Transcripts For CSPAN Seminar Focuses On Public Policy And The Mortgage Market 20160821

Change. I think the time is right to reexamine this. I think it can enhance competition in the market. Make the market open to more players. I think you can reduce financial risk for a lot of financial institutions. Now we have cfp be rules in place and the market is maturing i think its time to reengage in this discussion. Let me say one other thing that is not actually about compensation but i think is connected. Another thing that needs to be picked up is to pick up a continued to work on standardizing Mortgage Servicing data. Some of you may recall back in 2010 we started uniform Mortgage Data Program to standardize data. Whether it was appraisals, loan arbitration, so forth. On that agenda was Mortgage Servicing data. We think about these disclosures and we think about the credit investor, where this is all going, its important to pick up that difficult challenge of standardizing Mortgage Servicing data so this would help the market in Mortgage Servicing be more transparent and easier to price. Faith thank you. We will touch base on some of this in the future. It might be interesting to hear your perspective if the time is right to address servicing compensation. Thank you and welcome to all of you. On august 4, the bureau published a modest 900 pages for your Summer Reading enjoyment. [laughter] it are mens the 2013 rule and it includes really quite a lot of clarification a lot of clarifications and cleanups. Many things that the Mortgage Services themselves came to the bureau and asked if we would correct. It also introduces some new requirements that were extremely important to consumer advocates. Things like successors in interest, transfers of servicing, borrowers and bankruptcy. It is effective in multiple portions of the rule in 12 months from publication in the federal register. If that happens this month, it would be august of 2017. The bankruptcy and successes interest portions will be affected in 18 months, which would be february 2018. In what can only be attributed to laurie goodmans sense of humor, i now have nine minutes to describe 900 pages. [laughter] buchalter seatbelts, here we go. Seatlbelts, here we go. Let me talk about some of the changes to servicers specifically at the bureau for the 2013 rules. These are clarifications that services can indeed enter into shortterm repayment plans without collecting a complete application documentation for consumers. More flexibility to stop collecting documents for a particular mitigation option when it is evident the borrower is not a candidate for the option. Clarification on how servicers select a reasonable deadline for borrowers to send in the rest of the documents for their loss mitigation application. Servicers and advocates interestingly enough say can we just you 30 days . We have to have all of these time frames that we have to try to calculate. We said sure, sort of. Yes, you can do 30 days but you have to take certain Consumer Protection time frames into consideration. Clarification on the use of acceleration to address nonmonetary defaults. The current rule doesnt really have a way to foreclose if there is a nonmonetary default. We clarified that. Generally services will no longer be required to send periodic statements on the loan. Are you going to continue to send periodic statements for years and years and years to a borrower it was annoyed by that practice . Obviously that is a no. Exemption from the 120 day foreclosure moratorium when a servicer is joining the action of either a senior or a junior lien holder. And finally something as simple as can we please put a low number on the required insurance form . These are not all of the servicer request changes, but they are sort of indicative of the kind of things that are simple, practical changes that we were able to make. However there are certain aspects of the rules that are more challenging and certainly more important in terms of adding new Consumer Protections. One of those, which probably engendered the most Public Comment in the rule was successors in interest. Im sure you all know this but to be clear it is someone who has acquired an ownership interest in a property but is not on the mortgage so they dont have a direct relationship with the servicer of the loan. They need information in order to protect the asset that they own. The rule basically has three parts for successors in interest. The first is a definition of who a successor is. We have created a definition that is basically consistent with the scope of the sale protections and barn st. Germain. You would also have a successor in interest protection in the servicing rule. That includes individuals that have acquired property by death of a joint tenant, death of a relative of the borrower, transfer of ownership to a spouse or children that would require death, legal divorce or separation, and then moving ownership into a trust where the borrower is the beneficiary of the trust. First is the definition. The next part of the rule basically says it outlines requirements for communicating with potential successors. I raise my hand, i say im a successor, what do you do . We had significant feedback from the Advocacy Community that servicers did not want to talk to successors. People were having a very difficult time communicating. The world outlines very specific requirements for potential successor contact. The servicer is required to promptly respond with a list of the type of documents that successor would need to prove they are the successor. For example, if im recently widowed and i am entitled to the property but not on the note, what would this document be . It would be as simple as a death certificate and a copy of the deed showing me as the owner of the property. One would think that is simple but it has been made apparently fairly complicated. Identifying those documents that are most common, providing them timely, and when you receive the documents from the potential successor reviewing them and responding with a decision timely are all key elements of the rule. Finally, the rule gives borrower status to confirmed successors, which means the borrower is entitled to all the protections under most of the servicing rules. They are entitled to get periodic statements. Escrow notices, insurance notices. They are entitled to loss mitigation protections under the rule. What does the rule not do . We have a lot of comment as i mentioned on this rule. Services were extreme the concerned about their liability and responsibility. It does not create a private right of action for unconfirmed successors. It does not require servicers to proactively go out looking for successors. When they find out someone has died. If a successor contact them, they have an obligation to work with the individual but they dont have to start doing lexisnexis searches to find them. It does not require servicers to offer any particular loss mitigation option to a successor in interest that has not assumed the loan. They dont have to. However they cannot condition and evaluation for loss mitigation on an assumption. Finally, it does not require servicers to provide periodic statements for any of the other notices required under the rule to more than one individual on the loan. If there still is a remaining borrower, even if you have one or two or three successors, you can continue communicating with your existing borrower. You dont have to send multiple notices to multiple people. Borrowers in bankruptcy. Basically certain borrowers in bankruptcy who intend to retain homeownership will be entitled to receive a monthly periodic statement, or a coupon book or whatever that has specifically been modified for the bankruptcy. They also must receive written Early Intervention notices, but they will continue to be exempt from live contact in Early Intervention. Finally the rule is provided sample notices that were extensively consumer tested, specifically for bankruptcy so that servicers dont have to go out and try to figure out how to create their own periodic statement notice. Servicing transfers. The rule says that a transferee servicer must step into the shoes of the transferer so that servicing transfers do not adversely impact consumers. It is really straightforward. The servicer has no say over whether their loan gets transferred and the transferee and the transferer have to figure it out to the consumer is not harmed in this transaction. That said, we do understand the art limited exceptions. Especially when loss mitigation is in play. It is very difficult for a transferee servicer, the new servicer to be able to respond timely because of the timing differential and getting all of this body of information from place to place. We have carved out a couple of specific exceptions. For example, if a loss mitigation application is received by a transfer or servicer within five days of the transfer date, that service or may not have the opportunity to review that and send the fiveday knowledge with notice and tell that borrower but they need to complete the application. The transferee will be required to do that but they will have days after the transfer to make that happened. They get extra time. Same thing is true in the case of a completed application. If a borrower has submitted an application within a short time prior to the transfer and the transfer servicer has not had the opportunity to review it and make a decision on the application, the transferee is required to do so. Same application. Dont ask me for more documents. Dont make me recreate everything. Look at my application and make a decision. They will have 30 days after the transfer to do that. They should have plenty of time in order to make those things happen. There are a couple of other nuances about appeals and some other things and there are also protections for the borrower because the time frames are being pushed out. Essentially that is the transfer of servicing rule. There are a number of changes in the loss mitigation space. Many of those changes were driven specifically by servicers themselves. They gave us more flexibility here and there. There are a couple i want to point out. The first one and probably the most important is the end of the one bite rule. In our current servicing rules all of the protections and loss mitigation only apply to a borrower one time during the entire life of the loan. A borrower has an adverse event and they get a loan modification for example, four years later some other terrible thing happens to them, they dont get any protections of the rule in the current rules. This will change on the new effective date. A borrower will be entitled to the protections of the rule more than once in the life of the loan if the borrower has submitted an application, a complete application, regardless of whether they did or did not get the mod. They reperform under that loan. Preperformance could be a permanent modification that brings the loan current. It could be a check from aunt mary. It doesnt matter. If the borrower manages to reinstate the loan, in the future if they have another adverse event, they can reapply. Also there is a new requirement for a written notice of complete application. A borrower submits the documents and there is no requirement to tell them they are done. Yes, we have your stuff. Under the new rule there will be that requirement. Finally the rule defines delinquency with respect to the servicing provisions of reg x and reg z. To begin a pmi. That doesnt mean the can of other definitions of delete quincy. He cant say you are not the liquid until after the 15 day grace period, or dont think my customers are deliquent until after 30 days. When you send the 36 day notice . When you send the 45 day notice . How do you cap 120 days of delinquency before you can take legal action. Those are all based of the new definitions in the rule which is basically the definition everyone is using anyway so it should not be too complicated. Lots of other things i can talk about. How did i do . Faith how long did it take you to either read or develop those pages . Ms. Maggiono we published in the role of november 2014. Faith michael, we are excited to hear from you and your new role. Let me just comment on three things. One is the loss mitigation standards issue now that the crisis era and programs and making housing and Homes Affordable programs for all expiring. I would like to really support an elaborate on some of eds comments. And close with floating an idea for a special servicer. With respect to loss mitigation standards, i have always been of the opinion that whoever owns or guarantees or mortgage should not determine what borrowers options are when they become troubled and distressed. I have always supported the notion of National Loss litigation standards. While congress is not opined on that, nor the administration directly, the Housing Finance reform works through johnson credo. We supported and the Senate Banking Committee Majority that voted that bill out of Committee Really agreed there ought to be National Loss mitigation standards and included a provision for joint rulemaking between with the regulator would be, the successors to fannie and freddie and cfpb. At the same time back in 2013, in the annual report of the Financial Stability oversight council, it too calls for National Loss mitigation standards. As we contemplate the life after the report from treasury and fha, a little more detailed guidance by cfpb they came out in the last few days were certainly all looking forward to the release of the mba 1 mod report and continued engagement around the development of consensus standards. I keep really hoping for the adoption of National Standards so that all borrowers are on a level playing field. With respect to Compensation Reform, again going back to the fsoc report, we recognize the need to align incentives with the escalating costs of servicing nonperforming loans. And in that report and 2013 called for efforts to implement Compensation Structures that align incentives of Mortgage Servicing with those of borrowers and other participants in the mortgage market. We tried but unsuccessfully to actually it into johnson crepo and that joint rulemaking for loss mitigation standards. Also Compensation Reform. I continue to believe that its very important to move on that issue. Ed made the case that we are no longer in a gsc wanted to percent guarantee, but in a world of credit Risk Transfer where a interests with those who are taking credit risks with Mortgage Servicing, particularly of nonperforming loans becomes increasingly important. I just want to point out that in a recent securitization of j. P. Morgan chase earlier this year the securitization is the first that has gone to market under what is called the fdic safe harbor rule. The safe harbor rule is about if you meet the requirements of fdic that when into effect in 2010, the collateral would be protected that supports the bonds that are bought by private investors in the event the issuer goes bankrupt. In addition to that safe harbor, the fdic rules require an alignment of interests in the servicing issue. It requires service to compensation to include incentives for servicing and loss mitigation action. This deal that went to market that is out there really has adopted a Compensation Structure in a fee Service Structure similar to the options that ed spoke about and put up in the 2011 white paper that is really interesting and something we all should be both interested in an following. And set of that flat 25 basis point Servicing Fee io strip, it is a Compensation Structure in three parts. It establishes a base Servicing Fee for performing loans of 19 a month per loan. Incentives, there are monetary incentives to the servicer when that loan for those loans go into delinquency. 200 a loan per month for loans that are 30 to 119 days delinquent but not in foreclosure or reo. It escalates to 252 per loan per month if they are 120 days or more delinquent. And there is a series of onetime event driven fees, 1500 for a completed short sale to the servicer, 500 for a completed deed in lieu of foreclosure. 1000 for a completed reo sale. There are actually now examples of how a menu Service Compensation structure and a multitiered securitization with a number of taking mortgage credit risk out in the marketplace that we should be following. That is the second thing. Let me just close by mentioning way back when i joined treasury and we sell the escalation and knew about rising costs, we didnt know the cost of servicing performing loans or servicing performing loans have gone up significantly as well. A few of us a treasury, and this was purely at the staff level, never one of the chain of command, were thinking about whether or not as we saw the reputation risk, as we saw big banks beginning to kind of be hesitant at putting overlays on not wanting to take that next chance of originating loans with a higher probability likelihood of going into the lein whether or not those lenders might be interested in getting together and creating a nonprofit cooperatively owned special servicer that would take the responsibility of servicing these delinquent loans on a rulesbasedm best track this base where you have a situation in a Service World where that coop would not be having to earn private equity rates of return, but would really be able to apply best practices, loss mitigation standards in the best interest maximizing npv where maybe that would give banks more comfort in moving of that risk curve where you have credit qualified borrowers but with a higher chance of default. I am not going to go into any elaboration on that but i would like to put it out there. Faith thank you, michael. I think we have seen such a shift in the banks withdrawing from the msr market that it will be interesting to further discuss institutions in both cycles of the market and hold that thought. Laurie . Thank you very much. Before picking up some of the things, i would like to incite about three sweeping structural changes that have affected the industry. The first is the rise of the nonbank servicers. The numbers are really start. Nonbank servicers comprise 34 of the servicing assets of the top 50 institutions in the Second Quarter of 2016. This is up 3 from the end of 2015. It is up 28 from 2010. You can see the rapid shift between the bank and the nonbank servicers, with the nonbank servicers gaining market share. The second trend is the d consolidation of the industry. The top five servicers comprise 37 of standings in 2001. Erosive 59 by 2009. It is now down to 37 . One of the top five of the nonbank servicers, nation star, in five of the top 10. There has been an incredible deconsolidation of the industry. Approximately 1. 6 trillion in the 10 billion in family servicing is sub service. This is up from 1. 15 trillion dollars in 2014 that is two years ago. This is a natural outgrowth of the deconsolidation of the industry. Some servicers want to outsource everything, someone to outsource only delinquent loans. You should expect more sub service or activity. I think there is going to be a number of things that will receive attention in the years ahead. My talked about loss mitigation standards and servicing Compensation Reform and i would like the opportunity to pile on. At the potential need for greater regulation of nonbank servicing. Let me start with any for servicing Compensation Reform. This is actually, thanks to the mba, we have seen a performing them is 181 a year. The cost of servicing a nonperforming loan is 2386 per annum. The Institution Service all loans at the same price now. That price is 25 basis points. Your average loan size is about 215,000. 25 basis point is 538 per year. You are losing a ton of money on nonperforming loans and making a ton of money on the performing loan. As ed pointed out, this fee has, been unchanged since the mid1980s ignoring the fact the average loan size has grown considerably and technological advances have made it less costly to service performing loans. You clearly have a cost structure that is misaligned. The msr asset is very volatile. Clearly producing in size would decrease in volatility. This is particularly important in a world in which not banks have grown in importance. When we first talked about this in 2011 we were in a world where things for very important. We were concerned about the new rules that would create a problem for the banks. That is if msr assets are under 10 of capital, the capital charges 250 . Over 10 , it is a dollar for dollar per reduction. A huge escalation from the old level. At this point however the number of banks with significant servicing assets over 10 is very low. The real problem is for the nonbanks. You probably cant see this all that well. Basically what this shows you is that msr assets are very small percentage of total bank assets. They are a very large percentage of nonbank assets. Nonbanks are not better capitalized than the bank counterparts. The volatile msr assets we were worried about in 2011 in relation to the banks are really a far more major problem in the nonbanks at this point in time. It is much more difficult to say the Current System does not work and it is actually come up with something better. There are two possibilities that were discussed in 2011. The reserve account and the more fundamental change which was the feeforservice approach. In todays environment neither of these is a slamdunk. The first is an easier change. The second fits the growing nonbank servicing model much better. Under the Current System, our concern is that servicers may skimp on nonperforming loan servicing. If we moved to a feeforservice basis with Compensation Reform, will services be disincentive to make a proactive call when they can collect higher fees if they wait . Another set of issues, certainly a feeforservice approach would facilitate the transfer of delinquent loans at 120 days. However the problem if you modify early, if we transfer the borrower will likely be in the middle of a modification. Laurie talked about trying to transfer a loan when youre in the middle of a loss mitigation process. When you think about mandatory service and transfer, as what mike was talking about, that is very problematic. Finally we have to think about servicing and its impact on asset to credit. If we were to perform servicing through either mechanism, the reserve account with a feeforservice basis, it would introduce riskbased pricing into the servicing equation. And do we want to offset this. That is sort of the set of issues i think about when it think about servicing Compensation Reform, which i supported in 2011 and continue to do so. There is no easy solution. The second topic i would like to address is the need for greater regulation of nonbank servicers. Right now the cfp be irresponsible as it relates to the consumer experience. The nonbanks have no federal regulator whatsoever. The gsc each other own capital liquidity requirements that are much lighter than Bank Capital Requirements posed by the bank regulators. The prudential regulations in the current environment is essentially provided by the warehouse lenders eventual the lines of business when they feel the entities are too risky and drive them out of business. Ed made the point that msrs have essential exposure to risk and nonbanks servicers, as we saw in the slide, represent a considerable amount of their total assets. The volatility of these assets constrained income cash flow and liquidity during periods of or rising default rates. If we do servicing Compensation Reform and end up with a feeforservice model, then we really dont need any prudential regulators. These problems largely go away. If we dont do servicing Compensation Reform, do the nonbank servicers need more regulation, higher capital liquidity requirements when none of these entities are systematically important . Cant we just transfer the servicing . I think the answer is yes, you could. It will be more isolated. We dont have regulatory system were no institutions fail. We are worried about systemic risk. The failures are due to macroeconomic factors and most are due to sharply falling Interest Rates or rising default rates. A lot of the institutions fail at the same time, there might be insufficient capacity transfer services. It would be crosslinked to do the servicing transfers. Our view is at the minimum Capital Requirements should be riskbased. Currently the gsc require the same. Another complicated factor is that the nonbank servicers are an incredibly diverse group. Some have sizable operations that provide a natural hedge against msr risks. Others rely on servicing extensively. I know the idea of a selfregulatory organization imploded with the nonbank entities subject to stress tests. The question in my mind is if the industry is capable of doing a selfregulatory organization with enough peace to stress testing. Both service and prudential regulation of nonbank servicers are issues that will be we will be hearing more about in the years ahead. Thank you very much. Faith thank you so much. As ragu speaks, we are also dominated by heavy government footprints of lending towards business. I have not heard what the investor rule is and they fled the market. Servicing and investors have had a tough road over the last several years. I would like to we then if we get back to more normalized marketplaces, how do we protect both the consumer and the investor from participating in bringing more Ready Capital to the market . I had a choice here of going before or after laurie goodman. I think i mightve chosen poorly in that. [laughter] processing some of what her great comments were. Let me try to provide a reaction to some of the things we heard on the panel today as faith said monday provided you from the industry as i do i will try to address the slide in front of you. The lesson i recall reform coming up was in 2011 under mr. Demarcos leadership. They are good for a couple of different models around servicing Compensation Reform. A feebased model, a custodial reserve model. And a lot of good discussion on servicing reform. What im reminded of is that a lot of things that changed since 2011. A lot of good things. We have a lot of reforms in the customer market for Mortgage Servicing. We have 2000 pages of rules from the cfpb to keep everyone in line. The industry respects Laurie Maggiano now. The gscs have done a lot of work on disclosures. The crt market is getting off the ground and evolving right now as well. That is very good. We have seen a growth and diversity in the servicing industry as well. Laurie talked about nonbanks coming in and services who vary in size coming into the market. Certainly we think having diversity in the servicing industry is a good thing as well. That is usually a sign of a healthy market. At least we have one indicator trending in that direction. These are some the things that are going well right now. I would like to point out, as i recall in 2011, a lot of the focus on reform was not around what sort of model we should have for compensation. The weather servicers were making money off of customers who were in distress by delaying the foreclosure process, collecting fees off of that. I dont want to speak for what happened in 2011. I want to say from my perspective we are pleased to see a lot of that, if that is been in 2011, a lot of that has changed. That is a good work of the cfpb. At wells fargo less than half of 1 of our revenue the make and servicing comes from late fees. We forgive late fees if the customer goes through modification. That is not part of the business anymore. Unfortunately that is something we see in the industry. These are all good things we see right now. Other things have changed in the last five years. The servicing costs is a good example of that. Im not sure how would you can see the numbers. I cant see the numbers that well. Maybe i dont want to. Maybe i just want to see the numbers. Back of the envelope when you think about it. Performing costs on servicing performing loans has gone up three times in the last five years. Five times for nonperforming loans. The costs have gone up significantly both for loans and perform well for customers that pay their bills on time and for those that need help with their mortgages. Profits have risen dramatically in the last five years. As laurie said, there is a Credit Availability issue. There are too Many Americans not able to get homes, particularly firsttime homebuyers in this market. That is something very important to the industry and wells fargo as well. We know all of these things. I look at the slide. There are a lot of ways to slice the data. You will see the cost slice by performing loans and nonperforming loans, or different parts of the business. The take away message is that the servicing business is really complex and costly and really complicated. That is true. At many levels it is true that it is very complex. What i fear is when we talk about the complexity of the business we of skier what we can actually do to fix things. I will attempt to bring it up a couple of levels here. Maybe boiled the servicing Business Model down to a very short two or three sentences to help us understand a little bit about where we can go from here as well. Generally there are two parts that were alluded to in servicing business. You have the business where you service performing loans, the customers who pay their bills on time that the vast majority of americans. And you have a nonperforming loans, the customers who need help, need Specialized Service to be able to service those needs. The performing loan business, as you probably know, is a business which has very strict costs and predicable revenues. I forgot the term earlier, a normalized kind of business generally. Then you have your nonperforming loan business which is completely different. You dont have a lot of fixed costs. They are variable and unpredictable. Customers who were in loans having difficulty paying them back need personalized help. This is not a business that will be tremendously automated as well. You have these two parts of the business that ultimately most servicers are trying to balance. What a servicer will typically do is take the money they make, the revenues they make in the performing loan business and use that money to make investments in nonperforming loans. Nobody is looking to make a buck off of nonperforming loans. You have this balance model. We make money off of performing loans. Do you use that to really work on the unpredictable cost that happens with nonperforming loans as well. That is fine. That works as a space suggested for many years. That has changed now dramatically in the last five years. It changed because the costs you see here. In performing loans margins of gotten thinner. Nonperforming loans cost. What we have not talked about which is more important than just the cost of nonperforming loans is the unpredictability of costs as well. At the same time weve seen costs go up three times in the last five years, we see the unpredictability of cost of nonperforming loans go up as well. That tandem rising has cost a lot of issues. Having said that, what can you really do about that . A couple of things. One is we can look at the performing loan business and say, whiter costs going up . Where costs going up for this tens of millions of loans and costing americans that are being serviced on loans they are paying off on time and cyclically . There was a lot of reasons for that. It is more than i can go into in the remaining time i have. I will make. One comment the servicing industry really doesnt have time to catch his breath in the last few years. We have an operationalizing new regulations or rules from investors constantly for the past few years. We support all of those. We certainly support the recent work that laurie has done in bankruptcy statements. We support all of that. It suggests that every year there is more and more work, more operations, and that is not necessarily a bad thing. We will work through that. It tells you were not able to normalize the costs. Every year we are putting on something new and we have to normalize that. When i look at this and say performing loan costs are rising high, i would expect that to continue the more we are continuing to implement new rules and standards on an annual basis. When we are able to normalize this and count the efficiencies, it will perhaps shift a little bit. The second thing i would say is reducing the incidence of customers going into default. Reducing the incidence of nonperforming loans. I think the gscs under the leadership of fha have done every good work. Mike talked about a tremendous program. A lot of learning for the industry. There is work taking place right now. That is critical work. That type of work reduces the incidence of customers having difficulty going down a road they dont want to go down and creating a lot of of the issues we talked about. However the figure is difficult on fha. On fha its important to talk about it. There are over 10 million american loans. We service 30 of all fha loans. Fha is important to us, customers are important to us and our relationship to fha is important. This is a case we start to see a divergence between gscs and fha. They are limited and often lead to borrower outcomes that are not as beneficial as you would like to see. If anybody wants to read the metric support, i can email that to you. The default rate for fha customers through modification part if they are significantly higher. Their options are far less than what they would see as well. Reducing the incidence of default, seeing a divergence year, really good work under the leadership of fha. Work necessary likely in the fha as well. The third part is this unpredictability of default costs. Im not trying to minimize the rising default costs. I think mike in laurie and everyone has talked about that well. The unpredictability gets just as much attention as a cost itself. The inability to know what you are on the hook for, the inability to plan or budget for money you might need to spend is a critical issue. As much as anything else i think it causes a lot of concern. Here we start to see a divergence with the gscs and fha as well. Fannie mae and freddie mac along with fha have done some work here on warrants and others to really make is a little bit more predictable. The Health Servicers understand what they are accountable for if they dont meet the standards. Very different case at fha and probably the most significant issue we have right now in the servicing industry is the unpredictability of costs in the fha servicing space. We have situations where it is hard to predict penalties associated with missing foreclosure deadlines and the fha space. Part of it penalties with missing bank standards. There is a lot of lack of clarity in the space. The ability to bring clarity and predictability into fha space is about as important an issue we have right now in addressing what we see in front of us in the servicing industry now. Those are my comments in general. Where i think we can go from here. In no way am i trying to minimize the conversation around servicing Compensation Reform or even some of the other ideas that michael talked about. When need that type of dialogue and fought and pushing forward. Reform is a word that is probably with us here for the long term. I would suggest that to use a cliched phrase, we are at a bit of an inflection point. The point really is are we going to accept the way things are today or do we think there can be some change here . That is the inflection point. If you except costs will be extremely elevated in servicing, that it will be unpredictability and a lot of these servicing costs, it will be hard to reduce the incidence of default in the fha space. If you accept that will happen and we look at solutions that are more far reaching then talked about before, i am not there yet. I am not there yet where i am saying we have to accept that the way that is. I think if we get the industry opportunity to normalize the standard set of come out, we understand some of the deals that michael and others have talked about and other crt work that is evolving. Im not suggesting that reform doesnt need to happen, but its important that we understand what is a condition of the industry . What are we trying to fix . Faith thank you so much. One thing i think we should lose is about reform for fha and hide as well as gscs, and not talk about reform without talking about the full housing market. The best part his ahead because we get to talk and hear from you on the questions you have from this esteemed panel. Questions from the audience. In the back left corner . Say who you are. Todd wiggins. I appreciate your presentations. I want to ask about dodd frank and whether you feel it has been ineffective legislative initiative. Not to make a political statement, but do you feel it was worth the trouble overall . Mr. Kakamanu i appreciate you asking that question. Im in a reflexive mood as well. I think reforms were necessary, absolutely. I think that they were reforms necessary in terms of how the industry was making loans, in terms of how we were servicing loans. There was a lot we can do to get better. I think a lot of good things came out of dodd frank. I think together as an industry along with many consumer advocates and others who care deeply about the housing market, we have been able to learn about how to serve customers and think about their business in the with a repay loans. How do we standardize that across the industry. I think the work that laurie and her team of done have brought consistency. To a large extent i would say reforms were necessary. Many things came out of the dodd frank which are very positive. I think many things came out of the learnings of the financial crisis they didnt necessarily result in the dodd frank act of her positive. Speaking from sitting in a company, cap wells fargo, i know we spent a tremendous amount of time stepping back and listening to our customers, understanding how they felt and what they were experiencing. That has changed just as much as regulations of changed as well. I think a lot of good things of happened in the last five or six years. Faith sarah ortel . Thank you for being here. A couple of people mentioned it but i think its worth mentioning again, the store you have told so compellingly must be played and the constraints on credit. If you have these evermore expensive cost for nonperforming loans, the intent is to originate loans that might be at a higher risk to not perform, and are likely to become more and more powerful. I think the point you made at the end about volatility and the lack of availability to predict, i think we dont think about servicing businesses in the same ways as far as hedging risk and ensuring against loss in a way we do in the credit enhancement side credit risk side. Particularly with a lack of predictive models of the cost of servicing. It almost certainly has to be an aspect of constraint of credit. I hope the panel will spend a moment talking about those consequences as we go forward in talking about different servicing models, evaluate them in those terms. We have seen an enormous the metatech innovations in part of the Financial Services sector. Particularly around had access new customers. Far less investment has been spent in managing and service existing. Customers maybe because you have been reactive, but the startups are not investing in the same way. I am wondering whether nonperforming servicing is the place where tech may be able to help us bring the cost down. Ms. Goodman yes. I think servicing is a huge mistake in terms of access to credit. We have written about it, about the uncertain costs, they get especially problematic if you can document accosted the euro how to price it in. If you cant document the cost, the reaction is i will stay away from it. I think thats an important contributor to the overlay that many of the lenders have on top of the gscs and especially the fha credit box. They are more significant on the fha credit box at this point because of the fact servicing is basically such a pain in the ass. And the false claims act. The fact that you are seven certain about conveying the fact that fha loans dont have one timeline for the process. They have one for each aspect of the process and if you violate any of the timelines, you have an uncertain penalty structure. I think that work still has to be cleared up and certainly interesting those things will make a difference in terms of the overlays that lenders are sitting on top of the fha box. I cant emphasize enough how important that fha box is because for many of the more credit constrained customers, fha is their only alternative. Those constraints for the overlays are meaningful. Mr. Kakamanu i would offer two reactions. I agree on fha servicing. The m predicted ability can cost is extraordinarily high. I want to make knowledge that fha has been doing work in this space. They publish changes earlier this year specifically because of reservation and some other foreclosure timelines. A lot more really remains to be done. We can go into technicalities but i will briefly say it is nearly impossible for servicers to accurately predict the costs when an fha servicing loan goes into default. It is a very difficult process. And what needs to happen there. I had planned to say this, but i will offer a comment about your tech and innovation piece. I have been with wells fargo for 14 years. In 2004 i was working in the online channel. My job was to work in the originations side. I felt it was an opportunity and online servicing for home loans. I moved into that space and built of the Online Banking platform for wells fargo at that time. Prior to the financial crisis wells fargo invested tens of millions of dollars in an online platform, trying to build services for its vast servicing portfolio. That grew from under 100,000 customers over 5 million and five or six years. We made a tremendous investment before the financial crisis in building up a kind of infrastructure. We do make a commitment and investment in infrastructure and wells fargo now, but there is less of an opportunity to make that in the customers space. It is not visual. He see that and how we implement regulations and operationalizing other things or working on bankruptcy statements. We are spending a lot of money on those kind of things. I think its remarkable that you have an industry where you have tens of millions of customers, all of phone you have an interest in them when they pay their mortgage, and there is not a greater interest in entering that space. I dont have an answer for it but i think its a remarkable sort of thing. Faith is it fair to say that someone who went to the crisis with you, the Legacy Technology really was a burden to the industry. Back to your point, the lack of innovation weighed against compliance, certainty, lowering or minimizing risk, and no one skipped past that the have the workarounds in the system. That is my observation. Mr. Demarco i appreciate the way you raise the fha point that is really important. If you know what it is and you can work with it, that really has to be addressed. Not to put too nuanced a point, we have always priced for the risk of the borrower being a potential for higher cost servicing. The discussion is focused on minimum Servicing Fees. That is not the whole story. Bank originators can determine the kind of access io they want to factor in additional cost of higher risk loans. We have to be careful if you get three things and you can only have two of them, which ones do you want . If we want to be extending leveraged credit with volatile incomes or difficulty handling credit, there will be a real regime about dealing with it to reduce costs like this, then you have to allowed something in there for those costs to be accounted for and priced. Perhaps rather than this sort of being the traditional tugofwar on this issue we can try to be more thoughtful about extending credit to low and moderate income housing. Folks with a riskier borrower using mortgage products, financial counseling, and other forms of assistance and support, it helps keep that borrower from becoming one of those orange loans. If you create a situation where you are more likely to succeed and less likely to be delinquent, thats another path the dealing with this issue. That requires thats a different conversation and one that is way overdue, including in the fha program. Ms. Maggiano i can help by putting the pandemic going on vacation. [laughter] normalization. Ms. Maggiano when we talked about centech, the basic Core Processing systems used in this industry are really fabulous. They are ancient, but they really work. They do it they are supposed to do. They process the account for millions and millions of payments. Where we have seen the disconnect is in the special servicing, the default servicing. They were never designed to do that. They are bit Core Processing systems. As we go out into supervisory work we see that servicers have tried to compensate throughout the entire crisis. Goodness knows there were patches in patches and homemade programs and offtheshelf programs. They just dont work very effectively with each other. We also are surprised. Part of it was that everyone was moving too fast. This ready, fire, aim. Now we do have an opportunity in the industry for some interesting centech folks to come up. The space is available in default servicing, escrow servicing. Those kinds of functions that are much higher touch with consumers. We really hope to see that. They published a special supervisory bulletin the longago will remain some observations that many of the noncompliant findings we found were directly attributable to systems that just dont work, systems that dont talk to each other, systems that dont communicate effectively with the Core Processing systems that just another capacity to do the tasks they are being asked to do. Great opportunity for some smart people to move into this space. We sure hope it happens. Faith we have time for a few more questions. I think raghu has address my question. Laurie has written extensively on the millions of borrowers who a been additionally assisted and access provided that resembles the conditions before the housing crisis. Looking at that and getting an idea of that, what under more normalized conditions and less uncertainty, what would be the cost for performing a nonperforming loans . What would that look like . Mr. Kakamanu it is a good question. I honest and candid answer is i dont know. It is very difficult to be able to predict what that is. I have a suspicion if you normalize costs and companies in servicers can develop efficiencies and how to do things well, not only do costs go down but Customer Service goes up as well, which is also more important in many ways. I dont have a better answer for you. I wish i did. I have a suspicion. I think as we start a normalized we see two minutes of people, you start to see compliance with the operational excellence. That takes some time to really happen. Faith over here . Hi. My name is agatha. Thank you all for your time and sharing to expertise. I had a question for michael stegman. In your first comment on what can happen after hamp, you mentioned you were in support of a National Loss mitigation standard that would make sure that consumers and borrowers are on a level playing field. Could you talk a little bit about what you mean . You say you are in favor of a more streamlined modification, incomebased, or are you thinking about something more closely recently the mod . Mr. Stegman i am waiting to see the final report on the one mod. It does deal both with the shortterm interruption problems which may be a streamlined, but im thinking should we have a single application, regardless of who owns your homes. Who owns the loan. Should there be with some flexibility and mpv model or discount rates and choices vary because nondepositories versus depositories have settled. There is some controversy about whether they should be a standard. When i was doing low and moderate income Affordable Housing evaluation of precrisis, there was Early Intervention on the part we talk about something called preventative servicing. Early on in a delinquency there was contact between the servicer in the borrower. There was scripting with call centers trying to engage borrowers on the extent of the attachment to their house and their willingness to really try to save their home. And the beginning of a conversation about a possible workout in those days it was called a workout. In the post crisis world it might not be possible to have that kind of conversation and shortcircuit the waterfall and the whole process of beginning on the modification kind of things. We found that low and moderate income people whose payment records for more volatile, the deliquency was not a good predictor of foreclosure. An early contact was made. It is hard in the posthamp world, it is unclear what services are allowed to do or should do that might have a whole lot better chance of connecting with borrowers early in the process and helping them out. We need more conversation about that. It may well be that we can reach consensus. My view it has been there all to the a formal rulemaking. Faith a quick question for the panel. Do you think the judicial and nonjudicial state foreclosure timeline way into that same conversation . As part of that conversation, i think in a deeper sense. One more. For raghu and laurie, for the cost increase particularly on the nonperforming loan side, how much of that you think is in driven by regulatory and set of operational changes and inefficiencies as a number of nonperformers increase . Ms. Goodman if anything you develop proxies. There is a Regulatory Asset of it, but there is also you trying to do more. You are required to do more for the borrowers. That was the case here years ago. Mr. Kakamanu there are a couple of things driving the cost. Clearly this is a last five years that is become incredibly regulated. Not just regulated from the cfpb to Consumer Protection standards. The rules driven from an investor standpoint as well. This has changed incredibly over the last five or six years, particularly in the gse space i think to some degree this is going to be a part of the business. There will be a high cost business. The other thing we have learned as well is that, really learned powerfully in the last five or six years and this is where i will disagree with lauries earlier point, when a customer has difficulty making a payment they need to talk to a person. They need help. This is not an automated process for them. There are standard situations when a customer is having difficulty making the payment. The other think the servicing industry has done is investigating in my not just in the technology infrastructure, but the people infrastructure to make sure that is an actual person to work with a customer in default. I know that wells fargo, and i think its true across the industry, we have a single point of contact when a customer goes into default to work with him throughout the process. You see some normalization. There are business and legislative and investor decisions here as well that will likely result in elevated costs for the duration. Faith any closing comments from the panel . Ms. Maggiano it is very much a laborintensive process and you have to have real people. A couple of panelists have talked about the importance of counseling and getting borrowers to somebody can help them understand the options they are being offered. At the same time there are certain things. In the servicing transfer if the systems dont talk to each other and the documents dont transfer the information, those people who are performing loans will catch up. Its not a big deal. The people of nonperforming loans really get lost. There are a lot of things that can be mechanized to determine and ensure you get the correct dates you are following the correct timelines from the regulations. But that will never, ever replace the single point of contact, talking to somebody, working through, helping them understand what their options are in helping them make the right decision for themselves and their family. Faith thank you. Mr. Stegman i hope people really reflect on a comment. Mr. Kakamanu i hope it doesnt get lost in this conversation, which is about the fact that deflecting commodification is one way to think about helping a customer. This is a much larger issue and question an opportunity for us. People can aspire to pay their loan. People are not the counseling and a lot of the other work ed talked about, there is the opportunity to change the dynamic. There are too many people who are not in homes today that should be in homes. I wanted to sort of knowledge eds comment and hope we reflect on that. Mr. Demarco one observation. This is been a very governmentregulated environment in the last eight years. There is still value to market and market incentives of Credit Investors being able to help identify deficiencies, getting to the question, given the answer to the question about what are these costs. Having a competitive market certainly can also be part of this future in creating a better force. Faith michael, any last words . Mr. Stegman following up on the homebuyer education issue. In this post crisis world would have got an enormous amount of valuable resources and the counselors and really redeploying those in finding a Business Model that works, that built homeownership, education and counseling into the front end and bringing tens of thousands, hundreds of thousands of prequalified borrowers to lenders to compete for, that should be part of the bigger discussion. The builds homeownership into the front end and brings in tens of thousands of prequalified low and moderate income borrowers to compete for. Thats the part of the bigger discussion. Faith schwartz congratulations to those who have done more work on that. Thank you to this great panel. Thank you all for being here. Thank you urban institute. Thank you. [applause] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] [captions Copyright National cable satellite corp. 2016] on newsmakers, roger stone talks about mr. Drums campaign strategy, what we can expect from the president ial debates and issues that could affect the the debate. Announcer tonight on june day, history professor and historian discusses her book white trash. There were actually poor white ghettos in places like indianapolis, chicago, and they were described in many of the same derogatory ways as poor blacks who were living in the city. And as part of our history that we dont talk about. We dont really want to face up to the fact at how important classes. Announcer tonight at 8 00 p. M. Day onn a june cspan. The 1996 welfare law, our program looks back at the Senate Debate over the 1996 law. The current welfare system has failed the very families it was intended to serve. I dont know many people who humiliate themselves, standing in line waiting for their welfare check. Drugs in their drunks. They are out there. But a lot of those people are simply people who have not yet discovered a way out of their misery and poverty. That thee decided states and the governors and the legislatures out there in america are as concerned about are, as concerned about their wellbeing and as concerned, if not more so, then we are about the status of welfare in their states. Announcer and includes discussions on how the changes impacted the poor. From now on, our nations answer to this great social challenge will no longer be never ending cycle of welfare. They will be the dignity and power and the ethic of work. Today, we are taking understory chance to make welfare what it was meant to be, a Second Chance , not a way of life. Announcer monday night at 8 00 p. M. Eastern on cspan. Announcer on tuesday, the Defense Departments top Suicide Prevention and Mental Health experts discussed whether Media Coverage has an influence on the soldiers and veterans considering suicide. This is an hour and 15 minutes. Good morning, everyone. Good morning to this mornings roundtable discussion, one of the set the second of this years Suicide Prevention program. To cspan for filming this mornings event and also for our journalists and our media that have come this morning, specifically from military. Com and our start a stripes partners. Thank you to other media folks in the room. Key to franklin. I am the director of the defense Suicide Prevention program. Today, we will hear from senator smith. Senator smith is the president and ceo of the National Association of broadcasters since 2009. Prior to this position, he served two terms in the u. S. Senate from oregon. Senator smith has a personal story to share today. Im sure you will appreciate how with him is morning. Mariel also hear from dayak, the president and ceo of the intent the Entertainment Industry council. She is an enemyawardwinning producer. Finally, we will hear from calling clarke, from the National Flat the National Action alliance. These are professionals it come together regularly to put plans in place for Suicide Prevention for the nation. Colleen is the secretariat of the National Action alliance and member of the perfection on strategic partnerships. She has over 10 years of experience in Public Health and Suicide Prevention. Honored tom introduce rosemary williams. Is the assistant secretary for Public Affairs for the department of Veterans Affairs. The pair up the department of Veterans Affairs is a key partner in preventing suicide. Two communities coming together , journalists coming together around developing a common approach for really for saving lives, i think. Our Work Together is critically improve important. Suicide is one of the only feels that is so important that we come together around a common language and a common language. We know that words matter. And we know that we dont want to inadvertently ever excellently do harm or say the wrong thing. So i couldnt be more pleased to have a conversation about this and bringing together. About these tough issues that are near and dear to my heart. We are also regular bit late. So its goahead and get started. Thank you. Th may i express appreciation to each of you for being here. Our things, my thanks to the department of defense and the Defense Office and Suicide Prevention. This is the work of the mind and of the heart. And it is an issue where those who put their shoulder to this wheel, i would say that you work on the side of angels. I come to this meeting with you. Y imitation certainly nothing i say or that i hope you will hear today suggests that any of your rights in the media to express yourselves are in any way infringed. What we are here today is to learn from one another. On a personal level, i suppose the reason i was invited here is to the u. S. Went senate, i knew virtually nothing about the issues of psychology or psychiatry. I knew in my own life, i could probably count the down days i on one hand. And two of those days were days i lost elections. [indiscernible] [laughter] [laughter] [laughter] said, my wife and i, in 1981, adopted a beautiful infant boy or the name of garrett lee smith. Boy. Tt was a tenderhearted he was handsome. He was good. With i think a very special challenge in life. Tragically too late that he was a manic depressive, bipolar, and the day before his 23rd birthday, he took his life in his college dormitory. Late,ad to learn to tragically too late, as Many American parents do. You that i tell found myself in the service, and am probably known for i hope for good, but certainly the best good eye of her did in the u. S. Senate was to pass Mental Health my colleagueshat named after my son and that led to many other breakthroughs in terms of Mental Health relates to as it insurance, defense, issues and many more things, and to the everlasting credit. I will say this as a republican, and everlasting credit to our president , who is a democrat, in our Affordable Care act, that Mental Health coverage be there. I am very proud of that and hope that, however reforms occur they future, that that is a corner store and cornerstone of policy in america. If you have physical health and you do not have Mental Health, you do not have health. It is important for all of us to remember. You register politically, this issue does not register republican or democrat. This is a human issue. It is something that our society is on the frontiers of understanding. And dealing with. And in dealing with it, i say this out of deep, deep respect, as one in broadcasting now, i cant myself as part of the media the media has a if notous opportunity, an obligation, to understand this issue and to report on it in a way that will better inform the American People and parents like sharon and i were about the ands of suicidal tendencies the resources and affordability of Mental Health treatment in our age and its ability, as never before, to help people to lead good and productive lives. Some of our greatest artists, some of our greatest citizens, some of our greatest statesman statesman, Abraham Lincoln comes to mind, people with serious Mental Health issues, and in the case of lincoln and churchill, they managed to make it through and to do great good. So we all have a stake in Mental Health. Mental health touches most , either families directly or indirectly or through a neighbor or a relative. Us tobehooves all of become informed and know the resources, know the signs, and know the availability of treatment. So my thanks sincerely to all of you in the Defense Department and in the media for your interest in this most important issue that really is a lifeanddeath issue. As the ceo of the National Association of broadcasters, i was called to the white house following the unspeakable tragedy that happened at the Sandy Hook Elementary School by our Vice President , joe biden. He and i served as a their chairman our Ranking Member of the European Affairs subcommittee for many years. Together all the people in various aspects of the media to basically ask what could we do . Startedconversation about issues like content, what can we do to change content, issues like cant like gun control, how can we advance that cause . And it came a point in the discussions where joe, as i call him, or our Vice President , turned to me and said what do you think . Said, well, mr. Vice president , you know as well as i do there is no federal court in the land that will allow you to dictate content to those in the media or in the entertainment business. So you are bound by the first amendment. And when you go to gun control, you are bound by the second amendment. You know as well as i do how impervious an issue that is to change. The root of most, not all, but most of these there isgun tragedies, the issue of affordability and excess ability to Mental Health. And he said, what can we do about it . I said there is something you can do about it because this is an issue that does unite our hard politics. He knew, because he was my real inr in past and passing Mental Health legislation, that we could bring the American People around this issue because it is not partisan. I then volunteered the broadcasting industry to do something about it. And i am very proud of my podcasters all over the country independent of their dues, we raised a Million Dollars to produce a series of ads in english and spanish, both for radio and for television, and it was called ok to talk. Platformmulti national directed at young people, specifically teens, like my son garret was. To mind it was to remind them and their parents that they need to talk about Mental Health and its ok to talk about Mental Health. Broadcastings unbridled reach into the homes of American People and every Community Across our country, this powerful platform of broadcasting was used to encourage young people to talk about Mental Health and seeking help. Campaign, ok to talk local radio and television stations and broadcast networks, for ways ooked one of the reasons i am proud to be a broadcaster, i have a mother named udall. When you have a udall mother, you are raised in the ethic of public service. And broadcasters are public servants. I love that aspect, quality of our branch of broadcasting