MONDAY, JUNE 23, 2008

Good morning. Thank you, Nic (Retsinas). I am pleased to join with David (Lowman) and Saul (Ramirez) for the release of this report, the 20th "State of the Nation's Housing."

I also congratulate Eric Belsky and his entire team for the quality of this report. I know how much hard work went into this effort.

And, of course, thanks to Harvard University for continued sponsorship of the Joint Center for Housing Studies.

The "State of the Nation's Housing" report is an extremely valuable addition to our understanding of the housing market. In fact, it is THE comprehensive compendium, a picture formed by encyclopedic statistics, and identification of the ebb and flow of powerful forces in our economy. It is a survey, illustrating how the housing market has changed. It is also a barometer, showing how we arrived at the current housing market, a sensitive instrument for telling us about the state of the market. Additionally, it is an indicator of the future direction of the housing market, casting light on the trends propelling us into the months and years ahead.

That is why this report has a worldwide audience of policy-makers, investors, lenders, housing advocates, and economists. It may be the single most important academic publication in the housing industry each year.

There is a remarkable amount of information. This data will be very helpful, even crucial, as we confront the current turbulence in the housing market.

For some the story may be the downturn in the housing market. But, by itself, that is only a part of the story. The market itself is rapidly changing, in flux, quickly shifting to confront the downward gravitational grip of the housing crisis.

In fact, the market is changing right now, this instant. The paradigm of thinking is shifting, with more attention to the needs of borrowers. There have been aggressive actions against predatory lenders and much more self-policing by the industry. And the lenders themselves are changing the market by working closer with borrowers to avoid foreclosure. For example, the HOPE NOW Alliance, which includes lenders who hold 90 percent of mortgages, has been very aggressive. The alliance members have sent out letters, made phone calls, issued a temporary pause on foreclosure efforts, and announced new guidelines to provide rapid relief to homeowners in trouble. These efforts have already reached 1.6 million homeowners, helping people stay in their homes.

This changing market also has more involvement by the Federal Housing Administration (FHA). Currently, FHA has 4.8 million insured single-family mortgages and 13,000 insured multifamily projects in its portfolio. Our share of the market is growing very fast, from 1.8 percent in 2006 to now about 10 percent at this moment. In the first quarter of calendar year 2008, compared to the same period last year, there has been an increase in applications in Florida of 163 percent, Maryland 323percent, Minnesota 288 percent, and Nevada: 343 percent. The surge of applications is evident in every state.

This is a major change. And I think it will grow larger in the next few months.

Through expansion of our regulatory authority we have helped roughly 250,000 families since September 2007 avoid foreclosure by refinancing into FHASecure. We believe that in total FHASecure will rescue about 500,000 families by the end of the year.

In addition to helping struggling homeowners, the program has added much-needed liquidity to the real estate market. Since September 2007, FHA has helped pump more than $76.1 billion of mortgage activity into the housing market; more than $30.3 billion of that investment came through FHASecure.

The Economic Stimulus Package will add even more families to FHA. The increased loan limits have made an instant impact on the market. With each month we see more and more people turning to FHA who were priced out before. Since March, thousands of families have already refinanced with FHA because we increased limits.

We have taken other actions, like the temporary policy announced this month to allow for the immediate sale of vacant foreclosed properties. Historically, FHA has prohibited insuring a mortgage on a home owned by the seller for less than 90 days. This prohibition was intended to prevent property "flipping," a predatory practice that strips a home of its equity before being quickly resold at an inflated price to an unsuspecting buyer. But, for one year, FHA will insure foreclosed properties marketed and sold by property disposition firms on behalf of lenders. This new policy will permit the immediate sale of foreclosed properties to legitimate borrowers wishing to use FHA-insured financing.

Lastly, there is legislation in Congress that may dramatically restructure the housing market, if it is passed. Helpful actions would be FHA modernization, continued authorization of risk-based pricing, and a ban on seller-funded downpayments. Actions that would be disastrous would be to dump bad loans on FHA or turn FHA into the federal lender of last resort, a mega-agency that in effect replaces private lenders. However this works out, the market will be different, for better or worse. And these changes will alter the prognosis for the future in the current report.

I know there are some who think the concept of a "homeownership society" is dead. They are wrong. Homeownership is part of the American Dream. Yes, some of the enormous gains of the first half of the decade may have been lost. But the answer is to find a way for people to find the right house and the right mortgage, not to abandon the idea of homeownership itself.

I believe we are far from finished in making changes to the housing market. Our goal must be to help more families buy a home they can afford, to help families keep their homes once purchased, to place the market on a more stable foundation, and to smooth out the disparate cycles. As we do this, our discussions will begin with the "State of the Nation's Housing" report, and our success or failure will be documented in the reports to come.

Again, congratulations on the publication of this fine report. Thank you for including me in its release.


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