Mortgage Bankers Association of America
Remarks prepared for delivery by Secretary Mel Martinez
89th Annual Convention
Tuesday, October 22, 2002
It is a pleasure to be meeting again with the Mortgage Bankers
Association of America. I have tremendous respect for the men and
women of MBA. Your work is critical to the health of our national
economy and the lives of every family hoping to build security and
stability through homeownership.
I want to recognize outgoing president Jim Murphy. Jim, I appreciate
the leadership you have brought to MBA. It was a big thrill for
me at the 2001 conference in Toronto when you announced that MBA
was dedicating a Habitat for Humanity house in my name. As you know,
promoting the work of faith-based organizations is a top priority
of President Bush. It is wonderful that MBA members are so deeply
involved in Habitat's fundraising and building projects.
Three senior members of the HUD leadership team have joined me
here today. FHA Commissioner and Assistant Secretary of Housing
John Weicher, Ginnie Mae President Ronnie Rosenfeld, and Inspector
General Ken Donohue are all doing outstanding work. I feel very
fortunate to have the benefit of their considerable experience.
Thank you, John, for your very generous introduction, and congratulations
as you officially take MBA's reins. I want to thank you for your
leadership in the President's initiative to increase minority homeownership.
The mortgage finance industry will play a vital role in meeting
the President's goal to boost the number of minority homeowners
by at least 5.5 million families by the end of the decade.
President Bush announced that goal in June when he rolled out America's
Homeownership Challenge, the centerpiece of his efforts to close
the homeownership gap that exists between minority and non-minority
Our response to the President's challenge was the Blueprint for
the American Dream Partnership - an unprecedented public/private
partnership that harnesses the resources of the federal government
with those of the housing industry to accomplish the President's
goal. We launched the Blueprint Partnership last week at the White
House Conference on Increasing Minority Homeownership in Washington,
DC. MBA has been a partner in this effort from the start, and I
applaud you for your leadership on this initiative.
The President calls homeownership a "cornerstone of America"
and I doubt that anyone here would disagree. The purchase of a home
represents the path to prosperity for the vast majority of families.
The ability of the American people to tap assets like their homes
allows them to unlock what Peruvian economist Hernando DeSoto calls
the "mystery of capital." Families can insure their homes
against loss, borrow against them, and pass them on to their children.
They can use their mortgage to help fund a new business.
Boosting minority homeownership has tremendous social benefits
for individuals and families. At the same time, it spurs job growth,
increases consumer spending, and increases the economic security
of neighborhoods and the nation as a whole. A HUD study we released
last week revealed that the potential economic benefit of adding
5.5 million first-time minority homebuyers is a staggering $256
Everyone in this room knows that when it comes to creating and
spreading wealth, homeownership is a force like no other. The commitments
that you and our other Blueprint for the American Dream partners
have made are the key to helping us to close the minority homeownership
gap and helping more Americans to create more wealth.
As the President said last week, "We can put light where there's
darkness, and hope where there's despondency in this country. And
part of it is working together as a nation to encourage folks to
own their own home."
I told you last year in Toronto that one of the major ways this
Administration is working to increase minority homeownership is
by streamlining the mortgage finance process.
This time last year, I issued a policy statement clarifying HUD's
position on yield spread premiums, preserving them as a financing
option for families. At the same time, we recognized that there
were serious disclosure problems involving yield spread premiums.
Yield spread premiums were often used to generate additional profits
through an unscrupulous business practice that placed unsuspecting
borrowers in higher-rate loans without their knowledge. Of course,
only a small percentage of brokers were involved in this kind of
activity. Most are doing wonderful work in their communities.
In the process of issuing our policy statement on yield spread
premiums, I committed HUD to establishing clearer disclosure rules,
and to simplifying and improving the mortgage origination process.
Last October, we began a process to overhaul the regulations governing
the Real Estate Settlement Procedures Act. And today, I am happy
to report that we are nearing the finish line.
In addition to RESPA being an outdated and complicated law, we
all know that mortgage finance is itself a complicated industry
- even for those who work in it. It is even more of a mystery for
families who are undertaking a process of this magnitude for the
first time. Too often, they are not armed with the knowledge they
need. And the process itself is not very transparent.
This Administration is working to remove the uncertainty from the
mortgage finance process and ensure that would-be homeowners - and
existing homeowners looking to refinance - are armed with the facts.
This will ultimately prevent unscrupulous lending practices and
increase homeownership for those who seek it, particularly minorities.
After months of consultations with industry groups, consumer advocates,
and federal agencies, HUD published its RESPA reform proposal for
public comment on July 29. For nearly three months, people have
had the opportunity to respond. The comment period is open for just
one more week - until October 28.
The Proposed Rule addresses the inadequacies of the existing RESPA
regulations in three ways:
The Rule fundamentally changes the way in which compensation to
mortgage brokers is disclosed to borrowers. With these changes,
the Rule ensures that borrowers understand the availably of yield
spread premiums to help pay their closing costs and preserves their
use for this purpose.
The Rule significantly improves HUD's Good Faith Estimate settlement
cost disclosure. In so doing it makes the costs clearer to and firmer
for borrowers, which will lead to lower settlement costs. Consumers
will get the estimate before they have to make a commitment to a
lender, giving them time to shop for the best loan to meet their
As you know, HUD's current rules impede the ability of industry
to offer simpler guaranteed packages of settlement services and
mortgage loans to consumers. The proposed Rule changes this by removing
regulatory barriers to allow any entity to develop and offer such
packages if they choose to do so. It is not our intention
to pick winners or losers in the economy but rather to unleash the
creativity of the marketplace.
We believe that our proposal can reduce settlement costs by an
average of $700 per closing. Overall, the annual savings to consumers
could be as much as $8 billion. That kind of savings will allow
many Americans who are priced out of the homebuying market today
to buy a home.
Numerous industry groups, consumer advocates, and government agencies
have publicly endorsed our efforts to simplify and streamline the
homebuying process. I applaud the MBA leadership for its support.
Despite the broad support for our proposal, I know that not everyone
is happy with it. Mortgage brokers, for example, tell me they feel
they are being singled out. I can tell you that no segment of the
industry is being singled out. My job as HUD Secretary, and my sole
focus in this reform effort, is to protect the consumer, so that
when they purchase a home, they understand exactly what they are
paying for. Under our Proposed Rule, consumers are protected.
I am committed to this reform effort. Once we have read all the
comments and carefully considered all of the significant issues
raised, we will make any necessary revisions and, as quickly as
possible, complete the Final Rule.
There is no question that the housing industry is vital to the
success of the American economy. The events of September 11th, 2001,
showed us just how important the industry has become; even though
the economy hit a rough spot in the months that followed, the strength
of the industry prevented much of the country from falling into
recession. In light of our changing world, we need to do all that
we can to help the housing industry grow and prosper.
The announcement I am making today about FHA-insured multifamily
properties will help.
Since the events of 9/11, primary insurance companies have been
excluding or limiting coverage for acts of terrorism in catastrophic
loss insurance policies. This includes policies that cover multifamily
properties. Even when such coverage is available, it is expensive,
the terms are restrictive, and the coverage limits are low.
Although it was not required in the past, some lenders have begun
requiring properties to secure terrorism insurance as a condition
of the mortgage. Such coverage could cost the owner of a typical
100-unit project an additional $5,000 annually. This is putting
a financial strain on existing properties and discouraging the construction
of new properties.
In response, HUD is announcing that we will not require insurance
coverage against acts of terrorism. In the event that an act of
terrorism destroys or partially destroys an FHA-insured multifamily
property, HUD will pay the claim to the lender.
This new policy will reduce costs for existing and future FHA-insured
multifamily properties, and encourage the construction of new projects.
At a time when affordable housing is difficult to find in certain
pockets around the country, this is an important step in ensuring
more options for renters and continuing economic growth in our country.
While we are passionate about our mission to increase the ranks
of America's homeowners, HUD's agenda is broad and covers every
aspect of single-family housing, multifamily housing, and urban
and economic development.
Another important aspect of our work at HUD is providing affordable,
safe, and decent housing opportunities to those who rent. Our rental
assistance programs collectively help more than four million rental
households. Along with help for renters, we continue to help communities
meet housing and other needs through HUD's Community Development
Block Grants and our HOME program. And our Administration is deeply
engaged in meeting the challenge of homelessness.
Through all of our work, our focus is on helping families and individuals
who never imagined owning their own home or becoming economically
self-sufficient, to realize their own American Dream.
In this, we depend on your partnership.
The mortgage finance industry is one piece of an elaborate network
this nation has developed to meet the housing needs of our citizens.
It is a critical piece, for when it comes time for a family to finance
the largest purchase most of them will ever make, they turn to you.
The fact that anybody in this country - regardless of their background,
or the place they were born - has the opportunity to purchase the
home of their choice, in the neighborhood of their choosing, is
a remarkable achievement. And you help to make it happen.
At the White House Conference on Increasing Minority Homeownership
last week, I met a family that symbolizes everything the President
is trying to achieve through his focus on minority homeownership.
Their story should be an inspiration to all of us who work to make
homeownership a reality for families in this country.
Carlos and Jane Arias and their son Gian Carlos arrived here as
immigrants from Peru. They wanted to own their own home, but faced
so many obstacles that homeownership to them was nothing but a dream.
They did not speak English. They had no credit history in this country.
And even if they could get a mortgage, they had little money to
put towards a down payment and closing costs.
But through homebuyer education and down payment assistance provided
by our Blueprint partners, the Arias family navigated their way
through the process of establishing credit and buying a home. Just
18 months after arriving in this country, they became homeowners.
In 18 months, they went from being new immigrants with little hope
of ever owning a home of their own, to being homeowners. And last
week, they got to tell their story to the President - just a few
days before they were sworn in as American citizens.
I would say that if the Arias family can become homeowners in this
country, the dream of owning a home is available to all Americans.
Through our work at HUD, the continued commitment of President
Bush, and the support of partners like MBA, we will inspire more
success stories like the one the Arias family has to tell. And our
communities and the entire nation will grow even stronger as more
families achieve the American Dream for themselves.
Content Archived: March 16, 2010