captioning performed by vitac and i want goes to the necessity for us to focus like a laser on the actions and activities of state attorney generals. understanding that in some cases state attorney generals have never been near a housing program ever before. in other cases, state attorney generals have been intimately involved in seeking redress on behalf of their citizens. and i think our message should be that the state attorney general should follow the letter and the spirit of a settlement which was about housing.

[ applause ] not about -- not about asphalt. not about planting trees. some things that i'm for, too. but we need to really be vigilant, because in the scheme of things, this was an interesting settlement because it was a settlement before any real lawsuits were filed. so it was -- its parameters were shaped i think to the best of the ability of those who happened to be at the table. but we cannot remain silent. we want to see the money that goes to the states invested in things like housing counseling so that people -- [ applause ] and so that people can be equipped with the help they need to take advantage of the programs that are going to be created and the opportunities

that are going to happen as a result. this is where we could all come together, because the ultimate success of the settlement depends on, one, the ability and the good faith of the banks, but, two, on the ability of constituents and consumers to understand and have the help they need to take advantage of the opportunities and the relief that there is. so we've already at the national urban league written to every state attorney general. we encourage you to do the same. we encourage you to go have meetings with those state attorney generals, get to know them, share with them your thinking, appeal to friendly state legislators, because attorney generals answer to state legislators when it comes to -- we've got to recognize that we've got work to do to make sure that how those funds are deployed is accountable to the letter and spirit of the settlement. >> okay. so, let me ask this.

i mean, one of the things is obviously this was a settlement with the five major banks. but should we -- obviously, we at ncrc, at least we know, and certainly urban league and nclc, we all know that the field of financial institutions that ought to be signing these agreements and making a commitment to help, you know, home owners avoid foreclosures is bigger than five institutions. joe, any insight on that in your conversations with the attorney generals? will there be more of these signings, more help on the way? >> right now my hands are full, and i'm not involved -- i've got plenty of business right now. we'll be able to have something more pleasant in about six months. we could do it now if we had to, but i'm not soliciting business at the moment. john, i don't have any insight on that at all. >> that's one reason why we have to keep pushing. we have to keep pushing for national servicing standards. the settlement is good as far as

it goes, but it doesn't cover all banks, and the standards aren't rigorous enough in some areas, i think. >> right. and would you mind talking a few nor minutes about your thoughts arnold the servicing standards? >> only 300. 500? >> only 37 pages. >> yeah. only 37 pages. never mind. i am hopeful -- of course you're right, and ultimately the jurisdiction and the ability to promulgate national standards of the cfpb, i'm hopeful, frankly weather the settlement that what we'll do is begin to generate a record about the implementation of this that's helpful and also further action at the federal level. i don't pretend to think this is going to do it, and i don't think -- these aren't the final solutions. but i think they're a part of the solution. i think it's a first step forward and that's what we're going to try to do.

i think there's an issue, by the way, about 37 pages, 300 requirements. some of them, you know, why they have to be requirements is a little crazy, like you got to own the note. that's a requirement. that's a standard. >> right. >> but it is a concern to me slightly that if we have a very complex and expensive system of servicing regulation -- and we may need it. it may be required in order to make sure people are fairly treated -- that does impact, influence, the shape of the industry itself, how many firms can actually afford to do it, how many firms -- who can actually afford, the consultants, the lawyers, and take the time and money to do it properly. like other things, the first thing you do is build it out, let's get it. and i'll be gone but the rest of you may be here. then try to pare it back and try to make it efficient, right, to try to balance the efficiency and fairness.

but i think let's start with what we've got and work from there. we can't go back to what we had. i also think, by the way, the studies show these standards are a safe harbor of a sort. i think other institutions ought to be looking at them as a way you can pretty much assure yourself of at least -- of -- you can mitigate the -- >> certainly as a lawyer i'd be looking at any servicer that didn't follow those and thinking they were a sitting duck for litigation. [ applause ] >> frank? >> as a business guy, let me say a word in favor of regulation. particularly in financial services. i'm hopeful these servicing regulations will follow this guide. one of the problems in financial services is that it typically is very competitive as between the companies, and small differences make a big difference in your market share.

what happens, and i think this is really what happened -- overall a mortgage crisis, but for example, if one servicer begins to slap it off and not use the highest standards and not check to see is the note really here, did someone really sign the document or not, then they're getting a competitive advantage against the other guys. and the other guys say, well, gee, how are they doing it so much more quickly than we are? well, they're not checking the note. well, then maybe we won't check for the note. maybe we won't check for the signing. and so you see this race to the bottom. and i think that permeated what happened during the crisis that there was this race to the bottom. people knew how to service loans properly. they'd been doing it for decades. but when it became economically disadvantageous to do it correctly, they followed the buck. so there is a benefit, and i think there's a benefit for the businesses in having standards where, if there are outlaws in the industry, they'll be the

first one to drop the dime on them so that they will be stopped rather than becoming the example. and this race to the bottom is behind so many financial crises that we've seen. and so ordinarily most business people would be saying no regulation, regulation is always bad, it's always impeding. in this case, i think this could be one of the best things that happens to the mortgage industry, is to have some commonsense standards that you cannot fall below and so you don't have to worry about competing with someone who's just cutting corners all the time. [ applause ] >> by the way, i was going to say back when we used to have the originate and distribute model, we had brokers and independent mortgage backers and my guys were regulating that piece of the industry, our best source of enforcement information, right, we what we found out was from competitors. i mean, i'm serious. we got more liens that actually resulted in civil penalties and sometimes prosecutions from

competitors in the marketplace than we did from anybody else. that's the truth. >> one line of question there, joe. as you develop this database of pretty important information about services and what is occurring and what has happened to borrowers and so on, is that something that would be available for groups like ours? that would be incredible value for us and our analysis of what needs to be done. >> there is a lot of discussion now with a lot of people, including some agencies of government and others, about loan level data. and i am interested and have gotten a suggestion when i walked in, which was good, and i'm getting a lot of help, but the truth is i'm not. i actually am waiting to hear from a number of advocacy groups about what exactly -- it's sort of, you know -- it's almost a buzz phrase. what exactly are we talking about? so i'm interested in hearing from you about what you think, what you and your colleagues

think that is. and i can promise you what i promised investors this morning. i promise you i will take it seriously. i promise you i will work on it. i don't promise you joy. i promise i will work on it. and so -- and so -- but i think it would be -- i agree with you that it would be a sad state of affairs if we went through this whole process and did not collect information in the way that this was usable and could be seen distributed so it would be credible, because it won't be credible if i keep it in my hermetically sealed mayonnaise jar or something. you're not going to believe it. >> so we're probably going to have some time for questions. i think there are some cards on the table. if you would just write them down, try to write them legibly and not too long a question. and then we'll have staff pick them up. in the meantime, while we're doing that, i'm going to ask our panel for brief vignettes on if you were put in charge, what

would the thing you would -- be the first thing you would do, first two or three things immediately to try to address this foreclosure crisis and jump-start the housing economy? start with you, mark. >> sure. that's a tough question. i would have tried to have us not get here to begin with. i tend to think of the housing market as a combination of we -- weak demand and excess supply. i think i would try to address those issues through various ways. part of the demand equation is going to be the availability of credit, so obviously some of the credit we have we don't want to come back, but i believe there's some credit we do want to come back that has not come back. along those lines -- >> so you're in charge. how would you make credit come back? >> well, for starters, i would take a good look and probably -- >> because we agree with you. >> right. the devil's in the details so, let's talk about some of the details of this stuff. i wouldn't even bother to try to

fix the qrm. i would get rid of it. i think it's going to be more disruptive and i don't think we have the time to figure out how to do it right in terms of hurting credit. so that to me would just go. this is going to be a counterintuitive one, but quite frankly, if i was to do it all, i'm going to assume i can direct mr. bernanke to do what i wanted to do as well, and counterintuitively, we need to start raising rates because i think the rates we have today are discouraging banks from taking loans onto their balance sheet because of interest rate risk. and we know the rates are going to go up at some point, which will depress housing prices then. so i would rather have that hold off like a band-aid and move forward. so those are some of the things i would do to try to do it. there are a whole variety of other things. for instance, senators schumer and lee have an immigration bill where you can come in and buy housing. i think that's a smart idea. i think it's going to be a small number but it's a smart idea.

you see people from europe buying homes. again, trying to figure out ways to get that demand back in. there is a very difficult part getting back to something frank said earlier. speculators were a very big part of this, and the tension is how much speculation do we want to come back in terms of getting prices? we could say none. that to me means there's no speculation, then prices are going to be weak for a while, so, you know, if you want to look at suspending capital gains and somebody buying a house for the next five years or something like in those regards to have -- because i don't know how you fix las vegas without some degree of second home buyers. >> okay. so mark -- >> should i summarize? >> no, no. that's okay. >> too long? >> thank you. we got it. >> i'm going to take out my magic wand, and i'm going to decree automatic principal reduction reset for all mortgages, for every homeowner who's under water, to take those loans and reformat them so that

people can confidently pay on that going forward. number two, i would take the concept of a comprehensive program to take the abandoned, foreclosed properties, to work with construction companies, construction unions, community-based organizations to get those properties fixed up and put them back into commerce either as rentals that lead to home ownership or as home ownership opportunities. it would be comprehensive. it would be directed with strong leadership, and it would be a public/private collaboration. the third thing i would do is going forward i would place a renewed emphasis on home buyer education or housing counseling, because when people are

financially literate and educated they make good decisions. and that that ought to be part of the dna of the mortgage market going forward, because we live in a complex world and helping people become more financially educated through housing counseling and other types of programs has been proven, proven, time and time again, to reduce bad decision making, and secondarily to lead to lower foreclosure rates if you control it for job losses. >> thank you, mark. it seems to me that this financial education really belongs in early education and through high school and -- >> everywhere. >> the fact that we community groups have to keep doing this, or working with banks or churches or others, i mean, that's good because it's not there, but it i means to me -- and it shouldn't just be about mortgages. it should be about, you know, compound interest, everything in

our -- building wealth. >> as part of algebra. >> exactly. joe, you've got the magic wand. they've asked you as a former banking commissioner, as somebody who enforced anti-predatory lending laws and now is working with the a.g.s, they've given you a bigger job and it comes with a wand. >> i'll tell you what i was trying to get my friends in north carolina to do before i left. it's an instruction of my former fellow regulators. i would go down and talk to civic leaderships and say, look, our banks and all banks, but particularly southern banks, have a concentration of real estate generally. and there is a regulatory disfavor, shall we say, in real estate lending. i said to people in various cities, look, sort of to have an idea of have an actual community development plan. look at everything you've got, right? find out the neighborhoods,

where are they, what are they, who owns the loans, what's the stuff, and then present to the banks -- and all banks, not just the biggest, your local community banks, everybody -- here is our agreed local idea of what the credit needs of the community, right? sound familiar? like a cra. right? but the credit needs of the community are prepared to deal with foreclosures, to deal with vacant property, to refinance commercial profits that are otherwise not going to roll over and be foreclosed on next, to do all this stuff. but then, yes, i'm a crazy person like the former commissioner, talking to his federal colleagues and talk turkey and quit this, what should i say, mania about real estate lending and use the powers to give banks credit for addressing the real credit needs of the communities, which are addressing these problems. that's what i would do. [ applause ] >> frank, you're back in charge.

>> well, the first thing i would do is roll back the clock and undo some of the things that were done over the last ten years, particularly in dealing with the crisis once it happened. i mean, i think the failure to use t.a.r.p. as the basis for principal write-downs i think was a tragedy, because there's no -- i have no desire to hurt the banks. i have a desire to help the families. but with t.a.r.p. money gone, you sort of don't have that tool. but the most important thing i can do, and someone said this earlier, is jump-start the economy. get people jobs. jobs solve most problems in most people's lives. then i think you've got to begin to attack the problem in pieces. anytime you deal with something as big as a mortgage market and you say how to deal with all of it, you can't. you really have to break it down into pieces. but you've got to deal with the issues of the origination of loans. today it is very hard, even for

a creditworthy person, to get a loan. it takes so long. it is making it very difficult for people to buy homes because of the long period of time it takes for an origination to actually occur. people who are trying to sell, they don't know whether they've actually sold or not because you've got a contingency. the origination process. we've got to get over the fear of making a mistake and originate loans in a normal businesslike way. the underwriting standards themselves, you know, have -- particularly by banks on non-fannie and freddie and fha loans have been jacked up to a level which basically is saying we don't want this business. and i think -- you know, i don't want to have the government telling them what their rules should be, but they need to look themselves. a lot of these banks are in shock about what's happened to them, because a lot of them didn't know anything about the mortgage business when they bought a lot of these companies. so this whole thing has been a great revelation to them.

the next step in servicing, we talked a lot about that, we've got to get a handle on how we can the turn the modification process into something that's much more streamlined, get the ideology out of it. i understand the moral questions. i understand the moral hazard issues. i understand that the reo -- but all we're doing is depressing value for everybody. everybody's wealth has gone down as long as this is here. we've got to do things to fix this problem. and sometimes you're just going to have to swallow and make the problem work at the family level. on the securitization side, we have to find a way to revive securitization. our mortgage market is just too big. it is bigger than our banking system. and people -- they lose context in this that, you know, there's about a trillion dollars of credit card debt outstanding.

there's $11 trillion of mortgages. this is huge, and we can't do it without access to worldwide capital. we have to make securitization work again. [ applause ] >> i think if i was put in charge, the first thing i would do is resign and demand they fire the fool who appointed me. >> that's what i should have done. >> but then other than that, i agree with what mr. rain said and what mr. murray said. i think those are important parts. for the long term, i think we also have to make sure that the consumer financial protection bureau stays strong, that there's no way for that to be weakened going forward. we do need wyatt earp, probably doc holliday to govern the

financial institutions going forward. so i mean, those would be the things besides taking the money out of the political system. i think that is sort of the lynchpin that is corrupting our politics and we have to figure out a way that our federal elections can be federally financed and we can't have the corporations pouring in these huge amount of money, a huge amount of money, into our elections. [ applause ] >> diane. >> my focus would be on the few million homeowners at risk of losing their homes still, and i think what i would do, the first thing i would do, would be to say that before a servicer can foreclose, they have to actually evaluate the homeowner for loan modification, and if this is a really radical proposal -- if that loan modification would return more value to the

investor than proceeding with the foreclosure they have to offer it to the homeowner. and if they don't, then they can't foreclose. and that would be my proposal. [ applause ] >> thank you, diane. i was looking at some of these questions. the first one is for you, joe. joe smith. how much are you relying on self reporting from services in your enforcement of the settlement? how would you determine the accuracy of those reports? >> well, the settlement documents require that i receive reports from the banks, and the banks do the self analysis first. the important thing to me to start is that the banks have internal review groups that are independent enough, big enough, competent enough, to do a job so we don't have to do much additional. if they aren't, we'll do more. i think, frankly, this is something we'll leave behind, i

hope will be left behind, after the settlement is over which is to say the banks will do a better job of self monitoring and with quality control so we have an industry where they correct error quicker and we go down the road. i'm an optimist. i think that can happen. we'll see. >> so this is a question for any one. why not allow principle reduction for borrowers severely under water and not in default? why not allow that? i think we will allow it. nobody? we're all in agreement, why not? okay. what keeps financial institutions -- unless someone wants to say more than that. what keeps financial institutions from paying their portfolio of loans from purging their portfolio in minority communities before the final settlement? purging their portfolio of loans in minority communities before

the final settlement. >> i don't know if they did or didn't. the statement contains sort of -- it's not a question, it's a statement really. i don't know that's true or false. >> anybody? can we call upon banks to voluntarily stay foreclosures until borrowers are reviewed for principle reduction made under the ag settlement? is there any reason we can't just call for voluntary stay of foreclosure until -- >> well, the standards themselves require that there be a review. that is one of the 300. that's one of the better ones. you like that one. i like that one. >> it's not as it used to be. >> thank you very much. [ laughter ] it's more than we had, right, so it's a start. i do -- in a number of situations things like service

members civil relief act and appeal rights and there may be additional appeal rights. we're moving in that direction. one thing we can do, and i know you'll help me, which is good, we're going to see how the enhanced services work, do they have an impact at all. is it enough? and then we can go from there. >> final question. can someone make housing counseling mandatory prior to homeowners receiving assistance? [ applause ] >> great question. >> i do think counseling in my own experience, is crucial to distressed borrowers. i don't think the settlement requires it, and i know that industry has -- there have been parts, not so much the banks as some capital markets opposed that just because it inhibited economic efficiency and it cost money. but i think there is a clear

correlation between counseling and good results. so i think it's a good idea to have it if we can. >> john, you know that when we first introduced our affordable housing loans at fannie mae we required counseling. we had terrific support from the counseling industry and lenders wanted to make the loans without counseling. over time those requirements got watered down and became a judgment call for the lenders. personally i always believed as somebody with a credit background, i believed that counseling was a value add. it turns out in real life. for example, you know, some lenders said why are you requiring a down payment of 3%. that's so little let's make it zero. well, my experience in life is that people having a little bit of skin in the game goes a long way. [ applause ]

people who are not serious, they don't show up. if you say if you have to have counseling, if they aren't serious they don't show up. you don't want them to show up -- you don't want them to have a loan if they are unwilling to show up. so to me, counseling was important then. i believe it's important now. i think that it is for a lot of people, their success in homeownership might come from waiting three months, saving a few, $1,000 more, just in case. so that when they get into homeownership they have a greater chance to be successful. these are the kinds of things that raw economic efficiency in running a business would say well, this is unnecessary, cut that out. that's just cost. when in reality i think it has a significant impact on credit performance and always have thought that. >> quickly. thanks. >> in fha's reverse mortgage product there is a counseling requirement and this may surprise you that i spent a number of years on the hill

pushing to have counseling expanded to the program that was met with resistance from friends of ours that remain nameless. that's an area to look at. fha is 50% of first time buyers today. to me that's the market that needs counseling. that's why we look to start. >> i think there is also an opportunity under the qualified mortgage standards in dodd frank to push for inclusion as counseling there was a prong for qualified mortgages. >> so counseling matters, we all agree. okay. so, you know, i really appreciate these gentlemen and gentlewomen joining us on this dais as we have this conversation. [ applause ] >> you are a good man. >> and i hope that obviously several hundred people in this room, i hope you enjoyed the conversation. sounds like you did. more importantly or equally as important is in america through