U.S. Conference of Mayors


I want to thank you for inviting me to be here today; and I’d especially like to thank Mayor Kilpatrick for hosting this panel.  I know you recently hosted a similar event up in your hometown of Detroit, and I’m thrilled to be able to participate this time around. 

As you all know, we are here to address a very real and growing problem in many of your communities – that of declining housing markets and growing foreclosure rates.

And while we’ll certainly discuss the negative impact these circumstances have created around the country, I’d also like to use this opportunity today to emphasize the efforts being put forth to restore housing markets.

I’d especially like to discuss specific programs designed to alleviate the stress caused by subprime loans, interest rate resets, and foreclosures for individuals and communities in your part(s) of the country.

I’ll focus my remarks on FHA’s role in this effort to help homeowners and communities, but feel free to ask me about other support coming from HUD, particularly through our housing counseling network.

Just to put my comments in context, I’d like to say that we at FHA have been expressing concerns about the proliferation of these subprime loans for at least two years now.

Like so many of you who administer government lending programs, we knew that first-time homebuyers are often better served by specialized state and local HFA homebuyer programs and/or insured financing and we really believed that a lot of borrowers were taking on mortgage products that they didn’t understand and couldn’t afford. 

Lo and behold, here we all are today, talking amongst ourselves about what we can collectively do to help.

So, here’s the silver lining in this unfortunate set of circumstances in which we all now find ourselves:  all of us who wanted to serve these very borrowers over the last few years will now have the opportunity to do so today.  Except now we are “rescuing” them.

We in FHA now have the opportunity to get families into FHA-insured financing, which is safe, fairly priced, and, frankly, we believe, one of the most consumer-friendly products on the market.

I hate the thought that these hard-working families are struggling, but I’m very, very pleased that we have a solution, and a good one.

That said, we announced in September the launch of an expanded FHA refinancing product, which we named FHASecure.

In the announcement, we made it clear that we were changing our product to permit two new, important features: 

  1. We’d permit borrowers who were delinquent on their subprime ARMs as a result of the interest rate reset to refinance into FHA loans; and
  2. We’d permit lenders to place a subordinate lien behind an FHA-insured first to help borrowers who were “underwater” on their existing mortgages.

These two changes were designed to help many more families take advantage of the tremendous benefit that FHA offers – access to market-rate financing.

To date, FHASecure has received 186,000 applications and has closed 70,000 refinance transactions.  And by the end of 2008, FHA expects to help more than 300,000 families refinance their home mortgages.

And while the vast majority of those we’ve helped were current on their existing mortgage, we expect to help more and more delinquent borrowers as we improve the program and sign up more lenders. 

This is a very critical time for many American homeowners and – just as the President has alluded to in recent weeks – we at FHA are doing everything we can to provide a very real solution. 

In addition to FHASecure, HUD has also been an integral participant in the creation of the HOPE NOW Alliance. 

Initiated by HUD and Treasury on October 11, 2007, the Alliance brings together dozens of mortgage servicers, national counseling agencies, investors and industry trade associations to accomplish one task.

They seek to provide effective foreclosure alternatives for the unprecedented number of American families that are at risk of losing their homes due to mortgage default.

By streamlining communication and providing a sustainable funding source for default counseling, the Alliance has been able to standardize loss mitigation decision making and provide fast, consistent workout options for borrowers.

They have also created a single point of contact for foreclosure assistance (886-995-HOPE) and reached as many “no-contact” borrowers as possible through targeted mailings and a national advertising campaign.

So far, the hard work of the Alliance and its’ members has already resulted in the release of a national advertising campaign, which has aired more than 20,000 TV and radio spots reaching millions of English and Spanish speaking borrowers.

In addition, the HOPE NOW Alliance has been responsible for approximately 500,000 letters being mailed to no-contact borrowers across the country offering workout assistance.

This is separate from FHA’s independent direct-mail efforts, which are slated to reach 850,000 borrowers whose interest rates are scheduled to reset in 2008. 

As part of this outreach initiative, Secretary Jackson will be traveling around the country discussing the Bush Administration’s efforts to help families avoid foreclosure and grow the economy.

He will be stopping in cities that have been greatly affected by foreclosure, and he will be highlighting specific steps the Administration is taking to assist trouble homeowners, including: FHASecure, the HOPE NOW Alliance, and the last major piece of this recovery puzzle: legislation to modernize FHA.

Our FHA reform bill, different versions of which have passed both bodies of Congress, would increase access to home loans by lowering down payment requirements and allow FHA to insure bigger mortgages in high-cost states – places like California, New York, Massachusetts, and right here in the District, where FHA has practically been non-existent for the better part of a decade.

It would also expand FHA's authority to price the insurance fairly, with risk-based premiums.  All of these changes are critically important in the effort to help subprime borrowers refinance into safe and affordable home loans. 

Although Congress has acted to pass these reform efforts, we aren’t out of the woods yet.  We must now reconcile the differences between the two bills and produce a single, comprehensive piece of legislation. 

Yet while we recognize the importance of clarity and accuracy of language, I think we are losing valuable time through these deliberations.

We need this bill now, as do hundreds of thousands of Americans.  And hopefully, the continued attention being given to this issue will act as a catalyst to get this legislation written into law.

The progress we are seeing at FHA indicates a step in the right direction, right for the economy and right for Americans at risk of losing their homes.

I hope this brief overviewhas helped paint a clearer picture of exactly how HUD and FHA are working to benefit borrowers.  Much has been accomplished, yet much remains to be done.

And for those of you who have questions, I’d be happy to address them at this time…


Content Archived: January 12, 2012