SPECIAL ASSISTANT TO THE
SECRETARY OF HOUSING AND URBAN DEVELOPMENT
BEFORE THE NATIONAL ASSOCIATION OF FEDERAL CREDIT UNIONS
SEPTEMBER 12, 2017
As prepared for delivery. The speaker may add or subtract comments during his presentation.
Thank you. I am pleased to be here. Very pleased. Federal credit unions are central to the American economy. Your work, every day, provides financial services and assistance to millions of Americans. They count on you. I wanted to personally thank President Dan Berger, Board Chair Richard Harris, and the entire leadership for their vision and engagement. And, thanks to each one of you, the membership, for your service and your many contributions to the country.
Credit unions help build this country and work hard for the interests of their members. You are the “people’s banks.”
Your work has been on-going for decades. Eighty years ago, in 1937, Edward Filene, the father of American credit unions, spoke here in Washington, just a few blocks from where we are now. He spoke of freedom and empowerment for every American: “every family, every community, every state and every nation – (we must) not leave anybody out.”
And, he saw the link to housing. He was a visionary advocate for housing. A home was a source of shelter, of pride, a reflection of our values, “spiritual.” Credit unions were part of that story. In 1934, the year federal legislation expanded credit unions, was also the year that the Federal Housing Administration was created by an act of Congress, making us fiscal partners even before HUD was created. Homes required lenders; credit unions were a natural source for financing.
For Edward Filene, housing was “common ground” in America. Housing could bring us together. And, as he foresaw, housing has brought us together here today.
We need that unity and strength. Natural disasters test us. Hurricanes Harvey and Irma have left vast, catastrophic damage in Texas, Louisiana, and Florida. Justifiable and unprecedented claims on our resources. HUD is a front-line responder. So are credit unions. And, we must respond with determination, creativity, and compassion. This is a moment people turn to HUD and to credit unions for help.
HUD has already been coordinating closely with FEMA and other agencies to organize our efforts and make sure we are fully responsive. Secretary Carson has been to Texas twice. We are locating vacancies and moving displaced residents into safer housing. This includes Public Housing Agencies and Multi-Family owners.
HUD funding will help with the rehabilitation, repair, or restoration of homes. HUD's programs give the State and local communities the flexibility to redirect millions of dollars to those who need them. We hope you will also help to rebuild and reclaim those homes.
You should know, we also are providing FHA mortgage insurance, which is available to people who have lost their homes. This will enable them to rebuild or buy another home. Some people will be eligible for 100 percent financing.
And, we have granted foreclosure relief for those who need it. HUD is granting a 90-day moratorium on foreclosures and forbearance on foreclosures of Federal Housing Administration (FHA)-insured home mortgages.
We will do all of this, and more. We want to do everything we can. We must look for other ways to explore our common ground. Edward Filene once said: “Progress is the constant replacement of the best there is with something still better.”
Secretary Carson is involved in talks with both the White House and Congress. We can do better. At the moment, and for the foreseeable future, the housing market is sustainable, safe, stable, and secure. But, we can make the market stronger. We want more competition. Freddie Mac, Fannie Mae, and Ginnie Mae, together, currently own or guarantee over $6.2 trillion in unpaid principal balances of single family mortgages. This is out of $10.3 trillion in outstanding single family mortgage debt. We would like to see private capital make a comeback in the mortgage market.
FHA continues to play an important role. FHA can calibrate to the needs of the market, enlarging like an accordion and contracting, when less necessary, so we help maintain the stability of the market, which was what happened as banks withdrew from the housing market during the 2008 recession.
Together, FHA and Ginnie Mae have provided a countercyclical safeguard, ensuring that credit-worthy borrowers can obtain a mortgage. Currently, 4,000 borrowers a day are being helped through FHA. Last year, 1.25 million American families closed on homes with the help of FHA loans. And FHA’s market share for Fiscal Year 2016 was 13.2 percent. This is less than in 2008, and in the years immediately following the housing crisis.
A related issue. I know many of you are looking for an improvement with PACE loans. So are we. These loans, which originally focused on helping in energy efficiency, such as solar panels, have been used in ways that have confused consumers and increased risk to mortgage lenders. We can do better...we must insist on changes.
I also know you are worried about first time home ownership by Millennials, who often are priced out of the market. At FHA, we have revised condo rules to encourage first-time homeownership. We have also made it easier for Millennials to get an FHA loan. But, we must do better. We are exploring ways to bring more, credit-worthy Millennials into homeownership.
On the other end of the spectrum, we have adjusted the HECM reverse mortgage program to make it more fiscally sound. The program must help seniors age in place. We must responsibly work to enable the program to become fiscally sustainable. We don’t want to take funding from traditional FHA lending. In fact, in Fiscal Year 2016, HECM’s economic value was a negative $7.7 billion. Because it is part of FHA, the losses have drained capital from FHA’s primary insurance program. FHA must, under statutory obligations, maintain at least a 2 percent overall capital reserve ration. This is now at risk.
So, FHA has just sent out letters outlining new circumstances for the reverse mortgage. First, for new reverse mortgages, we are lowering the level seniors can draw against their equity. We will continue to adjust for borrower age and interest rates. These changes will begin FY 2018. Current reverse mortgages will not be affected. There will be much more attention paid to circumstances and maintenance of the loan.
Second, we are changing the initial insurance premiums, making them standard. The initial premium on reverse mortgages will now be 2 percent. That’s an increase for some borrowers and a decrease for others.
And, third, we are also changing the annual insurance premium. The annual premium will now be .5 percent, down from 1.25 percent. This will provide fee relief for borrowers by slowing the rate of growth for the loan and preserving more of their equity.
Finally, let me brief you on some other changes at HUD. We are reinvigorating and reimaging our mission and improving lines of communication. We want the department to be run more like a business, utilizing concepts associated with business, with better communication, more staff input, more responsive action, more attention to customer satisfaction, and better results.
Edward Filene would understand. He often spoke of the human aspect of his work, both in business and philanthropy. We saw that humanity in Texas and now in Florida, where people rushed from across the United States to help those in need. Many of you have come from long distances, too. We search for ways to make housing and lending a human enterprise to meet a basic, human need.
Edward Filene remains a powerful presence here in Washington. For example, his grand-daughter donated the land and buildings that became a concert venue – Wolf Trap in Northern Virginia. Almost every night people gather for concerts or other events, creating a community, sharing experiences. This is our “common ground.”
And, by gathering here today, we explore the common ground that unites us.
Thank you for your invitation. I know that Secretary Carson and the Department of Housing and Urban Development look forward to working with you in the years ahead.