Federal Housing Administration (FHA) Commissioner Carol Galante and U.S. Department of Treasury Secretary Jacob J. Lew announced the Obama Administration's efforts to continue helping struggling homeowners avoid foreclosure, increase access to affordable rental options and expand access to credit for borrowers.
In remarks at the Making Home Affordable (MHA) Fifth Anniversary Summit, Secretary Jacob Lew specifically unveiled a new financing partnership between the Treasury Department and HUD aimed at supporting FHA’s multifamily mortgage risk-sharing program. In addition, Secretary Lew announced an extension of the MHA program for at least one year and a new effort to help jumpstart the Private Label Securities (PLS) market. Before speaking at the Summit, Secretary Lew met with homeowners and housing counselors at the Greater Washington Urban League, a non-profit organization that provides direct services and advocacy to more than 65,000 individuals each year.
With the new HUD-Treasury partnership, the Federal Financing Bank (FFB) will use its authority to finance FHA-insured mortgages that support the construction and preservation of rental housing. The first partnership with the New York City Housing Development Corporation will help restore affordable rental housing damaged by Superstorm Sandy in Far Rockaway, Queens.
“Families have been especially hard hit during the rental housing crisis. Demand is soaring and prices are climbing,” said Carol Galante, Federal Housing Administration Commissioner and Assistant Secretary for Housing, U.S. Department of Housing and Urban Development. “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.”
“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. This 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.”
In addition to the new HUD-Treasury partnership, Secretary Lew announced that the Administration would be extending MHA at least until Dec. 31, 2016, to allow the Administration to continue assisting homeowners facing foreclosure and those whose homes are underwater. To date, the MHA program has provided relief to homeowners across the country, including more than 1.3 million homeowners who have permanently modified their mortgages, saving a median of $540 a month in mortgage payments. The Treasury Department’s housing assistance programs have also become a model for the broader housing sector, setting a new standard for the mortgage industry on how to restructure loans and help homeowners. More than five million homeowners have been helped by private lenders who have, in many cases, used a similar framework to the one created by MHA’s Home Affordable Modification Program.
Finally, in an effort to help expand access to credit for qualified prospective homeowners, Secretary Lew announced a new Treasury-led effort to catalyze the PLS market.
Prior to the housing crisis, private label securities provided access to credit for many qualified Americans who did not meet Government-Sponsored Enterprises (GSEs) and FHA eligibility requirements. Securitization allowed the risks associated with extending mortgage credit to be allocated among investors with different appetites for taking credit and interest rate risk.
Since the crisis, Treasury officials have been working with regulators to put in place reforms that address the flaws in the securitization and lending practices that played a role in the financial crisis. Nevertheless, many of the largest investors have not returned to the market, resulting in very little issuance and few mortgage financing options for borrowers aside from government-supported channels. To help determine what more can be done to encourage a well-functioning PLS market, the Treasury Department is publishing a Request for Comment in the Federal Register and plans to host a series of upcoming meetings with investors and securitizers to further explore ways to increase private lending.
