Thank you very much, Steve (Brown), for that kind introduction. More importantly, thank you for your leadership--starting in Ohio--and now across the nation.
Although you've only been President a few months, I know you've already taken bold steps to help the industry adapt and succeed in these changing times. And I deeply appreciate all your great work.
I'd also like to thank all of you: the leadership team, members and supporters of the National Association of Realtors. As leaders in business and in your communities, you've done great work to move our nation forward during good times and bad.
All of us at HUD have been proud to work with you on a wide-variety of efforts to bring new opportunities to families, to strengthen communities and to secure a better future for our country.
For that and more, I am grateful to be with you today.
I am especially grateful because you brought cake, which gives you a special place in my heart.
And I can't think of more appropriate friends and partners to join in celebrating the Federal Housing Administration's 80th birthday.
The Importance of FHA
This is an important milestone because we all know the critical role that "home" plays in our lives. In the mid-1930s, FHA launched a weekly radio broadcast called "What Home Means to Me." It was a series of 26 installments that aired on Sundays featuring corporate leaders, government officials singers poets World War I heroes and more, speaking about how housing was important to their lives.
One person talked about how home is one of the few magic words in the world. A doctor spoke about home being, by far, the greatest influence on health he knew. Another American said that home is essentially a state of mind -- one of memories and associations. Another talked about how home means a thousand things, which I think we all can relate to.
Home is at the center of every family's life. It's the heart of strong communities. It helps people build wealth, send their kids to college and retire with comfort and dignity. It's an important part of our economy, creating jobs and fueling growth. In short, home is critical to not only our lives, but our nation's life.
But, as Steve just alluded to, historically, the housing market has seen its challenges. FHA was created during a trying time for our country because of the Great Depression. Franklin Roosevelt famously spoke about seeing one-third of a nation that was "ill housed, ill-clad and ill nourished."
So many Americans had lost their jobs -- including two million construction workers. Those who did have resources often had trouble meeting the terms for mortgages, which were limited to 50 percent of a property's market value, with a repayment schedule spread over three to five years -- ending with a balloon payment.
As a result, the dream of homeownership was out of reach for so many families. But, President Roosevelt correctly recognized that we could do better, once declaring the "right of every family to a decent home." So as part of the National Housing Act, he created the Federal Housing Administration.
And in the years since, FHA has helped generations of Americans, from financing military housing for veterans returning home from World War II, to spurring the production of millions of privately-owned apartments for vulnerable communities during the middle of the century, to keeping cash-strapped properties afloat during the energy and inflation crisis of the 1970s.
And of course, as Steve mentioned, during the Great Recession, FHA stepped up to keep capital flowing in the mortgage market, which many people believe prevented a total housing crash.
So as we look back at the last 80 years, there is a lot to celebrate. And when I look at the history of FHA, NAR represents an important chapter.
Our two organizations have been partners for progress since the beginning. Together, our work has done a lot of good for families and communities across the country. But as you know, we can't afford to spend a lot of time looking in the rearview mirror. We've also got to look forward at the next 80 years, and we've got to start by building a strong foundation today.
Strengthening FHA for the Future
Our nation has come a long way since the depths of the economic crisis. For instance, according to NAR, 2013 was the best year for existing home sales since 2006. In the big picture, trends like prices and starts are pointing in the right direction: up.
And that's part of a larger economic comeback that's seen businesses create 9.2 million new jobs, a manufacturing sector that is adding jobs after decades of decline and a booming auto-sector.
But we all know that there is more work to do. When it comes to buying a home, before the crisis, credit was too easy to get. Now it is too difficult. One example:, from 2007 to 2012, lending to borrowers with scores credit scores between 620 and 680 fell 90%.
To be clear: not everyone in this category is ready to own. But there are many who are ready and aren't being served by the market. This is bad for them. It also hurts your businesses and all the people you employ. And it hinders our economic recovery.
At HUD, we've been taking a long look in the mirror to see what we can do to increase the flow of credit. Specifically, we have been looking for innovative ways to get credit to those ready to buy, and ensure these transactions have the best possible chance to succeed.
The result of these efforts is what we are announcing today: we call it a "Blueprint for Access."
To help borrowers, we are working to embed housing counseling through the FHA origination and servicing process.
Research has shown that counseling reduces delinquency by roughly 30 percent for first-time buyers because it helps families make the best financial decisions for the future. It's also a good financial decision for the health of FHA because it helps ensure that we are dealing with responsible buyers.
So we are launching an initiative called Homeowners Armed with Knowledge--also known as HAWK--which will be ready to go by the Fall. Under this four-year pilot program, first time homebuyers who commit to counseling will qualify for reduced premiums on their loans.
Those who do it before signing a contract to purchase a home will receive a 50 basis point reduction in the upfront FHA mortgage insurance premium, and then right before they close will receive an immediate discount of 10 basis points off their annual premium.
Those who also do it after closing--along with 24 months of consecutive payments and no 90-day delinquencies--will receive another 15 basis point reduction. And if they take all these steps, they can realize the combined savings.
Specifically, for the average FHA loan balance of $180,000, these reductions can add up to roughly $10,000 in savings over the life of the loan. This is a win for families, FHA, lenders, you and the overall market, which is why we are very excited about its potential impact.
We are also excited by our work with lenders. We want to create an environment that encourages responsible behavior, and provides clear rules of the road, so lenders can originate loans without inappropriate fear of penalty for who they lend to, as opposed to the quality of their process
So as part of our Blueprint, we are making revisions to our Quality Assurance program- or how we enforce our rules with lenders. We are changing the way in which we provide policy direction--and monitor lender compliance and performance--so that it better protects FHA and reduces uncertainty for lenders in their interactions with HUD.
We're also working to provide clarity and transparency in FHA's policies to encourage lending to qualified borrowers across the spectrum. Our initial efforts are working, with some lenders already beginning to reduce credit overlays.
And again, this is a win for lenders, FHA, families, you and the overall market. Carol (Galante) will talk about these measures in greater detail later. But know this: the Blueprint for Access will help ensure that FHA remains a champion for opportunity for the next 80 years.
In doing so, it will continue to assist responsible families, from all backgrounds, in making their dream of homeownership a reality. But make no mistake: we know that FHA can't secure this dream alone.
We recognize its limits. It can't address all the challenges currently facing the market. Only legislation can, which is why we need to bring housing finance reform to the finish line.
Housing Finance Reform
As all of you know, in March, Senators Johnson and Crapo announced housing reform legislation. This bipartisan effort would go a long way in building a rock-solid system that brings responsibility, opportunity and stability back to the housing market.
It would create a housing finance system with certainty on what the government guarantee means--and when it's used--and ensure that taxpayers won't be left holding the bag the next time trouble hits.
It would provide the certainty private capital needs to return to the market, and put an end to the days when Fannie, Freddie and FHA dominate the market -- a model we all know is unsustainable. It would place special emphasis on affordability, proposing up to $5 billion a year for housing trust funds that would, among other things, provide down payment assistance to help responsible families ready to buy.
It would use market-based incentives to expand access to credit, including giving community banks and small lenders a better chance to compete. In total, these efforts would make a tremendous difference for the housing market, our economy and our nation.
Now, is this bill perfect? Of course not. There things that all of us would change. But, make no mistake: it represents progress towards building a healthier market for generations to come.
Now of course, this is Washington. There are a lot of naysayers out there who say that reform doesn't ever have a chance. And the fact is that we face an uphill battle.
But we've got to keep the focus on people. People deserve access to credit. People deserve the chance to buy a home if they are ready. People deserve to operate in a market that is safe and stable. And it's up to us to make it happen.
That's why I appreciate all the contributions you make, every day--on a wide-variety of issues--to move the industry forward. It's also why HUD is launching our "Blueprint for Access" today to expand the circle of opportunity for more families.
This work cannot wait. To borrow one of Steve Brown's themes as President of NAR: the time is now.
Home is one of the few magic words in the world. Home is the source of our greatest memories and associations. Home is at the center of every family's life and the heart of strong neighborhoods.
That's why we must not rest till every family--who is ready to buy--can. So let's work together to ensure this happens and make the next 80 years the golden age of a growing, prosperous and responsible housing market.