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Federal Home Loan Bank Directors Conference

Remarks prepared for delivery by
Secretary Mel Martinez

Washington, DC
Tuesday, May 14, 2002

Thank you for your very generous welcome. John, I appreciate your kind words of introduction. It was a great pleasure to swear you in as chairman of the Federal Housing Finance Board. The Board needs your leadership, and the President could not have made a better choice.

I know the Chairman is committed to helping America's families find affordable housing. In fact, he considers this one of his highest priorities. I am pleased to hear it, because this is certainly a top priority of both the President and myself.

Congratulations to the incoming appointees. As you know, you are undertaking a tremendous responsibility. The 12 banks of the Federal Home Loan Bank System are a $700 billion business. Each bank has assets averaging $58 billion. The public interest directorships are vitally important positions; through you, the banks fulfill their mission of increasing local housing finance and community development opportunities.

You have been asked to serve because you are all community leaders who have distinguished yourselves in the private and public sectors. After looking over your resumes, the word "diverse" does not seem comprehensive enough to describe this group. Nearly 50 percent of the new appointees are either women or minorities. And you bring to this job a tremendous mix of expertise and life experiences.

In this room, we have state legislators...



Retired bank officers...

A college president...

A couple of ordained ministers...

And a former governor, among others!

Even though your backgrounds are varied, you each bring to the Federal Home Loan Bank System a unique understanding of the challenge we face in providing decent, affordable housing in this country.

I want to talk about that challenge this morning - how HUD is meeting it, how the Federal Home Loan Banks are helping, and how the Federal Home Loan Banks and HUD can open the doors of the American Dream to more families.

We used to set aside one week every year for celebrating the joys of homeownership. Because President Bush has made increasing the ranks of homeowners a national priority, we now have too many success stories and too much information to share in just a week. And so National Homeownership Month was born.

We will mark it in June with events across the country. You are going to see the active involvement of the White House in spreading the word about homeownership and its many benefits. I am excited to have an opportunity to reach so many more potential homebuyers.

As we head toward Homeownership Month, it is an appropriate time for you all to meet, and a good time for me to meet with you. HUD and the Federal Home Loan Bank System both have the basic public purpose of promoting homeownership. We do it in somewhat different ways, but we both do it. And we have been doing it for a long time - you for 70 years, and HUD just two years behind.

The 12 Federal Home Loan Banks play a critical role in helping America meet the housing needs of our urban and rural communities. The fact that we have a homeownership rate today of nearly 68% in this country speaks to your success.

What the national homeownership figure does not reveal, however, is that minorities are not sharing equally in the housing boom.

For example, roughly 47 percent of Hispanics and 48 percent of African-Americans were homeowners in 2000. That may be a record, but those figures are still well below the U.S. average.

We obviously have a long way to go. But because the President and I believe so firmly in the transforming power of homeownership, we are committed to closing the gap.

I do not need to sell this audience on the benefits of homeownership and the many ways in which owning a home enriches the homebuyer, their family, and their community. The Administration plan for increasing the number of homeowners has five basic steps.

First... We are working to open the doors of homeownership to more minorities by helping them overcome one of the biggest hurdles: the down payment. Each year under the President's budget, the American Dream Downpayment Fund will help 40,000 first-time, low-income homebuyers achieve a home of their own.

Second... The HUD program that supports organizations like Habitat for Humanity has made homeownership a reality for thousands of families. I am a big fan of Habitat, and you can take great pride in the fact that the Federal Home Loan Bank System is Habitat's biggest corporate contributor. We are tripling funding for the program that supports entities like Habitat to $65 million next year. These dollars will support the construction of some 3,800 homes for low-income Americans.

Third... Another initiative that we are excited about helps low-income families make the move from Section 8 housing to homeownership by allowing them to put up to a year's worth of their rental vouchers toward a home down payment.

Fourth... The key to successful homebuying is full disclosure of all settlement costs, up front, before homebuyers have to pay anything to a broker or lender. I have undertaken comprehensive reform of the Real Estate Settlement Procedures Act. My goal is to improve the mortgage process so that consumers get simpler, clearer, and earlier disclosure - and have the opportunity to shop for the best mortgage to meet their needs, at a lower cost.

And fifth... The increase in sub-prime loans - and the corresponding rise in cases of predatory lending - have made financial literacy more important than ever. Armed with the facts, an educated consumer is far less likely to be victimized by the predatory lending practices that involve only a small percentage of lenders, but are so harmful to the dreams of poor families.

Housing counseling is an invaluable tool for prospective homebuyers. We plan to make it a separate program and boost its funding substantially in the coming year.

Through these five steps and other ongoing projects, I am certain that we will make it easier, and less expensive, for minority families to move into homes of their own.

The Federal Home Loan Banks share this mission. And through the Affordable Housing Program - what some have called the "crown jewel" of the Home Loan Bank System - you have been very successful in carrying it out.

One of my predecessors, Secretary Kemp, worked with the Federal Home Loan Banks back in 1990 to establish the Affordable Housing Program. Twelve years later, you have a lot to be proud of: $1.5 billion in AHP contributions by the Federal Home Loan Banks to support almost 315,000 housing units for low and moderate income families.

AHP projects take many forms, but are all built around financing the purchase, construction, or rehabilitation of affordable housing for very-low, low, and moderate-income households. Member institutions are urged to be creative in finding ways to support and encourage projects that boost the supply of affordable housing.

Of course, we recognize that homeownership is not an option for everyone. I know that two-thirds of the units you have supported through the AHP are rental housing, and that is great - plenty of renters need help, too.

Today, more than 4 million households rely on a variety of HUD programs to help them meet the high costs of rental housing. The HUD budget for the coming fiscal year preserves - and expands - our commitment to helping low-income families afford the high costs of rental housing.

We propose to renew all expiring rental subsidy contracts to protect current families, and provide housing vouchers to 34,000 additional low-income families. These vouchers reduce the amount paid by low-income families in rent to approximately 30 percent of their income, helping those who struggle most with their monthly rent checks.

I know that some of your communities are facing a shortage of affordable housing. A number of critical federal programs - like the low-income housing tax credit, community development block grants, the HOME program, and HOPE VI - are dedicated to improving the affordable housing supply.

Although it is not usually thought of as an affordable housing program, FHA mortgage insurance is helping to make rental housing possible for people who need it. Though April, FHA had issued $1.7 billion in insurance commitments for new apartment construction. This was more than was issued during the entire previous fiscal year - and we have five more months of business left ahead of us, with continuing favorable mortgage interest and market conditions.

Our move to spur the construction and rehabilitation of affordable housing by increasing the FHA multifamily insurance limits - for the first time in nine years - is clearly having a positive impact.

HUD will continue to look for ways to support efforts on the state and local levels that ease the affordability gap and help more Americans live in the home of their dreams, in the neighborhood of their choice.

In light of the recent attention on Fannie Mae and Freddie Mac, I want to take a moment to assure you that HUD takes its oversight role seriously and will not shirk from these responsibilities.

The current regulatory structure divides oversight into two areas of responsibility. An independent office within HUD, the Office of Federal Housing Enterprise Oversight - or OFHEO - regulates both GSEs for safety and soundness by ensuring that they are adequately capitalized and operating their businesses in a financially sound manner. HUD, meanwhile, has oversight responsibility for ensuring that Fannie Mae and Freddie Mac comply with the public purposes set forth in their Charters. Together, HUD and OFHEO have a role to play in contributing to the strength and vitality of the nation's housing finance system through their regulation of Fannie and Freddie.

Along with creating new opportunities for homeownership and boosting the supply of affordable housing, there is a third major initiative that I would like to tell you about - one that reaches out to the 600,000 men, women, and children in this country who are homeless on any given night.

HUD has the lead federal role in providing shelter assistance to homeless people. We support thousands of homeless shelters and other assistance centers around the country, and we have spent the past year working to strengthen these partnerships even more. Yet, despite Washington's massive investment in solving the challenge of homelessness, too many Americans are still suffering.

We have undertaken a major initiative effort to help homeless Americans get the care and shelter they need. And I have issued a challenge that we end chronic homelessness within the next ten years.

We awarded a record $1 billion this year to fund homeless assistance programs. Our commitment will increase next year, through $1.1 billion in funding the Administration has proposed. HUD intends to double funding for the Interagency Council on the Homeless, which President Bush reactivated to better coordinate the work of the many federal agencies that provide funding for homeless services.

What I keep reminding folks, both inside and outside government, is that homelessness is not unique to any one state or region. The problem is not a partisan issue, either. Solving it will require the combined resources of the federal government, state and local governments, and the many community based organizations that partner with us. But I am confident that we have the resources to do the job.

I have done quite a bit of traveling around the country since being sworn into office. There is no greater thrill for me than to meet with families in cities like Albuquerque, Jacksonville, Hartford, St. Louis, and San Diego and see firsthand how HUD is helping to change people's lives. We are bringing hope to those have felt hopeless, and I cannot think of anything more rewarding.

You and I know that the American Dream of homeownership is an attainable goal. We see it achieved every day, so often by families who never imagined owning their own home or becoming self-sufficient. Whether you are a newcomer to the Federal Home Loan Bank System or in the midst of your term, you are in a position to make the dream a reality.

Through your work - and the continued commitment of the Bush Administration - citizens will have new tools and opportunities they can put to work improving both their lives and their communities as they travel the road to achieving their own American Dream. I am glad that you have joined us on this mission.

Content Archived: March 16, 2010

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