10% of all mortgages it. so a very, very high rate of delinquencies. now, of course what we just looked at was the effects of the house price bust on the borrowers and homeowners and those are quite serious. anotherourse there's side to this which is the lenders, the people who made the loans. and obviously with something close to 10% of mortgages in delinquencies, banks and other holders of mortgage related securities suffered sizable losses and that proved to be an important trigger of the crisis. now, there's an interesting question here, in 1999, 2000, 2001, we had a big increase in stock prices, including but not only dot-com or tech bubble prices, and that -- those prices fell very sharply in 2000-2001, and a lot of paper wealth was destroyed by that. and in fact, the amount of paper wealth destroyed by the decline in dot-com and other stock prices was not radically different than the amount of wealth destroyed by the housing movement bust. and yet, as you know, the dot- com bust led only to a mild rece

so i want to talk about mortgage-backed securities. in the beginning of the book there's new research i did i show how the mortgage backed securities called participation certificates funded the housing boom of the 1920's and this is how he was able to sleep at night after the collapse. he knew that the money could come. but in these mortgage-backed securities are shunned by the market because they were toxic assets that couldn't be resold and lost all their value in those mortgages as the house's got foreclosed on so they were backed by the fed and ignored by the market in the 1930's only to be resurrected in the 1970's as a way to channel money into the inner cities with the noblest of intentions originally conceived under the johnson administration, but it was under nixon, actually under nixon's secretary someone named george romney, author of a certain presidential candidate said it was implemented and he rode on the occasion he said on the occasion in the 1970's of this very first mortgage-backed securities being issued this event

would it be mortgage servicers? student loans, credit cards? what would it be? >> it a little hard to determine trends yet because it's been a short time, and we have been receiving complaints in stages. but i think there is very little question that the pace of complaints has been fastest in the mortgage area. especially around foreclosures and around servicer practices and the frustration that people feel. in fact, my guess is that the pattern of complaints we're receiving mirrors the pattern of complaints each of your offices receive from your constituents, because i think most of these problems are pretty common nationally. we have also received a lot of complaints around credit cards. typically for smaller dollar issues. but still very frustrating to people. and we have begun receiving complaints about student loans. and we expect we'll have a significant volume of those. and others. . >> i'm glad that you volunteered that answer, the priority of area of concerns and complaints have been in the mortgage area. and i commend you. i think on january 20th of 20

people took mortgages they never should have and less thnders ma mortgages they should not have loaned. it was facilitated by incentives like mortgage interest deductiblity which is something that we do no have which encourage s people to take out bigger mortgages. and the regulatory oversight was not robust and financial innovation was not so quick, people could not keep pace with what was happening. so regulators fell behind. banks did not hold enough capit capital, so in fact, everyone was to blame. and part of the reason the interest rates were so low so long is because the global circulation of the reserves from china flowing into the treasury and when we think about the great moderation, it was falicy, all right? economics tell us, you go through business cycles, and during expansions, balances will build up and at some point a shock will hit you and it will cause an unwinding of the imbalances. as we had lower and stable interest rates and inflation, there w there was a great willingness to extend credit and a push for yield, meaning people going up the risk curve and ultimately

cordray, the state and federal mortgage servicing settlement unveiled in february set forth new mortgage servicing standards and addressed issues such as pre-foreclosure referral notices to borrowers, third-party provider oversight, loss mitigation requirements, single point of contact standards and other measures. however, the settlement only covers five of our major mortgage servicers, and the servicing standards will only be in place for the life of the settlement. that is three years. i don't know -- i know you have a lot on your plate, but does a cfpb have any plans to develop permanent servicing standards that cover the entire servicing industry? if so, will cfpb use the servicing standards in the state federal settlement as a template for whatever you develop? >> thank you, congresswoman, for the question. it's a very timely question. and the answer is we do have intention of developing servicing standards that would apply across the industry. one of the things we want is for all servicers to be put on a level playing field. as you noted, the servicing settlement was a partial ste

we're talking about mortgage issues, both servicer and brokers. a lot of areas that people have a lot of dissatisfaction with, and that we need to make sure that the laws are being respected, that they're being followed, that they're being enforced. so i do think that our emphasis is that enforcement is one of a number of tools, all of which are essential to doing our job well. and i think particularly given the fact that we're dealing with both banks and nonbanks and no federal oversight of nonbanks has previously existed, this is appropriate. but we will continue to calibrate that as we go. we're learning as we go every month, as you can imagine. >> based on the consumer testimony, the cfpb's overdraft protection and payday advance, it's apparent there exists in the marketplace a growing need for short-term needs. i think it's critical we identify and address the small number of lenders who operate illegally whether they're ensured depositories or nonbanks. my concern is overregulation by the cfpb of the vast majority of regulated banks and nonb

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>> mortgage servicing is an example. there were a lot of larger banks and also nonbanks engaged in mortgage servicing, meaning i have a mortgage, all right? i get a loan from someone. i buy that house. what happens in this marketplace, which has gotten more complicated in the last 20 years, is that the person or firm that's actually dealing with my morton an ongoing basis, taking the payments, making sure they are applied correctly, dealing with situations that may come up where i fall behind, working with me to make sure that mortgage is still working and i'm still making payments, that's the whole industry in itself now, mortgage servicing. those rights are often bought and sold in a secondary market. so i may get a loan from you. you are my original mortgage lendor. by the time i have a property down the road, three or four years down the road, the person dealing with me might be different. when i go to deal with someone, you come back and say, sorry, i'm not dealing with you, it is these others. many were contracting

the mortgage servicing is one example. -- >> mortgage servicing is one example. what happen in this marketplace, which has gotten a lot more complicated, is that the person -- the firm that is dealing with my mortgage on an ongoing basis, taking the payments and making sure they are applied correctly, dealing with situations that might come up if i fall behind, working with me to make sure i am making payments, that is a whole industry to itself out. mortgage service. those rights are often bought and sold in the secondary market. i may get a loan from you. by the time i have a problem compared it may be someone different. those can be bought and sold without my approval. many of them more contract with their parties to deal with some aspects of this. some of the bitter really lousy job. it is documented now. banking agencies, the gao -- everybody who has looked at this has shown this. the way in which some of the vendors really performed poorly matters a lot to consumers. it also matters to the institutions. many of them are flimsy capitalized. this looks good o

mortgage than your house is worth, you still may be able under this program if your mortgage is heldfy fannie or freddie you may be able to refinance at a lower interest rate which will reduce your payments. that program is underway anding. it doesn't necessarily work if your mortgage is being held by a bank because they're not part of this program, they may choose you might be out of luck if your mortgage is not held by fannie and ramsike that. the fed is not involved in them. our jo mortgage rate low and hope we can help homeowners. but programs like that, which allow people to get lower payments obviously are going to be helpful to those people because they'll face less financial stress and maybe a smaller chance that they'll end up being delinqnt mortgage. >> hi, i'm michael fineberg. thank you very much. you mentioned in y the dangers of deflags from the great depression and more recently in japan. one of the maintaining a target inflation rate above zero to to provide a cushion about the possibility of deflation. in the united states there's been a fear of deflation causing the f

fixed-rate mortgage. there were all different other kinds of mortgages being offered and offered to people with weaker credit. now, one feature that many of these mortgages had was that in order for them to be repaid, you had to have ongoing increases in house prices. so, for example, you might be a mortgage borrower who would buy an adjustable rate mortgage, an arm, where the initial interest rate was say, 1%, which means you could afford the payment for the first year or two. now after two years the mortgage might go up to 3%. after four years, 5%, and then higher and higher. so in order to avoid that you had to at some point refinance into a more standard mortgage and as long as house prices were going up, creating equity for homeowners, it was possible to do that refinance but once home prices stopped rising and by 2006 they were already declining quite sharply, borrowers were finding themselves rather than having building equity, they found themselves underwater. they couldn't refinance and they foun

get a mortgage these days. other categories like small businesses have found it difficult to get credit. the inability to start a small business or to get credit to expand a small business is one of the reasons why job creation has been relatively slow. >> another aspect of markets has to do with the european situation, which i haven't gotten into it. following with the financial crisis in europe, there's now a second stage whereby the solvency issues of a number of countr countries like greece and portugal and ireland can pay their creditors have le conditions in europe and those have affected the u.s. by creating risk aversion and by volatility in the financial marketsbe -- been a negative factor. it can't solve all the problems that there are. in particular what we're seeing in this recovery is a number of structural issues relating for example, to the housing market to the mortgage market so banks, to credit extension. and to the european situation and other kinds of policies, fiscal policies or housing pol

>> they can reduce mortgages. everybody is under water in their mortgage.heir mortgage down to the appraised value of the home. if you have a $250,000 home, but it's appraised at $100,000 it reduces it if you want to sell the house or do something different. you are not so much under water or owe money. >> we have a graphic. if you owe $200,000 on a home worth $150,000. >> it will go down almost $200, really, with the difference. the same $100,000 with the 4% interest rate. it's saving on the payment side and not being so far under water. >> how do you qualify? >> you have to be behind on the mortgage, owner occupied residence at the time you took it out. it has to be on or before january 1, 2009. you have to be current on your mortgage payment. and you have to be underwater. you have to owe more on the house than it's worth. >> there are plenty of those people. it's designed to help motivate those under water to keep paying, right? >> right. they don't want foreclosures on the market and people walking away. a lot of people are walking away. hopefully, it'

, our largest mortgage servicer.ess allows it servicers to hire their own auditors to investigate their practices in 2009 and 2010. i cannot understand why it would not include the cfpb in the process. we did not get a really good answer. given the new jurisdiction over servicers, what do you think? you have any desire to be involved in this process? >> we are taking complaint now on our website and in calls from people about mortgage issues. a few of those complaints deal with foreclosure situations and other surfacing issues. i think the congress is well served on any kind of significant initiative like this to exert oversight just as you exert oversight over our efforts and processes. the occ was the first of the federal agencies to step up and document the extensive abuses in the mortgage servicing sector. they issued a report on that that demonstrated the seriousness and realized it affected the safety and soundness of the institutions. that allow anybody to move forward toward the servicing settlement. we need

as a result of your reporting on a case of mortgage lending fraught related to f.h.a. loans tell us about yeah this was related to one of the most egregious scams as i mentioned there are people who had various ways or frauds and only getting these mortgages underwritten by f.h.a. and backed by the government and one of the most egregious scams was what is called seller funded down payment assistance and these operations are more than one of them would arrange to get the meager three percent down payment required by f.h.a. just so the borrower had some skin in the game but they'd figure out how to get around that by basically having the seller mark up the home typically has a home builder trying to move inventory have them mark up the price take the difference and donate it to a nonprofit set up by these operations and then use that money to cover the down payment so essentially you end up with an inflated home loan backed by the government homeowner who never brought anything to the table and this was probably recruited off the street and didn't know what the heck the

in the wake of the latest housing bubble and the you know mortgages. free for all and the housing market crash and i would i would certainly agree with that it's it's in big trouble and we're starting to see mainstream reports catching on to this and potential need for a bailout and there were two reports i believe just in the last six months alone one was from wharton and one was from george washington university and with these reports found is basically if you do any sort of legitimate fundamental analysis of what's in it if a cheese portfolio it is way worse then their official assumptions and projections of their own solvency to the tune of fifty fifty billion plus ok so f.h.a. it's part of the securitization financialization of the economy of the banking sector which is there amid biggest piece of a lot of me it's been going on for decades and it's about taking the mortgages and re offering them and so i still haven't deicing repackaging them and it becomes a bloated middle of the american global economy what supposedly is backed up by assets thes

lehman invested heavily in mortgage securities and commercial real estate during the 2000s. as house prices fell, lehman's position got worse and they were losing money in real estate. lehman was becoming insolvent. it was losing money in all of its investments. and it was coming under a lot of pressure. indeed as lehman's creditors lost confidence they with drew fug refused to roll over lehman's paper and other business partners said we're not going to do business you because we're afraid you won't be here next week. lehman was increasingly losing money and increasingly finding it unable to fund itself. they to find somebody put more capital into the firm. it was unable to do that. on september 15th it filed for bankruptcy. this was an enormous shock that affected the whole global financial system. now in particular, one of the many implications of the failure of lehman brothersas money market funds. there was one particular fairly large money market fund that held among its other a bys lehman. when lehman failed that commercial paper was either worthless or completely illl

right now more than eleven million americans are underwater on their home mortgages meaning they owe more money than their houses were there's an easy solution say somebody has a house with a two hundred thousand dollars mortgage on it but because of the bush crash that was only where the hundred fifty thousand dollars. if the book if a bank were to write down the mortgage to one hundred fifty thousand dollars and the homeowner could refinance if it is lower rates or sell the house both of which would massively stimulate the economy banks of course don't want to do this because they'd have to come up with the fifty thousand dollars to make a spread between the two but there's a mechanism already in place that takes that load off the banks and that's for fannie or freddie who backstop about eighty percent of us mortgages to take the hit themselves there's even a law that let them do it it would get the economy up and running immediately and overnight republicans in the senate are blocking it and they're succeeding because they had an inside man on the job meet ed demarco the acting di

sub-prime mortgages and these mortgages often required little or no down payment.hink nonprime instead of sub-prime. sub-prime with the lowest quality in terms of the credit of the borrowers but there were other mortgages that were below so-called prime mortgages and other types of mortgages that were also not up to the additional standards of credit underwriting so i say nonprime. what was happening again was that essentially lenders, mortgage lenders were moving further down the credit spectrum lending to more and more people whose credit was less stellar. you can see this in a number of different ways. on the left side of this picture is the percentage of mortgage origination's that new mortgages created that were nonprime. that is sub-prime or all-day or some other lower-quality mortgage and you can see a sharp increase particularly in the middle of 2,002,006 almost a third of all mortgages that were originated were nonprime. another indicator of the consideration of mortgage quality in the right figure is% of nonprime loans with no or low documentation. if you

10% of all mortgages it. so a very, very high rate of delinquencies. now, of course what we just looked at was the effects of the house price bust on the borrowers and homeowners and those are quite serious. but of course there's another side to this which is the lenders, the people who made the loans. and obviously with something close to 10% of mortgages in delinquencies, banks and other holders of mortgage related securities suffered sizable losses and that proved to be an important trigger of the crisis. now, there's an interesting question here, in 1999, 2000, 2001, we had a big increase in stock prices, including but not only dot-com or tech bubble prices, and that -- those prices fell very sharply in 2000-2001, and a lot of paper wealth was destroyed by that. and in fact, the amount of paper wealth destroyed by the decline in dot-com and other stock prices was not radically different than the amount of wealth destroyed by the housing movement bust. and yet, as you know, the dot-com bust led only to a m

, driving up cost and limiting access to mortgage credit. we've seen the rule implemented in the name of consumer protection that had the impact of limiting the impact to lower cost loans. some prevented borrowers from closing because legitimate discrepancy in the closing table. rules that are implemented in the consume procedure techs in the force of mortgage originators to offer loans where consumers pay more for their closing costs. we must protect the consumer and we must seek cost -- make sure that costs to increase in the name of consumer protections are not implemented. we must not restrict liquidity or consume procedure techs in the name of consumer protection. we must -- i hope you'll address the ways you make sure the access to credit and preserve consumer closing costs will not formulate these rules and they are done appropriately. >> mr. carney for one minute. >> thank you, mr. chairman. thank you for having this hearing and thank director cordray for coming in. it's good to see you. my colleagues on the other side of the aisle a

a lot of people that have fha mortgages, but most consumers don't have fha mortgages.ve it, they may have already refinanced. so it's definitely going to have a lot of fha mortgage holders. it's not going to help the 2 million to 3 million as expected but overall when you consider other plans, thing it's a step in the right direction. >> all right. thanks for coming by this morning. >>> here are four ways for homeowners to unlock the money in your house. if mortgage rates are at least two percentage points less than the rate you're paying, you need to refinance, even if you've done it recently. 15 years, 3.36%. next, appeal your property taxes. most people who do get money back. on average around $1,300 a year. that's according to value appeal.com. do your homework. call the assessor's firm first to understand the value for understanding your home's value. it's often only a fraction of the real value. doond sweat the small stuff. they add up. using a programmable thermostat will save you $180 a year, this is according to energystar. and don't overpay for your technolog

home seizures ahead according to those who track it that is why that's when a five billion dollars mortgage settlement between states and the banks may be to blame we'll tell you why and we'll look at what this means and things may be stressed in the wake of the goldman sachs' greg smith bed there's certainly evidence they're doing damage control some of them should more of us be stressed though about the results and more importantly the methods behind the actual bank stress tests we'll go in-depth with senior managing director of tangent capital partners christopher whalen and while we're on the greg smith fallout. troll gone wild here there's no question about that. maybe but with wall street shedding jobs and squeezing out less in compensation is there less to lose could a whistleblowing actually become the next growth industry on wall street with the prospect of multimillion dollar payout from regulators that you never know will talk about it let's get to today's capital account. so it's a later we are still seeing the fallout from the greg smith off that everyone is talking about goldm

homeowners let's pull out some quotes he said that americans preference for long term fixed rate mortgages means many are paying more than necessary for their homes he said also to if we could pull out the next line of that. despite rising debt levels of bankruptcy filings it appeared american household finances were generally sound and he said that low interest rates and surging home prices had given consumers flexibility to damage debt now act there are recommending all of that he went on in the next few years to raise interest rates and that continued for a few years and we saw how that all turned out with the subprime mortgage crisis so after he gave out advice as i said he began raising rates and then the rest is history now continuing on he was also opposed to regulating the then burgeoning derivatives industry along with larry summers back in the late ninety's look there they are in one thousand nine hundred nine the committee to save the world now time later put greenspan on a list of twenty five people to blame for the financial crisis and in congressional testimony greenspan reve

let's talk about the big mortgage deal. are we going to see more foreclosures now? >> i'm not a big fan of the mortgage deal. i think we have to let the housing market reset itself. in my view, it's too little too late. housing prices in america are back to about 2,000 levels. it took 25 years to get america going again and i think in america we have to get back on track and this isn't going to cut it. >> a lot of people have been screaming about the mortgage deals saying it was good for the banks, maybe not good for homeowners. >> certainly it depends on the homeowner. people who have a mortgage now held by fannie mae or freddie mac, they're not eligible for this. it's a very small group of homeowners who are eligible. and if you think about it, maybe someone used the phrase of a $25 billion drop in a $700 billion bucket, that's the overall value of under water mortgages, people who owe more than their home is worth. if the goal is to change the housing market, it doesn't do very much. >> thanks so much. richard, lizzy, nice to see both of you. thanks. >> thank you

you die, we'll pay off the mortgage, but that mortgage life insurance, if you're buying that to protectay off your mortgamor mortga mortgage, that money is going to the lender. suppose you've been paying that, only ten years left to go on this 30-year mortgage. that money is only going to pay off the whatever is left on that existing mortgage, and your spouse may have a better use for that large sum of money. maybe for educating a child. >> uh-huh. >> so you want to buy a decreasing term life insurance to cove the mortgage. it guess down in value, it goes down in premiums as your mortgage gets paid off. >> ten seconds left. flight insurance. why do we not want this? >> well, unless you're going to be on a plane with an out of control flight attendant, or a crazy man in the cockpit -- >> you never know. >> you never know, but the odds of you crack are really, really slim. >> this is not with your luggage and all that? >> no, no, no. >> got it. >> no. this is to protect you, should the plane fall out of the sky. >> got it. all right. dar ya doia dolan, we miss ken. best regards to him. >>

and then we looked at the electronic registry maintained by the mortgage industry that tracks loans.acked what was in the county record to see if there were conflicts. we found a significant number of complex there. 58%. -- conflicts there. we go into each of these in the report and talk about what we're looking at. we try to explain it in plain english, showing you the different exceptions within each of the subject areas. not only did we findq issues and 99% -- irregularities in 99% of loans. 84% appeared to be clear violations of law. but it was not that we found one issue in 99% of those loans. two-thirds of them had four or more issues. four of irregularities, violations of law, or more. more than 75% of the loans had violations within three or more subject areas. it is not that we found -- these loans did not have one thing wrong with them. they had many things wrong with themç across different subject areas, across different parts of the foreclosure process. that goes further to substantiate the conclusion we made, which is that the foreclosure process in the merit -- califor

greatan mortgage.most of these mortgages have the feature that they reduce monthly payments allow mortgage payments to rise over time. the other aspect was that there was very little underwriting, very little analysis, to make sure that the borrower was creditworthy to be able to make the payments. here are some advertisements that can illustrate some of the issues. i like the one on the right. we took the name of the company off. but so that the features they are offering. 1% low start rate. that is the start rate. stated in come to mean to tell us with your income is. we write it down. no documentation. that is evident. 100% finance, and no down payment. interest only loan. you pay the interest but no printable. debt consolidation. it meant that you could go to the mortgage company and say not only does want to borrow money to buy the house, but i want to add in all my credit debt and everything into one big mortgage payments. i will pay for that. you can see that there are some very problematic prac

there's a lot of issues right now with the tightness of mortgage standards where people can't get mortgage credit even bh they meet gse standards. so we have talked about clarifying the warranties as well. i think that could be a constructive step. servicing is an important issue. you know, you just referred to the beginning the servicing agreement. since early last year we put consent orders on all the major servicers to improve their practices and have principal points of contact for individual borrowers to provide more counseling and better controls and so on. there's a whole variety of things to be done and not all are congressional. so are our own responsibilities at regulators. some require congressional input. >> the vice chairman is now recognized for five minutes. >> thank you, mr. chairman. chairman bernanke, in your testimony you describe the recovery as modest relative to historic terms with note for the record that under this administration when you add in those that are underemployed, those who have left the labor force due to giving up the true unemployment rate is 15.4%. ha

assuming a $200,000 mortgage going from 4.4.5% in mortgage rate adds about $60 a month to one's paymentswhile $700 a year matters, not sure if that's a dell breaker. something else to remember. this market is not as dependent on mortgage rates as it once was. 31% of all sales were cash. which means even noninvestors are turning to cash. don't forget 35% of the market is distressed sales. that is foreclosures or short sales which are on the very low end of the market. again, a majority bought with cash. the question is going forward, what will the impact be? well, you know, there are a lot of other things weighing on mortgage rates. that is a lot of the government implications and qualified residential mortgage standards that are coming up later. they will weigh on the rates. but some actually believe a little rise in rates gets some potential home buyers off the fence because they're worried they might miss out on those low rates, might want to buy now. little hopium, maybe. a little more on the blog. >> there is always a silver lying, diana. >>> we know home building stocks like d.r. ho

what developed quite a while ago, beforeç security, mortgag- backed securities, fannie mae, freddie is a peer the antiquated system that has not kept up with the changes in the industry. i think what this report shows is that the system is completely broken, for us, as county recorder, the mortgage industry, the system is broken for consumers. we have plenty of laws on the books but they are clearly not being followed. equitas reviewed this together with us. each of those records show at least one clear violation of the law. çanother percentage applied to suspicious activities. that is like backdating documents. not a violation of law, but odd when you submit documents that are backdated two yearsok prior, submitted on behalf of the agencies that no longer exist. almost every single document we reviewed of the 2405 foreclosuresç between january 2009 and november 2012 showed that. a sample of 382 documents between -- of that total -- 2405 foreclosure sales. the main challenge we face is we want to ensure, asñr reporters, that we have a clear and transparent title process. i think w