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.
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.
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.
CAVUTO: See that is what leads me to believe, Secretary, no offense here, that really this was a stimulus program, despite disguise.
DONOVAN: Well, Neil, let's recognize that there was real damage done here.
CAVUTO: No, no, let's say there was, let's say there was. And many agree with you.
But, in the end, what is the $1,500 or $2,000 going to do unless it just puts more money into the economy, which might or might not be a fine thing to do -- but in the end that is what this was, that other mortgage rework programs, for example, have not done much to change either the default rate or people who just are making bad all over again.
DONOVAN: Well, look, again, most people, the punishment fits the crime, in the sense that the damage that was done to them was that amount.
If it was worse, they have other recourse they can get to fully compensate them for the damage. The real thing here is, is this a response? You have a lot of families who have done the right thing and paid their bills. They live next to someone who was wrongly foreclosed and there was damage was done to them.
And so we wanted to provide help refinancing for homeowners that are current on their mortgages. And there are other ways the settlement helps homeowners, but the punishment fits the crime, in the sense that there were millions of people hurt by these actions of the banks. They were really egregious, some of the things that we found. And it wasn't just the homeowners who lost their homes that were harmed. It was everyone in the neighborhood where they were foreclosed --
CAVUTO: But then part of me then says, just as a business guy, I am looking at it, Secretary, and saying, well, the $26 billion or so that the banks are responsible to make this right, and to get everything addressed that you addressed, what is to encourage them to increase lending or loosen their lending standards to not be so tough on people you say would otherwise and dutifully qualify for mortgages, when they have just been slapped with $26 billion kick in the heinie?
What is going to behoove them to be generous?
DONOVAN: Look. First of all, we should hold them accountable for where they have made mistakes and they did here.
But again the nightmare scenario, not just for the housing market, but for the banks themselves is they could have had 50 different lawsuits from different states dragging on over 10 or 15 years.
CAVUTO: No, you are right. They bit that bullet because it was better bullet than 50 different massive bullets. I understand.
But you see what I am saying, though? What would behoove them to keep lending if they know this is a big fine they have been paying they will have to address in the interim? They don't want to get their heinies in hot water again.
DONOVAN: Again, if we can turn the page on this, if we can...
CAVUTO: Do you think this turns the page?
DONOVAN: It turns the page on the servicing and the foreclosure standards, and the problems that we had. It doesn't turn the page on everything, but we didn't investigate everything.
What we are turning the page on is the issues that we investigated, resolve those, get help to homeowners immediately. And by the way, everyone is going to benefit if we can get more confidence in the housing market, resolve these issues, take away that uncertainty. Lending is going to come back and frankly homeowners will be more confident about buying homes.
CAVUTO: But do you think that this points a finger -- let's say the banks are bogeymen. Let's say they horrible, wretched human beings who have nothing of interest but the bottom line.
That individuals are not to blame as well, that they signed documents knowing full well, the no-doc craze, they signed onto documents, they knew they could not afford the house, they knew this, yet, everyone is a victim but the banks.
DONOVAN: Well, Neil, look, that's why we set up a program that tries to compensates people for the actual harm done. We are not saying everyone lost their house wrongly. We said there is a set...
CAVUTO: But this shows no discretion.
DONOVAN: Actually, there are two different ways they can get compensated.
One is they can come in just quickly and get a small payment and that is what most of the damage was. There's also this separate process for them where you really lost your house, come in and you have got demonstrate it. You have got to do a full review of it. And that is the other way a homeowner can be helped. So it really does fit the remedy to what happened.
At the end of the day there is plenty of blame to go around. What I am focused on is how do we move past this, how do we get to a place where we can help homeowners recover, but also help the housing market recover?
And I think there is a reason why we had 49 state attorneys general sign on, 24 Republican and 25 Democrat, because there was a sense this was not only good for homeowners, it was good for the housing market more broadly.
CAVUTO: All right, we will watch it very closely.
Mr. Secretary, very good seeing you.
DONOVAN: Good to see you.
CAVUTO: Thank you. very, very much.
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