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 secretary of housing and urban development, both of whom have submitted reform proposals to the president , as well as the director of the federal Housing Finance agency who serves as the regulator conservator of freddie mae and fanny fannie mae and freddie mac. It marks 11 years since the government bailed out and put those where they remain today. Prior to 2008 the Government Sponsored Enterprises held . 45 in capital for every 100 in capital for every 100 in mortgages guaranteed. Now they hold just . 19 after a 200 bailout from taxpayers. 11 years later these systemically Important Companies continue to be too big to fail and are more leverage than they were before the financial crisis. Taxpayers inevitably remain on the hook for the next market downturn. In march pres. Trump signed a memorandum directing the department of treasury and urban development to develop a plan for administrative and legislative perform of the Housing Finance system. Many of the recommendations and the plans released on thursday are consistent with my outline to fix the finance housing system including attracting private protecting taxpayers against future bailout and promoting competition as well as preserving certain incremental reforms that have already taken place during the conservatorship including a transfer of credit risk, a single security and common securitization platform and loan pricing that doesnt fairly vary based on the size of the lender. It has not an acceptable and my preference remains to fix it through comprehensive legislation. Five years ago this committee demonstrate that was possible. We came together to advance a comprehensive solution on this topic. This year i released my housing reform outline which holds on the principles of that are for. Outlines for permanent, sustainable housing, a system that protects taxpayers by reducing the systemic too big to fail risk proposed by guarantors and preserves the existing infrastructure in the Housing Finance system that works well while significantly increasing the role of private capital. It establishes new layers of protection between mortgage credit risk in taxpayers and ensures a level Playing Field for all sizes and types while locking in uniform, responsible underwriting standards. It promotes broad accessibility to mortgage credit including in underserved markets. Only congress has the tools to necessarily provide the comprehensive reform to our system that will be durable through any market cycle. It is important for the administration to begin moving forward. With incremental steps that move the system in the right direction. After 11 years of conservatorship it is long past time to make the hard decisions and address the business of this financial crisis. Sen. Brown . Welcome back to my colleagues. We are going to hear from the Trump Administration today about the next steps on Housing Finance reform. It is clear from the plan they put out x week what trump thinks these should be. It will make mortgages more expensive and harder to get. We should not have to tell president we have an Affordable Housing crisis. We all know it and we see it. I see it when i talked to residents of manufactured Housing Communities 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 the community. I see it when i drive past boardedup houses that the lungs to the victims of predatory lending in cleveland in my neighborhood of Slavic Village and it happens across the country. When i talk to young people who want to buy a home but drown in student debt and cant save enough for a down payment or afford a mortgage, these are the crises facing real families across ohio and our country. They are homeowners, former known homeowners and have one thing in common. They cant afford places to call home. We talked about what it would take for the finance system to work for working families. In march we held two hearings with representatives from the guild of homebuilders, the Credit Unions, civil rights communities and multifamily lenders. We heard during those hearings at affordability and access are not just components of Housing Finance but the whole reason we have a Housing Finance system. They cant be an afterthought once weve answered other questions. They have to be dealt into the system. We need a system that will help renters, no matter who they are or where they live. We need policies that focus on increasing service for underserved markets like rural areas and manufactured housing homeowners, and borrowers locked out of the market for decades because of discrimination. It helps a wide variety of vendors and borrowers to participate so they can be the needs of all families particularly those who have been left behind for generations. In march hearings and the hearings since weve heard remarkably around principles for conform reform. They have said reform should protect access to affordable fixedRate Mortgages. It should provide a catastrophic government guarantee. We should structure guarantors like Public Utilities providing a regulated rate of return. They said we should serve a Broad National market and blenders of all shapes and sizes equitably. They said we should maintain a duty to service all borrowers, they said we should expand investment in Affordable Housing, and maintain successful multi Family Business model to ensure continued are better access of Affordable Rentals for housing. Yet unsurprisingly pres. Trump and his administration missed the point. Rather than create a system that addresses the needs of working families the administration has put out halfbaked proposals that will make mortgages more expensive and harder to get. In addition to increasing costs it would get the existing tools that we have to help underserved families finally find an Affordable Apartment or on their first home. The president s plans would roll back Consumer Protections or disclosures put in print place following financial crisis. Lets be clear, whether you are renting or want to buy a home or own a home and want to sell it, pres. Trumps plan hurts you. All to funnel, no surprise, more money to the same wall street system that wrecked the Housing Market and wrecked families lives in 2008. I thought this might mean hope against hope leveling the Playing Field for communities of color, young households trapped by student debt or renters who cant afford to save for a down payment. You can imagine disappointment when i saw that all nine proposals was about leveling the Playing Field for wall street which is looking to play make more money off of working family more mortgages. We shouldnt be surprised. The white house looks like a retreat for executives and plans about making it easier for wall street, the president and the president s home city making it easier to profit off of hardworking families. The planes come in the midst of other troubling proposals to get a bedrock civil rights law and the Community Investment act. Taken together the president is once again deciding to betray working families in youngstown cleveland and baltimore. Secretary carson, baltimore the city that is so beloved, once again decided to sign with wall street over the dignity of work. We dont need to make it easier for wall street to get richer. We need to quote sec. Carson. Newsflash, rich people are going to get richer anyway. Housing should not be optional. Its a basic need and no one should go without it in this great country. Witnesses are the hon. Steve mnuchin, hon. Benjamin s carson, secretary of housing and urban development and mark calabro director of the finance agency. Sec. Mnuchin you may begin. Ranking member brown and members of the committee, i am 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. I would like to thank the chairman and committee for the work on this important issue. The outline that you released was a productive step of ensuring the safety and stability of our finance system. In september 2008 Government Sponsored Enterprises fannie mae and freddie mac were put taken the provided 190 billion in taxpayer assistance. Later they continue to be supported by a treasury commitment. The continued conservatorships have perpetuated farreaching government influence over the Housing Finance sector. It has left taxpayers exposed to future bailouts. It includes almost 50 recommended actions which would reduce the role of federal government, protect against future bailouts, increase privatesector competition in the house. As required by pres. Trumps directive, a can and should be reformed to ensure safety. No law describes the endpoint for conservatorships. No conservatorship is meant to be permanent including the fha management of gf c. Treasury reform plan takes great care to preserve what works in both system. Each of the recommended reforms are incremental, realistic, and balanced. In particular it would preserve the Government Support of the 30 year fixed rate loan which should be explicitly defined tailored and paid for. It is recommended that congress pay for the full credit of the federal government limited to the timely payment of principal and interest on Mortgage Backed securities. This guarantee should be available to any other f hfa improved competitor. The Regulatory Environment should be harmonized so the gscs is on a Playing Field. The gscs has a competitive advantage under the queue and patch to the Consumer Protection finance bureaus ability to repay rule. Announced that this wouldnt expire january 21 or after a short extension. The treasury supports the planned expiration and further revisions of the ability to repay rule to ensure that have safe harbor after the patch. Finally i must emphasize that the administrations preference is to work with congress to enact comprehensive housing reform legislation it could achieve longlasting structural reform that taylors explicit permit support of the secondary market and repeals charters and other statutory privileges that give competitive advantages. At the same time we believe it can and should proceed legislatively. Administrative actions will be supported to enhance regulation, promote revit sector competition and satisfied preconditions set forth in the plan for ending conservatorship. I am proud of the work weve done to create conditions for greater economic growth, better opportunities for working families and higher wages for all americans. I look forward to discussing finance reform and hope the committee will work with us on a bipartisan basis to move forward with legislation. Thank you and i look forward to answering your questions. Sec. Carson . Ranking member brown and members of the committee thank you for this opportunity to appear before you today to discuss how the department of housing and urban development will support efforts to reform the nations high financing system as well as think the team. We say we have the Ugliest Building but the best people and special shout out to mike kelly whose birthday is today. Since the crisis the federal government has continued to play an outsized role in the financial housing system. It is imperative that congress and the Administration Act to refocus the system so we report access to credit and ensure Government Programs do not overlap with and crowd out private capital. Im pleased to present an overview of the finance reform plan that we submitted last week. Hud supports the families with a home owning opportunities through the federal Housing Administration providing Credit Access and liquidity in the Mortgage Market. During the financial crisis in because of the policies of the previous administration, growing to approximately 350 and 400 respectively between the years of 2007 and 2018. Our reform plan will reduce the role in finance and protect taxpayers. To that end i ask congress to work with the administration on 4 key pillars. Return fha to the core mission of serving low and moderate income families including first time home buyers who cannot be served through traditional underwriting. To protect taxpayers from the risk of bailouts, and provide fha and ginnie mae with the tools they need to manage risk associated with oversized portfolios, and to provide liquidity to the Housing Finance system. It contains many recommendations but for the sake of my oral testimony let me focus on a few. First, return fha to its core mission. In those areas where it cant or wont work we must make sure we target programs to borrowers not served by traditional underwriting. This is been the most important contribution traditionally facilitating early entry into homeownership particularly to firsttime homebuyers. Millions of lower income families would like access to Affordable Credit. Refocusing the strength and the ability to help credit worthy borrowers to avoid foreclosure. Second, mortgage policies should be better coordinated in order to allow qualified borrowers to access a responsible and Affordable Credit options. Our plan proposes that hud and fhfa mccord need to ensure that Fannie Mae Freddie mac and fhfa play reserved roles in the marketplace. The department of Veterans Affairs and the department of agriculture as the sole source of low down payment financing for borrowers not served by conventional Mortgage Markets. Third, to better protect taxpayers we need to strengthen the riskmanagement systems. Fhfa ensures more than last trillion dollars in fannie mae guarantees 2 trillion in mortgagebacked securities. It is imperative that businesses conduct did in a manner that protects taxpayers. Fha must maintain an appropriate level of capital reserves. It is dashed to sustain the book of business as it did in the administration. Our plan strengthens governments and builds the capital ratio well above the statutory minimum to safeguard the agency against episodes of market decrease. To fulfill this duty and ensure that it continues to provide Affordable Access to mortgage credit for Mission Mission focused borrowers, protocols that government staffing procurement and Tech Knowledge he and therefore the plan recommends that Congress Enact legislation that would restructure fha as an autonomous Government Owned Corporation within hud. The president ial memorandum provides an opportunity for congress in the administration to Work Together to ensure that fha and fannie mae their missions sustainably. I welcome the participation and reforms. These agencies better able to fill responsibilities to borrowers and the american taxpayers with that corporation. Thank you and i look forward to answering your question. Director calabro . Ranking member brown and members of the committee thank you for the invitation to perform this hearing. I can think of few systems deserving of attention. The finance system is an urgent need of reform. I want to thank secretary mnuchin and carson to produce planes that build responsible roadmaps that protect taxpayers and maintains access. I also want to thank secretary mnuchin for the opportunity to have offered commentary during its development. These are broadly consistent with my top rarities. First, to cement fhfa as a worldclass regulator and restore fannie and freddie. The process to and conservatorships, i will note the longest was 18 months. A root cause was imprudent mortgage lending backed by insufficient capital. I believe this problems problem remains unresolved. The Enterprises Share of load down payment are back to 2004 levels feeling with mortgage credit from uncapitalized is a mistake and will end with disaster. The enterprises are not equipped to sustain a downturn. It can bond 5. 5 trillion in singlefamily and multifamily ordinances out of a 12 trillion combined market. With just 6 billion of allowed capital they combine leverage ratio of nearly 1 they combine leverage ratio of nearly 1000 to 1. In comparison institutions have a ratio of 10 to 1. The fast illustrate this example. In the last crisis housing prices declined by 27 . The results modeling 20 decline and lose over 40 billion in capital. We should actually expect greater price volatility Going Forward. Let me also emphasize our current plan undercuts sustainable homeownership. They have expanded with the economy and maintain risk that ensure th