Transcript: Hearing Q&A with Rep. Keith Ellison (D-Minn.) & FHFA Director Edward DeMarco on government conservatorship of Fannie Mae & Freddie Mac

Edited by Jenny Jiang

Partial transcript of Q&A with Rep. Keith Ellison (D-Minn.) and Edward DeMarco, Acting Director of the Federal Housing Finance Agency, on the FHFA’s conservatorship of Fannie Mae and Freddie Mac. The House Committee on Financial Services Hearing was held on March 19, 2013:

Rep. Keith Ellison (D-Minn.):
…Mr. DeMarco, I just want to acknowledge that you did acknowledge the pain that millions of families have gone through. I think that’s important for you to note that because as we’re having this very civil conversation you know the reality of what people are going through not just individual families but whole neighborhoods.

Edward DeMarco:
Yes, sir. Absolutely.

Rep. Keith Ellison (D-Minn.):
…Now Fannie and Freddie are making some profit – when we – a few years ago we passed a bill establishing a National Housing Trust Fund and the law said that the proceeds would fund the National Housing Trust Fund that would help low-income families. Now, in my own district of Minneapolis, we have an occupancy rate of like 98% and we could really use the help that a National Housing Trust Fund for low-income rental housing could provide. When do you see the GSEs complying with the law they would fund the trust fund? Or do you?

Edward DeMarco:
Well, I would say we have been complying with the law from the beginning because the law clearly indicated that FHFA could make determinations based upon the financial conditions of the company not to contribute money to the funds and that’s been our ongoing determination.

Rep. Keith Ellison (D-Minn.):
Do you see that changing? What’s the future of funding that National Housing Trust Fund given the profitability?

Edward DeMarco:
Well, first of all, I want to make sure that this profitability is sustainable, Congressman, and I’m still mindful of the monies that are owed to the Treasury Department and that, frankly, these funds if they are not going to the trust fund are going back to the taxpayer and I’ve not thought about this recently so I would want to give your question a little bit more careful consideration.

Rep. Keith Ellison (D-Minn.):
I appreciate that and proceeds can go in different directions – some to pay back the taxpayers, some to fund the housing trust fund. The other thing is – I’ve talked to people about these difficulties as everybody on this committee have and you have, and one of the things that I would like to get your feedback on is this situation in which somebody perhaps can’t pay their mortgage – maybe they’ll lose their home in foreclosure and then maybe it’ll be sold back at market rate, which then – at least to my understanding – the previous occupant is not allowed to bid on. Are you familiar with this situation?

Edward DeMarco:
I am. That would be considered an unsafe and unsound practice to engage in that sort of activity, because then you’re not actually doing things at arm’s length.

Rep. Keith Ellison (D-Minn.):
Now, what if you were to…just treat the person as an arm’s length person? I mean, just look at their new financial situation, look at their ability to pay now? Because has been said by many, many people fall into foreclosure because of the market, because of a medical problem. Will you at least look at these cases on a case-by-case basis? Because there seems like there’s a blanket denial.

Edward DeMarco:
Well, I think I’d like to do better than that, Congressman. I think where we have gotten to is this: If a family gets in trouble on their mortgage, we now have processes and requirements in place for the servicer to be reaching out to that family from day one, and there’s a whole menu of options to help that family that are tailored to what the potential circumstances might be that have caused them to get into trouble. Is it a temporary issue regarding a medical condition where the person’s out of work for a few months? Is it unemployment? Is it a permanent reduction in income for that household? For each of those types of situations, we’ve got tailored responses.

But what we have done much better on now is that when this happens today that servicers know what to do and they’re supposed to be in contact with that borrower right away. I don’t want that borrower getting 90 or 120 days behind on their mortgage before they’ve actually been working with the servicer and have been offered the kind of assistance that you were talking [about]. Because fundamentally, Congressman, the way we’re going to most help people is to get them right away. When they first get into trouble, we want to be reaching out to them, and frankly we want them reaching out to us. This menu of opportunities here, including significant reduction in their mortgage payment, are now well-established. We’ve got these systems in place and are really want to be able to help people.

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