learning how -- we do the same things in different ways, so i don't think there is a dash working their way through challenges. thank you. >> my next question is for secretary cumens. i am wondering about the radi l radicalizati radicalization, particularly as it relates to the balkans, mainly ini albania. tehran is closest to the most corrupt capital in the world. what -- less of a haven that fair owe's on the united states?

>> thank you, congressman. with respect to albania -- i should preface my remarks by saying everywhere where the department of homeland security declares internationally. we work with the department of state and choose omission authority. that being the case in about 99% of our postings. countries such as albainia, we are particularly dependent on the state that would be different. of defense, it has been -- the engagement in albania has been through the international law enforcement academy, alea in

bucharest. there has been a certain amount of training and capacity building that has taken place. i don't have that off the top of my head, but i can supply that to you. >> would you provide the information to me? thank you very much for being here today. we appreciate your testimony and the questions you answered so forthrightly. we'll probably have another hearing on this subject down the road. i looked at the map the other day of e e e e e e e e e essents

services we need in the housing

area. thank you, mr. chairman. >> secretary donovan, please proceed. >> thank you, chairman johnston, ranking member shall be and members of the committee for the opportunity and for your partnership which i was reminded of this past weekend as i join other members of president obama's cabinet to tour the devastation wrought by the recent tornadoes. as i prepare to return to the region next week i want to assure you, senator shelby and the four other members of the committee from affected states i will do everything in my power as the secretary to ensure this administration makes the lives of displaced families whole again. today i come before the committee to discuss the investment of this fiscal year 2012 budget proposal calls for to help america with the future by of educating, innovating and outbuilding our competitors. i will also highlight the steps the proposal seeks to improve how we operate the programs and the tough choices it makes to ensure we take responsibility for the deficits. obviously our fiscal year 2012

proposal was developed before the continuing resolution for the fiscal year passed by congress signed into law by president obama. although the cuts in the agreement were necessary to ensure we live within our means and keep the government running the president noted that the sea are contained real cuts that would have an impact on services and people who rely on them. indeed i believe the president's 2012 budget strikes an appropriate balance between the need to reduce spending and preserve critical services for americans. mr. chairman and sold in the 2012 proposal, we follow the three principles to help us strike this balance. the first is to continue support for the housing market while bringing private capital back. two years ago with the housing market collapsing and private capital in retreat the administration had no trace but to take action. the critical support provided is to help over 2 million families buy homes since that time and nearly 1.5 million homeowners refinance into stable, affordable products with average monthly savings exceeding

100 billion. and while fha continue supporting the housing recovery in the year ahead, we also must help private capital return to the market. this is a process hud began many months ago and i want to thank congress for passing legislation the last session to reform the mortgage insurance premium structure. with this authority, feg increase premiums to 25 basis points last month. because of these reforms and others, fha has projected to generate $9.8 billion proceeds for the tax payer in a fiscal year 2011. indeed the reforms generating the receipts today set the stage for more private capital to return in the years to come weigel insuring fha remains a vital source of financing for underserved borrowers and communities. one of the fiscal year 2012 request is $4,738,000,000,000 in the riss budget authority because of the fha and ginnie mae received a cost of the taxpayer for the budget is only 41.7 billion. this is consistent with the president's proposal to bring

non-security discretionary spending to the lowest share of the economy since president eisenhower. the second principle we use to develop the budget is to protect current residents and improve the crow programs that serve them. will the median income of american households today is over $50,000 for households who live in the assisted housing its $10,200 per year. and more than half our elderly or disabled. at the same time, having seen from 2007 to 2009 the largest increase in the history of the hud's worst case housing survey it's clear the recession hit these families hard. that's why the 80% of the proposed budget keeps the residents in their homes and provides basic opportunities to public housing while also continuing to serve the most vulnerable populations through the homeless programs. because the cost of serving the same families grows each year, protecting the existing families and programs require us to make tough choices with the remaining 20% of the budget and putting

the decision to reduce funding from 2010 levels for the canada development block grant, home investment partnerships and new construction for the hud supported housing programs for the elderly and disabled. eyes of our myself as a local housing officials the difference these funds can make supporting senior housing, boys and girls clubs, ymca and other providers of critical community services. these cuts are significant but with american families tightening their belts, we need to do the same. i would note this budget provides $80 million for the housing counseling program which was eliminated in the continuing resolution. there was particularly painful to the responsible homeowners and neighborhoods around the country struggling to keep their homes and restoring it reflect the president's call to make tough cuts to reduce the deficit without sacrificing the core investments we need to grow the economy. at the same time this budget makes a strong commitment to do more of what works and stop doing what doesn't. by including provisions of the

section 8 felker reform act and the budget we will simplify and streamline the voucher program and save $1 billion for the taxpayer over the next five years while supporting the ability of the housing authority in small towns and rural areas to better serve the working poor. indeed thinks the senator reid and the committee leadership passing the act is a new housing stability program reflects the unique and growing need in those communities. the budget also calls partners accountable for the funding they received from hud to fund the public-housing operating fund we require public housing authorities with excess reserves to contribute $1 billion. these resources were set aside so our ph a could continue operating during a rainy day and i think we would all agree that rainy day is here. these efforts point to the commitment expressed through the transformation initiative to improving the programs. the funds are replacing the the systems of the largest programs housing choice vouchers that date from the early 1990's so we can hold the to the could

accountable for managing the budgets just like families and businesses are doing across the country. the flexibility tian provides allows us for the first time to offer technical assistance across all of our community planning development programs and watch a new initiative to improve the financial management accountability of troubled housing authorities. bye supporting research evaluation and program demonstrations cotillon in paris the hud accountability by identifying what we do well and we need to do better. these needed reforms allow us to propose increased investment in programs we know work like the hud program for homeless veterans. this is built on a solid body of evidence that determine a supportive housing was going to end homelessness and save money for the taxpayer by putting an end to the revolving door of emergency rooms, shelters and jails. as such, the budget would increase funding for homeless programs by more than 25% over 2011 to keep the president's commitment to opening doors.

the first federal strategic plan to end homelessness which the administration unveiled last june to end chronic veteran homelessness by 2015 and homelessness among families and children by 2020. our firm and final principal for developing the budget is to develop initiatives that have been part of a wedge of the last 20 years but in this fiscal climate proposed no new initiatives. the president made clear when the rooster and educating our children but that's not possible if we live in a whole generation of people behind in the poorest neighborhoods. that's why i'd like to thank senator menendez working with us on the terrace neighborhood initiative which was founded in the sea are and we again propose funding in fiscal year 2012. tweeze neighborhoods allow the communities to use the mixed use financed was pioneered by secretary jack kemp and henry cisneros with the program to transform all federally assisted housing neighborhoods. similarly ensuring america out builds our competitors, requires

for the future right now we're losing 10,000 units from the public housing stock every year. the sinking is billions of dollars of private capital sitting on the sidelines that could put tens of thousands of construction workers to work rebuilding this housing. that's up to 255,000 public housing units using long-term project priest rental assistance opening new funding to affordable housing but also a new sense of discipline that extends from the way the properties are financed to the way they are managed. lastly, jimmy johnson, american business large and small cannot out in avaya their competitors wonder workers spend 52 cents of every dollar they you're on housing and transportation

combined and of a project some roads cost five times as much we stand fuel and time as it did 25 years ago. that's why we request another $150 million for the sustainable community initiatives building and funding provided in 2010 and in 2011. instead of federal one-size-fits-all rules that tell the community is what to do, this initiative is helping regions and communities to build comprehensive housing and transportation plans to create jobs and economic growth. with help from its record 7 million-dollar grant from hud, austin texas estimates it will create more than 7,000 permanent jobs generating an additional $1.1 billion of economic growth over the next five years and saving the taxpayer one in a quarter billion dollars. the potential of these innovations explain why the extraordinary demand for the grant program wasn't just coming from the largest metro areas. indeed over half of the regional grants were awarded to the rural regions and small towns and so mr. chairman come stifel's

fiscal 2012 proposal to the proposal isn't just spending was it's also about investing smarter and more effectively. it's about an hour to the crowd of educating and out in a feeding our competitors and making hard choices to reduce the deficit and put in place much needed reforms to hold ourselves to a high standard of performance. but most of what about the results we deliver for the people and places to depend on us the most. for mortgage-backed securities in the future starts at home and with the budget i respectfully submit targeted investments and tough choices we aim to prove it. thank you. >> thank you, mr. secretary. would the clerk please five minutes on clockworks and as mentioned earlier, you visited south dakota with me and saw firsthand the dillinger and facing the country to really appreciate the visit on these needs. i would like to ask about the speed of the hudna distribution.

mortgage-backed securities issued in fy 11 on january 27, 2011 compound and at present many have not received their full fy 11 funding. some have held housing development and others have started to eliminate the staff. what is the department dillinger to speed the provision process to ensure the tribes will receive their full allocation of fy 11 ai hbp funding program that the very earliest possible moment? >> senator, obviously the delay in approving the 2011 budget about half the way into the fiscal year has had a significant impact not only on the tribes, but on recipients of the funding across all of our

programs. we have moved now that the budget is in place to accelerate the we that we are awarding that funding, in fact one of the things we have learned with the new process we put in place under the recovery act where we are five months ahead of the targets we set for distributing the money as you know tribes across the country used quite effectively and quickly a witness to grants in the past. we've taken the team that developed of the implementation around the recovery act and assigned them to accelerate our regular funding process he's so we expect to be able to distribute much more quickly this year the american block grants and we'd be happy to sit down with you and your staff to give you details of exactly when we expect that to happen based

on the last few weeks of work we've done since the budget was resolved. >> good. mr. secretary, your request includes $88 million for hud's counseling program. as you know, this program was not funded and fy e. 11th. is hud's program still an important use of federal dollars? >> absolutely. and i mentioned this specifically in my testimony. what we have seen is housing counseling has always had a benefit to homeowners, but particularly through this crisis we have seen the importance of housing counseling has increased substantially. urban institute recently did a study that showed homeowners that are in difficult times with their mortgages are 70% less

likely to be foreclosed on if they receive counseling. we've also seen from other studies homeowners to purchase homes with counseling are more likely to be successful in being able to stay in those homes if caught so given the impact the housing crisis had on the economy more broadly, given the number of families still struggling to make the payment of unemployment, we think this is an absolutely the wrong time to eliminate funding for the counseling. i would also note some have said there is a program for the neighbor works in the budget as well that continue to get funding in 2011. i think the key point here is that only meets a portion of the needs of their. for example, beyond just the families struggling to pay their mortgages, seniors who are interested in using our reverse mortgage program are required to have counseling.

that counseling was paid for through hud's appropriation. there's no other source of funding and now that will fall on the seniors. so we expect as of october 1st with a fist cut there are many agencies around the country no longer able to provide funding there are approximately 70,000 homeowners who we will not be able to reach without the funding and even we were hoping for. and so it is absolutely critical that in 2012 we restart this funding. >> has it been a justifiable focus on the fhe single-family volume is often overlooked that the multifamily loan volume is in the recent years. can you describe some of the actions taken to ensure the

ongoing integrity of the multi family programs also would is the growth in the volume say about the multifamily housing access to capital? >> i appreciate you asking this question because it is often overlooked given the crisis we had in a single-family how important the fha programs have been to the continuation of the multifamily market and you're exactly right in terms of the increases we've seen in our multi family program to the we have applied many of the same tools in the multifamily programs we have on the single-family program. the fact we appointed our fha first-ever chief riss officer created a whole set tools to track and monitor the default in

the fha portfolio, the delinquencies and half as a result of that made a number of changes in the underwriting criteria for these programs and changing many components of the underwriting terms such as the loan-to-value ratio and range of other things that have improved the performance of the programs. what i would note, however, is unlike the single family side, multi family programs have performed relatively well through the crisis at the gse the multi family programs did not contribute to their collapse. and we continue to see even through our most recent numbers the multi family programs that hud deemed profitable. while they are much smaller and don't contribute nearly as much as a single-family side to the mowing .8 billion in receipts that we expect this year the have continued to be profitable

and they are a critical source as we have seen iran to rise, vacancy decline in the rental stock is an absolutely critical we continue to have a source of financing available as we work our way through this crisis. >> senator shall be? >> thank you mr. chairman. >> secretary donovan, we have had these conversations before getting the private access and private capital because there's a lot more out there. anytime we can access capital including prime in the pump, putting some money to say access and two-thirds more on something like that i think we are making good progress and i think you do, too. would you expand a little bit on what you're talking about the program did into the private capital tell you were doing this? i guess in many ways. estimate absolutely.

public housing is the single most important example of this. public housing is the only form of affordable housing in the entire country today that has these very difficult barriers to access and private capital. is really only indy 500 hope six program and very limited other examples to the choice neighborhoods where public housing is able to access low-income tax credits for other private capital and other public capital as well. the result of that is set in my testimony isn't just that we are losing 10,000 units of public housing a year, but what we also see is that too often public housing is cut off from the neighborhoods that surround it and cut off from opportunity. to give you an example from my prior life, we try to bring grocery stores and public housing. we try to bring new development on to public housing land, mixed income housing, senior housing that would help those raise

their kids in public housing and now need more support in smaller units and it was like banging our heads against the wall too often, senator, to try to bring those tools to public housing. so it's time the federal government got out of the way and allowed many of the entrepreneurs and the communities that have despite some of these pressure actions done creative things to look into that. that's why we have a proposal, demonstration of allow over to under 50,000 units through some fairly simple legislative changes to change the way that that land is zoned to allow the deeds of trust to change and change the way we fund public housing. right now we supply capital funding and operating funding and we are really the only source of funding that can support those units by changing it to in operating subsidies similar to the way section 8 works with all of the other

owners. we would allow public housing authorities to be able to access all of these sources. we estimate is $25 billion of private capital sitting on the sidelines that can create hundreds of thousands of jobs in construction. starting today, if we could unlock that capital. >> do you need a statutory change? >> we have a very limited authority to do this, and we are expanding ways of the we can do this with existing authority -- >> this committee? >> absolutely but we are proposing a demonstration which will be legislative the would increase buy roughly ten times the number of units we could reach >> would you crystallize that and get it to the committee to have already indicated at least to me and the chairman? >> i'd be happy to do that. estimate of one to get into something else if i could come cost savings trying to do more.

>> according to the cato institute the amount of money we currently spent on subsidizing affordable housing is enough to pay 100% of the rent by every family in the country earning less than $22,000 a year. some changes could be made to ensure we are holding the greatest number of families in the most efficient cost savings manner possible. what steps has hud taken to reduce the cost while increasing the efficiency of the housing programs? >> that is a tough job to term. >> very important. but look, this is as a former customer of hud if i could put it that way, i would say we have too many programs with conflicting rules. there's too many places where we require housing authorities or owners to comply with or u.s

systems or other things that frankly are not efficient and so i would point to the two things that were critical. one is we have proposed and worked with this committee on the bill would call the section 8 vouchers reform act. and just to give you one specific it simple, we have as a sudden my testimony, over half of our residents are elderly or people with disabilities. they tend to be on fixed incomes. 80% of them have exactly the same income year after year, and yet we have required recertification of 100% of the residents each year. it will allow was on a risk basis to say these are residents much more likely to have an income change. we would target them for the annual certification but others come seniors for example, we learn that it's less likely. if we do every two years we've done the analysis.

the impact of that is a savings of a couple hundred million dollars alone in one year. >> that makes sense. >> so svra come if we could get it passed as either part of cogent process -- budget process or support a bill i'm hoping that we could get is a billion dollars in savings over five years. simply by making it easier for folks to run the programs and it would also in the rural areas helpless surf more families working. >> who would be against that? do you know? >> we became very close to getting it done at the end of last year and they're seem to be very broad support. there's an argument but very minor provisions but i would be hopeful we could get that done. it sickened example we hoped for and got flexibility from the appropriations committee to invest more in what we call transformation initiatives. it is investing in the systems

and control systems, fraud detection systems, public housing that will also allow us to save significant dollars in think as well. >> that's good. one more question. one of the criticisms of the current housing finance system is that it increases borrowing and accumulation of debt rather than the building of equity. i know that's what we need is equity. some scholars have proposed a better way to encourage the responsible homeownership is for the federal government to stop subsidizing mortgage rates and instead held potential homeowners build their finances for a downpayment. i don't know how that would work. what is your view of shifting subsidies away from encouraging borrowing in the programs that help them build equity in their homes? i have to see the mechanics myself of that concept. >> i think it is clear from the

crisis that we have been through and we need this very clear in our white paper that we did with the treasury on the finance reform that we have spent too much money subsidizing what often didn't get to the borrowers because what we did is to have an indirect implicit threat of an explicit guarantee and didn't have a system with feeney and friday that made sure the benefits made it to the taxpayer. and we support limiting the risk to the taxpayers in the future system. we do think there is a role for the fha for a targeted guarantee. we have a number of proposals and the reason given he might be used to ensure that in a crisis we have adequate financing and the rates remain stable and

affordable but i do think is more we can do to shift funding towards building equity. one proposal we have come and i know senator reed has been a champion of this is that rather than having the next incentive of goals which did not accomplish what they were intended to do under fannie and freddie in too many cases we have an explicit funding source that would support downpayment assistance and rental housing through a dedicated stream of financing the the national housing trust fund is one way to do that under the prior system we think their needs to be much more explicit targeted source of support the doesn't mix incentives the way the goals did in the prior system >> senator reid. >> thank you mr. secretary for your great leadership.

let me ask about the family self-sufficiency program. that's something i know that you have included in your budget. it's something that my local housing advocates is a very strong and you have one of the greatest vintages in the job of having been as you describe both the consumer of the higher the services now provider and many perspectives we are working on a proposal together with your colleagues to help improve this program and your views of where we should go. of the family self-sufficiency and the reason is it is a smart approach. too often we focus on the short term and don't think about how our programs can help support self-sufficiency and reach the

ultimate goal of families who can work getting jobs, becoming independent and graduating from the program, if you will, and making space for those that are on the waiting list elsewhere. it makes sense for everyone to do more of that. the problems as you fight and fight for that right now it works in our housing program, our felker program to those programs are completely separate and we think it makes perfect sense and this goes to senator shelby's point to combine the programs, reduce the cost of them and be able to expand the number of the families it reaches. we also think it's a terrific idea to have this reach hour multifamily program as well. right now the residents of the project based section 8 are not eligible to participate in fss to we think it makes perfect sense to this. we also think that this is one of the things the transformation

initiative is funding as well that we have a very good anecdotal evidence, and some limited studies of the success of fss. beah torian new york city invested substantially raised a lot of profit foundation money to expand but also to study it more closely and that we are doing the transportation initiative to look at this in detail the impacts with greater studies we could demonstrate this program pays for itself and we ought to be doing much more of expanding it substantially so the proposal was absolutely going in the right direction. >> i think also to your emphasis on analyzing and ensuring that this is funds knorr the cost and if it makes sense that we are investing but also getting much more return that is the key part of what we want to do. let me turn my attention and commend you for your increase in

the proposed budget for the homeless assistance programs. we have some success in the country throughout getting people off the streets and into some type of structure. but would you take a moment from your perspective of how, why it's important to invest in these programs? >> well, to go back to the point that you just made, we demonstrated that it is more expensive for somebody to live on the street particularly chronically homeless person than it is housing. it's simply that. and this recognition i think is growing broadly. your leadership and the bipartisan passage of the act showed that there is a growing recognition that investing in our homeless program is not only saving lives, it saves money.

and the fact that and as difficult a budget environment we have that there is an increase in our homeless programs and the 2011 cr and we are proposing difficult cuts to many programs the significant increase in the homeland program in 2012 demonstrates that we have shown that these programs work. now the issue i would point to there's a small increase. it will not allow us to implement the harth act fully. we will implement one portion of it but to give you an example, there was a very important new role homelessness programs created in the act. there is not adequate funding to find that in 2011. and so making sure that after all of the work that was done over the decade as you know very directly to create the act it's critical that we find ways to

ensure that we can find the pieces of it because it makes sense it, consolidates and will lower administrative costs for hud but tens of thousands of families, and i would just last lease a as you know what the veterans in the country 50% more likely to be homeless than average americans, the commitment president made in the veterans homelessness by 2015 we think is absolutely critical and the vouchers are an important part of that as well. >> one of the examples that help work on this effort is the testimony senator byrd and i took in the hearing in north carolina housing why the two or three veterans were living basically behind a bicycle rack in durham and one of the communities, one of the rural communities, that is where the

university is also, but it's not a big mitropoulos and it should be effective. we can't lose sight of the role homelessness. let me turn to another topic and that is we all work on legislation that ultimately produced one aspect of what was in national housing trust fund. we originally thought we would fund the proceeds. that is not an option at this moment. so, we are working to try to tap into some of the profits that have been generated through the war and could again working together on this committee we insisted be part of the legislation which supported the banks over the last several years, and we've actually recouped about $9 billion in pure profit. in addition to the preferred dividends were paid when we sold the war and we picked up

$9 billion just as i think they would have done if they were lending the money to us. that's one source. but to the larger issue of why it's important to get this trust fund off the ground from your perspective. >> i think many people missed this has been have seen the housing crisis to fill in many communities we have excess vacant units overbuilding in some areas. at the same time, throughout the entire crisis, for the low and moderate-income renters the burden increased. rent went above the low end of the scale. between 2007 to 2009 we saw a 20% increase in just two years in worst case housing needs. the biggest increase the we recorded in the history of the survey. and so there is no question that while the trust fund was critical before the housing

crisis it is absolutely essentials now given what we have seen. in a very difficult budget the president proposed a billion dollars to initially capitalized the trust fund and in the long term we believe as i said earlier that one critical part of housing finance reform is that we find a long-term source. we set up a trust fund locally thousands of communities have done the serve the country in the the key is by having a dedicated stream of funding that's not dependent on appropriations as the original would have been it assures a consistent source of that funding that can really be generated year after year. >> thank you. again, let me just had our experience from rhode island is that in these low to moderate

rentals the price of the last has gone up 45%. as one of the terrible ironies of the last few years is in the worst housing collapse where residential homes were falling rental property prices because people need someplace to stay and this housing trust fund would provide affordable rental housing and do it in a consistent way as you pointed out. this goes to the issue that has been plaguing all the fuss for two plus years now and there is the foreclosure. to take effective comprehensive action, and i am encouraged servicing guidelines have been released, updated and the services have invested more resources but what is still absolutely difficult to explain

and for the average person deliberately provocative and disruptive of their whole lives is the dual tracking of the foreclosure modification. and i would point out that the south carolina supreme court justice ruled two days ago suspended all foreclosure in south carolina in the reason of the dual track and that is the and also by new york and connecticut. so this is not a localized problem and it's not one of the classic problems of well it's a blue problem, read problem, etc.. when you have the eminent justices of south carolina court saying this is so offensive to the basic legal rights of our citizens we are going to tell order banks not to foreclose until they clean this up we have to do something nationally. and i must say i was frustrated

by the settlement agreed to by a federal banking. i know you were participating in those discussions. in the whole topic of the foreclosure individual track modification i would like your comments and opinions of what we can do. >> let me start by saying broadly we've taken a broad set of steps that have made a difference. the fact is that the number of people entering the foreclosure today is down about 40% from where it was a year ago. we think there probably would have been twice as many foreclosures over the last two years if we hadn't acted in the way the we did. but i will also be honest we have been frustrated, too in terms of the steps not going as far as we had expected or would have liked and part of the

reason for that has been the difficulties in the servicers actually implementing and being able to help folks that by all means in the programs could have been helped. just specifically on the settlement that you described, we have been and continue to coordinate with the regulators. to be clear, their decision requires plans from the individual institution within 60 days. there is nothing in those requirements that conflicts with the ongoing discussions we are having with the banks especially on the issue of dual track and other surfacing standards, we are very much agreed that there needs to be stronger consistent

standards including on the dual track and if i may do will track that we are pursuing on that in the short term for the institutions that would be participating there to make sure that the fix those prophecies. but in the long term as we sit in our housing finance reform proposal having clear consistent servicing standards that cover everyone whose servicing is absolutely critical and that is something that we've begun to work on longer-term establishing principles around that and then beginning to work out the details. i would just say it is in everyone's interest to do this. there are homeowners in communities that have suffered, financial institutions that have suffered because they haven't taken common sense steps where it makes sense and it's in everyone's financial support to

modify loans. that hasn't happened because of all of the conflicting and confusing morass of issues a writ of the way that the securitized loans have been serviced so standards about pulling the service agreements and all the other steps here will benefit everyone if we can get their. thank you mr. chairman. >> cementer merkley. >> thank you mr. chair and mr. secretary for your testimony today. and i certainly echo the thoughts of my colleague from ruda island that it has been extremely disappointing to see how incredibly slow the action has been to even address the fundamental issues of process, the single point of contact with the dual track and the recent settlement was along the lines of continuing to cheerleader and say this is the right thing to do, please, please do it as

opposed to anything that actually takes us down the path. we have been cheerleading for a year-and-a-half and see virtually no results on the ground. people coming in the door today are not telling you different story than they had a year ago in terms of the complete insanity of reaching a different person the may contract still having their files lost repeatedly so on and so forth. for a long time we've been hearing results around the corner. we haven't seen them. >> to turn to the qualified residential mortgage process and the proposed 20% down payment requirement, there's a lot of concern in the house and the world but this will create a two-tiered system. i would suspect you could survey

my entire community of working class families where i live or any similar communities around the country into would be hard pressed to find a single family that bought their first house with a 20% down payment unless they have inherited money or win the lottery or something and the would be one of 100 at best. the you have any sense right now what the point spread is on the difference between other things equal between somebody putting down 5% and putting down 20%? >> i'm sorry. the point spread you mean -- >> in terms of the 30 year advertising mortgage. >> given that the fha continues to operate and provide low-cost financing for the low down payment, we continue to be yet to have a relative affordable low down payment option

available, but i think outside of the fha, that spread has been pretty substantial. i haven't looked at it the last day or two but it's white and dramatically as we have come through the crisis and would be in excess of the point my expectation would be. >> i have had a lot of conversations with people on the ground who's worked with families and i'm adding to that my own experience working for habitat humanity and developing affordable housing and the collective impression is that a small down payment of really drove the risk of foreclosure, and for a couple reasons one is simply that -- and talking about

pretty 2003 mortgage market before the failure to regulate the teaser rate mortgages, believe interest rates mortgages, before that set the foundation for this entire meltdown there was a steady appreciation in housing prices, and folks who renting if they could come up with a down payment in a few years they had some significant equity and found themselves far better off in terms of stability in the financial foundation than those who continue to rent and the huge incentives to hold onto their house as a point of great pride and stability for their family and the primary wealth building aspect of their life. things become quite different

when you introduce the predatory mortgages and the balloon in the housing value the was driven by the teaser rate mortgages. but take that away because we aren't going back on the path. we have thankfully outlawed the undocumented loans and the prepayment penalties and the steering payments that drove the originators to steer people into the sub primes. all of that so we are trying to reclaim the standard amortizing mortgages as a wealth building instrument that it has been since it was invented all been the great depression. the 20% down payment requirement driving a two-tiered market to the disadvantage in no provision to buy 20% down payment. i would try to get your thoughts on that.

>> it's a very important question, and i think in my mind it's important to state up front there is no question that down payment is one piece of what helps predict the performance of loans and the risk and we certainly saw through the crisis has i think that you acknowledged we went too far. could we have seen in the portfolio there is down payments or other loans that were effectively 100 per cent ltv that the performance was significantly worse even controlling other factors but i think the issue here is both the one you raised which is important which is access. we have to balance thinking about the importance of making sure a range of middle class families, low-income families continue if they can afford to be homeowners and prepare to be

homeowners of the continue to have access because down payment is the single most important barrier. we need to balance that against safety and soundness. but i think the other point i would make is that we shouldn't lose sight of the fact that down payment is only one element of the felipe risk and what really got us into trouble is the leader in the press between down payment and a whole range of other factors. so when we put out the proposal and i would emphasize its proposed we've made no final decisions we are very interested in comments. we did put in the preamble alternative to the 20% that was at 10% that is really inviting comment of exactly the time that you're making of what should that balance be coming and what other factors should we take into account should mortgages

aren't or other types of risk retention be able to compensate for that, how exactly do we make these pieces work because it isn't as simple as saying we should look at the loan-to-value and ignore the other components of leering of risk. >> everything i've seen shows a very small discrepancy before we allow the predatory mortgages in 2003 and within the fully amortizing certainly amounting to less than the basis point, and i just want to reemphasize this point taking the wrong lesson out of the crisis the lesson was you don't allow kickbacks to the loan originators or undocumented loans, you don't allow teaser rates with deutsch prepayment penalties to lock people into them because in that setting you will drive people in need of

that balloon bricks and will matter how much a downpayment to have severe needs to be scanned in the game but putting a large premium would be a misreading of the experience that we have had the last 20 years in the mortgages. so i would just want to emphasize that fought. there was a study that cannot because the new census of northeast portland which was a poor area and used to work in it were a message out migration of impoverished families, and the main finding was that it was a failure of the city to work and i say this city because it was kind of related to the city policy but it does reverberate in the broad housing world the failure to tackle the down payment problem. while i was working there we created an organization called project downpayment specifically to try to tackle this fifth by raising the money to assist was very slow and difficult and a few families work civilized.

those who were stabilized their housing went, their homes went from joost to 60,000. so they participated in the american dream and the way we can never get through to minting. >> i would love to call a one-shot program, the so-called opportunity program. it's been moved into the budget online and it's not clear what that means for its future and i think it's been a substantial factor in encouraging the type of fundamental -- fundamentally fair strategies that have in power a tremendous number of families who never otherwise would have been homeowners. >> thank you, cementer merkley. thank you, mr. secretary, for your testimony. i look forward to working with

you and the committee to ensure hud programs can effectively meet the needs of our families and communities. this hearing is adjourned. >> thank you, centers.

which i suspect growing up in brooklyn might be the cause for some other kind of award but this is in the day for that. born in brooklyn and went to manhattan college. list you think his new york bonafides are not real. when ronald reagan became president rudy became an associate attorney general and much to the surprise of some folks went back to new york city to become u.s. attorney for the southern district of new york.