HUD chief: Settlement is one piece of broader puzzle
Secretary of Housing and Urban Development (HUD) Shaun Donovan speaks during a press briefing in the Brady Press Briefing Room at the White House in Washington, D.C. Donovan helped architect the $25 billion foreclosure settlement between the five biggest mortgage companies and state and federal regulators. He discusses whether it's fair.
Kai Ryssdal: The six-year crash of the American housing market is, maybe, slowing. There's a lot to be done yet, but one big step was taken yesterday with the $25 billion settlement between the five biggest mortgage companies and state and federal regulators.
Shaun Donovan is one of those regulators; he's the secretary of Housing and Urban Development. Mr. Secretary, good to have you with us.
Shaun Donovan: Great to be on the show.
Ryssdal: I wonder if you worry that by making this agreement and by unplugging, if you will, that the backlog of foreclosures that there have been in this economy for the past year or two -- because of the robo-signing issue -- whether or not things might get worse before they better.
Donovan: Well look, there is some chance that homes that haven't been foreclosed on will get foreclosed on now because there is more clarity in the process. If somebody is still in their home, they will have a chance to get help as a result of this. I do think that getting clarity, lifting the cloud from the market, turning the page on this era of recklessness, is an important piece of what this settlement can achieve.
Ryssdal: I wonder though if, given the size of the size of the problem of the American housing market -- with hundreds of billion of dollar of underwater mortgages -- whether $25 billion is enough to do any of that. It's a small, small deal.
Donovan: Look, what we were focusing on here were the servicing practices -- the robo-signing that people have heard about and a range of other things that they did wrong. When you step back, what really created this crisis was the orignation and the securitization practices. That's where the damage was really done. We shouldn't see this as solving all the problems that led to the housing crisis. What we should see it as is one of the biggest steps that we have taken so far.
Ryssdal: Let me see if I can take some of the higher-profile items that have been discussed in the reporting on this and get your take on those. First of all, the $2,000 payment for people who were foreclosed upon in the past three or four years, rightly or wrongly. I wonder, Mr. Secretary, if -- with all respect -- $2,000 isn't sort of insulting to someone who has lost their home?
Donovan: Most of the folks, they were asked to add fees that shouldn't have been. Their paperwork may have been delayed or lost. While those are real violations, they also aren't things that caused people to lose their homes. We felt that by creating sort of a straightforward, kind of class-action process almost, if everyone in this group could get a quick, simple payment was important. If you lost your home and you shouldn't have, you will be fully compensated for that harm based on whatever evidence is there. If those aren't satisfactory to you, you're not giving up any legal rights to be able to come in and sue. So you really have to see those payments as part of three different avenues that homeowners have.
Ryssdal: On the subject of principal reductions, or writing down the main amount owed on the mortgage, I wonder how you decide between a guy down the street who has missed a bunch of payments and is still sitting there in his house, but will be eligible for some kind of principal relief, and the guy on the other side of the street who has made all his payments and yet may not get that relief. How do you decide? Where's the fairness here?
Donovan: Well look, these were violations in the servicing area. If you're current on your mortgage, you're not having any problems -- you weren't a victim of these practices. This is one piece of a broader puzzle. We absolutely recognize that the damage here is much broader than will be solved just by this one step of the settlement.
Ryssdal: I wanted to ask you about the politics of this thing briefly. You know, for the past year and a half that everybody's been talking about this settlement, it's been state attorneys general, 50 states, 49 states, whatever it was. And then yesterday morning we woke up and the president of the United States was standing there saying 'I have made this agreement.' I wonder about the political optics of this thing in an election.
Donovan: I don't think he was taking credit for it alone. In fact, he thanked those state attorneys general -- Republican and Democrat -- who were standing behind him. So honestly, yesterday restored a little bit of my faith that we have a political process where we can get things done.
Ryssdal: Shaun Donovan, secretary of Housing and Urban Development. Mr. Secretary, thanks for your time.
Donovan: Great to be with you.