am presenting core logic tonight. those types of information to inform their insight. tonight is a collaboration we have had with the urban institute for going on for years. we are pleased to be a cosponsor of this event with the urban institute. thank you so much for being here. tonight it will talk about mortgage servicing. i bet you knew much about mortgage servicing seven or eight years ago. high-margin business. financial crisis. fast-forward and we have a lot to talk about it mortgage servicing, including the model, the alignment of interest, the cost of servicing, origination, access to credit. you will hear from experts

across the board in the financial sector in both the public and private sectors. let's introduced briefly each panelist and i laughed then the speak for about 10 minutes. then we will open it up for questions and answers for this group. many of you know these panelist well. thank you for being here. first we have ed marco to my left. he is a senior fellow at the milken institute. -- milton institute. he works on housing policy and financial institution regulation. asis best known for his role acting director of the federal finance housing agency, where he fromhe goc as a regulator 2009 to 2014. welcome ed. we have lori marciano. she is the program manager for markets and regulation for the consumer financial protection

bureau. ofi was also the director of the homeownership preservation program and an architect of the affordable program and treasury. she has had many years in the industry. she has done a great job. axt we have michael stegman, fellow at the policy center for finance. he works on housing finance. and michael was a senior policy advisor to the white house. before that senior adviser to the office of the treasury, secretary of the treasury. we are delighted to have michael with us tonight as well. next we have laurie goodman. she needs no introduction in this crowd. codirector of the urban institute housing finance policy center, along with elana mccarter. lori is a voracious researcher and publisher.

over 200 articles and journals and of the five books co-authored and authored. among well known policymakers and the public about important issues on housing finance. ragu, senior vice president for housing policy and capital markets at wells fargo. managing the role of regulation inside of wells fargo. tr.d frank, qm, ar he helped start a platform and wells fargo for an online banking platform. welcome. >> thank you, faith. thank you for taking time out to be here. .t's really an important topic important for consumers. for the many participants in this ecosystem of housing finance.

what i will do is focus on mortgage servicing compensation. something that remarkably has not changed in decades as the servicing world itself has undergone profound changes. let me start with why this is an issue. most of my remarks will be in the context of the agency market, the freddie mac market. a lot of it is also generalized for the private market and so forth. simplicity.- for servicing's, compensation has been a minimum servicing fee required by fannie and freddie of 25 basis points. this 25 broad consensus basis point minimum servicing thatesults in compensation far exceeds the actual cost of

servicing and performing loans. yet it is less than needed for nonperforming loans. as we are about to see it becomes even more pronounced in that case. i only have one chart. let's turn to it now. thanks a mortgage bankers association. they published this chart a few weeks ago. what this chart shows is the fully loaded servicing costs for both reforming and nonperforming loans. we do this from 2008 to 2015. there are two things that stand out. what is the cost of servicing and performing loans is much less than the cost of servicing a non-performing one. the other is they are growing. they point out two things about this. comparing 2008 to 2015. was eight times more expensive to service a nonperforming loan. now it is 13 times more.

the cost of both of gone up. servicingexibility in left fannie and freddie scrambling to properly beef up operations and make the effort, the direct hands-on effort with consumers who homeowners who are having trouble with the mortgages. clean up with a lot of additional compensation being paid out in the form of compensation they got layered on. that was done in the midst of the crisis. something that ought to be addressed. another critical reason we need to address this issue is mortgage servicing rights. this current compensation system we get treats what is called mortgaging service right. he represents the future cash flow when a loan is sold to fannie or freddie. this future cash flow last as long as the mortgage does, so it

economically acts like an interest-only strip. borrowers prepay and suddenly that loan goes away and there is no compensation coming in any interest rates go in the other direction, the opposite happens. -- an msr isn difficult to manage, diffilt to hedge, and requires a great deal of capital to hold on your balance sheet. can -- itm is he lends to financial instability for the holders. the other is because of these characteristics it tends to limit holders to larger, more sophisticated holders. making it smaller for midsized servicers to compete. we should want more participation and compensation

that's competition by smaller, midsized players. we should want less systemic risk. i think we should fix this. as regulators, we should be focusing on how the market is working. do they allow for entry and exit? is there liquidity in the market? the valley of asset or activity transparent or eva lee assessed? -- easily assessed? the answer is largely no. let's fix it. what we should be looking for is a model that allows for responsive servicing for homeowners, efficient litigation with appropriate high touch to help troubled homeowners, and sufficient compensation to achieve that outcome. we have to be seeking reduced volatility and increased competition. acting 2011 when i was director of fha, we try to tackle this issue.

we started a discussion with market participants about where and how to change marketing compensation. the industry had been engaging in these debates for a long time at the start of 2011 we announced we were going to systematically explore possible new compensation structures. they wanted to engage market participants in the process. we wanted better for consumers and better for fannie and freddie. initially proposed four general approaches to have this -- how this might be done. we went to industry conferences and tried to engage with participants in working this out. in september of 2011 be published a more formal proposal. a formal public comment on two general options. one was to reduce the minimum servicing fee in order to reduce

the msr, and also create a reserve fund that would be there to help pay for the higher costs of not performing loan servicing. the other was to go in a different direction and create a fee-for-service structure. was,eedback we got in 2011 well, we don't have consensus. there was general agreement on a couple of things. there was general agreement to most people the system is not ideal, even if some did not want to change it. moreover, the other set of comments were this isn't really the right time to deal with this. the mortgage market is really fragile. this is 2011. servicers had their hands full trying to keep up with the evolving loan modification programs, what fannie and freddie were doing and so forth. really importantly we didn't know about -- what the rules are

requirements for going to look like going forward. it was hard to reject compensation when you had any of all the thing -- you had an evolving set of service requirements. speaking for myself it was always something of was convinced needed to be addressed once the timing was right. frankly i think it is right now to begin re-examining this issue and greet -- reconsidering it. i think there are important changes since 2011 to take note of. first, as we are about the year from lori, we have much better ideas about what those servicing rules are. the cfpb has published servicing standards and additions to it. we will hear about that in a moment. these rules provide a pretty detailed prescription about what is required of servicers with regard to nonperforming loans. we have much better information

now. other key changes are we now have an evolving credit. itnsfer market back in 2011 was all the fannie and freddie. this was about aligning between the servicer and the interest as fannie and freddie as a creditor. private capital holding a meaningful credit loss exposure. they are an important part of this discussion now. they are the ones in a loss position. how servicing is done, how it is compensating off to tie into credit transfers, including how pricing and crt works. that will be part of the discussion this time around. we have moved on and making progress towards greater low-level disclosures. this means investors, including these credit investors will have better ideas about news is servicing and how things are being done. we have made a lot of improvement and advancement with

regard to warrant. i won't get into the technical part, but the msr serves as protection collateral for fannie and freddie on warrants. as that evolves, the needs change. i think the time is right to re-examine this. i think it can enhance competition in the market. make the market open to more players. i think you can reduce financial risk for a lot of financial institutions. now we have cfp be rules in place and the market is maturing i think it's time to reengage in this discussion. thate say one other thing is not actually about compensation but i think is connected. another thing that needs to be picked up is to pick up a continued to work on standardizing mortgage servicing data. some of you may recall back in 2010 we started uniform mortgage data program to standardize

data. whether it was appraisals, loan arbitration, so forth. on that agenda was mortgage servicing data. we think about these disclosures and we think about the credit investor, where this is all going, it's important to pick up that difficult challenge of standardizing mortgage servicing data so this would help the market in mortgage servicing be more transparent and easier to price. faith: thank you. we will touch base on some of this in the future. it might be interesting to hear your perspective at the time -- if the time is right to address servicing compensation. >> thank you and welcome to all of the -- all of you. on august 4, the bureau published a modest 900 pages for your summer reading enjoyment. [laughter] men's the 2013 rule and it includes really quite a lot

of clarification a lot of clarifications and cleanups. many things that the mortgage services themselves came to the bureau and asked if we would correct. it also introduces some new requirements that were extremely important to consumer advocates. things like successors in interest, transfers of servicing, borrowers and bankers in -- bankruptcy. it is effective in multiple portions of the rule in 12 months from publication in the federal register. if that happens this month, it would be august of 2017. the bankruptcy and successes interest portions will be affected in 18 months, which would be february 2018. in what can only be attributed to laurie goodman's sense of humor, i now have nine minutes

to describe 900 pages. [laughter] buchalter seatbelts, here we go. let me talk about some of the changes to servicers specifically at the bureau for the 2013 rules. these are clarifications that services can indeed enter into short-term repayment plans without collecting a complete application documentation for consumers. more flexibility to stop collecting documents for a particular mitigation option when it is evident the borrower is not a candidate for the option. clarification on how servicers select a reasonable deadline for borrowers to send in the rest of the documents for their loss mitigation application. servicers and advocates interestingly enough say can we just you 30 days? we have to have all of these time frames that we have to try to calculate. we said sure, sort of.

yes, you can do 30 days but you have to take certain consumer protection time frames into consideration. clarification on the use of acceleration to address nonmonetary defaults. the current rule doesn't really have a way to foreclose if there is a nonmonetary default. we clarified that. generally services will no longer be required to send periodic tables -- statements on the loan. are you going to continue to send periodic statements for years and years and years to a borrower it was annoyed by that practice? obviously that is a no. exemption from the 120 day foreclosure moratorium when a servicer is joining the action of either a senior or a junior lien holder. and finally something as simple as can we please put a low number on the required insurance form?

these are not all of the servicer request changes, but they are sort of indicative of the kind of things that are simple, practical changes that we were able to make. however there are certain aspects of the rules that are more challenging and certainly more important in terms of adding new consumer protections. one of those, which probably engendered the most public comment in the rule was successors in interest. i'm sure you all know this but to be clear it is someone who has acquired an interest -- ownership interest in a property but is not on the mortgage so they don't have a direct relationship with the servicer of the loan. they need information in order to protect the asset that they own. the rule basically has three parts for successors in interest. the first is a definition of who a successor is. we have created a definition that is basically consistent

with the scope of the sale protections and barn st. germain. also have a successor in interest protection in the servicing rule. individuals that have acquired property by death of a joint tenant, death of a relative of the borrower, transfer of ownership to a spouse or children that would require death, legal divorce or separation, and then moving ownership into a trust where the borrower is the beneficiary of the trust. first is the definition. the next part of the rule basically says it outlines requirements for communicating with potential successors. i raise my hand, i say i'm a successor, what do you do? we had significant feedback from the advocacy community that servicers did not want to talk

to successors. people were having a very difficult time communicating. the world outlines very specific requirements for potential successor contact. the servicer is required to promptly respond with a list of the type of documents that successor would need to prove they are the successor. if i'm recently widowed and i am entitled to the property but not on the note, what would this document be? it would be as simple as a death certificate and a copy of the deed showing me as the owner of the property. one would think that is simple but it has been made apparently fairly complicated. identifying those documents that are most common, providing them timely, and when you receive the documents from the potential successor reviewing them and responding with a decision timely are all key elements of the rule.

finally, the rule gives borrower successors,nfirmed which means the borrower is entitled to all the protections under most of the servicing rules. they are entitled to get periodic statements. escrow notices, insurance notices. they are entitled to loss mitigation protections under the rule. what does the rule not do? we have a lot of comment as i mentioned on this rule. services were extreme the concerned about their liability and responsibility. it does not create a private right of action for unconfirmed successors. it does not require servicers to proactively go out looking for successors. when they find out someone has died. them,uccessor contact they have an obligation to work with the individual but they don't have to start doing lexis-nexis searches to find them.

it does not require servicers to offer any particular loss mitigation option to a successor in interest that has not assumed the loan. they don't have to. however they cannot condition and evaluation for loss mitigation on an assumption. it does not require servicers to provide periodic statements for any of the other notices required under the rule to more than one individual on the loan. if there still is a remaining borrower, even if you have one or two or three successors, you can continue communicating with your existing borrower. you don't have to send multiple notices to multiple people. borrowers in bankruptcy. basically certain borrowers in bankruptcy who intend to retain homeownership will be entitled to receive a monthly periodic statement, or a coupon book or whatever that has specifically

been modified for the bankruptcy. they also must receive written early intervention notices, but they will continue to be exempt from live contact in early intervention. finally the rule is provided sample notices that were extensively consumer tested, specifically for bankruptcy so that servicers don't have to go out and try to figure out how to create their own periodic statement notice. servicing transfers. the rule says that a transferee servicer must step into the shoes of the transferer so that servicing transfers do not adversely impact consumers. it is really straightforward. the servicer has no say over whether their loan gets transferred and the transferee and the transferer have to figure it out to the consumer is not harmed in this transaction.

that said, we do understand the art limited exceptions. especially when loss mitigation is in play. it is very difficult for a transferee servicer, the new servicer to be able to respond timely because of the timing differential and getting all of this body of information from place to place. we have carved out a couple of specific exceptions. if a losse, mitigation application is received by a transfer or servicer within five days of the transfer date, that service or may not have the opportunity to review that and send the five-day knowledge with notice until that borrower -- and tell that borrower but they need to complete the application. the transferee will be required to do that but they will have days after the transfer to make that happened. they get extra time. same thing is true in the case

of a completed application. if a borrower has submitted an applicion within a short time prior to the transfer and the has not hadvicer the opportunity to review it and make a decision on the application, the transferee is required to do so. same application. don't ask me for more documents. don't make me re-create everything. look at my application and make a decision. they will have 30 days after the transfer to do that. they should have plenty of time in order to make those things happen. there are a couple of other nuances about appeals and some other things and there are also protections for the borrower because the time frames are being pushed out. essentially that is the transfer of servicing rule. there are a number of changes in the loss mitigation space. many of those changes were driven specifically by servicers themselves.

they gave us more flexibility here and there. there are a couple i want to point out. the first one and probably the most important is the end of the one bite rule. in our current servicing rules all of the protections and loss mitigation only apply to a borrower one time during the entire life of the loan. eventower has an adverse and they get a loan modification for example, four years later some other terrible thing happens to them, they don't get any protections of the rule in the current rules. this will change on the new effective date. a borrower will be entitled to the protections of the rule more than once in the life of the loan if the borrower has submitted an application, a complete application, regardless of whether they did or did not get the mod. they reperform under that loan. preperformance could be a permanent modification that

brings the loan current. it could be a check from aunt mary. it doesn't matter. if the borrower manages to reinstate the loan, in the future if they have another adverse event, they can reapply. also there is a new requirement for a written notice of complete application. a borrower simental the documents and under the new rule -- submit the documents and there is no requirement to tell them they are done. yes, we have your stuff. under the new rule there will be that requirement. finally the rule defines delinquency with respect to the servicing provisions of reg x and reg z. to begin a pmi. that doesn't mean the can of other definitions of delete quincy. he can't say you are not the liquid until after the 15 day grace period, or don't think my

customers are liquid until after 30 days. -- the liquid until after -- deliquent until after 30 days. when you send the 36 day notice? when you send the 45 day notice? how do cap 120 days of dili quincy before you can take legal action. those are all based of the new definitions in the rule which is basically the definition everyone is using anyway so it should not be too complicated. lots of other things i can talk about. how did i do? faith: how long did it take you to either read or develop those pages? ms. maggiono: we published in the role of november 2014. faith: michael, we are excited to hear from year -- you and your new role. >> let me just comment on three

things. loss mitigation standards issue now that the crisis era and programs and making housing and homes affordable programs for all expired -- expiring. i would like to really support an elaborate on some of its comments.- ed's floating an idea for a special servicer. with respect to loss mitigation standards, i have always been of the opinion that whoever owns or guarantees or mortgage should not determine what borrowers options are when they become troubled and distressed. i have always supported the

notion of national loss litigation standards. while congress is not opined on that, nor the administration directly, the housing finance reform works through johnson credo. and the senate banking committee majority that voted that bill out of committee really agreed there ought to be national loss mitigation standards and included a provision for joint rulemaking wit between with the regulator would be, the successors to innie and freddie and cfp be .- cfpb at the same time back in 2013, in the annual report of the financial stability oversight

forcil, it too calls national loss mitigation standards. life aftermplate the the rert from treasury and fha a, a little more detailed guidance by cfpb they came out in the last few days were certainly all looking forward to the release of the mba 1 mod report and continued engagement around the development of consensus standards. i keep really hoping for the adoption of national standards so that all borrowers are on a level playing field. with respect to compensation reform, again going back to the recognize thee need to align incentives with

the escalating costs of servicing nonperforming loans. and in that report and 2013 called for efforts to implement compensation structures that align incentives of mortgage servicing with those of borrowers and other participants in the mortgage market. we tried but unsuccessfully to actually it into johnson crepo and that joint rulemaking for loss mitigation standards. also compensation reform. that it's to believe very important to move on that issue. that we are noe longer in a gsc wanted to percent guarantee, but in a world of credit risk transfer where a interests with those who are taking credit risks with

mortgage servicing, particularly of nonperforming loans becomes increasingly important. i just want to point out that in a recent securitization of j.p. morgan chase earlier this year the securitization is the first that has gone to market under what is called the fdic safe harbor rule. the safe harbor rule is about if you meet the requirements of fdic that when into effect in 2010, the collateral would be protected that supports the bonds that are bought by private investors in the event the issuer goes bankrupt. harbor,ion to that safe the fdic rules require an

alignment of interests in the servicing issue. it requires service to compensation to include incentives for servicing and loss mitigation action. this deal that went to market that is out there really has adopted a compensation structure in a fee service structure similar to the options that ed spoke about and put up in the 2011 white paper that is really interesting and something we all should be both interested in an following. and set of that flat 25 basis strip, iticing fee io is a compensation structure in three parts. it establishes a base servicing fee for performing loans of $19 a month per loan.

incentives, there are monetary incentives to the servicer when that loan for those loans go into delinquency. $200 a loan per month for loans delinquent 190 days but not in foreclosure or reo. it escalates to $252 per loan per month if they are 120 days or more delinquent. and there is a series of one-time event driven fees, $1500 for a completed short sale $500 for aicer, completed deed in lieu of foreclosure. sale.for a completed reo there are actually now examples service menu

compensation structure and a multi-tiered securitization with -- taking mortgage credit risk out in the marketplace that we should be following. that is the second thing. mentioning close by way back when i joined treasury and we sell the escalation and knwe -- knew about rising the cost didn't know of servicing performing loans or servicing performing loans have gone up significantly as well. a few of us a treasury, and this was purely at the staff level, never one of the chain of command, were thinking about whether or not as we saw the reputation risk, as we saw big banks beginning to kind of be

hesitant at putting overlays on not wanting to take that next chance of originating loans with a higher probability likelihood of going into the leak wednesday -- whether or not those lenders might be interested in getting together in creating -- and creating a nonprofit cooperatively owned special servicer that would take the responsibility of servicing these delinquent loans on a rules-basedm best track this base where you have a situation in a service world where that co-op would not be having to earn private equity rates of return, but would really be able to apply best practices, loss

mitigation standards in the best interest maximizing npv where maybe that would give banks more comfort in moving of that risk curve where you have credit qualified borrowers but with a higher chance of default. i am not going to go int any elaboration on that but i would like to put it out there. faith: thank you, michael. i think we have seen such a shift in the banks withdrawing from the msr market that it will be interesting to further discuss institutions in both cycles of the market and hold that thought. laurie? thank you very much. before picking up some of the things, i would like to incite

about three sweeping structural changes that have affected the industry. the first is the rise of the non-bank servicers. the numbers are really start. 34%bank servicers comprise of the servicing assets of the top 50 institutions in the second quarter of 2016. this is up 3% from the end of 2015. it is up 28% from 2010. you can see the rapid shift between the bank and the non-bank servicers, with the non-bank servicers gaining market share. the dcond trend is consolidation of the industry. the top five servicers comprise in 2001.andings erosive 59% by 2009.

it is now down to 37%. one of the top five of the non-bank servicers, nation star, in five of the top 10. incredibleeen an deconsolidation of the industry. trillion iny 1.6 the $10 billion in family servicing is sub service. this is up from 1.15 trillion dollars in 2014 that is two years ago. this is a natural outgrowth of the deconsolidation of the industry. some servicers want to outsource everything, someone to outsource only delete when loans -- delinquent loans. you should expect more sub service or activity. to be athere is going number of things that will

receive attention in the years ahead. my talked about loss mitigation standards and servicing compensation reform and i would on. the opportunity to pile at the potential need for greater regulation of non-bank servicing. let me start with any for servicing compensation reform. the is actually, thanks to mba, we have seen a performing them is $181 a year. the cost of servicing a nonperforming loan is $2386 per annum. the institutionervice all loans at the same price now. that price is 25 basis points. your average loan size is about $215,000. is $538 per year. on are losing a ton of money

nonperforming loans and making a ton of money on the performing loan. fee has,nted out, this been unchanged since the mid-1980's ignoring the fact the average loan size has grown considerably and technological advances have made it less costly to service performing loans. crop -- costave a structure that is misaligned. the msr asset is very volatile. clearly producing in size would decrease in volatility. this is particularly important in a world in which not banks have grown in importance. when we first talked about this in 2011 we were in a world where things for very important. we were concerned about the news rules that would create a problem for the banks.

that is if msr assets are under 10% of capital, the capital charges 250%. over 10%, it is a dollar for dollar per. -- reduction. a huge escalation from the old level. at this point however the number of banks with significant servicing assets over 10% is very low. the real problem is for the nonbanks. you probably can't see this all that well. isically what this shows you that msr access -- assets are very small percentage of total bank assets. they are a very large percentage of non-bank assets. nonbanks are not better capitalized than the bank counterparts. assets we werer

worried about in 2011 in relation to the banks are really a far more major problem in the nonbanks at this point in time. it is much more difficult to say the current system does not work and it is actually come up with something better. there are two possibilities that were discussed in 2011. the reserve account and the more fundamental change which was the fee-for-service approach. in today's environment neither of these is a slamdunk. the first is an easier change. the second fits the non--- growing non-bank servicing model much better. under the current system, our concern is that servicers may skimp on nonperforming loan servicing. if we moved to a fee-for-service basis with compensation reform, will services be disincentive to make a proactive call when they can collect higher fees if they

wait? certainlyt of issues, a fee-for-service approach would facilitate the transfer of delinquent loans at 100 days -- 120 days. however the problem if you modify early, if we transfer the borrower will likely be in the middle of a modification. ie talked about trying to transfer a loan when you're in the middle of a loss mitigation process. when you think about mandatory service and transfer, as what mike was talking about, that is very problematic. finally we have to think about servicing and its impact on asset to credit. if we were to perform servicing through either mechanism, the reserve account with a fee-for-service basis, it would introduce risk-based pricing into the servicing equation.

and do we want to offset this. that is sort of the set of issues i think about when it think about servicing compensation reform, which i supported in 2011 and continue to do so. there is no easy solution. the second topic i would like to address is the need for greater regulation of non-bank servicers. right now the cfp be irresponsible as everglades to the consumer experience -- as it relates to the consumer experience. the nonbanks have no federal regulator whatsoever. capitaleach other own liquidity requirements that are much lighter than bank capital requirements posed by the bank regulators. the prudential regulations in the current environment is essentially provided by the warehouse lenders eventual the lines of business when they feel the entities are too risky and drive them out of business. 's made the point that msr

have essential exposure to risk and nonbanks servicers, as we saw in the slide, represent a considerable amount of their total assets. the volatility of these assets constrained income cash flow and liquidity during periods of sharply falling interest rates or rising default rates. if we do servicing compensation reform and end up with a fee-for-service model, then we really don't need any prudential regulators. these problems largely go away. if we don't do servicing compensation reform, do the non-bank servicers need more regulation, higher capital liquidity requirements when none of these entities are systematically important? can't we just transfer the servicing? i think the answer is yes, you could. it will be more isolated. they want -- we don't have

regulatory system were no institutions fail. we are worried about systemic risk. the failures are due to macroeconomic factors and most are due to sharply falling interest rates or rising default rates. a lot of the institutions fail at the same time, there might be insufficient capacity transfer services. to dold be cross-linked the servicing transfers. our view is at the minimum capital requirements should be risk-based. -- gscly the gcs require the same. factor ismplicated that the non-bank servicers are an incredibly diverse group. some have sizable operations that provide a natural hedge against msr risks. others rely on servicing extensively.

i know the idea of a self-regulatory organization imploded with the non-bank entities subject to stress tests. the question in my mind is if the industry is capable of doing a self-regulatory organization with enough peace to stress testing. both service and prudential regulation of non-bank servicers are issues that will be -- we will be hearing more about in the years ahead. thank you very much. faith: thank you so much. speaks, we are also dominated by heavy government footprints of lending towards business. i have not heard what the investor rule is and they fled the market. servicing and investors have had a tough road over the last several years. i would like to we then if we get back to more normalized

marketplaces, how do we protect both the consumer and the investor from participating in bringing more ready capital to the market? >> i had a choice here of going before or after laurie goodman. i think i might've chosen poorly in that. [laughter] processing some of what her great comments were. let me try to provide a reaction to some of the things we heard on the panel today as faith said monday provided you from the i will try todo address the slide in front of the. -- in front of you. the lesson i recall reform coming up was in 2011 under mr. demarco's leadership. they are good for a couple of different models around servicing compensation reform. a fee-based model, a custodial

reserve model. and a lot of good discussion on servicing reform. what i'm reminded of is that a lot of things that changed since 2011. a lot of good things. we have a lot of reforms in the customer market for mortgage servicing. we have 2000 pages of rules from the cfpb to keep everyone in line. the name -- the industry respects laurie margiotta now -- maggiano now. 's have done a lot of work on disclosures. the crt market is getting off the ground and evolving right now as well. that is very good. we have seen a growth and diversity in the servicing industry as well. e talked about nonbanks coming in and services who vary

in size coming into the market. certainly we think having diversity in the servicing industry is a good thing as well. that is usually a sign of a healthy market. at least we have one indicator trending in that direction. these are some the things that are going well right now. i would like to point out, as i recall in 2011, a lot of the focus on reform was not around what sort of model we should have for compensation. the weather servicers were making money off of customers who were in distress by delaying the foreclosure process, collecting fees off of that. i don't want to speak for what happened in 2011. i want to say from my perspective we are pleased to see a lot of that, if that is been in 2011, a lot of that has changed. that is a good work of the cfpb. at wells fargo less than half of 1% of our revenue the make and servicing comes from late fees.

we forgive late fees if the customer goes through modification. that is not part of the business anymore. unfortunately that is something we see in the industry. these are all good things we see right now. other things have changed in the last five years. the servicing costs is a good example of that. i'm not sure how would you can see the numbers. i can't see the numbers that well. maybe i don't want to. maybe i just want to see the numbers. back of the envelope when you think about it. performing costs on servicing performing loans has gone up three times in the last five years. five times for nonperforming loans. the costs have gone up significantly both for loans and perform well for customers that pay their bills on time and for those that need help with their mortgages. profits have risen dramatically in the last five years. said,i said -- laurie

there is a credit availability issue. there are too many americans not able to get homes, particularly first-time homebuyers in this market. that is something very important to the industry and wells fargo as well. we know all of these things. i look at the slide. there are a lot of ways to slice the data. you will see the cost slice by performing loans and nonperforming loans, or different parts of the business. the take away message is that the servicing business is really complex and costly and really complicated. that is true. at many levels it is true that it is very complex. what i fear is when we talk about the complexity of the business we of skier what we can actually do to fix things. i will attempt to bring it up a couple of levels here. maybe boiled the servicing business model down to a very short two or three sentences to

help us understand a little bit about where we can go from here as well. generally there are two parts that were alluded to in servicing business. you have the business where you service performing loans,, the customers who pay their bills on time that the vast majority of americans. and you have a nonperforming loans, the customers who need help, need specialized service to be able to service those needs. the performing loan business, as you probably know, is a business strict costs and predicable revenues. i forgot the term earlier, a normalized kind of business generally. then you have your nonperforming loan business which is completely bit -- different. you don't have a lot of fixed costs. they are variable and unpredictable. customers who were in loans

having difficulty paying them back need personalized help. this is not a business that will be tremendously automated as well. you have these two parts of the business that ultimately most servicers are trying to balance. what a servicer will typically do is take the money they make, the revenues they make in the performing loan business and use that money to make investments in nonperforming loans. nobody is looking to make a buck off of nonperforming loans. you have this balance model. we make money off of performing loans. do you use that to really work on the unpredictable cost that happens with nonperforming loans as well. that is fine. that works as a space suggested for many years. that has changed now dramatically in the last five years. it changed because the costs you see here. in performing loans margins of gotten thinner. nonperforming loans cost. what we have not talked about which is more important than

just the cost of nonperforming loans is the unpredictability of costs as well. at the same time we've seen costs go up three times in the last five years, we see the unpredictability of cost of nonperforming loans go up as well. that and him rising has cost a lot of issues. that, what can you really do about that? a couple of things. one is we can look at the performing loan business and say , whiter costs going up? where costs going up for this tens of millions of loans and costing americans that are being serviced on loans they are paying off on time and cyclically? there was a lot of reasons for that. it is more than i can go into in the remaining time i have. i will make one comment. the servicing industry really doesn't have time to catch his breath in the last few years. we have an operationalizing new

regulations or rules from investors constantly for the past few years. we support all of those. we certainly support the recent work that laurie has done in bankruptcy statements. we support all of that. it suggests that every year there is more and more work, and that is not necessarily a bad thing. we will work through that. it tells you were not able to normalize the costs. every year we are putting on something new and we have to normalize that. when i look at this and say performing loan costs are rising high, i would expect that to continue the more we are continuing to implement new rules and standards on an annual basis. when we are able to normalize this and count the efficiencies, it will perhaps shift a little bit. the second thing i would say is reducing the incidence of customers going into default.

reducing the incidence of nonperforming loans. i think the gsc's under the leadership of fha have done every good work. mike talked about a tremendous program. a lot of learning for the industry. there is work taking place right now. that is critical work. that type of work reduces the incidence of customers having difficulty going down a road they don't want to go down and creating a lot of of the issues we talked about. however the figure is difficult on fha. on fha it's important to talk about it. there are over 10 million american loans. we service 30% of all fha loans. fha is important to us, customers are important to us and our relationship to fha is important. this is a case we start to see a divergence between gsc's and

fha. they are limited and often lead to borrower outcomes that are not as beneficial as you would like to see. if anybody wants to read the metric support, i can e-mail that to you. the default rate for fha customers through modification part if they can -- are significantly higher. their options are far less than what they would see as well. reducing the incidence of default, seeing a divergence year, really good work under the leadershipf fha. work necessary likely in the fha as well. the third part is this unpredictability of default costs. i'm not trying to minimize the rising default costs. i think mike in laurie and everyone has talked about that well. the unpredictability gets just as much attention as a cost itself. the inability to know what you are on the hook for, the

inability to plan or budget for money you might need to spend is a critical issue. as much as anything else i think it causes a lot of concern. here we start to see a divergence with the gsc's and fha as well. fannie mae and freddie mac along fha have done some work here on warrants and others to really make is a little bit more predictable. the health servicers what they -- understand what they are accountable for if they don't meet the standards. and different case at fha probably the most significant issue we have right now in the servicing industry is the unpredictability of costs in the fha servicing space. where it isations hard to predict penalties associated with missing foreclosure deadlines and the fha space.

part of it penalties with missing bank standards. there is a lot of lack of clarity in the space. the ability to bring clarity and predictability into fha space is about as important an issue we have right now in addressing what we see in front of us in the servicing industry now. those are my comments in general. where i think we can go from here. in no way am i trying to minimize the conversation around servicing compensation reform or even some of the other ideas that michael talked about. when need that type of dialogue and fought and pushing forward. reform is a word that is probably with us here for the long term. i would suggest that to use a cliched phrase, we are at a bit of an inflection point. is are we going to accept the way things are today or do we think there can

be some change here? that is the inflection point. if you except costs will be extremely elevated in servicing, that it will be unpredictability and a lot of these servicing costs, it will be hard to reduce the incidence of default in the fha space. if you accept that will happen and we look at solutions that are more far reaching then talked about before, i am not there yet. i am not there yet where i am saying we have to accept that the way that is. i think if we get the industry opportunity to normalize the standard set of come out, we need organ -- understand some of the deals that michael and others have talked about and other crt work that is evolving. i'm not suggesting that reform doesn't need to happen, but it's important that we understand what is a condition of the industry? what are we trying to fix? faith: thank you so much.

one thing i think we should lose is about reform for fha and hide as well as gsc's, and not talk about reform without talking about the full housing market. his aheadart because we get to talk and hear from you on the questions you have from this esteemed panel. questions from the audience. in the back left corner? say who you are. todd wiggins. i appreciate your presentations. i want to ask about dodd frank and whether you feel it has been ineffective legislative initiative. not to make a political statement, 50 you feel it was worth the trouble overall -- but do you feel it was worth the trouble overall? mr. kakamanu: i appreciate you

asking that question. i'm in a reflexive mood as well. i think reforms were necessary, absolutely. i think that they were reforms necessary in terms of how the industry was making loans, in terms of how we were servicing loans. there was a lot we can do to get better. i think a lot of good things came out of dodd frank. industryogether as an along with many consumer advocates and others who care deeply about the housing market, we have been able to learnable -- learn about how to serve customers and think about their business in the with a repay loans. how do we standardize that across the industry. riehink the work that lau and her team of done have brought consistency. to a large extent i would say reforms were necessary. many things came out of the dodd frank which are very positive.

i think many things came out of the learnings of the financial crisis they didn't necessarily result in the dodd frank act of her positive. speaking from sitting in a company, cap wells fargo, i know we spent a tremendous amount of time stepping back and listening to our customers, understanding how they felt and what they were experiencing. that has changed just as much as regulations of changed as well. i think a lot of good things of happened in the last five or six years. ortel?sarah or tell -- >> thank you for being here. a couple of people mentioned it but i think it's worth mentioning again, the store you have told so compellingly must be played and the constraints on credit. if you have these evermore

expensive cost for nonperforming loans, the intent is to originate loans that might be at a higher risk to not perform, and are likely to become more and more powerful. i think the point you made at the end about volatility and the lack of availability to predict, i think we don't think about servicing businesses in the same ways as far as hedging risk and ensuring against loss in a way we do in the credit enhancement side -- credit risk side. particularly with a lack of predictive models of the cost of servicing. it almost certainly has to be an aspect of constraint of credit. i hope the panel will spend a moment talking about those consequences as we go forward in talking about different servicing models, evaluate them in those terms. we have seen an enormous the meta-tech innovations in part of the financial services sector.

particularly around had access new customers. far less investment has been spent in managing and service existing. customers maybe because you have been reactive, but the start of -- startups are not investing in the same way. i am wondering whether nonperforming servicing is the place where tech may be able to help us bring the cost down. ms. goodman: yes. i think servicing is a huge mistake in terms of access to credit. we have written about it, about the uncertain costs, they get especially problematic if you you cancument -- if document accosted the euro how to price it in. if you can't document the cost, the reaction is i will stay away

from it. i think that's an important contributor to the overlay that many of the lenders have on top and especially the fha credit box. they are more significant on the fha credit box at this point because of the fact servicing is basically such a pain in the ass. and the false claims act. that you are seven certain about conveying the fact that fha loans have a -- don't have one timeline for the process. they have one for each aspect of the process and if you violate any of the timelines, you have an uncertain penalty structure. that work still has to be cleared up and certainly interesting those things will make a difference in terms of that lenders are

sitting on top of the fha box. i can't emphasize enough how important that fha box is because for many of the more credit constrained customers, fha is their only alternative. those constraints for the overlays are meaningful. mr. kakamanu: i would offer to rejections -- two reactions. i agree on fha servicing. the m predicted ability can cost is extraordinarily high. i want to make knowledge that fha has been doing work in this space. they publish changes earlier this year specifically because of reservation and some other foreclosure timelines. a lot more really remains to be done. we can go into technicalities but i will briefly say it is

nearly impossible for servicers to accurately predict the costs when an fha servicing loan goes into default. it is a very difficult process. and what needs to happen there. this, but id to say will offer a comment about your tech and innovation peace. -- piece. i have been with wells fargo for 14 years. in 2004 i was working in the online channel. my job was to work in the origination's side. i felt it was an opportunity and online servicing for home loans. andved into that space built of the online banking platform for wells fargo at that time. prior to the financial crisis wells fargo invested tens of millions of dollars in an online platform, trying to build services for its vast servicing portfolio. that grew from under 100,000

customers over 5 million and five or six years. we made a tremendous investment before the financial crisis in building up a kind of infrastructure. ando make a commitment investment in infrastructure and wells fargo now, but there is less of an opportunity to make that in the customer's space. it is not visual. he see that and how we implement regulations and operationalizing other things or working on bankruptcy statements. we are spending a lot of money on those kind of things. i think it's remarkable that you have an industry where you have tens of millions of customers, all of phone you have an interest in them when they pay their mortgage, and there is not a greater interest in entering that space. i don't have an answer for it but i think it's a remarkable sort of thing. say that it fair to someone who went to the crisis with you, the legacy technology

really was a burden to the industry. back to your point, the lack of innovation weighed against compliance, certainty, lowering or minimizing risk, and no one skipped past that the have the workarounds in the system. that is my observation. mr. stegman: i appreciate the way you raise the fha point -- mr. demarco: that is really important. if you know what it is and you can work with it, that really has to be addressed. too nuanced a point, we have always priced for the risk of the borrower being a potential for higher cost servicing.

the discussion is focused on minimum servicing fees. that is not the whole story. determinenators can the kind of access io they want to factor in additional cost of higher risk loans. we have to be careful if you get three things and you can only have two of them, which ones do you want? be extendingo leveraged credit with volatile incomes or difficulty handling credit, there will be a real regime about dealing with it to reduce costs like this, then you have to allowed something in there for those costs to be accounted for and priced. perhaps rather than this sort of being the traditional tug-of-war on this issue we can try to be more thoughtful about extending

credit to low and moderate income housing. folks with a riskier borrower using mortgage products, financial counseling, and other support,assistance and it helps keep that borrower from becoming one of those orange loans. situation where you are more likely to succeed and less likely to be delinquent, that's another path the dealing with this issue. that requires -- that's a different conversation and one that is way overdue, including in the fha program. ms. maggiano: i can help by putting the pandemic going on vacation. [laughter]

>> normalization. ms. maggiano: when we talked about centech, the basic core processing systems used in this industry are really fabulous. they are ancient, but they really work. they do it they are supposed to do. they process the account for millions and millions of payments. where we have seen the disconnect is in the special servicing, the default servicing. they were never designed to do that. they are bit core processing systems. as we go out into supervisory work we see that servicers have tried to compensate throughout the entire crisis. goodness knows there were patches in patches and homemade programs and off-the-shelf programs. they just don't work very

effectively with each other. we also are surprised. part of it was that everyone was moving too fast. this ready, fire, aim. now we do have an opportunity in the industry for some interesting centech folks to come up. the space is available in default servicing, escrow servicing. those kinds of functions that are much higher touch with consumers. we really hope to see that. they published a special supervisory bulletin the long-ago will remain some observations that many of the noncompliant findings we found were directly attributable to systems that just don't work, systems that don't talk to each other, systems that don't communicate effectively with the core processing systems that just another capacity to do the

tasks they are being asked to do. great opportunity for some smart people to move into this space. we sure hope it happens. faith: we have time for a few more questions. i think raghu has address my question. laurie has written extensively on the millions of borrowers who a been additionally assisted and access provided that resembles the conditions before the housing crisis. looking at that and getting an what under more normalized conditions and less uncertainty, what would be the cost for performing a nonperforming loans? what would that look like? mr. kakamanu: it is a good question. i honest and candid answer is i don't know.

it is very difficult to be able to predict what that is. i have a suspicion if you normalize costs and companies in servicers can develop efficiencies and how to do things well, not only do costs go down but customer service goes up as well, which is also -- more important in many ways. i don't have a better answer for you. i wish i did. i have a suspicion. i think as we sort -- start a normalized we see two minutes of people, you start to see compliance with the operational excellence. that takes some time to really happen. faith: over here? >> hi.

my name is agatha. thank you all for your time and sharing to expertise. i had a question for michael stegman. in your first comment on what can happen after hamp, you mentioned you were in support of a national loss mitigation standard that would make sure that consumers and borrowers are on a level playing field. could you talk a little bit about what you mean? you say you are in favor of a more streamlined modification, income-based, or are you thinking about something more closely recently the mod? seestegman: i am waiting to the final report on the one mod. it does deal both with the

short-term interruption problems which may be a streamlined, but i'm thinking should we have a single application, regardless of who owns your homes. who owns the loan. be with some model orty and mpv discount rates and choices very because -- vary because non-depositories versus depositories have settled. aboutis some controversy whether they should be a standard. when i was doing low and moderate income affordable of precrisis,tion

there was early intervention on the part -- we talk about something called for dennis -- preventative servicing. early on in italy quincy -- in a delinquency there was contact between the servicer in the borrower. there was scripting with call centers trying to engage borrowers on the extent of the attachment to their house and their willingness to really try to make -- save their home. and the beginning of a conversation about a possible workout in those days it was called a workout. in the post crisis world it might not be possible to have that kind of conversation and

short-circuit the waterfall and beginningprocess of on the modification kind of things. we found that low and moderate income people whose payment records for more volatile, the delay quincy was not a good -- daily quincy -- was not a good predictor of foreclosure. an early contact was made. posthampd in the what, it is unclear services are allowed to do or should do that might have a whole lot better chance of connecting with borrower's early in the process and helping them out. we need more conversation about that. reach well be that we can

consensus. my view it has been there all to the a formal rulemaking. faith: a quick question for the panel. do you think the judicial and nonjudicial state foreclosure timeline way into that same conversation? as part of that conversation, i think in a deeper sense. one more. e, for thehu and lauri cost increase particularly on the nonperforming loan side, how much of that you think is in german by regulatory and let -- driven by regulatory and set of operational changes and inefficiencies as a number of non-performers increase?

ms. goodman: if anything you develop proxies. there is a regulatory asset of it, but there is also you trying to do more. you are required to do more for the borrowers. that was the case here years ago. that basically -- there are a couple of things driving the cost. clearly this is a last five years that is become incredibly regulated. not just regulated from the cfpb to consumer protection standards. the rules driv from an investor standpoint as well. this has changed incredibly over the last five or six years, particularly in the gse space --

degree this is going to be a part of the business. there will be a high cost business. the other thing we have learned as well is that, really learned powerfully in the last five or six years and this is where i will disagree with laurie's earlier point, when a customer has difficulty making a payment they need to talk to a person. they need help. this is not an automated process for them. this is not -- there are standard situations when a customer is having difficulty making the payment. the other think the servicing industry has done is investigating in my not just in the technology infrastructure, but the people infrastructure to make sure that is an actual person to work with a customer in default. i know that wells fargo, and i think it's true across the industry, we have a single point

of contact when a customer goes into default to work with him throughout the process. you see some normalization. there are business and legislative and investor decisions here as well that will likely result in elevated costs for the duration. faith: any closing comments from the panel? ms. maggiano: it is very much a labor-intensive process and you have to have real people. a couple of panelists have talked about the importance of counseling and getting borrowers to somebody can help them understand the options they are being offered. at the same time there are certain things. if theservicing transfer systems don't talk to each other and the documents don't transfer the information, those people who are performing loans will catch up. it's not a big deal.

the people of nonperforming loans really get lost. there are a lot of things that can be mecnized to determine and ensure you get the correct dates you are following the correct timelines from the regulations. but that will never, ever replace the single point of contact, talking to somebody, working through, helping them understand what their options are in helping them make the right decision for themselves and their family. faith: thank you. mr. stegman: i hope people really reflect on a comment. mr. kakamanu: i hope it doesn't get lost in this conversation, which is about the fact that deflecting commodification is one way to think about helping a customer. this is a much larger issue and question an opportunity for us. people can aspire to pay their loan. -- the counseling

and a lot of the other work ed talked about, there is the opportunity to change the dynamic. there are too many people who are not in homes today that should be in homes. i wanted to sort of knowledge ed's comment and hope we reflect on that. observation.one very -- aen a very a very government regulated environment in the last eight years. there is still value to market and market incentives of credit investors being able to help identify deficiencies, getting to the question, given the answer to the question about what are these costs. having a competitive market certainly can also be part of this future in creating a better force.

words?michael, any last mr. stegman: following up on the homebuyer education issue. world would crisis have got an enormous amount of valuable resources and the counselors and really uilds homeownership into the front end and bringing tens of thousands of pre-qualify low and moderate income borrowers to compete for. biggerthe part of the discussion. faith schwartz: congratulations to those who have done more work on that. thank you to this great panel. here.you all for being

thank you urban institute. thank you. [applause] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] [captions copyright national cable satellite corp. 2016]

c-span, portions of the techcrunch district new york event. activists from across the country to discuss the latest information technology. ,ere is a preview with bj novak star and writer for the tv show "the office." bj novak: many of you will pretend not to have heard of is , how it film star prepare for it worked it was interesting the combination of physical and emotional stuff.

could you write me a quick essay on what it was to distract? are you serious? if you were to list your thoughts, it comes out really easy. that is why we expected it to be a little more practical but it is personal. you are saying a lot about you. that is what comes out in the margins. >> portions of the annual techcurnch conference tonight at 8:00 eastern. >> "washington journal" line every day with policies that affect you. longingp, inglis who has access to the idea of global warming tells his fellow democrats when they

should join. how have them e.g. on things are playing out. join the discussion. host: each week in this segment of "washington journal," we spotlight a reason magazine piece. this week's story took up an entire magazine. it is scott anderson's 40,000 word piece on "the new york times" magazine, on the fracturing of the arab world. he joins us now from new york. mr. anderson, you write it is the story of an entire region, but you also write that you tried to telling human story, one that has its share of heroes, even some hours of hope but what follows, you say is ultimately a dark warning. what is the dark warning? guest: when you look at where the region has been and where it is in the near future, it is hard to have much optimism. whee the region has been and where it is in the near future, it is hard to have much optimism.

there are small glimmers of optimism for you can have in certain countries. but the overall future i think for the region is a pretty ominous one. : how did you try to tell the story echo a story that takes place well over a decade? guest: i have been reporting for 25 years now. i felt like, five years on from the arab spring, and what is happening in the region now, today in places like iraq and syria and libya, we are really at kind of a turning point in the region. i wanted to do this kind of comprehensive look at how we got here and where we might be headed next. times magazine, when they approached me about this idea of doing an entire issue, i realized quickly that no one is going to read a 40,000-word essay written by me on the region. so i decided to tell the history

of what has happened there, through the lives and experiences of a handful of people. so i and it up using six people from the region and showing what has happened through their lives. in some cases, starting backwards with the american invasion of iraq in 2003. other suspect -- other subjects that you meet during the rise of isis. i included a tapestry of the region through the experiences of these six people. host: if our viewers who have read the story have questions about it, republicans, it is 202-748-8001. democrats, 202-748-8000. independents, 202-748-8002.

host: talk about one or two of those human stories that you followed. one of the six people featured in this story. guest: i will start with an iraqi woman from a shia family, a traditional family from a provincial city south of baghdad. she had just graduated, a top graduate from college when the americans invaded in 2003. she got very swept up with is ideal that americans were coming in to create a democracy, that good forgoing to be human rights and women's rights. up working for the coalition provisional authority. rking on women's issues. when the americans and the cpa

withdrew and the american influence in iraq quickly, she was kind of stranded. she tried to continue to do these human rights and women's rights issues and ended up being death-threated by militias. she left iraq and got her family out, and she spent the next decade living in limbo in jordan. amazingly, i had known her for included years, and i her in this project. a few months ago she joined in the exodus to europe, joining in the trip from turkey to greece. she is living in austria. is one of theter last i introduced. , from aso an iraqi

sunni family from tikrit. laborer, a young guy, 21 years old. when i -- when isis came into tikrit, he joined isis. he spent a year fighting for isis, and in part of his basic training, it was to execute different prisoners of isis on different occasions, shooting people in the back of the head. he was captured recently, and i interviewed him, had two long interviews with him at a secret prison camp in kurdistan. his future is very bleak. i want to talk about some of the criticism that your story has received. hadd french is a writer who a recent column about your piece. he writes that the magazine largely underplays the historic and present influence of islam. mostrticular, of islam's

vicious jihadists strain. the picture "the times" paints is indeed terrible, but not terrible enough to show the whole truth. what do you make of that criticism? , even at 40,000 words, you cannot cover everything. talkeling is that by the of radical islamic jihad is him, i think in a lot of ways it is really overstated. about 20ewed over -- isis prisoners. isis soldiers who are now captured, either in iraq or kurdistan. the thing that struck me over and over again, these tended to be the foot soldiers. i am not saying there is not an intelligentsia. and the foreign fighters might be slightly different, but among the 90% who make up the grunts, the foot soldiers of isis, a

couple of things that typified them, none of them had been radicalized in mosques. most of them had never read the koran. they joined isis for the same reason that guys join inner-city gangs, because their buddies did. justhad no future, and in this powerless, impotent life that they had, it looks better to live large, as awful as that might be for a couple of years, then to continue in this existence. time and again, i discovered that these guys who joined isis, it was not at all for religious regions. it was about power, about the power that comes in picking up a gun and lording it over other people. read as american readers this story about the fracturing of the arab lands, in your

analysis, has american intervention made things better or worse? guest: absolutely worse. one of my main thesis points in --s is that i think you have the fracture in the middle east really started with the american invasion of iraq in 2003. it was not necessarily going into it going to be a wholly negative thing. way.t came out that it completely altered the political chessboard in the middle east. you can certainly argue that the chessboard needed to be disrupted. when you had was an incredibly fossilized clinical system. you had dictators who had been in power 30 or 40 years. in no place that i travel around the world had i seen such political stagnation as i always felt in the arab world. all that said, what the americans did by invading iraq was to open up these tribal and

sectarian fissures that existed just below the surface of things in iraq, and it had a knock on effect throughout the region. this is something that clearly americans had not thought through very clearly when they went in. host: scott anderson is our guest in the spotlight on magazines segment. we are talking about his piece in the new york times. a few of his nonfiction books, "the man who'd tried to save the world." questions andour comments as we go through his story in the last half-hour of today's program. barbara is up first in new york. she is an independent. good morning. you're on with scott anderson. caller: good morning. book called, in a "the facts change," he writes it is tacitly conceded that america's reasons for going to war in iraq were not necessarily

those advertised at the time. the current u.s. administration, a major strategic consideration was the need to destabilize and reconfigure the middle east in a thought to benefit israel. when you comment? guest: i completely agree with everything right up to the end, but i am not sure that it was to benefit israel. the united states was indeed the biggest beneficiarof change in the region for one thing the bush administration realized quickly was that if you bring democracy to the middle east, there is this whole overture done after the american invasion of iraq. about 2005, 2006. there was this democracy initiative. i think the notion was that if you create democracies in this part of the world, they are going to be pro-america.

in fact, in country after those that benefit from the true democratic election is people who are from hezbollah, people who are inevitable -- is next.rida francis is a democrat. good morning. good morning. i agree with hillary clinton about opening our borders to refugees. even if a few terrorists get in and kill 100 americans, we can save thousands of hungry refugees. i agree completely with her. have a good day. host: scott anderson, on the refugee debate. of the sixknow, two people i write about in this article have actually gone to europe. ,s i mentioned, the iraqi woman

and the young syrian man. know, one thing i will say, i cannot imagine we are going to allow many refugees into this country if we start to see acts of terrorism in their midst. but one thing i will say about refugees -- and this has been true through every wave of immigration in this country since time began -- invariably, it is the best and the brightest of the culture who have the and the initiative to believe. the iraqi woman is now in austria. in my epilogue to the piece, i say austria's gain is iraq's loss per you can multiply that a million times over, with a vast majority of the refugees leaving iraq, syria, and going to europe

, and in some cases coming here. these are people in my opinion who very much add to the vitality of whatever country they settle in. host: a big part of your story is what is happening around the arab spring. can you talk about your thoughts as that was happening, and your reflections on it since? those whoas one of initially was extremely optimistic when the arab spring started. -- when demonstrates the demonstrations started in tunisia, and they spread to egypt and were in libya. it goes back to what i was saying before about the political paralysis i had always felt in the arab world. and here for the first time, on a mass scale, the arab suite, as they call it, the masses of people were rising up and directing their anger to where it always belongs, which was to the desperate oligarchies -- to

spot oligarchies. the problem with the arab spring -- amid these totalitarian ,egimes like syria, like libya people had been so beaten down and so politically silent for so many years, there was no consensus that had been built of what would take their place when these dictators were overthrown. example, ie a small come from a rather politically oriented family. politics withking my father from a very early age. the people i profile in this magazine piece, i would ask them -- growing up, at the dinner did your father, what did your mother say about the regime? and again and again, they would say we never talked about it.

the syrian college student -- i was stunned -- he told me even what myhave no it idea father thinks of the bashar al-assad regime. we never talk about it. even in the intimacy of your immediate family, you never talked about it because you never knew who might inform on you. given that utter lack of discussion of what was to come afterwards, i think people were at a loss. when these dictators were toppled, what is going to take their place? jesse is on our line for democrats. good morning. good morning. i would agree with everything you are saying. i am old enough to remember world war ii. it seems like after world war ii

we just got in love with ourselves with wars. 2003, i do not know if you remember -- it seemed like we just have a love affair with war. it seems like it will never end. we are tired of these wars. from a diplomat's point of view, i do not think how we have gotten anything for it. host: scott anderson, on the benefits that america is receiving through all of this? guest: it is hard to see any benefit to it. the gentleman mentioned vietnam. the amazing thing about the war iraq being compared to vietnam even before the invasion of iraq occurred. the parallels are really rather

striking i think in both places, this is a recurrent thing in the american collective psyche, certainly be political psyche, that we see a desperate, a communist regime, it totalitarian regime like saddam overthrow that if we these people, they will hail us as liberators. people really do not like having their countries invaded and their homes bombed. so i think we seem to get caught out on this over and over again. the one thing i will say about the comparison between vietnam and iraq is that the tragedy of there was athat cost of 55,000 american lives and well over that with the enemy's lives it did not change the world equation.

this thing that lbj and neck some were obsessed with -- and nixon were possessed with, it had very little effect. the ultimate tragedy in iraq is that obviously it is far less in terms of american lives, but the long-lasting effect of iraq we will be living with, and our children will be living with for the next 40 or 50 years. host: the story again, "fractured land: how the world came apart." if you want to call in, republicans, it is 202-748-8001. democrats, 202-748-8000. independents 202-748-8002 .02-748-8002 caller: i believe they didn't think it through. i think: powell said if you break it, -- i think colin

powell said that if you break it, you bought it. i think it was a way to expand the military wartime profiteering. and i am very dismayed by the fact that we did that and pushed into it. thank you. it is a good show. thank you very much. host: scott anderson, your thoughts. guest: what i just mentioned, i this notion,as this collective notion in the you caninistration that capitalize on september 11 to kind of change this region that had been very stagnant for a very long bit of time. to the degree that oil played , that the american military presence played into it can be debated. the ultimate

tragedy of that is that part of the reason we -- part of the propaganda of going against saddam hussein was this idea that iraq becomes a haven for islamic terror. nothing could be further from the truth. but bashar al-assad and moammar gadhafi -- they are all despots and vicious rulers, but their primary target throughout their rule had been islamic fundamentalist. they also islamic fundamentalism as the primary danger. so there was this great irony, going into these countries -- certainly in iraq, and to a limited degree in libya -- that you sort of opened up the pandora's box, where islamic fundamentalists came into the void. in october of 2002, i interviewed the market of the -- muammar gaddafi, four or five

months before the invasion of iraq happened. i asked him if the american invasion went forward, who would benefit. and moammar can duffy, he -- moammar gadhafi, he had this aura of like a philosopher king. question,ed him that his answer was instantaneous. "oh some of bin laden, -- "oh osama bin laden, he will benefit. most prescienthe things that has ever been said about the american invasion in iraq. kay is in missouri, and independent. good morning. caller: thank you for taking my call. i believe we live in a fractured land ourselves in the united states. if you are familiar at all with

the daily life of being poor and elderly or poor and any age in a rural, small-town america, we need three things for the m people here to wake up -- for the young people here to wake up to a different life tomorrow. that is we need national public health care with special provision for the elderly so that families are not pulverized when their elderly need care. free, asducation to be was called for by you know who. and because these young people are not even having access to education. because they are in dead-end jobs. the reason they go into the military -- let's be honest --

for a good many of them, is that is the only way out of town. and, speaking of getting out of town, we have no mass public transportation system. to leave my own hometown, you have to go either 150 miles north or south to make a connection. you cannot go to any of the small towns around here, and even if you do not -- and if you do not have the money to pay personal driver or friends to take you there, you are a virtual prisoner of your town. host: scott anderson, any parallels you can draw between what she was calling for and sort of the conditions that set the stage for the story that unfolds in your piece? mean, just picking up in the poor of --

and rural areas, and not in therily rural, but inner city also -- often the only way out is through the military. i do not want to carry the parallel too far, but when you are talking about -- with the men i talked about who joined isis, it is a similar thing. it is the utter lack of an economic future. .t is a sense of powerlessness , myother thing about isis one character was scraping by living at home, picking up day laborer jobs in construction sites, and isis comes in and are offering $300, $400 a month to be recruited. you get a fancy uniform, you get to ride around in a gun -- with a gun in toyota land cruisers. the allure of the military -- not even the allure -- as the

only way out for a lot of people. but i do think there is a live every day with news and policy issues that affect you. inglis who has embraced the idea of global warming. how cute points together his republican colleagues. it is life beginning at 7:00 eastern thursday morning. it join the discussion. the c-span radio app makes it easy to follow the 2016 election. it is free to download.

>> in a couple of minutes, c-span's prime time programming gets under way tonight. techcrunchtion of the disrupt new york difference that took place in may. under way getting here as our prooim time lineup gets started on c-span in just a moments. first, some political headlines from the day. hill.one from the the headline, meet the new team trump. the article stating in part: polls, republican presidential nominee donald trump has entrusted his campaign to an executive with brightboard ews and g.o.p. poster who has trusted campaigns with newt