Magazine article Mortgage Banking

HUD Secretary Says Housing Markets 'Not out of the Woods'

Magazine article Mortgage Banking

HUD Secretary Says Housing Markets 'Not out of the Woods'

Article excerpt

Speaking at the National Policy Conference put on by the Mortgage Bankers Association (MBA) in Washington, D.C., Secretary of Housing and Urban Development (HUD) Shaun Donovan went through a litany of things that had improved in the 15 months since the new administration had taken charge in the midst of a deep recession. But then he added, "None of this is to say that we are out of the woods. The housing recovery, as you know all too well, is still fragile. We still may see further declines."

The most concrete example he gave that the market is nowhere near out of the woods was the serious delinquency rate for loans insured by the Federal Housing Administration (FHA). Donovan told the group, "Today I want to give you the first glimpse into FHA's March numbers, reflecting the second quarter of the fiscal year. Our serious-delinquency rate has risen to 9.1 percent versus 7.4 percent a year ago, which mirrors a trend we are seeing in the prime mortgage market as well, as delinquencies are increasingly driven by unemployment."

That reflects an FHA single family program that is plagued by delinquencies from prior books of business, which has prompted a crackdown on lenders found violating the rules or producing poor-quality loans. Donovan told the group of mortgage bankers, "[I]n a single year, FHA's Mortgagee Review Board took six times as many enforcement actions as it did in the entire previous decade."

Donovan said there was some good news in the recent FHA numbers. He said the early delinquencies were better than expected. He noted, "The number of FHA loans in early default and claims has declined 15 percent since December 2009, a strong indicator that loan quality continues to improve."

The HUD secretary also announced an upcoming change to the Ginnie Mae program intended to help small lenders. He told the MBA conference, "Beginning in October or November, Ginnie Mae will allow lenders to securitize single loans and will issue pools on a daily rather than on a monthly basis." Donovan noted that the change "won't be going into effect tomorrow," and Ginnie Mae needs to set up the systems to make the program accommodate the changes.

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As for the administration's efforts to reform the mortgage finance system and more specifically Fannie Mae and Freddie Mac, the HUD secretary said, "We expect to get to that legislation next year, not this calendar year." In his speech he added, "While some have called for hasty action, we are committed to taking a responsible approach marked by care and deliberation so that we don't needlessly alarm investors around the world and spark a significant pullback of capital from our still-fragile mortgage markets. …

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