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38 TREASURY OFFICIAL SAYS ADMINISTRATION 'READY, WILLING, AND ABLE' TO TALK HOUSING FINANCE REFORM Speaking at the National Council of State Housing Agencies Legislative Conference in early March, the Department of U.S. Depart- ment of Treasury Counselor to the Secretary for Housing Finance Policy, Dr. Michael Steg- man, said that the Obama administration is "ready, willing, and able" to talk housing finance reform, which has been a hot-button topic in recent months as Fannie Mae and Freddie Mac remain in conservatorship of the Federal Housing Finance Agency. "e administration remains ready, willing, and able to work in good faith with members of both parties to complete this important but unfinished piece of financial reform," Stegman said. "As memories of the financial crisis fade, we cannot become complacent. e best time to act is when the housing market is well along the path to recovery and credit markets are normalizing, not on the precipice of a new economic shock when there is little time to be thoughtful." While Stegman's remarks on the subject of housing finance reform may seem optimistic, many mortgage industry professionals are not convinced. On the same morning that Stegman delivered his speech at the NCSHA's conference, the Collingwood Group and the Five Star Insti- tute released their March 2015 Mortgage Industry Outlook report containing a survey in which 60 percent of mortgage industry professionals polled said there was "zero chance" of housing finance reform happening under the Obama adminis- tration, which ends in January 2017. About 34 percent of respondents in that survey said they believed there was less than a 25 percent chance of housing finance reform taking place under Obama's watch. Stegman said the administration would not end the conservatorship of the GSEs without a viable alternative that provides that elusive bal- ance between eliminating taxpayer risk while still allowing credit access. "I know that many of you want to know where we are on housing finance reform," Steg- man said. "On this subject, let me be clear: e administration stands by our belief that the only way to responsibly end the conservatorship of Fannie Mae and Freddie Mac is through legisla- tion that puts in place a sustainable housing fi- nance system that has private capital at risk ahead of taxpayers, while preserving access to mortgage credit during severe downturns." Stegman also discussed the Hardest Hit Fund, which the government created in response to the financial crisis, and stated that to date the fund has provided more than $3.8 billion for 70 programs to help approximately 227,000 homeowners in the communities that were hit the hardest by the recession. e mortgage market could have taken twice the default risk during the first three quarters of 2014 and remained well within the high standards set from 2001 to 2003, according to data released by the Urban Institute. An analysis of the Housing Finance Policy Center's Credit Availability Index (HCAI) by Wei Li and Laurie Goodman of the Urban Institute's Housing Finance Policy Center revealed that there was no change in the market's post-crisis overcorrection during the first three quarters of 2014. Rather, the study showed a reluctance on the part of lenders to accept any real borrower risk and a continued absence of loans with risky terms. e HCAI was first introduced by the Housing Finance Policy Center in December to measure the amount of default risk the mort- gage market takes on at origination for owner- occupied purchase loans and how much of the risk is due to either loan type or credit risk on the part of the borrower. Default risk is defined as the likelihood that a mortgage loan will go 90 days or more delinquent, with the understanding that not all loans that go 90 days delinquent will end up in foreclosure or liquidation. e latest HCAI analysis of the first three quarters of 2014 showed that 5 percent of all mortgages originated during that period were likely to default under conditions considered overall economic scenarios, while 6.4 percent of loans originated between 2010 and 2013 were likely to default when placed under the same economic conditions. e lower probability for default for loans originated in 2014 compared to those originated from 2010 to 2013 indicates a tighter credit box in 2014 compared to the three years prior. Compared with loans originated during 2001 and 2003, which was a time of balanced credit ac- cess and default risk, mortgage loans had a default probability of 12.4 percent under similar economic conditions that measured default probability for loans originated in 2014 and 2010 to 2013. When considering just borrower risk, the default likeli- hood for loans originated from 2001 to 2003 fell to 9.1 percent, while 3.4 percent of the default risk for loans during that time was attributable to risky products. Li and Goodman concluded that due to the complete absence of risky products in today's mortgage market, doubling the default risk on loans originated in 2014 (5 percent) would still put risk well within the cautious 2001 to 2003 standards.

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