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ask he was a policy reporter on the details of the bipartisan immigration. see spans "washington journal" joint and the conversation tuesday morning on c-span, c-span now or online at c-span.org. the director of the federal housing finance agency senator thompson home appraisals federal homeowner banks liquidity the hearing before the house financial services committee runs nearly four hours. [inaudible conversations]

[inaudible conversations] the committee will come to order without objection shares authorized to declarede recess o the committed any time. this hearing is entitled the f hfa oversight protecting homeowners and taxpayers. without objection all members left five legislative days within which to submit extraneous f materials to the chair for inclusion in the record. i don't recognize myself for four-minute opening statement. this morning the committee will hold a hearing called federal housing oversight protecting homeowners and taxpayers. this is our committee second hearing on the government's role in response to the housing base

by too many americans in as many weeks. we are fortunate to have the f hfa director sandra thompson as our witness for the second time in her two years as head of the agency director thompson to set along with over 20 years experience with the federal deposit insurance corporation followed by 10 years at f hfa thank you for being here director. let's address the elephant in the room. fannie mae and freddie. >> are under government conservative ship near 15 years eco former directing ed demarco we are asking a lot of our director to act as a regulator and conservator for fannie mae and freddie. continue to make what would be otherwise private business decisions while also regulating the enterprise. as long as they are under conservative ship the agency primary focus should be raising enterprise capitol maintaining

their narrow charter and mission. in many respects housing finance looks dramatically different than it did back when the agency was created in 2008. according to recent research non- bank companies now originate 71% of agency backed loans 86% of government-backed loans. banks have all but retreated from the servicing and loan origination business the cause of bank capitol and liquidity rules implemented in the dodd frank regime. main all in 2008 the feds are buying mortgage-backed securities for the first time as a temporary repeat temporary response to the financial crisis. but now they own nearly a quarter at 25% of all one -- four in the country. it's only recently started trimming $2.7 trillion in mortgage-backed securities. generationally high inflation out of control government

spending have made housing affordability worse with mortgage rates hitting 20 years hi last fall. gse somehow becomes even larger. we have to realize these outcomes are the result of action taken in this very room over many years. it's hard for me too see this as a good outcome. having lived through the obama ,trump, and by administration. note serious collaborative reform to the gse. and sure the has a tremendous influence of our housing market and the american economy director thompson has been active to revamp and expand the role this includes a questionable politically driven equitable housing lending mandates. to the technical improve in the process for new product approval continuing to build enterprise capitol. members can decide for themselves of changes are good or bad it's clear if you favor a more limited scope for

government's role in housing as i do you are probably out of luck. we're trending in the wrong direction for over a decade all this brings to this hearing for congress to do his job provide rightoversight and accountabilio f hfa too many instances it appears they've allowed safety and soundness to take a backseat to advancing to the gse. earlier this month agency resent it's unworkable debt to income -based fee went on the opaque process that used to set gse pricing adjustments. the agency also has to be focused on the safety and soundness not only of fannie and freddie but the 11 federal home 11 federal homebanks given whatn the banking market that is a critical issue. i now turn to the ranking member for a four-minute opening statement. >> thank you very much good morning all. i am pleased to welcome director sandra l thompson before committee this morning earlier

this month federal housing finance agency made a step in the right direction to low level price adjustments in the way that ensures great credit scores not enough for a down payment particularly in today's housing market. they are not unfairly penalized compared to similar with higher income unfortunately republicans are continuing to spread misinformation about the new pricing framework and regurgitate alternative facts about what this actually means even after their own witness debunked their claims last week here are the facts yet again. these changes will not result in higher bars n subsidizing lower scrap credit scores ed demarco

was invited by the republicans to hearing last week stated these price changes are not focused we are focused on making sure across the grid we are making a rate of return efficient the capitol that has to be raised." in fact these changes follow through and acted by the trump administration more importantly our nations housing and homelessness crisis worsens across rural and urban communities the changes will correct for subsidies that benefited wealthier individuals purchasing lavish vacation homes and investment properties for over a decade. i would also like to point out director thompson's updates to the pricing framework will benefit constituents everywhere. including the district and north carolina the subcommittee chair

district in ohio. for home buyers will pay some of the lowest fees among all enterprise growers. my colleagues on the other side of the aisle are more concerned about the protecting the wealthy even if it comes at the expense of those with less intergenerational wealth. i for one support the effort to expand the american dreams of homeownership. finally i would like to close with this. despite supporting a debt ceiling increase three times under trump despite president biden making a generous offer of level funding the government republicans continue to threaten economic calamity including chaos in the housing market that would raise mortgage rates well over 8%.

their plan also eliminates 100,000 jobs were teachers but millions at risk for homelessness and undermine health insurance to 21 million americans for the fact republicans are up in arms modest pricing adjustments their own republican witness reports while ignoring the devastating costs and the harm of that feeling brinksmanship shows everyonewi undermining biden wil undermining america. committee house democrats will continue to support policies that help every family live with dignity. vote for the housing or form reformcleanly raising the debt ceiling. i look forward to director thompson setting the record straight today and with that i yield back. >> a gentle lady yields back. recognize mr. davidson for one

minute. >> director thompson thank you for joining us today. this hearing comes at a critical time as consumers are struggling with inflation. much of which could be a sherbet in the housing costs. the housing finance agency may not be the most well-known agency your credit score redistribution plan has captured everyone'sbu attention. in response to our letter and market feedback i am pleased you have withdrawn a portion of your llp a changes debt to income ratios, thank you for that. nevertheless i am confident you will hear additional work remains toea be done. as both a regulator conservator i will remind you the conservatorship for fannie and freddie has lasted longer than brittney spears conservatorship did. between that the credit score redistribution plan bypassing traditional title insurance, limiting consumer credit information and federal home loan bank oversight there's much concern about thee current foc. i am sure these will be discussed today and i look

forward to hearing your t answe. >> a gentleman from missouri at mr. cleaver the ranking member is recognized for one minute. >> thank you, mr. chairman. thank you madam chair for being with us today. housing is roughly 15% of the gross domestic products. 30% of emplacement and the largest among american families according to the federal reserve the wealth of a homeowner is 40 times greater than that of a renter. address the lack of housing supply and preserving the opportunity for homeownership for the average american requires deliberate and sustained action. unfortunately some my colleagues in congress have abandoned what i believed to be a very significant issue as it relates to housing. we have not done very much discussion or action lack of

action i look forward to hearing director thompson this morning and thank you again for this hearing. >> demo is back today we welcome tessa t my the honorable sandra thompson of the federal finance agency. we thank you for being taking him to be with us again before the committee of the recognize for five minutes to give an oral presentation of your testimony. without objection a written statement will be made part of the full record director thompson you are now recognized for five minutes. >> thank you. chairman ranking member waters and mr. hill distinguished members of the committee. i am pleased to be with you today to discuss the work facing her housing market. my last appeared before this committee in july i spoke about

my career as a federal safety and soundness regulate the safety and soundness of a regulated entities is a key component of all policy decisions for. >> if you pause for just a minute? could you pull the mic closer to you it will extend up closer thank you so much. >> thank you very much. i think the director. i appeared before this committee in july i spoke about my career as a federal safety and soundness regulator. the safety and soundness of a regulated entities is a key component in other actions we take. in the home loan bank system and not achieve their missions without a continued and unwavering focus on safety and soundness. as you know home prices have sorted recent years mortgage interest rates are higher than they have been's is a record low interest rates experienced

during the pandemic. in addition the countries and with the housing supply shortage simply there are not enough houses especially for first-timo homebuyers. many young adults people just starting out collegeng graduates below have been renting for a a while along members of our required them to live or they work. such as teachers, policemen, firefighters and other first responders who cannot afford homeownership or if they can buy a home they have to move far away from their places of employment to find a home they can afford. this is true for people across our country and both rural and urban areas. most first-time homebuyers cannot afford to put 20% down on a house $40000 on the 200,000-dollar house and $60000 on the 300,000-dollar house. these are credit worthy people

who are paying their rent, utility, other bills on time they simply cannot afford a large down payment. the pricing changes we have made will help most first-time homebuyers by eliminating the upfront fees. we were able to do this because the return the enterprise has earned on second homes and vacation homes, investor homes are more that enough to offset t first-time homebuyer upfront fee. but unfortunately the reality is either with no upfront fees the first-time homebuyer still pays higher overall mortgage costs than most other homebuyers. pricing for loans is complex so i would like to take this opportunity to provide more context and clarity so the public can better understand why we made changes to the outdated pricing grids updated the pricing framework for three

reasons. one to update grids that had not been changed in almost a decade. two, help credit worthy creditworthyfirst-time homebuyey income wealth across this country and three to enhance the safety and soundness of the enterprise by building capitol. this reduces the risk to taxpayers borne the burden of supporting the enterprises since they placed into a conservative conservatorshipin 2008. the pricing grids prior to these changes have not been updated in many years were not fully reflective of the capitol framework that govern the enterprise requirement in fact acmany low to moderate income borrowers were overcharged some borrowers were under charge compared to the capitol requirements. but most importantly and i want to be very clear on this key point which is one that bears repeating. and the new pricing grid

borrowers with strong credit profiles are not be penalized at the expense of borrowers with weaker creditof profiles. put another way, even with reduced fees borrowers with lower credit scores and lower down payments will continue to pay higher overall mortgage costs and bars with higher credit scores and higher down payment. the purchase of a home is a complicated transaction and homebuyer should have accurate information to make the best decisions possible. understanding how mortgage insurance by law the enterprise cannot purchase alone with the loan to value greater than 80% which means if someone puts down more than 20% or more 20% or less they have to have credit enhancement to protect the

enterprises. most of the time of this credit enhancement takes the place of mortgage insurance. borrowers must pay for this in addition to their guaranteed fees this does not show up on the pricing grid and it is why many loan-to-value ratios greater than 80% of what looks like lower fees but you have to add the mortgage insurance premiumsmo to these loans to gea more complete picture of borrower costs. the less down payment you have the more it mortgage insurance coverage you need and the higher theco cost. the recent focus on pricing rings needed attention to her housing affordability challenges. housing makes up 16% of u.s. gdp and for most americans their home is their largest asset. owning a home is the primary way for hard-working families to build wealth and pass it on to

their children and grandchildren. and for renters, their rent to bill is usually the largest expense that they have every month. every american deserved safe, decent, affordable housing. we would love to work with this committee to come up with ways to address the increase in the unattainable american dream of owning a home. i am sure if we work together we can find other ways to make housing more affordable so people who have had their dreams deferred or denied in one day soon be in a home of their own so they can start the wealth journey that will benefit not only but their communities. >> thank you director for your testimony. y it's now time to turn to members questions are recognize myself for five minutes for questioning. the agency has a new activities rule which you worked on a mightily when you're first in office which means there's transparency around any new products and activities of the government-sponsored

enterprises. so they do not displace private sector firms are crowd out capitol. for this reason i was glad to see the rulemaking finalized in december. under this process they submit advance notice to get approval for new products and activities including any pilot programs director thompson since rules of god have you received any submitted submissions for new activities or products? >> thank you mr. hill. the new activities rule was finalized last year we spent this year implementing processes and the enterprises to submit for us to review. we deferred the implementation through april 28 told the enterprises they had new products they would have to wait until our processes were complete before they submit to the agency for our review. >> are those processes complete and open to submission? >> yes the processes are

complete we have not yet received from my perspective they have to come through our new products committee which actually we are having a meeting tomorrow and some of the products. plus you commit to notifying congress if and when the agency makes anyre decisions on any of the future submissions? >> we are happy to work with congress. i would mention that as part of the rule we have a pilot transparency so any pilot the enterprises are undertaking is posted on ourd website we are absolutely happy to work with the committee. >> i think that would be helpful, thank you. as you have been in your position over the last two years is the capitol ratios the capitol requirements is the capitol higher or lower in the enterprises than it was when he became director? x that's a great question.

the enterprises capitol rule. >> i mean the capitol itself for. >> the actual capitol? s for fannie mae and freddie. >> is a higher or lower questar. >> is higher than it was when i came into office. the enterprises are just now able to retain capitol. >> is the rule the capitol mandate is it require more capitol now or it wasn't higher when he took office? the rule itself? >> the rule was changed to allow for credit risk transfer. as you know both enterprises are the biggest holders of mortgage credit in the country. we facilitated a credit risk transfer process by making nominal changes to the capitol rule. when i came into service acting director the rule was penalizing to some extent the credit risk transfer that move the credit

risk to the private sector. we made changes not to the requirements themselves, but to the leverage of buffer. instead of having a static buffer we made it more dynamic. and we facilitated more credit risk transfer because the leverage transfer. >> are you concerned with the high interest rate and high inflation? are you concerned about the impact of inflation and high interest rates on the health of the agencies and if so do you think the capitol requirements should be higher right now? >> i am very concerned about thf our country. we are very much trying to build capital so they can continue to operate in a safe and sound manner.

that's quite a lot of capital. click saying carriage -- i we've a had a home loan bank in the past five months due to the crisis for liquidity, it's still your intent to provide legislative recommendation and if so, when you click the home loan of the poet to it this year. earlier? >> thank you.

i'm going to continue with my questions based on where we started. i am concerned about rate mortgages which talks about interest rates over the life of the mortgage. arms contribute -- i know that would prevent some of the more predatory features that were problematic back then. without fully being aware when those the homeowner knows to refinance the mortgage into a fixed rate loan and can afford to do so. the monthly housing payment increased significantly. this is especially true.

we're seeing monthly payments increasing by $1000 a month which is a financial shock for families. i wanted to talk about educating consumers about arms and how they are different and whether the volume looks like today. i really want to explore about increasing inflation. they are going to lose these homes. if anything can be done, you have to do it. you have to stop at some point. ms. thompson: thank you for the question.

i'm happy to say most are fixed-rate. the majority have low interest-rate. now, underwriters have to underwrite so instead of making the payment at 2% or 3%, they have to add the margin for the full payment when they are fully

protected. i do think the rising interest rate environment contributes greatly to the purchase activity. very high interest rates in a short period of time. i think the provisions in place for mortgages are well-suited to assess borrowers ability to repay. >> i want to -- i want to talk to you about that some more. let me go into another question. we're less than two weeks away

that my republican colleagues are threatening an economic catastrophe. if we were to default, can you help us put the framework to contest? >> thank you for the question. interest rates will increase substantially, it will be even more difficult for borrowers or potential borrowers to enter into homeownership, there will

be concern among the investor community because there are a number of -- >> the gentleman from texas is recognized. >> thank you very much, director, i'm delighted you are here. i have not provided to a copy of the letter which i would be pleased to do. as angeli, is noxious conservatorship but it is specifically about the conversation that fannie mae has grossly overstepped its authority to abolish appraisals

for refinance purpose. can you please discuss with this committee? >> appraisals are always an option. there are alternatives and people would not blame you in your home. we also have, what you are talking about is primarily for

the finances. they have to reach certain criteria and it is not the goal to ever serve in market capacity. fannie and freddie have come up with alternative tools to help the borrower and lender's long in the process. i think we have leverage technology because it provides good risk management oversight. >> your testimony today is only refinancing? >> in limited purchase properties. it has to be very specific circumstances. the borrower always has the

right. >> i would like to offer my concern over this conservatorship and i think it's important to note that this committee has outlined really wants to know about the ending of that conservatorship. can you discuss that? ms. thompson: the enterprise has been in conservatorship for 15 years. as you know, there is a huge ownership interest that the treasury interest has fannie and freddie that has been long-standing.

there are lots of rules with the impact for example, the single counterpart rule, what does that mean? right now we have uniform mortgage-backed securities. there are a number of rules would have to be considered as well. there's been lots of conversation that the decision

for the congress to make. >> i appreciate the time. i yelled back. >> mr. sherman is recognized for five minutes. >> those who do not remember history are doomed to repeat it. many in this room experience the meltdown during the 2008 with section because you had enterprises out to make a profit. turns out to be explicit, took the upside, they got the upside and downside.

now, there are those that say let's free fannie and freddie from the conservatorship. i saved not broke, don't fix it. borrowing a bit over what the u.s. government borrows and they are making money for the federal government. i realize conservatorship may not have worked well for britney spears but is working out well for us. it's a remarkable conclusion because inflation has been higher in germany or the u.k. or france has been here. covid is worldwide. policies are not.

i was going to ask that great question, the identifying of homebuyers. especially when it comes to apartments and condos. director thompson, i sent you a letter saying you don't need title insurance, you don't need an opinion letter. i wrote a lot of letters when i was a lawyer, none of them came with a guarantee. if somebody buys a home and they don't own it, all they have is an opinion letter, they have to

prove that the attorney was negligent. it's complicated stuff. i made a lot of mistakes that were not my fault. if you hope you could prove that they are adequately insured. ms. thompson: i would emphasize that the seller that they represent that the hope -- home

is being purchased that there are no superior liens and that the title is clear, and the lender has to represent that is true. i think freddie mac has been allowing -- >> i'm going to another question. fannie and freddie have talked about transitioning to credit agencies rather than a report where you need all three.

there are only three credit agencies. none of those -- you are guaranteed. ms. thompson: thank you for the question. >> thank you, mr. chairman. can you give us a brief summary? ms. thompson: certainly. i think it was october of last year.

there was a hung jury. i think it's to live. the previous trial was -- we're trying to figure out the amount. the trials coming up in july. >> thank you. can you tell me the amount of

legal defense fees taxpayers have paid so far? >> i will have to get back to you on that. it's been the past 14 years that they have participated on a high would be happy to give you this number. >> i would greatly appreciate that. >> what steps do you think policyholders should take? >> i think the private markets is important to have the balance , and helps competition but also helps homeownership because

people are competing for mortgage loans. for the past 30 years, the market and challenges which have not completely been gone but mostly, if there's any way to facilitate market. i think that would be helpful. many of the nonbanks at the end of the day, there would be more participation in the mortgage market. >> does the biden administration have a plan? ms. thompson: i don't know that

we have a plan, i have not spoken with the administration about that. i do believe that the capital requirements is important, appropriate capital, pricing and commercially viable. you want to make sure people are sure about what they are investing in. if they ever got conservatorship, they would need a huge capital raise. they also need capital requirements. >> thank you.

what role should pricing play? ms. thompson: risk-based pricing is very important. we currently have the concerns, we have issued a request for input to ask that very question. what role should the capital play? should there be -- we are looking for stakeholders to provide input on how we established returns so we can answer that question responsibly. >> the gentleman's time has expired. the ranking member is recognized for five minutes. >> thank you for the excellent job you're doing. let me follow-up. i agree with the ranking member.

our republican colleagues are threatening to default on our debt. what effect would it have on the housing market? it's important to talk about what effect it would have. ms. thompson: i believe interest rates would increase, to the extent homeowners are impacted and would not get paid. it would impact employment for mortgages. to the extent delinquencies are increased, we would have to start making sure investors are paid. i don't know how long something

like this would last. he lost a lot of confidence in the last great recession. we are just regaining the confidence back. again, interest rates are really high. you're going to get return on investors. borrowers, homeownership. >> you're talking about the private market getting involved.

it will be devastating, in other words. they are faced with losing rental assistance. this idea of defaults in america if they continue to hold the debt ceiling hostage. talking about and discussing appraisal biases. appraisal is a critical part of the homebuying process and significant attention has been resulting for borrowers of color. i understand that you hosted the

second just last week, could you provide any key takeaways from the public hearing? >> thank you for the question. we have issued over 43 million loans or data, this to help appraisal bias, we have provision so people can use tools to look at neighborhoods and pricing of homes in different neighborhoods. in many cases at lower values

with nonminority neighborhoods. most of the discussion was based on anecdotal data. people can go on our website and compute their own conclusions. i've seen a number of studies that do reflect that some are lower in minority neighborhoods. >> what about in the appraisal profession? ms. thompson: there are a number of appraisers, and it is our understanding -- >> the time has expired.

the gentleman is recognized for five minutes. >> i'm curious. do you ever meet with the president all? do talk about policies? ms. thompson: we have met with the president. >> about policies are doing for homeownership, increasing rates? if you delineated what you think is going to happen? >> we have conversations with the white house, treasury, other

regulators. of course. >> they may hear you come but they don't listen. ms. thompson: -- >> is going to have a dramatic effect. >> rising interest rates is a huge contributor. > pays to chair the sub committee, and one of the statistics is -- 100,000 people. the homebuilder associations. homeowners.

inflated interest rates ms. thompson: ms. thompson:. high interest rates are very impactful. >> what are the impacts? two they care? it's a national issue. we don't -- ms. thompson: what i said is we do talk --

>> it seems like you cannot, what your job? how can you not be forceful in saying i am an advocate for housing. your policies are killing us. please listen to me, i don't hear that from you. i'm sorry. you are in charge of examination for risk management. is that correct? ms. thompson: that is correct. >> you enforce capital requirements on the bank. ms. thompson: they do. >> he spoke about $300 billion to be able to -- about 100.

they are making progress. the problem is, as long as they are undercapitalized, it allows a whole lot of other things. in your position as a risk management officer, would you allow the banks to engage in new activities? ms. thompson: the banks would have to submit to regulators. >> the question is, if you had banks that are severely undercapitalized and they wanted to expand, would you go along with it? ms. thompson: i would have to look. >> you know as well as i do, that would not happen.

they're going to come. ms. thompson: to the extent it would help increase the capital. >> i would thank the gentleman. now, we recognize the ranking member of the house. >> thank you, chairman. director thompson. back in october of 2022, it was announced that the agency transition to a credit report rather than a try merged for gse back mortgages. i want to focus on the portion that proposes to use credit

scores as a representative for single family mortgages instead of the lower. under the three credit report system about potential borrowers. my concern is by removing one of the reports from the lender reveal, fhs is potentially leaving out predictive and positive credit history out of the credit risk assessment. while i agree we need more competitioncompetition between e agencies, i have concerns this action could have serious implications.

the proposal is more sustainable. can you explain what your agency means by more sustainable? having said that, we made several advances in technology. now there is national ending. we currently required the enterprises to get credit scores

from all three companies. when we initially undertook the credit score model update review which is a separate but related activity. if you get credit scores from three credit reporting agencies. three credit reporting agencies to one credit reporting agency. there was very little from three to two. >> let me ask you about the risk. has there been a better view of the risk that this could have on the underwriting process?

to ensure positive credit history is not left out of a borrower's credit risk. >> we have done an assessment on the differences from three credit scores to one credit score. again, the accuracy is not impacted very much if at all from three to two. we do believe that will foster competition. positive rental payment, that is something that is currently included in the underwriting systems. if people report these positive payments, they are included. they are factored in. >> would you be willing to share this information with members of this committee so we can have a better understanding of the

impact the credit report proposal could have on her constituents? >> we would be happy to provide you a briefing. >> thank you. and thank you for doing a wonderful job. quick thank you. director thompson? i with her to follow up on the concerns of my colleagues regarding the recent changes. when you compare the previous prices, they are perplexing changes. for example, a borrower with a credit score between 760 with a down payment of 15 to 20%, it will have a significant lay higher adjustment.

the same down payment would be significantly lower. you discussed new testimony to assist lower income -- would you discuss how this policy objective is way along protecting the safety and soundness? >> absolutely. they are calibrated to the new capital requirement that the enterprises are subject to. the prior grid was outdated and had not been subject to any updates over eight years. the last time a change was made to the pricing grid was in maybe 2014. since then, the enterprises have had the conservatorship capital framework. they were not changed to reflect that framework nor were they changed to reflect the new

capital requirements and so we believe your income needs to cover your expenses. new pricing rates absolutely reflect the cost of capital and other administrative expenses. >> you can see why the lower credit scores and lower down payments have a fee with higher down payments. you can see why this is concerning. people looking at this. the deities owned approximately seven point 4 trillion in mortgages at the end of last year. that is more than half of the $13 trillion mortgage market. is this why it is imperative that congress play and oversight role in fhfa director? can you discuss what you view as the oversight role of congress

in identifying risk and vulnerabilities within the housing finance sector? >> i think congress has policymaking responsibility for the entire sector. we are happy to provide any information you need with regard to how we are managing and overseeing the enterprises and the home loan bank. >> where due to the risks and vulnerability these days? >> one of the risks is making sure we have capital so that the enterprises can cover any losses. there is also the dual mandate of making sure this is provided throughout the country. that means across the country so they can have access to homeownership. i think there is a dual mandate

we have to be responsible for. >> there are remaining moments director. we have been under the conservatorship since 2008. in fh affect, it is charged with taking as regulator and conservatory. can you explain how your approach to both of these different possibilities and what you see as the greatest challenge as unique? >> sure. we believe that safety and sustainable access to credit are everything. everything we do at fha is we have examined is on-site at the enterprise. we make sure that they are accomplishing their missions in a safe and sound manner. we believe that both are attainable and it should not be either or. we have the dual mandate to

provide safety and affordable housing to americans throughout the country. >> thank you very much. >> the gentleman yelled back. mr. green is recognized. quick thank you, mr. chairman. thank you for appearing today as well. i would also like to thank the ranking member. mr. chairman, you might recall that in the last congress, the oversight investigation on the question related to tenant protection -- i see where a recent investigation alleges a page -- it is being alleged that they colluded with landlords to help

inflate rental prices using private data. the question becomes is this price setting or price-fixing software? does this pricing over the allow landlords to coordinate prices and provide rental pricing higher than competitive levels? it is a great concern because we want to make sure we protect tenants from the breaches and this looks like an odd means by which this could occur. i am concerned by how the fha might play a role in protecting tenants. can you give some commentary? >> sure.

their agency is preparing to issue a request to get stakeholder input on this very issue. our secondary market participants, they provide the funding to lenders. we asked them to talk to the lenders who talk to the property managers. we wanted to figure out why they are not using this type of algorithm to establish this. we want to make sure we are balancing tenant protection so that -- tenants certainly have rights and also, multifamily lenders that build these properties are part of this conversation. we are looking forward to getting input on our request for input. >> thank you for looking into

this. i am moved by this in part because when i was a neophyte lawyer, we were given a booklet to give suggested prices for jury actions. divorce, dwi, others. this did not seem to be a violation of antitrust laws. this was so that you create a price level that is beyond what would ordinarily be a competitive price. this smells very much of what i experienced when i was a neophyte lawyer. i am concerned to the extent that i may give you a written request. i don't want you to get blindsided.

not making a request as it relates to this. on the hearing that we had, it became very obvious to us that major corporations were buying up these properties. and that somehow in buying them, prices were being elevated. prices were being elevated. not only were prices too high for mergers but they were cutting into book poor people don't like with what rich people have. course i would allow institutional investors to purchase these multi-single-family rental properties. written we have not allow that.

>> i will heal back the remainder of my time. >> i think the chair and i think director thompson for joining us here today. i just want to join my colleagues in their concerns with the recent changes to these home mortgage fees. i have heard from countless people in the housing community, homebuyers, young and old in missouri that are adamantly opposed to this rule. you are taking money from those with good credit that have spent years saving for a home and transferring it to risky borrowers.

we all agree there is a housing affordability problem in this country. it will not be solved by punishing those who play by the rules. this is on the broader pricing change initiative after significant stakeholders. this is one step in the right direction. however, i believe you are putting the cart before the horse here. by releasing a new pricing framework without proper input first. why did the fha formally neglect request this before releasing this new pricing framework? >> thank you for the question.

the reports on pricing every year to the congress -- we also published reports that discuss what the pricing requirements are. what i would like to say is the new pricing grades do not punish people with high credit scores and higher down payments. what people forget to look at is the cost. >> the american people cannot see this any differently. will you commit to increase transparency and stakeholder input for actions like this in the future?

>> yes. we will certainly commit and many have extremely early payment defaults at the time. economic stress. could that result in more systemic risk for either one in the short term? or number two, in the longer term as did syria? with the enterprise of require more insurance. it has the first loss position and protect the enterprises. any loan that has less than 20% down is required by law to have

a credit report. >> we are all familiar with pmi. i am talking about the by merge tremors transition. they would only require two credit reports to determine consumer credit scores. i am sure you would agree that relying on incomplete and imprecise data raises the possibility of another gfp policy created mortgage prices. lenders cannot accurately price risk and manage their mortgage related exposures for flying unlimited picture for the credit files. ultimately the taxpayers will play -- paid the cost of mortgage defaults to increase. the most predictive of models is credit scores. so how would this change happen? what does your in the learning

process that be made? quick decision would be made early on, the lid would choose and they think it fosters competition and lowers the cost for the buyers. >> to all three had the same data? >> there more data than others. -- they have more data than others. >> respond to the gentleman. the gentle men from missouri is frank. -- recognize. let me speak to your availability and staff discuss these issues of significance to us. and particularly about why they're interested in fha is in

des moines, iowa. we ended up having a lot of concerns around the silicon bank -- silicon valley bank. because the fhlb had provided billions of dollars in the weeks that led up to their buyouts. whenever that happens, we will get questions about what the

priority was. if that is in fact the mission and they are backed by the federal government, how can they justify giving billions of dollars to these two banks? >> thank you for the question. some banks are certainly part of the greater financial ecosystem. as part of the report that we issued, the discussion about all this and the failure of the three banks or the two banks over the weekend, what i would say is the primary regulator of permissible activities -- we try

make sure that they are not the lender of last resort. and to the extent that if they want to advance, we certainly work with them, we assess their credit and we look at their activities. we'll get reports of examination. we have to rely on our own credit assessment. based on the requirement of law, they are required to provide advancement and advancements need to be used for home listings. whether it is all of that were mortgage-backed securities. we keep a close eye on the home.

we are definitely going to incorporate the home loan bank's role. >> thank you. i look forward to seeing that. federal homeland banks have over a trillion dollars in assets. we are also having a serious problem with homeownership or the lack thereof. is it reasonable that the federal homeland bank place i may -- a more active and aggressive role in responding to the we conducted numerous sessions around the country to talk about the role of among banks.

every session, many participants said there was more home loan bank could do to be helpful in their affordable housing possibilities so we will publish in report with suggestions made to help home loan banks better around affordable housing in respect of bags. >> look at right now by finance agency, this is a good time to look at this active role. >> the judgment recognizes the gentleman from kentucky in your recompense for five minutes from a direct purposes looking deeper thinker today. the recent changes to the price adjustments does not punish

barrooms from down payment and will impacts them but i have to draw down on your argument doesn't undermine risk. today access from any loans increased over the new pricing grid? >> yes. >> in terms of credit scores, where there any price increases on any loan for the credit score of 679 or lower? >> i don't have the chart -- >> the answer is no. but the next question, is it correct to say all increases in the ll pa under the new grad for assist with credit scores of 6844 higher? ... loans

which the pricing grid is tied to reflects both. the answer is yes. so every one of these higher fees goes to borrowers with credit scores higher than 680. thisob is the problem that membs have because our constituents have a problem with this. and may advance a political agenda of equitable housing but it does not advance a statutory mandate that you as the director have to promote safety and soundness. so, what we think you are doing here by assessing higher fees on higher credit borrowers issue were actually contradicting the statutory mandate to advance safety and soundness you're putting taxpayers at risk. i want you to take that feedback, evaluate and recognize

the fact the borrowers with the highest credit scoresit are doig the higher fees. let me follow up and answer some very good questions about the federal home loan bank system. one t of the key lessons from te bank failures is how quickly they can cripple financial institution or a home loan banks have an ability to respond mosta instantly to their members funding needs. this is particular important for community banks and credit unions who otherwise and have access to the capital markets. i hear what you are saying but federal home loan banks are not the lender of last resort. but considering the recent history would you agree any suggestion to limit access to the liquidity could have negativent consequences for financial institutions and consumers of residential mortgage assets cannot be effectively liquefied or pledged through fhlb borrowing? >> first i would like to say

evenhe with the reduced fees of borrowers with high credit scores in high down payment will always pay less then a borrowers with low credit scores and low down payment. that's the requirement we do believe it safe and sound with regard to the federal home loan banks the issue debt when a member comes in they have a large requirement. the debt markets are not open 24 hours a day. so what typically happens the federal home loan bank as the members come in they have staggered requests they have a larger request the home loan bank has to plan for and they have to shoot debt for the funding requirement. we make that planning which is appropriate for the home loan bank for. >> for a quick thank you forou your feedback just remember the important liquidity provisions home loan banks can provide here. on credit risk transfer the proposed conflict of interest

rulemakingfl exempts its their conservatorship. whether or not the enterprises are in conservatorship is no bearing whether the transaction withio a conflict of interest wh investors. i appreciate your stored capitol per credit for crt revisions made to the rogatory capitol framework which supports ongoing issues of credit risk transfer transactions to protect taxpayers but is there any reason you can think of why the sec should not write a rule that can apply to all issuers of crt or similar instruments rather than relying on clumsy exemptions that undermine efforts? >> we have no jurisdiction with the sec should or should not do to the extent they issue a rule we have a responsibility to respond and that's what we have done requests i'm just making the point i appreciate i yield back.

>> a gentlemen's time has expired for the gentleman from illinois mr. foster is now recognized for five minutes per. >> thank you mr. chair. director thompson, a variety of people are coming and coming to us individually for the private meetings ahead of time. and i. have to say when i encounter someone with your breath of experience your deep understanding of business considerations bring thank you for your years of service to our government. in post- individual financial institutions. several important financial institutions. there's painful reston's lessons in the recent past hope to

reintroduce a strengthening cybersecurity in the financial sector examine to regulate third-party service providers banking regulators with ftse and others have noted to regulate and supervise third-party providers. director thompson can you tell us the current extent of fh f a authority over third-party.

>> sure. thank you for that. we have been asking for authority to examine third parties that are counterparties to the enterprises in thes home loan banks were a number of years now so thank you for raising the issue. right now we used our conservatorshipno authority because the counterparties have contractual relationships with the enterprises but as a regulator we think it is very important to have examination authority similar to what the bank regulators have the bank service company act with their ability to oversee and examine third party critical to the regulated entities. >> i concur i hope congress moves on what i hope should really be a no-brainer on this. are you involved and vice chair bars holistic requirements?

and in particular will the report you are generating you set a due date in september really have a timeline that's useful or input into that given the importance of banks in providing liquidate? >> were not directly involved with the bank at capitol of federal reserve and other regulators are undertaking. i have committed to vice chair bar and other banking regulators to share information from the review we are undertaking on the home loan banks they are the primary federal t regulators its really important for us to continue to work together and communicate these are all in the larger ecosystem. so we will be sharing information along the way. >> your testimony you mentioned stress testing the capitol stress testing for the enterprises. and we had seen the biggest drop in host values unless 11 or 12

years. and that fortunately has not been accompanied by unemployment which is the other thing that can really wipe out capitol rapidly. what is it about the nature of the stress testing? is the stress testing you do comparable to the repeat of the 2008 crisis? >> actually complete use in much of the information published by the federal reserve and their esstress testing of their regulated entities we modify it to accommodate our regulated entity. we will look at highest concentration of counterparties will look at the home price decline that we have seen and other ways that others do not. we take what is publicly available we modify it just a little bit we publish the results of our stress test every year.

we want to be aligned where we count the other regulators and making differences that are a relevant to our counterparties and we publish a pick up the gentlest time has expired the chair now recognize a judgment for mr. texas mr. williams for five minutes per. >> thank you very much and thank you director for b being here im from texas and a car dealer in texas. i own multifamily properties in texas. i know the white house has been pushing and rent controls are going to tell me what i am going to make it takes away meat wanting to do things. and multifamily properties part of the initiative is to socialize the housing industry and the law is very clear it does not have the authority to enact these types of rent controls it is asserting yourself into that freak marking acting rent control of the operative effects that keeps people for me wanting to build it does with competition at catesby from having places to live it.

we'd see reduced housing supplied by you getting into the market eight lack of investment you not see that. costing push on to other tenants is what happens they focus to be shifted toward i believe increasing housing supply by reducing inflation. lowering interest rates and getting the supply chain under control and join with regulation for people like me want to build and help people. it is really hard to go borrow y money we have a cap on what you're going to make. all ofof these factors lead to n increase in home development and investments driving the supply up in the price down if you do those things. you are worried ms. thompson are you worried about the implementing rent caps and other regulations? at that harm the housing market like i'm talking about make it even more difficult to develop housing along with other economic challenges to discourage people like me from building? >> is a great question. if we want to get all sides on this issue and this is why we

are going to issue this request for inputs because we want to make sure what we are undertaking makes sense for the sound perspective and for the tenants. we are really looking forward to getting information that can address the very issue you have raised. we do not have a lot of input or influence on the supply chain. we do participate on multifamile side we have allowed both enterprises to eight or $50 million each and half of that has to be an rural and manufactured housing for. >> caps and forbearances not help you want to live in a decent homestead. so the next question traveling back from texas which is where i live i continuously hear about the dream of homeownership is becoming more and more unattainable for individuals in

my district. it's critical we support innovation designed to create choices for consumers one is to reducing prices and the housing space of the innovative approach such as direct to mortgage insurance.ag which you are familiar with. new private capitol to the market reduces risk for taxpayers. i'm fortunate you to potable pressures at the lack of action by the bite administration this axmodel is ready to launch but it's not been approved as a standard product offering. my question is why is it bite administration's which creates a lot of great things for consumers and innovation much lower cost foran borrowers. what are your thoughts on direct mortgage insurance approach that could be new capitol where does it stand with the fh fa currently? >> thank you for that. the product you mentioned we have to make a determination as to whether it was a new activity or new product for the

enterprises and would warrant making sure it was publicly available to the people got public comment. >> if it lowers cost us is that a good thing? >> lowered costs and improving risk management is always good but our rules suggest this might be a new activity or new product and we would not want to make a decision that would be impactful without getting input. >> a big government once again okay secondly or lastly gse have been in conservatorship coming up on 15 years this fall since a financial collapse in 2008 the former director made it a priority to get enterprises out of government control and back in the hands of private sector. we had a clear focus for the agency and seemed to building towards the ultimateti goal ever since you have taken over serving as director does not seemed like there is a similar focus on working to get away from the conservatorship.

soco many remain under governmet control and continue financially backed by american taxpayers fh fa must bolster to better protect taxpayers from undue risks so real quick what does the fha doing to build capitol in hopes of exiting service stewardship? >> we have a new pricing grid products the judgment time is expired as the director to respond for the record. >> a chart recognize a gentleman from ohio for five minutes. >> thank you, mr. chairman and thank you ranking member thank you for being here today chairwoman thompson. mr. chairman let me make this statement because my colleague from. missouri about her relationship and meeting with the president in the white house. and i heard a different response i heard heron say yes she meets with the white house. she met with the president and sheet presented information i

did not hear her say they did not listen for as chair emeritus of the congressional black caucus i can say on housing, thanks to this chairwoman and data and resources she supplied to me during my tenure as chair we were able, along with information that came from chairwoman waters we were able to present housing information to this president unlike the last president's been introduced about whatt presidents do. the last president did not know who or what the congressional black caucus was we represent 80 million americansns. 18 million black americans and for the last two years the a democrat and republican presidents have met with us and housing has been an issue. so thank you for that. let me continue with what congressman leaks and brought up.

we have held hearings in this committee led by chairwoman waters and others over the last two congresses that dealt with looking at diversity, equity, inclusion and some of the biases with appraisal. your time ran out when chairman meeks was starting to ask about representation of people of color and biases in this profession is there anything you like to add to a that? >> yes, thank you. in terms of appraisal diversity fannie mae and freddie. >> have worked with 29 sponsors to bring diverse persons into the appraisal industry that is again aging out and is less diverse than other industries. that is one of the things that came out of the hearing that we had last week friday with the appraisal subcommittee. right now there are 469

scholarships that have been given by the 29 sponsors. persons who are interested in serving in the appraisal industry. there is not a lot of knowledge at colleges or hbcus or community colleges about that. there is a lot of outreach that has been done. when people hear about it they want to find out more there's been a lot of interest in the appraisal industry by diverse persons and diverse organizations.ti we are trying to make sure we are, data and that in can through the private sector for. >> thank you is a former dni chair we really appreciate that. certainly we all know it was created by the housing and economic recovery act to restore the confidence and stability and mortgage markets in the wake of what we experience in 2008 with the financial crisis.

one of your agencies is to ensure the enterprise and the federal home loan banks are operating ind a safe and sound manner and serve as a reliable resource of liquidity in the market what is it doing under your leadership to help ensure the safety and the housing finance market is there anything you like to add? >> yes thank you. we are looking at the operations of the enterprise and a rake lead entities there are examiners on site i we have regular examinations. we are also look at ways for the enterprise to build capitol so they do not have to rely on taxpayer support should there be losses. we are looking at ways to help home ownership and a worse responsible way because one of the things we learned from the crisis was a does it make sense

to put people who if they can't stay in the home. it's a lose, lose situation we focus on sustainable some vetted and everything that we do. >> it is an economic crises were to occur, do you think what you have what you need at your disposal or is there anything else congress can do to help you? what's we will be happy to work with the congress on any way to help with looking at ways to help a. >> her. >> a gentler time is expired request thank you, mr. chairman and thank each of theth witness break which i recognize the gentleman from michigan mr. huizenga for five minutes. >> right here director. thank you for being here and appreciate your testimony. director do you believe is appropriate to prohibit gsc's from a varying their pricing solely based on the origination channel?

>> i think the pricing risks are based on the capitol and the performance of the different origination channels. >> okay so would you agree no more no less risky than equivalent one of the identical characteristic simply because it's originated through a third party would be a bad idea? >> i would agree. one of the points made earlier as a transition from the retail channels which show the experience on loans originated by channel so we can look at the losses associated with it and roll to reflect what the performance has been so we can price it appropriately be helpful to have data. >> will he should be permitted

flexibility to adjust the pricing frameworks to meet their mission and the safety and soundness i don't believe this should be permitted to implement pricing that violates principal or equal access the secondary market. you noted in your testimony statutory mission of ensuring the safety and soundness of that right related entities and inproviding access to affordable and sustainable housing" first-time homebuyers in underserved communities and i unapplaud you for that i am a former licensed realtor. when i got my real estate license i was taught one thing everyone is green. it doesn't matter where you are from what language you speak or what your religion might be or anything else can you afford it or can you not afford it? i am curious you believe the reports disparity pricing for tsthird-party organizations area departure from the core level playing field principal and has established?

chris want to see data that showed by channel with the loss experience has been so we can appropriately account for quick should there be a difference though? x i hope not. the date it would be helpful and more informative for me too answer the question. >> okay, moving on your appearance before our committee last july i submitted a question for the record concerning received steps that were taken to limit acquisition of mortgage loans sold through third-party originators. your response was, show us they would characterize it as lacking. you said must account for appropriate risks including those associated with the bonds originated through the third-party broker and correspondent channel. but underwritten loans provide an alternative competitive product that lowers costs and can reduce interest rates on low

and middle income borrowers driving the mission purpose of why you are there. here is what i am hoping to hear from you. i would like you to commit with the analysis used to determine the price changing and the pricing frameworks and i would like to know what kind of analysis you have conducted. give reference getting more data but you have taken some actions. so what is that based on? i'm especially concerned what this means for low and middle income borrowers. in my district we are wildly diverse we have urban, suburban excuse me we have urban, suburban and rural areas and in all of those.

i want to make sure those of borrowers are being treated equally we are committed to and giving uss that information? works absolutely. i would mentioned many of the barrios if their median income is less than 100 if you are a first-time homebuyer your upfront fee was eliminated. i would really want that message to get out that for first-time homebuyers up front feet was eliminated. you do have to continue to have mortgage insurance and your costs are going to ber higher that someone has a higher credit score and a higher down payment. but the upfront fee for first-time homebuyers and rural and urban throughout this country for. >> my remaining three seconds many of us are concerned about that disparity i'm making other wits. >> a german spy was expired thank you you back. the chair now recognize a gentleman from california mr. vargas for five minutes. >> thank you very much

mr. chair. i think the ranking member waters and i especially want to thank director thompson to say i iwant to join with my colleague mr. foster to thank you for the service you have given your deep knowledge i think you're doing a great job and i've enjoyed your performance today. in this sense that in a few times they try to put words in your mouth especially with respect to the president what you said and what you didn't say and you corrected the record very graciously. so again that normally does not happen here. it's a normal tit for tat and you did it better than anyone i've ever known do it. now that i praise you would do and to ask you some questions that you probably don't know the answer too. but since the other side brought it up at the beginning i have to ask. do you know what the inflation rate is of the eu in the uk? >> 's or adult for. >> that's right there's no need for you to know. president biden was blamed for

the inflation rate we have in the united states which is lower than it is in the uk, which is over 10% we are at 4.9 and also lower than is in the european union and yet biden's policies are not the european policies not the uk's policies. we have inflation all over the world because of the pandemic, supply chains, all sorts of issues each and every time my colleagues went to blame biden, biden, bided it did not work they use it in the last election they did not get the wave they thought they were trying the old trick again it's a worldwide phenomena we are doing better than the rest the world that is the reality. now, all of that being said i do have a problem with prices of homes. that is the real issue i will give you a good example i went on a inflation calculator two of them here on i took a look i bought my home in 1993 we paid

$176,000.4. a modest home. it's unique, it is a historic home. to date it would be worth $369,000 in u.s. inflation calculator. the asset calculator it will be worth three to 55000. that's reasonable. so somebody again wants to buy a house for three to $69000 in california that be very reasonable. i think that would be fine and people could afford that. the problem is the median home in san diego is over 800,000 now. and in my neighborhood that's ir 1.5 million. people cannot afford those prices. what can you do about them? that is the real issue it is if we had more supply and people they said they don't live in california or some house was up for sale there's all sorts of people trying to bidli on it.

what can we do about the supply? that is the issue. >> will be would be happy to work with the committee on anything we could do to help address the supply issue. we do not directly have an impact on that but we certainly could have ideas on things that could be done we would love to work with the committee to try to address those issues. there is a huge howdy housing shortage as you mentioned across the country. >> there's differentis types and calvert at whittemore tax product which becomes more strictly because were not used to that product but we have to have it if it'sth going to becoe affordable for. >> great points. one of the things the enterprise has done change the underwriting requirements to allow more accessory dwelling units they allow income to be used as part of the calculation. but just looking at manufactured housing different ways to think

about different types of homes that can help with the affordable level but throughout the country. >> with the last few minutes the seconds i have 50 seconds you were asked about the fed fund rate do you have anything to do with the fed fund rate do you call up and say lower it or raise it? >> no, i do not. >> of course not, of course not it's ridiculous some things my colleagues come up with on the other side of the aisle sometimes is surprising with that i yield my time back thank you, mr. chairman. >> the chair not recognized as a gentleman from georgia on the other side of the aisle sometimes is surprising with that i yield my time back thank you, mr. chairman. the chair not recognized as a gentleman from georgia for five minutes. correct thank you, mr. chairman thank you director thompson for coming in and speaking with usai today. i want to echo some of my colleaguesod concerns on the changes that took effect earlier this month but i would also like to echo some icons from georgia in missouri on the transition.

as mr. wagoner pointed out i don't think anyone would argue all three credit reporting bureaus reflect exact same information about borrower and thus they are not interchangeable. excluding a single trade line could move as credit score van include risk for lenders additionally as an element of hazard if only to scores or used how do you prevent lenders for borrowers from gaming the system on using more favorable scores? >> great question. we have a proposal out for our capitol and one of the questions in thaton rule is related to the buy merge try merge and how she calculated because right now to two-step process. you take the median on the and e lowest based on the two borrowers to move from median to average. how do we make sure if the

lender does not like to scores they pull a third when they are not using that. one of the things we are talking about is making sure if lenders pull three scores they have to use all three scores but if they pull to and don't like the two they have to make that. we are doing a request for comment on that in the new capitol in the comments were closed and think of may 12. but that is a question for. >> is as big you're still working on you've not come up with a conclusion? >> were getting it from the people are going to be using this. >> what about in the reverse situation it could move it borrowers up of ahab. missing critical information or a trade line could force millions of credit worthy consumers down to a lower credit vacant. wouldn't this reduce access for borrowers who otherwise be deemed credit worthy? >> in addition to the credit

score enterprise both have their own underwriting that they use. this is an input to that. they tried to take as much information as they can to make a good underwriting decision. i know of fannie mae uses trend and freddie is or does doesn't just talk about what it's paid for gets talked aboutut how it gets paid as well. there's a lot of information that's a i available that goes o an underwriting decision based on the analysis we did move them from three credit scores to two did not detract from the accuracy of the borrower's final credit score at all. >> what credit score models did you use for validation studies? >> two models were validated by the enterprises and vantage score four-point oh.

we are working upon a multi- onr implementation process to change from classic which is almost 30 years old to new credit scoring models. updating the credit scoring models has been a priority for the agency for years. they were validated by the enterprise and fha for. >> are you planning on validating across all the models? before implementation to evaluate the impact of the average scores cluster. >> invite merge try merge process is outside of the credit score model. the credit reporting agencies generate the score they send it to fica or advantage. they also send it to the lender of the lender would have two scores they would take the lower of the median or lower of the

average. >> the last question i'm running out of time here. we all know if a lender misses information and makesis a loan o someone who can't or does not pay back that affects every consumer across the board. is it a good idea to limit any information to lenders when a house is the largest purchase most people make in their lifetime?ll it's the most critical are you concerned at all about the adverse effects this might have if lenders becomes more risk adverse due to incomplete information? >> this would increase competition. again we looked at movement from three to two there is no difference in accuracy directs a gentleman's time has expired. >> thank you per the chair now recognizes a gentleman from nevada for five minutes. >> thank you mr. chair into the ranking member thank you director thompson for appearing before the committee.

iar want to start by commending your diligent work to expand opportunities for homeownership to hard-working americans will never sacrifice the safety and soundness of the government-sponsored enterprises. i would also like to applaud your thoughtful decision to resend of the proposed loan level pricing adjustment fee on a borrowers with debt to income ratios greater than 40%. we heard just last week from experts such as the realtors of president who reiterated the increased insurgency they would face ifdd they carry the additional fee. the new price matrix will help lower wealth of borrowers and increase access to her home talk first home buyers. i represent nevada at my district is 50000 square miles i have rural areas and urban areas. i am particularly concerned with the rural communities who have lower home prices and some of

the ballooning housing markets in las vegas but fit the profile of high credit but low wealth. and i look to these rural areas as an opportunity for entry-level home ownership. thank you for making up my priority. i also find it interesting when i hear this debate about credit worthiness. we just had bank executives here the other day who will not even take accountability for their lack of performance and governance on the banking institutions they have responsibility for. but yet somehow we will target individuals in question their credit worthiness on formulas in my opinion there out-of-date antiquated. particular after the housing

collapse the pandemic we have endured people are coming out of it. it iseo time that we allow peope the ability to show their worth is in investing in themselves and their families and one part of that is through homeownership. now, director thompson if you are aware there has been a renewed debate around how credit scores may bake in a history of discrimination. could you please discuss your view on the impact over reliance on credit scoring can have for majority/minority communities? additionally i noticed eight announcement that validated the use of additional credit scoring models so could you discuss how this potential change will help expand access to credit? >> yes, thank you. the enterprises have been using? classic credit score model for years classic is almost 30 years

old. it was time to update the model. we had a process enterprise went through where they validated applicantsts were updating the credit score models anybody who wants to use a new credit score can submit an application we had a validation process what we found both met all of the tests of accuracy, reliability but they were more inclusive. what is different today is the new models include positive rent payments. they include payment for utility bills they include payments for things that were not in place 30 years ago. >> that's the point, that's the point. so you are telling me and i previously was serving on the ways and means committee this is the end equity inherently baked

into some of the instructional inequities. so a homeowner can be treated one way and get credit but a renter who pays on time gets no credit. but now you are accounting for that in your new methodology? someone who is paying their utilities on time and their phone bills on time can now use that as a sign for credit worthiness? i appreciate that. i'm going to turn quickly to another issue i am concerned about. that is the role the enterprises have and stopping subsidizing home purchases from particulate out-of-state corporate speculators are buying up a bunch of properties and i do believe the federal government has a vested interest in this because of the role. i've introduced a bill the home act which would crackdown on corporate speculators and i would like to work with you. >> a gentlest time has expired. >> i'm sure there's

accountability in place because that's at thehe gentlemen's time has expired you'lll back. >> a chair now it recognize my cell for five. director thompson, thank you for being here today. thank you for your testimony. you and i have spoken about the loan level price adjustments that drew quite a bit of attention lately. i guess at some level the rfi you announced after you implemented the price indicates there is some openness to more input do you feel there is a way to get more transparency upfront to this is better understood? >> absolutely. we do publish every year with the pricing is then compared to what it was because with the enterprises were first in the conservatorship they were giving pricing discounts to larger sellers versus smaller sensors we want to make sure is a level playing field for community

banks as well. we are very conscientious about what they are paying, and who is paying what. we have it by distribution and you name it. >> as we spoke we could fill up all of my five minutes try to talk about it. i appreciate you taking the time to theo rfa. so just last week when our subcommittee on housing and insurance met we notice a bill called the middle-class borrower protection act i introduce that with colleagues yesterday. the bill reverts to the old prices increases those prices for a a year pending a g8 overvw of the current process. it would require to conduct a notice and comment procedure for future and frankly that probably would have dealt with on the transferee challenges i think anyway. and it mandates use risk-based pricing principles.

lastly a prohibits future changes based on debt to income ratio so thank you for withdrawing thatt effort. so do these proposals seem reasonable to you? >> i've not looked at the proposal will be happy to work with you' office on any proposed legislation that you have it. >> thank you directory appreciate that. i want to turn now to attention on the federal home banks. ceou finalize review of the federal home loan bank system at 100. what can you provide in terms of a timeline when to expect your findings? when can you go for a legislative standpoint. >> thank you. we hope to have the report by the end of the third quarter. the various sessions the home

loan banks serve their mission for communityal banks. i think that was evidenced during the most recent few weeks with the bank failures. but we also heard was there's a lot more they can do to be helpful and affordable housing and community development. we also heard people had views on the number. they had views on membership. we arere going to consolidate al of that the key part of liquidate with community banks. >> we will discussss liquidity home loan banks will help issue debt to meet liquidity

requirements. they have large requests and to lplan them out the home loan banks are not the lender of last resort they retained earnings have been higher. in spite of not nestlé top line revenue. when you look at the goal you set i think 300 billion for the goal that has been set what is that in relation to the size of the portfolio and how is that determined at the rate they'd have been returning earnings how long until they reach that? >> there's a capitol rule was established in 2020. establish the requirement for capitol for both off enterprise. to come to almost 100 million

$300 billion is much lower than it was two years ago the earnings are down. >> thank you my time is expired. liked light from michigan for five minutes for. >> 's f hfa looking at improving small dollar mortgages? >> yes particulate really hard for my community in wayne county, michigan. according to hud we account for the largest share of nations lower priced homes by colleagues may talk about. for over $100,000. freddy. >> or fannie may provide lenders a higher fee small to encourage

lending is that correct? who originate or refinance what we are fighting especially during the refinancing boom. really high interest rate. the bouncers were under 100,000 in the cost of clothing was really impactful to c them. we want to make sure we included small dollar loans in our view because there are countries there are communities around this country at this issue is very impactful. >> could subsidy be increased or suspect or expanded? >> will take a look at that. i would have to have a conversation with them.

>> you commit to talking to them about it? >> absolutely. another option for making small dollars more viable as to the secondary market by pulling some of the small loans has proposed pilot programs to secure personal property loans on manufactured homes for instance. what are your thoughts on self such efforts have either of the enterprises taken steps to establish pilot programs? >> theha enterprises cap and are able to purchase manufactured homes. they've got requirements of their selling guide we've seen an increase in the number of manufacturednu homes and manufactured home communities both enterprises. we are happy to work with your office on this very important issue be quick so love to l work with you on this.

other ways to leverage to encourage small market mortgages? >> this warrant certainly a conversation we would certainly want to talk about some investors who need to help facilitate the liquidity for these types of mortgages but again we would love to talk further and adapt with you about this. >> during the crisis in 2008 taken into conservatorship by your agency. ultimately you have authority over right now technically, legally, director thompson could they require the department to pilot programs to facilitate small dollar loans? >> certainly. enterprise have a number of pilot programs and again will try to be very transparent about the pilot activities for quick small dollar mortgages? >> some of the equitable housing finance plans there are

referencesho made to some the small dollar loans they do impact underserved communities. i will have to take a look be and be more specific with you progressing to more targeted and more intentional we lost more black homeownership than any otherr state in the country we have not truly recovered after the 2008 recession. we have neighborhoods thriving in detroit we have more renters than homeowners, because privae equity firms have been up to gobbled themve up. on tax foreclosure which we have been working with and working with. think much more intentional there is a report that came out and that is great but i think might residents are tired of studies and reports and want us to do much more. i want more credit to the

reinvestment act. for small dollar mortgages to incentivize i know it's not going to be profitable over 100,000-dollar mortgages. or in communes across the country are suffering because of that. >> had gentle it is time has expired that shirt not recognize a gentleman from tennessee mr. rhodes for five minutes. >> thank you, mr. chairman, and ranking member waters for holding this hearing and thank you to director thompson for being with us today. thank you for meeting with our team last week and talk about the industry including mortgagee insurance. close the we are currently showing the goal of making as attainable as possible. but of course you understand we also have to protect the taxpayers of this country so thank you for spending time witt me., >> then announced itth approved

two new credit scoring models for conventional mortgages. an advantage score four. recently announced its proposed implementation timelines whereby the agency would number one begin delivering and disclosing historical data for both the score is to support credit model updates first quarter 2025. as you know this is a complex undertaking that will have a broader impact on the capitol. the rule says and i quote the enterprises currently rely on classic pico for product eligibility loan pricing and disclosure purposes. and at the enterprise were to begin using different credit score for these purposes are multiple scores that grant for new originations, would need to be recalibrated.

director thompson can you explain -- can you expand on the ways it's preparing to recalibrate given the two new credit court scores and how do you think moving to these two score model impacts the rule? >> that you for the question. we are engaging stakeholders. they use the credit score model is not just the enterprise credit scores are used for underwriting they are used for pricing. the mortgage insurance companies for working with the enterprises to make sure we talk to and provided data to stakeholders who are going to be impacted by this change. what people will want to know is here is the credit score that's associated with a particular

loan. how does that calibrate or tie into the new scores? we are looking at publishing data make them comfortable. everybody has the information to make a credible decision it is soot impactful in the mortgage mamarket. we did think it was important to update the credit score model. they been using and has not been updated buter it has been around from his 30 years it does not take new ways of doing things into consideration. we want to be very careful with the update.bu we want to be inclusive. we want to provide data to make really good decisions about anthis. >> thank you for following up on some of my colleagues concerns the credit score changes director thompson will have on

fha loans and va loans? >> we again have done some analysis. we don't think moving from by merge to try marriage to buy merge has material impact. we know moving from three scores to one score has a huge impact we do not recommend that. we do work with and talk to our colleagues from fha, va, usda and hud. we are constantly engaged with them on this and other housing related issues because wes want to make sure we are coordinated. we are going to be working with them they will be one of the stakeholders that's included in all th' outreach we are doing so they're going to have to make those as well as that the direction they choose to take. >> thank you, quickly with the last remaining minutes here do

you believe any government guarantee should be paid for income behind significant private capitol and the first loss position kicking in only in the most catastrophic of economic crises? >> i believe in a capitol not just of quality but a quantity of capitol. a loss absorption ability first and foremost request my time is expired or yelled a back. >> a judgment from new york mr. tours is recognized for five minutes. >> think you try the r federal l hormone bank system exist for the purpose of housing finance isis juno federal home loan bans made $30 in advances. the crypto industry specialize the tech industry neither one had a particular focus on

housing. that would justify a massive liquidityei injection. if youma think $30 billion in advances to silver gate are an example of mission creek on the federal bank system? >> the activities of the bank itself are certainly up to the primary federal regulator. an institution that's a member of the home loan bank system they have to provide collateral we haircut the collateral so the advances are protected. when we provide when the home loan provide advanced to the member they should be using those funds for mortgage-backed securities or increase community lending or home lending and their perspective communities. >> it sounds like you would agree it was mission creek? >> i do not know. their mission is up to their primary federal regulator.

our role is to make sure they tied their advances to homeownership whether it is through mbs for. >> you think those liquidity rejections really to homeownership? >> you be the oil when who believe that that were true. you would be the only one to believe that that were joy don't think l anyone would think thats related progress will find out the facts and put them in our report. >> the banks receive the $30 billion were imminent risk of failing and ultimately did fail at the federal government had never intervened to ensure the deposits and signature those funds would have been permanently lost do you think it was responsible for the federal home on banks to inject $30 billion to failing banks? >> they are covered by cloud the home loan banks don't lose it funds adult nine times out of 10 they're over collateralized works not a loss for the home loan bankruptcy are you investigating whether these injections were related to

housing finance? >> we are take a holistic view everything that happens that we can fairplex with the timely for the review? works of number 30th. >> fox news had a headline that read new mortgage rules. buyers with bad credit. headlinecation of the it buyers with good credit card to an urban institute analysis of new pricing matrix those of the lowest credit scores and down payments or pay as much is two-point to percent in fees it's also the highest credit scores and down payments would pay nothing. does that strike you as a pricing model in the words of fox news as buyers of bad credit? >> our new pricing grid in no way allows persons with high down payments and high credit scores to pay more than a low a doesn't work that way. >> quite the opposite so the reporting has not been fair and

balanced? according to thece republican mo the gse are private corporations charted by the federal government special benefits to help make homeownership more available and affordable for lower and middle income hiamericans. given that description is it fair to say has a regulator and a conservator has a statutory obligation for lower income americans? >> yes.r >> those barriers include high fees, correct? >> we have equitable housing finance plans that look at what the barriers are and provide suggestions on how to remove those barriers for underserved areas. >> reducing feeson for lower income lower wealth borrowers is notal an active radical redistribution on your part. it is the fulfillment conferred upon you by congress is at a fair assessment? >> we did eliminate upfront fees ryfor home buyers throughout the

country. the weight we are able to pay for that is through second the fees charged a on second and vacation homes, investor homes are well more than the fees that were eliminated for first-time homebuyers who are credit worthy and struggling to have a down payment. in the enterprises affordable programs the average credit score for many ofth these i thik that it was 743742. we are just talk about credit worthy people that

director thompson, no doubtyou'd pilot program that would allow fannie mae toel effective i will provide title insurance on its own mortgages. i joined a good number of my colleagues on both sides of the aisle who are highly skeptical by one of the gsc's. title insurance is private market activity that's well outside of fannie mae's mission and clearest example to date of biden administration overreach. but id dug deeper into the fane mae pilot i found troubling aspects in the arrangement itself. are you aware of the company partnering with fannie mae on the pilot? >> that pilot has not been brought to my attention. we have a process enterprises to bring decisions to fhsa and i have not read about it in the

same way that you have. fhsa has not made that decision. >> are you aware that doma is on the verge of bankruptcy? its stock dropped from $10 to less than 30 cents since initial public offering last year and early investors have been selling off their shares driving share decline and putting the-term viability of company. here is a company on life support and along comes fannie mae to throw the lifeline. how can something like this happen? larry summers, 71st secretary. here is what i see a company essentially out of money but politically connected receiving

no-bid contract -- do you think that raises red flags? >> i have not seen that proposal come through me. >> i'm describing contractual relationships. does that generally raise a problem? >> we did not give an open contract. the pilot whatever it is is not approved by fhsa. it should not be undertaken until approval is given. doma holdings has the contract for the pilot. is that not true? >> i have not seen that proposal. >> okay, so let's just say that it is true because that's what's being reported. is it a problem that they are receiving no-bid contract and joe biden is buddy with the board of directors.

a problem it would be with my company filingr bankruptcy to have that issue. we look at safety and sound. that doesn't sound safe or sound. >> you're speaking my language. have you had any contact with larry summerst, regarding this? gahave you had any contact with the biden administration regarding the doma holdings? >> i have not could you look intd follow up to maybe give me more information about whether other companies were considered and how this all came about that? >> absolutely. >> thank you so much. one final follow-up, did fhfa consider that while nominally decreasing closing costs, a lack of title insurance for home buyers may leave consumers financially unprotected from false claims against their home for the life of their loan? was that a variable that was factored into these decisions?

>> the variable that the enterprises care about is making sure that the lender reps that the home is free and clear and has no superior liens and that there's clear title and the lender decides whether or not uh the, the title company, the title insurance is the mechanism. and i would say, and i've said this earlier, that freddie mac has allowed attorney opinion letters since 2008, but there haven't been many people that have used that. >> i think sticking to the main mission and not trying to take on title insurance would be the best path forward for this. thank you, i yelled back. >> the gentlewoman from texas miss garcia is now recognized for five minutes. >> thank you, mr. chairman. thank you, director thompson, for being here with us today. and let me just say that you've been a breath of fresh air as a witness and i appreciate the time that you spent with us and your candor in answering all our

questions. last week has been as has been noted by a couple of other of my colleagues, the subcommittee on housing and insurance at a hearing on the federal housing finance agencies recent loan level price adjustment changes. as i learned from the witnesses in that hearing, the recent fhfa pricing changes have to protect a potential to protect low and moderate income home buyers. a priority that i believe we should like share. further in that subcommittee hearing, i expressed my concern surrounding the republicans lack of action in the housing space, especially because we were in the midst of a major housing crisis. as you said in your opening statement, simply put there's just not enough homes, especially for first time home buyers. this can be said in the houston area that i represent.

we were always considered a good place to find a home that was affordable. but in the past decade, however, home prices have nearly doubled and about half of the residents now spend more than 30% of their income on housing costs alone. housing inventory in houston has decreased and the affordability gap has widened, especially for buyers and renters of color, -- of color. given our nation's worse and racial wealth and homeownership gaps, we know that people of color are more likely to be renters and homeowners are well over 40 times the median net worth of renters. when it comes to evictions and this is also true in houston, black and latina women are twice as likely to be evicted than their white counterparts. while people of color make up over 60% of the homeless population, which is more than more than their share of the total population. so, the fhfa has a duty to dismantle inequities in housing

and community development and it is prohibited from discrimination including through disparate treatment. how is fhfa ensuring that the operations and activities of the enterprises are affirmatively furthering fair housing opportunities for renters including through tenant protections? >> thank you. fhfa has an office of fair lending oversight and they examine both fannie mae and freddie mac to ensure that they're in compliance with the fair housing act and that there isn't disparate treatment and any of the policies or applications of those policies. they are examiners and they have reports of examination that they share with both enterprises. so that's one of the ways the push ways. -- so that is one of the ways. the other way is i mentioned earlier that we are going to issue a request for input for, to try to figure out what good

tenant protections are. just in terms of during the pandemic, one of the protections that were uh instituted by fannie and freddie and, and any organization that had a federally backed mortgage was there needed to be notice of eviction. there needed to be notice of a rent increase. just basic things. most of these things are dealt with at the state and local level, but just making sure that people have an opportunity to understand what their rights are and make sure that they're enforced. >> thank you. one essential component in supporting home ownership for all americans -- excuse me -- allergy season. one essential component to supporting homeownership for all americans is expanding access to credit and lending. disparities remain in mortgage access. only 4.7% of freddie may and 4% of freddie mac back mortgages

for home purchase purchases were from black home buyers in 2021. and research from the urban institute suggests that there are more than one million mortgages are missing from the u.s. financial market each year and disproportionate percentage of those are are missed by borrowers of color. what can fhfa do to make sure that young americans, low income americans and americans of color can purchase homes to build wealth for future generations? >> sure. so one of the, we noticed that same statistic and one of the uh things that we're requiring the enterprises to do is put forth an equitable housing finance plan that identifies what the barriers are. they also have to identify solutions for these underserved communities. one of the barriers is just the financial literacy in terms of homeownership. >> the lady's time has expired. director thompson, you may answer for the record. the gentleman from south

is now recognized for five carolina is now recognized for five minutes. >> thank you, miss thompson. appreciate you coming today. our constituents that i've talked with by are outraged about the government involvement. not just with the ll pa's adjustment but just as a whole in the housing market. how important where is in your mind and your role is directed to where is the private sector come in? do you support the private sector to get more involved in the housing market for people to buy? >> it would be nice to have a balance of private sector and government in the housing market as it as previously has existed . >> when the llpa was adjusted,

raised who did that go to? ,why wasn't there reporting prior to going into effect? so historically, every f h fa -- >> historically every fhfa director including myself has made pricing changes and we report on those changes every year, we send the reports to the congress and we publish them on our website. we also publish the rfi because -- if i could -- >> let me ask you tell me if i'm , right or wrong. that buyer with a base credit score, doesn't he pay an added fee? >> the fee that was eliminated for first-time homebuyers is paid for through second mortgages and vacation homes, investor properties.

they have higher fees and that's always been the case. that's where the money goes. >> that is subsidizing those with the lower credit scores. the money is going somewhere. >> the congress allowed us to get a lower return for certain mortgages. >> i wanna get my questions in. i think you've answered my question. regulations are all over um housing at every level. rent controls. is this something that should be expanded by the federal government in your opinion? >> our agency has not gotten involved -- >> what's your general opinion? our rent controls a great thing? >> we're actually issuing a request for input to the public to get information on rent controls and tenant protections to see what all stakeholders have to say. >> ok. on appraisals, i've heard going from three to two.

are the government agencies given uh, the appraisals, uh, all the credit reports, varying information that they can include in the credit report and what they can't include? >> the credit reporting agencies each have basic information and some companies report to one and like smaller community banks may report to one. >> it's left up to them. there's no guidance good i think it's good to put, uh, you know, if somebody pays their utility bill pays the rent, but it's also good to know those who don't pay, the different groups. you agree with that. >> yes, i do. so it ought to be all inclusive >> and they ought to be make the decision. >> it is opt in if the tenant wants it. and i think the information is negative reported. >> it has to be, it's part of the record. >> so the positive information needs to be reported too. so you have people paying their rent on time that needs to be included. >> ok. what is your opinion on this?

with the title insurance, an attorney's opinion letter versus getting a full title. >> the lender has to represent the fannie and freddie that they have clear title and that there's no superior lien to that property. so the lender can say, you know, here's a title insurance policy and in the case of freddie mac, who's been accepting attorney opinion letters since 2008, it be either or. one is not supplanting the other. >> ok. and that's up to the agency to decide which ones they accept? >> the lender. >> we've had affordability issues come up. have you ever asked those who are in the business why houses aren't affordable? could it be that, uh, gas prices are sky high? could it be at every level people are paying more for supplies? could it be that all of it's brought on by this administration which wasn't the , prior case?

is that ever -- i yield back i'm , out of time. >> gentleman from south carolina yields back. gentleman from north carolina, mr nichols, recognized for five minutes. >> thank you so much. thank you director thompson for being with us here today. over the weekend, i hosted a town hall in my district and one of the top issues i heard about was the high cost of housing and the lack of affordable housing options. and i've had one of the fastest growing congressional districts in the country. so this is a very important priority for my constituents. the high cost of housing is the single biggest squeeze on household budgets and a major drag on our economy. access to safe and affordable housing is essential to the well being of working families and individuals in north carolina and throughout the country. as vice chair of the new dems affordable housing task force i'm working to lower housing costs and increase the supply of affordable housing. unfortunately, if we're unable

to find viable bipartisan pathways forward on addressing the debt ceiling, housing prices in my district would skyrocket . according to data compiled by the u.s. census bureau, defaulting could cause mortgage cost in north carolina's 13th district to increase by $159,000. on a national scale, over half a million households nationwide could lose rental assistance and mortgage rates could surpass 8%. can you please share what defaulting on our debt would mean for our nation's housing finance market? >> sure. thank you for the question. i think everything that you just said -- extremely high mortgage rates would probably prevent or limit persons from purchasing a home. also making sure that the mortgage backed securities investors, you know, know that they're going to get paid for the investment that they made. so if there are borrowers, they

could be impacted by, you know, unemployment or issues related to employment, which could create delinquencies and it would just not be a positive thing for the mortgage market. >> thank you. you know, defaulting on our debt could also send our economy spiraling into a recession which i worry would have even broader impacts on housing costs for my constituents. how would a recession impact fannie mae and freddie mac, the government sponsored enterprises, enterprises created to help provide reliable and affordable access to home ownership? >> it would be prohibitive again because the interest rates would be probably so high that no one could afford a home. and i think fannie mae and freddie mac in terms of protecting, you know, borrowers who couldn't make their payments and they've got, you know, $100 million that they've accumulated over the last two years that can cover losses, but it just would not be a, a good outcome, honestly.

>> thanks. i want to shift gears here. my wife is an attorney, she handles real estate closing. so i certainly understand the importance of title insurance and the protection it provides to home buyers and lenders. i want to touch on this proposed pilot from fannie mae to become a de facto title insurance company. that that really concerns me when i've heard reported on that , as consumers could lose critical protections for their homes. i've heard your answers on this, you know, from, from my other colleagues, but just generally speaking, you know, director thompson, do you agree that protecting consumers and their homes should be a top priority? and that fannie mae by replacing title insurance probably is not the best way to do that? >> so yes, i do think that protecting consumers is critically important, especially on the largest asset purchase they'll make. but i do not believe that fannie mae is going to be in the primary market or the activities in the primary market at all.

again, the title insurance or attorney opinion letters are acceptable at freddie mac only on the aols and again, that's been since 2008, but those are really to protect fannie and freddie from the, the seller has to represent that they've got, you know, clear title and that there are no superior liens. and so the lender can decide what is acceptable. >> will you commit to conducting an open process with public input for any new program under consideration that is called for by the prior approval for enterprise products rule? >> we have a new products rule that we finalized in december and we've been working out how that new products rule will work both internally at fhfa and at fannie and freddie. and we are committed to making sure that pilots are public. and people know -- there's more transparency in what's going on

at fannie and freddie. >> thank you. i yield back. >> the gentleman from wisconsin is recognized for five minutes. >> thank you, mr. chair. thank you you director for being here. when fannie and freddie were taken into conservatorship in in 2008, treasury received uh warrants that give it the right to buy common stock in each of the gse's equal to 79% i guess of the total outstanding shares . those warrants expire in september of 2028. in august of 2020 the congressional budget office issued a report that estimated treasury could not only receive $190 billion for its senior preferred shares in addition to the from exercising its warrants $110 billion in the gse's. so while the conservatorship has gone on for far too long, i'm concerned that given the biden

administration's record to date, the date that these warrants could be, could be used as kind of a slush fund or piggy bank to advance any of the partisan housing agenda. and do you have any comment on that or is that something that you guys have identified or worried about at all? >> thank you for the question. and i think, you know, these conversations need to take place with treasury in terms of what their plans are for the warrant since they own them. we have not had those conversations with them. >> no conversations with secretary yellen at all about this topic so far? >> secretary yellen is on our oversight board and we talk about all things related to fhfa and their activities. on the specific topic of the warrant we have not had that conversation. >> ok, very good. the securities and exchange

commission recently re-proposed the conflicts of interest rule which could unintentionally impair the ability of private mortgage insurers from pure -- from procuring reinsurance through the capital markets. as a director, obviously, you have firsthand knowledge that private mi companies are subject to stringent regulation and requirements at both state and federal levels from the gse. and that they use reinsurance through the capital markets to manage risk and capital by , taking a first loss position, private mortgage insurances, reduced risk for the gse's protecting taxpayers. ,can you tell me if the fhfa is currently working with the sec on the final rule to ensure it does not really have any harm, i guess on the mortgage insurance. >> so i'm not available to talk, i can't talk about open rules, but we have -- the enterprises,

i should say have provided , comments on the impact of this particular rule on their credit risk transfer activities. >> ok. and, and with uh the last couple of minutes i have here, i just thought that maybe -- well, let me just talk about -- you justified the llpa changes partially by saying that they are needed to protect the gse capital buffer from losses. however gse's would have more capital if the fhfa did not lower fees for risk, riskier borrowers and use the capital uh from less risky borrowers to make, to make up for it. but the larger problem with these fees is that they act as kind of a political hedge against the fed's interest rate hikes. would you comment on that or do you agree with that? >> i think what i think is true is that the changes that we made in the pricing grid actually

help with safety and soundness because they are calibrated to the capital rule that's in effect and they also cover some of the administrative costs that the enterprises have. that's what the guarantee fee does. and the upfront fees are, are part of that. and so i do think that, uh, at the end of the day, the risk based fees that we have in place are doing the two jobs of one, safety and soundness by building capital and two, we were able to offset the fees for first time home buyers throughout the country by the fees that are charged for the second and vacation homes and investment properties. and so we were able to figure out a way to achieve the dual mandate that the fhfa has in overseeing fannie and freddie by updating these out of date pricing grids. >> i'm gonna run out of time, but maybe you could still answer one more question. it is more a thought that

continues to come up in financial services. there is this bracket or group of adults between 25 and 35 right now that have been completely froze out of the housing market. and wondering how you -- >> the gentleman's time has expired. if you submit the question in writing i'm sure the director will respond promptly. the gentleman from colorado is recognized for five minutes. >> iq, mr. chairman. director thompson, thank you so much for being here. you have a difficult job of making very complicated decisions and i appreciate the time that you've spent with me walking me through exactly why you all made the changes. and i, i think that you've done a good job in communicating the impacts of that and the intention. unfortunately not every american can sit with you and hear that. so i think that's the difficulty with politics taking these , complicated things and, and trying to create simple messages.

so thank you for your work and to everybody in your agency for the work you do every day. the fhfa serves a critical role in ensuring that americans with different incomes, levels of personal wealth and credit scores are able to purchase homes. and we all know that we're in the midst of a historic housing crisis and the dream of home ownership remains out of reach for many. home prices in colorado have skyrocketed throughout the last 20 years, but especially during the pandemic when people were able to work remotely and come to a place that they've always wanted to live. some communities in my district have seen their home values increase threefold in just a few years and are being forced to leave the communities that they grew up in. the increase in the cost of housing has also made it difficult for our small businesses to hire and retain workers and our public servants are far too often unable to stay and work in these communities.

one thing that this committee must address is how we can help incentivize building more housing. we know we have a supply issue. there are numerous reasons why but one significant contributor is our failure for decades to provide a legal pathway for people who want to work in the u.s. to do so. our workforce shortage and inability to address our failed immigration system has crippled our economic growth and has significantly increased the cost of building homes, installed our -- and stalled our progress in meeting our housing needs. we've also seen the unfortunate impact of failed tax policies in the u.s. that have increased the inequities in this country and have made it harder for regular people like me to have a chance to get ahead and build a better life. we're seeing the impacts of these policies in every area but especially in housing. homelessness is on the rise in every community, middle class families are having difficulty getting ahead to buy their first home, and in rural parts of my

district, the housing supply being bought up for vacation homes while people who have lived there their entire lives are being forced out. since i know you can't solve our failed tax policies and immigration system, you do oversee the financing of most housing. and i'd like to know what programs and incentives you're currently providing to help low and middle income individuals buy a home that our constituents should know about and what congress should consider to reduce the likelihood of houses being bought up for 3rd, 4th and 5th homes. also, what can we do to support our public servants in buying homes? so they can stay in the communities that depend on their services. >> thank you. we did reduce or eliminate the upfront fee for first time home buyers for the reasons that you've articulated. the housing supply shortage is very real. there aren't enough houses and people who live and -- work in

communities can't afford to live there. and so we eliminated the fee for mostly workforce housing, first responders, our policemen and firefighters and teachers as well as first time home buyers. people just out of college or people that have been living in apartments for a while. they just can't afford these down payments. and so they are required by law to have the mortgage insurance , which is added to their fee, which makes our pricing grids makes sense from a risk based perspective. but we really believe that we're able to eliminate these fees for first time home buyers because people are getting, you know, 2nd and 3rd homes and, you know, those fees kind of offset the fees that were eliminated. and so we just believe that home ownership is important, is important to communities around this country and whatever we can do to be helpful in that way, in a safe and sound manner is what

we're going to do. >> well, thank you. we have very little time left, but one of my, the problems that i constantly see is we have great ideas, great programs at every level of government, but nobody knows about it. do you have an outreach program? are there things that we can do in congress to support your work? >> i think the enterprises have outreach programs, but i really do wish the message about the first time home buyers would reverberate throughout the country so that people would know that the upfront fees for some home buyers are eliminated. >> the gentleman from pennsylvania is recognized for five minutes. >> thank you, mr chairman. thank you director for being with us. so there is, as we all know, a significant decrease in housing affordability in our country from supply issues, largely due to inflation, building costs, rising interest rates in >> the price appreciation is 50%

. hopefully, the administration is not planning on making this worse with new regulations and unnecessary government meddling. so, the government entities such as freddie mae, freddie mac, fhlb system. hud va usda represent a large share of the mortgage loan market. there obviously should be a coordinated approach to housing policy across the government to ensure the federal programs do not compete for market share in the past. when fha has reduced rates and incentivized borrowers to move to the f h a, which is supposed to be the safety net. not first choice. can you describe briefly how you coordinate with other federal agencies to ensure there is no duplication? >> of course. and we have quarterly meetings with the other government agencies. so, it's, we call it the housing, but we meet every quarter to talk about the policies that we are each undertaking so that we have a convert.

this has been going on for many, many years. we meet regularly. the secretary of hud is on our oversight board as well as the secretary of the treasury. we meet every quarter to have conversations about f h fa policies and we also have our teams work together on issues that affect housing in this country.

there's lots of communication when the f h a announced a premix cut of 30 basis points in february on the premix charge about borrowers. >> did the f h a consult with you on the premix reduction announced in february? >> they did not consult with us, certainly, the reduction in mortgage insurance premix have been widely speculated. they did let us know that they were going to move forward on, on that. that's not the case for many borrowers. fha back loans or va back loans. >> you feel it's a minimal effect? minimal effect. the questioning did not mention theme liquidity mission of fhlbo that you were also working, guidance for fhl banks, do you agree that providing liquidity to the members of fhlb is -- >> it's in the statute. regarding the guidance, can you

offer any details on what you might be planning now regarding the guidance, can you offer any, any details on what you might be planning? >> so, we did a study to figure out what was working and what was not? we had 17 listens to sessions around the country and three days of sessions here in washington. and one of the areas for improvement were the home loan banks, contributions to affordable housing programs. and that was throughout the country. and so we'll be culminating our report with what they've done correctly, which is a lot and as evidenced through the last, , the most recent bank failures and then some areas for improvement, some things we can do and some things we'll ask the congress to do. >> was the action of moving a fees higher for those with better credit if you will, versus those with lower credit. did, did you get much feedback related to that? >> sure. well, i would say that under no

circumstance do borrowers with high down payments pay more than borrowers with low credit and low down payments. and what we did was we took an outdated pricing grid that was so outdated that it overcharged a lot of the borrowers with the low credit and, and it overcharged other borrowers. and so, we took the current capital rule which really looks at on a loan by loan basis, the risk associated with each loan. and we calibrated the pricing grids to accommodate the new capital. i'd be happy to walk everybody through that. >> it was controversial that those with good credit would be punished and those with not so would be rewarded. i yelled back. >> mr. chairman, thanks

gentleman from pennsylvania, the gentlewoman from massachusetts miss presley is now recognized , for five minutes. >> thank you, director thompson for joining us and for what you do each day i represent the massachusetts seventh congressional district. there was a report the color of wealth put out by the federal reserve of boston that states that the average wealth for a black bostonian family is $8 and that of a white family is $247,500. i believe that has everything to do with home ownership in july. when you last came before our committee, i asked if your agency, the had considered how eliminating loan level price adjustments could increase equitable access to home ownership. following that hearing fhfa enacted reforms including the elimination of upfront fees for low to moderate income. i really applaud your leadership in making these pricing changes. these are important steps in improving equity in the housing market. i still believe that the fhfa needs to go further and fully eliminate these harmful fees which place home ownership out of reach for everyday people, especially black brown and

low-income home buyers. many stakeholders including consumer and housing groups agree it is time to get rid of these fees. have you investigated the feasibility and impact of eliminating llpa's altogether? >> sure. we mentioned that we have just recently issued a request for input, that talks about this issue. we're asking should the pricing grid be tied to the capital framework. so, there are a host of issues that we're trying to get stakeholder input on. i'd be happy to keep you up updated on our progress. >> i'd certainly welcome that. thank you. it does disproportionately impact censers of color. and so, i'm glad that you're looking at this so that we can eliminate these structural barriers to affordable housing.

mr. chair, i ask unanimous consent to enter a 2022 article by w b u r titled black and hispanic people are more likely to be denied mortgage loans in boston. i'd like to enter this into the record. >> without objection thompson. >> in this report found that 3501 applications for loans to purchase homes were denied in boston between 2015 and 2020. for white applicants, the denial rate was approximately 5%. but for black and latin x applicants, the denial rates were 15.3% and 12.7% respectively. this is a modern-day red lining in your view. what are the biggest barriers for lower income borrowers and borrowers of color when applying for conventional mortgages? >> so great question, we have found that many underserved borrowers, particularly in communities of color are renters and some of the positive rental payments don't get counted. and so, they end up being credit invisible or limit. they have limited credit. and so, to the extent that you report on positive rental payments, it really helps people build their credit in a way that

is reflective of their ability to and willingness to repay. and so those are some of the changes that both fannie mae and freddie mac have made in their underwriting mechanism. and when we update the credit score models, it will include things like, you know, rental payments and utility payments or streaming payments, just things that weren't thought about 30 years ago. so, this is really something that's very important, but the rental payment impacts everybody across the country because people, but we're not getting credit for positive rental. >> that's right. that's right.

>> and additionally, hikes in rental costs in my district in massachusetts and then across the country have put many low-income families really in dire straits. in boston. we've had rents that have risen by nearly 20% in some neighborhoods. director thompson, what can the f h fa do to prevent, to protect tenants from these egregious rent hikes? >> we are seeing specifically in properties with federally backed mortgages. so, we do a lot of investor and stakeholder outreach and we're getting ready to before the end of this month issue, a request for input on tenant protections. this has come up a lot of times and we want to h we are looking for comments ando request for input. >> thank you very much, director and i do -- it's really unconscionable this committee under public and majority have declined homelessness in 118th congress, housing affordability is the number one issue. >> the gentleman's time has

expired. >> the gentleman from wisconsin recognized for five minutes -- >> time has expired. the gentleman from wisconsin is recognized for five minutes. >> very good. thank you, mr. chairman, director thompson. home prices are skyrocketing because regulations and supply chain disruptions have made it too difficult to build new homes in many ways. interest rates have exploded because washington went on a spending spree and pretended the effects would only be temporary and transitory home ownership is getting even further out of reach for countless americans. meanwhile, the f h a is pushing changes that would penalize responsible home buyers and inject more risk into the housing finance system. i'm concerned it's the wrong approach. earlier this year, the ffa approved changes to the pricing system. we've discussed those changes today. they're complex, but i think it's clear that it would lead to many responsible borrowers paying more and ultimately those with lower credit scores and smaller down payments paying

less. you've noted some of your rationale for doing that. i don't know that i agree with the approach that you've taken, it seems broadly unfair. the fhfa is also allowing gs to expand the use of attorney opinion letters instead of traditional title insurance. and i'm concerned that may be putting borrowers at risk in the name of saving a few dollars upfront. and your agency is also considering a title insurance waiver pilot. and i'm concerned that would increase the risk for homeowners. i want to encourage you to review the course that you've set. and i think broadly, we do need to make sure that gas our safe sound and will capitalize and support responsible home ownership. the american people face a lot of challenges in today's high inflation, high interest rate environment. we need solutions that work for them. let me shift gears slightly and dive into a pair of questions that i think are relevant for us to get our heads wrapped around. first, i want to get in the

weeds here if i can into the three credit reports to two, from three credit reports to two that it could have, and will it have unintended consequences? and so, as we look at this move from the trimerge standard to a bimerge under the buy merge standard, do you feel that there might be an incentive for brokers to cherry pick the two highest credit scores for prospective borrower in. how would the f fa prevent any gaming in the system under a barge standard? >> so, moving from 3 to 2, i think one of the requirements we have is that if the lender chooses three, if they don't like the two, that if they choose three, they must use all three. but we're still working on that process. but i did want to, if i could just make a comment about something that you said earlier, i just want to make sure that

for the record that we've done a lot offices and there's high borrowers or high credit scores are not subsidizing borrowers with low credit scores. we are providing an elimination of fees for first time home buyers across the country in rural areas, manufactured housing and that is being paid for by people who are buying 2nd and 3rd and vacation homes and investor homes. and that money well offsets the fee elimination. >> is the fee increasing for, for high credit score to individuals? >> the fee is calibrated, the pricing grid is calibrated to the capital requirements for individual loans. and we went through a public notice and comment period on that. it's very public and you can we can look at that. >> understood, but it is the, is the fee increasing for high

credit score individuals? >> the fee is changing for not all high credit and not all loan, there's no universal it's just increasing for high credit score individuals. in some cases, it's zero, no change whatsoever. >> in some cases, is it increasing? >> in some cases, it's an increase in some cases it's a decrease but at the end of the day, it's no borrower with a low-down payment and a low credit score is going to pay less than they, that they're going to pay more on average than a high credit score borrower. that's just the way the calibrations understood. >> in the change from the proposal you put forward -- >> well, you would have to believe that the original grid was accurate, and the original grid was outdated. it wasn't calibrated to any of the capital requirements that the enterprises were using. not the one that was in place in 2017 and 2018 and, and not this one. so, we updated it to make the enterprises safer and sounder more viable and so that they could accurate the appropriate amount of capital for the risk that they're taking.

so, they wouldn't have to be on the backs of the taxpayers. >> i appreciate being follow up in writing on the merge because we ran out of time for it. mr. chairman. >> i thank the gentleman, the gentleman from new york, ms. velazquez is now recognized for five minutes. >> thank you, mr. chairman and thank you, miss director for being here. you know, if the republicans are so concerned about interest rate and mortgage payments being so high, what would it happen if there is a default, a debt default miss? >> so, i think the mortgage interest rates would be high and it would be likely preventative, more preventative from borrowers getting home ownership. and then i'm sure that mortgage bank, mortgage bank securities

investors would want to make sure that they got paid. >> one economist today described it as a so director thompson, -- as a calamity. senator van holland and i recently wrote to you and the other regulator regulators charged with writing the incentive-based compensation rules under section 9 56 of dodd frank. so, thank you for your response last week. some of the other regulators told me in this committee that the six agencies have met since the collapse of silicon valley bank and in notice of proposed rulemaking could be out by the end of the year. do you agree with what they said? and do you agree with this timeline for the notice of proposed rulemaking? >> thank you for the question. i was on the call where we agreed to move forward with the rule and to try to have it out by the end of the year. >> thank you. director thompson, as you know, residential co-ops are an

important part of our housing stock in new york city. can you explain the programs the g s e s have in place for affordable housing investment in co-ops and the options for refinancing? how is the f h fa working to expand programs for residential co-ops? so, the enterprises can buy co-ops and, and again, they purchase the loans that are made and we, you know, there are requirements for purchasing those co-ops. we have not, i don't know the specifics on if there are issues with that or not, but i do know those are eligible for purchase. >> so, director thompson, there

has been a lot of misinformation and mischaracterization by fox news to the changes. fhfa was making to its pricing structure. so, could you please explain how these changes were intended to help home buyers across the country in all communities? and maybe tonight, fox news will air your response. >> sure, thank you. so, the changes were made one to update the outdated pricing grid that had not been updated in almost 10 years. two, the changes were made to really help first time home buyers who cannot afford a huge down payment on a home to have them have home ownership more affordable and this is across the country.

certainly, this is for borrowers who have area median incomes of 100 and 100 and 20 in high cost areas. but we really thought it was important for the workforce for policemen and firemen and teachers and just people to be able to live where they worked. and we wanted to do what we can, could to provide affordability. and again, we're paying for that with the fees that are generated from second homes, investor homes and vacation homes. and so that was the second reason. and vacation homes and so that was the second reason, the third reason was to build capital so that the enterprises and be in a position to absorb more losses, the enterprises are woefully undercapitalized and this is a good way to balance and responsible. >> are you listening?

>> i yield back. >> thank you, director thompson. as you may know california has suffered from a chronic home affordability for years. last year, orange county, my district going over a million. to make matters worse, california has the highest rate of poverty than any state with 13.2%. so in california, we have a mismatch with low supply, the highest home prices in the countries and unable to afford a home. one of the solutions to california's housing access and affordability problems is found in yourr testimony, the move to newer more modern credit scoring rimodels, you're undertaking, 12.5% for my constituents in

california, 41% or 27,000 -- 26,000 of them with score of above 620. so can you outline the benefits of including rental payments, utility payments and cell phone payments and mortgage credits scores? >> sure, so i think one of the tenants,op someone's ability to pay and willingness to pay and if you have people that are making a living and making payments every single month on time and they can't afford a low downto payment, continuous payments of rent every single month is very important and ought to be considered in credit score and utilities. you certainly need water and

electric. people are paying their bills on time, justad because somebody hs low wealth doesn't mean they have bad credit and to the extent they are able to and willing to pay, then that ought to be taken into consideration. >> i couldn't agree with you more. i do have a bill to do just that. that would certainly help californians of achieving the american dream of home ownership. the topics of esg's venting into title insurances has come up recently and there are mare concerns amongst my colleagues. whether it's the reported fannie mae title waiver pilot or the alpromotion of unregulated title insurance alternative to low-income borrowers. i'm too worried that fha are pushing alternative products and don't protect home buyers,

lenders and so i would like to ask you and encourage you to go back and revisit the rationale behind fha pausing unregulated title insurance on low-income borrowers in general but mostly, most can you confirm that the risky unregulated alternative are not being pushed in southern california where i'm from and my constituents are or in other geographic across the united ststates. >> first let me confirm that it is our goal to protect borrowers and enterprises and fha is not pushing any unregulated entities. the title insurance is a requirement again by the lenders -- the lender to prove that there's clear title and that

there's no superior lane. since 2008 attorney opinion letters are an option for certain borrowers under certain circumstances but nobody is pushing that. >> thank you for the clarification. with the interest of time i just want to continue. i want to say that we need to ensure that these pilot parameters don't undermine the safe and soundness goal of fh, faa. i commend yousu for conducting a review of gse's, given the programs reduce risk to gse's and taxpayers and help achieve more favorable outcomes for borrowers in local communities i encourage you to restart this program as soon as possible but i understand the programs have come to a stop. so -- and these programs are important to help derisk programs, the gse's and we do agree that we need to restart

the program. >> make sure that all of the programs that the enterprise have arema included in the waterfall. >> gentleman from new york is recognized for five minutes. >> thank you, chairman. >> you were discussing title insurance with my colleague. last week we had housing insurance, i discussed, fha, fa-fha's proposal of waiving title insurance requirements and acting as title insurer in the lending organization. title insurance is a primary market function and gse cannot belong in a private market and disturbing to think that fannie mae or freddie mac might display title insurance. would you agree that fannie and fray have no place to offering title insurancece project?

>> i have not. fhsa is not pushing that and i have not seen that proposal and we would have to evaluate anything on the merits and soundness of the enterprises and borrowers. >> so you don't think that -- you broughtyo up letters. that -- well,k what do you think about the proposal? would you agree with the proposal if fannie and freddie want today waive title insurance? >> safe and sound. i would evaluate that on the merits. i haven't seen it. >> i wouldn't think it's safe and sound. i was a practicing attorney. thank godse for them, some of those closings and a lot of homeowners, a lot of grief by going through the title insurance policy. sound proposal and i hope if

anything does come forward, fannie and freddie would waive those insurance requirements, i irwould hope that you would objt to it because there's a reason private lenders require title insurance there. there's protection there. when homeowners purchase their homes that's theth biggest asset they are going to buy and it's one thing to have that protect the lender and other things that have title insurance that protect the home owner. i think any sort of waiver of title insurance requirements by the -- by the gse's would be a huge mistake and would end up hurting consumers. i want to move onto and what i would call but the administration has fha looking to enhancing tenant protections and addressing egregious rent increases in the enterprise multifamily programs. director thompson, what do you consider egregious rent increase and do you have concerns and

significantly impact the supply of affordable housing .. .. .. i would have to say one thing we've seen in new york which has rent stabilization laws and multifamily borrowers and significantly impact the affordable housing. >> one of the things we are doing is issuing a request for an bullet on this very topic. i would love to keep you in orange. the information wee are getting from all stakeholders on this really important issue and so, the renters, the low-income renters who, who are in these affordable housing, they face they, they're the ones who are again, who are hurt. so, i think when you're, you're

requesting this information again to pay attention and to focus on what the actual effect is and, and on these low incomes these low-income renters. and i think we have a perfect example of how they're harmed when you look at what's been going on in, in new york city where we already have rent stabilization laws and limits on deductions on investment and how to recoup capital improvements. last question because i'm running out of time. i've heard significant concerns from market, market participants.

we've heard a lot today about increasing access to home ownership, an issue that is especially hit home for me. i continue to hear about the concern for my constituents. according to the latest stats, new york has the lowest percentage of homeowners in the nation under 55%. one way to reduce prices in the housing space could be through a new model of providing mortgage insurance designed to create more flexibility in pricing for borrowers by utilizing new streamlined highlight capitalized approach. all right, i'll submit this for the record. i yield back. >> the gentleman from new york will submit that question for a prompt answer. and now we turn to the gentleman from new york. also, mr. lawler for five minutes. >> thank you, mr. chairman director thompson. you said a few minutes ago that the changes that you have made to mortgage pricing were designed to lower the risk profiles of the gses and i want to focus on the l lp a changes you announced in october where you decided to eliminate l lp s altogether on certain borrowers, like first time homeowners,

which you paid for with increased fees on second and vacation homes. that's obviously a policy choice. and we can argue whether it's good or bad. but my question is on the impact of this change from a risk management standpoint since first time home buyers have probably never owned a home before. there is no history of how they will do in repaying the largest loan they have ever taken in their lives. and yet you lowered the risk-based pricing fees on those loans to zero. can you tell us how that decision lowers the risk profiles of the g s e s here? >> sure. so, as you know, borrowers that have very low-down payments are required to have credit enhancement by law. so, the enterprises cannot buy a loan that has a loan to value ratio of greater than 80% unless it has credit enhancement. that credit enhancement takes the form of mortgage insurance and to the extent that borrowers with low loan to value ratios default, the mortgage insurance stands in front of and takes the first loss.

so, it reduces losses to the enterprises. the mortgage insurance companies are capitalized, they've got liquidity and at the end of the day, we're transferring the first lost credit risk to the private sector which helps protect the enterprises. so from a risk based perspective, the cost of that premix gets included in the pricing even though we eliminate the upfront fees, it's a very small portion of the total fees that high, i should say low credit risk, low down payment borrowers pay and they pay more than, than any other borrower. and if you look on the final grid that shows what the total amount of payment that borrowers pay. it is risk based. and there's absolutely no case where low credit score and low-down payment borrowers pay less than someone with a high credit score and high borrower.

and what i get nervous about is people hearing i don't have to have a good credit score to get a house and then they're going to go to the bank and get sorely disappointed. so, i want to make sure that people understand that you must, you know, continue to pay your bills. we're talking about credit worthy borrowers and again, in the enterprise flagship programs that are affordable programs, the credit scores are in over 740. these are people that make their payments, they're credit worthy, but they just don't have enough money for a down payment and the enterprises are protected through the mortgage insurance. >> my colleagues, miss wagner and mr. davidson discussed with you the issues that we have a perceived lack of transparency and stakeholder input that the rollout of the new pricing framework has brought up again.

while the recent formal rfi is a nice first step. the american people need to see more and given all the attention on the recent pricing changes and some of the backlash that has resulted. are there other specific ways that fhfa can increase transparency for actions like this in the future? >> sure. so, we specifically are intentional about providing public information on pricing every year. we submit a report to the congress and we also publish it on our website that talks about what the pricing is, how it's changed year over year. and it goes into detail on small lenders, larger lenders loan to value ratios. and so, in the 2022 report that we published, we articulated that we were going to update the pricing grids. and we also in the scorecard said we published that define what we expect the enterprises

to do both in 2022, 2023. we let the public know that we were these pricing changes. what was interesting to me was that many people didn't understand the mortgage insurance component. and so, we thought that we would take this opportunity to explain what we did by issuing the r f i and then get input to answer questions. like should we even have llpas , should we include mortgage insurance or not? should we tie the pricing to capital? so, we're trying to get as much input as we can. >> thank you. >> gentleman's time has expired. recognize the gentleman from florida, mr. donalds and we are having votes called on the floor and we will continue questioning until there are 200 votes outstanding. and so, i now recognize mr. donalds of florida for five minutes. >> thank you, mr. chairman and

director thompson. thanks for being here. i'm pleased to see that f h fa announced casino of the debt to income upfront fee proposal. in my view, the decision came after significant stockholder or stakeholder feedback and congressional oversight. can you speak about the specific issues inherent with the debt to income proposal from both lenders and borrowers that were raised throughout the process? >> so, when we made the announcement and there is a debt to income capital requirement in the capital rule, we lenders said they called and they were, they said this is real. we're having operational challenges implementing this. and i personally went to and visited lenders credit unions. i went to banks. i talked to heads of organizations and they walked us through the process, and they said especially for first time, first time home buyers, it was difficult to exactly pinpoint what the debt to income ratio was at a point in time.

many times, people forget, you know, pieces of information, whether it's expense or whether it's additional income that must get added into the calculation. and what they were nervous about was this notion called bait and switch that we'd start out with pricing for a loan with one set of information, they get additional information and then the pricing would change if it moved the debt to income ratio up to 40%. and so, there was lots of confusion about it and we postponed that implementation through august. and then after getting lots of information from talking to stakeholders, we rescinded it director. >> let me ask you a question. do you guys have any plans on trying to bring this back? >> no, no, we do not. >> no. so, we're ok. all right. i just want to make sure we clarify that sometimes i find in this town ideas bubble up, then they go away, then they bubble up again in the future. it's important to, to state that one of the thing i would talk, talk on real briefly is i have some strong concerns about the reported title insurance pilot

program at fannie namely the opaque process with which this program is being developed and how it would work in practice. a spokesperson from fanny stated in response to recent reporting on the title pilot that the agency was still in the research phase. can you describe the stakeholders and data fhfa is utilizing and collaborating with as it conducts research on this action? >> fhfa is not conducting research? it evaluates proposals from fannie mae and freddie mac. we have, i have not seen that proposal because a pilot would have to be approved by f h fa. and we also put in place a new products rule and we have like all the pilots that both fannie and freddie are engaged in that proposal has not come to f h fa for approval. >> ok. director, last question, are you concerned about the current size

gst's? do you guys have any concern about potential loosening of underwriting standards? >> so, yeah, so to answer your question, i'm concerned about the enterprises building capital so that they can cover their losses the size. the enterprises have very low delinquencies right now. the loan to value or the market to market loan to value on the book of the enterprises is the best it's ever been. but i am concerned about making sure that they build capital, so they don't have to default to, you know, getting taxpayer support. so that's my number one concern and my second concern. one a and one b is making sure that they fulfill their responsibility to provide liquidity throughout the united states, to homeowners everywhere, not leaving anybody out but making sure that credit worthy borrowers can get access to first time home ownership. >> well, i will say in closing,

i share a portion of your concern that and, and this is as a former banker who watched the residential side from the commercial side, i would say that with respect to the g s e s being able to be supportive of, of the mortgage markets to a degree is a goal that i think it's optimal, but that may, it may not always be realistic. but i think that the key concern is always going to have to be credit quality because credit quality is the thing that's going to protect taxpayers in the long run. with that, you'll back. >> the gentleman from iowa. mr. nunn is recognized for five minutes.

>> thank you, mr. chairman hill. very much appreciate director thompson. thank you so much for spending some time with us today. as a guy here from the midwest, i think we want to make sure that both our first time home buyers have an incredible experience and do this the right way and that ultimately the taxpayer is on the for when things don't work out the right way. and for those of folks watching back home in iowa today, your organization, the f h fa plays a unique role in how mortgage markets function. in fact, you're the primary regulator for our g s e s. fannie and freddie, over half of the mortgages on the market owned or guaranteed by those government agencies. that's more than 50% of where we are here. and you are the primary mission to regulate these g s e s by design. the ffa is intended to be an independent agency free from agenda or political pressure, whether it be from congress or from the white house. now, as we've heard here today, some have argued that the ffa is pushing forward the administration's equitable housing finance plans, but that you're doing it while displacing potentially private capital. additionally, your agency simply announced significant changes to long held standards via a press report or a periodic report disregarding any formal notice or comment period.

that is an issue that is concerning last october, the f h fa made two important announcements related to credit scores and home ownership. first adding vantage 4.0 seems to make a lot of sense and that's an area where we would agree with you. these new models help score an additional 11% of people in my district and nearly half of those folks score near prime or higher than 620. so, my question director is, what's the timeline for this project that you're working on? and can you commit to being communicative, not just with my office, but with us here in congress on how that process is going? >> thank you. so that it's going to be a multiyear effort to update credit scores because credit scores are used not just for underwriting, they're used for pricing, they're used for pooling, they're used by the mortgage insurance, they're used for by investors and so making sure that people have data so that they can calibrate the old to the new is going to be very important and it's going to take lots of stakeholders, you know, analyzing the data and making sure that their systems can absorb and that can process in a way that is safe and sound and that we don't lose a beat in terms of risk management.

>> i appreciate that. and that's good. i hope that we can expedite that process because i think we all recognize this is something that we want to get to in a safe way, but not something that takes years and years to do, but addresses the current concern as both my colleagues on each side of the aisle have mentioned, my second announcement is moving to a bimerged system. it raises some questions though my small community banks and credit unions, including those in rural iowa often only report data to one credit reporting agency under the buy merger standard two censers who have similar credit profiles could potentially get different price mortgages depending on one, which two reports are pulled, two which mortgage lender and consumers choose and three which or how many mortgage lenders they have access depending on where they live. so, for example, one of my constituents living in a large metropolitan area like des moines might receive something very different from one of my

rural guys in bedford iowa. how's the fhfa going to ensure that all americans have equal access to mortgages regardless of where they live? >> so, we're working on that process right now and we're getting input from stakeholders, we believe after analysis that moving from three credit scores to two is going to be beneficial for the borrowers and it will encourage competition from the credit reporting agencies and it would lower costs for the borrowers because instead of pulling in three credit reports, they only pull two and then the lender picks which two of those are right now. we're working through the process with the g s e s on trying to figure out whether there is going to be the median or the average. it used to be the median for the three and should it be the media n?

and we have a request out for comment on that very issue of moving from buy merch to trim merge. >> you look at that comment, i think one of the things that has a concern here is that you're asking for the f h fa is asking for more data specifically related to those mortgage, but at the same time excluding some information from the mortgage process. i hope that provides clear guidance. in my last 30 seconds here. i want to highlight the fact that we just had a cyber-attack in des moines, iowa. it really went after a nerd of young people who had no credit score whatsoever. that information is now being used by cyber criminals to be able to apply, talk to us a little about what the f h fa is doing in this area to really protect first time home buyers who may have no credit history, ? >> so, to the extent that first time home buyers have no credit history if they're renting and not living with their parents, perhaps the positive rental payments are being captured. >> thank you, mr. chair. we'll submit those questions to the record and you my time back. >> i recognize the gentlewoman

from texas, ms. dela cruz for five minutes. >> thank you, chairman, for holding this important hearing today and thank you, director thompson for appearing before the committee or towards the end here. i will start here that i am concerned about the increasing prices of housing and availability of affordable options, especially in my community, which is one of the most hispanic districts in the entire nation. in fact, over 80% of our district is hispanic. with record high inflation and a possible recession will only further complicate housing issues and introduce uncertainty in the system. we are living in a transitory period, moving from a low rate environment to a high rate environment and it is a time when we should be most focused on the safety and soundness of our system and not pushing to remake the system. so, with that said, director thompson, fhfa has required fannie and freddie to release equitable housing finance plans each year. during your tenure, the stated purpose of these plans is to create quote goals and actions to advance equity in housing finance. equity can mean a lot of different things to a lot of different people. what does this mean to you

specifically? >> sure. thank you for the question. so, we believe equitable housing plans are the vehicle that allow us to identify barriers to home ownership for underserved communities and particularly minority communities, but also come up with goals and objectives to eliminate those barriers. and i'll give you an example in the latino community. one of the barriers to is are the docents for the mortgage itself.

and as you mentioned, the mortgage is the one of the largest assets that most people will have. and so, what we've done is we've translated, you know, many of the mortgage docents into -- documents into different languages so that people who don't have english as their first language can understand what the docents say and walk -- documents say and those are the things that are in the plan. >> i reclaim my time. agree on focusing on the safety and soundness of the system. our concern is that the

trade-off that you had as a conservatory and regulator may have been affecting that soundness. not only for the hispanic community but for our district. do you believe that you must move the goal post? in other words, lessen or otherwise change the requirements to own a home to bring more borrowers to fannie mae and freddie mac. >> we absolutely believe that we are not lowering any credit standards. we are not making any changes that borrowers who would not be eligible will be otherwise eligible. we're just not doing that. we've seen that before. the equitable plans really go towards, you know, more education and a loan products and programs that are helpful to people who again have high

credit or reasonable credit, but they don't have the down payment. if you look again at the enterprise affordable programs, the average credit score for the borrowers in 2022 is over 700. it's over 730. and so, we're talking about credit worthy people. they may have low wealth, but they're credit worthy and they pay their bills on time. >> well, and again, i believe that what we are feeling and what constituents are telling us is that they feel that they've worked hard for their higher credit score and that they're having penalties because, or having to pay higher because of that higher credit score. with that i yield back. >> i thank the gentlewoman from texas. the gentleman from tennessee. mr. ogles is now recognized for five minutes. >> thank you, mr. chairman. and for the record, i do want to state as it pertains to the potential of a default. the house republicans have passed a piece of legislation.

it is incumbent on the senate democrats to do their job and pass our bill and it is incenting upon the president to do his job and sign our bill. so, this notion that the republicans are to blame is nonsense. if there's a default, it is a democrat default, ma'am. thank you for being here. i know it's been a long day and you're, you're ready to get out of here as are we. but one of the things i want to discuss is how climate change, some of the climate activism is creeping into the kind of the, the regulatory regime. i'll specifically go to fannie mae's website under e s g environmental web page notes and i'll paraphrase here that fannie continually seeks to better understand climate change related to risk? miss thompson. can you explain that the, you know, what risk to the banking, to the loans that, that climate has, that's being articulated by fannie and ultimately that you're overseeing.

>> sure. so, in the mortgage space, both fannie and freddie and the home loan banks look at, natural disasters. i mean, we're in the mortgage housing business and so to the extent that they are climbing the events and there have been just an increase number in the past few years, whether it's flood or hurricanes or wind, they cause damage to the properties that are owned by the enterprises and we want to make sure -- >> i will reclaim my time. the market has insurance for the purpose of risk, right? and so, i, i would ask, you know, in specific medical terms as it pertains to climate change, if there's a 3.5-degree change in temperature, how does that affect the housing financial system? >> sure. i'm glad you raised the question because in many states that are hugely impacted by climate, the insurance question remains.

i know last year in one state, there were the in the rating for those insurance companies was going to be downgraded. and so that means that borrowers wouldn't have coverage if yes -- >> flood insurance in florida does not impact borrowers in my state and so, to have a regulatory regime that is forming, you know, enforcing or forcing climate regulations for those types of things into this system is quite frankly inappropriate. when what i would really want to know is what is the plan and timeline? we've had two administrations talking about it, agreeing things need to be done but we continue to have this conversation. but here we are continuing to have this conversation here. we are without a clear picture of what the g s e s look like post conservatorship. how does it affect, impact the free market?

so, i want to get back to the question of what is your specific plan under your tenure to move them out of conservatorship quickly? >> right. so, my plan is to make sure they continue to build capital and that the prices they charge cover the cost of capital for every loan that they take. also, to make sure that they're running their operations in a safe and sound manner and to make sure that they're protected, which goes back to the insurance issue you raised. it's not just flood, it's wind hazard, fire, we need to make sure our properties are protected, and that coverage is available for those properties at inception and through the life of the loan. >> yes, ma'am. but specifically, as you look at building capital based off historic trends and obviously, we're in a different fluctuating market. what is your projected timeline to see them out of conservatorship? and is there anything that can be done to expedite that such as private capital? >> so, we're working to again build private cap, build capital for the enterprises and because the market has shifted from record acquisitions for refinances to this purchase

market, we're in the high interest rate. we've seen the number of loans come into the enterprises decline. and so, we're trying to build as much capital as we can and make sure that our infrastructures are as safe and as sound as possible. it will take a long time to, to get to the capital required. >> yes, ma'am. so, in other words, there's not a specific timeline. we, we're kind of in the same conversation that we're going to be having this for a nerd of years. mr. chairman, i yield back. >> gentlemen yield back. i want to thank director thompson for her testimony today. without objection. all members have five legislative days within which to submit additional written questions for the for the witness to the chair, which will be forwarded to the witness for her response. she had lots of written questions. and today and i ask you director thompson to please respond promptly as you are able, and i thank the ranking member for her perseverance in the hearing. this hearing is adjourned.

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handlinghe u.s. southernrder a final vote on impeachment is expected later in the day the on

c-span to the senate return to consider the nomination of kirk campbell with a final confirmation vote to follow in the afternoon. also on c-span three at 10:00 a.m. treasury secretary jeanette yellen testifies. before the house financial services committee. at 3:30 p.m. the senate meeting for foreign influence in the united states. you can watch are the coverage on the c-span now video out or online at c-span.org. on thursday, the u.s. supreme court will hear oral argument in the case of former president donald trump eligibility to be on the 2024 colorado ballot. former president trump was ineligible for running from office to the u.s. constitution and supporting and interacted from january 6. she stands "washington journal" with expert analysis previewing