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» VISIT US ONLINE @ DSNEWS.COM 77 According to Watt in a speech at the Women in Housing and Finance Public Policy Luncheon in late March, the FHFA is auctioning off NPLs with loss mitigation in mind: "Selling these seriously delinquent loans to new owners is a way to create a fresh start for loss mitigation purposes. Purchasers of these loans have a financial interest in working with borrowers to avoid foreclosure and to help borrowers re-perform on their mortgage. e new owners generally contract with specialty servicers that have extensive experience and better track records at offering loss mitigation solutions to seriously delinquent borrowers, and we believe they will be more likely to get better results. Given the impasse with the prior servicer, borrowers may be more likely to respond to outreach and loss mitigation solicitations by a new servicer using new techniques." NOT TO BE OUTDONE, THE REPUBLICANS ANSWERED. . . Wary of the many calls for change to agency NPL sales programs, the Republicans fired back in late March. Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, and Sen. Richard Shelby (R-Alabama), chairman of the Senate Banking Committee, wrote to Castro and Watt to voice concerns over potential changes that would "negatively impact the purpose of those programs and taxpayers alike." e lawmakers said they believe such changes should be "swiftly and categorically rejected." Hensarling and Shelby wrote that "Such calls are particularly inappropriate at a time when our country faces enormous fiscal challenges," citing an annual budget deficit expected to exceed $500 billion for the sixth time in eight years and a total public debt of more than $19.5 trillion. "Advocates of amending your NPL sales programs to establish beneficial classes of bidders—based on subjective special interests and not those of U.S. taxpayers—would violate the solemn responsibility that HUD and FHFA have as public stewards to minimize taxpayer losses on government-backed mortgages by maximizing their recoveries." In their letter, the two Republican lawmakers said campaigns that criticize the open and competitive NPL sales process are "based on a false notion that doing so is somehow contrary to the goal of 'neighborhood stabilization.'" ey contend that maintaining private market participation is essential to that goal because "the best outcome for taxpayers is always the best outcome for communities." Hensarling and Shelby cited a study released by the Urban Institute in January which stated that "e borrower outcomes are far better under the nonperforming loan sales than they would be without these programs." ey further pointed out a New York Times report from September 2015 which stated that private investors were more "creative and nimble" with banks with terms for delinquent borrowers. ey also noted that in the FHFA's recently released 2015 Scorecard Progress Report, the Agency said that "Sales of (NPLs) can improve outcomes for delinquent borrowers because the purchaser's financial interest is having borrowers re-perform on their loans and in avoiding foreclosure where possible (and) achieve a mutually beneficial outcome." For those loans on which foreclosure cannot be avoided, Hensarling and Shelby quoted Watt from a speech he made at a 2015 housing conference: "While NPL sales do not prevent foreclosures in every instance, we do expect NPL sales to produce better outcomes for borrowers, on the whole, than the status quo." Hensarling and Shelby encouraged both HUD and FHFA to continue to focus on private market participation "so that taxpayers and homeowners have the best chance at a successful future," adding that "a government guarantee on a mortgage is not and cannot be a license to inflict losses on NPLs on taxpayers." Both sides are now firmly engaged in the battle over whether the agency NPL sales programs should change or stay the same, and neither side appears to be willing to give an inch. Right now, the pressure is on the Democrats and housing advocates— while they have shown no signs of backing down, the agencies themselves have not given any indication that any changes to the NPL sales programs are forthcoming. COVER STORY INDUSTRY INSIGHT INDUSTRY INSIGHT

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