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CNBC EXCLUSIVE: CNBC TRANSCRIPT: CNBC'S MARIA BARTIROMO INTERVIEWS JAMES LOCKHART, DIRECTOR, FEDERAL HOUSING FINANCE AGENCY TODAY ON CNBC'S "CLOSING BELL"

WHEN: Today, March 9th

WHERE: CNBC's "Closing Bell"

Following is the unofficial transcript of a CNBC interview with Federal Finance Director James Lockhart today on CNBC's "Closing Bell."

All references must be sourced to CNBC.

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MARIA BARTIROMO: WHILE THE ECONOMIC CRISIS IS MUCH MORE THAN JUST A HOUSING PROBLEM, STABILIZING THE MARKET WILL PLAY A CRITICAL ROLE IN REVIVING THE ECONOMY. PRESIDENT OBAMA AND HIS TEAM HAVE PUT THEIR PLAN ON THE TABLE. IN A CNBC EXCLUSIVE, I'M JOINED BY ONE OF WASHINGTON'S KEY PLAYERS WHO WILL HELP IMPLEMENT THAT PLAN. HE'S JAMES LOCKHART DIRECTOR OF THE FEDERAL HOUSING FINANCE AGENCY. MR. LOCKHART NICE TO HAVE YOU ON THE PROGRAM.

JAMES LOCKHART: THANK YOU FOR HAVING ME.

BARTIROMO: GOOD TO SEE YOU. PEOPLE REALLY WANT TO KNOW HOW THIS MORTGAGE MODIFICATION PLAN FIRST OFF WILL WORK. TELL WHAT YOU SEE IN TERMS OF YOUR BIGGEST JOB IN IMPLEMENTING THIS.

LOCKHART: THE IMPORTANT THING IS REALLY TO GET THE MESSAGE OUT TO THE PEOPLE THAT HAVE THESE MORTGAGES, THAT THEY SHOULD CONTACT THEIR SERVICER AND TRY TO GET THEM MODIFIED. WHAT WILL HAPPEN IS THEY WILL BE ABLE TO LOWER THEIR MONTHLY PAYMENT TO ONLY 31% OF THEIR GROSS INCOME. AND THAT SHOULD HELP AN AWFUL LOT OF PEOPLE. WE ESTIMATE 4 TO 5 MILLION COULD BE HELPED BY THE MORTGAGE MODIFICATIONS ALONE.

BARTIROMO: YOU'RE TALKING ABOUT 55 MILLION MORTGAGES IN THIS COUNTRY. TELL WHAT THE GOAL IS. WHAT WOULD YOU LIKE TO SEE HAPPEN IN TERMS OF STABILIZING THE MARKET.

LOCKHART: WELL, WE REALLY WANT TO PREVENT FORECLOSURES. THAT'S WHAT IT'S ALL ABOUT. SO THERE ARE REALLY TWO PROGRAMS. THE LOAN MODIFICATION ONE AND THEN ALSO FANNIE AND FREDDIE ARE GOING TO DO REFINANCINGS AND THAT MIGHT BE ANOTHER 4 MILLION OR SO AS WELL. SO THE IDEA IS TO GTE PEOPLE'S MONTHLY PAYMENTS DOWN TO WHERE THEY CAN AFFORD IT AND PREVENT FORECLOSURES. AND THAT'S REALLY THE KEY GOAL HERE. TO KEEP PEOPLE IN THEIR HOUSES.

BARTIROMO: WELL WHAT ABOUT THOSE PEOPLE. WHEN YOU SEE A FORECLOSURE HISTORY OF A PERSON WHO DEFAULTS, THAT HAPPENS AGAIN AND AGAIN. SO WILL THIS PROGRAM GET RIGHT AT THOSE PEOPLE WHO KEEP DEFAULTING FROM TRIPPING UP. THINKING THAT PERHAPS THEY CAN GET THROUGH AND THEN THEY DEFAULT AGAIN.

LOCKHART: WELL IT WILL HELP THEM BUT I THINK EVEN MORE IMPORTANTLY IT WILL HELP THE PEOPLE THAT ARE ON THE EDGE NOW AND PREVENT THEM FROM GOING THROUGH THE PROCESS OF DEFAULTING AND BEING LATE ON THEIR PAYMENTS AND KEEP THEIR CREDIT RECORD BETTER. WE REALLY NEED TO GET TO THESE PEOPLE AND LOWER THEIR MONTHLY PAYMENTS SO THEY CAN AFFORD TO STAY IN THEIR HOUSES. IT WILL HELP THEM, IT WILL HELP THEIR NEIGHBORHOODS.

BARTIROMO: WHAT ABOUT THE CRAMDOWN EFFECT? THE LENDERS ARE SAYING, LOOK, THIS REALLY PUSHES YOU INTO A CORNER AND YOU'RE LETTING THE BANKRUPTCY JUDGE DECIDE SOME KEY ISSUES HERE. TELL ME YOUR THOUGHTS ON THE CRAMDOWNS.

LOCKHART: WELL WE'RE HOPING THAT THIS LOAN MODIFICATION PROGRAM AND THE REFINANCING REALLY ELIMINATES THE NEED FOR THIS BANKRUPTCY CRAMDOWN. IF WE CAN GET PEOPLE MODIFIED BEFORE THEY GO TO BANKRUPTCY COURT, IT WILL BE SO MUCH BETTER. SO MY POINT OF VIEW IS WE NEED TO ENCOURAGE PEOPLE TO GO TO THEIR SERVICERS, GET THEIR MORTGAGE PAYMENTS LOWERED. AND THE GOVERNMENT IS GOING TO SUBSIDIZE A MAJOR PORTION OF THAT, ALMOST HALF OF THE LOWERING OF THAT MORTGAGE PAYMENT.

BARTIROMO: WHO'S ELIGIBLE?

LOCKHART: WELL, FOR THE MORTGAGE MODIFICATION PROGRAM, IF YOU'RE HAVING SERIOUS DIFFICULTY MAKING YOUR MORTGAGE - EVEN IF YOU'RE MAKING YOUR MORTGAGE PAYMENTS - YOU'RE ELIGIBLE AND YOU SHOULD CONTACT YOUR SERVICER. IF YOU'RE LATE IN YOUR PAYMENTS YOU'RE DEFINITELY ELIGIBLE. IN THE REFINANCING PROGRAM, WHICH IS DIFFERENT - AND THAT'S ANYBODY THAT HAS A MORTGAGE THAT'S OWNED BY FREDDIE AND FANNIE, YOU HAVE BEEN CURRENT ON YOUR MORTGAGE, BUT THEY'LL REFINANCE A MORTGAGE EVEN IF YOUR LOAN TO VALUE IS ABOVE 100%. SO THAT EVEN IF YOU OWE MORE ON YOUR MORTGAGE THAN YOUR HOUSE IS WORTH TODAY, THAT WILL GO UP TO 105% AND IT WILL ALLOW PEOPLE TO REFINANCE THEIR MORTGAGE AND TAKE ADVANTAGE OF THESE LOWER RATES.

BARTIROMO: HAVE WE SEEN ANY IMPROVEMENT SO FAR? A LOT OF PEOPLE TALK ABOUT - IT'S NOT JUST THE SUBPRIME BORROWERS WHO ARE REALLY UNDER WATER BUT YOU'VE JUMBO MORTGAGES OUT THERE. THOSE ARE THE PEOPLE THAT ARE INCREASINGLY DEFAULTING AND FACING FORECLOSURE WHICH IS PRETTY INTERESTING.

LOCKHART: WELL, YES, IT STARTED OUT IN THE SUBPRIME MARKET BUT IT'S REALLY SPREAD. AND THE JUMBO MARKET IS IN THOSE HIGH COST STATES AND THOSE ARE THE ONES THAT HAVING THE MOST PROBLEMS, LIKE CALIFORNIA, ARIZONA, NEVADA, FLORIDA, AND SO WE NEED TO STABILIZE THE MARKET NOT ONLY FOR PEOPLE THAT ARE SUBPRIME AND CONFIRMING BUT ALSO FOR THE JUMBOS.

BARTIROMO: CLEARLY WE'RE IN A TOUGH ECONOMIC PERIOD. WE HAVE ANOTHER 600,000 PLUS JOBS CUT OVER THE LAST MONTH. HOW LONG DO YOU BELIEVE THIS IS GOING TO TAKE TO PUT SOME KIND OF STABILIZATION INTO THE HOUSING MARKET?

LOCKHART: I WISH I KNEW. MY HOPE IS THAT WE CAN START TO SLOW DOWN THAT FALL IN HOUSE PRICES OVER THE NEXT - BY THE END OF THIS YEAR. AND WE'LL START THEN SLOWLY COMING OUT OF OUT. WHAT WE NEED TO DO IS TO GET PEOPLE TO STAY IN THEIR HOUSES, GET THEIR LOANS MODIFIED, THEIR INTEREST RATES REDUCED AND THEN WE NEED TO GET BUYERS THAT HAVE BEEN SITTING ON THE SIDELINE FOR THE LAST COUPLE OF YEARS TO THINK ABOUT BUYING HOUSES AGAIN. AND WE'RE AT AN ALL-TIME AFFORDABILITY LEVELS NOW. MORTGAGE RATES ARE DOWN AND THAT'S REALLY GOOD. AND HOUSING PRICES MAKE IT THAT MUCH MORE AFFORDABLE FOR PEOPLE.

BARTIROMO: LET ME ASK YOU ABOUT ONE OF THE ISSUES OF THE DAY. THE NEWS HEADLINES OF THE DAY LAST WEEK. THE CEO OF FREDDIE MAC RESIGNED. REPORTS WERE THAT HE WAS FRUSTRATED OF HAVING TO CHECK IN WITH YOUR OFFICE BEFORE TAKING ANY ACTION. WHAT WAS THE TENSION ABOUT?

LOCKHART: WELL I THINK RUNNING A COMPANY IN WASHINGTON IS VERY DIFFERENT THAN RUNNING A COMPANY ANYWHERE ELSE BACUASE YOU HAVE THE MASTERS OF THE PRESS, YOU HAVE CONGRESS, YOU'VE GOT THE ADMINISTRATION. AND IT TAKES PEOPLE WITH EXPERIENCE TO DO THAT, AND HE WAS DOING A GOOD JOB AT RUNNING FREDDIE AND I REALLY ENJOYED WORKING WITH HIM, BUT THERE WERE FRUSTRATIONS AS WE GO FORWARD. BUT I THINK THE KEY THING IS WHAT WE NEED TO CONTINUE TO DO, WHAT WE'RE DOING NOW WHICH IS THESE LOAN MODIFICATIONS.

BARTIROMO: WILL YOU EVER SEE FRANNIE & FREDDIE SORT OF QUASI-GOVERNMENT OWNED/QUASI-PUBLIC OWNED AGAIN OR IS THAT A THING OF THE PAST?

LOCKHART: WELL I THINK COMING OUT OF THIS AS WE GET OUT OF CONSERVATORSHIP, WE HAVE TO LOOK AT THE FULL RANGE OF ALTERNATIVES, FROM PRIVATE OWNERSHIP TO REVISED GSE STRUCTURED GOVERNMENT SPONSOR, ENTERPRISE STRUCTURE, THERE'S ALSO THE POSSIBILITY OF NATIONALIZATION WHICH FRANKLY I'M AGAINST. I REALLY THINK THERE'S A WAY, AND IT WOULD BE BETTER TO HAVE THEM IN THE PRIVATE SECTOR.

BARTIROMO: TELL ME WHO IS PAYING FOR THIS. AT THE END OF THE DAY, A LOT OF PEOPLE SAY YES, THE MODIFICATION PROGRAM IS SOUND, IT WORKS, BUT WHO IS GOING TO BE FOOTING THE BILL FOR THESE MODIFYING OF THE MORTGAGES AND CAN WE AFFORD THIS AS A COUNTRY?

LOCKHART: WELL, MOST OF THE MONEY IS COMING OUT OF THE TARP PROGRAM THAT WAS APPROVED LAST YEAR BY CONGRESS AND ABOUT $50 BILLION OF THAT $700 BILLION WILL COME FROM THAT PROGRAM. AND I THINK WE CAN AFFORD IT BECAUSE IF WE DON'T, HOUSING PRICES WILL CONTINUE TO FALL, NEIGHBORHOODS WILL CONTINUE TO DETERIORATE, SO EVEN THOUGH YOU MAY NOT BE GETTING A MORTGAGE MODIFIED, IF YOU OWN A HOUSE IT WILL BE BETTER FOR YOU IF HOUSING PRICES STABILIZE.

BARTIROMO: BUT THE MODIFICATIONS NEED TO HAPPEN IN ORDER TO REALLY SEE A FLOOR IN FORECLOSURES.

LOCKHART: THAT'S EXACTLY RIGHT. WE REALLY NEED TO ROLL OUT THIS PROGRAM AS QUICKLY AS WE CAN, FANNIE & FREDDIE ARE GOING TO HELP THE PRIVATE SECTOR DO THAT AND THEY'RE GOING TO BE WORKING WITH SERVICERS NOT ONLY THEIR OWN SERVICERS BUT HTOSE THAT SERVICE OTHER MORTGAGES.

BARTIROMO: LIER LOANS IS ONE THE ISSUES THAT REALLY GET PEOPLE ENRAGED BECAUSE, THE APPLICANTS DIDN'T HAVE A JOB, THEY SAID THEY HAD ALL THESE CREDENTIALS AND THEN THEY TOOK OUT A MORTGAGE ANYWAY. SO HOW DO YOU GET AT THAT GROUP AND TRY TO MAKE A CHANGE IN TERMS OF THESE MODIFICATIONS?

LOCKHART: WELL, SOME PEOPLE JUST CAN'T AFFORD A HOUSE AND SHOULDN'T HAVE A HOUSE AND THERE'S GOING TO BE SOME FORECLOSURES ON SOME PEOPLE THAT REALLY DON'T HAVE A JOB, THEY CAN'T AFFORD TO MAKE MONTHLY PAYMENTS. WHAT WE'RE AIMING AT IS THOSE PEOPLE THAT ARE SCRIMPING BY THAT NEED THEIR PAYMENTS REDUCED SO THAT THEY CAN STAY IN THE HOUSE.

BARTIROMO: AND HOW SIGNIFICANT WILL THAT REDUCTION IN PAYMENTS BE?

LOCKHART: IT COULD BE VERY SIGNIFICANT. SOME PEOPLE ARE PAYING 50% OF THEIR MONTHLY INCOME IN HOUSING AND IT COULD BE REDUCED TO 31%, SO THAT'S A VERY BIG REDCUCTION THAT COULD HAPPEN. THE INTEREST RATES COULD BE REDUCED TO 2%,THEY COULD EXTEND THE MATURITY TO 40 YEARS, THEY CAN FORGIVE PRINCIPLE, THEY ACTUALLY CAN FOREBEAR ON PRINCIPLE, SO THERE'S A LOT OF TOOLS. AND THE GOVERNMENT IS GOING TO SUBSIDIZE HALF THE COST BETWEEN THE 38% AND 31% REDUCTION.

BARTIROMO: IS THERE ANYTHING MORE THAT NEEDS TO BE DONE IN YOUR VIEW AWAY FROM THESE PLANS?

LOCKHART: WELL THERE CERTAINLY ARE OTHER THINGS THAT NEED TO BE DONE IN THE FINANCIAL SERVICES AREA. I'M ACTUALLY ON THE TARP OVERSIGHT BOARD AND WE CONTINUE TO NEED TO DEVELOP PROGRAMS TO HELP FINANCIAL INSTITUTIONS RECOVER. I THINK THE FIRST PART OF TARP WAS RIGHT ON, THAT WE HAD TO GET CAPITAL TO THOSE BANKS AND NOW WE'VE GOT TO LOOK AT THOSE TROUBLED ASSETS TO FIGURE OUT WHAT ELSE WE CAN DO.

BARTIROMO: PERHAPS THE GOVERNMENT NEEDS TO BUY THOSE TROUBLED ASSETS?

LOCKHART: BUY THEM OR INSURE THEM.

BARTIROMO: MR. LOCKHART, GOOD TO HAVE YOU ON THE PROGRAM.





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