A Vow of Help to Homeowners
Thursday, April 9, 2009
Housing prices have plummeted, foreclosures are strangling the economy and House Speaker Nancy Pelosi couldn't seem to remember his name a few weeks after he was confirmed. It's fair to say that Shaun Donovan, the new secretary of the Department of Housing and Urban Development, has his work cut out for him. "In the prior administration, we had not been really at the grown-up table talking about the solutions to the housing crisis," says Donovan, who was tapped by President Obama while in the top job at the New York City housing department.
A former architect, Donovan, 43, once aspired to be a car designer. He's married, has two young sons and commutes home to New York on weekends. A highlight of his brief tenure: Michelle Obama's visit to the agency. "The thing I probably remember most was walking behind her. She went to meet a lot of the employees. Many of them had waited three or four hours. . . . After she said hello to them, [they] were either in tears or had fainted . . . because they were so excited. We very clearly were at the grown-up table in the mind of the employees because of that visit."
Romano: We're facing a tidal wave of foreclosures. How do you decide whom to help?
Donovan: We do have to make choices. . . . We can't, nor should we, help everybody. We're going to help people who live in their homes. This is not help that we're providing to investors or flippers.
Romano: Aren't you asking the taxpayers to subsidize some of these homeowners who made bad decisions?
Donovan: We've taken a set of actions within the administration that have driven interest rates to the lowest level they've been since we started keeping numbers in 1971. . . . That benefits anyone who's got a mortgage and is refinancing, who's looking to buy a home today. . . . There are people who . . . might have not understood the mortgage that they were taking out because they were taken advantage of. . . . There are people who made mistakes, but I certainly wouldn't say that it's their fault."
Romano: Has the market bottomed out?
Donovan: I think that it really depends on the place. . . . There are definitely signs that in the places that have been hardest hit, we may have hit bottom already [such as] California, Arizona, Florida. I think it's fair to say that there are markets that are still declining at this point.
Romano: How much attention are you paying to the commercial markets? Last week, the Hancock Tower in Boston sold for half of its value of two years ago.
Donovan: Clearly, the biggest focus has been on the single-family market. . . . We're not going to have a program to modify mortgages on the commercial side, because it's just not the same as keeping homeowners in their homes. It doesn't have the same focus for us on the commercial side. It's just a different situation.
Romano: Part of the reason we got into this mess is because bankers were telling some people that they could own a home and offering them these unreasonable rates. Should every American own a home?
Donovan: No. Not every American wants to be, nor should be, a homeowner. We shouldn't make loans to people when we know they can't afford them. We shouldn't set people up for failure by having rates that increase dramatically.