Prepared Remarks of Secretary Shaun Donovan at a Press Conference Announcing the Distressed Asset Stabilization Program
Clinton Global Initiative, Chicago, Illinois
Friday, June 8, 2012
Thank you. And thanks to the Clinton Global Initiative for bringing together partners from around the country to help us tackle some of our most pressing challenges -- based not on ideology, but on partnership and results. That’s our focus in the Obama Administration as well.
That’s why we’re gathered here today, as we announce that the Federal Housing Administration is enhancing its “note sales” program to give more homeowners with seriously delinquent loans the chance to avoid foreclosure.
This announcement comes at an important moment. While the recent jobs report reminds us that we still have a long way to go, there’s no question the tools the Obama Administration has provided to keep responsible families in their homes have made a real difference.
Because we provided responsible families opportunities to stay in their homes, foreclosure notices are half what they were in early 2009.
Because we helped communities struggling with concentrated foreclosures, places with targeted neighborhood stabilization investments have seen vacancies fall -- and home prices rise.
As a result, we’re coming out of what has been the best winter and spring since before the housing crisis began. Home prices are bouncing back -- posting the first annual increase in 5 years.
Put simply, our housing market has momentum we haven’t seen since before the crisis. And with the recent $25 billion mortgage servicing settlement, we have the tools we need to continue that momentum -- as we launch the most ambitious mortgage relief effort in history, and provide billions of dollars states like Illinois are using for housing counseling and other anti-foreclosure efforts.
But for all that progress, we need to do more. Throughout this crisis, we’ve turned to the FHA, which since President Obama took office has helped more than 1.3 million families stay in their homes through loss mitigations and early delinquency interventions.
And I’d like to thank Acting FHA Commissioner Carol Galante for making this progress possible.
But there are still thousands of FHA borrowers--the vast majority of whom received their loans before President Obama took office--who are severely delinquent today -- who have exhausted their options and could lose their homes in a matter of months.
That doesn’t just harm families -- but their neighbors who will see their home value drop by another $5-$10,000 the moment a foreclosure sign goes up on their block.
It hurts the taxpayer as well, who guarantees FHA loans.
That’s why we launched our single-family note sales pilot program, which has allowed FHA to sell more than 2,000 severely delinquent loans to private servicers for a market-determined price -- generally less than the outstanding balance owed on the loan.
In return, the servicer agrees not to foreclose on the family for at least an additional six months -- ideally using that time to work with the family to find an affordable solution to stay in their home.
With the Distressed Asset Stabilization Program we launch today, we will increase by as much as 10 times the number of loans available for purchase while making it easier for borrowers to avoid foreclosure.
Throughout this crisis, one of the things we’ve seen is that non-profits and other state and local organizations are critical partners -- because they understand best how to apply different tools to their communities.
These partners have been essential to the success of efforts like the Neighborhood Stabilization Program -- which is helping lift home prices in hard-hit communities at the same time it is creating nearly 95,000 jobs.
By strategically identifying pools of loans that are eligible, we’re giving these partners new opportunities to support families in hard hit communities.
And by crafting new standards for loans sold in the hardest-hit places, we’re giving servicers the incentives they need to rent these properties to families who need it -- or bring these loans out of default altogether.
That’s smart government. That’s what partnership is all about. And that’s why I’m so pleased to announce it here in Chicago today.
And with that, let me turn things over to Carol, who will go into more detail about how this new approach will work.