Remarks of Secretary Julian Castro Mortgage Bankers Association 2015 Annual Convention and Expo
October 19, 2015
As prepared for delivery
Thank you very much, Rodrigo (Lopez), for your kind words and your leadership. And congratulations on your new role as Chairman-elect.
Let me also thank your new Chair, Bill Emerson, your new Vice Chair, David Motley, and the entire Board of Directors. My thanks as well to Dave Stevens and the Senior Management Team.
Finally, I want to thank all of you, the membership of Mortgage Bankers Association, for the important work you’re doing in communities across the nation.
Today, there are young professionals, growing families, and retired couples who are dreaming of buying a place to call their own. They’ve saved up and maintained a good credit score. They’re going to open houses and looking through listings. They’re making offers and negotiating closing dates.
But for most buyers, the dream of homeownership won’t become a reality until that phone call or email from a mortgage lender that says, “Good news! You’ve been fully approved and cleared for closing.”
Your work helps turn hope into homeownership, and it’s been a pleasure to work with so many of you during my 14 months as Secretary.
I know of course, that we’re not going to agree on everything, but the best way to find common ground is through partnership and an open dialogue. And it’s why I’m here today: to exchange ideas that move our housing market forward. So I thank you for inviting me to your 2015 Annual Conference.
As you all know, HUD is celebrating a special milestone this year: our 50th Anniversary. A lot has changed in the past five decades. To borrow from the columnist, Tom Friedman, back in 1965 Facebook didn’t exist, Twitter was still a sound, the cloud was still in the sky, 4G was a parking space, apps were what you sent to college, and Skype was a typo.
But one thing that hasn’t changed is the magic of homeownership. President Johnson once said that owning a home is more than just a cherished dream: it represents achievement, something to be proud of – a place where a person can live with joy and pride, pleasure and dignity.
In the five decades since then-through ups and downs, bubbles and busts-this still holds true. Some were surprised that I put responsible homeownership as a top priority on my agenda, but as I’ve said time and again: the appropriate response to the recent housing crisis isn’t to do away with homeownership – it’s to do it right.
First, this means giving folks of all backgrounds the opportunity to enhance their own financial security, to invest in smart, sustainable growth that works for everyone, from the factory worker, to the school teacher, to the small business owner.
That’s what President Obama did when he stepped into the Oval Office in 2009. Nearly seven years later, the verdict is in: this approach is working. A record 67 straight months of private sector growth. More than 13 million new jobs. An unemployment rate cut in half. And a housing market full of momentum.
Sales of existing homes are near pre-bubble levels. Home prices are at the highest levels since 2007. And families have built $5.2 trillion in housing wealth since 2009.
So the record is clear: the housing market is stronger, optimism is up, opportunity is expanding. And FHA has played a big role in writing this comeback story, stepping up during the crisis and stabilizing the market.
Then in January, we made homeownership more affordable for responsible families by lowering mortgage insurance premiums half a percentage point. Our total volume was up 50% over the first six months of the year compared to 2014. In June alone, we endorsed 65,000 first-time homebuyers, enough to fill the San Diego Padres stadium a few blocks away one-and-a-half times over.
Our work is making a difference. We’re hearing that from borrowers. We’re hearing it from independent economists like Mark Zandi, who’s said that our MIP reduction has been vital to the housing rebound. And we’re hearing it from industry folks like Brian Chappelle who believes that FHA is “getting stronger, faster” and your very own Bill Cosgrove, who recently said that our MIP reduction was “brave.”
Now we’ve got to build on this progress by giving every American who’s ready and willing to buy a home the opportunity to do so. This begins with access to credit. As you know better than anyone, credit provides the financial horsepower that most folks need to make the leap from renting to owning. Without it, many of the “open houses” that you and I pass by will remain just that: open.
But it’s still too hard for creditworthy borrowers to get a loan. And groups who should be leading the home buying market of the future, millennials and communities of color, are among those being left out.
This tight market doesn’t just impact potential borrowers who’ve been relegated to the sidelines. It impacts your bottom lines because of the missed opportunities for business. And it impacts the growth of the housing market as a whole.
So all of us-government and industry-have got to come together to solve this challenge, and HUD’s committed to doing our part in three ways. The first is by giving you the certainty you need to expand your credit box and work with a wider-range of responsible borrowers.
It isn’t exactly breaking news that dealing with the government can be challenging to navigate. FHA is no exception, and that’s caused many of you to operate cautiously. That’s why, over the last two years, we’ve worked closely with industry leaders to create more clarity and certainty for those doing business with us.
The result is significant progress in developing a single-family handbook that takes policies spread out over 900 documents and puts them into one easy-to-use online source. The creation of a new taxonomy that will simplify defects in loans from 99 distinct categories to just nine and provide more useful feedback to lenders, which will make it easier to strengthen your processes. New servicing guidelines that no longer unfairly penalize you for missing filing deadlines, and our withdrawal of the proposed maximum time frame for filing a claim.
A new metric that provides us with a better understanding of a lender’s performance so that those dealing with a wider-range of borrowers won’t be judged unfairly compared to their peers. And our new proposed loan certifications that provide insight into what we expect of lenders when verifying a borrower’s information – a measure that we’re still working on so we appreciate your comments.
Now, to maximize the impact of this work, we’ve asked Congress for the authority to charge an Administrative Fee. I know that this is a concern to many of you, but here’s why we’re doing it. FHA is the largest mortgage insurer in this 21st century global economy. But when it comes to our technology, I might as well jump in the DeLorean like Marty McFly did in Back to the Future because our IT is that old.
Sometimes it feels like we’re sending faxes in an Instagram world. But in this political environment, we can’t depend on the appropriations process to give us the necessary resources. This Admin Fee will give us the funds to upgrade our IT systems. We can all agree that a stronger FHA leads to a stronger housing market, which is why we’re fighting for these funds to better serve you and borrowers across the nation.
But we’re not stopping with IT systems and enhanced clarity – our mission to support responsible homeownership is truly a comprehensive effort. That brings me to the second point I want to highlight today: our unconditional support of Ginnie Mae and its budget.
Ginnie Mae plays a unique role in the marketplace as the only issuer of mortgage-backed securities to carry the full faith and credit guaranty of the United States government. It’s providing lenders with a stable, low-risk avenue for capital, which enables more Americans to realize their dreams.
In the past year alone, nearly 5 million families, most of modest means, have benefited from Ginnie Mae’s work. And we continue to look for innovative ways to serve the market.
At last year’s Annual Conference, I mentioned that we were joining with Federal Home Loan Banks to launch a pilot program that gives small financial institutions access to the secondary market. Today, I’m proud to say that this effort has begun with three community banks, and two more are in the pipeline. This represents nearly 50 percent of all Federal Home Loan Banks, so half the nation will have access to this effort, and we predict thousands of new loans in the years ahead as a result.
Bottom line: HUD believes in Ginnie Mae. We value Ginnie Mae. And Ginnie Mae will continue to play an important role in the housing market for generations to come.
This brings me to my last point: empowering borrowers with the tools they need to be successful in today’s housing market. This means building on the economic progress that’s been made over the last seven years by investing in industries that create good jobs, by raising the minimum wage so that a good day’s work is rewarded, by making college affordable so that a diploma doesn’t come with a lifetime of debt.
And it also means investments in housing counseling. In addition to money, knowledge is the most important asset a family needs to achieve its goals. HUD works closely with 2,400 housing counseling agencies to help Americans turn their housing dreams into a reality, folks like the Hunt family in Baltimore.
In March of last year, they had a low credit score and little in the bank. Then they began working with a counselor who helped them reduce their debt, increase their savings, and strengthen their credit. A year later, with the help of an FHA loan, the Hunts bought their first home.
Housing counseling is making a difference family-by-family, block-by-block, community-by-community. That’s why HUD’s requested an additional $60 million in the President’s budget for this work. As the Mortgage Bankers Association shows with their own efforts, the more people know before they owe, the better off we all are.
President Lyndon Johnson once said that “history’s verdict of any society ultimately rests on how its people lived.” And as we gather here in 2015, our generation must do its part to give every American the chance to live a productive life, to contribute, to fulfill their God-given potential.
A few years ago, we faced the greatest housing test of our lifetimes, but we made it through. Not only are we still standing – we’re prospering and the economy is growing stronger.
That resilience, that strength, that fighting spirit is a testament to the American people. They’ve bounced back and stood tall in the face of historic challenges. They’ve picked themselves up and rebuilt their lives.
Our responsibility as public sector and private sector leaders is to do all we can to reward their hard work with opportunity. The opportunity to buy their own home. The opportunity to put down roots. The opportunity to build a brighter future.
Your industry is vital to this effort. As I said before, credit provides the financial horsepower that folks need to meet their goals, and we still have work to do as long as one creditworthy borrower is shut out of the market.
So let’s keep talking, keep collaborating, keep adapting and keep producing for those we serve.
Together, we can complete this great American comeback story and ensure that we help extend prosperity to more Americans than ever before.
Thank you very much.