Prepared Remarks of Secretary Shaun Donovan at the National Housing Conference’s 2013 Annual Policy Symposium
Friday, June 21, 2013
As prepared for delivery
Thank you very much, Chris (Estes), for that generous introduction and for the great job you are doing as President and CEO. You took on this role at a tough time for our communities, and I appreciate your leadership over this “big tent” of advocates.
This was an approach long championed by Carl Coan. And I know that all of us here today have heavy hearts because of Carl’s recent passing.
I am saddened that he’ll no longer grace us with his presence and his mind. But I know that his contributions will endure for many years to come. And I look forward to continuing to work with all of you to fight for the causes he cared about.
Please allow me to also recognize the three honorees from last night’s Gala: NeighborWorks America, Omni New York and Conrad Egan, who has been a friend and mentor to me over the years. They have made lasting contributions to the housing movement and are all deserving of this recognition.
Finally, I want to thank all of you with the National Housing Conference. Since 1931, your organization has done tremendous work to shape housing policies that benefit the common good.
It has been a pleasure to work with you throughout President Obama’s first term. And I want to build on this work throughout the second term.
I appreciate that NHC has already spoken out against the Fiscal Year 2014 budget proposed by the House Appropriations Subcommittee on Transportation, Housing and Urban Development.
You’ve correctly recognized that these proposed cuts hurt families, the housing recovery and
the health of our overall economy. And I look forward to working with you to get this message to as many people as possible.
I also look forward to our dialogue here at the 2013 Annual Policy Symposium. This room is full of a wide-range of stakeholders – from policymakers to business owners to community
Although we represent a diversity of fields and perspectives, we share a common cause – ensuring that all Americans have access to quality, affordable housing. As today’s theme indicates, I know you are committed to paving a new path forward to help neighborhoods and households recover from the housing crisis.
And I deeply appreciate this chance to share some thoughts about what the Obama administration has done, and will continue to do, to revitalize communities.
Confronting the Crisis
As I was preparing my remarks for today, I began to reflect on the first time I addressed NHC during my time as HUD Secretary. It was back in 2009 and our nation was in a lot of trouble.
We were all dealing with the aftermath of the housing bubble that had burst a few years earlier.
The market was crashing down, eventually leading to record foreclosures and 30 straight months of declining home prices. It was an historic crisis that devastated communities and shattered the hopes of families across the country.
That’s why, from day one, President Obama, and all of us at HUD, have considered helping struggling homeowners a top priority. We have taken a number of measures to stop the financial hemorrhaging and get our economy moving again – and good things are happening.
2012 was the strongest year of home sales since the economic crisis began. During that same period, according to Case-Shiller, home prices increased more than 7 percent, the fastest growth in nearly seven years. And since the beginning of last year, 2.3 million families who were underwater with their mortgages have now come up for air.
So we’ve come a long way. But make no mistake: none of us in the administration are content.
We know that our nation cannot reach its full potential if entire communities are being left behind.
That’s why, to borrow your theme, we are committed to paving a path forward for struggling homeowners. And we are using a variety of tools to ensure that this path is wide enough for all to get ahead in their lives.
One of these tools is obvious, but critical – and that is helping families facing foreclosure stay in their homes. In March of 2009, we launched the Making Home Affordable Program to provide relief to those at risk.
Since it began, nearly 1.1 million homeowners have received a permanent modification to their mortgages – with a median savings of roughly $550 dollars every month. And of course, this causes a ripple effect, benefiting neighbors, businesses and our economy as a whole.
So recently, HUD joined with the Treasury Department to announce we are extending the application deadline to December 2015 so that more homeowners can take part and stay in their homes.
This compliments our housing counseling efforts, which are empowering homeowners, and other potential buyers, with the important tools of knowledge and information. HUD now has a vast network of 2500 housing counselors that have helped over 9 million families to recover from the crisis and avoid scams.
To build on this work, earlier this week, we announced $40 million in housing counseling grants are being allocated to more than 330 organizations across the country. And our new Office of Housing Counseling has several initiatives under way to ensure borrowers can learn about all the rights and remedies they need to stay in their homes.
A Stronger FHA
Another important tool moving forward is strengthening the Federal Housing Administration.
As I understand it, you have an exciting panel focused on this very topic later, and it’s an important conversation to have.
The FHA has a long history of opening doors of opportunity for low and moderate-income families. And after the housing market collapsed a few years ago, its importance only grew, providing financing at a time when private capital froze up, especially for those in need of affordable housing.
As a result, FHA served as a major force, both in stopping the financial bleeding and in steering the market back in a positive direction. In fact, independent economist Mark Zandi has noted that the crisis would have been 25 percent worse if not for the role FHA played in keeping credit flowing. And it continues to have a positive impact today, even as the credit markets have eased and FHA reduces its footprint.
Yet, right now, it is currently facing an issue that threatens this work. This crisis is that our General and Special Risk Insurance fund is reaching its commitment authority limit.
Right now, we estimate that the $25 billion approved for Fiscal Year 2013 will not be enough to support the financing needs of our current multifamily and healthcare portfolio. In fact, HUD recently notified Congress that we have exhausted 75 percent of our authority for the year.
Without legislative action, we project we will run out of funds by mid-August. This means that shovel-ready multifamily and healthcare projects already in our pipeline will be delayed, or worse, unable to find financing.
I don’t have to tell you what kind of impact that would have. That’s why we can’t let this happen, both for the people directly impacted and the market as a whole. So if you value the role FHA plays in our market—as I know you do—I urge you to make your voice heard with Congress.
Contact your representatives and let them know how an additional $5 billion loan in commitment authority will be good for our communities; create 22,000 jobs; generate an additional $200 million in receipts to the Treasury; and benefit our entire nation. Doing so is critical to strengthening our housing market. And so is repairing our housing finance system.
Housing Finance Reform
As I said earlier, GSE’s helped stabilize the market during a historically difficult period in our nation’s history. But right now, their footprint is bigger than any of us would like, which is why we need to attract more private capital back to the market.
Doing so in a responsible way will be good for the long-term health of the finance system, which will benefit working- and middle-class communities, and our economy as a whole. So now is a time for Washington to stop all the posturing and instead make comprehensive bipartisan housing finance reform a reality.
And on the regulatory front, we are seeking to reduce uncertainties, increase credit availability and improve market safety for borrowers and investors through our QM and QRM rulemaking process.
We recognize how important it is to establish clear rules of the road for FHA insured lending – like through FHA QM –and that we do so in consideration of the Consumer Financial Protection Bureau’s QM rule.
So we are going to look at every piece of it to find a balance so we don’t hold back sensible lending in the future, while also ensuring that we don’t go back to what led us into the crisis.
Holding Banks Accountable
And in the larger financing picture, we are working to protect homeowners by holding banks accountable. We’ve got to ensure that financial institutions don’t go back to the same old, reprehensible practices that got us into this mess in the first place.
As all of you know, after the housing crisis began, many responsible homeowners—who had done everything right up until that point—reached out to their lenders, determined to do what was necessary to stay in their homes.
Unfortunately, some of the nation’s biggest financial institutions lacked that same determination.
In fact, they engaged in abusive behavior, like robo-signing, that didn’t give homeowners a fair chance to fight off foreclosure.
So the federal government partnered with a bipartisan group of 49 state attorneys general to get to the bottom of this abuse. The result was the landmark National Mortgage Servicing Settlement with five banks announced last year designed to one, speed up relief to struggling homeowners, and two, to change how these financial institutions do business going forward.
And today it is clear that the Settlement is making progress towards these goals. The five financial institutions have already distributed roughly $50 billion in direct relief to over 620,000 responsible homeowners. This relief includes more than 310,000 trial or permanent principal reductions, resulting in over $25 billion in debt forgiveness.
And just last week, $1.5 billion in checks were mailed to families to help compensate for the abuse they received – giving them a chance to get a fresh start.
In addition, the Settlement created tough new standards for the banks to follow. These measures were designed to prevent future servicing problems from deepening downturns and leaving distressed borrowers out in the cold.
Earlier this week, the Independent Monitor, Joe Smith, released his first compliance report monitoring how the banks are doing in meeting these requirements. And it was landmark moment in our fight for reform and increased transparency.
For too long, banks have been operating behind closed doors, making it hard for the public to see what they were up to. By bringing these operations into the spotlight, we now have an unprecedented look into how responsible homeowners are being treated.
And according to the report, the five banks have made progress. Joe’s data shows that these banks have stopped the practice of robo-signing. In addition, he has confirmed that they are no longer charging distressed borrowers a fee just to process a loan modification request – eliminating another barrier that has historically prevented families from seeking help.
Unfortunately, other harmful practices endure. Most notably, the compliance report shows that four of the five banks consistently fail to send notices and communicate decisions to homeowners in a timely manner.
This is unacceptable. That’s why, earlier this week, I took to the airwaves to send a simple message to these banks: that it is time for them to live up to their end of the deal by complying with all aspects of the Settlement.
If they don’t, we will work with our partners at the state level to explore all options to remedy this situation, from fining them for each failure, to hauling them back into court.
And I assured them that our commitment to this cause is unshakable. The homeowners who experienced servicing abuse deserve justice. And we won’t stop till they get it, and until banks reform their abusive practices, once and for all.
A Community Approach
We will continue to demand that these financial institutions change their behavior. And when it comes to the way government operates, know that we are changing our own approach to maximize the effectiveness of our efforts, especially in this budget environment.
More than ever, we are taking a community approach to solving our nation’s challenges. So we have worked to bolster our Neighborhood Stabilization Program. I know most of you are familiar with this initiative and its proven track record of creating jobs, stabilizing home prices and strengthening communities.
Over three rounds of funding, roughly $7 billion has been allocated to state and local governments to help areas suffering from foreclosures and abandonment. And once the funding is fully spent, it is projected to result in nearly 50,000 units of affordable housing, as well as provide homeownership assistance to more than 20,000 low-income households.
Ladders to Opportunity
And as we look ahead, we must ensure that the benefits and opportunities created by the housing recovery reach all communities, especially those hardest hit by the recession. Our nation will never fully heal as long as so many communities are hurting.
As President Obama has said, we need to build ladders of opportunity so that every person has a fair shot at lifting themselves up into a growing and thriving middle-class. And HUD is focusing on building these ladders through a number of initiatives.
One is Choice Neighborhoods. Through this effort, HUD is joining with a mix of private and public leaders from the local level to transform struggling neighborhoods into thriving communities.
Specifically, we are focused on three goals. The first is obviously housing, where we will replace distressed structures with high-quality, mixed-income options. The second is people, specifically improving educational outcomes for our youth so they are ready to compete and succeed. And the third focuses on the overall neighborhood, where we will work to create conditions that attract investment and spur economic growth.
Since 2010, HUD has awarded nine Choice Neighborhoods Implementation grants for a combined $230 million to stimulate activity in cities across the country. In addition, these grants generated $2 billion in leveraged funding, which is going a long way in infusing new opportunities and new hope in hard-hit areas.
And these gains will support one of President Obama’s larger efforts called Promise Zones.
The President is proposing to align a number of his signature initiatives from across the federal government to turnaround 20 of the hardest hit communities in the nation.
So HUD will be working with the Departments of Education, Agriculture, Justice and others to rebuild communities by improving their schools, protecting their streets and expanding their housing options.
Promise Zones will use the tools of targeted investments, tax incentives and technical assistance to make these goals a reality. And we want to work with local leaders like you to ensure that it reaches its full promise, and that each effort is tailored for each region.
Finally, I want to assure you that we are still pushing for Project Rebuild. As you know, this initiative would rehabilitate or demolish more than one hundred thousand damaged or vacant properties in hundreds of communities, creating tens of thousands of jobs for the hard hit construction industry.
And I think we can all agree that this will go a long way in building ladders of opportunity so that every person, from every background, can left themselves higher.
So we won’t back down in trying to make this proposal happen. We won’t back down when it comes to giving hard-hit communities ladders to opportunity. And I know you won’t back down either.
Conclusion: Building Together
That’s why we are here today. We all want to create a path forward for struggling homeowners.
I commend all the great work you are doing towards this effort. And HUD has been proud to work alongside you:
To help families modify their mortgages.
To strengthen housing counseling services so that individuals can make the best decisions possible.
To bolster the FHA so that it can continue to open doors of opportunity for all.
To hold the banks accountable so that their abusive behavior becomes a thing of the past.
And to build ladders of opportunity through efforts like Promise Zones and Choice Neighborhoods so we can revitalize hard hit communities.
We are committed to all these goals. I know you are committed to addressing important housing issues as well.
And I look forward to our continued work together to shape a stronger and fairer nation.