PREPARED REMARKS FOR
BRIAN MONTGOMERY, FHA COMMISSIONER
ATLANTA, GA
SATURDAY, JUNE 28, 2008

Thank you, Charles (Gardner, Director Atlanta Homeownership Center). Good morning. I am pleased to join all of you at this homeownership summit.

A "summit" means a gathering, a meeting of all the people involved. It is a chance to hear information, share ideas, and reach out to help those in need.

And I believe that is what we can do today, on this Saturday morning. If you look around you will see the entire spectrum of the housing market represented: investors, lenders, housing counselors, homeowners, and government officials.

And we have all come here looking for answers, looking for ways to help homeowners in a time of turbulence in our housing markets. State of Georgia is on the frontlines. You had the 6th highest rate of any state's foreclosure in May, up 23 percent over last year at this time. But I know you are also alarmed by another statistic, that foreclosures increased by 11 percent from April to May. In Georgia, one in every 378 households was in foreclosure last month. And we know that a large number of these foreclosures have taken place in Atlanta. And we know what foreclosure means: the loss of property, equity, and dreams.

Here you have even witnessed housing prices in the Atlanta suburbs fall faster than in the inner city, with some homeowners going "underwater" with their mortgage.

The situation in Georgia is very sobering, but there is a lot we can and are doing together to bring greater rationality, stability, and security to the housing market. And some analysts predict that Atlanta will be among the first of the major cities to bounce back in the housing market. One way is through this "Homeownership Summit." Here we get together and share ideas, working in partnership to help people keep their homes. That, by itself, is a good starting point. We need to change the dynamics of the housing market.

But we also need to offer up concrete steps that borrowers and lenders can take to avoid foreclosure.

For those looking to avoid foreclosure on your home, I strongly suggest housing counseling. It can be valuable pre-mortgage and even after that. We know that approximately 97 percent of those who completed our housing counseling program with a HUD-approved housing counselor avoided foreclosure in 2007. That is powerful evidence about the difference that housing counseling can make.

We have over 2300 HUD-approved housing counseling agencies in the United States. And some of those counselors are here today. So please talk to a counselor. Housing counseling help prevent problems.

Another answer is to call your lender. Communication is vital, even if you have called before. The dynamic in the market is rapidly changing, and the industry has created a voluntary effort called HOPE NOW Alliance. Most of the mortgage lenders belong to the alliance. They have taken a number of steps to help borrowers reworking their mortgages, already reaching about 1.6 million homeowners in trouble.

A third answer is to look at the Federal Housing Administration (FHA). And here I am speaking to everyone: lenders, homeowners, counselors, and everyone involved in the housing market. FHA is a powerful, promising answer for many of those in trouble. It is an island of hope for many families.

As you know, FHA has been around since 1934. In fact, we celebrate out 74th anniversary this week. FHA started off as a strong market presence, and then faded into relative obscurity in the last couple of decades.

Now, FHA is back as a significant part of the housing market. FHA's market share has increased from about 1.8 percent in 2006 to about 10 at the present moment. It may even increase in the months ahead.

In late August 2007, President Bush introduced FHASecureto help Americans facing foreclosure refinance into a safer, more secure FHA loan. Since then, approximately 250,000 families have been able to refinance with FHA. Our projections show that we are on pace to reach a total of 500,000 families by year's end.

In Georgia, more and more people are turning to FHA. In the first eight months of this fiscal year, the number of purchases and refinancing involving FHA has doubled over the previous fiscal year.

Almost three months ago, in early April, I announced additional assistance to even more at-risk homeowners. That expansion will start on July 14. It will assist families in default as a result of temporary economic hardship, as well as those who were affected by payment shock.

Expanding FHASecure offers lenders and borrowers a refinancing alternative that makes voluntary write-downs a viable option. Appropriately reducing the principal amount owed on subprime mortgages helps both troubled borrowers and lenders.

Another helpful action was the passage of the President's Economic Stimulus Package. The stimulus package temporarily increased FHA's loan limits. For the rest of the year, we can back more mortgages in high-cost states and help homeowners hold on to their houses. That may help borrowers in Atlanta and other high-priced housing markets in Georgia. For example, the median home price in Atlanta in 2008 is now around $210,000. It is generally lower elsewhere in the state, depending on location. The temporary loan limit for Atlanta is $346,250. So the new limits should have a significant, positive impact.

Nationally, we project that the temporary loan limits will help approximately 100,000 homeowners obtain safe FHA-backed loans by the end of this year.

But these loan limits will expire at the end of the year. So we need to have appropriate and long-term changes to FHA's loan limits through modernization legislation.

We have taken other steps. In an effort to stabilize declining home values in certain neighborhoods, this week we announced a temporary policy that will extend government-backed mortgage insurance and 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.

For one year, FHA will insure foreclosed properties marketed and sold by property disposition firms on behalf of lenders. The properties, which must purchased by owner-occupants, will no longer be subject to the customary 90-day waiting period.

This action will allow homebuyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes in neighborhoods across the country.

Additionally, we need to make mortgages more understandable and more uniform. That's why we are proposing through new regulations to reform the Real Estate Settlement Procedures Act (RESPA) to require all mortgage lenders and brokers to clearly display, up front, an estimate of all settlement services, fees, and charges. They must not be hidden in the fine print.

The rule will require a clear statement that would itemize closing costs and lock in certain charges at settlement. This would offer greater transparency and certainty, allowing Americans to shop and compare.

And this week I announced a new program, the FHA Liaison Program. I have designated staff who will work directly with lenders to educate them about FHA and to help facilitate FHA loans for borrowers who quality.

These are just some of the answers. In a changing marketplace there are numerous opportunities to make a difference, if we look for them, and take appropriate action. I can assure you that at FHA we will be looking for every possible way to help homeowners keep their homes.

I think there is much we can do together. This summit gives us an opportunity to make a difference for each other, here in Atlanta and throughout Georgia.

Good luck. Thank you for inviting me to join you.

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