[Public Papers of the Presidents of the United States: George W. Bush (2007, Book II)]
[December 6, 2007]
[Pages 1527-1530]
[From the U.S. Government Publishing Office www.gpo.gov]



Remarks Following a Meeting With Secretary of the Treasury Henry M. 
Paulson, Jr., and Secretary of Housing 
and Urban Development Alphonso R. Jackson
December 6, 2007

    Good afternoon. Before turning to the situation in the housing 
market, I send my sympathy to the families of those murdered in Omaha, 
Nebraska, yesterday. I was in Omaha just before the shooting took place, 
and I know what a difficult day it is for that fine community. The 
victims and their loved ones are in the prayers of Americans. The 
Federal Government stands ready to help in any way we can. And our whole 
Nation grieves with the people of Omaha.
    I just had an important discussion on the housing market with 
Secretary Paulson, Secretary Jackson, and members of the mortgage 
industry.
    The housing market is moving through a period of change. In recent 
years, innovative mortgage products have helped millions of Americans 
afford their own homes, and that's good. Unfortunately, some of these 
products were used irresponsibly. Some lenders made loans that borrowers 
did not understand, especially in the subprime sector. Some borrowers 
took out loans they knew they could not afford. And to compound the 
problem, many mortgages are packaged into securities and sold to 
investors around the world. So when concerns about subprime loans begin 
to mount--began to mount, uncertainty spread to the broader financial 
markets.
    Secretary Paulson and Secretary Jackson and Chairman 
Bernanke are monitoring developments in the 
housing market and working to limit the disruption to our overall 
economy. Data released this morning confirmed the difficulties facing 
the housing market. Yet one reason for confidence is that the downturn 
in housing comes against a backdrop of solid fundamentals in other 
areas, including low inflation, a healthy job market, record-high 
exports. America's economy has proved itself highly resilient. And it is 
strong, and it is flexible, and it is dynamic enough to weather this 
storm.
    For individual homeowners, the problem is more difficult. Many of 
those feeling financial stress have an adjustable rate mortgage, which 
typically starts with a lower

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interest rate and then resets to a higher rate after a few years. Many 
of those borrowers cannot afford the higher payments. And now some are 
fearing foreclosure, which is a terrible burden for hard-working 
families and a source of concern for communities and neighborhoods 
across our country.
    The rise in foreclosures would have negative consequences for our 
economy. Lenders and investors would face enormous losses, so they have 
an interest in supporting mortgage counseling and working with 
homeowners to prevent foreclosure.
    The Government has a role to play as well. We should not bail out 
lenders, real estate speculators, or those who made the reckless 
decision to buy a home they knew they could never afford. Yet there are 
some responsible homeowners who could avoid foreclosure with some 
assistance. And in August, I announced a series of targeted actions to 
help them. My administration has moved forward in three key areas.
    First, we've launched a new initiative at the Federal Housing 
Administration called FHASecure. This program gives the FHA greater 
flexibility to offset refinancing to homeowners--to offer refinancing to 
homeowners who have good credit histories, but cannot afford their 
current payments. In just 3 months, the FHA has helped more than 35,000 
people refinance. And in the coming year, the FHA expects this program 
to help more than 300,000 families.
    Second, in August, I asked Secretaries Paulson and Jackson to work 
with lenders and loan servicers and mortgage counselors and investors on 
an initiative to help struggling homeowners find a way to refinance. 
They assembled a private sector group called HOPE NOW Alliance. Their 
leaders are with us today. HOPE NOW is an example of Government bringing 
together members of the private sector to voluntarily address a national 
challenge, without taxpayer subsidies or without Government mandates. 
I'm pleased to announce that our efforts have yielded a promising new 
source of relief for American homeowners.
    Representatives of HOPE NOW just briefed me on their plan to help 
homeowners who will not be able to make the higher payments on their 
subprime loan once the interest rates go up, but who can at least afford 
the current starter rate. HOPE NOW members have agreed on a set of 
industry-wide standards to provide relief to these borrowers in one of 
three ways: by refinancing an existing loan into a new private mortgage, 
by moving them into an FHASecure loan, or by freezing their current 
interest rate for 5 years.
    Lenders are already refinancing and modifying mortgages on a case-
by-case basis. With this systematic approach, HOPE NOW will be able to 
help large groups of homeowners all at once. This will bring more relief 
to more homeowners more quickly. HOPE NOW estimates there are up to 1.2 
million American homeowners who could be eligible for this assistance.
    Public awareness is critical to this effort because the group can 
only help homeowners who ask for it. So HOPE NOW recently mailed 
hundreds of thousands of letters to borrowers falling behind on their 
payments, and they have set up a counseling hotline that Americans can 
call 24 hours a day. I've directed Secretaries Paulson and Jackson to 
expand the public awareness campaign. And I have a message for every 
homeowner worried about rising mortgage payments: The best you can do 
for your family is to call 1-800-995-HOPE [1-888-995-HOPE].* That is 1-
800-995-H-O-P-E [1-888-995-H-O-P-E].*
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    *White House correction.
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    Third, the Federal Government is taking several regulatory actions 
to make the mortgage industry more transparent, reliable, and fair. 
Later this month, the Federal Reserve intends to announce stronger 
lending standards that will help protect borrowers. At the same time, 
HUD and the Federal

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banking regulators are taking steps to improve disclosure requirements 
so that homeowners can be confident that they are receiving complete, 
accurate, and understandable information about their mortgages.
    As we take these steps, the Department of Justice will continue to 
pursue wrongdoing in the banking and housing industries so we can help 
ensure that those who defraud American consumers face justice.
    These measures will help many struggling homeowners, and the United 
States Congress has the potential to help even more. Yet in 3 months 
since I made my proposals, the Congress has not sent me a single bill to 
help homeowners. If Members are serious about responding to the 
challenges in the housing market, they can start with the following 
steps.
    First, Congress needs to pass legislation to modernize the FHA. In 
April 2006, I sent Congress an FHA modernization bill. This bill would 
increase access to FHA-insured loans by lowering down payment 
requirements, allowing the FHA to insure bigger mortgages in high-cost 
States, and expanding FHA's authority to price insurance fairly with 
risk-based premiums. This bill could allow the FHA to reach an 
additional 250,000 families who could not otherwise qualify for prime-
rate financing. Last year, the House passed the bill with more than 400 
votes, and this year, the House passed it again. Yet the Senate has not 
acted. The liquidity and stability that FHA provides the market are 
needed more than ever, and I urge the United States Senate to move as 
quickly as possible on this important piece of legislation.
    Second, Congress needs to temporarily reform the Tax Code to help 
homeowners refinance during this time of housing market stress. Under 
current law, if the value of your house declines and your bank forgives 
a portion of your mortgage, the Tax Code treats the amount forgiven as 
taxable income. When you're worried about making your payments, higher 
taxes are the last thing you need. The House agrees and recently passed 
this relief with bipartisan support. Yet the Senate has not responded. 
This simple reform could help many American homeowners in an hour of 
need, and the Senate should pass it as soon as possible.
    Changing the Tax Code can also help State and local governments do 
their part to help homeowners. Under current law, cities and States can 
issue tax-exempt bonds to finance new mortgages for first-time home 
buyers. My administration has proposed allowing cities and States to 
issue these tax-exempt mortgage bonds for an additional purpose: to 
refinance existing loans. This temporary measure would make it easier 
for State housing authorities to help troubled borrowers, and Congress 
should approve it quickly.
    Third, Congress needs to pass funding to support mortgage 
counseling. Nonprofit groups like NeighborWorks provides essential 
services to--by helping homeowners find affordable mortgage solutions 
and prevent foreclosures. My budget requests nearly $120 million for 
NeighborWorks and another 50 million for HUD's mortgage counseling 
programs. Congress has had these requests since February, yet it has not 
sent me a bill, and they need to get the funding to my desk.
    Fourth, Congress needs to pass legislation to reform Government-
sponsored enterprises like Freddie Mac and Fannie Mae. These 
institutions provide liquidity in the mortgage market that benefits 
millions of homeowners, and it is vital they operate safely and operate 
soundly. So I've called on Congress to pass legislation that strengthens 
independent regulation of the GSEs and ensures they focus on their 
important housing mission. The GSE reform bill passed by the House 
earlier this year is a good start, but the Senate has not acted, and the 
United States Senate needs to pass this legislation soon.
    The holidays are fast approaching, and unfortunately, this will be a 
time of anxiety

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for Americans worried about their mortgages and their homes. There's no 
perfect solution, but the homeowners deserve our help. And the steps 
I've outlined today are a sensible response to a serious challenge. I 
call on Congress to move forward quickly and join with me in delivering 
relief to homeowners in need so we can keep our economy healthy and the 
American Dream alive.
    God bless.

Note: The President spoke at 1:23 p.m. in the Roosevelt Room at the 
White House.