury department look to those in 2018. as you know therly this year thd that he began collecting $10 million a year in 2006 to advance prudence interest in western government in june 23, 2016 he was named trump's campaign chair and listen to weeks later june 7, he asked for intermediary pass, if he needs private briefings.
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two half-year sanctions were lifted and after that they announced it was investing $200 million into a project in kentucky. in april this year you testified on this committee that you delisted the sanctions because this is your quote, the company approach does not approach them they approach us a large group of people. was senator mcconnell among the people who approach you? >> i'm not sure what this has to do with housing reform. >> the trust in our financial system depends on the entire system. >> again i'm happy to answer but i don't see the relevance to housing reform. no i've never spoken to mitch mcconnell about that other than when we briefed the entire senate. >> did secretary approaching to that the sanctions? >> no he did not. >> did any member of congress approach with respect to lifting the sanctions?
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>> not that i can recall that we had extensive discussions with many people on what we would do about lifting the sanctions. >> did craig of brady industries approach about lifting the sanctions? >> i'm not even sure i'm aware of who that is. >> brady industries the company of substantial beneficiary in kentucky. >> i'm not aware of who that is. >> did anyone associated with brady industries approach you? >> again as i've testified before, we lifted the sanction sanctions -- >> a yes or no is fine. i'm just asking if you understand. >> i get to that because of last week, it was reported in december of 2018 largely with your decision to lift sanctions there was a seizure of documents from tariff services ltb, a london-based company, real estate firm that he controlled.
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as that rate has been described as being in connection with the special counsel investigation and of course the one led by mr. this rate is substantially ca contemporaneous with lifting sanctions and you depreciate i'm sure about this all looks so the question is, did you have any knowledge of the raid or the preparation for the raid at the time you made a decision to lift the sanctions? >> i find it interesting when were here to discuss housing reform that you're trying to grow me on something that happened months ago. >> i would reiterate if you can isolate the financial sector lehman brothers would still be here today. i'm concerned whether or not people trust the treasury department is acting in the best interest paid to do have knowledge of the raid or the preparation at the time you lift
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the sanctions? >> i did not know the raid with a special counsel. >> any of the incidents that you've given me can i assume that your lack of knowledge can be applied to the entire treasury department, were there people in the treasury -- >> of course you cannot assume that i'm not making this presentation for people within the treasury department. hagan -- >> the final question -- >> if you have concerns work happy to discuss at the appropriate time. >> my final question and your willingness to share. were you here today to ensure the ploys of the treasury department under control will comply with any congressional subpoenas relating to this. >> i will assure you we will follow the law that is reviewed by the general counsel. i think as you know we have received subpoenas that were not legal in all refer them to my general counsel and they will be reviewed. i can assure you will always follow the law. that is our intent. >> let's hope so.
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are you back. >> the gentleman from arkansas. mr. hill is working nice for five minutes. thank you, chairman own waters i appreciate secondary mentorship and cursive for being here today. in your presentation to the senate, you can tell all the interest that we have on this topic in the committee about a year ago i wrote about huffing and freddie have been violating -- this is my view of violating their charters and misleading congress and misleading investors dating back to the 1980s and i am always very suspicious of reform ideas since the 80s, 90s and the 2000 have really not delivered very successfully on those. the agencies have entered an activity including but not limited to mortgage insurance to
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non-bank and mortgage servicing rights. these concerns regarding the proper role in the overall housing market which we talked about today. additionally the gse has continued to grow footprint by increasing the loan limit allowing subsidies for second homes and increasing caps for multifamily lending. to collaborate, you looked at this issue now that your head of regulatory body, how are you going to ensure the gse's stay within their charters. >> thank you, congressman and let me emphasize, this is a critical concern anytime a player in the marketplace has considerable market power they try to leverage in other lines and i think that something we have to be cautious about when fannie and freddie have the ability to put anybody out of business that they can compete with. it's a large concern of mine in the housing economic recovery act in 2008 set up a structure for product approval and this is
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a big concern going into the crisis and i'm disappointed were 11 years later and there's not been an establishment before we got there. what will set up a rulemaking and have a clear process to make sure -- >> i thank you for that. i think you can echo mitch daniels former governor of indiana in the yellow pages, it does not need to be done by the government. i urge you to be very disciplined in looking at the process. you reference in your testimony on page three that your job to remove the gse's from conservatorship with reorganization, rehabilitation or other affairs, a ticket from the treasury report and the hud report there is a biased towards recapping and releasing, those are my words, not your words. but it's the appearance that the implication by what's been said is that we will release these and they will raise capital with reduction and renegotiate the
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for preferred stock negotiation and going back out to the marketplace. do support recapping and releasing fannie mae and freddie. >> i do not support putting them back after the way they were before the crisis. i will say i share secretary mnuchin earlier point that no decision has been made moving forward. i have a responsibility in the interim to help those enterprises. >> secretary mnuchin would you like to comment. >> i would say your characterization of a bias i don't agree with that. i think outside testified earlier we have the option to take them out through conservatorship or receivership. we have not had any discussion in my senses what we do agree on they need more capital and we would hire appropriate advisors to determine what's in the best interest of the taxpayer. >> so you're open-minded about the various models of substitution that might be
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proposed? in other words we have proposals to have a mutual that is a utility nonprofit that the utility government that's utility. or the recapping release with competition where the director has congressional authority to charter new energies, you are open to considering all these options? >> i would say our number one objective is to make sure we meet the housing goals that they have been outplayed into protect the cow taxpayers. whatever the best alternative is. >> thinking mr. secretary. secretary carson, earlier this year when he testified i recommended fha commissioner brian montgomery test about the committee and i still hope our chair will courag encourage hime and discuss fha's book of business. i'm concerned it's deteriorated at loan quality over the last couple of years and fica scores are lower that dictate income ratios are higher and that's
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concerning to me. and also they have mentioned the gse's competing with fha for the same first-time homebuyer market. so carson do agree the gse should not compete with the fha first-time homebuyer market the secondary market? >> i think the gse's have a different mission target than fha does. and can they both work with than that, of course they can but one is more specialized like a cardiac surgeon and a urologist. they both could probably operate on your heart but i think you'd probably rather have a cardiac surgeon. >> will put you down on the next witness for that. i yield back. >> the gentlewoman from virginia your mechanics for five minutes. >> thank you, madam chairwoman and thank you for everyone here on the right side.
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and thank you for the distinguished gentleman to coming to talk to us about the important topic. secretary carson, fha charges a flat fee for mortgages that it backs. your plan for housing finance reform recommends a risk based for fha loans. advocates have expressed concern that it's fundamentally undermine the commission to underserved borrowers by charging them higher premiums to those who can least afford them. has hud evaluated the facts of risk-based pricing throughout the current section? specifically what would be the effect of tiered pricing on the least wealthy americans whose credit scores are below 650. >> this is been a subject of great conversation. we have looked at the different scenarios and we feel if we just have a one-size-fits-all model, it has a tendency to attract higher risk people into the pool. in the long run it could actually elevate the cost for
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the low-income individual. >> you didn't answer the question but with the fee be higher for high-risk individuals and lower for lower risk individuals. >> yes. >> has the hud conducted a fair housing analysis to determine if protective classes of borrowers would be disproportionally impacted by the new policy? >> protected classes would undergo the same type of credit risk analysis. and they would have the fees appropriately scheduled for them. >> are you saying the fees would not be based on the risk it would be based on whether or not protected class. >> these are based on risk whether you're a protected class or not. >> so has hud conducted a housing analysis to determine what the impact would be? >> it's in the information.
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>> did hud conduct an analysis. >> of course we looked at the various scenarios and we have the information. >> is information that protective classes are disproportionately impacted by these risk based fees questioning. >> no they are not. >> if you would share that analysis that would be fantastic. thank you. >> secretary carson, hud's plan for housing finance reform recommends congress established fha, v8 and usda as a sole-source of low down payment financing for borrowers not served by the conventional mortgage market. are you recommending that fannie and freddie get out of the business of backing low down payment loans? >> i think it would be good if we have segments of the housing finance market focus on particular mission targets it does not mean there will be some overlap. >> if fha va has monopoly on the
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lowdown payment loans one of that crowd out private sector participation in those loans? >> the private sector could decide which segment of the population they want to specialize in. no one would try to tell them what they could or could not do. >> that would probably disproportionally impact less creditworthy protected classes as well would it not? >> it depends. some people in the private mortgage insurance market might decide they want to focus primarily on low-income high risk individuals but that probably is not going to be the financially best move to make but they might feel social obligation to do that. we would not preclude them from doing that if they wanted to. >> if not social obligation or social desires to be a motivating factor among those to these.
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>> secretary carson i see we only have one minute left so i want to give you a chance to apologize for, you made during a meeting with hud staff last month where you describe transgender as men. >> i was relating a story of the women's group that told me about big hairy men who were not transgender women by the way coming into your facility and having to be accepted because of the rules that were in place -- >> what was the women's group that told you the story? >> it was a group from alaska. >> what was the name. >> i don't remember. >> can you get that first please. so you don't feel the need to apologize for the common. >> no i think this will concept of correctness you can say this you can say that you can't repeat what someone said is foolishness and we need to be more mature than that.
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>> very good. thank you very much. i yield back. >> the gentleman from georgia mr. letterman is darkness for five minutes. >> thank you madame chair. thank you all three of you for being here. and doctor carson, secretary mnuchin u.s. have been here before and you're aware that tricks that go on. and i appreciate you being here. sometimes i'm amazed myself with what happens here. there is a popular television commercial about these young people in the middle of a horse show and the have an opportunity to run away from this terrible incident they are in and they jump in a running car to go behind chain cells instead in rancho cemetery. i often relate that to congress. as it seems like when we find yourselves in the middle of a really bad situation some of us look for the running car and
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others want to run to the chainsaw to make the situation worse and worse. i appreciate what you're trying to do with the reforms of the dsps. you're looking for the running car. the economy is the running car that we can jump in and strength the power to make changes going forward. an economy is strong in my hometown of georgia we just posted in august the lowest on employment rate and history of that county. and to give you an example in 2010 unemployment was 12-point to percent in august and 2018 it was 3.8 and issue 3.5%. we are seeing manufacturing return. however, we also see problems associated -- good problems but problems with the strong economy. one is the jobs made available we just have skill workers getting into those jobs and i held a skilled jobs fair at the beginning of this month where we
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bought employers and put the invitation out to every high school in our district in every high high school respond in over 400 showed up to get matched with employers. we are addressing those. the other issue i hear from employers is the lack of entry-level homes for their employees and they are bringing in. because -- my son-in-law and daughter are looking for home and he said basically anything in the starter home level in the area of georgia is $140,000 to $180,000 is sold by the time it hits the market and sells for more than the asking price of the home. return to find ways to address that. it is pushing the new employees to take long commutes from other communities because they cannot find the affordable housing and our area and we say into the housing, or they're moving into multifamily housing which is creating a supply and demand
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issue which is causing apartment complexes and other multifamily homes prices to go up. so my question, and i appreciate the efforts to retain capital. because we do need to have the rainy day fund if and when we do get into the next financial crisis. i think that is good business decision and a good running car to be in. i concern is -- i know this will was proposed by the predecessor. if we make that a permanent role with conservatorship and things are going again in a permanent rule is a requirement for multilevel family or multifamily dwellings to be double of that of a single family and the concern is because that further impact the availability of these homes that are needed and are parts of the country?
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>> i thank you for the question. we want to make sure fundamentally with a well thought out strong rule that fannie and freddie are there during stress time so they can provide the credit and i'll remind the committee if you go back and look, 2008 and 2009, 2010 fannie mae pulled back from the marketplace and focused on saving themselves. i think any enterprise would've done the same. we need to make sure they are strong going into a stressful environment so they continue to be there. we are not looking to penalize multifamily or single-family relative to each other but to make sure that the risk-based capital can reflect the relative risk and fortunately the multifamily portfolio largely came to the crisis will much stronger way underwriting there. but make it to the risk and the capital is balanced. >> i just want to make sure by doubling the retaining from the multifamily it does not create an unbalanced barrier. one other quick question, there
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has been a prohibition against the lobbying on conservatorship. i want to make sure that we continue that going forward and will you support a ban on lobbying the congress about the geocities. it depends on how much structure. even fannie and freddie have first amendment rights. i want to make sure we respect this. >> i yield back. >> the gentlewoman from north carolina mrs. adams is recognized for five minutes. >> thank you madame chair and thank you gentlemen for being here today. first-time homebuyers that traditionally have been the driving force in the housing market they traditionally lie on low down payment mortgages to purchase their homes. in fact over the past several years nearly 80% of first-time homebuyers with mortgages purchased on using low down payment products.
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can you speak to how the fh fa will ensure borrowers continue to have access to affordable payment options. >> we will certainly continue to make sure that they are sustainable and when we get people into homeownership they are there to stay and i think down payments are part of the question as is dti, fica and we want to make sure we get them to stay and that's what we will trying to do. >> thank you for the commitment and for each of you if you could answer yes or no it will be helpful. he. extensive details on other
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recommendations in the plan you provide no details on the kind of affordable housing programs of the fund or how you would expect this would be an adequate replacement for the affordable housing goals. it's clear on the details of the plan when it comes to affordable housing. the affordable housing cannot be an active fault on the finance reform. it's got to be at the center. so, can you please tell us why you have decided not to spell out the key details of your own plan on affordable housing? >> as i said in my opening
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testimony because i want to clarify, we want to make sure there is affordable housing that is one alternative that has been proposed and isn't necessarily our only alternative. what we are saying is we want to make sure they are accountable in a bipartisan basis and figuring out how we do not have was affordable housing if anything hopefully. you do have some details than. >> we have views absolutely that we would sit down on a bipartisan basis and want this resolved. >> thank you. they made several changes to the
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affordable lending products. fannie mae and freddie mac was possible and previously the programs had limits of 100% of the area of the median income and now the income limits are 80%. 80%. director, are you concerned that these will deprive them of mortgage options but potentially lock them out of the conventional market? >> i think it's important that we make sure the affordable housing efforts are well targeted so for instance the statutory framework has little housing holes build on in -- based on income and while it is correlated, they are actually only weakly so we are in a situation historically where higher credit, low income borrowers had been cross subsidizing and higher income borrowers so one of the things we are trying to make sure it's
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essentially make sure that the affordable housing products that provided are well targeted to the income of the families. >> thank you very much and i will yield back my time. >> the gentleman from ohio with rick ice for five minutes. >> i think the witnesses. thank you for the work you do on behalf of our great country and the skill with which you do it. it's been an honor to see you work in your roles and really just for the benefit of the folks back home in ohio concerned about affordable housing as well it's not just on the coast where affordable housing is of concern in the rural communities often we faced shortages and part of that is due to the population density even though it cost of living is much more manageable. when you look at the size of the balance sheet that we have within treasury and the various components, i am just curious what percentage is comprised of things the market would produce?
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market risk versus essentially subsidized programs that would never actually be produced and marketed. >> as someone that grew up in rural america, the importance of making sure that it's available and i would also note i have seen the federal home loan banks and recently visited and want to make sure that i get outside of washington that more directly to the question, we are looking very closely whether it is a conversation between the private market we don't want any gaps, but we do want to look at eric and the private sector take this up so no one is left out. >> i don't know if we will have an easy quantitative answer but highlight the problem to me. if you think about the balance sheet, we begin with underwriting and somethings wouldn't pass the test.
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if they really wanted. they only exist because there is a federal program that intentionally targets this end we decided as a country collectively, you know, to pass a law that said if we are going to do these things, the market would produce you and my concern goes to how those filtered through the balance sheet and wind up on the back end in a current risk transfer. when i look at the efforts to deliver the balance sheet and the risk back out into the market and i think back on the housing crisis. people in the financial sector has been demonized because they structured these mortgage-backed security products in a way that was full of bad products and not enough good products. it seems to me the non- market-based risk shouldn't enter the market. it should be held on the balance sheet because the only reason it exists is because the federal government decided to create it.
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as we look to deliver the balance sheet and use the product code of the risk transfer for the benefit can you explain what the credit risk transfer is? >> what they would often do is have a loan on the reference and credit risk into the marketplace they have over 200 some investors in the marketplace into some of these insurance companies and other types of investors and they will essentially take the credit loss, so if this doesn't perform the credit loss is transferred to the investor. it allows us t to get market signals, so the day that we see are an indication of what the market participants think about the undermining risk of the reference, so we were learning a lot from the process and having a better and take on risk and of course within the conservatorship there's an important way to get out to the gmc's. >> when we were selling the product right now my concern is
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this us and maintained on the balance sheet and in fact some might propose to protect the taxpayer if you keep the good stuff on the government balance sheet effectively, you know, keep in the market and that is a recipe for disaster. this should never enter the market, because the market would never actually produce it. they wouldn't do the underwriting to allow this to happen in the first place. as i look through the recommendations, mr. secretary i would ask you consider the structure 35% with the economy moving and record low unemployment, wealth and prosperity on the rise every income level in the united states of america, we are actually providing bigger housing subsidies in right after
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the crisis when we had a shortage of affordable housing in a different level. we have 10% unemployment and the trend is and for less federal housing subsidies. it's for more. we continue to load these up bad products. i just ask you perfect market by making sure that doesn't wind up in the risk also that people in the financial sector can do so on the front and backend and that the government can contain the problem but they are in fact creating. >> you are recognized for five minutes. >> we currently have a system that is the envy of the world. ordinarily working people able to buy and borrow hundreds of thousands of dollars at pretty low rates. we have a system that has produced $300 billion of profit for the federal government and has paid back the federal government $109 billion more
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than was necessary at the beginning of the crisis. it works. it produces huge profits and low interest rates. it is a far better real estate finance system than any other in the world. it has one giant walter is no way to make a billion dollars for the private individual. there is no way to get stock options for a private individual. it works for everybody except the 100th of the top 1%. this is working so well that you couldn't get congress, not even the congress which often makes a stupid mistake to approve spending of these entities off. they are government entities. do you believe that you can spend these off without an act of congress authorizing the tax >> yes we do but let me just make a comment --
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>> you've got your living statement. this is my five minutes. i hope very much that you don't. it would be a terrible mistake. but let's move on. you said we are not going to lower the conforming loan limit is a part of your plan. you wouldn't deny the federal government backstop to the loans over a certain amount as long as that amount is and the loan limit. you are not playing into the decline of the limit by saying for ten loans under that limit will still come for them they just won't get a backstop. >> that isn't the case. >> one out of six mortgages relies on the batch that is set
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to expire in early 2001. the tendency particularly in my branch of government is to deal with things like a day before it is going to explode. can i be confident that the business will have plenty of advance notice if there is a change >> i will certainly ask them to get it done in time. >> i am helping you out. >> 's okay. we have a federal system and the decision is whether to have rent control, or decision made by state and by states delegated to the cities and i would hope we wouldn't try to use the power that you have to tell california and various cities what kind of rent control they would have if especially when you are making the loan at the beginning you
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know what the rent is when you make on. it has to be based on the rent that exists when you make the loan so the opportunity may be very beneficial for the real estate investor but not necessary for you to determine that it will pay the mortgage. if they're going tis there goint to penalize the multi-family home purchasers if they happen to be a city that allows certain type of rent control? >> the answer is that it has worked for a long period of time and i think the question is if they are substantial changes to the rent control, that really come and this is the director's responsibility that they have to properly underwrite the credit of the loans.
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>> but it would be an underwriting issue and not a use of the power of the federal government to go with one system rather than -- as i think about it shouldn't be a big underwriting concern because you are making the loan based on the rental exist. nobody is making the loan and saying it is a terrible incident flowing between you raise that it is going to -- >> i would comment pair coul thd be a credit issue for example if these are 30 year loans and people don't reinvest capital to keep the buildings project there could be -- >> i look forward to the loans and i will yield back. >> the gentleman from north carolina is recognized for five minutes. >> thing you do each of you for being here. the hearing was entitled as the
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end of affordable housing. so, to each of you, is there anything in the administration housing reform plan that would send affordable housing or that would call for the end of affordable housing, yes or no? hispanic absolutely not. the highest priority is providing affordable housing. i try to clarify that and i would give the chair and others the benefit of perhaps they didn't understand certain aspects of the plan. >> again, yes or no to each of you. what it want americans out of a 30 year fixed rate mortgage or result in the loss of investor confidence in the market? >> no. >> no. >> thank you. is the goal of affordable housing that are advanced through the convoluted system we have set aside or could it be better served through the housing finance system with a
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more efficient transparent and accountable mechanism for delivering tailored support? >> the latter. >> i have yet to see a government program that couldn't be made better. >> director, this question is for you and for the record i appreciate your hard work serving as the conservator of fannie and freddie and as a regulator of the federal home loan system you've been transparent on what your course will be on every step you intended to take i understand you were in the middle of the comprehensive review of the pilots and special programs. and i tell you this because in a couple of areas i worry that they are operating in ways that compete directly with the primary mortgage market. take for example the mortgage insurance pilot called imagine. should it be operating programs that directly compete in the private sector, and if not,
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would you explain why you are opposed to? >> the topline issue both inside and outside of the conservator should i expect them to live within their charters and we will take it very correct if it isn't on the page they are not doing it, that is the way it is. within conservatorship, it is to be focused on getting out of conservatorship and that has to be the primary focus of strengthening the companies and getting ready for the potential downturn in the housing market. >> could you elaborate on that a little more what way you see them competing against, i want to drive back home and if you could help me. >> we will be existing to get to reviewing them to make sure that they are. >> the main priority if he would say it again would be to get out of conservatorship. >> absolutely.
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>> again, director, what are the impacts on the taxpayers and home buyers in the expanded market share since the financial crisis and how the attempt to grow is out of this displaced private capital and expanded taxpayer is? >> we certainly want to make sure it i is any way that isn't counterproductive. it's important to keep in mind i would've called what they historically have done is a little bit of skimming of the cream if the will of taking the bigger risk away and that force is then to have to raise the premiums and threatens the viability of the fha so i do think there is a way to make sure the referendum across the street isn't being undermined by what they are doing. >> final question in your view that kind of a countercyclical poll showed the fha play in a
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market? >> it's important to keep in mind that they were all created to be countercyclical. they should be the support in times of stress and to put a four under the market. they shouldn't be leading the charge over the cliff. they should be there to be the net to catch the market when it goes south. >> thank you to each of you and with that i would yield back. >> thank you madam chair and for holding this important hearing on the question again of the lack of affordable housing and need for more affordable housing and the reforms of the administration see. this is very important in my district in suburban philadelphia, the lack of affordable housing across the spectrum of folks that need affordable housing. so, i know i'm at the end of the
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line your second line in the testimony to many americans blacks with each of us deserve and an affordable place to call home whether it is rented or owned. can you help us understand the scope of the problem in specifics whether it is a rental, home purchase, rural areas, underserved, give us a scope of the area. >> we have seen an increase in homelessness and many other cities as well. we've seen the ability to afford rent. he has broad economic problems as well as the ability to move somewhere, to move to new york or los angeles that threatened if you can't find a place to live and i'm sure you can talk to any of this for interns the difficulty when they come to washington. it impacts the stability in your life and it's difficult to keep a job if you are not stable so to me this is a crisis that is
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all encompassing. >> by the numbers come some of the data that we have seen, only one in four eligible for rental assistance or low income housing assistance actually receives it. those that match your data? hell do we expand and reach out to the other three quarters of the folks that are suffering under the problem specifically? >> i think that there are three fundamental concerns going on at the risk of iteration, land, labor and loans. i think that we do need broad-based reform and a zoning in a timely process to try to speed that up. second, we have a distinct shortage especially with trade contractors don't have enough plumbers, electricians, carpenters, throw the money out if you don't have someone to swing the hammer isn't going to get built and we need to focus on that. my response to is an important piece of the puzzle that i've
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emphasized the need to fix all three of these. >> is it your ambition to make sure that we do reach out and get the whole host of folks that need affordable housing? >> absolutely. >> mr. secretary, is that your ambition also that we would use the government in a limited way to make sure that we are reaching all of those that need home ownership assistance? >> if i would come and i think there appears to be bipartisan support on the need for better affordable housing. >> nowhere in the testimony that i hear you were secretary carson talked about the gap, the three fourththreefourths of people ine of units i read with interest your issues about reform in sure we are more efficient. you said you are recommending more efficient means of delivering the support. how about more abundant be arguing tourists in doing that?
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>> i personally think it is a good goal and we would work to do that. again, that is part of the reason why our preference is to do congressional legislation and sit down on a bipartisan basis to agree with these things and how to do it. >> is it your ambition we expend resources to make sure we get everybody affordable housing? >> it is one of our highest priority is coming and that is why this past spring we have a display on the national mall. it's not a lack of innovation or a lack of entrepreneurship is an abundance of barriers that prevent us from being able to use it and we need all of the resources to work together to remove those because we are smart people and we can do it. >> the concern however is it seems to me it is an attempt to privatize and it is and the governments responsibility. back to the director is it your
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ambition, you said twice and i heard clearly in the condition fannie mae and freddie mac will fail in the downturn. is it your ambition to shore them up? >> it is my ambition for that not to happen. >> again it is both. we would never spin them off without shoring them up. >> they are private but keep them privatized and out of conservatorship into receivership. >> three out of four people who need efficient affordable housing that's your ambition and the trajectory that you're hoping to take? >> affordable housing is part of this issue is a broad government issue. >> thank you madam chair. >> gentle man from tennessee is recognized. >> thank you for convening today's hearing and thank you to the witnesses were hearing also.
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if i could, i think that the secretary earlier today was asked about manufactured housing which is also important in my district of memphis and west tennessee. in the housing and economic recovery act of 2008 there is a duty to serve provision of singled out the availability for the housing is an underserved area fannie mae and freddie mac required by statute to make a concerted effort to address. as it relates to the duty to serve the provision, the administration's housing finance plan proposes to replace the duty to serve with patrons. and accountable mechanism to transfer some of these activities. if you could explain how this would work in respect to manufactured housing with both real personal property
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challenges etc.. and let me emphasize several years ago i ran the housing program and i do think for much is the most affordable option we can continue to make sure that they have active involvement in manufactured housing and in a way that is safe and sound. >> it is involveis involved tode every intent we will actively carry that out. >> secretary carson and it is good to see you again. i had the honor of having you in memphis a few weeks ago as it relates to the opportunity zones
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and we have 32 created under the tax cuts and jobs act. we mentioned the importance of the local community involvement and also in the property values. can i ask you how do you see the opportunity zones the way of addressing affordable housing in memphis is by no affordable housing you also made it affordable housing stock in on this before you enter the union vote project. >> the initial starting point might be per instance like
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st. louis and abandoned foundry and then they have to build workforce housing and a lot of f the workforce housing is going to the affordable housing. we have to be able to take advantage or allow the builders to take advantage of some of the grant programs. so, instead of just per instance the single multi-family unit we used mixed purpose units that provides housing and also jobs. and of course they tend to fertilize the areas of other people want to come in and take advantage. >> thank you, secretary carson. one thing i did not mention the opportunities created that i
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just described is an area with some degree and you are responsible for certifying these opportunity zones. can you describe the impact of the communities that we are seeing across the country and these opportunities addressing those? >> first of all, states have the ability to designate them if they fit certain requirements, we certified them and we think that the states are better determine where these are appropriate. yes, i think for the areas that you have described, they have been very beneficial and i think not just for housing which is a big part of this but also for the new businesses and businesses being relocated. >> i think the witnesses and sealed back. yield back. >> the gentle man from illinois is recognized for five minutes. >> thank you very much, madam
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chair and the panelists for being here today. inadequate affordable housing is a major issue that people in chicago face especially the working class families that i represent on the southwest and northwest side of the city. they have seen their wages remain stagnant. it's gone up by 13% while the median household income for the renters went up one half of 1%. the market isn't any better particularly for the communities of color who were hit the hardest by the housing crash the most for closures and devastation to recover them and that is why the role is so critical in helping the communities regain wealth and home ownership, so i think that we are on the same page but for the record if you could answer
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no or yes t to this review you e promoting affordable housing, correct? >> yes. did you believe the government plays a role in achieving housing affordability. >> the fha noted that its plan c. seeks to ensure they are properly compensated for the risky loans part of that is introducing the tier-based pricing and fha guaranteed loans and i would like to ask if you also share those that i think you've committed to the representative.
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to the credit rating of the applicant, correct? >> thank you. but it is disappointing to me that seems to run counter to the model that the governed for decades across subsidization of the loan applicants with stronger credit creates a risk pool provided this regardless of credit so what you're proving is basically risk based pricing undermining the entire model that allows the fha to backlog of low-income families with less credit to the high-risk individuals and charge them a bit more, the people that are
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low risk and have developed a very good credit line would have a smaller premium. >> so, those that have struggled financially, economically are going to be charged more. it depends if the credit is reflective of that experience. >> it depends on how you determine that risk. >> for the other impediments to the housing development, secretary carson coming your agency note, your agencynoted rd with local housing markets. both of you are suggesting that some type of penalty for areas that enact the rent control is that the take away and what other impediments might you be
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referring to? >> i made a comment on this earlier. first i think that it has worked in many markets for long periods of time. i think the comment was in certain markets there are some very, very drastic changes to the rent control and they have implications for underwriting so that was the purpose of that. >> there are multiple in pediments there are wetlands, historical land, height restrictions, density restrictions, zoning restrictions. by the time you add those up, it becomes increasingly substantial it's gone up by 45%.
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>> local officials tend to know their communities best. thank you and i will yield back. >> i would like to announce the goal and i intend to recognize the following members and then we will adjourn. with the challenges to reform the housing finance system all the while not disrupting the housing market, one thing is clear is an obligation to work with the administration and forged a bipartisan path to responsibly address the challenges being discussed today. i first question, director, you've testified about the current leverage ratio being 500-110 the things are around 10-1 and in your view what is
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the proper target for the interface to be leveraged? >> a lot less. but i think ultimately they represent the same risks in the financial system as others and i think they should be in the ballpark. one of the things we've talked about there is a concern that this plan could be seen as a bailout for the preferred equity holders and i guess my question would be what is the functional difference between holding the reserves in a dedicated account versus where we can watch them and we know exactly what the catch is doing i doing at what s marketing versus having it on the balance sheet. >> let me emphasize that on till you're out of conservatorship they are not payouts to them as we maintain so i just want to be very clear about that we are building a buffer to protect the entities in times of loss. we have been devoted t haven't f
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deciding what the next route is, so again that could be an option. >> what is the functional difference in your mind between having a dedicated account. >> i just want to verify again although the treasury isn't being paid cash, the amount that we are deferring in the liquidity preference will go up so there is no difference from my standpoint between having cash in the bank and having an obligation that is owed to us. >> director, you've talked a lot about the current leverage ratio there is no way they could sustain any sort of a meaningful downturn. could you put some clarity around but specifically by celtic at the downturn and what kind of stress test are you running and where should we be concerned? >> the most recent stress test we are performing for fannie and freddie shows if you have a
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downturn similar to the last one coming to put it into the excess of 40 billion. and again i don't see how you get the money back so these are not small numbers we are talking about. >> when talking with local sql thursday expressed support for the responsibly ending of conservatorship's in efforts to capitalize. however they've expressed some concern about limiting fannie and freddie's ability to offer the cash out investment properties and reviewing the overlap between them specifically low down payment and hide it to income value. prevented them from offering these products could limit the consumer choice and specifically in regards to the fha it would shrink the liquidity of the market. can you talk about why you recommend the changes and how you view them to the consumer context. overall economy? >> the art of saying to eliminate the cash out, but
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obviously when the borrowers take the cash out it creates a risky loan. it used to be that this was one of the great savings mechanisms. we want to make sure they set up the credit they look at the cash out refinance differently than they look at the purchase of the money mortgage. >> thank you and i will yield back. >> the gentlewoman from new york is recognized for five minutes. >> thank you madam chair and to the witnesses for coming today. secretary carson is good to see you again. releasing grainy and freddie from the conservatorship is one of your top priority priorities? >> i would say housing reform is one of my top priority then again we haven't predetermined whether they go through the conservatorship or receivership. they should be privatized and it
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says here privatizing is right up there on the top ten list of things we are going to get it on. do you recall that. >> i was just referring to we do believe they belong in the private sector and that could be true that he went through as i said other resolutions. >> are you aware of the same day you make a comment that the share price increased by 46% and freddie mac share prices jumped 43%? >> i think that it is clear the market didn't understand what they implied. many times there is very little liquidity and markets are not sufficient. >> just to clarify for the record and for the confidence of the american people, have you your self o for any beneficiary including your 15 disclosed, would they stand to receive any
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financial gain from the conservatorship? >> i've divested all of my assets and other than, i've divested all of my assets and i have no reason to believe i have anything to gain. >> was there anything following those remarks? >> you have also made clear your intentions from the conservatorship to provide an explicit government guarantee if you have already taken steps in that direction by allowing them to build capital. there are serious concerns that if you proceed with the plan without congress there would be a serious loss of investor confidence which could result in an unforeseeable disruption to the housing market. have you heard from any of those concerns from the domestic or global investors? >> let me clarify this is my
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obligation following the law that requires me to us then and put them in receivership. we certainly heard from a select number that would like us not to do that. to be very clear if the choices on the one hand i follow the law and i don't follow the law because wall street doesn't like it, i'm going to follow the law. >> going back to the concerns about disruption of the housing market, are some of those disruptions that have been raised? >> a number as investors because that would undermine the ruling. they would like a guarantee. i guess i should say my years of dealing with wall street i haven't met anybody on wall street doesn't want to take the upside and leave the taxpayer with the downside. so for me wall street is about
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taking the upside and downside. with the information you provide in your testimony i would like to discuss the amount of rent in the 14th district of new york in average renter earns about $20 an hour. but they don't earn enough to afford a one-bedroom apartment at the market rent. families are looking for stability as household income can't keep up with the rising cost of rent. first and foremost i want to ask for someone making about $45,000, what do you think is a fair rent for them to pay? >> if we use the standards where it is 30% of your income, that is one standard and of course there are fair market rent a cent at 40% and we could argue whether those were too much or too little. i would fully agree with the overall premise we have a lack of affordable rental housing not only in new york but many other areas of america. i would note when we've recently changed for multifamily caps we increased the percentage.
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>> i just need to grab an answer because i'm running out of time. >> you want a number, i think it ultimately should be between them -- >> $45,000 a year or? >> do you know anyone that makes 45,000 unaccounted for their rent is? >> that's a little higher income than 45 basically the income -- >> $45,000 a year because the ballpark? >> if you were a friend of mine making 45, but i suggest not as a government official, i would be happy to say that you probably shouldn't spend more than 15 grand tops. >> thank you very much. >> you are recognized for five minutes. >> thank you, chairwoman and for calling this hearing. before i begin today, i want to reiterate to my colleague the call to ask for a study i do
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believe that would be important. i agree with many of my colleagues today that housing finance reform is both welcome and long overdue as it has been said times today the time to reform our housing finance system is when times are good and not when the system is in a time of crisis. one thing i noticed in m have ny brief ten months here in congress is that you often we let the person be the enemy of the goods. the proposals put forth by hud and a treasury represent a positive first step on the path to reforming our housing finance system. there are 116 itemized reform recommendations between the two reports promoting competition and eliminating redundant these and protecting taxpayers from future bailouts is good policy. it is responsible governance. relatively stable housing markets, we have right now it will not last forever. i think we all agree that it
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never does. it stands to reason that members of this committee will not agree on every single recommendation, but we cannot afford to let the person be the enemy of the good. i hope that we can put our partisanship aside so that we can make our housing finance system more resilient before we reach another crisis. one issue i was pleased to see addressed in the housing finance reform plan was that of manufactured housing. manufactured housing is incredibly important to the sixth district of tennessee which i'm proud to represent. manufactured homes account for 7.1% of occupied housing units. in tennessee they account for 10.5% and in my district, 13%. doctor carson, i appreciate your continued attention to the programs that serve the manufactured housing in the comments that you have made in prior testimony about the need to make adjustments to the top title i entitled to programs to
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better serve the manufactured housing. i am concerned the volume of manufactured home loans being supported continues to decline. however. among the administration reforms mentioned in the report is the need to publish updated standards that address predatory burdens of participating in the program. doctor carson, what's updates would improve the title i program, and what can be done either legislatively or administratively to expedite these updates? >> we have greatly expanded the manufacturing and housing office to look at all the issues that would facilitate not only the construction, the safety measures associated with them, combining some of the updates to accelerate the process, and we will continue to do that fully
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recognizing this is one of the major players when it comes to reducing the cost of housing not only in the rural areas but throughout the nation. that, coupled with looking at the modular housing and other new techniques and panels to look at the new techniques and assist us in manufactured housing is a huge portion of that. director, can you give me an update on the programs that are included in the plan? >> we are currently reviewing that. they have since requested modifications to the current plan since we are going to put those out and have some sessions indicate a comment back but we are currently under the review board out. >> what is being done to ensure that the pilot programs ensure that they are cherry picking the best ones so that the pilots are
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not significantly disrupted in the other market players? >> i think it is an incredibly important question. my object in overtime as the either prove themselves to be successful as they grow. i think it is problematic if you have long-running pilots through select industry players that have access others did not have so i think that they should be open to all individuals work than we intended to end offensive again i would agree where we need to do is to figure out how this is a program that everybody else can participate in on a level playing field if it makes sense. >> finally, there is one final concern i would like to raise with you and it is one of iger often back home, you and i have discussed the issue before and that is to bring in excessive compensation packages especially at the gse's and especially while they are still in conservatorship. could you say a word about that? >> a couple of months ago we made some changes to the compensation practices that they better aligned than to be in the
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conservatorship. >> thank you and i would yield back. >> i would like to thank the witnesses for their testimony today without objection all members will have five legislative days within which to submit additional written questions were the witnesses to the chair which will be forwarded to the witnesses for the response. i've asked our witnesses to please respond. without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. the hearing is adjourned. thank you very much.
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