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Mortgage Bankers Association
2nd Annual National Housing Summit
Remarks prepared for delivery by
Secretary Mel Martinez
Washington, DC
Tuesday, March 12, 2002
Good morning, and welcome to Washington. I appreciate the invitation to join you here today.
Thank
you, Jim, for your very kind words of introduction. The last time
we met - at your annual conference in Toronto - you were just
stepping into the MBA chairmanship. You seem to be holding up
nicely. No doubt those existing home sales figures from January
had something to do with it.
I
want to thank MBA for doing me a great honor in Toronto by donating
a Habitat for Humanity house in my name. Habitat is an organization
of exceptional merit, and the involvement of MBA members in Habitat's
fundraising and building projects is a partnership worth celebrating.
This
is my third opportunity to meet with you as a group and I am glad
that you decided to have me back. I have some exciting new projects
to tell you about� and of course, a great deal has happened since
Toronto.
MBA's
visit to Washington coincides with the six-month anniversary of
the attacks on the World Trade Center and the Pentagon. Yesterday,
I attended a very moving ceremony at the White House, where the
President and Cabinet remembered September 11th in the company
of some of the many heroes of that day, and the days since.
The
attacks forced the Administration to adjust its priorities - to
ensure that we would win the war against terrorism and help Americans
be safe at home. The President is pleased with our success so
far, although everybody recognizes that we still have a great
deal of work ahead of us.
Along
with providing security against terrorism, we want to help American
families achieve economic security. Both goals are intertwined
within the President's budget for the coming fiscal year.
The
$31.5 billion HUD budget contains good news.
Our
budget will ensure that HUD's important work continues uninterrupted,
and provides families across the nation with new opportunities
to climb the steps of the American Dream of homeownership.
The
federal government is one of the three main components of the
housing system in this country. The other two, of course, are
consumers themselves and you, the lending industry. I want to
touch briefly on all three, beginning with the role of the federal
government.
Washington's
responsibility is to provide a supportive framework in which government,
the construction industry, lenders, non-profits, and others who
are vital to the success of our housing system operate. The government
offers tax incentives that help bring people into the mainstream
housing market. We work to fill in any gaps in the system by addressing
issues of unequal access to credit and the inability of low-income
families to afford housing.
The
President and I believe, however, that the federal government
can do more to encourage homeownership in our communities.
Thanks
in part to the most robust housing market ever, more Americans
were homeowners last year than at any time in this nation's history.
The
overall homeownership rate for 2001 stood at 67.8 percent, nearly
half a percentage point higher than it was the year before. Because
you provide the financing that makes homeownership possible for
millions, I give a lot of the credit to MBA and its members.
HUD's
focus on moving families into their own homes helped to ensure
that minority homeownership is rising as well, despite the effects
of the terrorist attacks and a troubled economy. We still need
to continue to focus on bringing the dream of homeownership to
all Americans.
During
the past year, HUD has made expanding homeownership - especially
among minority families - a top priority. We are actively promoting
the benefits of homeownership whenever and wherever we can. From
wealth creation to family stability, homeownership helps build
strong communities.
I
know that I am preaching to the choir when it comes to the value
of homeownership.
First of all, it represents an increase of about seven percent
over the previous year. At a time when every dollar is precious,
and the cost of homeland security is necessarily consuming many
federal resources, this increase shows the President's commitment
to improving housing and communities.
Our budget will ensure that HUD's important work continues uninterrupted,
and provides families across the nation with new opportunities
to climb the steps of the American Dream of homeownership.
The federal government is one of the three main components of
the housing system in this country. The other two, of course,
are consumers themselves and you, the lending industry. I want
to touch briefly on all three, beginning with the role of the
federal government.
Washington's responsibility is to provide a supportive framework
in which government, the construction industry, lenders, non-profits,
and others who are vital to the success of our housing system
operate. The government offers tax incentives that help bring
people into the mainstream housing market. We work to fill in
any gaps in the system by addressing issues of unequal access
to credit and the inability of low-income families to afford housing.
The President and I believe, however, that the federal government
can do more to encourage homeownership in our communities.
Thanks in part to the most robust housing market ever, more Americans
were homeowners last year than at any time in this nation's history.
The overall homeownership rate for 2001 stood at 67.8 percent,
nearly half a percentage point higher than it was the year before.
Because you provide the financing that makes homeownership possible
for millions, I give a lot of the credit to MBA and its members.
HUD's focus on moving families into their own homes helped to
ensure that minority homeownership is rising as well, despite
the effects of the terrorist attacks and a troubled economy. We
still need to continue to focus on bringing the dream of homeownership
to all Americans.
During the past year, HUD has made expanding homeownership - especially
among minority families - a top priority. We are actively promoting
the benefits of homeownership whenever and wherever we can. From
wealth creation to family stability, homeownership helps build
strong communities.
I know that I am preaching to the choir when it comes to the value
of homeownership. As a first step in helping more families own
a home of their own, we have quadrupled the American Dream Downpayment
Fund in our budget, to $200 million.
This Presidential initiative will help 40,000 first-time homebuyers
overcome the high down payment and closing costs that are significant
obstacles to homeownership.
We are tripling funding for the Self-Help Homeownership Opportunity
Program - or SHOP - to $65 million. That $65 million, along with
a lot of sweat equity, will make possible the construction of
an additional 3,800 homes for disadvantaged Americans.
Another exciting homeownership initiative we are targeting to
low-income families will allow them to put up to a year's worth
of their Section 8 rental vouchers toward a home down payment.
And I am very pleased to be able to tell you that the FHA Hybrid
Adjustable Rate Mortgage, which we proposed and Congress approved
last year, is going to be implemented soon. This is a new tool
that will encourage homeownership by reducing initial homebuying
costs.
To encourage the production of moderate-income rental housing
in underserved areas, the HUD budget announces that we will reduce
the section 221(d)(4) mortgage insurance premium from 80 basis
points to 57 basis points.
We made a commitment at HUD to a comprehensive review of the credit
subsidy program. We examined the statistical techniques that were
used to analyze loan performance. We thoroughly updated and refined
FHA's data and incorporated the major tax law changes in the 1980s
that affected the profitability of multifamily housing.
Through our review, we were able to lower premiums, create a self-sustaining
program, provide the industry with stable financing at a much
lower cost, and provide thousands of new opportunities for rental
housing across the country.
Three times over the last eight years, HUD has been forced to
shut down our multifamily mortgage insurance programs because
of lack of credit subsidy. Last year, the shutdown stopped the
construction of some 30,000 rental units throughout the country
and clouded developers in uncertainty.
Today, I am happy to report that our FHA business is strong, both
for single family and multifamily housing. In fact, business is
so strong that if our insurance commitments continue at the current
rate for the rest of the year, we will exceed our statutory limitations
for both the MMI Fund and the GI Fund.
If that continues, I will have to ask Congress to raise the statutory
ceilings enacted last October.
I am particularly pleased with our multifamily business this year.
Through the first five months of the fiscal year, FHA has issued
insurance commitments totaling close to $1.4 billion - compared
to $900 million for the same period a year ago. That is up 50
percent.
Despite the fears expressed by some outside of HUD that raising
the insurance premium would damage the multifamily industry, that
clearly has not happened.
Let me turn now from government to consumer.
We talk often about the rights of homebuyers, and the protections
they are afforded to help ensure that they are treated fairly�
that they are not defrauded� and that they understand the costs
of the home they are buying and have the opportunity to shop the
marketplace.
What we fail to talk about often enough is the fact that homebuyers
have responsibilities, too. The first is to be an educated consumer.
The lending industry offers so many financing options to potential
homebuyers that only an educated consumer can hope to successfully
navigate the system. A buyer cannot possibly make an informed
home purchase if they do not understand the lending process.
The increase in sub-prime lending has made financial literacy
more important than ever. Armed with the facts, a consumer is
far less likely to be victimized by the predatory lending practices
that can trap unsuspecting homebuyers.
Housing counseling has suddenly become a lot more than just another
good idea.
Of course, HUD has funded housing counseling in the past. But
we consider it to be such an invaluable tool for prospective homebuyers
that we have proposed making housing counseling a separate program.
We are funding the counseling program at $35 million� the highest
amount ever, and a $15 million increase over last year.
I want to recognize MBA for taking on a housing counseling project
of its own� the "Stop Mortgage Fraud" program you are kicking
off this week. Your brochure and web site are welcome additions
to the arsenal in the fight against predatory lending. Congratulations�
and thank you for all your work to promote fair and honest lending.
As the third component of the housing system, the real estate
finance industry has never been more important to our economy
than you are today.
When the terrorists struck and experts predicted dire economic
consequences across the board, the housing market overall stayed
strong. Housing continued to perform well when a recession was
officially declared. When an otherwise-gloomy holiday season came
and went, the housing market stayed afloat. And now, with signs
that the recession is ending, the housing market is getting much
of the credit.
You provide a service that is critical to the prosperity of the
American economy. And you are actively supporting the Administration's
efforts to expand the ranks of homeowners and improve and simplify
today's cumbersome homebuying process.
The lending industry has an important stake in a major project
we have undertaken at HUD: the long-overdue challenge of making
homebuying more consumer friendly through comprehensive reform
of RESPA.
I described HUD's plans when we met in Toronto. Today, I want
you to know that we are making good progress.
Intensive staff discussions on a proposed rule that would improve
disclosure for buyers have been underway for months; obviously,
we want to get both the substance and the language right. In addition,
we have been meeting with many, many people from outside HUD -
both industry folks and consumer representatives. As you can imagine,
there are strong opinions on this subject, and we have been careful
to ensure that every viewpoint is heard.
Once we have finished drafting the proposed rule, we will send
it through the normal clearance process: first through the Administration,
then to Congress for review.
At the end of the day, our goal is to create a homebuying process
that is: (1) less complicated and more consumer-friendly; (2)
grounded in transparency through full and early disclosure, and;
(3) less expensive for buyers.
While I cannot give you a firm date when we would like to wrap
up work on the proposed rule, we are probably looking at the first
part of the summer by the time every last "t" has been crossed.
In the meantime, we will continue to talk with people as the process
moves forward. Of course, I welcome your input.
I have been very pleased by the industry's response since I announced
that we intended to reform RESPA. Some mortgage bankers have already
started offering full disclosure voluntarily, without waiting
for HUD to finalize the new disclosure requirements. That is the
sort of action that makes you such a good industry.
Another of our proposals, one we plan to offer in our fiscal year
2003 legislative package, is to make permanent the existing down
payment simplification authority. This is strongly supported by
MBA. Extending the procedure will avoid a situation where HUD
and its clients have to revert to the confusing practices of the
past.
One of the exciting initiatives I wanted to talk about is a new
system that goes to the heart of our efforts to crack down on
predatory lending. Many solutions are being tried across the country,
but this effort is national in scope and has great potential.
We call it Appraiser Watch.
Appraiser Watch is similar to our successful Credit Watch program.
Over the last three years, HUD has identified 103 lenders through
Credit Watch whose loans have had very high defaults and claims
in the first couple of years. We believe the same approach will
be useful for lenders.
Through Appraiser Watch, FHA will adopt procedures for identifying
appraisers linked to excessive defaults and claims on those mortgages
where they performed the property appraisal. While mortgage default
does not necessarily prove misfeasance on the part of the appraiser,
FHA will use this information to help target its field review
efforts and to take other sanctions, as appropriate.
Of course, we recognize that loans go into default for many reasons
besides inaccurate appraisals. Certain mortgage products, geographic
areas, and other factors contribute to higher than average default
and claim rates, and FHA will take these factors fully into account
before applying any sanctions.
We are now in the early stages of the rulemaking process, and
we look forward to giving appraisers, lenders, and everyone else
an opportunity to advise us and comment on this new approach to
ensuring more accountability within the industry.
The federal government, consumers, and the lending industry are
linked by our mutual goal of expanding homeownership to more Americans.
Our best hope of achieving success is to work in close concert
with each other, guided by the same high standards and principles,
and motivated by the same goals.
Your industry has a profound influence in our communities. You
help families live their dreams� in the neighborhoods of their
choice� in homes of their own. It is impossible to underestimate
your impact.
Thank you for the job you do for the homebuying public, and I
look forward to working closely with you in the future.
Content Archived: March 12, 2010
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