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Interviews with Secretary Donovan & Rep. Cardoza

Interviews with Secretary Donovan & Rep. Cardoza

By John King, USA - October 24, 2011

KING: Sadly, the numbers don't lie. Home values nationally declined 4.5 percent in the last year. The unemployment rate, 8.2 percent when the president signed the stimulus and gave that speech, it's 9.1 percent now. And analysts are predicting a record 1.5 million foreclosures in 2012.

So will this latest White House plan finally help? The secretary of housing and urban development secretary Shaun Donovan is with us tonight. Mister Secretary, if you go through that history, it pretty sober. Why should anyone think this latest plan will prove to be the difference?

SHAUN DONOVAN, HOUSING AND URBAN DEVELOPMENT SECRETARY: We've taken the housing market that was literally falling off a cliff. And we've stabilized it. But it is also true that we haven't done enough. And we haven't gone far enough. And we're going to keep pushing, keep expanding these efforts to make sure that we do get to a point where the housing market isn't just stabilized but it is recovering and recovering in a way that homeowners again have a light at the end of the tunnel and can see themselves getting back above water.

So we're continuing to push. Today's announcement is part of a broader strategy to keep making a difference in the housing market. Those are the facts.

KING: How many people, how many homeowners do you think will be held by this new revision of the rules?

DONOVAN: Well, we're going to finalize the rules over the next couple weeks with the federal regulator that is primarily responsible here. We're also going to have to see how the private sector responds. Because ultimately, we need the private sector to step up whether it's on the streamlining that we've done with second leans or mortgage insurance.

But if you look at the broad population of who is eligible. There are about four million families that have Fannie Mae or Freddie Mac loans that are underwater and that could benefit by a refinancing.

The average benefit is over $2,500 a year. So, it's a substantial benefit for those families. We are going to see how - have to see how many of them actually take this up. But the other thing I think that is important here, John, is the kinds of changes that we're making. Common sense changes to streamline to mortgage process. To bring down costs for refinancing could also benefit many other homeowners as well. There are six to seven million Fannie Mae or Freddie Mac borrowers who are above water, that have equity in their homes and could benefit from a substantial reduction in their interest rate. But haven't refinanced?

And so we hope that removing some of these barriers could also help them to refinance as well. And that would provide another boost to the economy.

KING: Is it fair to say you're a bit cautious about putting exact number on this because the predictions in the past, the president said seven to nine million there in the first program. And under the stimulus plan they said unemployment wouldn't go above 8.1. Is part of this caution for the history?

DONOVAN: Are we bit cautious here in numbers? Yes.

But part of the issue is we've gone, we've sat down with the private sector. We've figured out how to make these changes to streamline a process that has been too difficult to unwind to this date. But we're going to have to see how those work.

What there's no question about is that this is the right thing to do. It is something that will put more money in the family in the pockets of American families. It is something that will help the housing market more broadly and the economy more broadly because it is going to be better in terms of consumer spending.

The other thing I would say, it is good for the taxpayer in the sense that these will be safer loans. The Fannie and Freddie loans that are going to be refinanced will default less because payments will be lower. So, in that sense it is a win/win for the private sector, for the American home owner but also for the taxpayer as well.

KING: The secretary of Housing and Urban development, Shaun Donovan. Sir, appreciate your time tonight.

DONOVAN: Thank you very much.

KING: Continuing the conversation now with the politician who knows this crisis all too well. California democratic Congressman Dennis Cardoza whose constituents right in the bulls eye of the housing crisis.

Three cities in his central valley district. Modesto, Stockton, Merced at the third, fourth and sixth highest foreclosure rate in the country. Congressman, thanks for being with us tonight.

You heard the secretary say this is a win/win. This perhaps finally is some at least the beginning of the help to get people back. Is this enough?

REP. DENNIS CARDOZA (D), CALIFORNIA: Well John, I'm glad the secretary is refocused on this. Frankly, I handed them out to my district and I told him in 2009 that these programs weren't going to be enough. They will not be effective for my district. And they haven't been effective for most of the country where these problems exist.

KING: Why? What's wrong them? You heard the president back in 2009 themselves sold this at the time. They were very ambitious, very optimistic and frankly they haven't worked out to match the numbers. Is it their fault or is it just something in the market?

CARDOZA: Well, its good intentions but they haven't put enough pressure on the banks. They haven't - the programs were too cumbersome to begin. In my area, many of the homes are 70 percent underwater when they limited it to 105 and then to 125 percent of loan to value, they immediately you know cut of the worst hit areas. And those markets just continue to decline.

KING: There's an argument about this. I want to you listen here to the former Massachusetts Governor Mitt Romney is out in Las Vegas the other day. He gave an interview in the newspaper out there.

You stay administration hasn't done enough and you talk about those who are way underwater, 150 percent, 170 percent. And what you view as the government's responsibility to help them. Listen to Governor Romney. He has a very different perspective.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: Don't try to stop the foreclosure process. Let it run its course and hit the bottom. Allow investors to buy homes. Put renters in them, phase the homes up and let it turn around and come back up. The Obama administration has slow walked the foreclosure process.

(END VIDEO CLIP)

KING: His perspective is that the government will never in get it right. You say it's too cumbersome, too many rules, to have lean on the banks hard enough. His perspective is you know what? The government is never in get this right. Get out of the way. Painful maybe but let the market run its course.

CARDOZA: Well, look at Mister Romney's state of Michigan that he is so proud of being from. And you look at Detroit. And because of the spiraling values, the homes they live in, now cost less than the car they make. What cars they still make. It is a very intractable problem. When the appraisals and the values start declining, they tend to be a vortex that just keeps going until it hits bottom. We can't afford as a country to let this problem continue until we all hit bottom.

KING: You're not running for re-election.

CARDOZA: I'm not.

KING: How much does this (inaudible) district factor in effect that are not going to try again?

CARDOZA: It's a big frustration. The frustration that I was not able to get more people focused on this sooner. The neglect to this crisis until now of the administration. They talked a good game. They put in some programs that I think were well intentioned but they simply haven't worked and that --

KING: Democrat neglect is a pretty strong word. This is a president who is about to go around the country saying I want four more years. I've tried my best to have a democrat saying he has neglected one of the biggest, if not the country's biggest economies.

CARDOZA: In my opinion, this is the administration's biggest failure. And it's the reason -- without excising this cancer from the economy, you are never going to cure the patient. And I support the president. I'll vote for the president next election. I hope he wins because the alternatives are much worst.

KING: He is not going to get, he's not going to get what you want and now with the Republican house, I suspect. Why didn't, it happen in the two steer Democrats controlled everything?

CARDOZA: We could not get them to focus on it, frankly.

KING: Could not get the White House to focus on it?

CARDOZA: Right.

KING: And you tried.

CARDOZA: We tried. I've sent 30 letters. Well, we did a lot of meetings. I brought Mister Donavan to my district. He told me he had the answer. Clearly he didn't. You showed tonight in your statistics. The statistics don't lie.

When I told him that they didn't have the correct answer, they were pretty arrogant about it. He said you don't understand what you're talking about. A former realtor, a former businessman, I think I know what I was talking about. They just simply didn't listen to the members of Congress were telling them there was a better way.

KING: And what will this may sound a crass question. What will the political ramifications be for the president? I don't assume you think he'll lose California, but in your part of the state which is a little more dicey.

CARDOZA: The president has a chance to get it right. I hope he does. I want him to success succeed. America needs him to succeed. And so, I'm hopeful that this program will work better than I think it might.

It's a baby step. I think it's a positive step. And it's an acknowledgement that the problem is significant. I'm glad he's going to Las Vegas to announce it. Hopefully he'll talk to enough people there that he understands the depth of despair that's going on in our country.

My folks have been living through a depression. And 30 percent of my folks have already lost their houses. It is significant. It is awful for the people in the families going through it. And it really needs to be addressed.

KING: Appreciate your help tonight in understanding this.

CARDOZA: Thank you.

KING: Thank you Sir. 

John King, USA

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