. . . .

>> it is a tax on new

homebuyers. >> i wouldn't say it is a tax. path of continually raising it. you are talking about a piece that was put in place when the mortgage markets were in distress. we are looking at the composition of them including adverse markets and assessing what you're talking about. the overall path we are on is to continue to increase. >> let me ask you about long level price adjustments. they are three percentage point. they make fannie and freddie execution uncompetitive relative to the fha. reducing these fees would make

high ltb lows more competitive. do you agree that they are distracting the market and hampering the return of capital? raise them, more we the more we will encourage private capital into this marketplace. 's with the administration intent on winding down fannie and freddie, is it your sincere and honest belief that the private market in and of itself this void? especially considering that 90%

-- this is a huge void. 90% of all of the new mortgages are done by freddie and fannie. -- i am notng satisfied that we have something that can take the place of that. can the government step out of this marketplace and can them mortgage market be supported without any government involvement? that is not what i anticipate. it is not what i have an expecting war would like to see. single-family mortgage market in the united states is $10

trillion. i do not expect the outcome to be that all of it is done by private capital without government environment -- involvement. is moved towards the government having most of the responsibility in the mortgage market. it has moved in the last five years. we have to start moving that dial away from government and away from taxpayers and back towards more private capital participation. $10 trillion, and there is a lack of space. we can make that progress and have a vibrant role for government. i suggested that in thinking where that government role should be, it should the constructive for congress to begin with the traditional

explicit government guarantee such as the fha program and the va program. those exist to provide guarantees. let us figure out where can preserve the market and what is left and what the government needs to do to support the rest. >> it does that make sense that we should figure out what governments role should be. if you agree that government has a role here. it does. how do we figure out how to make that work. how do we guarantee that the 30 year fixed mortgage will stay in place and available as an option to them? without the government role? >> the time has expired. > >> i want to congratulate you for the 2012 strategic plan that

you have undertaken. that is the direction we need to go to both a new infrastructure for secondary market and dominancehe gse;'s and credibility the american public requires. do you know what time you have for developing a single security because there are changes on a monthly basis. some of the services are having to deal with. is that platform that you are envisioning -- are you using that as a building block for the reform housing finance system going forward? >> yes, i do think this could

serve as a building block for congress to utilize envisioning the future of the second mortgage market. about how long -- we announced 13 months ago that it was our intention to work with fannie and freddie to develop this platform. in october last year, we issued a paper in which we described the potential scope of this platform and how it would operate. we solicited public input on this. we have been considering that in going about the next phase in going about the design. we will continue to reach out to market participants in a formal way to continue to get market input. this is a multiyear project. thank you. we can use that as a basis for

our system moving forward. one set is complete, do we need two gse's. that is a rhetorical question. i will like to ask you with regard to the system moving forward and how it pertains to regional banks and community banks. is it important to maintain a competitive market in mortgage origination? >> absolutely. >> do you believe that these markets are more or less competitive than they work five years ago. ? getting more competitive. some of the largest institutions have stepped back a little. >> do you believe that concentration in those markets

would be a good thing or a bad thing? >> i am not a fan of concentration. that is why the more we can do to keep this competitive and to keep an active role for small to midsize players the better. >> that is what has led to the too big to fail. what steps are you taking and making changes to the gse's and market rules to ensure they will not disproportionately affect regional banks and otherwise lead to more consolidation or concentration of market share? >> it is important that we develop standards that define how the mortgage market works. you had to provide a bunch of proprietary coating regarding the characteristics of the mortgage. if you were to take it and sell

it to freddy you would have to provide that information with different data definitions. our smallostly for and midsized institutions. eachgraded peopl quality company was getting. data standards are important. >> thank you. i would like to thank you for what you are doing. i hope we can work with the senate and administration. every day we wait to reform the another day of the taxpayers are on hook for potential losses. i look forward to working with you. i yield back. >> the gentleman from texas. you indicated to mr. scott

that you believe there is a room for the public sector and home mortgage financing? >> i do. >> that means you are in agreement with the builder so i talked to, the bankers i talked to, the realtors i talked to, this is a fair assessment when i say that most of the people for a publicved and private role in mortgage financing. is this a fair statement? >> it is. the time is limited. i will try to give you time to elaborate. because you and i agree that there is a role for the public sector, it also means that you and i disagree with people who say that there is only a role

for the private sector. you and i have to assume that this is a fair statement. >> we will have to agree or disagree. you and i seem to be an agreement. >> we are. >> i am talking about our agreement. that makes news for me. prior to this hearing, i was not sure where you were. i appreciate your being absolutely certain as to where you are. supportcated that you the harp program. that is a refi program. support it, tell me how are you working to make sure that persons who are under the purview of the gse's can

benefit? >> we have looked at the performance of this program and made changes to make this more accessible to borrowers. 2012 speak for themselves. we are not done. a campaign toake make citizens more aware of this program and the benefits. >> is there something that prevents you from creating an automated process by which you can send notices to persons who are financed through the's gs's indicating to them that they may be eligible for this program? >> that is done by their mortgage service. would it be too much that we

would conclude we have done more than we should? >> we are doing a live here with it. i am not sure what you're driving at. we have a lot of people who can pay a lower mortgage payment and keep their homes. many of them may lose their homes. i inc. we can do more to make them aware -- i think we can do more to make them aware of the refi program. just afrom you and your position -- juxtaposition, this would mean something to them. would you do something considering by way of a notice? >> we will take a public marketing campaign -- >> does

that mean notice? improve theo general public awareness and reach out in the communities -- not saying that you would send a notice. that we have been sending notices directly to borrowers. >> that i misunderstood. i owe you an apology. you.to-do marco -- i like weant to make sure understand each other. do you believe that such a fun it should exist that we should have a fun to help us maintain our affordable housing stock? >> that is outside the boundaries of mine responsibilities. that is apology -- that is policy decisions for the

congress. pre-k's i will accept your answer. take you. >> we appreciate the comedy between the two gentlemen -- we appreciate the common ground on the two children. the gentleman from virginia. >> thank you for your candor and leadership. after many long years, the gse 's are turning a profit. i would like to hear from you what are the advantages and disadvantages of the return to profitability for you as conservator? hasn't led we cast to changes in taxes to accomplish this reform -- has it led to changes to accomplish this reform? what should we look out for with this positive turn of events and recognizing that we need in thental reform

taxpayers have ponied up billions of dollars. >> it is hard to see any negative -- we have been working towards this all o along. and of the key drivers here is house prices. that is a huge impact on the profitability. it indicates that the country's housing markets are starting stabilize and show some recovery. also a positive. the fact they are making money now gives us more flexibility to undertake these important steps of selling off some portion of credit risk. it gives us resources like invest in building this platform. we worked through a good bit of a legacy. we can free up these resources to the future goals. >> are there disadvantages?

>> i cannot think of any to them earning money. >> in your speech you gave on march 4, you stated that one of the housing crisis has been a shift in consumer demand patterns away from home purchases to reaching. can you comment on your view as to whether or not this shift is versus al phenomenon normalization of demand as the distortion of it over subsidize government mortgage market are reduced? >> it has elements of both. howeholds have reassessed they want to manage their balance sheets, what the risks are up being a homeowner. that has come into play -- the weakness of the economy.

even for those who are still employed, if they have lack of thatinty, if they fear their job could be at risk or their hours could be at risk, that will make them less likely to want to buy a home. these are contracting factors. there is a natural readjustment. we reached a homeownership rate above what we had seen before. if that is above a concept of a natural rate, one may expect to see a modest equine. >> i yield back. i want to narrow the conversation. withu see anything wrong the mortgage backed securities guaranteeing a return, which is

what happens now? unlike anything else, if you go ginnie mae, it is 100% guaranteed. withu see anything wrong saying i know i will because it is guaranteed by the federal government? >> i do. the basic risk of the taxpayer guaranteeing most or all of the mortgages is that you are relying on civil servants. as hard-working as we are, you are relying on government agents to interpret and study and follow mortgage credit risk

and be able to make adjustments and pricing. rather than relying on market participants who have their own money to lose having to make that informed judgment by what market -- work each credit risk look like -- by what mortgage credit risk looks like. there is a role for government and the private sector and people that have the money at risk to assess this risk and help price it in the marketplace. that is not a job for government. >> reform is needed. any reform would be massive and messy. for the gseallows 's to do the mortgage backed nd undo it creates a

problem. a bit unsavory, but at the same time, i do not -- that we must have the secondary mortgage market. i do not know how we fashion this. let me explain in a different way what we are doing with this contract strategic goal. what i want to do with mortgages that are being sold rather than fannie and freddie and the american taxpayer being the only source of guarantee, i want to take some portions and say to market participants, we will do a trade. i will sell you this risk.

you are going to get a return for being willing to bear this risk. i get the benefit of your private equity backing this and i get the benefit of your perception of what is risk looks like rather than just relying on my agency to do that. what we get is a market price signal about this risk. we are in a shared risk environment. is iwe are doing in 2013 have constructed fannie and freddie to understate -- to undertake multiple types of transactions to sell off pieces of the credit risk so we can see what kind of execution we get in the marketplace, how the marketplaces are pricing it so we get a better sense of -- if this starts to look like there is good demand for this, we can then start to proceed gradually to see how much more we can sell and how much more they will buy

and how they continue to address this risk. that is the way we keep this from being big and messy. we make it orderly and gradual. we do it in a resolute way to bring either capital back to the market. >> have you written anything on that? >> we have a couple of documents i would be happy to share with you. i would be happy to go over it in more debepth. >> i yield back. for being here. i appreciate your time and information. over 90%en noted that of new mortgage originations are supported by the federal orernment through gse's ginnie mae. the gse's guaranteed them.

if the of a sustainable housing system is to be successful, what issues should policy makers consider regarding the appropriate role of the fha and ginnie may? how can we prevent leakage from the wind down of gse's driving business to fha and expanding taxpayer liability? >> with regard to fha -- congress could give fha greater clarity with what congress expects fha target markets to be. first-timerve homebuyers? is it raised on certain communities? is it to help people get into their starter home? only real perimeter or limit is the loan limit the fha

operates under. that is one way congress could express guidance to the role of fha. there are things that could be done with fha to give it buetter but stability in terms of pricing risks and resourcing itself as an agency to carry out a mandate. in other places we set up these guaranteed functions as independent government owned corporations and give them more flexibility in terms of how they esources, human capital and with regard to pricing. these are things congress could consider in the context of fha's role. could you talk a little bit about how you think increasing gse's will affect the fha? will it push business to fha?

will there be more explicit government guarantees? sa keep an eye on what the other gse's are. we gradually increase gse's on the marketplace. another critical component here is it is not just how it matters in the matrix, it is also the mortgage insurance premium private companies are assessing. that is an important pricing element when you are looking at the decision of a borrower to go fha or conventional. we are aware that increasing our gse's -- everything else constant -- that could move this risk over to fha. whether it is in the freddy fighting the mortgage or fha, we

should be operating with is pricinge mechanisms so we undertake this business in a way in which we are adequately pricing for the risk we are undertaking. >> time is limited. i will yield back the balance of my time. i want to acknowledge that you did acknowledge the pain millions of families have gone through. that is important because as we are having this civil conversation, you know what the reality of the people. not just individual families but whole neighborhoods. >> yes, sir. >> now that fannie and freddie

are making profit, when we passed a bill establishing a national housing trust fund, and the law said that the proceeds would fund the national housing system and help low income families. my district of many annapolis -- minneapolis has an occupancy rate of 98%. he could use the help to provide -- the gse issee compliant with a law that would fund a trust fund. >> we have been complying with the law from the beginning. couldicated that fhfa make determinations based on the financial conditions of the companies not to contribute money to the funds. that has been an ongoing determination. >> who you see that changing? what is the future of funding the national housing trust fund

given the profitability? >> i want to make sure the profitability is sustainable. i am mindful that -- of money owed to the treasury department. if they do not go to the trust fund, they go back to the taxpayer. i would want to give your question more careful consideration. >> i appreciate that. proceeds can go in different directions -- some to pay the taxpayers, some to fund the housing trust fund. have talked to people about these difficulties and one of likehings that i owwould your feedback on is a situation in which someone cannot pay their wordage and lose their mortgage and foreclosure and it

will be sold back at market previousch then the occupant is not allowed to bid on. are you familiar with this? >> that would be considered an unsafe practice to engage in that sort of activity because you are not doing things at arms length. >> what if you were to just treat the person as an arms length person. look at their new financial situation and their ability to pay now. many people have fallen into foreclosure because of the market, because of medical problems. will you look at these cases on a case-by-case basis? it seems like there is a blanket denial. >> i will like to do better than that. ,here we have gone to business

if any get in trouble on their mortgage, we have processes and requirements in place so the servicer will reach out to the family from day one. there is a menu of options to help the family that are tailored to the potential circumstances that have caused them to get into trouble. is it temporary regarding a medical condition? is it unemployment? it is a permanent reduction in income? we have tailored responses. what we have done better on now is when this happens today, surfaces know what to do. they are in contact with the borrower right away. i do not want that are are getting 120 -- i do not want the borrower getting 100 20 days behind the mortgage before they are offered assistance you're talking about.

the thing we will -- the way we will help people is to get them right away. we want to reach out to them. we want them reaching out to us. this menu of opportunities including significant reductions in their mortgage payment are well-established. we have the systems in place and want to help people. >> i will try to give my question out. i may have to take the answer. you have indicated that the fh fa's first goal is to build a new infrastructure -- >> submit your question in writing. we have an agreement that all members who are in the room right now will get their and the guest will be excused. i will be stripped on the time for each person. >> i want to talk about your

strategic plan setting three basics -- the confidence building the new infrastructure, constructing some part in maintaining others. when i look at the details on instructing -- constructing, see discussions about raising fees, entering and risk sharing transaction. in multi family parts, i see specific charges. heavyset similar targets for shrinking or constructing --and track thcontaracting? >> fannie mae and freddie mac -- are share -- there established processes whereby if

fannie mae buys a multifamily mortgage, they are not taking all of that credit risk. they are sharing it with the originator. that is not the it works in single-family. he have another step we have to take first in single-family. that is establishing what these processes are to start sharing the risk. i goal is in 2013 -- let's get those transactions tested in the marketplace. let's get the process to do it in place. in subsequent years, we can look towards an approach we are taking with multi family to see an increase in share sold off. look to the future when we can talk about specific percentage charges. how small a market share can you have and still provide the us is very the critique? >> we go back to the early

2000's. you were 45% of the market. now you are 100%. how small a role can you play and still for a that function? liquidity.g it can be a good deal less than 90%. you will not turn that switch overnight. thatay to get to where answer is is to do it incrementally. >> it is fair to say historically that market can function with you supplying guarantees on less than half. >> fannie mae and freddie mac has less than half of the market. my largerions to question. we talk about contracting the market. when you talk about the strategic plan, you are talking about operating within the

existing system, the existing this implicitis taxpayer guaranteed. is that system broken? doesn't that -- your goal in doing this is to protect the taxpayer. isn't it true you will not be able to protect the taxpayer to get rid of the guarantee? you will get rid of the potential conflicts -- you have three masters. you have the taxpayer that you owe money to and try to protect , there are circumstances under which you are asked to contribute to a housing trust fund, but you have private shareholders. isn't the gse systems flawed? regardless of anything you do, we will have these issues in the long run. >> it is broken. i look forward to working with the congress -- >> can you fix it with leaving place?payer guarantee

you have to go to a system where you become an agency or private entity? crocs you need to clarify where the government's role is an it's exposure. the gse model was the problem. it was a melding of private capital and public support in a way that harms the american taxpayer. >> i appreciate the steps you are taking because that is the goal of your plan. i would put it to you or the larger group that we are always going to have this risk regardless of how successful you are in contracting or building or maintaining. until we get the taxpayer out of the distance of the guarantee, they will always be on the hook eventually. i encourage everyone to consider the possibility that it is a system that is broken, not the operation. multi family housing -- in

the last four or five years, i have not heard complaints about fannie mae or freddie mac's role in the multi family housing as a participant in there alone -- and various loans or obligations. have you received complaints? >> i am sure i have heard complaints. >> that has not been the area where there has been substantial required by the taxpayers? >> that is correct. keep this business profitable. >> speaking of profitability, one of the gentlemen brought it up -- freddie marc is made money recently. how much?

and the last month or two? llion.ut $8 buii >> they may? >> they have indicated in a willg to the sec they report positive income in 2012. >> i want to congratulate you on that. it had not been going that way. what i thought was a good description of the zero to $10 trillion continuum over the last two years. the federal role has grown because there was no private involvement in the market because they got clobbered more than fannie mae and freddie mac. the private sector -- i appreciate the theory. i agree with a lot of the theoretical statements. the private sector did not price 2006, 2in 2005,

thousand seven, and 2008. would you agree? >> neither the gse's nor the credit sector did a good job. >> the private sector withdrew completely from the market. there was a vacuum for fannie mae and freddie mac and for the role you have been playing. >> that is correct. >> i agree with you. in terms of a continuum or a inl, we are probably too terms of the federal involvement. without it, it would have been no market. >> that is correct. >> let's talk about standards. you were talking about technological platforms. one of the reasons we got into trouble is the underwriting standards seem to go out of the window for several years. would you not agree? >> yes, sir. >> you have put back into place,

which have led to the profitability of three organizations. >> yes, sir. >> what are the standards of this technological standard. senator wyden wrote a letter concerning lender processing services. were you involved in the litigation? were you involved in any of the settlements with lps? >> let me verify. we were believe involved in that litigation. >> what i would like you to do is to take a look at the role of lps and all of this. there was one platform, a technological platform, that was good when things were going

smoothly. it was very hurried in terms of lawyers, processing enclosures. i asked for you all to take a look at this. i would be the missed if i did not bring up limits for you to say that that is in every aware i think if you exercise those calls, it would be a additional profitability to both fannie mae and freddie mac. i yield back. i appreciate your time. your time is growing short. lenderto talk about placed insurance. that has not come up. there had been a push by fannie mae looking at trying to come up with one lender, underwriter, agent, group. you put the brakes on that

operation or movement toward that. do you see any value in selecting these preferred vendors versus having a free market system do that? the waye concerns about the lender placed insurance market has worked. a lot of people do. we made iteeking -- part of the scorecard for 2013. i am seeking to work with other regulations -- regulators to come up with a market standard for how to improve the transparency competition of the marketplace so that errors and investors are better protected. i am looking for not a fannie mae-centric approach or conclusion. i would want to help fannie mae as conservativor.

we can do better than that. we can create a better standard for the market so that the borers mortgage -- so when the borrowers mortgage is owned by another participant, we can bring something better to the way the market works. >> i am hearing you say that will pretend to preserve a role for the a's andrs and the mg' underwriters and try to put in reasonable rules. >> we want to continue to have insurance coverage were you have a situation where a borrower cannot obtain homeowners insurance or the borrower has defaulted on a mortgage. we want to make sure the asset is protected. background is in real

estate and developing. i am familiar with those things. we have to protect the assets for those. we cannot just have it hanging. to me that we were talking about that there was no marketplace for these mortgages and we needed to have fannie and freddie step in. i am not sure if they need to do so astronomically as they have. we got in the situation because of fraud. . no one was making a bad this is a decision. they made bad business decisions because there was a significant piece of the equation missing as they would make those calculations. is that fair? >> i would add five to the list.

-- i would add a fraud to the list. add business decisions were made outside of the fraud. >> we are not verifying people 's incomes. we are declaring that shuffle a -- aaa. do we need 30 year mortgages? to theave a neighbor north, that 30 year mortgages have not been part of their history. they may amortize over that. there is a one year or six months or five-year. they are getting into long-term mortgages. that will impact that. >> the notion of need is set. we do not interpret that the same way as everyone else.

about 30 year mortgages -- in some sense it arose as an affordable product because used to be 15 years or 20 years, 25 years. they pushing up the maturity spectrum to make financing more affordable. not that there is anything wrong with that. with a 30 year mortgage, you do not start paying printable over the first several years. -- start paying the principal over the first several years. it is not the best for the first time homebuyers. the first time homebuyers tend to own their first home for four or five years. foray not be the best their circumstance if they buy that house with that kind of timeline as what they expect.

there may be a different mortgage product in which they can build equity at a faster weight than a 30 year fixed-rate mortgage. >> someone at 60 years of age may be financing or refinancing. you are outside of your potential earning power structure. thank you. thank you for hanging in there. thank you to the chairman and ranking member for allowing me a few minutes. years before i arrived in congress, i was the president of a nonprofit dedicated to dealing with vacant and abandoned property. i came to that work because for 13 years prior to that, i was a county treasurer. i was living my dream of being the tax collector in flint, michigan.

[laughter] one of the concerns i develop -- becomame more aware of there are about 100 land banks, including the one in my hometown. that most systems seem to take when it comes to systems tend to treat these assets as a commodity in the marketplace. they often a measure of value of a transaction and purely transactional terms and did not consider let alone attempt to internalize the sometimes very negative externalities of those decisions.

what is the status of the enterprises reo now as opposed to one year ago? >> we are reducing the reo inventory. one of the contributors to these reported profits in 2012 is the return we are getting is higher than anticipated. andbout a year ago, february 2012, there was a pilot program announced that would take fannie mae-own property and purchases to bulk investors. comment -- the intent was to get property out of your inventory and support what was increasing demand for quality rental housing. that was one potential outcome. anyone in short that the

disposition standards -- in short that the disposition standards have been adhered to i the purchasers? program, thereot were a number of restrictions on the disposition post transaction. in place togime monitor that. limiting the ability of the acquirer in terms of how they would this process of the property -- how they would dispose of the property. most properties were already rented. they wanted to see that that rental be preserved as a rental property for an amount of time. they restricted the disposition to ensure most of the properties remain dwindles for a number of

years. >> is their data or experience that shows how successful that has been in terms of the downstream condition of the properties? is it working? have there been situations are purchasers have not adhered? >> it is early. we close on the transactions late summer. i am not aware of problems. >> was their preference granted to community-based entities, local land banks, or nonprofits that may take the approach that the transactional value or the revenue stream generated by those properties were not the only considerations that the external factor the condition of the property was in consideration >> >> i want to have my stufaff talk to you abot the technical details. we have provisions that included partnering with local groups

that have from air t with these tests that are familiar with these. >> to what extent has it been the case that local relevant state law or local ordinance have been adhered to regarding management and the condition of the properties? cases, we adhere to state law. where state law conflicts with federal law or the operation or conservativorship, those have bn rare. the ranking member has something to mention. i have a document. i asked consents to enter it

into the new record. >> you have five days to enter additional material. any member with additional questions have an additional five days to ask the questions. we aske you to respond to those in a timely manner. thank you to the director for your work in this area. thank you for your testimony today. thank you for spending extra time. i appreciate the comment you made that you will follow-up on individual basis to answer additional questions. this hearing is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013] dr. franciswith

collins. as 7:00 a.m., your calls and comments on "washington journal ." >> today a former afghanistan war commander talks about the u.s. and nato missions in afghanistan. live from the brookings institution begins at 10 a.m. eastern on c-span. >> tonight, called a bigamist and adulterer, rachel jackson dies of a heart attack before andrew jackson takes office. his niece becomes the hostess but is later dismissed. in the next administration, angelica novembevan buren. major questions and comments by phone, facebook, and twitter live tonight at liv9:00 p.m.

>> we go straight to a personal topic. the chairman has been on since the late 2009. his term is up. yours will be up next year. will we see turnover? >> we have stagnant terms. the past six years have flown by. we shall see. i get asked this every couple of years. i am thinking about it. >> thinking about what? >> what to do next. what comes after the commission. i did not think we should stay in these positions forever. i love my job. keeping me here.

we have work to do. >> commissioner robert mcdowell -- chairman jenna kalkaska h chairman announced their retirement. this is at 8:00 p.m. eastern on c-span 2. >> this week on "q&a," dr. francis collins. the director of the national institute of health. your. francis collins, can give us in a nutshell what nih is? ofthe national institute health is an amazing place. it has a budget every year of approximately $30 billion. it is the largest supporter of biomedical research in the

world. half of that goes out to grants in every state of the nation. when you hear about a breakthrough that has happened in diabetes research or autism or alzheimer's, it is very likely that it came from a university or institute somewhere that was supported by nih. that is what we do. we support the best and brightest to chase after their visionary ideas, and we think we are good at that. >> what is the influence? as the director, with 27 institutes and centers, how do you influence what goes on? >> it is a very big place. it has 27 institutes and centers. they are various diseases- or organ-instance focused. -- organ-system focused. there is a cancer institute, a diabetes institute, a heart and lung institute. each of these is led by remarkable, world-class scientists. they work across the landscape to try to identify what has to happen next in order to advance human health.