Foreclosure Prevention Top Priority for HUD nominee Donovan
Shaun Donovan, nominated for the top post at the Department of Housing and Urban Development (HUD), has promised to make changes in federal housing programs under the Obama Administration following the increase in the number of foreclosed homes.
Donovan, who is also commissioner of the Department of Housing Preservation and Development in New York City, said that if confirmed, he would prioritize foreclosure prevention as part of an expanded strategy to alleviate the financial crisis.
During the confirmation hearing, Donovan has received an overwhelming support from members of the Senate Banking Committee. Committee Chairman Chris Dodd even said that Donovan is the most experienced HUD secretary nominee he has seen.
Meanwhile, Donovan expressed his support on the Federal Deposit Insurance Corp.’s (FDIC) program designed to modify IndyMac Bank mortgages that are in default.
The FDIC program would grant banks incentives to lower mortgage payments of borrowers to help them avoid foreclosure.
Furthermore, Donovan promised to make changes in the HUD program, Hope for Homeowners, which is designed to help about 400,000 homeowners who are facing foreclosures. The HUD program only made about 111 loans during its first month.
Donovan said that he would consider increasing the allowable loan-to-value rate and reducing initial borrower fees.
He would also give attention to the capacity of the Federal Housing Administration (FHA) after its share of the loan market for single-family homes increased from 4 percent in 2005 to nearly 21 percent in 2008.
According to HUD officials, the FHA needs additional staff, better technology and expanded authority to examine and monitor the volume of lenders involved in the federally-supported housing programs aimed at reducing the number of foreclosed properties in the country.
The possibility that the agency will be burdened with an increasing number of overdue mortgages is a cause of concern to some lawmakers.
Data from the Mortgage Bankers Association showed that one in 10 borrowers or about 4.6 million homeowners are either delayed on their loan payments or in some form of foreclosure.