• With: Shaun Donovan, secretary of Housing and Urban development

    This is a rush transcript from "Your World," March 5, 2012. This copy may not be in its final form and may be updated.

    NEIL CAVUTO, HOST: Rates are certainly near record lows. The 30-year fixed rate mortgage is now on track for the 14th straight week below four percent, four percent, if you can believe it, well under, by the way.

    But despite all of these rates falling, housing just keeps struggling and struggling.

    To the man trying to change that -- Shaun Donovan is the secretary of Housing and Urban development.

    Mr. Secretary, good to have you.

    SHAUN DONOVAN, HOUSING AND URBAN DEVELOPMENT SECRETARY: Great to be with you, Neil.

    CAVUTO: What changes this equation?

    DONOVAN: Well, three key things we have to do.

    One is get fewer people falling into foreclosure and help folks whether it is finding jobs or other things and get them current on mortgages. Second is we have too many properties sitting vacant and dragging down the prices. If you live next door to a house that goes into foreclosure, you are doing everything right, your own house loses $5,000 or $10,000 as soon that foreclosure sign goes up.

    The third thing is we have too much uncertainty on making new loans. We think there are 10 percent to 20 percent of buyers out there who are good risks and are just finding it hard to get credit. So those three things are the big barriers that we see to a full recovery.

    CAVUTO: Just the supply of homes in the market is, right, a great depressant. But many who are dutifully paying their mortgages are wondering, why is my neighbor or my colleague or my friend getting a break for not making good on his mortgage commitment when I am getting burned for doing just that?

    DONOVAN: Well, the truth is, the vast majority of Americans who are underwater are paying their mortgages, about 90 percent.

    CAVUTO: Right.

    DONOVAN: And the president has taken a number of steps over the last six months to help them.

    And as you said at the outset, we have record low interest rates, and that would usually do a huge boost for the economy. But we have not seen that come through because people can't refinance. So, we have put in place a series of steps to help more than 10 million Americans who are current, who are doing the right thing and paying, to refinance.

    CAVUTO: No matter who has their loans. In other words, it wasn't the original lender. As you know, these things are packaged, repackaged, and sold.

    DONOVAN: Right.

    CAVUTO: They can still take advantage of that.

    DONOVAN: We have done that where we can with Fannie Mae and Freddie Mac and FHA.

    What is left is there are about 3 million homeowners doing the right thing and paying who have not been able to refinance. And the president wants to work with Congress to open up that option to them.

    On average, it's about $3,000 a year. It's like a good-sized tax cut for them every single year.

    CAVUTO: But this $26 billion plan to slap the banks for the robo-signings and everything else, any response to that? I know it is still early, but any -- is it moving the needle at all?

    DONOVAN: Well, look, we just signed it a few weeks ago, and it will be registered in court this week, so, it is too early to see big results yet from it.

    What I can tell you though is a big cloud that was hanging over the market, the nightmare scenario, Neil, here was we could have had 10 or 15 years of 50 different states suing and going in different directions. Instead, what we got was one single clear set of standards on how you service a loan, how you foreclose --

    CAVUTO: But Fannie Mae and Freddie Mac were kept out of that.

    DONOVAN: Actually, Fannie Mae and Freddie Mac agreed to these standards as well.

    CAVUTO: But they were not part of this agreement.

    DONOVAN: They were not part of this agreement, but they agreed to the standards, because everyone had something to gain from doing this.

    And, by the way, when was the last time you saw 49 state attorneys general, Republican and Democrat, agree on anything?

    CAVUTO: Well, Secretary, here is the one thing that confused me about that deal. For those who were robo-signed out of their homes, for example, I think they get a $1,500 or $2,000 check for what they went through.

    But it applies I guess to everyone who was forced out of their homes. How do you distinguish? People hearing this are saying, wait a minute, that's not right.

    DONOVAN: I am glad you asked about it because there has been some real confusion about this.

    We did a lot of investigations here and most of what we found was that someone had their paperwork lost and they had to pay an extra month, or maybe they had some fees charged they shouldn't have. And most of the damage wasn't people lost their homes because they shouldn't have. It was something that might have cost them $1,500 or $2,000.

    So we set up a process. It was like a class action, where you come in, not a lot of paperwork, bureaucracy.

    CAVUTO: But you didn't discern a difference, right? Didn't everyone end up getting or will get...

    DONOVAN: That's in the settlement.

    There's a separate process the regulators have set up where if your damage really was you lost your home, you can come in, prove what the damage was and get whatever the amount is that was done. So there's two separate processes.

    (CROSSTALK)

    CAVUTO: See that is what leads me to believe, Secretary, no offense here, that really this was a stimulus program, despite disguise.