President Bush Addresses Real Estate and Mortgage Fraud
President George W. Bush issued the following statement today:
This administration will soon issue regulations that require mortgage brokers to fully disclose their fees and closing costs. We’re pursuing wrongdoing and fraud in the mortgage industry through the Department of Housing and Urban Development, the Department of Justice, the Federal Trade Commission, and other agencies. In other words, if you’ve been cheating somebody we’re going to find you and hold you to account. And we’ll continue to do our part to help improve all aspects of the mortgage marketplace that is really important to this economy of ours.
Bush’s statement, which was made while addressing the media on the larger issue of homeownership financing, is his first related to real estate and mortgage fraud that I could recall. The President, who was joined by Department of Housing and Urban Development Secretary Alfonso Jackson, and Henry Paulson Jr., Secretary of the Department of Treasury, also said:
Economic growth is healthy, and just yesterday we learned that our economy grew at a strong rate of 4 percent in the second quarter of this year. Wages are rising, unemployment is low, exports are up, and steady job creation continues.
We [Bush, Jackson, and Paulson]… had a good discussion about the situation in America’s financial markets. … One area that has shown particular strain is the mortgage market, especially what’s known as the sub-prime sector of the mortgage market. This market has seen tremendous innovation in recent years, as new lending products make credit available to more people. For the most part, this has been a positive development, and the reason why is millions of families have taken out mortgages to buy their homes, and American homeownership is at a near all-time high.
Unfortunately, there’s also been some excesses in the lending industry. One of the most troubling developments has been the increase in adjustable rate mortgages that start out with a very low interest rate and then reset to a higher rate after a few years. This has led some homeowners to take out loans larger than they could afford based on overly optimistic assumptions about the future performance of the housing market. Others may have been confused by the terms of their loan, or misled by irresponsible lenders. Whatever the reason they chose this kind of mortgage, some borrowers are now unable to make their monthly payments, or facing foreclosure.
The recent disturbances in the sub-prime mortgage industry are modest… But if you’re a family–if your family is one of those having trouble making the monthly payments–this problem doesn’t seem modest at all. I understand these concerns, and therefore, I’ve made this a top priority to help our homeowners navigate these financial challenges, so that many families as possible can stay in their homes. That’s what we’ve been working on, a plan to help homeowners.
We’ve got a role, the government has got a role to play — but it is limited. A federal bailout of lenders would only encourage a recurrence of the problem. It’s not the government’s job to bail out speculators, or those who made the decision to buy a home they knew they could never afford.
In the coming days, the FHA will launch a new program called FHA-Secure. This program will allow American homeowners who have got good credit history but cannot afford their current payments to refinance into FHA-insured mortgages.
I’m going to work with Congress to temporarily reform a key housing provision of the federal tax code, which will make it easier for homeowners to refinance their mortgages during this time of market stress. Under current law, homeowners who are unable to meet their mortgage payments can face an unexpected tax bill. … I believe we need to change the code to make it easier for people to refinance their homes and stay in their homes. … I’ve called Senator Debbie Stabenow of Michigan and told her that she’s on to a good idea with the bill that she…submitted to the Senate. … With a few changes in the Senate version and the House version, this administration can support [the] bill.
Above, when Bush refers to U.S. Senator Stabenow’s bill, he’s talking about the Mortgage Relief Act. The Mortgage Relief Act, introduced in May of this year by Senator Stabenow, would change current law that forces individuals to pay an income tax when they have had a part of their mortgage loan forgiven or have been forced to foreclose because of their inability to pay their mortgage.
Finally, Bush had this to say about the nation’s extremely high rate of foreclosures:
My administration will launch a new foreclosure avoidance initiative to help struggling homeowners find a way to refinance. Secretary Jackson and Secretary Paulson are going to reach out to a wide variety of groups that offer foreclosure counseling and refinancing for American homeowners. These groups include community organizations like NeighborWorks and mortgage lenders and loan services, and the FHA, as well as government-sponsored enterprises like Fannie Mae and Freddie Mac. These organizations exist to help people refinance, and we expect them to do that.
The Bush administration is hopeful that the aforementioned steps will deliver help and hope to American families who need it. “We’ll help guard against future problems in the housing sector, President Bush said. “We’ll reaffirm the vital place of homeownership in our nation. When more families own their own homes, neighborhoods are more vibrant and communities are stronger, and more people have a stake in the future of this country.”