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Opening Statement as Submitted to the U.S. House Committee on Financial Services
Daniel H. Mudd
President and CEO, Fannie Mae
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Testimony by Daniel H. Mudd Before the U.S. House Committee on Financial Services (Opening Statement as Submitted)
Washington, DC
April 17,
2007
Right now, we're getting at least 15,000 applications for subprime refinancing coming into our system per month. Because we have been adhering to our own prudent standards throughout, even before our new enhancements, 80 percent got a "yes." Altogether, we estimate that about 1.5 million homeowners who face resetting ARMs and potential payment shock this year and next could be eligible for our loan options. Certainly, lenders may choose someone else to buy or securitize the loans, but 1.5 million would be eligible for our options; we think this will also help establish a benchmark in the market for safe loans. These are also good alternatives for first-time homebuyers as the riskier "affordability" loans dry up.
Third, we are working with our housing partners to help counsel future homeowners. We are focusing especially on those who are most vulnerable, or for those whom a product modification alone will not save the day. We have to help people know what to do well before payment shock hits, and to avoid making the wrong mortgage choice in the first place.
- For example, we are providing $5 million in grants this year alone to support a national foreclosure prevention initiative being managed by NeighborWorks of America and the Homeownership Preservation Foundation. Such nonprofit organizations join with local governments, other nonprofit organizations, borrowers and lenders to help families overcome obstacles that could result in the loss of their homes.
- We also are launching a "Know Your Mortgage" effort, providing lenders with fact sheets with easy-to-understand descriptions of mortgage terms in English and Spanish for use with borrowers.
- In addition, we are expanding distribution of our Home Counselor Online system to lenders, organizations and agencies. This web-based application is designed to help people understand the home-buying process, how to protect or fix their credit, what to demand and what to avoid. We provide this system, free, to over 2,000 counseling agencies, and we'd like more to have it.
Finally, as we help the subprime market through this turmoil, Fannie Mae will continue to support better lending guidelines. When banking regulators finalize the new guidelines regarding teaser ARMs, which should be soon, we will work with our industry partners to comply with them. From the start, we said we believed the best course of action would be to follow the regulatory process to avoid further disruption of the subprime market and the borrowers who depend on it. That's what we're going to do. John Dugan, the Comptroller of the Currency, said of the proposed guidance, "We really don't want to unduly restrict credit to credit-worthy borrowers where the market is willing to extend that credit." We agree, and we stand ready and willing to extend that credit in a prudent and sustainable manner.
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The actions I described today are first steps. Today and going forward, Fannie Mae can and will do more than our part to help lenders to protect homeowners, stabilize the subprime segment of the mortgage market, and keep affordable mortgage credit flowing to families who need it most. We look forward to working with this Committee and the Congress as we do.
Thank you, Chairman Frank and Ranking Member Bachus for giving me the opportunity to testify today.
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