fhfa worked with the treasury and others to develop a series of programs, which used to our funds for loans. in all cases, fhfa has been guided by its responsibilities to limit actively for those that are safe and sound and are consistent with the goals of conservatorship. these programs have benefited the enterprises by mitigating risks and reducing both direct losses on loans were foreclosures are avoided and indirect losses on properties where housing markets are stabilized, reducing defaults on other loans. as shown in figure one, with these and other programs, including the federal reserve's large program for purchasing mortgage securities, the cost of mortgage borrowing declined absolutely and relative to yields on treasury securities. in figure two, financing and stability programs helped stabilize house prices almost immediately. by other measures, within a few months. in figure three, delinquencies continue to derive sharply in 2009 as the recession worse and. inventories of houses currently or potentially for sale are very high in portions of the country, so significant risk

fannie mae and freddie mac, looking at options like risks sharing or other legislative changes through fhfa photo of the sure fha is better prepared in the future to step then in this kind of role. >> would this be more likely others? >> i do think that if fha is the sole guarantor with va and usda plan a smaller role, but that they are the sole guarantor is particularly in the wake of a crisis, then there is certainly a risk that we take on a much larger footprint in the market then would happen under options two or three. that is something that we consider, and to work collaboratively with the committee to ensure that fha is prepared to take on a larger footprint in a crisis as we've done in this one. there are many issues. systems, around procurement, ensuring we have the ability to operate effectively and efficiency as we stepped up in a crisis, does the things that ought to be an essential part of what we're looking at as we consider reform to the gse's. >> senator shelby. >> secretary donovan, quoting your words, the administration is fully committed to exploring other measures to mak

fhfa worked with the treasury and others to develop a series of programs, which used to our funds for loans. in all cases, fhfa has been guided by its responsibilities to limit actively for those that are safe and sound and are consistent with the goals of conservatorship. these programs have benefited the enterprises by mitigating risks and reducing both direct losses on loans were foreclosures are avoided and indirect losses on properties where housing markets are stabilized, reducing defaults on other loa. as shown in figure one, with these and other programs, including the federal reserve's large program for purchasing mortgage securities, the cost of mortgage borrowing declined absolutely and relative to yiel on treasury securities. in figure two, financing and stability programs helped stabilize house prices almost immediately. by other measures, within a few months. in figure three, delinquencies continue to derive sharply in 2009 as the recession worse and. inventories of houses currently or potentially for sale are very high in portions of the country, so significant risks re

fannie mae and freddie mac, looking at options like risks sharing or other legislative changes through fhfa photo of the sure fha is better prepared in the future to step then in this kind of role. >> would this be more likely than one of the options than the others? >> i do think that if fha is the sole guarantor with va and usda plan a smaller role, but that they are the sole guarantor is particularly in the wake of a crisis, then there is certainly a risk that we take on a much larger footprint in the market then would happen under options two or three. that is something that we consider, and the work clabber delete with the committee to ensure that fha is prepared -- and to work collaborative leave with the committee to ensure that fha is prepared to take on a larger footprint in a crisis as we've done in this one. there are many issues. systems, around procurement, ensuring we have the ability to operate effectively and efficiency as we stepped up in a crisis, does the things that ought to be an essential part of what we're looking at as we consider reform to the gse's. >> senator shel

we'll look at any discussion with the fhfa so any proposal designed to keep them in existence for the long term, we will resist. any proposal that carries the risk of increasing the ultimate loss to the taxpayer, we will resist. i think you're right to highlight the the risks that we saw in a system where you had this combination of private equity holders able to benefit from guarantee. >> right. >> able to prevent effective regulation, and that's something we're not prepared to preserve for the future. >> i appreciate that. i will go to a second question i have, and that is as you look at the financial crisis we found ourselves in, you have recognized that there was excessive investment in the mortgage market which helped facilitate as i think you said speculation, 30% of the homes at one point where people speculated on homes, flipping homes. do you believe there was the perception by investors in addition to that that the housing market was too big to fail basically at the time? >> i don't know. i think government policies encourage distorted investment decisions, encouraged too mu

phipps, you testimony that frequent increases in fees from both fhfa and the gse's and credit overlays will unnecessarily increase the cost of home buyers and discourage consumers who can't otherwise afford a mortgage from participating in the housing market. in both cases, these were existing fees designed to protect the taxpayer. if these reasonable fee increases care -- deter a consumer from buying a house, does it not indicate that a person is better off renting a house, and do you support sounding -- challenging as to where early sound fees to prevent further bailouts? >> the short answer is that we believe got fha serves a specific purpose, and it has filled a void in the markets, a larger percentage than historical a. there have been several increases recently on fha. each time, the increases of the threshold becomes higher. there has to be a balance between cost and benefits, and we welcome that analysis. in the short answer, we think the stepping up of costs will really demand -- defect the level of demand. if you raise that too high, the people do not get on it, and we have f