[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
IMPLEMENTATION OF HIGHER FHA LOAN FEES
AND PENDING LEGISLATIVE PROPOSALS TO
STRENGTHEN THE FHA MMIF FUND AND
IMPROVE LENDER OVERSIGHT
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 22, 2010
__________
Printed for the use of the Committee on Financial Services
Serial No. 111-156
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62-681 WASHINGTON : 2010
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HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama
MAXINE WATERS, California MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina RON PAUL, Texas
GARY L. ACKERMAN, New York DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California WALTER B. JONES, Jr., North
GREGORY W. MEEKS, New York Carolina
DENNIS MOORE, Kansas JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts GARY G. MILLER, California
RUBEN HINOJOSA, Texas SHELLEY MOORE CAPITO, West
WM. LACY CLAY, Missouri Virginia
CAROLYN McCARTHY, New York JEB HENSARLING, Texas
JOE BACA, California SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia RANDY NEUGEBAUER, Texas
AL GREEN, Texas TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois JOHN CAMPBELL, California
GWEN MOORE, Wisconsin ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota KENNY MARCHANT, Texas
RON KLEIN, Florida THADDEUS G. McCOTTER, Michigan
CHARLES A. WILSON, Ohio KEVIN McCARTHY, California
ED PERLMUTTER, Colorado BILL POSEY, Florida
JOE DONNELLY, Indiana LYNN JENKINS, Kansas
BILL FOSTER, Illinois CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana ERIK PAULSEN, Minnesota
JACKIE SPEIER, California LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York
Jeanne M. Roslanowick, Staff Director and Chief Counsel
C O N T E N T S
----------
Page
Hearing held on:
September 22, 2010........................................... 1
Appendix:
September 22, 2010........................................... 31
WITNESSES
Wednesday, September 22, 2010
Stevens, Hon. David H., Assistant Secretary for Housing/FHA
Commissioner U.S. Department of Housing and Urban Development.. 6
APPENDIX
Prepared statements:
Towns, Hon. Edolphus......................................... 32
Stevens, Hon. David H........................................ 36
Additional Material Submitted for the Record
Stevens, Hon. David H.:
Written responses to questions submitted by Representative
Miller..................................................... 44
IMPLEMENTATION OF HIGHER FHA LOAN
FEES AND PENDING LEGISLATIVE
PROPOSALS TO STRENGTHEN THE
FHA MMIF FUND AND IMPROVE
LENDER OVERSIGHT
----------
Wednesday, September 22, 2010
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 10 a.m., in room
2128, Rayburn House Office Building, Hon. Barney Frank
[chairman of the committee] presiding.
Members present: Representatives Frank, Waters, Sherman,
Moore of Kansas, Scott, Green, Klein, Carson, Adler; Bachus,
Royce, Capito, Hensarling, Garrett, Posey, Paulsen, and Lance.
The Chairman. The hearing will come to order. I want to
apologize to the absent members. We originally scheduled this
hearing at the request of the gentlewoman from West Virginia,
Mrs. Capito, when the House acted, and the Senate followed our
lead and accommodated some requests from the Administration to
give them some of the tools. And I am pleased that those things
have happened. There is a better and broader set of provisions
still over there.
The gentlewoman from West Virginia at the time asked quite
appropriately for there to be a hearing. Obviously, when we set
the hearing, we did not--we thought it was going to be on a day
when there had been votes the night before. So I apologize for
the fact that we are scheduling this at a time when there
aren't a lot of members around.
I said, I apologize to the members. I was going to
apologize to Mr. Stevens, but let's be honest, very few
witnesses testifying miss members. I was once out in Hollywood
at a tour they give you at the studios, and they were making
some movie with panthers. I think Nastassja Kinski was in it.
And when we got to this one place, they apologized to me
because the panthers were at lunch. And I said, you never have
to apologize to me for the absence of panthers. I have never
missed them. And I suspect that may be somewhat the way the
witness feels.
But it is an important subject.
Mr. Bachus. Some of the panthers are filing in.
The Chairman. Okay. We will proceed with this.
Let me just say--and I am not going to take a lot of time--
that I have found the Commissioner to be responsive and
effective. The FHA plays a very important role. I think we all
agree, including the Commissioner, and I know Secretary
Donovan, that it is playing a bigger role now than we would
like it to be. The percentage that the FHA has right now is not
what it ought to be for the longer term. It is good that it is
there for now.
Examining how housing finance should be structured, what
happens after the demise of the GSEs, what is the role of the
FHA and the home loan banks and the private entities that will
deal with this are the number one set of topics for this
committee. We will be dealing with the question of what does
the world look like after the GSEs next week. But the FHA's
role is a part of it. So this is a very important hearing from
that standpoint, and I welcome the Commissioner.
The gentleman from Alabama is now recognized for how long?
Mr. Bachus. Does anyone else wish to speak on our side? And
how much time do we have?
The Chairman. Ten minutes.
Mr. Bachus. Ten minutes. I will take 3 minutes.
The Chairman. The gentleman from Alabama is recognized for
3 minutes. Well, just talk as long as you want.
Mr. Bachus. Thank you, Chairman Frank, and thank, you
Commissioner Stevens, for appearing before us this morning to
provide us an update on the fiscal and management performance
of the FHA.
I also want to thank Mrs. Capito for her leadership on FHA
issues and for requesting this hearing.
The release of last year's annual independent audit of the
FHA Insurance Fund and continued weakness in the housing market
have sparked a lot of anxiety on Capitol Hill and in the
financial markets as to whether the FHA program is viable, and
whether it can meet the many management and market challenges
that lie ahead. Last November's annual independent audit
indicated that the FHA fund had dropped to less than--to a
less-than-expected .53 percent capital ratio substantially
below the statutory 2 percent requirement.
The report also stated that the economic value of the fund
declined over 75 percent from the previous year to
approximately $2.73 billion. A new audit of the fund is
expected in less than 2 months, and given the many statutory
and regulatory changes that have been implemented over the past
year, it should serve as a useful barometer of whether the
policies are working.
Beyond the health of the fund, however, there are other
policy questions this committee needs to address. For example,
there are current estimates that the Federal Government is
responsible for more than 95 percent of all new mortgages, with
FHA carrying a 30 percent market share. This undeniably strong
presence in the market coupled with government guarantees for
loans up to $729,750 raises serious questions regarding the
impact of Federal policies and how we can assure that the
private sector reenters the market to decrease taxpayers'
exposure.
In assisting struggling homeowners, FHA has implemented
several new programs to assist families facing foreclosures and
borrowers whose mortgage principal exceeds the value of their
home. My understanding is that TARP and Neighborhood
Stabilization Program funds have been used; however, I am not
clear how these initiatives have helped a substantial number of
families and whether the assistance offered was cost-effective
to the taxpayer or fair to the homeowner.
And regarding efforts to dispose of real estate owned by
the FHA, there are concerns the agency is marketing programs
that encourage the same types of fraud, abuse and poor
underwriting standards that led to the current housing crisis,
which also increased taxpayer exposure. And I add to that the
fact that there are literally millions of homes on the market,
many millions owned by banks, those being in foreclosure or
facing foreclosure, which is an additional challenge.
In closing, I commend Ranking Member Capito again for her
work on the preservation and reform of the FHA program. Her
legislation, H.R. 4811, the FHA Safety and Soundness and
Taxpayer Protection Act of 2010, includes important
enforcement, fiscal, and risk assessment tools necessary to
adequately administer the program, detect fraud and abuse,
strengthen underwriting standards, and protect the taxpayer. We
believe these are worthy reforms that deserve the
Administration's support.
Commissioner Stevens, thank you again for being here. We
look forward to your testimony.
The Chairman. The gentlewoman from West Virginia, the
ranking member of the subcommittee, is recognized.
Mrs. Capito. Thank you, Mr. Chairman. I would like to thank
you and the ranking member for--well, first of all, thank
Chairman Frank for the debate that we had in July, and for
honoring my request that we have this meeting here with
Commissioner Stevens today. So thank you, Commissioner, for
coming.
Without repeating a lot of what we already know, almost a
year ago, the FHA presented to Congress an independent
actuarial report on the health of the Mutual Mortgage Insurance
Fund. I think we were all a little stunned. We were surprised
to learn that the reserves had fallen well below the mandated 2
percent. But since that hearing, we have worked in good faith,
I think, together to present commonsense ideas to help reform
the FHA.
As we know, the result of this was the introduction of H.R.
4811, the FHA Safety and Soundness and Taxpayer Protection Act
of 2010, which includes a lot of the reforms, much-needed
reforms: enforcement, fiscal, and risk assessment tools;
detection of fraud and abuse; and strengthening underwriting
standards. A majority of these reforms were included in H.R.
5072, which passed overwhelmingly in the House. One of the
centerpieces of this was the ability for FHA to increase the
annual premium, which was then signed into law, taken out
separately and signed into law in July. But I would urge my
colleagues in the Senate to move forward with further
consideration of the reforms that we have.
I look forward to hearing from Commissioner Stevens today
about the progress of the changes FHA has already implemented
to shore up the fund and to begin reducing FHA's market share.
Some estimates show that the Federal Government accounts for
over 95 percent of the mortgage market, with FHA making up 30
percent of that on its own. We must find solutions to restore a
healthy and vibrant private market if our economy is going to
function properly. FHA does have a role to play in the mortgage
market, but its presence should not be this large.
What steps should we take to encourage private capital back
into the market? FHA is currently able to insure loans up to
$729,000; $750,000 in high-cost areas. The limits for
conforming loans are similar. Are higher loan limits an
impediment to private market participation? I hope that is a
question we can get into today.
Finally, as Ranking Member Bachus mentioned in his
statement, FHA has implemented several new programs designed to
assist homeowners facing foreclosure and borrowers whose
mortgage principal exceeds the value of their homes, and to
reduce the number of foreclosed properties in the FHA
portfolio. These use TARP funds in neighborhood stabilization
programs. Concerns have been raised. I have raised concerns as
well. But these new programs will invite the same types of
fraud, abuse, and poor underwriting practices that led to the
current housing crisis, while also increasing taxpayer
exposure. It would be interesting to hear your thoughts on
these new programs, specifically on the concerns that have been
raised.
Additionally, I would like to say that one of the reasons I
felt this hearing was so important is because in July when we
moved forward with the reforms on the premium--on how to--FHA
to assess the premiums, I had the feeling that our backs were
up against the wall. We were in a situation where we needed to
act in July, because waiting until September or October was
going to put FHA in a bit of a precarious position. And that
raised a major red flag for me, because if in 2 months, we are
going to reach that level of, I don't want to say crisis, but
concern, that concerns me as to what the status of this is and
where we are moving forward.
So I appreciate you coming today, and I again thank the
chairman for calling this meeting. Thank you.
The Chairman. The gentlewoman from California.
Ms. Waters. Thank you very much, Mr. Chairman.
Mr. Commissioner, it is good to see you. Again, today, as I
recall, this is your fourth time up to testify before either
the full Financial Services Committee or my subcommittee since
you were appointed last year. We appreciate all the hard work
you have undertaken at FHA to root out the bad actors and
improve the financial health of the agency during the most
devastating economic housing crisis in a generation.
As you know, the House passed my bill, the FHA Reform Act
of 2010, H.R. 5072, in June of this year. That bill contained
many important reforms, including providing FHA with the
ability to adjust their premium structure and giving new powers
to FHA to crack down on lenders that use fraud or
misrepresentation, don't originate or don't underwrite loans
according to FHA requirements. In addition, my bill would give
FHA the ability to withdraw originating and underwriting
approval for a lender nationwide based on the performance of
one or more of its regional branches, and would improve the
reporting tools available to FHA to monitor risks.
Unfortunately, the Senate did not take action on that bill,
so many critical aspects of the reform we proposed have not
been made law. However, I was pleased that both the House and
Senate took action shortly before the August recess to pass a
pared-down bill to simply give FHA the authority to increase
the annual mortgage insurance premium.
I am eager to hear from the Commissioner today on the
continued need for the other provisions in the FHA Reform Act.
Additionally, I am interested in hearing from the Commissioner
about the implementation of the annual mortgage insurance
premium increase which will become effective on October 4th and
how FHA's new proposed premium structure change will impact the
size of the agency's capital reserves.
Finally, while I know that the new FHA actuarial study is
not yet available, I would like to hear more from the
Commissioner about his take on the state of the housing market
and how that is impacting current FHA borrowers, individuals
looking to purchase FHA-insured homes and the health of the
Mutual Mortgage Insurance Fund. So, Mr. Commissioner, I look
forward to your testimony.
Thank you, Mr. Chairman. I yield back the balance of my
time.
The Chairman. The gentleman from California, Mr. Royce.
Mr. Royce. Thank you, Mr. Chairman.
As you noted, Mr. Chairman, the private sector lenders have
really scaled back their activities during the last 2 years,
and the FHA has significantly stepped in and gone from probably
less than 5 percent to more than 30 percent of the mortgage
market. And if you include Fannie Mae and Freddie Mac in that,
it is now over 90 percent of new mortgages in the United
States.
It would be misguided, however, I think, to claim that this
amount of government involvement in the mortgage market
following a crisis would be proof that the market would not be
able to function without the government going forward into the
future. It was largely through these government entities that
we saw the erosion of lending standards, the elimination of
downpayment requirements, and the proliferation of subprime and
Alt-A loans. Since the government was complicit in inflating
the housing bubble and causing many of the problems we are
dealing with today, to turn around and to say then, see, you
need us forevermore, would be nonsensical.
So there is broad agreement that this much government
support is unsustainable. At least at the margin, it appears
the private market is ready and willing to step in, but in many
ways is being priced out of the market by the FHA.
The government has been and remains ill-equipped to
evaluate and price mortgage default risk. If we hope to build a
more resilient, less bubble-prone mortgage market, I would say
now is the time to at least begin to look at scaling back the
level of government support. Mr. Stevens, I look forward to
hearing from you on these topics and questioning you.
And I yield back, Mr. Chairman.
The Chairman. And with that, Mr. Stevens, we will take your
statement. Any material you want to submit in addition--I am
sorry, Mr. Hensarling is recognized.
Mr. Hensarling. Thank you, Mr. Chairman.
I do not believe that we will ultimately have a housing
recovery until we have a job recovery. I think one thing that
many members heard over the August recess was that there was
too much uncertainty in this economy. And we know that the
Federal Reserve has reported that there is at least $2
trillion, roughly $2 trillion, of capital that public companies
are sitting on that are on the sidelines that have not come
into this market to create jobs.
Over and over you hear questions about the cost and
uncertainty of health care. Unfortunately, people don't even
know what their effective tax rate is going to be beginning
January 1st. After two over $1 trillion deficits in a row,
businesses don't know how they are going to be called upon to
pay for that. Under the Dodd-Frank bill with, I believe, 342
rulemakings, more uncertainty in this economy, all of this has
an impact ultimately on the FHA.
I do want to thank the Commissioner. I think a number of
solid steps have been taken under his stewardship. I want to
thank the ranking member from West Virginia and the chairwoman
from California for the legislation that they proffered that we
passed in the House. Solid steps have been made. But people
still are concerned, and rightfully so, about whether the FHA
prove to be the next great American taxpayer bailout.
I look forward to hearing the Commissioner's testimony, and
not unlike the gentleman from California, once you have the
government dominate 95 percent of the market, I do not believe
that to be a good thing, a sustainable thing. I do not think it
is something that the taxpayers of America want. And until we
see a program that will allow the competitive market to once
again come back into place, I fear for the future of the FHA's
fund.
Mr. Chairman, I thank you for calling this hearing. I yield
back.
The Chairman. The Commissioner is now recognized for such
time as he needs.
STATEMENT OF THE HONORABLE DAVID H. STEVENS, ASSISTANT
SECRETARY FOR HOUSING/FHA COMMISSIONER U.S. DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT
Mr. Stevens. Thank you, Mr. Chairman.
Chairman Frank, Ranking Member Bachus, and members of the
committee, thank you for the opportunity to testify on the
financial condition of the Federal Housing Administration.
With Congress' help over the last year, FHA has made
significant reforms that have put the agency on stronger
financial footing. I would like to discuss those reforms today
and explain why our ability to protect the taxpayer for the
future depends on Congress enacting a broader, more
comprehensive set of reforms that we have proposed.
As you know, last year we informed Congress of the
independent actuary's findings that FHA's secondary reserves
had fallen below--had fallen to .53 percent of the total
insurance in force below the required 2 percent level. I told
you then that Secretary Donovan and I would do everything in
our power to ensure that the taxpayer was protected. And today,
while we are by no means out of the woods, we have made
significant headway toward stabilizing that portfolio.
In fact, according to our third quarter report to Congress,
instead of losing $2.6 billion in funds as the actuary
predicted, FHA has generated an additional $1.3 billion in
capital resources through the third fiscal quarter and
continues to earn more funds for the taxpayer. Furthermore,
actual foreclosures of FHA-insured homes have been 20 percent
less than predicted, which is why we have paid $3.7 billion
less in claims than projected. This was only possible because
the Administration had already begun implementing the most
sweeping set of reforms to FHA credit policy, risk management,
lender enforcement, and consumer protections in the agency's
history.
Mr. Chairman, we said last year that we would hire the
first Chief Risk Officer in the organization's history, and
with congressional approval we have formally established a
permanent risk management office within FHA, headed by a Deputy
Assistant Secretary, allowing us to assess and annualize risk
more actively and more proactively.
We also said that FHA would strengthen its lender
enforcement policies, and we have, eliminating FHA approval for
loan correspondents and increasing net worth requirements for
lenders. We have also suspended some well-known FHA-approved
lenders and withdrawn FHA approval for over 1,500 other
lenders, and have imposed over $4\1/4\ million in civil
penalties and administrative payments to noncompliant
institutions. We are sending a very clear message that if you
don't operate ethically and transparently, we will not do
business with you.
We said that we would restructure our mortgage insurance
premiums, and we have. In April, we raised our premiums from
175 basis points to 225 basis points across all product types.
In early October, thanks to legislation passed by Congress, FHA
reduced that premium up front to 100 basis points, offset by an
increase in the annual premium from 85 to 90 basis points
depending on the loan's loan-to-value ratio. On behalf of
Secretary Donovan and myself, I want to thank the House,
particularly you, Chairman Frank, and Ranking Member Bachus for
your leadership in passing that important legislation. I also
want to thank Chairwoman Waters and Ranking Member Capito as
well.
In addition, we also said that we would improve the quality
of loans we were making, and we have. We are strengthening
credit, risk controls, and we have implemented a two-step FICO
floor for FHA purchase borrowers. Purchase borrowers with
credit scores below 580 are now required to make a minimum of
10 percent downpayment. Only those with stronger credit scores
can make a minimum of 3\1/2\ percent downpayment.
We also promised to reduce seller concessions, which often
create incentives to inflate appraised value and are
significantly more likely to go into default. That is why we
have proposed a rule to reduce the maximum seller concessions
from 6 percent to 3 percent.
Lastly, we said we would modernize technology within the
FHA, and with your help we have made great strides towards
improving technical capacity to handle increased volume,
delivering our first comprehensive technology transformation
plan to Congress and modernizing FHA's technology
infrastructure.
We have also awarded contracts to upgrade our risk and
fraud tools and are building staff capacity through hiring and
training.
The early results of these efforts are encouraging. I
mentioned earlier that our capital reserves are growing faster
than projected, and that claim payments are less than
forecasted. Loan quality is improving as well. Our third-
quarter report shows that loan performance, as measured by
serious delinquencies and early payment delinquency rates, has
improved significantly with the first year-over-year decline in
new 90-day delinquencies in years. The average credit score on
current insurance endorsements has risen from 634 in 2007 to
700 today. Going forward, the President's budget projects these
actions will produce an additional $4.1 billion in FHA receipts
in Fiscal Year 2011, funds that FHA earns for the taxpayer.
Of course, despite the progress we have made, Mr. Chairman,
the job is far from over. Secretary Donovan and I remain
committed to comprehensive FHA reform legislation. And I would
like to thank the House of Representatives for recognizing the
urgency of this issue by passing the FHA Reform Act. Here
again, I want to thank this committee, and particularly the
leaders from both parties, for bringing this bill to passage in
the House. Tomorrow when I testify on the same set of issues in
front of the Senate Banking Committee, I will be urging the
panel members to follow the House's lead in passing
comprehensive FHA legislation before the end of the year.
In addition to strengthening FHA's lender enforcement
ability, the bill will allow for third-party loan originators
to close FHA-insured loans in their name and extend FHA's
ability to hold all lenders to the same standard by permitting
us to recoup losses through required indemnification for loans
that were improperly eliminated or in which fraud or
misrepresentation was involved. Building a stronger foundation
for the future requires us to pass this legislation, and I hope
the Senate will follow your lead and pass it by the end of the
year.
Mr. Chairman, these reforms are important not only because
we still have a long way to go, because home prices may still
decline further, and conditions may get worse before they get
better; they are also important because we know the critical
role FHA is playing in our housing market right now. Mr.
Chairman, this makes it even more important that we continue to
deliver on the commitments to strengthen the FHA and assist
responsible borrowers who need a helping hand, while working to
facilitate the return of private capital to the housing market.
We look forward to working with Congress closely on all these
issues as we further reduce risk to the American taxpayer and
ensure FHA can continue to provide stability in the housing
market at the moment we need it most.
So thank you again for the opportunity to testify, and with
that, I would be happy to answer any of your questions.
[The prepared statement of Commissioner Stevens can be
found on page 36 of the appendix.]
The Chairman. Thank you, Commissioner Stevens.
Let me say first, I am going to say to my Republican
colleagues, I know if we have a lame duck session, there will
be questions about what should and shouldn't be done, but I
would hope that this FHA bill, which went through the House
with virtual unanimity, would be considered sufficiently
noncontroversial and bipartisan so that we would join those of
us here with the Administration in asking the Senate to pass
the rest of the bill. We got them to pass some pieces of it
which you said were particularly important. But especially
after what you said, I would hope that would be something, and
I would think it would be, that we could jointly approach the
Senate and say, whatever the fights are, set them aside.
I know there are some people who argue that in a lame duck
session, you don't do anything that is terribly controversial,
although by Republican standards, apparently impeaching the
President of the United States doesn't count as controversial,
since the Republicans did that in the lame duck session of
1998. That would seem to be a pretty high bar under which we
could get other legislation. But leaving that aside, we, I
think, could get some agreement on this.
The other thing I just wanted to say is to thank you,
Commissioner. But I want to take some credit on a bipartisan
basis for this committee. You mentioned the debarment and the
failure. We had during the transition between the Obama and
Bush Administrations, the outgoing Bush Administration
officials came and testified and mentioned--in fact, it was not
even the Presidential appointees, they were the civil servants
who ran the place--and told us--this would have been late 2008
early 2009--that they did not have these powers of debarment;
that the FHA would know there were bad actors, but would still
have to give those bad actors a fifth, sixth, seventh, eighth
bite at the apple, and maybe they would succeed in getting some
things through. And this committee on a bipartisan basis
initiated that grant after listening to the people running it
in the last day's of the Bush Administration, and then the
Obama Administration came in and we worked with them.
And so, again, I think we will have our disagreements, and
we will have the criticisms that people make, but I take some
pride in that, and I was very pleased to have you tell us that,
and we agree, the role that the public sector entities are now
playing in the mortgage market is greater than it should be.
But I take some comfort from the fact that while it is there,
we have given you the tools to deal with it in an effective
way. So I appreciate that. And that is really all I wanted to
say, but I am through.
Mr. Bachus. Mr. Chairman, I agree with a lot of what you
said and would like Mrs. Capito, the chairman of the
subcommittee, to respond further.
The Chairman. I will yield to the gentlewoman.
Mr. Bachus. If she would.
Mrs. Capito. Well--
The Chairman. I am through.
Mrs. Capito. Oh, okay. Could I ask a question?
The Chairman. Yes.
Mrs. Capito. Okay. Great. Thank you.
Commissioner Stevens, am I correct in assuming that the
next independent review will be then coming out in November
like the previous one?
Mr. Stevens. Yes.
Mrs. Capito. Do you have a sense of where you are there? I
did miss the very beginning of your statement, so I apologize
for that.
Mr. Stevens. The actuary is done at the end of the fiscal
year by an independent firm, I think as we all know, and the
fiscal year obviously ends at the end of September. So at the
end of the year, the actuarial firm will take the full year's
data and produce a report. We intend to have that report in
early November.
Mrs. Capito. So you don't have a real--I am sure you have
your month-to-months and those kind of things.
Mr. Stevens. Here is what I would say. As we have said in
our third-quarter report that we released to Congress, there
are so many performance indicators that show that the strength
of the portfolio is much stronger than it was a year ago. The
variables, obviously, are what is the home price forecast. And
that is the single biggest impact of putting out an actuarial
forecast that could ultimately be the determinant of where the
capital reserve will end up. And so that is one of the big
variants. There are a variety of other things that we can talk
through, but I would not want to assume what this independent
firm will come out with when they release the actuarial study.
Mrs. Capito. I raised an issue in my opening statement
about the loan limits and the conforming limits. How many loans
is the FHA making in that larger--say, over a half million up
to whatever, the 700-and-some thousand? And do you see this a
place where FHA should be playing, or is it time to pull back
on that? Your comments?
Mr. Stevens. I think you ask an important question, and I
know it is one that you all are going to take up in debate here
in the near term.
There is absolutely no doubt that FHA should not be playing
as large a role as it is playing in the market. It also was a
sign of unhealthiness in the market when it was only 5 percent
of the market. Traditionally over time, in my 3 decades in this
industry, FHA has always played a role on sort of average terms
in the low teens as a percent of the overall market, that being
said as it relates specifically to loan limits.
The thing that I think we all need to understand clearly
about the FHA loan limits as it stands is that it is not about
the cap. Less than 3 percent of FHA's loans are over $417,000,
less than 3 percent.
Mrs. Capito. So that would be the 3 percent of the actual
numbers of the loans. But then what does that account--do you
have a different figure that accounts for how much that is?
Mr. Stevens. How much volume?
Mrs. Capito. Yes.
Mr. Stevens. I don't have a number I could give you, but
since they are larger loans, it would be a slightly, but not
significant difference between the numbers themselves.
Mrs. Capito. So only 3 percent of those are in the category
I am talking about?
Mr. Stevens. Right.
And if I could, I just want to clarify, for those of you
who understand how FHA is set, and I know you do, it is based
on median sales price, median home value, across the entire
Nation. And the way that temporary limits provide for today is
it provides for the FHA loan amount to be 125 percent of median
home price in every MSA across the country. So it is a very
detailed schedule.
Very few MSAs--the majority of MSAs actually would never go
anywhere near the cap based on the 125 percent. The concern we
have is if that was not extended for another year, that would
drop to 115 percent as was passed under HERA. So it is 115
percent of median sales price, but the median sales prices will
also be adjusted to current median sales prices, which are also
going to be dropping. So there would be, in essence, a double
hit to communities across the country that are really nowhere
near these high loan limits. But it is the formula itself that
is at the core of the necessity for the availability of FHA
financing in communities across districts across the country.
Mrs. Capito. And the other thing I raised, and I have one
quick other question, was the Neighborhood Stabilization
Program. As you know, we have put billions of dollars into this
program, and it sort of morphed into a little bit different
program through the FHA, or through HUD. How do you respond to
accountability, transparency, and all the issues that I think
are raised in a program such as this?
Mr. Stevens. I think the key question that has been raised
around FHA's role in the Neighborhood Stabilization Program has
been around something called First Look, which provides an
opportunity through the Stabilization Trust and their grantees
to in many cases have a 14-day prelook period at FHA
foreclosure in inventory before it goes to the open market.
Now, the reason for that, and the reason why the Secretary
has been so supportive of that and we supported that policy, is
twofold. One, it actually--I think it protects FHA ultimately
from a financial standpoint, and I will explain that. But first
and foremost, it also protects communities. If by allowing in
select communities, with the grantees' participation, to
identify homes in those communities that would be best served
by letting the grantee be involved and get a first look and
potentially buy that home for potentially a homeowner, or
potentially just to return that home back to the community that
could be converted into other use, it allows for broader
community stabilization.
That is what Secretary Donovan has been so focused on is
the broader impacts. But more importantly, please keep in mind
that the 14-day period that the trust gets a look at these
properties is preforeclosure, before we take control of that
property for resale. And what we find is on the properties that
ultimately are sold, they go much faster off our portfolio than
they would otherwise, and so we actually reduce our carrying
costs in FHA's REO space.
So we don't--the overall impact of the First Look program
in terms of the total REO portfolio will not be a significant
number, but we do believe it will have value to the strength of
the FHA while also stabilizing communities.
The Chairman. Thank you.
If I could get agreement, I gave up most of my time, but I
had 1 minute of questions, if there is no objection. And that
is there has been a lot of concern about the foreclosure
process. You called it to mind when you talked about
foreclosure. Now, I understand you have a pilot project with
Wells Fargo where you and Wells were partnered in terms of
third-party notification to try and diminish foreclosures, and
I am told that worked well. And if that is the case, could we
get it expanded? I do think we have learned one of the problems
is inadequate notice, people weren't used to all this, and we
are trying to improve this in a number of ways. You had some
concerns about how Fannie Mae and Freddie Mac are doing. Is it
correct that your experiment with Wells worked well, and if so,
is that a basis for expanding it?
Mr. Stevens. It is correct, Mr. Chairman, that Wells Fargo
was experimenting with a third-party firm that would actually
go door knocking in an attempt to try to mitigate, problem
solve at-risk properties in the foreclosure process and make
sure that those homeowners were aware of any option available.
It had some success. We support any effort that would help
mitigate that process.
Please do keep in mind with FHA, we are a little different
than other portfolios in the country that we require, mandate
for all our servicers that they engage in loss mitigation in
the early period of default, which these third-party firms
could help. But our process is far more extensive than many
other processes.
The Chairman. But does it include some requirement that
there be contact before foreclosure?
Mr. Stevens. It does include, absolutely, a requirement
that they contact the borrower pre-foreclosure, and that is
mandated. And we are now at a point we are much more robust in
our tracking of servicers and engaging with them much more--
The Chairman. Could you, because we have heard a lot of
complaints from members, it has been written about in the
press, and there are some concerns in Florida about it that hit
the New York Times, if you could respond in writing and tell us
what you are doing and maybe some basis on which we might
improve it, I thank you.
Mr. Stevens. Absolutely.
The Chairman. The gentlewoman from California.
Ms. Waters. Thank you very much, Mr. Chairman.
There are a number of issues here that I would like to
spend just a little bit of time on. It is not going to be
possible to go through all of these. But the loss mitigation
process that he is talking about is, I guess, similar to what
we are attempting to do in our legislation in mandating loss
mitigation prior to foreclosure. So I would be interested also,
as the chairman is, in seeing exactly the way that you are
handling this.
Let me just say on NSP, Mrs. Capito just asked some
questions. I think it is about time that we hold hearings, and
I think we had planned on holding some hearings, on NSP to see
exactly what is happening. In some of the areas, they were a
little slow getting started, and we need to find out whether or
not we have provided the technical assistance to some of those
entities to make sure they have NSP programs operating in the
way that we intended them to operate.
You also mentioned something about the 14-day period that
you give to the grantees in order to access the REOs. And we
have been holding some meetings out in my area about REOs, all
of the REOs from everywhere. And we have discovered that FHA
just didn't have that many that they were dealing with. But I
want to make sure that in whatever way we dispose of them, that
the local Realtors and realtists have an opportunity to do
business. So when the 14-day period--if a grantee is interested
in the REO, does that cut out the Realtor or the realtist? How
does that work; do you know?
Mr. Stevens. They would get a look through the contractors
that are managing REO inventory for us. But you have made very
clear to me in separate conversations about the need to utilize
local Realtors in the markets where that REO exists. And you
are absolutely right, Ms. Waters, that in California,
obviously, we don't have a lot of loans in your State, so it is
not as big a volume of numbers.
I will tell you it is something that the Secretary is also
interested in, and in the First Look rollout that we just
announced, FHA was ahead of the curve, we announced it first.
We then, both Assistant Secretary Mercedes Marquez and I,
called every bank in the Nation, including Freddie Mac and
Fannie Mae, every major servicer, and asked them to participate
in First Look as well.
So I do believe, to your concern, particularly in
California, there is an opportunity to more broadly engage. And
we could take that back also as a discussion item to follow up
on to make sure, now that we have all the banks signed on with
Freddie Mac and Fannie Mae and First Look, that obviously will
cover every market in the Nation. And we can go through that
dialogue also about making sure that local service providers
are given the opportunity to participate in this process, if
that is the core to your concern.
Ms. Waters. Yes, that is part of my concern, not only the
Realtors. But one of the things I want to take a closer look at
is the management of these properties, because one of the
complaints are--ongoing complaints we have is that you have a
national management service, and the way that they work, you
may end up with people providing services from one State to the
other State, which cuts out the locals in some way. So I do
want to talk about that more. Not today.
Mr. Stevens. I understand.
Ms. Waters. But in the future to see how we make sure that
the local service providers, whatever services they are
providing, have an opportunity to really participate, because
this goes to the whole question of jobs in the communities,
etc.
Now, having said all that, what about the PTFA? This is, as
I am told, the program protecting tenants in foreclosed
properties. The Protecting Tenants in Foreclosed Property Act
passed as part of the Helping Families Save Their Homes Act of
2009. Under PTFA, in the event of a foreclosure, bona fide
tenants have the right to stay in their property for 90 days or
the remainder of their lease, whichever is longer. According to
advocates working on this issue, they are not sure about what
FHA is doing at this time. Are you familiar with this at all?
Mr. Stevens. I am briefly familiar of it, and I went
through a briefing on this yesterday.
We are in complete compliance with the Protecting Families/
Save Their Homes Act, and I would be glad to follow up with
more detailed information on that for you.
Ms. Waters. Okay. Thank you. I would be interested to see
how that is working.
I yield back the balance of my time.
The Chairman. The gentleman from Alabama.
Mr. Bachus. Commissioner, in my opening statement, I
commented that certain estimates are that the government, the
Federal Government, is responsible for 95 percent of new
mortgages. I am not sure that is--you may have a little
different figure. But the FHA is carrying more than 30 percent
of the market. I have heard both you and Secretary Donovan
express concern that the FHA's current market share is
unsustainable, and I would like your comment on that. And also,
what steps should Congress take to encourage private capital
back into the market?
Mr. Stevens. Thank you for that question, and it is
something that we spend a significant amount of time concerned
with.
As I said earlier, I have been in this industry for 3
decades, and I started at a time when private banks and savings
and loans did much of the mortgage finance in America, and the
GSEs were just a small part of the market. Clearly, that has
changed as our markets have become more sophisticated over the
past decades.
There is also no doubt that there is a significant absence
of capital. And I do not believe that there would be an avenue
for private capital to emerge right now, given concerns about
home price futures and volatility in terms of available
capital, regulatory oversight, and the risk experience that
many of the banks have from their previous years.
As you can appreciate, many of the more interesting
products that emerged over the last decade, many of those were
bank portfolios, as well as the private sector that engaged in
things like option ARMs, the home equity--HELOC--market, those
kinds of things, which ultimately had performance rates that
may cause some resistance to reemerging. That being said, we
know markets are cyclical, and as the housing market recovers,
which it will, albeit perhaps slowly, there will be interest
for private capital to reemerge.
Now, the way FHA needs to shrink its market share back and
create an opportunity for private capital to reemerge is being
undertaken right now in what I think are significant steps. We
have made two mortgage insurance premium changes to price our
credit risk in a way that is more safe and sound, and by doing
so it is creating an entree for the private mortgage insurance
industry combined with private capital on the first mortgage to
reemerge. And I am sure your staff, if not you yourselves, have
heard the mortgage insurance industry applaud at many of our
recent changes, because we are clearly creating an opportunity
for private capital to reengage.
The changing of seller concessions--FHA has rules that are
just frankly more lenient than the private markets allow and
more lenient than should have been allowed at FHA, and we are
trying to change those things as well. Requiring bigger
downpayments for lower FICO scores, which we have just
implemented, prior to my coming here, there was no FICO floor
at all, prior to my being sworn in in July of last year. And
now, we are saying for scores of 580 and below, you have to
have a 10 percent downpayment. That is the biggest single
change in downpayments in FHA's history in terms of requiring
sort of more skin in the game to create a more level playing
field.
I think as we go forward, as financial stability begins to
take hold, the future of the housing finance system decisions
that need to be made, the White Paper that will be submitted to
Congress in January on that subject, that will begin to create
the rules of the road that I believe will create an environment
for private capital to reengage. But without question, FHA
needs to shrink its share of the market, but it needs to do so
in a balanced way so that we are not just creating a vacuum
where still no capital would come in regardless of our
participation or the lack thereof.
Mr. Bachus. And I agree that it has to be done in a
reasonable manner. I think the housing market is really
addicted to the government assistance now in this subsidy.
How can we reduce the government's involvement and limit
taxpayer exposure? You mentioned downpayments is one important
thing and also requiring a sound credit history. Are there
others?
Mr. Stevens. And I think the way--perhaps a healthy way to
look at this is to begin to reflect back on the environment we
are in. Obviously, we are still very much in the thick of the
worst housing crisis in our Nation's history. It was brought on
by an excessive amount of speculation in terms of too many
products that created an enthusiasm for homebuying that was far
from rational. And one thing we have learned is clearly not
everybody should own a home in the go-forward market, and this
Administration understands that clearly as well.
By all estimates by independents, the homeownership rate
will begin to decline. The big void here at this point is to
make certain that we don't create an additional tipping point
by an aberrant action in the absence of any other capital
provider in the market. And so having gone through market
cycles, I believe that private capital will emerge as markets
stabilize, and as we move into that scenario, the necessity for
FHA to play this size of a role, I believe, will shrink. And I
believe it will be the same for both--obviously for whatever
the future of the financial system is--for Freddie Mac and
Fannie Mae. Collectively, there is a commitment that private
capital needs to emerge, and I believe it will emerge as
markets begin to stabilize over time.
Mr. Bachus. Thank you.
The Chairman. The gentleman from California, Mr. Sherman.
Mr. Sherman. Thank you, Mr. Chairman.
My questions will build to some extent on those of Mrs.
Capito. One way to get a--perhaps the most likely way we are
going to get a double-dip recession is to see another sudden
decline in housing prices, particularly in the 12 largest
metropolitan areas, high-cost areas, in this country.
Representing one of those areas, home sales are going forward,
and every single home sale other than Malibu is Fannie, Freddie
or FHA. And it is critical that we maintain the $729,000 limit,
or we are going to see a sudden crash in home prices. Not only
will the $800,000 home not be able to get financed and perhaps
sell for $500,000, but the $500,000 then crashes
commensurately.
If we don't act soon, then how do you open escrow on
November 1st, knowing that if the escrow doesn't get to close
in January, you can't get financing, and it all falls through?
The private sector, therefore, needs to know before November
that we are going to maintain this limit at least for the
foreseeable future. But it is also the public sector that needs
to know you are running one of these agencies.
It is my understanding that FHA will soon begin
recalculating its loan limits to prepare for the scheduled
December 31st expiration of the temporary higher limit that has
been in place since 2008. I understand that it takes some time
to recalibrate the underwriting programs after the loan limit
changes. So if Congress decides to extend these higher levels,
and I hope they will, we should act sooner, I believe, rather
than later, or else there may be some lag time in
implementation of the loan agreements.
When will the FHA begin the process of recalculating loan
limits? That is to say, what is the deadline for Congress to
act to avoid any dislocation in the mortgage market and to
ensure continued access to affordable markets in important
places like Los Angeles?
Mr. Stevens. I would support your statement that extending
the loan limits for another year is important. The
Administration does support extending the loan limits both for
Freddie Mac, Fannie Mae, and FHA for an additional year for the
reasons you describe.
I also do want to as well reemphasize the point that for
FHA, it is less about the high loan limit, since a very small
number of loans actually go to that level. It is more how
reverting back to the permanent policies from the temporary
policies would affect every market area, every city in America
by collapsing the formula of how the limits are calculated in
every single market. So to that extent, the Administration is
behind both the extension of the FHA and GSE loan limits.
And beyond that, to your point, you are absolutely right as
well, is that lenders are going to begin committing people at
lower loan limits much sooner than in previous years because
the processing times are longer, and portfolios and backlogs
and mortgage applications are high in their operation. So
getting that done quickly is going to be even more important in
order to avoid people from not being able to get the high loan
limits in the near term.
We are in the process right now of looking at the median
sales price data, and I don't have a specific timeline of when
we would have the new policy. I would be glad to get that
information back to this committee as to when we would announce
our policy change, but it would be effective as of January 1st.
Mr. Sherman. And would your life be a lot easier if we told
you by the end of September what the rules were for January?
Mr. Stevens. Clearly, getting this done sooner rather than
later is important. And it is not about--with the FHA, this is
really about how everybody associated with homeownership in
America in every community across America will be impacted.
Mr. Sherman. Let me sneak in one more question. When you
and Secretary Donovan appeared before the committee last
December, I asked whether you could quantify the benefits that
accrue to the FHA reserves from the larger loan limits since
they appear to perform better. The Secretary testified that it
was too early to make such an estimate. We are a little later
now. To what extent is the ability to ensure those somewhat
larger home values in higher or--larger loans in high-cost
areas benefiting your reserves?
Mr. Stevens. The simple way to look at this is those higher
loans, generally speaking, are a very small percentage of our
portfolio, less than 3 percent. They perform no worse than any
other loan in the portfolio; in some cases, they perform
perhaps a little better on the recent portfolio. But it is not
a huge income generator in that context for FHA. It is more
about providing that level of opportunity for people to have
access to the mortgage finance system, again, across the
country.
Mr. Sherman. Thank you.
Ms. Waters. [presiding] Thank you.
Mr. Royce?
Mr. Royce. Thank you, Madam Chairwoman.
I was going to ask you, Commissioner Stevens, we had an
opportunity every couple of weeks, due to the work of Mr.
Garrett and Mr. Kanjorski, to sit down in a private setting
with Secretary Geithner, Paul Volcker, our former Federal
Reserve Chairman Greenspan, Comptroller John Dugan of the OCC,
and to listen to them give us their analysis of some of the
actions that have been taken that put us into the crisis, as
well as some of the recommendations going forward. And one of
the comments that Paul Volcker made, and subsequently was
reiterated in meetings when this was brought up, was just the
real problem with overleverage in the system, that it was a
great failing, and in particular, as explained, the
overleveraging combined with some of the moral hazard that we
had created with these quasi public-private entities that had
an implied public backstop. And as a consequence they said that
Fannie Mae and Freddie Mac, for example, were overleveraged 100
to 1, involved in arbitri.
Last year, we went through some of the numbers that were
presented, which, if I understand it, meant that your capital
reserve ratio had fallen to .53 percent, which would be a lot
less than the 2 percent mandated. The 2 percent mandated itself
would be a 50-to-1 ratio. So that would mean that the
overleveraging was somewhere in the area--something less than
200 to 1.
Now, I remember in 2004, the arguments--those of us who
were critics of Fannie and Freddie--the arguments we were
making about the extent of the overleveraging. And, of course,
we were told at the time that they would not need a taxpayer
bailout. And I guess in essence, since it is all off balance
sheet, we have losses of $145 billion now, but eventually, that
is going to be on the books. That loss is going to be something
that we are going to have to absorb, that the taxpayers will
directly absorb.
So the question I have for you is, can you say with any
level of certainty, and I know the President--I read your
remarks. We know that we have to see the actuarial study this
year. We know it is--in a couple of months it will be prepared,
but last year's number was very, very troubling. You had less
than a fourth of the minimum capital requirements which you are
required to hold. Is the capital level now going to take us out
of the woods, and can you say with any level of certainty that
FHA will not need to be bailed out? Let me just ask you that
question.
Mr. Stevens. This requires a little precision, but let me
just try to explain this as succinctly as possible.
I was sworn into this job in July of last year. When I
testified in April, I was running a large company as president
and COO, and I came in during testimony and said FHA was taking
on risks it should not be taking, and the 2006, 2007, and 2008
portfolios that were originated with very little control and
very little scrutiny over the institutions that originated them
are going to cost FHA a significant amount of money, and that
is literally the--it is those book years that had the greatest
impact on the portfolio. As a result, the capital reserve did
drop below the 2 percent but it isn't the total capital.
Mr. Royce. That is secondary capital?
Mr. Stevens. That is secondary capital. What happened is we
reduced what is in the capital reserve and shifted into what is
called the financing account, because the financing account has
to hold all reserves required to pay all forecasted losses.
Mr. Royce. That is the 4.5 percent today?
Mr. Stevens. That is correct. And so to just give you an
example, last year when I reported the capital reserves, the
combined accounts were $31.8 billion. In the third quarter
report, we are at $33.1 billion. So we are $1.3 billion higher
than we were.
Mr. Royce. I understand. But the part that was extrapolated
off of the poor position then was that it could be a loss of
$1.6 billion in 2012, right? So what you are saying is that
when the new analysis comes in, that projection is going to
probably be significantly lower; or do you know?
Mr. Stevens. Here is what I would strongly caution for any
of us who have been in financial forecasting on financial
institutional balance sheets. The most significant driver in
the forecast is ultimately going to be the projected forecast
of home prices, forecasted projection of interest rates. Those
are going to be two significant drivers on the performance of
the balance sheet.
I am not going to answer with any certainty where I think
the capital reserve will finish at the end of the year. Again,
this is an independent actuarial firm that is reviewing our
portfolio and running their models on the portfolio. I will
tell you this: that if the fund has not gone negative and
continues to remain positive, it will be thanks to the quick
actions of this committee and Congress giving us more authority
and actions of this Administration taking it--
Mr. Royce. And you did imply that private capital was
currently being priced out of the market by FHA as well? I
think you implied that.
Ms. Waters. Mr. Moore.
Mr. Moore of Kansas. Thank you. Mr. Stevens, in June of
2009, the Oversight Subcommittee I chair held a hearing on the
need to strengthen fraud prevention efforts in FHA and other
HUD programs. HUD's Inspector General Kenneth Donohue listed
several traditional fraud schemes--namely, appraisal fraud,
identity theft, and loan origination fraud--that remained a
concern with respect to FHA as well as other kinds of fraud,
such as foreclosure fraud, bankruptcy fraud, and reverse
mortgage fraud that he was concerned about.
It has been more than a year since that hearing. What steps
has FHA taken to combat both the traditional and new forms of
fraud, and is there a particular kind of fraud that is of most
concern?
Mr. Stevens. Well, thanks to observers like the Inspector
General and others that have looked at fraud in the FHA, and
with the help of Congress and the budget that was provided to
FHA, we have taken a variety of significant actions, and I will
try to outline a few of them very briefly.
Mr. Moore of Kansas. Thank you.
Mr. Stevens. First, we went after institutions that were
behaving improperly, and we established a much more frequent
regimen of mortgagee review board meetings which, in the last
year alone, we have eliminated 1,500 institutions that we
believe were acting improperly in the FHA portfolio, some of
which became very visible stories in the media--such as Lend
America and Taylor, Bean & Whitaker and others--where those
announcements culminated even further legal action. That is our
first line of defense.
The second is we submitted a technology plan, and we have
already to date awarded three contracts for fraud tools that
are going to be developed within the FHA portfolio. We just
announced our last contract a couple of days ago through
appropriations to fight fraud and misrepresentation in the
market at the loan level.
There is institutional fraud that has existed in our
industry, and it typically involves some form of collusion
between multiple participants in the market. An appraiser, a
loan officer, a title agent, perhaps a real estate agent, will
work together to try to commit fraud. And we believe while
there will always be these risks in the market, the
implementation of the SAFE Act, our technology enhancements
that we are making at FHA have significantly increased scrutiny
on lenders. The additional authority we received from Congress
and the additional authority we are asking for in the FHA
Reform Act will help ensure that gets reduced to as small a
number as possible on a going-forward basis.
Mr. Moore of Kansas. Thank you, sir.
And, Mr. Stevens, on page 4 of your testimony, you noted
that last October you hired the organization's first Chief Risk
Officer. Reflecting on the recent financial crisis, it was
clear that many financial firms, Lehman Brothers and others,
may have had risk officers in their organization, but they were
often overruled for other priorities. Obviously, the government
doesn't have the same profit motive as Lehman Brothers, but I
believe that taxpayer resources should be carefully managed to
minimize waste, fraud, and abuse.
Since establishing this new risk management position, has
this officer been influential in better managing FHA's risk
profile, and going forward, how do you make sure the Chief Risk
Officer's recommendations are fully considered and not
disregarded for other FHA priorities?
Mr. Stevens. The question you ask was one that was actually
expressed by both parties here in the committee, and it is one
that is a significant concern to me.
In the entire history of FHA, there has never been a risk
officer, a risk office; and quite frankly, when I walked into
my position, there wasn't a risk report of information being
provided. The risk officer now is an independent office
reporting directly to the Commissioner as a Deputy Assistant
Secretary on par with the heads of the multifamily business,
the single family business, and the health care business.
We are right now working on a regimen to change policies
and procedures so that any recommended change to policy will
actually go through the risk officer, where they can agree or
disagree with that policy; and if they disagree, it will stop
the process at that point, ultimately could result in things
having to be escalated to a Secretary in the event of
disagreement, but at least to the Commissioner for decision-
making.
So I agree strongly with the concerns that you expressed
and others have expressed here in the room, that at a bare
minimum on a go-for-the-long-term, we need to make sure that
that risk officer and that risk office has the procedures in
place to support them regardless of who may be in the
leadership chairs within the organization down the road.
My risk officer is here with me today, Bob Ryan, who is
behind me, and he has a strong, significant reputation in the
industry for being thoughtful and focused on risk management.
And I can assure you, under this Administration, no one will
override the risk officer to be more lenient. As a matter of
fact, we are clearly by our actions, if anything, going the
other way.
Mr. Moore. Thank you so very much. I yield back.
Ms. Waters. Mr. Hensarling.
Mr. Hensarling. Thank you, Madam Chairwoman.
Commissioner Stevens, under the FHA, this first look sales
program, the neighborhood stabilization groups, this can be
both individual 501(c)(3)s and municipalities, is that correct,
ultimately can qualify for the first loan program?
Mr. Stevens. Yes.
Mr. Hensarling. And as I understand it, you will sell these
properties, I think is it within a 14-day window of putting it
on the market?
Mr. Stevens. That is correct.
Mr. Hensarling. At a 10 percent discount to their appraised
value, correct?
Mr. Stevens. That is incorrect.
Mr. Hensarling. That is incorrect?
Mr. Stevens. Yes.
Mr. Hensarling. FHA properties at a discount of 10 percent
below their appraised value. Okay. What do you offer them at if
this information is incorrect?
Mr. Stevens. The minimum discount required for NSP through
the trust is a 1 percent discount, and part of that is the
grantee also must pay a fee. They must pay some of the fees
that are incurred in the settlement of that transaction.
Mr. Hensarling. Okay. They do receive a discount, and now
we are debating perhaps what that discount is.
Mr. Stevens. I have gone through extensive discussions on
that particular issue, both in the development of the program
and as recently as this morning, talking about the process that
NSP grantees go through and what, if any, price advantage may
be given. They get a bid process.
Mr. Hensarling. Let me see if I am hearing what I think I
am hearing. You are saying that the price advantage is 1
percent?
Mr. Stevens. The price advantage as guaranteed is 1
percent.
Mr. Hensarling. Guaranteed at 1 percent. So you can make it
larger? And your interpretation--
Mr. Stevens. That is correct.
Mr. Hensarling. --of the statute--and just how large can
you make the discount? What is your interpretation?
Mr. Stevens. We have programs in FHA that have existed for
years that allow discounts to communities for as high as 50
percent, depending on the condition of the property and what it
does for the community. They are done as a very small
percentage over time. I have actually not found that many that
have been done.
Mr. Hensarling. Commissioner Stevens, let me ask this
question.
Again, we know that in the last 2 years, our Nation has
experienced deficits, over $1 trillion, and we have the single
largest debt we have ever had in America's history. Debt held
by the public is going to double in 5 years under the
President's budget, triple over 10. It is an unsustainable path
that even the Administration has admitted, and so I am
concerned with any discount with these properties that are
provided.
I guess my question here is this: If a municipality
receives a property at some discount, it is my understanding
that there is nothing that prevents them from turning around
and perhaps flipping that at a profit, so that ultimately the
Federal taxpayer who is going broke may subsidize a municipal
taxpayer who may or may not also be going broke.
Can you disabuse me of this notion, or is it possible under
the program that the properties can be flipped?
Mr. Stevens. First of all, there are restrictions on the
resale through the Neighborhood Stabilization Program, but I
want to emphasize your primary point. I hope it is your primary
point. FHA is estimated by the President's budget to produce
over $5 billion in net positive receipts to the taxpayer in the
next year. This Administration--
Mr. Hensarling. Again, that is a good thing, but it was not
responsive to the question.
Mr. Stevens. Well, excuse me, I apologize. I thought it was
the beginning of the point that was being made.
There are restrictions on the resale of properties, and
from our perspective, we view actually this program on the REO
sales where virtually all REO that is sold in America by us and
virtually everybody else, ultimately is sold at whatever the
market will bear.
Mr. Hensarling. So the grantees conceivably can flip it at
a profit, correct?
Mr. Stevens. It is limited. It is capped in terms of the
profit.
Mr. Hensarling. My time is running out here, Mr. Stevens.
Let me try to get in another question.
As I look at the kind of the broad swath of the
Administration's foreclosure mitigation plans that haven't
seemed terribly successful to me, and that according to MVA
stats that I think with the exception of one quarter,
delinquencies have continued to climb.
I am particularly concerned about certain aspects of the
HEMP program. I think this summer I saw a report that the
average back-end ratio and the debt-to-income for HEMP
modifications is 63\1/2\ percent, which I believe most people
would not believe to be a sustainable debt burden on American
households. So I am curious. Of the FHA HEMP modifications,
what assumption are you making on default rates going forward,
and explain to me why risky borrowers are not being allowed to
refinance into an already fiscally precarious insurance--
Mr. Stevens. So the FHA HEMP refinance program takes an
existing FHA loan and refinances them into another FHA loan at
the same balance. So from a risk standpoint to the taxpayer and
to the portfolio, it doesn't add any incremental increased
risk. We already own the risk on that mortgage when we do the
HEMP modification, where there is absolutely no incremental
risk on that program.
There is absolutely no doubt that back-end ratios are going
to be a driver of performance on any of the HEMP programs. And
that is why as an example in our FHA short refinance program,
which will cause actual principal write-down, we have capped
the back-end ratio for people to be eligible for that program.
But I want to restate that there is no incremental risk.
Mr. Hensarling. Incremental being the operative term?
Mr. Stevens. Well, the risk is already on the loan, right?
Ms. Waters. Thank you very much. Mr. Carson?
Mr. Carson. Thank you, Madam Chairwoman.
When you testified before the Subcommittee on Housing and
Community Opportunity in March of this year, you proposed that
the Secretary be allowed to hold all investment lenders to the
same standard of accountability. Provisions in the FHA Reform
Act of 2010 permit the Secretary to require indemnity to all
such lenders.
Do you believe that there is a need for more oversight or
stricter qualifications as to which lenders are approved as
direct endorsement lenders?
Mr. Stevens. I do, and we did ask for that; and I
appreciate the question.
In the FHA reform bill that the House passed and this
committee put forth, it allowed us to expand our
indemnification capabilities from what is called LI lenders to
direct endorsement lenders. That bill has not been through the
Senate, and so at this point we still operate in a world where
we have stronger indemnification rights with LI lenders than we
do direct endorsement lenders. So that being said, I will tell
you a couple of things we are doing.
We increased the minimum capital standards required of all
lenders, direct endorsement or otherwise, so that we are making
sure that there at least is enough capital for these
institutions to bear their obligations in the event of fraud or
misrepresentation, which they all bear regardless of whether
they are DE or LI.
In addition to that, our mortgagee review board has stepped
up our enforcement activities on all lenders where we are
scrutinizing institutions with high compare ratios that are
outside of the norm and taking them under a closer look than
past organizations within FHA have done previously. But without
question, the ability to get the remaining terms that were in
the FHA Reform Act through the Senate and into law will give us
the broader enforcement capabilities that we clearly need.
Mr. Carson. One last question. Protecting the mortgage
insurance fund and capital reserves and, in turn, the American
taxpayers are major reasons for congressional support of FHA
reform. Do you agree that the legislation appropriately
addresses the concerns for current and future states of these
funds?
Mr. Stevens. Yes, I do.
Mr. Carson. Thank you. I yield back my time.
Ms. Waters. Mr. Posey?
Mr. Posey. Thank you, Madam Chairwoman.
Mr. Stevens, do you think the housing market has hit
bottom? I notice you indicate that equities are up in your
written testimony. Do you think the market has bottomed out?
Mr. Stevens. I am not an economist. I do believe that the
market is clearly in a better place than it was a year ago.
Mr. Posey. Just give me a yes or no. Do you think the
market has bottomed out?
Mr. Stevens. I honestly--and I am not trying to be
evasive--don't have a yes or no answer. I think we are near
bottom. Whether there is a few percentage points further down--
Mr. Posey. So that is no, you don't think it has bottomed
out yet; you think we are near bottom?
Mr. Stevens. I wouldn't be surprised--
Mr. Posey. That has to be in your vocabulary. Gut reaction.
Do you think we hit bottom yet or not? You are the second top
guy. You ought to know this.
Mr. Stevens. And I am not trying to be evasive. I am just
going to tell you I think we are, at minimum, near bottom and
we may be at bottom. To be honest--
Mr. Posey. I can't believe you just can't say yes or no.
Mr. Stevens. I review the same data that you have.
Mr. Posey. I can't believe you are giving me a song and
dance. I just want to know, do you think we have hit bottom
yet? You say we are near bottom. That means we are past bottom
and on the way down? Just tell me this straight: Do you think
we have hit bottom yet?
Mr. Stevens. I apologize if you are assuming I am trying to
give you a song and dance. I am trying to give a statement that
doesn't indicate that I have an absolute answer to--
Mr. Posey. I don't want your absolute answer. I want your
personal opinion. Do you think we have hit bottom yet?
Mr. Stevens. I think we are, at minimum, near bottom.
Mr. Posey. How many loans does FHA insure?
Mr. Stevens. We are going to do about 1.7 million loans
this year.
Mr. Posey. No, how many total do you have insured?
Mr. Stevens. Six million.
Mr. Posey. How many of those are current?
Mr. Stevens. If you give me just a moment, I will tell you
the exact numbers, but about 91 percent are current.
Mr. Posey. Okay. Of the 90 percent that aren't current, how
many are 30 days, 60 days, 90 days or worse?
Mr. Stevens. If you give me just one moment I want to
pull--
Mr. Posey. You can be looking at those while I ask you some
more questions.
Mr. Stevens. Okay.
Mr. Posey. Original estimates for the HOPE for Homeowners
Program would be that it would assist up to 400,000 troubled
homeowners, and to date, there have only been 1,355
applications when these notes were taken. What do you think the
reason is for people not to participate?
Mr. Stevens. I apologize; which specific program was this?
Mr. Posey. HOPE for Homeowners.
Mr. Stevens. The challenge with the HOPE for Homeowners, I
think it was a program built on good intent, but the processes
in place, as we have heard with a lot of these programs, the
paperwork required, the fact that there is still not a clear
liquid take-up, there is not a securitization market for that
on the back end, puts some natural limitations into the
program.
Mr. Posey. Okay. Under the HEMP program, what do you think
the status of that is? In other words, there was $14 billion
provided for incentives to support write-downs and second
liens. What percentage of that has been spent and what
percentage is still unspent?
Mr. Stevens. Well, HEMP has a variety of types of the
program. One is obviously the modification of the first
mortgage. There is a 2MP program which provides for second lien
write-down which was just rolled out midyear this year, and I
don't have the specific data for that. I would have to get that
from Treasury, but it is a very minimum number that has
utilized the second lien write-down.
Mr. Posey. I would like you to get that for us in writing
if you would.
Mr. Stevens. Yes.
Mr. Posey. I guess from TARP, that was $14 billion. I just
wonder what portion has been utilized, and for what purpose,
and what portion has still been unutilized. I hear from an
awful lot of constituents who are in trouble, and you have
quite a good Representative in central Florida, by the way, who
does quite an effective job of helping people out; but there is
still such a large amount of paperwork. They have such a
difficulty, FHA and non-FHA loans, and being able to talk to
anybody who is in a position of making the decisions, and not
FHA-specific problem, but I think a problem that could largely
mostly help turn this economy around.
And just to re-ask another question that has already been
asked, to what extent, if any, do you think FHA would be
looking for a bailout in the future?
Mr. Stevens. At this point, based on the reserves of FHA,
it is running on its own. It is financially sound. It is below
the minimum capital requirements. We need to increase that
capital, but it is requiring a bailout. We will know more when
the actuarial study is complete.
Mr. Posey. Can I take that as a tentative no?
Ms. Waters. Thank you. Mr. Klein?
Mr. Klein. Thank you, Madam Chairwoman.
I just want to pick up on, Mr. Stevens, what Chairman Frank
brought up before. We passed an FHA reform bill earlier in the
House, and the Senate sort of stalled on it. One of the things
that I had worked on was this pilot program which--an outreach
in terms of dealing with foreclosures and things like that.
Wells Fargo, I think, had partnered in doing face-to-face
outreach with troubled borrowers and it seems to have worked
fairly well. This whole issue of informed borrowers, understand
what their choices are, not just getting a foreclosure notice,
and sort of face-to-face approach for more information.
Since the bill didn't pass, I worked on this with Mr.
Marchant, but this is something that you have the authority to
consider and push it out there a little bit in terms of more
information and working with these organizations or some third-
party professionals that do this. The more information
borrowers can have about their choices, the better off we will
be.
A lot of it is they just don't know. People leave, they
come, they go. The posting doesn't always work. The issue here
is making more information available. So I want to encourage
you, is that something you have the authority to do without the
full legislation?
Mr. Stevens. We are looking at precisely what our authority
is for third-party outreach. We completely agree with you that
it can be impactful. We have spoken to Wells Fargo in terms of
the responsiveness of their pilot program they have been
utilizing. They pay anywhere from $70 to $100 per door-knocker
to go out. But we agree that early contact is critical and we
completely support any effort that would be successful and we
are looking to see how much authority we have and, more
importantly, if we have the funds to deploy the door-knockers.
I do want to restate, and Chairman Frank asked this
question earlier, that FHA is a little different, that we
require contact--loss mitigation actions within that early
period of delinquency in all loans within the FHA portfolio as
a part of our services. So we already have a broad set of
interventions that are required of all services. We already
have a broad set of interventions that are required, but if the
door-knocking, third-party intervention would add value in
improving performance and helping these homeowners who are so
desperately in need, we would absolutely support that.
Mr. Klein. If I can, just to continue on this, I think what
we found is the face-to-face contact is very meaningful. People
are stressed. They don't know where to turn. They don't know
what their choices are. They hear about this program and that
program, that some local not-for-profit in the community or
city is doing something. It is a matter of getting good
information to them, having someone they can look in the eye
and say, ``Hey, here is what the choices are.''
Again, the goal here is if someone can stay--and one of the
points, we help them, we want them to stay. It is good for the
community. It is good for that person. Sometimes it is
deferring some of the principal to the back. There are a lot of
things that can be done. It is a disconnect that sometimes
makes people just lose it all.
So I think it is a good investment. If you can get back to
me and let me know what your position is on whether you have
the authority, and if you do, what you are going to do.
Certainly, I would just suggest Florida as a good case study
for as much of this that can be done as possible. We would
appreciate it.
Mr. Stevens. We will do so.
Mr. Klein. Thank you.
Ms. Waters. Thank you very much. Mr. Garrett.
Mr. Garrett. Thank you. And in 5 minutes, you are done and
you can go home.
Just to follow up on the gentleman from Texas, one
question. The reason why I guess there was, I felt, confusion
there as far as whether it is 1 point or 10 points with regard
to the first loan program was because--and he didn't have that
right then, but I do now--is that it is in the Department's
press release, and I will just read the sentence.
It says: ``Furthermore, first look would provide NSE
purchasers with the opportunity to purchase FHA property at a
discount of 10 percent below their appraised value. It is
better.'' So he was going by your press release, so let's just
clarify.
This is an error, then; is that what you are saying?
Mr. Stevens. If it would be permissible, I would like to
respond in writing and make sure that we clarify what was
stated in the press release versus our specific policy.
Mr. Garrett. Okay. That would be very helpful. Thank you.
I appreciate the fact the opening comment was that you have
about what, 20 or 30 years in the industry, and coming to hear
it was actually in private industry, and that is good in my
book. Some people say that is what we are sort of lacking here
in Washington in the Administration. So I appreciate your
background in this.
So I am going to put you on the spot in that respect. I
know you don't want to give a specific number with regard to
Ed's question to the capital levels, where we were before, at
one quarter. I know your answer is we do not want to go below
zero. That is a yes, right?
Mr. Stevens. Correct.
Mr. Garrett. But can you give me this answer? When the
report comes out, will we be higher or lower than--I don't want
a firm number from you--but can you give us your best estimate,
with all your years of experience, of whether we will be higher
or lower than that number?
Mr. Stevens. A little of that is also trying to predict
what home prices will be.
Mr. Garrett. I understand that.
Mr. Stevens. And to relate that to the previous question,
let me just--and I want to be clear in the answer. I can't give
you that answer. And the reason is that the firm that does the
actuarial study will incorporate a home-price forecast that is
a new model that is being used which takes local markets and
looks at the exact rating of the FHA portfolio. It is much
improved. We don't have the data of all the specific markets,
so I just don't want to predict when the capital reserve that
is such a small number ultimately will be in the actual study
itself. So I do not have--
Mr. Garrett. Is that something that you as the new guy in
charge, new guy in town, sort of would want to have in your
position that you would be able to--maybe not today, maybe not
tomorrow, to quote a line from Casablanca--but is that not a
line today that you would want to be able to do that yourself?
Because that seems to be an important number you need to know
so you can gauge the rest of your activities, right?
Mr. Stevens. We would like to have the ability to do that
and we are--
Mr. Garrett. So you can't do it now; is what you are
saying?
Mr. Stevens. The resources required to be able to bring in
third parties to be able to do the analytics--
Mr. Garrett. Internally you can't do it?
Mr. Stevens. The FHA Reform Act that you all voted and
pushed through has that ability in there. So here is what we do
do, and you have it in your third quarterly report to Congress
which we just submitted. We give you a lot of data about the
portfolio, which is clearly a lot stronger than anybody
predicted.
Mr. Garrett. So the short answer is you can't do it now;
you want to do it; in the future you may be able to do it?
Mr. Stevens. That is correct.
Mr. Garrett. On the home loan prices, so your notes or
notes I took was, okay, the larger loans are around--under 3
percent of your portfolio, right? They are not a significant
income generator for the FHA, right?
Mr. Stevens. Right.
Mr. Garrett. So here is the issue. Right now, we are in
town very quickly trying to decide whether we should pass a tax
cut for people--not tax cut--extend the tax breaks for those
people making over $250,000. Should we be subsidizing those
people on the revenue side, right? That is what the issue is in
town right now.
Here, over here at the FHA, though, we are basically
subsidizing those people who are the high-income people in
their home purchases of people making $200,000 to $250,000.
Is that consistent that, on the one hand, the
Administration does not want to subsidize them, but on the
other hand, your agency says, no, we should be subsidizing,
even though it is such a small percentage of the portfolio and
it is not generating much money?
Mr. Stevens. To be clear, the Administration supports the
broad extension of the loan limits for the next year, and as I
stated earlier, Mr. Garrett, is that the FHA high loan limit
wouldn't be the most significant impact if they were not
extended. The big impact would be to even the lower end of
communities across the country which depend on this formula of
whether it is 125 percent of median sales price or or 115--
Mr. Garrett. So if we could just fix the formula, maybe
then we can address this issue and the Administration could be
consistent then in how we handle this?
Mr. Stevens. That would clearly be an alternative if we
went down the path. The challenge is we have such a short
timeline for the industry to adopt any changes taking place, is
that we would be impacting MSAs across the country if we do not
extend.
Mr. Garrett. Mr. Chairman, I just have one more question.
The Chairman. Go ahead.
Mr. Garrett. Other than the GSEs--I know we haven't fixed
that problem yet, but that is coming. But right now, they have
something over there called the adverse market fees and loan
level price adjustments. Okay?
Mr. Stevens. Yes.
Mr. Garrett. And they charge these fees, and I understand
when they were here, they explained why they do them. It helps
the book, that sort of thing.
But from your perspective, do you see them as actually
driving away business from the GSEs because that raises the
cost of going through the GSEs, right? And so if it drives
business away from the GSEs, that is sort of pushing it into
where? The only other market that is available and to you
folks.
Mr. Stevens. There are three markets, and we have seen them
growing. We are seeing some of the larger financial
institutions come into the market with jumbo financing, high
loan balance financing, which usually has taken the form of
adjustable rate mortgages, but we are seeing a growing volume
occurring right now over recent weeks.
The other two areas are clearly the loan level price
adjustments--what consumers and participants in the industry
are ultimately going to make a choice based on the cost of the
loan.
GSEs risk base price so they charge less for the top credit
tier, and they charge more as the risk increases. FHA has
always been a flat-priced market over time, and we have talked
about this before in terms of this. But the one change we put
into place so far, obviously, is if you are below 580 we are
now adding additional expense to it. But generally speaking,
there is no question that the cost of the loan is going to
reflect consumer behavior in one direction or the other.
Mr. Garrett. Say that last line again?
Mr. Stevens. There is no question that the price of the
loan is going to affect the decision the home buyer or borrower
makes ultimately and which loan product they select.
Mr. Garrett. So, at the end of the day, I will say all
other things being equal, as far as the price risk and the
pricing for that element of concern, if they add the price of
the adverse fees into it, it is going to be--and as a consumer,
that is that going to be higher cost for me, so I am going to
do the GSE. I know I might go into the private market, but
right now that really isn't there, so I am going to end up with
you folks.
Mr. Stevens. And I just say factually that we have had,
with our recent price change, we have actually made the GSE
review mortgage insurance and the loan level price adjustment
is actually a better option for some home buyers, and so our
adjustments have actually helped perhaps create a shift back.
However, we would describe sort of the private capital entre,
but without question, they will make a decision based on the
price of their mortgage.
Mr. Garrett. Just one follow-up on the beginning question,
Mr. Chairman--where the gentleman from Texas is going.
I understand I would think that the policy issue rationale
behind the--what do you call it--the first loan--first look
programs. I understand the theory behind that and I understand
also where the gentleman from Texas is coming. I sort of lean
that way, that at the end of the day, you want your book to be
good; you want a situation that you are not coming back here
with the capital level below 2 percent, or even below zero, and
looking for any bailouts or what have you.
The problem is, I wonder with the default rates that we
currently see--maybe you can give me the number on that on the
default rates. I forget what it is right now for the houses
that go into it.
Mr. Stevens. We have 8\1/2\ percent above 90 days late.
Mr. Garrett. Okay. I thought it was higher than that.
The Chairman. We do want to wind it up.
Mr. Garrett. So the question is, don't you really just sort
of kick the proverbial can down the road on these; so good for
the first 6 months or 30 days or what have you on these things.
But at the end of the day, if I am going to still default, the
risk was on the book before and after; all you did was push it
down the road and you didn't really benefit your bottom line at
the end of the day anyway. Actually it may be worse because
those people have just taken advantage of the house for 30 days
or 60 days or 90 days and haven't paid on it.
Mr. Stevens. Well, actually the performance rate on the FHA
portfolio is significantly higher than any other portfolio.
People actually will go into default, but they will recover at
a rate that is significantly higher than what I experienced in
the private sector or at the GSEs over time. A lot of it has to
do with our aggressive loss mitigation and programs we can put
in place to get people back on track.
And I will just tell you, remember, all our loans are
owner-occupied, primary residence, and our average loan balance
is much lower than most other portfolios in the market. So I
don't believe there is an alternative lifestyle option for many
people if we can help them get back into the home.
The Chairman. The time has expired. I don't want to get
into too much more of a discussion of alternative lifestyle
options. That would take us along a different path.
I will say that any members, either those who are here or
those who couldn't be here because we understand the schedule
had been changed for votes, who have additional questions can
submit them.
We can expect the Commissioner, as he always has, to be
responsive. And I would ask unanimous consent to insert into
the record the statement submitted to us by our colleague Mr.
Towns, the chairman of the Government Reform Committee, on his
bill which deals with red lining, H.R. 5941, and without
objection, that will be made a part of the record.
And the committee will adjourn, to reconvene at 2 p.m. for
a hearing with the Secretary of the Treasury.
[Whereupon, at 11:35 a.m., the hearing was adjourned.]
A P P E N D I X
September 22, 2010
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