Getting the benefit and availability of the site committees. We do believe we would get additional takeout from higher attach servicing of these loans with the policy changes that weve made. On the origination side, we are increasing premiums to some degree, 10 basis points on an annual basis. You think its important measure to take given what the fundies. We are very mindful that we have to be careful about adding additional cost on to new borrowers on loans that frankly are already profitable and starting to develop a cushion for fha. But at the same time, we need to ensure we can bring in additional revenue, which will be helpful for the fund moving forward. We are reversing a policy that has been not longstanding, but standing since around 2000 of automatically canceling mortgage Insurance Premium vanilla amortize to a 78 of tv. We have reversing the policy and making sure the Insurance Premium remains with the log. Fha is insuring the blog for ongoing period of time. We dont get off the risk with the mortgage Insurance Premium went away, so we feel it is important to be receiving the revenue. We know we have some default that happened after we canceled the mortgage Insurance Premiums on those loans. So this is an example i want to say of having a robust Risk Management office. It is the Risk Management office and looking at the analytics that understood that this was becoming a weaker and bigger problems particularly in a bill rate environment for the self amortization was happening very quickly because Interest Rates are low and on the other hand, we are in a place and time of Property Values were declining. This is a policy that mightve made sense in 2000, but it doesnt make sense today. And having an office that can really dig into these kinds of information and make policy changes they somewhat were finding. So im not going to go into every action that were taking, but i hope what people see from this is we are continuing to be aggressive about taking action and ensuring we can put the phone in the best position possible while balancing the need to provide access to credit for wouldbe home buyers and healthy neighborhoods in the nation frankly keep this fragile housing recovery going. Its attending medical very much. [applause] thank you so much. That was a remarkably clear and informative presentation in a short time. We appreciate that. And now its my pleasure to introduce our impressive panel. Well go in order. Roberto quercia misdirect her of the usc center for Community Capital where he leads Major Research projects related to low income homeownership, mortgage lending, said private predatory lending and financial services. Very called to call this honora key part or in housing issues and were thrilled to have him here today. David stevens is president and chief executive officer of the mortgage banking association. He was president of him as first commissioner in 2009 to 2011 and has more than 30 years of experience as executive and Mortgage Finance even though hes only 25 years old. Joseph tracy is a Senior Adviser to the president of the Federal Reserve bank of new york, where his work focuses on urban economics. Joe has recently coauthored several papers on the fhas Risk Management and brings a wealth of expertise to the panel. Susan wachter is the professional management and release a finance at the wharton school. Even more to us, shes an active member of Mortgage Finance working group, a coalition of housing enhance experts, Affordable Housing advocates and leading academics the cafe regularly to grapple with many challenges in this area. And last but certainly not least on a familiar face, sarah rosen wartell. Sir is currently president of the urban and the two, a farmer partly a cofounder of cap as she served for many years as their executive Vice President and shes responsible for so much of the work weve done in this housing area. Prior to her time at cap, they served as president deputy assistants for Economic Policy msn adviser to the fha commissioner. She is also an active member of mortgage command working group here moderating our panel today will be Nick Timiraos of the wall street journal. Previously he covered the 2008 president ial election where he travels at the obama campaign. Alter the podium over to you now. With everybody take a seat. Thank you all. Im really looking forward to our discussion this afternoon. Instead of doing opening statements, alaskan of a generic question that can help frame the discussion this afternoon and then we will go from there. Since sarah, i will start with you in alphabetical order by somebody at the end of the alphabet. The question i pose to all of you is maybe if you could identify which you see as the most important lesson that we should draw from the experience of the past five years with respect to the fha. A part of that and id also ask is whether lawmakers and taxpayers should be prepared to accept some level of loss given the deep housing recession we found. Ill start with you. I just have to say how much fun it is for me to be back at cap. I think i think the big lesson regarding fha is that a core concept of the federal housing policy if it didnt work as well as we wouldve liked. It wasnt as nimble as it couldve been in the crisis to protect taxpayers from lawsuits. But the key idea that fha was created around with this notion that at times when privacy trust in the market, preventing the bubble bust, preventing him in the nation of access when they have good reasons to reduce house prices from not wanting to put new capital at risk. If there isnt an alternative in the marketplace, the economic pain from not upanddown cycle is heart rate. But it has is absolutely the case that fha is going to take losses for the business giving 30 house price collapsed. There was unprecedented in anyones contemplation since the great depression. But the idea of than doing it it not only prevented greater losses on the books that fha already had. Like much private understood. Not only would fha take far greater losses than on the prices, but it did gses, other lenders that have a stake in your health wouldve taken far greater losses. The Balance Sheets of American Families have taken far greater losses because its not simply the individuals were able to sell their homes to people who had new finance team and could move to a new job or downsize when they couldnt afford the name. But the people who didnt sell their houses or didnt see home values collapses first they wouldve if they had not been credit availability. So having a countercyclical break, ideally one we could make more flexible, having not is an essential tool of Public Policy. And if that means you think about what we sent on a whole array of policies, i think we will avoid ultimately longterm taxpayer lawsuits, but its unclear. But if we do not, those are probably still going to be modest in comparison to the cost we are avoiding. Susan, anything you take away her out . Sarah actually goes right to the key point. The system is very cyclical. A privatesector system will always have elements of principality to it. Thats part of what we get with the private sector. Having a commercial mortgagebacked Security Market where prices there fell in the market and puts america at, ceos, through prices plummeted. By the way, that market has come back in that volatility and market a something that is perhaps of concern to the public. But when it is involving his peoples homes, of course that involves families, wealth creation, both destruction and it goes further to issue the facility of time and mic democracy if we destroy well. It also has implications for the Financial System because housing or backed by housing is the Financial Systems depend on. Its exactly what happened. So to counter that is the role they should play and should play. Taken in quite a different direction, implementation of that means that fha did not and should not have attempted to compete with the private sector when its put out loans in 2005, six and seven. At that point, the fha market share plummeted. There were some recommendations that will be fha needs to keep its market share. Why doesnt intend to compete . Thats exactly what it needed to not do to protect itself and future borrowers. Thats it that they what it did do. On the other hand, Warren Buffett said when the tide goes out and takes her close youre standing there. But i did go out and we did the imperfection in the fha model. So to intrinsically good lending standards and the commissioner just pointed to that. Show, beyond commerce locality, any lessons you think we have to study from the experience of the past five years . An important lesson is trying to do everything we can to be as transparent as possible. I think a key element of the arguments over what fhas countercyclical lending assist the Housing Market gets back to something often times did you seek equal, which is the ability of the homeownership experiences backing up. Subsidized credit of itself is not a longterm solution for unnecessary market adjustments. The question then is how the fha been doing it sustainable homeownership and barretts key in terms of do we have the right match irks that allow us to get the best insight into the. Homeownership is really about the borrowers. From the time they come into the fha system to the time they end. The challenge in terms of data and i think its a very good program, and internal refinance programs active in the fha means the number of borrowers go through multiple fha mortgages over their course and time at the fha. The metrics to allow you to follow the borrowers across his mortgages. If we want to ask what percentage of borrowers came in in 2007 have defaulted for successfully paid off the mortgage and all the credit race to the fha cant look at the data to make that determination because the borrower may have refinance in 2010 soccer looks as if the 2007 mortgage is paid off and therefore is a good outcome. A subsequent default is either not counted or misattributed to the year to streamline its place. Its not that its infeasible to link these together. The odd report goes into detail how in some cases the litter for five packages to get back to the purchaser must have the system. If my technical problem, but from the transparency standpoint we want to know what percentage of borrowers, how are they doing . Thats also going to become when we talk about the analysis of the economic alley with the fund an important question in terms of how the analysis is done. I think it should be borrower based and not marketbased. A few years ago, the fha had said they stay essentially wouldnt come. And technically it hasnt yet read the fha hasnt had to draw on treasury. That seems to be one of the could of the benefits of the fha provided to the markets. Theres a criticism updated the fha has perhaps strayed too far from its original missions. You think thats a fair criticism to the point in time we are in right now . So you know, you could argue that this thc and the fha have programs, so we have this dialogue about getting private dialogue in the market with a much broader discussion. Its interesting this debate has sued as a result of the most actuarial. Fha somewhat of a Great Success story leading up to this that the gics failed well over 150 billion of conservatorship. T. A. R. P. Funds paid out to many Financial Institutions to keep them afloat. Here the fha has been doing three and half financing and very low credit score borrowers of the 2005 to 2009 book years and despite all that finally had to send who showed the fund could go negative and for those of you who fit the actuarial, thats only in the run of scenario and quite frankly every assumption, the fund never goes negative over the long term. So yeah, its definitely common beyond. The loan limits doing this large jumbo mortgages. Some could argue this going well beyond and providing liquidity where we would not be financing in most markets. I dont believe those are components to risk per se. Theres definitely a question about mission, but larger loads are not concerns of the fha portfolio. If we bifurcate and study the portfolio itself, its the 2005 to 2009 book years which are causing performance problems prior to changes referred to the mortgage Insurance Premium increases have clearly changed performance outcome if it were for the time, 11 and 12 oaks come up with the impact of the fund would be significantly worse. We need to be careful not to overcorrect an environment where the portfolio is looking to be strong and continues to be a story about down payment assistance tinkering risk measures during the period when the market share went to well and allowing a credit discipline to be removed from the organization, which is clearly not the case. Roberto, folks who look and say 70 years and an agency that never requires treasury assistance, should we be given all of the things the panelists here be willing to accept some level today . [inaudible] i do not think that fha has strayed from its mission. In the first place competing the other end that way provides stability and supports the margin at times provides to credit worthy families in the market to create and innovate new products. [inaudible] be created and popularized a 20 down payment at 10 down payment in 1961 for many decades. So i think the reason why fha went to 700,000 plus people in california enabled the lending. In recessionary times, to me that role in the Current Business lays down with what the original mission is. But eventually was a normal adjustment. [inaudible] so when we look ahead to the next couple of years and we can have a discussion later about long term of fha, but in the near term, are there additional steps the fha ought to take to protect itself against losses . One example when you had fha proposed he will to capsular concessions, which are a 6 . The rulers and proposed a couple of times. I dont think weve seen a final rule. Loan limits are extended after they fell and were extended to does the gac for the First Time Ever you could get an fha loan larger than the gics known. Dessert tool on the table. Everything changes about this race pricing that fha ought to be considering . Welcome be brought up a few measures. I think fha should not have policies in place to a collection of that regard. But let me talk about the risk based pricing. I think one of the Mission Roles fha has served as an access point for demographics that otherwise would not gain access in the home buyer market. If you look the way gse price mortgages today at the height of tv under the curve, it gets extraordinarily expensive to get access imac causes outcomes that are not beneficial to the Housing Market. If you can control credit score, ability to repay variables, the down payment should not be a variable until you get into a distress scenario and you can control distress by making sure the qualification standards are there. That being said we dont down payment is the single biggest barrier to homeownerships and particularly impacts those borrowers who dont have large amounts of inherited wealth or disposable net income. That is heavily predominated by firsttime home buyers, africanamericans and hispanics. 80 of all mortgages lasher testers or other resource. Check it or not, those phones are expected to perform profitably for fha. So my worry would we miss you ultimately create societal impacts that dont reflect whats originated in the first place. So i think the focus on credit quality in terms to create the most important measure to take that overcorrect in the way that has unique outcomes demographically as a result of who gets access to homeownership in an unnecessary way. Anybody to add . The fha doesnt have too many mothers. You can raise down payments in Insurance Premiums four times over the past two years. Would you have a concern that she began to raise premiums so high you trifle with the best credit and have a traditional insurance deterioration for you now are bringing on the weakest credits while driving everybody else away. We be tricky conceptual issue, which is if we thought the business that fha was originating today were not going to pay for themselves under most reasonable economic scenarios. Then it would make sense to either tighten credit further and we have been raising the cost of love. We are able to do that today because we are in a low interest environment, but we may find ourselves in a different environment in which those dynamics will have its choices. But the fact is the actuarial estimates are the fha books of business Going Forward for more than pay for themselves. What were looking to do is pay for the losses occurred when we were knowingly playing a countercyclical role in the message to the private sector would do. But fraser uses intertemporal process and thats an inherent to some extent in any insurance model and fha does it for a public purpose to stabilize, but there is a point at which economists argue that its not rational for us to charge todays home buyers more than it costs us to pay for the cat. Similar shamanic national emergency. It is katrina of the Housing Market and maybe the Public Sector the economists argue we should write to treasury and the Housing Market and we should go back to charging home buyers that is rational for the insurance. I dont think we either have the political will or ultimately the Financing Mechanism to pay for the bubbles when they come. I think we should do that. But theres limits to how far. Its limited in fairness to th