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40 | M R EP O RT FEATURE "I'm all about making sure that people who want to have the opportunity to put a roof over their head can do it, but ultimately, I think taxpayers have to be protected in the private sector." You've spoken in the past about why a commitment to not just homeownership, but responsible homeownership is critical to avoiding repeats of past mistakes. Could you expand on that? O ne of the programs I helped create after I left Wall Street was something called the Responsible Homeowner Reward Program. As I said earlier, home- ownership isn't necessarily a right; it's a privilege. There are a number of things that come along with that—the ability, obviously, to make the timely payments of principal and interest. If you can't, that just doesn't affect the homeowner, or the guarantor of the loan—it also affects the neighborhood. If there are too many defaults, it affects widespread swaths of our country, which we saw for the first time in 2008. Prior to 2008, there were some pockets of high-default rates and subsequent negative-equity situations. We saw it in pockets of the country where they would close, say, an Air Force base or other military facilities, or a large company moved out of state, and people suddenly don't have jobs. But starting in 2007 through 2010 is where we saw it on a wide- spread basis. Responsible homeownership is important. That's where I think the marriage of the public and private sectors, not in developing programs to make sure everybody gets a home, but in developing programs and opportunities so that people who do have the wherewithal, in a challenging environment, are allowed to do that, are permitted to do so. If it means some government assis- tance, as long as the taxpayer is protected, I'm okay with gov- ernment assistance. If it's private sector lending, or an increase in private sector lending. We have to keep in mind that a lot of these banks that shared in irresponsible lending practices, a lot of these banks now get their funding from the Fed. When you can borrow from the Fed window, and you have that luxury, you also have a responsibility. We've got different risk man- agement protocols out there to make sure that we're doing it. The one thing that we really have to keep an eye on, especially in this environment: even though we are seeing unemployment coming down again, it's not far down as much as we saw in the recent past, a couple of years ago. We're also seeing some challenged pockets in the country, like in my state of New Jersey, where large companies are leaving the state. We have to have an eye on not just what the borrower can afford today, but what industry that borrower is in, what company that borrower belongs to, whether that company may be looking, longer term, at moving out of a state. Risk management doesn't necessarily involve just a static opportunity of looking where the borrower sits today, but a longer-term view of our national economic scene, and then some state and local observations about where companies are moving. I'm all about making sure that people who want to have the opportu- nity to put a roof over their head can do it, but ultimately, I think taxpayers have to be protected in the private sector, from private sector lenders, and taxpayers have to be protected when the GSEs are involved in lending also. What does that standpoint look like from an affordable housing standpoint, when rents are also increasing, and many are struggling even to make those ends meet? W e've seen a lot of financial institutions that are taking a deep dive into owning and buying properties. I think some of the largest owners of housing over the course of the last decade have been Wall Street firms like BlackRock and others. Again, when financial institutions have the luxury of borrowing from the Fed, they also have the responsibil- ity of making sure that taxpayers are not just protected, but people who are renters are also protect- ed. It's a slippery slope when you talk about price gouging, because all things being equal, rents—and home prices to some degree—are a function of supply and demand. But I do think there is a responsi- bility to make sure that those who want to purchase a home, or want to rent a home, are able to do so. What we have now is, a lot of financial institutions are becoming landlords. I work with a number of folks who have left Wall Street and are now involved in working with funds that are buying up homes. This situation that we had previously, where we saw widespread defaults, it wasn't just homeowner defaults, but there were people who couldn't make their rental payments either. I think a lot of these risk manag- ers who have moved more into property management understand that. They work a lot closer with some of the renters, not just on the front end of making sure that they have the wherewithal to make the rental payments and looking deeper at references. They look deeper at the organizations, and documentation, but in those times where you may see some econom- ic difficulties pop up here or there. A lot of these risk managers are very focused on protecting and preserving their assets. What that might mean is, if there exists a situation where somebody may not be able to make their rental payment because they lost a job, or they took a job that pays them a lot less, it's better to figure out how to keep the rent roll going, how to keep the asset cash flowing positive, than it is to say, "You can't pay, you're out." There's a plus and a minus of having more financial institu- tions more involved in both the purchase market and the rental market. I just think they need to