Committee will come to order. Let me think our witness for your patience. We are now ready to proceed under the five minute rule and i will give myself five minutes to begin the question phase of the hearing. Over the last year, has taken a number of actions to reduce the ability of fha borrowers to utilize down payment assistance programs from governments and cities. To purchase a home and has indicated that it intends to issue a proposed rule affecting down payment assistance in january. Secretary carson testified before this committee in june that he was not familiar with the hud data that identifies which Government Entity is providing down payment assistance and it appears that hud cannot determine which Government Programs are providing down payment assistance for any fha loan. Which is critical before attempting to issue new regulations of government down payment assistance programs. Will you commit to not moving forward any rulemaking or other Administrative Changes related to down payment assistance provided by governmental agencies until god is able to collect data on individual governmental entities and has analyzed a statistically significant amount of data on the performance and the pricing of fha loans with down payment assistance from each specific Government Entity . Can you expand on that mister administrator . Thank you mister chairman. As you know, down payment assistance has a long history at fha. When i was commissioner last time certain types of down payment assistance ultimately cost fha one and 16 and a half billion dollars in losses, according to our independent actuary. 16 or 60 . 16 and a half billion dollars in losses. On down paymentassistance . Tells me how that works. sassistance which is no longer permitted put the down payment on the mortgage and while it was technically called to get it was a gift they end up paying for because as you can imagine the default rate was almost 5 times. Mister administrator, down payment assistance is normally used to help firsttime homebuyers or those who qualify in that manner. To help them into a home. That is not a significant amount but it closes the gap to get cheaper loans so tell me what the problem is. I want to make sure that any down payment assistance providers doing so within what our rules permit, whether its jurisdictional or whether or not theres a financial benefit of the transaction they dont permit so i will commit that any effort to undertake rulemaking will be based on research and facts as we know it. We want to make sure that any gpa is done in the best interest of the borrower, not there to enrich people providing. And i agree totally with that perspective that the dpa should be done in the interest of the borrower and you and i know it goes to close the homeownership gap and there are other benefits to the dpa, so i would wonder if we could reach some kind of accommodation that the data would back up any decision made by the department. I mean, let me ask you one of the first actions the Trump Administration took upon being sworn into office was to suspend the planned reduction in fhas annual premiums by 25 basis points. Which would have saved the average borrower 500,000 first year alone and in response to cost from a lot of premium reduction to be of limited in light of the fhas improved financial help, secretary carson dated keep the rates as low as we can consistent with the loan since then secretary not only maintain a suspension on premium, he has proposed to arbitrarily increase the capital ratio far above what is statutorily required. Secretary carson does he still stand by his original statement that he will keep premiums as low as possible to assist with the law . Thank you mister chairman and in many ways i run a 1. 4 trillion dollar corporation. I have to carefully monitor our cash inflows and cash outlays. We consistently look at premium structure whether, its hard to say this one is too much or too little. Were looking at, we have the right structure in terms of how much is on the up front for how much is on the annual. Something we consistently look at and we will continue to do through this first term. All right, i thank you for your response and i now yield five minutes to my colleague from ohio. You mister chairman, i want to thank you for holding this hearing, its important and theres a number of issues that i want to try to eliminate and work on. Thank you for being here, i appreciate your service and three administrations. Two republicans, one democrat and the fact that youve worked to shore up the Insurance Fund to meet the two percent category capital requirements. Thats a very important, its already not a lot of money but that is the minimum required and i appreciate you getting there and keeping it there at sequoia accomplishment and ive been concerned about a long time. Id like to follow up on these, the first i talked about was whether you might be willing to work with the chairman and i and stakeholders to address the disparity in homeownership by race, is that something you might be willing to work with us on . Absolutely and we convene an internal working group on this several months ago to look at minority homeownership. Particularly your statement is now and the chairman mentioned the statistics in his Opening Statement and that disparity is too great and it leads to a disparity in wealth as well because its the biggest saving vehicle most people have so i want to thank you for your willingness to work with us. We look forward to working on that topic. Its an important topic because the American Dream needs to be accessible by every american. Its something all of us believe, we want to Work Together to find a way figure out whats driving the disparity and figure out how to address disparity i really appreciate common sense approach. We look forward to working with you on that. The second thing i mentioned was the fact that one size all premiums dont give a potential risk based discount for people of lower risk. Would you be willing to work with us and potentially stakeholders and even folks in the private sector because given governments history of mispricing risk, i think theres a lot of privatesector Mortgage Insurance Companies and others that could help in partnership with you as we fight to figure this out. Is that something youd be willing to work with us and maybe some outside private entities to figure out if we can find a way to do Something Like that to make sure people deserve a little bit of a break a little bit of a break evenif we that. Thanks for your question. We just want to make sure intruding on private capital because there are private mortgage insurers out there that work with the gsc. They can be part of the solution, they have elaborate systems and data and one of the other things i didnt mention that we talk about is i am so happy you gave you 20 million to update your it infrastructure. I understand are now using abacus 2. 0 so that they start, but idlike to make you a little more modern than that. I know we need to work to make sure we continue to give you the resources you need to upgrade the chairman and i had a side where we both acknowledged that we need to help you invest in your technology but i think i want to again acknowledge you can partner with outside industry that have the data and computingsystems to help you as you do this including our private mortgage insurers. There is no need to compete against them when you work withprivate industry to make it a winwin for everybody. Absolutely. Theres certain things are prohibited from doing. The great thing about statutes as we can change them. Are certainly open to that and were very thankful for the down payment on our Technology Upgrades. This is something i tried to get through and i was a commissioner in a Previous Administration so were happy that congress got us on a new trajectory to get us in a better place without technology. I want to mention one other program that sometimes its muchmaligned and let you talk about it a minute because what youve done to make the reverse program work and reverse mortgages are not for everybody but just because theyre not for everybody mina not for anybody and i want to give you a second to talk about what youve done to help make sure that those programs have the right guardrails around them to protect Senior Citizens but also are there for people thatmight need cash flow and have been a saving vehicle. The reverse Mortgage Program provides a great social mission, helps seniors age in place, providing stuff for every senior, depends on the situation but it is obviously like a lot of things is impacted by the housing collapse. It seems to be the very top of the apogee in terms of volume but the time when house prices came down, obviously the program was impacted by the area the Previous Administration made headway in the witness, working with congress on the mortgage stabilization and thankfully because good house price appreciation and other changes that weve made team to be heading a much better place and we were last year and thus being able to help seniors age in place. Thank you mister chairman. The gentleman from texas Esther Greene who is also the chair for the subcommittee on oversight and investigationis recognized for five minutes. Thank you mister chair and i liked about the witness, good to see you again. I am concerned about the role of expanding access to homeownership as well and its good to hear that the chairman and Ranking Member working in this area. One of the things we have been looking at is additional credit story. Im calling it alternative credit story. Have you any intelligence on this, any research has been done, anything youre doing inhouse that might be of benefit . Before that, when i was commissioner last time i may recall that we worked together with your office and from the affinity groups in the real estate but were not quite sure which way to go with alternative trade lines, alternative is for models. It struck me at the time and still today that if we were to do a Pilot Program looking at that, the fha would be the appropriate place to conduct that pilot. Technology has moved substantially since 06, 07 and there were players in the industry and if you look at the statistics, 25 to 35 million americans either have no credit score or somehow credit and i believe my heart and are, i want to back it up, i think theres a way you look responsibly and in the best interest of hours to look at nontraditional credit ways that might open the aperture somewhat. Those who may not understandthe term nontraditional credit, would you give explanation . Theres some that look at traditional credit, credit cards, auto loans. It may be stored differently than others. Theres others that look at cell phone bills, utility payments, rent payments, things of that nature and a factor your payments industry into that as well and theres some that do a little of both so i dont have all the answers today. I just think the prudent approach would be to conduct a pilot and to see where that would take us but as you know sooner wasput into in 2008. But for whatever reasons, the pilot was never limited. And the authorization ran out. I do recall that legislation that i had the good fortune to sponsor. And you did work with me. As you know, we have tried to maintain a traditional model and only add Additional Information, Additional Information about the lights, gas, water, phone, cable and i have to continually emphasize we dont decide that were going to eliminate the traditional model. All that stayed there but there are some people who benefit from having a rich payment history in these other areas that helps them. I find it interesting to note that yesterdays hearing we had representatives from five agencies here including the fed, fdic, actually was three, occ wasnt present but they had a joint communiquc where they have indicated that this is Something Worthy of consideration so it looks like were moving in that direction, its just a question of how long will it take us to have a Pilot Program that youre talking about and im working with my friends on the other side to see if we can collaborate and come to some reasonable conclusion as to how to move forward with this. Would you just respond to the notion of maintaining the traditional model and simply adding additional credit, thats why as a traditional as opposed to alternative causes people to believe that were going to forgo the additional, traditional model that is not at all what were talking about. But your comments please. I think theres a way to do it i think we would both agree should be done responsibly and in the borrowers best interest, but remember that will be a twoway street. Whereas you may have good payment is history and some of those nontraditional trade lines you also begin to pay might , youre going to feel that as well. No different than if you pay your credit card bill late or make your automobile payment late as well. So i just want to make sure the committee understands that if we were to do it we think we should look at ways that are the best for the consumer and it strikes me that fha would be the appropriate vehicle to use to do that and hud in general. Why dont we have an additional conversation but my time is up now but lets have my staff get with you so we can make anappointment and hash this out. We be happy to. Ideal back. The gentleman from missouri mister luke fryer is recognized for five minutes. Welcome commissioner montgomery. I want to start up with the question in regards to the false claims act. Memorandum of understanding, and ou was announced between the department of justice on the use of the false claims act. Im just curious and you give me details on this . What you hope to accomplish and i guess from the standpoint of how the barrier as the false claims act been and what do you hope the mo you, how will it affect the mortgage mortgages to make it more accessible . When i was commissioner last time we had a good balance between the percentage of lenders and nondepositories. We are out of balance now, 13 percent from our origination and that would come from repositories, it was about half and most of them would say they plan to move the claims act as the reason they got out of the program. Some of themgot out of the va program. Its not my intent to pick sides in that argument between independent lenders and depositories. I just think for a lot of reasons we need to find equilibrium there but i also think and allow the consumer advocate groups agree with me on this point, acs hasnt access to credit issue because a lot of families have banking relationships and a large depository for firsttime homebuyers are binding that there depository doesnt offer the fha program which is the nations flagship Homebuying Program is 1935. To me it seems a little odd. Thats not to say we look the other way when fraud or people that dont follow the rules, like the contrary area we just think somewhere between an indemnification and the equivalent of a drone strike on a lender in this case, they just got out of the program, there needs to be something in between and the Justice Departments working with our general counsel, our staff, we found a good place and i think brings a little more focused to the program, gives fha and hud a bigger voice in saying this rises to the level of false claim and therefore we would recommend or concurwith justice looking forward. The other 87 would be from independence after mark. Yes, sir. Credit unions, there depositories. They would fall under depositories. But independent would bethe quicken loans of the world . Yes, sir, lenders like quicken, some are publicly traded. Online lenders and offshore and all that kind of stuff. You have to be approved obviously. Its an amazing statistic. It took me by surprise here. Im not prepared for that. We were happy a lot of the consumer groups were responsible lending, and rc and others were on our side on this topic. I appreciate your explaining that. Also, with regards to the rest in your portfolio, obviously things are going well. Where increasing the capital account, but weve noticed the Credit Scores seem to be going backwards. Theres earlier default and debt income ratios are raising area should we be concerned about that . What are you doing to address that . Is that just the nature of the economy, whats going on . Ill try to boil down an hourlong response that we conduct daily stress tests on our portfolio and we put concern about the number of loans that come in with risk areas is accommodation of high debt income ratio, low Credit Scores and loans that came in from about august 2016 up until we made a change with the total scorecard. We are modeled at about one points per capital ratio. Thats not where we want tobe , congress requires a minimum two percent but we made changes in the total scorecard that went into effect marchof this year. They seem to be having their intended effect area and it seems like we stopped the threeyear slide in Credit Scores. They leveled off and improved one point. One quick question before my time goes away. The concern is even though youre very wellcapitalized right now you apparently have more risk in your portfolio than normal so in order to accommodate more risk are going to have more capital to be a solid entity and have enough reserves to ride this out until you get this or fully back in shape i would assume, how long do you think its going to take to do that. The house appreciations help a Strong Economy and we just want to make sure we call it turning the dial, we want to make sure we have access to credit. You want to make sure that should there be a downturn we have ample amount of reserves to whether that. Its a tricky dance but we think were managing it well. We will be watching, thank you very much. The gentleman from iowa is recognized for five minutes. Thank you chairman and thank you commissioner montgomery for being here. Weve been talking a lot today about increasing homeownership and addressing the shortage of Affordable Housing