&a, the comparisons between donald trump and andrew jackson. representsthink he the positive values that jackson represented. he certainly represents some of the negative values that jackson represented, but i think, i would tell president trump that if he wants to be like andrew jackson, he has to put the nation in front of his own personhood, in front of his own family, in front of his own interests because that is what jackson did for most of his presidency. >> sunday night at 8:00 eastern on c-span's q&a. >> at a senate hearing, the head of the housing agency urged congress to end the fannie mae and freddie mac. senators crushed with him about a program to help mortgage borrowers. the senate banking committee is

two hours. >> hank paulson explained the conservative should as a timeout. freddieannie and continued to dominate the mortgage market. approximately 70% of the mortgages are backed by the federal government. while fannie and freddie are earning profits and the housing market experiences a down turn and they could be on the hook for billions of dollars in the

status quo is not a viable option. the housing finance system depends on to government finances and it is unsustainable solution. andayers bear too much risk the government place to bigger role in the mortgage market. a number of groups have released proposals in recent months including the mba, milken institute, several co-authors for the urban institute and many others. the committee is considering all of these proposals as well as other ideas about what the future system should look like. meantime, they continue to serve as conservator and regulator of the enterprises. as regulator of the home loan banks. as conservator, they are obligated to conserve and preserve the access of fannie mae and freddie mac. they have undertinitiatives in ,

including some that began prior to the tenure. one significant undertaking is the creation of the platform. the platform was originally intended to function like a market utility independent from the enterprises that would be used to issue both agency securities and private label security. the platform has been developed specifically for security issues by fannie mae and freddie mac. one important question as we embark and how the finance reform is whether we should utilize the cst or consider other alternatives such as expanding the platform. element is thent increased transfer of better risk to the private sector. enterprises to continue to experiment with different forms of risk transfer them including both front end and back and structures to transporting credit risk into

the private sector is essential to project taxpayers and to build a more robust and sustainable market. increasing the amount of credit risk will be a critical component of housing finance reform. regardless of which direction the committee ultimately decides to take. i encourage the director to consider other policies and options to incentivize participation and a transfer to a new system. housing finance reform is the most significant peas of unfinished business following the financial crisis. it is important to build bipartisan support for a path forward to three years ago, seven republicans and six democrats on this committee voted in support of a comprehensive file -- housing bill. a key priority is to build on that bipartisan legacy and pass legislation that will create a sustainable housing finance system for future generations. i look forward to working with

you, director, and your staff throughout this process. senator brown. sen. brown: welcome back. nice to see you again. thank you for your public service. i appreciate the chairman's calling this hearing and establishing a bipartisan committee process by which we can consider the conservatorship of the mortgage companies. there have been several arguments claiming that housing finance reform is easy. some calling it an easy win for the trump administration. as the chairman then any of us andhe committee in 2013 2014, restructuring 1/5 of the economy is far from easy. that doesn't mean how we should avoid how to become a better government and intervention and financial market in the future. currently in agreement between treasury and federal housing financing requires the

government-sponsored enterprises to reduce their capital until the reserves reach zero in january 2018. the director was raising his concerns for a sometime. he was the first to warn about creditor lending prior to the housing crisis. unlike those warnings about predatory lending in which the administration largely ignored at the time, i am hopeful we can protect taxpayers from what is unavoidable situation created by an agreement entirely within the executive branch. some argue any adjustments in retained capital levels is equivalent to the supporting a return to the old structure of

the gse's. this is surely a strawman. there is no reason we cannot protect taxpayers and homeowners . it should be shared and a bipartisan goal. the committee should continue its work examining the gaps of the housing market with the housing crisis exposed. the original model of certain thatrs, exotic products puts borrowers at risk. private labels of securities that were not backed by gse's and lack to standardize sturm -- terms and a near complete breakdown in mortgage servicing and the ability of model line mortgage insurers to refill the commitments. they have made mistakes, chasing the market to purchase pls. providing lenders using price advantages to have games rather

than passing those benefits on to borrowers and or lenders that serve underserved communities. the mission is to provide stable liquid national mortgage markets, including in rural underserved communities. something which all want in honey housing finance system. the affordable housing goals for single families and multifamily housing along with the duty to serve rule was finalized in december they are key tools to totinue prioritizing acts safely reach underserved borrowers. only the changes congress makes will impact how expensive or affordable a 30 year fixed rate mortgage will be in the future and who has access to it. the decisions will impact how easily and quickly a growing family can sell their current home and buy a more expensive one. the decisions will impact which lenders have access to the system and whether a homebuyer

mortgage from the small community lender in her town. these decisions are not about back-office operations for faraway capital markets. it will have a substantial impact on households across the country whether their renters or homeowners. thank you for joining us and the committee seeks to understand the current status of the gse's and how we move forward without harming homeowners and buyers or putting taxpayers at greater risk. >> thank you, senator brown. we appreciate the service you have given and are continuing to give as we move forward to deal with the housing finance policy of our nation. i want to remind all of the senators as we go into the question to honor the five-minute rule with regard to the question period so that senators in line can get their opportunities. director, i would ask you to feel free to give your full statement and would you please

proceed at this time? watt: members of the committee, thank you for inviting me to testify. the hearing topic confirms you are well aware for conservative ships of fannie mae and freddie mac have been unprecedented, especially considering that these enterprises support over in mortgages. $5 trillion of additional importance is taxpayer backing under the preferred stock purchase agreement is limited to $118 billion for fannie mae and $141 billion for freddie. additional draws will reduce these further. i will focus on three points in my opening statement. my first point is fhfa has made numerous reforms to the enterprises during

conservatorship which are beneficial to the housing finance system and reduce risk. my written statement discusses these reforms and provides links to detailed reports. despite the reforms, i regularly hear that fannie mae and freddie mac are the same today as they were when they were placed into conservatorship. it's important that these assertions are recognized as assertions are recognized as false and to recognize the reforms already made are not disregarded. despite reforms already made fhfa is fully aware that housing reform will involve crucial decisions that go far beyond these reforms.

the second point i want to make unequivocally is that it is the role of congress, not fhfa to make the decision that chart the path out of conservatorship and to the future housing finance system. among the important decisions for congress are the following. how much backing if any should the federal government provide and in what form. what transition process should be followed to avoid disruption to the housing finance market, and who should implement that three, what role if any should the enterprise play in the reform housing finance system, and what statutory changes will be required to ensure they play

those roles effectively? four, what regulatory framework are needed in a reform system and who will have that responsibility? i reiterate, it is the role of congress to do housing reform and i encourage you to do so expeditiously. my final point is to identify and discuss the most significant challenge fhfa faces as congress moves ahead on reform. the challenges that a additional draws would reduce the taxpayer backing and the foreseeable risk that uncertainty could adversely impact housing finance market. are needed in a reform system and who will have that responsibility? unfortunately, this challenge is significantly greater today than it has been and it will continue to increase if not addressed.

when i first discussed this in 2016, each enterprise had $1.2 billion as a buffer to shield against having to make additional draws of taxpayer support in the event of an operating loss in any quarter. on january 1, the psp a buffer reduce the $600 million and on january 1, 2018 it will reduce to zero. neither enterprise will enter a quarterly loss without drying further taxpayer support. gap accounting for any number of noncredit factors in the ordinary course of business, regularly result in large fluctuations in enterprise gains or losses.

we also know lower corporate tax rates under tax reform would reduce the value of the enterprise tax asset and resortresult in short-term losses. the enterprises need some buffer to shield against short-term operating losses. in fact, it is especially irresponsible for the enterprise not to have a limited buffer because a loss in any quarter would result in an additional draw of taxpayer support and reduce treasuries fixed our commitment. as conservator, we reasonably foresee this could erode investor confidence and stifle liquidity in ways that could increase the cost of mortgage

credit to borrowers. as conservator we cannot risk these consequences and meet our statutory obligation to ensure that each enterprise fosters liquid, efficient, competitive and resilient national housing finance market. consequently, in our conservatorship role, fhfa take action as necessary to prevent additional draws of taxpayer support. neither this committee nor anyone else should view such action as interference with the prerogatives of congress, as efforts to influence the outcome of housing finance reform or as any step toward recap and release.we will take only such actions as necessary to avoid normal operating losses that would trigger a draw during

conservatorship. thank you again for the opportunity to testify, and as always, we stand ready to assist the committee in any way requested to do so. >> thank you very much, director watt. i appreciate that commitment. my first question, i would like to focus on credit capital. among the reforms listed, you discussed some of the efforts that the agency has undertaken to increase the participation of private capital in the market. since fha first started publishing a scorecard in 2012, an important component has been reducing taxpayer risk by a attracting investment in reducing the footprint. you have seen a significant increase in the risk transferred to the private sector which i applaud and i encourage you to continue to work to increase.

in addition to the risk transfer deals, what can fhfa and the enterprises do to attract more private capital to the market? mr. watt: the first thing we would do regularly is to not take loans that people cannot afford to pay. we have a defined credit box, and we try to encourage lenders to use the credit box, but we will not take alone outside that credit box. the second thing we have aggressively done is have the enterprises innovate in the risk the second thing we have transfer space, moving first to second loss positions or intermediary positions and moving to first loss position when it is financially feasible to do so.

i think the objective is to make the whole system as responsible and not move back to the kind of practices that were taking place prior to the crisis. >> thank you. achieving this objective will be one of the important things we seek to do as we work on legislation to resolve housing finance policy. has my final question in this round, i'd like to address capital at the enterprises. on january 1, 2018, the capital buffers at the enterprises will draw down to zero. that requires fannie mae and freddie to draw on their lines of treasury if they have a loss. this appears to me why conservatorship is not feasible.

the government is taking all the risk. while i understand you have concerns with the gse operating with zero capital buffers and occur.could you please respond. . want to work to address the issue, adding a small capital buffer does not change the need for a long-term solution to housing finance reform. unfortunately, suspending dividends will lead some to believe reform is not urgent and maintaining the status quo is sustainable. i would encourage you to work with the committee so that does not occur. could you please respond. mr. watt: first of all, let me say i agree with you, we will avoid a draw at all cost because we do believe there are risks associated with it. as conservator, our position is a little different than everyone else.

i liken to a situation when i went home and had a letter in my mailbox and it said my car was subject to recall because of the airbag. there were a number of people who said the risk of you driving the car is minimal. i absolutely agreed with them, but i was the responsible party, and my family was going to have to ride in that car, and so in to ride in that car, and so in this situation the cause that you have already given us a fannie mae and freddie, it's our responsibility to keep them safe and sound, to make them efficient while they are in conservatorship and it's your responsibility to change cause if you want to after that or whatever you decide to do. >> let me ask this question. you believe they have the

authority to withhold dividend payments? >> i do. authority to withhold dividend i also want to assure you that my first option would be to work with the secretary of treasury. these are contractual agreements. not legislative agreements. it's a contractual agreement between us and the secretary of treasury. modest changes to the pspa would be the first to most prudent way to address this issue, but if that fails, the responsibility falls back on me as the conservator of these enterprises and we cannot afford to run that risk. >> thank you.

my time has expired. i would like to ask if you and your staff can provide us with a legal analysis as to why you believe you have the authority without getting agreement from the secretary of treasury and dealing with the third amendment. senator brown. >> thank you, mr. chairman and director watt, thank you again. you talked about potential impending concerns on tax reform and short-term losses. the president's proposed tax reform plan that would cut the tax rate from 35 down to 15 of the finance committee and others would come to that, we don't know. moody's estimates that would cost fannie 15.6 billion and freddie 5.6 billion. since the stock purchase agreement and the limit of the retained capital and prohibits retained capital next year, talk to us about the impact it would

have on the gse and their financial ability and what it would do to impact access to mortgages in the broader housing market. you spoke about the general, but if you would dig down deeper with tax reform and where that goes. >> we are monitoring these discussions about tax reform because they would have, if they are adopted, and depending on what is adopted, would have impacts. it could range in our analysis from a low of like $5 billion up to $25 billion or $26 billion, and obviously the extent of those tax reforms -- and that's a short-term impact. this is not a commentary on the value of the reduction in the corporate tax rate.

we are talking about the short-term impact of that corporate tax rate cut on deferred tax assets which then has a short-term impact on the enterprise losses. one of the things we are regularly doing is talking to treasury monitoring what is happening in that tax cut space. if we wait until that happens, it may be too late or it's possible they could phase-in the tax cuts or it's possible something could be written in to protect the enterprises in conservatorship. all of those are possibilities,

but we have to be realistic about them and evaluate them so we are constantly making that kind of evaluation. the other regular kind of fluctuations that lead to quarterly losses, cap accounting principles and how you count hedging against risk. those are things that have nothing to do with whether you've extended good or bad credit. they are noncredit related factors but they balance the enterprises and losses around regularly. going to zero in a buffer could, in any quarter, put us in a situation where we could end up having to make a draw. >> thank you. let's switch to an ohio specific question, but one that could have impact moving forward in other places.

in ohio, investors used land contracts, known as contract for deed to generate income. they offer none of the protections of a mortgage because they're not a mortgage. they leave borrowers with properties that are uninhabitable. it happened in cincinnati and cleveland. you have the authority to be able to do something and my question is pretty simple. do you prohibit bidders from using deed and on single-family rental deals going forward. mr. watt: we will certainly look at that. we have changed the requirements a couple times but we never change them retroactively. we always change them prospectively because people who have bought these non-performing loans have bought them on a set of fixed assumptions and criteria that we have imposed on

them. it would have to be on a go forward basis. we are actively looking at that issue right now. >> thank you. senator corker. >> thank you, mr. watt for being here. congressman, what do we call you now. >> mel. >> that's what i've always called you but i didn't want to do so in front of people without your permission. thank you for coming and thank you for the job you're doing. i know we've had some conversations and it's your belief that the future of housing finance reform is totally congress' job to do and you are relying on this to make that happen. there is a left and right thing take and some in the middle folks that appear to be coming together and they may wish to take that up in the near future.

totally congress' job to do and from your perspective, that's our job to do and that's how we determine these entities and their future. mr. watt: i agree and i hope you heard me loud and clear, it's that role of congress we have made some changes to the enterprises and i don't want them disregarded because they are important. their future. i have outlined a number in my testimony. i didn't have a chance to do it in the short time i had and given an opening statement, but they are outlined specifically in my longer form written testimony, with links to the details about them. in a sense, you could think of that is gse reform and think of the committee's responsibility and congress responsibility as housing finance reform.

i don't want to get into semantics. >> we don't have any issues with the steps you're taking and we appreciate you informing us of those. we honestly had a recent conversation at the end of last quarter regarding the building up of capital within the entities, and the reason we did that is that was a pretty big change from where we've been. appreciate you informing us of the two entities have $258 billion worth of capital available to them. this whole notion of them running out of resources is a baseless issue. i don't know why that's being discussed because what it does is it changes the dynamic of what's been happening. it makes it appear there's a

different approach that's being taken by the administration. the administration is working with us and others to move ahead with reform. all of a sudden, a unilateral step by you when they've got $258 billion in capital available, i ran a pretty big company i started and our money went into overnight repose and we kept no cash. each day when we needed that we drew it out. in essence you have exactly the same type of thing available to fannie and freddie, $250 billion worth right now. to act as if drawing on this made available credit when the taxpayers already are 100% the backing of these entities, it just creates a different directions which sends a signal to the world that something different is occurring when it's not. i hope we've established they've got 258 billion available.

that's what it's for if you draw upon it. it doesn't affect the credit for anyone's perception of the anyone's perception of the securities that are being put out. mr. watt: senator, i tried to address that as forthright as i could in my opening statement. i have addressed it repeatedly, but i hope you heard the analogy i used. you all gave me these cars to drive for five years. he said keep them safe and sound. he said make them efficient. if there is a risk that a draw or a reduction in the commitment that backs these enterprises would interrupt the market, it is small. i acknowledge that. i'm not trying to overstate it. but, if it happens, and what we

say is reasonably foreseeable could happen, it won't be you they come to and talk to it about it, it will be the conservator because we are the responsible parties for this, during conservatorship. you are the responsible party for it going forward. >> why don't you go ahead and draw 10 billion on it and see. i'm telling you it will have no effect. >> i don't need to draw 10 billion on it. >> do it anyway. mr. watt: i would not do that and run that risk because it would expose me to the same risk that in trying to avoid. i just don't understand -- we've had this conversation before, but believe me i can't afford to take that risk any more than i could afford to drive a car that has a recall on it with an airbag with my family in it.

i tried to make that analogy for you. that is my responsibility and i have to live up to that responsibility. that's why you all approved me in this committee to do this job and that's why the senate confirmed me to do this job. i don't know what else i can say about that. i can't afford to assume that risk. you can afford to say it's theoretical. i can't afford to say i will assume it. >> well, it's one of the most baseless arguments i've ever heard. any company in america that had access to $258 billion line of credit from the u.s. government, backed by the u.s. government, i don't think would be concerned about market fluctuations. something has happened recently. i don't know what it is.

mr. watt: could get you into a discussion whether it's adequate or not adequate for a $5.6 trillion portfolio. i'm not saying this is a large risk, i am just saying i cannot afford to take it as conservator or because i have responsibility it. that is the point i am trying to make to you. >> thank you, mr. chairman. a number of things you talked about in your opening comments that you have been moving towards working with the private sector and you have. figure that would be appropriate of the portfolio should be put into private versus taxpayers? mr. watt: we have a goal of

90% ofring on at least the family that knew fit the criteria which is a substantial part of the portfolio. the goal would be to transfer as much of it as you can. >> do you think 90% is attainable? mr. watt: in normal times, actually we have exceeded that goal since we set the goal but the problem is if you require it and there is a downturn and investors walk away, and then you have made up -- have to adjust the price down so we are subsidizing the transfer and we don't want to do that. that is why i say we do it based on rational economic decisions.

so, i don't have any problem with the goal. the problem we have is when you write that and say you must do really -- it really is in a position into the market that is neither justify nor, in our opinion, reasonable to do that. >> so, i don't want to speak for everybody, i think folks want to see private capital take the risk off the taxpayers. so the question is, we want to make sure that you, or whoever in your position is as active as possible to give private equity into the entities. the question is, how should it be written so as not to tie your hands, but yet make sure you maintain aggressiveness.

mr. watt: i think it would be appropriate to set a goal and to give us flexibility based on the criteria that we talked about. we shared the goal of doing that, but you could easily get into a situation where you arege requiring us to make non-economic decisions if you say you must do it regardless of the economic circumstance. >> do you think it is possible to have a 30-year note without an explicit government guarantee? mr. watt: i think that is probably more into the housing finance reform area than it is for me to say, because i could just give you my personal opinion which is not worth much. >> it is worth a lot. mr. watt: i really try to keep from doing personal opinions. as opposed to expressing an opinion on her agency and we

have not developed an opinion on that. >> ok, i think your opinion does mean a lot, quite frankly. you are in the business a lot more than we are. we are depending on you in that >> you said it will be down to zero in 2018 which is coming up. by your opening statement today, you indicated that you do not think you need -- you do think you need a buffer. how much? >> it could very.

ar objective is not to make draw. we want to cover the normal fluctuations in operations. we want to monitor what is happening on tax reform because that could have a major impact, short-term on our situation. >> give us a ballpark figure on how much. >> it is hard for me to do that, senator -- orhas secretary minutia and anyone from the trump administration -- have you approached them or have they approached you about a buffer amount? we have had discussions with the secretary of treasury. did -- not a specific number. >> was he opposed to a buffer at all? senator scott.

>> thank you for holding this important meeting. thank you for coming out and sharing your thoughts and views. good to see you again and not on an airplane. you may know south carolina is a millionere about 1.4 people live in distressed communities which is one of the reasons i spent a lot of my time on my opportunity agenda. looking for ways to leave those communities and really experience their economic potential. much of climbing the economic ladder in this country, most of us even would suggest that living the american dream means owning your own home. reality of it is getting critically important to not think that

there are ways to help people get there that are logical and responsible. i know there has been a lot of conversation around the fact that today we are seeing the lowest first-time homebuyers since the 1970's. multiple years in a row we saw a decline in first-time homeowners. we know those living in distressed communities are those that are disproportionately representing those that are unable to climb out and experience home ownership for the first time. the difference between the net worth of americans can often be seen in the equity of the home. a renters net worth is somewhere $110,000 according to the consumer finance report. for those that own their home, it is near $200,000. at least 20 times more. the question is -- how do we help those folks that are paying their rent on time and utilities on time, use that data and -- in

evaluating their desire to own a home. according to the statistics, there are 26 million people who are credit invisible because the models that some use have not been updated to the latest model. i know -- i understand that you have been considering updating except.l that gse's can you tell us how much progress you have eight in that direction? and what are your thoughts in going from an antiquated system that leaves so many millions of americans without the credit processss to start the ?f buying a home senator, we have set as an objective to get through this process by the end of this year.

you that weell thought it was going to be a lot simpler than it has turned out to be. in -- and the primary reason for that is anytime you start talking about changing the credit scoring models, you set off a whole sequence of events that is very costly for people to change in changing back and forth between competing models is very difficult for the industry to do. we have spent a lot of time how -- whatgure out in goingere would be to a new model. we know new models will take

into account different considerations. andenterprises themselves, the automated underwriting to take somerying of those factors into account. because, unlike what most people assume, the enterprises do not always rely on credit scores to make these decisions. they are fact there's in making these decisions but they have independent evaluations to automated underwriting systems that can make these judgments. asking been aggressively them to do the innovation that is necessary but not be irresponsible because part of the reason that all, a lot of

people are having this problem is because their credit was so damaged by bad loans that they got involved in before, that they just have not been able to take out. it is a multifaceted problem. >> chairman has just helped me realize that even on the banking committee, five minutes is five minutes though i will try to stretch it a little bit. the fact of the matter is that if you are paying your rent and utilities on time, that is necessary information for making a credit decision. the primary, predominant way that someone purchases a home is their credit score. 76% of south korea lineaments can be scored -- south carolinians can be scored. if we go to the new model, a lower number can be scored. if you are not using the most

current model, it it is very dear late 19,000 south carolinians to be scored. thank you. >> senator cortez mastro. >> thank you. tt, the new senator from nevada could rate to have you here. servicing agenda. haveain concerned that we not yet gotten to the core of the problem driving servicing misconduct. in 2011, a white paper was released looking to overhaul the way that gse's were conducted for the legal settlements and gse rules have raised servicing standards. modifications are costly. stilles also still to -- have an incentive to extract

fees from homeowners and investors and homeowners are powerless to fire their servicer if they are not satisfied. do you still agree that we have to address house servicers are paid? and let me follow up with the going to do f h f a further work in this space? the answer to your first question is yes, i agree that something needs to be done in this space. it is a serious concern. we cannot do it alone. as the enterprises. because lenders have servicers and they are the bulk of the people who compensate services. so, if we try to do it alone, we just would not be able to get

there without their consultation. there is aow that legislative solution to it that we are working aggressively with getindustry to try to through this problem. be justg used to collect thing mortgage payments. -- just collecting mortgage payments. during the crisis, it became a much more difficult exercise and the compensation did not necessarily follow the complexity of it. so, the industry's have to -- the industries have to catch up to that. we are moving back to a more normalized time where it might not be as work in tents of as it was during the crisis.

-- might not be as work intensive as it was during the crisis. collection of the peoplehich is easy if pay it on time. it is just an accounting thing. >> i get it. the ground zero for the foreclosure crisis. i think we need to address that compensation structure for servicers and i am hoping you are committed to helping us with that. >> if you can find a legislative workion i would certainly aggressively with you to try to help. there is definitely movement needed in this area. >> that me ask one other question. -- let me ask one other question. community banks. some of the upfront deals have

benefited large banks that use a vertical integration model. the loananks originate and then they sell the risk off to the market. one concern is that if it is scaled up too much, you may choke off small lender access to the mortgage market. small lenders cannot compete because they do not have large-scale operas it -- operations. as congress contemplates the do wehase for gse reform, need to be mindful that credit risk sharing deal, particularly those involving upfront risk small,, do not box out community lenders. >> we definitely need to be worried about that and we are aggressively working to make sure the that does not happen. one of the things that we tried to do is make sure that large

and small lenders are treated alike. that should also be true in the credit risk transfer space. >> thank you. i will submit additional questions for your response as well. >> senator cotton. >> thank you, mr. chairman. mr. director, welcome. thank you for your service and for being here this morning. you and i recently discussed the issue of residential property assessed plane energy loans. commonly referred to as case -- pace loans. and how they affect the housing market. arkansas does not have these residential pace loans. these loans are unusual because they are liens and also because following thet disclosure requirements. as a result, these loans are

often high interest. they jump priority even though the loans come after the mortgage. they contain no federal disclosure or underwriting. examples of several severe consumer of used. i am aware of an 86-year-old dealing social security with severe dementia who was given a pace loan and she may now lose her home. to address this scandal, brad sherman and i have introduced legislation that would clarify that the truth in lending act applies to pace loans. i would like to discuss with you fanny and freddie's position on these loans. >> we have a policy against doing that. liensoblem is that these are put on after our loans are

already made and they jump ahead of fannie and freddie's lien position which have been our primary concern. taxthey also show up in the office and not in the land registry office. even after they are put on after we have made forth the loans that were superior to them, they jump ahead and we do not get notice of that so we can adjust for that. there are multiple problems. believe, would start to address some of those problems but our primary concern is that these so-called tax liens -- most people inc. of a tax is something that benefits a larger, wider group of people and not a single homeowner. runs counter to that

theory because it treats them as a superior tax lien which we have already taken into account. anytime you make a loan. you make then come back and put efficiency,ion for and it may be worth that or it may not, but we do not have any control over that. has really created a serious problem for the mortgage finance industry. it,rohibited -- we prohibit but there are limitations to how we can even find out about them. >> thank you bury much. my legislation -- thank you very much. my legislation would address those problems regarding vulnerable consumers.

what i hear you saying is that , youif the act passes would still have separate issues because one it is a super lame and number two, it is retroactive, and number three, it occurs in a different tax system. we address the consumer of use, you still have the problem of your financing system which could create broader problems of liquidity in the mortgage department. >> i will give you another little piece of information. reason, if rational you think about it, why a superior tax lien would be having an interest rate of 10%, 11%, or 12%, when a lean subordinate to it is going at 4% or 5%. that is the market rate.

there are preferences here that not something that is working in the marketplace. >> thank you very much for protecting the taxpayers from what is really a scandalous program. we are trying to protect consumers but there are real problems that the pace loan system presents. i have spoken to your counterparts including secretary carson about this program to see what we can do to rein in these abuses. >> welcome. a pleasure to serve with you in the house before. your service is exemplary. as the ranking democrat in this housing subcommittee, i want to take this opportunity on the question of housing finance systems to lay out a few

principles i think are important. one is to have a system that ensures broad affordability and access including for those homeowners in high-cost states like new jersey. canng mortgage servicing provide homeowners with sustainable modifications. the protection of taxpayer dollars. equitable access for lenders of all sizes so we do not overly concentrate the market in the larger institutions. clear obligations to serve low and moderate income borrowers. i look forward to working towards those goals with those that have similar views. of new jersey continues to struggle with underwater foreclosures. 2 2016, 85,000 new jersey residents lost their

homes to foreclosure. 3.2 million homes around the country still have underwater mortgages including more than 9% new jersey. 2014, freddie mac and later fannie mae would sell off loans in bulk in order to reduce risk to taxpayers and to help families stay in their homes. the enterprises have sold off more than 11,000 loans new jersey and have plans to do more. i was extremely pleased in march to see the new jersey capital when the bid community impact will of 158 loans in new jersey and the new york area. organizationsose with vested interests in the neighborhood, improvements can achieve outcomes that mutually benefit borrowers, distressed communities, and the enterprises themselves. what i want to know is what the enterprises can do to provide

greater access to loan sales for community oriented institutions who are better positioned to help borrowers stay in their homes. and i understand that fannie mae has prohibited the moving into direct sales of assets but it could offer pulls for nonprofit bidders. asen the proven track record the new jersey community capital, this could allow for --. i would like to hear what you can do better and i would like to encourage fhfa. work onve done a lot of this scenario. to be clear, one purpose was to get risk off the enterprises' books. more importantly, we wanted to get these loans in the hands of people who had more ability than

had,d, fannie and freddie because of our statutory limitations, to do the kind of innovative community preservation and stabilization work. we have always had as an object of trying to get these loans to people who are responsible which is why we have gone back and changed the criteria for bidders to write in certain requirements that they have to comply with. whether they are community-based or whether they are big purchasers. what we did is we reduced substantially the fines of the pool because the biggest impediment to nonprofits is just that nonprofits are generally nonprofits and they do not have money. to buy you need money these nonperforming loans off our books. obligated notrily

to give them away. we cannot do that. so, -- >> that is not what i am arguing for. >> reducing the size of the loan will was very critical. in fact, i think eight or nine of the community loan polls have been won by the organization in your state. i tell you what else we have done. we have met with local governments who were writing to us or state governments saying you should quit selling these loans to big wall street firms and our response to them is -- ok, if you would buy them, you have a vested interest in community stabilization, you are closer to the community. we can identify the loans in helpstate and you could

an nonprofits or you, as entity, as a state or local government, could get into this space. we are close to dealing with the state of new york because the bulk of these loans are in --rida, new jersey, new york five states. where the bulk of them are. we are trying to be as aggressive and innovative in this space as we can be. we share the objective of getting them and having these decisions about stabilizing to be unity's made as close to the neighborhood as the decisions can be made. >> we look forward to working with you and suggesting some other ideas to achieve that. it is not only about community stabilization.

it is also about the reality of communities of color to have a place to call home. >> we are going to work through the rollcall. sen. tillis. >> it is good to see you. you may not remember this, but the first congresswoman i ever i ever metressman was in 2004 and you were very gracious and attended at -- attentive to the discussions we had. >> i and still one of your constituents. >> i know you are. born in still creek -- steele creek. i think you were right in the position that you took in that we have got to come up with a solution. i have to believe that the work you have done, you mentioned in response to one of your questions, that you have

implemented reforms. that the best way to get to something bipartisan is to be very much construct did by the views -- very much construct ed by the views from the white house. do you agree with that? what would you envision as a good first step? we have seen proposals over the last few years. they have not moved forward. to get an idea of the good ideas, could you talk about that? > i have gotten a lot of fhfaicism because i took out of the finance discussion. it seemed to me that our role was to manage the enterprises and conservatorship in the here and the now. developed an

agency position on these things. but, i agree with you, if that, wesked us to do have a lot of experience. it is just not in our statutory mandate. if i have not wanted -- people get critical when i get out there and start advocating for certain principles in housing finance. i have not been asked to do that and it is not part of my statutory mandate. >> i admire you staying in the lanes. i appreciate that. but, in this case, you have expertise that i think would be helpful. rather than drilling down into the details, -- it, iyou ask me to do would try to be more aggressive in that space. >> i think it would be helpful

when we have discussions about going forward with gse reforms. those sorts of things would be very helpful to get your insights in the role that you have played in the past few years. we will need that help. i do have one question that recentrelates to the delay in pushing back the underlying system. it is being pushed back to 2019. some have expressed concern that there may not be a commitment to moving forward with that. but i think comic even in your written testimony, you said when and not if. intention, you are just working through technical difficulties. >> this is a major undertaking

to build that platform and we have learned a lot. we have tried to stay on a schedule. but no one should read that we are not committed to the csp. delay, do -- with the you feel the pushback is in achievable -- unachievable? -- au know, the industry lot of other stakeholders have to invest a lot of time in it for planning. that iso get an idea if a relatively sound date moving forward for planning purposes. >> i think it is sound. we have built some leeway into the timeline because we did not want to go for -- want to go back and extend again. we just added exmoor months.

six more months. i think we will be ready. ands critically important it is absolutely necessary to get to a single security which will save the taxpayers a lot of money. marketlp support the tba and increase liquidity in the market. there is no question about that. we are absolutely committed to that. >> thank you. we will be discussing how to you to au and get point where we are fully harvesting your expertise moving forward. it will be critically important to get a bipartisan solution that fulfills what i think is our obligation to move forward with reform. >> senator donnelly. senator donnelly: i want to say

watt dear friend, director , how pleased we are to have you here. we are grateful for your service. isst thing i want to ask you on the quarterly dividends to treasury, and i know you are going to put a buffer in. the flow willthat be positive for the foreseeable future as you look at the markets? : i expect it to but there are factors that i outlined in my opening statement that could adversely affect that especially when it is done on a quarterly basis. those fluctuations can be exaggerated. >> one of the areas from my state that is important is manufactured housing. i have encouraged your agency to finish the duty to serve rule

because i think it will increase affordable homeownership particularly in rural areas. the pilot program is a good start but i encourage you to expand those efforts. i am encouraged that the duty to serve as making progress. how do you see that rule impacting manufactured housing? watt: having a duty to approaching it in the way we are is the responsible way to do it. to do piloting in this area. it is an area that fannie and freddie have not been involved in, certainly not in the last 8-10 years. during conservatorship. so, it is a specialized market and we have to get involved in it in a responsible way and i believe, that if we do that, the

standards or the industry will -- andy be raised beyond twowe are just pushing the enterprises to look at ways to do this responsibly. wade in their and try to do the same that in the cattle space we do in the fixed housing space. there are different challenges and obstacles and there are different risks associated with it and we have to to responsibly assess those risks and be able to meet them and price them appropriately. >> when you look at affordable homeownership, which i know has always been one of your

cornerstones, various legislative proposals we have heard have been offered that would change the gse's from the current status. changeshat if the wrong are made it could endanger the american dream for middle-class families. do you share concerns around the 30 year fixed rate mortgage? that the changes could make that more difficult or could lead to higher interest rates and make it harder to borrow? director watt: i think the 30 year fixed your mortgage has become a standard for american homeowners. and it is important to retain that. or what is retained necessary to retain it is a subject that this committee and congress will have to address. is anhink that it expectation that american people

have because it has always been there. >> what are the changes to the current system that worry you the most in terms of maintaining affordability and flexibility that you have heard? planshink a lot of the that i have seen have some elements of trying to protect affordability. how it gets done is more in the housing finance reform based then it is in the conservatorship. >> i want to commend you for your leadership, ford you

for your steering us into a solid position. you have taken a terrific leadership position. i just want to say how grateful i am for your friendship as well. >> thank you, senator donnelly. director, you may have seen everyone disappearing. there is a vote going on. i do expect some senators to return. while we wait for them, i will take another turn. i want to return to the issue that senator corker discussed. as i understand, according to the preferred stock agreements, treasury has committed to buying senior preferred stock to ensure that freddie and fannie maintain a positive net worth. senator corker, i do not what to

speak for him. but as i understand his point, he is saying that the markets know that this agreement is in place and there is an option for the conservatorship that is available if there is a problem. i understand you to have concerns about -- what are your concerns about using that option to deal with the problem if there is an issue that arises? director watt: mr. chairman, and you say the markets "no" -- "know" --if you ask most people in the public, there is the opinion that there is an to thisd guarantee space. and that is not true. roadf you continue to a

the amount of the backing -- and erode thetinue to amount of the backing, it becomes more in parent -- a parent to investors -- more apparent to investors. i think it is important not to drawmore because if you more, it will reduce that explicit dollar amount of backing. whackalready out of because if you look at it, freddie is substantially smaller than fannie but freddie has more backing than fannie does. in -- in that context what is the solution?

is it to stop sweeping as much? would you recommend the treasury agreement for this we'd be adjusted to create a buffer? what is the appropriate way to protect against this problem? director watt: there are several options we can look at. they are not legislative options because the pspa is a contractual agreement. and i think the appropriate conversations about those options really need to take place between us and the secretary of treasury. the problem is that if the committee sends to the secretary of treasury the message that this is a no-no, to have those discussions, or to try to resolve this in a coordinated us -- it it leaves leaves it to us to have to unilaterally deal with it.

which is something i would preferred not to do. >> which gets back to the dividend question. director watt: but there are ways to address this with minor adjustments to the pspa. and that is not a move toward recap and release. it is not an invasion of the prerogatives of the committee. it is not an invitation to housing finance reform. waywe have to have that the -- that leeway to do it. and if we do not have it come it is a bilateral -- if we do not have it, it is a bilateral agreement. if the two parties will not dance, i will have to dance by myself which is not a pleasant position to be in and it may not be pretty.

but i have the ultimate risk here is the point i keep trying to make. analogy why i made the to my automobile and the collision. somebody has to assume that ultimate risk. right now, unless we can assume it together -- meanen you say "we" you you and the treasury. director watt: that is correct. >> any of the moves that you make, whether it is with treasury or a unilateral move, that those are not moves towards recap and release. director watt: i made one important point today. yes.

that point has been made. i also believe this conversation puts an exclamation point on one of the other points you have made which is that we need to move expeditiously to resolve this issue in congress with appropriate housing finance reform. this really highlights that concern. just want toid, i delve deeper and clarify. i am hearing you say that you feel -- tell me if i am understanding you -- that you actionat a draw or an under the current agreements to sell additional preferred stock to the treasury to keep the buffer in place should we end up at a problem, is a less preferable option or would be received less favorably in terms of its market impact than an adjustment to the agreements entered into mutually with you and the secretary -- and the

treasury secretary. stockms we have preferred purchase agreements in place. if accessing the terms of those agreements will create unease, would adjusting the agreements also create market unease? director watt: not to deal with a short-term loss situation. this is just about dealing with a short-term possibility of a loss. not think the market would react to that. know, from everything i have heard, senator, this reducing buffer was designed to put pressure on congress to do housing finance reform. billion three-year, $3

-- it just went down. if it gets 20, there is no 0, there if it gets to is no operating reserve we can draw on. it could be, and i should say that it would be, unsettling to the market. conservatory, afford to have that happen. because then, you start to adversely affect the pricing of mortgages, you run the risk of having the quiddity issues in the market. it may be far-fetched. and people can talk about it in the radical terms. -- theoretical terms. >> i tend to agree with senator

corker and perhaps the conversations we have had today can help allay that worry in the marketplace that your utilization of the terms of the existing agreements should not create any undue concern. that being said, i understand your point and i think it highlights that both you and the secretary of treasury need to work at this and we in congress need to work on getting a permanent solution in place. watt: you need to understand mr. chairman, that the terms from the existing agreement gives us authority to declare or not declare. that is not what i am lobbying to do. i think a better solution would be a joint solution. >> i would agree with that. that is what i was getting to with my earlier russians. thank you. senator eichmann. >> i am going back to the 30

year fixed-rate mortgage. >> do you believe a 30 year backstop is necessary? director watt: since i have taken this position, i have assiduously stuck to the notion that i should not be expressing why personal opinions as opposed to agency opinions. >> one of the greatest challenges we have in my state is housing, whether it is rural and affordable -- across the

board. i have done economic roundtables , development roundtables, number one, access to housing, affordable housing. cannot have rural development without housing. or economic element. we need a workforce to come to north dakota. i understand your sigh and i understand what it means. the next question, in the absence of a federal backstop, what options would a middle-class family have to get access to a home? thinkor watt: again, i this committee would have to define those options. and i want to go back and re-emphasize my position again. my responsibility as conservatory is to manage -- as to manage what

we have right now and stick to my knitting. when you get into defining what will be necessary in the future, housing finance reform and i think it is the responsibility of congress to do that. mean to sound like i am trying to avoid the questions you are asking. i just do not want to be criticized and once i left congress, i did not inc. it was my prerogative anymore to express personal opinions about how legislative things needed to be done. and especially, as long as i and the director of an agency which has not developed an agency position on that. >> when will you develop an agency position?

director what: we wouldn't to do you all asked us that because it is not in our statutory mandate now. in aybe we can get to this different way. i would ask you whether your agency has conduct did any analysis of what complete privatization would mean for access to mortgage credit and corresponding impact on middle-class families? director what: i do not think our agency has conducted formal research on that. andre aware of literature we have people in our agency that probably have great expertise. >> the point is your agency does have great expertise. no one in government knows what is happening in the mortgage market or in affordable housing and i include hud in this -- knows what you know.

we need permission and advice. we will have a choice on whether we are going to take that all important provision of the american dream which is homeownership and make it completely inaccessible for middle-class families. and that is a major initiative for us and a major concern. we do need to have some analysis, using the data you have on what works and what would not work. we can listen to the mortgage bankers. we can listen to the lending community who expressed great concern about complete privatization. i think we had a proposal here, it began as corker warner and then johnson. we have got to have your advice. you cannot play coy on this. i am not saying that as a preferred if. pejorative.

givetor watt: we regularly technical advice. any proposal that comes out, we will say -- look, if you do this , it will have this impact. .> i just asked you if we completely privatize, what will the impact be? director watt: if that is the proposal out there -- >> it is out there. director watt: i am not sure it is out there on this side of the capital. >> i am over my time. senator schatz. i apologize, i skipped over you. you got here earlier than some of the other senators. it is your turn now. >> director watt, i want to ask you about the role of fannie and freddie for providing affordable housing.

multifamily housing is often overlooked when we talk about housing finance reform. hfa has made an f effort to realign fannie and freddie to release with its core mission under the law. work onludes their financing multifamily housing. have you seen progress in motivating gse's to finance more affordable multifamily housing for low income housing --for low income families? director watt: yes. substantial amount of attention to the affordable space. yes, we have seen substantial progress in that area. and i think you will continue to see progress. i am glad you focused on this

because a lot of the questions sometimes assume that our fhfa andility as family unfriendly friendly is only in homeownership. it is actually in access of affordable housing. we are supposed to be agnostic really about whether it is home ownership or rental. obviously, because most people think the american dream involves homeownership, there is more emphasis on that. we are playing an act of role in the affordable rental space in the private sector is playing a very act of role -- a very active role in the rental space. we control the amount that fannie and freddie play in that space. >> there is a lot of talk on

this committee about the macro aspects of this. i want to drill down about what we can do to build more multifamily units, apartment building, rentals. that heidi and i have the same problem. though our states are different. this is a problem in every state, rural and urban and in every part of every state. the question is -- is there more you can do administratively to push in this direction and reorient your agency? is there any statutory impediment we may be able to work on as we do reform? tractor watt: i do not think we have statutory impediments. the one thing we have done to get more aggressive in this space, especially in rural is the duty to

serve role -- rule which obligates the enterprises to take aggressive steps to serve underserved areas. and a lot of the problems in this space, it in underserved rural areas, because fannie and freddie have not been backing manufactured housing, they do not do chattel lending. the duty to serve rule is forcing them to look at in a responsible way, how they might be able to do more with manufactured housing. is a major part of the housing stock, especially in rural areas.

if we do not do something in that space, we are missing an opportunity to support housing for people in rural areas. finally got the since 2008. role was made at putting a -- a role out there in 2010 and then it was put on the back burner. we have finally finalized the duty to serve rule and the first proposed plans for the gse's have come forward in the last two weeks, in fact. >> senator van hollen. >> thank you, mr. chairman. director watts, it is great to see you.

thank you for your service in congress and your good stewardship. i want to inc. you for exercising good and prudent judgment on behalf of the mission you have been entrusted with. we all know that families across the country were absolutely devastated by the financial meltdown. 5 million americans lost their homes. recovery has been an even. if you look at my state of maryland, baltimore city, prince george's county and some of our rural areas, they are still not really act -- fully back on their feet. they are facing neighborhood blight. and other problems. can you talk about the tools you have at your disposal to address these issues? and can you talk about the progress we may be making in baltimore city? started watt: we neighborhood stabilization in

detroit, chicago, and one other and then we expanded it substantially. one of the places we expanded it to was baltimore. we just went down the list of the most vulnerable neighborhoods. did not do this off the top of our heads. it was done very scientifically. what that does is it gives fannie and freddie more ofitude in how they dispose properties in vulnerable neighborhoods. it gives them an opportunity to work with nonprofits who are in the community. and in some cases, where it will cost them more to go through a foreclosure process than what the property is worth, it gives them an opportunity to .ontribute housing

it has to be a financial decision, obviously. making progress in all of the cities, and they are primarily cities because they were high concentration areas that got hit very hard in the crisis. >> thank you and i look forward to working with your team, especially in maryland. a question about the national housing trust. one of the things that the state of maryland and some of our counties have used effectively is the idea of housing trust. trusteffective, housing require a source of dedicated revenue. decisions withe their development partners and allow these projects to be capitalized in a timely manner. last year, we saw i believe the first installment of funds from

the national housing trust. can you talk about the importance of that fund? can you give us a sense hon. watt: it was suspended administratively, and i took a lot of heat for reinstating it, but it with a statutory mandate and i didn't see a reason not to follow the statute. since that has occurred, in millions of dollars have been contributed to the trust fund in 2016.

$455 million have been contributed based on 2016 earnings. it is always a year behind. we don't have control of the funds after they got over there. hud go parts to hug and -- and part two treasury. we did have the authority to to reverse theon .ecision that had been made we made it. hopefully, it has served. >> i want to thank you for making that decision. i appreciate your moving forward. i want you to know that maryland

is using its allocation of those funds effectively. thank you. >> senator warren. >> good to see you again, director watt. i am glad this committee is tackling housing finance of form again. -- reform again. we need to do so in a way that protects taxpayers and establishes an explicit and paid for government guaranty and provides more affordable housing options for people in massachusetts and across the country. access, theion of current mortgage rules define certain loans as qualified mortgages or qme, and offer lenders equal immunity for ones that meet the standards. it also grants status to any mortgages eligible for purchase

by fannie mae or freddie mac. it means that the underwriting -- at fannie any and freddie helped define the scope of the qme rule. accordingly, have a huge impact on the kinds of families that can get access to mortgage credit. this, the underwriting algorithms and criteria are kept secret. can you explain why it is reasonable to keep this information hidden, given it's important both to the economy and to appropriate oversight of the mortgage market? i don't know that i can explain that to you, but i can have our agency explain it to you as we understand it.

>> i would like to make a commitment public. hon. watt: i would not make a commitment public. that would be a part of what we -- >> as one of these entities are conservatorship and as long as their standards are setting the boundaries for our consumer federal protection issues, i think it is important they be public. we can't exercise oversight without them. let me ask another question about principal reduction. this the 2008 bank bailout, congress required fha to adopt a plan that seeks to maximize assistance for homeowners and minimize foreclosures. fhsa tos required consider principal reduction to achieve those goals.

fhsa did nothing and people lost their homes. when you were nominated to run the agency, you said you will tackle principle reduction. i asked you about it repeatedly. you didn't move an inch on this. finally, in april of 2016, you announced a principal reduction program. that is eight years and millions of foreclosures later. even then, you used eligibility criteria that was so demanding, that by your own calculations, only 33,000 borrowers in the entire nation would qualify for principal reduction. worse, you didn't actually require services to reduce the loan principal for those 33,000 eligible borrowers. you only require them to solicit borrowers eligible for a principal reduction modification

no later than october 15 of 2016. we are now nearly seven months past that deadline. i have looked at the quarterly foreclosure report. i can't find any information about how this program is working. know, how many of those 33,000 eligible borrowers as of today have actually gotten a principal reduction? hon. watt: i can't give you the exact number, but i can tell you it is a small number. 33,000 is a small number. i tried to explain why that is so -- the 33,000,ion of can you give me a ballpark? hon. watt: i will provide it, i just haven't at my fingertips. i don't think it is half. i think our projections indicated it will be more in the , would be5% to 20% who would likely be able to do

this. >> so after congress mandated a plan -- we did in 2008. it is written in the statue. hon. watt: there is also a countervailing provision that says we cannot do certain things that are not economically feasible. did to get to the 33,000 got to the people we could do with justice to both statutes. >> for years, people lost their fhsa would not enforce the part of the bill that says, give some relief to homeowners. study after study shows it was economically feasible to do that . instead, millions of people lost their homes. hon. watt: that is just not true. do his principal

reduction, but there are millions of people that we have provided belief for who some more in jeopardy. -- relief for whose homes were in jeopardy. modestcause we did a principal reduction program, it's just not true. >> you didn't do the principal reduction program. hon. watt: i have explained that to you multiple times in this committee. >> it is interesting. you did not start explaining it. he started out thing you would do it. i asked you in this hearing room over and over, at your confirmation hearing, and at follow-up oversight, and you did not say, we have already done something else. you said you would do principal reduction. hon. watt: if you go back and look at the record at my confirmation hearing or at any point in this hearing, in the hearing where we discussed this, that i made that commitment to you.

i said i would look at it. i would do it in accordance with the statute, and that is what i have done. >> now you are down to a few thousand people. after the crisis, the money just flew out the door to the banks. billions and billions of dollars. people, many of whom had been ripped off by those same banks, it was just one message of delay and we have to balance this other thing out, hand wringing about moral hazard excuses. hon. watt: i certainly hope you are not blaming me for that. i didn't create that situation. i tried to stop it when i was a member of the house by getting people to quit making loans to people who could not afford to repay them. i was the original author of the bill. i don't know -- i agree that although things have taken place, but to make it sound like

for some reason on your responsible for that, i think is unfair and untrue and unjust. the people who have preceded you share the blame. they did nothing. you have been driving this bus since 2013. by youriple reduction own numbers, at best, a few thousand people have gotten help. i think that it's shameful. >> we need to move on. i let this go on so the two of you could get it out. now it is up. it is a senator reid's turn. >> that you, mr. chairman. testimony, director, it is irresponsible for the enterprise not to have a limited --.

what i hear you saying is you want to prevent further taxpayer bailouts. is that accurate? hon. watt: additional drills could be misinterpreted, and we have to guard against that risk. yes. >> if you want to have a buffer in your organization so you can respond to a changing additions to the market -- hon. watt: that is correct. not even changing conditions, because we monitor closely changing conditions. these are noncredit related driving mossese sometimes that have nothing to do with whether we are responsible or not. they are visible -- basically

accounting the way you have to account for things and be timing of the accounting process. it is really not even about losses. it is more about accounting things. done, reform were depending on the extent of the corporate tax reduction, there would be a dramatic impact. we can calculate that. that would be one of the factors that we would be monitoring regularly to see what is happening in that space. is -- i don't want to make it sound like it is a likely thinkto happen, because i that could be misinterpreted,

but as conservator, we don't have the luxury of assuming that risk. you were here earlier when i used the example of when i got the notice that that airbags on my car needed to be replaced. everybody was telling me, that is not a problem. i was the responsible party in my family, and no id. the responsible party. i am driving these cars. until congress changes the cause i am driving, i have to drive these cars and i have to make them safe and guard against those kind of even remote risks that we have. >> thank you. of theas a discussion principal reduction, but there whichnumber of loans

fannie and freddie have sold the private sector and are subject to some type of either remediation or some efforts. could you tell us what you have done to improve the outcomes? principal reduction is one. are there other things you have done? hon. watt: i wish senator warren was still here to hear this. reasons we did not performing loan sales was that the private sector who buys these loans have substantially more flexibility than fannie and freddie have statutorily to do principal reduction. waterfall in the the nonperforming loan sales program. they are required to consider that as an option if it would improve the ability of borrowers

to perform on their loans and get those months reinstated -- those loans reinstated at some reduced interest rate or longer-term or reduced principal amount. all of those things in the nonperforming loan requirements that we have adopted. we could not do any more than we did as fannie and freddie, but we could transfer the loans to the private sector. they have substantially more flexibility, and that was one of the basis on which we did that. >> a final point, mr. director. all of us get feedback from borrowers that they haven't been helped. some metrics have about the different types of measures that have been taken.

a lot of it was in the purview of the banks of the holders of the notes, because they have more flexibility if you can give us a more complete picture, i think that would help us. if it is not principal reduction, it could be interest reduction. the ultimate number i think is how many people are still in their homes and can sing in their homes -- and can stay in their homes. metrics onwe do keep all of those things, because they are required to report, the buyers of these non-performing loans are required to report to us on the outcomes. -- thererequirements are requirements that they assume when they purchased the loans. the only way we can monitor compliance is to know what the actual performances. their results are substantially better than the results that we

would have gotten had we maintained those nonperforming loans on the books at fannie and freddie. >> that could be helpful. you might not keep this metric, but it you have -- if you have data that shows what happens when they foreclose. if there is an incentive to --eclose -- going hon. watt: we can provide that. >> thank you very much. director watt, that is the end of the questions. you have been here essentially two hours and given us your time and responded openly and honestly to these questions. did you want to say anything else? >> before we wrap it up, let me ,ust assayed to all senators there will be additional

questions in writing. one is one i have already asked. i again want to thank you. we are heavily interested in an engaged in this issue. we will continue to work with you as we move forward to develop the best housing policy began developed for this country. thank you, director watch. this meeting is adjourned. [crowd chatter] [captions copyright national cable satellite corp. 2017] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org]

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[crowd chatter] "> drawing "washington journal on monday as we visit the offices of the company to learn about the news organization startup and hear from their editors and reporters. joining us be the cofounder and ceo, jim. also a national political

reporter and republican leadership. allen, the cofounder and executive editor. watch "washington journal: spotlight" on c-span. in a world of ambiguity and temptation, you need a moral compass. you must develop principles that , notompromise for no one for a loved one, not for a job, and not for a chance at fame or wealth. >> and whether the individual acts and the legal, governmental, or private realm, one concerned dedicated person can -- what some consider to be an uncaring world. >> starting at the bottom is not communication. it is humility. an honest assessment of where you are in the learning curve. shelby your ego and put your head down. bulldog forward. >> the goal, excellence.

the agenda, plenty. environment, the pride in pluralism. >> just a few test commencement speeches. watch commencement speeches by politicians, business leaders, and white house officials on may andmay 27, memorial day, june 3 on c-span and c-span.org. the associated press is reporting tonight that the white house will be interviewing for possible candidates for fbi director, including andrew fisher, judge michael garcia, and senator john cornyn. attorney general jeff sessions will be among those interviewing the candidates. today, he announced a new policy directing federal prosecutors to seek stricter