Prepared Remarks of Secretary Shaun Donovan at the Florida Housing Coalition 2012 Conference
Rosen Shingle Creek Resort, Orlando, FL
Tuesday, September 11, 2012
Thank you, George -- for that introduction and for your leadership not only with the Coalition, but also in Pasco County. Many thanks also to Jaimie Ross for her extraordinary partnership as executive director of the coalition.
I’m thrilled to see so many of our partners here today -- from housing administrators to neighborhood stabilization grantees, from activists and advocates to representatives of financial institutions. It’s particularly good to see my friend, Sheila Crowley.
No one is a more powerful, effective advocate for families than Sheila -- she is the real deal.
It’s great to be back in Orlando -- and at such an important moment for Florida’s families, its economy and its future.
Today, while there’s still more to do, I wanted to discuss the work this Administration has done to bring Florida’s housing market back from the brink.
I want to discuss the work we’ve done to help homeowners keep their homes, the steps we are taking to rebuild homes and communities alike -- and what that means for Florida’s economy.
Above all, I want to talk about the choices we face -- how the looming budget sequester puts so much of this progress at risk and to describe the very real danger we face should it become law.
The Progress We’ve Made
I don’t have to tell this audience where we were when the President first stepped into the Oval Office some 44 months ago.
America’s economy was shedding 750,000 jobs per month. Housing prices had fallen off a cliff -- declining for thirty straight months. And every month, it seemed foreclosures were setting new records.
And while too many families are still struggling to pay their mortgage or keep their homes, we now stand at a far more encouraging moment.
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.
Because we provided critical support to the FHA, we preserved homeownership opportunities -- particularly for minority families, who were hit hard by this crisis.
In fact, since the President took office nearly 600,000 Latino families have bought or refinanced their home using an FHA-backed loan -- and this year alone, approximately 55 percent of Hispanic families have used FHA financing.
But even as we work to speed recovery, we have reason for optimism.
Here in Florida, not only are foreclosures down by a third over the last two years, but single family homes are selling for almost 8 percent more than they were just a year ago.
And median sales prices are the highest they’ve been since the earliest months of the Administration.
Improvements we’ve seen in home prices have helped create almost half a trillion dollars in home equity and lift 700,000 homeowners above water in the first quarter of 2012 alone. And in the last year about 270,000 Florida homeowners have gotten back above water.
We’re by no means out of the woods. But with housing construction nationally growing faster than any time since 2008, and the best winter and spring of home sales since the crisis began, the country’s housing market has momentum we haven’t seen in over five years.
A Historic Settlement
And with the recent $25 billion servicing settlement, Florida has some of the tools it needs to keep that momentum going.
You know the appalling way banks treated families throughout this crisis. Our investigations at HUD found everything from lost paperwork when people were applying for help, to dropped calls, to the signing thousands of foreclosure documents that banks never bothered to read.
As you know, over and over, folks who should have been able to get some help early on never did get that help -- help that in many cases banks were legally obligated to provide.
Allowing some of our largest and most powerful institutions to play by a different set of rules than everybody else—to commit forgery and perjury against ordinary families—is wrong.
But it’s more than just wrong.
It’s also illegal.
And it’s not what this Administration—and this President—believes we stand for as Americans.
And so I’m proud to say that the servicing settlement makes them pay for that behavior -- and not just by cutting a check, but by forcing them to provide help to homeowners once and for all.
And last month, we saw that homeowners here in Florida are indeed beginning to see results.
According to a preliminary report from the settlement’s Independent Monitor, tens of thousands of homeowners have already gotten the help they need.
This snapshot, taken from March through June of this year when the banks were ramping up their operations, indicates that of the roughly 165,000 homeowners who have received almost $14 billion in consumer relief, 27,000—about 1-in-6—are in Florida and have received on average more than $74,000 in benefits.
This includes homeowners currently in trial modifications -- who only because of the settlement can expect their bank to not simply reduce their monthly payments, but to actually write down what on average will be more than $112,000 of mortgage debt.
Indeed, the vast majority of that relief to consumers has come in the form of debt forgiveness. This includes principal reductions of first and second liens. It also includes the write-downs required to facilitate short sales that allow families who have been unable to get out from under hundreds of thousands of dollars of mortgage debt to move to a new job or start anew.
That’s good for Florida’s families and its economy alike.
Should the banks deliver on these commitments—and given the steep penalties they face for failure, I’m cautiously optimistic they will—these early results suggest that the settlement is on track to provide the most meaningful homeowner assistance we’ve seen since the housing crisis began.
Already, between the first quarter of 2011 and 2012, we saw the share of modifications including principal reduction more than triple. And with the implementation of the settlement and changes to the Home Affordable Modification Program earlier this year that encourage principal reduction, we expect that trend to accelerate.
The settlement also includes assistance for families who are current on their payments but haven’t been able to refinance because they owe more than their homes are worth -- and that describes nearly half of homes in the Sunshine State.
Here again, we are starting to see progress, with thousands of underwater homeowners in Florida having refinanced their mortgages because of the settlement. These families are saving more than $3,700 per year -- or more than $300 per month.
Let me tell you the story of one Florida homeowner who has been helped by the settlement. When her husband fell seriously ill, Milagros Rodriguez fell three months behind on her mortgage for her home in Miramar.
It was only because the settlement reduced the principal balance of her loan by $104,000 —and monthly payments by more than $650— that she was able to keep their home while he recovered.
And I want to say a word of thanks to Florida’s Attorney General Pam Bondi, who throughout the settlement negotiations fought to ensure the agreement provided billions of dollars in relief for Florida families -- and for the thousands of active-duty servicemembers and veterans here in Florida. As we commemorate the eleventh anniversary of the September 11th attacks, this work is particularly important today.
For those of you who work with this community on a regular basis, you know how often during this crisis military families were targeted for exploitation by banks and servicers -- forcing them to either sell their homes at a loss, or leave their families behind when they were relocated.
Because of leaders like Pam Bondi, these families are receiving justice from this settlement.
Whether it’s the special compensation and protections the settlement provides military families or the work so many in this audience do every day to prevent and end veterans homelessness, all this work is based on a simple idea:
That the men and women who wear our country’s uniform have exceeded our every expectation on the battlefield -- and that it’s time their leaders back home exceeded theirs.
Just as importantly, the settlement is focused on fixing the issues that led to so many of these problems in the first place.
Because of the settlement, all five banks have already committed to providing a single point of contact when at-risk families ask for help. And by October 5th, all five banks will have to comply with over 300 additional servicing standards that give homeowners confidence that lenders and servicers are following a comprehensive list of rights should they lose a job or have a medical emergency that puts their home at risk.
Indeed, according to this preliminary report, four of the five servicers tell us they have already implemented more than half of these standards.
Now, that’s not to suggest the job is done. If we’ve learned anything from this crisis, it’s that we need to hold the banks’ feet to the fire -- and not simply “trust” that they’re going to do the right thing, but insist on it.
And because of the way we structured this settlement, we can insist on it. Indeed, one of the settlement’s most important features is that it provided the Independent Monitor, Joe Smith, with the authority and the resources he needs to impose millions of dollars in additional fines and penalties should one of the banks fail to meet the settlement’s requirements in a particular area -- as well as the authority to take the banks right back to court if need be.
And if it comes to that, as a member of the Mortgage Settlement Oversight Committee, I have no doubt Attorney General Bondi will be right by Joe’s side.
We also need to ensure that the $334 million in state aid that the settlement provides Florida is used to fight foreclosures.
Attorney General Bondi has pledged to use these funds to help homeowners through proven tools like housing counseling and legal services. We believe that’s exactly the right approach -- and we need to support her.
Reducing Foreclosures, Rebuilding Equity
Still, for all the progress we’ve made, everyone here knows homeowners don’t need to be on the verge of foreclosure to have been hurt by this crisis.
Right now, millions of responsible homeowners—who are doing the right thing, and making their mortgage payments every month—still can’t refinance and take advantage of record-low interest rates because they are underwater.
That not only prevents them from saving thousands of dollars per year -- it also prevents our economy from receiving the lift that low interest rates typically provide.
That’s why last fall, the President called for us to step up our efforts. Within six weeks, we had identified barriers that were holding people with loans backed by Fannie Mae and Freddie Mac from refinancing -- and as a result, more than a million homeowners have applied and stand to save on average $3,000 per year.
Indeed, nationwide, refinancings are at a 3-year high -- and in Florida, applications have nearly tripled since these changes were first put into place.
The effects of these changes have been most dramatic for families who are deeply underwater -- and who had previously been locked out of refinancing completely.
Where less than 2,000 homeowners deeply underwater in Florida had been able to refinance over the previous three years, this year, in June and July, the number of homeowners with loan-to-value higher than 125 percent closing on HARP refinances in Florida shot up by nearly 18,000 -- more than 800 percent.
We also dramatically cut fees for FHA refinancing, making it available to more underwater borrowers who have FHA loans -- allowing families to pay minimum fees to refinance into a new FHA-insured loan.
Already, these changes are making a difference. Indeed, where FHA normally processes about 17,000 applications per month nationwide, we saw more than 55,000 applications a month in just the first three months -- a more than 200 percent increase.
But that is still not enough. That’s why President Obama is pushing Congress to act on four legislative proposals that will help ensure every responsible borrower has the opportunity to refinance and rebuild equity.
The first, Senator Feinstein’s Expanding Refinancing Opportunities Act, would provide homeowners whose loans are not guaranteed by the government access to simple, low-cost refinancing.
The second, developed by Senators Menendez and Boxer, would allow us to clear the remaining barriers to refinancing for homeowners with loans backed by Fannie and Freddie.
To ensure more families can refinance with a better deal, the Responsible Homeowner Refinancing Act creates competition between lenders and removes other hurdles like unnecessary appraisals, which will help lower the cost of refinancing for consumers.
We also need to ensure homeowners can rebuild equity.
Indeed, of all the eye-popping statistics we’ve seen during these past few years, perhaps the most striking is that Latino families lost two-thirds of their median household wealth between 2005 and 2009.
To me, that’s an absolute tragedy -- particularly given how many of these families were just starting to enter the middle class after decades of hard work.
After all, savings in our homes is the single biggest source of how we send our kids to college. It’s how entrepreneurs get the capital they need to start a small business -- and how people save for their retirements.
That’s why Senator Merkley’s Rebuilding Equity Act is so important -- helping underwater homeowners apply savings from refinancing to rebuild equity in their homes.
If they do, the majority of those families could get back above water in five years or less. That’s not only good for them -- it’s also good for our economy.
And it’s why this Administration supports the Project Rebuild Act introduced by Senator Jack Reed, which would create as many as 50,000 jobs in communities across Florida -- providing a boost to our hard-hit construction industry.
Just as importantly, Project Rebuild would help stabilize home values in the hardest-hit places.
This audience knows that the second a single foreclosure sign goes up on your block, your home value drops by as much as $10,000. Well, in places like Florida, you see whole neighborhoods with those signs.
But with tools like HUD’s Neighborhood Stabilization Program, we’ve been pushing back.
Not only is NSP on track to create nearly 90,000 jobs and address 95,000 vacant properties across the country, in hard-hit places like Hernando County, Florida, it’s helping families like Sandy and Socorro Beiro move in to once-foreclosed homes.
Several of you here today are NSP partners. Thank you for your work. You have been innovators when it comes to Neighborhood Stabilization -- and with some two dozen Community Land Trusts, I understand the Coalition is looking for ways to use deed restricted properties in the NSP process. We think it’s a good idea as well and are working on policy changes that will make it possible.
But the reason we need Project Rebuild is that the efforts you’ve been taking on don’t just create jobs and transform neighborhoods -- they also boost home values. Indeed, recent data shows that three-quarters of places that received targeted investments through the first two rounds of NSP showed increased home prices.
Project Rebuild would build on all this progress -- presenting a real opportunity for so many of the nonprofit partners here in this audience to take the work they’ve already done through NSP to the next level.
Within the next few weeks, we are hopeful that the Senate will consider two of these bills -- the Boxer-Menendez legislation and Senator Merkley’s bill.
We need your help to ensure every family who needs help gets help. And we need you to make your voices heard.
The Choices We Face
Because the debate in Washington isn’t about whether we create jobs faster or grow the economy. It’s how.
This audience knows all about the so-called fiscal cliff.
Well, if Congress fails to come to an agreement, we’ll all learn just how steep that cliff really is.
The resulting cuts will be so severe that it would be impossible for leaders like George, Sheila and so many of you to continue providing the kind of assistance you have to the most vulnerable Florida families -- assistance which has never been more important to our families and our economy than it is today.
Over a quarter million families—close to a million people, more than half of whom are elderly or disabled—would lose their housing vouchers and risk homelessness.
Another 100,000 families who currently receive housing assistance through HUD’s homelessness programs would be cut loose—including 1,500 homeless veterans and their families— reversing the progress we just made getting 1-in-5 veterans off the street in a single year’s time.
It would mean that 80,000 fewer struggling homeowners could work with a housing counselor -- with whom they are nearly twice as likely to receive the help they need to keep their home.
And it would cut Community Development Block Grant funding to levels not seen since 1975 -- funds communities leverage to invest in infrastructure and create jobs.
All told, the cuts to HUD’s budget alone would cost America an estimated 53,000 jobs.
Already, protecting current families in this fiscal environment required us to make choices in this budget that we would not have made in different circumstances.
But simply put, sequestration would be a disaster -- for Florida, for families, and for our economy.
By contrast, the President’s budget reflects the kind of balanced approach to deficit reduction that asks everyone to pay their fair share instead of balancing the budget on the backs of our most vulnerable.
So, this debate is about choices.
Choices like whether we make refinancing easier for families -- or leave them to fend for themselves as they fight to get back above water.
Like whether we put 200,000 people back to work rebuilding vacant homes -- or allow vacant homes in our hardest-hit neighborhoods to keep dragging down the property values of their neighbors and their home equity along with it.
Choices like whether we continue making progress on ending veterans homelessness—a goal some thought impossible only a few years ago—or leave our heroes to fight their toughest battle alone.
But in many ways, the choice before us is even more fundamental:
It’s whether we return to the same top-down policies that got us into this economic crisis -- or build an economy based on a strong, secure middle class.
It’s whether we settle for a country where a shrinking number of people do really well, while more Americans barely get by -- or build a nation where everyone gets a fair shot, does their fair share, and plays by the same rules.
What’s at stake aren’t Democratic or Republican values. They’re American values -- the values I stand for, that you stand for, and that we all stand for as Americans.
And we need to reclaim them. We need to fight for them.
With your partnership and commitment, I know we can -- and will. Thank you. And with that, I’d love to take some of your questions.