Treasury secretary Paulson recently made some optimistic comments on the US economy and included these comments on recent and pending FHA reforms:
In addition, the Administration continues our on-going efforts to minimize the housing market’s impact. We have made progress. Last Friday the HOPE NOW alliance, a coalition representing over 90 percent of the subprime servicing market, as well as non-profit mortgage counseling organizations, trade associations and investors, announced promising developments. This industry-wide effort employs multiple tools to reach and help struggling homeowners, including streamlining subprime borrowers into refinancings and loan modifications. According to HOPE NOW, the industry assisted 370,000 homeowners in the second half of 2007, and mortgage servicers modified subprime loans during the fourth quarter at a rate three times faster than in the third quarter.
As I have said, entire industries do not adjust easily or quickly, even when markets are calm. This alliance is demonstrating that an industry can, through coordination, make a difference and do so without forcing American taxpayers to pay the bill. I look forward to regular progress reports in the coming months. As we learn more, we will look for additional measures to reach more borrowers and prevent as many avoidable foreclosures as possible.
The Administration has also, through FHASecure, expanded affordable mortgage options. Working with Congress, we have increased funding for mortgage counselors who assist struggling homeowners. We have also temporarily eliminated taxes on forgiven mortgage debt. But more action is needed in the housing sector, action just as urgent as a broader short-term economic boost.
Congress needs to pass legislation to modernize the FHA, to increase availability of affordable FHA mortgages. It needs to strengthen regulatory oversight of Fannie Mae and Freddie Mac to ensure they will continue to fulfill their affordable mortgage financing mission. And as part of this reform, to temporarily raise the loan limit on conforming mortgages for securitization. Congress should also allow states to issue tax-exempt bonds to raise funds for innovative refinancing programs.