TOPICS > Economy

HUD Secretary Donovan: ‘We Need to Do More’ to Help Homeowners

February 1, 2012 at 12:00 AM EST
President Obama called the housing crisis "massive in size and scope" Wednesday as he described his latest proposal that would let homeowners with private mortgages refinance into government-backed loans. Judy Woodruff discusses the $5 billion to $10 billion plan with Secretary of Housing and Urban Development Shaun Donovan.
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JUDY WOODRUFF: Next, President Obama lays out a new plan for tackling the housing crisis, but will it be more successful than prior efforts?

The president had only to cross the Potomac River to Falls Church, Va., to find plenty of foreclosures.

PRESIDENT BARACK OBAMA: This housing crisis struck right at the heart of what it means to be middle class in America: our homes.

JUDY WOODRUFF: In fact, he said the crisis remains massive in size and scope, and he described his latest attempt to attack the problem, first by letting homeowners with private mortgages refinance into government-backed loans at record-low interest rates, even if they owe more than the home is worth.

The administration says the plan could help 3.5 million borrowers and save families about $3,000 a year. It would cost $5 billion to $10 billion, paid for by a fee on big banks. The president also called for a homeowners bill of rights and a program to rent out foreclosed properties.

Congress has already balked at the bank tax idea, but Mr. Obama insisted it’s time to try again.

The idea that somebody who's done all the right things, a family that's paid their mortgage, despite the fact that they're underwater . . . couldn't benefit from record-low interest rates today is inherently unfair. Secretary of Housing and Urban Development Shaun Donovan

BARACK OBAMA: It is wrong for anybody to suggest that the only option for struggling, responsible homeowners is to sit and wait for the housing market to hit bottom.

REP. JOHN BOEHNER, R-Ohio: Morning, everyone.

JUDY WOODRUFF: At the Capitol, Republican House Speaker John Boehner dismissed the proposals.

REP. JOHN BOEHNER: None of these programs have worked, and I don’t know why anyone would think that this next idea is going to work. And all they’ve done is delay the clearing of the market. The sooner the market clears and we understand where the prices really are will be the most important thing we can do in order to improve home values around the country.

JUDY WOODRUFF: An existing program already allows those with government-backed mortgages to secure lower interest rates.

About one million homeowners have used it, but President Obama conceded today that is well short of the goal of four million to five million.

For a closer look at the president’s plan, we turn to Shaun Donovan, secretary of housing and urban development.

I spoke with him a short time ago.

Secretary Shaun Donovan, thank you very much for talking with us.

HOUSING AND URBAN DEVELOPMENT SECRETARY SHAUN DONOVAN: Great to be with you, Judy.

JUDY WOODRUFF: Now, we just heard Speaker John Boehner say that none of the administration’s housing help plans in the past have had, in his words, any effect. The president himself acknowledged today they haven’t had the effect that he had hoped.

What gives you hope this one’s going to be any different?

SHAUN DONOVAN: Well, first of all, Speaker Boehner should talk to the million families that have been able to refinance their mortgages to record-low interest rates, even though they’re underwater, or the five million families who have been able to stay in their homes thanks to modifications.

The number of people falling into foreclosure today is down by about half since when the president took office. So we have made progress, but as the president said, and as I think you just recognized, we need to do more, and we need to go farther.

Specifically today, this proposal to expand the number of families that can refinance their mortgages, even though they’re underwater, this is something we know can work because it is working for Fannie Mae and Freddie Mac borrowers.

Last fall, the president asked us to expand the number of folks that we could reach by knocking down a bunch of the barriers that we’d found in the private market to refinancing. We did that. We brought together the private sector and others. And we were able to change things, like getting those who hold second mortgages that were standing in the way to reduce those, knocking down fees for appraisals and other things.

And that had bipartisan support. Sen. Boxer and Sen. Isakson put a bill together to support what we were doing. And we’ve seen broad support across the political spectrum from economists who say broader refinancing is one of the most important things that we can do, not just to help homeowners — it’s an average of $3,000 a year that they would save — but also to boost consumer spending.

That’s like a major tax cut, and it keeps going on every year that that family is paying the mortgage. So these are important steps that have broad support to move forward.

JUDY WOODRUFF: But the principal part of what you’re talking about is making people with — letting people with privately held mortgages get government-backed mortgage assistance.

Even your supporters are saying that is not going to pass the Congress. It was certainly the implication of what the speaker and other Republicans are saying. So what are homeowners to believe?

SHAUN DONOVAN: Well, Judy, let’s let folks look at the proposal and evaluate it.

And, again, the idea that somebody who’s done all the right things, a family that’s paid their mortgage, despite the fact that they’re underwater, for years through this crisis, the idea that they couldn’t benefit from record-low interest rates today is inherently unfair.

And we have made these changes. They have been broadly supported for families that have Fannie Mae and Freddie Mac or FHA mortgages. We ought to do the same thing as a simple matter of fairness for others who haven’t. And I think when folks in Congress take a look at this, they will support it, as have a broad range of economists across the board, who believe this is one of the most important steps that we can take for the housing market and for the economy more broadly.

JUDY WOODRUFF: Mr. Secretary, what do you say to the argument from not only the speaker, but other Republicans, including those running for president, that in the — when it comes to the housing crisis in this country, the market ought to be allowed, in essence, to just bottom out, and find out what the prices truly are of these housing properties?

SHAUN DONOVAN: Well, Judy, let’s be clear about what that means.

If you have a family whose entire net worth is tied up in their home, who is going to be able to start a small business because of the equity they had in their home or send their kids to college, bottoming out means telling those families they can’t send their kids to college, they can’t start that business.

It’s a little bit like saying, well, if you have got a fire in somebody’s house, you ought to let nature run its course, even if that means burning down the whole neighborhood. And if you’re a family where you have done everything right, you have paid your mortgage, and just because a foreclosure sign goes up next door, your own home loses $10,000 in value, it doesn’t make a lot of sense to me or the president to say to that family, oh, well, let nature take its course.

This is something we can make a difference on, we have made a difference on. And I will tell you, the president and I are not going to sit by and sit on our hands while we let those families, middle-class families who have done the right thing, suffer. This is a very clear divide between us, and I think it’s a very simple one for the American people to understand.

JUDY WOODRUFF: On the other hand, many of your supporters ask even up until today, why didn’t the administration push the banks, the lenders, the institutions that hold these mortgages harder earlier on to work with homeowners?

There is still lingering criticism of the administration that you didn’t push the banks when there was more clout, frankly, to get them to do something.

SHAUN DONOVAN: Judy, two things I would say to that. One is, on the refinancing program that we put out, we immediately took steps to make it available, and what we found over time is that there were a series of barriers in the market that stood in the way.

And those were things that we couldn’t just force the banks to do. We had to sit down and really work through the issues, things like, well, how could we create a mechanism so that second liens would be re-subordinated? Was there a new technology that we could use to do automated appraisals?

Those are things that we have done that have allowed us to open up refinancing to many more people, and those weren’t things that were simply a question of pushing. It was a question of sitting down, working collaboratively, and making it happen.

On the other hand, there are examples where we do have to push the banks much harder, and I would use as an example the work that we have been doing with 50 state attorneys general around the country on the foreclosure abuses that we saw, just horrendous problems with foreclosing on families while they were trying to get help, robo-signing of documents.

That’s an area where we are holding the institutions accountable with tens of billions of dollars of penalties and also help directly to homeowners that is mandatory. It’s not something that the banks will choose to sign up for. It’s something that’s mandatory as a result of our coordinated enforcement actions with states and with the federal government.

JUDY WOODRUFF: Secretary Shaun Donovan, thank you very much for talking with us.

SHAUN DONOVAN: Great to be with you, Judy.