we have seen rates coming down but there was a set of borrowers who were not able to refinance. the program was designed to help them. after 2 1/2 years we have done about 890,000 borrowers who successfully refinanced. we were looking at it in lit of the continued decline in interest rates and fact that borrowers were continuing to make good on their mortgages to see where we expected more to be able it refinance through it so should we do things to make it more accessible. late summer my agency embarked on a review of how the program was working and beginninged not just with freddie mac and fannie mae but with borrowers to identify the frictions that were making the program less accessible than we anticipated. so, after a careful review of that we identified some changes

operationally and programmatic that could be made to the program to allow more borrowers to be able to refinance. it may be helpful to go through what borrowers we are talking about and the particular circumstances defining eligibility. the first thing is we are talking about borrowers whose mortgages are owned or guaranteed by fannie mae or freddie mac. that is the scope of responsibility of fhfa. then borrowers with mortgages owned by fannie and freddie whose current loan to value ratio is above 80% and obtained their mortgage some time before june of 2009. what we announced were several changes to make it more accessible to the borrowers and we are expecting -- it is hard say exactly how many folks will take advantage of it.

given the changes we have made we estimate maybe at least roughly doubling what we have seen come through the program. that will help folks that have been locked into not being able it take advantage of today's lower rates to be able to do so and will reduce the credit risk to fannie mae and freddie mac if they successfully refinance. >> to follow up, some saw barriers to the program. you have worked to remove some of the risks involved. do you expect the mortgage industry to get on board? >> part of the frictions that i mentioned were things that were making it appear more difficult for lenders to be able it participate in the program. we have done a couple of things in terms of refining the program that we expect will make it more attractive to lenders to want to participate.

we think the changes we have made will make them want to participate and helps be more desiring of working with borrowers who are looking to do this. an important thing that changed that will help is we removed something called representations and warranties, basically the lender had to fannie and freddie. these are borrowers who are near under water on the mortgage or all under water and been paying a number of years. these are seasoned loans and we think these operational changes will enhance the lender's desire to want to participate in the program. >> next question. go ahead. >> it has been built as a program to hepler payments and that will reduce the risk of default for fannie and freddie but you made changes that will encourage borrowers to shorten the loan terms which does reduce the amount of money over time

but incrows the -- increase the monthly payments. so i wonder if there is a contradiction to shorten the amortization but take on a high monthly payment. >> i wouldn't say this is not that we are requiring it. it is that we are encouraging it as an opportunity for borrowers to consider. set harp aside for a minute because fannie and freddie have refinanced about nine million mortgages since early 2009 and we have seen a real trend about borrowers who are refinancing into shorter-term mortgages. that doesn't always result in an increase in monthly payments. in fact, depending on what the original interest rate is and the new one you could go to a shorter term and have a lower payment. what we are doing with the changes we have made is to, with

respect to the risk based pricing that we are carrying forward into this program, it has always been part of the program, we're eliminating the risk based fees that are part of the refinance if the borrower goes to a 20-year mortgage or less. the advantage of this to the borrower is mortgage rates on shorter-term phrts tend to be lower so they get a lower mortgage rate and don't have risk based fees and by paying the loan off faster they will pay much less interest over the life of the mortgage and if they are under water they will get above water a lot faster. this is as option. borrowers can still take advantage of harp using a 30-year fixed rate mortgage. if they do, there will be a risk based fee assessed with it but we're lowering the fees relative to where they have been in this program. we are finalizing what the new fee structure will look like but made clear they will be lower.

we have to charge the fees because in fact by getting into a 30-year mortgage the borrower is extending the term from where they are today and that manassas especially if they are -- if they are under water that means fannie mae and freddie mac will be carrying it a longer period of time even though the borrower demonstrated a desire to repay the mortgage. >> the housing market we are seeing a scarcity of bears when banks are selling more foreclosures and distressed sales and that will probably price lower during the winter. last month your agency solicited 4,000 comments from the public on how to convert some of those potential foreclosures into homes that could be rented out possibly through a hit-and-run vent with private investors. i'm wondering if you could give us a sense of when fannie and freddie might do on a real

estate owned to rental program. >> a little background for viewers. fannie mae and freddie mac do have over 200,000 properties in their portfolio. these are properties that have gone through foreclosure and then fannie and freddie need to sell they will back in the marketplace. usually this is done a single property at a time. what we did is as you noted we invited public comment in august as to whether there were ways of packaging multiple properties -- maybes, maybe hundreds -- doing geographically - based way and put them out as a group particularly styling the offering to the marketplace in a way that is attuned to the local market conditions. so there is a strong rental

demand in a particular market it may be a i attractive to sell them -- it may be attractive to sell them to a group that is interested in rent being the houses in the marketplace. 4,000 noted, we receive 4,0d comments and we think we will have good ideas come out of it. i can't say which ones or when but now that we have the harp announcement out we are turning to this as the next priority. >> in terms of the refinance program, there is also talk of principal write-downs. you have met with house democrats who have urged this option to dampen the amount of foreclosures. does your organization think of this or should away write it all off altogether? >> so the idea of forgiving principal for borrowers that are

under water on the mortgage has been getting widely discussed for since the start of the housing crisis. the position that the federal housing finance agency has taken with regard to providing principal forgiveness as a form of assisting borrowers is this. we have looked at the array of tools available to help borrowers that are in difficulty on their mortgage. we have a legal responsibility as the conservator of fannie mae and freddie mac to kevin their assets to conserve their assets and property. we need to minimize the losses on the troubled mortgages that we have. we have evaluated principal forgiveness programs relative to the tools we have in miin plac today. the conclusion we have reached is on a stand-alone basis

principal forgiveness doesn't accomplish our conservator mandate relative to the loan modification tools and techniques that we have in place n now. the principal forgiveness tool that the treasury department has made part of the modification plan is designed to get a borrower in trouble down to a monthly payment of 31% of their mechanical -- monthly income. we are doing that with the tools we are using and we often use principal forbearance, which means for a period of time there is a zero rate of interest being charged on the principal. the principal is not being forgiven. the borrower still has an obligation and responsibility for the ultimate repayment of the loan. we think that is striking the appropriate biologicalance of pg assistance but protecting the

american taxpayer. >> you touched upon a good point. fannie and freddie are supported by taxpayer funds. how long are we going to see them do that? >> fannie mae and freddie mac have been in federal conservatorship a little over and this is longer than some of us anticipated when we initiated the conservatorship. what we are really awaiting here, the final resolution of what happens it fannie mae and freddie mac and where the housing finance system goes post fannie and freddie is awaiting congress and the administration to develop and enact legislation. all fhfa can do with the statutory authority it has is put fannie mae and freddie mac back out there just as they were. there is a lot of discussion going on between the administration and lawmakers about what we want to learn from the last several years and failure of fannie and freddie

what kind of housing system and mechanisms we want in the future. but that debate needs to take place and we need to await an act of congress to give us clear direction on where aware going forward and what the time line for that will be. >> how much money set aside for the potential new mortgages coming in? >> the new mortgages that fannie mae and freddie mac make today, whether new purchases or refinances, whether harp refinances or general refinances, there's been a lot of change since conservatorship to improve the underwriting standards and pricing of the mortgages. so, we believe that the new business that has been coming in is in fact profitable and will not result in additional draws from the taxpayer. the draws that are continuing today are really still working through the mortgages that were made principally in the period 2005 to 2008. we are still working through those difficulties and we will

be for a bit longer. >> this is our "news makers" program. ed edward demarco acting head of the fhfa. our next question. >> on that point about credit standards, there are some industry veterans that say just as credit standards became ridiculously lax during the housing bubble today it has swing too far to the other side and the concern is that the knee on the throat of the economy is the credit shortage that is putting pressure on prices and fannie and freddie together with other federal agencies really are the main source of credit for mortgages. i wonder how concerned are you that fannie and freddie may be undermining their recovery by making it too hard to get a loan today. >> this certainly is a

challenge. clearly the underwriting standards needed to be tightened. pricing needed to be improved. in fact, i don't think we are done with pricing. i have said publicly that the prici pricing, the risk-based pricing that fannie and freddie have in place today is less than what a truly private market would have in terms of pricing this risk with private capital rather than taxpayer capital at risk. so, over a longer term i believe pricing of this risk will need to continue to gradually increase. it has during the period of could have beenorship and will -- conservatorship and will need to. but it is a concern that in any market when it goes through this difficulty that suddenly credit standards tighten too much and impede the recovery.

as we've looked at this one thing we're seeing and are analyzing is fannie and freddie have one set of underwriting standards and guidelines for the purpose lenders but lenders are also concerned about the risk they have in making mortgages and so they are often adding their own additional terms or restrictions on the mortgages they are willing to make. fannie and freddie don't make loans to borrowers. lenders do it. then the lenders sell the loans to fannie and freddie. so when we look at loans coming in today we are seeing they are underwritten to a tighter than fannie and freddie alone would require. i think this is going to just need more time to work through. we have been engaged recently in productive discussions with the lending community about some of these differences. b but it will require a greater sense of stability and

confidence in markets generally and in labor markets. if borrowers feel that there is greater job security and we start to see some improvement in unemployment, these things will also help a lot to improve and encourage the country's housing markets. >> a follow-up if you wish, sir. >> to the point of how the is being run, there has been more criticism of fannie and freddie of late that there is -- this week larry summers in an op-ed in the financial times wrote that fannie and freddie have become a case of disastrous pro cyclical policy and criticized the fhfa saying it took a narrow view of the public interest and not acted to ensure the markets be stable identifies and taken no account of the g.s.c. depends on the national housing recovery.

i wonder how you would respond to that lane of criticism. >> within the statutory authority that fhfa has, it has been aggressively trying to assist the housing market to ensure that the country continues to have a liquid and stable and functioning secondary mortgage market so new mortgages can be made. i believe that is what is happening. i also believe that we have a responsibility to be minimizing losses from older mortgages that have been made and to provide assistance to homeowners where that assistance is going to lower the cost to the taxpayer relative to the cost of that house going through foreclosure. i believe that we are doing that. we have completed more than -- about 1.9 million foreclosure alternative transactions since conservatorship. but what dr. summers was arguing for in that edit stooriaeditori

believe, goes beyond what congress has appropriated and directed the fhfa is designed do and if the assistance to borrowers is the appropriate public policy, it is my belief that the way the system is supposed to work in this country is the congress of the united states should enact legislation that provides those funds for that purpose and directs this agency to carry that out. i believe that some of those things that are being advocated for us to do really go beyond what congress has given us the authority to do and that the funds that have been made available for fannie and freddie were not provided for this broad relief purpose. >> how does that lack of direction from congress make your job harder then? >> well, it does make it challenging. we have a responsibility to be

conserving and preserving these assets. i say that a lot, but what are we talking about? we are talking about assets, meaning mortgages that were originated before conservatorship and that is a lot about minimizing losses on poorly underwritten loans. we are talking about the mortgages that have been made since conservatorship and improving the underwriting, strengthening the pricing allows the mortgage market to continue to function. we have the companies themselves. and there are two things here, preserving and conserving their business processes and platforms so they continue to operate effectively, and then there are employees of the company who are quite necessary it continuing to ensure fannie mae and freddie mac operate. onservatorship is not meant to be a long-term solution. the longer it goes on it does become pretty challenging to make decisions about long-term investments that companies are supposed to make in order to

continue to be effective in their operations while at the same time the longer-term plan is we are in a wind-down mode with the companies to try to step back their footprint in the mortgage market and we know ultimately congress is going to enact legislation that will create something new in place of what we have now. so, the longer this goes on the greater the challenge it is for fhfa it make these determinations of how to do business. >> if you could get a final question it -- in. >> a year ago there was not a discussion around more financing or alternative ways of dispesting of tphroerbs. in the hrlast -- in the last si months it seems like you are moving on different fronts. has your view of the conservatorship shifted? has your view of market risk from a declining market changed? >> a couple of things have

changed. interest rates have fallen further so that makes the refinance proposition even more relevant. and we have really had more experience with the harp program and we have been able to sort of look back and say we have had 2 1/2 years of experience with this program and we should have enough information to evaluate it and make improvements to it. with regard to the disposition of foreclosed properties, a year ago this time we were focused on problems in mortgage servicing of troubled loans. there was all the discussion and analysis that began with respect to robo signing and how foreclosure processing was going on. so a lot of attention including attention at fhfa was focused on identifying these problems and figuring out remedies. a lot of progress has been made on that front and now as we start to see foreclosures

picking up again we want to get moving on figuring out how to best to handle the properties. >> edward demarco is the acting director of the fhfa. thank you for joining us. margaret, what is the potential of harp doing what it initially wants to do? >> a lot of people are asking why now, why not two years ago couldn't fhfa move in this direction. this is a very small set of borrowers. there are people who it is worth not walking away from their homes and they think that a refinance might make a reduction in the monthly payments. i'm not sure it will be the stimulus the administration wants. there will be an uptick in the numbers. again, this program when it was first rolled out in 2009 expected to hit five million borrowers. it has come drastically under that bar. >> nick, what are your thoughts

on success? >> well, i think that doctor demarco has a tough job. he's been criticized on all this week. some folks say this is just a band-aid for the housing market that needs a lot more help. other folks on the hill are saying you are doing too much, we should be focusing on getting to the bottom of the housing market and let the foreclosures flow through. i think he is getting criticism and he is in a very important job because housing is a big albatross around the neck of the and he has the lever to fannie and freddie. so it is a tough balancing act. i don't envy the job. up with a owed question specifically looking at the rates of the loan when it comes to shortened loan terms. what was the importance of that question in your mind? >> well, i think that there's been some folks who said if we're doing refinancing, a to

stimulate the economy to get more cash in borrowers' pockets and improve the risk that they default that means lowering the payment. now if you are giving an incentive by making it more attractive to shorten the terms that may increase the monthly payment. it helps long term with deleveraging with getting borrowers to pay down faster but do a lot if you are trying to stimulate the economy and lower monthly payments. >> as far as the criticism we talked about toward the end hearing not only from democrats but larry summers what does that indicate about the way they look at fannie and freddie as opposed to how he runs them? >> republicans look at this absorbing taxpayer dollars. they want to see an end. democrats just want to see something done to constituents are not facing plummeting home values, increased foreclosure rates. there are different motivations for why in is criticism heaped on this agency.

but i think that he does have the ability it unlock what fannie and freddie can do but how much do we need to rely on housing to pick up the recovery in the economy? will there be another sector that can push us forward. >> you followed up with a question talking about write-downs. will it be part of the conversation going on? >> it is definitely a piece of the puzzle people are bringing forward. democrats have raised in a meeting with him and oversight panel meeting they had last week. and he said he was going to take a look. today it sounded like it was kind of off the table as nothing that is meant for fannie and freddie. >> i tonight thank our guests for joining us on our program. to both of you thanks for being on "news makers." [captioning performed by

national captioning institute] [captions copyright national cable satellite corp. 2011] c-span series on key figures that ran for president and lost. today the life of thomas e. dewey. >> i don't want every story to b be 1800 words. >> last month jill abrahmson is the first executive editor of "new york times." she envisions some changes. >> there is a certain lack of discipli discipline, sometimes a point is repeated too many times in a story or there are three quotes making the same point where one would do. i would like to see a variety of story lines. >> she will discuss her career, new book and the future of the

times tonight on c-span's "q&.". >> the heat is on. this is the first time that i have seen in my long tenure in politics where the heat, the real heat. because if they can't come up with something and watch this go on they won't want to go home. >> the deficit reduction committee will hear from former senators and white house officials who participated in past deficit reduction talks. you can watch video of those meetings and at the c-span video labor. everything is archived and searchable. watch what you want when you want.

>> book tv and american history tv are in knoxville. we look at the history and literary life of the marble city. on c-span 2 the university of tennessee's body farm four acres of decomposing human remains on a real life c.s.i. and a look at the roots author alex haley. how he fell in love with the city during a 1982 visit. and on american history tv on c-span 3 a visit to the sequoia birthplace museum. the director explains how an indian silver smith created a system of writing for the cherokee language. and a visit to oak ridge national laboratory and its participate in the development of the atomic bomb.

and bruce whaoeeeler on the hisy and future of knoxville. the weekend on book tv and american history tv in knoxville, tennessee. >> middle and high school students it is time to get the cameras rolling for the c-span student cam video. make a five to eight minute video on the theme the constitution and you and get it to us by january 20. you could win the grand prize of $5,000. for complete details go to student cam.org. every weekend let us be your source for public affairs. nonfiction books and american history. it is politics and public affairs events. c-span 2 has become tv with the latest books and american history on c-span 3 showcasing people and events that shaped our country.