February 13, 2008
HP-825

Treasurer Anna Escobedo Cabral
Remarks on Housing before the National Association of Hispanic Media

Washington - Good morning. Thank you, Clara, for that introduction. I'm pleased to join this distinguished group of publishers, editors, and writers from Hispanic-owned or Spanish language newspapers. I want to thank you for the important work you do. Not only are you important leaders for the Hispanic community – you are also the critical messengers that help ensure our communities are kept informed.

I'm excited to be here today because I have some important messages to share regarding ongoing efforts at Treasury, including our work to address the current challenges in the housing market. And I'd like to call on your partnership and support in these efforts.

As many of you know, our country is experiencing a period of adjustment in the housing sector of our economy. While the long-term economic fundamentals of our country remain strong, many individuals, families and communities are experiencing the pain of resetting mortgage rates, home price depreciation, and neighborhood foreclosures. A significant number of Americans have lost their homes due to foreclosures, and many more are struggling. The Hispanic community is among those struggling.

Over the past several months, I've had the opportunity to visit some of out country's most affected communities. I've seen firsthand the negatives impacts of foreclosures. The blow of a foreclosed home ripples through the broader community – resulting in depreciated home values, higher crime rates, increased unemployment, and placing a strain on the overall financial stability and health of the community.

Clearly, foreclosures are painful for families, cities, the lenders and the larger economy. As a result, we have redoubled our efforts to reach borrowers who may need help. State and local leaders, community organizations, and the private sector have been working hard to address this issue. But much work remains, and we need your help.

Elevated foreclosure rates are expected to remain over the course of the next two years. In fact, approximately 1.8 million subprime mortgages are expected to reset in this same time period. The good news is that not all of these will end in foreclosure. Some homeowners will be able to afford their new payments. Others will refinance into a fixed rate mortgage on their own. Unfortunately for some whose finances have been stretched to thin, foreclosure will be unavoidable.

However, there is still another group that falls in the middle. This is a group that we can help through a targeted approach, but first we need to identify and reach them.

Over the past six months, Treasury has been working with the Department of Housing and Urban Development to with the clear goal to help more Americans remain in their homes. As a result, A new national alliance – HOPE NOW – was launched at the end of last year. The Alliance – made up of our nation's leading counselors, servicers and investors – has been critical to bolstering our outreach efforts to vulnerable homeowners. Today, the Alliance has grown to make up over 94 percent of the subprime mortgage servicing market.

Under the leadership of Secretaries Paulson and Jackson a new effort called Project Lifeline was launched yesterday. This is a targets outreach effort to the most vulnerable homeowners- those for whom foreclosure is most imminent. Under this program, the largest members of the HOPE NOW Alliance will begin sending letters to homeowners who are delinquent in their payments by 90 days or more. These letters will offer a step-by-step simple approach that may enable homeowners to pause their foreclosure for 30 days while a potential modification is being worked out.

Now this is just a small step in what will continue to be a broader plan, but it is significant for homeowners who otherwise would have gone into foreclosure immediately.

Since its creation, HOPE NOW has been successful in offering a variety of other resources to struggling homeowners. First, they adopted a centralized hotline that offers free foreclosure prevention counseling. The hotline – 888-995-HOPE – is operated by the Homeownership Preservation Foundation, and in order to sustain the HOPE hotline, servicers and investors reimburse hotline counselors $100 for every session completed. The $100 fee per counseling session was a major step, as counseling has traditionally been supported solely by government and foundation funding.

HOPE NOW servicers are also contacting all subprime adjustable-rate mortgage borrowers at a minimum of 120 day before their mortgage is due to reset in an effort to identify and help troubled borrowers. The earlier borrowers reach out for assistance, the more options they'll find.

The HOPE NOW alliance also launched a direct mail campaign late last year. This is a critical step. We know that half of borrowers who reached foreclosure never reached out to their lender or a housing counselor to ask for help. In some cases, this can be a cultural issue – instead of stepping out into the light and asking for help, many borrowers hide in the dark, ignoring the letters from their lenders.

The HOPE NOW mail campaign is targeted to all borrowers who are 60 days or more delinquent on their loans, but have still not contacted their servicer. The letter provides good information about foreclosure prevention under one recognizable and trustworthy HOPE NOW banner. Most importantly it shows them that help is available if they ask for it.

To date, HOPE NOW has sent approximately 775,000 letters to borrowers who could have the option to work out a more affordable solution, and they will continue to reach more borrowers in the coming months. For borrowers who are reluctant to call their lender, they can call the 888-995-HOPE hotline to reach an independent, non-profit counselor who can help guide them through their options.

Other HOPE NOW accomplishments include streamlining efforts between counselors and services so that they can communicate better and improve their efficiency as well as developing standard performance measures. Any strong initiative must have measures of progress. We've already seen these measures put to test.

Since its launch, the HOPE hotline has experienced a 540% increase. In August, it was receiving an average of 625 calls per day and now it receives 4,000 new calls a day. In addition, early results of the HOPE NOW outreach letters indicate over 16% of recipients have contacted their servicer or a non-profit counselor to explore potential mortgage solutions.

HOPE NOW also recently reported that the industry helped 545,000 homeowners with subprime loans in the second half of 2007, and 150,000 of those homeowners received modifications.

Even better, the rate of modifications of subprime loans more than doubled from the third quarter to the fourth quarter of calendar year 2007, and we expect this progress to continue.

We are pleased with the progress of the HOPE NOW Alliance. For our part, the Administration has also worked with Congress to provide increased funding to NeighborWorks for counselor networks and requested that Congress pass FHA modernization. Congress passed the President's tax relief proposal, which was signed into law in December and will help relieve some of the burden on families. The Administration will also continue working with the Congress on its proposal to allow state housing authorities to issue tax-exempt bonds to help refinance borrowers into more affordable mortgages.

These are all positive steps in the right direction. But this challenge will not disappear tomorrow, and our work must not stop here. We must instead remain committed to expanding our outreach network to reach as many struggling individuals in communities throughout our country.

This is where your role as messengers to our communities can help. You have the potential to empower your readers, viewers and listeners in the Hispanic community with information that could be critical to helping them remain in their homes.

As Treasurer, I spend a lot of time talking about the importance of financial literacy. In many cases, our most vulnerable communities – underserved communities, those without bank accounts who lack access to basic financial services – are also minority communities who lack the information they need to make smart financial decisions.

At Treasury, we've been working hard to reach these communities, and we need your help. There are a variety of financial education topics of great significance to the Hispanic community – from understanding the importance of having a bank account to knowing how to use credit to your advantage to knowing the terms of your mortgage.

I challenge you to learn more about these issues and work to incorporate them into your stories and publications. To promote foreclosure prevention, NeighborWorks and the Ad Council have launched a PSA campaign targeted at struggling homeowners.

These messages – for print, radio and television – are available in English and Spanish. We need your help in spreading this message, and I invite you to partner with us in this effort.

Our progress is only as great as our strongest partnerships. I encourage you to help us spread this important message to as many homeowners as possible, and if there is any way we can be of help to you, please let us know.

One last point before I close: Since taking office, President Bush has worked hard to break down barriers to homeownership and expand the dream of owning a home to more Americans. It is incumbent upon us to preserve this dream. At the end of the day, if we can help keep more families in their homes, our country and economy will be better off as a whole. Once again, I applaud your efforts to keep the Hispanic community informed. Working together, I'm confident we can help preserve the American dream of homeownership.

Thank you.