>> as long as the business incentives for banking and loan services run count for savings and loans there is a need for action that addresses them. for me that makes a lost sense. as long as the services aren't incentivized.

how do we get those somehow realign. >> i do think with respect to fair treatment of homeowners with respect to the servicer, that the system as it is now was simply not developed with the

prospect of a large number of foreclosures and troubled loans in mind. >> when you see the problems across the board, that's why i said in my testimony and will repeat here. i think you do need more of a national level that step by step process. one institution to one institution i don't think gets to the larger point you have been raising.

services are supposed to implement this pregram. given the stories we have heard, reluctance to engage in second loan modifications i'm concern abouted where this is going the second lean program is part of the program to the general

point, the existence of second leans has been problematic for us. the property rights run first to the first lean holder. in this whole loan modification effort we have been engaged in to figure out that the second lean holder ought to be taking

protection. i would share the comments >> thank you.

2006, we had a huge housing crisis in this country. even before that, the mortgage crisis was showed its face in 2001 and 2002 and everything. all you people here have not come up with a solution to sof it. all your brains, you've got a lot of them. i've sat on this committee for 12 jeers and listened to the same absolute goobly goop. you have not had an answer to any question. all you do is deal in talk. you don't deal in fact.

how do you solve the problem? how do you get out the first mortgage owner and second owner? how do you get out? i do not believe there's not one of you that can come up with an answer to solve this crisis, which is about to go the wrong way again. if you saw the numbers in 2010 for act you saw them minus 2% in-housing. i'm telling you, if it goes badly in november and december

until we get the housing traitened out, we are not going to get the loans straightened out.

apply the regulations day-to-day and bank to bank. senator, whenever this issue comes up. we can review that and make sure wherever the skam inners we want a validation. certainly much better than the larger institution.

please give me specific example who kind of losses do you expect to take on the mortgage and mortgage back securities i can say as part of the mortgage backed securities are thoughs it

is something that we are not at service with in the specific going to the losses in delayed because this individual servicer has a problem. nowhere near that amount. the fact that there's a loss already coming on the mortgage is seriously sdeeling went. we reported up here to the

commit kwli. they are much in the process of doing that. we have been clear and public

for that in months by a servicer or loan originator. we are having the lone originate or they are afraid to put their

names forward. they are in total and complete control of who and how they can lend money >> i can not respond to generalized issues thank you for your leadership.

it has been an extraordinary exploration of the process by which we agory gate the capital and the many challenges that have arisen in the course of mortgage practices both to the retail level i wanted to start

by asking you a little about the put back risk. the outstanding purchase requests with reserves less than $10 billion. we have requested is that the plans from the largest bank

holding companies and this independent exercise. for those, the put back is significant risk. where there are issue $en eyescale of 1-10, how big of an issue do you think this will be? >> instead of being ee vasive,

let me be ee vasive. if i had to guess, i guess for a few institutions that number would be reasonably high even if these are such big institutions. we'll continue to pay attention to it. that is to make sure the loan process doesn't move ahead did i roughly capture your comment

just acknowledging your work staff and some of the protection that work in january that did put clarification around working the duel track program. your treasury and testimony. it said clearly it is their policy to pursue both tracks simultaneously that the only factor is that they do not go through with the sale of the process under way the foyer closure service received one of

the homeowners enormously confusing. that would change the dynamic for the families involved. is that the point until the modification tract is completed. with respect to the program, services may not start the process until loans are evaluated or until a service numbers are exhausted.

my time is out. the situation is that often when folks are seeking certification, at three months or 90 days, this is the start to the process. now that the process is under way the banks do not suspend the foreclosure process. technically you are making a correct point. it cannot begin. so often the result before the banking procedure is not

suspended. all of us are seeing in a tronger position. >> we completely agree with you that that process in june of this year, servicers had to stop the value in place in the last they do stop that process but for those loans subject to other investor guidelines where they are not permitted to do so, they cannot. they do not have the authority to override but that is the specific guidance issued in january to 10 effective in june,

done in response. we have a real problem on the ground to be addressed. under our authority. meant to be in alignment with the ham p program, those are not ham p loans per se. i would like to receive what you are saying about duel tracking.

i think that this is a matter of confusion not just for homeowners but confusion in a lot of other places as well. i think that the responsibility here in the way this is run for enter prize loans in harmony is that as soon as aboroer starts missing payments that they have difficulty with their mortgage. there is a single track. that is to work on the option to taylor to the circumstances of that baroer. that is what we should begin working on.

the qualifying for some kind of loss activity. working on greater clarity for theboroers. once the process starts, i'm looking to ensure the assets. i do think we have a responsibility for the conservator to be moving along if we are not making, hitting a meaningful mile stone with respect to the loss mit indication of all services offered. those offers are numerous. i would like to leave it at that

we absolutely want the services to be doing everything possible to come up with the appropriate foreclosure alternative. that must sdart months before any foreclosure processing would start. >> completely dissatisfied.

we'll continue the conference. that's an important question. thank you. asking for numbers. just to put these in the record. between january and is this august? end of august, there were 278,000 completed foreclosures. since january to date, the ones now in process of foreclosure, those are the two numbers.

>> the reduction of hours and so forth. the mac owe economic implications we had this housing

bubble and crash. because of all the issues that have been raised here. we find ourselves in the place that though it is in the investor's economic interest it is in the homeowner's interest to get the modifications done. because it is in the broader interest, we don't drive housing proiss down because we are foreclosing numbers. i think the observes could find

a way to modify the question i have is the national standard or is the incentive on the marketplace here. for us, this entire conversation is talking about the conversation there have been devastating consequences frnl i

don't know if you want to respond to that. >> i'll have something to say about that. i'll agree with the point. secondly in response to the specific question. it is about standards the first lean, second lean issue also about resources. dealing with foreclosure and modifications the not because rule also be an end all, be all.

to think about how all these things will i don't we don't fix the market going forward unless the key driver on the loans. they really do have a big roll to play playing a broader role in this process. requesting that all services to acknowledge the circumstances

there seems to be somebody talking to the borrowers saying clear clear >> completely upside down. it is your turn that that is our solution with the single point contact. >> that would be another one of

our institutions. we do agree. in the kofrntss we are now having with services, they share the concern that the duel track is confusing. if you have entered in to the method ti indication and performing under it, you shouldn't be getting things in your mailbox and about an add in the paper and the home you live in. where the servicers have the flexibility. we are directing them to halt the process. the fact is that it is a space document nated by contractual obligations. in many cases, what happens is that there are particular rule that's apply. we need to give that attention

and sort that out. any person represented on this table here today on the financialover sight commission. shared by the treasury. you are here. the question of why we haven't been able to come up with the answers. there may be contractual issues

with these ideas we have seemed to agree on. this was a classic indication. here we are with the systemically ris ti problem. the issue is why aren't you meeting? why am i not meeting about this commission we have formed what's going on? >> we did have a discussion in the private session of the foreclosure issue it is

something that will be taken up by counsel. due to be completed within the next month of the institutions and brought back to the council. that is something taken. were those talked about at that meeting? are we hearing them for the first time today. that level we held in details will go onto the solution i have

raised this in the past, i didn't think we'd see one so quickly. i didn't think that we would be sitting here with a bunch of witnesses talking about the systemic problem. i didn't hear much about this bill. i didn't expect miracles out of it. the fact that you all meet doesn't mean an answer coming out of it. what better case could you have in this one with the value like this? >> thank you very much mr. chairman, like every other member.

i couldn't help but note. those that follow us to the senate will have to be diminished. i had no idea now that although not in the public service although our time here will come to a conclusion, our friendship will not. so thank you. i want to thank you and your families to the devotion. i just had two or three questions.

we have other drags on the economy. businesses are sitting on a couple trillion dollars. we have some of the problems of the sovereign debt froe ses of europe. china may be worried about increased relations obviously real estate has been a real dragon the economy.

do you have an opinion about what a risk does to the overall economy. the clearing will take more time and there will be less circulation. the housing prices to be stable. obviously not providing an impetus to growth. there are probably multiple ways in when the housing market can clear. some with greater costs

>> saying we are not going to avoid doing foreclosures by a long shot. if we are to get the housing best. undoubtedly having. >> the sooner we clear the better. home prices can start rising again. >> right now, if you just look objectively based on past experience, conditions, finance and other conditions for home buying are actually quite good. but home buying is not near when people hope it would be. they may think housing prices are going to decline some more. until we strengthen the economy to help deal with number one and clear the market where number two, we are not going to get

that. >> the for protracted this foreclosure is. with regard to the put become problem. . .

>> i wish that capital requirements for the primary dragon lending. the other factors seem to be playing a greater role >> my last question has to do with what many people are asking themselves. when they pick up the paper, there is an understandable sense of outrage. if someone has been on deservedly foreclosed upon, if that was not justified, people say this is outrageous. at the same time you read these articles and it would appear that a fair amount of this are technical paper problems that

will ultimately be resolved. do any of you have any sense about the percentage of these cases that are miscarriages of justice for lack of a better term and how many of them are purely technical in nature and postponing the day of reckoning? >> again, we keep mentioning the fact that we are still in the middle of these execs. >> based upon what you have seen today. >> the indications coming in are that we are not seeing many cases where the wrong person has been identified. they were current on a mortgage or kind of lorton under a modification under which they were performing. these were long dated foreclosure process is taking place where the problems are more technical. the fact of the matter is, there are laws that require certain things to be done. if there is a violation of law,

that is unacceptable and you have to cure that problem and remedy that situation. even if the problems are more technical in that sense, they are legal deficiencies. they have to be fixed. they are not legal foreclosures. >> we are paying a macroeconomic price for the delay in resolving this issue. we are looking for a paint free resolution. that is what politicians usually do. economists remind us that is not possible at the end of the day. the more efficiently we can resolve this while still -- if only one person has been unjustly foreclosed upon that as one person to manage. how do people that from happening but do that in the most efficient way possible and avoid the overall drag to the economy the cause every american to suffer?

that is the underlying purpose of my two questions. i really encourage you to look at the misalignment of incentives. we are going to avoid a repetition, there is a wonderful saying in law school ," a problem susceptible of repetition yet evading review." we don't want that here. this is susceptible to repetition if we don't align the incentives. i would appreciate your focus on this. thank you for your patience and chairman, it has been a pleasure. >> i want to thank you for your patience and your work on the committee. you have been a great asset over the last couple of years. in my last monologue about the financial services oversight commission, this is a question for the secretary of the treasury. who is the chairman of this

commission. while i raise the issue to all of you at the table, the question goes back to the secretary and i would appreciate if you carry it back to him. all of like to know what is happening. it seems to me the idea of getting the collective wisdom of people around this table at this table in front of us to really help, please convey that message. >> thank you very much, mr. chairman. like everyone else on this committee, i would like to offer my praise to you. it has been a pleasure and an honor to serve with you and in my judgment, your one of the very best senators that the united states has ever had. thank you for everything you have done. . chairman bair, i'm concerned about farm lending and commercial real-estate lending.

according to the fdic, farmers are falling behind in their loans at a 17-year high. often times, collateral is the form itself. if a farmer defaults on an operating loan, not only are they at risk of losing their livelihood but also their home. because of the economy and some of farm loans are indeed in trouble, several banks are telling us that regulators are seeing farm loans as suspect and discouraging community banks from carrying farm loans. this attitude is hurting rural america without making the banking system any safer. what is the fdic doing to work with banks to make sure that farmers have adequate access to credit? would the fdic consider issuing guidance on farm loans similar to the commercial real-estate guidance that was issued last year? >> thank you for that question. part of the sentiments are

strong but the dairy industry has been having trouble. we appreciate that. we have guidance encouraging provincial lending and loan restructuring activity confined to small businesses and commercial loans would be open to openag lending. there are parts of that that are troubled and providing clarification is something we would be open to them i heard you to say that you are willing to discuss guidance on farm loans? >> absolutely. >> that is great to hear, thank you. >because of the decrease in real estate prices, many commercial borrowers would not be able to reap the finance causing massive foreclosures and hurting banks nationwide. community banks are not to have large real estate portfolios and will likely be hit hardest by this downturn.

community bankers are not certain how regulators will trade commercial loans that they have on their books. despite the very hard for them to lend to small businesses. last year, the fdic and other regulators can up with guidelines for when a bank can modify its commercial real estate loan. these guidelines said that the lenders would not be penalized by examiners for pursuing workout evarts with their borrowers. i have heard from bankers that regulatory examiners do not always follow these guidelines permit what can be done to bridge the gulf between what is written in washington and what is happening at local level? is the fdic series about giving banks a chance to work out these loans without freezing a bank's ability to make other loans? >> yes, we have very specific items that we issued with other regulators encouraging prudent

loan workout. we have encouraged workouts of residential loans as well. if the collateral has gone down, that does not immediately mean that the money will be criticized. if it is current and the borrower is making payments, we tell our examiners they should not criticize the loan. if the law is in trouble we want to restructure. -- if alone is in trouble we want to restructure -- if the loan is in trouble we want to restructure. it is very typical right now. parts of the country particularly commercial real estate still has some troubles. the balance sheets are getting cleaned up and the construction development loans in particular, the balances have been coming down and the credit quality is improving. we are emerging from this.

for some banks that have heavy concentrations, they have troubled loans and may need to maintain capital against heavy losses and i can constrain their balance sheet capacity to lend. that is driven by the fact that they have trouble lobes not the supervisory process --loans and not the supervisory process. loan balances have remained a constant 4 $1 billion in assets and smaller separate loan balances have been increasing during this time. if there are specific institutions, we would be happy to take a look at that.

we want to make sure our policies are appropriately applied. i don't want to raise expectations. there is a lot of troubled commercial real-estate loans than of thank you very much >> thank you, senator. i will leave the record open for additional questions because we have a second panel and i want to give them a chance to be heard. i want to quickly ask governor terullo who raised the issue of standards. i think that is a terrific idea. i want to get a quick acknowledgment whether or not at first blush from the rest of you, is that an idea from hfa, is thatwn to f something you like? >> that is something we support

and we have tried when hamp was set up to set up servicing standard theme we have tried to address this for banks. >> certainly given all that we have seen, we need to give serious thought to the model here and whether we can improve this question of incentives. are there perverse incentives that are operating in can that be better aligned, that is certainly a good time to give that a look. >> as this committee takes up hazzard finance reform next month, i hope that part of that is absolute standards that don't go beyond servicing standards and suggest there are a range of things in the mortgage industry for which assuring where and how standards are established, overseas and imports should be part of that discussion. >> tim johnson will be chairing

the committee come january. i will make the request of all of you to submit more than just a suggested idea of testimony. we would like to get may be some specific ideas. maybe this is something that the federal financial oversight committee might submit to us some legislative ideas and language that could be a part of this committee's consideration over the next month or so. that would be very helpful so i will make the request of all of you. i suggest that maybe the oversight committee -- commission might not be a bad place to cook these ideas that would make this more efficient and a single point of contact is terrific. i thank all of you. this will be my last opportunity for this particular panel, i am grateful to all of you. i have enjoyed immensely working

with treasury and the fdic and the board of governors and occ and i want to commend fhfa. people born guerrillas the conservatorship you have taken on and without you there and without the financing system, we would be a made the problem. people recognize that saw want to take the opportunity to thank you and your staff for the work you're doing. the committee will look forward to working with you on this. i thank all of you very, very much. >> thank you, mr. chairman, congratulations. >> next, your calls and comments on "washington journal." after that "newsmakers." than the senate armed services committee on the policy known as "don't ask, don't tell." today, join our live three-hour

conversation hour"the satanic verses" author salman rushdie. later on "after words," former president jimmy carter looks back on his presidency from his white house diary. find information on line at book-tv.com. a political roundtable this morning and -- on the current 112th congress. grover norquist, president of americans for tax reform talks about the deficit commission bendix -- extending the bush tax cuts. then we will discuss the dream act which gives individuals brought to the united states as brought to the united states as children an opportunity to