fha is not underwriting them themselves. will we have to end up bailing out the fha? could that happen? is that in our future? >> i think there is a stinct possibility. fha and what the stress test shows is that if there is economic downturn, tking about next month or even next year, any time in the next couple of years fha will be in a worlof hurt. that is the problem congress has to understand better and by withholding the informion from congress that is where it is a disservice to everyone cluding your listeners. gerri: i couldn't agree more. i want to show some interesting numbers my producer came up with. what we'r we are doing here is e comparing overtime year-to-year. who has the most bad loans on the books, wre our loans re denquent? it is not even fannie mae and dirty mac, it is the fha. why is that? >> fha continues to ke loans that are very, very risky. they will make lns to someone with a very low fico, minimal down payment, and that alone continues to have a likelihood of defaulting 15 or 20%. they make a lot of loans like that, and that is a problem. i h

that is also the largest amount that fha will end up hating in a claim. ,hat is were fha's liability that is the maximum they are allowed to pay. from that, we have what is ,alled a principal limit factor which is a percentage of that value that is available to the individual borrower, and that comes from a table that hud provides. what that table has on one side, it has every possible interest .ate, 5%, 5.2 five percent across the top, every age. the table gives us the percentage of value at the particular interest rate used to -- they may have their fees to the loan deducted. they could say i want to take it all or take six monthly payments or any combination thereof. >> is there a maximum amount that hud guarantees? >> the lesser of the actual value of the property or the fha national loan limit. if the home is worth $400,000, that's the value. >> $625,000 is the maximum. >> that is 150%. >> just a couple of final questions about taxes and insurance. why would it not make sense to include as in a typical mortgage payment, taxes and insurance that seniors do not find themselves at

the fha is not required to do this stress test.did not include the results in its public audit report. >> it really shows the exposure that taxpayers have to the fha's business over a trillion dollars in business, but secondly, as many times the case in washington, you end up having a coverup that then becomes the bigger story as the initial underlying story. >> oversight committee chairman issa wrote fha commissioner next week and said, quote, documents and communications clearly show that the fha was determined to avoid disclosing the stress test results. now he wanted to interview her and other top officials as part of the probe, and the fha did not respond to the request for comment. depp nighs? dennis: thank you very much, peter barnes. cheryl: well, we'll go back to the new york stock exchange in a moment, but the big board now, down, pushing session lows, 180 points, 14,000997. we got a lot going on with the markets. again, ism, services came out, april factory orderings but it was the adp report. people are not liking it, a

this underscores the need for measured and appropriate fha reform. the important historical role the fha has played for first-time home buyers and for others who haven't been able to reach, you know, the housing market in the past, but we need to have the fha on a sustainable, responsible path, and that's why we'll look at things like increasing the minimum requirement for down payments. >> right. >> bringing down the maximum loan amount. >> right. >> and get it on a sustainable path. >> my wife and i have never bought a property whether it's a condo, apartment or a home without putting 20% down, never, never, never. i've tried, and they have -- and i have good credit scores. meredith, i want to go to you on this because, look. i'm an optimist on housing. i like the numbers i see on sales and like the numbers they see on prices. there's good things going on but this fha thing, another government mistake. >> the biggest government mistake with respect to housing is the fact that there's not a clear housing policy out of washington, so there was -- we

as we know, fha is facing a challenge currently. it has indat that its mortgage credit authority will .e exhausted by early august as you know, the administration requested another $5 billion in authority from congress. these decisions, i think, lacks transparency. an undesirable thing, i think, in this environment. >> david, you are the ceo of one of the most potent housing trade associations, mortgage bank you -- mortgage banking association. >> yes, i am. [laughter] >> but david, i step act and look at it -- hmm, mortgage spreads have widened. what is not to like? sounds good to me. making money. >> this is the core subject. i think all of us look around the room and we have sat on panels at various events like this talking about this future state. that is paint the picture. gse's have served a critical role in refinances america. the harp program would never have been able to work had it not been for freddie and fannie, because it created a streamlined crash -- process to do refinances. we are almost at the end and we are at the

fha did 1,000,074, 237,000 loans. if you look out of that number, how many loans were made for african-americans of that 1,074,237? it was 9486540.4%. hispanics did somewhat better. 144,000 or 13.47%. if you think about that, you know, you are looking at the fha if you ask if the status quo is unsustainable, it is because of the 2012 -- some of you are better at this than i am. it looks more like america in the 1950s. not the american of 2013. many of these families will be in laser color, 70%. we are giving those same people less access to fha and a smaller access to fannie and freddie another similar issue. our young people facing prospects of slower income growth? many are burdened with a higher degree of student loan debts than in past generations. unless we are willing to take ownership with us, we will need a mortgage finance system that recognizes the importance of low down payment wonders those will be further exacerbated with regulators who suggest the so-called qualified conventional mortgage is one that req

the fha actuarial review says that without the loss protection provided by fha insurance lenders would need to increase interest rates or reduce the amount of equity borrowers can access in order to cover the financial risk proposed by reverse mortgages. what would be the impact on senior borrowers of the fha lost protection. >> yes, we did have a fledgling, but growing proprietary reverse mortgage market before the crash in property values a few years ago. there were some very good, attractive products that report to market. however, they self insured, so to speak, but doing a much more conservative loan to value. a lower loan to value works well with a higher value all, but if you apply a lower limit of value to the lower value homes that we do under the program, you're really not coming up to the net benefit to pay off the existing indebtedness that people typically have on their properties. therefore you are unable to service them. so the proprietary market really serves homeowners' with elms that have values approaching a million dollars increase. in some cases perhaps $800,000, b

as we know, fha is facing a challenge currently. it has indicated that its mortgage credit authority will be exhausted by early august. as you know, the administration has requested another $5 billion in authority from congress. so, some of these decisions, i think, like transparency. and that it simply is an undesirable thing, i think in this environment. >> so, david, you are the ceo of one of the most potent trade associations. >> i am. >> yes, i am. >> getting more potent every day. but david, i step back and look at it. your mortgage spreads have widened. private capital is backed by the government. was not to like? >> well, it sounds good to me. making money perry this, of course, i think all of us have all sat on panels of various events like this talking about the future is safe. well, let's paint the picture. the gst has served a critical role in refinancing. the program would never have been able to work and refinance all the united states had not been for freddie and fannie because it created a streamlined process to do r

through reforms to improve loan performance in the fha reverse loan mortgage program. one of the challenges in managing is the inability to move swiftly in making automatic changes that could enhance the security and financial performances of the insurance fund. under current law, changes to the program would have to go through the rulemaking process that could take up to two years to be implemented. it seems we do not have the time to wait for this process. in my view, we have to give them the authority to modify the program through the issuance of letters that could be implemented in a matter of months and not years. because the increasing cost to taxpayers has grown. congress must act now. to protect our seniors, i introduced for 69, allowing the fha to implement reforms given the authority of the mortgagee letter to reduce the amount of sustainableed to levels, perform assessments to determine if the loan is affordable, and establish tax and insurance set-asides through escrow accounts to prevent foreclosures. i firmly believe giving fha the authority to make these

the fha get will be at the bottom of the list. limited inventory come of your options for those people in need the fha loans. but i think credit is going to be a head wind in this recovery. so for people who are thinking about a new housing bubble, you have to look at is a lot of the price movement right now is people puku putting cash down has been in the game. we don't see the funny money. gerri: investors at the end of the day. i want to ask you one question about the bull case which i think is an interesting point. so while the problems is there's not enough supply. we talk about inventories of the time. you mean by that is there is not enough new housing being built. we need a ton more. is that going to help? >> we are of growing the housing stock in the country. we have bill very little new homes over the past five years. they have been depressed, competing against these foreclosures demand a lot of them to set up in building. now we have households. and people moving and of their parents' basement and you are seeing demand

>> the fha is our biggest ally. they understand what needs to be done. >> well, you don't want to write everybody's mortgage, right? >> no, no. so the only thing is, they understand that there is a room to retreat. the biggest thing, when you look at the overlap between the business they do and we do, historically, it used to be a narrow overlap, but got pretty large. and now we are reclaiming the ground we're in. we don't want to go all the way there, because there are some loans we did in the past, we don't want to touch. >> good. we don't want you to touch them either. that is s.a. ibrahim, ceo of radian group. now you see why i'm excited. the whole market is high. the whole market may be coming in, but think about stocks like radian when they do. "mad money" is back after the break. >>> coming up, through the fog? shares of cloud computing player salesforce.com, are taking a beating today, after announcing its multibillion dollar deal for digital marketer, exact target. but could this buy lead to brighter days?

that's not just talking about federally backed fha loans, folks. i know those can go less.hese are lenders who stop the 10% down loan years ago to only now bring them back. joining us now from wells fargo, economist anita caan. are we doomed to repeat the mistakes of the past? >> no, i think that this particular housing recovery is very different this we've seen previously. the 10% down payment is definitely opening the door to more would-be buyers. the problem in the downtown is the no doclander so as we're seeing balance sheets are better. >> you have to show more credit history and more documented numbers to get the 10% down payment, is it tighter than it used to be? >> if we look at the borrower where the lenders are extending credit, these borrowers have very high fico scores. if you look at where lenders are lending, fico scores have to be almost upwards of 780. anything below 620 is almost nonexistent, so we're seeing a different borrower. >> so you're saying with absolute conviction this time is different? >> with absolutely conviction. so far this time is different

. >> sí perdieron él fha tiene que esperar 3 años, pero ya no más son 3. >> la demanda de vivienda varo. >> sí traduce en rentas, y compra hoy con un pago de 1500 ese pago será igual en 30 años. >> los precios incrementan y será un nivel de construccion. >> agencia de servicios humanos piden ser ratificados que viven en san francisco por qué quedarían desprotegidas en albergues. >> la propuesta se aprueba, afecta familias. >> Él director de recursos humanos considera que no lso contribuyentes no tienen que pagar por familias que no son de san francisco. >> lanzan un plan para aumentar él interes en escuelas de verano. >> así inicio él plan de alfabetizacion, llegaron al capitolio buscando a legisladores para beneficiar a los niños. >> están matriculados por 7 meses y pierden habilidades para hacer matemáticas, durante esos 3 meses perdidos al final de cuenta por eso es muy sincero que damos recursos suficientes. >> la campaña "él verano importa" incrementa habilidades del niño para mostrar un avance intelecutal. >> se realizo una feria de alfabetizacion con bailes y lectura entre otro

would it be possible to specifically call out s fha j to receive they will receive the city report and we'll forward the cb mc pooling upon receipt. so the planning department of public health has many ways to look at this and i'll defer it to the gentleman to be able to do that. we have situations where we notify people's of sequa action because this that doesn't involve hundreds and hundreds of actions it should be okay to notify people of the changes it should not be a problem. >> if we specifically call those out -- >> i think probably the thing to do is allow people to let us know who wants to be notified. in terms of not to call out one or two groups we'd put out a call and a is if you're interested in being notified

first the fha pulling back, a lot of talk about fannie mae and freddie mac and whether the governmentto restrict them or phase them out. in the latter case, isn't that radian's gigantic opportunity? >> under certain scenarios there, has been this promo -- proposal on the news. and that's a great scenario for us. basically, what that means is that the government wants to guarantee a catastrophic level from an entity which will be a success to fannie and freddie, will play a utility type role and the government will guarantee catastrophic risk, leaving more room for private capital players like us, and very specifically, the mortgage insurance players will have more room to play in a larger market to play in. >> okay, now, if you took your book of business say next year at this time, how much of it would be -- let's just call it the bad stuff, and what percentage would be the good stuff. >> we are already down to 50/50. and at the rate at which we are writing, not only are we the largest mortgage insurance player in terms of market share today, but at these trends prevail in terms of ou

fha, fannie, they're getting tougher on the underwriting standards. no matter what you say. i've seen crazy, stupid things and we still have an appraisal crisis in this country. >> what were you going to say, chris? >> part of it is the investors have been concentrating on the low-priced homes. what does that do? that pushes up the prices. there are few of them under $100,000, it's a statistical artifact, in how you're collecting the data. and you're talking about the cash buyers. they're focusing on the kinds of things they can get rental yields on, and that's where you're seeing the people concentrate. there's some high net worth folks who don't need a loan, but a lot of them are focusing on the low-priced stuff. the prices -- some of the markets, they're up 20%, 30% in a year. >> it's interesting that they're cash buyers, in an environment when rates are rock-bottom levels, they're still uncertain about it, and, you know, they just want to put their cash somewhere -- >> well, the problem is, in some of the deals, you have 28 people bidding on one house the day it goes on

. >> the stress test is just another indicator that if fha were to come under stress, these scenarioshat they put out, very quickly go and incur large losses that would have to be paid for by the taxpayer. >> documents and communications clearly show that the fha was determined to avoid disclosing the stress test results. he wants to interview her and other top officials. the agency did not respond to our requests for comment. back to you. lori: okay. many thanks. melissa: the market spreading. phil flynn is on the pits of this cme. that inventory report was so bullish. >> i think it is because of where the drawdown came. a lot of it was in the gulf coast. i think that is why the market is somewhat calm right now. that is amazing considering the fact of if you look at the gulf of mexico, it looks like we have a tropical disturbance down there. there is a little bit of nervousness. part of it is the weakness in the stock market. we still have the highest level since the end of may ever. melissa: thinking so much. >> think you. lori: more problemm for toyota. toyota saying there is a br

the fed has lowered interest rates and on the housing side have fannie mae, freddie mac, fha, almost00% domination of the housing market through the government. what do we get? bubbles burst, bubbles burst. gerri: that is what i am worried about. i remember the last time we got into a housing bubbl i started looking athose little pieces of evidence something was awry and i found something about that in this market today. we look at the searches on the web for homes, everybody buys homes this way now. in places like palm springs, sacramento, california. we have web search is going on from 4:00 a.m. to 10:00 a.m. in astonishing nmbers. i find that to be a sign somehow the market might be ahead of itself. what do you think? >> everybody is saying the pshology bubble, the housing prices shooting up there i want to get on the bandwagon. i thought i saw this in 2004, and we are seeing inventory come back on the market, so i had to get into the housing market now. zero down payment if posble. we are repeating the same cycle. gerri: i agree. we will watch this very carefully and i am sure yo

folk who is have a freddie mac or fanny may or fha mortgage can qualify under the home afford able mortgagecation program, which is extended until 2015. but last year, there were changes to it. so if hua previous modification and defaulted, you are able to apply again. originally, it was only for owner-occupied homes, but now if you need help with a second home, you can apply again as well. so over 1 million people have benefitted to $550 savings a month. it's a significant opportunity now. >> jamie: that's tremendous. i am so glad the people who couldn't get it before can get involved now. for those who want to sell their homes, why are home prices rising? why is this the time to get the maximum price for your house? >> let's look at the folk who is have been sitting on sidelines and want to sell. the main reasons are they are underwater, meaning they owe the bank more than their home is worth or close to that, or they have paid a lot for their home at the peak and they want the home value to recover. they don't want to sell for less than they paid. number 1, now is probably the best time

when borrowers are facing tighter underwriting and higher fees for mortgage insurers including the fhaa little math for you so you can get the whole picture. you're buying a home today, let's take the median home price in may from the realtors of $208,000. put 20% down and get a $166,000 loan. back in early may when rates were at 3.5%, were you paying $745 a month, that's not included insurance and taxes. bump the rate up to 4.5%, and you're paying $841 a month, a 13% jump. this affects not just the amount of home you can buy but it also affects what you can qualify for. given today's strict to debt income limit. george says his refi volume is still cloeg but mortgage home buysers who would lower their payment. for buyers, most don't realize how fast things are rising. today the 30-year fixed is pricing 4.5% with no points. rates are rising just as some double digit price increases from a year ago and that's not helping. tyler? >> all right, diana, diana olick reporting fours. now to kayla tausche with a look at why banks are not passing on these higher -- let me just say they are not

. >> to take over the 95% of what fannie, freddie and fha do. >> so we're going to keep charging taxpayers not going to charge taxpayers, we're going to have, i like corker's idea -- >> i like corker's idea. >> we're going to come up with this little bit of fund. >> where does that come from? >> we don't have to. going to come and bond -- it's going to come through bond conduits. nobody's going to buy it directly, nobody's going to say let's put $50 billion together and open a mortgage company. you need a government backstop. it's going to have some kind of insurance fund that's going to make sense and that's the way we're going to go forward with this. >> we're seeing 10% jumbo loans come back. there's so many different loan programs. >> yeah. >> good. i'll send my clients to you. >> because the pmi companies are guaranteeing them, that's why. that's all that is. the pmi companies are saying, okay, we'll do it. >> so you don't have to have a government backed mortgage insurance. >> you guys can keep the conference going. >> good idea. >> that's all you had to mention. that got him going.

you also have to limit fha because otherwise the business will just shift over there.hen as that happens the private sector steps in. and if you have a market based on loans that perform, in a, you know, with very low default rates, historically we had very low default rates. we threw it all away in the 1990s in the at years in the name of affordable housing and putting people into homes they doesn't afford. tracy: makes so much sense. but the problem is it also taaes so much time and by thh time we get to a point where it could potentially be feasible, oh, what do you know, it is an election year and nobody wants to rock the year. to the point they politicize it, they put it into politics all around, don't they? >> absolutely. i was at an event yesterday, so-called bipartisan policy center put on and they had all of the usual people there talking about how you needed government guaranty and you had to provide access for as many people as possible, affordability. well, these terms, we've been through this process. this is exactly what they tried in 1992 ann it was a tr

hat hud guarantees >> the lesser of the actual value of the property or the fha limit.l loan 00,000,home is worth $4 that's the value. is the maximum. 150%.at is >> just a couple of final questions about taxes and insurance. to would it not make sense include as in a typical mortgage payment, taxes and insurance that seniors to not find themselves at the end of the day hit with his challenge? >> we are not collecting mortgage payments on a monthly basis. the reverse mortgage does not have a monthly payment feature. there would be a significant cost to putting that in place. it raises a number of other issues. >> the collection of it would have a cost. >> if they borrow does not pay their insurance, that is a default situation. the lender is required to advance the taxes on behalf of er and ask them to get in touch and create a payment plan. the lender is required to request permission to accelerate because that is a default. if we would move to weigh in borrow mrs. the march payment, where are we? what does that mean? june, they miss again. there is a lot of questions about how you handl

and in home prices, there's different home price metrics, but our fha home price measure that we use,we're expecting to grow at least 5, 6% over the next year or two each year. so the housing market, we believe, has finally caught up with the broader economic recovery, and the wealth effect created from rising home values will be a much more important boost to consumer confidence and spending going forward. turning to the consumer, the consumer will also be in a more important position to support the economic recovery. we do think there'll be a better support than there has been over the last couple of years and will be stronger over the next two years. indeed, we think real consumer spending growth which fourth quarter in 2012 was up only 1.8%, we think will rise to above a 2.5% growth rate in 2013 and 2014. it's a combination of several factors, why we see a stronger consumer. high stock prices are certainly helping, rising home values are another piece of the wealth story. we're also seeing declining gas and energy prices which is helping out lower income households also boost thei

we are going to continue to buy mortgage-n worth of backed securities from fannie and freddie and fha. he said they might start curtailing this a little bit. the reaction of the market was lethal and quick. the stock market plunged 400 points over two days. just a little friday, but it is still coming down. interest rates popped up words. it has gone up a lot. and in this morning's wall street journal -- 's ": and in this morning wall street journal," there is this article. guest: that is a good quote. the answer to that is that we don't know. we have never done this before. the fed is in uncharted waters. it is trying, but trying to generate gdp growth through cheap money is a theory and we are not seeing a lot of evidence for it. ?e are, what five or six years into this recession. they claim it went away in june of 2009, but, let's face it, it is still with us. unemployment recession is still there. an employment is still doggedly high. they cannot bring it down. itt: talk to us about what was initially that the fed was trying to do regarding this stimulus. what was it called? why d

president and ceo of the mortgage banker's association, he served as assistant secretary of housing and fha009. i thought people were doing this because rates were moving up, it was their lost chance, they're not? >> there was a little panic refinancing over the last couple weeks, overall, mortgage applications are down 28% from a year ago, driven mostly by refinance, purchase applications are up almost 7%, so, ye, i mean at some point, everybody has refinanced who can at 3.5 to 4sh, now we're a little over 4%, there is not a lot left refinanceable in the market. >> that shows you how sensitive even a slight backup in rates is and why so many people are paying so much attention to what the fed does. when we hear things leak this, that probably makes a fed hesitant to do anything too quickly. >> well, look, you just had a person talking about this on the previous clip. i think, you know, all bets are off when it comes to the fed. let be real at some point the fed has to stop convening. you can only buy your debt so long. mortgage mark, i keep telling people, quite frankly this rise in rates

the trouble is they're squeezed by tough underwriting and by higher fees from fha and fannie and freddie where those conforming loans that most of the first time home buyers use. a jumbo rate, 4.28% this week. a conforming, 4.14% according to bank rate. that is an amazingly close spread. carl? >> that's right. i'll pick it up, di ab na. thank you for that important space to watch. consumer sentiment is declining in june coming off a six-year high. we saw that number hit at 9:55 a.m. as we've been reporting this week, elite trainers are gaining early access to this data for a fee. eamon javers is all over this story joining us with the latest. anything today in particular that caught your attention? >> good morning. we did see some movement today and what we've been doing is analyzing it here in realtime with our computers at cnbc to see what the move was, but it did appear to me watching the spy live two seconds before we saw the consumer sentiment number there was a bit of a downward tick. we have seen some increased volume in trading right at that 9:54:58 time frame. remember, that's t

they receive the largest taxpayer bailout merely to wondered billion dollars and along with the fha to come government now controls more than 90% of the nation's mortgage finance market with no end in sight. one of the most important steps we can take ending the too big to fail institution is to remove the permanent tax payer backed government guarantee of fannie and freddie. for far too long, fannie and freddie have been aware at wall street and foreign banks go to off load their financial risk on main street taxpayers. this must stop and this senate well as part of our committee system of housing legislation to a sustainable for homeowners so they can have the opportunity to buy homes they can actually afford to keep the rate sustainable for taxpayers so they are never again forced to fund another washington bailout. sustainable for the nation's economy so that we avoid the boom and bust housing cycle that have heard so many in the past. regrettably, dodd-frank not only fails to end to big to fail in its intended taxpayer bailout, and actually codifies them into the law. title one, s

the only thing i would just add is it is even listening -- interesting looking at being fha family -- multifamily program. a lot of restraint -- constraints came from the high cost multifamily business that clog up the processes at fha. there has been de minimis focus on multifamily affordable apartment creation in this country, and with household formation reaching one million-plus annually, the question is, where will people live affordably on a go forward basis? i do not see a groundswell of work on that. i think there is an opportunity to create a groundswell of work on the subject. >> i think it is a great question and what we have been rappling with. it is hard to bring together a coalition of consumer organizations and get them all lit up over at the 30-year amortization of a g fee against -- right there, i lost 90% of my crowd. we made a specific effort to call out what i believe the key areas of consumer organizations and affordable housing advocates should focus on. looking at housing access and affordability. unless there is a voice outside of the mortgage industry -- no of