San Francisco—More than 2 million foreclosures are expected this year, said Steve Preston, secretary of the Department of Housing and Urban Development, at the Mortgage Bankers Association (MBA) annual convention in San Francisco.
In addition, nearly 12 million Americans have mortgages today that cost more than the value of their homes. “We are gravely concerned about the ongoing impact that the home values and the tough economy can have on our future,” Preston said.
After presenting the big numbers, Preston tried to put them in context. The foreclosures are about a third of the 5.5 million or 6 million homes that are likely to be sold this year in the country. The number of foreclosures is more than double the number or pace of housing starts.
“Not every mortgage can be saved and not every mortgage should be saved, but there are many that can be saved,” he said, citing different industry efforts to rework troubled loans.
Since last September, the Federal Housing Administration (FHA) has helped nearly 400,000 families keep their homes by refinancing to a more affordable FHA-insured mortgage. “We believe that number will increase to about 500,000 by the end of the year,” Preston said.
He stressed the importance of housing counseling, saying it can be a lifeline to borrowers in distress.
“These efforts have been critical in stemming the tide of foreclosures and helping millions of Americans stay in their homes, but there is work to do going forward,” he said. “We have got to expand the reach and impact of our collective actions because the issue is not going to wane. It’s going to continue to pressure our housing market and our economy. Every preventable foreclosure that we mitigate on reasonable terms is good for the families, good for our communities, and good for our economy.”
He called for increased focus on outreach and communication about the avenues of support that are available. There also needs to be continued “engagement among private partners.” Many private lenders have made bold moves, he said, including adopting broad-based moratoriums on interest resets, expanding staff to assist borrowers in need, and showing an increased willingness to modify loans.
On the other hand, Preston said he has also heard from borrowers and counselors that loan servicers often don’t have the authority to help them or loan modifications guidelines are so rigid that many people who can be helped are falling through the cracks.
“I’m concerned that unless the industry continues to address these issues head-on and aggressively, Congress may lose patience and impose stronger measures upon those in the business of homeownership,” he said. “So now is the time to continue to be bold, especially with the new tools that the government has provided and especially as it relates to people who are coming forward and raising their hand to say, ‘I’ve got a problem. I can’t pay my mortgage. I need help.’ We have got to meet them where they are to help them with a path forward to stay in those homes where it makes sense.”
Preston added that it is important to make mortgages more understandable and the process more transparent.
Who’s responsible for Fannie, Freddie troubles?
Following Preston’s speech, there was a discussion of the political landscape with Karl Rove, former deputy chief of staff and senior adviser to President George W. Bush, and George Mitchell, former Senate majority leader.
Both Rove and Mitchell agreed that the federal rescue plan was the right move. “I don’t think anyone involved liked the idea of taking the steps that were taken, but when you confront reality in a crisis situation, you have to do what’s necessary,” said Mitchell, who served as a Democratic senator from Maine for several years before leaving office in 1995. “I think it was on balance the right thing to do. Let’s hope that it works.”
The discussion grew more heated when MBA Chairman David Kittle asked them who in Congress should be held responsible for the troubles surrounding Fannie Mae and Freddie Mac.
Rove pointed the finger at Chris Dodd, D-Conn., saying Dodd chose to make it a partisan issue when efforts to reform the government-sponsored enterprises failed in 2005. He also named Barney Frank, D-Mass., saying he has been a persistent defender of Fannie and Freddie. “We might still be in a bad patch, but it would be no where near as bad if we had been able to get those reforms passed in 2005,” said Rove.
Mitchell disagreed. “I think there is plenty of blame to go around,” he said. “I think the last thing this country needs now is to engage in an orgy of finger-pointing and blame-identifying when we have a serious national crisis that deserves to be addressed. The implication that two Democrats on Capitol Hill are responsible for all the problems that we have is, in my judgment, simply untrue and so far-fetched that it’s not to be believable.
The discussion was interrupted a few times by protesters, including one woman who walked on stage, calling for Rove’s arrest for treason.