TOM HUDSON: With home prices still dropping nationwide and more than 1.5 million
homes falling into foreclosure, President Obama is pushing for new help for
homeowners to refinance those mortgages. First unveiled in his state of
the union address and announced in detail today, the White House effort
targets people who are current on their mortgages to refinance into lower
interest rate loans, even if they owe more than their home is worth. Shaun
Donovan is the secretary of Housing and Urban Development and he joins us
from that agency tonight. Secretary Donovan, welcome back to NBR. Nice to
see you again.
SHAUN DONOVAN, SECRETARY, HOUSING AND URBAN DEVELOPMENT: Great to be
HUDSON: This plan is aimed for refinancing home owners into taxpayer
guaranteed mortgages through Fannie Mae and Freddie Mac, is that correct?
DONOVAN: Actually it would be refinancing them through FHA,
which is part of HUD. But the basic idea here, the president has taken
important steps over the last six months to make sure that middle class
families who are doing the right thing, they`re paying their mortgages even
though they`re under water, would have the ability to refinance. The
problem is if you happen to have a mortgage that isn`t a Fannie Mae or a
Freddie Mac or an FHA mortgage, you`re out of luck, and you may be doing
everything right, paying your bills, but you can`t benefit from what are
today record low interest rates.
HUDSON: Secretary Donovan, we just learned this week that Freddie
Mac has financial positions that profit when homeowners stay in higher
interest rate loans. Will this practice continue, even under FHA
DONOVAN: Well, first of all, I was, as you are, troubled by this
information and the Treasury Department is working with the regulator of
Fannie Mae and Freddie Mac to make sure that these practices are fully
looked at and that there`s a full accounting of what actually happened here
and that we make sure it doesn`t happen going forward. One of the things
that these allegations point to is that Congress should act and require
that whatever conflicts there may be, whatever other interests, homeowners
who are doing the right thing, paying their mortgages have the ability to
refinance, Fannie Mae or Freddie Mac mortgages or other mortgages.
HUDSON: Let`s talk about the ability of the guarantee here that`s
being offered or being suggested by the White House, the Federal Housing
Administration already guarantees more than $1 trillion in mortgages. How
much more could this new effort increase that guarantee, put more
taxpayers` money behind home loans?
DONOVAN: Well, first of all, let`s be clear. This broader refinancing
effort is something that economists on both sides of the political spectrum
have all agreed is one of the most important steps that we can take to help
the housing market, to strengthen housing prices and to put more money into
families` pockets. But —
HUDSON: So how much —
DONOVAN: .$3,000 a year.
HUDSON: How much more exposure would it put on the balance sheet for
DONOVAN: The point I`m making is that this would actually strengthen
taxpayer standing because every loan that`s currently on the books of FHA
or Fannie Mae or Freddie Mac depends on the performance of the housing
market going forward. So that`s the first thing. The second is we would
put in place very clear protections for FHA. We think the overall cost is
$5 to $10 billion. That would be paid out of a fee paid by the banks that
got us into this problem to begin with. They ought to be part of the
solution. And we would create a completely separate FHA fund, separate
from all the existing mortgages that are there, with real protections to
make sure that the riskiest mortgages don`t come into that.
HUDSON: So this would be walled off from the current portfolio?
HUDSON: OK. Secretary Donovan, we have to leave it there. Thank you
for the insights and the explanation here tonight. We appreciate it.
DONOVAN: Thank you.
HUDSON: Shaun Donovan, he`s the secretary of Housing and Urban