Thank you and good afternoon. This is a very impressive gathering. I want to congratulate the three organizations which have joined together for this conference: the National Association of Hispanic Real Estate Professionals, the Asian Real Estate Association of America, and the National Association of Real Estate Brokers. Thank you for including me at this historic meeting.
I particularly want to thank Chairman (Felix) DeHerrera for inviting me, and I want to congratulate Felix for his outstanding leadership. This has been a challenging year. Felix, you have provided inspirational and steady direction across uncharted seas. I look forward to working with your successor, Rebecca Gallardo-Serrano. Rebecca, congratulations on your election as Chair (of NAHREP).
As many of you know, I am from Texas. Growing up in my neighborhood, I was welcomed into the homes of many of my Spanish-speaking friends. Each time, in each home, I was impressed by what I saw: beauty, order, lots of photographs, a feeling of family, and great warmth. I once asked a boyhood friend: �What is it about your home?� He said, �Well, my parents are so proud. This home means very much to them. It symbolizes the American Dream. They don�t just love our home�they revere it. For them, it is a place of prayer, family, and love�kind of like church, only we live here.�
I remember that beautiful, simple description. And I agree: homeownership is the American Dream. And, in years past, in our various organizations, we have gathered with great joy, aware of a growing rate of homeownership, especially for our nation�s Hispanic/Latino, Asian, and Black Americans. From 2001-2005, homeownership was steadily increasing, providing historic levels of ownership for the economy and allowing millions of people to experience the American Dream. And minority homeownership was growing rapidly, reaching above 50 percent for the first time for Asians, and for Blacks, and for Hispanic/Latinos. And for the general population, homeownership levels reached above 70 percent, historic levels that were simply astounding, a powerful rate of growth and wealth creation unparalleled in our history or the economic history of the world.
Now, the boom is over. We meet this time in a more sobering environment, a time of distress, worry, and much concern. Most people are still doing well. But we read tales of hardship and disappointment. Like many of you, I was saddened to read the cover story in the Washington Post last Saturday, on Easter Eve. It was about Glenda Ortiz, a recent immigrant from Honduras. I�m sure many of you read it. In 2005, she bought a home here in Virginia, in her words a �piece of the soil,� a fulfillment of the American Dream. But there were a number of problems. She overpaid for it, agreeing to a high-interest subprime loan. She signed papers she didn�t understand in a language she didn�t speak with information that wasn�t accurate, counseled by someone who didn�t know what they were doing, with a mortgage that was jointly held by other people, and a mortgage company that seemingly engaged in a number of questionable practices. The monthly mortgage was too much to begin with, and the monthly payments kept going up and up and up, became unaffordable, and she eventually lost her home and her equity, forced into selling it at an undervalued price to avoid foreclosure. It was a nightmare of horrors in housing, the perfect storm that would be a disaster for Glenda Ortiz, and an abject lesson for us all. Glenda lamented: �My house. My dream. It was all an illusion.�
Yes, for some it does become an illusion. Her story says much about the problems of homeownership. Most homeowners, about 96 percent, still make their payments on time. For the remaining 4 percent, they don�t�some can�t! Recently, I saw some shocking statistics: in neighborhoods where more than 80 percent of the population is non-white, you find 65 percent of all foreclosure activity. Part of the problem has been subprime loans, where in recent years 30 percent of home purchases by Black Americans were subprime loans, and 20 percent of home purchase by Hispanics/Latinos. Most people still have a solid investment in their home, although about 8.8 million now find themselves �underwater� as home equity sinks lower than the value of their mortgage. And the Hispanic/Latino community and the Black community harder than the rest of the nation. A recent study found that blacks will lose between $72 billion and $93 billion for subprime loans taken out over the last eight years. Latinos will lose between $76 billion and $93 billion.
Yes, for some people the American Dream is still possible, but for some it disappears with the arrival of a foreclosure letter. This is a crisis that is often measured by facts and figures. But we need to be mindful that this is about people, our friends and neighbors. It is about Glenda Ortiz, about people we know, about our neighborhoods, and about our communities.
Foreclosure is tragic. But it is not inevitable. There is much we can do...and much we are doing.
For example, we have placed a strong emphasis on FHA. It can be a powerful answer for those in need. In August 2007, the President and I introduced an effort, FHASecure, to help more Americans facing foreclosure refinance into a safer, more secure FHA loan. We did this using current regulatory authority. There has been a noticeable increase in the number of closings with FHA. Already more than 130,000 homeowners have been able to refinance with FHA. By year�s end, we expect FHA will be able to help more than 300,000 families refinance into affordable FHA-insured mortgages. And because FHA has a high percentage of loans with Hispanic/Latino, Black, and Asian homeowners, it is a very good option for our minority communities.
FHASecure has made a significant and positive impact on the housing market. In only five months, from September 2007 through January 2008, FHA helped pump more than $47.5 billion of much-needed mortgage activity into the housing market. More than $19 billion of that investment came through FHASecure.
So FHA can make a profound difference. Recently, there was a good story in the Denver Post, on March 5th. It was about Lewis and Patricia Gonzales, who faced an unmanageable adjustable rate mortgage of 10.8 percent. Part of the problem was that they were �underwater,� with a home that was now valued less than the mortgage. So they couldn�t get an acceptable �refi.�
Well, one lender helped the couple refinance through FHA, with a mortgage that is now 6.5 percent. Their lender said that he has now made about 100 such loans. He called them �home saver loans.�
This was a happy ending for the Gonzales Family. And, their story is being told around the country because FHA is helping many Americans keep their homes.
People need to know more about FHA and the opportunities to use it. That�s why FHA is mailing letters to 850,000 at-risk homeowners to urge them to refinance with safer, more affordable FHA-backed mortgages. These letters are being sent to homeowners who already have or soon will confront the first reset of their adjustable rate mortgage, and are currently living in locations subject to FHA loan limits.
FHA has recently become more competitive in high-cost areas. The President just signed the Economic Stimulus Package into law. It temporarily raises the loan limits for FHA. In communities and states all across the country, the temporary loan limits are very competitive, often much higher than the median price of a home.
Unfortunately, these new loan limits will end in January 2009.
I believe we need to raise the loan limits permanently to an acceptable level. For two years the Administration has tried to get FHA Modernization through Congress. We saw some of the coming danger in 2005. That is why we tried to get FHA Modernization through, then and now. We could have possibly saved hundreds of thousands of people from going through foreclosure, especially in places hard hit, like California, Florida, or Ohio. It is vital that the safety of an FHA-backed loan is an option for homeowners wherever they live. We also need to make the minimum down payment more flexible and create a fairer insurance premium structure. This will allow more families to use FHA. Our estimates indicate that FHA modernization could help as many as 250,000 more families by the end of 2008. Every day of delay places thousands of homeowners at risk. Congress needs to send the President an acceptable package of reform right now!
And as we work to address the problems in the housing market, we need to be wise and prudent. We must not over-correct and create a new set of problems. Also, we must not turn the government into the realtor of last resort or the default mortgage lender. Such actions would distort the market in other ways and prolong the downturn.
The Administration is also taking steps to ensure it is easy for homeowners to understand the fine print when they do sign on the dotted line. We must make mortgages understandable and clear. That�s why we are committed to reform of the Real Estate Settlement Procedures Act (RESPA). On the Friday before Palm Sunday, three weeks ago, we announced the new RESPA regulations which will bring much needed transparency and simplicity to the home-buying process for the 12.5 million Americans who buy or refinance a home every year. These regulations are an important step forward in changing the climate of the home buying process.
We also know that housing counseling works. People need help to understand their mortgages and the terms of the contract. As many as half of the people in foreclosure did not read or understand their contracts. They just signed on the dotted line. Some people didn�t understand because of the complexities of the contracts.
But we can address this problem, and address it powerfully with housing counseling. We know that about 96 percent of those who saw a HUD-approved housing counselor in 2007 avoided foreclosure. That is powerful evidence about the difference that housing counseling can make.
So the President has requested $65 million in his new budget for housing counseling. That is an increase of more than 150 percent since he assumed office. Housing counselors could have helped the homeowner gain a better perspective about affordability and balanced expectations. Families must buy homes they can afford. They must understand the features of financing and the ramifications of resets, and the terms and the timelines. Prospective homeowners must have a prudent mortgage, not a �suicide loan.� We must remove the confusion and misunderstanding from the process. There must be full disclosure, understandable information, and a transparent process.
There is also more industry cooperation with government and homeowners. You see this with the Hope Now Alliance. This is a pro-active industry program to help homeowners at risk of foreclosure. The Alliance members comprise more than 90 percent of the mortgage industry.
I also applaud a recent effort by all servers involved in the Hope Now Alliance initiative to provide a temporary �pause� for homeowners in the foreclosure process. This effort is called �Project Lifeline.� It will allow each qualifying homeowner a chance to investigate other options, including refinancing with the current lender or elsewhere, including into an FHA-backed loan.
Yes, we are changing the culture of lending. There is more cooperation, more attention to the needs of the homeowner, more willingness to find solutions that avoid foreclosure. That is the story that needs to be told and retold. The housing crisis is changing the housing market. And when we come out of this crisis we will have a more stable, predictable, and lasting rate of growth.
I�m sure you have noticed that the solutions I have mentioned are not silver bullets. The housing crisis will not be addressed by one answer, one solution. Rather, it is important to craft solutions that directly address each one of the complex, inter-related problems that make up this crisis.
We will come out of this cycle of despair into a changed market. There has been an audible sigh of relief. Yes, we still have a long way to go. But there is hope. There are solutions. The Federal Reserve Board has taken some vital steps to steady the economy. We are continuing to look for more ways to help homeowners in trouble. And, we are trying to do more with FHASecure.
All of this is small consolation for Glenda Ortiz and others. But the American Dream is not an illusion. That dream is there� possible� waiting� and we can make it a reality for potential homeowners if we have the wisdom and commitment to continue to work together.