HUD Secretary Shaun Donovan on CNN
Over the weekend, the Housing and Urban Development Secretary Shaun Donovan sat down at CNN to discuss the future of homeownership in America. Right off the bat, it was notable that since Donovan was nominated, the number of foreclosures has nearly doubled in America, Obama himself has called housing the “biggest drag on the economy” and only 36% of Americans polled approve of Obama’s handling of the housing crisis. Clearly, Donovan has a tremendous challenge given the decline in the housing market. He calls it the “most serious crisis we’ve had in housing since the depression.”
Donovan unfortunately used the tired line of alluding to “Bush did it” as he claimed 30 straight months of falling home prices prior to Obama taking office, noting the current administration has improved housing (although all signs point to a tiny blip of improvement, but continued decline in recent months). “We are making progress,” Donovan said.
What progress has the Obama administration made in housing?
Despite years of our reporting the complete failure of HAMP, one of our nation’s largest blemishes in economic history, Donovan claimed that “tens of thousands” of people are getting permanent loan modifications each month (but doesn’t mention the tens of thousands of others who are not being granted modifications).
Rather than discuss methods of repair or make mention of HAMP, Donovan places blame on the servicers’ inability to process modifications. We have reported on widespread servicer failure, however, Donovan glossed over the finer point that the government has injected itself into the process and doesn’t have an answer as to which way to move forward.
Shifting to a 20% down system
Congress is considering a proposal to require 20% down on all home loans which Donovan won’t directly disagree with, rather said, “we can’t overcorrect that we go so far in the other direction that we cut off homeownership for people who really can be successful homeowners.”
“I think that we need to look at for those who have been successful, if you have a credit score that’s good, if we know you can be a suc homeowner, we have to have ways to get people access to homeownership that are less than 20% down” which is why FHA still offers low down payment loans, Donovan said.
Donovan takes an anti-investment stance
We are highly disappointed that the Obama Administration is continuing the stance that they are the arbiters of good versus bad and reading between the lines, we heard Donovan take an anti-investment position as he separates them from homes of primary residence and alludes to homeownership almost as a right, also alluding that real estate investment homes are subject to being rejected as less than worthy.
Donovan said, “when we modify loans that we are picking folks who really are trying to do the right thing. We check can they afford to be in their home today?” He says if they can afford to live in the home today, then maybe they won’t help them, rather focus on the “real” troubled homeowners. If the government sees their role as economy corrector, we find it egregious that any government official, much less the HUD Secretary, to ignore preventative measures and to continue cherry picking which homeowners to help based on some arbitrary and unmeasurable metric of whether or not a homeowner deserves help.
The dreamy American dream
Despite homeownership dipping to 66% nationally, Donovan notes evidence that homeownership helps communities by improving neighborliness, and even a child’s performance in school and that “homeonwership will continue to be an important part of the american dream and we can’t cut it off for folks who really can be successful homeowners.”
Donovan says they are working toward “common sense write-downs” and that they are “working with all state AGs and 10 fed agencies” to settle mortgage servicing problems (like the robo-signing debacle), but we urge our readers to note that any White House involvement in the mortgage probes have failed as AGs have noted their hands are tied due to lack of paper trails and government infighting over who is in charge is not being improved or influenced by any supposed White House involvement and negotiations continue to break down.
Donovan’s ultimate answer to fixing housing?
“Today is not the time to discuss eliminating the mortgage deduction” but that it is time to buy as “housing is more affordable than it has been in a generation.” Some agree, some disagree, but his statement that “if you look at most of the important indicators of where the housing market is going, they are improving” is completely incorrect (as evidenced in multiple real estate sectors).
Donovan ends the interview by not committing to when he thinks home prices will hit bottom but infers that when shadow inventory declines, prices will improve and some believe it will happen this year. We do not believe a recover will begin this year and we’ll be lucky if it begins in 2012, but either way, we agree that in some areas, affordability is a factor in purchasing (for buyers that can actually obtain a loan, that is).
Interview reveals ugly side of the Administration
We want to support anyone in the Presidential office and have tremendous respect for the job, but lightly put, we are disappointed. Obama calls housing the worst part of the economy, but Donovan can’t name any current or past actions taken to legitimately fix housing.
Yes, Donovan says homeownership is still a continuing part of the American Dream and that it’s not dying, but his relatively evasive speech and spin away from the current administration and himself were notable. We are disappointed to see a continued stance that lacks prevention and continued back patting prior to it being deserved. Donovan’s assertion that the government is in the role to arbitrarily and subjectively determine which homeowners “deserve” modifications not based on qualifications, but based on whether or not the government thinks the owner is nobly living the American Dream is appalling. Housing is a mess and if the HUD Secretary doesn’t think so, we’re in real trouble.