Prepared Remarks of Secretary Shaun Donovan at the 2012 Asian Real Estate Association of America National Convention

Las Vegas, NV
Monday, September 24, 2012

Thank you, Jim -- for that very kind introduction.  It’s terrific to be back in Nevada and to join so many real estate, mortgage and housing professionals at this critical moment for our housing recovery.  So, I want to thank you, Jim, as well as Kathryn Tsao for your partnership.

For nearly a decade, AREAA has played an important role--and provided an important voice--to ensure Asian American communities have a pathway to homeownership--sustainable homeownership in sustainable communities--and addressing housing and lending discrimination facing the AAPI community. 

Indeed, particularly these last three-plus years, your partnership has been absolutely critical to our efforts to push back against what has been a historic crisis -- one that has taken a toll on our Asian American communities.

That’s one reason I’m proud to have been participating in the White House Initiative on Asian American and Pacific Islanders with Hyeok Kim, Chris Lu at the White House and so many others and be involved in its Federal Interagency Working Group.

But I’m even prouder that in the past three years, we have engaged AAPI communities like never before in our agency’s history -- from conducting listening sessions around the country with Assistant Secretary Trasvina, to holding community meetings in Washington and in your communities, to HUD’s ongoing work to survey how we collect housing data and break out AAPIs wherever possible.

Today, I’d like to talk about the progress we’ve made in our housing market -- here in Nevada and across the country.

I want to discuss the tools we’ve provided that have made some of this progress possible -- as well as the additional tools we need to build on it.

And ultimately, I want to talk about some of the fundamental choices we face in the weeks ahead that put so much of this progress at risk.

Progress in Our Housing Market

I don’t have to tell this audience where we were when the President first stepped into the Oval Office. 

America’s economy was shedding 750,000 jobs per month.  Housing prices had fallen off a cliff -- declining for thirty straight months.  And every month, it seemed foreclosures were setting new records. 

Now, some may have a case of selective amnesia about what it was like back then. 

But not you.  You know that Las Vegas--Ground Zero for the foreclosure crisis--just happened to be located in the state with the fastest growing Asian American population in the country. 

Well, today, because of the work we’ve done together, we now stand at a far more encouraging moment.

Foreclosure notices are half what they were in early 2009.

Because we helped communities struggling with concentrated foreclosures, places with targeted neighborhood stabilization investments have seen vacancies fall -- and home prices rise. 

Because we provided critical support to the FHA, we preserved a critical pathway to the middle class. 

And our recently released scorecard shows the results of these efforts clearly, with the Case-Shiller home price index up for first time since September, 2010.

It shows that the number of underwater homeowners has dropped 11 percent since end of last year -- and home price improvements in the first half of this year alone have helped lift 1.3 million families above water. 

And as you would expect for a region so reliant on tourism, that national improvement has been felt here in Las Vegas as well, with single-family housing permits up more than 50 percent this year compared to last. 

Case-Shiller reports that Las Vegas home prices have gone up for the last 3 months -- and seriously delinquent mortgages have gone down for five quarters in a row.

None of this is to say the job is done.  We still have a lot of work to ensure this progress reaches families who need it most. 

But with housing construction nationally growing faster than any time since 2008, and the best winter and spring of home sales since the crisis began, the country’s housing market has momentum we haven’t seen in over five years. 

Building on Our Progress -- A Historic Settlement

And with the recent $25 billion servicing settlement, we have some of the tools we need to keep that momentum going.

AREAA has been a great partner in this effort.  And last month with a preliminary report from the settlement’s Independent Monitor, we saw the first signs that homeowners are beginning to see results.

This snapshot, taken when the banks were ramping up their operations, indicates that roughly 165,000 homeowners have received almost $14 billion in relief -- $76,000 on average.

This includes homeowners currently in trial modifications -- who only because of the settlement can expect their bank to not simply reduce their monthly payments, but to actually write down more than $108,000 of mortgage debt on average. 

Indeed, the vast majority of that relief to consumers has come in the form of debt forgiveness, including principal reductions of first and second liens.

It also includes refinancing for underwater homeowners and the write-downs required to facilitate short sales that allow families who have been unable to get out from under hundreds of thousands of dollars of mortgage debt to move to a new job or start anew. 

That’s good for families, communities and our economy.

Should the banks deliver on these commitments--and we will be watching them like hawks--these early results suggest that the settlement is on track to provide the most meaningful assistance we’ve seen since the housing crisis began.

Already, between the first quarter of 2011 and 2012, we saw the share of modifications including principal reduction more than triple. 

Because of the settlement, our hope is that principal write-downs will become not the exception when it comes to helping struggling homeowners -- but the standard.

The settlement also provides consumer relief to hundreds of thousands of homeowners who lost their homes around the country. Today I’m proud to announce that our state attorney general partners, through their administrator, will begin to mail packages of information to 2 million eligible consumers, including more than 66,000 Nevada families, with instructions on how to apply for a direct cash payment under the settlement. 

And I want to thank Attorney General Masto, who pushed hard to ensure that the settlement held the banks accountable and provided compensation for Nevada homeowners harmed by abusive servicing practices.

Just as importantly, the settlement is focused on fixing the issues that led to so many of these problems in the first place. 

Because of the settlement, all five banks have already committed to providing a single point of contact when at-risk families ask for help. 

And by October 5^th, all five banks will have to comply with more than 300 additional servicing standards that build upon the new protections introduced when the President announced the Homeowner Bill of Rights. 

That means, at the same time the Administration’s new Consumer Financial Protection Bureau is putting in place a single, straightforward set of commonsense rules that families can count on when they’re buying a home, the standards in this settlement will give people the confidence that lenders and servicers are following a comprehensive list of rights should they ever lose a job or have a medical emergency that puts their home at risk. 

Indeed, according to this preliminary report, four of the five servicers tell us they have already implemented more than half of these standards.

Lastly, at a time when we had to scratch and claw for $45 million to restore housing counseling funding in Washington, the settlement forces banks to pay billions of dollars to states they can use for these purposes. 

With the help of folks like you, Attorneys General from both parties--from Democrats like Catherine Cortez Masto here in Nevada to Republicans like John Suthers of Colorado--have committed to doing just that. 

And these new resources will be absolutely critical to ensuring that the tools we provide reach the families who need them most. 

Already, housing counseling grants we provide have helped the National Coalition for Asian Pacific American Development better serve AAPI families struggling to keep their homes.

These resources have made a particularly big difference for those in the AAPI population with limited English proficiency -- which describes a third of the AAPI community.

In addition, under Assistant Secretary Trasvina’s leadership, we have translated over a hundred housing documents into 16 languages -- and set up a language assistance line that is capable of translating into 150 languages, including 15 AAPI languages. 

Building on Our Progress -- Refinancing and Rebuilding

Of course, at-risk families aren’t the only ones who these counseling resources will benefit. 

So, too, will they help the millions of responsible homeowners--who are doing the right thing, and making their mortgage payments every month--who still can’t refinance -- who still can’t take advantage of record-low interest rates because they are underwater.

That not only prevents them from saving thousands of dollars per year -- it also prevents our economy from receiving the lift that low interest rates typically provide.

That’s why last fall, the President called for us to step up our efforts.  Within six weeks, we had identified barriers that were holding people with loans backed by Fannie Mae and Freddie Mac from refinancing. 

And as a result, more than a million homeowners have applied and stand to save on average $3,000 per year.  More than a half million have closed already, outpacing all of 2011. 

The effects of these changes have been most dramatic for families who are deeply underwater -- and who had previously been locked out of refinancing completely. 

Where only a handful of homeowners deeply underwater had been able to refinance over the previous three years, this year, in June and July, the number of homeowners with loan-to-value higher than 125 percent closing on HARP refinances shot up by more than 400 percent -- and twice that in hard-hit states like Nevada. 

We also dramatically cut fees for FHA refinancing -- allowing families to pay minimum fees to refinance into a new FHA-insured loan.   And in just the first three months, we saw a more than 200 percent increase in applications.

But even with refinancings at a 3-year high, we need to do more. 

That’s why President Obama is pushing Congress to act on a series of legislative proposals that will help families refinance and rebuild what they’ve lost.

The first, Senator Feinstein’s Expanding Refinancing Opportunities Act, would provide homeowners whose loans are not guaranteed by the government access to simple, low-cost refinancing.

The second, developed by Senators Menendez and Boxer, would allow us to clear the remaining barriers to refinancing for homeowners with loans backed by Fannie and Freddie. 

To ensure more families can refinance with a better deal, the Responsible Homeowner Refinancing Act creates competition between lenders so consumers can shop for better rates -- and it removes other burdensome fees.

We also need to ensure homeowners can rebuild equity.

Savings in our homes is the single biggest source of how we send our kids to college.  It’s how entrepreneurs get the capital they need to start a small business -- and how people save for their retirements.

For immigrants to this country, in many ways home equity is the lifeblood of the American Dream.

That’s why the Rebuilding Equity Act, sponsored by Senator Merkley, is so important -- encouraging underwater homeowners to apply savings from refinancing to rebuild equity in their homes. 

If they do, the majority of those families could get back above water in five years or less.  That’s not only good for them -- it’s also good for our economy.   

As we speak, Majority Leader Reid is fighting to get these bills to a vote in the Congress before they recess for the year. 

Collectively, they would ensure that every responsible family can not only refinance--regardless of whether they have a loan backed by government--but also rebuild the equity they have lost.

And as we make this big push in the days and weeks to come, we need AREAA to continue making that case -- that tearing down barriers to refinancing is critical to not only protecting the communities you serve but also rebuilding their economies.

Building On Our Progress -- Helping Hard Hit Communities

Lastly, I want to say a few words about steps we need to help not just homeowners -- but hard hit communities.

This audience knows that the second a single foreclosure sign goes up on your block, your home value drops by as much as $10,000.  Well, in places like Las Vegas, you see neighborhoods filled with those signs.

But with tools like HUD’s Neighborhood Stabilization Program, which is on track to create nearly 90,000 jobs and address 95,000 vacant properties across the country, we’ve been pushing back. 

That’s why the President proposed a new Project Rebuild, which would build on these efforts and create as many as 11,000 jobs in communities across Nevada -- providing a boost to our hard-hit construction industry.

Project Rebuild wouldn’t just create jobs and transform neighborhoods -- but also boost home values.  Indeed, recent data shows that three-quarters of places that received targeted investments through the first two rounds of NSP showed increased home prices.

Project Rebuild presents a real opportunity to take our neighborhood stabilization work to the next level -- but it’s not on the only innovative tool in our toolbox. 

Right now, there are still thousands of FHA borrowers--the vast majority of whom received their loans before President Obama took office--who are severely delinquent -- who have exhausted their options and could lose their homes in a matter of months.

That’s why we recently expanded our single-family note sales pilot program, which allows FHA to sell some 9,000 severely delinquent loans to private servicers for a market-determined price -- in return for which, the new servicer agrees not to foreclose for at least an additional six months.

By strategically identifying pools of loans that are eligible, this effort creates new opportunities to support at risk families and hard hit communities alike.

Just last week, we received bids on the first of a two-part sale and this Thursday, we’ll be selling approximately $700 million worth of FHA loans which have been split up into seven pools specifically designed to stabilize neighborhoods in four hard-hit markets: Phoenix, Chicago, Newark, and Tampa.

Having worked closely with state and local housing agencies on this effort, we made sure banks, investors and nonprofits have a strong incentive not simply to succeed in the short-term -- but to remain invested in these neighborhoods for the years to come.

And in states where we haven’t seen the so-called “shadow inventory” shrink as quickly as other markets, this represents a critical step in our efforts to keep homeowners in their homes and shrink the supply of foreclosed homes dragging down home values and neighborhoods alike.

The Choices We Face

For me, for all of us, all this work is about rebuilding faith in the American Dream -- faith that this crisis--the cause and its effects--has sorely tested.

If this crisis has taught us anything about the American Dream, it’s that if you can’t be protected from predatory lending and unscrupulous servicers…if you can’t move to get a new job because your home is so deeply underwater…or if you can’t even buy a home in the first place--no matter how hard you’ve worked or how much you’ve saved--then that’s no dream at all.

We’ve made real progress.  It hasn’t always been easy.  It hasn’t always been as quick as I’d like. 

But with your help--and your partnership, lifting up AAPI families--we have made progress.

But finishing the job requires us to make some fundamental choices in the weeks ahead.

Like whether we make refinancing easier for families -- or leave them to fend for themselves as they fight to get back above water. 

Like whether we create a Project Rebuild that puts 200,000 people back to work rebuilding vacant homes -- or allow abandonment in our hardest-hit neighborhoods to keep dragging down the property values of their neighbors and their home equity along with it.

Like whether we even have an FHA around to ensure we provide a pathway to homeownership -- or shut responsible borrowers out completely.

Like whether we impose arbitrary and destructive cuts to programs that put the middle-class, seniors, children, veterans, and our economy at risk--doing damage that no amount of planning by any agency could mitigate--or take a balanced approach to deficit reduction that asks everyone to pay their fair share.

But in many ways, the choice before us is even more fundamental: 

It’s whether we return to the same top-down policies that got us into this economic crisis -- or build an economy based on the strong, secure middle class each of you have dedicated your careers to creating. 

It’s whether we settle for a country where a shrinking number of people do really well, while more Americans barely get by -- or build a nation where everyone gets a fair shot, does their fair share, and plays by the same rules. 

Those aren’t Democratic or Republican values.  They’re American values -- the values we all stand for as Americans.

And we need to reclaim them.  We need to fight for them.

But we can’t do it alone.  We need your help to make the case that we can’t afford to return to the days when homeownership was seen as just a vehicle for profits on Wall Street, when hard-hit communities were left behind, or when a family could be penalized for nothing more than having faith in the American Dream.

That’s not right.  That’s not the country I want for my children -- or you want for yours. 

President Obama and I want to build a country where that faith is rewarded.  Where hard work is a pathway to opportunity once again.  Where we have an economy built on the values and virtues of the families and communities that represent the future of America in the 21^st century.

That’s a dream worth fighting for.  And in the weeks and months to come, I know we will together.  Thank you so much.