it's been four years since the gses invited to the servitor should generally not know how important housing his tour economy. some estimate housing and related interest trees are rewording 25% of our economy. until the street of housing, our broader economy will not fully recover. this is a command is a important issue to all of us. i applaud bipartisan efforts on

this committee with mr. campbell and mr. peters, mr. miller and ms. mccarthy in hopeless hearings to focus on related ideas. i look forward to hearing more today about your three-part strategic plan to build company pain and contract the gses. in your efforts for a single platform and standardize part says, i believe it's a great step forward, a great development. i also believe that your efforts to maintain foreclosure prevention activities and credit availability at refinance mortgages has been successful. i also want to applaud the work with harrop, the home affordable refinance program to promote prevention at today's has had successes. one by one blade refinances have

been done which nearly equals the number of subway finances the prior three years. the focus on underwater mortgages is greater than 105 want to value ratios represent 43% of the harp refinance can. 215 and 2011 if that is a movement in the right direction, but we still can do more. it is in the area of contracting that i have the most questions including the effect to have a multifamily housing, single-family housing. the gse portfolio except on pieces that the credit here has not been interested in. they usually are not interested in providing affordable housing. have questions about the effect it will have on the goal of the policy of affordable housing, which we deeply support in the

30 year mortgage. i also have questions about what contracting will need in terms of the guaranteed fees of longer for closure times. better outcomes in terms of rates for closures. should we be looking at the result that rewording states or localities that keep people in their homes as opposed to reason their fees. i look forward to your testimony. >> the chair recognizes the gentleman from california for one and it. >> thank you, mr. chairman. the secondary market of merck investors develops a deep mobile market overtook to the advantage of the average american. the hybrid was fundamentally flawed. in fact it is private companies and public policy charters serving two masters for replacing the function they

historically performed we still need a viable secondary mortgage market with sound underrating principles. saying we need to look to the secondary market for mortgages and focus on that. the system separate from the government eliminate the model with the private sector benefit from the government guarantee come in many government race, private sector rewards. nature the secondary market was privately financed capital we insist on government funds. the maximum cutting a private sector was not the part of the bill portion of it. historically housing right to recovery. we need an alternative rapidly. thank you. >> the china recognizes general from california, mr. sherman for a minute and a half. >> in the 1930s detroit dat is no federal and home finance it did not work out. then we tried the gse model for

organizations run by those reported for profit had a full implicit guarantee. so they took risks to benefit shareholders on the taxpayers, so that is not something we should return to. i'll agree with the chairman but if that's as far as it goes. but i do think we need a federal agency for more than one involved in the market. otherwise we'll see the end of the 30 year mortgage at fixed rates available to average middle-class families. what percentage of the market this government agency or agencies should controller be involved in is the subject of the forward to discussing in this room. we all want to hope those homeowners that are troubled or underwater, but we should recognize many of the ways we hope cost the federal government

money or reduce the value of instruments held or in effect guaranteed by the federal government. i want to commend the gses for their help in allowing homeowners to refinance, even if they are underwater since that usually doesn't cause the federal government any money. what it does cost of those investors repeat five and six and 7% yield and government guarantee paper. i look forward to hearing more. >> the china recognizes the gentleman from california, mr. roy's for one minute. >> thank you, mr. chairman. i want to think director demarco for being with us and share with the committee giving the director is taking some bold courageous steps as a regulator and conservator of the gses. the same cannot be said of the administration. secretary geithner and donovan

promise plans. we had a failure where the white paper. greater failure of the housing payment system, we got away paper. a white paper with the choose your adventure response is not what congress needs to not let our markets need. we need to restore the appropriate role of housing finance. many serious leadership to move us away from a system overly reliant on taxpayers towards a pre-functioning market accurately. prices risk. thank you. i yield back. >> the chair recognizes mr. green for one minute. >> thank you, mr. chairman. mr. chairman and welcome mr. demarco. there is a role for the private sector. there's also a role for the public sector. i talked to the builders. they play their role for the

public to appear to attack to realtors and they believe there's a rule. i talked to the bankers. they played no role for the public here. in my constituency was 30 year loan some are stand but there's a role for the public sector. the question is not whether there's a role, but whether we will take the time to fashion and craft a meaningful piece of legislation without anybody's recommend nations so we may have a role codified into the law. i regret we have not codify this into law, but i don't think it fenestration. there's 435 members of congress. anyone of us can crafter on legislation. i believe those who said we should do it when we were in charge i to do it now that they are in charge i yield back.

>> the chair recognizes the gentlelady from west virginia, as capito for one minute. >> thank you. bochum director demarco. i want to thank the chairman and also for his efforts to some at the discussion. we hope to structural and significant reforms. as has been said many times here, we've seen changes to regulatory structure here in the financial realm, but in some cases layered on too heavily for institutions to lend adequately. one thing we have not done is address the chief underlying cause of the crisis events are housing finance system. the objectives that lets him if ready to assume considerable risks in the market that ultimately to a taxpayer bailout rescued by the taxpayer. we are four years later and it's unacceptable we have not reformed and made a business

model available to housing finance and today we have left the taxpayers to pick up $187 billion in treasury support. the practice of privatizing gains in publicizing losses is unfair and meaningful reforms must reflect this. thank you. >> the chair recognizes mr. newco power for a minute and a half. >> thank you, mr. chairman. i also want to take mr. demarco for his service in being here this morning. as we approach the five-year anniversary of fannie and freddie, we realize the american taxpayers that inject almost $200 billion into entities. in the history of fannie and freddie has proven government involvement not only creates moral hazard but also political pressure for increasingly risky lending practices. the government guarantees mortgage debt, eliminates market discipline in the risk aversion

for investors in the government is incapable of establishing risk-based fees for guarantees and exposing taxpayers billions of dollars. unfortunately we haven't learned this lesson because here we are with so much of anything readable about reforming freddie and fannie appeared in the meantime, nine out of 10 mortgages have some federal maxis and taxpayers are on the hook for that. the white house said they wanted to do some thing about that but today did not put them forth a white paper that says this is what we might do. we never took any action on not. it's for congress and the administration to get the taxpayers off the hook so we can move forward with the housing finance market and i look forward to your testimony, mr. demarco. thank you for your service.

>> the chair recognizes the gentlelady from minnesota, ms. bob denver when i met. >> thank you, mr. chairman. also to her witness as what do we learn this millions of americans have been big guns by these policies. they've lost a leg with billions of dollars of assets. the people who suffer more than any power at the bottom end of the scale, the african-american community have suffered from these policies. we see over 90% of the mortgages having access to government involvement. this doesn't even pass the following off the chair laughing test to think this a public-private partnership. it's not. this is the federal government. it's been a failure. when are we going to release the government has been a lousy steward of people's money and also at the same time

disadvantage people with well-meaning programs. we need to pay back taxpayers who funded this bailout, get them out of the gses to change her thank you good idea die. >> the gentlelady from missouri, ms. wagner for one another. >> thank you, mr. chairman. as we continue this debate, and keeping your thoughts in mind. the first is the current situation masses about previously back in over 90 of his unacceptable and untenable. we've arrived due to a history of flawed government policies that continue to homeowners and taxpayers. the second is the gse model has got to go. in order for that to happen, congress and the fha must establish guidelines that provide transparency and legal certainty for private investors. this will encourage private capital to finance mortgages

just as virtually every other credit market in the united states. thirdly i believe if we can establish those rules and guidelines we will seek private capital into the mortgage market in a large way. moving us away from mistakes of the past and protected inlet and tax payers in the process. with this in mind, i look forward to hearing the testimony of mr. demarco. thank you. >> we now welcome mr. demarco is her sole witness in 2009 president obama designated mr. demarco as acting director of the finance agency, regulator fannie mae, freddie mac and the 12 federal thanks. mr. demarco is a civil servant with over 20 years of housing how was the experience, including stints at gao, treasury and au fait o. he holds both a ba and a phd in economics.

without objection, mr. demarco's full written statement will be made part of the record after his oral remarks. members are advised that mr. demarco will be excused as her witness at 12:30 today. welcome to our committee again. you are recognized for a summary of your testimony at this time. >> thank you, mr. chairman. chairman has to latecomer it could number waters, and please to be here to testify. i submitted a detailed statement of work to engage in activist is the two essays on important topics discussed. fannie mae and freddie mac were the enterprises and conservatorship for 4.5 years. they were never intended -- [inaudible] >> the committee will come to

order. one morning and he will be cleared. we look at the capitol police. require all observers to name chain ordering the quorum. order in the quorum by senators and exclusions on lake erie. i asked the police to remove the gentleman from the committee room. all guests will be reminded, they are guests of the committee. they will observe the core of all times or they will be escorted out of the room by the capitol police. mr. demarco, you're recognized

for a summary of your testimony. >> thank you, mr. chairman. i do understand the pain this housing crisis has caused for so many families around the country and the tremendous costs imposed upon the american taxpayer. the first chapter of conservatorship focused on restoring stability of liquidity to housing finance during the financial crisis in the fall 2008. we succeeded. the second chapter focus on foreclosure prevention efforts which are critical to hope barbers in this rest and essential to meeting our mandate to preserve and conserve the enterprise asset. efforts to minimize losses on troubled mortgages have been good for barbers, good for communities and good for taxpayers. >> affordable housing a mac [inaudible] >> the rosenhaus required servers to maintain order and

decorum for rule of law than -- [inaudible] >> and i thought barney frank had retired. >> the committee will come to order. the committee will come to order. mr. demarco, you are again recognized her summary of your testimony. >> the next line in my prepared remarks are the task has not been easy. while we have not always succeeded, the results are better than frequently recognized. and conservatorship, the enterprise complete more than 2.6 million foreclosure prevention transactions. as these come in nearly 2.2 million of these

transactions resulted in the bar were staying in their home. the borrowers able to pay mortgages and enterprises have refinanced 15 million mortgages since conservatorship. more importantly they've completed almost 2.2 million harp refinances. >> the witness will suspend. >> i would have to ask the capitol police to come in again and escort these individuals outside of the chambers. ladies and gentlemen, we are not going to allow you to disturb this hearing as part of the people. you will be excluded. >> mr. chairman, will be just as the people the signs to put them down rather than putting them out? >> all guests have been warned. you will not interfere with

proceedings at the people's house. capital police have been requested to escort all these people. i say to the ranking member, dave and were not once but twice and given every accommodation. you'll now be cleared from the chamber. [inaudible conversations] [inaudible conversations]

again, mr. demarco, you're recognized for your testimony. we have been get more than a couple sentences out. >> more importantly, we've completed 2.2 million harp refinances targeted at birth with little or no equity in homes. while not without shortcomings, delays and other problems come in this collection programs remain a noteworthy response to an unprecedented crisis in the work to help borrowers continues. today the tools and processes are much better established than they were a few years ago. a big reason for that is a dedicated work of employees at fannie mae and freddie mac in my own team of hard-working civil servant at fhfa. while we could need to refine and improve programs from last year we began moving onto another chat or of conservatorship. a year ago i sent to this committee is strategic lien for

the enterprise conservatorship. that plan had three broad strategic goals. first, build. build a new infrastructure for the secondary mortgage market. second, contract. gradually contract the enterprises dominant presence in the marketplace while simplifying and shrinking operations. third, maintain foreclosure prevention activities and credit availability for new and refinanced mortgages. these schools satisfy statutory man conservator are consistent with the administration's call for a gradual wind down at the enterprises and preserve all policy options for congress. achieving these goals will produce a stronger foundation on which congress said market participants can build to replace the pre-conservatorship gse model. earlier this month announced

specific steps i expect fannie mae and freddie mac to take this year in pursuit of these three goals. briefly we are building for the future by establishing a platform for future mortgage-backed securitization. the platform allowed by enterprises will have its own ceo and board and operate are neither come to me. building this platform is an important element to assisting congress but they transition to the old model to a new one. we are contracting enterprises by setting targets to gradually shrink each of their three business lines this year. lastly we are continuing efforts to maintain market stability and liquidity. areas of focus include reps and warrants, mortgage insurance in first place insurance. in closing, members have important choices to make the one defined the role in the housing finance system for years to come.

choices will directly affect business decisions of financial institutions and investors and help determine the framework for millions of households to borrow money for buying a home. fhfa of sorts working with this committee, other members of congress in the admin is grecian to make policy determinations in an east conservatorship speared thank you for inviting me here today and i look forward to discussing this import mongers at the committee. >> thank you, mr. demarco for your testimony. the chair now recognizes himself for five minutes. mr. demarco, on page four of your testimony, you use the term sustainable. you are focusing on a more secure, sustainable model for the secondary mortgage market. jeffrey lacher, president of the richmond federal reserve has said we should phase out government guarantees or home

mortgage debt, otherwise financial stability will be threatened by repeated boom, bust cycles and housing. homeownership may be able to set the objective we should subsidize housing equity, not housing debt. i too am focused on a sustainable housing finance system. mr. lacher is that the bolivar current system can foment boom bust cycles. from your perch in 20 years of experience in housing finance, do you see that is a risk? how do you use the term sustainable is used in your testimony? >> i certainly think the housing market does go through cycles and we certainly experienced a wrenching nationwide cycle now.

i think there's plenty of argument out there that a contributing factor as big government policies. that's certainly not the only thing contributing to problems the last few years. what i mean by sustainable as we are trying to build a market that truly can last for years and function with whatever role government has government and private market participants to rely on the soundness and stability of that model. the infrastructure were trying to build is basic building blocks. they will start this a conservator to get the thing is something announced in 2010 but the uniform mortgage data program. we want to do some in a simple as going to the mortgage industry a standard set of data

definitions for what gets reported on a mortgage application and comes to an investor, with the form and format and definitions look like so we have consistency in data and produces more quality. it's a basic building block. it sounds ho-hum. it's essential to building a sustainable model. other things are looking at standards to the marketplace. >> mr. demarco, on page 15, any system of housing finance is going to have some cost, some benefits. on page 15 in talking about federal housing policies, including specific credit support company said investment dollars towards housing the driver of the place of housing

other things being equal. so are you saying credit guarantees for what they do perhaps the lowest interest rates and the last date i saw from the federal reserve study years ago at the fan in model monospace about seven basis points out that the interest to help the consumer that the consumer may pay on the back and they pay more in their principle. this amateur singing your testimony? >> over 90% of mortgage securitization is being backed by the taxpayer either through ginny made or treasury supports as danny and freddie. if you subsidize to everyone via the house, you are subsidizing no one. it is causing simple supply and demand causing the price of the good to go a. so if there is this rod across

the entire market subsidies to housing credit, some portion of that gets captured by the home seller and is leading to higher prices. >> i'm running out of time, so your answer may have to come in writing. i'm curious, what is it we can do to consent private capital to come into the marketplace as they observe trueness of dollars of excess reserves at the fairbanks or nonfinancial corporate balance sheets. i hope somewhere that we will pursue the questioning. i understand you've raised twice, and curious why not a herder for time. i time is expired and i recognize the ranking member for five minutes. >> thank you, mr. chairman. tour the 112 and 113th

congress is, we have yet to have a hearing on various bipartisan gse per postals in the house of representatives. we also do not have a hearing on proposal for the 112 congress which would have the corrugated and hope the private markets to pick up the pieces. whichever approach you support, i think you agree that congress should be convening hearings on specific gse reform proposals. in their head as conservator, what is the cost of doing nothing? >> the cost of doing nothing or we are continuing to risk taxpayer supported fannie mae and freddie mac only make it harder for investors to return and have confidence about what the rules of the roach in mortgage lending will be going forward. >> in the absence of legislation

however it seems i've had this discussion with you that you have broadly interpreted your mandate to not only act as conservator, but aggressively wind down the gses market presents an entirely reform the mortgage market. in your testimony, you propose fining down the investment portfolio at a faster rate than agree to with the treasury. reducing the participation in the family market, even when it's unclear lenders would fail the housing space and increase the cost of single-family housing by offloading credit risk. giving your not presidentially appointed, permanent director, where do you draw the line? hypothetically how are your decisions being informed by

congress and the administration? >> ranking member watters, i would come as much congressional direction and legislation on these matters as we could get. congress enacted the guard rails about what it is fhfa assiduous regulator and conservator. i'm also informed by observing within the congress of the united states others a number of proposals, none of them resolve restoring fannie mae and freddie mac should pre-conservatorship unmindful the administration is to discuss its intent to wind down the enterprises and try to take a transparent process with congress in explaining what it is we are doing and why and with this strategic plan over a year

ago laid out for congressman thoughts about where it debuted its statutory responsibilities in the gradual steps we plan to take under that strategic plan and i try to be transparent about his end of the night full but gradual manner. >> the treasure in the fhfa agree to a reduction of 15% per year the summer. why do you feel it's necessary to require the gses to exceed this target by selling less liquid assets. how you ensure such sales will not result in reduced return to the taxpayer? >> one of the requirements replace him and his transactions sensible. i would point out within the 15% reduction within the treasury

agreement, fannie mae and freddie mac can achieve over the next couple of years by not being by absorbing the national runoff of their routine portfolio. i'm trying to shrink operations, trying to de-risk the company so we can get some risk off the back of the american taxpayer overcharged take a gradual approach to doing that by encouraging sales of certain non-liquid assets on their portfolio. this will also ease the job for congress in terms of thinking about a transition away from any and conservatorship to a future model. the more we simplify operation and gradually shrink that makes the transition easier. >> you have set a target of 10% reduction, new acquisition in 2012. what will be the impact of reduction on rental prices? >> i would not expect any meaningful impact.

fannie mae and freddie mac in the early years of the conservatorship share of the market should increase substantially. in 2013 what i want is to see the decrease continue and we also have reasonable overall size of the family market will gradually decline. but i'm trying to avoid is fannie mae and ready mac operating with government backing, taking on a greater share of the market that should be the case. >> the chair recognizes the gentleman or new jersey, mr. garrett, chairman of the capital markets subcommittee recognized for five minutes. >> thank you, mr. chairman. when me follow up. you said something interesting in response to the chairman's question about having 90% of the market to such an extent we are basically subsidizing everybody. what is the effect on pricing in

the first time home buyer trying to get into that market? >> asic economics would suggest if you subsidize everybody that it's going to push it the price of housing other things the old. there's a lot of things going on ,-com,-com ma including actions of the federal reserve. but that's just a basic economic observation. >> it is, but a lightbulb went off fair bet to say to subsidize everyone at the end of the day you are harming them because it's harder for the person to get interesting in. let's talk about the risk because the gses have credit risk. can you talk about your work and ideas is so enough credit risk. when the gses have credit risk that means you and i have credit risk, too. what are your plans they are? >> with every family mortgage fannie mae and freddie mac buy

in securitize, they are standing behind the mortgage 100%, which means the american taxpayer standing behind it. but would like to do is engage in transactions with private investors, private capital markets to sell out credit risk. if they are by no inmate assault that some portion of the loss would be absorbed by a private investor rather than the american taxpayer. >> you mention 30 billion they seek a 2013. >> yes, sir. >> is that the total amount? >> no, that's the unpaid principal balance of mortgage paper $130 billion worth of mortgages in which there is some amount of credit less associated with mortgages sold off to the private market. >> what is that percentagewise about credit risk the gses

have? >> in terms of the stock they've got about $5 trillion in mortgage guarantees. it's a pretty tiny fraction. >> this is but a private program. >> is a star. >> another issue is the sequester and some ideas have come out to come up with other revenue. there's a bipartisan bill to prevent the u.s. treasury from québec team ipo to basically sell the private sector and use the money of the revenue stream. have you heard about that and what can you tell about that would be a good idea or bad idea? >> and generally familiar with the bill. i'm not sure who would want to purchase equity by these companies, but i understood the intent of the sponsors to say we

want to ensure the congress that the united states had a say in the disposition of fannie mae and freddie mac. >> you know about the bill, but if that's something the administration -- >> i'm not aware that's being contemplated. >> this to be one of the worst things they could do if they did that? if so, why would that be? >> right now they are starting to make money and i'm pleased by that. that money right now every quarter is swept in the dividend payment to the treasury department and away the senior agreement with the treasury works is the actual liquidation preference of the senior preferred stock does not decline regardless of how much is paid a dividend. so they still liquidation preference retained by the treasury department is substantial. >> the bottom line if we did if we did this to basically put us back into the situation

precrisis as far as the public private partnership that just did not work? >> if we try to in any fashion recapitalized if they aren't put them them back out there. >> you are familiar with the preferred stock purchase agreements and changes made recently. can you talk about whether these changes hurt or help ability to fix reform the system? >> i think they help in that they provide assurance to investors in fannie mae and freddie mac securities at the dividend would not continue to borrow from the treasury in order to pay the treasury with regard to dividends. it also is ensuring the taxpayer starts to see more of a return on the support provided and does not allow for the companies to take earning an essentially recapitalized themselves.

>> i thank the gentleman. >> the charter recognizes the gentlelady from new york, ms. maloney for five minutes. >> why did fenian freddie get into subprime lending and what steps have you put in place to prevent any entity, whatever it is they are from taking action in the future? >> complicated story with regard to the enterprise, participation in subprime lending, but clearly driven by what was going on more broadly in the marketplace. there is a sense of fannie mae and freddie mac losing market share to private participants. there was a sense of serving more borrowers that the margin or mortgage market and the sense the strength of the u.s. housing was such that home prices are going to continue to rise. there were a thought of things

going into participation in the marketplace. with regard to where we are today, was undertaken a couple pretty important steps. one is that the pricing of doing tvs this marvelous piece today and it was. they are clearly underpricing risk in the marketplace and the second is underwriting standards have been in root in the 30s through the discipline are things like better discipline in the origination process and being produced today comply with the standards fannie and ready. >> i'm concerned about the multifamily housing. i want to quote from your remarks he gave at the national press club on march 7th. and i quote, we are setting a target of 10% reduction in multifamily business volumes

from 2012 levels. we expect a reduction will be achieved through some combination of the crease pricing and tighter overall underwriting standards. given the multifamily housing is critically important base for affordable housing in our country, well over 50 million people relying on it. seniors, students, low income, moderate income families. i feel preserving it is very. how did you decide and a 10% reduction as an appropriate volume? have you done any studies to see if the private sector will pick up and continue to help us with affordable multifamily housing. >> of course. certainly congresswoman, i share your feelings that multifamily is critical to housing citizen and is particularly important source of housing for the upper

income households. with that said, we came through the command of writing things cruising market size, traditionally fannie and freddie in the space, expectations of professor mark in the future and recognizing we did have a goal of gradually reducing underprice the part of the marketplace. also paying attention to unmindful of us retired earlier combo over 90% of the activity is through the government. it's not the case in the multifamily market. it retained a good date of private participation and competition in the marketplace and i've certainly been hearing from the banking community concerns that they want to participate and are at the participants and concerned about fannie and freddie operating with the government backing having an unfair advantage in

the market. i am comfortable there is private capital actively competing in this marketplace. all that said, we intend to monitor how this is carried out and how the market evolves and to be mindful of that. but many companies have statutory mission to support affordable housing. >> have you consulted with the treasury department and fha? a part of this decision? >> i consulted with both of those departments in advance of announcing this decision. >> i also want to question whether their speeches on the differences between the single-family businesses and multifamily businesses. are you approaching a differently in your approach? >> yes, we are. it's a good thing for me to explain the reasoning here. the single-family mortgages, in

multifamily mortgages they are already doing risksharing with private capital. trying to get the single-family to look more like multifamily weathers risksharing with private capital. >> the time of the gentlelady is expired. the chair recognizes the gentleman from california, mr. miller for five minutes. >> there's so many responses to the question asked here to testimony yesterday's language that defines subprime versus predatory. i got in three or four bills of the senate. he released her conservator scorecard much for its nu had detailed specific priorities of three strategic goals. sounds like a bill introduced last year that achievement in that direction. what effect will the platform have been getting the private

sector money back to the secondary market? >> i think it has an opportunity to be a contributing factor to bringing private capital into the marketplace. you think about investors mortgage-backed securities and the losses they suffered in problems that have become apparent as a result of the collapse of the housing system think investors will be more comfortable bringing private capital to the mortgage market if they can rely better on how securities are going to work, with the rights and protections that investors are, how mortgages will be serviced, what kind of transparency with regard to the actual performance of the underlying mortgages are things were trying to bring to this platform and we think will make returning to the market for a track is for investors. >> the problem i have is you have taxpayers at risk in the private sector making profits.

if you can see what they were brought there's market share to stockholders basically made every mistake they could make at that point. what advantages or disadvantage do you see it's been in the south is a >> construct tenet is a joy the entity. i expect the congress and united states to make the final determination. it's going to be up to congress to determine the disposition. your options are essentially a government or corporation. sele to a private entity or turn it into a market utility and have it operate as a financial market utility. >> my concern is the perch on a private entity, do you envision a rated the flaw in the past of the hybrid auto that exist today? >> without some sort of control for knowing what the governing mechanism is, is certainly open

to a direction other than the one i'm designing for right now. >> what d.c. is the as the benefits and spinning private entities? >> the naysayers, the larger benefit on this particular one is structuring a market utility. none of the for-profit entity comes for something to serve market it just depends. one thing i would be concerned about is making sure however this operates in the future's so small midsize lenders have fair access to secondary market execution. >> the concern i have is if you look at fha there's been debate. i don't think it's crowding at the risk of private or is not grabbing and in much of that is due to legislation we've enact down the other, which i think we have to eliminate. what are the barriers that prevent private capital for

secondary market finance? >> there's a number of things inhibiting the full return. one is fannie mae and freddie mac are dominant players in the marketplace operating with taxpayer support, which puts them in a place to another private investors cannot get to. the other is the infrastructure for establishing standards and allowing investors to feel comfortable returning is not your there's still plenty of regulatory uncertainty with regard to a range of thing from risk based capital rules to regulation to be implemented under doc frank. >> you've talked about contraction of the gses and the concept from the marketplace , but how to barriers we've created for you through legislation impacts ability to do that quite

>> the biggest impediment for me for the thing i could use most for congress' legislative direction, even if it's not the whole picture, at least to provide some sense -- parameters with respect to this platform and how to gradually shrink presence in the marketplace. the steps we can take incrementally today. >> chair recognizes ms. velasquez for five minutes. >> thank you, mr. chairman. mr. demarco, the fhfa has proposed reducing the mortgage fees on a state-by-state basis. to determine the new fees, he will look at the length of judicial actions and cost of legal services, to fact is that high correlation to states with

robust consumer protection laws. as a result, you will see the highest increase under your proposal. do you think it is fair for followers in new york to be saddled with higher fees because they require accurate documentation and mortgage services accountable in the foreclosure process. >> congresswoman, the residents get the benefit of that protection and the benefit carry some cost having the residents of the state bear the cost that goes along with that benefit is supposed to the residents of other states pay enough costs. i would say with regard -- >> and they asked this question. the underlying message you send me to states like new york is

that mr. robert roach to provide robust consumer protection? >> absolutely not. it's not the intent of my message. the state of new york is two or three standard deviations removed from the rest of the country with regard to how long it takes an investor to secure their security interests in a mortgage after the borrower defaults and imposes a great deal of cost on fannie and freddie. >> we will face higher fees? >> we propose that for public comment. >> for the financial crisis they were not to blame. mr. demarco, you continue to reject principal reductions that could help underwater homeowners despite analysis fishes billions of dollars a month am saving. as you know, the rationale for not participating has been the

fear of barbers to resist benefits. so you cannot draft rules that would reduce the risk abroad while also facilitating a faster housing market recovery and taxpayer savings. >> with regard to that issue, congresswoman, the fhfa spent six hartmann's carefully studying and analyzing the principal reduction alternative underhand, which is that the department asked us to do. we put out extensive analytics regarding the work we did conclusions we driven the basis for that conclusion. i think we have well documented the reasons why we decline participating in the principal reduction alternative. with that said, we continue on a

path of energetic effort to provide prevention alternatives to homeowners who can chug on their mortgage in as they went through my remarks, i think we have demonstrated that through over 2 million homeowners in trouble in workers being able to retain their home. >> out of how many millions? 11 ilya? >> asked to be with regard to the number of borrowers. >> mr. demarco, her jersey to the congresswoman from new york about reducing the business volume to 10%. so it doesn't make economic sense to me that you are going to reduce a 10% volume in one of the most profitable stable portfolios they have. why is that?

>> as conservator, we have set out to gradually shrink the footprint in the market place so we can restore order to private capital in the multifamily segment is to be part of that, just like the single-family segment does in the retained portfolio does. >> so we heard the national association of home elders estimate that to 400,000 new multifamily housing unit will need to be built each year for the next 10 years to keep up with demand. >> the time of the gentlelady has expired. he can answer in writing. >> thank you, mr. chairman. >> in that case, the gentlelady

from new york is recognized for unanimous consent request. >> i thank you, mr. chairman. i ask unanimous consent to place a record by numerous members of congress in support of the gentlelady's position that guaranteed fees should be related to outcomes, keeping people in their homes and should not be penalized. >> without objection or the chair recognizes the gentlelady from west virginia, ms. capita over five minutes. >> thank you, mr. chairman. i want to talk timing here. utah about reshaping and repositioning the gses. when it thinks we have been for the committee and you've asked for congressional guidance is what is the timing aspect of this? i think we all realize that the timing would do is to short, we could harm the housing market, which i don't think anybody wants to do. if it's too loud, how are we ever going to get their?

how do we find the sweet spot of the timing of winding down and out in the private architect more of that space added that to your thoughts on that question. >> i think that's a fair concerned given the trauma are housing system has gone through. not that we are four and half years into the conservatorship, we clearly see signed the recovery and housing across most of our markets in the united states. i do believe the desert nighttime to begin the gradual stepping back and that is what we're doing is to do that, get it started coming to a gradually, but it's a multiyear venture to do that and some of the things we are doing multiyear ventures. it is going to take time to fully build up this platform and have it fully operational and extensive outside with regard to contract the enterprise footprint in the marketplace is meant to be gradual so that this is done slowly over time so we don't distract recovery of the

marketplace and so investors congratulate get comfortable and step back in. >> i know you're not going to react to specific time frames, but i've come a tenure committee and to 25 year? >> i would even go five to 10. we should be moving ahead now. >> thank you. the csp be has put out a rule on the q. and had my understanding is if your loan is secured as they fannie or freddie are automatically considered for a qualified mortgage. in my view, this leads to more expansion of cne and freddie participation. ..

>> anticipates that fannie and freddie would -- because a going to run their own rule or have their own parameters. is that correct? >> they have their own underwriting rules. rollicking at that in light of what they have determined is appropriate to the finds u.n. >> do you think there could be a scenario where you have qm to my qualified mortgage in one scenario. to me that will lead to massive confusion. >> the way it's written, this rule as it is now, morgan said

is not otherwise a qualified mortgage could be so if it passes through the automated underwriting system. >> the other question i have -- this may be on the taxpayer protection issue. and i only have like a man left. it's very complicated. in my opening statement i talked about 187 billion or ever the exact figure is and then we talked about the over nine and a half billion in net income. what does that figure actually go to? does it ever touch that 1,807,000,000,000? will it ever if it takes -- keeps generating profits? i guess, the taxpayers ever going to get the money back. >> the amount the taxpayers have put and with regard side covering losses of fannie and freddie is not being, with that amount, is not being reduced and cities dividend payments.

the taxpayer is getting back to return on the capital. a dividend of the capital plan, but it is not the repayment of capital. rihanna lowering the amount that is owed to the treasury department. >> if the improvements continue, would that be a scenario? were the principal would begin to get repaid? >> that's not how it's structured. >> thank you. >> the chair now recognizes that some men from north carolina for five minutes. >> thank you, mr. chairman. in light of media speculation which started of the weekend, i decided to attend today's hearing as a member of this committee because of the critical importance of the subject being addressed solely to listen and not to engage, therefore i am going to yield back the balance of my time.

>> the gentleman yields back the balance of this time. the chair now recognizes the gentleman from texas for five minutes. >> thank you, mr. chairman. i want to go back to something that you were saying a while ago and get you to rephrase that because obviously there's been a lot of controversy about the principle right down policy. there were some people here earlier disagree with you that you may have noticed. but he said that -- i think he spent an inordinate amount of time researching that issue. is that correct. >> yes, sir. >> and the finding was kuwait is our responsibility as the conservative, your responsibility is to conserve and do is in the best interest of the taxpayers. is that correct. >> is, sir. >> and so did you conclude then that riding principle down for people that were already paying in mortgages was not in the best

interest of the taxpayers? >> yes, sir. >> so i think it is interesting. one of the things that has been said about the housing crisis is that fed it -- ready and fannie played a part. there are a lot of people to blame immobile one of the things that keeps coming up to blame, being used by congress and other political influence to make housing policy that was not necessarily sound. would you concur with that finding? >> i would. yes. >> and so is intended interesting that is still going on? >> it has a certain irony after $180 billion of taxpayer money. >> to still have people that want to continue to use friday in fannie for housing policy. is that correct? >> it would appear that way. >> so i find that canada interesting. a couple of -- i don't know how many people are involved. attorney generals are calling for your replacement because you

did not buy into the principle right down program. and i guess i think it is also interesting, some of those attorney-general also were part of the settlement. and what we do know is about half of the money that these states received for the settlement went to housing programs, but the other half of it did not go to housing. is that correct? >> from what i have read in press reports, yes, sir. >> so i think one of the things that poinsettia's that the reason we need to begin to diminish the freddie in fannie rule is that we -- i think you heard me say in my opening testimony, we don't seem to have learned any of the losses. in fact, there continues to be pressure within congress and outside groups for freddie in fannie to keep doing what they have been doing but basically what you have testified, week to start putting more and more

potential contingent liability in the american taxpayers. >> it is. and certainly it was demonstrated here to be an emotional issue and one that affects real families. i take very seriously the harm that this financial crisis in housing crisis has imposed on families across the country. but we have tough decisions to make, and we have to rebuild the system so that we don't put these families at risk again it will put the american taxpayer risk. >> i want to go back to one of the issues. the portfolio. uni have had some discussions about that. we are at record low interest rates. in fact, i don't know how we can go any lower from here. the chairman of the federal reserve seems to be on a mission to try to see if we can get these rates lower. and so my opinion is is that the value of your portfolio has to

be at its maximum by now because those rates begin to trend back up. those are the values of year retained portfolio assets and will go down. is that typically happens? >> for certain portions of the portfolio, yes. for others it may be more critical economic factors affecting the value of the essence. >> and so what efforts are you currently pursuing to accelerate the reduction of the portfolio? and what efforts -- what are some of the things to you were doing in that respect? >> an important thing to understand about the retained portfolio is that they are much different than they were the day they went into conservatorship. when it went into conservatorship there were dominated by their own mortgage-backed securities which traded in the marketplace and home mortgage loans. about the mortgage and put it on the balance sheet.

today it is much different. it is much less liquid. they have a lot of nonperforming loans and the balance sheet. a lot of loans that have gone through fun modification. the runoff in more liquid, they're sold. the marketplace. they're left with less liquid assets. that is will return to gradually get on the balance sheet. >> the gentleman has expired. the chair recognizes the gym and from california for five minutes >> this seems to be universal belief that it's a bad idea to have the taxpayers take all the risk and private shareholders to the upside. we tend to view these government agencies, but as a understand technically their 21% owned by their private shareholders. furthermore, by keeping this 21% ownership the net operating loss

, the tax benefit is still retained by these entities we have a net of $1,307,000,000,000 of taxpayer money, on its way up to maybe 200 billion. how about the tax -- have the taxpayers done enough to deserve 100% ownership of these entities and to know that were not going to lose revenue to the net operating loss carry forward. when are we taking steps to acquire 100% ownership? >> i'm looking forward to legislative action by the congress of the united states to make those determinations. >> but until then the taxpayers own 21 percent of something we are paying on already $1,307,000,000,000 for. and until then we're going to suffer the tax reductions of the

largest pool of net operating losses of aware of finance where money. perhaps there will be some action by congress. >> and might ask you to propose some. of the last year so you never is the guarantee fees in an attempt to of level the playing field. can you provide the committee with your findings regarding any increase in private capitol participation in the secondary market as a result of your fees or in conjunction with your fees >> given that fannie and freddie your so representing over 90 percent of the securitization market in well over 80 percent of the mortgage flow one can say that this has led to a dramatic reversal with regret to their

share. i can report to in our own conversations with market participants and observations of market practices we do believe we're getting closer to a price at which we will see more mortgages not consult. a more profitable execution. >> a you think you're getting there. >> making progress. >> your not there yet. a just want to comment. it was interesting to hear your opening remarks saying that the beneficiaries of the gst activity are not so much the home buyer has a home owner. i don't think that's necessarily a bad thing can be seen a further collapse in the home prices, this country would be in much worse shape than we are now . >> the value judgment. was strictly noting that if you subsidize everybody there is a basic economic principles.

>> we all understand to provide lower interest rates in and supports housing prices. can you provide the committee with a time line for the completion of this single securitization plan for that you are constructed? >> i cannot. we have said that the faa would be -- enough said it would be a multi-year effort. i said that i would like to see this. this transition can be done within five years. beyond that it is very hard to put a strict time line on something which is still in the design phase, trying to scope out what it is a you know it's a pretty material undertaking including a big -- a good bit. >> he talked about creating a market utility or public utility . there are private sector enterprises. we could have some public utility that can package loans

and sell them into the market. a lawyer federal government can provide a federal guarantee. there you anticipating that this public utilities providing the federal guarantee largest packaging? >> i anticipating that this utility be structured in such a way that it can issue what is back securities that have a federal guarantee of the and can also issue mortgage-backed securities that to not have a federal guarantee. there would not presumably be the into providing a guarantee for the government. this is the operational plan for the under which the securities would be produced, sold into the marketplace. because there would be done in the market utility, that consistency would make the market more liquid. >> thank you. >> the chair now recognizes as a woman from north carolina for five minutes. >> thank you for your service to our people and with that our government.

i want to take up from the previous line of questions. he said that 90 percent of new mortgages origination, new mortgage originations are backed by the federal government. and a majority of the of standing mortgages, you preside over what is the successors of fannie and freddie. no, i bring this up because the chairman started off by asking his final question about have you incentivize private capital back into this marketplace. let me begin one step before that. what are the current barriers to private capital coming into this second -- secondary mortgage market. >> of the dominant portion in the market operating with

taxpayer support, uncertain the vote the government's role in futures toward to be including the timing and ultimate disposition of fannie freddie. there is uncertainty with regard to rulemaking that is still pending in the marketplace including capitol rules and waiting to see a bit more alma market itself regains its footing. these are all contributing factors. >> the first factor which is the government backing, that makes the backing of the federal government makes these mortgages cheaper which means the private sector can't compete. >> that's basically it. >> that's basically it. and could have can we incentivize private capital to come in. >> one way we can do it and now we are doing is as we have talked about her of there, gradually increasing guarantee fees to move toward a pricing

that is reflective of what private capital expect to manage that risk for its own -- putting its own equity in place. that's an important component. >> and you have taken -- you've taken steps to actually put these two separate platforms of fannie and freddie together in the process is ongoing. >> it is. and it's part of our conservative mandate. is that just about building for the future, as important as that is. they're operating a combined $5 trillion book of business. we have to continue to invest in infrastructure. spend a lot of time thinking, what does it mean as concern over to companies that give ministration says it wants to wind them? kaj invest taxpayers' dollars in continuing to develop and strengthen the underlying infrastructure of the securitization businesses using

taxpayer money in that the same time expecting a ultimately to wind feasting stem it gives us a more efficient way of utilizing taxpayer dollars >> spinning off that entity as a private verses government owned utility. >> i think that certainly if private market participants thought they had greater stake in what his platform was doing we would get there input into it and it would help shape the design. i said when i put up the score card, we are intended to develop a formal mechanism to be receiving market input on this. the that the more they see that this is something that they can have access to and participate and what it does to serve the market will attract the more to will really. it. >> in previous hearings i have

been very frank with the position you have been put in as acting director and the decisions you have had to make. i just asked her broadly, what is your role here as conservative? does that mean your to protect the taxpayer, here to see the vibrant housing market place an increasing values? is it to make sure that investors are rewarded for investing in these entities? what is your purpose and rule? >> i have -- almost all of that. in my prayers statement i go through this tessitura provisions your. fundamentally we her responsibility as conservative to conserve and preserve the assets. what that means is the american taxpayer providing this capital with all the risk exposure on

the legacy book been minimizing losses. we also have responsibility for insuring stability liquidity in the market -- mortgage market and the statues as we have to maximize our efforts to prevent foreclosures subject to a net value test or we're protecting taxpayers. >> the chair now recognizes the gentleman from new york for five minutes. >> thank you. >> let me pick up with a couple of questions that were asked. that is, let me first deal with the public utility. of wondering what actions are you going to take to insure that the large banks and investment firms and others who were bad actors, were shown to have treated to the financial crises, prohibit them from the lesson these public utilities. >> i think that one of the real important things about restoring industry standards from data to

the way or the securitization is the, by giving that to beat as single industry standard rather than a set of proprietary standards operated by major, a huge financial institutions, by dealing that at the quebec easier for small and mid-sized institutions to continue to be active participants in this marketplace because in the industry and the vendors that serve this industry developing the technology and then the technology is available to all market participants. that's why i think it's important to get the standard stunt and have standard contracts, standard disclosure, standard data reporting because i think that this was going to help along for the small and midsize participants to remain active. also, all we're looking for with the spot for is it's very important to me this it -- that this operate in such a way that

if your local bank in the state of new york or wherever they have an access to the secondary mortgage market the canary to the mortgages and sell them in this plot for. these to be designed in such a way that we ensure that can't access for small and mid-sized institutions. >> you think that would exclude the larger ones with the that have really cause these crises. >> and not looking to exclude lawyers institutions from the marketplace. am looking to make this marketplace as competitive and transparent as we can make it. >> on another issue, the bs this question. what to make sure and a stand. we had of that hearing not too long ago. fannie and freddie, because of the financial crisis. what do you think? >> it's our intent say they have

drawn over $100 billion to the american taxpayer. certainly the business decisions of these companies in the years leading -- leading into conservatorship contributed to the housing crisis and the economic crisis we have here. there were a lot of factors that played. honestly i am not one to sign up for a single explanation for what caused this crisis. there's so many parties that have a share the blame, from regulators to fannie and freddie to investors to big financial institutions, to borrowers. there are lot of contributing factors to what went wrong in this marketplace. >> and the me also because i also know that you are suing some major banks for mortgage backed securities that

originated with aaa ratings that freddie in fannie bought. can you tell me why. >> its consistent with hell if hcfa has understood its conservatorship mandate to conserve and preserve the assets of the company. if there are losses being absorbed that by contractual or legal rights should be of store by some other party or of irresponsibility of the party, we are working with these companies in conservatorship to exercise those rights and to get that compensation on the losses. we see that with regard to the representation warranty put back plans and with regard to private label securities we felt confident that we have grounds say that some of the securities sold to fannie mae and freddie mac were misrepresented in terms of what was there in that after

seeking other remedies we resorted to the system that is in place to resolve these sorts of businesses beats. we resorted to the court system to set forth our claim and to seek appropriate compensation for these losses. that's part of our responsibility to protect the american taxpayer. >> said of the gun have much time left. >> back good observation. the chair now recognizes the gentleman from california for five minutes. >> thank you. thank you, director. going to follow upon some scenes we have touch-tone ready. a little deeper. you mentioned that there will take several years to do reform and transition to a different system. but if we don't give started? what are the cost or risks of inaction, simply leaving them as they are well enough alone.

>> there are several. certainly to the stand that the ongoing role of the gst crowds out market participants are makes it harder for them to compete. it will deploy their capital someplace else. then if you want to draw them back in you just make it that much harder. second, testified before this committee numerous times about the challenge of having to large companies like this in conservatorship. you think about the two critical foundations of these companies. the people of worker in the basic infrastructures to support their operations. we have been asking the employees of fannie mae and freddie mac for four and a half years to continue working at these companies under this kind of scrutiny and criticism. reduced pay and then ask them. we don't know what will happen to you. the administration keeps saying you don't. all these legislative proposals of the rear not going back to

that business model. we can't tell you where we're going to read what you stay and keep working. these individuals have careers for themselves and have choices. i think that we certainly have risk with that kind of uncertainty. another risk that i spoke of earlier. we need to continue to invest in the infrastructure. every day by a new 30 year mortgage. that's a 30 your commitment that the american taxpayers made, and i have to have the technology infrastructure and operating infrastructure to be able to manage there risk cover its entire life span. that's quite a long tail already. so i have to invest taxpayer dollars to keep that sound. so this is another area, at the we should be : >> looking at the cheapies. we mentioned their is a subsidy. they are not equivalent to what as you mentioned in your answer, something that might bring cap -- private capital back,

equivalent to what the private sector deemed was the risk. if you look at the gp we have now, and they understand some of those have been diverted and a going to general government purposes that are unrelated to housing or fannie and freddie aerophagia fehr anything. if you look at the total amounts , how close are we to what would be a market for lack of better term rate or the kind of rate that would make private capital look and say, well, maybe i would take that risk for the press. >> well, i have certainly heard from some market analysts that think that we're getting close. we've got to find my testimony says that we have basically double the average pre conservatorship from 25 to 50. and so i think that we are within striking distance of certainly getting there with regard to a least some portion. one of the things that is important about the contract element of our strategic plan

and will we want to do with these risk sharing, that is actually going to give us some market observation of what the market is pricing this risk at. that would make the better informed to be able to answer a question. >> it will do that have? >> we are going to do is sell off some portion of the credit exposure on these mortgages. so the investor in the into taking on the risk of going to want a return on it. and so within the press will it -- it will be able to discern. >> of it in a gp, what else would attract private capital? what else can we do to startup bring in, crowded, are you want to call it, private capital back into taking some additional risk >> one thing that has not come up, certainly on the minds of market participants, the conforming loan limits. something that the congress of

the united states as a legislator of the number of times, but the last act by congress actually was to see if substantial reduction in the fannie mae and freddie mac conforming loan limit in high-cost areas. in early 2012 it went from 730,625,000. markets still operating. think that there is room here. a gradual drawing in of conforming loan limits is another way to start. >> thank you. i yield back. >> the chair now recognizes the job from massachusetts. >> thank you. i don't know how one feel about your new approach, but i want to congratulate you for having the courage to do it. honestly, it is kind of surprised me that this congress and the last congress have not yet had a single hearing, were

directed to. there are several polls on the table, but thus far we have been -- i personally have reached out to allow the people trying to figure out what we should do well where we should go. thus far to my knowledge we have had no formalized discussion. my hope is that your proposal will prompt us into it least having an adult conversation about where we want to go. i watched closely. me know if it time will have a more in-depth debate as to whether its current. >> thank you. >> as far as the principal right down, and follow the other side of the issue. i know that we consider for the next five minutes and rehash it, but the stuff going to help. i suspect it what you said earlier, i expect you feel the pain of the people who are caught in this cortex. for me the people that i felt the most difficult for, at least lately, the people that a

startling to beat their mortgages. regardless of principle right down, i every mortgage my house one of the times and it's all about cash flow. nothing else than how much can i afford to make the most important thing any homeowner. the cash flow can be affecting a lot of different ways. a principal right down is one way. the of the ways to extend the term will reduce the rate. the problem is that they cannot take current benefits are reduced rate hike and adjusted by rewriting my mortgage. again, i want to distinguish that group of people from people and not paid anything. there's an awful lot of people of a struggling committee of the mortgage was two, three, $400 less per month they could make it. is there been any consideration. if you want to return of principal and allowing these

people temporarily as a one-term thing to get into these lower rates so that they can get their homeownership back, their life back of the control of their life back so you can get off the hot seat for not doing enough for people who are concerned. >> absolutely. i appreciate an opportunity to provide that information to you. the we look to it the principle, there was an approach with the here. it is still focused on getting the borrower to a monthly payment of 31 percent of the household's monthly income. the law modifications we doing at least get the borrower to 31% because that's the first thing they're doing. so to your point, we are lowering the interest rate. we are extending the turn to for years. we're for bury your principal, taking the underwater portion and setting aside and charging is your rate of interest.

all these things we're doing to do exactly you just laid out, which is to enable the house will cash flow to the will to support the mortgage. we have gone beyond hand. developing modification tools the will resulted in even lower monthly. for many of our borrowers. the treasury department like to so much that they adopted it themselves over a year ago. it is now part of their program. his smile was working for ross. does the very thing he said, trying to get the borrower's monthly payment down. if they want to stay in the house, we want to give them every opportunity. one other thing cal with respect to refinances, we touch lightly. that is a daily underwater bar wars to be able to refinance the mortgage is one thing in my

statement that has not,. we're very pleased with the success of the program. we're prepared to undertake a marketing campaign to further reach out and let our worst no this is a legitimate program that can help the. >> appreciate that. i would love to see more detailed statistics. when people come into my office and can't access or don't know about it. in fact help that, unlike the area. in the detailed information would be helpful. >> i make sure our office gets that to you. >> the chair now recognizes the gym and from what carolina for five minutes. >> thank you. thank you for your very capable service in the presentation.

you recently noted that the ministrations failure to provide a detailed plan of how to know wind down has made it harder to support the housing market. given that the administration has not provided, what steps have you taken as director to prepare the gst will post conservatorship housing market. is the more that can be done? does it require some guidance from the ministration? >> ultimately the bringing the conservatorship to an end which is the ultimate wine town is going to require action by the congress. in the meantime, we are taking steps to gradually contract the enterprises footprint in the marketplace where they can guarantee fees. starting to sell single-family mortgage credit risk of a shrinking the overall size of the monthly family book, selling assets and exhilarated rate.

the administration -- i obviously have an important relationship with the of the destruction. they heard this year cheryl. i consult with them a lot. i believe -- demonstration is to speak for itself with regard to the specifics about way out. of the leaving of a good relationship in indicating the direction that i believe it is useful to go in. >> you feel here been adequately corrected. >> i feel like i have a good working relationship and consultation and i know where we agree and where we disagree. that would say what i need most is to bring these conservatorship to an end. in need of the congress and administration to agree on a legislative path that defines the role of the government in the mortgage market killing forward so that we can no where

rear actually building towards as the bill for the future. >> thank you. yield back my time. >> thank you. >> the chair now recognizes the gentleman from georgia for five minutes. >> thank you very much. welcome. with home sales and pricing, prices of homes increasing in mortgage spreads back to normal levels, white and fannie and freddie continued to assess an adverse market delivery charge which took in nearly $3 billion in 2012? aren't these actually fees which are no longer needed and is effectively a tax on new home buyers. >> well, i would not say it to tax. i would say that on the one hand we year-and-a-half of continuing to raise. you're talking about a component piece that was put in place when

the mortgage markets were in distress. no will say that as part of our evaluation of the next tips for increasing, i am looking at -- we are looking at the composition including adverse market fees. and assessing what your talking about, but i want to be clear that the overall path we're on is to continue to increase. >> the me ask you about low-level price adjustments. low level price adjustments of as much as three percentage points make fannie and freddie execution uncompetitive relative to the fha. reducing these fees would make hire ltv loans with private in my more competitive. to you agree that these l.l. croupier's are distracting the market and hampering the return of private capital?

>> i think tomorrow we raise the overall d.c. the more we are going to encourage private capital back into this marketplace. >> now, with the administration, with the ministration intent on winding down fannie and freddie coming in is it your sincere and honest belief that the private market in and of itself will be able to a board this void, especially considering that 90 percent -- this is a huge void, 90 percent of all of the new mortgages were done by freddie and fannie and that it is just baffling to me.

i just am not satisfied that we have something that can take the place of that. >> congressman, here is so i think about it. the short answer to your question. what to make sure from the question when. can a government staffed entirely out of this marketplace and kendis mortgage market be supported without a government involvement? is a well of like to see? does not what i anticipate, and is not really what i expect and would like to see. what from it this way. single-family mortgage market in the united states is a $10 trillion market. i don't expect the outcome to be that all 10 trillion is done by private capitol, nor am i expecting all 10 trillion to be done by the government without capital. that dial has moved well toward

the government having most of their responsibilities. the dial has moved in last five years. what i would envision is to start moving antheil away from government and with the taxpayers and back toward more private capitol participation. my gosh, between zero and 10 trillion, that's a lot of places to reset the dial. at the greek and make substantial progress away from taxpayers and still have of rival for government. i suggest it elsewhere that in thinking about where that governable ought to be, it might be constructive for congress to begin with the traditional explicit government guarantee programs, such as the fha program in the viejo program because those are existing programs to provide guarantees. let's figure out where congress intends them to serve the market. then one can think about what's left and what does the

government need to do to support the rest. >> it doesn't make sense that we ought to figure out exactly what government's role should be. if you agree that government as the role and it does, how we figure out how to make them work? how do we guarantee that the 30 year fixed mortgage will stay in place and available as an option without the government will. >> the time of the system has expired. the witness can answer in writing. the chair recognizes the gym from ohio for five minutes. >> thank you. i want to first recognize and congratulate you for the 2012 strategic plan the you have undertaken. think we all agree that that is the direction we need to go to build a new infrastructure, second to eventually contract and gst dominance and finally to

maintain the foreclosure prevention activities that the american public requires. i want to ask around those three things some questions. this is a two-part question. what timing you have for developing a single security. right now there are changes on a monthly basis. is that single platform the you envision, you try to use that as a foundation on a building block for the reform housing finance system. >> the answer to your second question is yes. this can serve as a building block for congress to in vision a feature secondary mortgage market. in answer to the first question, we announced 13 months ago that it was our intention to work

with fannie and freddie to develop this plan for. we made that clear to the congress and the public. in a october of last year we issued a white paper in which we describe for the market the potential scope of this plan for and how it would actually operate. we solicited public input on this. we have been considering an input in going about the next phase of the design of the platform. we expect to continue to reach out to market participants in a formal way to the will to continue to give market and put. overall, and this is a multi-year project. >> thank you. i think you for their work and i think we can use that as a basis no less your rhetorical question do we really need to gics? >> os could answer that.

i would like to ask you some questions with baritone the system moving toward a data pertains to regional and community banks. you believe it's important to maintain a competitive market? secondary in servicing markets. >> absolutely. >> to you think the -- de believe that these markets are more less competitive than they were five years ago? >> more interestingly, in some ways perhaps getting a bit more competitive. some of the largest institutions of actually stepped back a little bit. >> to you believe that concentration in those markets, additional concentration of market share would be a good or bad thing going forward? >> and not a big fan of concentration and a financial system. that's why the more we can do to keep this competitive and to keep an active role for small and midsize players the better.

>> i agree in think that is what has led to some of the too big to fail. i guess the west coast trips to take all the analysis to perform in making changes to the gst some market rules to assure that those changes will disproportionately affect regional banks or community banks and otherwise lead to more consolidation, more concentration of market share. >> it's critically important that we develop standards that define how the mortgage market works. as one very quick thing, if he sold the mortgage, you so one loan to fannie mae, you have to provide a whole bunch of proprietary coating regarding the characteristics of that mortgage. if you were to take that and say, no, want to selig, you would have to provide all information in an entirely different system with different data definitions. that was particularly costly. also the grace the quality of the data.

that's why i think that the data standards are important and will really help smaller institutions >> thank you. i would just like to up thank you for what you're doing. i hope we can work together on this committee and with the senate and administration because i think every day we read to reform is another day that the taxpayers are on the hook. what to think for the way you have run your conservatorship of look forward to working with you in the future. >> thank you. >> the chair now recognizes the gentleman from texas for five minutes. >> thank you. i think the ranking member is well. something bearing repeating committee have indicated. i may be paraphrasing. you believe that there is a rule for the public sector in home mortgage financing. is this correct. >> i do. >> that then means that you are now in agreement with the builders that i talked to, the

bankers that i talked to, the real letters that i talked to. i think that this is a fair assessment less said the post of the people who are absolves in this process that i've talked to your public as well as a preferable in mortgage financing is this a fair statement? >> it is. to be clear -- >> let me do this. the time is limited. notre give you some time to elaborate. i do want to have this. because you would i agree that there is a will of the public sector command also means the uni disagree with people who say that there is only a will for the private sector. we have to assume that this is a fair statement. >> well -- >> listen.

uni going to have to agree or disagree. right now you and i seem to be in agreement. >> we are. >> all right. that's one talk about. that makes news for me. prior to this area was not absolutely sure where you work, and i appreciate your being absolutely certain as to where you are. moving along quickly, you indicated to you support the harp program. benazir refinance program. and if you supported tell me how you working to make sure that persons who are under the purview of the gst benefit from your support? >> we have continually look at the performance of this program and made changes to make this more accessible to borrowers around the country. i think that the members in 2012

speak for themselves. as i said earlier, we are intending to undertake a marketing campaign to make citizens more aware of these programs and the potential benefit. >> if there is something that prevents you from creating an automated process by which you can send notices to persons who are financed through the gst, you all the mortgages, sending the notice indicating to them that they may be eligible for this program. >> that is being done. it's time by a mortgage servicer >> but the mortgage servicer. >> yes sir. >> what it in any way be too much to be done to the extent that we would conclude we had to more than we should for you to do this with the portfolio the you have? >> i think we're doing quite a lot. another sure what you're driving at.

>> well, i'll tell you what i'm driving at. we have a lot of people who can pay the lower mortgage payments and keep their homes. many of them may lose their homes. i think that we can do more than make them aware of the refinance program and you talked about. and i think it coming from you and your position this would mean something to the. so on going to ask the you consider doing something to waive the notice. >> okay. i have already committed to undertake public marketing campaign. >> public marketing, -- >> we want the improve the general public awareness, and we also want to reach out directly in those communities. >> you're going to have to take it from your testimony they are

not saying you will send a notice. >> i'm sorry, congressman, ira said that we already have been sending notices directly to borrowers. >> you have questions, sir. >> that i misunderstood you know you and apology. iq. >> thank you. >> a want to make sure we understand each other. let me move quickly to a national a foreign house will. he believes such a firm should exist, that we should have a fund to help us maintain our affordable housing stock. >> congressman, beverly is outside the bill of my responsibility. that's not policy decision for the congress. i didn't come here to have an opinion about the trust fund. >> i'll accept your answer. >> thank you. >> the gentleman's time has expired and we appreciate the comments. and with that we turn now to the gentleman from virginia. >> thank you.

thank you for your candor and your lead. after many long years the gst these are beginning to turn a profit. i guess i would like to hear from you the advantages and disadvantages of the return to profitability for you as concerned what should we -- has it led to any change in tactics to accomplish this reform and your part? there are things that perhaps who would be wise to look out for with this positive turn of events but also recognizing that we really do need fundamental reform and the taxpayers have ponied up north of $180 billion. >> it's hard to see any negative that's will the have been working toward all.

i think that is certainly good news. one of the key drivers is house prices. that is a huge impact on the profitability. it's an indication that the country's housing markets really are starting to stabilize and show some sign of recovery. also a very positive thing. the fact that they're making money and gives us more flexibility to undertake these important steps of selling off some portion of credit risk. gives us the opportunity in the resources to do things like invest in building this platform because we have worked through a good bit of the legacy begins to free up resources to the future looking polls that we have. >> are there any disadvantages? >> i can't think of any disadvantages. >> okay. in your speech the you gave on march 4th, the national association of business economics you stated that one of the effects of the housing

markets is shifting consumer demand patterns away from home purchases toward renting. was wondering if you could comment on your view as to whether or not this shift is a rational phenomenon of consumers and investors suggested to new market realities verses of normalization of demand as a distortion of an over subsidized government mortgage market. >> i will expect it has elements of both. it has elements of both. you know, the margin, how they want to manage there balance sheets, with the risks are being a homeowner. and so that the certainly come into play. the weakness of the economy. and those that are still employed, if they have a lack of certainty, feel that their job could be at risk or their hours could be a risk, that will make them less likely to want to buy a home.

these are all contributing factors. there is perhaps the natural readjustment. we reached home ownership rate above all we have ever seen before. above some concept of the natural rate. one might expect to see a modest decline. >> thank you and your back the balance my time. >> thank you. >> thank you. >> thank you, mr. chairman. >> a very narrow conversation. >> the mortgage-backed security actually guaranteeing in return which is essentially what happens now. unlike anything else, if you go

to fund its 100% guaranteed. see you see anything wrong with someone saying and no one going to get my money because it is guaranteed by the federal permit . >> i do. i think that the basic risk of the taxpayer guaranteeing most toro the mortgages, loyal as we are, your going to reliance on government agents to interpret and steady in follow mortgage credit risk and to be able to from time to time make adjustments in pricing rather than relying on market participants who actually have their own money to lose having to make that continually informed judgment about what mortgage credit risk actually

looks like. where i think my conversation, the studio will for government, there's also clearly a role for the private sector, the people that have their own money rest of the will to assess this risk and held prices in the marketplace. >> reform is probably needed. you would agree that any reform would be massive and nancy. a charter allows for the gst to do the mortgage-backed security. and so to undo it creates a problem. for me it was always a bit unsavory, but at the same time i don't think we can do it -- i agree with you and mr. green

that we absolutely must have the secondary mortgage market. but don't know refashion this. >> if i may. and may have an explanation about what we're doing that might help both of us. let me try to explain what we're dealing with this strategical. what i want to do with mortgages that are being sold, rather than the american taxpayer being the only source of guarantee, want to take some portion and say to market participants, will do a trade. ..

multiple types of transactions. there's different way of this credit risk that we can see what kind of execution make it in the marketplace, how the marketplace is pricing it so they get a better sense of this the start to have good command returns start to proceed gradually. how are they continuing to address this risk. that's the way this is big and messy, but we make it work or the gradual, but but we do it in a resolute way to bring private

capital back to the market. >> have you written anything on that? >> we have a couple of documents i'd be happy to go and work out. >> the gentleman yields back. >> thank you, mr. chairman. thank you for being here today. her chic or tavern information. mr. demarco, it's another currently mortgage origination there's a debate of federal governments what they offer guaranteed 61% of all residential mortgage among the finance system based on private cap bill, what issue should policymakers regarding appropriate role of the fha and ginny mae moving forward and how

could we prevent the case from driving business to taxpayer liability? >> while this is not a program i'm responsible for, i would like to offer a few observations. first, congress could give fha greater clarity with what congress expects fha targeted market to be to serve first-time home buyers based on certain community. businessman to help people get into their starter home, their first home and then you're expected to go to the conventional market or not. right now the only real parameter or the one that is the loan limit that fha operates under. that's the congress could express guidance to the role of fha. these things they could be done to give it greater flexibility in terms of pricing risk and

being able to resource itself as an agent he to carry out a mandate. in other places reset your key function as independent government of corporations and give them more flexibility is in how they manage their business, what resources, greater flexibility in the human capital of the people they hire to do the job with regard to pricing. these are all things congress could consider in the context of fha's roman marketplace going forward. >> switching gears a little bit. how you think increasing to push business to fha, will there be more explicit guarantees they are quick studies see this playing out? >> fha and fhfa certainly keep

an eye on what the others are. we both been gradually increasing in the marketplace in another critical component is not just gifi that ponder, mccurry h. further risk. that's a price element when one is looking at the decision of a borrower to go fha or conventional. we are well aware increasing gifi everything else constant. tension at the risk over. the point is whether fannie and freddie by the mortgage or fha, we all should the operating with risk based pricing mechanism so we undertake the business in a way in which were adequately

pricing the risk were undertaking. >> time is limited. i would have that the balance of my time. thank you, mr. chairman. >> gentleman is still that. >> thank you, mr. chairman. i appreciate this hearing. mr. demarco how i want to acknowledge you did it know which the pain lancet families have gone through. it is important to note that because her having a civil conversation coming you know the reality people go through not individual families but whole neighborhoods. >> let me ask you this. so now danny and freddie are making profit. a few years ago we established it though and the lawson the proceeds would fund to help low

income families had an occupancy rate of 98% and we could use low income housing could provide. when the gc gses complying with the law with the trust fund or do you? >> we have been complied with the law from the beginning because the lot indicated that fhfa could make determinations based on the condition of the companies not to contribute money to the fund and that has been ongoing determination. >> what is the future of funding for housing fund given profitability? >> first of all i want to make sure the profitability is sustainable and i'm still mindful of the treasury department and the sense that they don't grow to the trust

fund are going back to the taxpayer and i have not thought about this recently, so i would want to get here? careful consideration. >> i appreciate that. proceeds can go in different directions to pay back the taxpayer, i appreciate you thinking about that. the other thing is i've talked to people about these difficulties if everybody on this committee has and you have and one other thing is that would like to get your feedback on is the situation in which somebody, say can't pick a mortgage company believes their home in foreclosure and maybe it will be sold back to her carefree, which then at least to my understanding the previous occupant is not allowed to bid on. are you familiar with the

situation? >> that would be an unsafe and unsound prayer is to engage and not activity because then you're not doing things at arms length. >> what if you were to treat the person is at arms length person. just look at their new financial situation and the ability to pay now because that's been said by many, many font to foreclosure because of the market because of the medical problem. we at least look at cases on a case-by-case basis? it seems that there's a blanket blanket denial. >> where we have gotten to his face. a family could cinch up on their mortgage and we know how processes and requirements in place for the service or to reach out to the family from day

one and there's a whole menu of options to help the family tailored to as circumstances may be to cause them to get into trouble. see temporary shoe whether persons out of work for a few minutes? is a permanent reduction in income for that household? reach of those situations, we've got tailored responses. what we've done much better on no is when this happens today that the servicers know what to do and they're supposed to be in contact right away. i don't want the buyer were getting 90 or 120 days behind on their mortgage before they been working with the service or i'd have been offered the kind of assistance are talking with. but we were going to most all people is to get them right away when they first get into trouble. we want to reach out to and and frankly we want them reaching out to us.

this menu including payment is now well established. we've got the systems in place now and really want to help people. >> i'm going to try and get my question out. even indicated the first goal is to build a new infrastructure -- >> os the gentleman to cement his questions in writing. we have an agreement with the witness and also the ranking member that all members in the room right now will get their questions in an mr. demarco will be excused beyond the time is agreed upon. >> will be struck the time for each person. having three basic thesis but building this contract and part of the business. i want to focus on contracting

because when i look at the details i see some discussion and i want to talk specifically about single-family. if you sum up everything peace, enter into risksharing transactions, but it's not until i move to the multifamily part that i see specific targets in terms of percentage reductions. a 10% goal for shrinking the portion of your business. patty said similar targets for shrinking or contracting a single-family portion? >> there's an explanation for that. fannie mae and freddie mac today risk share on the multifamily mortgages they purchase. they party establish businesses practices whereby they are not taking other credit risk. that's not the way it works in

single-family. we've got another step we've got to take a nice establishing what these processes are to start sharing of risk. michael listened 23rd and let's get those this transactions tested on netscape the process to do an in-place and in subsequent years look towards an approach retaking with multi-family and pre-share of this. >> to the extent we can, listed down the road to the future when you're able to start talking about specific percentage targets for the family portion business. how small can you have and still provide the quicker the necessary. now you're at the a few hundred% of the market. how small their role can you plan to fill that particular

function? >> a particular function or providing liquidity can be a bit less than 90%. you're not going to turn that switch overnight. the way to get to wherever the answer is just to do it incrementally and that's the path around. >> is fair to say historically the market can function less than half. >> fannie mae and freddie mac traditionally have less than half the market. >> this transitions to miniature question which as we talk about contracting the market bush folks may agree or disagree with. even on different pieces, you're still talking about operating within the existing system, the existing regime, which is the simplistic taxpayer guaranteed. is not system broke a? if you're caught doing this is

to protect the taxpayer, isn't it true you're not going to go to protect the taxpayer and to get rid of the guaranteed? the only way you get rid of the conflicts, which is discussed remasters right now. you've got the taxpayers and their circumstances under which are asked to contribute to housing trust fund dicicco private shareholders. is not whole system fundamentally flawed regardless of anything you do, were so going to have issues in the long run. >> it is broken and i look forward to working with the congress. >> is it possible to fix it with the taxpayer guarantee, the implicit taxpayer guarantee in place. the church of church of a system where you become an agency or private entity, one or the other come you can't be both. >> unique to clarify its

exposure. the model you're talking about broken is the complete melting of capital and public support in a way that harms the american taxes. >> appreciate the steps you're taking because that is the goal of your strategic plan. i would put it to the larger groups that were always going to have this risk regardless of how successful mr. tree into it, and until we get the taxpayer out of the business of the guarantee come in the taxpayer will be on the hook and a thank you the work you're doing but i consider the possibility is a system broken, not the operation. >> mr. perlmutter for five minutes. >> thank you, mr. chairman. mr. demarco, good to see you. just a couple things. mr. mulvaney first brought it all to family housing in the last four or five years as we've

gone through this have not heard any complaints about fannie mae or freddie mac's role in the multi-housing market as a participant in an various fonts and obligations. have you received any complaints on the multifamily piece of this? >> i hear lots of complaints, congressman, so i'm sure it hurt things about multifamily. >> that hasn't been that area where there has been substantial requirement by the taxpayers to underwrite loans quick >> that's correct. we've managed to keep the business profitable. >> speaking of profitability, one of the gentleman brought it out. freddie mac has made many recently. is that true? how much? >> was at 11 billion? about a billion. >> fannie mae, have they made many recently?

>> they have indicated in a filing they will report a positive income in 2012. >> i just want to congratulate you on that. it had been going that way for a long time. what i thought was really a good description of the zero to $10 trillion continuum over the last few years the federal role has grown because there was no private involvement in the market because they got clobbered by then fannie mae and freddie mac. private sector i appreciate the theory and accurate theoretical statements that the private sector didn't price it well back in 2005, 2006, 2007 and to designate. wouldn't you agree? >> is coming neither did a good job. >> the private sector more or less which are completely from

the market in which case there is a vacuum for the role you've been playing at fhfa. >> that's correct. >> i agree with you in terms of the continua you describe, we probably are too far in terms of the federal involvement. so you are talking about technological platforms. one of the reasons we got in trouble is the rating standards seemed to go out the window for several years. would you not agree to that? >> yes, sir. >> you all put back into place the profitability to your organizations now. >> yes, sir. >> one of the standards have been worried about is this

technological standard. senator wyden has written a letter to the department of justice concerned to lend a processing services. were you about genetic litigation? was fannie mae, freddie mac involved in any settlements? >> let me verify -- i'm a believer above did not litigation. >> what i'd like you to do that ask your counsel as well to take a look at the role of lps and all of this. there was one platform, a technological platform that is good when things are going smoothly, but was very hurried in foreclosures in those kinds of things and i just ask for you all to take a look at that. i would be remiss if i didn't

bring up remix for you to say that is an area where if you exercise would be a profitability to fannie mae and freddie mac. without a yield that. >> appreciate your time is growing. i do have something i'll want to talk a little bit about lpi, lender placed insurance. that's kind of a technical in the weeds. but there's been a push looking at trying to come up with one lender, one underwriter, one featuring group. i believe you had put it the brakes on not operation around that movement towards said. d.c. any value and select and vendors versus having a free-market system data?

>> congressman, i have concerns about the way the lender placed assurances worked. i think a lot of people do. what i am seeking a major part of the scorecard for 2013 is i am seeking to work with regulators said market participants to come up with the market standard for how to improve the transparency and competition in this market place so borrowers and investors are better protected. what i am looking for is not a fannie mae centric approach or conclusion here. i want to see them in a better position with regard to lpi. i think we can do some aim to create a better standard for the markets of the borrowers mortgages on a fannie mae,

freddie mac or some other market participant to bring something better to the greatest market works. >> i think i am hearing you say that fhfa will attempt to preserve a role for the service areas and underwriters which i put in reasonable rules and guidelines issue. >> we want to have insurance coverage you have the situation are either a borrower is unable to obtain homeowners insurance in the location of the borrower defaulted on her gauge so we don't have insurance coverage because they have not been paid. we want to make sure the asset is protected. >> which i think we all see. my background is in real estate in developing and familiar with those things. we've got to protect the assets of those that invested heavily

in it. a couple minutes and a couple quick things. we were talking a little bit about my friend from colorado talking about no marketplace for these mortgages and we needed to have cne and freddie stepping. i'm not sure they needed to as they have, but we got in that situation because of fraud. it wasn't because no one is making a bad business decision on calculations, having the information. it seems they made bad business decisions because they receive significant piece of the equation missing if they were going to make calculations. isn't that fair? >> i would certainly add fraud to the list of contributing yours. but i think plenty of bad business decisions were made outside the fraud. >> it seems to me not verifying very fine people send comments

suddenly derailed dirty systems declaring it's probably not the best system to do that. on a more philosophical question comment do we really need dirtier mortgages? recredit neighbor to the north the 30 year mortgages have not been part of their history. they make amortized over that, but then there is one year, sometimes even one year come aside here, not just really getting into launcher mortgages. i'm curious if we can unpack it in the next 45 seconds. >> the notion of need is a little hard for me to say we respond to a question. will make an observation however. some sensitive roses and affordable product because

mortgages even on fixed-rate mortgages became more commonplace they were 15 years, 20 years, 25 years and kept pushing out the maturity spectrum to make financing more affordable. not that there's anything wrong with that. it is that with a 30 year mortgage company do not start paying down principal over this for several years. one thing i would say about mortgage is it is not necessarily the best mortgage product for a home buyer, especially first-time home buyer. if you look and see the first-time home buyers tend to go on their first for four years or five years, it may not be the best if they buy the house with that kind of timeline is what they expect. they may be mortgage friday to build equity at a faster rate and a 30 year fixed-rate page. >> i appreciate that. somebody at 60 years of age may be financing or refinance thing

is outside your potential earning power stroke there. >> mr. kilby for five minutes. >> first of all, thank you for hanging in there and seen and acted as chairman of making them were for rewarding patience in allowing a few minutes of your time. but a few years before i write to congress a couple months ago i was the president of a nonprofit organization for vacant and abandoned property. i came to that pic is 13 years prior i was a county treasurer. i was sitting in a lifetime dream of being the tax collector in flint michigan. i think you understand what i was dealing with to assert extent. one of the can to the developed and became much more aware, especially as i travel the country and set up land banks,

about 100 have participated in including my hometown is the approach that system seem to take when it comes to real estate. management anticipation. they tend to treat assets as a marketplace and measure the value and don't ever consider, let alone attempt to internalize this sometimes negative negative externalities of this disposition of systems. a couple questions that do at that area. what is the status of the enterprise now as opposed to a year ago? >> so we certainly are reducing the advent story. one of the things contributing

to these reported profits in 2012 is the return we are getting on sales is than anticipated. >> so about a year ago i think it was in february of 12 was a pilot program announced that it takes fannie mae on properties and offer bulk purchases to investors. i would just ask you to comment on that, but particularly comments as i understood the intent was to get property out of your inventory and supported increasing demand for rental housing in many communities. that was at least one of the potential outcomes. how heinz anyone else insured the disposition standards they were the basis for transactions have been a here today purchasers? >> so actually the pilot program

the reference was a number of restrictions on the disposition of properties for this transaction and so we have a regime in place to monitor that, but it is something some sense limited the ability of the acquiring holiday dispose of the properties. most of the properties that were part of these transactions are already rented. so fannie with the landlord for these properties. we wanted to see favre told that the property be preserved as a rental property for a period of time and so there accompanists restricted to disposition to make sure they remain rentals for a number of years. >> is there any data or experience that shows how that has been in the downstream condition of the properties? is it working or how different

situations for purchase are not adhered in action taken? >> it's a little early since we closed late-summer, but i'm not aware of any problems that have been identified. >> was there a specific preference to community-based entities, local and tanks or nonprofit intermediaries that may take the approach that the transactional value or even the revenue stream generated by properties are not the only considerations the external effects of the condition was also a consideration? >> yes, sir, i probably want to have a staff talk to you about the technical details, but we did have provisions that included partnering with local nonprofits and housing groups but these markets. >> to what extent has that been

the case the local relevant state law on local ordinances have been a tear to this particular properties. >> most cases we hear to state law. state conflicts with with federal law. but those have been rare. >> thank you very much. >> that brings to classify things. first the ranking member has sent thing to enter into the record. >> thank you, mr. chairman. i have here a document that is empowering and strengthening ohio's people. i ask unanimous consent to the record. >> any other or who is extraneous material also has five additional days to do so.

thirdly, and a member who did not get to ask questions or have additional questions also have five days to ask us questions that we asked the director in a timely manner to respond to those. fourthly, thank you to the director as i said at the outset for your work in this area and your testimony and thank you for spending time so we can clear to the people who did have the patience to us questions and i appreciate the comment that she would follow on individual basis to answer some of those questions. the fifth day is this hearing is adjourned. >> thank you, mr. chairman.

>> so other generations they had to reattach, how to remove, how do we go forward in this fast-paced world? the millennial stake at all in stride because that's the reality about regrouping as vertices and adaptability to be resilient, the economic crisis which has led to incredible

unemployment an incredible death for young people. young people are optimistic about long-term economic future because they see in one year could be totally different because we saw how quickly it started and we can see how quickly it might go away. there is a sense that grass is greener on the other side and we have the ability to know what get there. >> try to use his status spoke on the future of the persian gulf and shared his thoughts on u.s. engagement in the region. this is 45 minutes. [applause] >> if i could return some of the debates dr. henry has been one

of those individuals who were never had a particularly vexing challenge, which is darn near every day for the last 10 years, whether i was at opm sang her the commander of centcom chief stephanie army, i could call him up together a group together and let me bang around some of our most complex problems. so it's good to see you again, sir. ambassadors come especially to future diplomats of our world, with those of my generation are hoping to wrap this into a go and hand it to you. don't count on not. i'm always encouraged when i travel around and visit those who have agreed to dedicate a place to diplomatic corps in all of our countries. i think there's reason for msn. ladies and gentlemen, good

afternoon. thank you for having me here today, especially ambassador youssef, good to see you again so sad because many of you might know just the other night the ambassador received a distinguished diplomat service a work of affairs council. he earned it by bringing the united arab emirates and united states closer together. his acceptance speech was terrific. i would be smart to see right now. but i don't know dr. henry wade do that. he'll answer the questions during the q&a. i ask you to prepare for that. this roundtable series today, something i might consider a modulus for the mind full has a valuable forum for thinking through challenges and opportunities we face in local

region and throughout the world. much of my own life as dr. hamre mentioned, but also much of my family's life has been spent in and shaped by the region. before central command as dr. dr. hamre noted. i'd had three times in 15 or 16 months in all of these experiences and many friendships and relationships that go with them are part of who i am. with that in mind, i came here today with a message of assurance, a little peace of mind in the context of uncertainty or a spray paint american humorous been in the finley peter dunne who read at the end of the 19th century i'm here to afflict the comfortable and comfort the

afflicted. we face real danger at a time and resources are in decline and they should worry most of us. at the same time, we are not a nation or a military in decline. we have it within us to stay strong, to remain a global leader and a reliable partner and that should comfort you. or you may be skeptical and question how these opposing ideas can coexist. i concede there is room for debate here. allow me to share some of what is on my mind before hearing what is on your mind and i will start with where we might all need a little bit of assurance and that is in a word risk. they describe mayhem.

and then i met there in all of these forms may be a driver's very loosely tied christmas tree on the hood of the car, and emotional teenager and by the way, is there any other kind of teenager? texting behind the wheel of a car. in any case, mayhem prevails in the message is unique to have insurance against mayhem because mayhem is all around you. in some ways it feels a bit like the world we confront today, both insert and dangerous. i will concede not agrees with that to categorize the road. some accounts reexperience an evolutionary and the point in human violence. that his fitness and we like that trend are continuing. i suggest the united states

military deserve some of the credit for that evolutionary low level of violence. we hope prevent by deterring aggression and assuring partners. our presence as a source of stability that fuels economic growth. this is true of the middle east as it is in the far east. for the bad news, less violence does not necessarily mean less danger. risk is on the rise. that is to say the probability and consequences of aggression are growing up as a result of two trends. for one, power is shifting below and beyond the state. in his new book, power is actually detained. by the way, is in a separate and different think tank, but i just want to quote him because i find the argument rather persuasive.

in any case, the shift of power is spawning more act are set or more can i did and many are market couple unwilling to do harm. the shift is changing the relationship in many parts of the road between government and the governed. new social contracts are negotiated in the street. we are witnessing the birth of citizenship in many parts of the middle east. at the same time advanced technologies proliferate down and out. militaries now has listed as hosts. cyberhas reached a point to be his sister to those bullets and bombs. our homeland is not the sanctuary of one's choice. unlike the famous story of the fisherman in a tale of the arabian nights, we will not be putting the genie back in the bottle. mayhem is here to stay, the fund is not.

in a sense, the deductible on the policy has gone a then we can understand why. our nation has come through historic connection to restore the foundation of our power. we need to do this. deficit reduction is a national security imperative that we need to be -- we need to be a lot smarter about how we go about it. is the notice we haven't had a budget since i became chairman of the joint chiefs and for some time before that. sequestration is quite simply the most a response to the way possible to manage the nation's defense. he is the antithesis. when a budget certainty, time and flexibility. sequestration compromises readiness and compounds risk. left unaddressed, it could lead to a security gap, lapse in

coverage against the dresser and national security interest. it's also the law i'm hopeful but not all that optimistic that magnitude a mechanism will be defused in some future budget deal. in the meantime we have no choice which is of course our worst-case scenario. so are you feeling afflicted? if you are coming you're in good company. the coverage to continue my insurance metaphor may be a little less than what you're used to, but still the best available and it will get better in time. here's very hope that confidence brings comfort. last week i called our joint chiefs and combatant commanders to discuss how we will lead through the latest contraction. it is a bit of a historical

pattern. in that room over 600 years of military experience around the table. frankly i thought we looked pretty good. he may have noticed if you watched us testify upon the hill. let me tell you what you did not see in that group arbuthnot is seen as weakness. you would not have heard a chorus of decline. this is a rustle of bunch as those who serve for a nation by resolute punch. punch. they have the courage to make difficult choices about investments, about our people and our way of work. they are ready with every man and woman, the combatant commanders in chiefs as if every single soldier, sailor, airman and marine in uniform to get their last breath to defend america and her allies. they've also been down this road

before. when posting the possibility of making mistakes and draw down. eventually come through this. stronger as the military and the nation. make no mistakes those were in the startup times for military family. this one is going to be the toughest yet. at least it's going to be different. this would be the first with an all volunteer force. there's no nasty mobilization. we didn't modernize much so a quick missile older and there's no peace dividend on the horizon for recent i described previously. we have to find opportunity in the midst of this fiscal crisis. we need to be different. we can't do it alone. we need the help of elected officials to give certain tea, flexibility and time to make change. if we can get the reforms to pay

and compensation and if we get rid of weapons and infrastructure, we can begin to restore versatility of the joint force at an affordable and sustainable costs. as i stand here today, i don't yet know whether or if or how much her defense strategy will change, but i predict it will. we need to elected assumptions and adjusting nations to match abilities and that means doing less not less well. it also means wind and other instruments of power to help underwrite global security. of course he won't do this well if we don't that diplomacy and development with sufficient dollars. partners will have to work with us to collaborate with this on accepting greater share of the risk. some are more ready and willing to do that than others. i have to say the united arab

emirates is their most credible and capable ally. our consistent first-line of defense has been and always will be our greatest strength. as we navigate challenges and opportunities that lay ahead. i should probably close by and i had of optimism and pessimism. i hope i sense that you might feel better as a result of this conversation. you're starting to reconcile stay strong with fewer dollars. if so, you should feel pretty good about yourself. as scott fitzgerald said the test of a first-rate intelligence is the ability to hold two competing in opposing ideas in your mind at the same time if that impact is the definition of intelligence a

concert they tell you i am daring i suspect you are as well. i'm sure there's someone with a genius and intelligence in this crowd is armed for your first question. that's my prepared remarks. i did come here today with the tent and assuring you we will be fairly through this. the conditions are not making it easy to do that. none of us who serve in uniform and civilian life in economics, i don't think any of you sign up for anything easy. easy was it part of the job description. we'll get through this, but we'll get through it mostly because the application of leadership thinking, creativity and commitment to each other. that's the message i want to leave you with before i.t. questions that we have had a

shared future. we have an interest in sharing outcomes as soon as i had and that will always be the case and always factor into decisions we make about distributions gaging all the things they need to be done for the past 25 or 30 years to make sure the middle east in particular is on a path for greater security, stability on the basis of our common interests and values. without take questions. [applause] there at the podium. >> if i get a tough one, i had this tap dance i worked out. >> it's quicker to run out of the door. >> i will stay standing.

>> thank you, mr. chairman. [inaudible] grateful to coming. i ask all of you that you wait until you recognize. i think we have microphones. identify yourself and all mass question and also u.s. your question in the form of the question, which is not to make a long statement and say what you think of my statement? >> i've never seen that happen. >> not in washington. or and the middle east program here and he talked about cooperation. most of what we protect those who talk about burden sharing, what is the role for partnerships in countries which are not allies relying on energy from the cold.

should be speak about that differently? >> it goes something like this. if by 2017 can achieve independence, why in the world would continued to be concerned about the energy that flows out of the gold? my answer is i didn't go to the polls in 1991 and stayed there for the next 20 years. that's not why i went. that's not what my children went. we went there because we thought the region of the world where we have not except for a few bilateral relationships invested much bandwidth, commitment and we went there in 91 because of the aggression of saddam

hussein, but we stayed there because he came to the realization the future is tied to our future and not through this thing called oreo, but rather as a said earlier, the shared interest in a common future where people could build a better life and what types could be managed collaboratively. not by the united states uniquely, but the relationships we build on congress. when i hear in 2017 oil more you speak for us. that's great. i hope we achieve energy independence. from a military perspective and i can only speak that the continued development of military capabilities notably in my world, but also partnerships

and trusts by exchanging noncommissioned officers and military schools that are not he says he will find the future would be. the greater commitment. if you measure commitment in terms of numbers of boots on the ground and aircraft carriers, there will always be debated about climbing or declining commitment. that's not what the commitment is all about. i went to the goal for 91 and spent almost the next 20 years on and off. >> we have a microphone. >> thank you very much for those comments. my question dovetails along one of the questions i hear as they travel home more and more frequently is based on your

withdraw from afghanistan, is the u.s. committed to the gulf region in the middle east in general? if you can elaborate more on the commitment to the region. if the answer is yes, how can we find more ways to demonstrate? >> the answer is yes. the expanded answer to that would indeed be, how can we find ways to demonstrate her commitment differently? you know, the notion of withdrawing from iraq and afghanistan is somehow indicative of less commitment to the region. i would really like to react to that. i spent three years in iraq. you now, which you have to say we are all aware jamar is the ten-year anniversary and the debate goes on about whether we should have, whether it was

worth it and that debate will go on. even if in this room we all decided we have a common answer to that question that will go on it should go on. bashevis beatrice that he about the things we do. my personal belief is having given iraq -- first of all, there is no longer a strong man, the dictator and threat to the region by the name of saddam hussein was. secondly and import late is given the iraqi people an incredible opportunity to say which she will about whether it was a clean path to that opportunity or one fraught with missteps come opportunities gained, opportunities lost, of course it was. but the point is we did give them an opportunity. today we have a partner, not an

adversary and he remains to be seen how strong a partner they are willing and can become but we have a partner. to your point, it was enough of the bow at some point our presence in iraq would reduce as they were asking for and giving the opportunities take control of their own destinies and to see that play out in afghanistan the next few years. that's separate and distinct from our commitment to engage with, collaborate with important partners in the region and again not measured in terms of air ratings or carrier battle groups, but in terms of collaborations with the united arab emirates to build your capabilities and were eager to help you do that and what, reducing fake exercises.

23 or 24 nations participate. that's the future. not necessarily the united states of america sitting there with half the united states navy positioned in the gulf, but rather a long-term strategy that is feasible given the resources available that will allow us to achieve some common of decades. i can tell you at the united arab emirates in particular. the other strong allies we have come to saudi arabia, jordan. they start taking them down, someone will say why didn't you mention me? we do have incredible allies who will remain allies. we just have to figure out how to help you do more so we can do less. but that doesn't mean less well. >> question over here. wait for a microphone.

>> hello, general dempsey. most of our allies in the region are very concerned about not only are nuclear program but increasing involvement in politics and the economy. if you had the opportunity to sit quietly with the supreme leader of iran and talk him out of whatever he appears to be intended to do in the region, what would you say about u.s. intentions in u.s. cooperation with partners in the region? >> first thing i would do is send dennis rodman over. [laughter] the truth is the first thing i would do is i would ask them why they are doing what they're doing. i really like to hear from him personally because we know of course what his surrogate are

doing. i would like to know from him by their defeat -- if they -- you know in that region the three countries that have as many countries, iran, turkey and egypt are the cornerstone of that region. does that mean we want to be like any of them or anyone else want to be like thatcome up with have to account for the fact those three countries are the historic cornerstones are endpoints of that region. the first thing at the know is what is it they believe the future holds for the region and why are they apparently it seems to me on a path to try to dredge up old animosities among sunni and shia things that frankly in this time in world history should be able