Speaking Thursday at the Making Home Affordable five-year anniversary summit, U.S. Treasury Secretary Jacob Lew announced several initiatives designed to spur the flailing housing market.
Lew identified three specific issues that are holding back housing in the United States and announced plans to address each of those issues.
Citing the lack of private capital in the market, the dearth of affordable rental options and the abundance of Americans who are facing foreclosure or are underwater on their mortgages, Lew announced three new plans:
- The extension of the Making Home Affordable program until “at least December 31, 2016”
- A plan to expand access to credit by working to revive the private-label mortgage-backed securities market
- A new partnership between the Treasury and the Department of Housing and Urban Development to build new, affordable rental housing
Lew recognized the progress that the housing market has made in the wake of the crash but said that there is still more work to do.
“Families and neighborhoods across the country continue to recover from the financial crisis, and we must not lose our resolve to help them, even as the economy continues to expand,” said Secretary Lew.
“From day one, the Obama Administration has worked to provide relief to struggling homeowners and stabilize hard-hit communities. Today’s announcement continues that effort. These new actions will help provide more affordable options for renters, assist homeowners facing foreclosure or juggling bills to pay their mortgages and expand access to credit for prospective borrowers.”
Lew celebrated the success of the MHA program since its inception. “This innovative program has provided relief to homeowners across the country, including more than a million homeowners who have been able to permanently modify their mortgages through HAMP and save roughly $540 a month in mortgage payments," Lew said. “The Making Home Affordable program is not just helping families keep their homes, it is giving families peace of mind.”
But Lew said that there are many homeowners who are still in need of help. “We need to continue to be there for homeowners who are facing foreclosure, those who are struggling with increasing interest rates on their modified mortgages, and those whose homes are caught underwater,” he said. “The truth is, when you work hard, act responsibly, and play by the rules, you should not have to live in fear that you are going to lose your home.”
To that end, Lew said the administration will be extending the MHA program until at least the end of 2016. Previously, the program was set to terminate on December 31, 2015.
Lew also recognized the “millions of Americans with good credit who cannot get a mortgage,” due to the lack of private capital in the market. “We need to develop new solutions for credit-worthy families who want to buy a home but continue to get rejected by lenders,” Lew said.
“The fact is, we need to attract more private capital to the housing market, and that is why I have directed my team to bring investors and securitizers together in the months ahead so we can uncover new paths to increase private investment.”
Lew acknowledged the “meaningful steps” taken recently by the Federal Housing Finance Agency and the Federal Housing Administration to “improve lender confidence in making GSE and FHA backed loans," but said that the administration must do more “to make sure our markets are effectively serving potential homebuyers.”
Lew said that includes “fostering the development of a safe and sustainable private market for mortgage lending that can serve alongside government-supported options.” He said that the private label securities market has been “dormant since the financial crisis.”
Specifically, Lew said that the Treasury will be publishing a “request for comment,” in an effort to “help us better understand what we can do to encourage a well-functioning private securitization market.” Lew said the administration also plans to host a series of upcoming meetings with investors and securitizers to further explore ways to increase private lending.
Finally, Lew announced a new partnership between the Treasury and HUD to “create and preserve” quality rental housing by “reducing the interest rate for affordable multifamily apartment buildings.”
Lew said the administration will accomplish this by “supporting the FHA’s multifamily mortgage risk-sharing program, which helps drive construction and rehabilitation of rental housing.”
Lew called on Congress to permit Ginnie Mae to securitize FHA risk-sharing loans. “But until Congress takes action on new legislation, I am directing the Federal Financing Bank to use its existing authority to finance these FHA-insured mortgages,” Lew said.
“The new partnership between the Treasury Department and HUD will help create and preserve more decent rental housing by significantly reducing the interest rate for affordable multifamily apartment buildings compared to the cost of tax-exempt bonds under current market conditions,” the Treasury said in a statement.
Carol Galante, FHA Commissioner and HUD’s Assistant Secretary for Housing, celebrated the plan. “Families have been especially hard hit during the rental housing crisis. Demand is soaring and prices are climbing,” she said.
“To help the many hard-working families who cannot find affordable rental housing, we are partnering with the Treasury Department, to broaden our efforts to create and preserve safe, decent and affordable rental housing by allowing more Housing Finance Agencies access to the capital they need to build or maintain affordable multifamily apartment buildings.”
Lew also called on Congress to extend the Mortgage Forgiveness Debt Relief Act, “so struggling families that have lost their home to foreclosure or that have sold their home in a short sale in order to move into more affordable housing are not punished with a large tax bill.”
He also urged Congress to pass housing finance reform. “The work in the Senate Banking Committee was an important milestone on the road to reform, but lawmakers need to keep moving forward,” he said.
“We know we can create a better system that provides responsible Americans with mortgage credit while supporting affordable rentals for those who choose not to buy. We can create that system without putting taxpayers at undue risk, but we need Congress to act. Passing legislation is the only way we can achieve meaningful and sustainable housing finance reform.”