The Office of Thrift Supervision held its second annual National Housing Forum in Washington D.C. today, inviting a number of housing market power players to share insights and opinions, including Countrywide CEO Angelo Mozilo, HUD Secretary Alphonso Jackson, Treasury Secretary Henry Paulson, Moody’s chief economist Mark Zandi, and others.
Countrywide CEO Angelo Mozilo called for more involvement from the government financiers Fannie Mae and Freddie Mac, saying the government should work to ease restrictions on the types of loans they can buy.
“The jump start is going to have to be done through government agencies,” Mozilo said. “It’s the only way to step out of this cycle.”
Mozilo also showed support for the pending loan modification plan, adding that Countrywide had already begun modifying its own loans, expecting to modify 75,000 loans by freezing low teaser rates.
He also expressed caution that further lending restrictions would aggravate the current situation, saying, “It’s very important we keep as many choices as possible for them as long as the loans are written responsibly.”
Treasury Secretary Henry Paulson expressed optimism about the progress of the pending loan modification plan, saying he expected something to be announced by week’s end.
As far as when the loan modification plan would be released, Paulson said, “I am confident they will finalize these standards soon.”
“We are working aggressively and quickly, utilizing available tools and creating new ones, to help financially responsible but struggling homeowners,” Paulson said.
Paulson identified four categories of subprime borrowers, including those who can afford to pay adjustable rate loans, those who don’t have “the financial wherewithal to sustain home ownership,” those who are able to refinance their adjustable-rate mortgage, and finally those who can afford the introductory rate but not the higher adjusted rate.
He said the last category of borrowers is the one the government is interested in assisting.
The Treasury Secretary also called on Congress to create an independent regulator for Fannie and Freddie, which he claimed is “critical to their ability to serve their public policy purpose.”
HUD Secretary Alphonso Jackson predicted that 70 percent of all subprime loans will likely not fall into foreclosure, noting that not all subprime loans are bad loans.
Jackson added that the government is working with the private sector to differentiate between the good and bad loans, and needs to step in to put the housing market on the “most positive course that we can.”
He also touted the FHASecure refinance loan, which he claimed will help 80,000 families stay in their homes, and another 160,000 next year.
“We need to help more and more Americans keep their homes,” he said. “These families are in danger of losing their homes.”
Fannie Mae Chief Executive Daniel Mudd said his company has modified some $10 billion worth of subprime loans to assist homeowners at risk of foreclosure.
Mudd said “we’re supportive” of the pending loan modification plan, but said pinpointing the right borrowers would be a daunting task.
Qualifying eligible loans is “going to vary enormously from product to product, state to state, borrower to borrower, home to home,” Mudd said. “This is the reason it’s going to take some time. It has got to be worked out on the ground where people live.”
Mark Zandi, chief economist at Moody’s, predicted a rather bleak outlook for the housing market.
He noted that housing starts should bottom out next year, but will continue to fall throughout 2008, and maybe into 2009, with no full recovery until well into the next decade.
The Moody’s Economy.com co-founder called the current housing market the worst since the Great Depression, saying conditions would worsen unless the Fed continues to cut rates and mortgage lenders modify more loans.
Zandi called for a loan modification rate between 20 and 30 percent, noting that only 1 percent of all loans were modified in the first six months of 2007.
Toll Brothers CEO Robert Toll echoed statements made by the others, saying Fannie and Freddie’s inability to buy loans above the conforming loan limit of $417,000 essentially keeps them out of higher-priced markets like California.
Toll called on the Fed to “get into line”, saying they were “obviously behind the curve” as bond rates dipped below the Federal Funds Rate.