Meeting with the National Governors Association
PREPARED REMARKS FOR
ALPHONSO JACKSON, SECRETARY OF HOUSING AND URBAN DEVELOPMENT
MONDAY, FEBRUARY 25, 2008
Thank you for that warm welcome. One hundred years ago this May, the nation�s Governors gathered at the White House for the first time, with President Teddy Roosevelt. The topic back then: conservation of natural resources. I guess some things never change!
Today, seeing nearly every Governor in this room, I feel a sense of awe. Fifty sovereign States, each with its own unique character, causes, and concerns, uniting on behalf of the common national interest.
It�s a great example to the world. And I am proud to work for a President who understands your concerns, because he�s been there, sitting right where you are, as a former Governor.
I have been privileged to travel to many of your States over the past few months:
- to Detroit, Michigan, for a popular homeownership workshop�
- to Memphis, Tennessee, for affordable housing and community revitalization�
- to New Orleans, Louisiana, with Habitat for Humanity to help hurricane victims�
- to the Bronx, New York, to promote �green� public housing�
- and, most recently, to Columbus, Ohio, to talk about our foreclosure prevention efforts.
That is what I want to talk about today.
I do not have to spell out what the rise in foreclosures has meant to your States. It breaks my heart to see families having to pack away their dreams and memories into boxes.
It hurts to see the indirect victims of foreclosure�renters forced out, neighborhoods blighted, even, tragically, pets left behind.
As HUD Secretary, it especially pains me to hear voices in the media say that homeownership is a losing bet, more American Nightmare than American Dream.
Nonsense. They�re wrong. And here�s why. Because we have the tools to solve the problem.
Now, we cannot turn the market around overnight. I understand that. Booms never last; they�re always followed by corrections. We cannot dictate what buyers pay and what sellers charge. In a free country, we cannot, and should not, control the free market.
We do see encouraging signs of recovery. Housing starts and housing completions are up slightly; applications for home mortgages are rising; and interest rates are falling. This will help.
And please don�t misunderstand�I�m not talking about blanket foreclosure amnesty, or a bailout, as some have called for. That would be irresponsible.
Such a measure would distort the market further. It would strangle credit. That could be devastating to homeowners and new buyers alike.
I agree with what Treasury Secretary Hank Paulson told Congress: �Our test is, how do we prevent a market failure, [and] how do we prevent those foreclosures that are avoidable?�
So let me tell you what HUD and this Administration is doing.
First, we are getting immediate help to homeowners. That is why President Bush and Congress worked so hard to pass the economic stimulus plan. Many families, no doubt, will use those rebate checks to help pay off overdue mortgage payments and housing-related bills.
Others will benefit from the higher loan limits that enable more families to qualify for a mortgage from HUD�s Federal Housing Administration.
The change will help the FHA penetrate high-cost markets such as California and New York, giving families there a safe, affordable option to risky subprime mortgages.
Unfortunately, it�s for one year only. That�s not good enough. We need a more permanent solution. That means modernization of the FHA.
The FHA has served this nation well, helping more than 35 million Americans buy a home. But it�s showing its age�74 years, to be exact. Not quite as old as the NGA, but close!
Two years ago, we introduced a bill to modernize the FHA in Congress. It would provide flexible downpayment requirements and higher loan limits. It also would enable the FHA to fairly price premiums, taking risk into account.
This is critical. One-size-fits-all does not make sense for Governors, and it does not make sense for premiums, either.
We believe FHA modernization could help a quarter of a million families this year alone. It passed the House and Senate in bipartisan fashion. We need your help to persuade Congress to finally get it to the President�s desk.
Now, like you, we do not have the luxury of sitting in place, wringing our hands, waiting for Congress to act. So we acted first. Let me tell you about FHASecure.
The President and I introduced FHASecure last August. It�s designed to help families with good credit and a history of on-time payments, but who find themselves falling behind on their mortgage payments.
Many were steered into subprime loans with low �teaser� interest rates. Those rates are now resetting, with a vengeance. New York Times columnist David Leonhardt called them �wishful thinking loans.�
The time for �wishful thinking� is over. One-point-eight million subprime loans are scheduled to reset by the end of 2009. So FHASecure allows delinquent homeowners for the first time to qualify for an FHA loan.
Since August, we�ve helped more than 94,000 homeowners. We expect to reach 300,000 by year�s end.
How is it working State-by-State? Let me show you. In January of 2007, 632 Ohio families refinanced into the FHA. A year later, more than 1,400 did, a 122 percent increase. In New Jersey, the increase was nearly four-fold. And�by the way�this is just primary households we�re talking about. Flipping speculators need not apply!
During the subprime explosion, FHA loans fell out of favor. The Washington Post called it �a little old-fashioned in some respects. Be prepared to document your income, assets and debts.�
Some unscrupulous lenders, looking for a quick buck, went the other way. One predator even bragged about his �NINJA� loans�that stands for �No Income, No Job, No Assets� required.
We�ve seen the results. So now, the FHA is back. And we�re letting the American people know about it, sending letters out to 850,000 homeowners with resetting rates who might qualify.
But we cannot do it alone. Last year, Secretary Paulson and I called on the mortgage industry to pitch in. And they did, creating the Hope Now Alliance.
Representing 90 percent of the subprime market, Hope Now members have contacted more than half a million homeowners. Their hotline (888) 995-HOPE receives about 4,000 calls a day. Members recently announced a plan to help up to one million homeowners avoid foreclosure over the next two years.
Last week, Alliance members took another important step. It�s called Project Lifeline. It�s aimed at homeowners who face a real risk of losing their home, but who have not yet faced the problem.
Many are in denial. Some are ashamed. It�s human nature to put off hard choices as long as possible. More than half of all homeowners in foreclosure did not discuss it beforehand with their servicer. We must change this.
Project Lifeline presses �pause� on the foreclosure process, halting it for 30 days so delinquent homeowners can work with lenders and housing counselors to modify their loans.
This is not a �Band-Aid� solution. This is the very heart of the problem. Many people don�t realize that the solution is in their hands.
Imagine that you�re very sick. If a doctor told you that by getting a checkup you�d have a 96 percent chance of survival, you would visit him, right?
Well, last year, 96 percent of households that saw a HUD-approved housing counselor and completed the program avoided foreclosure. Amazing.
There are 2,300 of these counseling agencies across the country, ready to help. Last year, they reached more than 1.6 million households.
President Bush has increased funding for housing counselors by 150 percent since 2001. Our new budget calls for another $65 million, plus $180 million for our non-profit partner NeighborWorks. It�s money well spent.
We�re also holding foreclosure prevention workshops all across America. I�ve been to many of them. And I�ve seen shame replaced with hope.
I also want all prospective homeowners to know their rights and responsibilities before they sign on the dotted line. It�s the same old story, isn�t it? The benefits are bannered high on page one while the costs are buried in the fine print.
I�m reminded of the joke: �Why is it you can never read a doctor�s prescription, but you can always read his bill?�
So last month, President Bush signed an executive order creating the Advisory Council on Financial Literacy. HUD is playing a leading role.
Our new brochure, called �Home Economics,� details the five steps to become financially literate and prepared to own a home. We�re sending four million copies out across the country, in both English and Spanish. I brought a few with me today.
Let me add that this year is the 40th anniversary of the Fair Housing Act, something near and dear to me.
Our budget increases the amount of money to fight housing discrimination based on race, religion, gender, sexual orientation, family status, or disability.
We�re building on that historic legacy with our new Fair Lending Division. It will hold lenders accountable who refuse loans for spurious reasons, or who impose different terms or conditions based on race or national origin.
We�ve also awarded grants totaling $1 million to selected States so you can develop and share best practices to stop lending discrimination. Because you have a critical role to play.
As Governors, there�s one other thing you can do. Sometimes the greatest barrier to homeownership is a man-made one called red tape. Research shows that it increases housing costs by between ten and thirty-five percent.
Last summer, we issued a National Call to Action to reform onerous regulations. Many communities have signed on to what we call the America�s Affordable Communities Initiative.
Last year, we awarded the Robert L. Woodson, Jr., Award to the city of San Jose for freeing up thousands of affordable homes. They did it by overcoming complex land use regulations and tax policies.
Some of you have adopted similar programs, such as Vermont�s New Neighborhoods Initiative. But I urge all of you to back America�s Affordable Communities Initiative.
We�re also doing more at HUD to increase the stock of affordable housing. President Bush has requested a $263 million increase for our HOME program, our largest affordable housing block grant program.
I am proud of the fact that, despite the housing slump, homeownership rates remain at near-record levels. Minority homeownership has increased dramatically since 2001.
These families are learning that homeownership remains the single best path to wealth and independence.
Now we must use all our tools�from education to communication to investigation�to sustain those gains.
And I�m asking the States to lead the way.
I applaud you for trying different approaches: Arizona�s Homebuyers� Bill of Rights�Vermont�s Urban Homesteading plan�Ohio�s Foreclosure Prevention Task Force. Keep on trying.
I often say that HUD is in the business of building dreams. And our nation�s Governors are sending the message that the American Dream is alive and well.