first? is it a two-party system capable of having an honest dialogue about the housing crisis? your thoughts. >> well, i was as we were discussing before the panel, the settlement which has given me my current employment is the result of work together by attorneys general for the united states and in case you didn't know, and i didn't know until i was told, 25 of them are democrats and 24 are republicans. and so in fact, and the 25 democrats and 24 republicans worked together with a federal government that is democratic to get the settlement done. now some people -- there are differing view about the settlement itself but the idea it's not possible to be nonpartisan -- i look better without it -- is at least that's an example. i will say the other piece is on the other end of the mortgage

process in origination, we have a nationwide mortgage licensing system put together originally by my colleagues and myself and we were democrats and republicans and worked with hud and cfpb after the safe act was enacted to do that. there are examples of people working together across party lines in the united states. as an old states rightser, it's nice to see the states have taken the lead in this. >> what joe smith is saying hey, we've got republican -- 25 democrats and 24 republican ags who came together and came to an agreement on the settlement. why is it so difficult for us to have at the federal level this positive discourse to try to come up with solutions to address it? >> well, let's keep in mind that -- and certainly this was all before joe. you didn't get to the settlement very quickly so there was quite a process to it. and we certainly have seen a handful of things one can debate

what the ultimate impact of the jobs act will be. but that passed by partisan with support by the president. one, obviously, we're in an election year. that's going to make high level issues very difficult to reach agreement on and there's substantial disagreements over a diagnosis of the problem. and so part of it's politics. part of it is policy, as well. all that said is, i think when you can have a small number of areas where people can come together and agree, i'm hopeful a few things can get done. >> i was going to make the point, john, your slides told the truth. the whole truth, and nothing but the truth. >> okay. >> so help me god. >> and we can argue about diagnosis, but you can't argue the facts. you can't invent facts although this town is excellent at spinning facts. taking half of the facts and putting them out there. and you just identified what is

really a challenge for the country coming out of a recession. how can there be great disparities of wealth, healthy profits, yet, extreme difficulties for poor and working and middle class people in this country? my own take is, is that we have to reconcile that we need a plan to rebuild the country and that this argument about government versus the private sector is al ideological argument when we need to have government plus the private sector. working together. what i learned at the local level where public/private partnerships are real is that people are concerned about results. and i think that will sometimes people hide -- it's important to have philosophy and ideology, but people hide behind

philosophy and ideology. we have a challenge. one of the things that history teaches us is when this nation has faced great challenges, it was willing to try new and different things. when this nation faced great challenges, one of the things it put at the heart and at the center is is a step going to be important and helpful for the working and middle class americans. and we've got to push all of these housing policies through that very important lens. >> thank you. frank. >> well, i'm a pessimist on this. and i'm a pessimist because from the time i originally was working for model cities back in seattle very many years ago, the big debate really was about affordable housing and could we get a consensus around affordable housing. as all of you, that's been a struggle for a very long time. but there was never a debate about home ownership.

there was never a debate that we had a national policy to extend home ownership to all who could qualify for all of the reasons that we all know. including just the hard-core economic reasons that john was referring to, it is the central source of wealth for the average american. not the average minority american, for the average american, they've had more wealth in their home than they will ever had in the stock market. but what's happened now, the extraordinary thing is we lost our consensus about homeowner 1347 ship. we now hear that the biggest problems that america faced in the financial crisis was that too many people wanted to own their own home. >> i do want to get into that question. before we jump into that because that's the very first question i want to talk about is what's happening to this notion of being a homeowner used to be a solid tenant in the american dream for most people and i think that's under jeopardy. what is it going to change the

quality of quality of conversation? mark mentioned it's an election year. regardless of what happens, wlrng president obama continues in january or whether this, you know, there's a change, that that's still better part of another year that we can't expect to see something. i don't think we can live with that. i think the movements, i've been mentioning occupy wall street, the tea party and rebuild a dream movement all in the same sentence, the point of it was that you know, there's grassroots anger about what's happening. people have different solutions, different ideas of why it is and how we should do something about it, but it does seem like we are kicking this can down the road in not creating this kind of solution. go ahead. >> just to clarify. i'm not suggestinging that because it's an election year we should not do anything. i'm suggesting that i think if i was a betting man, i wouldn't put my own money on a lot of ha happening.

that said, think it's a tragedy that not a lot is going to happen and we should push to get something to happen. >> i also think it is in an election year when people can shake what have public officials respond to. and that's why i hope people in this room will not go silent. will continue to advocate and i think frank raines made a very important point. it strikes me as just absolutely wrong to suggest that home ownership is not essential to the future of the american dream. and it strikes me as an important and puzzling change in a narrative for which there was a consensus for decades and decades. and when that consensus emerged in the post world war ii period, we grew a middle class.

we built strong neighborhoods and communities. it was not absolutely perfect, and there were many mistakes made. i challenge those who suggest that will home ownership should not be a central part of the american dream for their policy to house the nation. what is it that everyone that we go to some sort of old style eastern european apartment flat? is that what it is? and i think -- i call the question. for those who say that home ownership shouldn't be a central part of the american deem to articulate their housing strategy. is it subsidies for rentals? what is it? i mean, we have to recognize that there's a nation that has to be housed. there's a growing nation that has to be housed. >> so this is the, of course, the question i interrupted franklin about. and we're back with it.

so let's go to it. because i think it's a good point. i think that there is the notion of home ownership in america as a fair opportunity for people to be able to use that as a vehicle for building wealth and building a secure, safe environment is really in jeopardy now. the conversations we hear, i mean, when is an organization like ncrc or the national urban leaguing are in sync with the national association of realtors and the mortgage bankers association on one issue. >> and the home builders. >> that that home ownership is critically important because we're all concerned about the level of conversation about throwing the baby out with the bath water on what happened in this financial crisis. so franklin, sorry for interrupting you, put you back on point. >> thank you. the point is i think unless we get a consensus, and i think

this is what mark was aiming at, unhez we get a consensus, the politicians aren't going to respond. they don't lead. they find parades and they get in front of them. a and -- [ applause ] so my experience is that somebody's got to start the parade. but right now, it's going in the wrong direction. i mean, there's a very serious argument going on in this town although i this i it's been lost from a housing standpoint, but there are many people who say that home ownership is a bad thing economically, that it's not a good thing for the country that we put too many resources into housing, that people don't know what they're doing by investing so much of their consumption in if the housing. this is the standard economic analysis in this town and through much of the country about housing. this is what those of involved in housing for the last 30 or 40 years, we've been having this argument for a long time.

we won for most of that period of time. we're now losing. unless that argument is turned around, congress is not going to do anything to expands home ownership. indeed, we may find in the guise of corporate tax reform that the largest source of funds supporting affordable rental housing, the low income housing tax credit, could be eliminated because remember, that's a credit going to corporations. so when they say take away all credits for corporations, that's the biggest source of financing for housing. so we're losing the argument in washington. unless we can begin to win the argument, there are not going to be a lot of brave souls out fighting the political fight. that's my major point. that's why it's important to understand the need to make the positive case for housing particularly for home ownership. >> [ applause ] >> i think that's exactly right. and i think where we will

mess -- i apologize for my voice. i think where we in the community organizing movements around the country, we really missed the boat at the time of the obama swell because you know, there was a time when the people of this country were really on fire about a problem. and i think because we lost it temporarily, the tea party took over and absorbed some of that energy. and we lost out. but we have to be preparing, preparing very quickly for next time we get that opportunity again. it may be this coming election. let's be ready to help start this process by working to get the money out of politics, by you know, doing all ta we need to do to start building a big enough movement to make sure that housing is on the top of

the agenda as we want it to be. >> okay. so one of the things that struck me as interesting is when ben bernanke, the chairman of the federal reserve bank, produced this paper that spoke to the housing issue. usually fed chairmen, we certainly weren't used to chairman greens span producing papers on the housing issue. and so it kind of surprised us, and when the paper came out, i mean, what it was -- it was very heavily weighted towards what we should be doing with this problem is essentially creating a lot of rental situations. i refer to it his paper as let them eat rent. perhaps that's not as fair as it should be, but i am concerned about even that is a nod in the direction of like, well, home ownership is out of the reach of

people. and maybe what we ought to be doing is promoting rental housing. that's not that we don't have a need for quality affordable rental housing but i think a lot of these situations we'll have people, particularly this segment of the market that's being encouraged and supported to acquire these properties, these investment companies who are going to turn them into contemporary rentals long enough for them to, for the market to wait for the market to improve which they turn them around and flip them and sell them. there may be some slum landlords in the process. i'm sure that's not at all what chairman bernanke had in mind, but i am concerned about that tone of that suggestion, other suggestions from well-meaning people that rental is the alternative to home ownership supposed to rental is a need that we have in this country and that we ought to have a housing policy and housing commitment that has both the private sector and corporate. >> but inherent in that type of

thing is rental for some. and home ownership for others. inherent in that is a return to yesterday. a return to a long time ago. in the early part of the 20th century when people who own homes bought them with cash or they put 50% down because they had the depth of wealth. also inherent in that is what washington revels in. and that is absolutelyism. it's either home ownership or it's rental. when the truth at the community level is you need comprehensive housing policies. it the issue is where do we place our value proposition? is it going to be on home ownership? on asset building? i would ride through neighborhoods in my beloved new orleans, and eyeball inspection

was all it took for me to separate those neighborhoods where people owned versus those neighborhoods where people rented. [ applause ] and sometimes the discussion is also dominated by an eastern seaboard view of the world. new york is a city with a low home ownership rate. it's a city where people are used to comfortable living in apartments. most cities in america are not like that. people want to live in detached homes. they want to have a driveway. they want to have a grass. they want to have a lawn. even if it's small. and so we need to say yes, we can accommodate in a comprehensive housing policy. a combination of rentals and home ownership, but we need to reaffirm the value. this is a discussion about

values associated with the american dream. what is it going to be? >> i think it's also a discussion of what's -- there are a lot of daniels that came out of this period of malfeasant you know predatory lending practices and this is one of them. there was a time when a lot of mortgage lending was done to working class people, working poor people, to people of color but they were prime loans. they were sustainable. i remember in 1994 and 1995, fannie mae looking at their statistics. they had a 50% jump in originations home loans to african-americans in '94. in '95, they had another 50% jump. two years, 100% increase in the loans that they were securityizing for afric african-americ african-americans. they were all prime loans. they weren't these things where no documentation piggy back loans, balloon payments these

predatory nonsustainable kinds of loans. and somehow, you know, that got lost in the this whole discussion. well home ownership isn't for everybody. well it is for everybody if it's fair. if the terms and conditions are right. so dianne, please. >> i mean, that's the point that i've been thinking about as we talk about this, what's gotten lost in this conversation is remembering what those kinds of loans were. that led to the crisis, it led to the collapse, it led to financial calamity across the world. it was toxic loans, loans that were made to people largely refinanced loans without any expectation that people would be able to pay them back. when you look at the numbers, african-americans of all income stripes and the better their credit was, the more likely they were to get a subprime loan. compared to similar white borer. african-americans with good credit, with fico scores over 680 were almost three times as likely as similar white

borrowers to get a subprime loan. those were the loans. they were sucking wealth out of communities where they had built up wealth. even before the crisis, those loans led to foreclosure rates 30 times higher in some areas than prime loans. it was the kind of loans that were made that drove this crisis. and we have forgotten that when we have these conversations. [ applause ] >> one other -- i think that's exactly right and one other point that illustrates that, you know, where we stretched too far during this period that we pushed too much, during this period, the home ownership rate went up when we did the most sfeching that we've ever seen. the home ownership went from the 64% to 67. the african rate went from the 48 to 50. this is what's stretching too much looked like. we never had a policy in this country that everybody was going to own their own home. we thought it would be a thrill if 70% did.

that would have been something we would have said was such an a aachieveme aachievement. but the notion that's out there now that that -- people thought 100% of people were going to be able to own their own home, that african-american loans had gone up to some incredible number was crazy. it was absolutely craziness. we made some progress. but where we didn't make progress was not loans that were aimed at folks who didn't have a chance. if you look at the areas in the country that are most devastated by the housing collapse, they're areas in which you had the highest percentage of loans to investors. some of you might call them speculators, but the official -- the official name is investors. in las vegas, 30% of all the loans made were made to people who were investors. and that's assuming you believed on their form when they said i'm really going to live in the hous house. i really think it was more like 50%. just imagine -- you don't have

to have a comply kayed economic theory to understand why it all collapsed. if the 30% all of a sudden said i'm just not going to buy another house, 30% of the demand in the entire market goes away overnight. and if they decide, well, i think i'll lighten up a little, and you can see why housing prices collapsed in all of these areas that -- where you had very high investors. this has nothing to do with the average american family wanting to own a home. this has nothing to do with it. this was rank speculation that was being financed out of wall street with no questions asked. and that is what causes crisis. blaming people, ordinary people who tried to own a home for this crisis is simply wrong. [ applause ] >> well, i want to -- you know, i think frank is absolutely right, but to go back to something you shared is really to dig into the numbers around who got the subprime products. and that many of them, most of

them, were -- if memory serves me correctly -- not for first-time home buyers. >> that's right. >> and many of them were to people who already owned their homes who were refinancing to take cash out, and most of them were white, and many -- a large percentage of them were middle class. what i ask each of you to do is to counteract the false narrative, to counteract the weapons of mass deception which seek to deceive people. let's at least have a discussion about public policy that's based on facts. frank brought some important facts out. so did you. we cannot build the future without understanding if we allow false narratives, misinformation, spins and lies to color our understanding of

what, in fact, happened. and i think that's why this panel and what you do, john, is so helpful, because it helps to really get the real facts to people out in the community so that they can share that. >> thank you. [ applause ] >> so, i'm just thinking that one of the challenges for us now today and promoting home ownership and making sure it is available to those who are creditworthy and to pay their mortgage, the options on where lenders can go -- lenders, of course, don't -- no longer keep these loans in portfolio. they sell them to somebody. and right now that somebody is the u.s. government. it's interesting that there's such a monolithic call for, you know, the end to fannie and freddie, to do away with fha. and of course if that were to happen, if you think we have a housing problem now, that would really collapse the housing market, probably send us into a

depression. i mean, there wouldn't be -- we don't see folks in wall street, these private-label securities, the one who is buy mortgages when the government is not securitizing or putting their stamp of approval on them. i just don't see this pent-up demand of wall street firms that are saying, yes, bring us those mortgages, we'll buy them. so -- but this is -- it's more than a sort of information deception issue. it's more a case of where is the physical market that's going to step back into this arena to make sure that quality loans that are sustainable, that are done on their proper terms and conditions, that indeed the private sector wall street, which was -- obviously played a major role in this, where is it that they're going to -- where is the mechanism for them to step in and begin to help alleviate this problem? i mean, is there -- am i missing this? is there -- are all these private-label securities out there just waiting to get into

this? >> i guess i don't tend to think of it as a choice between freddie and fannie and private-label skurgtization. frankly, we should go back to a jimmy stewart world where you knew the local banker, he knew you -- [ applause ] you went to him, he knew your circumstances and you worked it out. a lot of problems today with foreclosure modifications, the fact these are not in loan portfolio, they're all in securitization somewhere, not all due to fannie mae of the past, but when a bank sells it and buys it back, that's not much of a securitization in my opinion. you've only made the situation more complicated. so i want to go back to a simpler time. i want to go back to a time where we do have credit available. certainly, there were problems in the past. it's not a perfect model to have a positive-based model. i will say on the aside, the assumptions are, the estimates

are a trillion dollars next year in originations. well, banks have a trillion dollars in cash doing nothing. and to me the debate should be how do we get those banks to take that trillion dollars to put it into the market. [ applause ] >> i think it's unlikely that we're going to end up in a market that's really back to the jimmy stewart days. and my memory of "it's a wonderful life" is there are also evil bankers in that world. [ applause ] it's not an either/or, and i think it's simplistic to say there was this period when we lived in eden and then we were expelled. i mean, securitization is a function of life. i think it's one of the reasons why it's so important to think about things like risk retention and assigning liability and recourse for homeowners so that when a servicer doesn't make the loan modification the homeowner can actually defend a foreclosure. all of these things are important. on the other hand, i agree with mark that the gses have not been

a force for good in addressing the crisis. the fha oig's report from march of this year found that they pretty much dropped the ball on monitoring servicers, costing billions of dollars by failing to make sure that services bid modifications appropriately. you know, it's no secret that the gses have really been the major impediment to implementing principal reductions, which the this country desperately needs. so -- [ applause ] i think we're stuck with securitization, i think it's part of our lives, and we've got to make sure that it's accountable. >> i think we need to stir the pot with our friends in the administration, as well, because, you know, some of the happy talk is a little too happy. we still have serious problems in terms of the secondary market when you have four servicers holding 50% of the servicing and

also having 50% of the second liens. there's an inherent conflict of interest in that market that isn't being addressed. and that has to be dealt with at some point. >> you know, i'd like to just -- and i think this is an important part. you know, some of this is also, you know, chicken and egg. we've got a per sis tenlt problem of unemployment in this country. a person out of work can't afford to pay much of anything -- not a mortgage, not a rent payment. you've got large numbers of people in -- you know, there's a debate we need a housing comeback, but can we get it without a robust jobs comeback. we've got job creation. it's just not at the levels large enough to bring the economy back. so i'm always torn as to what has to come first. but my sensibilities say that jobs have to prime it and then

housing can accelerate. but that's a real challenge out there in creating demand, and demand comes from a sense of certainty that people have. and i think it affects both supply and demand for mortgages. >> perhaps i want's actually that they're not -- perhaps it's not a chicken and egg in the sense that they're simultaneous. we have a housing crisis. we have, according to the gao, some 11 million properties that are either vacant or in need of serious repair. there's a tremendous amount of opportunity in construction and the building trades that could bring people back to work, bring these properties back online. how are we ever going to jump-start the home building industry in america which is a major, major driver of job creation in the country if we have this pent-up inventory, some 3 million homes that are just on the market now for sale. so it seems to me