Mayor Oscar Goodman, thank you for those stirring remarks, and for your fine leadership of this fabulous city....
You know, Las Vegas shows what can be accomplished when you have vision. To see great hotels rise up, where others see only desert. To believe that people will want to come here, and put down roots, and build a home and life.
Those of you in this room have that vision. You're using it to help your customers build their dreams. And I salute you for it.
Of course, when times are tough, that's when vision is most important. You have to forecast the crisis-and see beyond it to the brighter day ahead, no matter what the critics might say.
To hear some in the media, this area is about to return to the desert. Listen to Newsweek, reporting on the nearby town of Henderson:
"The subprime mortgage mess and subsequent credit crunch are turning communities like Black Mountain Vista into luxury ghost towns.... Yellow patches blot the Spartan lawns and phone books lie on front porches, their covers bleached from weeks under the desert sun."
Whoa! Easy, there. Let's pull back for a moment.
Yes, the foreclosure problem is real. And it's hit Nevada hard. The state has the highest foreclosure rate in the country. Here in Clark County, one in 277 households were in foreclosure at the end of last year, about four times higher than the national rate.
This is a reflection of a national problem. In January, sales of existing homes fell to the slowest rate since 1999.
In 2005, there was about a four-month supply of unsold homes in the U.S. Today, it's a 10-month supply.
And about one in ten homeowners nationwide is now "underwater," owing more than their house is worth.
But make no mistake, the housing boom was a bubble. Prices were rising too high to be sustainable.
Think about it: from 2000 to 2006, median family income rose about 14 percent-while median existing home prices rose 50 percent.
Still, calling this a correction doesn't make it hurt any less. Builders are worried. Your customers are wary. And homeowners are weary, trying to keep their homes.
Those are the facts on the ground today. But what does our vision tell us about tomorrow?
It tells us that we can create the conditions for recovery. We can make the boom-bust cycle shorter and shallower. We can replace gimmicks and shortcuts with transparency and honesty. And we can take the necessary steps to prevent foreclosure.
That's right, foreclosure is not inevitable, it's preventable. And we have the tools to prevent it.
Let me tell you about it.
First, our economic stimulus plan.
It's providing immediate relief to homeowners so they can pay down mortgages or other housing-related bills.
The plan also raises the Federal Housing Administration's loan limits, enabling more families to qualify for a safe, affordable FHA mortgage.
This is important. Families in high-cost states have been priced out of FHA-backed loans. This has created a vacuum, filled by exotic subprime loans.
Families with home loans up to $729,750 will now qualify for an FHA loan, depending on where they live.
We're announcing the county-by-county loan limits today. We believe the change will help an estimated quarter of a million homeowners.
Even moderate-cost states like Nevada will be helped. Here in Clark County, loan limits will go up nearly $100,000, to $400,000. And the stimulus plan helps in another way, by injecting much-needed liquidity into the market. A lack of liquidity has kept families with good credit profiles from getting loans.
The stimulus plan has stimulated a good response-and not just from people who didn't think Democrats and Republicans could cooperate!
The chief economist for the National Association of Realtors predicts demand for housing will rise, and that a rebound may happen before the end of the year. And the market is responding, with lower interest rates.
That's the good news. Unfortunately, the new FHA loan limits expire at the end of the year.
We need a more permanent solution. So our next step must be to modernize the 74-year-old FHA.
Two years ago, before the downturn, we introduced an FHA modernization bill to Congress.
Our plan offers flexible downpayment requirements and higher loan limits.
It would also enable the FHA to fairly price premiums, taking risk into account so the market makes rational decisions. We don't want anyone caught by surprise again.
FHA modernization could help a quarter of a million families this year alone.
It passed the House and Senate in overwhelmingly bipartisan fashion. But a final bill has yet to reach the President. Congress must act-now!
In the meantime, we aren't waiting around. Last August, the President and I introduced FHASecure.
It helps responsible families who, having paid their bills on-time under the original interest rate, find themselves falling behind under the reset rate.
For the first time, these delinquent families would be able to qualify for an FHA loan. "Underwater" borrowers and those in the process of foreclosure may also qualify.
Now, there are rules. We require a history of on-time mortgage payments under the original rate. Multiple-property-flipping speculators need not apply. And we actually verify income levels-shocking, I know!
Since August, we've helped 110,000 homeowners who were current or past due on their loans refinance through FHASecure. We expect to reach 300,000 by year's end.
Here in Nevada, the number of FHA refinances nearly tripled from January 2007 to January 2008-a good start.
Our reforms are making a difference. In just five months, FHA has helped pump more than $37 billion of much-needed mortgage activity into the housing market. More than $14 billion of that was through FHASecure.
Ladies and gentlemen, the FHA is hot again! For years, it was derided as old-fashioned, a dinosaur.
We couldn't compete with the gimmicks-the "piggyback loans," "liar loans," or "NINJA" loans-"No Income, No Job, No Assets" required. A couple years ago, half of all subprime loans were okayed without verified income levels.
But now, the FHA is back. And we're letting people know about it, sending letters out to 850,000 homeowners with resetting rates who might qualify.
Because of this, the schemes and shortcuts are starting to give way to transparency.
CitiMortgage now requires buyers to sign an affidavit attesting to their income levels. And the Federal Reserve recently passed "Truth-in-Lending" reforms, including a ban on liar loans.
Listen to real estate columnist Ken Harney: "FICO score standards generally are higher..., stated-income mortgages with no verifications are hard to find, and major investors are on the prowl for anything hinting at fraud."
Good! We're back to basics. Blocking and tackling. Savings and credit ratings.
But we must be careful. This is a balancing act. Government must remember that 93 percent of homeowners are paying their mortgages on time. Only two percent are in foreclosure. So we must use a scalpel, not a sledgehammer. We want credit to smarten up, not dry up.
The President supports legislation that will truly help homeowners. In December, he signed the Mortgage Debt Relief Act.
It protects families from higher taxes when they refinance their home mortgage. It also opens a three-year window for families to refinance their mortgage without having to pay federal taxes on debt forgiveness.
However, there are some other ideas that, I believe, would do more harm than good.
We don't need new federal programs to redevelop abandoned and vacant homes. They would be extremely costly and divert money from where it's needed.
Some have proposed rewriting bankruptcy law. This would certainly aid lawyers. I'm not sure it would help realtors or homeowners.
I believe Americans are a fair people. They want to help. But they understand that the answer to an economic challenge must ultimately come from the people who drive the economy.
They want the tools of recovery in their own hands. And they do not want to kill the spirit of opportunity that made this country great.
And so I want to talk about the most important element of our reforms: the individual buyers themselves.
You might say that, homeownership starts with homework.
I've spoken to so many people who did not quite know what they were agreeing to as they signed on the dotted line.
In some cases, buyers were lured by low "teaser" interest rates without understanding that they would double or even triple over time.
Some did not read their prospectus. Others did not understand it. Often, the benefits were bannered on page one while the penalties were buried in the fine print.
It reminds me of the line: "Why is it you can never read a doctor's prescription, but you can always read the bill?"
There are more ways than ever before to buy a home. And so we must educate homeowners like never before.
They must know their rights and responsibilities on the way in, not just on the way out.
In January, President Bush signed an executive order creating the Advisory Council on Financial Literacy.
The role of the Council goes beyond promoting ownership. We want families to know what goes into a home: planning, savings, good credit, and, above all, communication.
We're sending out four million copies of our new brochure, called "Home Economics," in both English and Spanish. It shows the five key steps to become prepared to own a home. I brought a few with me today.
The most important step may be to contact a housing counselor. Most homeowners don't even know that free housing counseling is available!
That's a shame. There are more than 2,300 HUD-approved counseling agencies, ready and able to help, at all ends of the process.
This is not a trivial issue. This is the very heart of the matter.
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, in the first three quarters of 2007, 96 percent of households that saw a HUD-approved housing counselor and completed the program avoided foreclosure. A great story.
We've increased funding for housing counseling by 150 percent since 2001. President Bush's new budget proposal would increase it further, by $65 million.
The budget contains another $180 million for HUD's non-profit partner NeighborWorks. It's money well-spent. Studies show that homeowners respond more quickly to community and non-profit groups than to lenders and banks.
Let's face it, some folks are in denial about their financial problems. Instead of communicating, they withdraw. Half of all homeowners in foreclosure did not discuss it beforehand with their servicer or lender.
Often, it's hard to know who to call, with so many mortgages chopped up, sold, and resold.
Last year, Treasury Secretary Paulson and I called on the mortgage industry to offer a broad response. And they did, creating the Hope Now Alliance.
Hope Now members have contacted over a half million homeowners. Their hotline now receives more than 4,500 calls a day.
Their last round of letters to homeowners in trouble got a 26 percent response rate. It doesn't sound like much, but in this business, it's a lot!
Recently, Alliance members launched Project Lifeline. It "pauses" the foreclosure process for 30 days so eligible homeowners can work with lenders to modify their loans. It makes good sense.
The bottom line: Hope Now announced this week that the industry has reworked more than one million mortgages for families since July.
I've thrown a lot of numbers at you. But behind all the numbers are people, who must work together to solve their problems.
That brings me to our foreclosure prevention workshops.
We've held dozens of these workshops across the country, including in Nevada, bringing together families, lenders, and counselors. I've been to many of them. And every time, I see denial and fear replaced with hope.
Communities can help, as well. Excessive regulations are standing in the way between Americans and affordable housing.
Research shows that red tape increases costs between ten and thirty-five percent. It adds about $12,000 to the price of an average, single-family subdivision home.
Last summer, we issued a National Call to Action to reform onerous regulations.
Hundreds of communities and organizations have joined our America's Affordable Communities Initiative-including Las Vegas, North Las Vegas, and Henderson, Nevada.
It's setting a great example, and I urge all States to join this effort.
I believe Las Vegas remains a great bet for the future. There are 41,000 hotel rooms opening up in the next 10 months. And this State remains a top draw for new, out-of-state residents.
But, as the recovery begins, we must not forget our hard-won lessons.
- Housing booms never last.
- You can�t get something for nothing.
- Honesty and transparency are the best policies.
- Communication is critical.
- And education is the great equalizer.
Elvis Presley, when he played Vegas, used to tell his band members not to take the audience for granted. �I remind them that it�s a new crowd out there,� he said, �and they haven�t seen us before.� You didn�t think I would quote Elvis, did you?
Your new customers may be coming in at the end of the slump. But they�and we�must learn from it.
If we do, we will do more than build the American Dream. We will sustain it.
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