Prepared Remarks of Secretary Shaun Donovan at the New Jersey Citizen Action Financial Reform Summit “From Dodd-Frank to Occupy and Everything in Between”
Rutgers Paul Robeson Center, Newark, NJ
Friday, September 21, 2012
Thank you, Phyllis -- for that introduction and leadership.
Thanks as well to my good friend, Senator Menendez, whose leadership has been essential -- on everything from building strong neighborhoods of opportunity, to helping Northern Jersey communities partner to drive economic growth not as competitors but as a region.
Most of all, I want to thank all of you. From advocates, to representatives from public housing authorities, to housing counselors, each of you has played a critical role in helping us push back against this crisis and help families in need.
Indeed, since President Obama took office, HUD-approved housing counselors have helped 8 million families. Families working with a housing counselor are twice as likely to receive the help they need to keep their homes.
And we’ve needed your efforts more than ever -- because despite momentum in our housing market, too many families in New Jersey are still hurting.
Today, only one state has more homeowners with seriously delinquent loans. And where increases in home values lifted 1.3 million homeowners nationally above water in the first half of the year, here in New Jersey they still haven’t fully stabilized.
So, today, I want to say a few words about some of the new tools we’re providing to help New Jersey’s homeowners.
I want to describe the additional steps leaders like Senator Menendez are pushing to build on those efforts.
And I want to talk about the innovative tools we are providing to hard-hit communities like Newark to help stabilize hard hit neighborhoods and home values alike.
A Historic Settlement
Now, this audience doesn’t need me to remind them of the appalling way banks treated families during this crisis -- from lost paperwork from people applying for help, to dropped calls, to the signing of thousands of foreclosure documents that banks never bothered to read.
You saw over and over how folks who should have been able to get some help early on never got it -- 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 more than just wrong.
It’s also illegal. And it’s not what this Administration--and this President--believes we stand for as Americans.
That’s why the Administration’s recent $25 billion settlement with 49 bipartisan state attorneys general and the five largest mortgage servicers was so important -- forcing them to help homeowners once and for all.
And with the recent preliminary report from an Independent Monitor, we saw the first signs that homeowners are beginning to see results.
This snapshot, taken when the banks were ramping up their operations, indicates that nearly 4,000 New Jersey homeowners have received almost $320 million in relief -- $76,000 on average.
This includes homeowners who only because of the settlement can expect their bank to not simply reduce their monthly payments, but to actually write down more than $114,000 of mortgage debt.
The vast majority of that relief to consumers has come in the form of debt forgiveness -- principal reductions of first and second liens. It also includes the write-downs required to facilitate short sales that allow families 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 New Jersey’s families and economy alike.
Just as importantly, the settlement is focused on fixing the issues that led to so many of these problems.
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 servicers are following a comprehensive list of rights should they lose a job or have a medical emergency that puts their home at risk.
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--providing the Independent Monitor with the authority and resources he needs to impose millions of dollars in fines and penalties--we can insist on it -- and will.
Refinancing and Rebuilding
Still, everyone here knows homeowners don’t need to be on the verge of foreclosure to have been hurt by this crisis.
As a result of our efforts to identify barriers that were holding people with loans backed by Fannie and Freddie from refinancing, refinances are up 80 percent here in New Jersey -- and families stand to save about $3,000 per year.
And for New Jersey families who are deeply underwater, the effects of these changes have been dramatic.
Where only a handful of homeowners deeply underwater had been able to refinance over the previous three years, this year, in June alone, the number of homeowners in New Jersey with loan-to-value higher than 125 percent closing on HARP refinances shot up by more than 700 percent.
To help the millions of families who remain locked out, President Obama has been pushing Congress to act on a series of legislative proposals that will help ensure every responsible borrower can refinance and rebuild equity.
Just today, Senator Menendez and I met two homeowners in Elizabeth who because of his bill--the Responsible Homeowner Refinancing Act--would finally be able to refinance.
We are fighting to get his bill--and two others--to the floor of the Congress before they recess for the year.
Collectively, they would ensure that every responsible family can not only refinance--regardless of whether they have a loan backed by government--but also rebuild the equity they need to send kids to college, start a small business or save for their retirements.
And as we make this big push in the days and weeks to come, we need you to make that case -- that tearing down barriers to refinancing is critical to not only protecting New Jersey’s families but also rebuilding its economy.
Rebuilding Hard Hit Communities
Lastly, I want to say a few words about steps we need to help not just homeowners -- but hard hit communities.
Many of you are no doubt familiar with Project Rebuild, which would create up to 2,000 jobs in New Jersey and dramatically scale up the Neighborhood Stabilization Program, which has helped not only reduce vacancies in hard-hit communities but lift home prices as well.
Here in Newark, partners used NSP dollars and Low-Income Housing Tax Credits to open Clinton Hill Apartments -- and provide quality, affordable rental housing for homeless veterans and low-income families.
Project Rebuild presents a real opportunity for the nonprofit partners here to take that kind of work to the next level -- but that’s not on the only innovative tool in our toolbox.
Right now, there are still thousands of FHA borrowers--the vast majority of whom received their loans before President Obama took office--who are severely delinquent -- 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 as much as $10,000 the moment another foreclosure sign goes up on their block.
That’s why we recently expanded our single-family note sales pilot program, which allows FHA to sell some 9,000 severely delinquent loans to private servicers for a market-determined price -- in return for which, the new servicer agrees not to foreclose for at least an additional six months.
Throughout this crisis, one of the things we’ve seen is that your organizations are critical partners because you understand best how to apply tools like these.
By strategically identifying pools of loans that are eligible, we’re giving partners like you new opportunities to support families in hard hit communities.
Just last week, we received bids the first of a two-part sale and next Thursday, we’ll be selling approximately $700 million worth of FHA loans which have been split up into seven pools specifically designed to stabilize neighborhoods -- including 600 loans here in Newark.
Having worked closely with state and local housing agencies on this effort, we made sure banks, investors and nonprofits have a strong incentive not simply to succeed in the short-term -- but to remain invested in these neighborhoods for the years to come.
And in states like New Jersey where we haven’t seen the so-called “shadow inventory” shrink as quickly as other markets, this represents a critical step in our efforts to keep homeowners in their homes and shrink the supply of foreclosed homes dragging down home values and neighborhoods alike.
Housing and Communities Built to Last
Obviously, none of these tools, by themselves, are going to fix New Jersey’s housing problems overnight.
But whether it’s holding institutions accountable for their actions, ensuring every family gets a shot to hold on to American Dream, or refusing to let neighborhoods hard hit by this crisis slide into decades of disrepair and decline, we’ve already proven that we work in partnership, we can begin to rebuild an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same rules.
Those aren’t my values or your values. They’re American values. They’re what bring us together today -- and with your help, we’re going to fight for them.
Thank you -- and with that, I’d love to take your questions.