PREPARED REMARKS FOR
ALPHONSO JACKSON, SECRETARY OF HOUSING AND URBAN DEVELOPMENT
DETROIT, MI
THURSDAY, NOVEMBER 15, 2007

Thank you, Engram Lloyd, for that kind introduction and for all your great work.

Let me take this opportunity to thank the regional directors, support staff, and HUD employees who worked so hard to make this workshop successful....

A special thanks to the people at Fannie Mae and Freddie Mac....

I appreciate the Metropolitan United Methodist Church hosting this event....

Finally, I want to thank the people of Michigan and especially the Motor City for welcoming us....

Let me kick off this event with a little recent housing news. In southeast Michigan, sales of homes and condominiums were up slightly in October over 2006 levels. This was driven by a 26 percent rise in home sales in Detroit. Sales in the region have increased in seven of the past 10 months.

That's good news. Unfortunately, it comes against the backdrop of the housing slump. Nationwide, existing home sales are predicted to fall to a five-year low. For new home sales, the prediction is a 10-year low. Foreclosures are up sharply, as are vacancies.

This presents buyers with new opportunities. But it also flashes a yellow caution light about the experience of recent buyers, who got in at the peak of the housing market and got burned.

That's why we're here today. The purpose of this workshop is not to sugarcoat, but to inform and educate and listen. Yes, we will tell consumers about great new buying opportunities. But we will also take steps to help families keep the homes they own.

That has never been more important, nationally, or in Michigan. The birthplace of the auto industry now has one of the highest unemployment rates in the country.

As jobs go, homes follow. Michigan's foreclosure rate is twice the national average.

Foreclosure comes as an unpleasant surprise to some homeowners. Surveys show that about half of the borrowers in foreclosure did not discuss it beforehand with their mortgage counselor or servicer.

It's human nature to want to avoid trouble, or deny it outright. But I want all homeowners to realize that the key to recovery is in their hands. My message is, "Buyer, Be Aware."

Of course, communication is a two-way street. Many mortgages are sold, resold and repackaged, so that it's difficult to tell who's in charge. I often hear complaints from homeowners frustrated that they don't know whom to call.

Today, we will address those complaints. Homeowners will be able to speak with lenders and mortgage company representatives one-on-one, and face-to-face. They want to avoid foreclosure, too. Foreclosure benefits no one. I thank these representatives for participating.

I am pleased to report that the mortgage industry has gotten the message. Many new partnerships are being formed to prevent foreclosure.

Consumers will hear from the folks of Detroit HOPE-which stands for Home Ownership Preservation Enterprise. They have held several well-attended workshops in the area.

Also attending are representatives from the Michigan State Housing Development Authority. I'd like to thank them for their "Save the Dream" foreclosure prevention campaign. The toll-free hotline is 1-866-946-7432.

This is a serious issue involving millions of Americans. And HUD is on their side.

We've increased our budget for housing counselors by 200 percent since 2000. Some of those HUD-approved counselors are here today, to help buyers understand the fine print.

I'd like to recognize the Mission of Peace Community Development Corp., which will help present the session for first-time homebuyers. Thank you for being a part of this workshop.

We've posted foreclosure prevention tips on our website, www.hud.gov. Our tips have been listed in Parade Magazine. Number one is, "Don't ignore the problem. Contact your lender."

We've also helped lead a government-wide effort to improve Americans' financial literacy. Our new brochure, targeted to potential homebuyers, is entitled "Home Economics." It will be out very shortly.

Finally, Treasury Secretary Paulson and I have asked the mortgage industry to identify and contact homeowners with past due accounts who want to do what it takes to keep their homes. Their first nationwide mailing campaign is underway, and that is good news.

Education and preparation are key. Some buyers don't know their FICO score-or even what a FICO is. It's a commonly used credit score, by the way.

And the homebuying process is complicated. A prospectus might number hundreds of pages-fine print which often goes unread.

During the housing boom, many buyers were enticed by low "teaser" interest rates into choosing adjustable rate mortgages (ARMs). They didn't read the fine print. Now the bill is coming due, with rates resetting on them at double or triple the original.

The boom also created an explosion in subprime loans. To be fair, the vast majority of subprime loans were sound then, and are sound now.

Their growth helped many minority families become first-time homeowners.

We're working to meet the President's call for 5.5 million new minority homeowners by decade's end. We must work equally hard to help those families keep their homes.

To that end, I want to thank Nina Rodriguez and the Southwest Housing Solution for conducting a workshop for Spanish-speaking individuals.

When it comes to subprimes, we all know that some lenders and brokers pushed the envelope, steering new buyers into ever-more risky and exotic loans.

Last year, about half of subprime loans went to borrowers who did not fully document their income-what is now known as a "liar loan." There were also plenty of "balloon mortgages" that are now adrift, and "piggyback loans" which don't have a hoof to stand on. One lender even bragged about his "NINJA" loans-"No Income, No Job and No Assets."

I find predatory lending unacceptable. HUD is going after the unscrupulous sharks in the housing market waters. One way is by creating a new Fair Lending Division within our Office of Fair Housing and Equal Opportunity. They will review mortgage lending practices and investigate complaints of discrimination.

But we must do more. We must give qualified and responsible homeowners who find themselves behind on their payments a second chance.

Today, consumers will learn of a new refinancing product from HUD's Federal Housing Administration (FHA). It's called FHASecure. For the first time, it allows homeowners in default because their interest rate reset to obtain a safe, affordable, government-backed FHA loan. Families still current on their loan may also qualify.

There are rules. A history of on-time mortgage payments under the original interest rates and a sound debt-to-income ratio are required. We want to encourage responsible decision-making, not reckless speculation.

Under FHASecure, the average subprime homeowner would save about $400 a month. An estimated 240,000 homeowners would keep their homes under the FHA's programs.

It is vital that we prevent foreclosure. It doesn't just hurt families, it devastates communities. We must help these communities recover.

That's where our new FHA incentive plan comes in. It will enable homebuyers in Michigan and Ohio to purchase a HUD-owned home with a $100 downpayment when using an FHA-insured mortgage.

These buyers will also obtain a $2,500 sales allowance at closing, to be used toward closing costs, to pay down the mortgage, or to make home repairs through HUD's Purchase and Repair program, which revitalizes neighborhoods hard-hit by default.

We estimate that about a thousand buyers in Michigan and Ohio will benefit from these incentives over the next 10 months.

Now, I understand that some consumers might be skeptical of new offers. They've heard the breathless offers of quick-fix mortgages. They've heard the siren song of fee-for-foreclosure help.

But more and more people are choosing the safety and security of an FHA loan. Here in Michigan, FHA refinancing has increased 140 percent since 2005.

Many more people could take advantage if Congress modernizes this 73-year-old program.

Eighteen months ago, President Bush proposed a bipartisan bill to lower FHA's downpayment limits and raise its loan limits. Another 200,000 families, of every race and nationality, could be helped by these changes. Congress needs to act today.

My belief in our mission is strengthened by what I see here today. I've seen first-hand what homeownership can do for a family, a community, and a country. It can improve a child's education and health. And it can ensure a senior citizen's financial well-being.

It's called the American Dream for a reason!

I'm still sold on homeownership-with good reason. Listen to one of the builders of this great city:

"My ambition is to employ more and more men," wrote Henry Ford. "We want to help build lives and homes."

So do we. Homeownership has long been an anchor of stability in uncertain times. The steps we take today will help keep it that way. Let's get started.

Thank you.

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NOTE: To read the Press Release, visit http://archives.hud.gov/news/2007/pr07-169.cfm