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