By Eugene T. Lowe
July 16, 2007

Housing and Urban Development Secretary Alphonso Jackson delivered remarks during the Business Plenary session on June 25 at the 75th Annual Conference of Mayors meeting. In general, his remarks were centered around homeownership, and more specifically on subprime lenders and mortgage foreclosures. The Secretary told the mayors that he saw his job through their eyes. Housing defines cities. To mayors, the Secretary said, housing is important to a city’s tax base. “Every house that falls into foreclosure hurts a family and a city’s economic bottom line,” he said.

Amplifying on the topic of foreclosure, Secretary Jackson said, “In 2005, things changed. We are now decelerating in the housing market.” Some predict that there could be as many as 2 million mortgage foreclosures in the coming year. Over one trillion dollars in new mortgages will reset over the next five years. There are some economists who predict that it will take five years for the housing market to recover. The Secretary told the mayors that he disagrees with such a pessimistic outlook.

“Strategic, common'sense moves can create more housing”, the Secretary asserted. He said that it is important to recognize powerful factors at work such as full employment and a homeownership rate near an all time high (approximately 70 percent of Americans own their home). “While we have made significant gains in minority homeownership, there is still a long way to go,” Jackson noted. As he emphasized homeownership, the Secretary reminded the mayors that HUD was not abandoning rental housing, and that more funding will be available for the Community Development Block Grant (CDBG) program.

There are problems with predatory lending, which are illegal, unethical loans to homebuyers. “We will pursue predatory lenders aggressively,” the Secretary said. He asked the mayors to do the same and to report all predatory lenders and practices to HUD. Secretary Jackson said further that we must “educate consumers.” He added, “Citizens need to be empowered with tools so that they can understand the fine print and know when to call for help. Both housing counseling and financial education are important.”

In addition, the Secretary said that we must deal with the subprime problem. According to the Secretary, 80 percent of subprime loans will be fine; 20 percent will account for the problem of foreclosures. Such loans do not take into account the buyer’s financial situation or ability to pay back the loan, he added.

As we approach another round of resets in 2008, “There is something that we can do,” Secretary Jackson noted. The Federal Housing Administration (FHA) is the answer. The Secretary told the mayors that he has asked the FHA to help refinance problematic subprime loans. “There are thousands of families that are now being helped. But, we need legislation to modernize FHA. With the legislation, we will be able to help many more families,” he said.

Jackson closed his remarks by asking the mayors to work with HUD to remove impediments or barriers to homeownership. He said, “Burdensome regulations, excessive fees, and out-of-date building codes add to the cost of housing.” The Secretary reported that 120 communities are now working to reduce barriers.