This hearing will come to order. Today we are joined by the leading voices within the administration on reforming and strengthening our Housing Finance system. The secretary of the treasury and the secretary of housing and urban development, both of whom have just proposed proposals to the president , as well as the director of the federal Housing Finance industry who serves as the regulator and conservator of fanny mae and freddie mac. Last friday marked 11 years since the government bailed out and put fanny mae and freddie mac into conservatorship where they remain today. Prior to 2008, they held just 0. 45 in capital for every 100 in mortgages they guaranteed. Now they hold just 0. 19. After a historic 200 billion bailout from the taxpayers. 11 years later, these Important Companies continue to be too big to fail, and are even more leveraged than they were before the financial crisis. And taxpayers remain on the hook in the event of the next market downturn. In march, President Trump signed a memorandum directing the department of treasury and housing and urban development to develop a plan for administrative and legislative reform of the federal Housing Finance system. Many of the legislative recommendations in the plans that were released on thursday are consistent with my outline to fix our Housing Finance system. Including attracting private capital back into the market, protecting taxpayers against future bailouts, and promoting competition. As well as preserving certain important incremental reforms that have already taken place during the conservatorship, including a robust transfer of credit risk. The single security and common secureatization platform and loan pricing that does not varavary. The status quo is not and has not been acceptable, and my strong preference remains to fix it through comprehensive legislation. Five years ago this committee demonstrated its possible. We came together to adhavenvanc solution on this topic. I released my outline which builds upon many principles of those efforts. It sets out a blueprint for sustainable new housing financing, a system that protects taxpayers by reducing the systemic too big to fail risk posed by the current mo mortgage guarantors. It establishes protection between risk and taxpayers. It insured a level Playing Field for originators of all sizes and types while also locking in uniform, responsible underwriting standards. And it promotes broad accessibility to mortgage credit, including in underserved markets. Ultimately only congress has the tools to necessarily provide the holistic comprehensive reform to our system that will be durable through any market cycle. However, its important for the administration to begin moving forward. With incremental steps that move the system in the right direction. After 11 years of conservatorship, its long past time to make the hard decision and address this last Unfinished Business of the last financial crisis. Senator brown. Thank you, mr. Chairman. Welcome to the witnesses, welcome back to my colleagues. Were going to hear from the Trump Administration today about the next steps on Housing Finance reform. Its clear from the plan they put out last week what President Trump thinks the steps should be. The trump plan will make mortgages more expensive. We shouldnt have to tell the president we have an Affordable Housing crisis in this country. We all know it t we all see it. I see it when i talk to residents of a manufactured Housing Community on the verge of losing their homes because they cant afford the rent increase imposed by wealthy private Equity Investors from outside their states who just bought their community. I see it when i drive past the boarded up houses that belonged to the victims of predatory lending in my home city of cleveland in my neighborhood. It happens across the country. I see it when i talk to young people in their 20s and 30s who want to buy a home, but who drown in student debt and cant save enough for a down payment or for a mortgage. These are the real crisis facing families all across ohio and our country. Theyre representers, homeowners, former homeowners, they all have one thing in common. They cant afford a place to call home. Weve had productive hearings in this committee where we talked about what it would take for the Housing Finance system to actually work for working families. In march, we held two hearings with representatives from the home builders, the realtors, the mortgage bankers, the credit unio unions, civil rights communities. We heard during those hearings that affordability and access arent just components of Housing Finance, theyre the whole reason we have a Housing Finance system. They cant be an afterthought once weve answered other questions about the structure of the Housing Finance system. They have to be built into the system. We need a housing system built on a mission to serve borrowers and renters no matter who they are, what kind of work they do, where they live. That means we need policies that focus on increasing service for underserved markets like manufactured home owners, manufactured housing homeowners and borrowers who have been locked out of the market for decades because of discrimination. We need a system that helps a wide variety of lenders and borrowers participate so they can meet all families needs, particularly those who have been left behind for generations. In our march hearings and the hearings since weve heard housing stakeholders coalescing around a few principles for reform. They have consensus, they have said reform should protect access to affordable 30 year fixed Rate Mortgages. They should provide a catastrophic government guarantee. We should structure loan guarantors. They said we should serve a Broad National market, we should serve lenders of all types and sizes equitably. They said we should maintain a duty to serve all markets and borrowers. They have said we should maintain Affordable Housing goals and metrics. They said we should expand investment in Affordable Housing. And they said we should maintain the gses successful multifamily Business Models and insure continued or better access for financing of affordable rental housing. Yet, unsurprisingly, President Trump and his administration missed the point. Rather than create a system that addresses the needs of working families, the Trump Administration has put out half baked proposals that will make mortgages more expensive and harder to get. In addition to increasing costs, the plan would make it harder for small lenders to compete and would gut the existing tools we have now to help underserved families finally find an Affordable Apartment or own their first home. The president s plans would roll back Consumer Protections and investor disclosures put in place following the crisis. As we know theres been a collective amnesia unthto preve toxic securities from building up our financial system. Lets be clear, whether youre renting or want to buy a home or own a home and want to sell it, President Trumps plan hurts you. All to funnel, no surprise here, all to funnel more money to the same wall street system that wrecked the Housing Market and wrecked families lives in 2008. I was encouraged when i saw the plan had nine separate proposals dedicated as leveling the Playing Field. I thought it might mean leveling the Playing Field, renters who cant afford to save for a down payment. I saw all nine proposals, every last one of them was about leveling the Playing Field for wall street. Which is looking to make more money off of working families mortgages really . We shouldnt be surprised the white house looks like a retreat for wall street executives. Only this plan is the same as every other plan, making it easier for wall street, the president and the president s home city making it easier for wall street to profit off hardworking families. These plans come in the midst of a flurry of other troubling Administration Proposals to weaken fair housing and lending protections, to gut a bed rock civil rights law. The president is once again decided to betray working families in youngstown, cleveland, and baltimore. Baltimore, the city that the president finds is so beloved. Once again, sides with wall street overthe dignity of work. We dont need to make it easier for wall street to get richer, we need to quote secretary carson, rich people are going to get richer anyway. We need to make it easier for every American Family to find an affordable place to call home. Housing shouldnt be optional. Its a basic need. No one should go without it in this great country. Thank you, mr. Chairman. Our Witnesses Today are the honorable steve mnuchin, secretary of the treasury. Benjamin carson, and the director of the federal Housing Finance agency. Secretary mnuchin, you may begin. Thank you. Chairman, Ranking Member brown and members of the committee, im pleased to be with you today to discuss the Treasury Departments Housing Finance reform plan that will protect taxpayers and foster competition in the market. Id like to thank the chairman and the committee for your work on this important issue. The outline you released in february was an important step. In september of 2008, the Government Sponsored Enterprises were placed into conservatorship. Treasury has provided the gses with over 190 billion in taxpayer assistance. 11 years later, the gses remain in conservatorship and continue to be supported by a treasury commitment to keep them solvent. This has perpetiauated governme influence. It has left taxpayers exposed to future bailouts. The plan includes almost 50 recommended actions. These measures would reduce the role of the federal government, enhance Taxpayer Protection against future bailouts, increase private sector competition in the housing system. As required by President Trumps directive, treasury plan shows the gses can and should be reformed today insure their safety and soundness. No law prescribes a specific end point for the conservatorship, its not meant to be permanent, and that includes the management of the gses. The plan provides a road map to release them from conservatorship. The reform plan takes great care to preserve what works in the system. Each of the treasurys recommended reforms is incremental, realistic and balanced. In particular, the treasury plan would preserve the longstanding Government Support of the 30 year fixed Rate Mortgage loan. That support should be explicitly defined, tailored and paid for. The treasury recommends that congress authorize a paid for guaranteed backed by the full faith and credit of the federal government thats limited to the timely payment of principle and interest on qualifying Mortgage Backed securities. To foster competition, this guarantee should be available to the gses and also to any other approved competitor. Moreover, the environment should be harmmonized. For example, the gses currently have an advantage over other participants over the patch to the Consumer Protection finance bureaus ability to repay rule. In july 2019 it was announced the patch would expire in january 21 or after a short extension. Treasury sports the planned expiration and it supports further revisions to the repay rule to insure that mortgage lenders have a bright line safe harbor after the patch. Finally, i must emphasize, our recommendations make it clear that the administrations preference is to work with congress to enact comprehensive housing reform legislation. Legislation could achieve long lasting structural reform that tailored explicit Government Support of the secondary market and repeals gses congressional charters and other privileges that give them competitive advantage. We believe that reform can and should proceed administratively. Pending legislation, treasury will continue to support the administrative actions to enhance regulation, promote private sector competition, and satisfy the preconditions set forth in the plan for ending the gses conservatorship. Under the leadership of the president , im proud of the work weve done to create conditions for greater economic growth, more and better opportunities for working families, and higher wages for all americans. Today, i look forward to discussing with you the Critical Issues of Housing Finance reform. I truly hope that the committee will work with us on a bipartisan basis to move forward with legislation. Thank you very much and i look forward to answering your questi questio questions. Thank you. Secretary carson. Ranking member brown, and members of the committee, thank you for this opportunity to appear before you today to discuss how the u. S. Department of housing and urban development will support these efforts. Also i want to thank the tremendous team weve assembled at hud. We have the ugleieiest buildingt the best people. In the years since the financial crisis, the government has played an outsized role in the nations Housing Finance system. Its imperative that congress and administration refocus this system that we support appropriate and responsible access to credit and insure Government Programs do not overlap with and crowd out private capital. Im pleased to present an overview of huds Housing Finance reform plan we submitted to the president last week. Hud supports millions of families with affordable Home Ownership opportunities through the federal Housing Administration and Credit Access and liquidity in the Mortgage Markets. During the financial crisis, and because of the policies of the previous administration, fhas Balance Sheet swelled to 350 and 400 between the years of 2007 and 2018. Our reform plan will reduce the federal governments outsized role in Housing Finance and protect taxpayers. To that end, i ask congress to work with the administration on four key pillars. Number one, return fha to its core mission of serving low and moderate income families, including first time home buyers who cannot be served through traditional underwriting. To protect american taxpayers number two, from the risk of bailouts. Number three, provide fha with the tools they need to mask the risk associated with oversized portfolios, and to provide liquidity to the Housing Finance system. Our reform plan continues many recommendations. But for the same of my oral testimony today, let me focus on just a few. First, return fha to its core mission. We ought to allow the private market to work. In those areas where it cant or wont work, we must make certain that we target programs to borrowers, not served by traditional underwriting. Historically, this has been fhas most important contribution to the american Housing Market. Facilitating earlier entry into home oiwnership for these families, particularly first time home buyers. Without insurance, millions of lower and middle income families would lack access to affordable mortgage credit. Refocusing on core mission will strengthen the ability for borrowers to avoid foreclosure. Credit policies should be better coordinated in order to allow qualified borrowers to access responsible and Affordable Credit options. Our plan proposed that hud and fhfa will coordinate to insure they serve defined roles within the marketplace. Hud recommends that congress establish fha, the department of Veterans Affairs and the department of agriculture as the sole source of low down payment financing for borrowers not served by the conventional Mortgage Market. Third, to better protect taxpayers, we need to strengthen fhas Risk Management systems. Fha currently insured more than 1. 4 trillion in mortgage debt. Meanwhile, jenny mae has over 2 trillion in Mortgage Backed securities. Its imperative they conduct their business in a manner that protects american taxpayers. Fha must maintain an appropriate level of capital reserves. Its unacceptable for the agency to ever again require a draw upon taxpayers funds to sustain its business as it did in the previous administration. Our plan strengthens fha governance and fills it well above the 2 minimum to sa safeguard against market decrease. To fulfill this duty to taxpayers and to insure it continues to pr