HUD boss: Let’s keep families in homes
Steve Preston took on his role as the new U.S. Secretary of Housing and Urban Development at arguably the most challenging time for the U.S. housing industry in decades.
Foreclosures are rampant across the country and are particularly bad in Michigan as more defaults on home loans are on the horizon.
“Many of us believe that our primary focus as government leaders should be to help people stay in their homes if they are committed to making mortgage payments and can afford to if they have the right mortgage,” Preston said in a speech Wednesday to the Detroit Economic Club.
Preston was sworn in last month. He replaces Alphonso Jackson, who resigned in April amid ethics investigations. Preston had been head of the Small Business Administration before taking the helm at HUD. He spent the bulk of his career in the private sector as an investment banker and in executive positions at ServiceMaster Co. and First Data Corp.
Housing foreclosures nationwide were up 50% in June compared with the same month in 2007 but were down 3% from May, according to figures released today from Irvine, Calif.-based RealtyTrac Inc. Michigan ranked fifth nationally for its foreclosure rate in June with one household of every 375 in some stage of foreclosure. Foreclosure filings fell 6% when compared with May but were up 19% when compared with June 2007. Michigan had 12,025 properties in some stage of foreclosure last month including 2,413 notices of default, 4,897 notices of sale and 4,715 bank repossessions, according to RealtyTrac.
“The challenges here may be deeper than in other parts of the country,” Preston said about Michigan.
HUD hopes to start a pilot program in Detroit to provide new foreclosure prevention assistance to homeowners, he said. The program would let lenders sell delinquent FHA-insured mortgages to HUD and a joint venture partner to be named. The goal is to keep more people in their homes and to avoid adding to the foreclosure crisis that has lowered home prices and caused a glut of unsold homes.
With another $150 billion in subprime adjustable rate mortgages resetting to higher interest rates in the next 18 months, more foreclosures are expected to hit the market this year and early in 2009. That puts a market recovery off until next year at the earliest, Preston said.
He said HUD has been acting to help more families avoid foreclosure. It has expanded the Federal Housing Administration loan program last August to help people in subprime loans to refinance to a fixed-rate, 30-year FHA mortgage backed by the government.
The program, called FHASecure, has helped more than 265,000 families refinance since last summer. Overall, FHA has grown from 2% of the mortgage market in 2005 to more than 10% now. In Michigan, FHA applications increased by 180% in the first quarter of 2008 compared with the same quarter a year ago, Preston said.
FHA also has helped keep 300,000 of its delinquent borrowers out of foreclosure over the past three years by using corrective action plans.
Preston announced plans to expand the program starting next Monday to families who have missed up to three mortgage payments in the past year or who have a temporary setback to qualify for an FHA loan.
HUD also worked with the Treasury Department to start the Hope Now Alliance last year to help borrowers having trouble making mortgage payments get help. The alliance has grown to include 27 mortgage lenders who handle 90% of the subprime market and a majority of all loans.
“By reworking mortgages with homeowners facing foreclosure, the industry has reached 1.7 million homeowners in trouble,” Preston said. “That gets right to the problem and it doesn’t cost the taxpayers anything.”
The Bush administration also wants to put $65 million toward housing counseling this year because it is effective in keeping delinquent borrowers from foreclosure, he said.