2008 National Housing Summit


Thank you, Anoop (Prakash). Good morning. Thank you all for coming. Welcome.

We meet at an extraordinary point in our nation's economic history. The need for our partnership and collaboration has never been greater, and the quality of that partnership will mean the difference for millions of Americans.

The past two years have seen mounting challenges in the housing market. Those challenges have become more difficult with the passage of time.

This summer, home prices dropped to the lowest levels in years. Foreclosures continued to increase, as housing starts and home sales continued to decline.
And communities suffered as more houses began to stand empty. There was much reason for concern. It was a summer of discontent in the housing market.

But, discontent turned to upheaval. September and the first days of October have been a white-knuckle time for all of us. There has been a succession of shock waves forcing the President, Treasury, the Fed, HUD, FDIC, and Congress to undertake unprecedented actions to try to stem the turbulence in our market. The problems have been monumental, almost beyond belief, vast, foreboding, with global implications.

We saw the need to save Fannie Mae and Freddie Mac; AIG, Wachovia and WaMu. There was the collapse of Lehman Brothers, virtually unthinkable a few months ago. These are enormous corporations with global reach and impact. And their problems rippled out far beyond our borders.
In this new financial landscape, each day we were called upon to craft targeted, on-point solutions on a sweeping scale.

Then, just two weeks ago, the need for rapid intervention startled, overwhelmed, the nation. Thankfully, the President signed the emergency legislation on Friday after tense and intense negotiations with the Congress.

And at the same time in my own Agency, we took important positive steps forward, such as the rollout of our Hope for Homeowners refinance program to help struggling homeowners and the allocation of significant federal funding for communities to purchase and rehabilitate foreclosed properties.

Each of these actions has been important. Housing is central to our economy, and economic confidence is critical to the availability of credit.

And we haven't had time to wait. The market needs solutions, support, and liquidity. There is a dire need for stability.

One year ago, six months ago, even three months ago, a similar gathering would have confronted a much different world. The economic landscape is changing right before our eyes, evolving rapidly as some industry leaders find themselves in a new relationship with the federal government, others now a part of new companies, and some have just disappeared.

Yes, there are challenges...and opportunities ... ahead. And we have much to discuss, much to absorb. There are some who already talk about new economic architecture on that landscape. They are right.

There are new structures in place, a new financial landscape that did not exist a few months ago. We find ourselves in a land we thought we knew, using common language, relying on our previous experiences and traditions, only to discover that there is much to learn and a pressing need for invention.

The toolbox has grown and there are more tools to address the housing crisis. We need to figure out how best to use these tools to help people in need. And we must do this together. We need your leadership and creativity. We must maximize the power of partnership. And we need to do that right now...today!

One of the benefits of this summit is that we can exchange information and educate each other.

There are best practices to garner from state and local governments across America. As a part of this metamorphosis, we need to create powerful and lasting partnerships.

The federal government cannot do it alone, nor should it. In my view, some of those partnerships will be created in this room today and tomorrow.

Even with recent legislation and new tools to help homeowners, this crisis is not over. We may face further challenges in waves. We will see delinquencies from Alt-A and Option ARMs resetting into 2010.

We need to support credit for new home buyers, in order to work through deep inventories. And we need to understand the need for affordable housing during this period of disruption. Now is the time to get ahead of these and other upcoming challenges.

We have already come a long way. There have been major steps forward. Let me mention some architectural changes that enable us to better respond to the needs of homeowners in your communities across the country. You need to understand them to better help homeowners in your communities.

At HUD, we have been working hard to help many people who cannot afford their current mortgages keep their homes. One way is through loan insurance provided by HUD's Federal Housing Administration (FHA). The advantages of FHA-insured loans are well known:

  • 30 year fixed mortgage
  • Last payments same as the first
  • A government-backed mortgage.

FHA can mean salvation for homeowners confronting an increase in their mortgage payment, a balloon payment or a life event.

In August of 2007 we opened up FHA to subprime borrowers who had begun to miss payments because of reset. We rebranded our refinancing product FHASecure, and we expanded this program even further this summer.

Since we launched FHASecure, we refinanced approximately 380,000 families, many of whom may have lost their homes, into a more affordable FHA-insured mortgage. We believe a total of about 500,000 families will refinance into more affordable FHA mortgages by the end of the year.

Last week, I announced implementation of the HOPE for Homeowners program. This program will provide additional help to refinance families in the most difficult situations. For lenders to participate, they must reduce the loan amount to no more than 90% of the home value, insuring a layer of equity. In addition the restructured loan must meet an affordable standard for the family, to reduce the chance of another default. We and our partners have moved mountains to launch HOPE for Homeowners by October 1, the first allowable date under the legislation.

We strongly encourage borrowers to work with their lenders to determine if any of HUD's programs can give them the help they need.

FHA also plays a growing role in helping homebuyers purchase homes (as the subprime market has collapsed). Currently, FHA has almost 5 million insured single-family mortgages.

With FHA's expanding role, its market share has grown from 2% to 14% in just two years. Our loan volume is running at 3-4 times last year's level. And we continue to see new lenders entering the program.

Together, we need to increase everyone's understanding of these new opportunities. FHA Commissioner Brian Montgomery and his team have already reached out to work more closely with lenders and state housing authorities. For example, FHA has instituted a liaison program to better inform lenders about FHA's products.

In addition, FHA has also signed a Memorandum of Understanding (MOU) with the state housing finance agency in Minnesota to help qualifying borrowers in that state. We are working on signing similar MOUs in other states.

The program was just started, but already we are seeing some results. There are outreach efforts to several cities in Minnesota. There are events this week to explain how lenders in Minnesota can work with FHA.
We must continue to build partnerships like this one with local agencies that are working with families and lenders on the front lines. I am hopeful that similar partnerships can be formed over the next two days.

And with FHA-approved loans you get FHA's successful loss mitigation efforts. FHA has been a leader in contacting FHA insured homeowners in trouble to work out solutions. In 2008 FHA servicers completed more than 100,000 loss mitigation actions. Of these 96,500 resulted in borrowers retaining homeownership.

This represents an 11.5% increase in home ownership retention over 2007. In fact, loss mitigation efforts have helped about 300,000 families keep their homes over the last three years. This means 300,000 fewer foreclosures.

This summer, we reinstituted a pilot program in Detroit to provide new, more aggressive foreclosure prevention assistance to homeowners. Traditionally, when all FHA loss mitigation measures have been exhausted, lenders foreclose and then submit a claim to FHA.

Under the pilot program, we are creating a means for lenders and investors to sell their non-performing mortgages before foreclosure to HUD and a joint venture partner that specializes in foreclosure prevention.

HUD will transfer the assigned mortgage loans to a joint venture partner who will be responsible for servicing the loan and helping families stay in their homes. The loan will be sold at a significant discount, enabling the joint venture to modify the loan to make it more affordable.

Treasury and HUD have worked on a broad based effort with private lenders called HOPE NOW. HOPE NOW is a voluntary, private sector effort to contact homeowners in trouble and help them stay in their home, often by renegotiating the mortgage.

HOPE NOW has streamlined the loan review process to speed up loan modifications and refinancings and established best practices to deal with difficult situations like second liens.

At the moment, 27 of the nation's biggest mortgage companies are participating, companies that service about 90 percent of the subprime loans. Nearly 2.3 million loans have been reworked since July 2007. We face an industry wide problem. It will need industry-wide solutions.

Now, mortgage matters are often complicated and many borrowers need help understanding them. Many foreclosures can be avoided - either by helping people make good decisions when they take a loan, or by helping them understand their options when they can't pay their loan. The terms can be confusing. People don't know what questions to ask. They often don't know where to start.

We know that housing counselors are very successful in helping families. There are 2300 HUD-approved housing counselors in the United States.

Last week, I announced the release of $50 million in housing counseling grants. And the President has requested $65 million in his fiscal year 2009 budget for housing counseling. That is an increase of more than 150 percent since he assumed office.

We are also expanding efforts to improve financial literacy in the future. This is one place where the public and private sector are in complete agreement. And I applaud industry efforts and efforts by non-profits to promote financial literacy.

Recently I held a roundtable on financial literacy with industry leaders and government officials. The exchange of views was very helpful. I believe we all came away dedicated to improve efforts to help give people the tools to promote their financial well-being and their ability to make responsible decisions.

Beyond counseling and financial literacy, we are working to ensure that homebuyers have the information they need to make a fully informed decision when they buy a home.
So another step we have taken is to begin the process for adopting new rules that would ensure borrowers understand the fine print.

We are working on rules that would require mortgage lenders to provide a clear statement of all closing costs and expected monthly obligations under the loan. These new rules under the Real Estate Settlement and Procedures Act (RESPA) will ensure borrowers know what they are agreeing to.

That is just common sense, a good business practice, and it is the right thing to do.

Cities and states confront significant challenges in addressing the problems associated with vacancy and blight. FHA has announced a temporary policy 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 to discourage flipping. But, for one year, FHA will permit the immediate sale of foreclosed properties to legitimate borrowers wishing to use FHA-insured financing.

10 days ago, I also announced the allocation of $3.92 billion, through the Community Block Grant Program, for cities and states to respond to the effects of high foreclosures.

Through the Neighborhood Stabilization Program, HUD will provide targeted emergency assistance to state and local governments to acquire and redevelop foreclosed properties that might otherwise become sources of abandonment and blight within their communities. These targeted funds will be used to purchase foreclosed homes at a discount and to rehabilitate or redevelop them in order to respond to rising foreclosures and falling home values.

State and local governments can use their grants to acquire land and property; to demolish or rehabilitate abandoned properties; and to offer downpayment and closing cost assistance to low and moderate-income homebuyers. You will be hearing more about this program today.

We want to help communities put families back into these homes and to breathe new life into neighborhoods trying to recover from the effects of foreclosure and declining property values.

So far I have talked about actions primarily involving HUD. But there have obviously been powerful measures taken to address broader systemic issues.

The actions by Treasury and the Federal Reserve Board to shore up the marketplace have been necessary.

Placing Freddie Mac and Fannie Mae in a conservatorship has been an important step forward. It will dramatically improve oversight, clarify their mission, and ensure they have the capital and liquidity they need to perform a vital role in helping Americans get mortgages.

The economic assistance package just signed by the President was also essential. Credit must begin to flow again to businesses and American families. When credit is frozen, American families can't get capital they need to pay for education, buy homes, or pay for emergencies. Businesses can't get capital they need to invest in ways that grow our economy, creates jobs, and expands opportunity.

Our summit is timely. By definition, a summit is a gathering of leaders to talk together and create a common path to the future. And this is such a meeting. Here, in this audience, we have hundreds of leaders in government and policy, advocacy and administration...public and private...profit and non-profit...housing counselors, government officials, and trade representatives.

We need to talk. And we need to listen. We need to work together as never before. Nearly 800 people from 45 states have joined us for this unprecedented forum. I am pleased you came here to share your wisdom and participate in this summit.

In August, I held a roundtable in Southern California with state and local officials to discuss market challenges they were facing in their communities. I was struck by how many officials did not know or understand the tools that were available to them to help stabilize neighborhoods.

This summit is an opportunity for us to work together to understand the tools and programs that are available, like FHASecure, Hope for Homeowners, HOPE NOW, the Neighborhood Stabilization Act, and for housing counseling.

But, it is also an opportunity for you to share ideas, forge relationships, and maximize partnerships and practices with colleagues from neighboring states and communities that might be facing similar challenges.

We have a summit agenda that will help us craft a common vision and sustained partnership for the future. It will also help us gain feedback and a sharing of experience. There is even room for some brainstorming.

Let me offer a preview for the next two days.

After my remarks, there will be a presentation on the Neighborhood Stabilization Program.

We will continue throughout the day to provide more information about the Neighborhood Stabilization Program. First you will hear a detailed discussion of the program. Then Anoop Prakash will lead a panel discussion on ideas about best practices to use the grants awarded to your communities effectively.

After lunch, there will be several panel discussions.

  • One is about recycling foreclosures for community good.
  • A second concerns foreclosure prevention and loss mitigation.
  • A third is about expanding consumer education.

Then we will have six breakout sessions for questions on the technical aspects of implementation of the Neighborhood Stabilization Program.

At the end of the day we will have opportunities for networking with HUD and with representatives of our partner organization.

Tomorrow, the head of the National Economic Council will give you an insider's view of the legislation signed by the President last week.
FHA Commissioner Brian Montgomery will discuss the Housing and Economic Recovery Act and the Hope for Homeowners Program.

Following their presentation, there will be two breakout sessions on foreclosure prevention and loss mitigation: one for state and local governments, the other for the industry.

This information will enable us to work better together...work as partners.

  • To grapple with the issues on our doorsteps;
  • To extract value out of programs that have been launched; and
  • To leverage each other's creative ideas.

The actions we all take in this time of crisis could shape the face of our communities and neighborhoods. The lessons we learn here can help us address the deeper policy and structural issues for the future.

In all of this, we must remember the families that we serve - people who need us. More than two million people could enter foreclosure this year, on top of those who have already lost a home and with more foreclosures expected next year. There are families losing their investments, their savings, and the place where their children grow up. We must help them.

That is our job now! And this must happen in a way that best restores trust, faith, credibility, and even hope among our own citizens and among the investors and decision-makers around the world.
This is our time for leadership, our time for statesmanship, wisdom, and prudential decisions that heal a wounded economy and stabilize a global marketplace. This is the time for our best. This is our moment to make a profound difference, to help those who need us.

Again, thank you for coming.

To read the Press Release: go here.


Content Archived: February 6, 2012