    [Public Papers of the Presidents of the United States: George W. Bush (2007, Book II)]
    [August 31, 2007]
    [Pages 1150-1153]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Remarks on Homeownership Financing and an Exchange With Reporters
    August 31, 2007

        The President. Good morning. Thank you for joining me. Secretary
    Paulson and Secretary Jackson gave me an update on the strong fundamentals of
    our Nation's economy. 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.

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        We also had a good discussion about the situation in America's
    financial markets. The markets are in a period of transition as
    participants reassess and reprice risk. This process has been unfolding
    for some time, and it's going to take more time to fully play out. As it
    does, America's overall economy will remain strong enough to weather any
    turbulence.
        One area that has shown particular strain is the mortgage market,
    especially what's known as the subprime 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 alltime 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.
        Complicating the situation for borrowers is the nature of today's
    mortgage market. In many cases, the neighborhood banker who issued a
    family's mortgage does not own that mortgage for long. Instead,
    mortgages are sold as securities on the global market. And that makes it
    harder for the lender and borrower to renegotiate.
        The recent disturbances in the subprime mortgage industry are
    modest; they're modest in relation to the size of our economy. 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. Yet there are many American homeowners who could get through
    this difficult time with a little flexibility from their lenders or a
    little help from their Government. So I strongly urge lenders to work
    with homeowners to adjust their mortgages. I believe lenders have a
    responsibility to help these good people to renegotiate so they can stay
    in their home. And today I'm going to outline a variety of steps at the
    Federal level to help American families keep their homes.
        First, we're going to work to modernize and improve the Federal
    Housing Administration; that's known as the FHA. The FHA is a Government
    Agency that provides mortgage insurance to borrowers through a network
    of private sector lenders. Sixteen months ago, I sent Congress an FHA
    modernization bill that would help more homeowners qualify for this
    insurance by lowering downpayment requirements, by increasing loan
    limits, and providing more flexibility in pricing. These reforms would
    allow the FHA to reach families that need help, those with low incomes,
    less-than-perfect credit records, or little savings.
        Last year, the House passed this bill with more than 400 votes.
    Unfortunately, Congress hasn't acted this year. It would be a good task
    for Congress to come and get FHA modernization done so that we can help
    these people refinance their homes,

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    so more people can stay in their homes. I look forward to signing a bill
    as quickly as possible.
        In the coming days, the FHA will launch a new program called
    FHASecure. This program will allow American homeowners who have got good
    credit history but cannot afford their current payments to refinance
    into FHA-insured mortgages. This means that many families who are
    struggling now will be able to refinance their loans, meet their monthly
    payments, and keep their homes. In other words, we're going to start
    reaching out and making sure people know that this option is available
    to them so they can stay in their homes.
        Second, 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. For example, let's
    say the value of your house declines by $20,000 and your adjustable rate
    mortgage payments have grown to a level you cannot afford. If the bank
    modifies your mortgage and forgives $20,000 of your loan, the Tax Code
    treats that $20,000 as taxable income. When your home is losing value
    and your family is under financial stress, the last thing you need to do
    is to be hit with higher taxes.
        So I believe we need to change the code to make it easier for people
    to refinance their homes and stay in their homes. And to this end, I've
    called Senator Debbie Stabenow of
    Michigan and told her that she's on to a good idea with the bill that
    she and George Voinovich have submitted
    to the Senate. The House has got Rob Andrews of New Jersey and Ron Lewis of
    Kentucky introducing legislation that is a positive step toward changing
    the Tax Code so people aren't penalized when they refinance their homes.
    With a few changes in the Senate version and the House version, this
    administration can support these bills, and we look forward to working
    with them--the Senators and the Members of the House--to pass
    commonsense legislation to help us address this issue.
        Third, 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 servicers 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.
        See, it's easy for me to stand up here and talk about refinancing--
    some people don't even know what I'm talking about. And we can--we need
    to have a focused effort to help people understand the mortgage
    financing options available to them or to identify homeowners before
    they face hardships and help them understand what's possible.
        Finally, the Federal Government is taking a variety of actions to
    make the mortgage industry more transparent, more reliable, and more
    fair so we can reduce the likelihood that these kind of lending problems
    won't happen again. Federal banking regulators are improving disclosure
    requirements to ensure that lenders provide homeowners with complete and
    accurate and understandable information about their mortgages, including
    the possibility that their monthly payments could rise dramatically. In
    other words, we believe that if the consumer is better informed, these
    kind of problems won't arise--are less likely to arise in the first
    place. Banking regulators are also strengthening lending standards to
    help ensure that borrowers are not approved for mortgages larger than
    they can handle.

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        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.
        With all the steps I've outlined today, we will deliver help and
    hope to American families who need it. We'll help guard against future
    problems in the housing sector. 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.
        Owning a home has always been at the center of the American Dream.
    Together with the United States Congress, I will continue working to
    help make that dream a reality for more of our citizens. Thank you.

    Banking Industry

        Q. Sir, what about the hedge funds and banks that are overexposed on
    the subprime market? That's a bigger problem. Have you got a plan?
        The President. Thank you.

    Note: The President spoke at 11:05 a.m. in the Rose Garden at the White
    House.