PREPARED REMARKS FOR
STEVE PRESTON
SECRETARY OF HOUSING AND URBAN DEVELOPMENT
AT THE
NATIONAL HOUSING SUMMIT
WASHINGTON, D.C.
TUESDAY, OCTOBER 7, 2008

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.

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