[Senate Hearing 116-1]
[From the U.S. Government Publishing Office]


                                                         S. Hrg. 116-1


   NOMINATIONS OF BIMAL PATEL, TODD M. HARPER, RODNEY HOOD, AND MARK 
                            ANTHONY CALABRIA

=======================================================================

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                                   ON

                            NOMINATIONS OF:

  Bimal Patel, of Georgia, to be an Assistant Secretary for Financial 
                  Institutions, Department of Treasury

                               __________

  Todd M. Harper, of Virginia, to be a Member of The National Credit 
                       Union Administration Board

                               __________

 Rodney Hood, of North Carolina, to be a Member of The National Credit 
                       Union Administration Board

                               __________

   Mark Anthony Calabria, of Virginia, to be Director of The Federal 
                         Housing Finance Agency

                               __________

                           FEBRUARY 14, 2019

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs
                                
                                
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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                      MIKE CRAPO, Idaho, Chairman

RICHARD C. SHELBY, Alabama           SHERROD BROWN, Ohio
PATRICK J. TOOMEY, Pennsylvania      JACK REED, Rhode Island
TIM SCOTT, South Carolina            ROBERT MENENDEZ, New Jersey
BEN SASSE, Nebraska                  JON TESTER, Montana
TOM COTTON, Arkansas                 MARK R. WARNER, Virginia
MIKE ROUNDS, South Dakota            ELIZABETH WARREN, Massachusetts
DAVID PERDUE, Georgia                BRIAN SCHATZ, Hawaii
THOM TILLIS, North Carolina          CHRIS VAN HOLLEN, Maryland
JOHN KENNEDY, Louisiana              CATHERINE CORTEZ MASTO, Nevada
MARTHA MCSALLY, Arizona              DOUG JONES, Alabama
JERRY MORAN, Kansas                  TINA SMITH, Minnesota
KEVIN CRAMER, North Dakota           KYRSTEN SINEMA, Arizona

                     Gregg Richard, Staff Director

                      Joe Carapiet, Chief Counsel

                          Matt Jones, Counsel

                Brandon Beall, Professional Staff Member

            Laura Swanson, Democratic Deputy Staff Director

                 Elisha Tuku, Democratic Chief Counsel

                 Beth Cooper, Professional Staff Member

                Corey Frayer, Professional Staff Member

                       Dawn Ratliff, Chief Clerk

                      Cameron Ricker, Deputy Clerk

                      Shelvin Simmons, IT Director

                    Charles J. Moffat, Hearing Clerk

                          Jim Crowell, Editor



                                  (ii)

                         C  O  N  T  E  N  T  S

                              ----------                              

                      THURSDAY, FEBRUARY 14, 2019

                                                                   Page

Opening statement of Chairman Crapo..............................     1
    Prepared statement...........................................    41

Opening statements, comments, or prepared statements of:
    Senator Brown................................................     3
        Prepared statement.......................................    42

                                NOMINEES

Bimal Patel, of Georgia, to be an Assistant Secretary for 
  Financial Institutions, Department of Treasury.................     5
    Prepared statement...........................................    43
    Biographical sketch of nominee...............................    45
    Responses to written questions of:
        Senator Brown............................................   106
        Senator Moran............................................   112
        Senator Cortez Masto.....................................   113
        Senator Sinema...........................................   114
Todd M. Harper, of Virginia, to be a Member of the National 
  Credit Union Administration Board..............................     7
    Prepared statement...........................................    52
    Biographical sketch of nominee...............................    54
    Responses to written questions of:
        Senator Brown............................................   114
        Senator Rounds...........................................   119
        Senator Moran............................................   120
        Senator Cortez Masto.....................................   123
        Senator Jones............................................   128
        Senator Smith............................................   130
        Senator Sinema...........................................   131
Rodney Hood, of North Carolina, to be a Member of the National 
  Credit Union Administration Board..............................     8
    Prepared statement...........................................    65
    Biographical sketch of nominee...............................    67
    Responses to written questions of:
        Senator Brown............................................   131
        Senator Rounds...........................................   136
        Senator Moran............................................   137
        Senator Cortez Masto.....................................   139
        Senator Jones............................................   146
        Senator Smith............................................   147
        Senator Sinema...........................................   148
Mark Anthony Calabria, of Virginia, to be Director of the Federal 
  Housing Finance Agency.........................................    10
    Prepared statement...........................................    74
    Biographical sketch of nominee...............................    76
    Responses to written questions of:
        Senator Brown............................................   148
        Senators Brown and Reed..................................   158

                                 (iii)

                                                                   Page

    Responses to written questions of: --Continued
        Senator Scott............................................   159
        Senator Rounds...........................................   159
        Senator Tillis...........................................   160
        Senator Moran............................................   161
        Senator Reed.............................................   165
        Senator Menendez.........................................   165
        Senator Warner...........................................   169
        Senator Schatz...........................................   171
        Senator Cortez Masto.....................................   174
        Senator Jones............................................   182
        Senator Sinema...........................................   184

              Additional Material Supplied for the Record

Letters submitted by Chairman Crapo..............................   186
Letter submitted by Senator Brown................................   201
Letter submitted by Senator Tillis...............................   203


                                  (iv)

 
   NOMINATIONS OF BIMAL PATEL, TODD M. HARPER, RODNEY HOOD, AND MARK 
                            ANTHONY CALABRIA

                              ----------                              


                      THURSDAY, FEBRUARY 14, 2019

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:02 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Mike Crapo, Chairman of the 
Committee, presiding.

            OPENING STATEMENT OF CHAIRMAN MIKE CRAPO

    Chairman Crapo. The hearing will come to order.
    This morning, we will hear testimony on the nominations of 
Bimal Patel, to be Assistant Secretary of the Treasury for 
Financial Institutions; Todd Harper, to be a Member of the 
National Credit Union Administration Board; Rodney Hood, to be 
another Member of the National Credit Union Administration 
Board; and Mark Calabria, to be Director of the Federal Housing 
Finance Agency.
    Welcome to all of you. I see friends and family behind you, 
and I welcome them here today as well.
    Mr. Patel has been nominated to serve as the Assistant 
Secretary of the Treasury for Financial Institutions. In this 
role, Mr. Patel would be responsible for Treasury's efforts on 
legislation and regulation concerning financial institutions 
and overseeing the Terrorism Risk Insurance Program and the 
Community Development Financial Institutions Fund.
    Mr. Patel brings a wealth of knowledge on financial 
services policy and regulation, stemming from extensive 
experience in both the private and public sector.
    Since May 2017, he has served as Treasury's Deputy 
Assistant Secretary for Financial Stability Oversight Council, 
or FSOC, where he is responsible for overseeing FSOC staff and 
activities.
    Prior to joining Treasury, Mr. Patel provided financial 
policy and regulatory expertise as a partner at O'Melveny and 
Myers, including as Head of the Financial Advisory and 
Regulatory Practice, and served as senior advisor to Director 
Jeremiah O. Norton at the Federal Deposit Insurance 
Corporation.
    Mr. Harper and Mr. Hood have both been nominated to the 
Board of the National Credit Union Administration. The NCUA 
plays a critical role in overseeing and insuring a major 
segment of our Nation's community financial institutions--
federally insured credit unions.
    Each of these nominees comes with prior NCUA experience.
    Mr. Harper led the Office of Public and Congressional 
Affairs and served as the Chief Policy Advisor to the NCUA 
Chairman between 2011 and 2017. Before that, he had a long 
career focusing on the financial services industry on Capitol 
Hill, including as the staff director of the Subcommittee on 
Capital Markets, Insurance and Government-Sponsored Enterprises 
of the House Financial Services Committee, and as legislative 
director for former Congressman Paul Kanjorski.
    Mr. Hood currently serves as a corporate responsibility 
manager for JPMorgan Chase, where he manages partnerships with 
organizations that serve community development, civil rights, 
and the disability community. Between 2005 and 2010, Mr. Hood 
served as a member of the NCUA Board, including being elected 
as its vice chairman. Before that, he served in the Senior 
Executive Service as the Associate Administrator of the Rural 
Housing Service at the U.S. Department of Agriculture.
    Dr. Calabria is a leading expert on housing and mortgage 
finance and a respected Ph.D. economist. He has nearly 30 years 
of experience interacting with the housing market from the 
perspective of academia, Government, industry, trade 
associations, and think tanks.
    Dr. Calabria has dedicated the majority of his career to 
public service, including as Deputy Assistant Secretary of 
Housing and Urban Development, nearly a decade as a Senior 
Professional Staff Member to this Committee, and now as Chief 
Economist in the Office of the Vice President.
    Dr. Calabria has also worked for the National Association 
of Realtors, the National Association of Home Builders, the 
Farm Credit Council, the Harvard University Joint Center for 
Housing Studies, and recently at the CATO Institute, as 
director of Financial Regulation Studies.
    Over the course of his public service career, Dr. Calabria 
has a long history of working across the aisle to deliver 
meaningful, lasting reforms. He played a key role in a number 
of bipartisan legislative achievements, including the HEARTH 
Act, which strengthened our Nation's homelessness assistance 
programs, and HERA, the law which established FHFA and created 
the position to which he has been nominated.
    Throughout his career, Dr. Calabria has worked to champion 
market reforms that benefit consumers and enhance the safety 
and soundness of our housing finance system.
    At FHFA, Dr. Calabria would continue to work toward these 
objectives as regulator of Fannie Mae, Freddie Mac, and the 
Federal Home Loan Bank system. He would also be charged with 
protecting taxpayers, ensuring responsible access to mortgage 
credit, and serving out FHFA's statutory mandate to conserve 
and preserve the assets of Fannie Mae and Freddie Mac.
    Members of this Committee are incredibly cognizant that a 
full decade now has passed since the Government asserted 
control of the GSEs. After 10 years of market recovery, these 
mortgage giants remain stuck in conservatorship, with the 
taxpayers still on the hook in the event of a housing market 
downturn.
    It appears that the old, failed status quo is slowly 
beginning to take hold again, with the Government in some ways 
expanding its reach even further, entering new markets where it 
has never been before. The status quo is not a viable option, 
and finding a comprehensive solution remains a top priority for 
me.
    It is my view that action on housing finance reform is the 
prerogative of Congress, and my strong preference is for us to 
explore a legislative pathway forward. However, FHFA can also 
play an important role in helping us move forward to a more 
sustainable housing finance system facilitated by an engaged 
and strongly capitalized private sector.
    If confirmed, I look forward to working with each of these 
nominees on many important issues within each of their 
respective policy areas, including: housing finance and other 
issues critical to taxpayers and homebuyers; data privacy and 
security; capital formation and corporate governance; and 
continuing efforts from last Congress to provide meaningful 
relief to homeowners, consumers, and smaller businesses.
    Again, I thank you all for your willingness to serve and 
for appearing before our Committee today.
    Senator Brown.

           OPENING STATEMENT OF SENATOR SHERROD BROWN

    Senator Brown. Thank you, Mr. Chairman, for holding this 
hearing today on the nominations of Bimal Patel, Todd Harper, 
Rodney Hood, and Mark Calabria. Welcome, all four of you, to 
the Committee. Congratulations to the nominees. I look forward 
to their testimony and especially the responses from each of 
you.
    It is important that we consider new nominees in a timely 
manner. Mr. Chairman, I appreciate your including Mr. Harper in 
today's hearing.
    I want to remind my colleagues of both sides, although many 
more seem to be here on my side than yours. I want to remind my 
colleagues that four noncontroversial nominees to the Export-
Import Bank never received a vote on the Senate floor last 
Congress, while nominees that were sent up from the White House 
much later were in fact confirmed. We also continue to wait on 
the White House for nominees for the Democratic positions at 
SEC and FDIC.
    All of today's nominees have the opportunity to use their 
positions, if confirmed, to improve the lives of American 
families. They can make it easier for families to buy homes 
with mortgages they can afford. They can encourage credit 
unions to offer fair products to Americans left behind too 
often by our banking system. They can support policies that 
protect consumers and our financial system from risky 
activities at financial institutions.
    Mr. Patel has been nominated to the Treasury Department 
Assistant Secretary for Financial Institutions. He would take 
on a new role at Treasury that covers a broad range of policy 
issues affecting financial institutions.
    Mr. Harper and Mr. Hood have been nominated to the National 
Credit Union Administration Board, an agency they are both 
familiar with. Mr. Hood previously served as NCUA Board Member 
from 2005 to '10. Mr. Harper worked in the NCUA's Office of 
Public and Congressional Affairs, served as a chief policy 
advisor to the chair from 2011 to '17. Both nominees are good 
for us. Both nominees possess a deep understanding of credit 
unions and the issues that affect them.
    Finally, Dr. Calabria has been nominated to lead the 
Federal Housing Finance Agency. Most Americans probably do not 
know that FHFA even exists, but as the regulator of the GSEs, 
it affects whether Americans can get a mortgage, how much they 
pay for their mortgage, what kind of rental options they have. 
This is particularly true for low- and moderate-income families 
and for communities that have been abandoned by Wall Street.
    The housing problems facing families are clear. Rent is too 
expensive and in too many communities, particularly communities 
of color, there is not access to safe, sustainable mortgages. 
These are the problems that the next director should be working 
to address.
    Dr. Calabria has a long history in housing. He was a staff 
member on the Committee when Congress passed the Housing and 
Economic Recovery Act, creating FHFA, so he is well aware of 
the significant influence that he would have in that job.
    He has written extensively on the housing system, 
particularly on GSEs. These writings raise serious questions 
about the impact that Dr. Calabria's actions could have on the 
housing market if his views are in fact implemented.
    He has questioned the need for the 30-year fixed-rate 
mortgage around which there has been in our society from 
industry, homeowners, and Government alike, around which there 
has been mostly consensus. He has advocated against a 
Government guarantee for qualifying mortgage-backed securities. 
These positions contradict what we have heard from housing 
stakeholders time and time and time again who have appeared 
before this Committee.
    Dr. Calabria has called for repeal the GSEs' affordable 
housing goals, which help ensure that Fannie and Freddie are 
fulfilling their statutory missions to facilitate home 
ownership and rental housing for low-income families. In the 
last testimony he submitted to this Committee 4 years ago, Dr. 
Calabria said the two primary tools facilitating private-market 
home financing, the GSEs and FHA, ``should eventually be 
eliminated.'' Through the hearing this morning, I hope to 
understand if Dr. Calabria still believes that.
    When work has dignity, everyone can afford housing in their 
community. We know that is not true today. We are facing a 
housing affordability crisis. Wages are lagging behind the 
increase in home prices. One in four renters spends more than 
half their income on rent--one in four.
    Seven of the 10 fastest-growing occupations do not pay 
enough to afford to rent a modest one-bedroom apartment, let 
alone save for a downpayment. The next generation of potential 
homebuyers is saddled with the maximum of student loan debt.
    Borrowers of color were systematically shut out of the 
housing market for generations. They suffered some of the 
biggest losses during the financial crisis. They still face 
discrimination when trying to get a loan.
    Those are the challenges we must confront. We need a 
strong, mission-driven housing finance system working to make 
sure all Americans can afford safe and quality housing where 
they live and work and send their children to school.
    I will be listening to see how Dr. Calabria's plans align 
with these goals.
    Thank you.
    Chairman Crapo. Thank you, Senator Brown.
    Before I administer the oath, I would just respond on the 
movement of nominees. I appreciate Senator Brown's 
acknowledgement that this Committee has moved their nominees 
promptly, and we will continue to do so.
    There are many reasons why there has been delays on the 
floor moving nominees, but I hope that we can work together in 
this Congress to get this Committee's nominees all moved 
forward promptly as we get them to the floor.
    Senator Brown. Thank you, Mr. Chairman.
    I ask that you use your immense--I know it is immense--
influence with the White House to get them to move on some of 
the Democratic nominees that have not been offered up.
    Chairman Crapo. I will work with you on that.
    Senator Brown. Thanks.
    Chairman Crapo. And we will work to get all of them moved.
    At this point, would you all please stand. I will 
administer the oath.
    Please raise your right hand. Do you swear or affirm that 
the testimony you are about to give is the truth, the whole 
truth, and nothing but the truth, so help you God?
    Mr. Patel. I do.
    Mr. Harper. I do.
    Mr. Hood. I do.
    Mr. Calabria. I do.
    Chairman Crapo. There is one more question. Do you agree to 
appear and testify before any duly constituted committee of the 
Senate?
    Mr. Patel. I do.
    Mr. Harper. I do.
    Mr. Hood. I do.
    Mr. Calabria. I do.
    Chairman Crapo. Thank you. You may each be seated.
    Each of your written testimonies will be made a part of the 
record in their entirety.
    Before you begin your statements, I invite you, if you 
choose, to introduce anyone in your family or friends who is in 
attendance with you.
    I remind you, we have a 5-minute clock. I encourage you to 
pay very close attention to it. I say the same thing to my 
colleagues on the Committee when it is time for them to ask 
their questions.
    With that, Mr. Patel, you may proceed.

   TESTIMONY OF BIMAL PATEL, OF GEORGIA, TO BE AN ASSISTANT 
  SECRETARY FOR FINANCIAL INSTITUTIONS, DEPARTMENT OF TREASURY

    Mr. Patel. Thank you, Mr. Chairman.
    Chairman Crapo, Ranking Member Brown, and Members of the 
Committee, it is among the greatest privileges of my life to 
appear before you today.
    Thank you to the Senators and staff members with whom I 
have met in advance of this hearing. If I am fortunate enough 
to be confirmed, I look forward to meeting with and working 
with all of you on the important issues in the portfolio of the 
Assistant Secretary for Financial Institutions.
    My story begins with my parents, who are seated behind me 
today. Truthfully, neither my family nor I would be here today 
if it were not for the United States of America and all it 
stands for.
    My dad grew up as a peanut farmer in rural India. Raised in 
abject poverty, he was driven by an unshakeable determination 
to build a better life. Lacking resources, he immigrated to the 
U.S. primarily by boat. Here, he pursued higher education, 
ultimately earning his Ph.D. from NYU. He worked incredibly 
hard over a 50-plus-year career, including operating a number 
of small businesses in my home State of Georgia and teaching at 
Spelman College, a historically black all-women's college in 
Atlanta.
    Like my dad, my journey to being before you today was not 
without adversity. I was born 3 months premature, weighing in 
at just 2 pounds and 2 ounces. When I was 2 weeks old, doctors 
put me in a room with a baby that had pneumonia. I contracted 
the pneumonia, and my brain was damaged. Doctors told my 
parents that I would never grow past 4 feet tall, that I would 
be incapacitated, and that I would die. I am so fortunate that 
the doctors saved my life and that my parents, particularly my 
mom, always believed in me.
    The common thread between my dad's path and mine is that 
America made our improbable stories possible. Coming to America 
with nothing, my dad found opportunities that only our country 
provides to give my brother and me the chance to realize our 
own dreams.
    Likewise, America is probably the only country where a 
child with brain damage and cerebral palsy would be accepted so 
completely and encouraged so unfailingly to overcome such 
obstacles.
    This journey has motivated me to serve to try to repay the 
enormous debt I owe to our country, and I am proud to have 
accepted the call to public service when I have been asked.
    From 2012 to 2015, I served as a senior advisor at the 
FDIC, and I currently serve as the Deputy Assistant Secretary 
of the Treasury for FSOC.
    In addition to Government service, I have practiced law at 
O'Melveny and Myers, most recently as a partner and the head of 
the Financial Advisory and Regulation Practice. I represented 
depository institutions of all sizes, including many community 
banks and regional financial institutions.
    I have also advised on credit union structural and 
regulatory issues, and I have previously represented community 
interest and charitable organizations on a pro bono basis on 
matters relating to financial regulation.
    One consistent objective of my work has been assisting 
depository institutions to better serve their communities and 
to provide a broader array of services to a greater number of 
customers.
    I also love teaching and mentoring the younger generation, 
a passion that has led me to teach an undergraduate economics 
course on Banking Regulation at my alma mater, Stanford 
University, since 2014.
    Above all, the thing that has drawn me to financial 
services is the unique connection between our financial system 
and American families and small businesses like those my dad 
operated.
    At its best, our financial system is the force multiplier 
of our economy, linking savers to those who seek credit to 
pursue education, build businesses, and help their families to 
live better lives.
    Financial services also assist Americans in saving for 
retirement and in ensuring loved ones against difficult life 
events and losses.
    Thank you again for the opportunity and the honor of 
appearing before you today. I would be happy to answer any 
questions you have and would be humbled to earn your support 
for my nomination.
    Chairman Crapo. Thank you, Mr. Patel.
    Mr. Harper.

TESTIMONY OF TODD M. HARPER, OF VIRGINIA, TO BE A MEMBER OF THE 
           NATIONAL CREDIT UNION ADMINISTRATION BOARD

    Mr. Harper. Chairman Crapo, Ranking Member Brown, and 
Members of the Committee, thank you for inviting me to testify 
as a nominee to become a Board Member of the National Credit 
Union Administration. If confirmed, it would be an honor and 
privilege to serve.
    Moreover, I am especially grateful to those who have 
supported me in this process, including Chairman Crapo and his 
staff who moved quickly to consider me.
    In working over two decades for Congress and at the NCUA, I 
have gained broad knowledge of financial services regulatory 
matters and a deep understanding of many of the issues facing 
federally insured credit unions.
    But my commitment to public service really started with my 
parents. As professional educators and community leaders, my 
parents instilled in me a strong desire to give back to others. 
They also taught me the importance of finding common ground 
when making decisions.
    You see, before they fell in love and married, my mother 
was the president of the teachers union and my father was the 
superintendent of schools. One was a Democrat; the other, a 
Republican. Yet during negotiations, they would work together 
to find the best possible deal for both sides.
    In carrying their leadership lessons with me throughout my 
career, I have skillfully solved complex problems, reached 
bipartisan consensus where possible, and bridged differences 
between business and Government to produce results.
    As a senior advisor to former Congressman Kanjorski and 
staff director for the House Financial Services Capital Markets 
Subcommittee, I worked on every major financial services law 
from the enactment of the Gramm-Leach-Bliley Act in 1999 
through the passage of the Dodd-Frank Act in 2010.
    Most notable, however, is my long track record on credit 
union issues, which began when Congress considered and passed 
the Credit Union Membership Access Act. This bipartisan law 
responded to a Supreme Court ruling that threatened the long-
term viability of thousands of credit unions.
    Subsequently, I led staff in drafting the Credit Union 
Regulatory Improvements Act, which Congressmen Kanjorski and 
Royce first introduced in 2003. Their bipartisan bill aimed to 
strengthen capital standards, advance economic opportunity, and 
provide targeted regulatory relief, three goals that continue 
to guide me.
    During the financial crisis, I later worked to convene the 
first congressional hearing to explore the creation of the 
Temporary Corporate Credit Union Stabilization Fund and 
spearheaded staff efforts in the House to lower the costs of 
managing both the Corporate Stabilization Fund and the Share 
Insurance Fund.
    Most recently, I served as NCUA's senior executive for 
public and congressional affairs, as well as the chief policy 
advisor to former Chairmen Debbie Matz and Rick Metsger.
    My time at NCUA honed my management skills, and my 
professional experience have informed my regulatory philosophy. 
In my view, financial regulators need to be fair and forward 
looking; innovative, inclusive, and independent; risk focused 
and ready to act expeditiously when necessary; and 
appropriately engaged with all stakeholders to develop 
effective but not excessive regulation.
    An NCUA Board Member should also be well informed, ask 
tough questions, and make impartial judgments that balance 
competing viewpoints in a transparent manner. If confirmed, I 
am confident that I would do just that.
    My top priority, unquestionably, would be to protect the 
safety and soundness of federally insured credit unions and the 
Share Insurance Fund. To do so, I would focus on the issues of 
capital, liquidity, and cybersecurity. I would also prioritize 
the agency's consumer protection responsibilities, consistent 
with the law and work to support small credit unions, minority 
depository institution, and low-income credit unions. These 
institutions face the challenges of increased competition, 
limited resources, and difficulties in achieving economies of 
scale.
    To expand economic opportunity, I believe that the NCUA 
must also work to increase access to affordable financial 
services for the unbanked and the underbanked. This, too, would 
be a priority for my work.
    Once again, it would be a tremendous honor to serve as an 
NCUA Board Member, if confirmed. I would be pleased to answer 
any questions.
    Chairman Crapo. Thank you, Mr. Harper.
    Mr. Hood.

TESTIMONY OF RODNEY HOOD, OF NORTH CAROLINA, TO BE A MEMBER OF 
         THE NATIONAL CREDIT UNION ADMINISTRATION BOARD

    Mr. Hood. Thank you.
    With me today, I have seventh grade students visiting from 
Durham, North Carolina, from Durham Academy--Kayla, Michael, 
and Emma--along with their chaperone, Stephen Barringer.
    Chairman Crapo. Thank you. We welcome you.
    Mr. Hood. Chairman Crapo, Ranking Member Brown, and 
distinguished Members of the Committee, thank you so much for 
the opportunity to meet with you as a nominee to serve on the 
Board of the National Credit Union Administration.
    It is indeed an honor and a privilege to be nominated to 
the NCUA Board, and if confirmed, I will do my level best to 
fulfill the trust placed in me by the President and the Senate.
    I am especially grateful for strong support I have received 
from the Senators of my home State, Senators Thom Tillis and 
Richard Burr from North Carolina.
    While my parents are not here in person, I feel the warmth 
of their presence as they watch from heaven. I am thankful for 
them for bequeathing me with a value system that reflects 
humility, integrity, hard work, and compassion. These values 
have helped me make a difference in the lives of many people 
during my 25 years in the private sector and in public service.
    Through my education and work experiences, I have developed 
a broad knowledge of the financial services industry and have a 
keen understanding of the responsibilities of regulators. NCUA 
plays an important role both regulator and insurer to protect 
the savings of more than 115 million hardworking Americans in 
an industry with over $1.4 trillion in assets.
    If confirmed by the Senate, I will work diligently to 
ensure the continued safety and soundness of our Nation's 
credit union system in today's dynamic marketplace.
    I look forward to returning to NCUA and fulfilling the 
duties and responsibilities of a Board Member. While my 
paramount responsibility would be ensuring the safe and sound 
operations of federally insured credit unions, additional 
responsibilities will include ensuring that NCUA thoroughly 
applies all relevant consumer protections, creates 
opportunities to promote financial education and inclusion, and 
fosters an environment where low-to-moderate income and 
disabled individuals have access to affordable financial 
services and economic mobility.
    During the 4 years of my term at NCUA over a decade ago, I 
worked to fairly and thoughtfully implement the Federal Credit 
Union Act and maintain the safety of the National Credit Union 
Share Insurance Fund. My regulatory philosophy remains the same 
today as it was then that regulation needs to be effective but 
not excessive.
    My interest in serving vulnerable communities grew from my 
volunteer work as a missionary in Africa and later as a banker 
who became engaged in community and economic development. I 
still today fondly remember the joy and excitement I saw when a 
young woman who attended one of my bank's homebuyer education 
classes realized that home ownership could be more than just a 
dream for her and her family.
    After attending a series of homebuyer education classes, 
building a solid credit profile, and obtaining downpayment 
assistance, she was able to purchase her first home. She later 
showed her gratitude by inviting me to tour her new home and 
share a meal with her family.
    I recognize that credit unions are indeed a critical 
element in helping families achieve their American dream of 
home ownership, assisting entrepreneurs increasing small 
businesses, and providing the trusted mechanisms for families 
to save for the future.
    My nearly three decades of public- and private-sector 
experience have provided me with profound leadership 
opportunities. This includes the importance of building solid 
teams, paying close attention to the basics, and putting a face 
in the decisions you make. These experiences have provided me 
with a sound foundation for evaluating the policy issues facing 
the NCUA Board and the credit union industry.
    If confirmed by the Senate, I will return to NCUA with a 
risk-based and market-oriented mindset based on the following 
tenets. First, I will work to ensure that credit unions remain 
safe and sound institutions. Second, I will strive to be 
recognized as a fair and thoughtful regulator. Third, I will 
bring focused leadership and management to NCUA while seeking 
to ensure efficient operations and prudent use of resources. 
Fourth and finally, I understand the importance of disclosure 
and transparency, and I will work closely with all the Members 
of Congress to ensure the financial integrity of credit unions 
in today's ever-changing environment.
    Chairman Crapo, Ranking Member Brown, and Members of the 
Committee, I am deeply honored to appear before you this 
morning and would like to thank you again for your courtesy and 
consideration. I welcome any questions you may have.
    Chairman Crapo. Thank you, Mr. Hood.
    Dr. Calabria.

TESTIMONY OF MARK ANTHONY CALABRIA, OF VIRGINIA, TO BE DIRECTOR 
             OF THE FEDERAL HOUSING FINANCE AGENCY

    Mr. Calabria. Chairman Crapo, Ranking Member Brown, and 
distinguished Members of the Committee, I thank you for the 
opportunity to appear before the Committee today as the nominee 
for Director of the Federal Housing Finance Agency.
    I also want to thank the President for the trust and 
confidence placed in me for this nomination. Additionally, I 
want to express my deep appreciation to Vice President Pence. 
Serving as Chief Economist for the Vice President has truly 
been one of the greatest honors of my life. It perhaps rivals 
the other great privilege of my career, which has been to serve 
on the staff of this Committee.
    I take tremendous pride in having served on the Committee 
staff under the leadership of Senator Shelby. While GSE reform 
was eventually passed in 2008, the structure of that reform 
largely mirrors the Shelby bills of 2004 and 2005. If anyone is 
the legislative father of Federal Housing Finance Agency, it is 
Senator Richard Shelby.
    I believe being part of the process that resulted in the 
Housing and Economic Recovery Act of 2008 has also given me 
unique and valuable insights into the mission and history of 
FHFA. I well remember the shortcomings of its predecessors, the 
Office of Federal Housing Enterprise Oversight and the Federal 
Housing Finance Board.
    I was also extremely fortunate to serve on the Committee 
staff during the leadership of Senator Paul Sarbanes. While I 
did not always agree with Senator Sarbanes' policy positions, I 
have always strived to live up to the standards of 
professionalism and conduct he set for this Committee, 
particularly Senator Sarbanes' belief that it is indeed 
possible for us to disagree without being disagreeable.
    I take great pride in the fact that I continue to count a 
number of former Sarbanes staff as friends. Speaking of 
friends, it is also a true pleasure to be sitting at the table 
today with three gentlemen who I all consider friends.
    I also want to recognize my partner who is here with me 
today, Allison Randall. Allison's life-long work to end 
domestic violence has been a daily inspiration to me. I have to 
give a nod to the Committee here as well, since Allison and I 
met while working on the 2005 reauthorization of the Violence 
Against Women Act, whose Title VI, Housing Opportunities and 
Safety for Battered Women and Children, was the product of this 
Committee. And I take great pride in those efforts.
    I also want to--since I do not get to brag on my sister a 
lot and she is here today, I really do appreciate her 10-plus 
years of service with Loudoun County, Virginia's Office of 
Family Services.
    I am also very fortunate to, last, have my mother with me 
today, Janie Jones. Let me stress this is not my day; this is 
her day. I would not be sitting at this table if not for the 
many sacrifices made by the woman behind me. I could have not 
done anywhere near the job she did for many years as a single 
mother raising four children. She is an inspiration to me every 
day. It is also my mother's 20-plus years working----
    [Applause.]
    Mr. Calabria. Somehow managing while raising four children, 
my mother also managed to spend 20 years for the County of 
Fairfax, Virginia, and her work there instilled a deep respect 
for public service in me. However, since she also spent her 
time at Fairfax County working for the Comptroller's Office, 
she also instilled in me the unavoidable reality that whatever 
the goals of Government, the numbers have to add up.
    And while the primary focus of FHFA has been on our 
Nation's mortgage markets, the last piece of legislation I was 
privileged to work on for this Committee was the Homeless 
Emergency Assistance and Rapid Transition to Housing Act of 
2009. It was a particular honor working with Senator Jack Reed 
and his staff, particularly my good friend Kara Stein who 
clearly has gone on to bigger and better things, to strengthen 
our Nation's homelessness assistance programs to better service 
homeless families, especially those living in rural America.
    Homelessness and rural housing are only a few of the areas 
I have worked on. During my service on the Committee staff, I 
worked on over 20 pieces of legislation that became law, mostly 
in the areas of housing and mortgage finance, most of which 
passed this Committee unanimously. And I believe we can get 
back to that.
    In addition to my Committee experience, I briefly oversaw 
HUD's regulation of the mortgage market, primarily under the 
Real Estate Settlement Procedures Act.
    I have also spent a number of years performing economic 
research on the housing and mortgage market for two of the 
largest housing industry trade associations.
    I have spent the last 20-some years researching and writing 
about our Nation's housing and mortgage markets. I believe I 
have successfully mastered not just the economics of our 
housing and mortgage markets, but also the legal and policy 
details. I believe that particular combination of skills and 
strengths makes me uniquely qualified to serve as the director 
of FHFA.
    As perhaps Committee Members are aware, I have extensive 
writings in the area of mortgage finance. I have on occasions 
expressed strong opinions on the history and future of our 
mortgage finance system. I have most definitely expressed, and 
express here today, a frustration with the current state of our 
mortgage finance system and the very strong need for reform.
    Despite that frustration, I want to very clearly state to 
this Committee that, if confirmed, my role as the Director of 
FHFA is to carry out the clear intent of Congress, not to 
impose my own vision.
    I have even brought with me here today my, as you can see, 
dog-eared, 10-year-old copy of HERA that I got here as a 
Committee staffer, and I can guarantee you that whatever the 
policy question, the first thing I will do is say to myself, 
``What does the statute say?'' That is my guiding principle.
    Let me emphasize and close that we are truly, in my 
opinion, at a critical juncture in housing finance policy. As 
the Ranking Member alluded to, families across America face 
heavy burdens making their rent or mortgage payment in many 
cities, towns, and States, as well as the unique barriers we 
see faced in our rural and tribal communities.
    I also strongly believe that shelter is one of the most 
critical of basic human needs facing any family. Whether it is 
rented or owned, American families need an affordable place to 
call home.
    I thank the Committee for your consideration. I look 
forward to your questions.
    Chairman Crapo. Thank you, Dr. Calabria, and I will start 
with you and work back across the table through my questions.
    As you know, Doctor, housing finance reform is a top 
priority for me. It remains my view that it is the role of 
Congress to deliver the solution, and we are currently 
exploring a pathway forward.
    My priorities are to establish stronger levels of taxpayer 
protection, preserve the 30-year fixed-rate mortgage, increase 
competition among mortgage guarantors, ensure a level playing 
field for lenders of all sizes, and promote access to 
affordable housing.
    If confirmed, can you commit to working with Congress to 
enact legislation that is consistent with these principles, and 
would you please add what are your priorities?
    Mr. Calabria. Mr. Chairman, first, let me commend you on 
your recent introduction of a framework and principles. I share 
all of those principles. I believe that a number of critical 
elements need to take place in reform. For instance, I believe 
one element that we all share is the greater need for 
competition. This is a perfect example of where the regulator 
cannot make these changes. For, ultimately, there to be open 
charters, open competition is something Congress has to make.
    So the very broad changes I think that need to happen in 
mortgage finance system have to be done by Congress, and I 
would pledge to work in consultation and partnership with this 
Committee moving forward.
    I do believe that it is, indeed, possible for us to have a 
well-capitalized, strong system that preserves the 30-year 
mortgage and does provide access to affordable housing. I think 
we can achieve those goals, and I believe we can do it in a 
bipartisan manner.
    I will remind the Committee, the first floor vote, I 
believe, on HERA, we got 84 votes, I believe. So I know that we 
can get there.
    Chairman Crapo. Well, thank you, and I agree with your 
assessment. And I look forward to working with you and your 
work with us to help us get to that point.
    For Mr. Hood and Mr. Harper together, a recent Washington 
Post article raised concerns over NCUA's expense reimbursement 
policy. It is my understanding that the NCUA's reimbursement 
policy may not be aligned with that of other Federal financial 
regulators.
    Mr. Hood and Mr. Harper, can you both commit to reviewing 
the NCUA's expense reimbursement policy and making updates to 
better align it with the policy of other Federal financial 
regulators, as appropriate?
    Mr. Hood. Thank you, Chairman Crapo, for that question, 
and, yes, sir, if confirmed by the Senate, I pledge to you and 
the Members of this body that on day one, I will work with 
agency staff and leadership to, one, understand the current 
reimbursement policy and take every step with them to ensure 
that it is in alignment with the other financial regulators.
    I recognize that those of us in public service must 
continually garner public trust from the American people.
    Chairman Crapo. All right. Thank you.
    Mr. Harper.
    Mr. Harper. Yes, Senator, I would certainly work on that, 
starting on day one. It is important for me that the rules be 
clear so that people understand them, that they be consistent 
across regulators, and finally that they be communicated to 
those who follow them so that they can follow them. And those 
would be my guiding principles as I worked on this issue as 
well, if confirmed.
    Chairman Crapo. Thank you.
    And, Mr. Patel, the Terrorism Risk Insurance Act of 2015, 
or TRIA as we call it, expires at the end of 2020. Getting 
terrorism risk insurance right is important in order to protect 
taxpayers and limit the economic and physical impact of any 
future terrorist attack on the United States.
    As the Committee undertakes the program's reauthorization, 
we will work to identify whether improvements can be made to 
TRIA, such as increasing the recoupment and coinsurance levels.
    The Office of Financial Institutions is responsible for 
overseeing TRIA. Mr. Patel, if confirmed, can you commit to 
working with Congress to enact legislation to achieve this 
balance, and do you have any priorities in that context?
    Mr. Patel. Mr. Chairman, thank you for the question. Let me 
start out by saying I hope that we never have another terrorist 
attack on U.S. soil. I understand how important it is to 
address the economic harms that can come from these attacks, 
and if confirmed, I look forward to working with you, your 
team, the Committee, and the Congress on these important 
issues.
    With respect to my specific priorities in this portfolio, 
these issues are not in my current portfolio. I am, however, 
broadly familiar with some of the important debates surrounding 
TRIA reauthorization, including program triggers, insurer 
deductibles, and as you say, recoupment amounts.
    So, if confirmed, I will work with you on all of those 
issues.
    Chairman Crapo. Thank you very much.
    Senator Brown.
    Senator Brown. Thank you, Mr. Chairman.
    Dr. Calabria, in 2012, following the financial crisis, in a 
blog you wrote for CATO on a CATO website, you referred to 
homeowners who might benefit from principal reduction as 
``deadbeats.'' That year, a quarter of homeowners in my home 
State of Ohio owed more on their mortgages than their homes 
were worth. Last year, two cities in Ohio were on the list of 
the 12 areas with the largest number of underwater homeowners. 
A number of Senators on this Committee--Senators Sinema, 
McSally, Perdue, Smith, Cortez-Masto, Toomey, Van Hollen, and 
Warner--also had cities on that list. What makes these 
borrowers deadbeats?
    Mr. Calabria. First of all, Senator, let me emphasize I, in 
no way, meant to have a broad generalization of all borrowers. 
I think we do need to be able to figure out which borrowers can 
pay and which borrowers cannot pay.
    I will say from my own personal upbringing that if you are 
someone who is raised by a divorced single mother and those 
promised child support payments do not show up and you see 
questions about whether an electricity bill is going to get 
paid, you can sometimes develop strong feelings about those who 
do not honor their obligations and not keep their promises.
    Senator Brown. Well, I get that. I mean, you have a lot of 
skill in answering questions like that. But, I mean, if the 
housing market----
    [Laughter.]
    Senator Brown. I mean, you have been to this Committee.
    If the housing market were to face another crisis--and I do 
not want to make it personal in that if someone had referred to 
your family if they could not make their mortgage payment--I 
live in--as you have heard me say in this Committee, I live in 
ZIP Code 44105. That ZIP Code in 2007 had more--the first half 
of that year had more foreclosures than any ZIP Code in the 
United States, and there is no way they were all deadbeats.
    Mr. Calabria. And I----
    Senator Brown. OK. If the housing market were to face 
another crisis, would you support FHFA offering any help to 
borrowers, which you sort of dismiss with that term 
``deadbeats''?
    Mr. Calabria. I absolutely believe it is appropriate for 
FHFA to offer assistance. I do believe we should recognize and 
applaud the efforts of Ed DeMarco and the wide-based 
forbearance that was done by FHFA during the crisis.
    I think you need to approach different borrowers 
differently. There are some borrowers who might be facing a 
shock in income because they have lost a job, but I do think 
for those borrowers who can pay, I think it is important that 
our mortgage market sets an expectation of those who can pay 
should pay, and we should focus our efforts on those who cannot 
pay and who need assistance.
    Senator Brown. Well, thank you. I am not sure you made that 
distinction in your choice of words then.
    Last month in Politico, Comptroller Otting said there is a 
clear mission that is outlined by the Treasury and the White 
House what they want to accomplish in FHFA that he will try to 
move down the rails before you are confirmed and you will 
continue that mission.
    Just 2 weeks later, Otting reportedly told FHFA staff that 
you and Treasury had signed off on a path for the GSEs. What 
exactly is he referring to, Dr. Calabria?
    Mr. Calabria. Senator, if I can make a clarification on the 
last part as well. I think it is important to keep in mind the 
context of blogs and posts. I mean, a typical 2-, 300-word blog 
does not tend to have a lot of nuance. I would be the first to 
say that, and I would really encourage folks to look at a 
broader range of what I have said.
    Senator Brown. As I would too, Dr. Calabria, but in Trump's 
America, we see a lot of name calling. And I am hopeful that as 
a Trump nominee, you will sort of back off that part of your 
life to label people--I do not know what that was about, but to 
label people like that.
    But go on to the next question with Mr. Otting.
    Mr. Calabria. I appreciate that.
    So let me first be very clear. Despite being a member of 
the Vice President's office, I am here today only speaking for 
myself. I have not heard Director Otting's words.
    My read of what I believe he said, which again, I should 
urge is just my read--my read of what he said is to convey a 
sense of urgency to the FHA staff. What I believe he has 
referred to in terms of me signing off, I believe he was 
referring to my longstanding, loud support for reform, and I 
believe that what he was trying to convey to the staff was 
essentially a pep talk of we will move forward.
    I think it is important to keep in mind this is an agency 
for the last 10 years where the staff do not even know whether 
this agency is going to be around in a couple years. That 
really undermined staff morale. So, in my opinion, I believe 
Mr. Otting was trying to essentially raise staff morale and say 
we want to try to get to--and Mark is committed, if confirmed--
to getting to a spot where this agency and the staff have 
certainty in their lives.
    Senator Brown. Thank you.
    In my office when we talked, you acknowledged that you had 
left earlier and did not have these conversations, but before 
you were selected, did you recommend specific things to the 
Administration on the best path forward for GSEs?
    Mr. Calabria. As you alluded to, Senator, once it became 
clear that I was going to be the nominee or the choice for the 
Administration, I pulled myself out of it.
    Senator Brown. Before that. Before that.
    Mr. Calabria. There were conversations I was involved in, 
such as, for instance, in December of 2017, you remember the 
amendments that allowed a $3 billion cushion to be built up by 
the GSEs. I was part of those conversations.
    Senator Brown. And you recommended what? If you are going 
to be confirmed, we need to know what you think and what your 
policies will be.
    Mr. Calabria. This is an example of where I supported 
allowing a modest capital buffer so that we would not have to 
force a draw, partly because, of course, the impact of tax 
reform and the deferred tax loss as being held by the GSEs.
    Senator Brown. Could I get one more question, Mr. Chairman? 
I am always doing this. All right.
    Chairman Crapo. As the Ranking Member, you can, but do not 
start a pattern.
    Senator Brown. OK.
    Chairman Crapo. Thanks.
    Senator Brown. I inevitably will, but I apologize.
    [Laughter.]
    Chairman Crapo. Well, noted. I give notice to the other 
Members, I will remind you that you do not have that right.
    [Laughter.]
    Senator Brown. Thank you, Mr. Chairman. Can I have two 
questions?
    Chairman Crapo. No.
    [Laughter.]
    Chairman Crapo. And this will be a short one.
    Senator Brown. OK. It will be a short one. I do not know. I 
am not sure about the answer.
    You have advocated eliminating the affordable housing 
goals. Is this your view, and do you similarly support 
elimination of the GSEs' duty to serve?
    Mr. Calabria. My concern about the affordable housing goals 
in the past have taken place in the context of two large 
institutions with essentially zero capital. I do believe we can 
get to a spot where we can have risk-taking via affordable 
housing goals if we can have an appropriate regulatory 
structure that has capital backing those goals.
    I am very concerned about any large financial institution 
where we push it to take additional risk without the 
appropriate regulatory structure in place.
    My comments in the past about getting rid of the GSEs is 
getting rid of the basic model of privatized gains and 
socialized losses. I believe all large financial institutions 
need to be ``well-capitalized, well-managed, and well-
regulated,'' a phrase I have heard a number of times from 
Senator Shelby.
    I believe it is fair to say that GSEs were none of the 
above before the crisis, and so my concern is this fundamental 
model of heads, the executives, of Fannie and Freddie walk out 
with lots of money, and the rest of us get held in the bag.
    I want these entities to be good corporate citizens. I want 
them to be the model of how other corporations should want to 
behave.
    Chairman Crapo. Thank you.
    Senator Shelby.
    Senator Shelby. Mr. Chairman, I guess a former chairman 
would not get that extra time. The current ranking guy would.
    Chairman Crapo. Sorry.
    Senator Shelby. I will not ask for it.
    [Laughter.]
    Senator Kennedy. The Chairman of Appropriations would, 
though.
    [Laughter.]
    Senator Shelby. Thank you, Senator Kennedy.
    Chairman Crapo. Yeah. Thanks, Senator Kennedy.
    Senator Shelby. But we are in the Banking Committee.
    Thank you very much.
    All of you, I believe, are eminently qualified for your 
positions.
    Mr. Patel, you have a compelling story. I had a good 
conversation with you in my office. I intend to support you. I 
intend to support Mr. Harper. I intend to support Mr. Hood, and 
I certainly intend to support Dr. Calabria, who worked right 
here with us, hand in glove, day after day, and I believe in a 
bipartisan way.
    He mentioned Senator Sarbanes when he was Chairman and when 
he was ranking when I was Chairman.
    I do not know--and I associate my remarks with the Chairman 
Crapo here about his background and his experience. Dr. 
Calabria is eminently qualified for this position. I do not 
know of anybody--I have been on this Committee--this is my 33rd 
year--that would be more qualified and more concerned and more 
diligently than Mark Calabria. We have been through this.
    I would like to pose one question to you. What do you 
consider to be the risk and cost of failing to reform the GSEs, 
which we have struggled with? And we all know they play a 
prominent role in our housing market. What is the risk of 
failing to go forward after 10 years of conservatorship?
    Mr. Calabria. Well, foremost, Senator, while I believe that 
a number of sound economic policies have been put in place that 
have created record job creation, I also believe that we have 
not cured the business cycle. We have not cured the housing 
cycle, and I believe if we do not reform the GSEs that there 
will be significant losses. That we could be looking at tens of 
billions, if not hundreds of billions of taxpayer losses.
    I believe we potentially put a tremendous number of 
families through the same sort of struggles and foreclosures 
and losses to their wealth that we saw last time.
    So, if I am driven by anything, it is fundamentally having 
served on this Committee and lived through the crisis and not 
ever wanting us to do that again. It does devastating things to 
families. It does devastating things to taxpayers.
    And I think, last, it is important to keep in mind, I 
believe the bailouts of Fannie and Freddie as well as other 
institutions really bred a lot of deep cynicism in the American 
public about our political and financial system, and I believe 
for us to heal some of the divides in our country, I believe we 
must address these issues. And I believe another set of large 
financial bailouts would just be devastating to the public 
psyche.
    Senator Shelby. Thank you.
    My time is good. Thank you, Mr. Chair.
    Chairman Crapo. Thank you.
    Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Dr. Calabria, I appreciated our visit together in my 
office.
    I want to follow up, though, on Senator Brown's questions. 
My home State of New Jersey had the third highest foreclosure 
rate in the country, with nearly 8 percent of homes in 
foreclosure in 2013.
    New Jersey families are not deadbeats. They worked hard. 
They played by the rules, and tens of thousands of them lost 
everything when the crisis hit.
    So why is it that your writings mysteriously omit any blame 
for the true deadbeats of the crisis, the corporate deadbeats, 
the banks that played fast and loose, steering borrowers into 
risky products; the investors that demanded higher and higher 
returns, no matter the impact on the economy? I see no mention 
of that.
    Mr. Calabria. Senator, I would be happy to submit 
publications I have written on the record that have been very 
critical of banks.
    Let me say I take tremendous pride in having been part of 
the Shelby team when we stood against the bank bailouts, and I 
wish the rest of the country had listened. There was a better 
way to do this than the bank bailouts.
    I believe entities like Lehman got what they deserved, and 
I have been very vocal in many things I have written. I am 
deeply concerned that ``too big to fail'' is still a problem 
that faces our financial system, and that many financial 
institutions lack accountability. So I share that concern, 
Senator.
    And I will remind you that FHFA sits on FSOC, and I will 
take financial stability and accountability for our largest 
financial----
    Senator Menendez. You may have had the view that bailing 
them out was not the way to save the overall system, but I do 
not see any of your writings calling them ``deadbeats'' at the 
end of the day for driving people into products and investors 
who wanted high rates of return at the end of the day.
    But let me turn to something else. Let me move to another 
key issue for New Jersey and several other States represented 
by Members of both sides of this Committee.
    You have proposed immediately reducing loan limits to 
precrisis levels, with further annual reductions of $50,000. 
You have gone so far as to say that loan limits should be 
reduced to $200,000.
    Fourteen of New Jersey's 21 counties have median home 
prices above $200,000, meaning tens of thousands of people in 
New Jersey could be locked out of purchasing a home under your 
approach.
    In 2017, 70 percent of new mortgage loans in New Jersey 
were greater than $200,000.
    So I know you are an economist, and I presume you have done 
quite a bit of research on the numbers here. So let me ask you. 
If you were to reduce conforming loan limits to, say, $200,000, 
what percentage of those mortgages do you think would be pushed 
out of the market altogether?
    Mr. Calabria. First, Senator, let me clarify that the 
setting of loan limits is in statute. It is mechanical. It is 
not within the discretion of FHFA to set the loan limits, so I 
would have no power, if confirmed, to change the loan limits. 
That is appropriately in the purview of Congress. I think that 
is the appropriate place for it to be.
    Senator Menendez. Well, let me say--you said this to me 
yesterday, so I did a little research. And I am glad to hear 
that that is your reading of the statute. However, I have a 
different understanding of what your authorities would be.
    So that being said, since you have said this on the record 
here as well as you said it to me privately, if you somehow 
found out in the future that you do have the authority to 
reduce conforming loan limits, would you do so in accordance 
with what you have espoused in your writings?
    Mr. Calabria. Senator--well, not knowing of a possible 
legal argument for reducing the loan limits--I certainly have 
heard commentators out there argue that the vast powers of a 
conservator allow you to reduce loan limits. My belief is that 
is an incorrect reading of the powers of a conservator, and 
that the powers of conservator do not include reducing loan 
limits. The powers of a conservator have to conserve the assets 
and preserve the assets of the companies. I believe reducing 
the loan limits would be inconsistent with the objectives of a 
conservator.
    So I think it is important to not prejudge. If someone 
brings me new legal information, I have to be able to evaluate 
that in a new sense.
    I can commit to you today I know of nothing in front of me 
that would suggest that the loan limits would be lowered.
    Senator Menendez. So to satisfy my concerns, would you 
follow up in writing to the Committee your analysis as to 
whether you have authority to reduce conforming loan limits and 
also follow up and provide analysis on the specific impacts to 
pricing and mortgage rates in a State like New Jersey, for 
example, if loan limits were to be reduced to the precrisis 
levels or to $200,000? This is critical. Fourteen of my 21 
counties are over this as median. Then, at the end of the day, 
if the views that have been espoused by you in the past, if you 
have that power, that is going to have a direct impact on 
thousands of potential homeowners in my State and in other 
States across the country.
    Mr. Calabria. Understood.
    Senator Menendez. You will do that?
    Mr. Calabria. Yes, Senator.
    Senator Menendez. Thank you.
    Chairman Crapo. Thank you.
    Senator Toomey.
    Senator Toomey. Thanks very much, Mr. Chairman.
    I want to thank each of the panelists we have today, the 
nominees, because I think we have got a slate of just 
terrifically qualified people with amazing life stories, and I 
am grateful to each one of you for your willingness to serve. 
And I think you are going to add a tremendous amount of 
personal knowledge and expertise and judgment to some really 
challenging circumstances, so thank you for that.
    Dr. Calabria, I want to sort of ask you to share some 
thoughts with us because I think about Fannie and Freddie as a 
huge embarrassment for Congress. The fact that the two 
institutions at Ground Zero of the financial crisis, which 
deserve a very significant share of the blame for the debacle 
that occurred, they have been allowed to grow. Their market 
share is enormous. By any measure, they are enormous financial 
institutions. They have no capital to speak of. They are in a 
conservatorship, and we have done nothing to fundamentally 
restructure these giant behemoths other than to sweep their 
profits into the Treasury every quarter, leaving virtually no 
cushion.
    I share your view about a $3 billion capital buffer, but 
let us be clear. That is trivial in the scheme of things.
    So this, I think, is a big challenge. It is long, long 
overdue that we address, and so I would just be grateful for 
your thoughts, your advice on what we ought to do about this. 
You will have certain powers and actually significant powers in 
your role, but you pointed out correctly that, for instance, 
creating a mortgage finance market where there is greater 
competition and a much more robust role for private-sector 
lenders, that probably requires legislation.
    So help us in how we ought to think about moving forward on 
this challenge, if you would.
    Mr. Calabria. Thank you, Senator, and I really would agree 
and emphasize that while I do believe that the regulator can 
make a number of changes that can try to get the GSEs on a 
stable footing for the next inevitable downturn so that we can 
minimize losses and minimize damage done to families, I do 
believe the fundamental things that need to be changed by the 
system have to be changed by Congress. And I would urge that 
those be done in a bipartisan manner within Senator Crapo's 
framework and many others that talked about this.
    Foremost, I believe we need an open, competitive market. 
There is certainly part of me that I will say that has a 
suspicion of monopolies and duopolies. I tend to think that if 
we are going to--I do not like to see exclusive privileges 
handed out. I think anybody who meets these charters should be 
able to get them. So, again, I think we should, as an 
assumption, be suspicious of duopolies.
    I think, ultimately, it is not only important that we 
should be suspicious--because that we know that monopolies and 
duopolies tend not to pass on all their benefits to consumers 
but tend to capture a large amount of those benefits for 
themselves--so that consumers benefit from competition.
    But I think just as importantly, as we have seen during the 
financial crisis, having a competitive market will allow us to 
better address the too-big-to-fail nature of these entities. If 
we have got a dozen of these entities, we are less captive to 
having to bail any one of them out, and I think that is 
important to bring some market discipline and some 
accountability.
    So, A, competition is a big part of this. B, I think having 
an explicit model where we know--where we get away from implied 
guarantee. We know what is guaranteed. It is explicit. It is on 
budget. It is clear.
    I think the best analogy that is a model that we know that 
works, if you think about how the FDIC works, there is an 
explicit set of creditors who are protected. There are 
obligations. There is competition. In theory, any depository 
should be able to fail and go out of business in orderly 
manner. I really think that that is broadly the kind of model 
we should be looking at.
    And I will last end with--because I still occasionally have 
that voice of Senator Shelby in my head saying, ``Never see an 
institution fail that was well-capitalized, well-managed, and 
well-regulated,'' and I believe that is our objective is to 
make sure that these entities are well-capitalized, well-
managed, well-regulated. And it is certainly worth remembering 
the amount of leverage of these companies go into the crisis. 
They were guaranteed to fail. It was an inevitability. It was a 
guarantee.
    And I do--and I was the first to say that a lot of my 
motivation is having to solve this before the crisis, where it 
was very difficult to get anybody to take it seriously. So I 
wish we had fixed it then, and I hope we can fix it now, so 
that we do not find ourselves back in this situation.
    Senator Toomey. Thanks very much.
    Thanks, Mr. Chairman.
    Chairman Crapo. Senator Tester.
    Senator Tester. Thank you, Mr. Chairman and Ranking Member 
Brown, for the hearing today.
    I want to thank all the nominees for being up here. I 
appreciate it.
    Dr. Calabria, there are some things you say that I agree 
totally with, and a lot of other stuff, especially in your 
writings in the past, have been disturbing.
    For example, you have essentially blamed the Federal 
Reserve for the financial crisis and said that the housing 
crisis was not a result of predatory lending by lenders. Do you 
still stand by that?
    Mr. Calabria. Well, Senator, from a financial--well, first 
of all, I appreciate you reading my work.
    Senator Tester. Absolutely.
    [Laughter.]
    Mr. Calabria. And I do want to--and I do want to emphasize 
that many things are in the form of blog posts and op-eds, and 
again, 2- or 300 words sometimes lacks nuance.
    Senator Tester. Yeah, but sometimes it shows truthfulness.
    Mr. Calabria. Absolutely. And I stand by all of it, but let 
me clarify.
    So, certainly, in terms of monetary policy, I think from a 
financial stability perspective, anytime we see a financial 
system where you have got years on end, where the interest--
real interest rates are negative, I----
    Senator Tester. Yeah. But let us go back to the original 
question.
    Mr. Calabria. You asked----
    Senator Tester. And that was the blame was put on the 
Federal Reserve, not on the predatory lenders. Do you still 
stand by that?
    Mr. Calabria. I believe there were a large number of 
parties to blame, including predatory lenders.
    Senator Tester. OK.
    In the past, you have suggested that we raise guarantee 
fees charged by Fannie and Freddie to pay down the debt. Is 
that still your position?
    Mr. Calabria. The decision on whether we use guarantee fees 
for anything other than credit ultimately lies with Congress.
    Senator Tester. I got that, but what is your position?
    Mr. Calabria. I do not believe it is within the authority 
of FHFA to do that, so I do not believe it is a decision I have 
power to----
    Senator Tester. But if you had the ability to make that 
decision or the recommendation to other people to do that, 
would you say let us raise the G-fees and you need to pay down 
the debt? It is a simple philosophy. That is all.
    Mr. Calabria. Understood. And I will note that that is a 
proposal that the Congressional Budget Office has made.
    Senator Tester. And what is your feeling?
    Mr. Calabria. My feeling is I take the long-term debt 
situation very serious.
    Senator Tester. So do I. What is your feeling on using G-
fees to pay down the debt?
    Mr. Calabria. I do not think it would get us there would be 
my--would be my feeling. I do not think we could make a very 
large impact on the debt that way, and I think we have to look 
at a number of other avenues to look at that.
    Senator Tester. So that is not still your position?
    Mr. Calabria. That is correct.
    Senator Tester. OK.
    Do you believe that a 30-year fixed-rate mortgage can exist 
without Government backing?
    Mr. Calabria. I believe the history of the 30-year fixed-
rate mortgage has been popularized and created first by 
guarantees provided by the Federal Housing Administration.
    Senator Tester. That is OK. I do not need the history. I 
just need to know--I just----
    Mr. Calabria. Well, I think this is important.
    Senator Tester. I know. I know it is important, but I just 
need to know your philosophy.
    Mr. Calabria. Senator, I will absolutely, if confirmed, 
guarantee you today that at the end of my 5-year term, the 30-
year fixed-rate mortgage will be widely available. Guarantee.
    Senator Tester. OK. Do you believe in Government guarantee 
of that fixed-rate mortgage?
    Mr. Calabria. I believe we will continue and should have 
the Government guarantee behind that mortgage.
    Senator Tester. OK. But you are not too gung-ho about the 
Government guarantee portion, at least that is what writings in 
the past have indicated?
    Mr. Calabria. I believe that any sort of guarantee provided 
creates moral hazard, and we have to have an appropriate 
regulatory structure to manage that moral hazard. And my 
concern, fundamentally in the past, is that we have lacked the 
appropriate regulatory structures to control the risks that are 
there.
    Senator Tester. OK.
    Mr. Calabria. I believe we can take all sorts of risks if 
we have a structure that supports it.
    Senator Tester. OK.
    Dr. Calabria, I--and I apologize for saying ``Mr. 
Calabria,'' if I have a few times.
    Dr. Calabria, most of the stuff that I have read that you 
have put forth would indicate that you are the last person in 
the world that would want this job, and I think the last 
sentence of your opening--the last page or two of your opening 
actually referred to that. It said, ``Regardless of what I have 
said in the past, I still want the job.''
    I farm in my real life, and if I hated farming, I guarantee 
you I would not be in that business. Why do you want this job?
    Mr. Calabria. Senator, you know, as you heard from my 
comments regarding the work of my mother, sister, my family, if 
qualified people are not willing to stand up and take public 
service and take responsibility, it is not----
    Senator Tester. But if in your gut you want this agency to 
go away----
    Mr. Calabria. Senator----
    Senator Tester. ----or at least be significantly 
restructured, we got a problem.
    Mr. Calabria. Senator, as a staff member of this Committee, 
I helped create FHFA. I am proud of the work of FHFA. FHFA is 
an absolutely necessary agency. In fact, I want to raise the 
stature of FHFA.
    I remember how the employees at its predecessor felt, 
OFHEO. I remember how coward they were in their inability to 
stand up and be able to do effective financial regulators.
    I remember repeatedly Senator Shelby using the term 
``world-class regulator.'' I am committed to seeing the work of 
HERA finally completed and to turning FHFA into a world-class 
regulator.
    Senator Tester. Thank you, Dr. Calabria.
    Thank you, Mr. Chairman.
    Chairman Crapo. Thank you.
    Senator Rounds.
    Senator Rounds. Thank you, Mr. Chairman.
    Dr. Calabria, I am enjoying the back-and-forth here a 
little bit, but I want to bring it back down a little bit. And 
let us just have a little conversation here.
    Number one, do you think that 30-year mortgage is an 
important item to have?
    Mr. Calabria. Absolutely. I have one myself. I would like 
to keep it.
    Senator Rounds. OK. Second of all----
    [Laughter.]
    Senator Rounds. Well, getting this job might just make that 
possible.
    What about--look, when it comes to a 30-year, is there any 
question in your mind but that a secondary market for those 
securities--is there any question in your mind that that is not 
an important item to have?
    Mr. Calabria. I believe we do need a vibrant secondary 
market and a 30-year mortgage, and really to clarify some of 
the questions that have been raised, in the past I have 
expressed a frustration that we saw this during the crisis. We 
saw this when we tried to get the HERA. That too often someone 
would just invoke the 30-year mortgage and say, therefore, we 
cannot touch any element of the existing system and no reform 
is possible.
    I believe what we need to do is we need to roll up our 
sleeves, and we need to get our hands dirty and say what in our 
system is crucial and critical to the 30-year mortgage and what 
can we change.
    So, again, my frustration in the past has been by this sort 
pushback that somehow we are not supposed to talk about fixing 
the system if we could just, you know, invoke 30-year mortgage, 
end of conversation, we have to take the system as it is.
    Senator Rounds. Yeah. Just think about what would have 
happened if we would have taken the same approach with Social 
Security and we were fixing it on a year-to-year basis so that 
it would actually survive, so that we actually could guarantee 
the next generation that it would be there.
    The same kind of a thing comes in when we talk about a 30-
year mortgage or the opportunity for some sort of a guarantee, 
so that that asset or that loan can be sold in a secondary 
market.
    These GSEs have done that in the past, but there has been a 
real problem when Congress sometimes meddles and suggests that 
things should be done.
    When you talk about underwriting and understanding 
standards, would it be fair to say that you simply believe that 
underwriting standards are a critical part of maintaining long-
term successes of any mortgage of any size?
    Mr. Calabria. Absolutely, Senator. I am a very ardent 
believer in home ownership. I would go as far to say I view 
home ownership as one of the fundamental planks of a free 
society. I think it is critical to us, but I believe that home 
ownership has to be sustainable. I believe we cannot just 
funnel families through that are not going to survive home 
ownership and are going to be worse off because of it, what it 
devastates to do to them. So, to me, I want to make sure where 
we are going, sustainable home ownership.
    And I will last note I know Senator Shelby remembers every 
time the Committee tried to do mortgage finance reform before 
the crisis. We had parties out there saying, ``Oh, this is a 
bill that destroys Fannie and Freddie and shut down Fannie and 
Freddie.'' We know the truth was that Senator Shelby's efforts 
and the efforts of this Committee before the crisis, we are 
trying to avoid Fannie and Freddie from getting in trouble and 
try to make sure that they were there.
    And so let me be very clear. I am the last person who is 
trying to disrupt the mortgage market. I am trying to stop the 
mortgage market from disrupting itself.
    Senator Rounds. And that requires a series of underwriting 
guidelines that have been vetted. It requires discipline. It 
requires a facility that allows for the open trade and 
marketability of those products. It requires the availability 
of liquidity. Are all of those items that have to go into a 
good secondary market?
    Mr. Calabria. Absolutely, Senator.
    Senator Rounds. So what you are suggesting and what I hear 
you saying is let us have some discipline in this. Let us make 
this thing. Let us fix this thing. Let us not just simply 
promise that everybody gets a 30-year mortgage, kind of like we 
promise everybody that they put money into Social Security and 
therefore we never have to look at it again and we will never 
manage it. What we are really talking about here is taking 
responsibility so that the next generation can have those same 
guarantees. Fair statement?
    Mr. Calabria. Absolutely, Senator.
    Senator Rounds. Thank you.
    Mr. Calabria. Thank you.
    Senator Rounds. Thank you, Mr. Chairman.
    Chairman Crapo. Thank you, Senator Rounds.
    Senator Warner.
    Senator Warner. Thank you, Mr. Chairman.
    Dr. Calabria, I enjoyed our meeting. I do not necessarily 
agree, but I appreciated our back-and-forth.
    I want to start with an area. My understanding is you 
believe that the FHFA Director can go ahead and unilaterally 
require an increase in the capital reserves, capital 
requirements for the GSEs. Is that correct?
    Mr. Calabria. Not under the terms of the current preferred 
share agreements. The previous director proposed a risk-based 
capital rule, but that would have not taken place, even if it 
was finalized within the existing framework. So for any 
additional capital to be raised above the $3 billion that is 
there requires an agreement to be----
    Senator Warner. But you supported that, did not you, back 
in an Urban Institute article in 2016?
    Mr. Calabria. I believe----
    Senator Warner. You supported that concept----
    Mr. Calabria. I believe the----
    Senator Warner. ----I guess, closer to bank-like capital.
    Mr. Calabria. I support the concept of having significantly 
more capital at the GSEs.
    Senator Warner. I guess one of the concerns I have, if we 
go to a bank-like capital requirements, that that is going to 
dramatically increase the cost of borrowing, particularly for 
low-income borrowers, borrowers of color or others. I think if 
you currently have--currently, borrowers are basically requires 
to pay about 30 basis points on the mortgages guaranteed by the 
GSEs.
    My calculation--and I am trying to do this on a 
conservative basis--would be that if you raised GSEs' capital 
to bank-like capital, you would be talking about at least a 
tripling of the capital requirements. You can take this from 
about 30 basis points to 90 basis points. That is close to a 
full 1 percent increase. That on a traditional $300,000 loan 
would be an increase in cost of over $60,000, and I think we 
have got a housing affordability crisis in this country, and 
that is just for a traditional lender.
    If you go to a really at-risk lender, low-income, who 
already pays significantly higher in terms of their costs of 
loans, I mean, I have seen estimates that would have almost a 
doubling of the cost to those low-income borrowers.
    So if we are trying to grapple with affordability--and 
clearly, we have talked about the need to make sure that the 
GSEs are stronger and have more appropriate protections, but 
holding bank-like capital reserves, how can you square that 
with the concerns about the affordability, the crisis that we 
have in the housing market?
    Mr. Calabria. Well, first, let me emphasize my full 
agreement with the affordability crisis facing this country.
    Let me say on the capital, certainly, in an ideal world, it 
would be nice to have lots of capital, given that I might want 
to go here or here. So any kind of place between here and here, 
I view as an improvement. So I can certainly commit to you I am 
the last person to ever let the perfect be the enemy of the 
good.
    I think if we can get to a reasonable capital level that 
avoids the losses during the crisis and does so--and I believe 
we can do so in a way that will maintain affordability. It is 
important to keep in mind that we see in the corporate debt 
markets that the higher leverage a company has, the more it 
pays on its debt, and primarily, the cost of mortgages for 
Fannie and Freddie are not driven by the cost of capital but 
driven by the cost of debt that, in fact, having some less 
leverage should actually make it cheaper for them to borrow.
    But, last, let me emphasize Fannie and Freddie's primary 
role, in my opinion, is to be there during the downturn, and we 
saw in 2009 and 2010 where they pulled back because they were 
so highly leveraged, and they did not play the role they were 
supposed to play because they did not have enough capital going 
into the crisis.
    Senator Warner. Well, again, I think as somebody who has 
spent more time on this subject than I ever wanted to spend. I 
think there are areas here where we can make improvements, but 
I am terribly afraid that bank-like capital requirements of the 
GSEs--one of the reasons why I think it is so essential that we 
have this kind of a backstop would dramatically increase 
affordability concerns.
    I would also argue that one of the things that we need, and 
some of us have proposed, is on any loan that was guaranteed, a 
dedicated revenue stream that would go toward housing goals, 
that would go toward low-income, first-time homebuyers, and 
whatever reform takes place, I hope would include that.
    Let me quickly, before the clock ticks down--one of the 
areas that we have not touched on, we know you want to shrink 
the footprint of the GSEs, but one of the areas that did not 
create a crisis was multifamily. GSEs now have about nearly a 
50 percent share of the multifamily. Do you think that we ought 
to--this was an area that was not broke, but would you think 
that we ought to dramatically shrink the GSE's footprint within 
the multifamily range?
    Mr. Calabria. Let me, first of all, fully agree the 
multifamily portfolio seemed to perform well during the crisis, 
and of course, they were much better underwritten than the 
single-family portfolio. And I do not believe we needs the same 
sort of changes in the multifamily side of the GSEs that we 
need on the single family----
    Senator Warner. Again, my concern is this is an area that 
survived through the crisis. If we are going to deal with 
affordability, multifamily is going to be an absolutely 
critical component, and I would be very, very reluctant, even 
as somebody who has advocated for some fairly major reform, 
that we take that old admonition of ``first do no harm.''
    Thank you, Mr. Chairman.
    Chairman Crapo. Thank you.
    Senator Kennedy.
    Senator Kennedy. Thank you, Mr. Chairman.
    Gentlemen, I only have 5 minutes, so I would ask you to 
please answer my questions directly. I know you know a lot, but 
try to answer my questions.
    Mr. Patel, tell me what the community banks in our country 
did to contribute to the 2008 meltdown.
    Mr. Patel. Senator Kennedy, thank you for the question.
    Senator Kennedy. You do not need to thank me. You can just 
answer.
    Mr. Patel. Sure. So I have deep background in----
    Senator Kennedy. What did the community banks do to 
contribute to the 2008 meltdown?
    Mr. Patel. To answer your question, this is why the 
Department of the Treasury is called for tailoring and why----
    Senator Kennedy. Did the community banks in 2008 contribute 
to the banking meltdown?
    Mr. Patel. They were not a substantial part of the cause of 
the----
    Senator Kennedy. OK. Then why have we tried to regulate 
them half to death?
    Mr. Patel. Senator Kennedy, again, thank you.
    I commend the work of this Committee on a bipartisan basis 
to----
    Senator Kennedy. Do you believe that we should--we should 
lighten the regulation, not remove the regulation, but lighten 
the burdensome regulation on community banks?
    Mr. Patel. I fully support appropriate tailoring, which is 
reflected in both the Treasury----
    Senator Kennedy. That is a yes?
    Mr. Patel. Yes.
    Senator Kennedy. OK. Do you believe we still have banks 
that are too big to fail?
    Mr. Patel. Senator, I believe comparing to precrisis levels 
that financial institutions on the whole are better----
    Senator Kennedy. Do you believe that we still have banks 
that are too big to fail?
    Mr. Patel. Senator Kennedy, I again believe in the 
aggregate that we have greater visibility and resolvability. 
The system----
    Senator Kennedy. Yeah. But do you believe we still have 
banks that are too big to fail? Am I missing something here? I 
am not connecting with you.
    Mr. Patel. Yes. Sir----
    Senator Kennedy. Do we still have banks that are too big to 
fail? Now, you are going to run financial institutions in this 
country. That is kind of a basic question.
    Mr. Patel. It is, and I think that the circumstances 
surrounding failure are very fact-dependent.
    Senator Kennedy. Yeah. Do you think we--well, you are not 
going to answer the question, are you?
    Mr. Patel. Again----
    Senator Kennedy. Let me try another one.
    Mr. Patel. OK.
    Senator Kennedy. We did have a financial meltdown in 2008, 
right?
    Mr. Patel. We did, yes.
    Senator Kennedy. Oh, thank God.
    Do you find it embarrassing that many financial 
institutions that contributed to that meltdown were not held 
accountable, and not just the institutions but the people 
responsible?
    Mr. Patel. Senator, I strongly believe in protecting 
taxpayers, and I hope that we never have to live through 
another set of events like the events from----
    Senator Kennedy. Mr. Patel, I am not going to vote for you 
if you do not answer my questions. I do not mean to be rude.
    Mr. Patel. OK.
    Senator Kennedy. But I need answers, OK? You know we have 
limited time. I just burned about 20 seconds. We should get you 
to do your job.
    Mr. Patel. We should hold accountable those responsible.
    Senator Kennedy. And we did not, did we?
    Mr. Patel. In some cases, we did not.
    Senator Kennedy. Right. See? That was easy.
    Mr. Patel. I apologize.
    Senator Kennedy. I mean, I am not against big. I am against 
dumb. I am against not properly--I am not a big regulation kind 
of guy, but I am against not properly regulating our financial 
markets. The emphasis is properly, and you have got to do that.
    Mr. Patel. I commit to you, sir, that if I am fortunate 
enough to be confirmed, I will work with you and try to address 
your concerns.
    Senator Kennedy. And I appreciate that.
    Doctor, let me ask you a question, please. You mentioned--
and if you could just give me a quick answer. You mentioned 
there were alternatives to the bank bailouts?
    Mr. Calabria. Yes.
    Senator Kennedy. Briefly, what were they?
    Mr. Calabria. So I think we could have essentially done 
debt equity swaps that would have put the debtholders--at risk, 
what we are trying to accomplish with TLAC.
    Senator Kennedy. OK. What else?
    Mr. Calabria. I think some of these companies just should 
have gone to the bankruptcy. I think we could have done 
prepackage bankruptcies, debt equity swaps. I think there are a 
large number of options, and of course, I believe it is 
important that we treated all institutions the same.
    Senator, as you were alluding to, we let small banks fail, 
and we did not let big banks fail.
    Senator Kennedy. Let me ask you another question. This is 
kind of open-ended, and I have got 40 seconds. So you are going 
to have to give me the CliffsNotes versions.
    You are King for a Day. Forget the politics. Forget the 
personalities. What would you do, writing on a blank slate, to 
fix the GSEs?
    Mr. Calabria. I would make them subject to the same 
regulatory and legal structures that every other large 
financial institutions is subject to.
    Senator Kennedy. Thank you.
    Mr. Calabria. You are welcome, Senator.
    Senator Kennedy. Thank you, Mr. Chairman.
    Chairman Crapo. Thank you, Senator.
    Senator Warren.
    Senator Warren. Thank you, Mr. Chairman.
    Thank you all for being here today.
    So for generations, buying a home has been the number one 
way that working families build wealth, a home, not only a 
place to live, but also an asset that may appreciate, that may 
be collateral for a new business. If grandma can hang on to the 
house until she dies, it boosts the chances for the next 
generation.
    So, for decades, America subsidized housing purchases for 
white families, but this country deliberately discriminated 
against black families trying to buy homes. Redlining and other 
discriminatory tactics were outlawed more than 50 years ago, 
but today, the gap in the home ownership rate between black 
homeowners and white homeowners is bigger than it was back when 
housing discrimination was legal.
    So, Dr. Calabria, you are an economist who studied the 
housing market for years. Are you concerned about the home 
ownership gap between black and white Americans?
    Mr. Calabria. Absolutely, Senator.
    Senator Warren. Good. Me too.
    So Congress requires the Federal Housing Finance Agency, 
the FHFA that we are talking about today, to set affordable 
housing goals. If you are confirmed as Director, that is going 
to be your job. You are right in charge of that, and that is 
what will determine whether or not lenders have the liquidity 
they need to make mortgages to low and very low-income families 
in poor neighborhoods, many of which are families of color.
    But here is a problem. You have already made clear that you 
want to gut these housing goals. You testified in 2011 that it 
is ``beyond debate'' that these affordable housing goals 
contributed to the financial crisis. You think that, but the 
10-person Financial Crisis Inquiry Commission, which was 
commissioned by Congress to make the definitive findings about 
the causes of the financial crisis, concluded after a year-long 
investigation that included 19 days of public hearing and the 
review of millions of documents and interviews with more than 
700 witnesses that the affordable housing goals did not cause 
the subprime crisis. And in a separate 2014 study by the St. 
Louis Fed, they reached the same conclusions.
    So, Dr. Calabria, we have a lot more information about what 
causes the financial crisis than we did back when you testified 
in 2011.
    So let me ask. Do you still think that the affordable 
housing goals played a big role in the crisis?
    Mr. Calabria. Senator, if I could just quickly read from 
Chapter 17 of the Federal Crisis Inquiry Commission: 
``Affordable housing goals imposed by the Department of Housing 
and Urban Development did contribute marginally to these 
practices.''
    Senator Warren. Marginally.
    Mr. Calabria. And I would agree with that statement, 
marginally. That is my position today.
    Senator Warren. So your shift--you have shifted from 2011. 
You now say it had a marginal effect on it; is that right?
    Mr. Calabria. Senator, I believe there is a marginal 
effect, modest effect.
    Senator Warren. And the 2014 study by the St. Louis Fed, 
which says, no, it did not have any effect, do you agree with 
them? I take it no.
    Mr. Calabria. I have not read the study, Senator.
    Senator Warren. OK. You have not looked at that study?
    Mr. Calabria. I read a lot, but I cannot catch everything. 
But I will--let me--let me absolutely commit to you.
    Senator Warren. OK. Never mind. We are going to be out of 
time here.
    So by the early 2000s, home ownership rates for families of 
color had finally begun to increase in a meaningful way, and 
then the shady lenders move in. And they target black and brown 
families with the worst scams and the most abusive mortgages.
    According to the FDIC, these loans were rarely used to meet 
affordable housing goals. When these loans blew up, that is 
what crashed the economy, not affordable housing goals that 
helped more than 25 million families, including many families 
of color become homeowners.
    So let me ask. If you are confirmed as Director of the 
FHFA, will you commit to preserving strong affordable housing 
goals?
    Mr. Calabria. Within the confines and direction of the 
statute, absolutely yes.
    Senator Warren. All right. So that is important because--I 
want to hear that. Today, the median black family in America 
has about $2 in wealth for every $100 in wealth that the median 
white family in America has. Fixing the home ownership gap is a 
key element to addressing the racial wealth gap.
    Home ownership is the American dream in no small part 
because it provides financial security for families, and if we 
have an FHFA Director who does not feel the urgency of opening 
doors to home ownership for creditworthy families of color, 
then we cannot go forward and cannot have my vote.
    Mr. Calabria. Senator, I am absolutely committed to making 
sure that those opportunities are there. My concern is simply 
to make sure it is done is as sustainable manner that keeps 
those families in those homes.
    Senator Warren. So if they are creditworthy, though, you 
are going to keep the door open on affordable housing goals. 
Are we right?
    Mr. Calabria. Absolutely yes.
    Senator Warren. We understand this?
    Mr. Calabria. We--meeting of the minds here, as lawyers 
would say.
    Senator Warren. All right. Thank you.
    Chairman Crapo. Thank you.
    Senator Tillis.
    Senator Tillis. Thank you, Mr. Chairman.
    Mr. Calabria, you are in luck. You are not going to get my 
first question.
    [Laughter.]
    Mr. Calabria. Thank you, Senator.
    Senator Tillis. Actually, before I get started, I have a 
staff down at the end of the dais. So I would like for the 
seventh graders who are in the audience to stand up really 
quickly--I do not even know if this is within the rules--so we 
can take a quick picture of you, and we will send it back to 
you.
    Welcome.
    Yeah, right over there.
    I am using my time here. So I do not know if that was 
untoward, but----
    Chairman Crapo. I was going to say you are using your time, 
but you can go right ahead.
    [Laughter.]
    Senator Tillis. Of course.
    This is the first time I have had to call you ``Mr. Hood.'' 
Normally, it is just ``Rodney.'' But it is good to see you 
here, and thank you so much for your service on the Board of 
Governors. You made me very proud there, and I know you are 
going to make me proud here.
    You have experience in the agency. You know me. Back in the 
time that I was Speaker, I was all about lean regulations, not 
un-regulating, but regulating in as lean a way possible.
    Tell me--and then maybe you and Mr. Harper can determine 
whether or not you agree or disagree on the approach, but tell 
me what we can do to better streamline and reduce the 
regulatory burden as long as we understand that--to a level 
that we are managing the risk, what kind of priorities would 
you try to set or encourage in your capacity back on the NCUA?
    Mr. Hood. Thank you, Senator Tillis, for your time, your 
support, and for your question this morning.
    I am a safety and soundness regulator, sir, and if 
confirmed, I would continue to work to make sure that 
regulation at NCUA remains effective but not excessive.
    In returning to the agency, when I was last there over a 
decade ago, we as a board would review one-third of the credit 
union regulations every year, such that in every 3-year cycle, 
all 100 percent of those rules and regulations have been 
evaluated so that we could determine which ones were still 
relevant, which ones were still germane for maintaining safety 
and soundness. So I will go back with that mindset.
    Senator Tillis. Mr. Harper, would you agree with that 
approach?
    Mr. Harper. Yes, more or less.
    The point I would make is that it is very important to 
tailor the rules. Credit unions have a wide range in size. The 
smallest is perhaps what? $20,000 in size?
    Senator Tillis. I am glad to hear you say that because I 
think, conceptually, you need to apply the same process that we 
have suggested within 2155, the Regulatory Reform Act, for 
baking institutions. You need to understand their activities, 
their portfolios, their size. All of those play into the extent 
to which they need to be regulated, and I hope you will go on 
with that in mind because, frankly, I worry postcrisis about 
the financial services ecosystem. I worry about de novo banks, 
small banks, and credit unions play an important role in that. 
They fared pretty well in the crisis, quite honestly, but they 
have kind of gotten swept up in the regulatory reactions 
afterwards.
    So I am looking forward to you all getting in there and 
getting to a lean place.
    Mr. Patel, you have got an extraordinary story, you and 
your parents, and I appreciate you being here. You are going to 
be in the mix for FSOC, and I am a little bit worried about--
again, I am a lean regulation--everybody thinks lean regulation 
means no regulation. I mean the least amount of regulation to 
manage an identifiable risk out there.
    But I am beginning to think there may be some drift in FSOC 
to where nonbanking financial institutions could be swept in 
and actually have additional regulations, even in this 
Administration. What can you do to assure me that that is not 
the path we are going to take, should you be confirmed?
    Mr. Patel. Senator Tillis, thank you for the question.
    The council is currently considering alternative approaches 
to the previous council's nonbank's designations policy. Among 
that, we are looking at things like increased transparency, the 
inclusion of cost-benefit analysis requirements, which I think 
is an important hallmark of all financial regulation. 
Government policy should not be enacted if it does more harm 
than good, and we should take stock of the burdens that 
regulation imposes while being mindful of systemic risk.
    Senator Tillis. Well, I appreciate you doing that because I 
can tell you if you do not come back with a clear cost-benefit 
analysis, count me in as the person writing the resolution of 
disapproval to try and deprive you of having that authority 
moving forward. So do not put me in a position where I would 
have to do that.
    Mr. Calabria--by the way, I am supporting all your 
nominations. You have all done great work. Mr. Calabria, you 
have done great work.
    I guess I would give compliments to the other three of you 
who have never posted a blog, apparently.
    [Laughter.]
    Senator Tillis. And, Mr. Calabria, I would just say I have 
seen some of your writings. You are a brilliant person. We are 
going to need your help in seeing if there is any way that we 
can actually make progress on GSE reform. I am not sure that we 
can in this Congress.
    Thank you all for being here.
    Chairman Crapo. Thank you.
    Senator Smith. Thank you very much, Mr. Chair and Ranking 
Member Brown, and thanks to all of you for being here today and 
for your willingness to serve our country.
    Dr. Calabria, you are back in the questioner's seat, I 
think.
    You said earlier that home ownership is a fundamental plank 
in our country, and the problem, of course, is that that plank 
cannot be found in a lot of parts of our country.
    I appreciate you coming in and talking with me in my office 
a couple of days ago, and we talked about the availability of 
quality affordable housing in rural areas and what a challenge 
that that presents to these communities' stability and growth 
and economic development, not to mention the opportunity for 
rural families. Of course, this issue is even greater for 
Native Americans on tribal lands, even greater obstacles in 
finding affordable housing and access to credit. And this is an 
issue, a big issue in Minnesota and also around the country.
    So when we talked about this in my office earlier, we had a 
general conversation about how affordable housing is good, but 
I want to dive into that a little bit.
    As you know, Fannie Mae and Freddie Mac have released their 
first-ever Duty to Serve plans, as required under HERA, and 
these 3-year plans list specific and measurable commitments to 
invest in and to promote affordable mortgages in unserved 
markets, like in rural markets and Native communities.
    So, Dr. Calabria, how can you square what you have written 
earlier around the elimination of GSE affordable housing goals, 
and what is in these Duty to Serve plans and your vision for 
the GSEs? How do you square that?
    Mr. Calabria. So, Senator, I think one of the things that 
makes me uniquely qualified is having been part of the 
structure that came up with those, both the Duty to Serve, the 
Trust Fund, as well as the Capital Magnet Fund, were largely 
structured, crafted, drawn by myself and Senator Reed's staff. 
So I have got the benefit of the legislative history that was 
there, and I can certainly say my sense of that legislative 
history is none of those things were meant to come at the 
sacrifice of safety and soundness. And so my concerns that have 
been expressed since the crisis is that there is not a 
framework of safety and soundness or capital to protect us 
against taking more risk.
    I think the ultimate goal here is that we can come together 
and build a framework for the GSEs where there is capital, 
where there is sufficient regulation, and if we have got that 
framework, I believe that we can make advances and take more 
risks.
    Senator Smith. So what will you do to ensure that the GSEs 
continue their support for affordable housing and mortgage 
lending in rural areas and Native communities?
    Mr. Calabria. First, let me recognize having grown up in 
rural America, I am very cognizant of the unique economic 
issues that face it.
    I also had the privilege, benefit, as a Committee staffer 
to visit a number of tribal communities across this country, 
and of course, one of the first things I would try to do is 
have FHFA work with the Bureau of Indian Affairs. We know that 
there are very unique titling problems in tribal communities 
that make it very difficult to do standardized mortgage 
lending.
    Senator Smith. Yes, we talked about that.
    Mr. Calabria. And I think that we really want to focus 
that.
    Let me also say, because I think it is incredibly 
important--it is outside of the scope of FHFA--one of the 
biggest constraints in affordable housing in this country is 
zoning, and I really do think the recent changes in Minneapolis 
are some smart moves that I hope a number of other cities 
around America copy.
    Senator Smith. Thank you. I think they have done some smart 
things in Minneapolis, and I appreciate you mentioning that.
    Let me ask you. Can you commit to retaining the targeted 
initiatives for rural areas and tribal lands in the Duty to 
Serve plans----
    Mr. Calabria. Yep.
    Senator Smith. ----if the GSEs are reformed or restructured 
in any way?
    Mr. Calabria. I absolutely, Senator, commit to having those 
continue to be part of the process.
    As an economist, I want to be able to also commit that we 
collect data on this and we make sure that we are best 
targeting these programs in a way that we are effective and 
receive results.
    Senator Smith. But does continuing to have them be part of 
the process mean continuing to keep them in place?
    Mr. Calabria. Keep them in place as long as the existing 
regulatory structure is there.
    Of course, I think if the Committee decides to take a 
different route legislatively, I do believe we can look at a 
number of options.
    But within--if confirmed, within my authorities of 
Director, I will be fully committed that as long as those are 
the law and the statutes that I will carry them out as 
intended.
    Senator Smith. OK. I just have a couple of seconds left, 
but I appreciate very much, Mr. Hood and Mr. Harper, you being 
here. Credit unions are incredibly important in my State and 
especially in rural areas. So would one of you just in the few 
seconds that I have left--and I would love to submit my 
question for the record to get your fuller response. Can you 
tell me a little bit about the role that you see credit unions 
playing in and creating better access to credit in rural areas?
    Mr. Harper. I think that is an incredibly important issue 
and that NCUA has adopted rules and regs that allow credit 
unions and help facilitate getting into the rural areas, and if 
confirmed, certainly underserved markets like rural areas would 
continue to be a priority for me.
    Senator Smith. Mr. Hood.
    Mr. Hood. If I may, Senator Smith. I too agree that credit 
unions can play a role in bringing affordable home ownership to 
rural America.
    Prior to joining NCUA over a decade ago, I worked at USDA 
Rural Development, where I have managed the Single Family 
Housing Programs. So I would like to find innovative ways to 
engage credit unions in bringing home ownership opportunities 
to areas such as yours in rural America.
    Senator Smith. Thank you very much.
    Chairman Crapo. Senator Van Hollen.
    Senator Van Hollen. Thank you, Mr. Chairman, and 
congratulations to all of you on your nominations.
    Mr. Calabria, there has been a lot of discussion about the 
30-year mortgage and your views on the 30-year mortgage. So let 
me see if I can just summarize what I understand is your 
position. That you will not take any action under your 
authority to reduce the current Government support for the 30-
year mortgage; is that right?
    Mr. Calabria. That is correct, Senator.
    And if I could take it a moment aside----
    Senator Van Hollen. I am sorry.
    Mr. Calabria. Quite all right.
    Senator Van Hollen. I am just looking--as Senator Kennedy 
said, time is short.
    As you are well aware, there are articles that have been 
put out that Mr. Otting at the OCC together with the 
Administration, the White House and Treasury, have a plan to 
reform the GSEs. Are you familiar with their plan?
    Mr. Calabria. I have not seen anything that looks like a 
plan.
    Senator Van Hollen. OK. Because it is curious because they 
say it is a White House-Treasury plan. Of course, you work for 
the Vice President, but you are telling us today you have no 
idea what they are talking about here.
    Mr. Calabria. Senator, once it became clear in the fall 
that I would be the nominee, I took myself out of any 
internal--I felt it was important for maintaining the 
independence of FHFA that I stopped being part of any internal 
dialog, once again, that was inside my nomination.
    Senator Van Hollen. I know the Ranking Member asked you 
some questions on this. The fact that Mr. Otting has said that 
you have signed off on this, you have not signed off? If you 
have not seen a plan, you cannot sign off on it, right?
    Mr. Calabria. Correct. If I could--my belief of what Mr. 
Otting has said----
    Senator Van Hollen. That is all right.
    Mr. Calabria. That is all right.
    Senator Van Hollen. You have not signed off on it. You do 
not even know of any plan; is that correct?
    Mr. Calabria. Correct.
    Senator Van Hollen. You do not know of any plan. OK.
    As you indicated, you were very much a part of writing the 
HERA law, and as you indicated, the Housing Trust and Capital 
Magnet Funds are big parts of that. In fact, just yesterday, 
the CDF fund announced 38 organizations around the country 
would receive funds from the Capital Magnet Fund, including 
some from Baltimore in Maryland.
    So, as I understand your testimony today, you are committed 
to continuing to pursue those programs; is that correct?
    Mr. Calabria. Within the confines of the statute, yes.
    Senator Van Hollen. OK. So the statute, as I understand it, 
says that you, if confirmed, would be able to temporarily 
suspend the allocation of the funds if they contribute to 
financial instability.
    My question to you today is, Do you have any indication 
today or in the foreseeable future that that standard would be 
triggered?
    Mr. Calabria. Senator, the trigger is mechanical. I do not 
see anything today, of course, subject to--I am not inside the 
agencies. I do not have access to confidential supervisory 
information, but everything that I am aware of publicly would 
suggest to me that that trigger is not in danger of being 
tripped, if you will.
    Senator Van Hollen. And so long as that trigger is not 
tripped, you will continue to provide robust support; is that 
right?
    Mr. Calabria. That is correct.
    Senator Van Hollen. OK, thanks.
    Now, I do want to get at this issue my colleague has 
raised--the Ranking Member mentioned your quote about 
deadbeat--because it is important going forward to figure out 
what the cause of 2008, and there were lots of causes. But 
there is no doubt you have weighed in disproportionately on 
this theory that it was caused by the GSEs and CRA.
    Let me ask you about CRA. Do you agree it is an important 
tool to prevent redlining and discrimination in lending?
    Mr. Calabria. I agree it has been.
    Senator Van Hollen. I am sorry?
    Mr. Calabria. Yes.
    Senator Van Hollen. And do you agree that we continue to 
see redlining and discrimination in lending?
    Mr. Calabria. I believe that we do.
    I do want to clarify. I have never anywhere put CRA 
anywhere in the top 10 of--I have talked about a number of 
factors that I think have caused the crisis. I believe my 
writings have all expressed that CRA and the housing goals were 
modest, at best, and that there were much bigger causes.
    Senator Van Hollen. Well, you have written about it. I 
mean, I have an article here----
    Mr. Calabria. That is right.
    Senator Van Hollen. ----I think from 2009, and the headline 
is ``Does CRA Undermine Bank Safety?'' And you go on. It is to 
suggest that it was a not insignificant component, which is at 
odds with other findings. I do not know if you want to----
    Mr. Calabria. Senator, the blog post in question references 
a study done by the Dallas Federal Reserve Bank that simply 
found a relationship between poor CAMEL ratings and high CRA 
ratings. I certainly think supervisors should take a look at 
that and make sure that CRA ratings are achieved not at the 
expense of safety and soundness, and I believe we can achieve 
them not at the expense of safety and soundness.
    Senator Van Hollen. I appreciate this because, as you know, 
others have looked at this, including John Dugan, who was, of 
course, OCC head during the crisis who said that the CRA is not 
the culprit behind subprime mortgage lending.
    So I do have concerns about the fact that the overwhelming 
weight of your writing suggests that lending to minority 
communities or communities that--while they have--can get good 
credit ratings have been overlooked by the market were the 
primary culprit. It just seems the overwhelming weight of 
evidence does in the other direction.
    I understand you are acknowledging that today when you 
said, in response to Senator Warner's question, that it was 
just marginal with respect to GSEs; is that right?
    Mr. Calabria. That is right, and personally, I believe my 
writing reflects those as being marginal causes.
    Senator Van Hollen. OK. Thank you.
    Thank you, Mr. Chair.
    Chairman Crapo. Thank you.
    Senator Cortez Masto.
    Senator Cortez Masto. Thank you.
    Welcome, gentlemen. Congratulations on your nominations. 
Welcome to your families. It has been a long morning. I realize 
that. You only have 10 minutes left, though, so we are almost 
through it.
    So for that reason, I have got 5 minutes. Dr. Calabria, 
thank you for meeting with me. I really appreciate the 
conversation in my office.
    But let me jump back here because I heard you say that you 
support affordable housing goals, but also incorporated within 
that, you want sustainable home ownership; is that correct?
    Mr. Calabria. That is correct.
    Senator Cortez Masto. OK. So can I ask you do you believe 
that--or let me ask you this. You oppose downpayments of less 
than 5 percent and at times even want to see downpayments at 10 
percent or higher. Is that true?
    Mr. Calabria. I think we need to look at downpayments in a 
holistic sense. I think it depends on other things such as DTI, 
such as FICO scores. So I think we have to take each loan 
holistically.
    I think there are plenty of circumstances where even zero 
downpayment lending is sustainable, but I do think we need to 
avoid the risk layering that was such a problem during the 
crisis.
    Senator Cortez Masto. I am glad you brought up FICO scores 
because you suggested also that only people with FICO credit 
scores of 700 should be able to get a mortgage; is that true?
    Mr. Calabria. That is a very broad statement.
    I certainly do not think there should be any legal 
prohibition in the mortgage market against any sort of FICO 
score.
    Senator Cortez Masto. Good, because that would affect half 
of the people in the State of Nevada who have FICO scores under 
700.
    If you are appointed to head the Federal Housing Finance 
Agency, will you insist that homeowners have $15,000 or $20,000 
in cash before they can buy a home?
    Mr. Calabria. Senator, the number--I do not believe I have 
ever written that, but the number strikes me as a bit 
arbitrary.
    I do think it is important for people to have cash 
reserves. That has clearly got to depend on the house in 
question, the mortgage in question, the borrower in question. 
So I do not think it is--probably more a ratio would be more 
significant, but I do think we need to prepare families for 
when the boiler goes out or a new roof. I mean, we need to make 
sure that people can be prepared to meet the expenses of home 
ownership when they are there.
    Senator Cortez Masto. Well, can you identify for me what 
you mean by sustainable home ownership and what you would do 
differently?
    Mr. Calabria. So what I would do differently is looking at 
the factors that do not--that do not end up keeping--so that 
they just do not funnel through. That they get a mortgage. They 
are out of there 6 months, a year, 2 years. If we want to put a 
number on it, I think the ability to sustain the mortgage 
without defaulting--obviously, there are going to be life 
events that may hit you, but if we are seeing these mortgages--
and we saw a lot of early payment defaults during the crisis. 
If a mortgage goes bad in 3, 5, 6 months, there is something 
wrong with that, whether it is the lender, the borrower, or 
somebody, and so making sure----
    Senator Cortez Masto. What if it is not the borrower's 
fault?
    Mr. Calabria. Then we should go after the lender. I have 
made such proposals in the past. I have suggested, for 
instance, that FHA be aggressive with lenders that default 
within the first 6 months.
    Senator Cortez Masto. I have got 2 minutes left. Thank you.
    Let me ask you this. You have written about bringing back 
recourse in the foreclosure plan, and what it sounds like to me 
is you are willing to expand recourse lending; is that true?
    Mr. Calabria. Well, first of all, many products, such as 
the 203(b) FHA program are recourse products. I think what we 
need to keep in mind is----
    Senator Cortez Masto. But they are not--they are actually 
not utilized, though, so that is my concern.
    Mr. Calabria. But it is the law.
    Senator Cortez Masto. Yeah.
    Would you actually trigger that, and would you engage in 
that or support recourse lending?
    And let me just say this because I do not understand why a 
mortgage lender, other than the underlying security or the loan 
asset, which is the house, why they should get more than that, 
why they should be able to go after a homeowner's car, their 
retirement fund, their life savings on a mortgage loan----
    Mr. Calabria. So, first, let me----
    Senator Cortez Masto. ----instead of just the underlying 
security, which is the house.
    Mr. Calabria. Let me first emphasize that a lender should 
never be able to get more than the size of the loan, but the 
empirical evidence suggests that the existence of recourse 
expands mortgage access and lower risk cost. And I think we 
need to be looking at--cognizant of anything that we do that 
reduces access and increases costs.
    Senator Cortez Masto. So would you support that at the 
Federal level, recourse--expanding recourse lending?
    Mr. Calabria. I am comfortable with that remaining at the 
State level.
    Senator Cortez Masto. So you would not employ that at all--
--
    Mr. Calabria. I do not believe that----
    Senator Cortez Masto. ----and support it in any way at the 
Federal level?
    Mr. Calabria. I do not believe at the Federal level, other 
than the Federal products that might already include that.
    Senator Cortez Masto. Thank you.
    I have got 30 seconds left. Let me ask Mr. Harper and Mr. 
Hood very quickly. The NCUA has a proposed rule exempting 
commercial loans under $1 million from appraisals. Do you have 
any concerns that allowing loans of a million dollars without 
appraisals could lead to higher defaults and a hit on the Share 
Insurance Fund?
    And let me start with Mr. Hood.
    Mr. Hood. I am not totally familiar with what is taking 
place now NCUA, Senator Cortez Masto. If confirmed, I would 
work with agency staff to really understand what they are 
implying with the exemption of the $1 million for commercial 
loans.
    Senator Cortez Masto. Thank you.
    Mr. Harper.
    Mr. Harper. I would agree with your concerns about raising 
the appraisal.
    One thing in particular that I would want to look at is 
where the other regulators are, which I believe is at a 
different level for that particular product, and for me, 
consistency across regulations is an important thing.
    Senator Cortez Masto. Thank you.
    Thank you, gentlemen.
    Chairman Crapo. Thank you.
    Senator Reed.
    Senator Reed. Well, thank you, Mr. Chairman.
    I would like to say they have saved the best for last, but 
all I can say with assurance is they saved the last for the 
shortest Member of the Committee.
    Dr. Calabria, let me begin by thanking you for your help in 
2009 on the HEARTH Act. It is very important for homeless 
individuals, and the problem is still with us, as you well 
know.
    But let me also try to complement and reaffirm Senator Van 
Hollen's comments about the Capital Magnet Fund and Housing 
Trust Fund.
    On a bipartisan basis, we found that these are absolutely 
crucial because they are outside the appropriations process. 
They are dependable sources of funds for affordable rental 
housing.
    Indeed, Senator Collins and I just wrote to the FHFA's 
Acting Director to ask him to maintain this critical funding.
    So, in that spirit, will you commit to continue funding the 
Capital Magnet Fund and the Housing Trust Fund if you are 
confirmed?
    Mr. Calabria. Within the confines of the statute, 
absolutely yes.
    Senator Reed. And from my listening to Senator Van Hollen's 
questioning back and forth, there is a technical provision you 
cited that may prevent you from doing that?
    Mr. Calabria. It is a mechanical trigger, so it is not 
discretionary.
    I would put it this way. That mechanical trigger is only 
going to be tripped. However, if the GSEs are essentially 
failing, I certainly take very seriously that if confirmed, my 
primary responsibility as a prudential regulator is to make 
sure that does not happen.
    Senator Reed. Thank you. Well, I will take that as an 
optimistic, confident ``yes, I will.'' Thank you.
    You were with us on March 15th, 2012, for a very good 
hearing on the FHFA, and you said, and I quote, ``I agree that 
I think that their conservatorship powers are quite broad. 
Where I would draw the distinction is I do not believe they 
allow, in my opinion, FHFA to take systemic overall marketwide 
effects into account in what they do,'' which raises the 
question: If you are confirmed, do you believe that you must 
ignore the market impacts of the decisions you would make at 
FHFA? For instance, if a particular decision would result in a 
shrinking mortgage market or would squeeze out responsible 
borrowers, would you be unable to take that into your 
considerations?
    Mr. Calabria. Senator, it would seem to me that since the 
primary consideration of conservatorship is to protect the 
safety and soundness of the entities, that anything that I 
would do that would weaken and potentially push down the 
housing market would obviously impact the safety and soundness 
of the entities.
    So, certainly, the broader macroeconomic impact that 
undermines the purpose of the conservatorship would have to be 
considered, in my opinion.
    Senator Reed. It does seem to be somewhat different than 
the comments you made at the hearing. Would you acknowledge 
that?
    Mr. Calabria. Senator, that was a number of years ago. I do 
not have----
    Senator Reed. No, this is not a, you know, ``gotcha.'' The 
point is that your view is a holistic one, that significant 
decisions you will make that would have an impact on the market 
or looking at the market would inform those decisions, correct?
    Mr. Calabria. Correct. And I do believe they would have to 
have market-wide impacts. So there certainly could be modest 
changes that do not impact the market overall that are not 
relevant to the conservatorship that I do not believe I would 
have the authority to address.
    Senator Reed. But if it was a significant impact on 
affordability of housing, on access to mortgages, those things, 
you would have to take that into consideration?
    Mr. Calabria. Absolutely, because that would directly 
impact the safety and soundness of the enterprises.
    Senator Reed. Thank you very much.
    Gentlemen, good luck, and thank you very much.
    Mr. Calabria. Thank you, Senator.
    Chairman Crapo. Thank you, Senator Reed.
    And that concludes the questioning for today's hearing.
    For the Senators who wish to submit questions for the 
record, those questions are due to the Committee this coming 
Tuesday, February 19th.
    And we ask our nominees to respond to those questions no 
later than the close of Friday, February 22nd.
    I thank you again to each of you for your willingness to 
serve and for being here today, and with that, this hearing is 
adjourned.
    Mr. Hood. Thank you.
    [Whereupon, at 11:52 a.m., the hearing was adjourned.]
    [Prepared statements, biographical sketches of nominees, 
responses to written questions, and additional material 
supplied for the record follow:]
               PREPARED STATEMENT OF CHAIRMAN MIKE CRAPO
    This morning we will hear testimony on the nominations of Bimal 
Patel, to be Assistant Secretary of the Treasury for Financial 
Institutions; Todd Harper, to be a Member of the National Credit Union 
Administration Board; Rodney Hood, to be another Member of the National 
Credit Union Administration Board; and Mark Calabria, to be Director of 
the Federal Housing Finance Agency.
    Welcome, all of you. I see friends and family behind you, and I 
welcome them here today as well.
    Mr. Patel has been nominated to serve as Assistant Secretary of the 
Treasury for Financial Institutions.
    In this role, Mr. Patel would be responsible for Treasury's efforts 
on legislation and regulation concerning financial institutions, and 
overseeing the Terrorism Risk Insurance Program and Community 
Development Financial Institutions Fund.
    Mr. Patel brings a wealth of knowledge on financial services policy 
and regulation, stemming from extensive experience in both the private 
and public sector.
    Since May 2017, he has served as Treasury's Deputy Assistant 
Secretary for the Financial Stability Oversight Council, or FSOC, where 
he is responsible for overseeing FSOC staff and activities.
    Prior to joining Treasury, Mr. Patel provided financial policy and 
regulatory expertise as a partner at O'Melveny and Myers, LLP, 
including as Head of the Financial Advisory and Regulation Practice, 
and served as senior advisor to Director Jeremiah O. Norton at the 
Federal Deposit Insurance Corporation.
    Mr. Harper and Mr. Hood have both been nominated to the board of 
the National Credit Union Administration (NCUA).
    The NCUA plays a critical role in overseeing and insuring a major 
segment of our Nation's community financial institutions: federally 
insured credit unions.
    Each of these nominees comes with prior NCUA experience.
    Mr. Harper led the Office of Public and Congressional Affairs and 
served as the chief policy advisor to the NCUA Chairman between 2011 
and 2017.
    Before that, he had a long career focusing on the financial 
services industry on Capitol Hill, including as the staff director of 
the Subcommittee on Capital Markets, Insurance and Government Sponsored 
Enterprises of the House Financial Services Committee, and as 
legislative director for former Congressman Paul Kanjorski.
    Mr. Hood currently serves as a corporate responsibility manager for 
JPMorgan Chase, where he manages partnerships with organizations that 
serve community development, civil rights and disability community.
    Between 2005 and 2010, Mr. Hood served as a member of the NCUA, 
including being elected as its vice chairman.
    Before that, he served in the Senior Executive Service as the 
Associate Administrator of the Rural Housing Service at the U.S. 
Department of Agriculture.
    Dr. Calabria is a leading expert on housing and mortgage finance, 
and a respected Ph.D. economist.
    He has nearly 30 years of experience interacting with the housing 
market from the perspective of academia, Government, industry, trade 
associations, and think tanks.
    Dr. Calabria has dedicated the majority of his career to public 
service, including as Deputy Assistant Secretary of Housing and Urban 
Development, nearly a decade as a Senior Professional Staff Member to 
this Committee, and now as Chief Economist in the Office of the Vice 
President.
    Dr. Calabria has also worked for the National Association of 
Realtors, the National Association of Homebuilders, the Farm Credit 
Council, the Harvard University Joint Center for Housing Studies, and 
recently at the CATO Institute, as Director of Financial Regulation 
Studies.
    Over the course of his public service career, Dr. Calabria has a 
long history of working across the aisle to deliver meaningful, lasting 
reforms.
    He played a key role in a number of bipartisan legislative 
achievements, including the HEARTH Act, which strengthened our Nation's 
homelessness assistance programs, and HERA, the law which established 
FHFA and created the position to which he has been nominated.
    Throughout his career, Dr. Calabria has worked to champion market 
reforms that benefit consumers, and enhance the safety and soundness of 
our housing finance system.
    At FHFA, Dr. Calabria would continue to work toward these 
objectives as regulator of Fannie Mae, Freddie Mac, and the Federal 
Home Loan Bank system.
    He would also be charged with protecting taxpayers, ensuring 
responsible access to mortgage credit, and serving out FHFA's statutory 
mandate to conserve and preserve the assets of Fannie Mae and Freddie 
Mac.
    Members of this Committee are incredibly cognizant that a full 
decade has now passed since the Government asserted control of the 
GSEs.
    After 10 years of market recovery, these mortgage giants remain 
stuck in conservatorship, with taxpayers still on the hook in the event 
of a housing market downturn.
    It appears that the old, failed status quo is slowly beginning to 
take hold again, with the Government in some ways expanding its reach 
even further, entering new markets where it has never been before.
    The status quo is not a viable option, and finding a comprehensive 
solution remains a top priority for me.
    It is my view that action on housing finance reform is the 
prerogative of Congress, and my strong preference is for us to explore 
a legislative pathway forward.
    However, FHFA can also play an important role in helping us move 
toward a more sustainable housing finance system facilitated by an 
engaged and strongly capitalized private sector.
    If confirmed, I look forward to working with each of these nominees 
on many important issues within each of their respective policy areas, 
including: housing finance and other issues critical to taxpayers and 
homebuyers; data privacy and security; capital formation and corporate 
governance; and continuing efforts from last Congress to provide 
meaningful relief to homeowners, consumers, and smaller businesses.
    Thank you all for your willingness to serve and for appearing 
before our Committee today.
                                 ______
                                 
              PREPARED STATEMENT OF SENATOR SHERROD BROWN
    Thank you, Chairman Crapo, for holding this hearing today on the 
nominations of Mr. Bimal Patel, Mr. Todd Harper, Mr. Rodney Hood, and 
Dr. Mark Calabria--congratulations to all of the nominees and welcome 
to your families and guests. I look forward to their testimony and 
responses to Members' questions.
    While it is important that we consider new nominees in a timely 
manner--Mr. Chairman, I appreciate you including Mr. Harper in today's 
hearing--I want to remind my colleagues, four noncontroversial nominees 
to the Export Import Bank never received a vote on the Senate floor 
last Congress while nominees that were sent up from the White House 
months later were confirmed. We also continue to wait on the White 
House for nominees for Democratic positions at the SEC and FDIC.
    All of today's nominees, if confirmed, have the opportunity to use 
their positions to improve the lives of American families. They can 
make it easier for families to buy homes with mortgages they can 
afford, they can encourage credit unions to offer fair products to 
Americans left behind by our banking system, and they can support 
policies that protect consumers and our financial system from risky 
activities at financial institutions.
    Mr. Patel has been nominated to be Treasury Department Assistant 
Secretary for Financial Institutions. If confirmed, Mr. Patel would 
take on a new role at Treasury that covers a broad range of policy 
issues affecting financial institutions.
    Mr. Harper and Mr. Hood have been nominated to the Board of the 
National Credit Union Administration, an agency they're both familiar 
with. Mr. Hood previously served as an NCUA Board Member from 2005 to 
2010. Mr. Harper worked in the NCUA's office of Public and 
Congressional Affairs and served as the chief policy advisor to the 
Chair from 2011 to 2017. Both nominees possess a deep understanding of 
credit unions and the issues that affect them.
    Finally, Dr. Calabria has been nominated to lead the Federal 
Housing Finance Agency.
    Most Americans probably don't know that F-H-F-A exists. But as the 
regulator of the G-S-Es, it affects whether they can get a mortgage, 
how much they pay for that mortgage, and what kind of rental options 
they have. This is particularly true for low- and moderate-income 
families, and for communities that have been abandoned by Wall Street 
banks.
    The housing problems facing families are clear: rent is too 
expensive and too many communities--particularly communities of color--
can't access safe, sustainable mortgages. These are the problems the 
next Director should be working to address. Dr. Calabria has a long 
history in housing policy. He was a staff member on this Committee when 
Congress passed the Housing and Economic Recovery Act creating F-H-F-A, 
so he is well aware of the significant influence he would have.
    He's written extensively on the housing system, and particularly on 
the G-S-Es. Those writings raise serious questions about the impact 
that Dr. Calabria's actions could have on the housing market if his 
views are implemented. He has questioned the need for the 30-year 
fixed-rate mortgage and advocated against a Government guarantee for 
qualifying mortgage-backed securities. These positions contradict what 
we have heard from housing stakeholders who have appeared before this 
Committee over the past 4 years.
    Dr. Calabria has also called for repeal of the G-S-Es' affordable 
housing goals, which help ensure that Fannie Mae and Freddie Mac are 
fulfilling their statutory missions to facilitate home ownership and 
rental housing for low-income families. In the last testimony he 
submitted to this Committee in 2015, Dr. Calabria said that the two 
primary tools facilitating private market home financing, the G-S-Es 
and F-H-A, ``should eventually be eliminated.''
    Through the hearing this morning I hope to better understand if Dr. 
Calabria still believes that. When work has dignity, everyone can 
afford housing in their community. We know that's not true today. We're 
facing a housing affordability crisis. Wages are lagging far behind the 
increase in home prices. One in four renters spends more than half 
their income on rent.
    Seven of the 10 fastest growing occupations don't pay enough to 
afford to rent a modest one-bedroom apartment, let alone save for a 
downpayment. The next generation of potential homebuyers is saddled 
with a mountain of student loan debt. Borrowers of color were 
systematically shut out of the housing market for generations, they 
suffered some of the biggest losses during the financial crisis, and 
they still face discrimination when trying to get a loan.
    Those are the challenges we have to confront. We need a strong, 
mission-driven housing finance system working to make sure all 
Americans can afford safe, quality housing where they live, work, and 
send their kids to school.
    I will be listening to see how Dr. Calabria's plans align with that 
goal.
    Thank you, Mr. Chairman.
                                 ______
                                 
                   PREPARED STATEMENT OF BIMAL PATEL
To be an Assistant Secretary for Financial Institutions, Department of 
                                Treasury
                           February 14, 2019
    Chairman Crapo, Ranking Member Brown, and Members of the Committee, 
it is among the greatest privileges of my life to appear before you 
today. Thank you to the Senators and the staff members with whom I have 
met in advance of this hearing. If I am fortunate enough to be 
confirmed, I look forward to meeting with and working with all of you 
on the important issues in the portfolio of the Assistant Secretary for 
Financial Institutions.
    My interest in serving our country begins with my parents, who are 
seated behind me today. Truthfully, neither my family nor I would be 
here today if it were not for the United States of America and all it 
stands for.
    My Dad grew up as a peanut farmer in rural India. Raised in abject 
poverty, he was driven by an unshakeable determination to build a 
better life. Lacking resources, he immigrated to the U.S. primarily by 
boat. Here, he pursued higher education, ultimately earning his Ph.D. 
from NYU. He worked incredibly hard over a 50-plus-year career, 
including operating a number of small businesses in my home State of 
Georgia and teaching at Spelman College, a Historically Black all-
women's college in Atlanta.
    Like my Dad, my journey to being before you today was not without 
adversity. I was born 3 months premature, weighing in at just two 
pounds and two ounces. When I was 2 weeks old, doctors put me in a room 
with a baby that had pneumonia. I contracted the pneumonia, and my 
brain was damaged. Doctors told my parents that I would never grow past 
four feet tall, that I would be incapacitated, and that I would die. I 
am so fortunate that the doctors saved my life and that my parents, 
particularly my Mom, always believed in me.
    The common thread between my Dad's path and mine is that America 
made our improbable stories possible. Coming to America with nothing, 
my Dad found opportunities that only our country provides to give my 
brother and me the chance to realize our own dreams. Likewise, America 
is probably the only country where a child with brain damage and 
Cerebral Palsy would be accepted so completely and encouraged so 
unfailingly to overcome such obstacles.
    This journey has motivated me to serve and to try to repay the 
enormous debt I owe to our country, and I am proud to have accepted the 
call to public service when I have been asked. From 2012-2015, I served 
as a Senior Advisor at the FDIC, and I currently serve as the Deputy 
Assistant Secretary of the Treasury for FSOC.
    In addition to Government service, I have practiced law at 
O'Melveny and Myers, most recently as a Partner and the Head of the 
Financial Advisory and Regulation Practice. In that capacity, I 
represented depository institutions of all sizes including many 
community banks and regional financial institutions. I have also 
advised on credit union structural and regulatory issues. And, I have 
previously represented community interest and charitable organizations 
on a pro bono basis on matters relating to financial regulation. One 
consistent objective of my work has been assisting depository 
institutions to better serve their communities and to provide a broader 
array of services to a greater number of customers.
    I also love teaching and mentoring the younger generation--a 
passion that has led me to teach an undergraduate economics course on 
Banking Regulation at my alma mater--Stanford University--since 2014.
    Above all, the thing that has drawn me to financial services is the 
unique connection between our financial system and American families 
and small businesses like those my Dad operated. At its best, our 
financial system is the force multiplier of our economy, linking savers 
to those who seek credit to pursue education, build businesses, and 
help their families to live better lives. Financial services also 
assist Americans in saving for retirement and in insuring loved ones 
against difficult life events and losses.
    Thank you again for the opportunity and the honor of appearing 
before you today. I would be would be happy to answer any questions you 
have and would be humbled to earn your support for my nomination.
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                  PREPARED STATEMENT OF TODD M. HARPER
    To be a Member of The National Credit Union Administration Board
                           February 14, 2019
    Chairman Crapo, Ranking Member Brown, and Members of the Committee, 
thank you for the invitation to testify before you today as a nominee 
to become a Board Member of the National Credit Union Administration. 
If confirmed, it would be an honor and a privilege to serve.
    Moreover, I am humbled by the trust and faith placed in me by the 
Administration and the U.S. Senate. I am especially grateful to those 
who have supported me in this process, including Chairman Crapo and his 
staff who moved quickly to consider me, the President and his aides who 
vetted and nominated me, and Democratic Leader Schumer and Ranking 
Member Brown who recommended me.
    With nearly 25 years of Government experience primarily working for 
Congress on financial services matters and at the NCUA, I have gained 
broad knowledge of financial services regulatory matters and a deep 
understanding of the many policy issues facing the $1.4 trillion credit 
union system and its 115.4 million members.
    But my commitment to public service really started with my parents. 
As professional educators and community leaders, my parents instilled 
in me a strong desire to give back to others. They also taught me the 
importance of finding common ground when making decisions.
    You see, before they fell in love and married, my mother was the 
president of the teacher's union and my father was the superintendent 
of schools. One was a Democrat and the other a Republican, yet during 
negotiations they would work together to reach the best possible deal 
for both sides.
    I have carried their leadership lessons with me throughout my 
career. As a result, I have skillfully solved complex problems, reached 
bipartisan consensus where possible, and bridged differences between 
business and Government to produce results.
    As a long-time congressional aide, I served as a senior advisor to 
Congressman Paul E. Kanjorski of Pennsylvania and staff director of the 
House Financial Services Subcommittee on Capital Markets, Insurance, 
and Government Sponsored Enterprises. In these roles, I worked on every 
major financial services law from the enactment of the Gramm-Leach-
Bliley Financial Services Modernization Act in 1999 through the passage 
of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 
2010.
    Most notable, however, is my long track record of working on credit 
union issues, which began when Congress considered and passed the 
Credit Union Membership Access Act. Introduced by Congressman Kanjorski 
and Congressman Steve LaTourette of Ohio, the bipartisan law responded 
to a U.S. Supreme Court ruling that threatened the long-term viability 
of thousands of credit unions.
    Subsequently, I led staff in drafting the first version of the 
Credit Union Regulatory Improvements Act of 2003, bipartisan 
legislation introduced by Congressman Kanjorski and Congressman Ed 
Royce of California. Their bill aimed to strengthen capital standards, 
advance economic opportunity, and provide targeted regulatory relief, 
three goals that continue to guide me.
    During the financial crisis, I worked to convene the first 
congressional hearing to explore the creation of a Temporary Corporate 
Credit Union Stabilization Fund. And in 2010, I spearheaded staff 
efforts in the House to secure enactment of a law to lower the costs of 
managing both the Corporate Stabilization Fund and the National Credit 
Union Share Insurance Fund.
    Most recently, I spent 6 years as NCUA's senior executive for 
public and congressional affairs, as well as the chief policy advisor 
to former Chairmen Debbie Matz and Rick Metsger. Ultimately, the time I 
spent at NCUA strengthened my knowledge of the credit union system and 
honed my management skills. In 2015, the agency recognized my 
leadership abilities by selecting me as a supervisor of the year.
    My professional experiences have also informed my regulatory 
philosophy. In my view, financial regulators need to be fair and 
forward looking; innovative, inclusive, and independent; risk focused 
and ready to act expeditiously when necessary; and appropriately 
engaged with all stakeholders to develop effective, but not excessive, 
regulation.
    Additionally, an NCUA Board Member should be well informed, ask 
tough questions, and make impartial judgments that balance competing 
viewpoints in a transparent manner. If confirmed, I am confident I 
would do just that.
    My priorities, first and foremost, would be to safeguard the safety 
and soundness of federally insured credit unions, preserve the 
integrity of the credit union industry in a continually evolving and 
increasingly complex marketplace, and protect taxpayers and credit 
union members from losses to the Share Insurance Fund. Accordingly, if 
confirmed, I would focus on the issues of capital, liquidity, and 
cybersecurity. I would also prioritize the agency's consumer protection 
responsibilities, consistent with the law.
    By law, the credit union system has a mission to promote thrift and 
serve people of modest means. As such, if confirmed, I would work 
diligently with my NCUA Board colleagues to foster an environment that 
supports small credit unions, minority depository institutions, and 
low-income credit unions, which face the challenges of increased 
competition, limited resources, and difficulties in achieving economies 
of scale.
    Additionally, I am committed to increasing access to financial 
services for both the unbanked and the underbanked. This, too, would be 
a priority for my work.
    In closing, it would be a tremendous honor, if confirmed, to serve 
as an NCUA Board Member. I believe that my expertise on financial 
services policy and credit union issues, prior experience as a senior 
congressional and regulatory staffer, proven ability to fairly consider 
and balance competing viewpoints, and demonstrated strategic leadership 
and communications skills combine to make me well qualified to serve in 
this position.
    Thank you again for the chance to appear before you today and for 
considering me for this role.
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                   PREPARED STATEMENT OF RODNEY HOOD
    To be a Member of The National Credit Union Administration Board
                           February 14, 2019
    Chairman Crapo, Ranking Member Brown, and Distinguished Members of 
the Committee, Thank You for the opportunity to meet with you this 
morning as a nominee to serve on the Board of the National Credit Union 
Administration.
    It is indeed an honor and a privilege to be nominated to the NCUA 
Board, and if confirmed, I will do my level best to fulfill the trust 
placed in me by the President and the U.S. Senate. I am especially 
grateful for the unwavering support I have received from the Senators 
of my home State, Senator Richard Burr and Senator Thom Tillis. I am 
humbled by the gracious words expressed in their letter on my behalf 
for the public record and applaud their remarkable leadership and 
service to the State of North Carolina.
    I also want to than NCUA Board Chairman J. Mark McWatters for his 
encouragement, my fellow nominee, Todd Harper, for his patience and 
tenacity, and the professional staff at the NCUA who provided me 
thorough briefings and insights on the myriad issues facing the agency 
and federally insured credit unions.
    While my parents are not here in person, I feel the warmth of their 
presence as they watch from heaven. I am thankful to them for 
bequeathing to me a strong value system--a value system that 
encompasses humility, integrity, hard work, and compassion. I believe 
these values have helped me make a difference in the lives of many 
people during my 25 years in the private sector and in public service.
    Through my education and work experiences, I have developed and 
nurtured a broad knowledge of the financial services industry and have 
a keen understanding of the tremendous responsibilities of regulators. 
The NCUA plays an important role as both regulator and insurer to 
protect the savings of more than 105 million Americans in an industry 
with more than $1.4 trillion in assets.
    I also recognize credit unions play a critical role in helping 
families achieve the American dream of home ownership; assisting 
entrepreneurs in creating small businesses; and providing the trusted 
affordable and essential financial services so families can save for 
the future. If confirmed by the Senate, I will work diligently to 
ensure the continued safety and soundness of our Nation's credit union 
system as it competes in a dynamic and ever-changing marketplace.
    I look forward to returning to NCUA and fulfilling the duties and 
responsibilities of a Board Member. My paramount responsibility will be 
ensuring the safe and sound operation of federally insured credit 
unions. Additional responsibilities will include ensuring that NCUA 
thoroughly applies all relevant consumer protections, creates 
opportunities to promote financial education and financial inclusion, 
and fosters an environment where low-to-moderate income and disabled 
individuals have access to affordable financial services.
    I am committed to listening carefully, working hard, and doing my 
level best to ensure the safety and soundness of the Nation's credit 
union system--both the financial institutions and the National Credit 
Union Share Insurance Fund.
    During the 4 years of my term at NCUA over a decade ago, I worked 
diligently to fairly and thoughtfully implement the Federal Credit 
Union Act and ensure the safety and soundness of the Nation's then 
8,000 credit unions, which at the time more than 80 million member-
owners and had assets over $600 billion. My regulatory philosophy was, 
and still remains, that regulation needs to be effective, but not 
excessive.
    One of my lasting accomplishments from my previous term at NCUA was 
the launch of Enterprise Risk Management Summits that provided training 
sessions to credit unions on how to mitigate and manage risks. Working 
in collaboration with regulators from the Federal Reserve, OCC, FDIC, 
Federal Home Loan Banks, and National Economic Council, I hosted 
sessions with subject matter experts and credit union leaders that 
addressed risk areas such as liquidity, interest rate, and 
concentration. It was through my efforts that today Enterprise Risk 
Management is embedded in the Agency's supervisory and examination 
process.
    My interest in serving vulnerable communities grew from my 
volunteer work as a missionary in Africa and later as a banker engaged 
in community development. I still fondly remember the joy and 
excitement I saw when a young woman who attended one of my bank's 
homebuyer education classes, learned that home ownership was not just a 
dream for her and her family. She was able to attend a series of 
homebuyer classes, build a credit profile and obtain downpayment 
assistance to purchase her first home. She showed her appreciation by 
inviting me to tour her new home and share a meal with her family.
    I have heard it said, ``The true measure of compassion is more than 
good intentions, it is good results.'' I have been blessed and 
fortunate to spend over 25-years working with some of the country's 
most respected financial institutions that sought to empower economic 
stability and shared prosperity in our local communities. While at 
North Carolina Mutual and Wells Fargo, I held management positions that 
allowed me to promote community development and outreach initiatives to 
underserved communities. I served on the board of the Wells Fargo 
Housing Foundation, and managed public-private partnerships with 
results-oriented organizations such as the Neighborhood Reinvestment 
Corporation and Habitat for Humanity.
    Having served as a Community Reinvestment Act Officer at Bank of 
America and National Director of Affordable Housing at Wells Fargo, I 
have been both an advocate for and provider of affordable housing and 
small business lending. In those positions, I oversaw loan programs, 
managed teams of regional community development managers, and worked 
with our credit policy group to evaluate and manage risks. I have also 
provided financial education to underserved communities by conducting 
seminars on how to buy a home and obtain the financing necessary to 
start a small business.
    My current work in the Corporate Responsibility Group at JPMorgan 
Chase provides me with opportunities to manage national partnerships 
with nonprofit organizations such as the NAACP, National Urban League, 
NeighborWorks America, National Disability Institute and RespectAbility 
in promoting financial inclusion and shared prosperity in underserved 
communities. I also work with regulators from the OCC, FDIC, Federal 
Reserve, and CFPB in hosting Financial Inclusion Summits for the 
disabled community. These experiences directly exposed me to the 
importance of regulatory review, financial soundness, and risk 
management.
    My public sector experience includes serving as the Associate 
Administrator of the Rural Housing Service at the U.S. Department of 
Agriculture, where I helped administer a $43 billion loan portfolio of 
over 400,000 homeowners. I also served on the Board of NeighborWorks 
America with leaders from the Federal banking regulators and the 
Federal Housing Commissioner. Additional public sector experience 
includes my term as a member of the University of North Carolina System 
Board of Governors--the policy and oversight body for North Carolina's 
public college system--serving 17 universities, more than 220,000 
students and the UNC Hospital System. In that role, I served as the 
Vice Chairman of the Board's Audit, Risk Management, and Compliance 
Committee.
    My experiences in the private and public sectors have provided me 
with leadership opportunities and have taught me valuable lessons about 
responsibility, accountability, and transparency. This includes the 
importance of building solid teams, paying attention to the basics, and 
putting a face on the decisions you make. These experiences have 
provided me with a sound foundation and robust skill set for evaluating 
the policy issues facing the NCUA Board.
    If confirmed by the Senate, I will return to the NCUA with a risk-
based and market-oriented mindset based on the following tenets:

    First, I will work to ensure that credit unions remain safe 
        and sound institutions.

    Second, I will strive to be recognized as a fair and 
        thoughtful regulator--one who realizes the value and necessity 
        of regulation while also being cognizant of the impact of 
        excessive regulation.

    Third, I will bring focused leadership and management to 
        the NCUA while seeking to ensure efficient operations and 
        prudent use of resources.

    Fourth and finally understand the importance of disclosure 
        and transparency and will work closely with the Members of this 
        Committee, and all members of Congress, to ensure the financial 
        integrity of credit unions in an ever-changing and dynamic 
        environment.

    Mr. Chairman and Members of the Committee, I am honored to appear 
before you this morning and would like to thank you again for your 
courtesy and consideration. I welcome any questions you may have.
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              PREPARED STATEMENT OF MARK ANTHONY CALABRIA
          To be Director of The Federal Housing Finance Agency
                           February 14, 2019
    Chairman Crapo, Ranking Member Brown, and distinguished Members of 
the Committee, I thank you for the opportunity to appear before the 
Committee today as the nominee for Director of the Federal Housing 
Finance Agency (FHFA).
    I also want to thank the President for the trust and confidence 
placed in me for this nomination. Additionally I want to express my 
deep appreciation to Vice President Pence. Serving as Chief Economist 
for the Vice President has been one of the greatest honors of my life.
    It perhaps rivals the other great privilege of my career, which has 
been to serve on the staff of this Committee. I take tremendous pride 
in having served on the Committee staff under Senator Shelby. While GSE 
reform was eventually passed in 2008, the structure of that reform 
largely mirrors the Shelby bills of 2004 and 2005. If anyone is the 
legislative father of FHFA, it is Senator Shelby.
    I believe being part of the process that resulted in the Housing 
and Economic Recovery Act of 2008 (HERA) has also given me unique and 
valuable insights into the mission and history of FHFA. I well remember 
the short comings of its predecessors, OFHEO and the FHFB.
    I was also extremely fortunate to serve on the Committee staff 
during the leadership of Senator Paul Sarbanes. While I did not always 
agree with his policy positions, I have strived to live up to the 
standards of professionalism and conduct he set for this Committee. 
Particularly Senator Sarbanes' belief that it is indeed possible to 
disagree without being disagreeable.
    I take great pride in the fact that I continue to count a number of 
former Sarbanes staff as friends.
    Speaking of friends, it is also a true pleasure to be sitting at 
the table today with three gentlemen I have the privilege of calling 
friends.
    I also want to recognize my partner, Allison Randall, who is here 
with me today. Allison's life-long work to end domestic violence has 
been a daily inspiration to me.
    I have to thank the Committee here as well, as Allison and I met 
working on the 2005 reauthorization of the Violence Against Women Act, 
whose Title VI: Housing Opportunities and Safety for Battered Women and 
Children, was the product of this Committee.
    Lastly, I want to recognize my mother, Janie Jones, who is here 
with me today. I know my sitting at this table is only possible due to 
the many sacrifices made by my mother. I doubt I could have done half 
the job she did, for many years as a single mother raising four 
children.
    It was also my mother's 20-plus years working for the County of 
Fairfax Virginia that instilled in me a deep respect for public 
service.
    As she spent her service there in the Comptroller's office, she 
also instilled in me the unavoidable reality that whatever the goals of 
Government, the numbers have to add up.
    While the primary focus of FHFA is on our Nation's mortgage 
markets, the last piece of legislation I was privileged to work on for 
this Committee was the Homeless Emergency Assistance and Rapid 
Transition to Housing Act of 2009. It was a particular honor working 
with Senator Reed and his staff to strengthen our Nation's homelessness 
assistance programs to better service homeless families, especially 
those living in rural America.
    Homelessness and rural housing are only a few of the areas I have 
worked on. During my service on the Committee staff I worked on over 20 
pieces of legislation that became law, mostly in the areas of housing 
and mortgage finance.
    In addition to my Committee experience, I briefly oversaw HUD's 
regulation of the mortgage market, primarily under RESPA.
    I have also spent a number of years performing economic research on 
the housing and mortgage market for two of the largest housing industry 
trade associations.
    I have spent the last 20-some years researching and writing about 
our Nation's housing and mortgage markets. I believe I have 
successfully mastered not just the economics of our housing and 
mortgage markets, but also the legal and policy details. I believe that 
particular combination of skills and strengths makes me uniquely 
qualified to serve as the director of FHFA.
    As the Members of the Committee are perhaps aware, I have an 
extensive record of writings in the area of mortgage finance. I have on 
a few occasions expressed strong opinions on the history and future of 
our mortgage finance system. I have most definitely expressed, and 
express here today, a frustration with the current state of our 
mortgage system and the need for reform.
    Despite that frustration, I want to very clearly state to this 
Committee, that if confirmed, my role as Director of FHFA is to carry 
out the clear intent of Congress, not to impose my own vision.
    I have even brought with me today my nearly decade old, dog-eared 
personal copy of HERA. Whatever the policy issue, my first question 
will always be ``what does the statute say?''
    Let me close by emphasizing that I believe we are truly at a 
critical juncture in housing finance policy. Families across America 
face heavy burdens making their rent or mortgage payments in many 
cities, towns and States, as well as the unique barriers faced in our 
rural and tribal communities.
    I also strongly believe that shelter is one of the most critical of 
basic needs facing any family. Whether it is rented or owned, American 
families need an affordable place to call home.
    I thank you for your consideration today and look forward to your 
questions.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                        FROM BIMAL PATEL

Q.1. Capital Magnet Fund--The Community Development Financial 
Institutions (CDFI) Fund is tasked with disbursing Capital 
Magnet Fund (CMF) contributions from Fannie Mae and Freddie Mac 
(the Enterprises). If confirmed, the CDFI Fund and its CMF 
disbursements will be under your administrative purview.
    In 2018, the Administration proposed to rescind the 
Enterprises' Capital Magnet Fund contributions, rather than 
disburse them. The Administration made this proposal despite 
the fact that families across the country are suffering from an 
affordable rental housing shortage. I am pleased that Congress 
rejected this proposal.
    I am also pleased that two Ohio organizations, National 
Church Residences and the Ohio Capital Finance Corporation, 
were recently awarded a combined $13.5 million of CMF funding 
to help create and preserve affordable housing in Ohio and in 
other States. As required, these organizations will leverage at 
least $10 for every $1 awarded by CMF.
    Given that 1 in 4 renter households are spending more than 
half of their incomes on housing costs, do you agree with the 
Administration's proposal to block the distribution of Capital 
Magnet Funds?

A.1. The CDFI Fund is statutorily required to administer the 
Capital Magnet Fund Program allocation when received. If 
confirmed, I will continue to administer the program consistent 
with these requirements.

Q.2. How do you intend to advise the Administration on any 
future budget proposals to rescind CMF funding?

A.2. If confirmed, I will provide the Administration with 
information on programmatic and awardee activity as requested.

Q.3. In any year in which the Enterprises transfer funds to 
CMF, will you commit:
    To promptly issue a CMF Notice of Funding Availability 
(NOFA) without regard to any Administration proposal to rescind 
such funding?

A.3. Upon receipt of funding, the CDFI Fund administers the 
program, including release of the NOFA, in accordance with 
statutory and regulatory program guidelines. If confirmed, I 
will continue to administer the program consistent with these 
requirements.

Q.4. To promptly award funds in response to that NOFA without 
regard to any Administration proposal to rescind such funding?

A.4. As required by law, the CDFI Fund administers the Capital 
Magnet Fund program rounds once funding is received. If 
confirmed, I will continue to administer the program consistent 
with these requirements.

Q.5. Community Development Financial Institutions (CDFI) Fund--
The CDFI Fund promotes community and economic development by 
providing financial and technical assistance to CDFIs so that 
they can expand access to financial services and affordable 
credit to underserved people and communities, including those 
in distressed urban, rural, suburban, Tribal, and Alaska and 
Hawaiian Native areas. For FY2019, the Administration proposed 
to eliminate new funding for CDFI discretionary programs 
including the Bank Enterprise Award Program, CDFI program, the 
Native American CDFI Assistance Program, and the Healthy Food 
Financing Initiative. I am pleased that Congress rejected this 
proposal.
    Do you agree with the Administration's proposal to 
eliminate new funding for CDFI discretionary programs?

A.5. If confirmed, I will continue to administer the program at 
funding levels appropriated by the Congress.

Q.6. How do you intend to advise the Administration on any 
future budget proposals to eliminate CDFI discretionary 
funding?

A.6. If confirmed, I will provide the Administration with 
information on programmatic and awardee activity as requested.

Q.7. Capital/TBTF/FSOC/Shadow Banking--Your former boss at the 
FDIC, Jeremiah Norton, worked with former FDIC Chair Gruenberg 
and Vice Chair Hoenig to strengthen leverage capital 
requirements. But you know that the financial crisis wasn't 
caused by only the risky behavior at the banks, there were 
significant risks in the nonbanks and shadow banks as well. 
That said, at FSOC, you supported the Secretary's efforts to 
de-designate AIG and Prudential. Because of these efforts, 
there is now not a single nonbank ``Systemically Important 
Financial Institution'' or ``SIFI'' that has Federal oversight, 
and we see significant risks growing in the shadow banks.
    If confirmed as Assistant Secretary for Financial 
Institutions, you will have financial regulation in your 
portfolio. In light of experience at the FDIC, do you agree 
with efforts at the Federal Reserve to weaken leverage capital 
requirements?

A.7. I support simple, transparent, and strong capital 
requirements for banks. It is important that the banking system 
be appropriately capitalized to protect taxpayers and to 
facilitate economic growth. The regulatory capital framework in 
the U.S. possesses several components, which should each be 
meaningful: risk-based, leverage, and supervisory stress-test 
based capital requirements. Achieving the right calibrations 
for each regime is the responsibility of our independent 
banking regulators, who are currently undertaking open 
rulemakings. As such, it would be inappropriate for me to 
comment on an open rulemaking.

Q.8. In your response to Senator Kennedy's question, you said 
that you believe ``Too-Big-To-Fail'' banks still exist. 
Notwithstanding increases in capital since the crisis, how 
would you propose to address this issue, including risks from 
interconnectivity, if you are confirmed?

A.8. Current law requires that bankruptcy be the presumptive 
path for resolving large and complex financial institutions. In 
order to protect taxpayers, we must continue to enhance the 
resolvability of banks. To that end, in its February 2018 
report on Orderly Liquidation Authority and Bankruptcy Reform, 
Treasury recommended a series of proposed reforms aimed at 
improving the resolvability of financial institutions under 
bankruptcy. The Treasury report states that improving the 
Bankruptcy Code, ``would build on the resolution planning 
process under Title I of the Dodd-Frank Act and other 
postcrisis developments that have made U.S. financial companies 
more readily resolvable in bankruptcy--including major 
increases in usable capital and liquidity buffers, elimination 
of significant short-term debt at the bank holding company 
level, and efforts to simplify and rationalize corporate entity 
structure.'' Treasury also recommended certain measures be 
taken to enhance taxpayer protections under OLA.
    With respect to risks related to interconnectivity, on 
August 6, 2018, the Board of Governors of the Federal Reserve 
System published a final rule requiring single counterparty 
credit limits under Section 165(e) of the Dodd-Frank Act, and 
the Federal Reserve should continue to monitor the 
implementation of this rule.

Q.9. Section 165(d) of the Dodd-Frank Act, commonly referred to 
as the ``living wills'' requirement, was designed to simplify 
large, complex financial institutions so they would no longer 
be a threat to financial stability. Large, complex financial 
institutions are required to prove they can undergo an orderly 
bankruptcy under current law. Do you think all financial 
institutions are currently meeting these requirements? Do you 
think these large, complex financial institutions should be 
simplified so they can undergo an orderly bankruptcy, as 
current law requires? Would changes to the bankruptcy code made 
specifically for large, complex firms weaken this requirement 
and preserve the existence of the kinds of financial 
institutions whose mismanagement precipitated a worldwide 
financial crisis?

A.9. I have not had the opportunity to review resolution plans 
in my current capacity and thus do not have a view on whether 
banking organizations are satisfying the resolvability 
requirements under Section 165(d). I strongly support ensuring 
that large, complex financial institutions satisfy applicable 
legal requirements under Section 165(d). In order to protect 
taxpayers, we must continue to enhance the resolvability of 
banks.

Q.10. What was your role in FSOC's de-designation of AIG and 
Prudential?

A.10. The reevaluation of nonbank financial companies is 
required not less than annually pursuant to Section 113 of the 
Dodd-Frank Act. With respect to the Council's determination to 
rescind the designation of AIG, I coordinated the staff-level 
analysis that Council members considered in their 
determination. With respect the reevaluation of Prudential, I 
am recused and did not materially participate in the matter. 
The Council's reevaluation process of nonbank financial 
companies under Section 113 of the Dodd-Frank Act is a months-
long process that is extensive and thorough. The Council's 
analysis has previously considered financial stability risks 
through several transmission channels, including exposures, 
asset liquidation, and critical function or services. The 
Council has also considered complexity and resolvability and 
existing regulatory scrutiny in its analysis.

Q.11. Do you believe there are no nonbank ``SIFIs'' in the 
U.S.?

A.11. There are currently no nonbank financial companies that 
the Council has determined under Dodd-Frank Section 113 should 
be subject to Federal Reserve supervision and enhanced 
prudential standards. The Council noted in its 2018 Annual 
Report, that ``[s]ince [December 2017], the Council has not 
advanced any nonbank financial companies to Stage 3 or made a 
proposed or final determination [of systemic importance] 
regarding any nonbank financial company.''

Q.12. If confirmed as Assistant Secretary for Financial 
Institutions, what will you propose to address growing risks in 
the shadow banking sector?

A.12. It is important that banking regulators possess the data 
and information necessary to address risks that might arise 
from nonbank counterparty relationships. If confirmed, I will 
work with banking regulators to monitor and address these risks 
as appropriate.

Q.13. Insurance--One of your roles as Assistant Secretary for 
Financial Institutions will be to oversee the Federal Insurance 
Office (FIO), which has the authority to monitor the insurance 
industry, including identifying issues or gaps in the 
regulation of insurers that could contribute to a systemic 
crisis in the insurance industry of the United States financial 
system.
    What specific steps will you take to identify issues or 
gaps in the regulation of insurers that could contribute to a 
systemic crisis in the insurance industry of the United States 
financial system?

A.13. One of the Federal Insurance Office's (FIO) statutory 
authorities is to monitor the insurance industry for issues 
that could contribute to a systemic crisis in the U.S. 
insurance industry. Among other things, FIO also serves as a 
source of insurance policy expertise in the Federal Government 
and coordinates Federal efforts and develops policy on 
prudential aspects of international insurance. FIO monitors the 
insurance industry through its active participation in both its 
domestic work and its international engagement at the 
International Association of Insurance Supervisors. FIO also 
issues a host of reports assessing many of these risks, 
including: annual reports to the Congress, reports on the 
Terrorism Risk Insurance Program, a report on efforts to 
increase transparency at international standard-setting bodies, 
and others, which highlights its important work in these areas. 
If confirmed, I will work closely with FIO to continue these 
efforts, and to continue reporting on these important issues to 
the Congress.

Q.14. If confirmed, you would oversee the FIO, which serves as 
a nonvoting FSOC member and has authority to recommend to FSOC 
that it designate an insurer as an entity subject to regulation 
by the Board of Governors. Under what circumstances would you 
recommend that the FSOC designate or redesignate an insurer as 
a SIFI?

A.14. Under Section 113 of the Dodd-Frank Act, if the Council 
determines that the material financial distress at a U.S. 
nonbank financial company, or the nature, scope, size, scale, 
concentration, interconnectedness, or mix of the activities of 
a U.S. nonbank financial company, could pose a threat to the 
financial stability of the United States, they may subject that 
firm to Federal Reserve supervision and enhanced prudential 
standards. Treasury recommended in its November 17, 2017, 
report on FSOC designations that the Council should prioritize 
identifying particular financial activities or products that 
could pose risks to U.S. financial stability and also 
recommended enhancements to the designation process under 
Section 113 to include cost-benefit analysis, consideration of 
likelihood of material financial distress and pre- and post-
designation off ramps. Council members are considering the 
recommendations made in the report, which, if adopted, would 
have implications for the designation process and analysis. If 
confirmed, I will work closely with the Federal Insurance 
Office (FIO) to monitor the risks facing the U.S. insurance 
industry.

Q.15. In your view, what are the current risks facing large 
insurance companies and how are they different from those that 
existed during the financial crisis? How do you propose to 
address these risks if confirmed as Assistant Secretary for 
Financial institutions?

A.15. Since the financial crisis, the set of possible risks 
facing the U.S. financial system, including U.S. insurers, 
continues to evolve. As noted in FSOC's 2018 annual report, as 
the financial system, including insurers, increase its reliance 
on information technology, there is an increasing risk that a 
cybersecurity event will have severe negative consequences, 
potentially entailing systemic implications for the U.S. 
insurance sector. If confirmed, I will have FIO and the Office 
of Critical Infrastructure Protection and Compliance Policy 
continue to work together on these important cybersecurity 
issues. Additionally, it is important that FIO continue to 
monitor how changes in technology create both potential 
opportunities and risks for the U.S. insurance sector, and if 
confirmed, I will work to ensure it does so.

Q.16. Treasury Reports--You played a role in several of the 
reports released by the Treasury Department in 2018 pursuant to 
President Trump's Executive Order 13772 on Financial 
Regulation.
    Which reports did you work on and what was your role in the 
writing of each of those reports?

A.16. I oversaw the staff drafting of the report on Financial 
Stability Oversight Council Designations. I also participated, 
to various degrees, in the development of the Treasury's 
reports on Banks and Credit Unions, Asset Management and 
Insurance, and Nonbank Financials, FinTech, and Innovation and 
the Orderly Liquidation Authority and Bankruptcy Reform.

Q.17. Many of the recommendations in the Treasury's reports 
look like the wish lists of the financial industry. Treasury 
disclosed the meetings it took in preparation for the reports 
and it met overwhelmingly with industry compared to civil 
rights and consumer advocacy groups. Were you a participant in 
these meetings? Why did you meet with more industry 
representatives than groups that advocate for consumers, 
workers, and families?

A.17. I believe that public policy is substantially improved 
when considering a diverse set of viewpoints, and if confirmed, 
I will continue to seek a diverse set of perspectives in my 
work. During the development of the reports, Treasury consulted 
extensively with a wide range of stakeholders, including trade 
associations, financial services firms, consumer advocacy 
groups and community interest organizations, academics, and 
other experts. Treasury also reviewed a wide range of data, 
research, and published material from both public and private 
sector sources.

Q.18. If confirmed, what will be your role in carrying out all/
any of the unimplemented recommendations in these reports? What 
recommendations will you prioritize?

A.18. The vast majority of recommendations made in the Treasury 
reports require action by the financial regulatory agencies or 
the Congress. If confirmed I look forward to engaging with both 
the Congress and the financial regulatory agencies should they 
choose to implement any of the policy recommendations.

Q.19. Treasury's Nonbanks, FinTech, and Innovation report 
advocated that the CFPB rescind its payday lending rule. Do you 
support CFPB Director Kraninger's efforts to repeal the ability 
to repay and repeat loan limit provisions of the payday lending 
rule?

A.19. I recognize the importance of small-dollar credit to 
American families, particularly middle-class and lower-income 
families. I also support appropriate consumer protections that 
allow consumers to make informed decisions and preserve 
availability of consumer financial products. The Bureau is 
currently undertaking an open rulemaking on this issue. As 
such, it would be inappropriate for me to comment on an open 
rulemaking.

Q.20. What recommendations do you believe would most benefit 
American families?

A.20. The Treasury reports made a number of recommendations, 
many of which would benefit U.S. consumers, businesses, and the 
overall economy. Two examples include encouraging 
simplification of the de novo bank application process to allow 
banks to serve a greater number of consumers and communities, 
and minimizing burden on rural and agricultural lenders, as 
appropriate, to help families in rural and agricultural 
communities.

Q.21. FinTech--You have written and testified on expanding 
financial technology and worked on the Treasury report on 
Nonbanks, FinTech, and Innovation. I am skeptical of making it 
easier for nonbank financial institutions to avoid State and 
Federal consumer protection laws. Many innovative financial 
products are already offered under the existing regulatory 
framework without violating the law.

Q.21. What is your position on nonbanks accessing consumer data 
and providing financial products without the same safety and 
soundness regulations and consumer protections that community 
banks are required to comply with?

A.22. The current practice of data sharing between banks and 
nonbank firms can deliver real benefits to consumers looking to 
lower the cost of borrowing, better manage their expenses, and 
save for the future. At the same time, I think that the current 
methods for sharing data need to be improved to allow for more 
responsible and secure sharing of consumer financial data, and 
to address key issues around security and liability. If 
confirmed, I would be happy to work with the Congress as it 
considers what potential revisions to the legislative and 
regulatory frameworks around consumer financial data or data 
aggregation might be needed.

Q.22. Prior to the 2008 financial crisis, the financial 
services and banking industry claimed that dangerous subprime 
mortgages were ``innovative'' and would ``increase access to 
credit'' for millions of families that they ended up grievously 
harming. How are the ``innovations'' you hope to encourage by 
weakening laws and regulations different from the 
``innovations'' promised by subprime mortgage lenders?

A.23. Innovation must be undertaken in a responsible manner, 
one that protects consumer data privacy and enables consumers 
to make informed choices regarding the use of financial 
services. Fraudulent products designed to interfere with 
consumers' ability to make such informed choices should be 
restricted in favor of products that offer clear disclosures.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
                        FROM BIMAL PATEL

Q.1. In the Midwest, where there is substantial need for 
investment but generally fewer CDFIs to help raise, leverage, 
and deploy capital. Although making grants to start new CDFIs 
is part of the solution over the long-term, this process takes 
time to accelerate and do responsibly. Actively fostering 
partnerships is key to the success of the CDFI fund--between 
existing CDFIs and community banks to jointly lend to community 
projects; between CDFIs and local networks of nonprofits for 
grants and loans for small businesses in rural communities; and 
between larger national CDFIs and local CDFIs to jointly lend 
larger, long-term loans. It seems there is more Treasury and 
the CDFI Fund can do to further incentivize and promote this 
type of collaboration that is essential to the Midwest.
    In your role leading the Office of Financial Institutions 
and in turn, the Office of Financial Institutions Policy, how 
can Treasury and the CDFI Fund be more committed and creative 
to meeting this need for collaborative efforts?

A.1. The CDFI Fund currently promotes partnerships with banks 
and other financing partners through a variety of measures. For 
example, through an innovation prize competition, the CDFI Fund 
supported the development of an online platform to match small 
businesses declined for loans by banks or online lenders with a 
CDFI that may be able to meet their needs. If confirmed, I look 
forward to working with you to promote investment in rural 
communities.

Q.2. Can you share your thoughts about what more the CDFI Fund 
can do to promote such investment in rural communities?

A.2. The CDFI Fund currently has a strong commitment to serving 
rural communities. If confirmed, I intend to keep that 
commitment, and look forward to working with you to promote 
investment in rural communities and increase access to capital 
in underserved rural areas. Although only 15 percent of the 
U.S. population is located in nonmetropolitan areas, about 21 
percent of New Markets Tax Credit investments and 18 percent of 
CDFI awardee investments are located in such areas (using the 
OMB/U.S. Census Bureau definition for nonmetropolitan 
counties). Similarly, of the 38 Capital Magnet Fund awardees, 
24 percent will invest at least half of their award dollars in 
rural areas.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
             SENATOR CORTEZ MASTO FROM BIMAL PATEL

Q.1. Providing banking services for firms that provide cannabis 
remains a problem. Not just for the cannabis firms but for 
their vendors.
    What would you do meet the banking needs of cannabis firms?

A.1. Treasury has stated that financial institutions are 
expected to follow the law and reasonably manage their anti- 
money-laundering risks. Treasury has noted the importance of 
working towards a solution on this issue and has noted 
associated risks in areas such as tax collection and illicit 
finance. I understand clarity surrounding this issue is 
important to constituents in Nevada, and, if confirmed, I will 
work with you to better understand your perspectives on this 
issue.

Q.2. When I was Attorney General, there was not adequate 
research on risks in the financial market that would soon 
devastate Nevada. I am concerned that the enormous reduction of 
staffing at the Office of Financial Research will result in 
weaker analysis.
    How will you make sure that the OFR's research is thorough 
and easily comprehensible and accessible to policymakers all 
across the country, academics, researchers and business 
leaders?

A.2. Analytical rigor in policymaking is extremely important to 
me. If confirmed, I will continue to work with OFR to support 
high standards of quality in policymaking and research. The 
OFR's annual reports, working papers, briefs, monitors, and 
other products are widely available on the OFR's website for 
public use.

Q.3. In your current position, you are part of Treasury's 
efforts regarding cryptocurrencies. I am deeply concerned by 
cryptocurrencies' potential to be used to commit crimes, such 
as human and drug trafficking.
    In your conversations with Treasury's working group, have 
you discussed cryptocurrencies' potential to be used to commit 
crimes?

A.3. Treasury has discussed these concerns with the members of 
the FSOC Digital Assets and Distributed Ledger Technology (DLT) 
Working Group. Additionally, Treasury's Office of Terrorism and 
Financial Intelligence has been working closely with financial 
regulators and partners in law enforcement to proactively 
address these concerns and prosecute crimes.

Q.4. The Assistant Secretary of Treasury for Financial 
Institutions is also responsible for overseeing legislation 
that affects agencies which regulate or insure financial 
institutions, such as the Federal Home Loan Bank System. 
Recently, the Federal Home Loan Banks issued a proposal to 
modify their affordable housing goals.
    Do you support the affordable housing and community 
development mission of the Federal Home Loan Banks?

A.4. I am in favor of a housing finance policy that promotes 
consumer access to mortgage credit, while protecting the 
interests of taxpayers. The FHLBanks are overseen by an 
independent regulator, FHFA, and I would defer questions on 
FHLBank affordable housing and community development activities 
to FHFA.

Q.5. Do you support the Affordable Housing goals as recently 
proposed?

A.5. I am in favor of a housing finance policy that promotes 
consumer access to mortgage credit, while protecting the 
interests of taxpayers. The FHLBanks are overseen by an 
independent regulator, FHFA, and I would defer questions on 
FHLBank affordable housing and community development activities 
to FHFA.

Q.6. How will you urge the Federal Home Loan Banks to expand on 
their community development mission?

A.6. I am in favor of a housing finance policy that promotes 
consumer access to mortgage credit, while protecting the 
interests of taxpayers. The FHLBanks are overseen by an 
independent regulator, FHFA, and I would defer questions on 
FHLBank affordable housing and community development activities 
to FHFA.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                        FROM BIMAL PATEL

Q.1. In Arizona, voters approved cannabis for medical use in 
2010. Following the rescission of the Cole Memorandum in 
January 2018, financial institutions reacted with concern and 
uncertainty in how to provide banking services to legal 
cannabis and cannabis-related businesses. If confirmed, how 
will you work to ensure that State laws like Arizona's are 
respected and that these legal Arizona businesses can access 
essential banking services?

A.1. Treasury has stated that financial institutions are 
expected to follow the law and reasonably manage their anti- 
money-laundering risks. Treasury has noted the importance of 
working towards a solution on this issue and has noted 
associated risks in areas such as tax collection and illicit 
finance. I understand clarity surrounding this issue is 
important to constituents in Arizona, and, if confirmed, I will 
work with you to better understand your perspectives on this 
issue.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                      FROM TODD M. HARPER

Q.1. Credit Union Fees--Last fall, the New York Times reported 
on high fees and interest rates charged to members of the 
Marriott Employees' Federal Credit Union--a credit union that 
was formed so that employees would have access to low-cost 
financial services. Marriott Employees' Federal Credit Union 
has a low-income designation meaning 50 percent of its members 
have family incomes of less than 80 percent of the median 
income in the areas it serves.
    As the article indicated, many of these workers are 
struggling to make ends meet, and these fees make their 
economic situations worse. In the same article, it was reported 
that some of the executives and management of Marriott who also 
use the credit union are receiving million-dollar mortgages and 
car loans at below-market interest rates.
    If confirmed, will you commit to review credit unions' fees 
like overdraft and minimum balance charges as described in the 
article? Will you commit to crack down on fees if they are 
inconsistent with the credit union system's mission of 
providing affordable financial services to working families?

A.1. Yes. If confirmed, I will commit to reviewing such fees 
and taking appropriate action, consistent with Federal consumer 
protection laws and the NCUA's regulations. I will also explore 
how the NCUA presently monitors the performance of credit 
unions receiving the low-income designation to determine 
whether new or modified procedures should be adopted to ensure 
that these credit unions fulfill their statutory mission of 
promoting thrift, especially for people of modest means. In my 
view, our Nation's system of cooperative credit ought to serve 
everyone.

Q.2. Financial Crisis--You advised former NCUA Chair Debbie 
Matz during and after the 2008 financial crisis. What lessons 
did you learn about credit union regulation from that time? 
What issues will you approach differently now because of that 
experience?

A.2. Several lessons stand out. First, consistent with their 
risk profiles, federally insured credit unions need to build up 
and maintain enough reserves of high-quality capital during 
good times to survive economic downturns. Second, the agency 
must maintain appropriate levels of experienced staff and 
funding in good economic cycles to be prepared to conduct 
effective, timely, and thorough examinations during challenging 
economic periods. Third, supervisory activities should be 
focused on those institutions and activities that pose the 
greatest risk to the National Credit Union Share Insurance 
Fund. To address such risks, the NCUA Board in the years 
immediately following the financial crisis adopted important 
rules on stress testing, emergency liquidity, and risk-based 
capital, among others, to address the problems identified 
during the crisis.
    The financial crisis also shaped my thinking about 
regulatory readiness. It is imperative for financial regulators 
to always maintain an open mind about where risks might rise. 
While my safety-and-soundness focus would be on the issues of 
capital, liquidity, and cybersecurity, I recognize that in our 
Nation's complex financial system new, more pressing threats 
may quickly develop. Regulators, therefore, need to have the 
agility and ability to quickly respond to such threats in order 
to protect the safety and soundness of the financial 
institutions they charter, supervise, or insure, and to 
safeguard taxpayers from losses to the share and deposit 
insurance funds. Finally, the NCUA must work vigilantly to 
mitigate threats within the credit union system.

Q.3. Underbanked and Unbanked--In your testimony you indicated 
that one of your top priorities is to increase access for the 
unbanked and underbanked to credit union products and services. 
If confirmed, what will you propose to achieve this objective?

A.3. Just as there are food deserts where residents lack access 
to grocery stores, there are financial deserts where residents 
lack access to affordable products offered by mainstream 
financial services providers. If confirmed, I would undertake 
several actions to expand access to mainstream financial 
services for the unbanked and underbanked. For example, I would 
publicly support legislative efforts in Congress to allow 
Federal credit unions of all charter types to add underserved 
areas to their fields of membership. This change to the law 
would likely have the greatest impact on expanding access to 
affordable financial services for the unbanked and underbanked.
    Additionally, if confirmed, I would publicly support 
efforts to maintain or increase appropriations for the 
Community Development Revolving Loan Fund and the Community 
Development Financial Institutions Fund. Both programs support 
efforts to expand access to financial services in low-income 
communities.
    If confirmed, I would also work to ensure that the NCUA's 
Office of Consumer Financial Protection has the resources it 
needs to conduct effective financial literacy outreach to the 
unbanked and underbanked. Similarly, I would work to ensure 
that the NCUA's Office of Credit Union Resources and Expansion 
has the staffing and funding needed to conduct outreach to 
credit unions through webinars, in-person conferences, one-on-
one assistance, and the distribution of best practices about 
providing financial services to the unbanked and underbanked. 
Additionally, I would ask the office to explore whether there 
are ways to streamline and simplify the application process for 
chartering new credit unions aimed at serving the unbanked and 
underbanked.
    Finally, and perhaps most importantly, I would set a tone 
at the top of the organization by speaking often and regularly 
about the need for credit unions to expand their services to 
the unbanked and underbanked. In this regard, I would explore 
whether to convene a series of collaborative workshops across 
the country to focus more on this issue, like the Partnering 
and Leadership Successes forums convened more than 15 years 
ago.

Q.4. Mergers, Acquisitions, and Consolidation--There has been a 
trend in consolidation in the financial industry, including 
among credit unions. NCUA approved 53 mergers in the fourth 
quarter of 2018 and credit union mergers and acquisitions have 
increased the size of the average credit union. What do you 
think is the impact of consolidation on credit union members? 
What can be done, if anything, to slow down or reverse this 
trend?

A.4. The consolidation trend among all types of depository 
institutions has remained relatively constant and consistent 
across all economic cycles for more than three decades. Two of 
the leading causes of consolidations in the credit union system 
include a lack of succession planning by small credit unions 
and the need to achieve economies of scale to provide the 
services that members want. While consolidations unquestionably 
limit consumer choice in selecting their financial providers, 
many consumers ultimately receive access to a greater array of 
services.
    Nevertheless, I recognize the real need to support and 
assist smaller, federally insured credit unions, especially 
those with $100 million or less in assets. These small credit 
unions make up more than 70 percent of the units in the system. 
If confirmed to the NCUA Board, I would work to ensure that the 
NCUA's Office of Credit Union Resources and Expansion has the 
funding and staffing needed to reach out to these financial 
institutions to assist them in succession planning and 
identifying opportunities for growth, consistent with safety 
and soundness.
    Finally, I would work to further tailor and target the 
NCUA's rules to reduce the regulatory and supervisory burdens 
for small credit unions, when possible. Such regulatory relief 
would help to level the playing field for smaller credit unions 
without substantially increasing risk to the Share Insurance 
Fund.

Q.5. If confirmed, when approving credit union mergers or 
acquisitions, how will you ensure that continued presence and 
investment in the local community are taken into consideration 
so that working families continue to have access to financial 
services?

A.5. If confirmed, I would work with staff and my Board 
colleagues to review the agency's existing policies and 
procedures for handling credit union mergers, acquisitions, and 
charter expansions. When the NCUA charters a new credit union, 
approves a field-of-membership expansion for an existing 
community-based credit union, or permits a credit union to 
convert to a community charter, the credit union must have in 
place a business and marketing plan, which the agency then 
monitors for compliance over a period of several years. A 
similar process could be used after mergers and acquisitions to 
ensure the continued access of working families to financial 
services.

Q.6. Pentagon Federal Credit Union Merger--Earlier this year, 
Pentagon Federal Credit Union (PenFed), a credit union with $23 
billion in assets and over 1.6 million members, acquired 
Progressive Credit Union, a New York State-chartered credit 
union with $383 million in assets and an open charter. While 
PenFed has said it will not use the open charter, if it were to 
change its mind in the future, would you support that decision?

A.6. Presently, the Federal Credit Union Act does not allow for 
the chartering of a Federal credit union with an open field of 
membership. In this instance, however, through an emergency 
voluntary merger Pen Fed acquired a State-chartered credit 
union which had an open field of membership for many decades. 
If confirmed, I would have serious reservations if PenFed used 
the open charter to expand its membership. In my view, our 
Nation's system of cooperative credit should serve everyone. 
Therefore, I would want to understand how PenFed planned to 
promote thrift and ensure access to affordable financial 
services, especially for people of modest means.

Q.7. If so, should the NCUA change how it regulates a large 
credit union with no restrictions on its field of membership?

A.7. The use of an open field of membership by a large Federal 
credit union would cause me concerns, especially as to whether 
the institution is serving all communities, including financial 
deserts with many underserved and underbanked consumers. If 
confirmed to the NCUA Board, I would explore how the NCUA's 
Office of National Examinations and Supervision, which oversees 
and examines credit unions with $10 billion or more in assets, 
presently assesses the performance of a large Federal credit 
union in serving its field of membership and consider with my 
Board colleagues how such oversight should change. I would act 
to ensure that such oversight remains consistent with the 
requirements of the Federal Credit Union Act, consumer 
protection laws, and other legal requirements.

Q.8. Field of Membership--Over time, State regulators and the 
NCUA have expanded field-of-membership rules, to expand access 
to financial services for a greater number of consumers. 
Expanding access to the financial system is extremely 
important, but it is just as important to ensure those same 
credit unions are serving all members of these increasingly 
larger communities and fields of membership. What does the NCUA 
currently do to evaluate a credit union's performance in 
serving all of its members?

A.8. It is a priority for me to expand access to financial 
services for the underserved and underbanked. When the NCUA 
charters a new credit union, approves a field-of-membership 
expansion for an existing community-based credit union, or 
permits a credit union to convert to a community charter, the 
credit union must have in place a business and marketing plan, 
which the agency then monitors for compliance over a period of 
several years. If confirmed to the NCUA Board, I would evaluate 
the effectiveness of this practice, as well as any other of the 
agency's current policies for ensuring that Federal credit 
unions with an expanded field of membership are appropriately 
serving all their members.

Q.9. Are there any improvements for which you would advocate if 
confirmed?

A.9. As mentioned above, when the NCUA charters a new credit 
union, approves a field-of-membership expansion for an existing 
community-based credit union, or permits a credit union to 
convert to a community charter, the credit union must have in 
place a business and marketing plan, which the agency then 
monitors for compliance over a period of several years. A 
similar process could be used to evaluate the performance of 
credit unions serving larger fields of membership to determine 
whether they are appropriately serving all their members. Such 
a review would be consistent with the statutory mission of 
credit unions to promote thrift, especially for people of 
modest means.

Q.10. Payday Alternative Loans (PALs)--The CFPB Director 
recently proposed drastically weakening the agency's payday 
rule. Will you pledge not to follow in Director Kraninger's 
footsteps and work to maintain the restrictions, fee limits, 
and current interest rate caps on the NCUA's Payday Alternative 
Loan (PAL) product?

A.10. The NCUA's PAL product is designed to expand access to 
affordable financial services in a safe-and-sound manner. It 
provides an affordable alternative to predatory payday and 
title loans. In my view, it is very important to maintain the 
consumer protections built into the current NCUA regulation, 
including maintaining appropriate limits on fees, interest 
rates, and rollovers.
    The NCUA Board has also proposed a rule that would expand 
the ability of credit unions to offer more PALs products to 
their members. If confirmed to the NCUA Board, I would work 
with my Board colleagues to ensure appropriate consumer 
protections remain in place, like those related to limits on 
fees, interest rates, and rollovers. It is also important to 
ensure that members receiving a payday alternative loan can 
repay the loan so that they can build a positive credit history 
and gain access to more affordable loan products offered by 
federally insured credit unions and other mainstream financial 
services providers.

Q.11. NCUA Spending--At your confirmation hearing, Chairman 
Crapo asked about recent press reports about excessive spending 
by the current chair of the NCUA Board. While some of the 
spending is allowed under NCUA policies, some of it was not, as 
confirmed by the NCUA Inspector General Report. You committed 
to Chairman Crapo that you would review these policies if 
confirmed, which I support. You have worked at the NCUA before, 
are there certain items you believe should not be reimbursed 
for Board members or staff by a Federal agency?

A.11. The NCUA should work with its sister regulators to 
develop a common reimbursement policy for representation and 
travel expenses modeled on the rules in place at other Federal 
regulatory agencies. In my view, such a policy should not allow 
for the purchase of alcohol by an individual Board Member or 
staff, although it may be permissible to serve alcohol at 
widely attended conferences and meetings. If confirmed, I would 
work with my NCUA Board colleagues to ensure that the rules in 
this area are clear, consistent, and communicated. Finally, if 
confirmed to the NCUA Board, I would commit to not seeking 
reimbursement for alcohol purchases regardless of the policy.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS
                      FROM TODD M. HARPER

Q.1. Last Congress, I was the Senate sponsor of S. 3750, the 
Common Sense Credit Union Capital Relief Act of 2018. It would 
call for a delay in the implementation of the NCUA's risk-based 
capital rule. What are your thoughts on the risk-based capital 
rule? Should implementation of the rule be delayed? Should 
Congress reevaluate the need for the rule entirely?

A.1. In my view, it is important for all financial institutions 
backed by Federal deposit or share insurance to hold capital 
commensurate with the risks held on their balance sheets. In 
the case of federally insured credit unions, such capital will 
protect taxpayers by helping to prevent or mitigate losses to 
the National Credit Union Share Insurance Fund when a credit 
union fails.
    To maintain the safety and soundness of federally insured 
credit unions, the Federal Credit Union Act currently requires 
the NCUA Board to issue regulations to create a system of 
prompt corrective action. This system must be consistent with 
the requirements of the Federal Credit Union Act and comparable 
to the rules of Federal banking regulators. It must also take 
into account the cooperative character of credit unions.
    In 2013, the Federal banking agencies adopted new risk-
based capital rules. To maintain comparability with these 
rules, the NCUA Board moved ahead with efforts to modify its 
risk-based capital rule. Action on this regulation was also 
recommended by the Government Accountability Office and the 
NCUA's Inspector General.
    The NCUA Board finalized its risk-based capital rule in 
late 2015. As initially approved, this rule applied to complex 
credit unions with $100 million or more in assets and provided 
for an implementation period of more than 3 years. Last year, 
while your legislation was pending, the NCUA Board increased 
the threshold to $500 million and extended the implementation 
period for an additional year. The new effective date for 
compliance is January 1, 2020.
    As I understand it, nearly all federally insured credit 
unions covered by the current risk-based capital rule would be 
subject to the lower leverage capital requirement contained in 
the Federal Credit Union Act. In all, less than 20 federally 
insured credit unions would be subject to the higher risk-based 
capital requirement contained in the agency's revised rule. 
These 20 or so credit unions engage in riskier activities or 
hold higher concentrations of certain assets on their books.
    If confirmed, I would keep your concerns in mind and take a 
fresh look at this issue. First, I would want to know the 
actual capital held at each of these 20 or so credit unions 
before making any decision about whether to further delay the 
rule. As I understand it, many of them have recently increased 
the capital held on their books in response to the NCUA Board's 
rulemaking. I would also want to know what Federal banking 
regulators have done with their risk-based capital rules given 
the comparability requirements of the Federal Credit Union Act.
    Finally, during the last 2 years, the failure of several 
federally insured credit unions that concentrated in taxi-
medallion lending have resulted in large losses for the Share 
Insurance Fund. If the NCUA's risk-based capital rule had been 
in effect earlier, some of these losses might have been 
mitigated. If confirmed, I would keep this recent history at 
the forefront of my mind when making any decision about whether 
to further delay implementation of the NCUA's risk-based 
capital regulation.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
                      FROM TODD M. HARPER

Q.1. In addition to voluntarily following the spirit of the 
President's Executive Order to reduce regulatory burden, the 
current NCUA Board has focused much of its recent rulemaking 
activity on reducing unnecessary regulatory burden. Do you 
agree with voluntarily following the Executive Order, and will 
you do so if confirmed?

A.1. The NCUA has a long history of voluntarily complying with 
Executive Orders so long as the order does not compromise the 
mission of the agency, conflict with statutory law, or 
undermine the safety and soundness of credit unions. In my 
view, these efforts have generally improved the quality of 
rulemaking over time and addressed pressing regulatory concerns 
at the time. If confirmed, I would support the continuation of 
the agency's long-standing practice of voluntarily following 
Executive Orders, as appropriate.

Q.2. With regard to future NCUA rulemakings, what approach will 
you take in terms of focusing on a reduction of unnecessary 
regulatory burden?

A.2. For several of its rules, the NCUA has tailored regulatory 
requirements based on the asset size of the credit union. 
Currently, more than 70 percent of federally insured credit 
unions have $100 million or less in assets. In my view, it is 
especially important that the NCUA work to minimize the 
regulatory burdens of these financial institutions so that they 
can instead focus on serving the needs of their members and 
building net worth, as appropriate. If confirmed, I would 
examine how the NCUA could further tailor its rules to limit 
regulatory burdens based on the size, scale, and scope of a 
credit union and its activities, consistent with the statutory 
requirements established by Congress and the need to protect 
both consumers and the safety and soundness of the credit union 
system.

Q.3. Credit unions, as not-for-profit, member-owned 
institutions, are inherently different than for-profit banks. 
It is critical that a member of the NCUA Board appreciate this 
difference and support the credit union philosophy of people 
helping people. While it is inevitable that some credit unions 
will occasionally choose to switch from a credit union to a 
bank charter, what will you do to uphold the core philosophy of 
credit unions to ensure they remain a viable source of 
financial services for Americans?

A.3. In my many years working at the NCUA and for Congress, I 
have gained a great appreciation for the credit union 
philosophy and the uniqueness of the credit union charter. 
Therefore, if confirmed, I would set a tone at the top by 
regularly reminding credit unions of their statutory mission to 
promote thrift, especially for people of modest means. I would 
also closely monitor the composition of the lending portfolio 
of both the credit union system and individual credit unions to 
determine whether consumer financial needs are being met.
    Generally, the credit union system remains very focused on 
serving members' financial needs. Of the $1 trillion in loans 
presently held on the books of federally insured credit unions, 
residential mortgages account for nearly 45 percent of the 
total, auto loans for 35 percent, and credit card debt for 
approximately 5 percent. Additionally, while federally insured 
credit unions constitute just 7 percent of the assets of our 
Nation's financial institutions, they provide 11.5 percent of 
consumer loans. Together, these metrics provide a way for 
quickly assessing whether credit unions are remaining a viable 
source of financial services for Americans.

Q.4. The NCUA is unique from other Federal financial regulatory 
agencies in that it is an independent regulator and insurer of 
credit unions. Do you support the agency's continued 
independence?

A.4. Yes. In the aftermath of the savings-and-loan crisis, 
Congress worked to strengthen Federal financial institutions 
regulators by providing independence in setting budgets and 
collecting fees, submitting testimony to Congress, and allowing 
for rulemaking outside of the OMB-approval process used for 
other executive branch agencies, among other things. Such 
independence helps to ensure the effective supervision of the 
credit union system and protects against inappropriate 
political interference.

Q.5. What can the NCUA do to ensure it is able to maintain its 
current status as an independent regulator and insurer?

A.5. First and foremost, the NCUA must continue to ensure the 
safety and soundness of the credit union system and protect the 
National Credit Union Share Insurance Fund from losses. The 
agency must also maintain an arm's-length distance from the 
entities it charters, regulates, or insures. Appropriate 
engagement with all stakeholders is important to develop 
effective, but not excessive, regulation and supervision, but 
it must be done in a way to prevent regulatory capture.
    If confirmed, I would also work with my colleagues on the 
NCUA Board and staff to ensure that the agency is transparent 
in its regulatory actions and budgeting process, fair and 
forward-looking, innovative and inclusive, and risk-focused and 
ready to act expeditiously when necessary. Together, these 
steps would help to maintain the independence of the agency 
going forward.

Q.6. As the prudential regulator and Federal insurer, the NCUA 
retains oversight over the vast majority of a credit union's 
operations. However, there are numerous areas where there is 
overlap with other regulatory agencies, such as the Consumer 
Financial Protection Bureau (CFPB) in regard to certain 
consumer financial protection laws and regulations, as well as 
some areas where other agencies maintain exclusive authority 
over certain issues, such as the Federal Communications 
Commission in regard to certain consumer protections, including 
the Telephone Consumer Protection Act. Do you appreciate the 
importance of the NCUA's continued coordination with other 
Federal regulatory agencies?

A.6. Absolutely. Early in my career, I spent 4 years at the 
Occupational Safety and Health Administration. In this role, I 
worked on several matters, including interagency jurisdictional 
issues. While at the NCUA, I also advised agency officials 
about matters related to the Federal Financial Institutions 
Examination Council, the interagency body empowered to 
prescribe uniform principles, standards, and report forms for 
the Federal examination of financial institutions, and the 
Financial Stability Oversight Council. As a result, I recognize 
that Government agencies need to work together to minimize 
conflicts, inform decision making, collaborate, and coordinate. 
If confirmed, I would work to do just that.

Q.7. How will you ensure the NCUA works in close collaboration 
with other agencies on issues and rulemakings that directly 
impact credit unions?

A.7. In my view, effective regulation and supervision require 
appropriate engagement with all stakeholders, including Federal 
financial regulators, State regulators, and other Government 
agencies. If confirmed, I would work to maintain collaborative 
relationships with the NCUA's sister agencies at the State and 
Federal levels, as well as through the Federal Financial 
Institutions Examination Council. I would also work with my 
colleagues on the NCUA Board to conduct outreach to other 
agencies on a case-by-case basis. When done well, such 
cooperation should produce better policy outcomes.

Q.8. One of the important responsibilities of the NCUA Board is 
oversight and management of the National Credit Union 
Administration Central Liquidity Facility (CLF), an 
instrumentality of the United States whose purpose is ``to 
improve general financial stability by meeting the liquidity 
needs of credit unions and thereby encourage savings, support 
consumer and mortgage lending, and provide basic financial 
resources to all segments of the economy.''
    Since this is the 40th anniversary year of the CLF's 
establishment and the credit union industry has changed 
significantly over that course of years in many respects, 
including the number of credit unions and the services they 
provide, if confirmed would you make a review of the CLF during 
this anniversary year a priority, with an eye towards making 
improvements that may be warranted based on the changes that 
have occurred since its founding?

A.8. In the aftermath of the financial crisis, the NCUA Board 
approved its emergency liquidity rule. Among other things, this 
rule requires credit unions above $250 million in assets to 
maintain access to a federally backed liquidity provider like 
the NCUA's Central Liquidity Facility or the Federal Reserve's 
Discount Window. After the rule's implementation, there was an 
initial uptick in the number of credit unions purchasing stock 
in the CLF. Since then, as I understand it, the number of 
members of the CLF has remained relatively constant.
    If confirmed, I would work with my colleagues on the NCUA 
Board to determine whether a comprehensive review the 
operations of the CLF and the NCUA's emergency liquidity 
requirements is needed at this time. I would approach any such 
review with an open mind and an eye on identifying improvements 
to the CLF's operations as you suggest. In my view, the CLF 
should examine the creditworthiness of the credit unions to 
which it lends money. I would also want to reexamine the 
agency's prior legislative proposals to enhance access to 
emergency liquidity for the credit union system by making 
targeted changes to the CLF and expanding the agency's access 
to the U.S. Treasury.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
            SENATOR CORTEZ MASTO FROM TODD M. HARPER

Q.1. The National Credit Union Administration staff has been 
through a major consolidation--a shrinking to three regional 
offices from five. How will you manage this transition so that 
the staff remain focused on their mission and have the 
resources they need? Does the consolidation present any 
concerns?

A.1. As I understand it, the NCUA completed the consolidation 
of its regional offices at the start of 2019. Therefore, if 
confirmed, my concerns going forward would be to identify and 
ameliorate any unintended consequences from the consolidation. 
First, it is important to learn the views of credit unions 
about any problems resulting from the consolidation, such as 
additional costs and increased staff time for some credit 
unions to travel to meet with regional office leaders.
    Additionally, I have concerns about the ability of regional 
offices to effectively coordinate across a greater number of 
States. As such, I would want to learn more about their 
experiences by speaking with both regional directors and State 
regulators. In a dual-chartering system, open and frequent 
dialogue between Federal and State regulators is important to 
maintain safety and soundness and achieve the requirements of 
the Federal Credit Union Act and other laws.
    Finally, the NCUA's staff is the agency's most important 
asset. I would, therefore, want to speak with the workforce to 
determine their impressions of the reorganization. I 
particularly would like to see how the structural changes have 
affected the employee engagement and satisfaction metrics in 
the annual Employee Viewpoint Survey compiled by the 
Partnership for Public Service. If confirmed, I would work with 
my colleagues on the NCUA Board to determine ways we could 
improve those scores going forward if they have declined.

Q.2. Nationwide, nearly 20 million families live in 
manufactured homes, about 7 percent of the housing stock. The 
quality of the homes is good but at times, the financing can be 
predatory. The duty-to-serve requirements of Fannie Mae and 
Freddie Mac could provide an opportunity for credit unions to 
increase their lending to manufactured home buyers.
    Do you see an opportunity for credit unions to provide more 
loans to people wishing to buy a manufactured home? If so, what 
will you do to help credit unions serve manufactured home 
buyers?

A.2. Yes. As I understand it, Fannie Mae and Freddie Mac are 
currently implementing the duty-to-serve rule adopted by the 
Federal Housing Finance Agency in 2016. Among other 
requirements, the enterprises must support the manufactured 
housing industry. Eligible activities include manufactured 
homes titled as real property, manufactured homes titled as 
personal property, and blanket loans for certain categories of 
manufactured housing communities.
    Presently, 47 percent of federally insured credit unions 
have the low-income designation, which generally means that a 
majority of the credit union's members live in areas where 
residents earn 80 percent or less than the median family income 
for the metropolitan area or the national metropolitan area, 
whichever is greater. Because such households are more likely 
to purchase manufactured housing, these low-income credit 
unions are uniquely situated to make the most of this 
opportunity and better serve their members.
    If confirmed to the NCUA Board, I would work to raise the 
awareness of all credit unions about the ongoing and evolving 
efforts of Fannie Mae and Freddie Mac to support manufactured 
housing. I would also work to encourage low-income credit 
unions to collaborate with both enterprises through convening 
meetings with interested parties, writing opinion pieces, and 
sharing information as appropriate. Further, I would explore 
how the NCUA's current rules for manufactured housing loans are 
working. These rules were last updated more than a decade ago 
and may need further refinements. Finally, I would support 
financial literacy efforts by the NCUA's Office of Consumer 
Financial Protection to educate consumers about manufactured 
housing loans so they can make more informed decisions when 
purchasing a home.

Q.3. This Committee has invested a fair bit of time trying to 
stop money laundering and terrorist financing while also 
keeping access to the financial system for cash businesses, 
humanitarian groups and people sending remittances abroad to 
fragile Nations.
    Do you have any advice for us on how to improve the Bank 
Secrecy Act and Anti- Money-Laundering statutes that detect 
such dangerous activities while avoiding harmful derisking for 
legitimate actors?

A.3. As I understand it, Bank Secrecy Act and Anti- Money-
Laundering regulations apply to all credit unions regardless of 
asset size. Accordingly, the NCUA has put in place rules to 
require all federally insured credit unions to develop a 
written, risk-based Bank Secrecy Act compliance program. 
Smaller credit unions also encounter compliance challenges, 
resulting from a lack of staffing and expertise, the migration 
of high-risk activities into the credit union space, and a 
delay in adapting training and independent testing programs. In 
establishing a new statutory system, Congress should remain 
mindful of these regulatory burdens.

Q.4. Do you have recommendations to implement?

A.4. In my view, Congress should keep the experiences of small 
credit unions in mind when updating the Bank Secrecy Act and 
related laws. In developing a new system, priority should be 
given to:

    focusing first on targeting and identifying 
        criminal activity;

    reducing unnecessary paperwork burdens;

    using artificial intelligence to determine 
        incidents of money laundering just as credit card 
        providers use such technology to identify 
        irregularities in consumer purchases;

    allowing regulators to tailor statutory 
        requirements, where possible, to minimize burdens for 
        smaller financial institutions; and

    permitting the sharing of information between 
        financial institutions.

    Equally important is ensuring the ability of immigrants to 
send money back home to support the legitimate needs of their 
families and friends, such as shelter, food, and clothing, to 
name a few. If confirmed, I would further explore how to update 
the law with the NCUA's experts.

Q.5. The NCUA is unique from other Federal financial regulatory 
agencies in that it is an independent regulator and insurer of 
credit unions. Do you support the agency's continued 
independence?

A.5. Yes. In the aftermath of the savings-and-loan crisis, 
Congress worked to strengthen Federal financial institutions 
regulators by providing independence in setting budgets and 
collecting fees, submitting testimony to Congress, and allowing 
for rulemaking outside of the OMB-approval process used for 
other executive branch agencies, among other things. Such 
independence helps to ensure the effective supervision of the 
credit union system and protects against inappropriate 
political interference.

Q.6. What can the NCUA do to ensure it is able to maintain its 
current status as an independent regulator and insurer?

A.6. First and foremost, the NCUA must continue to ensure the 
safety and soundness of the credit union system and protect the 
National Credit Union Share Insurance Fund from losses. The 
agency must also maintain an arm's-length distance from the 
entities it charters, regulates, or insures. Appropriate 
engagement with all stakeholders is important to develop 
effective, but not excessive, regulation and supervision, but 
it must be done in a way to prevent regulatory capture.
    If confirmed, I would also work with my colleagues on the 
NCUA Board and staff to ensure that the agency is transparent 
in its regulatory actions and budgeting process, fair and 
forward-looking, innovative and inclusive, and risk-focused and 
ready to act expeditiously when necessary. Together, these 
steps would help to maintain the independence of the agency 
going forward.

Q.7. As the prudential regulator and Federal insurer, the NCUA 
retains oversight over the vast majority of a credit union's 
operations. However, there are numerous areas where there is 
overlap with other regulatory agencies, such as the Consumer 
Financial Protection Bureau in regard to certain consumer 
financial protection laws and regulations, as well as some 
areas where other agencies maintain exclusive authority over 
certain issues, such as the Federal Communications Commission 
in regard to certain consumer protections, including the 
Telephone Consumer Protection Act.
    Do you appreciate the importance of the NCUA's continued 
coordination with other Federal regulatory agencies?

A.7. Absolutely. Early in my career, I spent 4 years at the 
Occupational Safety and Health Administration. In this role, I 
worked on several matters, including interagency jurisdictional 
issues. While at the NCUA, I also advised agency officials 
about matters related to the Federal Financial Institutions 
Examination Council, the interagency body empowered to 
prescribe uniform principles, standards, and report forms for 
the Federal examination of financial institutions, and the 
Financial Stability Oversight Council. As a result, I recognize 
that Government agencies need to work together to minimize 
conflicts, inform decision making, collaborate, and coordinate. 
If confirmed, I would work to do just that.

Q.8. How will you ensure the NCUA works in close collaboration 
with other agencies on issues and rulemakings that directly 
impact credit unions?

A.8. In my view, effective regulation and supervision require 
appropriate engagement with all stakeholders, including Federal 
financial regulators, State regulators, and other Government 
agencies. If confirmed, I would work to maintain collaborative 
relationships with the NCUA's sister agencies at the State and 
Federal levels, as well as through the Federal Financial 
Institutions Examination Council. I would also work with my 
colleagues on the NCUA Board to conduct outreach to other 
agencies on a case-by-case basis. When done well, such 
cooperation should produce better policy outcomes.

Q.9. Last summer, NCUA proposed significant changes to the 
program it calls ``Payday Alternative Loans,'' or ``PAL''. For 
nearly a decade, this program has permitted Federal credit 
unions, on loans up to $1,000, to charge more than the Federal 
credit union interest rate limit (28 percent instead of 18 
percent) as well as an application fee of up to $20 per loan. 
But it has always included an important limit--it limits the 
number of these $20 fees to three every 6 months--a measure 
that prevents credit unions from abusing the program by 
repeatedly charging $20 on even very small loans, keeping 
customers in a cycle of repeat loans that mirrors the payday 
loan debt trap itself.
    But in its 2018 proposal, NCUA inexplicably proposed 
lifting this limit--a proposal that was opposed by more than 
100 civil rights, faith, consumer and community groups, as well 
as the National Federation of Community Development Credit 
Unions (now Inclusiv)--because it would make it easier for 
credit unions to trap customers in unaffordable short-term 
loans. NCUA has not yet finalized this proposal.
    Would you oppose sanctioning the ability of Federal credit 
unions to put members into an unlimited number of high-cost 
short-term loans?

A.9. Yes. In my view, allowing for unlimited rollovers has the 
potential to trap individuals in a cycle of debt. If confirmed 
to the NCUA Board, I would explore how to expand consumer 
access to affordable, short-term credit products while also 
maintaining the safety and soundness of credit unions. Allowing 
for unlimited rollovers and unlimited fees associated with such 
rollovers would be inconsistent with my views. I believe credit 
unions should provide access to affordable financial products 
for their members, especially those of modest means.

Q.10. If the CFPB's commonsense payday loan rule was repealed, 
the new PAL proposal would permit a 1-month, $100 loan with two 
semimonthly payments, at an effective APR of 345 percent, 
flipped 11 times in a year (so, 12 loans total). This is an 
annual cost of $240, plus 28 percent interest, for effectively 
$100 in credit. Does this sound like the kind of behavior NCUA 
should be encouraging, especially when it has a near decade-old 
policy that would limit high-cost loans to three loans every 6 
months?

A.10. The NCUA's current PALs product is designed to expand 
access to affordable financial services in a safe-and-sound 
manner. It provides an affordable alternative to predatory 
payday and title loans for consumers. In my view, it is very 
important to maintain the consumer protections built into the 
current regulation, including appropriate limits on fees, 
interest rates, and rollovers.
    With respect to the proposed rule, if confirmed, I would 
work with my colleagues to ensure appropriate consumer 
protections remain in place, like those related to limits on 
fees, interest rates, and rollovers. When working on these 
issues, I also would apply the lessons I learned when working 
for Congress on issues like mortgage servicing, escrows, and 
appraisals to hopefully reach consensus with my colleagues, 
effectively protect consumers, and expand the ability of credit 
unions to meet the needs of their members.

Q.11. The ``ability to repay'' concept exists in virtually 
every regulatory or legislative precedent. It includes an 
assessment not only of income--or the lender's ability to seize 
that income on payday--but also of obligations or expenses.
    Should a Federal credit union make loans based on a 
determination that the borrower has the ability to repay the 
loan?

A.11. Yes. It is important to ensure that Federal credit union 
members receiving a payday alternative loan can repay the 
advance so that they can build a positive credit history and 
gain access to more affordable loan products offered by 
federally insured credit unions and other mainstream financial 
services providers. As I understand it, the guidance covering 
the current payday alternative loan rule contains best 
practices for responsible underwriting, including obtaining 
documentation of income, as well as reviewing account activity 
for existing members, for determining the ability of an 
individual to repay the short-term loan. It is important to 
continue this practice.

Q.12. Currently, NCUA rules severely limit the ability of 
Federal credit unions to hedge the interest rate risk of having 
long-term loans, such as mortgages, and short-term deposits. 
Other financial institutions do not have this restriction.
    Should credit unions be able to hedge this interest rate 
risk for the safety of the credit unions and the insurance 
fund? Why or why not?

A.12. To manage the risk on their balance sheets, credit unions 
need to have the ability hedge their interest rate risk. In 
2014, the NCUA Board approved a final rule to provide approved 
Federal credit unions with limited authority to mitigate 
interest rate risk by allowing the purchase of specified, 
``plain vanilla'' derivatives. As I understand it, this 
regulation applies only to Federal credit unions, and is not 
applicable to federally insured, State-chartered credit unions, 
except where States have provided approval for such authority.
    As part of its current regulatory reform agenda, the NCUA 
has proposed revisiting this regulation. If confirmed, I would 
approach this issue with an open mind. When done well, the use 
of hedges can reduce risks for the credit union and the Share 
Insurance Fund. When done poorly, however, such hedging could 
pose substantial risks for the credit union system.
    In looking at this policy issue, if confirmed, I would want 
to explore the complexity of the hedging product, the 
sophistication of the credit union and its staff, and the risks 
posed to the Share Insurance Fund, among other things. My 
findings on each of these issues would inform my determination 
about whether to support or oppose changes the agency's 
existing regulations in this area.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR JONES
                      FROM TODD M. HARPER

Q.1. Mr. Harper, credit unions play a critical role in 
providing financial services to underserved communities. 
However, given their traditional structure, credit unions have 
not been included in the Community Reinvestment Act (CRA). As 
you know, the Federal financial regulators are currently 
considering updates to the implementation of CRA. Given the 
change in business models, practices, and technology in both 
banks and credit unions in the years since CRA was last 
updated, I believe this is an opportunity to take a 
comprehensive look at how institutions of all type serve their 
communities.
    While Congress would need to act to apply CRA to credit 
unions, do you believe there are steps NCUA can take to ensure 
that credit unions of all sizes are adequately providing 
services to underserved communities?

A.1. First and foremost, if confirmed as an NCUA Board Member, 
I would set a tone at the top by regularly reminding credit 
unions of their statutory mission to promote thrift, especially 
for people of modest means. Additionally, I would publicly 
support legislative efforts in Congress to allow all Federal 
credit unions to add underserved areas to their fields of 
membership. This change to the law would likely have the 
greatest impact on expanding access to affordable financial 
services for the unbanked and underbanked.
    Additionally, I would support the ongoing efforts of the 
agency to use data collected under the Home Mortgage Disclosure 
Act to determine whether credit unions are fulfilling their 
fair lending responsibilities. Specifically, the agency's 
Office of Consumer Financial Protection actively analyzes this 
data to assist in identifying possible discriminatory lending 
patterns and enforcing antidiscrimination statutes. To 
effectively enforce such laws, the office also relies on 
observations and recommendations from the NCUA's field 
examiners, compliance violations reported in the NCUA's 
examination tool, and member complaints. If confirmed, I would 
review these existing efforts to determine whether any further 
changes are merited.
    Finally, when the NCUA charters a new credit union, 
approves a field-of-membership expansion for an existing 
community-based credit union, or permits a credit union to 
convert to a community charter, the credit union must have in 
place a business and marketing plan, which the agency then 
monitors for compliance over a period of several years. 
Consistent with the Federal Credit Union Act and other Federal 
laws, the NCUA Board could consider putting in place a similar 
process to evaluate whether certain credit unions are 
adequately providing financial services to underserved 
communities.
    In applying such a rule, the NCUA could focus on Federal 
credit unions having: a community charter, an underserved area 
in the field of membership, or assets above a predetermined 
threshold. However, in adopting any such rule, the agency would 
need to ensure that it is properly scoped, minimally 
burdensome, and effectively tailored to meet the purposes of 
such a rule. If confirmed, I would work with my fellow Board 
Members and agency staff to further explore this issue.

Q.2. Mr. Harper, credit unions, along with banks, money service 
businesses and other financial institutions, are tasked with 
being on the ``front lines'' of our current Anti- Money-
Laundering (AML) regime. There is currently bipartisan 
agreement that our current AML system is in need of updating 
and reform. The system is too often inefficient and expensive 
while not adequately providing law enforcement with the 
information they need to pursue criminals. In addition, there 
is broad agreement that there should be broad collection of 
beneficial ownership information. Specifically, what do you 
believe should be priorities for creating a modern risk-based 
AML system?

A.2. As I understand it, Bank Secrecy Act and Anti- Money-
Laundering regulations apply to all credit unions regardless of 
asset size. Accordingly, the NCUA has put in place rules to 
require all federally insured credit unions to develop a 
written, risk-based Bank Secrecy Act compliance program. 
Smaller credit unions also encounter compliance challenges, 
resulting from a lack of staffing and expertise, the migration 
of high-risk activities into the credit union space, and a 
delay in adapting training and independent testing programs.
    In my view, Congress should keep the experiences of small 
credit unions in mind when updating the Bank Secrecy Act and 
related laws. In developing a new system, priority should be 
given to:

    focusing first on targeting and identifying 
        criminal activity;

    reducing unnecessary paperwork burdens;

    using artificial intelligence to determine 
        incidents of money laundering just as credit card 
        providers use such technology to identify 
        irregularities in consumer purchases;

    allowing regulators to tailor statutory 
        requirements, where possible, to minimize burdens for 
        smaller financial institutions; and

    permitting the sharing of information between 
        financial institutions.

    If confirmed, I would further explore how to update the law 
with the NCUA's experts.

Q.3. Mr. Harper, credit unions play a critical role in 
providing financial services to underserved communities. 
However, given their traditional structure, credit unions have 
not been included in the Community Reinvestment Act (CRA).
    As you know, the Federal financial regulators are currently 
considering updates to the implementation of CRA. Given the 
change in business models, practices, and technology in both 
banks and credit unions in the years since CRA was last 
updated, I believe this is an opportunity to take a 
comprehensive look at how institutions of all types serve their 
communities.
    While Congress would need to act to apply CRA to credit 
unions, do you believe there are steps NCUA can take to ensure 
that credit unions of all sizes are adequately providing 
services to underserved communities?

A.3. See the answer to your first question above.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SMITH
                      FROM TODD M. HARPER

Q.1. I often hear stories about a difficult barrier to 
constructing new housing in rural areas and tribal lands--both 
affordable housing and workforce housing. That barrier is 
access to lenders and financial institutions. What role should 
credit unions play in ensuring that new housing construction in 
rural areas and tribal lands is adequately financed?

A.1. If confirmed to the NCUA Board, providing financial 
services to the unbanked and underbanked would be one of my 
priorities. In my view, given their statutory mission to 
promote thrift, especially for people of modest means, Federal 
credit unions serving rural areas and tribal reservations have 
a unique opportunity to finance affordable housing and 
workforce housing. Accordingly, I would work to advance that 
goal.
    As I understand it, Fannie Mae and Freddie Mac are 
currently implementing the duty-to-serve rule adopted by the 
Federal Housing Finance Agency in 2016. Among other 
requirements, the enterprises must support housing for high-
needs rural populations, including individuals living on tribal 
reservations and agricultural workers.
    Credit unions with a field of membership that includes 
rural communities or tribal areas are especially well situated 
to address this affordable housing need as they know the 
communities they serve. If confirmed to the NCUA Board, I 
would, therefore, work to raise the awareness of credit unions 
about the ongoing and evolving efforts of Fannie Mae and 
Freddie Mac to support affordable housing in rural communities 
and tribal areas. I would also work to encourage credit unions 
to collaborate with both enterprises through convening meetings 
with interested parties, writing opinion pieces, and sharing 
information as appropriate.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                      FROM TODD M. HARPER

Q.1. Unlike other Federal financial regulatory agencies, the 
NCUA is an independent regulator and insurer of credit unions. 
How will you ensure the agency continues to be independent and 
vigilant in protecting the safety and soundness of credit 
unions in Arizona?

A.1. First and foremost, the NCUA must continue to ensure the 
safety and soundness of the credit union system and protect the 
National Credit Union Share Insurance Fund from losses. 
Accordingly, my focus would be on capital, liquidity, and 
cybersecurity. I would also work to ensure that the agency has 
enough staff and funding to conduct timely and adequate 
supervision of federally insured credit unions in Arizona and 
across the country.
    The agency must also maintain an arm's-length distance from 
the entities it charters, regulates, or insures. Appropriate 
engagement with all stakeholders is important to develop 
effective, but not excessive, regulation and supervision, but 
it must be done in a way to prevent regulatory capture.
    Finally, if confirmed, I would work with my colleagues on 
the NCUA Board and staff to ensure that the agency is open 
about its regulatory actions and transparent in its budgeting 
process, an issue that you have personally worked on. The NCUA 
should also be fair and forward-looking, innovative and 
inclusive, and risk-focused and ready to act expeditiously when 
necessary. Together, these steps would help to maintain the 
independence of the agency going forward.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                        FROM RODNEY HOOD

Q.1. Fees--Last fall, the New York Times reported on high fees 
and interest rates charged to members of the Marriott 
Employees' Federal Credit Union--a credit union that was formed 
so that employees would have access to low cost financial 
services. \1\ Marriott Employees' Federal Credit Union has a 
low income designation meaning 50 percent of its members have 
family incomes of less than 80 percent of the median income in 
the areas it serves.
---------------------------------------------------------------------------
     \1\ ``Marriott Workers Struggle To Pay Bills, Credit Union 
Feeds'', the New York Times, October 11, 2018, available at https://
www.nytimes.com/2018/10/11/business/marriott-credit-union-employee-
strike.html.
---------------------------------------------------------------------------
    As the article indicated, many of these workers are 
struggling to make ends meet, and these fees make their 
economic situations worse. In the same article, it was reported 
that some of the executives and management of Marriott who also 
use the credit union are receiving million dollar mortgages and 
car loans at below-market interest rates.
    If confirmed, will you commit to review credit unions' fees 
like overdraft and minimum balance charges as described in the 
article? Will you commit to crack down on fees if they are 
inconsistent with the credit union system's mission of 
providing affordable financial services to working families?

A.1. If confirmed to the NCUA Board, I commit to reviewing 
credit unions' fees and working to prevent the collection of 
fees that are inconsistent with the credit union system's 
mission of providing affordable financial services to working 
families. While I understand and believe that certain fees are 
a necessary part of credit union operations, I pledge to do my 
level best to ensure that any fees which are collected are 
consistent with the credit union mission of ``people helping 
people'' and do not needlessly penalize the underserved and 
those of lesser means.

Q.2. Financial Crisis--You served on the Board of the NCUA from 
2005 to 2010--the years leading up to and during the financial 
crisis. What lessons did you learn about credit union 
regulation from that time? What issues will you approach 
differently now because of that experience?

A.2. It was my great honor and privilege to serve as an NCUA 
Board Member for 4 years, from 2005-2009. My time there, as 
well as my education and my experiences both before and after 
my NCUA tenure, shaped my regulatory philosophy that regulation 
needs to be effective, but not excessive. To that end, if I am 
confirmed to the NCUA Board, I would support a regulatory 
regime that is risk focused and market-oriented. While my 
paramount responsibility would be ensuring the safe and sound 
operation of federally insured credit unions, I also would 
strive to be recognized as a fair and thoughtful regulator, one 
who realizes the value and necessity of regulation while 
remaining cognizant of the impact of excessive regulation. I, 
therefore, would support appropriately tailored regulations, 
scaled to an institution's size and complexity. I believe that 
such targeted regulations provide an environment that better 
protects the credit union system and the National Credit Union 
Share Insurance Fund and is friendlier to credit unions.
    One of my lasting accomplishments from my previous term 
focused on risk management, as years of experience in the 
financial services industry has taught me that financial 
institutions cannot avoid all risks and should instead take 
appropriate steps to mitigate and manage risks. As an NCUA 
Board Member, I launched a series of Enterprise Risk Management 
Summits, which provided training to credit unions on how to do 
just that. Working in collaboration with regulators from the 
Federal Reserve, the OCC, the FDIC, the Federal Home Loan 
Banks, and the National Economic Council, I hosted sessions 
with subject matter experts and credit union leaders in risk 
areas such as liquidity, interest rate, and concentration risk. 
If confirmed to the NCUA Board, I would continue my efforts in 
this important area, with a particular focus on cybersecurity 
risk.
    Additionally, the financial crisis and my time at the NCUA 
emphasized to me the crucial role the NCUA and the credit union 
industry can--and must--play in improving financial access for 
vulnerable communities. If confirmed, one of my top priorities 
would be to ensure that the NCUA creates opportunities to 
promote financial education and financial inclusion and fosters 
an environment where low-to-moderate income and disabled 
individuals have access to affordable financial services.

Q.3. Underbanked and Unbanked--In your testimony you indicated 
that one of your top priorities is to increase access for the 
unbanked and underbanked to credit union products and services. 
If confirmed, what will you propose to achieve this objective?

A.3. As I noted in my testimony, my interest in serving 
vulnerable communities grew from my volunteer work as a 
missionary in Africa and later as a banker engaged in community 
development. I have been fortunate to spend over 25 years 
working with some of the country's most respected financial 
institutions that sought to empower economic stability and 
shared prosperity in our local communities. I have held 
management positions that allowed me to promote community 
development and outreach initiatives to underserved 
communities. As a provider of affordable housing and small 
business lending, I oversaw loan programs, managed teams of 
regional community development managers, and worked with credit 
policy groups to evaluate and manage risks. It literally has 
been my life's work, and this work dovetails seamlessly with 
the ethos of the credit union industry, which is ``people 
helping people.'' It is work that I hope to continue at the 
NCUA, if confirmed again to the NCUA Board. If confirmed, I 
would explore all avenues within the NCUA's authority to 
increase access for unbanked and underbanked individuals to 
credit union products and services, including building upon the 
NCUA's already impressive financial literacy efforts.
    In addition to working to improve unbanked and underbanked 
individuals' access to credit union services under the NCUA's 
current authority, I would also like to work with Congress on 
legislative changes to allow all Federal credit unions, 
regardless of charter type, to add underserved areas to their 
fields of membership. Doing so would allow these institutions 
to offer financial services to those with no or limited access 
to credit union membership.

Q.4. Mergers, Acquisitions, and Consolidation--There has been a 
trend in consolidation in the financial industry, including 
among credit unions. NCUA approved 53 mergers in the fourth 
quarter of 2018 and credit union mergers and acquisitions have 
increased the size of the average credit union. What do you 
think is the impact of consolidation on credit union members? 
What can be done, if anything, to slow down or reverse this 
trend?

A.4. While I share your concern about consolidation's 
potentially negative impact on credit union members, I also 
believe that consolidation can, and often does, have a positive 
impact. In many cases, credit unions involved in mergers are 
quite small and have limited hours, locations, services, and 
product availability. In such cases, members can access an 
expanded set of services and products through a merger. The 
merging credit unions can take advantage of better economies of 
scale, thus improving their competitiveness against larger 
financial institutions.
    When mergers between credit unions do occur, a credit 
union's members--its owners and customers--generally vote on 
whether to permit the merger. This ownership structure provides 
some degree of assurance that the merger will be good for 
consumers. In such merger votes, the potential benefits to 
members, including lower loan rates or higher rates on 
deposits, often plays a key role in determining whether the 
merger occurs.
    If confirmed, I commit to working with credit unions, and 
small credit unions in particular, to ensure their continued 
viability in this ever-changing financial services marketplace. 
At the same time, I will continue to support a credit union's 
decision to merge with another credit union if that is the will 
of its membership.

Q.5. If confirmed, when approving credit union mergers or 
acquisitions, how will you ensure that continued presence and 
investment in the local community are taken into consideration 
so that working families continue to have access to financial 
services?

A.5. Credit unions, like all financial institutions, are 
undergoing consolidation. I believe that many factors are 
responsible for this trend, including economies of scale and 
the burden of regulatory compliance. In some cases, a credit 
union may seek a merger when a sponsor that has been supporting 
the credit union's operating expenses or providing office space 
withdraws that support. If confirmed to the NCUA Board, an 
important consideration for me in the approval of mergers or 
acquisitions would be continuity of service to the members of 
the impacted financial institutions. From discussions with 
agency staff, I understand that, in most mergers of credit 
unions, the continuing credit union retains most or all of the 
merging credit union's locations and staff. When retaining the 
location of a merging credit union is impracticable or 
impossible, such as when a merging credit union's facility is 
located in a factory or building of the sponsor discontinuing 
support, the merging credit union's board of directors often 
favors a merger partner with a nearby location. I further 
understand that, in the current approval process, the NCUA 
takes account of such factors as continued presence and service 
in the local community. If confirmed to the NCUA Board, I would 
support that current practice and would explore other avenues 
within the NCUA's current authority to ensure that working 
families do not lose access to critical financial services due 
to a merger or acquisition of their credit unions.

Q.6. Pentagon Federal Credit Union Merger--Earlier this year, 
Pentagon Federal Credit Union (PenFed), a credit union with $23 
billion in assets and over 1.6 million members, acquired 
Progressive Credit Union, a NY State chartered credit union 
with $383 million in assets and an open charter. While PenFed 
has said it will not use the open charter, if it were to change 
its mind in the future, would you support that decision? If so, 
should the NCUA change how it regulates a large credit union 
with no restrictions on its field of membership?

A.6. As I understand it, the situation with PenFed is a unique 
one resulting from an emergency merger with Progressive Credit 
Union, a State-chartered credit union that held a 
(grandfathered) national field of membership from the State of 
New York. I further understand that very few credit unions 
maintain such a broad field of membership. If confirmed to the 
NCUA Board, I would not necessarily object to PenFed's business 
decision to use the open charter it acquired through a legal 
merger process. Before making any decision, however, I would 
consult with the agency's staff to ensure that PenFed would be 
able to continue to operate in a safe and sound manner and to 
fulfill its mission to provide affordable financial services to 
all of its members, particularly those of modest means.

Q.7. Field of Membership--Over time, State regulators and the 
NCUA have expanded field of membership rules, to expand access 
to financial services for a greater number of consumers. 
Expanding access to the financial system is extremely 
important, but it is just as important to ensure those same 
credit unions are serving all members of these increasingly 
larger communities and fields of membership. What does the NCUA 
currently do to evaluate a credit union's performance in 
serving all of its members? Are there any improvements for 
which you would advocate if confirmed?

A.7. NCUA's Office of Credit Union Resources and Expansion 
(CURE) oversees the performance of Federal credit unions in 
serving all their members and ensuring that all members, 
including those in underserved communities and particularly in 
urban areas and rural districts, have access to credit union 
services. I understand that the NCUA requires a newly chartered 
or newly expanded community credit to submit business and 
marketing plans for its new community, including underserved 
areas. It then reviews the credit union's compliance with those 
plans for several years after the charter is granted or 
expanded. If confirmed to the NCUA Board, I would work closely 
with the NCUA's CURE office to explore all avenues within the 
NCUA's authority to increase the number of new charters and 
expanded community charters to facilitate access for unbanked 
and underbanked individuals to credit union products and 
services. As well, if confirmed, I would like to work with 
Congress on legislative changes to allow all Federal credit 
unions, regardless of charter type, to add underserved areas to 
their fields of membership. Doing so would allow these 
institutions to offer financial services to those with no or 
limited access to credit union membership.

Q.8. Payday Alternative Loan (PALs)--The CFPB Director recently 
proposed drastically weakening the agency's payday rule. Will 
you pledge not to follow in Director Kraninger's footsteps and 
work to maintain the restrictions, fee limits, and current 
interest rate caps on the NCUA's Payday Alternative Loan (PAL) 
product?

A.8. If confirmed to the NCUA Board, I pledge to carefully 
consider a variety of factors to inform my regulatory approach 
to the NCUA's PALs rule. These factors include, but are not 
limited to, careful consideration of stakeholder input, the 
supervisory framework of my Federal banking agency 
counterparts, and thoughtful evaluation of any unintended 
consequences of changes. My goal with respect to the NCUA's 
PALs rule is that it will continue to help consumers find a 
path to mainstream, lower-cost financial products and services, 
and I will not support changes to the rule that contravene this 
objective.

Q.9. NCUA Spending--At your confirmation hearing, Chairman 
Crapo asked about recent press reports about excessive spending 
by the current chair of the NCUA Board. While some of the 
spending is allowed under NCUA policies, some of it was not, as 
confirmed by the NCUA Inspector General Report. You committed 
to Chairman Crapo that you would review these policies if 
confirmed, which I support. You have served on the NCUA Board 
before, are there certain items you believe should not be 
reimbursed for Board members or staff by a Federal agency?

A.9. As I committed during my confirmation hearing, if 
confirmed to the NCUA Board, I will work to ensure the NCUA's 
spending policies are clearly written and consistent with the 
other Federal banking regulators. In direct response to your 
question, I believe only expenses with a business purpose 
related directly to the mission of the agency should be 
reimbursed, so that excludes reimbursement for expenses that 
would be considered entertainment. Moreover, while the 
reimbursement for alcohol-related representational expenses is 
legal, as noted by the Office of Inspector General, I would 
seek a policy change to exclude it as a future reimbursable 
expense to individual Board members or NCUA staff.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS
                        FROM RODNEY HOOD

Q.1. Last Congress I was the Senate sponsor of S. 3750, the 
Common Sense Credit Union Capital Relief Act of 2018. It would 
call for a delay in the implementation of the NCUA's Risk-Based 
Capital Rule. What are your thoughts on the RBC Rule? Should 
implementation of the Rule be delayed? Should Congress 
reevaluate the need for the Rule entirely?

A.1. If confirmed to the NCUA Board, I would support a further 
delay to the implementation of the RBC Rule, so that I and my 
fellow Board Members can further study and assess its real 
effects on the credit union system. I note that the NCUA will 
have two new Board Members if my fellow nominee, Todd Harper, 
and I are both confirmed. Therefore, I think this is the 
appropriate time to stop and study the RBC Rule. Only after 
that careful consideration of the costs and benefits should the 
NCUA Board decide whether to proceed with the RBC Rule and, if 
so, when. I respectfully note that the question of whether 
Congress should reevaluate the need for the RBC Rule rests with 
Congress.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
                        FROM RODNEY HOOD

Q.1. In addition to voluntarily following the spirit of the 
President's Executive Order to reduce regulatory burden, the 
current NCUA Board has focused much of its recent rulemaking 
activity on reducing unnecessary regulatory burden. Do you 
agree with voluntarily following the Executive Order, and will 
you do so if confirmed?

A.1. Yes, I agree with the current NCUA Board's decision to 
voluntarily follow the spirit of the Executive Order by 
amending or repealing regulatory requirements that are 
outdated, ineffective, or excessively burdensome. If confirmed, 
I am fully committed to complying with this aim and providing 
regulatory relief where it makes sense to do so. As articulated 
in my testimony, I believe in developing effective, but not 
excessive, regulation that safeguards the safety and soundness 
of federally insured credit unions, preserves the integrity of 
the credit union industry, and protects the National Credit 
Union Share Insurance Fund from losses.

Q.2. With regard to future NCUA rulemakings, what approach will 
you take in terms of focusing on a reduction of unnecessary 
regulatory burden?

A.2. As stated above and in my testimony, if confirmed, I would 
fully support amending or repealing regulatory requirements 
that are outdated, ineffective, or excessively burdensome. I 
believe that the regulatory reform agenda that the current NCUA 
Board has adopted is a good start to improving credit unions' 
regulatory landscape. More specifically, I would advocate for 
the continued modernization and tailoring of regulatory 
requirements to reduce unnecessary burdens and make regulations 
commensurate with an individual credit union's size, 
complexity, and risk profile. If confirmed, I would return to 
the NCUA Board with a risk-based and market-oriented mindset 
based on several tenets, including being recognized as a fair 
and thoughtful regulator who realizes the value and necessity 
of regulation but remains cognizant of the impact of excessive 
regulation.

Q.3. Credit unions, as not-for-profit, member owned 
institutions, are inherently different than for-profit banks. 
It is critical that a member of the NCUA Board appreciate this 
difference and support the credit union philosophy of people 
helping people. While it is inevitable that some credit unions 
will occasionally choose to switch from a credit union to a 
bank charter, what will you do to uphold the core philosophy of 
credit unions to ensure they remain a viable source of 
financial services for Americans?

A.3. My work spanning over 25 years in the financial services 
industry fits seamlessly with the core philosophy of credit 
unions, which is ``people helping people.'' Through my 
education and that work, including many years focused on 
community development and my prior service on the NCUA Board, I 
have developed a keen understanding of the tremendous 
responsibilities of regulators. The NCUA plays a vital role as 
both regulator and insurer to protect the savings of more than 
100 million American in an industry with more than $1.4 
trillion in assets. If confirmed for another term as an NCUA 
Board Member, I will return to the NCUA with a risk-based and 
market-oriented mindset based on the following tenets:

    working to ensure that federally insured credit 
        unions remain safe and sound institutions;

    striving to be recognized as a fair and thoughtful 
        regulator who realizes the value and necessity of 
        regulation but remains cognizant of the burdensome 
        impact of excessive regulation;

    bringing focused leadership and management to the 
        NCUA while seeking to ensure efficient operations and 
        prudent use of resources; and

    understanding the important of disclosure and 
        transparency to a wide variety of stakeholders.

A.4. If confirmed, I would explore all avenues within the 
NCUA's current authority to increase access for unbanked and 
underbanked individuals, especially those in our Nation's most 
vulnerable communities, to credit union products and services. 
Moreover, I would also like to work with Congress on 
legislative changes to allow all Federal credit unions, 
regardless of charter type, to add underserved areas to their 
fields of membership. Doing so would allow these institutions 
to offer financial services to those with no or limited access 
to credit union membership. I believe that all of these 
experiences, philosophies, and priorities would benefit the 
credit union system by helping to ensure that credit unions 
continue to be fulfill their statutory mission of helping 
people, particularly those of modest means.

Q.4. One of the important responsibilities of the NCUA Board is 
oversight and management of the National Credit Union 
Administration Central Liquidity Facility (CLF), an 
instrumentality of the United States whose purpose is ``to 
improve general financial stability by meeting the liquidity 
needs of credit unions and thereby encourage savings, support 
consumer and mortgage lending, and provide basic financial 
resources to all segments of the economy.'' Since this is the 
40th anniversary year of the CLF's establishment and the credit 
union industry has changed significantly over that course of 
years in many respects, including the number of credit unions 
and the services they provide, if confirmed would you make a 
review of the CLF during this anniversary year a priority, with 
an eye towards making improvements that may be warranted based 
on the changes that have occurred since its founding?

A.5. Yes, I believe it would be a fitting time to reexamine the 
CLF to determine what changes would benefit this very important 
liquidity tool for credit unions. If confirmed, I would work 
with my fellow Board Members to explore all avenues within the 
NCUA's current authority to update and modernize the CLF. 
Further, I would welcome the opportunity to work with Congress 
on legislative changes needed to improve the CLF's 
effectiveness and utility to the credit union system. Given the 
important role the CLF plays in providing a liquidity source to 
credit unions, if confirmed, I would support efforts to improve 
the CLF's operations and functionality.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
             SENATOR CORTEZ MASTO FROM RODNEY HOOD

Q.1. Mr. Hood, you served on the NCUA board prior to the 
Financial Crisis. We know that a number of credit unions 
purchased mortgage-backed securities that resulted in their 
institutions failing. What have you learned about avoiding risk 
that you would do differently during your service this time?

A.1. There were four corporate, or wholesale, credit unions 
that failed because the AAA- and AA-rated private label 
mortgage-backed securities they purchased experienced large 
losses when the underlying mortgages experienced high levels of 
default during the Great Recession. Consumer, or retail, credit 
unions largely avoided these types of securities, and thus none 
failed from losses on such securities. The biggest lesson 
learned for me is just how important it is that an enterprise 
have the necessary expertise and strong governance when 
investing in more complex or risky financial products. Good 
risk management and governance will result in proper control 
over how much exposure an institution takes relative to its 
capacity to handle the risk in relation to capital and 
liquidity levels. Regulators need to ensure this expertise and 
strong governance is in place and operating effectively for 
credit unions with complex or risky assets, or high 
concentrations of certain assets.

Q.2. Mr. Hood, please tell me more about how you think NCUA can 
support financial inclusion for people with disabilities? Both 
as employees and in ensuring credit unions provide access for 
people who may be blind, hard of hearing or have another 
disability?

A.2. If confirmed to the NCUA Board, I would bring with me a 
strong commitment to diversity and inclusion in all things and 
on all levels, including financial inclusion for people with 
disabilities. I believe all persons should enjoy equal and fair 
access to quality, safe, and affordable financial products and 
services. As an NCUA Board Member, I would continue my work to 
advance inclusion for people with disabilities by ensuring 
everyone has equal and fair access to mainstream financial 
services. I would work to encourage credit unions to provide 
financial education, savings, and other products and services 
that meet the needs of all members, including those with 
disabilities. Moreover, I would work to ensure that, as the 
regulator, the NCUA is sensitive to and considers the needs of 
the individuals with disabilities when issuing regulations.
    I believe that the NCUA can support financial inclusion for 
people with disabilities in many different ways and, if 
confirmed, I would prioritize working with agency staff in the 
following ways to advance inclusion:

    The NCUA's Office of Credit Union Resources and 
        Expansion provides resources, such as grants and web-
        based training, to credit unions. If confirmed as an 
        NCUA Board Member, I would like to see the office 
        expand their offerings to include grants, training, and 
        educational resources specifically designed to 
        stimulate financial inclusion for people with 
        disabilities. I would work to ensure this training is 
        relevant and accessible to individuals with 
        disabilities so they, too, can obtain the training they 
        need to be successful.

    One of the charges of the NCUA's Office of Minority 
        and Women Inclusion is to monitor and assess diversity 
        and inclusion in the credit union industry. To that 
        end, the OMWI office, through presentations and written 
        publications, actively encourages credit unions to 
        embrace diversity and inclusion in the workplace, in 
        the boardroom and in the products and services they 
        offer. If confirmed, I would support this effort and 
        work with the office to encourage credit unions to 
        develop products such as home and vehicle modification 
        loans to enable people with disabilities to meet their 
        unique challenges.

    The NCUA must be diligent in ensuring that its 
        regulations do not place an undue burden on any group, 
        including people with disabilities. It is also critical 
        that the NCUA enable and encourage credit unions to 
        establish products and services that enhance the 
        financial inclusion of this community. For example, 
        many mainstream matched savings products specify that 
        deposits come from earned income, which by default may 
        exclude some individuals with disabilities as many 
        depend on a wide variety of public benefits for their 
        income and other needs. Being inclusive requires that 
        public benefits and other nonearned income sources also 
        be considered for such product types.

    The NCUA can also work to expand savings programs 
        like ABLE Accounts. These tax-advantaged matched 
        savings accounts for individuals with disabilities and 
        their families were created with the passage of the 
        Achieving a Better Life Experience Act of 2014, better 
        known as the ABLE Act. Such programs can ease the 
        significant financial burden faced by people with 
        disabilities that require expensive accommodations and 
        services.

    Research has shown that people with disabilities 
        are more likely than people without a disability to be 
        unbanked or underbanked. The NCUA's Office of Minority 
        and Women Inclusion can encourage credit unions to 
        partner with organizations offering programs designed 
        to serve the unbanked or underbanked such as the 
        Volunteer Income Tax Assistance program. The VITA 
        program provides free tax assistance and tax 
        preparation services to the unbanked and underbanked 
        and those with disabilities. These services are 
        generally paired with financial education, savings, and 
        other products and services specifically designed for 
        this population. Additionally, the VITA program helps 
        ensure people with disabilities are aware of and 
        benefit from all available tax credits, thus providing 
        participants with additional income and greater 
        financial stability.

    I believe ensuring access to financial services for 
individuals with disabilities is an opportunity, not a burden, 
for credit unions. Reducing barriers and encouraging equal 
access for all leads to stronger communities and a stronger 
Nation.

Q.3. Mr. Hood, you have served on the Neighborworks board. In 
FY18, the median credit score for 9,903 Neighborworks clients 
was 694. As you know, Neighborworks borrowers succeed at home 
ownership despite having low credit scores. If policies were 
changed to require a 700 credit score, what would the impact be 
on home buyers served by credit unions and other entities?

A.3. Having the good fortune of working for more than 25 years 
in the financial services sector, during which I provided 
financial education to underserved communities by conducting 
homebuyer education classes, I keenly appreciate that the 
availability of mortgages is the cornerstone of American home 
ownership. For decades, America's credit unions and other 
financial institutions have enabled home ownership by 
originating mortgages not just to those with pristine credit, 
but also to those with imperfect credit histories. I believe 
that establishing an artificial floor on borrower credit scores 
would jeopardize that dream for many would-be borrowers, 
including a significant number of minority households.
    A score of 700 would reflect an extraordinarily high 
threshold; indeed, reports indicate that figure is above the 
U.S. average credit score. Moreover, it should be noted that 
mortgage underwriters take into account many factors when 
evaluating loans. I believe that a credit score floor of 700 
would inappropriately ignore such considerations, like the size 
of the borrower downpayment and the debt service burden. A hard 
floor would seem misguided, as many loans with borrower credit 
scores of less than 700 are extraordinarily safe from a credit 
risk perspective.
    A final point is that there is great imprecision associated 
with credit scores. As credit risk modelers readily concede, 
although credit scores are correlated with the likelihood that 
a borrower will make payments, there is significant ``noise'' 
in such measurement. A given borrower with a credit score of 
690 may, in fact, be just as likely to make payments as someone 
with a score of 710. Credit scores are merely statistical 
measures that make use of ``hard'' information in credit 
repositories. Such information can be flawed and, in fact, does 
not reflect a complete picture of the borrower's financial 
condition. Accordingly, I believe that great care must be 
exercised when considering the imposition of a fixed credit 
score floor.

Q.4. Mr. Hood, you noted your opposition to rulemaking that was 
``excessive.'' Please identify at least three rules that 
pertain to credit unions that you believe are ``excessive.'' 
What changes would you recommend to those rules?

A.4. The current NCUA Board has adopted and published a 
regulatory reform agenda that identifies regulations that it 
has determined are outdated, ineffective, or excessively 
burdensome. If confirmed to the NCUA Board, I intend to work 
with my fellow Board Members and agency staff swiftly yet 
judiciously to implement this agenda. Among the many regulatory 
changes identified in the agenda, I believe that the following 
three regulations are excessive in their current form and that 
their amendment would greatly benefit the credit union 
industry: (1) modernization of the Federal credit union bylaws; 
(2) modernization of the NCUA's regulations governing credit 
union investments; and (3) modernization of the Bank Secrecy 
Act requirements applicable to credit unions.
    First, I believe that the Federal credit union bylaws need 
to be modernized. An update to the form of bylaws that the NCUA 
has adopted is long overdue. In fact, as I understand it, the 
form of bylaws was last updated during my prior tenure on the 
NCUA Board. Fortunately, the current NCUA Board has already 
issued a proposed rule to update, clarify, and simplify the 
Federal credit union bylaws and remove outdated, obsolete, or 
excessively burdensome provisions. If confirmed, I look forward 
to reviewing the comments received on the proposal and 
assisting in the development of a final rule to modernize the 
bylaws so that they provide flexibility in governance for both 
credit unions and their members.
    The second regulatory change I would like to see made is 
the modernization of the NCUA's regulations governing credit 
union investments to remove unnecessary restrictions that are 
not statutorily required and not required from a safety and 
soundness perspective. The NCUA's regulatory reform agenda 
suggests a change to a more principles-based approach.
    Finally, I would like to work to update credit union Bank 
Secrecy Act requirements. While the NCUA has limited authority 
in this area, I believe that the NCUA needs to continue working 
on an interagency basis and with Congress to modernize Bank 
Secrecy Act requirements so that they are both more effective 
and less burdensome on financial institutions.

Q.5. The National Credit Union Administration staff has been 
through a major consolidation--shrinking to three regional 
offices from five. How will you manage this transition so that 
the staff remain focused on their mission and have the 
resources they need? Does the consolidation present any 
concerns?

A.5. From my briefings with agency leadership, the transition 
was completed as of January 1, 2019, with as minimal disruption 
as possible to staff and operations. The NCUA completed its 
restructuring of the agency's headquarters at the start of 
2018, while the regional office restructure was completed at 
the start of 2019. If confirmed, I plan to continue the 
dialogue I have already started with each agency office head to 
ensure proper balancing of sufficient resources to meet the 
agency's mission with the substantial savings the restructuring 
provided to the credit unions that fund the agency's budget. As 
well, from my first term as an NCUA Board Member, I know that 
the NCUA's staff are second-to-none in their professionalism, 
enthusiasm, and dedication to the agency's mission. If 
confirmed for another term as an NCUA Board Member, I would 
work diligently to ensure that nothing from this recent 
consolidation has changed that.

Q.6. Nationwide, nearly 20 million families live in 
manufactured homes: about 7 percent of the housing stock. The 
quality of the homes is good but at times, the financing can be 
predatory. The duty-to-serve requirements of Fannie Mae and 
Freddie Mac could provide an opportunity for credit unions to 
increase their lending to manufactured home buyers. Do you see 
an opportunity for credit unions to provide more loans to 
people wishing to buy a manufactured home? If so, what will you 
do to help credit unions serve manufactured home buyers?

A.6. Yes, I see a ripe opportunity for credit unions to 
continue to support the manufactured home markets in a safe and 
sound manner. Loans for manufactured housing and mobile homes 
is an important service that credit unions provide and, if 
confirmed, I would work to make sure credit unions have the 
flexibility they need to make these loans, consistent with 
safety and soundness principles. In 2005, the NCUA amended its 
regulations to provide that manufactured housing can qualify 
for mortgages of up to 20 years. If confirmed to the NCUA 
Board, I would work with my fellow Board Members and agency 
staff to explore all available avenues to provide additional 
flexibilities for manufactured housing lending.

Q.7. This Committee has invested a fair bit of time trying to 
stop money laundering and terrorist financing while also 
keeping access to the financial system for cash businesses, 
humanitarian groups and people sending remittances abroad to 
fragile Nations. Do you have any advice for us on how to 
improve the Bank Secrecy Act and Anti- Money-Laundering 
statutes that detect such dangerous activities while avoiding 
harmful derisking for legitimate actors? Do you have 
recommendations to implement?

A.7. The current Bank Secrecy Act and Anti- Money-Laundering 
(AML) statutes place a great deal of responsibility on 
financial institutions to detect and report illicit financial 
activity. A risk-based system provides greater flexibility, but 
also creates uncertainty and requires greater judgment about 
when to report something. Hence, financial institutions 
ultimately may choose to avoid providing service to higher risk 
customers, where the cost of servicing certain accounts to a 
satisfactory degree of certainty outweighs the benefits. 
Modernizing the AML system to target the highest priority risks 
and automate the reporting requirements for lower risks would 
help alleviate this uncertainty. In addition, I believe that 
providing more clarity about reporting requirements for 
financial institutions would reduce burden and unnecessary de-
risking by financial institutions. Finally, as noted above, if 
confirmed, I would like to work to update credit union Bank 
Secrecy Act requirements. While the NCUA has limited authority 
in this area, I believe that the NCUA needs to continue working 
on an interagency basis and with Congress to modernize Bank 
Secrecy Act requirements so that they are both more effective 
and less burdensome on financial institutions.

Q.8. The NCUA is unique from other Federal financial regulatory 
agencies in that it is an independent regulator and insurer of 
credit unions. Do you support the agency's continued 
independence?

A.8. Yes, I support the continued independence of the NCUA, as 
well as that of the other Federal financial regulatory 
agencies. Such independence, particularly in the areas of 
budgeting and rulemaking, enables the NCUA and its peer 
agencies to be effective at maintaining confidence in the 
Nation's federally insured financial system and nimble in 
responding to changing financial conditions, whether in the 
general economy or at specific institutions. While it's true 
that the NCUA is unique among Federal financial regulatory 
agencies by maintaining dual roles as an independent regulator 
and an insurer, whereas those functions are housed in separate 
agencies in the Federal banking regulatory system, I note that 
Congress has uniformly entrusted these functions to independent 
agencies.

Q.9. What can the NCUA do to ensure it is able to maintain its 
current status as an independent regulator and insurer?

A.9. If confirmed, my paramount responsibility as an NCUA Board 
Member would be to protect the safety and soundness of the 
credit union system and the health of the National Credit Union 
Share Insurance Fund. I would work with my fellow Board Members 
to take actions, including the promulgation of necessary 
regulations, in furtherance of that shared responsibility. I 
also would work with fellow financial regulators at both the 
Federal and State levels to ensure the continued confidence in 
our Nation's federally insured financial system. Moreover, if 
confirmed, I would like to continue the agency's current focus 
on transparency and accountability in all aspects of the NCUA's 
operations.

Q.10. As the prudential regulator and Federal insurer, the NCUA 
retains oversight over the vast majority of a credit union's 
operations. However, there are numerous areas where there is 
overlap with other regulatory agencies, such as the Consumer 
Financial Protection Bureau in regard to certain consumer 
financial protection laws and regulations, as well as some 
areas where other agencies maintain exclusive authority over 
certain issues, such as the Federal Communications Commission 
in regard to certain consumer protections, including the 
Telephone Consumer Protection Act. Do you appreciate the 
importance of the NCUA's continued coordination with other 
Federal regulatory agencies?

A.10. Yes, I absolutely appreciate the importance of the NCUA's 
continued coordination with other Federal regulatory agencies. 
As a Federal financial regulatory agency, the NCUA serves on a 
number of interagency panels, including the Federal Financial 
Institutions Examination Council (FFIEC) and the Financial 
Stability Oversight Council (FSOC), that coordinate supervisory 
policy and regulation across all types of financial 
institutions. This type of interagency collaboration is 
critical to ensure consistency among depository financial 
institutions and continued confidence in the Nation's federally 
insured financial system.
    During my previous term as an NCUA Board Member, I launched 
a series of Enterprise Risk Management Summits, which provided 
training to credit unions on how to mitigate and manage risks. 
Working in collaboration with regulators from the Federal 
Reserve, the OCC, the FDIC, the Federal Home Loan Banks, and 
the National Economic Council, I hosted sessions with subject 
matter experts and credit union leaders in various risk areas. 
The interagency collaboration was invaluable to these efforts. 
If confirmed to the NCUA Board, I welcome the opportunity to 
continue my work in this important area, with a particular 
focus on cybersecurity and the risk it poses across the entire 
financial system.

Q.11. How will you ensure the NCUA works in close collaboration 
with other agencies on issues and rulemakings that directly 
impact credit unions?

A.11. If confirmed as an NCUA Board Member, I would work with 
agency staff to monitor legislative and regulatory developments 
that could directly impact credit unions. Where appropriate, I 
would reach out to my colleagues at other Federal regulators to 
highlight the unique nature of the credit union industry and to 
encourage greater collaboration and information sharing on 
regulatory initiatives. I would also hope to have the honor of 
working with fellow regulators on my Enterprise Risk Management 
Summits and through organizations like Neighborworks.

Q.12. Last summer, NCUA proposed significant changes to the 
program it calls ``Payday Alternative Loans'', or ``PAL''. For 
nearly a decade, this program has permitted Federal credit 
unions, on loans up to $1,000, to charge more than the Federal 
credit union interest rate limit (28 percent instead of 18 
percent) as well as an application fee of up to $20 per loan. 
But it has always included an important limit--it limits the 
number of these $20 fees to three every 6 months--a measure 
that prevents credit unions from abusing the program by 
repeatedly charging $20 on even very small loans, keeping 
customers in a cycle of repeat loans that mirrors the payday 
loan debt trap itself.
    But in its 2018 proposal, NCUA inexplicably proposed 
lifting this limit--a proposal that was opposed by more than 
100 civil rights, faith, consumer and community groups, as well 
as the National Federation of Community Development Credit 
Unions (now Inclusiv)--because it would make it easier for 
credit unions to trap customers in unaffordable short-term 
loans. NCUA has not yet finalized this proposal. Would you 
oppose sanctioning the ability of Federal credit unions to put 
members into an unlimited number of high-cost short-term loans?

A.12. If confirmed to the NCUA Board, I would work with my 
fellow Board Members to ensure that Federal credit unions 
continue to provide their members a considerably lower cost 
alternative to products offered by traditional predatory payday 
lenders. Although I would approach this, and any, issue with an 
open mind, I would be reluctant to sanction any initiative that 
would not support a consumer's ability to break the crippling 
cycle of high-cost payday loans.

Q.13. If the CFPB's commonsense payday loan rule was to 
repealed, the new PAL proposal would permit a 1-month, $100 
loan with two semimonthly payments, at an effective APR of 345 
percent, flipped 11 times in a year (so, 12 loans total). This 
is an annual cost of $240, plus 28 percent interest, for 
effectively $100 in credit. Does this sound like the kind of 
behavior NCUA should be encouraging, especially when it has a 
near decade-old policy that would limit high-cost loans to 
three loans every 6 months?

A.13. As noted above, if confirmed, I would hesitate to approve 
any regulatory change that would not support a consumer's 
ability to break the cycle of predatory payday loans.

Q.14. The ``ability to repay'' concept exists is virtually 
every regulatory or legislative precedent. It includes an 
assessment not only of income--or the lender's ability to seize 
that income on payday--but also of obligations or expenses. 
Should a Federal credit union make loans based on a 
determination that the borrower has the ability to repay the 
loan?

A.14. If confirmed to the NCUA Board, I would work to ensure 
that a credit union makes a PALs loan with its member's best 
interests in mind, including the amount granted, the loan term, 
the total cost, and the member's ability to repay the loan. 
These are all factors that play an important role in a 
consumer's ability to break the crippling cycle of predatory 
payday lending.

Q.15. Currently, NCUA rules severely limit the ability of 
Federal credit unions to hedge the interest rate risk of having 
long-term loans, such as mortgages, and short-term deposits. 
Other financial institutions do not have this restriction. 
Should credit unions be able to hedge this interest rate risk 
for the safety of the credit unions and the insurance fund? Why 
or why not?

A.15. I believe that credit unions with the requisite expertise 
should be able to use derivatives to hedge against interest 
rate risk. I understand that, in 2014, the NCUA finalized a 
rule permitting Federal credit unions to use derivatives to 
mitigate interest rate risk. Applicable State law governs 
whether federally insured, State-chartered credit unions can 
similarly use derivatives as a hedge against interest rate 
risk. As part of its regulatory reform agenda, the current NCUA 
Board has indicated its willingness to explore whether to 
provide Federal credit unions with additional flexibility in 
using derivatives to manage interest rate risk. If confirmed, I 
would support that effort, provided that any such derivatives 
instruments and programs are executed and implemented in 
accordance with strong safety and soundness principles.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR JONES
                        FROM RODNEY HOOD

Q.1. Mr. Hood, credit unions play a critical role in providing 
financial services to underserved communities. However, given 
their traditional structure, credit unions have not been 
included in the Community Reinvestment Act (CRA). As you know, 
the Federal financial regulators are currently considering 
updates to the implementation of CRA. Given the change in 
business models, practices, and technology in both banks and 
credit unions in the years since CRA was last updated, I 
believe this is an opportunity to take a comprehensive look at 
how institutions of all type serve their communities. While 
Congress would need to act to apply CRA to credit unions, do 
you believe there are steps NCUA can take to ensure that credit 
unions of all sizes are adequately providing services to 
underserved communities?

A.1. Serving the underserved is a core part of the credit union 
mission and philosophy, which is to meet the credit and savings 
needs of consumers, especially persons of modest means. 
Further, as part of the NCUA's mission to protect the safety 
and soundness of the credit union system, the agency has 
developed initiatives to facilitate credit unions more 
effectively serving their memberships, especially those in 
underserved areas. I believe that credit unions are fulfilling 
that mission now and, if confirmed to the NCUA Board, would 
explore all avenues within the NCUA's authority to increase 
access for unbanked and underbanked individuals to credit union 
products and services, including building upon the NCUA's 
financial literacy efforts.
    In addition to working to improve unbanked and underbanked 
individuals' access to credit union services under the NCUA's 
current authority, if confirmed, I would also like to work with 
Congress on legislative changes to the Federal Credit Union 
Act, such as allowing all Federal credit unions, regardless of 
charter type, to add underserved areas to their fields of 
membership. Doing so would allow these institutions to offer 
financial services to those with no or limited access to credit 
union membership.

Q.2. Mr. Hood, credit unions, along with banks, money service 
businesses and other financial institutions, are tasked with 
being on the ``front lines'' of our current Anti- Money-
Laundering (AML) regime. There is currently bipartisan 
agreement that our current AML system is need of updating and 
reform. The system is too often inefficient and expensive while 
not adequately providing law enforcement with the information 
they need to pursue criminals. In addition, there is broad 
agreement that there should be broad collection of beneficial 
ownership information. Specifically, what do you believe should 
be priorities for creating a modern risk-based AML system?

A.2. I believe that a modern risk-based AML system must move 
away from the current process, which is largely manual and very 
burdensome, and instead leverage technology, such as machine 
learning and artificial intelligence. For example, if confirmed 
to the NCUA Board, I would work with law enforcement, my fellow 
regulators, and the financial community to develop and 
implement an automated data reporting framework to replace 
Currency and Transaction Reports. I also would work with 
stakeholders to ensure that all financial institutions, 
including credit unions, could run algorithms designed to 
address the needs of law enforcement to automate identifying 
accounts. Overall, I believe that AML requirements need to be 
flexible to allow resources to be directed toward the greatest 
priorities and to fit a range of new business models, 
specifically those that leverage technology and other forms of 
value exchange such as cryptocurrency.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SMITH
                        FROM RODNEY HOOD

Q.1. I often hear stories about a difficult barrier to 
constructing new housing in rural areas and tribal lands--both 
affordable housing and workforce housing. That barrier is 
access to lenders and financial institutions. What role should 
credit unions play in ensuring that new housing construction in 
rural areas and tribal lands is adequately financed?

A.1. I believe that credit unions play a critical role in 
helping families achieve the American dream of home ownership. 
And I believe they can do even more to help residents of rural 
areas and tribal lands, many of whom are unbanked or 
underbanked. As noted in my testimony, one of my top priorities 
as an NCUA Board Member, if confirmed, would be to ensure that 
the NCUA creates opportunities to promote financial education 
and financial inclusion. I would work with my fellow Board 
Members and agency staff, particularly in the NCUA's Office of 
Credit Union Resources and Expansion (CURE), to explore all 
avenues within the NCUA's authority to increase access for 
unbanked and underbanked individuals to credit union products 
and services, including building upon the NCUA's already 
impressive financial literacy efforts. Moreover, I would 
leverage my experience as a former Associate Administrator of 
the Rural Housing Service at the U.S. Department of 
Agriculture, where I helped administer a $43 billion loan 
portfolio of over 400,000 homeowners, to seek opportunities to 
connect credit unions and their members in rural areas to 
existing public sector lending programs.
    In addition to working to improve unbanked and underbanked 
individuals' access to credit union services under the NCUA's 
current authority, I would also like to work with Congress on 
legislative changes to the Federal Credit Union Act, such as 
allowing all Federal credit unions, regardless of charter type, 
to add underserved areas to their fields of membership. Doing 
so would allow these institutions to offer financial services 
to those with no or limited access to credit union membership.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                        FROM RODNEY HOOD

Q.1. Unlike other Federal financial regulatory agencies, the 
NCUA is an independent regulator and insurer of credit unions. 
How will you ensure the agency continues to be independent and 
vigilant in protecting the safety and soundness of credit 
unions in Arizona?

A.1. If confirmed, my paramount responsibility as an NCUA Board 
Member would be to protect the safety and soundness of the 
credit union system, including credit unions in Arizona, and 
the health of the National Credit Union Share Insurance Fund. I 
would work with my fellow Board Members to take actions, 
including the promulgation of necessary regulations, in 
furtherance of that shared responsibility. I also would work 
with fellow financial regulators at both the Federal and State 
levels to ensure the continued confidence in our Nation's 
federally insured financial system. Moreover, if confirmed, I 
would like to continue the agency's current focus on 
transparency and accountability in all aspects of the NCUA's 
operations.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                   FROM MARK ANTHONY CALABRIA

Q.1. FHFA Director/Administrative Actions--During your 
testimony, you stated that the FHFA Director ``can make a 
number of changes that can try to get the GSEs on stable 
footing'' without additional legislation.
    Please list all changes that you believe the FHFA Director 
can make, either independently or in cooperation with executive 
branch agencies, to achieve this goal.

A.1. In the absence of a full legal review, as well as a review 
of current confidential supervisory information regarding the 
GSEs, listing ``all'' possible changes is not feasible.

Q.2. If you are confirmed, which of these policies do you 
intend to pursue?

A.2. Not being privy to confidential supervisory information 
regarding entities under the supervision of FHFA, I am not in a 
position to commit to any particular set of policies or 
actions.

Q.3. PSPAs and Capital--You coauthored a paper which asserts 
that ``Treasury's and FHFA's actions in the conservatorships of 
the Companies after the 2012 Third Amendment and the advent of 
the net worth sweeps violate . . . the express requirements of 
HERA.'' \1\
---------------------------------------------------------------------------
     \1\ See ``The Conservatorships of Fannie Mae and Freddie Mac: 
Actions Violate HERA and Established Insolvency Principles'', Michael 
Krimminger and Mark Calabria, February 9, 2015, available at https://
www.cato.org/publications/working-paper/conservatorships-fannie-mae-
freddie-mac-actions-violate-hera-established.
---------------------------------------------------------------------------
    Just last month, FHFA and Treasury defended the Third 
Amendment in court. Specifically, FHFA argued that the 
``Conservator's execution of the Third Amendment fell squarely 
within its broad statutory powers and functions, including to 
``take over the assets of and operate the [Enterprises],'' 
``carry on [their] business,'' ``perform all functions'' of the 
Enterprises, ``contract'' on their behalf, and ``conduct all 
business of the [Enterprises]''--all in the manner the 
Conservator ``determines is in the best interests of the 
[Enterprises] or the Agency.'' \2\
---------------------------------------------------------------------------
     \2\ See ``En Banc Supplemental Brief of Defendants-Appellees'', 
Federal Housing Finance Agency and Joseph M. Otting, Patrick J. 
Collins, et al. v. Steven T. Mnuchin, et al., No. 17-20364.
---------------------------------------------------------------------------
    Do you still believe that the Third Amendment violates 
HERA?

A.3. I believe there continue to be significant legal questions 
regarding the Third Amendment. My analysis was based solely on 
publicly available information. If confirmed, I will examine 
FHFA internal legal documents on this issue and consult with 
relevant FHFA personnel before reaching any further 
conclusions.

Q.4. As FHFA Director, would you continue to defend the actions 
of FHFA, including the Third Amendment, in court?

A.4. Any further defense of currently on-going legal matters 
would depend upon a review of internal FHFA legal documents, 
which I have not been privy to, as well consultation with FHFA 
counsel.

Q.5. If you continue to assert that FHFA's actions violate the 
law, what actions would you take as FHFA Director to change the 
Third Amendment and comply with HERA as you read it? Would 
those actions result in FHFA acting as conservator or receiver 
of the Enterprises?

A.5. After review of internal FHFA legal documents, and 
appropriate legal consultation, if there is a conclusion that 
the law has been violated, I would make every effort to bring 
FHFA into compliance within the authorities of FHFA.

Q.6. Regardless of your answers above, if confirmed do you 
intend to operate the Enterprises in conservatorship or 
receivership status prior to any legislative changes to the 
Enterprises?

A.6. As the Enterprises are currently in conservatorship, if 
confirmed I would expect to continue to operate the Enterprises 
in conservatorship until the conditions have been established 
that would mandate an exit from conservatorship.

Q.7. During your testimony you emphasized the importance of 
capital at the GSEs. But you also noted that, for capital to be 
increased above the current $3 billion retained at each 
Enterprise, there would need to be an agreement between 
Treasury and FHFA to allow them to retain additional earnings.
    As FHFA Director, would you seek to increase the amount of 
capital supporting each Enterprise outside of the current 
Treasury backstop prior to any legislative reforms?

A.7. Yes, as Section 1102 of HERA places among the Director's 
duties the maintenance of adequate capital.

Q.8. If so, what steps would be necessary to build that 
capital? Would this require an amendment or other alteration to 
the Senior Preferred Stock Purchase Agreements? Would all 
capital come from retained earnings?

A.8. An amendment may be required. However, a more precise 
answer to these questions would require an extensive analysis 
of the Enterprises' financial condition, as well as future 
forecasts of such, an exercise which I have not yet performed.

Q.9. If not, why not?

A.9. See answer immediately above.

Q.10. During your testimony, you stated that you ``support the 
concept of having significantly more capital at the GSEs.''
    What amount of capital, either in dollar or percentage 
terms, would you seek to attain at the GSEs if the GSEs were to 
rebuild capital in their current state and continue serving the 
same segments of the market, notwithstanding the existing Third 
Amendment to the Senior Preferred Stock Purchase Agreements?

A.10. I believe the Director is obligated to try to achieve the 
minimum capital levels specified in Section 1362 of the 1992 
Act, as amended by HERA.

Q.11. What amount of this capital do you believe should be 
common equity? What amount, if any, of this capital could be 
achieved, or by what amount could this capital requirement be 
lowered, in the single-family portfolio with risk transfer to 
approved counterparties including private mortgage insurers, 
reinsurers, and the capital markets?

A.11. I believe the composition of GSE capital must be 
consistent with Sections 1303(4) and 1362 of the 1992 Act, as 
amended by HERA. Changes to the risk-based capital levels can 
consider risk transfers.

Q.12. In 2018, FHFA published a Notice of Proposed Rulemaking 
(NPRM) to establish Enterprise risk-based capital requirements. 
While proposed capital requirements would not be applicable 
while the current Senior Preferred Stock Purchase Agreements 
(PSPAs) are in place, the proposal outlines a framework for 
regulatory capital for financially healthy Enterprises and 
establishes the capital structure used to determine whether 
pricing is appropriate and Enterprise activities are economical 
under the PSPAs. The comment period for the NPRM closed on 
November 16, 2018.
    Do you believe FHFA's 2018 proposal outlines an appropriate 
framework for establishing capital requirements at the 
Enterprises? If not, why not?

A.12. I have not yet read the proposed risk-based capital rule.

Q.13. If confirmed, will you review the comments submitted and 
continue the current risk-based capital rulemaking; start a new 
rulemaking; or stop all capital rulemakings for the 
Enterprises? If you intend to propose a new rule or stop 
capital rulemakings, please explain how you will approach the 
regulation of capital at the Enterprises.

A.13. If confirmed, I intend to review the comments and 
proposed rule and take the appropriate actions as warranted by 
that review.

Q.14. Credit Risk Transfer--In its regular credit risk transfer 
(CRT) reports, FHFA states that it assesses CRT programs and 
transfers on a set of principles, including that the 
Enterprises transfer risk when it is ``economically sensible to 
do so.'' FHFA defines economical CRT transactions as 
``transactions in which the cost to the Enterprise for 
transferring the credit risk does not meaningfully exceed the 
cost to the Enterprise of self-insuring the credit risk being 
transferred.'' \3\
---------------------------------------------------------------------------
     \3\ ``Credit Risk Transfer Progress Report: Second Quarter 2018,'' 
FHFA, available at https://www.fhfa.gov/AboutUs/Reports/
ReportDocuments/CRT-Progress-Report-2Q18.pdf.
---------------------------------------------------------------------------
    Do you support the principle that all Enterprise credit 
risk transfer should be economically sensible? If not, why not?

A.14. I have not had the opportunity to review FHFA guidelines 
in this area. If confirmed, I intend to do so.

Q.15. During an economic downturn, certain types of credit risk 
transfer could become more expensive and therefore 
uneconomical. If credit risk transfer became uneconomical, 
would you support modifying transfer volume to allow only those 
transfers that remain economical? If not, why not?

A.15. During an economic downturn, I would support reviewing 
existing credit risk transfers in light of the macroeconomic 
conditions and taking any actions that are warranted, 
consistent with the statutory framework.

Q.16. Structure of FHFA--As you noted during your testimony, 
you worked on the Housing and Economic Recovery Act (HERA), 
which created the FHFA, and the two housing finance bills that 
preceded it, S. 1508, the Federal Enterprise Regulatory Reform 
Act of 2003 and S. 190, the Federal Housing Regulatory Reform 
Act of 2005. All three pieces of legislation created a 
regulator for Fannie Mae and Freddie Mac headed by a single 
director appointed by the President with the advice and consent 
of the Senate. The 2005 legislation and HERA, which ultimately 
became law, were clear that the agency director would only be 
removable for cause.
    If confirmed as FHFA Director, will you defend the single 
director structure of FHFA?

A.16. Yes.

Q.17. Do you believe an independent agency with FHFA's breadth 
of authority and a single director removable only for cause is 
constitutional? If not, why did you help draft and why have you 
consistently defended two laws that you believe to be 
unconstitutional?

A.17. I am not a lawyer or constitutional scholar so this is 
not my area of expertise, but my own view is that FHFA's 
structure is lawful.

Q.18. Independence--In our private meeting and during your 
testimony, you stated that you removed yourself from all 
internal discussions about the future of the housing finance 
system within the Administration upon notice that you would be 
nominated because it was important ``for maintaining the FHFA 
is ``an independent regulator that the President is supposed to 
have no control over.'' \4\
---------------------------------------------------------------------------
     \4\ ``Random Thoughts on Obama's New Mortgage Plan'', Mark A. 
Calabria, October 25, 2011, available at https://www.cato.org/blog/
random-thoughts-obamas-new-mortgage-plan.
---------------------------------------------------------------------------
    As a member of the Committee staff that worked on HERA and 
the creation of FHFA as an independent agency, how does the 
President's choice of an Acting Director at FHFA who is 
simultaneously a member of an executive branch agency within a 
larger agency, the Treasury Department, which is part of the 
President's Cabinet, preserve that independence? How can a 
single individual be both an appointee within a Cabinet-level 
agency and independent of the President?

A.18. I have not examined this legal question.

Q.19. As a member of the Committee staff that created a 
legislative process for selecting an Acting Director of FHFA 
from among the three Deputy Directors at FHFA in the event of a 
vacancy, are you concerned that the President did not follow 
the process established by Congress?

A.19. I have not examined this legal question.

Q.20. Did you continue meeting with housing finance industry 
stakeholders or regulated entities in your official capacity as 
Chief Economist to the Vice President between September 2018 
and your nomination hearing? If so, how were you able to convey 
the stakeholders' concerns and the Administration's views if 
you had removed yourself from internal deliberations?

A.20. Yes. I did not, in general, convey the substance of those 
meetings to others and instead urged stakeholders to directly 
engage with the President's staff or relevant agency personnel.

Q.21. World Class Regulator--During your testimony, you said 
that you are ``committed to seeing the work of HERA finally 
completed and turning FHFA into a world-class regulator.''
    What does it take to be a world-class regulator? If you do 
not believe that FHFA is currently a world-class regulator, 
what changes do you believe are necessary to make it one?

A.21. I believe FHFA should be granted the full range of 
regulatory authorities granted to most other financial 
regulators. For instance in the area of capital, bank 
regulators, especially under Section 38 of the Federal Deposit 
Insurance Act, have considerable authority which FHFA lacks. It 
is my intent, if confirmed, to deliver to the Committee a list 
of authorities held by other regulators which FHFA currently 
lacks.

Q.22. Are there other parts of HERA that you believe are not 
complete or fully implemented? What steps do you believe are 
necessary to see the work of HERA completed?

A.22. See answer above. Additionally a world-class regulator 
should be viewed as a significant source of research and 
information on the policy issues under its purview. Currently, 
for instance, the Federal Reserve System does far more research 
and analysis on our mortgage markets and mortgage policy than 
does FHFA. I would intend to close that gap.

Q.23. Multiple Guarantors--In response to questions during your 
nomination hearing, you stated that ``one element [you] believe 
we all share is a greater need for competition.''
    Were you referring to competition in the primary market, 
the secondary market, or both? If it is competition in the 
secondary market, what factors do you believe secondary market 
entities should compete on?

A.23. Both. Other than any sort of explicit Government 
guarantee, which should only be provided by a nonprofit, FDIC 
style model, all other elements of the secondary market should 
be open to competition.

Q.24. How would additional competition in the secondary market 
impact liquidity and pricing in the To-Be-Announced (TBA) 
market?

A.24. I believe competition would improve liquidity and pricing 
in the TBA market. As is well established in the economics 
literature on market structure, competitive markets result, in 
general, with better pricing for the consumer than monopolistic 
markets or duopolies.

Q.25. Multifamily--As you stated during your nomination 
hearing, our country is facing a housing affordability crisis. 
About a quarter of renters currently spend more than half of 
their income on housing, and there is no market where a person 
working 40 hours per week at minimum wage can afford a modest 
two-bedroom apartment.
    Do you believe there is a role for the Enterprises to play 
in addressing the rental affordability crisis? If so, if 
confirmed, what changes in the Enterprises' policies or 
products would you support to address this affordability 
crisis?

A.25. Yes. Before engaging in any changes in this area, I 
believe an appropriate review of the effectiveness of those 
policies and programs would be warranted and that any changes 
flow from that review.

Q.26. If confirmed, would you support a continued Government 
guarantee on multifamily loans through the Enterprises? If so, 
would you support that guarantee being extended to the same or 
a greater population of loans and products?

A.26. Before lending support to any set of proposals, I would 
need to engage in considerable review and examination of those 
policies.

Q.27. The Enterprises' primary multifamily products--Fannie 
Mae's Delegated Underwriting System (DUS) and Freddie Mac's K 
Deal Program--differ in their risk-sharing models. Do you 
believe these products are treated appropriately in FHFA's 
Enterprise Capital Requirements NPRM?

A.27. I have not read the referenced NPRM.

Q.28. Fair Housing/Fair Lending--There remains an enormous 
racial gap in home ownership and wealth, and in many cities 
redlining still defines the occupancy of neighborhoods. You 
have written that ``the vast majority, if not all, of the 
racial home ownership gap is explained by factors such as age, 
income, family status, wealth and local housing costs,'' so we 
should stop trying to ``socially engineer a specific home 
ownership rate.'' \5\
---------------------------------------------------------------------------
     \5\ ``Race and Homeownership: Historical Trends'', Mark A. 
Calabria, January 13, 2011, available at https://www.cato.org/blog/
race-homeownership-historical-trends.
---------------------------------------------------------------------------
    Do you believe systemic discrimination exists in the 
housing market today? If not, when do you believe it ended and 
how?

A.28. Yes.

Q.29. What if any role should FHFA play in addressing the 
effects of past and present systemic discrimination in today's 
home ownership and rental housing markets?

A.29. FHFA has an important role in insuring that all entities 
under its supervision fully comply with our Nation's Fair 
Housing Laws. FHFA also has a role in making sure that the 
activities of entities under its supervision do not contribute 
to further segregation. Additionally FHFA has a role in making 
sure that efforts to extent home ownership are done in a 
sustainable manner that do not leave vulnerable families worse 
off.

Q.30. 30-Year Fixed-Rate Mortgage--In response to a question 
from Senator Tester, you stated that, if confirmed, at the end 
of your 5-year term, ``the 30-year fixed-rate mortgage will be 
widely available.''
    Do you believe that, if confirmed, at the end of your term 
secondary market financing for the 30-year fixed-rate mortgage 
will be available in the conventional market to the same or a 
larger population of borrowers to whom it is available today at 
the same or lower cost (not including market changes in 
interest rates)?

A.30. Yes.

Q.31. If not, what changes would you expect to see and what 
populations of lenders and borrowers are those changes most 
likely to effect in the primary market?

A.31. N/A.

Q.32. G-Fees--You have written that the GSEs should be 
guaranteeing a smaller subset of loans--those with higher FICO 
scores, higher downpayments, and lower loan amounts. \6\ You've 
also said that the GSEs should be charging more for their 
guarantee. \7\ During your testimony before the Committee, you 
clarified that we should look at each loan holistically to 
evaluate whether or not it is eligible for guarantee.
---------------------------------------------------------------------------
     \6\ See ``If We Decide To Keep Fannie Mae Around . . . '', Mark A. 
Calabria, February 18, 2015, available at https://www.cato.org/blog/we-
decide-keep-fannie-mae-around; Testimony before the U.S. House of 
Representatives Committee on Financial Services, ``A Legislative 
Proposal To Protect American Taxpayers and Homeowners by Creating a 
Sustainable Housing Finance System'', Mark A. Calabria, July 18, 2013, 
available at https://www.cato.org/publications/testimony/legislative-
proposal-protect-american-taxpayers-homeowners-creating.
     \7\ See Testimony before the U.S. Senate Committee on Banking, 
Housing, and Urban Affairs, ``The State of the Housing Market'', Mark 
A. Calabria, March 9, 2011, available at https://www.cato.org/
publications/congressional-testimony/state-housing-market.
---------------------------------------------------------------------------
    Looking holistically at the loans being guaranteed by the 
Enterprises today, are there loans being purchased or products 
being offered at either Enterprise that you would eliminate or 
increase the price for? If so, please name those products and 
what if any price changes are necessary.

A.32. Without a full review of the GSEs' current business and 
loan performance, including examination of confidential 
supervisory information, I do not have the full set of 
information necessary to answer this question.

Q.33. If you are confirmed, would you maintain the existing 
guarantee fee framework, or would you adjust the existing 
pricing grids, including any loan-level price adjustments, 
either by product or by borrower characteristic? If you would 
adjust the pricing grids, please explain any proposed changes.

A.33. Without a full review of the GSEs' current business and 
loan performance, including examination of confidential 
supervisory information, I do not have the full set of 
information necessary to speak to this issue.

Q.34. Have you studied how many borrowers would no longer have 
access to a loan or would pay more for it if you made the 
changes noted in the prior two answers?

A.34. No.

Q.35. Fannie Mae and Freddie Mac have historically offered 
lenders volume-based discounts for loans that will be 
guaranteed by the Enterprises. These discounts disadvantaged 
small lenders that could be forced to sell loans to a larger 
competitor or face higher transaction costs. Under the 
regulation of FHFA, volume-based discounts have been 
eliminated.
    If confirmed, do you commit to maintain equal guarantee fee 
pricing for all lenders, regardless of the number of loans they 
deliver to an Enterprise or the form in which those loans are 
delivered?

A.35. I am generally supportive of the elimination of volume 
discounts, but without a full examination of the issue, and 
without access to any internal FHFA analysis, I believe it 
would be inappropriate to commit to any particular course of 
action at this point.

Q.36. If confirmed, do you commit to support equal guarantee 
fee pricing for all lenders, regardless of the number of loans 
they deliver to an Enterprise or the form in which those loans 
are delivered in any future secondary market system?

A.36. Without a full examination of the issue, and without 
access to any internal FHFA analysis, I believe it would be 
inappropriate to commit to any particular course of action at 
this point.

Q.37. Underwriting--If you are confirmed, would you make any 
changes to the Enterprises' underwriting standards as they 
exist today? If so, please detail any proposed changes and 
provide an analysis of the impact that such changes would 
likely have on prospective mortgagors.

A.37. Without a full review of the GSEs' current business and 
loan performance, including examination of confidential 
supervisory information, I do not have the full set of 
information necessary to answer this question.

Q.38. In response to a question from Senator Cortez Masto 
regarding your previous suggestion that only borrowers with 700 
FICO scores should get loans, you replied that you `` . . . 
certainly don't think there should be any legal prohibition in 
the mortgage market against any sort of FICO score.''
    Do you believe that FHFA should prohibit the Enterprises 
from guaranteeing loans or securities containing loans to 
borrowers with FICO scores below 700?

A.38. No.

Q.39. If not, do you believe that the Enterprises should charge 
more to guarantee loans with FICO scores below 700 than they 
currently charge? If so, how much more?

A.39. Without a full review of the GSEs' current business and 
loan performance, including examination of confidential 
supervisory information, I do not have the full set of 
information necessary to answer this question.

Q.40. Affordable Housing Goals--You told the Committee that 
``we can get to a spot where we can have risk-taking via 
affordable housing goals if we can have an appropriate 
regulatory structure that has capital backing those goals.'' 
You later told the Committee that you would preserve the 
affordable housing goals ``within the confines and direction of 
the statute.''
    What is an appropriate regulatory structure for the 
affordable housing goals? How does an appropriate structure 
differ from the regulatory structure that exists today?

A.40. There is essentially no capital backing the GSEs today. I 
believe that is not an appropriate capital or regulatory 
structure.

Q.41. What is the appropriate capital backing the affordable 
housing goals? How much of that capital would come from 
guarantee fees or other charges assessed to the homeowners 
whose loans were part of the single-family housing goals, and 
how would those guarantee fees or other charges differ from the 
charges assessed to homeowners whose loans were not included 
within the goals?

A.41. Without a full review of the GSEs' current business and 
loan performance, including examination of confidential 
supervisory information, I do not have the full set of 
information necessary to comment.

Q.42. What parts of the statute would prohibit you from 
preserving and implementing the affordable housing goals in any 
given year? How would you determine whether that statute would 
apply in any quarter or year?

A.42. Section 1131 of HERA. I have not seen a legal opinion as 
to whether the Section 1131 determination is quarterly or 
annual or of a different frequency altogether.

Q.43. Duty To Serve Underserved Markets--You testified before 
the Committee that, if you are confirmed, the GSEs' duty to 
serve underserved markets would be ``part of the process'' and 
that the requirements would remain in place ``as long as the 
existing regulatory structure is there.''
    You were very forthcoming with the Committee about the type 
of secondary market structure you would promote if confirmed. 
If confirmed, would you similarly support maintaining a 
statutory duty to serve underserved markets for all secondary 
market participants regulated by FHFA or any regulator that 
replaces it?

A.43. Support for any legislative proposal would dependent upon 
the full details of that proposal.

Q.44. If confirmed, will you support all Enterprise activities 
in fulfillment of their duty to serve plans as published and 
amended in 2017 and 2018 while you await legislative changes to 
the secondary market?

A.44. I have not had the opportunity to review the duty to 
serve plans published and amended in 2017 and 2018.

Q.45. CSP--The Common Securitization Platform (CSP) has been 
under development for over 5 years and is scheduled to begin 
issuing a single security for both Fannie Mae and Freddie Mac 
mortgage-backed securities in less than 4 months. Market 
participants and regulators have been working to address 
outstanding regulatory and practical questions posed by the 
single security. But you have written that ``[w]asting money on 
the CSP is another classic Washington boondoggle, fundamentally 
misdiagnosing the problem and building a new organization to 
provide a solution that no one in the market asked for.'' \8\
---------------------------------------------------------------------------
     \8\ ``Can the Private Market Return to Home Lending?'', Ike 
Brannon and Mark A. Calabria, July 14, 2016, available at https://
www.cato.org/publications/commentary/bna-insights-can-private-market-
return-home-lending.
---------------------------------------------------------------------------
    If confirmed, do you intend to finalize the rulemaking for 
the single security, and begin issuance of a single security in 
June 2019?

A.45. Assuming that issuance is feasible and practicable at 
that point, then yes, but that decision would also be subject 
to a review of the progress to date.

Q.46. What impact, if any, do you believe a single security 
will have on the size and liquidity of the secondary market?

A.46. I understand the intent is to have a more standardized 
secondary market that is larger and with more liquidity.

Q.47. If confirmed, do you intend to continue developing the 
CSP? Do you expect the CSP to have additional functionalities 
beyond its current role in the issuance of a single security in 
the coming years? If so, what functionalities do you expect 
that the CSP will build?

A.47. I have no expectations as to additional functionalities, 
but am open to the possibility of such.

Q.48. CEOs--Both Fannie Mae and Freddie Mac are in the process 
of selecting new Chief Executive Officers (CEOs). In its 
capacity as regulator, FHFA is responsible for overseeing 
Enterprise compliance with 12 U.S.C. 4520, ``Minority and women 
inclusion; diversity requirements'' and its implementing 
regulations. Furthermore, as conservator, FHFA succeeds to 
``all rights, titles, powers, and privileges of the regulated 
entity, and of any stockholder, officer, or director of such 
regulated entity.'' \9\ Both as regulator and conservator, FHFA 
has substantial influence over the selection process for and 
hiring of senior Enterprise leadership.
---------------------------------------------------------------------------
     \9\ 12 U.S.C. 4617(b)(2)(B)(i).
---------------------------------------------------------------------------
    If confirmed, will you commit to ensure that a diverse set 
of candidates are considered to fill both CEO vacancies and any 
other future leadership vacancies at the Enterprises, the 
Federal Home Loan Banks, and FHFA during your tenure?

A.48. Yes.

Q.49. FSOC--If confirmed as FHFA Director, you will also serve 
as a voting member of the Financial Stability Oversight Council 
(FSOC), which is responsible for identifying risks to the 
financial stability of the United States; promoting market 
discipline; and responding to emerging risks to the stability 
of the United States' financial system.
    What do you see as the current threats to U.S. financial 
stability and what are the emerging risks? What steps to do you 
believe FSOC should take to address these risks?

A.49. Property markets, over any sufficient time horizon, are 
almost always financial stability concerns and should be 
monitored constantly. The slowing global economy, for instance 
any adverse impact from Brexit, needs to be monitored. Given 
that our financial markets and institutions will always face 
risks, I believe the best approach is to make sure that those 
institutions are well-capitalized, well-regulated, and well-
managed. The continued normalization of interest rates and its 
impact on financial institutions should also be closely 
monitored.

Q.50. In your written testimony, you said that your first 
question when deciding what actions to take as FHFA Director 
would be ``what does the statute say?'' Would that approach be 
the same as a member of FSOC?

A.50. Yes.

Q.51. Do you believe that FSOC is currently fulfilling all of 
its statutory requirements? If not, which requirements are not 
fulfilled and what steps would you take to fulfill all 
requirements?

A.51. My impression is yes, but I intend to more closely 
examine this issue if confirmed.
                                ------                                


           RESPONSES TO WRITTEN QUESTIONS OF SENATORS
           BROWN AND REED FROM MARK ANTHONY CALABRIA

Q.1. Housing Trust Fund/Capital Magnet Fund--During your 
nomination hearing, you stated that there is a ``mechanical 
trigger'' that requires or bars the transmission of Enterprise 
funds to the Housing Trust Fund (HTF) and Capital Magnet Fund 
(CMF).
    What, specifically, is the mechanical trigger that would 
lead the FHFA to bar transmission of funds from the Enterprises 
to the HTF and CMF?

A.1. The trigger mechanism is detailed in Section 1131 of HERA, 
codified in 12 U.S.C. 4567.

Q.1. What changes in the Enterprises' status, including changes 
to the Senior Preferred Stock Purchase Agreements, the 
Enterprises' capital restoration plan, or the Enterprises' 
status in conservatorship or receivership, would bar annual 
transmission of funds to the HTF and CMF?

A.1. Only those changes having the impacts detailed in Section 
1131 of HERA.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT
                   FROM MARK ANTHONY CALABRIA

Q.1. Last Congress, this Committee moved historic bipartisan 
legislation. In particular, S. 2155 included my language to 
make it easier for the banking underserved to gain access to 
credit. Sec. 310 is designed to increase competition and 
innovation for credit scoring, with the goal of allowing 
lenders the option of choosing from among multiple validated 
and approved scoring models when originating mortgage loans. 
There is currently only one credit scoring model permitted in 
the housing finance space.
    I am concerned that the proposed rulemaking, released under 
prior Director Watt, hinders the opportunity for robust 
competition that this legislation intends to generate. Sec. 
310's Congressional intent is to ensure innovation that expands 
the options available to lenders so that Americans from all 
backgrounds have more access to credit and are able to reach 
the ``American dream''. I am concerned the proposed rulemaking 
does not fulfill that.
    Dr. Calabria, I would like to take this opportunity to 
follow up with you on your appearance before the Senate Banking 
Committee regarding your nomination to be Director of the 
Federal Housing Finance Agency. I appreciated your comments and 
commitment to increase competition in the housing finance 
sector.
    Please answer the following with specificity:
    If confirmed, will you commit to ensuring and prioritizing 
that the proposed rulemaking of Sec. 310 follows Congressional 
intent?

A.1. Yes.

Q.2. FHFA informed some Members of this Committee in July of 
2018 that it would be difficult to fulfill the statutory 
timeline for full implementation of Sec. 310 as passed by 
Congress and as signed into law by the President. Will you 
commit to doing all in your power to accomplish complete 
implementation of Sec. 310 as required by statute or as soon 
thereafter as possible?

A.2. Yes.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS
                   FROM MARK ANTHONY CALABRIA

Q.1. I understand that one plan under consideration for GSE 
reform is recap and release. In essence this entails allowing 
Fannie and Freddie to build a capital buffer back up and then 
releasing them from conservatorship. However, I am concerned 
that recap and release--without additional reforms--would take 
us back to right where we started precrisis. What are the most 
important reforms that you believe need to be made to the GSEs 
before they're released from conservatorship?

A.1. I share your concerns and believe a simple ``recap and 
release'' that goes back to the preconservatorship model would 
be a mistake. Foremost the GSEs require significantly higher 
capital than their preconservatorship levels. It would also be 
preferable for Congress to open up the model to competition, 
allowing the regulator to charter new entrants. Improving the 
resolution framework to allow for an orderly reorganization or 
liquidation of a failing GSE is also needed.

Q.2. Following our exchange during the Banking Committee's 
hearing, it's clear we both agree about the importance of 
private capital in the mortgage market. Since FHFA was created 
it has used a number of pilot programs, such as the IMAGIN 
program, to attract private capital to the secondary market and 
reduce risks borne by the American taxpayer. If confirmed as 
Director, will you continue to find ways to adopt policies that 
reduce risks to the American taxpayer and lower costs for 
borrowers?

A.2. Yes, as the GSEs are not currently building sufficient 
capital on their own, I believe it is critical that FHFA 
continue to examine and pursue other alternatives for 
transferring that risk to other market participants who do 
maintain sufficient capital.

Q.3. From a good governance standpoint, I am concerned that in 
some instances the GSEs have also used pilot programs as a 
means to circumvent the normal Federal notice and comment 
process. This has created inappropriate competition with the 
private market in certain circumstances. Do you intend to use 
the standard Administrative Procedures Act process to help 
promote transparency at FHFA?

A.3. I share the concerns regarding previous practices in the 
areas of pilot and new programs at the GSEs. I am committed to 
increasing the transparency of that process and minimizing any 
adverse impact on competition.

Q.4. I would like to better understand your views on the Fannie 
and Freddie duopoly, particularly while they've been in 
conservatorship, and the impact on purely private players who 
don't have the implicit Government guarantee. Has the continued 
GSE conservatorship perpetuated a Fannie and Freddie duopoly in 
the housing market? And should the GSEs remain focused on their 
primary mission, which is providing liquidity to the secondary 
market?

A.4. Ultimately I believe Congress should open the GSEs' 
charters to competition. I do believe that the current 
conservatorship has further entrenched the GSEs and reduced 
competition in the secondary mortgage market. Part of this 
reduced competition has been the result of exempting the GSEs 
from rules that apply to other market participants. I believe 
the GSEs and other financial institutions should, to the 
greatest degree possible, operate on a level regulatory playing 
field. I share the concerns that the GSEs could leverage their 
market power to vertically integrate into other segments of the 
mortgage market. Accordingly I believe the GSEs should remain 
focused on their primary mission, providing liquidity to the 
secondary mortgage market.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS
                   FROM MARK ANTHONY CALABRIA

Q.1. Former Director Mel Watt issued a proposed rule on 
enterprise capital as applied to multifamily housing capital 
standards. The proposed rule would require approximately three-
and-a-half times the credit risk capital that single-family 
homes required during such times of stress, even though single 
family losses were demonstrably higher during the last 
recession. The credit performance of the GSE book of 
multifamily loans dramatically outperformed single family.
    Can you commit that any postconservator capital standard or 
in-conservatorship guidelines that you may be in charge of 
implementing will be reflective of the historical performance 
of that asset class? Will such standards be based on 
transparent, real data, and risk-based pricing and analysis?

A.1. While I have not had an opportunity to read the proposed 
rule, I do strongly believe that any risk-based capital 
standard should incorporate historical loan performance data 
and be based on transparent, real data as well as risk-based 
pricing and analysis.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
                   FROM MARK ANTHONY CALABRIA

Q.1. Communities around the country, including in my State, are 
experiencing a shortage of buildable lots and homes. In NAHB 
surveys, two-thirds of builders currently report a low or very-
low supply of lots. This lack of supply is driving up prices 
and impacting housing affordability, especially for entry level 
and first-time home buyers. One way to help fix this problem is 
to ensure an adequate pipeline of acquisition, development, and 
construction financing for land developers and builders.
    What role do you see Fannie Mae and Freddie Mac having to 
solve barriers for housing supply, such as through construction 
loans and other financing for builders?

A.1. Lack of supply is, in my opinion, the number one obstacle 
to more affordable housing in our Nation. The decline in the 
number of small banks since the passage of Dodd-Frank has 
placed a particular drag on the availability of acquisition, 
development and construction (ADC) lending. I believe the GSEs 
can and should play a constructive role in facilitating ADC 
lending, especially among smaller lenders. If confirmed, I 
intend to review the GSEs' activities in this area and make any 
regulatory changes warranted.

Q.2. Our Nation's residential home builders rely on 
acquisition, development, and construction (AD&C) lending to 
provide the capital necessary to meet the growing needs of the 
Nation's housing market. Small builders, who construct 
approximately 80 percent of all new housing in America each 
year, don't have access to Wall Street financing, and thus must 
rely on community banks to provide this much-needed liquidity 
as they tend to understand local housing markets better than 
larger lenders. However, community banks have not been able to 
meet current construction financing needs. While the stock of 
outstanding home building construction loans has grown by 95 
percent, an increase of $38 billion, since the first quarter of 
2013, lending remains much reduced from years past. In fact the 
current stock of existing residential AD&C loans now stands 61 
percent lower than the peak level of residential construction 
lending of $203.8 billion reached during the first quarter of 
2008. Clearly more needs to be done to encourage community bank 
lending and facilitate the flow of AD&C financing.
    Given the damage to both home builders and community banks 
during the economic downturn which has resulted in limited AD&C 
liquidity, how would a properly structured Government guarantee 
for AD&C loans help make financing for builders more 
consistently available and support our Nation's builders and 
community banks during future economic downturns?

A.2. The financial crisis, as well as Dodd-Frank, have been 
accompanied by a significant reduction in the number of 
community banks, as well as a reduction in their activity. I 
believe, as expressed in S. 2155 passed last Congress, that 
community bank relief should remain an important and continued 
focus for Congress. I am committed to examining a number of 
options for increasing community bank participation with the 
GSEs, and insuring that such is done in a safe and sound 
manner.

Q.3. It appears to be a direct conflict of interest for the 
same people who are setting the private mortgage insurers' 
capital and operational standards to also be developing a 
program that will allow the GSEs to essentially self-insure--or 
at a minimum, to set up structures that will have less players, 
transparency, and stability through cycles--that amounts to 
what the GSEs perceive as an additional market advantage. Do 
you agree?

A.3. I believe private mortgage insurers have an important role 
to play in our mortgage markets. I have not had the opportunity 
to fully examine FHFA and the GSEs' activities in this area, 
but intend to examine and evaluate the impact of the GSEs on 
competition in the mortgage insurance area.

Q.4. I am troubled by the possibility of the GSEs using 
inconsistent standards--applying one approach to an industry or 
company and another in the same area of activity--for self-
benefit. This behavior would unlikely be tolerated by Federal 
bank regulators.
    How will you enforce fair standards and limit conflicts of 
interest by the GSEs?

A.4. I feel very strongly that both FHFA and the GSEs have an 
obligation to treat all market participants fairly and 
consistently, and those activities should parallel those of 
other Federal financial regulators and entities as closely as 
practicable. I would also view addressing conflicts of interest 
and failures of internal controls at the GSEs as one of my 
highest priorities.

Q.5. As Director, how would you consider the GSEs' Charters 
when deciding whether to authorize a pilot--i.e., is any 
activity permitted based on a colorable reading of the 
Charters? Or is there an effort to ensure the GSEs are 
responding appropriately to other market stakeholders?

A.5. Foremost would be a consideration of if the activity is 
permitted by the Charters. If such activity is permitted, the 
second question is whether such activity is consistent with 
safety and soundness, as well as the overall mission of the 
GSEs. In any determination, I would consult with other 
stakeholders and carefully weigh the competitive aspects of any 
new activities or programs.

Q.6. Would you consult with other Federal or State regulators 
in order to assess regulatory or market effects, including with 
Treasury on the financial effects of pilot activity?

A.6. Yes.

Q.7. Could a new Director eliminate the pilot approach and 
terminate all existing pilots? If the effect would be material, 
would this warrant additional disclosure, oversight, and 
participation by market stakeholders in the piloting process?

A.7. I am not aware of the correct legal interpretation in 
terms of terminating existing pilots. If confirmed, I would 
consult with FHFA's General Counsel on this issue. Whatever 
actions taken in this area would be done in a transparent 
manner, seeking input from relevant stakeholders.

Q.8. In the last year, the issue of pilot programs initiated by 
Fannie Mae or Freddie Mac have raised concerns. A January 2019 
GAO report said these pilot programs widen the scope of 
activities of the companies and, ``allow them to become more 
dominant by potentially growing their role beyond the secondary 
market and into the primary market.'' I have concerns about the 
impact these pilots potentially have on fair and free 
competition. The secretive nature of these pilots can have the 
effect of unfairly disrupting the market, especially when only 
one or two companies participate and therefore functionally get 
a leg up on the market.
    What steps can FHFA take to ensure pilots don't unfairly 
advantage one company in the market?

A.8. FHFA can first conduct an economic analysis looking at 
potential competitive market effects of new programs. Second, 
FHFA, can, to the extent practicable and consistent with HERA, 
encourage the GSEs to begin any pilot programs with 
participation by a reasonable number of companies.

Q.9. How will you enforce fair standards and limit conflicts of 
interest by the GSEs?

A.9. By fully reviewing the current examination procedures and, 
if warranted, increasing the amount of examination time devoted 
to enforcing fair standards and conflicts of interest. If 
warranted, I would consider hiring additional FHFA staff to 
specifically monitor these specific issues.

Q.10. That same GAO report said, ``According to FHFA, the 
enterprises' boards of directors oversee day-to-day operations, 
but certain matters are subject to FHFA review and approval. 
For example, FHFA officials told us that FHFA reviews and 
approves some pilot programs.''
    What criteria does FHFA use to determine which pilot 
programs it should review and approve and which pilot programs 
FHFA should not review or approve?

A.10. As I have not been at FHFA, I am not familiar with the 
internal criteria used. If confirmed, I intend to examine and 
review this criteria.

Q.11. What oversight does FHFA conduct of the GSEs when it 
comes to pilots? Do FHFA experts and economists help design the 
metrics and criteria for determining success?

A.11. As I have not been at FHFA, I am not familiar with the 
internal oversight currently conducted on pilot programs. If 
confirmed, I intend to examine and review these oversight 
efforts.

Q.12. A September 2018 White Paper by FHFA's Office of the 
Inspector General said ``FHFA does not consider the IMAGIN 
pilot program to constitute primary market activity because 
Freddie Mac is not originating loans under this pilot 
program.''
    Short of originating loans, what activities are outside the 
GSEs' charters?

A.12. I have not conducted a legal review of this question, nor 
am I privy to any internal FHFA review of this question. I do, 
however, believe that FHFA should, if it has not done so 
already, examine this question. It is fully my intent, if 
confirmed, to see that the GSEs operate fully within their 
charters.

Q.13. Each year the FHFA publishes a conservatorship scorecard. 
This scorecard is supposed to reflect the metrics that FHFA 
uses to review proposals from the GSEs in a year. It makes 
sense that as conservator, FHFA would direct the GSEs to only 
consider pilots that have a strong link to one of those items 
on the score card, with pilots on mortgage insurance, single 
family rentals, and appraisal data.
    Is it safe to assume that we won't see a pilot on products 
that are outside the score card items, like title insurance or 
real estate brokerages?

A.13. As a general approach, I believe that new activities, 
products or programs done within a conservatorship must be 
consistent with the objectives of the conservatorship.

Q.14. I've worked my colleagues on both sides of the aisle to 
reform our broken housing finance system. We came close in 
2014, when we passed a bipartisan product out of this 
Committee, but Harry Reid never moved our bill. While we are 
not giving up in Congress, the FHFA no doubt will play a large 
role in housing finance reform and there are a number of 
Administrative actions that can be taken to help or hurt 
taxpayers, lenders, consumers, etc. Frankly, a lot of time and 
attention of the GSE reform debate focuses on the single family 
piece of the business, but as someone who cares a great deal 
about renters too, I am concerned about how recent actions 
taken by the FHFA under the leadership of Mel Watt could impact 
affordable housing and workforce housing. In fact, the FHFA has 
considered a rule that affects multifamily housing finance 
liquidity.
    I know you can't comment on the rule, but can you commit to 
the Committee that you will not do anything that will directly 
increase the cost to millions of renters of multifamily 
housing?

A.14. It is not my intent to increase the cost of rental 
housing. If confirmed, every reasonable effort will be made to 
consider any direct impact on rental costs.

Q.15. Securitization has been crucial in transitioning billions 
of dollars in credit risk away from the American taxpayer 
through the GSEs' CRT (credit risk transfer) program. 
Securitization can play a critical complimentary role in any 
reformed housing finance system by expanding private credit's 
role via private label MBS while the GSE footprint shrinks. 
With this in mind, how will you encourage the return of a 
healthy and responsible securitization market if confirmed as 
Director of the FHFA?

A.15. I believe FHFA's Director can play an important role in 
encouraging a healthy, responsible and competitive secondary 
mortgage market. Foremost, if confirmed, I would work with my 
fellow regulators on FSOC to address broader issues related to 
securitization to help improve the functioning of the 
securitized mortgage market. Creating a level and transparent 
playing field is essential in this area, especially in terms of 
gaining investor confidence. I would also devote considerable 
time and attention to first listening to the concerns of 
stakeholders in securitization and working to address obstacles 
to responsible, private label securitization.
                                ------                                


         RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
                   FROM MARK ANTHONY CALABRIA

Q.1. If confirmed, you'll have immense authority over our 
housing policy and effectively, the homes and lives of many 
Americans. You have said that the Housing and Economic Recovery 
Act is being violated, so what would you do about it if you are 
confirmed? Would you continue Mr. DeMarco's and Mr. Watt's 
policy? Would you put the Enterprises into conservatorship? Or 
would you put the Enterprises into receivership? Could you 
please provide your economic analysis to assess the likely 
impact of any of these choices on our housing markets, 
particularly mortgage rates and housing prices?

A.1. My previous writings in relation to HERA's Section 1145 
are based solely upon publicly available data and analysis. As 
I have not been privy to any internal FHFA analysis on these 
questions, my first action, in regard to this area, would be to 
review any internal work done on this question. I fully 
recognize that regulatory actions can often look different on 
the ``outside'' than on the inside of a regulator. My writings 
on this area are also focused upon decisions made primarily in 
the fall of 2008 and immediately thereafter. As I am not privy 
to any confidential supervisory information regarding entities 
regulated by FHFA, any actions taken would have to be based 
upon current supervisory information. If confirmed, I would 
consult such information.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
          SENATOR MENENDEZ FROM MARK ANTHONY CALABRIA

Q.1. As conservator, in which role FHFA succeeds to ``all 
rights, titles, powers, and privileges of the regulated entity, 
and of any stockholder, officer, or director of such regulated 
entity,'' \1\
---------------------------------------------------------------------------
     \1\ 12 U.S.C. 4617(b)(2)(A)(i).
---------------------------------------------------------------------------
    Do you have the authority to reduce, not increase, or 
otherwise alter the maximum loan amount of the single-family 
loans that either Enterprise may guarantee, either in regular 
or high-cost areas?

A.1. No.

Q.2. If you do have that authority, would you use that 
authority to reduce, not increase, or otherwise alter the 
maximum loan amount of the single-family loans that either 
Enterprise may guarantee, either in regular or high-cost areas?

A.2. N/A.

Q.3. If you do not have that authority, please provide the 
legal analysis supporting your conclusion that you do not have 
that authority. Additionally, please state whether you would 
reduce or not increase the maximum loan amount that may be 
guaranteed by an Enterprise if you later found that you had the 
statutory authority to do so.

A.3. I simply see no statutory basis for exercising said 
authority. If such authority is granted, I would at that time 
consider how best to exercise such authority.

Q.4. Please provide analysis on the specific impacts to pricing 
and mortgage rates in New Jersey if loan limits were to be 
reduced to: (a) precrisis levels ($417,000); and (b) $200,000. 
Additionally please provide estimates on what this volume 
reduction would mean for pricing and mortgage rates nationally.

A.4. The following analysis is based upon the United States 
Census Bureau's American Community Survey, which reports a 
median home value for the State of New Jersey of $334,900. For 
select urban areas in New Jersey, the current loan limit is 
$726,525, for the remainder of the state the loan limit is 
currently $484,350.
    My estimate is that the current loan limits cover 
approximately 90 percent of the owner occupied homes in New 
Jersey. Returning to the precrisis conforming loan limit of 
$417,000 would cover approximately two-thirds of owner-occupied 
homes in New Jersey. A loan limit of $200,000 would cover 
approximately a third of owner-occupied homes in New Jersey.
    Since mid-2013, mortgage rates on jumbo loans have been 
below that of GSE conforming loans by an average of 33 basis 
points. \2\ Adjusting for differences in credit quality and 
other relevant characteristics still leaves mortgage rates on 
jumbo non-GSE loans below that of GSE conforming loans by an 
average of 5 basis points. \3\
---------------------------------------------------------------------------
     \2\ https://www.corelogic.com/blog/2018/08/why-are-jumbo-loans-
cheaper-than-conforming-loans.aspx
     \3\ https://www.corelogic.com/blog/2018/10/jumbo-conforming-
spread-risk-location-scale-economies-affect-rate.aspx

Q.5. Do you have plans to take other steps to reduce loan 
volume at the Enterprises, whether through pricing, limiting 
---------------------------------------------------------------------------
certain loan products, and reducing the credit box?

A.5. Without a full review of the GSEs' current business and 
loan performance, including examination of confidential 
supervisory information, I do not have the full set of 
information necessary to make this decision.

Q.6. In the context of changes to loan limits or other 
restrictions to the Enterprises' footprint, what do you 
consider to be small or incremental?

A.6. Changes that do not significantly shift the overall 
contours of the market and that are easily reversed.

Q.7. What specific economic evidence do have that small or 
incremental changes will not still cause significant market 
disruption?

A.7. While the future is inherently unknowable, I believe there 
is high degree of certainly that if the current status quo 
persists, there will be significant costs to the taxpayer, 
investors, and borrowers during the next housing downturn. We 
have seen repeated instances of changes to the GSE market 
shares and have some sense of the modest impact these have had 
on the market place.

Q.8. What specific data or market impacts would cause you to 
reevaluate and reverse course of any changes?

A.8. Disruptions in the agency debt market, significant changes 
in the Treasury-mortgage spread, significant swings in home 
buying and selling activity. There are a large number of 
macroeconomic indicators for our housing and mortgage markets.

Q.9. Will you commit that you will not use pricing schemes that 
unfairly penalize larger cost loans that still fall within the 
conforming loan limits?

A.9. Yes.

Q.10. Do you believe that a Government guarantee is critical to 
the liquidity and stability of the TBA market? If so, how would 
you balance the stability of the TBA market with any planned 
reductions to the role of the Government in the housing market 
overall?

A.10. I believe Government guarantees, particularly FHA and VA, 
have historically provided the basis for broad market 
acceptance of the secondary mortgage market.

Q.11. HUD-approved housing counseling agencies work primarily 
with low- and moderate-income households, preparing homebuyers 
for responsible home ownership and helping financially 
challenged homeowners work with their mortgage servicers to get 
loan workouts or other solutions. Recent studies show positive 
outcomes by families who receive housing counseling, including 
significantly lower default rates and more successful loan 
modifications.
    Given the effectiveness of housing counseling in helping 
low- and moderate-income households to help themselves to 
responsibly achieve the dream of home ownership, how would you 
utilize housing counseling programs to strengthen GSE lending 
and servicing? Additionally, how would you recommend funding 
the provision of housing counseling services?

A.11. I believe quality housing counseling programs can provide 
significant benefits to borrowers, while if structured 
appropriately, also reducing defaults. I believe lenders should 
be encouraged to fund additional counseling activities.

Q.12. What is your opinion of FHFA's notice of proposed 
rulemaking to implement Section 310 of S. 2155, the Economic 
Growth, Regulatory Relief, and Consumer Protection Act?

A.12. I have not had an opportunity to read the proposed 
rulemaking.

Q.13. Over the last few decades, the Enterprises have been 
critical providers of multifamily housing financing across all 
income levels. What role do you see the agencies playing in the 
multifamily space going forward?

A.13. The Enterprises' multifamily business performed 
significantly better than its single family business during the 
crisis and was not the source of the Enterprises' failures. 
Accordingly the multifamily business can provide some important 
lessons for the single family business. While reform debates 
have focused largely on the single family business, I do 
believe it is critical for Congress to appropriately examine 
the future of the GSEs' role in the multifamily mortgage 
market.

Q.14. You have advocated for requiring minimum downpayments of 
5 percent or more and minimum FICO scores of 700. Please 
provide detailed analysis of how such restrictions would impact 
pricing and accessibility of single-family mortgage loans both 
nationally, and in New Jersey.

A.14. As pricing is related to default, any efforts that 
increase FICO and downpayments would reduce the mortgage 
pricing. The existing economic literature suggests that such 
would not impact home ownership rates, but would delay the 
timing of first home purchase.

Q.15. What evidence do you have that these borrowers will find 
affordable home ownership options in the private market?

A.15. I believe we can appropriately manage the risk of the 
GSEs without adversely impacting home ownership options.

Q.16. If these borrowers cannot access home ownership and join 
the population of renters, where are we going to get the needed 
rental stock when we are already in the midst of an affordable 
housing crisis?

A.16. We are indeed facing an affordable housing crisis and I 
believe local and State governments need to reform their land 
use policies so that more affordable housing can be built.

Q.17. What are the effects on rents if we add a large number of 
new households, in other words demand, to the rental market?

A.17. One cannot determine the impact of demand shifts on 
prices without an analysis of supply shifts.

Q.18. Do you have a plan to develop new rental housing?

A.18. Yes, we must reform the land use policies (often 
exclusionary zoning) that make it so difficult to supply 
housing in too much of our Nation.

Q.19. Will you commit to preserving lower downpayment programs 
at the Enterprises that make home ownership accessible to 
underserved communities?

A.19. Yes, to the extent that such are done in a sustainable, 
responsible manner.

Q.20. In our individual meeting, you said it is your view that 
you would not have statutory authority to suspend contributions 
to the housing trust fund and capital magnet fund.
    Does that mean that former FHFA Director DeMarco was in 
violation of statute while he had temporarily suspended 
contributions to the funds?

A.20. No, as there are conditions under Section 1131 where the 
contributions are required to be suspended. I have not seen 
evidence that those conditions were not met at the time that 
Director DeMarco acted.

Q.21. You have justified eliminating the 30-year fixed-rate 
mortgage based on the presence of such a rate in the private 
market for jumbo loans.
    If there was no Government-backed 30-year fixed-rate 
mortgage, how much more would it cost for borrowers to purchase 
a home with a 30-year fixed-rate mortgage?

A.21. I have not called for eliminating the 30-year fixed-rate 
mortgage. Jumbo nonagency loan rates are currently below those 
for agency-backed loans.

Q.22. Who might no longer have access to a 30-year product?

A.22. I believe we can maintain access to the 30-year fixed-
rate mortgage and still have a well-capitalized, well-regulated 
mortgage finance system.

Q.23. In place of the 30-year fixed-rate mortgage, you have 
suggested that borrowers should instead move to adjustable rate 
mortgages because they would ``likely see a reduction in their 
mortgage rate'' during a recession. \4\ But of course, the 
opposite is also true, in a time of growth, borrowers could see 
their rates rise dramatically. And with home prices increasing 
at twice the rate of income growth, borrowers with adjustable 
rate mortgages could be in serious trouble.
---------------------------------------------------------------------------
     \4\ https://www.cato.org/blog/arms-automatic-stabilizers
---------------------------------------------------------------------------
    How does your proposal work in the current economic 
environment? Please be detailed in your answer.

A.23. Yes, any truly countercyclical policy is designed to 
reduce both busts and booms. And of course the interest rate 
risk inherent in long term fixed mortgages does not disappear 
in the securitization process. I have simply called for a more 
transparent accounting of the actual risks in our financial 
system so as to better manage those risks and minimize both the 
severity and frequency of future crises.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
                   FROM MARK ANTHONY CALABRIA

Q.1. In your testimony, you said that if confirmed you would 
look to do what the law requires you to do. Is it true that in 
an Urban Institute article in 2016, and elsewhere, you 
advocated for requiring the GSEs to hold the same capital as 
the largest banks, saying that the FHFA Director is REQUIRED to 
increase GSE capital to match that held by the largest banks as 
a result of the Temporary Payroll Tax Cut Continuation Act of 
2011?

A.1. I have not, to the best of my knowledge, claimed that FHFA 
is currently required to increase GSE capital to bank like 
levels. My Urban Institute article can be found here: https://
www.urban.org/policy-centers/housing-finance-policy-center/
projects/housing-finance-reform-incubator/mark-calabria-coming-
full-circle-mortgage-finance.

Q.2. While the GSEs are not permitted to build significant 
amounts of capital under the PSPAs, would you support requiring 
the GSEs to hold bank-like capital were the PSPAs not an 
obstacle?

A.2. Yes, ultimately I would recommend Congress give the 
regulator authorities over capital that mirror those of Section 
38 of the Federal Deposit Insurance Act.

Q.3. The GSEs are currently run as if they were required to 
hold between 2-2.5 percent capital. Even if the PSPAs are not 
amended, would you support requiring the GSEs to price mortgage 
loans as if they were required to hold bank-like capital so as 
to equalize the playing field between GSEs and banks?

A.3. To the extent that such a pricing change was consistent 
with and required by law, then yes.

Q.4. Do you believe the FHFA director currently has the ability 
to reduce product availability by removing the GSEs' ability to 
guarantee investor loans, loans for second homes, and cash-out 
refinancing?
    Would you support those product limitations?

A.4. I have not yet seen a legal analysis of this question. 
Before making any conclusions I would need to consult FHFA's 
legal staff and any other appropriate parties.

Q.5. Do you believe risk-based capital should be the binding 
limitation on the GSEs, or should a leverage ratio be binding?

A.5. Historically the leverage ratio has been the only binding 
capital constraint on the GSEs. The extent to which a risk-
based or leverage standard should bind would depend upon the 
particular parameters of those standards. So short answer is: 
It depends. That said, I believe that, even with a well-
constructed risk-based capital rule, given the limitations and 
historical performance of risk-based capital standards, there 
should continue to be a leverage ratio for all large federally 
chartered financial institutions, including the GSEs.

Q.6. Should each borrower have to pay the full cost of capital 
required to guarantee their mortgage based on the perceived 
riskiness of that mortgage?

A.6. No, not necessarily.

Q.7. We discussed in our meeting the need for congressional 
action on comprehensive housing finance reform.
    What actions can you take if confirmed as Director to 
encourage congressional action?

A.7. Foremost, the Director can help to create both a public 
and Congressional ``sense of urgency'' regarding the need for 
reform; second, the Director can submit proposals and 
suggestions to Congress for reform; third, the Director can 
help to assemble the various stakeholders and push for a reform 
consensus; and lastly, the Director can create, within the 
confines of the statute, regulatory changes that lay the ground 
work for reform, such as the single security platform.

Q.8. Even if this Congress were to adopt legislation supporting 
the principles you have outlined, the transition to that future 
state could take a number of years. No matter which 
congressional plan is adopted, nearly all market structures 
rely on a central utility that builds on the work done to date 
to create a common security, such as selling the GSEs' 
automatic underwriting system and data to the utility and 
giving the utility responsibility for master servicing. These 
actions would reduce the centrality of the GSEs to the housing 
finance system and begin some of the transition work that would 
take years and is necessary to a legislative solution to the 
GSEs. Furthermore it would be in your power as conservator to 
begin taking these actions to encourage congressional action on 
reform.
    Will you take these steps if confirmed as director?

A.8. Yes, I would, if confirmed, continue in the direction of 
creating common infrastructure, within the confines of the 
existing statutory framework.

Q.9. In 2017, the GSEs had a nearly 50 percent market share in 
multifamily loans. Do you think the GSEs do too much business 
in the multifamily sector and that the private sector should 
shoulder a greater loan of multifamily loans?

A.9. At a very general level, yes.

Q.10. The GSEs have exemptions from their multifamily purchase 
caps if they meet certain affordability requirements in their 
deals. Do you think that exemption is appropriate? Should it be 
narrowed?

A.10. I have not closely examined the current exemptions. I 
would plan to review such exemptions and make any changes 
deemed necessary. Such changes could include a narrow or a 
broadening, depending upon the circumstances.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHATZ
                   FROM MARK ANTHONY CALABRIA

Q.1. You have previously written that Federal policy puts too 
much focus on home ownership--that there is nothing wrong with 
renting. When we spoke recently about the housing challenges 
facing Hawaii, you mentioned that, in certain markets, reducing 
barriers to construction is not enough to spur affordable and 
workforce multifamily housing construction and more needs to be 
done.
    What steps would you take as Director to increase 
affordable and workforce housing supply?

A.1. I generally see the primary obstacles to increasing the 
supply of affordable and workforce housing being driven by 
lending, labor, and land constraints. For the constraints 
outside the direct purview of FHFA, such as land use, I would 
intend to be a public voice for addressing those constraints 
and bringing additional public attention to the need for 
additional affordable housing. Within the direct purview of 
FHFA, I would first improve the evaluation of the existing 
programs, such as the housing trust fund, the capital magnet 
fund and the FHLB's affordable housing fund. I believe it is 
critical that we maximize the impact of these programs. I would 
also focus on evaluating and reducing barriers to small 
mortgage lending. Often the hardest mortgages to make are those 
under $50,000, yet in some areas, these smaller units provide 
an important source of affordable housing. I would also 
research the unique obstacles faced in the mortgage market by 
micro-units and small homes. I have personally seen a large 
range of home designs on the Hawaiian Islands, especially some 
of the smaller units build to house lava evacuees on the Big 
Island. Given the unique housing needs on the Hawaiian Islands, 
I would strengthen the relationship between FHFA, the entities 
under its supervision and the Hawaiian Department of Hawaiian 
Home Lands.

Q.2. You have written that you do not think HMDA data 
collection should exist. \1\
---------------------------------------------------------------------------
     \1\ https://www.cato.org/blog/observations-mortgage-market-2011-
hmda-data
---------------------------------------------------------------------------
    Without HMDA, would anyone have a window into who was being 
served by the housing market--and who was not?

A.2. I remain concerned that advances in data analysis can 
enable the combining of HMDA data with publicly available data, 
such as court house mortgage and property records, so as to 
``de-mask'' individual loan applicants, threatening the privacy 
of those loan applicants and leaving them vulnerable to 
identity theft. There are a range of options to minimize these 
risks. One option would be to return to the earlier use of 
HMDA, where the individual applicant data was solely used for 
internal enforcement purposes and individual applicant data was 
not publicly released. In this instance regulators could still 
release to the public aggregates, even aggregates for 
individual financial institutions. I take very seriously 
threats to consumer privacy and would work diligently to best 
protect consumers from the potential for ``de-masking'' or 
other forms of hacking. This includes how regulators and 
supervised entities store confidential data.

Q.3. You have called for mortgage lending to return to the days 
of loans being originated and held on a bank's balance sheet. 
You acknowledge that, in the days before securitization, 
markets were fragmented and it was easier to get loans in some 
communities than others, yet you believe that local banks can 
better serve homebuyers who don't fit the traditional credit 
box. During your confirmation hearing, you stated that you 
would commit to collecting data on affordable housing and 
mortgage lending activities at the community level.
    How would you gather the data to evaluate whether your 
position on underserved borrowers is correct in an ``originate 
and hold'' model like the one you recommended in 2016?
    If we were to return to this model, would not it be in the 
Government's best interest to know how and where loans were 
being made?

A.3. I do believe it is critical for policymakers to receive 
timely data on the performance of the mortgage market. A number 
of existing data collections, such as HMDA, are collected 
whether the loan is securitized or held in portfolio. When HMDA 
was originally passed, in 1975, securitization was relatively 
small percentage of the mortgage market. I do believe it is 
possible for financial regulators to continue to collect 
mortgage data on loans held in portfolio, and to occasionally 
publish public aggregates of that data. Researchers at the 
financial regulators can also conduct statistical analysis of 
loan and applicant level data in a secure environment.
    To clarify my previous writings, I have not called for an 
end or ban to securitization but rather leveling the regulatory 
playing field between the ``originate-and-hold'' model and the 
``originate-and-sell'' model. Whether a mortgage is held as a 
whole loan or within a securitized pool, it ultimately rests of 
some institution's balance sheet. My objective is that 
whoever's balance sheet the loan ultimately rests on, that 
there be sufficient capital and an appropriate regulatory 
structure to manage that risk.

Q.4. In December, FHFA released a proposed rule outlining 
standards and processes for Fannie and Freddie to use in 
considering alternative credit scoring models.
    The rule would prohibit the GSEs from considering any 
credit score model developed by a company owned or affiliated 
with a ``consumer data providers'' such as the credit bureau. I 
have previously raised concerns with vertical integration and 
anticompetitive behavior if the GSEs were allowed to use a 
credit score from a company that is owned or affiliated with 
consumer data providers.
    What is your view of the proposed rule and your position on 
the importance of independent credit score model providers?

A.4. I have not had an opportunity to read the proposed rule. 
That said, I am generally familiar with the issue. I do 
appreciate your concerns about vertical integration, and also 
concerns that others have raised about relying too heavily on a 
single credit bureau. Given the central importance of the 
credit rating process in determining both access to and the 
pricing of mortgage credit, I plan to carefully review this 
issue more generally, and more specifically, the proposed rule 
before FHFA.

Q.5. The President's 2018 and 2019 budgets and rescission 
request eliminated funding for the Housing Trust Fund and 
Capital Magnet Fund.
    Did you advise the President or any other White House or 
Office of Management and Budget staff on this cut? What advice 
did you provide? Would you end the allocation to the funds as 
Director?

A.5. I was not involved in this particular budget issue. I take 
the independence of FHFA very seriously, including budgetary 
issues. Section 1131 of the Housing and Economic Recovery Act 
of 2008 establishes a mandatory process for determining 
contributions to both the Trust Fund and the Capital Magnet 
Fund, as well as determining any suspensions. It is my intent 
to comply fully with the mandatory process established in 
Section 1131, which I do not believe gives the Director the 
discretion to simply end contributions.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
        SENATOR CORTEZ MASTO FROM MARK ANTHONY CALABRIA

Q.1. If you are confirmed to this position, you will lead an 
accomplished staff at the Federal Housing Finance Agency. Their 
work has stabilized the housing market and our economy. Many 
families can still sell their homes to families who can afford 
to buy them.
    Name three things that the FHFA has done under Director Mel 
Watt that you support, will continue and even build on.

A.1. (1) I will continue the recruitment and expansion of 
career staff hires with a background in financial regulation; 
(2) I will continue and expand the research and economics 
function at FHFA; and (3) I will continue and expand the 
borrower education and financial literacy activities under 
FHFA.

Q.2. Name three things that you will change at the FHFA if you 
were to become its new director.

A.2. As I am not currently at FHFA, I will approach the agency 
with an open mind in terms of changes. With that in mind, my 
impression is that the agency may not always be perceived as a 
welcoming and supportive work-place. First, it is my objective 
for all employees at FHFA to feel free of any harassment or 
intimidation. Strengthening the core human resources function 
is a high priority. Second, it is critical for the Director to 
have a constant sense of the housing and mortgage markets, so I 
intend to create an economics and statistics function with a 
direct report to the Director. Third, I believe it is critical, 
given the affordability crisis facing so much of our Nation, 
that the Director become a vocal spokesperson for an affordable 
and vibrant national housing market.

Q.3. Why do you think the FHFA is not a ``world class 
regulator'' now? What changes will you implement to reach your 
vision of an FHFA that is a ``world class regulator''?

A.3. Foremost the FHFA lacks statutory authorities, such as 
that over capital, which other financial regulators possess. It 
is my intent to submit to Congress a proposed list of statutory 
changes that would better align FHFA with the regulatory 
authorities found at other financial regulators.

Q.4. Will you consider yourself an employee of the FHFA and 
comply with all employee guidance related to appropriate 
workplace behavior, expense reimbursement, etc.

A.4. Yes.

Q.5. What are your goals for the Office of Minority and Women 
Inclusion?

A.5. Foremost to make FHFA an inclusive and safe workplace. 
Second to see that qualified applicants from all backgrounds 
are considered for any open career positions and that FHFA, in 
its recruitment efforts, reach out to historically 
underrepresented communities.

Q.6. At your nomination hearing, we discussed ``sustainable 
home ownership.'' You stated that facilitating sustainable home 
ownership is ``looking at the factors that don't end up . . . 
so they don't just funnel through, that they get a mortgage, 
they're out of there in 6 months, a year, 2 years . . . you 
know if we want to put a number on it, I think the ability to 
sustain the mortgage without defaulting, obviously there are 
going to be life events that hit you, but if we're seeing these 
mortgages, and we saw a lot of early payment defaults during 
the crisis. If a mortgage goes bad in 3, 5, 6 months, there's 
something wrong with that, whether it's the lender, the 
borrower, or somebody.''
    In your opinion, what factors contribute to sustainable 
home ownership? Please note which elements you think must meet 
minimal guidelines such as a certain FICO score, a percent of 
downpayment/minimum loan-to-value ratio, a maximum debt-to-
income ratio, mortgage loan terms, quality housing counseling, 
etc., for single-family loans to qualify for purchase by Fannie 
Mae and Freddie Mac. If you think flexibility is warranted 
within some conditions, please note those conditions.

A.6. Recognizing the difficulties that have been experienced 
with implementation of the Qualified Mortgage rule, with its 
``hard lines'', I believe flexibility is warranted. That 
flexibility should avoid undue risk-laying, so that 
compensating differentials can be factored into underwriting 
decisions. Other than those explicitly required in statute, it 
is not my intent to draw hard lines around any one specific 
underwriting criteria. That said, FHFA has an important role in 
monitoring loan performance. Practices that result in excessive 
delinquencies would be examined, both from a prudential 
standpoint but also from a sustainable home ownership 
perspective.

Q.7. Do you believe the FHFA plays a role in facilitating 
sustainable home ownership? If so, what recommendations would 
you implement?

A.7. Yes, as unsustainable home ownership is a direct threat to 
the prudential operations of the regulated entities, as well as 
a threat to a resilient housing market. My first actions would 
be to conduct a series of stress-tests on the regulated 
entities. As I do not currently have access to confidential 
supervisory information regarding the regulated entities, I 
cannot yet know what specific reforms I might seek to 
implement.

Q.8. If confirmed, what are your plans to change the 
Government's role in the housing finance system?

A.8. The most important elements of our housing finance system 
in need of change, such as greater competition, can only be 
achieved by Congress. My most immediate plan is to work with 
Congress to build the necessary momentum for reform. The FHFA 
Director's ability to change the Government's role in housing 
finance is quite limited within the statutory confines of HERA 
and the GSE Charter Acts.

Q.9. You have previously argued that the 2008 Financial Crisis 
was exacerbated by homeowners buying homes with low 
downpayments, which you argued were unsuitable for sustainable 
home ownership. \1\ You suggest requiring downpayments of 5 
percent, 10 percent or higher. \2\ However, there is data that 
shows it would take nearly two decades for homebuyers to save 
up for a 20 percent downpayment. According to the U.S. Mortgage 
Insurers, it would 19 years for the average family to save up 
for a 20 percent downpayment. For the typical African American 
family, it would take 29 years, and for Latino families, it 
would take 24 years. \3\ A recent study indicated it would two-
thirds of millennials at least 20 years to save up for a 20 
percent downpayment on a median priced condo in their housing 
market. Downpayments well below 20 percent and even below 5 
percent may be required for many to access home ownership.
---------------------------------------------------------------------------
     \1\ Calabria, Mark A. ``A Fake Financial Fix'', Cato Institute. 
June 18, 2009. Available at: https://www.cato.org/publications/
commentary/fake-financial-fix.
     \2\ Calabria, Mark A. ``FHA Bailout Is Inevitable, But Taxpayer 
Pain Is Not'', Cato Institute. January 5, 2013. Available at: https://
www.cato.org/publications/commentary/fha-bailout-inevitable-taxpayer-
pain-not.
     \3\ U.S. Mortgage Insurers. ``Mortgage Insurance: Helping Nevada 
Families Get Into Homes'', U.S.M.I. Accessed February 13, 2019.
---------------------------------------------------------------------------
    Will you consider making any changes to minimum downpayment 
requirements for loans purchased by the Enterprises or the 
FHLBanks?

A.9. I have no immediate plans to change downpayment 
requirements. Any such future changes would have to take place 
in the context of FHFA's statutory authorities and be directly 
driven by statutory duties of the Director.

Q.10. If confirmed, will you use your ``bully pulpit'' to urge 
for higher downpayments? If so, what will you recommend?

A.10. FHFA supports borrower education. It would be my intent 
to make sure that borrowers are properly educated as to both 
the rewards and risks from home ownership. Borrowers should be 
free to make their own decisions, but FHFA does have a role in 
helping to make sure that those decisions are informed.

Q.11. In your 2012 op-ed, you asked why retirees should accept 
less of a return from their pension fund investments in 
mortgage-backed securities in order to help young people buy 
homes they can afford. \4\ If you are able to implement your 
vision for bigger downpayments, higher interest rates and 
higher FICO scores, it will take decades for the average 
Latino, African American, and millennial households to buy a 
home. Especially as more than 1 in 4 Latinos and 1 in 4 African 
Americans are credit invisible. This decade, 7 of 10 new 
households are households of color. Next decade, 9 of 10 new 
households are going to be Hispanic, African American, Native 
American, or Asian Pacific American.
---------------------------------------------------------------------------
     \4\ Calabria, Mark A. ``Taxpayers Shouldn't Have To Pay for 
Underwater Mortgages'', Cato Institute. February 6, 2012. Available at: 
https://www.cato.org/publications/commentary/taxpayers-shouldnt-have-
pay-underwater-mortgages.
---------------------------------------------------------------------------
    If you change requirements to make it more expensive to buy 
a home, who do you think will buy the homes of retirees when 
they want to downsize or move? Investors? Will such purchases 
be at reduced prices because of a lack of competition as young 
families will not be able to afford them?

A.11. Consistent with the Director's statutory duties and 
authorities, I have no interest in making home ownership more 
expensive, quite the opposite, I would work to make home 
ownership less expensive.

Q.12. Will you change policies to allow Fannie Mae and Freddie 
Mac to resume providing financing to investors to purchase 
homes in bulk through the REO program or something similar?

A.12. I have not examined the current policies in this area in 
sufficient detail. If such policies were to change, it would 
only be after a deliberative process.

Q.13. After the Financial Crisis, Nevada had the highest 
foreclosure rate in the country for nearly 5 years. We had more 
than 219,000 foreclosures. In Nevada, home values plummeted 
from $265,000 in January 2008 to $122,000 in December 2011--
that's a 54 percent drop. In early 2010, 77 percent of homes in 
Las Vegas held negative equity. In your writings, you refer to 
homeowners in harsh terms. \5\ In your writings, you were more 
sympathetic to investors who were going to receive less of a 
profit than expected than to homeowners experiencing job loss, 
foreclosure, and bankruptcy. \6\
---------------------------------------------------------------------------
     \5\ Calabria, Mark A. ``Ed DeMarco Deserves a Medal'', Cato 
Institute. March 13, 2012. Available at: https://www.cato.org/blog/ed-
demarco-deserves-medal.
     \6\ Ibid.
---------------------------------------------------------------------------
    Can you point to any of your publications where you 
criticized organizations or corporations that also defaulted on 
their mortgages? For example, did you publish anything about 
the Mortgage Bankers of America which borrowed $75 million in 
2007 to buy a 10-story headquarters building in Washington, DC? 
When MBA chose not to make its payments and sold that building 
for $41 million, they shorted its lenders. Donald Trump made 
four trips to bankruptcy court for his casinos leaving lenders 
in a lurch. Did you write about the Trump's corporation 
numerous bankruptcies?

A.13. https://www.cato.org/publications/commentary/big-banks-
you-aint-cheating-you-aint-trying;
    https://www.cato.org/publications/commentary/too-big-fail;
    https://www.cato.org/publications/commentary/letting-
lehman-fail-was-choice-it-was-right-one;
    https://www.cato.org/publications/commentary/fed-proposal-
end-bailouts-falls-short;
    https://www.cato.org/publications/commentary/are-some-
banks-still-too-big-jail;
    https://www.cato.org/publications/commentary/are-banks-too-
big-jail;
    https://www.cato.org/publications/commentary/get-mortgage-
industry-out-taxpayers-pockets;

Q.14. Numerous economic analysts have found that adjusting the 
loan terms for borrowers facing a hardship, such as extending 
the terms, lowering the interest rate, shared appreciation, 
principal reduction, etc., can be less costly to the investor 
than foreclosure especially when the forces driving defaults 
are macroeconomic as they were in Nevada and much of the 
Nation. Forcing a borrower from a home and then selling that 
home for one-third or half of the previous value, could be more 
costly than foreclosure mitigation for some families. Please 
explain how you differentiate a ``deserving borrower'' who 
should be offered a modification rather than one who should 
not? What economic evidence do you rely on to promote more 
foreclosures instead of mitigation?

A.14. I have supported a number of mitigation tools, for 
instance praising FHFA's forbearance efforts. In any particular 
case, the appropriate response will depend on the specific 
circumstances of the borrower. Accordingly, borrowers in 
default will need to be evaluated on their current 
circumstances. I would point to the following as a sample of 
research that has informed by views:

    ``Mortgage-Default Research and the Recent Foreclosure 
Crisis'', Paul Willen and Christopher L. Foote. 2018. Annual 
Review of Financial Economics 10: 59-100.

    ``Identifying the Effect of Securitization on Foreclosure 
and Modification Rates Using Early-Payment Defaults'', Paul 
Willen with Manuel Adelino and Kris Gerardi. 2014. Journal of 
Real Estate Finance and Economics 49(3): 352-378.

    ``Why Don't Lenders Renegotiate More Home Mortgages? 
Redefaults, Self-Cures and Securitizations'', Paul Willen, 
Manuel Adelino, and Kris Gerardi. 2013. Journal of Monetary 
Economics 60(7): 835-853.

    ``Do Borrower Rights Improve Borrower Outcomes? Evidence 
From the Foreclosure Process'', Paul Willen, Kris Gerardi, and 
Lauren Lambie-Hanson. 2013. Journal of Urban Economics 73(1): 
1-17.

    ``Reducing Foreclosures: No Easy Answers'', Paul Willen, 
Christopher Foote, Kristopher S. Gerardi, and Lorenz Goette. 
2009. NBER Macroeconomics Annual 2009 24: 89-138.

    ``Subprime Mortgages, Foreclosures, and Urban 
Neighborhoods'', Paul Willen, Kristopher S. Gerardi. 2009. 
Berkeley Electronic Journal of Economic Analysis and Policy 
9(3): 1-37.

    ``Making Sense of the Subprime Crisis'', Paul Willen, 
Kristopher S. Gerardi, Andreas Lehnert, and Shane Sherlund. 
2008. Brookings Papers on Economic Activity 39(2): 69-145.

    ``Just the Facts: An Initial Analysis of the Subprime 
Crisis'', Paul Willen, Christopher Foote, Kristopher S. 
Gerardi, and Lorenz Goette. 2008. Journal of Housing Economics 
17(4): 291-305.

    ``Negative Equity and Foreclosure: Theory and Evidence'', 
Paul Willen, Christopher Foote, and Kristopher S. Gerardi. 
2008. Journal of Urban Economics 64(2): 234-245.

Q.15. You have urged an end to judicial foreclosures despite 
numerous evidence of illegal foreclosure activities such as 
robo-signing, inadequate review of documents, lenders taking 
homes from which they lacked title, etc. \7\ How do you protect 
the rights of homeowners without a judicial foreclosure 
process?
---------------------------------------------------------------------------
     \7\ Calabria, Mark A. ``Are Courts Dragging Out the Housing 
Crisis?'' Cato Institute. March 8, 2012. Available at: https://
www.cato.org/blog/are-courts-dragging-out-housing-crisis.

A.15. I have raised questions as to the costs and benefits of 
judicial versus administrative foreclosures. No foreclose 
system is without trade-offs. My writings have attempted to 
raise these issues so that policy makers can make more informed 
judgements regarding these unavoidable trade-offs.
    As I state in your citation: ``Now, I am a big believer in 
respecting contracts, and the existing legal environment is 
part of the contract, so I'm not advocating that States change 
their foreclosure process for existing loans. For loans not yet 
made, however, there appears to me to be the case for at least 
examining the merits of judicial foreclosure (or even better 
let borrowers and lenders freely contract to choose their own 
rules).'' This is not a call for ending judicial foreclosure 
but rather a call for examining its merits. I believe all 
public policies should be subject to regular examination.

Q.16. In 2011, you wrote, ``the most important driver of 
housing demand is income, which is driven by jobs.'' \8\ Yet, 
the gap between wages and housing costs remain too high. The 
cost to build a home--even in communities with few zoning 
restrictions--can be higher than a family can afford. The 
enactment of the affordable housing goals corresponded with a 
substantial increase in funding to low- and moderate-income 
homeowners and multifamily properties.
---------------------------------------------------------------------------
     \8\ Calabria, Mark A. ``Winners, Losers and Government'', Cato 
Institute. June 2, 2011. Available at: https://www.cato.org/
publications/commentary/winners-losers-government.
---------------------------------------------------------------------------
    If you are confirmed to lead the Federal Housing Finance 
Agency, what will you do to help the more than 12 million very 
low-income families struggling to find a safe home they can 
afford?

A.16. Please see my response to Senator Brian Schatz.

Q.17. Did you advise the President on his budget proposals to 
eliminate allocations to the Capital Magnet Fund and Housing 
Trust Fund in FY2018 and FY2019? Do you agree with the 
elimination of those funds that were included in the 
President's budget?

A.17. Please see my response to Senator Brian Schatz.

Q.18. If you are confirmed to lead FHFA, under what 
circumstances could you defund the Housing Trust Fund (HTF) and 
the Capital Magnet Fund (CMF)?

A.18. Please see my response to Senator Brian Schatz.

Q.19. Will you support and enforce the duty-to-serve 
requirements for affordable housing preservation, manufactured 
housing and rural housing as they are currently? Will you seek 
any changes to the DTS or HTF or CMF in the existing Fannie and 
Freddie system? If so, what changes will you pursue? Would you 
advice changes to the DTS and the Funds in a new approach?

A.19. I will carry out the statue as written. Any potential 
changes would only be undertaken following careful review and 
in accordance with all appropriate administrative processes.

Q.20. The GSEs' affordable housing goals changed institutional 
behavior; the GSEs offer more flexible lending programs; 
developed partnerships with other agencies and mortgage 
insurers; funded employer-assisted housing; engaged in special 
efforts in rural areas, on tribal lands, and for elderly 
borrowers; made investments in low-income rental housing and 
State housing finance agency bonds; and have made millions in 
loan purchases that qualify for the affordable housing goals.
    Today, the Enterprises have significant staff dedicated to 
affordable housing, they have affordable mortgage products and 
pilot programs (e.g., Home Ready and Home Possible loan 
products), they conduct significant market research and do 
outreach to key industry and other stakeholders in LMI and 
minority neighborhoods in order to facilitate home ownership 
and mortgage purchases in those communities. This work is 
driven by the affordable housing goals.
    Do you agree that it is important for FHFA to continue to 
provide assistance to and encourage the GSEs to facilitate 
financing for affordable housing?

A.20. Yes.

Q.21. Do you seek any changes to the number of staff focused on 
affordable housing at the Enterprises; do you believe today's 
level is too low, too high or just about right? Do you seek any 
changes in the areas of focus?

A.21. I do not currently have an opinion on the appropriate 
staffing levels. I do, however, see as the Director's 
responsibility to ensure that staffing levels in all of FHFA's 
functions are appropriate.

Q.22. Multifamily purchases by the GSEs are currently capped at 
$35 billion each, $70 billion in total. The GSEs combined can 
buy no more than $70 in debt backed by multifamily (>5 units) 
properties. Units that meet certain ``affordable'' requirements 
are exempt from these caps. This ``excluded category'' section 
of the market has been where most of the multifamily growth has 
been recently, with 2017 seeing about $70 billion in lending in 
that space alone, in addition to the $70 billion that was 
covered by the caps for a total of $140 billion in lending.
    Will you consider raising the multifamily mortgage cap that 
has been set at $35 billion per enterprise? Would you consider 
encouraging more rental housing within or outside of that cap 
for families and singles earning low to moderate wages?

A.22. Consistent with the statute, I would consider revisiting 
the current multifamily portfolio caps and making any 
appropriate changes. Within any appropriate changes would be an 
examination of current income targeting, as I do believe it is 
necessary that we incentivize recourses to be directed at those 
most in need.

Q.23. Nationwide, nearly 20 million families live in 
manufactured homes; about 7 percent of the housing stock. The 
quality of the homes is good but at times, the financing can be 
predatory. Just recently, Fannie Mae and Freddie Mac were 
assigned a duty-to-serve manufactured homeowners. They are in 
the early stages of meeting the financing needs of manufactured 
homeowners. In Nevada, Fannie Mae estimates it owns 
approximately 3,500 loans with a little under 1,000 purchased 
last year.
    What changes would you make to the GSEs' requirements to 
serve people who buy manufactured homes either with mortgages 
or with chattel loans?

A.23. During my tenure at HUD, I oversaw HUD's regulation of 
manufactured housing. I recognize there are a number of 
challenges facing this segment of the market, and commit to 
examining those challenges. Any changes would have to follow 
from that careful examination.

Q.24. Fannie Mae and Freddie Mac finance manufactured housing 
communities. In Nevada, in 2018, they purchased 62 loans of 
manufactured housing investors. What changes will you implement 
to ensure that those loans facilitate community ownership for 
owners who provide robust tenant protections? Are there things 
Fannie and Freddie can do to ensure that the manufactured home 
communities they finance do not have abusive practices such as 
high lot rents and fines, unfair evictions, limitations on 
tenant associations, etc.?

A.24. I strongly share the concern that the GSEs not facilitate 
abusive practices. It would be my intention to review the GSEs' 
activities in this area, and if warranted, pursue appropriate 
changes to their policies that would better protect borrowers 
and tenants.

Q.25. Most of the banks and credit unions in Nevada are small. 
They do not necessarily have the deposits that enable them to 
hold mortgage loans on their balance sheets. Nor do they 
necessarily want to bear the credit and interest rate risk for 
each loan they make. Securitization--selling loans on the 
secondary market in a responsible way--can lower their risk and 
free up cash for more loans.
    Recently, the FHFA issued a proposal to modify the Federal 
Home Loan Banks' affordable housing goals.
    Do you support the affordable housing and community 
development mission of the Federal Home Loan Banks (FHLBs)?

A.25. Yes.

Q.26. Do you support the FHLB affordable housing goals as 
recently proposed? If not, what changes would you make?

A.26. I have not had an opportunity to read the recent 
proposal.

Q.27. Do you support the recently modified FHLB Affordable 
Housing Program rule? If not, what changes would you make?

A.27. I have not had an opportunity to read the recently 
modified rule.

Q.28. What will you focus on to ensure the FHLBs meet their 
economic development mission?

A.28. Increased data collection and evaluation of those 
activities to ensure they produce the intended results.

Q.29. In 2017, Latinos received 19 percent of home loans, 
compared with 76 percent of home loans made to Whites. Latino 
home ownership in Nevada, at a rate of 42.8 percent, lags-
behind the State's overall home ownership rate of 54.9 percent.
    In your role as Director of the FHFA, what is your plan to 
oversee the Enterprises' programs and initiatives to facilitate 
home lending to Latinos and communities of color?

A.29. First to ensure that the enterprises are fully compliant 
with our Nation's fair housing laws; second to ensure that 
existing programs and initiatives are focused on sustainable 
home ownership; and third to engage in extensive program 
evaluation to ensure that those programs and initiatives are 
actually achieving the goal of sustainable home ownership. 
Given the dramatic harm done to Latinos and communities of 
color during the housing bust, it is my intention to avoid a 
repeat of that crisis.

Q.30. Do you believe that the Government should play a role in 
ensuring that communities of color and low- and moderate-income 
buyers have access to an affordable home loan? What actions do 
you think the FHLBanks, Fannie, and Freddie should do 
differently?

A.30. Yes, foremost I would research, examine, and evaluate 
current activities to make sure that the regulated entities' 
are currently acting in a manner consistent with that 
objective. To the degree that the regulated entities are not, I 
would seek changes, consistent with the statutory framework, to 
address those shortcomings. To the extent that such an 
examination suggests new actions, those would be evaluated and 
implemented, to the extent they are consistent with the 
statutory framework.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR JONES
                   FROM MARK ANTHONY CALABRIA

Q.1. Dr. Calabria, over 40 percent of Alabama's residents are 
rural, which include a large portion of our low and moderate 
income homebuyers and our homebuyers of color. These rural 
communities overwhelmingly have a financing model that involves 
their community bank or credit union, and Fannie Mae and 
Freddie Mac are critical to providing a secondary market for 
these mortgages.
    Should you consider actions to ``shrink the footprint'' of 
the Fannie Mae and Freddie Mac (the Enterprises), will you 
commit to maintain a pathway that preserves and expands access 
to traditional mortgage financing in rural areas?

A.1. Yes.

Q.2. Dr. Calabria, in a 2011 blog post about the racial home 
ownership gap, you wrote that we should ``abandon efforts to 
socially engineer specific home ownership rates.''
    Specifically what policies were you referring to in this 
reference? Do you maintain those views today?

A.2. The long term reduction in underwriting standards, as well 
as attempts to target a specific home ownership number. I 
believe our objective should be sustainable home ownership and 
we should not target a specific home ownership number.

Q.3. Do you believe the Federal Government's discriminatory 
policies led to the creation of a racial home ownership gap?'

A.3. Yes.

Q.4. Do you believe the Federal Government has a role in 
addressing that gap today?

A.4. Yes.

Q.5. Specifically, what can you do as FHFA Director to address 
this gap?

A.5. Ensure that the GSEs' offer products that create 
sustainable home ownership.

Q.6. If confirmed, will you commit to maintain policies that 
facilitate traditional mortgage credit to the underserved 
market of minority borrowers, across income ranges?

A.6. Yes.

Q.7. Do you believe FHFA, as a regulator of the Enterprises, 
has a role in the implementation and enforcement Federal fair 
housing laws, including the Fair Housing Act, the Equal Credit 
Opportunity Act, and the Truth-In-Lending Act?

A.7. Yes, working in concert with the primary regulators of 
these statues.

Q.8. Dr. Calabria, previously you have written that you believe 
Congress should ``repeal outright'' the Community Reinvestment 
Act (CRA).
    Do you continue to believe that Congress should repeal the 
CRA?

A.8. I believe appropriate safeguards should be put in place to 
maintain an adequate regulatory framework around CRA lending.

Q.9. If not, can you describe what evidence changed your view?

A.9. There is currently an on-going regulatory effort to 
strengthen some of the problems in CRA. Before any 
consideration of statutory changes, I believe we should wait 
for outcomes of that regulatory process.

Q.10. Do you believe the Federal Government has any role to 
compel financial institutions to serve the communities in which 
they are located, including low and moderate income 
communities?

A.10. Yes.

Q.11. As a member of the Financial Stability Oversight Counsel, 
the FHFA Director plays a critical role in the overall 
stability of our financial system. Given your comments in 
hearing about the role the CRA played in the financial crisis, 
do you currently believe that the CRA in any way poses a 
systemic risk to financial stability?

A.11. I believe all lending poses some degree of risk and 
should be regulated and monitored appropriately.

Q.12. Dr. Calabria, previously you have written that you 
believe that the downpayment and credit score requirements for 
the Enterprises should be raised dramatically. In Alabama, the 
median income is $46,000, and the median income for African 
American families is roughly $30,000. The current median 
listing price for a home in Alabama is just over $200,000. For 
that median African American family, if they were saving 10 
percent of their monthly income, every month, it would take 
them nearly 7 years to save for a 10 percent downpayment.
    What impact do you believe raising downpayment requirements 
for the GSEs would have on first time homebuyers? What do you 
believe the impact would be on overall home ownership rates, 
including specifically on home ownership rates among minority 
communities?

A.12. I believe we can appropriately manage underwriting 
standards in such a manner that would improve safety and 
soundness without any loss in home ownership rates.

Q.13. Statewide in Alabama, average credit scores are 680. In 
Birmingham and in Montgomery the averages are below 630. In a 
2015 blog post, you proposed minimum FICO scores of 700.
    Mortgages to many of these borrowers are currently eligible 
for purchase by the Enterprises--but presumably would not be 
under your proposals.

A.13. I believe the Enterprises should be focused on 
sustainable home ownership.

Q.14. What impact do you believe higher credit score 
requirements would have on home ownership rates in communities 
with large number of residents with below average or nonprime 
credit scores?

A.14. I believe we can appropriately manage underwriting 
standards in such a manner that would improve safety and 
soundness without any loss in home ownership rates.

Q.15. As you may know, in the years following the financial 
crisis, there have been no people of color or women serving as 
CEOs of Fannie Mae or Freddie Mac. In addition, currently, 
there are no people of color serving as President of a Federal 
Home Loan Bank.
    Dr. Calabria, do you believe it is important for there to 
be diversity among Federal financial regulators, their senior 
staff, and in the case of FHFA, among senior leadership at 
Fannie Mae, Freddie Mac, and the Federal Home Loan Banks? If 
so, why?

A.15. Yes, I have written, for instance, about a lack of 
diversity at the Federal Reserve.

Q.16. If confirmed as FHFA Director, will you commit to working 
with Congress to find ways to increase diversity among FHFA 
leadership and senior staff, as well as leadership at the 
Enterprises (including the Federal Home Loan Banks)?

A.16. Yes.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                   FROM MARK ANTHONY CALABRIA

Q.1. The 2008 housing crisis hit Arizona particularly hard, but 
the impact was not uniformly felt because Fannie Mae and 
Freddie Mac's multifamily housing programs included taxpayer 
protection tenets that appropriately distributed risk. 
Following their move to conservatorship, these GSEs serve an 
essential role in the multifamily housing market and have 
delivered $34 billion in net profits. As Congress considers 
housing finance reform, what lessons can be applied from the 
success of multifamily housing programs?

A.1. The primary reason the GSE multifamily portfolios 
performed so much better than the single family, despite 
similar declines in the value of multifamily properties, was 
the much more conservative nature of the mortgage underwriting 
applied in the multifamily space. The primary lesson here is 
that strong, sensible underwriting is critical.

Q.2. In 2013, in testimony before the House Financial Services 
Committee, you stated that a 2-year path to receivership for 
Fannie Mae and Freddie Mac would be ``more than sufficient time 
to prepare.'' Does the Housing and Economic Recovery Act of 
2008, which created the position you now seek, give the FHFA 
Director authority to move GSEs into receivership--in 2 years 
or otherwise--without Congressional approval?

A.2. The receivership provisions, contained in Section 1145 of 
HERA, do not require Congressional approval for either a 
mandatory or discretionary invoking of receivership. These 
provisions are structured to mirror the receivership provisions 
of the Federal Deposit Insurance Act (Sections 11 and 13), 
which also does not contain a requirement for Congressional 
approval. Relatedly, Title II of Dodd-Frank establishes a 
similar resolution mechanism that also does not require 
Congressional approval. That being said, I intend to consult 
closely with Congress on any reforms of the GSEs.

Q.3. Action in the face of the 2008 housing crisis was 
necessary to prevent further loss, foreclosure, and hardship 
for Arizona families and small businesses. If confirmed, and 
should a housing crisis occur under your tenure, what if any 
actions as FHFA Director would you consider taking to stabilize 
the market? Are there any actions you would definitively rule 
out, irrespective of economic circumstance, despite having the 
authority to do so? If so, why?

A.3. I believe FHFA has a responsibility to work to stabilize 
the housing market. I would consider any options that are 
within the authorities of FHFA and would not rule out any 
specific actions that are within the authorities of FHFA. For 
instance, I believe the broad based forbearance given to GSEs' 
borrowers during the last crisis was appropriate given the 
particular facts and circumstances.
              Additional Material Supplied for the Record
                  LETTERS SUBMITTED BY CHAIRMAN CRAPO
                  
                  
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