Thank you, Deb, for that very kind introduction. And let me thank your new president, Dave Stevens.
I always knew when we hired Dave at FHA that it wouldn't be long until he was back in his natural habitat: the private sector.
But you certainly made the most of your time in government service. Thank you, Dave -- for everything you did for FHA, for families and for the country.
It's a pleasure to be back with all of you today. Whether it is the role you play strengthening our nation's residential and commercial real estate markets, the opportunities you have to promote sustainable homeownership, or helping ensure access to affordable housing for all, the Mortgage Bankers Association has always been an influential voice when it comes to ensuring the strength and stability of our housing markets and neighborhoods alike.
Important Progress, New Challenges
Certainly, this is a very different environment than the one we faced when President Obama took office.
Then, America's economy was shedding 753,000 jobs per month.
Housing prices had fallen for thirty straight months.
Foreclosures were surging to record levels month after month after month.
Today, because the Obama Administration moved to keep interest rates low and restore confidence in Fannie Mae, Freddie Mac and the Federal Housing Administration, more than 13 million homeowners have refinanced their mortgages since April 2009 -- putting a total of $20 billion a year in real savings into the hands of American families and into our economy.
Today, because we provided responsible families opportunities to stay in their homes, more than 5.1 million modification arrangements have been started in the last two-and-a-half years. That's more than double the number of families who've lost their homes during that time.
Because we helped communities struggling with concentrated foreclosures, today we are on track to address 95,000 vacant and abandoned properties through our Neighborhood Stabilization Program.
Those are the numbers our Housing Scorecard shows this month -- and they represent important progress.
But we know there is much more to be done.
That's because even as RealtyTrac is reporting 11 straight months of year-over-year declines in foreclosure activity--and crediting our policies as a major factor for this improvement--barriers remain.
New challenges have emerged -- that prevent our housing market--and our economy--from fully recovering.
Where foreclosures were initially the result of bad loans, today delinquencies are increasingly driven by unemployment -- by the damage those loans inflicted on our economy.
While targeted support to markets struggling with foreclosures, blight and abandonment has reduced vacancy rates, increased home prices for four straight months and shrunk the inventory of homes for sale, an overhang of foreclosed properties on the market continues to drag down property values and harm the hardest-hit communities.
While we put an end to the worst abuses that caused this crisis and laid out a strategy for bringing private capital back to the mortgage market with Dodd-Frank and the Administration's White Paper, uncertainty about rules of the road going forward has sapped confidence and tightened credit.
And in a broader sense, as the protests going on outside and around the country remind us, people remain frustrated -- frustrated by an economy that does not reward hard work and responsibility.
Frustrated by the fact that Wall Street and Main Street don't seem to play by the same set of rules.
So today, I want to talk with you about how we are responding as circumstances have changed.
I want to talk about the new tools we are providing to overcome these three key barriers -- unemployment, the shadow inventory and uncertainty.
And most important of all, I want to talk about the role each of us has to play in restoring confidence, certainty and responsibility to our housing market.
Keeping People in their Homes
To begin, we must continue improving our efforts to keep people in their homes.
That's why in his jobs speech to Congress, President Obama charged HUD and Treasury to work with the Federal Housing Finance Agency to lower barriers to refinancing.
With HARP responsible for less than a million refinances, at a time when interest rates are actually below 4 percent, we need to pick up the pace.
And so, we've been engaged in intensive discussions with FHFA, lenders, mortgage insurers, regulators and investors to enhance the program and increase its reach.
Removing these barriers could help many more homeowners refinance mortgages into safer, more sustainable products, taking advantage of the lowest interest rates in half a century.
Indeed, with refinancing saving homeowners an average of $2,600 each in the first year alone, this will help pump billions of dollars into our economy -- making this a big opportunity for you to help American families, the housing market and our economy alike.
We hope to have a plan readied in the next couple of weeks -- and we will need you to commit your resources and your focus to this effort as well.
Critical to getting the most out of these changes and keeping people in their homes will be ensuring that families have access to the resources available to them. Over the last two-and-a-half years, 5.8 million borrowers have been helped by HUD-approved housing counselors.
Stunningly, despite the evidence housing counseling works--that people are twice as likely to receive assistance if they work with a counselor--the House majority has proposed eliminating this funding from HUD's budget next year.
President Obama has proposed to restore this funding in 2012 -- and anyone who cares about the housing market should be fighting for these funds.
These resources have been critical to the more than 5.1 million mortgage modifications that have been started since April 2009 I mentioned earlier -- which include nearly 1.7 million HAMP trial modification starts, more than 1 million FHA loss mitigation and early delinquency interventions, and more than 2.4 million proprietary modifications under HOPE Now.
Indeed, HAMP and FHA have not only helped keep families in their homes -- they've also set a standard for affordability in the private market, saving families an average of $333 per month.
But with foreclosures having migrated from the subprime to the prime market because of unemployment, reducing monthly payments doesn't go far enough. Instead, we need to expand our focus to offer more help for unemployed homeowners.
And so, we have begun requiring servicers participating in FHA and HAMP to give borrowers a minimum of 12 months to catch up on payments while they are looking for work.
With 60 percent of the unemployed out of work for more than three months--and 45 percent out of work for more than six months--it's critical that forbearance programs be in line with the how long it takes people to find a job.
These changes are intended to set a standard for the mortgage industry to provide more robust assistance to unemployed homeowners in the economic downturn.
I hope you all will adopt this approach not just in your FHA portfolios -- but across all loans.
This would complement the resources we are providing to state Housing Finance Agencies through our $7.6 billion Hardest Hit Fund to develop innovative ways of stopping foreclosures in the hardest-hit markets and the Emergency Homeowners Loan Program, which is providing a forgivable bridge loan of up to $50,000 to borrowers in 32 states.
Reducing the Overhang and Shadow Inventory
Speaking of unemployment, everyone in this audience knows that the most important indicator when it comes to the strength of our housing market isn't sale prices or delinquencies.
It's how many jobs we're creating -- and how fast we're creating them.
Indeed, while we've added private sector jobs for 19 straight months--2.6 million overall--we need to pick up the pace.
That's why President Obama is pushing the American Jobs Act, which is going to be introduced in Congress this week -- and also why I'm asking each of you to support it.
The ideas in the American Jobs Act are bipartisan -- like tax cuts for small businesses and families and keeping 280,000 teachers and first responders--many of whom are your customers--on the job.
So, I'm asking you for your support to help us get this bill through Congress over next few weeks -- to tell your Member of Congress that the housing market can't wait.
One of the most innovative provisions in the American Jobs Act would not only create 200,000 jobs -- it would also attack the second barrier to our housing recovery: the shadow inventory -- the overhang of foreclosed properties that are on the market and those we expect will soon be.
As I mentioned earlier, the Administration's Neighborhood Stabilization Program has helped improved sale prices and vacancy rates in areas with concentrated investments.
In fact, three-quarters of communities across the country with targeted neighborhood stabilization investments have seen vacancy rates go down -- and two-thirds have seen home prices go up compared to surrounding communities.
These successes have led President Obama to propose Project Rebuild to further stabilize neighborhoods and communities.
In communities across the country, we've seen how it's not just abandoned homes that can drag down an entire neighborhood -- but also vacant commercial properties.
That's why Project Rebuild would allow commercial redevelopment essential to neighborhood revitalization to be funded directly.
It also will expand the ability of the private sector to participate with localities -- ensuring there is the expertise and capacity to bring these neighborhoods back in a targeted way.
Project Rebuild's inclusion in the American Jobs Act reflects this Administration's belief that engaging the private sector to rebuild neighborhoods is essential to rebuilding our housing market and economy.
But Project Rebuild isn't the only way we can speed progress. With the rental market recovering faster, we need to think creatively about ways we can dispose of this shadow inventory.
With about a quarter of a million foreclosed properties owned by HUD and the GSEs, this August, HUD joined with FHFA and Treasury to issue a "Request for Information" to generate new ideas for absorbing excess inventory and stabilizing prices.
We received an overwhelming response -- which tells me that the private sector is ready to engage in a meaningful way to reduce the overhang.
We're reviewing those ideas now -- and in the coming months we will be developing a proposal that puts the best ones we've received to work.
Reducing Uncertainty, Improving Access to Credit
As important as these steps are, you all know that underlying all these issues is a lack of certainty -- of a clear understanding of the rules of the road you need to do business and our housing market needs to recover. A big void to fill involves the secondary markets and what will become of Fannie Mae and Freddie Mac.
To be sure, as our White Paper indicated, we have to reduce uncertainty to bring private capital back.
And we've begun to take those steps in a measured way, including raising premiums at FHA, and reducing loan limits to 2008 levels. Next, as part of the President's deficit plan, we plan to increase the guarantee fee by 10 basis points to level the playing field between the GSEs and the private sector, a critical step in making progress towards their eventual wind-down.
I know some of these steps are more welcome to you than others. For instance, I know many of you, as a direct result of the loan limits stepping down, are now going to step up and commit your capital to the jumbo segment of the marketplace -- stepping in as the GSEs back out.
Others, however, have expressed their concern that loss of government support may reduce loan volumes in some markets and make business harder.
But ultimately these steps taken together represent an important step toward reducing the government's footprint in the marketplace -- while doing so in a careful, measured way so as not to harm our recovery.
Another way to reduce uncertainty is to clear away barriers to recovery. That is one of the important goals of the foreclosure settlement we are pursuing with the state attorneys general and the largest servicers, which began in response to the revelations about robo-signing and reports that some banks had been repossessing the homes of families improperly.
Rather than pursuing hundreds of different lawsuits with varying degrees of success, the primary objective of this settlement is simple:
To benefit struggling homeowners now -- not sometime in the future by which time it will be too late to help many of these families.
This is particularly important for homeowners who face hardships and are underwater -- whose unaffordable monthly payments put them at an increased risk of default, dragging down markets, reducing labor mobility and consumer spending alike.
Enabling these families to restructure their debt and start building equity again not only improves their prospects -- but also those of their neighbors who have watched property values plummet by $5,000-10,000 simply because there is a foreclosure on their block.
The other goal of the settlement is equally important: to resolve these matters in a way that holds those responsible accountable, but also moves us forward -- by creating conditions that are more conducive for lending.
That includes setting servicing standards for 14 of the largest servicers in coordination with FHFA that can provide a benchmark for national standards going forward.
While a settlement would help us clear away barriers to recovery, we also have an opportunity to bring certainty to the housing market as we define the rules of the road as directed by Dodd-Frank.
Strong, common sense rules are critical -- whether it is working with the Consumer Financial Protection Bureau to create clear, national standards for servicing that cut across every portfolio, simplifying and streamlining the conflicting provisions of RESPA and TILA, or creating a level playing field that prevents another race to the bottom.
But we also need to make sure we don't add more barriers by overcorrecting.
During the financial crisis, we saw how bundling and packaging mortgages to sell on Wall Street with no accountability led to an erosion of lending and underwriting standards that fed the housing boom, deepened the housing bust and put countless homeowners in unsafe mortgage products.
In response, there has been substantial focus on reducing the risk of default.
But no one in this audience believes we are ever going to eliminate default risk entirely. Nor should we try to.
Rather, our goal should be to enable those who are able to access homeownership to do so safely and responsibly.
But the truth is, it isn't just the private market that's wrestling with this balance.
As evidence of that, I only need point to the ongoing development of the "qualifying residential mortgage" rule.
The goal of QRM is clear: to define what a "safe" mortgage looks like that would be exempt from Dodd-Frank's risk retention rules -- balancing the need for strong, clear underwriting standards with the ability to provide broad access to the housing market.
But as you know, a lot of the debate has centered around down payments -- which only tell one part of the story.
FHA delinquencies are 240 percent lower than subprimes, even though both featured low down payments.
Why? Because FHA had much stronger underwriting standards and fixed-rate traditional loan products.
That's why we've put in place a "two-step" FICO floor for FHA purchase borrowers that ensures only borrowers with credit scores above 580 can make a minimum 3.5 percent down payment.
And that's why with the QRM rule, we have laid out two down payment alternatives, one requiring 20 percent down, and another requiring 10 percent, which could be reached using a mix of private mortgage insurance and other credit enhancement.
We can't let this debate become so narrow that down payment becomes the only qualification for homeownership.
Just as we can't overcorrect with the rulemaking process around QRM, we need you to do the same in your operations and your businesses. Only then can we ensure the wide access that has always been the hallmark of our housing market and is essential to building the confidence we need to recover.
Confidence in Ourselves
Ultimately, restoring confidence in our housing market isn't about what's good for you or for me, but for all of us.
It's about people like Jason who lives in Grand Blanc, Michigan.
Jason commutes 45 minutes every day to Auburn Hills in his 1994 Oldsmobile.
He works in middle management for his employer -- and spends his day not in an office, but a cubicle.
And at the end of that day, he drives home to take his three kids to swim practice.
Recently, he tried to refinance his home to get a lower fixed rate mortgage but he couldn't -- not because he didn't qualify--and not because he couldn't pay--but because of the LTV ratio.
Because the value of his house has fallen so far.
As he put it, "It's hard to build up equity when your home value continues to go into the tankbecause everyone runs away from their commitment."
This kind of frustration exists in communities across the country -- and among many in this room as well.
I know that for all of you, and for your employees, this is a time of tremendous uncertainty.
I get that -- but what I also get is how essential your industry is to the strength of our economy, and the future of this country.
And President Obama gets it, too.
We know how important your work has been as we continue to recover from the crisis -- and its importance will only grow as we move ahead with reform.
There are countless families out there--and they might never know your names--that you have helped -- either by helping them become a homeowner for the first time or by saving their homes.
But there are millions more families who need your help.
They know we didn't get into this crisis overnight -- and we won't get out of it overnight either.
But these families--families like Jason's--are doing their part.
They're living up to their responsibilities.
It's time we lived up to ours -- all of us, public sector and private sector, in every housing market in the country.
That's what we need to do in the days and months to come. And with our collective commitment, I know we can.