Mortgage Bankers Association
Remarks as prepared for delivery
National Housing Summit
by Secretary Mel Martinez
Monday, March 10, 2003
Thank you, John. I appreciate your generous introduction. John
has brought strong leadership to the Mortgage Bankers Association
of America since coming aboard as Chairman. John, I was very happy
to see MBA so quickly get behind the President's initiative to increase
minority homeownership. And your personal commitment to our White
House Conference last October helped to make the day a great success.
I want to begin by thanking MBA for the announcement you'll be
making later today supporting President Bush and his plan to generate
economic growth. The President's initiative for stimulating the
economy - with its focus on reducing the family tax burden, promoting
business investment, and creating jobs - is one of our Administration's
top priorities. As the President has said, "We cannot be satisfied
until every part of our economy is healthy and vigorous."
A centerpiece of the plan is our proposal to eliminate the double
taxation of corporate earnings. I know there has been concern within
the affordable housing community that the President's economic package
would have unintended consequences to the Low-Income Housing Tax
Credit. The analysis MBA will be releasing later today determines
that the overall benefits of job creation and economic growth will
benefit consumers and the housing industry, and will not have a
significant impact on the Low-Income Housing Tax Credit.
The President's jobs and growth plan will boost the economy at
a time when just such a boost is needed.
The efforts of America's mortgage banking industry are critical
to the strength of our communities and national economy - especially
during this time of global uncertainty. With the War Against Terrorism
continuing and the attention of the world focused on Iraq, America
needs to be strong. The President's efforts have led the economy
into recovery, but the Administration will not rest until we move
beyond recovery and into lasting prosperity.
The housing market will be key to helping us achieve this.
As it has over the past two years, housing continues to lead the
way in turning around the nation's economy. The recent news that
sales of existing homes rose in January to a new monthly record
is yet another indicator of the ongoing strength of the housing
market, and another sign of a strengthening economy.
Our Administration has tremendous respect for the mortgage banking
industry and the way in which you empower families to achieve the
"American Dream" of homeownership. It is worth noting that many
of the families you serve are low- and moderate-income borrowers
who might not otherwise have the option of owning their own homes.
In fact, mortgage bankers consistently provide 80 to 85 percent
of all FHA and VA home loans.
Creating affordable housing options for more Americans remains
a critical component of the President's agenda. As a first step,
we want more families to become homeowners. And we want more of
those families to be minorities.
Homeownership reached record levels last year: 68.3 percent of
all Americans own their own homes. Yet, we continue to see a gap
between the homeownership rates of minorities and non-minorities.
By a significant margin, minority families are less likely to own
their own homes.
President Bush is committed to closing the gap. Last year, he set
a bold goal of creating an additional 5.5 million minority homeowners
by the end of this decade. HUD responded by launching our Blueprint
for the American Dream Partnership, and every segment of the housing
industry has joined with us to help meet the President's challenge.
MBA was one our first partners, and I salute the Association for
coming aboard early. You have committed to expanding your outreach
to minorities through homeownership education in Spanish, holding
community forums to discuss the challenges of moving minorities
into homeownership, and helping MBA members form effective public/private
The President has asked me to report back to him in June on our
progress in carrying out these and other commitments. John, I want
you to know I have to report to the President on this - so just
know I will be calling!
Our efforts to increase minority homeownership are having an impact.
HUD had set a national goal of insuring 1.1 million FHA single-family
mortgages last year. We far surpassed that goal with nearly 1.3
million actual endorsements. Of those, 419,000 went to minority
families, which again was well above our target for the year.
Another way that we are working to increase homeownership, and
at the same time attack the problem of predatory lending, is by
reforming the Real Estate Settlement Procedures Act. This has been
a top priority of mine since coming to HUD.
The mortgage finance process and the costs of closing remain major
impediments to homeownership. Every day, Americans enter into mortgage
loans - the largest financial obligation most families will undertake
- without the clear and useful information they receive with most
any other major purchase. This makes them vulnerable to predatory
lending practices, especially if the buyer is a member of the minority
or elderly populations.
After agreeing to the price of a house, too many families sit down
at the settlement table and discover unexpected fees that can add
hundreds, if not thousands, of dollars to the cost of their loan.
As a result, many homebuyers find the settlement process to be filled
with mystery and frustration.
This Administration is committed to streamlining the mortgage finance
process, so consumers can shop for mortgages and better understand
what will happen at the closing table. For these reasons, HUD has
proposed a major overhaul of the regulations governing the Real
Estate Settlement Procedures Act.
Shortly after taking office, I was faced with a major RESPA issue:
the legality of yield spread premiums. In response, we issued a
policy statement repeating our view that as long as the broker's
compensation is for goods, facilities, or services, and the total
compensation is reasonable, yield spread premiums to the mortgage
broker are legal under RESPA.
At the same time, we recognized that there were serious disclosure
problems involving yield spread premiums. We noted that less-scrupulous
brokers often used yield spread premiums to generate additional
profits, placing unsuspecting borrowers in higher-rate loans without
their knowledge. And so in the process of issuing the policy statement,
I committed HUD to establishing clearer disclosure rules for mortgage
broker fees, and to simplifying and improving the mortgage origination
process for everyone involved. There was general - virtually unanimous
- agreement among all the industry groups, as well as consumer advocates,
about the need for better disclosure: simpler, clearer, and on a
timely basis so consumers could shop for the best loan.
When I met with you last year at MBA's annual conference in Chicago,
I outlined in detail the steps HUD had taken up to that point to
overhaul the RESPA regulations. I told you that we were nearing
the finish line of this marathon effort. I can tell you today that
we are almost there.
HUD received nearly 43,000 responses while the rule was open for
public comment, which was a record for us. We have spent the 18
weeks since the comment period closed reviewing and cataloguing
each submission. Just as we have done since first undertaking this
massive effort, we have continued to meet with industry groups,
consumer advocates, and other interested parties. It was critical
that HUD know whether the approaches we have proposed are the right
ones - and if not, what alternatives may work better.
Since the proposed rule was published last summer, alternatives
have been brought to our attention. Our thinking is evolving on
how portions of the proposal can be revised for the final rule,
to ensure that all businesses, large and small, can take advantage
of the opportunities presented by the rule. Tomorrow, I will be
testifying before the House Committee on Small Business to describe
the ways in which our proposal will impact small businesses, and
how we can best minimize such impacts.
I believe that the Department has developed a well-crafted proposal
that can reduce settlement costs by an average of $700 per closing.
This kind of savings will allow many Americans currently priced
out of the homebuying market to buy a home. Overall, the annual
savings to consumers could be as much as $8 billion. This kind of
savings will have the great benefit of increasing the number of
lower-income Americans who will now be able to buy a home. We also
expect our proposal to promote innovation in the marketplace and
inspire greater public confidence in the mortgage lending industry.
Most importantly, our RESPA reforms will restore clarity, transparency,
and simplicity to the homebuying process.
MBA was an early supporter of our work on RESPA. I want to personally
commend MBA's leadership and members for your commitment to our
Because they ensure greater transparency, our proposed reforms
will make it more difficult for unscrupulous lenders to take advantage
of borrowers. However, let me be clear that although RESPA reform
is an important tool for addressing predatory lending, it will not
end predatory lending on its own. And so we are attacking the predatory
lending problem while preserving a source of credit for those with
less-than-perfect credit histories.
The Administration is targeting unscrupulous lenders in part by
pooling the resources of the Federal Government, and helping agencies
work together to fight abusive lending practices. As a result, HUD
and its partners are becoming much more effective in tracking down
lenders who prey upon first-time homebuyers, senior citizens, and
FHA has mounted a vigorous assault on predatory practices. This
year, we expect to publish at least 15 new regulations aimed directly
at curtailing abusive lending.
Among the other regulations are several that will strengthen FHA's
ability to monitor appraisers. These include new rules holding FHA
lenders accountable for the quality of appraisals, strengthening
the licensing and certification of FHA-approved appraisers, and
implementing Appraiser Watch, a fully computerized system for monitoring
an appraiser's default rate.
Three additional high-priority regulations are waiting to be finalized:
improvements to the Credit Watch program that will help us identify
problem loans and lenders earlier on, a proposal to limit the number
of FHA loans a nonprofit can have at one time, and a rule to prevent
future swindles like the 203(k) scam that threatened the availability
of affordable housing in New York City.
Of course, tough regulations mean little if they are not backed
up by tough enforcement. We are doing this as well. In the past
two fiscal years, we have taken vigorous action against abusive,
fraudulent, and negligent lending institutions and individual lenders.
These investigations have resulted in more than 500 debarments,
another 500 suspensions, and close to 5,000 indemnifications.
I want us to be even more vigilant, so I have directed new resources
to FHA's enforcement activities. We are interviewing for additional
investigative staff this week, and by the end of March, we will
have tripled the number of enforcement personnel.
I understand that abusive lenders constitute only the smallest
percentage of mortgage lenders. The vast majority of you are outstanding
businessmen and women who hold yourselves to the highest standards
and provide a valuable service in your communities. Yet, the activities
of only a handful of unscrupulous lenders can cast a shadow over
the entire industry.
HUD will devote all the resources at our disposal to putting abusive
lenders out of business.
If we had more time to spend together this morning, I would devote
the next 15 minutes to talking about HUD's efforts to expand affordable
rental housing production. We have taken a number of critically
important actions that are helping to boost the supply of affordable
multifamily housing. These efforts have prompted an enormous increase
in activity in FHA's major multifamily program.
Our commitment to affordable housing production continues in the
Fiscal Year 2004 budget, in which we have proposed a $113 million
increase in funding for the HOME Investment Partnerships program.
Overall, HOME will make $2.2 billion in funds available to state
and local grantees to help finance the costs of land acquisition,
new construction, rehabilitation, down payments, and rental assistance.
At MBA's October conference, I made an announcement restating HUD's
policy regarding terrorism insurance. We felt it was important to
do so because some lenders had begun requiring multifamily properties
to secure terrorism insurance as a condition of the mortgage. The
high cost of obtaining this insurance was putting a financial strain
on existing properties and discouraging the construction of new
I want you to know that HUD plans on issuing a proposed rule for
public comment that says FHA will not require insurance against
acts of terrorism for new multifamily projects with mortgage amounts
under $50 million. This clarifies our original announcement and
will impact very few applications for new FHA multifamily mortgage
insurance. Most importantly, the proposed rule will help reduce
costs for existing and future FHA-insured multifamily properties,
encourage new construction, and stimulate the local economic activity
that is so important today.
In closing, let me say that the federal government, consumers,
and the mortgage banking industry are linked by our mutual goal
of creating housing opportunities for more Americans. We should
be proud of our accomplishments over the past two years, but we
cannot rest on them. We have much more to achieve together, and
our best hope of being successful is to work in close concert with
each other, guided by the same high standards and principles, and
motivated by the same goals.
I look forward to strengthening HUD's partnership with MBA and
its members in the coming months, as we pursue the goal we share
of opening the American Dream to more families and individuals,
and opening up our communities to new opportunities for growth and
*This is not a transcript of the Secretary's Speech
Content Archived: March 16, 2010