• With: Gene Sperling, director of White House National Economic Council

    This is a rush transcript from "Your World," February 1, 2012. This copy may not be in its final form and may be updated.

    NEIL CAVUTO, HOST OF “YOUR WORLD”: Fair and balanced, Gene Sperling, he’s the director of the White House National Economic Council.

    Gene, first off, you think this plan the president proposes is the way to go. And I guess I am having trouble understanding how imposing fees that could go into the billions for banks helps lending.

    GENE SPERLING, DIRECTOR, WHITE HOUSE NATIONAL ECONOMIC COUNCIL: Well, let’s understand what the heart of the president’s proposal is.

    The heart of it is very simple. It’s saying that we should allow all responsible borrowers the chance to have streamlined refinancing, when we have historic low mortgage interest rates, and we have a lot of people who have made their payments, they have been responsible, but they are falling through the cracks because they didn’t get a GSE-backed loan or, oddly enough, sometimes because they had too much equity in their home, which makes no sense, or they are being -- and we are not allowing the kind of competition we need among the banks, so they are competing with homeowners to see who can give them the best deal, the best refinancing.

    That is the heart of this package. And it really should be quite uncontroversial at this time. This would be putting more money in the pockets of responsible homeowners. That it is good for the economy and it’s good for the housing market.

    CAVUTO: Maybe, Gene. And maybe your heart is in the right place, but we have been there, done that, tried that again and again and again, to at best mixed results. Right?

    SPERLING: Can I challenge you on that?

    CAVUTO: All these housing fixes, all these mortgage rewrites and reworks, what has it produced?

    SPERLING: Can I challenge you on that?

    This is really quite basic. Every American understands the basic notion that if you took out a mortgage at 7 percent and now you see mortgages are at 4 percent, or 4.25 percent, American would like to refinance. This is not about a big, complicated program. It’s about taking away barriers for typical American families who would like to refinance.

    And they hear that the government is taking away barriers that are leaving banks to shutting the door on them when they are trying to refinance, and they are taking away those barriers and making sure everyone is eligible.

    (CROSSTALK)

    CAVUTO: No, no, the idea looks good on the surface, Gene.

    (CROSSTALK)

    SPERLING: I really think this is the type of thing Democrats and Republicans should be able to agree to work on.

    CAVUTO: I agree. Refinance away. And it sounds good on paper.

    But you know so many of these mortgages are sold and then resold, and repackaged and sold again. So the original lender is long gone. So, the new investor comes in and said, wait a minute, why am I stuck with the refinancing costs of this borrower?

    SPERLING: Well, look, I think what we have tried to do is offer a guarantee so that there is -- there is an incentive for the lender not only to offer the refinancing, but also to create the competition that we want.

    (CROSSTALK)

    CAVUTO: Where is the incentive if he is paying more in fees? He might avoid it like the plague.

    SPERLING: I disagree with you about paying more in fees.

    First of all, let’s just be clear about something. If you are talking about the fact this program costs $5 billion to $10 billion and that the president, to protect the taxpayers, asked the very, very largest banks, banks -- financial institutions over $50 billion who are taking -- according to the degree of risk they’re taking, to pay a smaller fee, I don’t believe, nobody believes that those large financial institutions have no choice in how to deal with that, other than passing it off to the consumers.

    CAVUTO: But wouldn’t those banks retrench or try to recoup that capital in other areas? Wouldn’t they look even more askance at lending in the future or charge you other fees in other areas?

    If you are cynical of banks -- and, by the way, you have right to be in many cases -- aren’t they just going to find another way to zoom their customers?

    (CROSSTALK)

    SPERLING: But, Neil, what we are doing is exactly what you should support is we’re trying to create the competition so that every bank understands that they can offer a refinancing to a homeowner who is in the money, where it would make sense for them to do that.

    When you create that competition that is what is going to work.

    (CROSSTALK)

    CAVUTO: Yes, they’re paying for the privilege. They’re paying for the privilege.

    SPERLING: What doesn’t work right now is, without that competition, if I’m a bank, and you are -- you have a 7 percent mortgage and you are making payments to me, I don’t have any incentive to give you a new deal at 4 percent or 4.5 percent. I have that incentive if I think a competitor is going to take you away.

    CAVUTO: Yes, but I don’t see any incentive from prior efforts, Gene. That is what I’m saying, that what is to compel them -- looking at the history, what is to tell them this time it will succeed?

    (CROSSTALK)

    SPERLING: Well, first of all, I disagree with your assessment. I think that the things the president has done has helped lead to five million families having their mortgage modified. We have seen foreclosures go down, been cut in half.

    CAVUTO: More than half of them fail again.

    SPERLING: I don’t agree with that statistic.

    But, Neil, even if we wanted to come have a history debate, you know that what we are talking about here is a very simple thing. It is refinancing. It is something -- and let’s be honest.

    (CROSSTALK)

    CAVUTO: It is never simple, buddy. It’s never simple.