CNBC Interview - Transcript

Interview

CNBC Interview - Transcript

CNBC Interview with Secretary of Housing and Urban Development Shaun Donovan

Subject: Home Refinancings

Interviewers: Erin Burnett, Scott Wapner

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MS. BURNETT: We're now joined by the secretary of Housing and Urban Development. Joining us here from the White House Lawn Shaun Donovan, secretary of HUD.

Secretary Donovan, thanks so much for being with us. We appreciate your taking the time.

SEC. DONOVAN: It's great to be with you today.

MS. BURNETT: And obviously, it's clear the emphasis of the meeting was go to this website, makinghomeaffordable.gov. And I'm there, and I'm looking at it. Refinancing, modifications.

SEC. DONOVAN: Yeah.

MS. BURNETT: But it seems you've said that up to nine million Americans at this moment who have not yet refinanced could do so.

SEC. DONOVAN: That's exactly right. What the president talked about is the good news we've seen in the housing market since he announced his housing plan, interest rates at historic lows, refinancing up 88 percent since we announced the plan. And what he heard were stories today from people who have been able to keep their homes, been able to make up for lost wages just through refinancing their homes, on average up to $2,000 a year for the average American family. So it's good news in the housing market.

MS. BURNETT: And certainly it is. Obviously, there's one crucial question and our housing reporter, Diana Olick, was just raising it.

This issue of when your mortgage is worth more than your home, it -- that's usually when you're not able to refinance. And the real question is if you've got more than five percent negative equity in your home, do you have a plan for those people? And so many of the people in distress do have that negative equity problem.

SEC. DONOVAN: Well, that's where our modification plan comes into play. We're beginning to see those modifications take hold. The numbers should increase significantly in the coming months. Banks have been holding off on foreclosures while we're putting all the pieces in place of that. So that is really directed at those people who are really deeply underwater and have -- having trouble making their payments.

MR. WAPNER: Now, Mr. Donovan, these historically low mortgage rates that we've seen, clearly they're making some difference for the eight (million) or nine million Americans that have been mentioned today. But to make a real difference in a housing recovery, are rates still too high? Do we need to see them come down even below four percent perhaps as some have suggested?

SEC. DONOVAN: Well, I think you will see them continue to come down based on everything that we're doing. But recognize that they've already started to make a big difference.

Again, refinancing up 88 percent and in fact even home purchases are up about 20 percent since we announced the plan. So we are already seeing a difference and that means people being able to keep their homes. That's the stories that the president heard today, is people who have been able to save money, pay for medical expenses for a grandmother, in one case, really to make the difference between disaster for many of those families and staying in their homes and stabilizing their lives.

MR. WAPNER: What's your biggest concern right now? Is it the FHA, the Federal Housing Authority? As one article that I'm reading puts it, you know that the book is getting bigger, not necessarily better. And what is the -- what's the fallout from that?

SEC. DONOVAN: Well, what I would say is there are mixed signals there. While the defaults are going up and the delinquencies are going up, we're also actually seeing a significant increase in credit scores in FHA borrowers.

So I think FHA is playing a critical role right now. We're going to do everything we can to make sure we limit fraud in FHA, and to make sure the good loans --

MR. WAPNER: Are you going to have to go to taxpayers? Are you going to have to go to the taxpayers and ask for some money?

SEC. DONOVAN: We are looking at that carefully. I think -- I want to be very clear we're going to do everything that we can to limit the losses in FHA. It's a critical piece of the solution right now. More than 20 percent of all loans today in the U.S. are backed by the FHA. It's an important source of financing in these difficult times.

MS. BURNETT: Secretary Donovan, briefly before we go, Wells Fargo came out today. Obviously, they and other banks are making a lot of money by refinancing mortgages. Are the banks in this country doing enough? Or are they touting high application rates and not giving out enough mortgages, forcing Fannie and Freddie to pick up the market?

SEC. DONOVAN: Well, again, the numbers show that refinancings are up dramatically, 88 percent. We are seeing a significant increase in modications happening. And we are pushing to make sure that the banks do their part. Our plan requires them to reduce their interest payments on their own dime before we will ever step up and match their reductions. So we are demanding that the banks do something here to help American homeowners.

MS. BURNETT: Thank you, Secretary Donovan, for your time, sir.

SEC. DONOVAN: Thank you very much.

MS. BURNETT: We'll see you soon.

END.

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