U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

80–876 PDF 2013

SUSTAINABLE HOUSING FINANCE: 

PERSPECTIVES ON REFORMING THE FHA 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

HOUSING AND INSURANCE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

APRIL 10, 2013 

Printed for the use of the Committee on Financial Services 

Serial No. 113–10 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

GARY G. MILLER, California, Vice Chairman 

SPENCER BACHUS, Alabama, Chairman 

Emeritus 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

MICHAEL G. GRIMM, New York 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

TOM COTTON, Arkansas 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

SUBCOMMITTEE ON HOUSING AND INSURANCE

RANDY NEUGEBAUER, Texas, Chairman 

BLAINE LUETKEMEYER, Missouri, Vice 

Chairman 

EDWARD R. ROYCE, California 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

LYNN A. WESTMORELAND, Georgia 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

MICHAEL E. CAPUANO, Massachusetts, 

Ranking Member 

NYDIA M. VELA ́ ZQUEZ, New York 

EMANUEL CLEAVER, Missouri 

WM. LACY CLAY, Missouri 

BRAD SHERMAN, California 

JAMES A. HIMES, Connecticut 

CAROLYN MCCARTHY, New York 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

April 10, 2013 ................................................................................................... 1 

Appendix: 

April 10, 2013 ................................................................................................... 47 

WITNESSES 

WEDNESDAY, APRIL 10, 2013 

Kelly, Kevin, First Vice Chairman of the Board, National Association of 

Home Builders (NAHB) ....................................................................................... 13 

Marzol, Adolfo, Vice Chairman, Essent Guaranty, Inc. ....................................... 8 

Rossi, Clifford V., Executive-in-Residence and Tyser Teaching Fellow, Robert 

H. Smith School of Business, University of Maryland ...................................... 16 

Stevens, Hon. David H., President and Chief Executive Officer, Mortgage 

Bankers Association (MBA) ................................................................................. 10 

Thomas, Gary, 2013 President, National Association of REALTORS® (NAR) .. 11 

Wartell, Sarah Rosen, President, the Urban Institute ......................................... 14 

APPENDIX 

Prepared statements: 

Neugebauer, Hon. Randy ................................................................................. 48 

Kelly, Kevin ...................................................................................................... 50 

Marzol, Adolfo ................................................................................................... 59 

Rossi, Clifford V. ............................................................................................... 67 

Stevens, Hon. David H. .................................................................................... 78 

Thomas, Gary .................................................................................................... 99 

Wartell, Sarah Rosen ....................................................................................... 114 

(1) 

SUSTAINABLE HOUSING FINANCE: 

PERSPECTIVES ON REFORMING THE FHA 

Wednesday, April 10, 2013 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HOUSING

AND INSURANCE, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 10 a.m., in room 

2128, Rayburn House Office Building, Hon. Randy Neugebauer 

[chairman of the subcommittee] presiding. 

Members present: Representatives Neugebauer, Luetkemeyer, 

Royce, Miller, Capito, Garrett, Duffy, Hurt, Stivers; Capuano, 

Velazquez, Cleaver, Sherman, Sinema, and Beatty. 

Ex officio present: Representatives Bachus and Waters. 

Also present: Representatives Carney and Green. 

Chairman NEUGEBAUER. Good morning. The Subcommittee on 

Housing and Insurance will hold a hearing today entitled, ‘‘Sustainable Housing Finance: Perspectives on Reforming the FHA.’’ 

This is our fourth hearing on the FHA, a very important part of 

our economy and of the housing market. 

I will just remind everybody that we will have 10 minutes of 

opening statements on either side. And with that, I will recognize 

myself for an opening statement. 

As I mentioned, this is our fourth hearing on FHA and we have 

learned a little bit along the way. One of the things that we have 

learned is that FHA was not immune to the housing crisis and that 

their mortgage portfolio has been problematic to the point where 

we learned that their fund is basically underwater. 

It has a negative equity and the President just released his budget today which indicates that the American taxpayers may have to 

put as much as $943 million, nearly a billion dollars, into that 

fund. 

And we also heard from people saying that FHA had kind of 

moved beyond its initial charge, that it had expanded into markets 

and to territories it had not been before. 

We also learned that some people felt like FHA was, in many 

cases, being used as a vehicle for doing housing policy, sometimes 

to the detriment of FHA, and maybe sometimes to the detriment 

of the housing market. 

What we also learned, as we were looking to bring the private 

sector back into play for mortgage housing finance in this country, 

is that the pricing that FHA is using on its mortgage insurance in 

2 

many cases was very difficult to compete with, particularly since 

the American taxpayers are the ultimate backstop. 

We have had a number of witnesses say that FHA reform is 

probably needed. There hasn’t been a lot of reform to FHA in a 

number of years. 

And one of the things that I think House Republicans, and I 

think this committee, are committed to is having a robust housing 

finance market in our country, which is sustainable. 

Because we believe that if you have a sustainable, robust housing finance market in this country, then you will also have a more 

sustainable housing market in this country, and that is very important to the American people. 

Some of the people who got mortgages, who shouldn’t have gotten mortgages, could have been victims in this circumstance, but 

I think in many cases, the real victims of the housing crisis were 

those people who had been making their mortgage payments, or 

maybe they paid their house off and were counting on the equity 

in their house for retirement or to send kids to college. 

And because of the market conditions and what happened, those 

housing values went down and those people were as much of a victim as those folks who got mortgages which maybe shouldn’t have 

been made. 

So, I think that this is an important hearing today. We have, I 

think, additional stakeholders. We have tried to have as many 

stakeholders in this process as we can because, ultimately, the goal 

here is to begin to look at some legislative language and policy that 

we think accomplishes the goal of making a sustainable housing finance market in this country. 

And we want to make sure that we bring all of the stakeholders 

in place because it is important that we get it right. The ultimate 

goal here is to get this right. 

We look forward to hearing from the witnesses who are here 

today. I think we have a great panel and we are certainly looking 

forward to them. 

And with that, I yield back my time, and recognize my good 

friend, Mr. Capuano, the ranking member of the subcommittee, for 

his opening statement. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

I want to thank the members of the panel for being here today. 

I particularly want to welcome Mr. Kelly, who grew up in my 

neighborhood. We did lose him to a small State named Delaware 

or something. It is this little State somewhere along the Atlantic 

Ocean, but he is welcome back. 

And my understanding is he is still registered to vote in my district. Don’t worry about it, Mr. Kelly, nobody will change here as 

long as you vote the right way, of course. 

I just want to say that I actually want to thank the chairman. 

I think this panel today—I have read pretty much all of the testimony and I know pretty much where most of your organizations 

stand. 

I actually think this is going to be the most informative panel we 

have had, and the most thoughtful discussion, I am hoping. I am 

looking forward to it. 

3 

I think that is the end of my opening statement, because the 

truth is I want to hear from you. I want to engage in some discussion. 

I think we all agree that we want to make some changes to the 

FHA and I think we need to have a discussion about the specifics 

and the details of what should change, and what shouldn’t, within 

those parameters, which maybe today is not the day for full details, 

but at least some general parameters. 

So I am looking forward to it and, again, I want to thank the 

panel for coming. I look forward to your testimony. I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And, now, the vice chairman of the subcommittee, Mr. 

Luetkemeyer, is recognized for 2 minutes. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman, for this important 

hearing. 

While this conversation may be difficult at times, it is in the best 

interest of our country and the American people to closely examine 

FHA and to make responsible reforms to this Nation’s housing finance system. 

I continue to be troubled by the fact that FHA seems to have 

grown well beyond its original mission. Loan limits are high. The 

number of insured mortgages has surpassed 7 million nationwide. 

So the question is, can we find ways to reform the system? During a recent hearing, FHA Administrator Carol Galante made it 

clear that she would be supportive of seeing the loan limits, which 

now stand at $729,000, decrease. 

FHA was created to serve low- to moderate-income borrowers 

who were creditworthy. That mission appears to have changed as 

FHA’s book of business continues to grow. 

I firmly believe that we need to advance legislation that not only 

returns the mission of FHA to its original purpose of serving those 

creditworthy borrowers who need access to the housing finance system, but also one that shifts risk away from American taxpayers 

and allows for more participation in the private market. 

Last week, former FDIC Chairman Sheila Bair had an article in 

the Wall Street Journal which said, ‘‘Regulators let big banks look 

safer than they are’’ and it talked about the modeling of themselves 

and how they look at—when they look at their capital asset ratio. 

And it shows that the megabanks, the big banks, kind of fudge 

the numbers a little bit whenever they put some of their more risky 

assets at less than the actual value and concerns that we have 

about them and that part of those investments are mortgagebacked securities. 

So, again, we are playing with fire not only within the housing 

system itself, but also with investments in our financial system as 

well. 

I think it is essential that this committee work to return FHA 

to its original mission and to ensure that U.S. taxpayers are not 

the ones left footing the bill for these risky endeavors. 

I look forward to hearing ideas from the panel on how to reform 

the system into one that is safer and follows the tenets of its own 

lending and underwriting. 

And, with that, I yield back, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

4 

And, now, the ranking member of the full Financial Services 

Committee, the gentlewoman from California, Ms. Waters, is recognized for 3 minutes. 

Ms. WATERS. Thank you very much. I welcome the committee’s 

continued attention on FHA and I am pleased that we are hearing 

from a number of key industry participants today. 

Today’s hearing is the fourth hearing focused on FHA this year, 

and I welcome each of the witnesses to the committee. 

Since its inception in 1934, FHA has insured home loans for 

more than 37 million American families. For many of these families, FHA was the only home financing option. 

And while FHA has been put under considerable strain during 

the housing crisis, it served an important countercyclical role and 

ensured the continued availability of mortgage credit. 

Now that the housing market has stabilized, FHA’s footprint has 

been reduced, as we have heard from witnesses during previous 

hearings, and I am pleased that FHA has taken a number of important steps, including multiple premium increases, to strengthen 

themselves, which has helped lead to FHA’s strongest books of 

business on record in 2010 and 2011. 

The release today of the President’s Fiscal Year 2014 budget will, 

undoubtedly, return attention to the financial solvency of the Mutual Mortgage Insurance Fund (MMIF) and whether HUD may 

need to borrow funds from the Treasury, a situation, I might add, 

that we won’t know for sure until the end of this fiscal year. 

There are bipartisan steps that we can take right now that would 

help address the solvency issue. I recently introduced, along with 

the ranking member of this subcommittee, Michael Capuano, bipartisan FHA solvency legislation that passed this committee unanimously last year, and which subsequently passed the House with 

over 400 votes, something that does not occur in this body very 

often. 

So I want to take this opportunity to urge my colleagues on the 

other side of the aisle to join us in quickly passing this legislation 

and sending it to the Senate. 

Among the key reforms contained in that legislation is indemnification authority, which FHA Commissioner Galante included in 

her list of recommendations to this committee in mid-February. 

One other point that is cited in Mr. Thomas’ testimony, and that 

I believe deserves repeating, is that FHA continues to have significant resources, sufficient to pay 30 years’ worth of expected claims 

on its portfolio. 

The Fiscal Year 2012 actuarial review showed that the total capital resources of the Mutual Mortgage Insurance Fund at the end 

of Fiscal Year 2012 were estimated to be $30.4 billion. 

As Mr. Thomas’ testimony further notes, it is also important to 

keep in mind that the requirement that FHA hold 30 years’ worth 

of expected claims is 30 times more than what is required of banks, 

which are only required by the financial accounting standards to 

hold 1 year to reserve. 

I want to highlight this fact in particular for those of my colleagues who believe that FHA should operate more like a private 

company and be subject to accounting and other rules that apply 

to the private sector. 

5 

Once again, I want to welcome the witnesses to today’s hearing, 

and I look forward to examining more closely the ideas set forth 

in their testimony. I yield back the balance of my time. 

Chairman NEUGEBAUER. I thank the gentlewoman. 

Now, the gentleman from California, Mr. Royce, is recognized for 

1 minute. 

Mr. ROYCE. Thank you, Mr. Chairman. 

The President’s budget, which is going to be released later today, 

stands as a reminder of the risk posed to the American taxpayer 

if the financial solvency of the FHA is not addressed. 

And for us here today, it is an opportunity to start to turn the 

corner and talk about returning private capital to the mortgage insurance market. 

So my hope is that our witnesses will outline how the FHA can 

operate with a clearly defined mission that complements, instead 

of competes with, private credit enhancements. 

If that can be done, it is going to facilitate a sustainable housing 

finance system for the United States. And the FHA, of course, as 

we all know, has a key role to play for first-time and low- to moderate-income borrowers. 

But where we can unleash private capital, we should. And it is 

in the best interest of the taxpayer and our housing economy to do 

so. 

I yield back the balance of my time. 

Chairman NEUGEBAUER. I thank you. 

And I have my interpreter here, the ranking member, and he has 

been making sure that I pronounce the next person—Mr. Carney, 

is recognized for 1 minute. 

Did I say that right? 

Mr. CARNEY. Thank you, Mr. Chairman. I want to thank you and 

the ranking member. Don’t listen to the ranking member in pronouncing my last name though; you are not going to get it right. 

I just thank you for the opportunity to welcome one of my friends 

from Delaware, Kevin Kelly, who is here on the panel today. I have 

known Kevin for a long long time as an advisor, as a friend, and 

as an expert in housing in our State. 

As many of you may know, Kevin worked for one of the giants 

in housing in our State of Delaware and in our country, Leon 

Weiner—who passed away many years ago—a former president of 

the National Association of Home Builders, and I think the building has a bust of him outside of it. 

I have learned a lot from Kevin over the years on housing issues. 

He used to be the president of the Home Builders Association of 

Delaware. There was a time in a former life where I served as the 

acting director of public works for the largest county in our State, 

and we worked very closely together. 

I want to thank Kevin for all the work that he has done for our 

State, and he is now moving up as one of the vice presidents of the 

National Association of Home Builders, for all the work that he is 

doing and thank him for coming to be part of this panel today. 

And I yield my time back. Thank you. 

Chairman NEUGEBAUER. I thank the gentleman. 

And I had an opportunity to know Leon Weiner as well. He was 

a great American, a giant in the housing industry. 

6 

I now recognize the gentleman from California, Mr. Miller, for 2 

minutes. 

Mr. MILLER. Thank you, Mr. Chairman. 

If you look at the design of FHA, they were intended to play a 

countercyclical role, and in this downturn, that is exactly what 

they did as the private market withdrew, they moved in. 

Now, without a doubt, some of the worst years FHA has on the 

books are 2007 to 2009, and that is when they really ramped up 

to fill the void made by the private sector. 

The problem is that when they entered the market, they were 

not prepared for it. Their underwriting standards were not as they 

should have been. The premiums were not adequately adjusted in 

a timely fashion. 

But if you ask, did they do what they were intended to do, they 

did. The nice thing about what is happening today is you are seeing a recovery in the housing market. In my specific district, I am 

seeing people getting back to work because of that recovery. 

So, now, we look and say, what did FHA do that really restructured the way they were going, and in 2010, former FHA Commissioner Stevens created a risk management office. And, in doing 

that, he basically minimized some of the risks that were coming in 

the future, but he didn’t do it as rapidly as some wanted him to 

do, but I want to praise him for what he did. 

What we are experiencing now in the recovery, I think you can 

say was partly due to the efforts of FHA. Now, I am not defending 

them, saying that they did a great job and they did what they 

should have done. They did what they should have done at the 

right time. They didn’t do it in the right fashion. 

So how do we look at restructuring what they do in the future 

to make sure that their mission is appropriately managed and the 

risks they are taking on at a time is appropriate risk? 

The latest actuarial review made it clear that FHA was not fully 

prepared for the strain that it faced during the downturn, and I 

don’t think anybody on the panel is going to say they were prepared for it. 

But did they do their job on operational structure? I think they 

did because they were designed to be countercyclical, but they 

weren’t prepared for the measures that they were implementing 

and the full risks they were taking on. 

But as we return to a robust marketplace, we look for the private 

sector to come in and take over the job that the FHA has done and 

let’s hope that happens in a rapid fashion. 

I yield back the balance of my time. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, the gentleman from New Jersey, Mr. Garrett, the 

chairman of the Capital Markets Subcommittee, is recognized for 

2 minutes. 

Mr. GARRETT. Thank you, Mr. Chairman, for holding this important hearing. 

Reforming FHA must be a top priority of this committee. And I 

agree with each and every one of the points you raised: that we 

must stabilize FHA; clearly define its mission; reduce taxpayer exposure; and ensure that it is run well and run like an efficient insurance company. 

7 

But I would add one more point to the priorities. We must also 

make sure that the government’s scorekeepers provide the American taxpayer with an accurate picture of the risks that are assumed. 

To do this, the first thing you must realize is that there is no 

such thing as a free lunch when it comes to a government program. 

The costs are inevitably borne by the taxpayer. 

And people are beginning to realize that not only is government 

costly, but also that it costs more than they initially thought. The 

burden of government rarely comes in under budget. 

So the typical narrative of government programs gone bankrupt 

should come as no surprise. However, it defies common sense that 

the Mutual Mortgage Insurance Fund, according to Administration 

officials, actually makes money for the government. Only through 

the alchemy of government accounting can you transform a mortgage portfolio, figuratively led into gold, and still remain true to 

the law. 

This free money comes courtesy of the Fair Credit Reporting Act 

of 1990 (FCRA). Under FCRA, cooked accounting rules, the cost of 

Federal mortgage insurance it determined it’s risk on the basis of 

its subsidy cost including the risk that the borrowers default on its 

mortgages. 

The subsidy cost represents, in present value terms, the amount 

the loans are expected to earn or lose over their life. But the rub 

lies in the fact that FCRA uses the interest rates on Treasury securities to calculate this cost. This assumption fails to account for 

market risk or systemic risk. So unlike fair value accounting, 

which apparently incorporates a premium for market risk, FCRA 

fails to reflect the true cost of FHA-backed mortgage insurance. 

Unfortunately, the Administration has strongly resisted the move 

to fair value accounting, instead clinging to this dangerous fiction 

of FCRA and this alchemy. 

So to bring a ray of sunshine to Federal budgeting, you must require the Administration to account for Federal loan programs on 

a fair value basis. 

I do hope the Administration will finally wake up to the unfortunate economic reality we are in, and much like FHA, free lunches 

do end up costing a lot more than you expect. 

And with that, I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, the gentlewoman from Ohio, Ms. Beatty, is recognized 

for 1 minute. 

Mrs. BEATTY. Thank you, Mr. Chairman, and Mr. Ranking Member. 

I join my colleagues today as we continue the examination of the 

Federal Housing Administration, specifically looking to the future 

as we anticipate the necessary reforms for improving FHA’s longterm financial position, for refocusing the agency on its mission to 

increase mortgage assurance for first-time buyers and low- to moderate-income households. 

I think looking at the past history of the great benefits that FHA 

provided to the housing market and the economy as a whole, during the past several years, it has been, in my opinion, undeniable 

8 

that the FHA has been an integral part of the housing recovery 

and the market as a whole. 

And we could not, in my opinion, function without its presence. 

So I look forward to hearing your testimony and how you can be 

helpful to assure that we don’t lose sight of the original mission of 

FHA. 

Thank you, Mr. Chairman, and I yield back. 

Chairman NEUGEBAUER. I thank the gentlewoman. 

I ask unanimous consent that all members of the Financial Services Committee who are not members of the subcommittee and who 

have joined us today will be entitled to participate in the hearing. 

Without objection, it is so ordered. 

Now, it is my pleasure to introduce our panel today: Mr. Adolfo 

Marzol, vice chairman of Essent Guaranty, Inc; the Honorable 

David H. Stevens, president and chief executive officer of the Mortgage Bankers Association; Mr. Gary Thomas, 2013 president of the 

National Association of REALTORS®; Mr. Kevin Kelly, first vice 

chairman of the board of the National Association of Home Builders; Ms. Sarah Rosen Wartell, president of the Urban Institute; 

and Mr. Clifford Rossi, executive-in-residence and Tyser teaching 

fellow at the Robert H. Smith School of Business, University of 

Maryland. 

I thank the witnesses for being here, and with that, Mr. Marzol, 

you are recognized for 5 minutes. 

STATEMENT OF ADOLFO MARZOL, VICE CHAIRMAN, ESSENT 

GUARANTY, INC. 

Mr. MARZOL. Chairman Neugebauer, Ranking Member Capuano, 

and members of the subcommittee, thank you for the opportunity 

to testify today on, ‘‘Sustainable Housing Finance: Perspectives on 

Reforming the FHA.’’ 

My name is Adolfo Marzol, and I am vice chairman of Essent 

Guaranty, a private MI company. Just a little background on myself, my parents came to the United States as Cuban refugees in 

1961. They bought their home with an FHA loan. My mother actually still lives in that home today. 

I bought my first home with a 5-percent-down mortgage from 

Fannie Mae, fortunately, with private mortgage insurance. And I 

do think my family’s story mirrors so many, where access to housing finance has made a tremendous difference in our lives. 

Essent was formed in 2008 in the depths of the crisis. We are 

dedicated to prudently continuing to provide access to mortgage 

credit. We are guided by the fundamental belief that truly private 

capital will take credit risk without explicit or implicit guarantees 

is something that would be needed and valued in our housing finance system. 

We believe private MI, backed by strong capital and a reliable 

payment of valid claims, offers the market a product that effectively mitigates risk. It can be accessed by lenders of all size. It integrates smoothly into the functioning of the mortgage market, including TBA securitization. 

And we think if government provides backstops in the market, 

private MI provides an effective alternative between either all taxpayer credit risk or no taxpayer credit risk. 

9 

We are pleased that our business approach has been validated by 

the market. Since we actually began writing insurance in 2010, we 

have grown to be about 10 percent of the new private mortgage insurance being written. 

Our entry has been part of a broader renewal of a resilient industry which, importantly, is demonstrated through the ability of 

both new entrants and legacy companies to raise capital of over 

$10 billion since 2008, and nearly $2 billion just this year. 

Investor interest in providing capital to the U.S. MI industry appears to be quite strong, which should enable companies like 

Essent to do more. 

FHA helped our Nation through the crisis by expanding its role 

when private markets were distressed, and despite differing views 

regarding the eventual balance between the private and public 

roles in the market, we think there is widespread agreement that 

the role of private capital should be expanded from its present 

state, and taxpayer risk can be reduced. 

The balance towards private has definitely been improving. We 

think it can continue to improve without loss of access for ready 

borrowers by steady, incremental use of private MI. 

We support a future role for FHA, but transitioning to a more 

focused mission of providing access to homeownership for creditworthy borrowers who are not adequately served with private MI. 

And, today, we really come with four key recommendations: 

Number one would be to address the long-term solvency of FHA on 

a foundation of provisions similar to those that were adopted by 

the House last Congress in H.R. 4264, the FHA Emergency Fiscal 

Solvency Act of 2012, including additional authorities HUD has requested to address solvency, and we believe should also include setting prudential limits on seller concessions, a policy change HUD 

has proposed, but not implemented. 

Number two, we believe solvency should be addressed while moving toward a mission-focused footprint for FHA, simply because 

taking non-mission risks to address solvency needlessly increases 

taxpayer risk and creates incentives to serve borrowers that can be 

privately insured. 

Number three, we would like to urge beginning to explore a different relationship between private MI and FHA not as competitors, but as partners that make sure the market is covered. As 

partners, private insurance should play as large a role as possible, 

and FHA should be a complement that expands access where needed. 

And one approach to build a partnership is credit risk-sharing 

with private MI by FHA. Risk-sharing approaches should be tested 

through pilots, as FHFA has directed be done at the GSEs, targeting risk-sharing transactions on $60 billion in GSE mortgages 

to contract taxpayer risk this year. 

And, finally, we would ask for support for appropriate recognition 

of the value of private MI when regulators establish the final DoddFrank mandated risk retention rules and continued recognition of 

MI in Basel III capital rules for banks. 

Appropriate recognition for the risk-mitigating benefits of MI will 

avoid needless business going to FHA when private MI works well. 

10 

Thank you for this opportunity to share our views, and I welcome 

your questions. 

[The prepared statement of Mr. Marzol can be found on page 59 

of the appendix.] 

Chairman NEUGEBAUER. I thank the gentleman. 

And, now, Mr. Stevens, you are recognized for 5 minutes. Thank 

you for being here. 

STATEMENT OF THE HONORABLE DAVID H. STEVENS, PRESIDENT AND CHIEF EXECUTIVE OFFICER, MORTGAGE BANKERS ASSOCIATION (MBA) 

Mr. STEVENS. Thank you. Chairman Neugebauer, Ranking Member Capuano, and members of the subcommittee, thank you for the 

opportunity to offer MBA’s perspectives on FHA reform. 

The MBA represents the entire real estate finance industry, but 

given the circumstances facing FHA in the single-family market, 

my oral statement will focus on that sector. My written testimony 

includes our views on FHA’s critical role in multi-family rental 

housing as well. 

FHA has never played such an important role in the housing 

market. Today, it is the dominant source of mortgage finance for 

borrowers with low downpayments and those without high incomes 

or inherited wealth. 

Many of these are first-time homebuyers, young families looking 

to put down roots in a community, and they are a segment that 

must be served if we are going to grow our economy and sustain 

the housing recovery. 

Since the onset of the housing crisis, when FHA’s books suffered 

like everyone else’s, the agency has taken a number of steps to address losses in its single-family portfolio: raising mortgage insurance premiums; increasing downpayment requirements for certain 

borrowers; eliminating the approval of loan correspondence; raising 

lender net worth requirements; reexamining reverse mortgage policies; and establishing the Office of Risk Management. 

By making these changes, FHA has moved swiftly to protect taxpayers and the fund. The credit profile and performance of the 

2010 to 2012 portfolios demonstrates the effects of these changes. 

For example, the average FHA credit score for 2011 was 696, up 

from a historical average closer to 650. More importantly, these 

books are projected to contribute significantly to the economic value 

of the fund over the next several years. 

Looking ahead, we believe further programmatic changes at FHA 

must balance three priorities: restoring financial solvency; preserving FHA’s critical housing mission; and maintaining the agency’s countercyclical role. 

We continue to work with our members to develop additional policy changes regarding FHA’s future and we will certainly share 

those recommendations with this panel as they get completed. 

There are a number of steps this subcommittee could take to further strengthen FHA and promote the return of private capital. 

Loan limits could be lowered from the levels that were necessary 

at the height of the housing crisis. 

Downpayment requirements could be adjusted to mitigate for 

other risk factors like low credit scores. Risk-sharing is another 

11 

idea that if done prudently, could potentially meet all the objectives 

I have just listed. 

Similarly, risk-based underwriting could further reduce FHA’s 

credit risk by targeting areas of risk-layering. However, the consequences to FHA’s traditional borrowers on each of the above suggestions could be significant if FHA employs overly stringent controls. 

Finding the right balance is absolutely critical. Many lenders in 

recent years have tightened their standards beyond FHA’s minimums. FHA may need to lock in some of these overlays as appropriate. This would protect FHA from any erosion in standards as 

market conditions evolve. 

Also, in recent years, FHA has increased its oversight and enforcement of agency-approved lenders. To be clear, as FHA Commissioner, I initiated tighter controls and enforcement procedures 

that shut down irresponsible FHA lenders. When warranted, this 

was certainly the right thing to do for the fund. 

The key is finding the proper tolerances and communicating 

them clearly to market participants. When lenders are forced to operate their businesses to near perfect standards, they will operate 

well inside of those published standards. 

Right now, credit is far tighter than anyone has experienced in 

decades. There may be families with good credit willing to put 

down substantial downpayments who are being frozen out of the 

market because the risks of making any mistake are simply too 

great and the rules of the road are unclear and often contradictory. 

When lenders don’t know whether FHA will demand indemnification or cancel the government guarantee on top of the potential 

they may face substantial financial penalties because the goal posts 

have been moved, they will, quite naturally, only lend to people 

with perfect credit and limit financing options for FHA’s targeted 

population. 

Mr. Chairman, we need to strive to clear up the uncertainty in 

our real estate finance system. We need a system where homeownership is a doorway to opportunity and borrowers can once 

again feel safe, confident, and secure in their loans, but also a system that thrives in an environment that encourages a competitive, 

responsible marketplace so business can grow. 

That includes not just FHA, but also examining the future of the 

entire housing finance system. Ultimately, all stakeholders want 

the same thing: a fully functioning market that relies most heavily 

on private capital with a limited, appropriate role for Federal programs. 

A stable, sustainable FHA program must be part of that system. 

Thank you for the time. 

[The prepared statement of Mr. Stevens can be found on page 78 

of the appendix.] 

Chairman NEUGEBAUER. I thank the gentleman. 

Mr. Thomas, you are recognized for 5 minutes. 

STATEMENT OF GARY THOMAS, 2013 PRESIDENT, NATIONAL 

ASSOCIATION OF REALTORS® (NAR) 

Mr. THOMAS. Chairman Neugebauer, Ranking Member Capuano, 

and members of the subcommittee, thank you for this opportunity 

12 

to testify on behalf of the 1 million members of the National Association of REALTORS® who practice in all areas of residential and 

commercial real estate. 

My name is Gary Thomas. I am a second generation real estate 

professional from Villa Park, California. I have been in the business for more than 35 years and have served the industry in numerous roles. I currently serve as the 2013 president of the National Association of REALTORS®. Throughout the course of my real estate career, I have witnessed 

the vital role that the Federal Housing Administration plays in 

providing access to affordable homeownership. 

Over the past 5 years, FHA’s role has been more critical than 

ever as it sustained housing markets nationwide during the worst 

economic crisis of our lifetime. 

NAR recognizes the challenges that FHA is facing today and the 

concern about risk to the taxpayers. FHA has taken a number of 

significant steps to immediately replace their reserves, including 

raising premiums 5 times in the last 2 years, increasing risk management controls, and raising downpayments. 

We believe these changes are substantial and will continue to improve FHA’s financial condition. However, there are additional reforms that we believe will further enhance FHA and protect the 

availability of mortgage credit to millions of American families. 

Today, FHA is constrained in its response to economic conditions 

and its own financing standing. We support legislation to provide 

FHA with flexibility to change program requirements when necessary to protect the fund. These include greater flexibility on setting premiums, changing loan policies, and other programmatic 

changes. 

As a tool in its risk management arsenal, FHA should continue 

improving its oversight of lenders. We support legislation that provides FHA the authority to seek indemnification from direct endorsement lenders, and the ability to quickly terminate a lender’s 

ability to originate FHA-insured loans. 

There are a number of other proposals that have been suggested, 

which NAR believes are worthy of discussion. These include lowering the guarantee, and creating a risk-sharing model with private mortgage insurance companies. NAR does not currently have 

a policy on these proposals, but is actively reviewing them. 

We would benefit from additional information about the proposals and their impact on the FHA, consumers, and the housing 

markets. To summarize, the National Association of REALTORS® 

supports reforms that strengthen the FHA fund. And we look forward to the return of a vital, robust private market. 

NAR remains concerned about changes that would cause disruption to the housing market. Now is not the time to lose sight of 

FHA’s mission for the sake of encouraging greater private equity, 

which will return on its own when extenuating factors, such as regulatory uncertainty around issues like QM, QRM, and Basel III are 

resolved. 

We applaud FHA for continuing to serve the needs of hardworking American families who wish to purchase a home. And we 

stand in support of its mission, its purpose, and its performance, 

particularly in the times of a national housing crisis. 

13 

On behalf of the National Association of REALTORS®, thank 

you for the opportunity to share our thoughts on how we can work 

together to ensure that FHA maintains its critical role for American homeowners. And I look forward to taking any of your questions at the appropriate time. 

[The prepared statement of Mr. Thomas can be found on page 99 

of the appendix.] 

Chairman NEUGEBAUER. I thank the gentleman. And now, Mr. 

Kelly, you are recognized for 5 minutes. 

STATEMENT OF KEVIN KELLY, FIRST VICE CHAIRMAN OF THE 

BOARD, NATIONAL ASSOCIATION OF HOME BUILDERS (NAHB) 

Mr. KELLY. Thank you, Chairman Neugebauer, Ranking Member 

Capuano, and members of the subcommittee. I appreciate the opportunity to testify here before you today. I also wish to thank my 

Congressman, Congressman Carney, for being here today, and 

thank him for his service to this Congress and to our State. 

I am a homebuilder and developer from Wilmington, Delaware, 

and serve as first vice chairman of the National Association of 

Home Builders. NAHB supports efforts to improve FHA. We understand that this is not a simple undertaking, and change to FHA 

programs cannot be separated from the larger discussion of reforming the complex housing finance system, including future reforms 

to Fannie Mae and Freddie Mac. 

While the recent FHA actuarial report is troubling, and deserving of congressional oversight and action, NAHB urges Congress to 

proceed carefully. Although there is no question that the housing 

finance system needs to be reformed, the contributions that FHA 

has made during this economic downturn underscore the need for 

a government backstop to both the primary and secondary mortgage markets. 

As we have learned, private institutions have been unable or unwilling to meet the housing capital needs of homebuyers. Without 

government support for home purchasing and refinancing, the Nation’s mortgage markets will grind to a halt in times of economic 

stress and uncertainty, throwing the economy into recession. 

FHA has become the primary source of mortgage credit for firsttime homebuyers, minorities, and those of limited downpayment 

capabilities, as other sources of mortgage credit have disappeared. 

The program has been essential for the Nation’s economic recovery. 

FHA’s share of the market jumped from 3 percent during the housing boom to a high of 30 percent early during the housing crisis. 

Nearly 80 percent of FHA’s purchase loans have been for firsttime homebuyers. This dramatic shift is evidence that FHA is performing its mission of providing a Federal backstop to ensure that 

every creditworthy American has access to stable mortgage products. 

NAHB believes that the private market should be the primary 

source of mortgage financing, but that market is currently extremely limited. While such conditions prevail, it is appropriate for 

FHA and other federally-backed programs to play a larger-thanusual role to keep our economy afloat. 

FHA also plays an important role in financing of multi-family 

rental housing, especially now during the economic crisis. Such fiVerDate Nov 24 2008 17:20 Jun 24, 2013 Jkt 080876 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\80876.TXT TERRI
14 

nancing is particularly valuable in small markets where Fannie 

Mae, Freddie Mac, and other market participants are less active. 

FHA is now in danger of exhausting its multi-family commitment 

authority before the end of the fiscal year. It is vital for Congress 

to provide an additional $5 billion in commitment authority to prevent the programs from shutting down this summer. 

With Fannie Mae and Freddie Mac directed to reduce their respective multi-family businesses by 10 percent over the next year, 

we face a severe reduction in multi-family financing for reasons unrelated to market conditions. NAHB believes the Congress should 

look at FHA and its policies in an effort to ensure the program is 

on sound financial footing. 

While we have cautioned against the piecemeal approach to address housing finance reform, we have supported individual reforms aimed at providing the FHA with immediate tools to better 

manage risk and to protect the insurance fund. FHA must be modernized so the agency can operate more efficiently and effectively. 

It has been constrained both by Congress and HUD, which has 

impeded the agency’s ability to operate in a manner that evolves 

with the developments in the private market. FHA must be freed 

from bureaucratic restraints to develop a results-oriented culture. 

NAHB believes that this can be accomplished by restructuring 

FHA as an independent government entity within HUD. 

In addition, a number of other changes to the single-family programs have been proposed recently, including risk-based pricing, 

risk sharing, and reduction in the FHA loan guarantee. These proposals merit exploration. 

NAHB believes that any modification should be analyzed in the 

context of other changes that have occurred or may occur both 

within FHA and in the broader housing finance market. NAHB 

stands ready to work with you to achieve reforms that will provide 

much-needed stability for the Nation’s housing sector, while ensuring FHA’s future role as a source of mortgage financing, particularly in difficult financial times. Thank you, Mr. Chairman. 

[The prepared statement of Mr. Kelly can be found on page 50 

of the appendix.] 

Chairman NEUGEBAUER. Thank you, Mr. Kelly. Ms. Wartell, you 

are recognized for 5 minutes. 

STATEMENT OF SARAH ROSEN WARTELL, PRESIDENT, THE 

URBAN INSTITUTE 

Ms. WARTELL. Chairman Neugebauer, Ranking Member 

Capuano, and members of the subcommittee, thank you for the opportunity to testify about FHA. 

I am focused today on steps that Congress can take now to improve FHA’s financial health by strengthening its ability to manage 

risk and mitigate loss. You can help the agency to better protect 

taxpayers with additional loss mitigation measures. 

Some of these measures won broad bipartisan support from this 

Chamber just last year. I urge you to enact these now rather than 

let more time pass while costs that could be avoided continue to 

mount. 

At the same time, I hope you will hold off on decisions about 

FHA’s mission until the design of the larger housing finance sysVerDate Nov 24 2008 17:20 Jun 24, 2013 Jkt 080876 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\80876.TXT TERRI
15 

tem is clear. Some measures under discussion would limit access 

to FHA in ways that could impair its ability to provide countercyclical support to the economy, and help creditworthy borrowers. 

Once we have a plan to wind down the GSEs, and bring more 

private capital to housing finance, while preserving liquidity and 

long-term financing, FHA’s place in the market will be clear. Unfortunately, Congress is, at a bare minimum, many, many months 

away from enacting legislation to reform the broader system. And 

in the meantime, costs that FHA could avoid today continue to 

amount. 

It appears no deep differences prevent you from protecting taxpayers now in taking these modest steps. One caveat: I do believe 

that the time is right now to bring down the FHA loan limits 

gradually, recognizing that the different market conditions exist in 

high-cost areas. 

Fortunately, FHA’s market share is falling on its own, and private mortgage insurance is serving more of the market, as it 

should. Although the credit quality of FHA-insured loans is high 

right now, the majority are in terms the private insurers and the 

GSEs will not yet accept. 

As the GSEs and MI credit standards ease, FHA’s market share 

will continue to shrink, even while its capital position strengthens, 

just as it has in the past, after each period where FHA fills a gap 

in the market. 

So I urge you to take up now the provisions of the legislation 

passed overwhelmingly by this Chamber last year, with some modest changes I detail in my written testimony. Please also consider 

four additional management proposals that could help FHA to control costs. 

First, you can provide the Secretary with what I call ‘‘emergency 

risk mitigation powers,’’ so that he may suspend issuing insurance 

upon terms that are risky to the taxpayers, if he makes a finding 

that continuation under those terms exposes the taxpayers to elevated risk of loss, and fails to serve the public interest. 

The emergency authority would be time-limited, rulemaking 

would follow, and Congress could, at any time, vote to disapprove 

the use of those emergency powers. 

Second, you can direct the HUD Secretary to continuously improve its early-warning risk indicators. To my mind, the Administration’s proposal regarding specific changes to the compare ratio 

is too timid. You can empower the Secretary to use any early-warning indicator that evidence suggests is predictive of loss, provided 

it is lawful and nondiscriminatory. 

It shocks the conscience that FHA officials must continue to accept loans for insurance pending administrative procedures, when 

they know the taxpayers are being exposed to unnecessary risk 

from a particular lender. Of course, lenders must have a mechanism to challenge these determinations. But taxpayers, not program participants, should get the benefit of the doubt. 

Third, you can authorize FHA to pilot new insurance policies to 

test their costs, including carefully designed risk-sharing, consistent with principles I detail in my testimony, and understand 

better those costs and benefits before implementation. 

16 

Finally, provide FHA with the flexibility to use insurance premiums to pay for systems, contractors, and even employees with 

special skills at compensation akin to the bank regulators, to 

strengthen its capacity to mitigate risk. It will be some time still 

before broader housing finance reform legislation is enacted. 

The system that results will determine the role that FHA must 

play long into the future. In the meantime, I hope that Congress 

will tackle what is possible, non-controversial, and urgently needed, improvements to FHA’s ability to manage risk and reduce 

losses. A practical bill will be a helpful prerequisite to broader 

housing finance system reform. I thank you. 

[The prepared statement of Ms. Wartell can be found on page 

114 of the appendix.] 

Chairman NEUGEBAUER. Thank you. Mr. Rossi, you are recognized for 5 minutes. 

STATEMENT OF CLIFFORD V. ROSSI, EXECUTIVE-IN-RESIDENCE AND TYSER TEACHING FELLOW, ROBERT H. SMITH 

SCHOOL OF BUSINESS, UNIVERSITY OF MARYLAND 

Mr. ROSSI. Chairman Neugebauer, Ranking Member Capuano, 

and members of the subcommittee, thank you for the opportunity 

to testify on how to reform the Federal Housing Administration. 

I am currently an executive-in-residence and Tyser teaching fellow at the Robert H. Smith School of Business at the University 

of Maryland. Prior to my role at the University of Maryland, I 

spent more than 20 years at major financial institutions, managing 

or leading risk management functions. 

My testimony today focuses on the effectiveness of FHA structure, its policies, risk assessment, and operational capabilities to 

ensure the long-term financial sustainability of its programs. In addition, I highlight several recommendations that would secure the 

financial viability of FHA, while also clarifying and sustaining its 

role in the housing finance system. 

Unquestionably, FHA has served a critical role in our Nation’s 

housing market by providing affordable credit to about 40 million 

first-time homebuyers, and other borrowers with limited resources 

who would otherwise have difficulty in obtaining access to credit 

through more traditional private sector sources. 

The recent financial crisis and its aftermath underscore the importance of FHA’s countercyclical role in providing much-needed liquidity and credit to mortgage markets reeling from the withdrawal of private capital during this period. 

At the same time, FHA in its capacity as public steward of the 

$1 trillion-plus Mutual Mortgage Insurance Fund, has responsibility for maintaining the financial sustainability and integrity of 

that fund, which according to recent actuary analyses, has lately 

experienced considerable stress. 

The current state of the fund can be directly attributed to a lack 

of clarity in the scope of its programs; mission conflict between 

maintaining actuarial soundness of the fund and advancing homeownership opportunities to prospective borrowers; a lack of resources to effectively identify, measure, and manage risk consistent 

with an insurance fund of the scale and complexity of the fund; and 

17 

a lack of systematic and proactive countercyclical policy mechanisms to guide the agency as economic circumstances change. 

The question for policymakers is what changes should be made 

to FHA to provide the agency with the best opportunity to fulfill 

its crucial mission in housing, while also protecting the taxpayer? 

Ensuring the long-term viability of the fund, while clarifying FHA’s 

mission, can be achieved by implementing a number of reforms 

aimed at addressing the contributing factors to the current challenges facing FHA. 

These reforms include the following: clarifying the role of FHA 

vis-a-vis other market participants by requiring the FHA to adopt 

an area median income target to determine program eligibility, and 

to phase out the use of area-based loan limits. 

In conjunction with establishing income-based eligibility requirements, FHA should strengthen its requirements to ensure all eligible borrowers have the best chance of staying in their homes, restructuring the FHA to provide the agency with the flexibility and 

tools to manage its risk. 

An optimal structure for an agency the size of FHA would be to 

establish it within a new Federal corporation overseen by a commission comprised of the heads of the various Federal agencies 

with housing and mortgage responsibilities, and chaired by the 

HUD Secretary. 

This entity would bear some resemblance structurally, in my 

opinion, to the Federal Deposit Insurance Corporation. Such a 

structural arrangement would yield a number of benefits for FHA 

specifically, and for housing markets generally. 

A set of countercyclical policies and practices should be developed. Taking a cue from the Federal Reserve’s targeting of key 

macroeconomic factors in developing its monetary policy, a set of 

policy targets for housing and mortgage markets would provide 

FHA with clear direction on when to expand and contract its business. 

Such policy targets as local home—market home price trends, 

market credit spreads on mortgage securities, and other pertinent 

housing and mortgage metrics could provide FHA with direct feedback on the health of these markets. Permit FHA to enter into 

risk-sharing arrangements with suitable counterparties consistent 

with other market participants. And finally, provide greater pricing 

flexibility to the FHA, including the ability to initiate risk-based 

pricing of mortgage insurance premiums reflective of the inherent 

risk of a loan. 

Without question, FHA is an essential part of the housing finance system. While maligned for the current financial challenges 

of the fund, it is important to keep in mind that the FHA has 

served this country well for nearly 80 years. 

However, like many institutions, FHA has not kept pace with important structural changes in the market. The advent of 

securitization, and other sophisticated capital markets’ risk-transfer mechanisms, have left the FHA at a competitive disadvantage 

vis-a-vis other market participants. 

The lack of a clearly defined mission for FHA, along with potential conflict between its social and financial missions, are contributing factors to the current state of the fund. The agency requires 

18 

a number of major reforms in order to put it on a secure financial 

footing that would ensure its important legacy for borrowers for the 

next 80 years. Thank you very much. 

[The prepared statement of Mr. Rossi can be found on page 67 

of the appendix.] 

Chairman NEUGEBAUER. I thank the gentleman, and I thank our 

panel. We will now go to Member questions. Each Member will be 

recognized for 5 minutes in order of seniority. With that, the Chair 

recognizes himself for 5 minutes. 

Before I get into some questions, I want to just have a little poll 

here with the panel. How many people on the panel agree that the 

core mission of FHA is as a mortgage insurer, that is the core business? Would you raise your hands, please? 

And if the core mission is that it is a mortgage insurance company or entity, should it be run on an actuarially sound basis? 

Does everybody agree with that? 

I think the question then—and I appreciate the testimony—is I 

think every one of you mentioned the fact that FHA should engage 

in risk-sharing as one of the ways to get the taxpayers off the hook. 

Is there unanimity on that? Ms. Wartell? 

Ms. WARTELL. If I may just clarify, I think that appropriate pilots for parts of FHA’s business are a reasonable way to proceed, 

but to mandate FHA risk-sharing across the portfolio would not be 

something I would support. 

Chairman NEUGEBAUER. I think some people mentioned a pilot 

program, or something like that. But one of the parts of the risksharing piece that has been brought up is that there has been discussion about reducing the guarantee on FHA from 100 percent to 

some percentage more in line with what the private market insures. 

Is there anybody who disagrees with that concept? Mr. Stevens? 

Mr. STEVENS. I think that is the right way of approaching a pilot 

like this, Mr. Chairman. The thing I would emphasize is that we 

have to separate the guarantee against the mortgage-backed security versus the insurance guarantee that private capital has to 

make up at the loan level up front. 

And in the event of catastrophic loss, the way it works for VA, 

or even Freddie Mac or Fannie Mae, is in the event the institution 

ultimately fails, the guarantee still exists on the mortgage-backed 

security, which keeps capital flowing into the market. 

Chairman NEUGEBAUER. Ms. Wartell, did you want to comment 

on that? 

Ms. WARTELL. I just want to note that if we were to use a structure like that, Ginnie Mae would then continue to have a significant amount of counterparty risk. And so, it is very important that 

we—and that would be very different than for the VA portfolio, 

which serves a very discrete set of borrowers, with a different set 

of incentives. 

So proceeding with real caution, as opposed to funding, would be 

very important for FHA to— 

Chairman NEUGEBAUER. I am reminded, though, that Ginnie 

Mae actually does that for VA loans, and they are not 100 percent 

guaranteed. 

19 

Mr. STEVENS. You are absolutely correct. And I think for the 

most part, we all agree that a pilot is worthy of testing. I think the 

point that Sarah is making is that there are a fewer number of 

counterparties in the VA program. And FHA is widely distributed 

amongst a couple thousand institutions that participate in that 

program. 

And so therefore, the ability to manage the counterparty risk for 

that large number of lenders which participate in FHA will clearly 

add some cost to Ginnie Mae, which would have to be offset in 

some measure, either higher Ginnie Mae guarantee fees, or some 

way for them to build resources, because we also know that they 

are fairly underresourced as well. 

Chairman NEUGEBAUER. Mr. Marzol? 

Mr. MARZOL. Mr. Chairman, what I wanted to offer is I think the 

spirit of the suggestion of the limited guarantee is a worthy one, 

because it is an alignment of interests between private sector and 

public when there is risk-taking. I just wanted to point out that the 

approach to risk-sharing we suggest in our testimony is a fairly 

well-established one. 

We are risk-sharing partners today with the taxpayers when we 

put our first-loss insurance on loans that go into GSE 

securitizations. And so our proposal would be to at least try to take 

that approach, which is fairly well-established, and see if it can 

have merit, and can be utilized for some of the borrowers who are 

ending up in FHA. So, I just wanted to offer that thought. 

Chairman NEUGEBAUER. And then, I want to go in one other direction here. One of the proposals is that we make FHA a separate 

entity, and possibly decouple it from HUD. Because if it is, as the 

panel said, an insurance entity, then it might be better served 

being an independent agency, building up its reserves, and pricing 

to build up the reserves. 

But also, I think one of the witnesses—maybe it was you, Ms. 

Wartell—said that they needed some investment and technology, 

and to upgrade that. Right now, they are dependent on the normal 

budgetary process to be able to get the resources they need, maybe 

to have the state-of-the-art underwriting. 

Would anybody disagree that this committee shouldn’t consider 

looking at partitioning that entity from HUD? Mr. Marzol? 

Mr. MARZOL. It is not that I disagree with that suggestion. But 

what is important from our perspective—because you are right, 

FHA is a mortgage insurer. But I think we should be clear as to 

whether it is a government-owned mortgage insurer whose role is 

to compete broadly in the marketplace, and try to serve everyone 

it can, or is it a government program that is supposed to help expand access where the private sector can’t, and then within that 

framework, should be run appropriately as a mortgage insurer. 

I just think that is, from our perspective, an important clarification. 

Chairman NEUGEBAUER. Mr. Kelly? 

Mr. KELLY. Thank you. NAHB would support an independent 

agency housed within the Department of Housing and Urban Development for the reasons I stated in my testimony. 

It is an organization that needs to be modernized. It needs to be 

freed from the bureaucratic constraints that currently hamstring 

20 

the organization and its effectiveness. So we would support its 

independence, but it should be housed within the Department of 

Housing and Urban Development. 

Chairman NEUGEBAUER. I see my time has expired. I now recognize the ranking member, Mr. Capuano, for 5 minutes. 

Mr. CAPUANO. Thank you, Mr. Chairman, and again, I want to 

thank the panelists. So far, the testimony and the discussion has 

been exactly what I had hoped for, the least ideological discussion 

I think I have ever heard on this committee on an important issue. 

But that doesn’t mean we don’t have differences. It just means 

we are having an adult conversation, which is nice for a change. 

So thank you for that. 

I guess the only thing—I think I agree pretty much with a lot 

of generalities that I have heard. Again, details are details. But 

Mr. Stevens, I just want to clarify one thing that you did say. 

You said you want to see the limits lowered. And I don’t have 

a problem with that. But I want to be clear about it. I want you 

to clarify—would you agree that there are regional differences in 

real estate costs, and therefore, the limit should be adjusted from 

one region to another? 

Mr. STEVENS. Yes. Thank you, Congressman, for asking a followup on that question. 

We clearly think loan limits are worthy of consideration. It is not 

that easy. We all know that it is really not a matter of risk when 

it comes to FHA. First and foremost, the higher loan limits are actually additive in terms of negative subsidy to the budget, in terms 

of how it is calculated. And it is also a very small percentage of 

the portfolio. The other key point is obviously, the $729,000 is only in highercost markets. So it is just a handful of select markets around the 

country that are important— 

Mr. CAPUANO. I haven’t had one of them. 

Mr. STEVENS. —to those markets. And the thing we really believe 

is important in the event loan limits are not extended, because as 

you know, they automatically roll back, is we need to test and find 

out who is going to support those markets in the absence of those 

loan limits falling back. 

Mr. CAPUANO. I want to follow up on an important point, because 

I presume you are all relatively familiar with the congressional 

process, and how long we take to do anything. It is actually a good 

process. 

I know it is frustrating to a lot of people, but it works well, because we don’t take things like FHA and throw them out one day, 

and bring them in the next day. That is what it is meant to do. 

But because of that—and I agree with you—a lot of concerns were 

thrown out. 

Even the risk-sharing. I like the concept. But I will be honest 

with you, I am a little concerned about it. I would like to see it 

tested in certain pilot areas to see where it should go, exactly how 

it should work. Conceptually, it sounds fine. Ideologically, okay, 

let’s try it. 

But I would be very hesitant, probably, about just doing it. Because we are getting into something, and we don’t know where it 

is going to go. So for me, I would love to see some general pilot proVerDate Nov 24 2008 17:20 Jun 24, 2013 Jkt 080876 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\80876.TXT TERRI
21 

grams to try to specify and see exactly how all these new ideas 

work before we mess around with something that has worked so 

well for so long. 

That being the case, it is going to take us time. And in order for 

me—I come from the approach that says, ‘‘Look, let’s do what we 

can while we can. And then on the things we are not sure of, let’s 

take some time.’’ 

Again, I think that the FHA discussion is slowly moving away 

from the ideological debate and into something more realistic that 

we can eventually work out. But in the meantime, I think it is a 

mistake to sit here and do nothing. Because I am watching FHA 

kind of slowly fade away. 

The multi-housing stuff, the reverse mortgage stuff, is a real 

problem that we are doing nothing about because we want to do 

the whole thing or nothing. I feel just the opposite. I would like to 

get some pilot programs going in the meantime, and in the meantime, do what we can. 

We had a bill last year, that I am assuming you are all familiar 

with, which got 402 votes on the Floor of the House. Would any of 

you oppose the concept of taking that bill and passing it? Again, 

I fully admit it is not the bill I want, but it is something we have 

already agreed to. 

Pass that bill, and in the meantime, work on the other things 

that we want to try. Maybe get some pilot programs going, and 

move on other issues. Do any of you think that we should do nothing until we can do everything? Or do you think that we should do 

what we can do as quickly as we can to fix it? 

I guess I would ask you, Mr. Marzol, and then just go right down 

the panel. 

Mr. MARZOL. We are for making as much practical progress as 

can be made. And as I said in my oral testimony, we certainly 

thought the bill that passed last year, plus the additional—some 

additional authorities at HUD has requested a specific mention on 

the seller concessions. Those would certainly be progress. And if 

more can be done, more can be done. But we are all for progress. 

Chairman NEUGEBAUER. Mr. Stevens? 

Mr. STEVENS. The most recent version of the bill is very similar 

to the one that was introduced when I was FHA Commissioner, 

which also passed, I think, by 404 votes as well. There were some 

minor changes to it. And we would like the opportunity to be able 

to work with you on a couple of concerns. 

I could address them now if you would like. They are technical 

in nature. But we do agree generally that there is opportunity to 

put an FHA reform proposal through in the context as you stated. 

Chairman NEUGEBAUER. Mr. Thomas? 

Mr. THOMAS. Yes. We are in full support of the bill that you and 

Congresswoman Waters have proposed. It is very similar to the one 

last year that we supported, and we support yours as well. 

Mr. KELLY. Congressman, NAHB supported that piece of legislation last year. We think it gives—it is a platform to revisit the subject this year. But again, we would urge that FHA reform be 

donned in the broader context of overall reform to the housing finance system, including GSE reform. 

22 

Mr. CAPUANO. Mr. Kelly, just to clarify, and again, I agree with 

what you say. Getting back to the reality of Congress, you realize 

that broader discussion may take a long time to finalize. And a 

very clear question, do you think we should not do anything until 

we get the whole thing done? Because that is really the question 

we have. 

Mr. KELLY. As I say, the legislation—as opposed to doing nothing, something is better than nothing. But again, a preference 

would be to try and work on all of the moving parts at the same 

time, to develop a comprehensive reform to the mortgage finance 

system. 

Ms. WARTELL. Congressman, if there are ways in which this body 

can protect the taxpayers from additional losses that are agreed to 

today, I think it would be very difficult to justify failing to act on 

those now while additional costs are incurred. 

So, I fully agree. There are changes that could be made. They are 

technical in nature. They can be quickly worked out. You should 

do what you can do now. 

Chairman NEUGEBAUER. Mr. Rossi? 

Mr. ROSSI. I embrace pragmatic change that can happen quickly, 

but at the same time, I am a big believer that we have absolutely 

no national housing policy. And for that reason alone, I think that 

we have an excellent opportunity to finally step back and make the 

changes that we need to make to make both the secondary market 

or what we see in the conventional conforming side, as well as on 

the fully guaranteed side, the right steps going forward. 

So, in my opinion, quick legislation isn’t always necessarily good 

legislation. And so, I would at least caution the subcommittee to 

really kind of take a closer look at those things. 

Chairman NEUGEBAUER. I thank the gentlemen. And now the 

gentleman from Missouri, Mr. Luetkemeyer, is recognized for 5 

minutes. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. Just to kind of 

follow up on Mr. Capuano’s question, you all were talking about 

different changes. Are there things that the Administration could 

do right now? I know it takes a long time for Congress to get anything done. It is like watching paint dry on a wall here, what we 

do. 

Mr. Stevens, you are an interesting gentleman to have on the 

panel today, having been in the Administration before and FHA. 

Are there things that the Administration could do now through Executive Order, through some administrative rule, that could impact 

this, and make a big difference? 

Mr. STEVENS. There are some things. As you know, they have already done a lot that only came from the help of Congress when 

the ability to raise mortgage insurance premiums was initiated in 

this body, and ultimately went through the Senate. So that has 

been very helpful to the 2010, 2011, and 2012 portfolios, which are 

all, by all expectations—CBO, OMB, and otherwise—expected to be 

very profitable. 

There are measures that could be done. As an example, today 

FHA is being further protected beyond their own guidelines by 

lender criteria that is more conservative than what FHA allows for. 

And I think one of the things that should be considered, particuVerDate Nov 24 2008 17:20 Jun 24, 2013 Jkt 080876 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 K:\DOCS\80876.TXT TERRI
23 

larly as competition increases in the market, is will lenders in the 

broader lending community erode the credit of FHA by using the 

broadest scope of the FHA underwriting guidelines? Or should 

FHA take some measure to try to at least lock in and protect some 

of the credit that is being originated today? 

An easy example is that FHA’s minimum FICO credit score requirement is 580. Most lenders don’t do FHA loans at 580. They 

do them somewhere in the low 600s, due to performance concerns. 

That gap should be looked at closely by FHA policy experts, and 

it should be determined whether those should be locked in at some 

level to avoid the risk of potential erosion downstream as the market becomes more competitive. So there are some things that can 

be done by mortgagee letter that don’t require Congress. 

Mr. LUETKEMEYER. Ms. Wartell, in your response to Mr. 

Capuano, you made a comment, too, that there are some things 

that can be done. Are there things you are aware of, or suggestions 

you could make, that the Administration or FHA itself could do 

right now that would be impactful? 

Ms. WARTELL. There are a couple of measures that FHA is pursuing right now, but that require rulemaking for them to complete, 

and in some cases, because program participants have objected, 

there has even been litigation about that. 

So one of the reasons why I think some of the provisions in this 

legislation would be helpful is it would clarify FHA’s authority to 

take those actions through mortgagee letter. And I would be happy 

to specify those. I don’t have them off the top of my head. 

But I do think that giving FHA more flexibility to act sometimes 

without regulatory procedure speeds up their ability to protect the 

taxpayers. 

Mr. LUETKEMEYER. Thank you. Mr. Stevens, I know that in your 

position with the Mortgage Bankers Association, you see a lot of 

the housing market activity. Do you see from the actions being 

taken by the government regulators, or the government agencies 

here, that they are forcing the private market away from this by 

the fees or their criteria that they are using? 

And if so, are there ways that we can draw—bring it back in so 

the private market can come back in and be effective? 

Mr. STEVENS. Thank you for that question. I think it was actually referred to in Gary Thomas’s testimony as well, is that the extraordinary uncertainty in the lending community, through a morass of regulation coming from multiple bodies, not that regulation 

is wrong, because we need good regulations in the marketplace, but 

it is the inconsistency, the overlap, the lack of coordination in housing policy in Washington that is really causing much of the lending 

industry and private capital trepidation to re-engage in the system. 

If you are private equity today, you don’t know where QRM is 

going to end up. So why would you extend credit into the marketplace, knowing the risks associated with that? There are rules coming out from multiple regulators, and there is no coordination point 

at all within Washington. 

We have advocated strongly that this Administration could identify an individual or body to coordinate all of these policy efforts, 

and clearly articulate the sort of end-state, and try to move in a 

24 

coordinated fashion so that the confusion can subside, and private 

capital can find a pathway to re-enter the market. 

Mr. LUETKEMEYER. Yes, sir? Mr. Marzol? 

Mr. MARZOL. I wanted to make a comment. If uncertainty had 

paralyzed us, Essent wouldn’t be here today, because it took getting started in 2008 to be able to be in the market in 2013. 

And I would like to just, for ourselves, we think we have the capacity to do more. We think capital is interested in doing more 

through private mortgage insurance. I would like to give you the 

sense that if there is opportunity, we think at least our company, 

and broadly, our industry, is positioned to do more, while other private capital sources are trying to get their feet under them and resolve their uncertainties. 

Mr. LUETKEMEYER. I think my time is up. I certainly appreciate 

everybody being here this morning. It is a great discussion. Thank 

you. Thank you, Mr. Chairman. I yield back. 

Chairman NEUGEBAUER. Thank you. And now, the ranking member of the full Financial Services Committee, Ms. Waters, is recognized for 5 minutes. 

Ms. WATERS. Thank you very much, Mr. Chairman. I would like 

to get a little clarification discussion from Mr. Thomas about the 

requirement that FHA has sufficient reserves to pay predicted 

claims over 30-year period. 

The recent report released by FHA’s independent actuary states 

that FHA’s single-family insurance fund has an economic value of 

a negative, what, $16.3 billion? But FHA’s current cash reserves 

total about $30.4 billion. Notwithstanding this fact, FHA’s independent actuary estimates that it does not currently have sufficient 

reserves to pay predictive claims over a 30-year period. 

Can you discuss FHA’s requirement to hold reserves to cover 

claims over a 30-year period? How does that compare to the Financial Accounting Standards Board’s requirement for the reserves 

that need to be held by private financial institutions? And are you 

aware of any other Federal loan program that has such stringent 

accounting requirements? 

I am speculating that this is I guess, some protection with the 

30-year loan. But most people refinance about every 5 years or so. 

So what is this? And is it time for us to start looking at a repeal 

of this, and do something that makes good sense? 

Mr. THOMAS. If you look at it compared with the private side, it 

is completely wrong. So I would agree with you, that we do need 

to take a look at it. 

We also need to take a look at the fact that the Administration, 

in the budget that they are proposing, is asking to take a certain 

amount of money to put in, if in fact it is needed. It is not needed 

yet. And so why in the world are we even putting that in there 

when it is not needed? 

Also, the fund is performing extremely well, and should be—I 

don’t think they are even going to need it, from everything that we 

have researched, by the time we get to the end of the fiscal year. 

So, I agree with you. I don’t think that we need to have that type 

of a requirement on the government side that isn’t required on the 

private side. 

25 

Ms. WATERS. I know that sometimes when we begin to look at 

repealing certain things have replaced in law that people are very 

skeptical. They must have done it for a good reason. 

However, they don’t take into consideration everything that has 

happened since the law was first instituted. And I think it is time 

to take a look at this. 

And so since I am talking to you about it, I am going to come 

back and talk to you again about the possibility of a review of this 

that would help to rearrange our reserve requirements in ways 

that will not in any way put FHA at risk, but rather, relieve them 

of a requirement that makes it appear that somehow they are insolvent, or they are in trouble. 

And I just think that we should be a little bit more forward-looking than this, and not be held to this law, that perhaps does not— 

is not relevant at this point in time, as we look at what happens 

to the 30-year mortgage, for example. 

Again, I said that I think people refinance, or sell, or do something every 5 years. That is an amount of time that I remembered. 

I don’t know if that is still about the right amount of time. 

Mr. THOMAS. A little longer now. But that— 

Ms. WATERS. Seven years or what? 

Mr. THOMAS. Yes. 

Ms. WATERS. About seven—so I do think that it is worth review. 

Thank you very much. Mr. Chairman, I yield back the balance of 

my time. 

Chairman NEUGEBAUER. I thank the gentlewoman. And I now 

recognize Mr. Miller, from California for 5 minutes. 

Mr. MILLER. Thank you, Mr. Chairman. One thing Congress excels at is looking back. We really do a good job there. But if you 

look at the current market, and the uncertainty of QRM, Basel III, 

where the secondary market is going, we have created tremendous 

uncertainty in the marketplace right now. 

There has been debate that FHA is crowding the private sector. 

I think the private sector is just afraid to crowd back in. They are 

just not coming in. 

And there has been some debate that FHA should work more 

like a private business. But Mr. Stevens, had that occurred when 

the downturn existed, and had FHA worked more like a private 

business, and slowed our exit to the marketplace during the downturn, what would have been the result on the housing market and 

the economy? 

Mr. STEVENS. It would have been devastating. And, Congressman, as you know, we worked closely during that period of time. 

There was nobody providing low-downpayment financing in the 

marketplace. 

And quite frankly, even HMDA data for last year clearly shows 

that for first-time homebuyers and other demographics with low 

downpayments, there is no source of access to the housing finance 

system. As the market recovers, and its rules create greater certainty, Adolfo’s point aside, I think there is clearly not the interest 

in private capital to engage in a way that reflects sort of a normal 

lending environment as we have seen over past decades. 

26 

Mr. MILLER. Even last year, you could look at the marketplace. 

And when you were applying for loans, FHA was one of the few out 

there, because the private sector just wasn’t filling that void. 

Mr. STEVENS. Yes. If you look at—just take for example, Fannie 

Mae’s recent quarterly statement release, if you look at the average 

loan-to-value of their purchase transactions, or excluding HARP, 

which is in their financial statement—HARP is refinanced activity—it is in the high 60 percent range. 

So there is very little financing still coming into the market outside of FHA, VA, or USDA in the low-downpayment sector. And I 

think that will come in with confidence around a variety of things 

you suggested. 

Mr. MILLER. You are starting to see the private sector come back 

a little bit. But when you became FHA Commissioner, you took a 

number of steps to improve the risk management capability of the 

FHA. And can you help us understand how far behind the FHA 

was with risk management when you became Commissioner? 

Mr. STEVENS. Thank you for that question. As you well know, 

there was no risk management role at all at HUD when I came 

into the FHA job. It didn’t exist. 

So we actually had to come to this body. We had to get an approval to get it created as an office. We had to get appropriations 

to create the office. 

And that is one of those flexibility impediments that really 

makes it difficult for FHA to respond quickly in times of crisis. Because we had to go through a variety of steps, which took months, 

in fact almost a full year to get the Office of Risk Management established and funded so that we could create it, and to have an insurance company of any size, let alone the size of FHA, to not have 

an independent risk management oversight function was deplorable. And that could not have happened without the support of 

Congress. 

Mr. MILLER. Nobody expected the collapse to be as rapid as it 

was, or as significant when it did occur. That was part of the problem. And if FHA had appropriate capabilities during this crisis, do 

you think the losses would have been much smaller than they 

were? 

Mr. STEVENS. Yes. The budget is going to be released here any 

second. And I think as we look at the numbers, the two provisions 

that I think people are going to look at most closely is first, that 

the seller-funded downpayment assistance program, which actually 

FHA tried to stop and was sued to continue the program, will have 

cost the FHA over $13 billion cumulatively against what is likely 

to be less than a billion-dollar net loss. 

And second, the reverse mortgage program also was very costly. 

And that was a program that they had difficulty making changes 

to. If you could avoid those kinds of, what I call sort of ‘‘inability 

to respond to risk management issues,’’ as Sarah Wartell discussed 

earlier, and FHA could respond to those, there would have been a 

way to avoid actually any need for a draw whatsoever, had those 

two programs been addressed appropriately up front with their 

own authority. 

27 

Mr. MILLER. They played a good countercyclical role. Could they 

have played that part if they were much smaller than they are 

today? 

Mr. STEVENS. No. We have come through a recession that had 34 

percent home price declines from peak to trough. We had a 9 percent national unemployment rate, the worst recession since the 

Great Depression, the worst housing recession in anybody’s history 

here in this room. 

And FHA became sole-source provider for housing finance. Now, 

granted, it is well beyond what we would describe as their mission. 

But in the absence of FHA playing that role, I am not sure where 

the financing would have come from in this country. 

Mr. MILLER. Dr. Rossi, you gave examples of what private companies can do, but FHA cannot. Can you give us some examples of 

that? 

Mr. ROSSI. The one example that comes to mind as we think 

about the risk management—and I would applaud Dave Stevens’ 

efforts to revitalize, or actually establish a risk management office—but I will tell you that if FHA, in my opinion, was overseen 

by the Office of the Comptroller of the Currency or the Federal Reserve, their Board would be under consent decrees, or for still, 

some of the problems that exist today for the size and complexity 

of the fund that they had. 

There is no question in my mind that they need to—for the size 

of that fund, they definitely need to reinvigorate their practices 

around risk management. That is in my mind job number one for 

them to establish themselves in that critical role of being there 

for— 

Mr. MILLER. I want to applaud Mr. Stevens for his movement on 

risk management, on what you said. 

Mr. ROSSI. Yes, oh, absolutely. In fact, that, as a first mover on 

that, that was absolutely critical. 

Mr. MILLER. Yes. Thank you. I yield back the balance of my time. 

Chairman NEUGEBAUER. I thank the gentleman. The gentlelady 

from New York, Ms. Velazquez, is recognized for 5 minutes. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. Mr. Stevens, could 

you please explain to us, or discuss the difference between the 

steps taken by FHA to improve its solvency versus some of the proposals today, as increased FICO score, downpayments, and mortgage insurance premiums? 

Mr. STEVENS. Let’s start with the fundamental point that is 

going to come out in the budget, which I understand was just released. It shows that FHA will need a draw of just under a billion 

dollars. 

That is solely the result of the 2006 through the first part of 

2009 books of business. The 2010, 2011, and 2012 books by OMB, 

CBO, and the independent actuary for all those shows their books 

being very profitable, and well-managed. 

And I think the result, what has made those books profitable, 

made them less risky to the taxpayer, is the authority that was 

given to them, quite frankly, to raise premium, and some overlays 

that were put in around putting a minimum FICO score in place 

that would require a much larger downpayment beyond that. 

28 

And I would say fundamentally, FHA’s risk profile is a far different picture today, in terms of new loans being generated, than 

the kind of risk that was put on those books during those peak 

years. 

Ms. VELAZQUEZ. So can you tell me what specific reform, if any, 

you believe that is necessary today? 

Mr. STEVENS. I think they need greater flexibility, to Sarah’s 

point around emergency powers, which by the way, I don’t think 

is in the last bill that was presented. And that needs to be added. 

I do think there needs to be some additional capabilities for FHA 

to require indemnification of lenders that clearly violate the program. I think we have to be careful in some of that indemnification 

language, because it could also cause additional tightening. And 

there is a provision in there we need to talk about. But those are 

components. 

I think the third area is we need to think about risk-based underwriting. So rather than attach provisions that would put hardline vigor downpayments, for example, in the portfolio, which 

would be a wealth barrier to access, you can accomplish a similar 

outcome by putting better underwriting characteristics with lower 

downpayments, and first-time homebuyers, that might cap, for example, the debt-to-income ratio to a lower level, so that you can ensure sustainability for low-downpayment borrowers, while not excluding access to homeownership. 

Ms. VELAZQUEZ. Thank you, Mr. Stevens. Mr. Thomas and Mr. 

Kelly, what do you think will be the unintended consequences of 

implementing better work requirements than those that are in 

place today? Could they potentially harm the single-family mortgage market for first-time, lower-income or minority homebuyers, 

particularly those in high-cost areas like New York City? 

Mr. THOMAS. I am from California, so I understand that, too. 

Yes, it could. And so, I agree with Mr. Stevens. That is what you 

need to take a look at, not just coming up with a minimum downpayment, or anything like that. 

It needs to be looked at actuarially, as to that borrower and their 

ability to repay. It should not be just a hard line. That would harm 

the fund, and it would harm the ability of people to get into the— 

Ms. VELAZQUEZ. So how do we strike that balance? 

Mr. THOMAS. You are going to have to give them the flexibility 

to make the adjustments without having to come back to Congress 

to get those things implemented. They can do it if you give them 

the ability to do it. 

Ms. VELAZQUEZ. Yes, Mr. Kelly? 

Mr. KELLY. The National Association of Home Builders surveys 

its members on a fairly regular basis. In our recent surveys, when 

we asked, ‘‘What are the greatest impediments to builders selling 

homes?’’, they are telling us—and this has changed over the last 

couple of years—that it is buyers’ access to an availability of credit. 

So I think FHA has played a vitally important role in supporting 

the housing market during this downturn, and this Nation’s economy. I think we have to move very carefully in looking at the types 

of adjustments that were talked about by the other speakers. 

I am a builder and developer who, on the for-sale side, build to 

first-time homebuyers, often in lower-income, urban areas. And 

29 

quite frankly, we periodically examine and go back in those developments. 

The last 120 homes or so that I have sold in two developments 

in urban areas in Wilmington, Delaware, none of the buyers had 

more than a 3 percent downpayment. And out of the 120 over the 

last, I think it was 4 years, last time we checked, which was about 

a year ago, there was one default. All those buyers had to go 

through very extensive housing counseling. They all had FHA insurance. 

But again, I suggest that we have to do it carefully, and very 

thoughtfully. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I now recognize Mr. Bachus, the chairman emeritus of the full Financial Services Committee, for 5 minutes. 

Mr. BACHUS. Thank you. Looking at this various data about the 

HECM program, the home equity mortgage conversion, and the reverse mortgage program, it seems like that is disproportionately affecting the FHA insurance fund. 

I know there have been premium increases. But I would ask the 

panel, Mr. Kelly, Mr. Stevens, maybe any of you who would like 

to respond, are you aware of any changes to minimize FHA losses 

other than maybe increasing premiums? And does the industry 

have any—is there any consensus between, say, the agency and the 

industry on how to minimize these losses? 

Mr. STEVENS. Congressman, as we all know, the reverse program 

is a very unique program for seniors which extends to a senior citizen all the principal balance, interest accrues over time, and they 

make no payments. The only way the program works, quite frankly, is if home prices are appreciating over time, or if you keep the 

draw low enough so that it can compensate for flat home prices. 

The program, up until this point, did not allow for that. It was 

a full-draw, 30-year fixed-rate program that allowed too much of a 

draw up front to the senior. And when home prices didn’t appreciate, it put the fund underwater, and that is what has caused this 

disproportionate outcome. 

I actually think Commissioner Galante has made the right move 

in her most recent announcement that they are going to curtail the 

fixed-rate, full-draw HECM, in replacement for what they call the 

‘‘HECM Saver Program,’’ which is actuarially sound, at least the 

last time I looked at the actuarial review of that program. It reduces the draw amount. 

Raising premiums really doesn’t help at this point, because if the 

home doesn’t appreciate, and you can’t pay it back, you are not 

going to get the premium anyway. So we need to have a program 

which accommodates for a flatter home price market, while maintaining a program that still provides seniors access to some sort of 

ability to draw down their equity. 

And I think that HECM Saver, and eliminating the full-draw 

HECM is the way to get there. 

Mr. BACHUS. Mr. Kelly, do you want to make any comments? I 

know that home prices have started to appreciate again. That may 

take some pressure off. But we can’t assume that will continue. 

30 

Mr. KELLY. I would just reiterate that some of the things that 

have been done on the overall fund, not necessarily the HECM 

fund, I will be honest with you, I am not that familiar with it; 

haven’t utilized it. 

But some of the things that FHA has put in place in the last couple of years—higher mortgage insurance premiums, tighter underwriting standards, recently the requirement that the MIP continues to be paid by homeowners when their loan drops below 78 

percent, and the debt-to-income ratios that are currently being 

mandated for buyers with scores under 680—I believe are all very 

prudent measures that, again, will stand the fund in good stead 

over the long— 

Mr. BACHUS. Mr. Thomas, I should be asking you, I am sure, 

that first question. But what are your thoughts about minimizing 

the loss and HECM program? 

Mr. THOMAS. Those are the two areas that have caused the fund 

the greatest hazard. And I would agree that the most recent 

changes are going to do very well for the fund. And so, we support 

those. 

Mr. BACHUS. That is reducing the draw, basically, I think, may 

be a sure way to say that. And should FHA be in the business of 

insuring reverse mortgages, given their current financial situation? 

Would anyone like to answer that? 

Mr. STEVENS. It is a delicate subject, as you know better than 

anyone. The ability for seniors to particularly have access to equity 

in their homes is something that is important. And I do think you 

can do it in a sound manner. 

I think FHA was limited in terms of what they could have done 

in the past. I think the latest move, we will prove—although it will 

limit the amount seniors can draw, it still gives access to the program. 

I think eliminating it in its entirety is a question about public 

policy and support for the elderly, who own real estate, and have 

fewer other means to have income. 

Mr. BACHUS. It is a social mission. And I think you have to decide as a matter of policy whether that—and I think if it undermines the fund, the answer has to be no, if the changes work. 

Would anyone else care to make a comment? Also, what you would 

advise us to do. Mr. Rossi? 

Mr. ROSSI. Yes, thank you for asking that question. Actually, if 

I put myself back in the day when I was heading risk for several 

large institutions, one of the things that our regulators would tell 

us is, ‘‘Make sure you have your risk infrastructure in place ahead 

of any growth.’’ 

And that goes to programs like the HECM program. In my opinion, you need to go back and do the basic blocking and tackling of 

understanding the risk that you are taking on. And while I think 

that program is very important, you really have to go back and ask 

yourself, ‘‘Do we have the wherewithal to be able to take those 

risks on at this time?’’ 

Ms. WARTELL. Congressman, I think the important thing to emphasize is what Dave Stevens said earlier, that if at the time officials at FHA in the Bush Administration, or in the Obama Administration concluded they should change the rules of certain proVerDate Nov 24 2008 17:20 Jun 24, 2013 Jkt 080876 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 K:\DOCS\80876.TXT TERRI
31 

grams, either the seller-funded downpayments, or the HECM program, if they had been able to swiftly implement the changes they 

wanted, the FHA fund would be positive today. 

And so I think it really—I agree with Cliff about risk mitigation 

tools for FHA. But I also think we need to create the ability for 

them to protect the taxpayer by being able to act more swiftly. So 

the HECM program is a perfect example of the kind of flexibility 

that is required. 

Mr. BACHUS. And if any of you have recommendations on how we 

can be of assistance or supply statutory language, we would welcome that. 

Ms. WARTELL. Absolutely. 

Chairman NEUGEBAUER. I thank the gentleman. Now the gentleman from Missouri is recognized for 5 minutes. 

Mr. CLEAVER. Thank you, Mr. Chairman. And I am pleased we 

are having this hearing. I think we need to deal with the issues 

that have been raised here with FHA. 

Ms. Wartell, do you believe that the FHA is already independent 

of anything that may come out of this committee, moving in the 

right direction? 

Ms. WARTELL. I am sorry. Absolutely. FHA, as I mentioned in my 

testimony, market share has already fallen as it should. And history has shown us in prior circumstances where they played a similar countercyclical role, they took a hit to the health of the fund. 

In both cases, their share fell, and their solvency was restored. 

And there is this ability to essentially share risk intertemporally 

that is built into the mechanism of FHA and it is working again. 

Mr. CLEAVER. The reason I asked you, is because I thought you 

were suggesting what I already—except I am wondering if the 

other panelists agree that the FHA, independent of anything we 

are doing, is moving in the right direction? Does anybody believes 

the opposite is true? I am not particularly thrilled about some of 

the things they are doing, but I think they are trying to correct the 

problem internally. I am not really sure about the cancellation of 

the mortgage insurance premiums when they hit 78 percent. I 

think that is going to send people to the GSEs. Does anybody disagree with that? 

Mr. STEVENS. Congressman, I think the difference is that we 

have to consider, as we look at taxpayer protection, that while FHA 

used to cancel the premium at 78 percent loan-to-value (LTD), they 

still guaranteed the risk to the bondholders, regardless of loan-tovalue. 

For Freddie Mac and Fannie Mae, they cancel mortgage insurance if you can get an appraisal, or it amortizes down. But then, 

you have no more mortgage insurance on the transaction whatsoever. And if the loan goes into default, there is nothing there to 

back it up. So it is hard to guarantee the risk without collecting 

a premium for it. 

The second thing—and this is more for the Builders and the 

®REALTORS—I am not sure if consumers realize when they are 

buying a home that 15 years from now, they are not going to have 

to make that mortgage insurance premium, if it gets canceled when 

they get to 78 percent loan-to-value. 

32 

And if they don’t, then perhaps protecting the taxpayer should be 

the first priority. It doesn’t change your qualification ability. And 

it probably is not a decision at the point of sale. Although, again, 

I think that is a better question for Mr. Thomas or Mr. Kelly. 

Mr. CLEAVER. Mr. Thomas, would you please address that? 

Mr. THOMAS. Sure. Congressman, to my knowledge, that never 

comes up in the discussion when you are sitting with a potential 

homebuyer, as to the fact that they might be able to cancel the 

FHA premium at some future date. 

Mr. CLEAVER. But would you agree that they probably don’t even 

know anything about that? 

Mr. THOMAS. Absolutely. 

Mr. CLEAVER. So they can’t bring up what they don’t know. 

Mr. THOMAS. That is my point. The REALTOR® doesn’t explain 

it to them, nor does the mortgage person explain it either. 

Mr. CLEAVER. Mr. Kelly? 

Mr. KELLY. I would agree with Mr. Thomas. They don’t recognize 

that is an eventuality. I don’t think it is a factor in the decisionmaking process. 

Mr. CLEAVER. Let’s continue in my line of thinking about FHA 

moving in the right direction. Rising home prices, it is believed, are 

also going to very likely reduce the $16.3 trillion problem that we 

thought we would have for the first time in 79 years of FHA. So— 

Mr. STEVENS. The budget that was just released is a re-evaluation. Although I haven’t read it, I think we will find in the budget 

that what changed it from billions of dollars of expected loss to the 

current budget, which looks at it being less than a billion dollars, 

I think the home price changes are obviously a key driver there. 

And that also lowers what we call ‘‘severity costs’’ to FHA, because when a home goes into default and it sells in a rising home 

price market, that loss per foreclosure also ends up being less. I 

think both of those variables will likely be significant in what ultimately ended up being a much smaller loss than what was expected several months ago. 

Chairman NEUGEBAUER. So my final question is, if the entire 

panel believes and even with the actual report from November 

which said we were going to have a problem, that FHA is moving 

in the right direction. Is there any concern that tinkering with the 

FHA now that it is moving in the right direction, might create 

problems that don’t even exist today? 

Mr. ROSSI. I would just venture to say that we may be more 

lucky than anything else at this point that home prices are rising, 

and so the fund is down to maybe $1 billion or so, as opposed to 

getting any place, the right changes that they need to be made so 

that the sustainability of the fund is there for any kind of housing 

price market that we come up against. So that is my perspective 

on it. 

Ms. WARTELL. But Congressman, I think that there are two sets 

of changes. There are changes that will give FHA the ability to better manage its risk, which are the kinds of changes that I think 

you find every single member of this panel strongly supports. 

And then I think there are another set of changes which could 

have the effect of limiting access to FHA and whether those limits 

are appropriate or not is very hard to know, because we don’t know 

33 

what the policy framework for the rest of the housing market is 

going to look like when all of these changes come to there. So I 

think it is really important to act as quickly as you can on the 

things where there is consensus and make sure that we are doing 

the rest of those reforms in the context of broader reform. 

Chairman NEUGEBAUER. Good point. 

Thank you. And I thank the gentleman. Just a point of clarification in the budget’s number for the President. This is actually an 

increase of what was in the President’s budget from last year. It 

doesn’t actually make any representation of what the actuarial 

numbers are at this particular point in time. 

So I think sometimes, we have to make sure we are talking 

about the same numbers. I now recognize Mr. Garrett, from New 

Jersey, for 5 minutes. 

Mr. GARRETT. I thank the chairman, and I thank the panel 

again. First of all, let’s start this way. Is there anyone on the panel 

who thinks we should not be as transparent as we can with the 

American taxpayer as far as the risk that FHA potentially poses 

to them? Good. 

So we know that collectively, when we are talking about investors in the private sector, we want to make sure that we protect 

the investors by having appropriate accounting standards for them, 

so they know what they are investing in. Is there any reason, does 

anyone suggest that we should not then have appropriate accounting standards for FHA, have them account for their books like any 

traditional insurance company would? 

Ms. WARTELL. Congressman, I think the question is, what is appropriate for the taxpayer, and I think the rules that are embedded 

in the Federal Credit Reform Act are designed to accurately account for the cost taxpayer actually could bear. 

And I think there is a concern that former CBO Director Bob 

Reischauer, the Center on Budget Policy Priorities, and many others have mentioned about potential changes to the Credit Reform 

Act in ways that could essentially inflate the cost that the taxpayers might incur from potential risks in a way that could be inconsistent with actual costs to the government. 

Mr. GARRETT. So would you say that the initial subsidy estimates 

that FHA has given over the years have been accurate and transparent to the taxpayer and accurately reflect the risks to the taxpayer? 

Ms. WARTELL. I think that the taxpayer generally has all sorts 

of contingent liabilities, costs from the Social Security fund and 

from Medicare and many other different— 

Mr. GARRETT. But let’s just focus here on FHA for a moment. We 

can fix those on another day. Are they accurate as far as what they 

have been doing at FHA, in protecting that in a transparent and 

accurate manner over the years? 

Ms. WARTELL. I think FHA has generally been as good at predicting loss to a mortgage insurance fund as the private sector, actually probably better, but I take your point that it is very hard 

to know how housing prices and economy and unemployment will 

vary. 

Mr. GARRETT. So, let’s take a look at that. Does anybody disagree 

that they have been fairly accurate? Mr. Marzol? 

34 

Mr. MARZOL. Mr. Congressman, the comment I would make on 

the issue of mortgage credit risk, particularly with low-downpayment borrowers, is that the future outcomes depend a lot on what 

happens to the economy, home prices, and jobs. 

So there is uncertainty about those future outcomes. If the economy and jobs are good, the mortgages should perform fairly well. 

One of the tools that we use, and I am not an expert in GAAP or 

government accounting, but as a businessman, a tool that we use 

a lot is stress-testing our portfolio. 

It is not just assuming that times are going to be good, but it is 

asking ourselves, what will it look like if times are bad, including 

if they looked like the Great Recession that was— 

Mr. GARRETT. And does FHA do that now? 

Mr. MARZOL. Not, there are in the actuarial report, there are 

downsides— 

Mr. GARRETT. Right. 

Mr. MARZOL. —scenarios provided, and that is something that is 

just—people we try to look out a lot. 

Mr. GARRETT. So that is one thing that they are not doing as well 

as you would suggest, as you are doing. The other area is not incorporating a premium for market risk. And before I go to you, Mr. 

Stevens, let me just throw up some numbers to put this in perspective, so we can show the chart. 

If you really squint at that chart, this is from CBO, it is from 

1992 to 2011. Just to poke off some years, this is the initial subsidy 

estimate recorded as provided in the budget appendices from the 

CBO, in the first chart. And the next chart shows latest re-estimates as provided in Fiscal Year 2013 credits supplement. 

What do these charts show? To Ms. Wartell’s comment, yes, they 

show that FHA was predicting, and each year from 1992 to 2011, 

but basically, it is a negative number, which means the effect on 

the budget is that they would be ahead of the game, right? By $852 

million, in 1992, to 6 billion, 738 million dollars in 2011. How close 

were they to their predictions in all there? Well, let’s see. 

They were wrong in every single year. That is not a great track 

record. They were off by $205 million in 1992. In 2011, they were 

off by 3 billion, 376 million dollars. On a scoring level of one out 

of 100, zero isn’t that great, is it? So I would not say the level of 

accuracy is great. And yes, the private sector may not be that good 

at this, but if the private sector had a zero accuracy level, they 

would be out of business. 

But when the Federal Government has a zero accuracy level, the 

American taxpayers are the ones who foot the bills. So I would 

hope that we could agree, as was said at the beginning, that we 

all want more transparency and one of them would be to go into 

CBO with success. 

Or others have suggested doing corporate premium for market 

risk and also we go into fair value accounting, which perhaps along 

with what Mr. Marzol has also suggested, give us a more, true reflection of what this is affecting and the cost to the American taxpayer. With that, I see my time is up now. 

Chairman NEUGEBAUER. I thank the gentleman. And now the 

gentlelady from Arizona, Ms. Sinema, is recognized for 5 minutes. 

35 

Ms. SINEMA. Thank you, Mr. Chairman. Actually, I don’t have 

any questions. And that might make me the most popular member 

of the subcommittee today, actually. 

[laughter]. 

Thank you. 

Chairman NEUGEBAUER. With that, we will recognize Mrs. 

Beatty for 5 minutes. 

Mrs. BEATTY. Thank you, Mr. Chairman, and Mr. Ranking Member. First, let me thank all of the panelists who joined us today as 

we look at your perspectives on how to reform FHA. We have obviously had a number of these meetings, and we have had our Director from FHA come in and provide us highlights. 

In listening and reviewing your materials, I think many of you, 

and especially as I look at the document from you, Mr. Kelly, let 

me thank you for the third paragraph on page 2, where you give 

us the 80-year history and what FHA has gone through from the 

Great Depression. 

And in that last line, you talk about it being a testament to its 

ability to meet the mission in these difficult economic times, that 

we weren’t there 4 years ago, when we were really in the height 

of it. 

So my question to you or any one or two of the other panelists, 

is I take a more laser focus on the mission of FHA, to serve those 

low- and moderate-income homeowners, often first-time homeowners, and then for fun, let’s just throw in what happens when 

we look at a 620 credit score, or lower, because that is the population in my district, when I look at having the richest and the 

poorest. 

For you, the question is, let’s focus on those who are on the lower 

end. In looking at, and listening to the testimony, what I would 

like to hear is, what one specific thing, assuming we are all in 

favor in keeping it to its mission, and only tweaking it, what is the 

one thing that you could give me, that you would support or suggest to us, that we do for those low-income folks who aren’t going 

to have another opportunity? 

And certainly, we know that the housing market spurs the economy and I don’t think anyone here, and I don’t want to speak for 

you, would be against saying that this low- and moderate-income, 

first-time homeowner, who has had some life crises, as many of us 

might have had, should still deserve to have that opportunity to be 

insured for a home. What is it that you would do from your perspective? 

Mr. KELLY. I would tell you from my own experience, as I shared 

with the committee earlier, our company has built and developed 

a lot of first-time entry-level housing. We have used the FHA programs, often in conjunction with State and local programs. 

What I have viewed again, and this is anecdotal more than scientific, my own experience is the fact that in every instance where 

we have done these programs, there has been a mandatory housing 

counseling component to that. I think you are also going to find 

that probably, fairly universal, with State housing finance agencies, and their first-time homebuyer programs across the country. 

And I think if you look at the rates of foreclosures in those programs with State housing finance agencies, their portfolios are perVerDate Nov 24 2008 17:20 Jun 24, 2013 Jkt 080876 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 K:\DOCS\80876.TXT TERRI
36 

forming very well. I think it is very important that those who are 

unaccustomed to the obligations and responsibilities of buying a 

home and maintaining that home, understand what the total cost 

and real cost are for it, so they can prepare. 

Unfortunately, when they don’t get that counseling, many only 

think about the fact that they have to pay a mortgage. They have 

no idea that mortgage payments are going to include taxes and insurance escrows, and they don’t think about the cost of heating and 

cooling and maintaining the property. 

Mrs. BEATTY. Thank you. 

Mr. KELLY. The one thing I would say to your quote, what I 

think is at the root of your question is that recessions are hardest 

on those with the least means. And so if you are in a State that 

is dependent on manufacturing, for example, Ohio and Michigan, 

they got particularly gutted by the automobile industry. You find 

yourself unemployed, and you don’t have a lot of wealth in the 

bank to survive that period of unemployment. 

Your credit score is going to be hurt harder than those who have 

large amounts of inherited wealth, or relatives who help you out 

through those times. We do need to find a way to ensure that we 

have responsible access for consumers who don’t have those kinds 

of resources available to them, to get the advantages of homeownership, which is good for society, good for the community, and 

good for the economy. 

I think there are solutions that provide access. And one suggestion is to consider ensuring that they have a debt-to-income ratio 

that allows for enough residual income after their fixed costs to 

cover their liabilities, not necessarily allow 50 percent back into 

that income ratio, which could be unsustainable for a person who 

has other marginal means for paying their monthly obligation, lowering that debt-to-income ratio to a more reasonable level, while 

not excluding them entirely from the opportunity for homeownership. It is a balance of sustainability and access that is critical to 

the market. 

Mr. THOMAS. I would follow up too, Congresswoman, that we 

want to make sure that FHA remains available and affordable to 

all classes. We don’t want to see the increase in cost or 

downpayments that will disenfranchise these borrowers. If it was 

raised to 5 percent down, that would disenfranchise 300,000 borrowers a year. 

Chairman NEUGEBAUER. I thank the gentlewoman, and now the 

gentleman from Mr. Ohio, Mr. Stivers, is recognized for 5 minutes. 

Mr. STIVERS. Thank you, Mr. Chairman, and I want to thank the 

witnesses for being here today. I also want to thank the chairman 

for calling this very important hearing on how we can shore up 

FHA because to my fellow Ohio Congresswoman, FHA does have 

an important mission, and we want to make sure they are there 

to perform that mission. 

But I have heard some things that you have pretty much all 

agreed on today. Number one, and I will call it a consensus, there 

seems to be some mission conflict, and there seems to be a discussion about when it is appropriate to deal with that. FHA has to do 

a better job of allocating resources to risk management. They need 

to at least look at risk-sharing. 

37 

They need to do something with risk-based pricing and they need 

to do something with their risk exposure and decide what level 

they feel comfortable insuring, and I think all these things together 

can move us forward, and so I am going to ask some questions on 

each one of those things in turn, with regard to mission conflict, 

and my predecessor just talked a lot about how important FHA is 

to low-income folks. 

But I saw a recent study from the George Washington University 

School of Business which showed that 30 percent of FHA loans 

were going to families making more than 115 percent of the average median income, and I guess something looks like it is missing 

to me, and I will ask this question to Mr. Stevens, but why does 

FHA not have an income limit? 

There is a limit on the home price, there is a limit on lots of 

things but if it is really a mission geared toward low- and moderate-income buyers, why don’t we look at some type of cap on how 

much folks can make and be eligible? 

Mr. STEVENS. Congressman, I think virtually every economist— 

and I am not one—would agree and have advised over time that 

income is a better measure for an FHA program. The challenge is 

if we want a market that functions, income is one of the most disputed measures when it comes to backing up representations and 

warrantees. 

So if you put a minimum income, a maximum income level for 

a particular community, and an underwriter and a lender is underwriting, a self-employed borrower who has a part-time job as well, 

and there is a dispute ultimately upon default, as to what income 

level was used, that can become a problem. 

And I would just tell you anecdotally, I ran a large financial institution, and I brought 20 underwriters into a room. I handed 

them each a thick pair of tax returns, a set of tax returns. I had 

them all underwrite the same return separately, and then put their 

number on the white board in front of the room. And I had about 

12 different numbers out of that group of underwriters. 

And that is the risk we ultimately create for the lending community to advance capital. I think loan limits have become a proxy for 

that. 

Mr. STIVERS. Can I ask you, so you are the head of the Mortgage 

Bankers Association, do your members use income in their underwriting? 

Mr. STEVENS. They do. 

Mr. STIVERS. Should it be considered, maybe not a hard limit, 

but shouldn’t it be considered as a component? 

Mr. STEVENS. Again, I agree underwriting— 

Mr. STIVERS. It is— 

Mr. STEVENS. —the loan income level is the better and more accurate variable to ensure access to homeownership measures, and 

if it can be done with precision, in a way that can be implemented 

in the— 

Mr. STIVERS. Sure. 

Mr. STEVENS. —housing and system, we would absolutely be 

open to that. 

Mr. STIVERS. Does anybody disagree that FHA should spend 

more time and resources on their risk management? If they are 

38 

going to do that, they need to make sure they have the money, and 

I would just tell you that FHA does not charge the maximum premium allowed by law. 

But let’s move to the next topic that relates directly to that, and 

that is risk-based pricing, and I do have a question, sort of for Mr. 

Thomas, although kind of for Mr. Kelly. A lot of people brought up 

risk-based pricing. Mr. Thomas, in your testimony, you talked a lot 

about the problem with condominiums and I recognize that problem. 

But to the extent there is a problem there, would—and I know 

the REALTORS®, the organization you represent hates increasing 

FHA premiums or dislikes it. But would you rather have the ability 

of people who need condos to buy them at a risk-based premium, 

or have the current rules on condos? 

Mr. THOMAS. The interesting thing is that condos actually perform better than single-family homes. 

Mr. STIVERS. Sure. 

Mr. THOMAS. And condos are also typically the entry point into 

housing. So, we need to make sure that is available to them and 

currently, with some of the things that FHA requires of condo associations, the condo associations are not renewing their ability to 

have FHA loans in their complexes. So there are a lot of problems 

around the FHA in the condo area, and that is just one of them, 

Congressman. 

Mr. STIVERS. It looks like my time is up. I will yield back and 

hope for a second round of questions. 

Chairman NEUGEBAUER. Thank you. Now the gentleman from 

California, Mr. Royce, is recognized for questions. 

Mr. ROYCE. Thank you, Mr. Chairman. And let me start with Mr. 

Marzol. In your testimony, you describe a resurgence of capital to 

the private mortgage insurance industry, $2 billion raised this 

year. 

What is the state of the industry? How many companies are currently offering coverage? And do you expect more capital to be 

raised in the near term? 

Mr. MARZOL. —actually, the question comes at a good time. I 

think there have been some very positive developments in terms of 

the state of the industry, and there are six or seven, I think, active 

companies. I should probably go through and name them all. 

Mr. ROYCE. No, no, no, don’t do that. 

Mr. MARZOL. I— 

Mr. ROYCE. Spare me that. 

Mr. MARZOL. But the question comes at a good time. The industry has, and companies have had access to capital. There is another 

new entrant which came into the market this year, along with 

Essent having come into the market a couple of years ago. Another 

large corporation announced the acquisition of a smaller industry 

company in an attempt to turn that company into a full service 

provider. 

Mr. ROYCE. —so— 

Mr. MARZOL. Our feeling is that the capital markets are open 

now for mortgage insurers to raise capital. 

Mr. ROYCE. What is the number one thing Congress can do to ensure that capital gets off of the sidelines? 

39 

Mr. MARZOL. I think capital comes where it thinks it sees business opportunity and need. Things have been moving in the right 

direction, and I think the extent that Congress continues to take 

steps that signals that there is demand and need for mortgage insurance in the system, like the risk-sharing idea that has been 

talked about. Those are the kinds of things that will be very helpful to continue to bring capital to the industry. 

Mr. ROYCE. You raised another issue, and it is one that I raised 

at the last hearing. You raised this issue on the impact of the QRM 

rule and Basel III capital rules on FHA’s attractiveness to lenders 

and to banks. I am very worried that the net impact of these rules 

is that government policies are going to steer borrowers to the FHA 

and further crowd out the private markets. 

So let me just ask you, what do you think needs to be done to 

change those proposed rules to ensure a level playing field for private mortgage insurance? 

Mr. STEVENS. I think on Basel III, it would be any help that we 

could get, and we will make our own case, of course, to the bank. 

If there has been any help that we can get to persuade that private 

MI continues to be recognized for capital purposes, for banks, assuming that the MI is being provided by a financially sound mortgage insurance company. 

And then on risk retention, actually, our view is that the thing 

which would be most helpful would be to actually get mortgage insurance thought about the right way in the rule. And what I mean 

by the right way, is that private mortgage insurance is long-term 

risk retention. If we could get private mortgage insurance recognized as long-term risk retention in the rule, then wherever lenders 

end up, potentially having to have a risk retention obligation, if 

they don’t have the capital and balance sheet to bear that risk, we 

would then be able to step and be that risk retention source for the 

lender. 

Mr. ROYCE. Okay. Thank you. I want to go to Mr. Stevens and 

ask a question about eminent domain, because these proposals 

have been under consideration in a number of States, certainly 

California being an example. These proposals would use the eminent domain power to seize mortgages at a deep discount, and then 

refinance them using FHA insurance. Should FHA be used to back 

loans acquired through eminent domain? 

Mr. STEVENS. Thank you, Congressman. I believe strongly that 

the FHA should block the ability for eminent domain rules to use 

their insurance fund. Director DeMarco of the FHFA has said explicitly in a public statement that Freddie Mac and Fannie Mae 

will not be a source, as an outlet, for this eminent domain process 

and has gone further to say they may ultimately exclude financing 

being made available in those communities where eminent domain 

is used. 

That would leave the FHA solely there to be adversely selected 

by these communities and that should not be allowed. 

Mr. ROYCE. Do you want to jump in, too, on the QRM rule and 

the Basel III, Mr. Stevens? 

Mr. STEVENS. I think Adolfo’s point about recognizing other credit enhancements in these rules is critically important. But I don’t 

think it is enough to recognize credit enhancements in QRM, beVerDate Nov 24 2008 17:20 Jun 24, 2013 Jkt 080876 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 K:\DOCS\80876.TXT TERRI
40 

cause still the cost of capital for a government guarantor is cheaper, and so if there is a downpayment threshold, even if a private 

credit enhancement is recognized, that ultimate cost of capital for 

the private credit enhancement won’t compete with a governmentguaranteed credit enhancement. 

So, we really need to make certain that the QRM rule is defined 

as equaling the Qualified Mortgage rule and not set another barrier in place that creates an additional cost for private capital to 

engage in the market. 

Mr. ROYCE. Thank you, Mr. Stevens. 

Chairman NEUGEBAUER. I thank the gentleman. The gentleman 

from California, Mr. Sherman, is recognized for 5 minutes, and my 

apologies for not acknowledging you before. 

Mr. SHERMAN. You got the State right. I want to pick up on what 

Mr. Royce had to say. I am a bit confused on what basis—I don’t 

know if the other side is represented here—someone would argue 

that private mortgage insurance is not a risk mitigant. 

How is it that the folks defining both QRM and Basel III would 

say, just ignore this? Does anybody have any insight into how these 

two regulatory processes are going the wrong way? I see nothing 

but heads shaking and I look forward to working with you and 

with others on this subcommittee to try to make sure that both 

processes recognize the obvious, which is, if you own a mortgage 

that is insured, you have less risk than if you have a mortgage that 

is not insured. Mr. Thomas, maybe you could tell us a little bit 

about what it is like in the marketplace? Is PMI now thought of 

as a way to help, making some headway, expanding its share? 

And particularly with regard to condominiums, it is difficult to 

get FHA insurance for condominiums. What role does private mortgage insurance play there? 

Mr. THOMAS. We are not seeing the private mortgage insurance 

back into the market back in a big way. We would love to see it. 

And we would love to see the lenders back in as they were before 

the crisis. 

But, the rules that are still out there, the QM, the QRM, and the 

Basel III, once those are finally finalized, I think we will then start 

to see the restructuring of our whole mortgage system, so that we 

understand where the rules are and everybody can play by them. 

The problem is now, the lenders are not ready to get back into 

the market until they know what the game is that they have to 

play. And so, we are seeing just a continuing tightening of credit, 

both from the availability of it, to the qualification of it. I tell any 

of the borrowers I deal with that they are going to go through an 

inquisition, not a normal process. 

And so, that is what the borrower is facing today. It is much 

more difficult than it needs to be, but a lot of it is because of the 

regulations and the unintended consequences of not knowing what 

they are going to be. 

Mr. SHERMAN. Does anyone else have a comment on what is actually happening in the marketplace? Yes? 

Mr. MARZOL. Just a comment. Individual markets are different, 

but the private mortgage insurance industry in 2012 did write $175 

billion of— 

Mr. SHERMAN. And that is a substantial— 

41 

Mr. MARZOL. —of insurers, and definitely were up from the bottom when we were only at one time in 2010, I think between 4 and 

5 percent of the market. So we are a little bit of the invisible man 

of private capital in the mortgage market, but it is, it is not an insignificant sum of mortgages that are getting access to mortgage 

credit with private capital on them through private mortgage insurance. 

Ms. WARTELL. Congressman— 

Mr. SHERMAN. Yes, go ahead. 

Ms. WARTELL. I think the one thing to remember is that FHA, 

with its premium increases has now, and for many loans, not all 

of them, gotten to the point where it is more expensive than many 

of the MI products. The real barrier, one of the real barriers for the 

MIs, strictly in the purchase money as opposed to refinance market, is that they are limited to what the GSEs will purchase in 

much of their business. 

And so the dynamics here about where, how FHA market share 

can shrink and the MIs can grow, is not principally determined by 

FHA policy. There are other factors in the economy, including the 

regulation of the GSEs by the, in conservatorship. And so, I think 

we are getting— 

Mr. SHERMAN. So— 

Ms. WARTELL. —to a place that will be— 

Mr. SHERMAN. —if I can interrupt— 

Ms. WARTELL. —in that process. 

Mr. SHERMAN. —but we all want to see mortgage insurance play 

its role in the economy. We all want to see more private, less FHA, 

with returning FHA to more its traditional role, but ultimately, it 

is the lenders and the securitizers that control this process. 

And if you have the lenders affected by Basel III and QRM rules, 

that prefer FHA to private mortgage insurance, if you have Fannie 

Mae and Freddie Mac rules that prefer FHA to private mortgage 

insurance, then our whole goal of having private mortgage insurance return to its traditional role is distorted. 

Ms. WARTELL. A level playing field is absolutely the goal and I 

think there is sometimes too much emphasis on making FHA 

change the rules to level up the playing field. And I think often it 

is these larger structural issues that are going to create the opportunity for us to see more private capital return. 

Mr. SHERMAN. I believe my time has expired, but I look forward 

to working with my colleagues to try to push the securitizers and 

those who draft QM and QRM and Basel III in the right direction. 

Chairman NEUGEBAUER. I thank the gentleman. And now the 

gentleman from Wisconsin, Mr. Duffy, is recognized for 5 minutes. 

Mr. DUFFY. First off, Mr. Kelly, did you want to make a final 

comment there? I see you had your hand up. 

Mr. KELLY. No, simply that I mentioned this earlier in the hearing, that in response to Mr. Sherman’s question regarding what are 

we seeing, as I indicated, NAHB does a regular survey of its members and asks questions regarding the challenges they face in producing and selling homes, and the top of the heap at the moment 

is the credit access and availability and standards that their prospective buyers face. 

42 

Mr. DUFFY. Thank you. I am one who supports the traditional 

mission of FHA. I think it is important, however, that we balance 

that traditional mission of FHA with securing American taxpayers 

from having to step in and bail out more housing programs. 

Last year, we were in the hole $688 million at FHA. We had a 

mortgage settlement of a billion dollars that was able to plug that 

hole, per Mr. Stevens’ insightful comments, the budget came out 

with a request for $943 million for FHA, right under a billion dollars per year. 

To the point, a lot of us are concerned about the solvency of the 

program and taxpayers stepping in and bailing out the program. I 

think all of you on the panel had agreed that you are in favor of 

some form of risk sharing, is that correct? I think Mr. Neugebauer 

asked that question, and you all agreed to it. 

What kind of ratio do you think is appropriate? And I open it— 

is it 80/20, is it 50/50? 

Mr. STEVENS. Congressman, there are a couple of things that I 

would suggest. One is that FHA already has the authority to implement a risk-share pilot and that has not been done to date for a 

couple of reasons, but one of which is just resources to get it going. 

Mr. DUFFY. But what ratios? What kind of ratio do you have? 

Mr. STEVENS. The thing that I would suggest, and a ratio is a 

difficult one for the pilot, but I would suggest that we need to make 

sure that we do it in a way that doesn’t, that creates a clear market where there is not an option other than risk-sharing and the 

FHA for the pilot. Because otherwise, the execution will never 

work, and the pilot won’t work, so— 

Mr. DUFFY. But you— 

Mr. STEVENS. —and I— 

Mr. DUFFY. —start off with, what, 10 percent as a goal, or some 

small percentage to test the pilot before you expand it? 

Mr. STEVENS. I think that is where you need to stop. 

Mr. DUFFY. I want to give everyone a chance to answer, but I am 

a little confused on why we are asking for a pilot? Isn’t our pilot 

the VA and isn’t the VA really a pilot program for us, and it has 

worked? Why do we have to do another pilot? If we are talking 

about pilots, I wish we would have talked about pilots with regard 

to Dodd-Frank, not FHA. 

But we have already tested it out with the VA. Why are you— 

it seems like we are kind of slow walking this thing a little bit 

when we have seen it tested, and we have seen it works. Why don’t 

we just do it? 

Mr. STEVENS. Sarah, do you want to take that? 

Ms. WARTELL. Well, a couple of things. First of all, VA is a much 

smaller program, and although it has a much lower default rate, 

the borrower pool that is eligible is different. They tend to have 

better FICO scores and there is a set of ways in which— 

Mr. DUFFY. By its very nature— 

Ms. WARTELL. —the VA has indirect— 

Mr. DUFFY. —the definition of a pilot, it is a smaller program. 

Ms. WARTELL. It is more than a smaller program. It has very different and targeted borrowers who are eligible, and most of us 

would not predict that you would see the same behavior and the 

43 

same performance on a pilot that was applicable to the entire FHA 

borrowers. 

Mr. DUFFY. What leads you to believe that? 

Ms. WARTELL. Because the borrower is in VA, first of all, they 

are all military and eligible through their service in the military. 

There are ways in which they may have lost some eligibility for 

other VA benefits, if they fail to perform on their FHA, which creates a different incentive for them to perform on their loans, and 

they also tend to be concentrated in particular markets where some 

of the risks that FHA has borne aren’t there. So if this were expanded to the FHA’s traditional markets, you may see very different performance. 

That is why we would propose taking an FHA-eligible borrower, 

and find ways to share risk. In many loans, it is not risk sharing 

at all, because it is a 25 percent top loss coverage, and many of us 

would propose that FHA design a real true sharing of risk through 

the borrower, to align incentives better between the insurer and 

FHA. 

Mr. DUFFY. I appreciate your quick answer, getting it all in 

there. Maybe we can continue a dialogue on it. There are some 

more questions I have on the pilot program. In regard to premium 

increases, we are at 1.35 percent, we have a cap of 1.5 percent, so 

we are not there yet. 

But I think you all indicated that you support the legislation that 

passed last year which would bring us up to a cap of 2.05 percent. 

Do you all support raising that percentage, where you pass the 1.5 

percent, something closer to the 2 percent that was in the legislation that you all said you support? Anybody? My time is up, but 

I am not getting called, so I am going to ask you to answer the 

question. 

Mr. STEVENS. Congressman, the one thing I would say is that 

FHA, the good news is FHA has risen their premiums, raised their 

premiums multiple times and it wouldn’t— 

Mr. DUFFY. And it hasn’t— 

Mr. STEVENS. —they wouldn’t have that— 

Mr. DUFFY. —and it hasn’t worked yet, we are— 

Mr. STEVENS. —they wouldn’t have— 

Mr. DUFFY. —still short. 

Mr. STEVENS. —that capability if they hadn’t done it here, they 

just raised premiums April 1st by another 10 percent and our, and 

application activity was in the FHA, dropped 14 percent this last 

week. We are already losing share as a result of raising those. 

Mr. DUFFY. A $943 million shortfall this year. So I guess— 

Ms. WARTELL. It is on the HECM program. 

Mr. DUFFY. Go ahead. What is that? 

Ms. WARTELL. The shortfall this year has to do with losses on 

loans that they have already insured, and the predicted performance— 

Mr. DUFFY. Are you— 

Ms. WARTELL. —of the forward-looking— 

Mr. DUFFY. —are you calling Mr. Stevens out for his performance 

at a— 

[laughter]. 

44 

I will yield back and maybe we can we can chat further on this 

at some other time. 

Chairman NEUGEBAUER. I thank the gentleman, and now the 

gentleman from Delaware, Mr. Carney, is recognized. 

Mr. CARNEY. Thank you, Mr. Chairman, and thank you for giving me an opportunity to ask a few questions and to welcome my 

friend Kevin Kelly at the outset. I am not a member of this subcommittee, but I have to tell you, this hearing has been great. 

It has been very thoughtful, a great discussion. Starting off with 

your questions, Mr. Chairman, and there was quite a bit of agreement among the panelists which is not something that we often see 

in this hearing room, and it was really good to see, for me. 

Mr. Kelly knows that we have something in Delaware that we 

call the ‘‘Delaware way.’’ And when we have a problem, we kind 

of put our political differences aside, we get the experts in the 

room, and we try to figure out how to address the problem. 

It seems like if we did that here, on this issue, how to reform 

the FHA, we could put this panel together, maybe add some other 

folks and you all could write legislation that would represent a consensus among your groups. 

And I know we have done that in Delaware. We have done it on 

occasion where Mr. Kelly has led those kinds of initiatives and I 

just throw that out there as a suggestion, maybe to bring the Delaware way to resolve some of the differences we have around these 

issues here over the FHA and the reforms that are necessary. 

We very much appreciate all your input. I had to leave, and I 

really apologize for that. I don’t know if you had any discussion 

about the GSE reform, but I would be particularly interested in 

hearing your perspective on what we should do. 

The President asked us, a couple of years ago, actually Secretary 

Geithner came here to this committee with their White Paper, 

which included a continuum from complete privatization to some 

sort of public/private partnership there, and I would be interested 

if any of you have some—Ms. Wartell is leaning forward. I suspect 

she has some views and I would her first, my friend Mr. Kelly, and 

Mr. Stevens, and anyone else who would like to add your thoughts 

on that? Thank you. 

Ms. WARTELL. Clearly, it is appropriate for the Congress to remedy some of the failures of the past in the GSEs. That means that 

we should not have an unpriced and unpaid-for implicit guarantee. 

We need the government’s role to be limited to stand behind private capital, to be priced and paid for in some kind of catastrophic 

risk insurance fund, which will—and I think over time, that fund 

should stand behind a smaller portion of the market and gradually 

be phased out over time. 

The mechanism by which private capital can stand ahead of the 

taxpayers in that, I think can be diverse, but they—we don’t—the 

advances made by FHFA in creating a new securitization platform 

means that we can separate what the GSEs have been doing between securitization and credit enhancement, and come up with a 

way to ensure that there is well-capitalized entities with access to 

capital market mechanisms to stand ahead of the tax— 

Mr. CARNEY. Does the Urban Institute have a proposed solution 

or on— 

45 

Ms. WARTELL. I am working on a proposal that may come out in 

some weeks with some bipartisan colleagues. 

Mr. CARNEY. Thank you very much. Mr. Kelly? 

Mr. KELLY. Thank you, Congressman. NAHB has taken a position and I will reiterate it that we believe the most effective means 

of benefiting the taxpayer is a comprehensive reform, both to FHA 

as I said earlier in my remarks, as well as GSE reform. That— 

Mr. CARNEY. And we have heard that from many people who 

have come before our committee to do it— 

Mr. KELLY. And— 

Mr. CARNEY. —in a comprehensive way. 

Mr. KELLY. And we always encounter the law of unintended consequences. We think the mortgage finance system in America is in 

need of a holistic reform. We are in favor of reforming Fannie Mae 

and Freddie Mac. That should be done. We think that is a paramount concern. But we, again, think FHA reform should march 

along at the same time. 

With that said, we are emphatic in our position that it is essential that there be a government backstop, back in the primary and 

secondary mortgage markets to ensure continued access to credit 

for all homebuyers. 

Mr. CARNEY. Thank you—please. 

Mr. THOMAS. Yes. The National Association of REALTORS® has 

had a White Paper out for about 3 years on this, and I think if you 

read through it, you will see that we agree that there still needs 

to be a Federal backstop, and we need to have access to capital in 

any kind of a market. 

But there are many things that need to be contemplated in a reform of the GSEs and we are in support of that, and if you read 

through our White Paper, you will see that. 

Mr. CARNEY. Thank you very much, Mr. Stevens? 

Mr. STEVENS. The only thing I would say is, we have a White 

Paper out also. All of our papers generally recommend the same 

relatively similar construct. In fact, the BPC is in all that— 

Mr. CARNEY. So why is it so hard for us? 

Mr. STEVENS. We believe strongly that we have to start taking 

steps in that direction, having these institutions perpetually on, in 

conservatorship is untenable. They are controlling 70 percent of the 

liquidity in the housing finance system today. The decisions they 

make are extraordinarily impactful. 

The housing finance, both in terms of the government’s role and 

the private sector’s role and we really would encourage steps now 

while interest rates remain low, while the market’s in recovery, to 

deal with the future of the state of these two institutions in an organized way, because if we fail to do so, down the road when rates 

rise and tinkered with guaranteed fees for legislative purposes and 

otherwise we will be in a much worse position. 

So doing this now, we—in an organized way, is very important. 

Mr. CARNEY. I see my time has long expired. I appreciate the 

chairman for his forbearance and I will look at your White Papers, 

and I may call you and we can discuss it further. Thank you very 

much, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman and I thank our 

panelists. I think we have had a good discussion today, with a lot 

46 

of good ideas. I would just encourage the panel and the groups that 

you recommend that we are—the next step in this process is to 

begin to take some of these ideas and to put them into some sort 

of an action plan, which would probably be some legislative reform. 

If you have any other ideas—we don’t want to just limit it to the 

ones that you had today. As this debate begins to unfold, if you 

have thoughts and ideas, we certainly would welcome them. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

And without objection, this hearing is adjourned. 

[Whereupon, at 2:20 p.m., the hearing was adjourned.] 

(47) 

A P P E N D I X 

April 10, 2013 

48 


80876.001
49 


80876.002
50 


80876.003
51 


80876.004
52 


80876.005
53 


80876.006
54 


80876.007
55 


80876.008
56 


80876.009
57 


80876.010
58 


80876.011
59 


80876.012
60 


80876.013
61 


80876.014
62 


80876.015
63 


80876.016
64 


80876.017
65 


80876.018
66 


80876.019
67 


80876.020
68 


80876.021
69 


80876.022
70 


80876.023
71 


80876.024
72 


80876.025
73 


80876.026
74 


80876.027
75 


80876.028
76 


80876.029
77 


80876.030
78 


80876.031
79 


80876.032
80 


80876.033
81 


80876.034
82 


80876.035
83 


80876.036
84 


80876.037
85 


80876.038
86 


80876.039
87 


80876.040
88 


80876.041
89 


80876.042
90 


80876.043
91 


80876.044
92 


80876.045
93 


80876.046
94 


80876.047
95 


80876.048
96 


80876.049
97 


80876.050
98 


80876.051
99 


80876.052
100 


80876.053
101 


80876.054
102 


80876.055
103 


80876.056
104 


80876.057
105 


80876.058
106 


80876.059
107 


80876.060
108 


80876.061
109 


80876.062
110 


80876.063
111 


80876.064
112 


80876.065
113 


80876.066
114 


80876.067
115 


80876.068
116 


80876.069
117 


80876.070
118 


80876.071
119 


80876.072
120 


80876.073
121 


80876.074
122 


80876.075
123 


80876.076
124 


80876.077
125 


80876.078
126 


80876.079
127 


80876.080
128 


80876.081