Remarks of Secretary Shaun Donovan at Housing Finance Conference

Cash Room, Treasury Department
Tuesday, August 17, 2010

Thank you, Tim - for your kind words, for your partnership and for your leadership during this very critical time for our economy. It's a pleasure to be with all of you today - as we take this step toward rebuilding our housing market, our communities and our country.

By having each of you here today as part of our ongoing public dialogue about the future of housing finance, let there be no doubt that the Obama Administration is committed to hearing the best ideas from all sides of the discussion.

As we start this important conference, I would like to share some brief thoughts about what I believe this discussion means - not to those of us in Washington, but to the families and businesses outside this room.

We'll hear a lot today about capital markets, G-fees, risk-based capital and securitization.

And make no mistake: getting each of these things right will be essential to a healthier housing finance system and building a stronger economy.

But I want to take a step back for just a moment so that we focus on what's really at stake here - what all of these decisions are, in the end, about.

Why This Discussion is Important to Families on Main Street

To build on what Tim just said, as we know all too well by now, housing finance runs through the core of our entire economy - for better and for worse.

Our residential housing market is one of the largest sectors in our economy, making housing finance important not just to housing, but to the American economy as a whole - and, indeed, to the global economy. Even today, after all we've been through, the US mortgage market remains the second largest securities market in the world.

Two thirds of Americans live in their own home, and even through this crisis, that home remains the largest asset for roughly half of those families. Homeownership has helped millions of families climb the ladder into the Middle Class, as it can be a valuable means to build wealth when homeowners have a mortgage they can afford with terms they understand.

The Broader Social Impact of Housing Finance

Of course, in the last several years, we have seen that ladder become a slide back out of the Middle Class, as families struggle with unmanageable mortgage payments and declining home prices - which is precisely why today's discussion is about so much more than finance.

Because when you choose a home, you don't just choose a home.

You choose a community - schools for your children, public safety, and access to jobs.

Today's discussion is critical to ensure that we have a balanced national housing policy in which Americans have real choices about where they want to live:

Choices for responsible homeownership, which means homes that people can afford, with easy-to-understand mortgage products that make good economic sense;

Choices that allow broad access to homeownership, including options for those families who have historically been shut out of these markets;

Choices for affordable rental housing, which gives those for whom homeownership may not be the best option access to quality housing without undue financial burden.

It's also about our ability to compete in the 21st century - so people can move to where the jobs are, and so that America's entrepreneurs and innovators can attract the best minds to their businesses.

It's about whether families can move to where the best schools are, so that their children are not stuck in isolated neighborhoods marked by disinvestment, with no choice, no opportunity and no hope.

Indeed, for the next generation, this discussion is about whether their futures will be determined by talent and a will to succeed - or by the zip code they grow up in.

A healthy and robust housing finance system is key to providing Americans with these choices.

But a healthy and robust finance system means many different things:

It means ensuring that people who are in a financial position to own a home have access to the capital they need to take that important step. After all, housing is one of the most expensive and important purchases a family will make, running on average five times the homeowner's annual income. So few will be able to take that step without a strong housing finance system there to provide the capital.

It means making sure that families are not set up to fail with mortgages that enable them to buy homes they simply cannot afford.

And it means ensuring that financing is available for those who will build the rental housing that we need to provide choices for those families for whom homeownership may not be the best option.

A Robust Housing Finance System

So, the question today isn't whether we need a healthier, more robust system of housing finance - it's how we get there.

And in answering that question, we need to ask ourselves what role the government should be playing in the housing market.

To be clear, the government's footprint in the housing market needs to be smaller than it is today - where FHA and the GSEs collectively guarantee over 90 percent of all mortgage loans.

We need to work to foster a strong but healthy market for private capital - to harness the vitality, innovation and creativity in our system in a responsible way, so that consumers and communities gain real benefits without the race to the bottom that we have seen in recent years. And that's exactly what Wall Street Reform has done.

Wall Street Reform has provided an important foundation from which to build - increasing oversight for the mortgage industry, requiring more skin in the game for originators of home loans, helping close loopholes that fed the housing crisis and, above all, establishing the strongest consumer financial protections in our country's history.

We today stand on that firmer foundation as we consider all that is at stake in housing finance - not only for Wall Street, but for the families and businesses on Main Street.

By engaging each of you-stakeholders and experts with broad knowledge and many perspectives-I know we will.

Thank you for joining us - and I look forward to this discussion.

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