four types of yen countries in this regard. one is those with structure problems, building structure problems as they expend, china, those who have been accumulating problems internally, exporters, a lot of strong demand and commodity resources, commodity prices in the last couple years, lately coming down, facing problems, the third type of problem, pressures, expansion of policies, constrained and relaxed and abundant power in the global economy, once that normalizes the problems and the final type reversing, those

largely countries with a had to temporarily boost the demand but the type of investment, do not have systemic risks domestically and that is what happens once the collision normalizes, and -- more fundamental issues, and the time and commitment, very quick. the question i have been asking for the last year was the pace of recovery. is this normal? the banking crisis is usually severe, then the recovery takes much longer. it is not a surprise that the recovery is taking so long but the question we have is is this

slow recovery normal? then we decide to address this problem, not quite sure whether it is normal or not but it is slow. the g 20 levels that it is not successful, the economy is building up, the second question, is it cyclical? that is the second question we ask ourselves. if it is cyclical can rebalancing create demand? rebalancing as you know will help to demand strength, some countries demand overall global demand remains sufficiently robust to generate a pullout from a cyclical recession and our interest -- if you look at the overall savings and the

account balance that is where the rebalancing has to come from, you can actually see the savings have been rising very rapidly as a share of gdp advanced countries. savings have been falling. that is the case if you look at this chart that there is a case to be made to rebalance, to ensure the global economy demand remains robust. however if you look at the second shot which shows consumption in percentage of lower gdp, you realize we missed something. and aggregate demand is a shift, gdp is falling, the aggregate demand consumption from e. m. countries is rising sharply so that the question becomes much

more complicated, simple rebalancing. the reason rebalancing took place was because simply growth in advance, growth in yen countries was too rapid beyond the consumption but consumption itself was rapid too so if yen country start slow then the question becomes not only rebalancing but also how do we ensure this slowing growth in e m countries is not a company's lower consumption? it was dependent on fast growth in gdp. is it is a case to be made that investment has to increase but it is not a straightforward issue because more the reallocation of global resources rather than we should raise over investment on that so once you start looking at these in more detail, these things become very

complicated and it is not very clear how the global economy can address these issues. if the problem is structured in nature than fiscal stimulus might not have much structure at the time of public resources. you know this argument. if one were to be convinced as long as the global economy can provide adequate robust demand for the next two or three years, jump-start the global economy i am sure all countries would be willing to do this but the problem is the real problem is the trust nature, even then if the global economy were to agree on this stimulus, then two years afterwards everyone would be worse off. so we have to ask ourselves is it structural? is it cyclical? the answer is not very clear.

part of the reason is look at corporate profits and this is just the u.s. but i can assure you it is not only the case in the u.s. but generally corporate profits have been increasing and if the sluggish economy grows, fiscal policy, unemployment is not falling, corporate profits is rising. it begs the question whether there's enough competition in the product market. at the same time unemployment is very high and remains relatively robust even though participation rate is declining. many young people are leaving the labour market but even then unemployment is relatively sticky. wages have been declining, inequality growing and this begs the question whether the income

inequality itself is starting to impede demand creation so if you have become as simple example, if poor people get less of the income share and rich people get more income shares and the demand afterwards will be lower because the consumption, the consumption is lower than those in the port and at some point of the degree in the sudden threshold could impede economic growth altogether and what was done recently shows a relationship between these two. and financing, if the market is relatively competitive, working normal, why is there not enough funding? they are usually higher risk, but risks are not properly

priced and why is there no market created? to sell problems. lastly let me conclude by showing a few slides, just to indicate the problem korea faces, very similar to the rest of the g 20 as i will show you. gdp growth is well above world average, since then, growing that the average speed of the global economy and more recent, falling below the global average. korea has some -- at the moment. it could be a temporary phenomenon but definitely this is what you are seeing now. part of the reason, the export is growing, but later has been

winning. in terms of the trade, it has become increasingly more so in the last couple years but expert growth is slowing, very natural to expect the economy grows to be effective. relief effective, appreciating since the crisis, yet that is not fully reflective of what is going on. and increasing, domestic investment overall, this again i showed you earlier investment problems but at the global level it is not the reallocation level, korea needs to raise investment rather than otherwise. the sudden drop in investment

and slowing economic growth, slowing exports is actually driving up, despite their may have been some influence on the exchange rate, but that criteria, the yen, one has been appreciating a lot recently but that is not reflected on the trade side. it doesn't seem to be related to the real exchange rate going on in korea. japan has actually been negative even though korea appreciated it a lot. and integration so even if you account for this, korea is dependent, actually growing. all i wanted to show is what i

described for the g 20 countries with decreasing profit, increasing wage for the corporate, true for korea, to a lesser degree to a lesser extent than average in 20 countries but still income inequality. in the last three or four years, 20 years ago it has deteriorated again. not as much as the average g 20, reflective of what is going on at the global level. policy response, continuing globalization of through bilateral as well as some progress in the package. some implementation of these hopefully will help promote

trade. and raising unemployment. and to james economy. and making a ideas tradable. and in the end the innovation is translated into fta. thinking of too much. converting innovation. and it appears here. let me stop here and ask questions. >> who will be -- [inaudible]

>> stand up and introduce yourself. >> you mentioned the growth, to show in the next ten years, the public death. and 1.5% gdp over 3%. at the same time, you can see that the interest payments are pushing the discretionary coming down. and private wealth. >> what will happen is spending

in the u.s. had a negative impact on the u.s. economy. and definitely impact on the rest of the world with the kinds of tools because slow-growth obviously on the growth trend. the second channel would be through the financial channel. not warmly would it be that but the average interest rate, that will have a serious impact on the scientist system balance sheet. again, detail on korea and so on, for example probably easiest, the interest rates, i think i copied it-interest rate

of 1%. 100%. at the moment a lot going on for corporate earnings. interest rate increases on average, a strictly feeling half of. and the interest of revenue for entertainment probably go up from 51% to that level even more. as simple as thinking on this issue, corporate as well, it

will have implications. >> i guess -- all about you. the next question. >> come on. okay. next question or comment. in the back. >> i was wondering -- great analysis and i appreciate that that really intrigued by how corey's problems or issues are affected in many of the parameters you outlined, 20 on average. i was wondering if you could

elaborate about those challenges. >> just according to -- the simple answer is yes, korea would be able to address these challenges. that is the politically correct answer. the current policy in korea we are pursuing actively, opening up the trade system. we've recently concluded fda with australia. we expressed interest in joining of the ppp starting with this question. we are proceeding with china,

china and japan together, the asia -- in other words we have a lot of things going on on the trade side so obviously, to further liberalize the trade system, that would not only help boost exports and imports but also provide greater competition within the economy as well so that is one area. the secondary is pursuing policies that will end competition in the market. very focused on ensuring competition in the product market and a technical market is improved and would like to ensure the regulatory framework is intact and also the competition based in unfair competition in the system and so on so these things were made very clear in the last 27 statements and that also is a work in progress and lastly but

not least, we have a policy is establishing the creative economy and the last slide i was actually showing, the nutshell of that policy is trying to convert innovation into t.s. p. that is the shortest and most accurate description of what created this economy. i will give you one simple example. innovation is not equal to t s p. innovation becomes t s p later. that is essentially the key and that is what she is trying to achieve. >> national commerce council. china at a recent militancy and sort of the u.s. defense budget

sort of assume, more security. and developing an all-time high. would that have an impact on the korean economy? >> i don't know the answer. not from a political economy point of view but an economic alliance point of view. defense industry and politics in terms of the economy. it does work the other way around but i don't know the answer. >> you discussed in your

presentation, this is one of the major issues, the united states -- germany, china in these accounts. to do this, some countries need to export more of them, one of the challenges is seeing this, many countries with surpluses, how do we overcome those things to more sustainable levels? >> the surplus countries certainly are not accumulating or maintaining surpluses because they want to. one could argue why don't they

let the exchange -- if they were to use the exchange rates as a single influence to allow their trade to adjust, the exchange rate would alter significantly relative to those levels. the reason i am saying that is in many, not all but many cases the reason for the surplus is not necessarily because of the long relative price but because the recent slowdown when the economy grows, the classical answer to this is the exchange rate, our appreciation you have the exchange rate appreciation and the expenditure switching impact but if they do that commack as i mentioned, they need to appreciate too much. and letting the current account surplus get out of hand and

trying to boost domestic consumption and not necessarily through macro economic policies using the exchange rate this is part of the equation and they are trying to do the structure reform, the problem there is because different countries, the problem based on understanding what the reforms are being implemented or not, and the key issue is the g 20 level, the australian press this year, the single most important thing that will be discussed is growth strategy. what are the right reforms to ensure recovery in all the g 20 members and hopefully by the end of the year we will have answers. >> thank you so much for your

enthusiasm. what you said earlier, you mentioned this. [inaudible] >> i happen to be an admirer of -- [inaudible] interested in your view, thank you. >> before you give up the microphone, your first question was -- >> economics. >> right. >> the second question -- >> the second question.

>> with india and admired -- [inaudible] >> how do you know that i know that? >> predictable -- [inaudible] >> in terms of that, i can repeat what my japanese counterpart told me, to implement it forcefully. that is all i can say. they have various plans, various fields that are heavily controlled, not necessarily controlled by the government itself but have local industrial love for agreements and would like to open it up, they would like to promote further competition in these sectors. to what extent they will be

successful i have no idea. convey to you what i was told and actually in on japan a few months ago, i met their ministry and they will implement policies forcefully. i take their word for it. how that will impact economic growth, i am not clear because -- not because i don't believe what my colleagues told me in on japan but because nobody even in japan, are aware of reforms, even if successful, actually in terms of enabling growth. something beyond normal normality is of normality. the point that i was trying to

make is even before you go into the third aero, my concern is if the financial market encounters global financial market encounters the ability, the effect, that could have very constructive impact to. in terms of tampering as i have alluded to, things go as planned and i have full confidence that it will and what i mean is the pace of capering with taking place in such a way that it is phased with the strengthening of fundamentals in the u.s. economy. if that happens nothing will happen. placing the liquidity with fundamentals. that is the base line. on the other hand if that doesn't take place and something goes wrong, obviously the liquidity will become an issue. there will be a flight to safety and this time they might not

actually include the yen and will only include power. if that happens obviously countries like those that i moved as i don't know which group it was, i would put india as one of those groups that refer back to the lower potential. i am not an expert but this is based on my conversation with my colleagues. what i was led to believe is in deal was enjoying a temporary move from liquidity injection macro, easy macroeconomic policy but even the liquidity from the market, that seems to indicate that has built up systemic risk and may revert back to more stable, lower potential growth. there are other cases that i

don't want to mention where i think the classical imf program may be. >> other questions? >> do you again have a question for me? >> a response. you mentioned the adjustment would be through appreciation and you think the structure reformists -- how about another direct rule which is physical policy. could you elaborate on korea? could you share these in the near term? >> corey akorea's policy has re

that it will take a flexible position. that is the position. how you want to interpret that, you may have already noticed the actual outcome relative to the initial plan is relaxed already for the last year. the path has been done accordingly adjusted. as far as i am aware i don't think we have changed the position from the last summit where opposition was made very clear. >> i have a question and i want to give a few remarks. what are the indicators that

government, a government may be too aggressive in receiving the economy? receiving, that is correct. >> the government may be truly aggressive. can you be a little bit more direct? you are asking something, i am not quite sure -- >> it is not a trick question but the thing that takes place in the states is the government should step back, allow the economy the opportunity, the free enterprise system to recover itself as opposed to one stimulus after another, and it is the big debate that continues in this country and so at what point i dare any indicators in your mind, generic indicators to

show the government is too aggressive in intervening the economy? >> my view is in the short run, if the economy is sluggish and the government does engage in expansionary policies, in other words if you can see there is a downturn and the government doesn't exchange expansion policies and intervention. on the other extreme, if you start seeing inefficiencies' building up in sectors still the government does not slow, intervention or influence in resource allocation what is excessive intervention. and the latter is usually found

in cases where a country is emerging from a low income or developing to more middle-income groups where the economic structure itself is becoming too complicated for the government to be able to plan its way forward. >> that was a good economic answer and a good political answer. >> what you were -- the political answer. you should answer that question. >> we can do that another time. a lot of discussion going on in this contest whether the federal government will be involved in the bailouts and cost taxpayers $10 billion to bail out chrysler for example and quantitative easing every time the fed decides to back away from that, a to going out on wall street,

that is not your problem in korea but in the united states and thank you for sharing with us a lot of the insights. why don't you come on up and share with us the chairman of kingdom daily. staff to get me a better spelling. share with us a few minutes a couple of remarks. >> the point perspective on the korean economy. south korea's steve element over the last century has been nothing short of spectacular and the korean economy is not just in the past, expected to continue in the future. for an affairs magazine recently

selected south corey as one of the six hot markets to watch over, however, it is also true that korea faces a range of cost challenges that include domestic sectors such as the aging population and widening gross gap and external factors such as geopolitically unstable region extra. in particular i would like to note the connection between the south korea exporting sector and the domestic sectors. the exporting sectors mainly composed of large companies while the domestic sector is driven by small and medium-sized enterprise and self-employed. wary of global competitiveness, big corporations tend to look overseas for their manufacturing base instead of investing in

korea where the labor cost is too high. as a result, concern is being leased to the exporting sectors contribution to korean economy not so much as it was a decade ago. conventional wisdom has it that corey's exporting sector is the engine of the korean economy. fortunately the korean government is keenly aware of the challenge. since the president took office in february of 2013, the administration has been focusing on creative economy in an attempt to bring together innovative ideas and foster more vibrant start ups and the government is pushing ahead with a lowering barriers to the service sectors. in conclusion, respected korean economic expert dr. marcus

noland peterson institute, international economics. many americans, and a prepared treaty. south korea has probably proved expectation wrong. and steve find skeptics for years to come. >> we want to thank you. >> i want to -- >> my former colleagues in congress. stand up. >> not a question really. the last comment, this

presentation. and the north koreans, the behavior, what is going to happen to that type of impact to the korean economy is. and how does somebody direct that the north korean -- tax the investments. anyway, my comments on the north korean impact, that it can be --

continue. north korea could -- [inaudible] >> dramatic impacts to the south korean economy, right? [laughter] >> you have about two minutes. >> my personal view, because i haven't discussed this with anyone. my personal view is the korean economy at the moment is facing some inequities like any other country possibly because we are dependent on exports but given the policies we are implementing at the moment, it's quite confident in the medium term that for investors, not come

back with negative return particularly given the slow growth prospects in the rest of the world's. on a net basis korea is a good place to invest and i don't think hopefully that military stress from north korea is as serious as one might actually think. more recently kim jong un indicated his willingness to talk with south korean government but then again, you are the expert in the political economy. let me just -- >> i would concur. i was in korea last spring, and whatever the united states has joined military exercises with south korea, in north korea they get bent out of shape. as i was there i turned on television and a network whose

name i will not mention was talking about south koreans going into the subways and exercises for some tight of military assault by the north. i was out and they had gone shopping, stores were jammed, streets were jammed, everything is fine. the saber rattling continues but what is interesting is the fact that you see china, this is not a profit or anything, china is very much concerned what happened to kim jong un -- one of the reasons he was executed was because a portion of real estate was sold, industrial area, the chinese were amazed because it is a joint effort and all of a sudden it did not make

sense to them to have that type of summary execution like that to use as a reason for that, an agreement among the chinese and the north koreans as to how to utilize the real-estate with an particular industrial area. north korea continues at least in my view to bury itself in a deeper and deeper hole and while that goes on there is more respect now for korean ingenuity, investments, korea and built cars and korean named cars made here in america taking the greater market share. so the alliance between the united states and korea in my opinion continues to grow stronger. in light of what is going on in north korea. thank you very much for coming

and sharing. thank you all for coming this afternoon. [applause] >> several live events to tell you about on our companion network c-span3. the head of the chamber of commerce gives the annual state of american business speech at 9:30 a.m. eastern. etna in the results of university of virginia report on how to reduce health care costs. later house majority leader eric cantor will be at the brookings institution to talk about school police. live coverage is at 2:00 eastern. >> if i were to identify single most important challenge to overcome much -- the notion that is just as available. the reason we are here today is because of this inclination

which i -- not only in historical but anti historical because it denies centuries of islamic theology and tradition. hundreds of years of diversity, subscribes to the ideas and to be a muslim you have to follow its edicts from the seventh century, very limited period of time and i think our journey as american muslims has to be about refusing to be told by clerics who speak for us that the ideal is a seventh century reality. we are americans and muslims who need and islam of the 20 first century. 21st century. >> being muslim america on c-span2. and the book club will be discussing mark levin's the

liberty amendment. read the book and join the conversation. go to booktv.org and click on book club to enter the chat room. >> the consumer financial protection bureau acknowledged tuesday concerns over new housing rules. richard cordray told the national association of realtors that if agencies are ready to listen to wait to improve the rules that take effect this friday. we will show you as much of this as we can until live coverage of the senate at 10:00 eastern. [inaudible conversations] >> good morning. i am chris paul leechrome, 2014

president-elect of the national association of realtors. i am the only practitioner here that actually lists themselves real-estate for a living. so i have something i have been doing for 25 years. i live in hot springs national park, arkansas. i want to thank each of you for helping the national association of realtors started the year off with this discussion today. we are going to talk about the ability to pay rule, we are going to talk about mortgage lending and what affect consumer financial protection bureau new rules come in to affect this friday might have on that process. it is an issue that is very important to the real-estate industry. it is also very complicated. many people have worked long hours to sort out the

implications of specific language designed to improve the loan experience for consumers. through it all there has been a common goal to ensure consumer protection from risky loans but maintained their ready access to credit. a tough balance. at any hour we have been very involved in shaping the debate surrounding this issue as well as for the important qualified mortgage provision as well. to give you an idea of how we got to where we are today i thought we ought to do a little background. following the financial crisis related to the mortgage lending and lawmakers passed and this is a mouthful, the dodd-frank wall street reform and consumer protection act. we have shortened that, thank goodness but it was signed into law in july of 2010. its purpose was to strengthen

the regulatory environment and protect consumers. as written, the ruling kludge important provisions for consumers. it says lenders must make responsible, good faith determination that a mortgage is affordable to the consumer and that is why it is commonly referred to as the ability to repay rule. it sounds simple, and you wouldn't think we needed a lot to tell lenders they should make a borrower be able to repay before they lent the money. when i was a banker for some 15 years we called that banking 101. if you think back to the crazy loans that were made in 2004-5-6 you can see why such a rule might have been necessary. the policy supporting this concept went back as far as

2004. to be a qualified mortgage and receive safe harbor protection, the loan must have relatively low points and fees and following number of underwriting guidelines. they must not contain risky features such as interest only payments or payments that are less than the full amount of interest so that the borrower's debt might actually increase as the lone progresses. they cannot exceed 30 years as far as the term and finally the debt to income ratio must not exceed 43% of their gross income before taxes. certain government issued loans such as at h a you probably know are in short, are exempt.

to be a qualified mortgage and received a harbor protection, fees and points cannot exceed 3% of the total loan amount. the problem is under this rule, affiliated and not affiliated firms are treated differently. it is our view that this would be a disadvantage to many real-estate affiliate lenders and more importantly reduce the choice available to consumers of where they can get a mortgage. recalled the unaffiliated lender must still use the title company. bottom line is the consumer will pay the same fee. mortgage bankers have affiliated with affiliated companies involved in the transaction have to count more toward fees and points and large financial institutions such as title

insurance charges, escrow for homeowners' insurance. it is our view this would disadvantage many real-estate affiliated lenders, thereby again reducing the choice to consumers of where they can get that mortgage. mortgage choice act introduced by the house and senate would address this issue. it would, in our opinion, level the playing field. by not counting the affiliated title fees toward the 3% cap the same way the unaffiliated title fees are treated. it would also remove the requirement to count escrow for insurance from fees and point calculations. since the cap impact's low-priced loans more than half priced loans it would give low and moderate income buyers the same choice for mortgage providers as well buyers have. this is the remaining major

issue on which the national association of realtors continues to push for resolution and we believe a legislative fix is necessary for the cfpb to address this discrimination and provide greater access to consumers. n/a are supports mortgage lending, fair and transparent process for consumers. protections and ability to repay rule will go a long way towards insuring essay for lending environment to consumers. it has been suggested that the q m rule covers 90% of the mortgages made today. i have seen a number as high as 95%. 90% of loans with a credit score of 757 still limits this quite a

bit. lenders will make -- we think lenders will make non q m loans so there should be little impact on the market. we hope this is correct. nar will monitor the impact of the rules on consumers including these important new protections and work with cfpb and others to make sure the rules maintain access to affordable mortgage credit for consumers. at this time i would like to introduce a man who we all know is working hard for the consumer everywhere. the first director of the consumer financial protection bureau, richard cordray. mr. cordray, we are honored that you would join us here today to discuss the ability to repay rule and many issues surrounding qualified mortgages.

for those of you who probably most of you already knows this but before joining the the bureau mr. cordray served on the front lines of consumer protection as ohio's attorney general, covered more than $2 billion for retirees, investors and business owners. if you take major steps to strengthen protections against fraudulent foreclosures and financial predators' as ohio treasurer ann franklin county treasurer he led the state and county banking investment debt and financing activities early in his career. mr. cordray served as state representative for the thirty-third of ohio house district and was the third solicitor general in ohio history. some of the main not know that mr. cordray has argued seven cases before the united states supreme court boat for the clinton and bush justice departments.

he is a graduate of michigan state university, oxford university, university of chicago law school. right after mr. cordray speaks we are going to do some q&a and i will be back for that at that time. without further ado, ladies and gentlemen, tell me welcome director richard cordray. [applause] >> thank you for those remarks and i will try to address those points as we go through. thank you for being here today and i bring all of you good tidings and great joy for the new year. if you are like me change comes hard and i will find myself mistakenly riding 2013 on documents such as personal checks for another few weeks but there will be big differences between last year and this year in the mortgage market with new mortgage rules congress required

our new agency to write against a very strict statutory deadline. that was a great deal of work for us and a great deal of work for many others as well so i will focus closely on those issues and my remarks to you today. the consumer financial protection bureau and the national association of realtors share an important piece of common ground. and improving housing market will help both of us achieve our primary goals. for you this is your lifeblood, the core of what you do is help people achieve their dream of homeownership by matching them up with a home they can love and sustain as long as they choose to live there but for us too the central point is to improve the life of consumers which requires not just sound legal protections but also reasonable access to responsible credit. in the real-estate market and particular most people cannot grow into a brighter future for themselves and their families without borrowing against future to fulfill their deepest aspirations. very few families can buy a

house with ready cash so drying up texas to credit is neither in our interests nor in yours nor in the country's. what we do see can we share this goal in common is a world in which mortgage transactions can be expected to turn out successfully for borrowers and lenders. we insist the terms of the deal be made clear up front and they be described accurately and we insist that those involved must care about and document how the deal will be sustainable over the long run. these simple principles will help us ensure the mortgage market never melts down again the way it did a few short years ago making people's lives miserable in the process including those realtors and consumers. we are putting that sorry chapter behind us and reaching out for better days ahead. achieving these goals will mean satisfied customers for every realtor in america and successful consumers who are benefiting by the work done by our new agency. where exactly are we now as we

bring in the new year in 2014? five years after the worst financial crisis most of us have ever known the economy is growing again. people are getting back on their feet, the job market is rebounding as are the opportunities jobs can bring and best of all we are poised for greater progress in the year ahead. the consumer financial protection bureau is still in our infancy just 2-1/2 years old but we are putting hundreds of millions of dollars back and the pockets of consumers, helping to resolve complaints, many longstanding submitted to us by tens of thousands of consumers and we are helping americans make smarter financial choices when it comes to managing savings and credit and dealing with products like mortgages, bank accounts, student loans, auto loans. each day we try to put our best foot forward for american consumers but most relevant to those of you in this audience is the work we are doing to improve the functioning of the mortgage market. let me describe the implementation of new mortgage

rules which chris spoke to to some degree which are designed to make housing market work better for all americans including all of you realtors and customers. as we look back over the past few years we can start with something frank lloyd wright said, there's nothing more and common and common sense. that quotation epitomizes the heady years preceding the financial crisis of 2008. ..

and among other things the creation of the new consumer do. consumers want and need someone to stand on their side and provide safeguards against bad mortgage deals that ruin their credit, cost them their homes, and saddled them with additional problems. of course, consumers have to bear responsibility for their own choices, and they have done so in fees and other charges they cannot afford, in foreclosure proceedings that up in the their lives, and in margaret that hangs over them for years in the future. as i stand before you today we are now three days away from returning to a back to basics approach to mortgage lending practices. no debt traps, no surprises, no runaround. these are bedrock concepts backed by our new commonsense rules that take effect on january 10. these changes will each of you in the real estate business by creating a more stable and sustainable marketplace. the first act to basics approach addressed by our new mortgage

rules is no debt traps. as you know, if your potential client comes to you wanting to buy a home, they need to assess their choices carefully before signing up for long-term debt. the proposed terms of the mortgage deal should be clear and understandable. if they do their homework and follow plain logic they should be positioned to make a responsible decision that they can live with potentially for decades. what they should not have to worry about is getting lowered into a loan that will bring them ruin. for most people, the mortgage may well be the largest financial obligation of their lifetimes. at it can be difficult to figure out how much house and how much mortgage is the right amount. consumers can easily be confused by the intricacies of taxes, as gross, interest rates, private mortgage insurance, changing monthly payments, and various fees. most people rely on real estate professionals to tell them how it all works. they assume the lender will not lend the money unless the lender is confident they will be able to repay the loan. but if the lender does not check

on important facts, like income, savings, and debt load, it is impossible for the lender to know how much the consumer can spend each month on the mortgage. the lender cannot know whether the consumer can truly afford a loan if the lender only looks at whether the consumer can afford monthly payments under and ended up we teaser rate which may be irrelevant after the cheaper rate expires. in the lead up to the crisis we saw this happen over and over again. some mortgage businesses stopped their inquiries well short of the kind of due diligence needed to lend money responsibly. some joined their customers to engage in wishful thinking. some trick people into believing they could afford loans when they could not. some falsified the numbers to make them look like they could work. certainly some consumers should have known better and make very bad choices. but too many others did not even recognize the risks you take it on into it was too late. realtors were on the front lines. we are all now somewhere with low dock and exotic mortgages. we know people took out loans

they could not afford. we know people signed on -- have the transaction actually works. we know the originators get kickbacks for putting them in higher cost loans than they actually qualified for. our new mortgage rules put a stop to all that. our loan originator compensation rule bars yield spread premiums, which created financial incentives to push people into loans with higher interest rates than they qualify for under the credit history. under our ability-to-repay rule, also known as the qm role, lenders must not make a reasonable, good-faith determination that the consumer can afford the mortgage before they take on the debt. obviously, mortgage lenders do not have a crystal ball. they cannot predict of some of the lose a job or have an unexpected financial emergency. but they must look at a consumers income or assets, and at the debt, and must weigh them against the monthly payments over the long term. not just a teaser rate very.

lenders can offer any kind of mortgage they believe the borrower can afford and pay back. this is the very foundation of responsible lending. the financial crisis happened because some irresponsible lenders chose a different path, and many others followed suit to compete with them. of course, certain types of mortgages are more likely to become a trap for the borrower. our rule lays out basically good for loans known as qualified mortgages which must follow general just in -- debt to income guidelines. they cannot have certain risky features such a thing interest only or even negatively amortizing so that each month the consumer owns more than they did before. the loans must have relatively reasonable points and fees. let me make a point from which he raised about the good points in fees and unaffiliated. in our judgment that was the line congress do it explicitly in the statute. i think we often wonder the market as it moves forward and see if this is affecting things

and we want the real truth among others to bring information to us as to what you see happening in the marketplace. we will be open-minded in considering what that means. lenders can choose not to follow these guidelines and simply make a loan based on the reasonable, good-faith determination that the consumer is able to repay it. either way, they cannot track consumers in loans that the letters should recognize are unaffordable. of course consumers again with different problems now than they did leading up to the crisis. today, as millions continue to struggle to pay their mortgages, millions more are waiting for the market to recover more fully before they consider buying a home or selling one that is still under water. for many the problem is access to credit which has become achingly tight. since 2008, most mortgages have been priced on very attractive terms of access to credit has become so constrained that many consumers cannot borrow to buy home even with reasonable credit

history. so importantly, our rule makes every effort to take -- takes careful account of these access to credit issues. indeed, those lenders that have long upheld a strong underwriting standards have little to fear from the ability-to-repay rule. qualified mortgages cover the vast majority of loans made in today's market but they are by no means all of the mortgage market. this point is quite important and should not be misunderstood. these lenders including many of our community banks and credit unions have seen the strong performance of their loans over time. many of them keep loans in portfolio and so that every incentive to play close attention to the borrower's ability to repay. nothing about the traditional lending model has changed and they should continue to offer such mortgages to borrowers who need evaluate as posing reasonable credit risk, whether or not they meet the criteria to be classified as qualified mortgages. we all benefit by recognizing and sustaining responsible lending were ever we find in the mortgage market, realtors as much as anyone else.

let me take a moment to dispel some myths about what our ability-to-repay rule does and does not do, because rumors continue to circulate. the rule does not mean consumers, realtors and lenders will have to jump through unreasonable hoops to get alone. the truth is that lenders likely will be asking of a potential buyer just what responsible lenders have been asking for all of all, basic things like proof of income or assets. the rule does not mean only qualified mortgage loans will be allowed. lenders can continue to use their own reasonable judgment when looking at a consumers ability to repay. i had to this many times, saying the same thing. nor does this will restrict down payments but it says nothing about how much of a down payment the consumer has to make on the house believes that inhabit up to the hobart and the lender. finally, for the millions who already own their homes, the ability-to-repay rule does not change anything about a consumers current mortgage. it only applies to new mortgage

is that people applied for on or after january 10, 2014. >> in the end, our ability-to-repay rule is straightforward. it puts behind us once and for all the kind of a responsible lending that disrupted the housing market and so badly damaged our economy. it provides stronger consumer protections while preserving needed access to mortgage credit. our second back to basics approach affects the mortgage servicing market which performed so poorly in recent years. essential principles are no surprises and no runaround. simply put, consumers should not be hit with surprises by those responsible for collecting their payments. if they consumer buys him and his paying back the mortgage, our rules require servicers to keep the homeowner informed about your loan and to investigate and fix errors. consumer should be able to see a payments are credited. they should not be caught off guard when interest rates a just and they should not be slammed with these that seem to come out of nowhere. our new rules will help every bar worker consumers will not

have to guess how much money they owe or when the public because servicers must now send monthly statements and how they credited the monthly payment. estate up with all the important information in one place, showing interest rate, loan balance, escrow and account balance and whether things are going. consumers will get ample notice when interest rates adjust. this is valuable, practical information to guide people's choices and actions, exactly what they need. for consumers in trouble, getting the run around is not just for trading that can mean the loss of their homes. they need good information and actual hell. our rules require mortgage servicers to provide consumers with the available options to save him or to work on a problem making payments. for example, we restrict dual tracking by barring -- by barring services from starting foreclosure proceedings until the bar has been at the link with release 120 days. services must reach out an out t for them about edible options and how to get more information.

these rules should help prevent needless foreclosures which is best for borrowers, lenders, and our entire economy. are surfacing will has also spawned an erroneous myth that these new measures will block people down in red tape. on the contrary these measures are not new at all. they are exactly what did commute the banks and credit unions have been doing for many, many years. they amount to more than taking the time to work directly with customers to address their circumstances. in short, our ruling simply that mortgage servicers must now do their jobs. you know very well how much difference this makes. over the past year we've heard plenty from realtors around the country who are just as frustrated as consumers at poor mortgage servicing practices. they told us out the failings of individuals the ability to close on solid real estate deals to buy and sell homes. positive improvements in this area will benefit you and your businesses as well as consumers. we mean to end a failed process which too many struggling homeowners have been kept in the

dark about where they stand. too many americans have been forced to roll this rock up the hill only to see it roll down again repeatedly. people deserve better. they are entitled to be treated with respect, dignity and fairness to our new servicing rules will help ensure that happens. importantly these new mortgage was will have to be followed by non-banks and banks alike. so it no longer matters whether a loan is made by a bank or some other kind of financial firm. but also no longer matters whether a bank or nonbank is playing the role of the mortgage servicer, the same basic rules apply. our mortgage rules are backed by the full supervisor enforcement authority that congress vested in the consumer bureau. we will be vigilant about overseeing and enforcing these rules. as we saw in the lead up to the financial crisis, commonsense turned out to be not so common. by bringing back these basic building blocks of responsible lending and servicing the customer, we will improve conditions for consumers seeking to enter the market, 40 realtors

were seeking to arrange the purchase and sale of the home, and for all those still struggling to pay down their existing loans. it means a great deal to our new consumer bureau to know that the national association of realtors has members with boots on the ground in communities both small and large across the training. we urge you to help us spread the word about how consumers can make the most of this agency. make sure they know they can submit consumer completes the problems with their expensive with mortgages, credit cards, student loans, auto loans and bank accounts. work with us to educate your clients about the specific ways they can look forward to a new and better marketplace, and share with them that they can find impartial, expert answers to their frequently asked questions and ask cfpb. for all of these resources please direct them to our website at consumerfinance.gov. commonsense, after all, serves the common good. and make no mistake about it, the consumer bureau wants to see the real estate market thrive.

we are united by our strong desire to put the american housing market on a sustainable path fueled by responsible lending. you deserve it, and american consumers deserve it. thank you. [applause] >> thank you, director cordray. and i promise you that realtors will be the boots on the ground and we will be your sounding board. at the sun i got a couple questions for you. and if we have time we may take a couple more questions. measuring consumer's ability to repay before advancing mortgage credit, in fact our policy and support as i said earlier goes back as far as 2004. nar also believes access to credit has tightened

significantly since the mortgage crisis and remains tight. so how does the definition of a qualified mortgage, or qm, balance the need to ensure borrowers can repay the mortgage and yet have reasonable access to credit? >> thank you for the question, chris. first of all, as we worked on these rules over the 18 months that we were intensively focused on getting these rules done by genuine -- january 2014, we spent a lot of time listening and learning from people with real experience in the real estate market as those the expense people brought to our bureau from past work that they have done. and what we learned very clearly from that was that the mortgage market of 2012 is very different from the mortgage market of 2007, at that access to credit had become a significant problem in the wake of the financial crisis. let me say for the record, caused by the financial crisis and, therefore, caused of the mortgage meltdown. in the wake of that we decided

that we would draw the definition of a qualified mortgage quite broadly so as not to impair a current market. we also made a point to draw the definition of a qualified mortgage with very bright lines so as to discourage any prospect of litigation over what is a qualified mortgage. so there are three main categories of qualified mortgage is. the first is any mortgage that has a debt to income ratio of 43% or less which is quite a high number by historical standards. i think for years we talk about spinning the more than about a third of your income on housing. second though in addition to that, recognizing that there was uncertainty about gse reform and that fannie mae and freddie mac were significant underpinnings of the current real estate market we also said any mortgage that's eligible for purchase by the gsd, and effort, while there in conservatorship whether or not it -- is also eligible to be a qualified mortgage and can qualify as a prime mortgage as

safe harbor. also those insured and backed by osha, epa, and other government agencies. third, in addition to the and this is as we finalize the rule original in january 2013, we recognize that many smaller creditors in some parts of the market to the rural areas and small towns they are a key part of the market. and that they did not cause the financial crisis and that they lend responsibly. and so for mortgages that they offer that they keep in portal that may be customized to particular personal circumstances of borrowers and customers that they know well and they know the community well. for those servicers with 2 billion or less in assets that offer 500 or fewer mortgages a year and loans they keep on portfolio, those would be deemed to be qualified mortgages as well. in addition as you noted in your opening remarks, there are a number of loans that remain very

responsible loans that may or may not qualified under the particular definitions for a qualified mortgage. if lenders know that they have been making these loans according to strong underwriting guidelines and they have performed well over the years, they should continue to make those mortgages even though they're not qm, as long as they make a reasonable good faith determination that the consumer has the ability to repay that loan, then that is in compliance with the law and we tried to stress that, and i think of first -- thank you for stressing it today for lenders across the country. >> secondly, the actual implementation of the rule is important but we heard that some of the smaller mortgage lenders are finding ability to repay real burdensome, to actually government. so if we start to see that the implications of the ability-to-repay rule is reducing access to mortgage credit such as the calculation of the 3% cap, what are the steps that we as an industry and you as a regulator can take to

address this issue? >> thank you for that. one of the things i think we've shown all along is that we are very responsive debated and information about what's actually happening in the market. we don't mean to be ivory tower regulars but we want to know what's going on. i have said to the community bankers, i said it to credit unions, to the realtors and a city can do today, as we go, tell us what you're seeing and finding in the market. tell us what your experiences are. we will be sensitive to what's happening in the market. as i said our goals are clear. we want to provide sound consumer protections to people who borrow money to buy homes. we want to make sure that they are being treated responsibly by the lenders and that linking is responsible, we also want to see the real estate market is succeeding, that you have access to the credit they need to improve their lives in the way they like to improve their lives such as buying and owning a home, being able to build wi-fie

around that and to do that successfully. the problem in the run up to the financial crisis was that homeownership, much of what was being offered was not sustainable. putting people in the home on a short-term basis that's not going to last in the long-term is not good for them because i prefer the lenders and is not good for the economy as we saw. the biggest problem of credit in our time is still digging out from the rest of the financial crisis that should not have occurred or should never have occurred. >> thank you. and again, thank you for being with us here today. and get on half of the members for what you do for us, and we look forward to working with you in the future. [applause] >> chris, do you want to take a couple of questions from the

media? time for a little more? [inaudible] spill a question for you about the non-qm side of this thing. we are three days the implication of this and also three days on your anniversary of evangelizing about this pretty much nonstop. in particular on this point about look, you can still be non-qm mortgages. has it worked? do you detect a rising when his determination, openness, financial institutions to actually go that route? >> first of all we've made a number of, create a number of provisions in the rule. we made some changes after the rule was first finalize to take account of the needs of small creditors. and so for small creditors much of what they do is covered by the qualified mortgage rule almost regardless of what kind

of loans they make. if they make a loan and keep it in portfolio, that's covered under small creditors provision. if they make a loan and sell it in the secondary market, if they're selling it to fannie or freddie which is typically what they would get, that's covered under that provision of the qualified mortgage rule. so the only loans to small creditors are making that would not be covered under the rule would be loans that they're not keeping in portfolio, that they're selling in the second a marketer somebody other than fannie and freddie. we do expect that market will develop further over time but it's not every significant market at this point. for other lenders, what we're hearing and seeing as many of them are going to have said they're going to make non-qm loans where they feel comfortable that they can do so responsibly and they can document the consumer's ability to repay, there's a bank just this morning that is going to continue to make interest only loans, heard from other bankers will continue make certain interest only loans. when i think that the customer profile can sustain that over the long term.

and they can document and show that. there are other larger lenders who have said that they will continue to make non-qm loans where it didn't have an underwriting model that they feel strongly is a performing model and it shows the customer's ability to repay. that's really all that we're asking, and chris made the point. it's an amazing thing that you need a rule to tell the lender who is going to lend money to a borrower that you have to pay attention to the borrower's ability to repay that loan back to you. but in a market that had been transformed by the secondary market where people for a while at least make loans and just shove them off the books and feel that they've gotten rid of them, that was not the ethics of the mortgage market in the mid-years of the last decade. so these rules, had they been in place, and there's notable analysis goldman sachs did recently, no big fans of government regulation last time i checked, that said of the mortgages that were made that

defaulted in 2005, six and seven, half of them would not have been made had the qm rule been in place but i think it's notable. [inaudible] i mean, what are your instructions your examiners about giving lenders a fair shake? you encourage them to do you qm spin we've been very transparent about that. the examiner procedures and the way in which we're going to be examining around these rules have been published and up on our website since june of last year. those were worked out in close consultation with the other regulators. including both the banking regulators and the credit union and cua. all of us have agreed on those protocols, all of us are going to proceed under them. there was a statement issued, joint statement by the other

regulators recently affirming what i've been trying to say all along, that as long as lenders are lending responsibly according to strong criteria paying close attention to building to repay, whether a mortgage is qm or non-qm commitments -- it's not something the regulars will penalize anybody for. it's exactly what we're looking for and we'll take it where we can find it. >> time for one more. >> i'm with "the wall street journal." on the small creditors exemption that you mentioned, a lot of these small banks, smaller credit unions say hey, wait a second, 500 loans is a lot of loans. they could be reaching a situation where they hit that 500 loans have in june or july. what happens then? is that going to be an issue you are marching whether that captured the bigger? >> that is something we'll continue to monitor. when we write a rule, the same

when congress writes their statute, there are points at which up to draw certain lines at you make your best judgment about how and where to draw those lines and we tried to rest on data here. the line we drew, ma five and a mortgage is a year or less dense cover the vast majority of smaller creditors, committee banks and credit unions well over 90%, maybe 95%. it does not cover 100% to you always hear from those that are not within that. and we hear from them, i hear from them on our community banks advise against under credit in advisory council and we've asked them to continue to provide us with information as we go about how these changes and how the market changes, other changes in the market of course they go well beyond and have nothing to do with our rule. interest rates will go up and down over time. the economy will go up and down over time. the interest people have in renting versus owning will change in various ways over time. so as we monitor all that as we

go we will be sensitive to consider whether we got that line right, whether we should put it in a different place. i think the worst thing we could do right now we be a lot of additional tinkering with the rules in the early stages. let's let them work and see how they're working but we will be very interested in getting the data. if we see something that's dramatically out of bounds with what we expect in this market, you want to hear from the realtors, from the committee banks, credit unions, anybody who has line of sight on this market in order to think about what that means. >> thank you. >> thanks. >> and now for our panel today, come up and i will introduce them as they start to come. representing various aspects of our industry and we're looking forward to hearing from them,

first is the first panels are liked and it is, will give us the lending perspective it gives been the primary legal counsel to century mortgage company since its formation in 1996. in that capacity he oversees all of the centuries legal affairs including the creation of the lending division and its recent expansion. prior to join century, he was a recognized leader in financial services litigation and has been repeatedly recognized as one of the top attorneys for mortgage litigation. pacers on the board of directors for the many mortgage lenders of america and has served on its cfpb task force, testifying before congress on regulatory reform and its effect on committee mortgage lending. mr. kibbie doesn't honor graduate from tulane university and tulane law school and thank

you for joining us. >> thanks for having me. >> doctor and -- your she has. i think there's another chair, is there not? you can have my seat. i don't need to be up here, trust me. i'm going to go to the podium. >> dr. stone is an economist and former senior mortgage industry executive as well as an expert on consumer credit and affiliates. she is president of her own consulting firm which specializes in housing and mortgage finance. just extensive experience in the mortgage industry including serving as a senior vice president for corporate relations and vice president of housing, economics and financial research for freddie mac.

she earned her ph.d in economics from harvard university and graduated summa cum laude from washington university in st. louis. thank you. our next panelist is our own dr. lawrence yun. he's the chief economist and senior vice president of research at the national association of realtors but he directs research, provides regular commentary in the real estate market trends. dr. yun was listed by "usa today" among the top economic forecasters in the country. received his undergraduate degree from purdue university and our and his ph.d from university of maryland at college park. thank you, dr. yun. barry, our fourth bill is the direct of housing policy for the consumer federation of america. he also consults with

foundations, nonprofits and others in strategy and policy and program development. previously he was a senior vice president of fannie mae leading the community lending initiative. he has been an advocate for low and moderate income borrowers and underserved communities working to make housing more affordable. he has a ba in history from grinnell college and graduated from advanced management program at the wharton school of business at the university of pennsylvania. thank you, sir for joining us today. let's get started. i'm going to start off with you, jeff. for some time in our a has been with lenders nationwide to better understand how lenders in large and small, are prepared for the building to repay rule. can you talk to his obit about the qm standards and the changes would you think how to change the way business is done today?

>> absolutely. first of all thank you for having us here today. this is an important issue in our industry, one we've been tracking and many in and get contracted for a number of months, years actually. and are glad that the opportunity to comment on it this morning. director cordray i think said it very clearly and very eloquently. it's hard to argue with the concept of the building, at its core every lender wants to make a loan that the barbican repay. that's our ultimate goal in this entire affair. the cpb has done i think an admirable job of striking balance between the difficulties of qm and the difficulties of making that analysis. the cpb has been very forthcoming, very responsive and been very detailed in the manner in which they have written their regulation. however like anything else the devil can be in the details and

there are some lingering issues that we foresee with qm and the application of the ability to repay standard. first and foremost, would a delay in the rule have been an appropriate response at this point in time? director cordray point out the economy is still recovering, they were still trying to move forward and yet at the same time we perceive the ability to repay standard to restrict lending by at least 10% by the cpb's own estimation, and in high loan balance areas certainly significantly higher than that. we foresee that there may be some difficulties in the economic recovery as a result of the qm rule. additionally, director cordray made mention of a gse exemption. freddie mac and fannie mae. so long as the lone qualifier stability of freddie mac and fannie mae it will have qm status, a great concept, certainly something that will

allow many lenders and community lenders to continue moving forward with their plans and with the bases, so long as the gses remain in effect and gse reform does not accelerate our move forward but if the gses eying themselves to longer in existence, we could have an extension that becomes meaningless at that point. you've also mentioned -- having some difficulty with as well. the 3% rule, all of the charges must fit within the 3% gap in order for the loan to qualify for qm status. this is a standard in which it doesn't matter whether the service is being performed has the appropriate valley. it doesn't matter whether or not the service being performed is adequate or competent but it only matters whether not the party performing the service is affiliated with the lender. and that is something that we believe may require some further

study and they have a direct impact on many lenders, especially community lenders. >> thank you. ann come in your practice should probably consult with a number of financial institutions over the probably very recently. how do you think this rule might change the way institutions run their mortgage operations? >> well, thank you, and thank you again for inviting me. i have worked on this issue for quite some while, and i think for the most part most of my clients tend to be large depository institutions. are prepared for implication. i think as we heard earlier, there will continue to be non-qm loans made most likely particularly to credit worthy, highly credit worthy borrowers. i think one of the issues is what happens to jumbo mortgages with dti of 42%. i think support for the lenders again may be willing to take

good credits on in this space, a lot of the space is very good credit but i think the ultimate outcome will depend on the extent to which these get challenged in court, and the court's treatment of those challenges. having said that, i think the arctic couple of areas that are very important going forward. not just in the near term but in the next couple of years. they've been touched on a little bit. one is related to appendix q. as it's called, which is adequately detailed guidelines about how to calculate income and debt and assets. and while simple -- it was sort of in concept, it gets incredibly detailed, as it must, about banks ranging from the treatment of self employed borrowers to extended income from extended family members, and so while these are only guidelines, what really happened

is there's going to be codifying underwriting guidelines for typical loans. and while that is necessary it also has a real danger of creating sort of an ossified underwriting system that may be inappropriate over time. and i'm not just talking about fixing initial glitches, which undoubtedly will occur, undoubtedly will be fixed, but i think longer-term it's talking about making sure that these guidelines evolve with both the economy and the changing demographics. one of the clearest examples, recent immigrants who often have multiple family members contributing to income, often have nontraditional jobs. and that is going to be an

increasingly important segment, particularly for the first time home buyer market. and i think it's sort of incumbent on the agency to monitor these trends and make sure that they are not creating unintended barriers to access, particularly about segments of the population that we are most interested in protecting. i think the other aspect which jeff touched upon is the current exemptions for gse loans, particularly which basically exist for seven years, or gse reform, whichever comes first. so my guess is seven years. [laughter] but, you know, it's not too soon to begin to prepare for this. right now it would have a devastating impact on the market if these suddenly went away. and i think it's not too soon

for the cfpb to begin to really articulate what this exemption is trying to do, and to explore alternative ways to achieve those, the same desired results. because i think otherwise it could have a significantly higher impact on either cost or availability to credit. and i think the obvious thing is, well, this exemption really allows for the use of compensating factors. but if you're a dti about 42%, there are other things that could be waived to determine the overall credit profile of the borrower. i understand why the cfpb was reluctant to put certain compensating factors into those guidelines. i was actually part of the group that opposed the use of some of those and i think this is a good solution. but i think going forward, it's a real concern, and i think they

need to be prepared for that. so with this, i say to my friends at the cfpb, you know, begin to, you know, prepare for this and perhaps you could get some data that could push that further, you know, this sort of pushed past this very simple bright line cut off which is actually important to have, but begin to work on if the extension went away, or if the gses went away, and were replaced by something that you felt was not an appropriate to extended, then what, if anything, could you or should you do to sort of allow for more flexible underwriting guidelines? because prior to the crisis and all the things that happened to the crisis, one of the biggest problems for a lot of househol households, in getting access to credit was, you know, checkbook underwriting and after this and you've got to do that.

so compensating factors in the quantification of those i think is very important. the last thing i want to say is, it's really related to overall credit acts as. i think you talk to people about what's causing the extremely tight credit conditions that exist today, i don't hear to a mentioned are i think the agency has been a very good job to avoid that. a lot of other factors that are affecting that, sort of going forward, these are important issues whether not they increase the use of purchase request on indemnification request from fha, or the gses is causing a very chilling effect on the lending industry. the ambiguous nature of many under indictment, take us to relate to her kids and indemnification request is also makes lenders less willing to sort of stretch to the full credit box that they might otherwise do. the new servicing standards and

higher costs and higher obligations for service in nonperforming loans is another factor. the nature of the servicing contract and the fact that compensation is the same regardless of whether not alone performed is gone. and i think ultimately true, it's the reputation risk that occurs to lenders in making loans that may default. just realistically, some of the standards that may be fha would be willing to make, not all lenders are willing to do that. both because of reputation but because it's not their business model. so i think there are a lot of challenges with access to credit, but i think as currently constructed the qm is really a minor player on those issues. >> if i may follow up? ann made an excellent point about the jumbo market and the rigidity of the appendix q. did

anyone is ever underwritten alone knows what to look at the whole borrower and want to look up alone and you want to fit the whole borrower into alone that makes sense. appendix q. doesn't necessarily allow you to do that, especially in the jumbo market. there's also occasion i think great work of underwriting standards and by nature those and writing standards need of a lover of flux ability and the level of compensating factors associated with them. ann also mentioned the possibility of portfolio loans that don't meet the qm stand. first and foremost there is no secondary market for a non-to them long. there's no way for nondepository to take a non-to mom and transfer that on the second a market in a regional basis right now. as a nondeposit, many of the other lenders in the committee mortgage lenders of america group do not have the ability to portfolio those laws. so, therefore, non-to them loans become almost unbreakable for

many of our colleagues. >> thank you. [inaudible] what are you going to be watching for? what are you expecting the results to be and moving forward, what do you see happening in the future? >> thanks, chris. let me add my thanks to nar for having this session, having director, talk on a momentous week. having listened to the director i find it very hard to add anything. i thought he gave as cover hits and persuasive an explanation of this rule as is possible. it's easy to forget that this whole topic has been under discussion for going on five years when we include the formation of the dodd-frank act at the three years that regulations have been under consideration. i think if at this date the last things we have to discuss our

first, a disagreement about the issue of nontransparent bundle charges to consumers and how they should be treated, and what's going to happen seven years from now when fannie mae and freddie mac might a minus to be rather i would say we've done a hell of a job and want to congratulate the view. to your question, i think consumers are going to be in an environment, finally, where they can be confident that the ability to pay will be the fundamental pivot on which the lender makes a decision about whether to make a load on the. let's not forget as rich said, the reason dysregulation were mandated by congress and the law was adopted is because the lending institution he -- not all lenders but some of them simply forgot the basic rules of lending. the lending 101. you just can't have a trusting attitude after that, so yes the rules are not explicit and the rules laid out the ground rules for how did you lending. i think it's important to make the point that on the one hand

lenders throughout this process sought clarity, bright lines, a clear box, a pass-fail approach to underwriting and qualification for both qm and the h.r. now that they have we're hearing it is too rigid, too clear, too bounded. i would just ask all our lender colleagues can bring your underwriting into the room, you know how to do this. we did for most of history of homeownership and in u.s. and i think the market will be fun. what consumers may face, more requested documentation, verification. as a consumer advocate i have no problem telling consumers to suck it up and provide information. on some the questions jeff raised, the way the rule -- we can always ask for more time for things but sooner or later we have to move the application. and i can think of very few processes i've been involved with in a many years i worked on these issues that have more input, consideration. the bureau made an incredible effort to outreach to every

sector of the market, and i just think it's time to move forward. as richard said there may be glitches, procedures and supervision are focusing on effort at this point and they think they're making every effort to make this a success. on the gses i'll just paraphrase, we are all dead for now. gses are the main execution for mortgages as our fha and ginnie mae. both of them have been given this special exemption from rules which makes it i think much easier for lenders to do lending the way they're accustomed to doing it. i'm very pleased that i think we're at a terrific starting point and this is important week for consumers all over america. >> lawrence, what are your thoughts on the impact to the consumer with regard to cost and access? >> let me start with a $32,000 question. not a 64,000-dollar, 32000, because $32,000 is the amount of equity a typical buyer would have a cumulative in the past

couple of years. so a person who bought a home, two years ago would now have $32,000 in equity, a typical buyer. what is the profile of home buyers today? well, if one looks at the past eight years, the number of homeowners have not increased in fact they had decreased over the past eight years. which is completely contrary to historical normal. under normal circumstances, not the bubble years, under normal circumstances because of the growing population, america has 1 million roughly speaking additional homeowners. so to say that the past eight years we did not accumulate any additional water, that should be something shocking. -- additional homeowner. the additional renters has decreased by roughly five and their innocence this population increase and subsequent household formation is on record population. so even though we want to assure that consumers are protected, we

have to balance that out with consumer access. underwriting standard is extreme in tight. federal reserve askari remarked on that. in our estimates, holding back potentially 15% of potential home -- home buyers. you have tight underwriting standards. what does qm to? in our calculation winbook ipab underwriting by another five-somerset. on top of the 15% tight credit restriction that we have already encountered. so all they compensating factor is for non-qm to increase. non-qm lending increased? with the threat of lawsuit hanging over the lenders? i was a they could increase read only on the upper segment.

for people on the general category, people who are really extremely in high income, say recent medical graduate with a huge and not of student debt load, maybe they will get that non-qm law. so if one looks at the overall incentive of the job they were assigned to monitor, director cordray probably would not be a round four, six years, and then you have to say what are the civil servants incented. it's to protect consumers and their what -- they will be judged on the level of consumer default. the way to do that is to restrict underwriting, restrict lending. so from their incentive performance they may consider lower default, good outcome. however, from societies out, we

may be shifting towards where we have clearly tight underwriting standards, less people participating in homeownership, and clearly homeownership in our view from the perspective of, nar's perspective, has been the key factor in moving the country, say 50 years ago, from working-class and middle-class country. we may be losing out on that. >> chris, can i address that? personal both dan and/or submit an important point about restrictions that exist today. before the rule has been in effect, they're not a result of fears about atr or cuban. they are a result of other factors. but some of them are response and reaction to the loose lending practices that led to the crisis causing a reaction to some of its because fannie mae and freddie mac have partly under the direction of the conservative, tightened up their underwriting guidelines, restricted down payments, credit scores and that's had huge impact at a time and housing expenses are really at historic

lows. interest rates being low, house prices being dropped. a missed opportunity that is not at all a result of these requirements that are in dodd-frank or the cfpb. i think all of us need to now turn our attention away from focusing on this regulation which i think they got plenty right in focusing on these larger issues which will play into the ragged because of some of the differences between loans that don't meet the high price limit, because they been loaded up with fees that my estimation and i think that many others are superfluous and to hide under denying credit to too many people. low-income renters i think historically high percentages of their income for rent. they can't get into homeownership and raising declining rates of homeownership particularly among the very populations that are going to be the rising generation of home buyers from now until the end of my life, that's for sure. those our families that don't start typically with large amounts of family wealth or intergenerational wealth to be

used as down payment. populations which tend to skew lower and credit scores, not bad but lower than others. we have to get the system back to adapting to those realities and doing the kind of limping lg that we know how did and we historically have done very, very successful. i don't think this episode of whether the our qm loans are not acting to fight will be whether people will be qualified as credit worthy borrowers even if they have low wealth. >> thank you. lawrence, we put a lot of work into this. what impact do you foresee this rule having on home sales this spring and maybe even further into the future? and more important to me, on to any bigger issues after we haven't covered? >> clearly, it will impact the mortgage underwriting rules. but there could be other factors that is the bigger driver of the housing market recovery. clearly, the federal reserve is in a less accommodative mood now

which means interest rates will be rising. so that could be the big entrance, bigger than any other qm rules that is being implement. so we're monitoring that and it was very good your director cordray mentioned that he wants to see what's happening out in the field. he's asking nar to track how the qm may be hindering or whether, going as intended. it's good to get that. we will supply that information. so we are in a rising interest rate department bluer also in a job creating a department. so from the housing marking perspective i think eq has an impact, but maybe a more minor impact in relation to these job impact or the interest rate impact. so for the housing market, i don't see the housing market moving strongly upward or downward from this point i think it's sort of stabilized at this point, going in a nice, healthy activity level.

>> lawrence has made a great point about the director wanting to hear what's going on in the field. and through century mortgage company, hopefully we can provide some guidance in that regard as well. although it's true that there will be some non-community -- some non-qm lending going on, i think the director indicated that would be at the large institutional level and not necessarily at the community lenders level. but again, as a nondepository we generally have no ability to generate a non-qm loan. but the cfpb's view of a community letter on what constitutes a small lender may be too restrictive in our view because of the 100 organizations which are members of the -- that definition does not cover a single one of our entities. we would like that to take into

account not only entities which truly our committee lenders but also nondepository lenders as well. >> ann, do you expect something similar to what lawrence said or do you have different ideas of? >> i basically agree with what lawrence and others have said, that qm in terms of credit access is not the issue. i think the cfpb has done a great job in setting the initial rags -- regs. they continued to monitor the market which is critical because the economy and the demographic space is changing, and the sort of regs that are out there not a think will tend to be treated as not guidelines but sort of firm rules. and it's just something they should continue to monitor. >> can i make a point? one of the ironies of this, on the same week of the atr and qm rule becomes effective, mel

blount was sworn in yesterday as the new director of the federal housing finance agency. and as we've said, fannie mae and freddie mac hav have this extension if you are loans that are sold to them are qualified to them and they are along with fha basically the market are all but the jumbo loans. and i think this is a great opportunity for consumers, for lenders to shift away from what i think are really quite minor issues in the atr to roll which i think they have done right and shift back to how do we make sure these institutions which are after all in conservatorship become a positive force in moving forward with responsible lending that meets the atr and qm standards that moisture in toledo today. so i think it's a great confluence of opportunity that can bring the industry, consumer organizations, lenders together to try to move on these issues that have been constraining credit unnecessary. i'm no big fan of new unregulated lending are responsible lending. lawrence, i'm pleased that so

much confidence with the regulars. i just wonder where they were between 2000-2005. maybe they've all retired and a new chris gumbach and you will be right. but this is why we had to have dodd-frank and these rules and it's important to provide those guidelines. >> jeff, what impact do you see having on application process and the quality of underwriting? do you think that we in the field will notice a different? >> i'm not so sure that you in the field will notice much difference. as has been said repeatedly, the cfpb has been very transparent, very forthcoming, has been very communicative and the response of, as to the qm rule but it's been through numerous testing procedure, numerous rulemaking procedures. any lender who has been paying attention knows what qm is big any lender who has been paying attention should be prepared to implement qm from a procedural standpoint, and from an underwriting standpoint. so i'm not sure you will notice much difference.

>> barry, lenders must not concerned about implementation of the rule. but should also be concerned, and are they sufficiently protected, in your opinion? >> i think lenders are more than sufficiently protected but i think the bureau did an outstanding job in balancing the interests of consumers for whom this was meant to protect. and for lenders who have legitimate concerns about the requirements that are imposed upon them. i would just reflect on the experience that led to that over the last five years as so many homeowners have found themselves in desperate trouble -- >> we leave the last few minutes of this program which you can watch online anytime at c-span.org as we go live to the u.s. senate. lawmakers will continue consideration of a bill extending unemployment insurance benefits through the month of march for more than 1 million people whose unemployment expired last month. the bipartisan legislation was crafted by democratic senator jack reed of rhode island and

republican dean heller of nevada. yesterday passed a key procedural hurdle. an amendment and votes are possible throughout the day. live senate coverage now here on c-span2. the presiding officer: the senate will come to order. the chaplain will lead the senate in prayer. the chaplain: let us pray. gracious and changeless god, the creator of heavenly lights, your mercies sustain us. today, use our senators to accomplish your will, making