Prepared Remarks for Secretary of Housing and Urban Development Shaun Donovan at the Mortgage Bankers Association National Policy Conference

Washington, D.C.
Wednesday, April 29th, 2009

Thank you so much. It's great to be here with the Mortgage Bankers Association for your National Policy Conference. Thanks so much to John Courson for the introduction. Earlier this week I had the opportunity to meet with John to discuss the challenges facing the mortgage industry and how HUD and MBA can work together to stabilize the market and get our country's economy back on solid ground.

I come before you this evening at a historically unprecedented moment. As you're all painfully aware, our economy is in crisis: unemployment is high, incomes are falling, and home foreclosures are greater than at any time since the Great Depression. The Obama Administration has responded to this crisis with a comprehensive and multifaceted program to stimulate our economy and revive our housing markets: a recovery package to create or preserve 3-4 million jobs, a comprehensive program to stabilize financial markets, lower mortgage interest rates and unfreeze credit markets; and new efforts to help homeowners refinance their mortgages, avert foreclosures, stabilize hard hit neighborhoods and end the downward pressure on housing crisis.

We at HUD have also taken immediate action to do everything possible to right the crisis and keep American families in their homes. Today I'd like to share with you HUD's work on the President's housing plan, Making Home Affordable, and our new vision for the Federal Housing Administration: its viability and its contribution to solving the economic crisis and stabilizing the mortgage market. With new leadership in Washington and new leadership and vision at HUD, along with engagement and collaboration from partners like you, I know that we can put our economy and housing market back on solid ground and build a foundation to prevent this kind of crisis from happening again.

Let me talk about Making Home Affordable, the President's housing plan, and how it's been working to support a recovery in the housing market so far.

Making Home Affordable will help 7 to 9 million homeowners stay in their homes. It will target working homeowners who have made every possible effort to stay current on their mortgage payments. Making Home Affordable helps American homeowners in three ways. First, we are protecting housing opportunities for all Americans by taking action Administration-wide to reduce interest rates, which are now at historic lows. Second, we will assist 4 to 5 million homeowners who can't otherwise take advantage of today's historically low mortgage interest rates. Lastly, we have committed up to $75 billion to help an additional 3 to 4 million homeowners who are at risk of foreclosure modify their unaffordable mortgages into affordable ones.

Since the plan was put into place, rates on 30-year mortgages have dropped to an all-time low of 4.78% and refinancing applications are up to 88%. Fannie Mae refinanced $77 billion of mortgages in March, nearly twice the February amount, and their highest volume in one month since 2003. Over 500,000 borrowers have accessed Fannie Mae online to learn about refinancing and Fannie Mae is now processing applications to complete refinancing for eligible borrowers. And the Making Home Affordable website has received 11.2 million page views.

So far, we have received 11 formal commitments from servicers, and with our new website administered by Fannie Mae,, servicers can sign up as an approved participating servicer for the modification initiative and access all the necessary tools and resources necessary for the adoption and implementation of Making Home Affordable.

Yesterday, the Treasury and HUD announced a Second Lien Program will work in tandem with first lien modifications offered under the Home Affordable Modification Program to deliver a comprehensive affordability solution for struggling borrowers. Up to 50 percent of at-risk mortgages have second liens, and many properties in foreclosure have more than one lien. Under the Second Lien Program, when a Home Affordable Modification is initiated on a first lien, servicers participating in the Second Lien Program will automatically reduce payments on the associated second lien according to a pre-set protocol. Alternatively, servicers will have the option to extinguish the second lien in return for a lump sum payment under a pre-set formula determined by Treasury.

Yesterday, we also took steps to incorporate FHA's Hope for Homeowners into Making Home Affordable. Under the changes, when evaluating borrowers for a Home Affordable Modification, servicers will be required to determine eligibility for a Hope for Homeowners refinancing. Where Hope for Homeowners proves to be viable, the servicer must offer this option to the borrower. To ensure proper alignment of incentives, servicers and lenders will receive pay-for-success payments for Hope for Homeowners refinancing similar to those offered for Home Affordable Modifications.

In addition, the Obama Administration is seeking legislative fixes to the HOPE 4 Homeowners plan to strengthen it and help it work better for American families - specifically lowering costs to consumers, easing restrictive eligibility requirements, and making the program easier for lenders to offer. The original Hope 4 Homeowners Program is not working. Making H4H work better is an important element of the President's housing program, and there are ongoing discussions with a variety of interest parties on how to improve the program.

I know that as an organization, you all are very concerned about the viability of FHA. No part of HUD is more central and important to our national effort to promote affordable homeownership than the Federal Housing Administration, and I am committed to making FHA as responsive to market demands as it was when it was founded.

Today FHA continues to play a countercyclical role - serving as a backstop to the private mortgage market. FHA stays active in volatile and declining markets, continuing to make mortgage credit available to borrowers, even when private mortgage providers are withdrawing from the market. During difficult times, it is critically important to have an entity like FHA play this role - offering families access to near-prime rate financing.

Current market conditions highlight the critical role of the federal government in keeping mortgage credit flowing. With the collapse of global credit markets, FHA, Fannie Mae and Freddie Mac must continue to work with strong and well managed private sector entities to expand access to mortgage credit in the market.

In particular, FHA's role has grown substantially from 3 percent of lending activity by dollar volume in 2006 to approximately 30 percent of all mortgages originated today. At HUD, we must continue efforts to identify both the existing strengths and weaknesses of FHA, to work with Congress to make sure that FHA has the right program mix and pricing structure, is actuarially sound, and the organizational infrastructure to continue to expand homeownership opportunities to those families traditionally not well served by the private market place.

Last week, President Obama's nominee to be the Assistant Secretary for Housing/ Federal Housing Commissioner, David Stevens, went before the Senate for his confirmation hearings.

I believe that Dave is one of the best in the mortgage business with experience ranging from mortgage originations, to secondary markets, to managing a national real estate firm. Dave and I will work closely together to diagnose and address the challenges now facing FHA. Dave brings a hands-on systems approach to mortgage origination, and is anxious to see first- hand the status of FHA's systems and programs and to quickly put in place process and technology improvements in all facets of FHA's operations. Dave will be a steady hand in helping to manage FHA through these challenging times. He will also help FHA become an important partner with you in driving energy efficiency and achieving savings that will make it possible for average American families to weatherize their homes.

Finally, the recent mortgage market meltdown has provided ample evidence that we must work to rethink each and every aspect of the nation's housing finance system. Building on its historic mission, I am committed to ensuring that FHA continues to provide liquidity and stability to the mortgage market, while at the same time developing the new products and programs that continue to expand access to homeownership to lower-income and lower-wealth households not well served by the private market.

FHA exists to serve American homeownership needs, particularly in times of economic crisis, and that's why we at HUD will work with our industry partners like you to revitalize FHA and make it a stronger, more flexible partner to you and the American people as we work to respond to the economic crisis.

Clearly, the majority of our work around the housing crisis to date has been focused on the effect of declining house prices on the viability of the single-family market and our work to keep homeowners in their homes, but the same forces are at work in the multi-family market.

When I was at HUD before, I worked very closely with mortgage bankers involved in the multi-family housing finance, development, and preservation and I know firsthand both the challenges and the opportunities in the multi-family market. While Making Home Affordable focuses on single-family housing and stabilizing the single-family market, I fully recognize that multifamily issues need to be addressed.

For example, together HUD and Treasury, along with GSE's are now hard at work to provide assistance to struggling state and local housing finance agencies so that they can once again play a significant role in financing affordable housing.

Work on the multi-family side has to be - and will be - a key component of HUD's transformation initiative in the months and years to come. I know that many of you in this room have significant interest in working with the FHA on multi-family finance and we want to be a good partner for you. We want to make sure that you have timely information from which to base your decisions on, and we want to make sure that HUD engages appropriately on property preservation, which is so critical. Every time we can avoid the difficulty and cost of building and affordable multi-family development and preserve it, we should.

Of course, another legislative issue facing Congress right now relates to bankruptcy reform. Support of comprehensive bankruptcy reform is another part of the President's plan to address the housing crisis. We have heard your position on bankruptcy reform - and I heard it first hand from John Courson yesterday - and I know that we have fundamental disagreements on this issue. However, there are clearly many areas that we do agree on and I look forward to furthering our discourse on all areas relating to the housing crisis and our Administration response.

So while the President and all federal agencies, including HUD, have taken immediate actions to address the economic and housing crises, we are also looking ahead and planning for the future so that our country never again has to face an economic crisis like this.

Obviously, as we look forward into the future, we must examine all of the factors in the mortgage industry that led us into this crisis in the first place. We must devise and put into place sensible structures so that we don't repeat the mistakes of the past.

While we are without a doubt in a crisis, I know that together we can be partners in finding and implementing solutions that will help American families struggling to stay in their homes and thereby help you. We rise and fall together and together I know that we can meet our nation's challenges and put our country's economy back on solid ground.

Thank you.


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