Secretary Cuomo's Speech to the
Mortgage Bankers Association Convention
October 19, 1998
SECRETARY CUOMO: Thank you. Thank you very much. Good morning to all of you, and congratulations on a truly great year.
First, I just had the pleasure of sitting here and watching you conduct a little business, on your way through the change of the Board, and the vote on the change of the Board, and Mark called it right from here, ayes and nos. Ayes had it, and no nos.
I said to myself, wouldn't it be great if Washington could work that way, and that's the way we did the budget? Not quite.
It's a pleasure to be here. Mark said that we had to change our schedule to be here, but we wouldn't have missed it for the world. What we have done together is really a special tribute to MBA, and for homeowners all across this nation, and I wanted to come and thank you for everything you�ve done, personally.
First, Mark Smith. He was very kind in my introduction, but I had the pleasure of working with Mark intensely this past year, and I can tell you this; we're going to see General Schwartzkopf later in the week. We've invited him to the convention.
In Mark Smith, you cannot have a better leader. What this man did is unbelievable. Always remembering what we had to accomplish, but also why we were in the fight in the first place. It is my pleasure and my honor to work with him.
A.J. Parkinson defines leadership, and I quote: �The vision to see a better future, the intelligence to chart the course, and the courage to lead the way.�
By that definition, Mark Smith is truly a leader, and Mark, I'd like to present you with the Secretary's Leadership Award for all you've done this past year, for the MBA and for the United States of America. Congratulations, Mark.
The bottom line � congratulations to you. We have the good news, bad news. The bad news is, you have one tough act to follow, Don.
The good news is President Clinton and I are more committed than ever to housing, and in working together with the MBA.
I want to thank the whole MBA staff, which was really phenomenal this year; Paul Reed, Mike Farrell, Bob O'Toole, Brad Johnson: they made it happen.
My team is here today. You're going to meet them later on. The new FHA Commissioner, who I believe � in a legacy of great, great professionals � is going to be the greatest FHA Commissioner in history. He's already started down that path, Bill Apgar, and you'll be seeing him later.
Patrick Eckman is here. Ira Peppercorn is here. The Deputy in FHA, Chuck Wehrwein is here, the Deputy who oversees all the multi-family. Bob Hickmott is here, who manages the relationships. So the whole team...and the team's working very well together.
It's amazing how fast and furious this past year has been, and it's hard to believe that it's already been a year since I was here last. When I came before you, I said � as you heard in the introduction � that we understood at FHA and HUD that we had to clean our own house first before we could really help you sell homes.
I told you that I was a homebuilder. I was the first HUD Secretary actually to have ever built homes. Surprising, but that's a fact, and that I had done financing. I understood the business from your perspective, and that I would work very hard to make FHA and H.U.D work more like a business, make government operate more like a business.
Sounded like an oxymoron to you, I'm sure. You were skeptical, and you have the right to be skeptical, because you have heard many promises from many people from Washington saying, don't worry: I'm going to clean up the Department. But you extended your hand and you gave me the benefit of the doubt, and we did great, great things together.
Let me begin this morning by reporting on what we did over this past year alone � by working together. We brought the FHA from a sixty�s bureaucracy to the doorstep of the 21st century. We brought home the best HUD budget in ten years. We passed a public housing bill that had been languishing for six years, and we did more than 1.1 million single-family home endorsements, the third best year in FHA's 60 year history. That's what we did, working together.
We outlined last year, in this speech, ten goals for FHA and HUD...that our partnership would have ten goals. Let me give you the countdown report on the ten major goals for FHA and HUD
Number ten, we said that we would bring FHA's system into the 21st century; that Fannie Mae and Freddie Mac, the PMI's, and the entire mortgage industry were using computers and the Internet, and that FHA was still using an adding machine and rotary phones; that we couldn't be competitive that way; that we had to change, and that we would move to an automated underwriting system. You have heard that from us before � and that it starts and then stops in the process � but we said we were going to get it done.
One year later, we have the Freddie Mac-FHA � I like to say FHA-Freddie Mac � FHA-Freddie Mac loan prospect or automated underwriting system up and running, and we have processed nearly 50,000 loans through that automated underwriting system.
We've cut the FHA application process from four weeks to two minutes through that system. Two minutes, and the best is yet to come.
We're now bringing the Freddie Mac-FHA system up to scale over this next year. We're also evaluating a joint venture with Fannie Mae as an automated underwriting system, also. But, clearly, by this time next year, paper applications at FHA will be a distant memory.
Number nine, I told you we had to take FHA and do what the private sector did 15, 20 years ago � go from a retail operation to a consolidated wholesale operation. We've been doing business out of 81 retail centers that we would �technologize,� and then go to four nationwide home ownership centers. We have done that.
Number eight, I told you that we had to get new expertise at the department. We have not had a significant infusion of new talent at HUD in over 20 years. We can't be competitive that way. We can't be vital that way. Twenty years, the entire industry has changed five times over in that period of time, and we had no new talent walking in the door.
We hired 130 new, what we call, Community Builders, who are the �leaners-on� for the client. They're in the Department. They run it. Today, we're going to get back to Washington, and announce the next 130. Next, we will have another class of 260. In total, just shy of 500 new Community Builders.
Then we're going to be hiring 200 new professionals � just in FHA � the best and the brightest minds from the private sector, coming into the FHA, who know this area from a business perspective, to infuse FHA with the perspective that you have every day being in the business world. Real people, real talent, like LaVonda Williams I met the other day from J.P. Morgan, private investment banker. She's now going to be in the FHA
With that talent, next year is even going to be better.
Number seven, I told you that I would simplify the downpayment process. In the legislation passed last week we move from numerous, complex downpayment formulas to a single, simple, consumer-friendly method. You no longer have to be an Einstein to figure out a downpayment at FHA One formula and two variables, the size of the loan and the average cost of the closing in the area, period. So simple, even the HUD Secretary can figure out this formula.
Number six. We said we would work to increase consumer confidence and reform the appraisal process. We said that a bad inspection hurts everyone, a bad appraisal hurts everyone, and the FHA and MBA are committed to the most honest, most fair, most open homebuying process in history, and that's what we're going to get.
Number five. We said we would make the FHA work for the middle-class, also, and that we would come up with a new product, which is a rehabilitation loan product. All the forecasters are saying that the big growth over the next few years is going to be in the rehabilitation area. We wanted to make sure FHA was poised for that growth with a rehabilitation product.
We designed the first one. It was in the legislation that was passed last week. We're so proud of it, we named it after a retiring Congressman, Joseph P. Kennedy Rehabilitation Loan Program for FHA We're proud of the Congressman, not to mention that he's also my brother-in-law, so it was very good for me at home that we named the program after him.
You wondered how Government worked, right?
We said that it can help with the middle-class � we would start the Officer Next Door Program, which is so simple, but so effective. We sell foreclosed FHA properties to police officers at a 50 percent discount. If the homes are in distressed communities, it�s a break for the police officer, and it also gets the police officer as a neighbor in some of the toughest communities in America � which is where you want them � which then fortifies the entire neighborhood and helps it go forward.
When we were here last year, we said, working together, we can do 1,000. Actually, we did 2,000, and President Clinton said we're going to do an additional 1,000 � for 3,000 police officers in FHA foreclosed homes in communities all across the nation.
Fourth of all, and you heard the President mention it on the tape, we said we would take all of these HUD housing subsidy programs and array them in a continuum so they all led to the best goal, the highest goal, which is home ownership.
We had the Section 8 housing program, one of the main housing programs in this nation, second to public housing, the largest single government subsidy program. The Section 8 program is about $8 billion per year � 8 billion, 1.2 million households.
How does the Section 8 program work, $8 billion of subsidy?
The person who gets Section 8 can have four, five, $600 a month, but they can only use it to rent.
We said, if you believe in home ownership, if it's one of the best industries for the nation, why wouldn't you allow a Section 8 voucher to be used for home ownership also?
If a person can pay a mortgage for the same amount or less than they could pay the rent, why not allow them? Why not take that $8 billion and make it a four-star home ownership? Why not take those 1.2 million families and say, �You don't have to be a renter forever, you can be an owner, and we're going to help you do it.�
In the legislation passed last week, the Section 8 program now has �empowerment vouchers� that can be used to rent, or pay a mortgage, and we will use those funds to help the home ownership industry in this nation.
Number three. We said that we couldn't make FHA work apart and aside from the entire department � and that all of HUD would have to be reformed and would have to change if FHA was going to � and the proof was in the pudding.
We did the hard management work. We did the downsizing, which in the case of HUD, was truly rightsizing. The productivity of HUD has actually gone up. Bi-partisan, Democrats and Republicans will tell you the same thing. The proof is in the pudding.
President Clinton put forth the best budget for HUD in ten years. Last week, the Congress gave us the best budget for HUD in ten years. It is fundamentally a new HUD and a better HUD
The second goal that we said we would work on was changing the relationship between HUD and the MBA, and HUD and the private sector housing group, by and large.
We're going to work to alleviate the government-private sector tension. I've said we're both trying to get to the same goal � let's see if we can't get there together...and we did that with extraordinary success, working with MBA. We also did it working with the National Association of Home Builders. We worked through an issue called barrier removals. The Home Builders are working on removing barriers to affordability, code and zoning requirements that increase the cost of housing.
We worked with the manufactured housing groups to change the relationship and ended ten years of tension that had been growing and building with the manufactured housing people.
We worked with the Realtors to figure out how to get to one America. As President Clinton would say: How to get to fair housing, but do it cooperatively, rather than at odds. We did all of that, with the MBA leading the way.
We will announce a new advertising campaign � that was done in concert with BBD&O. HUD will now have a major advertising campaign which is promoting home ownership, so we add our voice to your choir.
Goal number one, and what we said was going to be the cherry on the cake, was to raise the FHA loan limit. It made no sense whatsoever to have an FHA loan limit of $86,000 when the average home was selling for $100,000. It was ludicrous. We said we would not be intimidated by the opposition. We would not be daunted by the odds, and we would not quit.
Yes, it had been a fight that we lost before. We had tried the same fight for the past 4 years. We have lost every year, but we said this year, it will be different. This year, if we join arms, and we remember that we're fighting the good fight, and we both work, and we both work together, we can win this FHA loan limits battle, and last week, we did.
This new FHA will set the way for a new America. Instead of having 2,000 different FHA loan limits, 2,000 different ones, we'll have one-tenth the amount from 2,000 to just under 200. Rather than having loan limits across the nation that didn't really get you into the marketplace, we'll now have a maximum rate of up to $197,000.
More Americans will be able to afford a home because of what you did. You look at the numbers in San Francisco. The limit goes up by more than $27,000, from 170 to 197. Seattle, we raised it by more than 14,000, from 170 to 185. Nashville, the limit goes up by $47,000 to $170,000. In upstate Maine, the limit will go up more than 18 to $109,000.
This is a new reality. This is a new tool that you're provided with that can make a real difference, in your business and in the lives of American people. The bill was passed last week. The bill will be signed by President Clinton this week.
The moment after the bill is signed, Bill Apgar and the new FHA will issue a mortgagee letter, and those new limits will become effective immediately. So you can take those new limits back to your community, and get back to work, and use these limits to get more Americans in more American homes.
Those were the ten goals, and we were ten for ten. But the credit for those accomplishments truly goes to the people in this room. I credit Mark Smith. I credit Paul Reed. I credit Brad Johnson, Bob O'Toole for a phenomenal, phenomenal job.
I also credit each and every member of the MBA who took these issues to the American people, who used the grass roots mechanism, who spoke to their local legislators and spoke to their Congress people and said, let's do the right thing for America. Let's improve the housing industry. Let's raise the FHA loan limits and make FHA work. It's good business and it's good American policy, and you did it.
When they write the history books, 1998 will be the year that you...you fundamentally redesigned and reinvented the FHA, and you should be very proud of it, and I was proud to be your partner in that endeavor. Thank you.
I would like to be able to say that our work is all done, that we had a great year and we worked hard, and now we can lay back and then enjoy it. Unfortunately, that's not the case.
Last year was a great year, record-setting year, but you have to remember, we had the strongest economy in history at our back. If you look forward now, we might not have the same economic strength that we did, the same historic economic strength that we did. All the fundamentals remain the same, but now you see intermittent storm clouds on the horizon, seated in far away lands, but with powerful implications for our shores.
We're learning that a storm in Asia creates rain in America. What the storms are showing us is that we can no longer operate in isolation. We do live in a global world, and these economies are all globally interconnected.
Turbulence and change is going to be a feature of this global economy. Last week's sudden rise in mortgage rates was a signal of the kinds of change that we can no longer be surprised by. Indeed, we may very well have to expect them in the future.
The prudent business stance for the new millennium is to assume that change will be constant � but as in any challenge, there is also opportunity and the opportunity for us is to make the housing industry the anchor in the storm. The way a home provides stability and security to an individual and a family, let the housing industry provide stability to this nation's economy as we go through these next few years. We can do it just the way we did it last year.
How? First, by keeping the economy strong, overall. President Clinton has done a masterful job with this over the past six years. We have to keep going. We have to keep the fundamentals right. Namely, we have to keep the deficit down. We have to keep the deficit down. We now have the deficit at zero. Just remember what a phenomenal accomplishment that was.
When President Clinton took office, the deficit had 12 zeros. Now it is just zero. The deficit was almost a way of life, it had been with us for so long. We're actually now talking about a surplus in this economy.
Now I'm a Democrat, and I know you think all Democrats like to spend money, but I'm telling you, in these times, we have to be fiscally prudent. Don't think about spending the surplus. Don't think about spending the profit even before the ink has dried. Let's be fiscally intelligent, fiscally prudent. Let's keep that deficit down. That has to be the first order of business.
After that, in the housing industry, we have to find new markets. We discussed this last year. The new immigrants, in the best nation, are a new market for every person in this room.
A few blocks from this convention hall is a neighborhood called, Hillson, in Chicago. Mexican-Americans. Highest home ownership rate in history.
Brooklyn, New York, highest home ownership rate in history. These are new immigrants who come with resources, who come with energy, and they want to own. Different type of audience than we've dealt with in the past, but we have to reach out to them.
African-Americans, Latino-Americans, still far below the overall housing rate. African-Americans rate is 46. Hispanic rate is 44. Overall rate is 66. There is an opportunity to do good and to do well, at the same time. We have to do it.
We also have a new market in cities. The theory of concentric circles of development, we're moving out and out and out in suburban pattern of development, and the rural pattern. Let's start to look at those cities again. Maybe the best opportunity is in our rear-view mirror.
Cities are safer. They are stronger than ever before � there's a new breed of mayor who is very enlightened. We can build homes in the city. Faced with a two-hour commute or living in the city, people would rather live in the city.
There is a new market, a market that we haven't looked at for 25 years. We should take a second look at it. We have to increase consumer confidence in housing and we have to alleviate the anxiety. That's what we're trying to do with the Home Buyer Protection Program.
I was on the plane on the way here this morning. The news loop was showing a piece from Fleecing America, NBC, that showed how people got ripped off when they bought homes because the appraisals were bad.
Buying a home is the largest single purchase of most people's lives. The anxiety is very, very high. One of the main obstacles to not doing it is the fear that we're making a mistake. We have to alleviate that anxiety. We have to do it through improving and perfecting the inspection, the appraisal process, give people confidence. RESPA and TILA, a part of that, a fair, honest, understandable process for everyone.
No one wants to change a system in any way other than an open, full and fair system for everyone. We also have to continue the FHA reforms, and there are a couple of things that, legislatively, we can't have happen. One of them is increasing the fixed fees on Ginnie Mae.
This past year in the legislation � which has all good things � one frightening aspect was it prophesied an additional cost on Ginnie Mae, which would now, obviously, have to be passed along. A tax on Ginnie Mae is effectively a tax on home ownership. That is the last thing that we want to do now.
Ginnie Mae had one of the best years in history, $610 million would guarantee approximately 138 billion in new mortgage-backed securities. If it was a Fortune 100 company, Fortune 500, it would be number 100. Number 100 in a Fortune 500.
There is no safer investment than the full faith and credit of the United States Government. We're now talking about the economy being a little more circumspect, and the flight to quality.
Well, Ginnie Mae is the place to be in the flight for quality. To increase the fee of Ginnie Mae is to assault home ownership, and every person in this room should commit themselves to fighting that assault today. It cannot happen, it must not happen.
Those are some of the goals that we have to work on for next year. But if we have nearly the success that we had last year, I'm sure it would be a very, very good year, indeed.
Let me leave you with this thought: In getting ready for today � in fact, in Mark Smith's speech from last year � he spoke about mortgages, in one sense, as a commodity, but they're different than pork bellies or gold futures. There's something special about home mortgages. They're not just a finance vehicle.
I was at a reception over the weekend honoring Angelo Mozilo, Countrywide, and they ran a videotape, and he was talking about why he did what he did. He was talking about his parents as immigrants, and how they came to this country, and what owning their home meant, and pictures of people moving into the home. That joy, that expression they have on their face when they walk into that home and they know it's going to be theirs. It is priceless.
Sure, this is a business, but it is also a pleasure. When you do the job that you do � as a business � you are also doing a phenomenal job for this nation. That is why this is a unique coming together. It is the private sector, literally, making the nation a better place.
Home ownership is gold. There is nothing like home ownership � what it does for a family, what it does for a block, what it does for a community, what it does for a city. Nothing works like home ownership.
One of this nation's great secrets is that we are all owners. We are all vested, and we do that through the home ownership system. Nothing gives you that pride. Nothing gives you that commitment like owning your own home. It is the fundamental building block of this nation.
Yes, it's the cornerstone of the American economy, but it's also the touchstone of the American ideal. It is the greatest gift you can give. It sums up what the beauty of this nation is all about. It is the monument to opportunity in America.
They use a term, American Dream. It is not trite. It is true. It is the American Dream. It is the dream that drives people, around the planet, to try to get to this nation � and you make that dream come true. No one else does. You make that dream come true.
Let's keep doing it. Let's keep doing it together, and let's make more dreams a reality for more Americans in home ownership.
Thank you very much and God bless.
Content Archived: January 20, 2009