Hollis McLoughlin's Speech at the Regional Housing Foreclosure Summit on June 19, 2008
Prepared Remarks for Hollis McLoughlin
SVP External Relations, Freddie Mac
Regional Housing Foreclosure Summit
Washington, DC
June 19, 2008
Thank you Penny [Penny Gross, Board Vice Chairman, COG] for the introduction. And the Freddie Mac grants and contributions you just mentioned should definitely help local communities and neighborhoods cope with the spike in foreclosures.
I also want to thank all the representatives from business, government, non-profits and philanthropy for joining us today to discuss this critical issue.
We are all keenly aware of what is going on in our communities; with more abandoned homes, unsettled families, and stretched social services and affordable housing. The key to meeting this challenge is to develop a united front – to pursue a comprehensive plan for action.
It makes perfect sense that we should look to the Metropolitan Washington Council of Governments for guidance and assistance on this issue. As a proven leader and manager of regional initiatives, COG is an invaluable resource for shaping an aggressive, focused and coordinated strategy. The dramatic rise in foreclosures across county boundaries and state-lines is just too big and complex an issue to be handled alone. The solutions require a regional effort and approach.
We especially know that is the case here in the Greater Washington Metropolitan Area. And while we are a national company, it is because we take our local role very seriously, that we're hosting this summit.
This morning, I'll raise some of the challenges we'll be working on and discussing today. I'll also touch on in more detail why Freddie Mac is sponsoring this summit, and what we're doing to help local families that are facing foreclosure.
Challenges Facing Us Today
Let me start by discussing the wide scope of issues we're here to address.
First, we know that foreclosures are rapidly rising across the region, but how severe is the problem in each of our separate jurisdictions? Prince William County, for instance, is experiencing a tidal wave of foreclosures, where one in 20 houses is unoccupied, but is this really the case everywhere, or is it just a squall in some localized areas?
Second, what are the social and other implications surrounding foreclosure? We all know the potential damaging effects foreclosures can have on individuals and neighborhoods. USA Today, for example,had a recent article describing how foreclosures are taking a big toll on mental health. And the Washington Post this week is running a major series on the housing bubble and its after shocks in finance and housing. What other social and related issues does foreclosure bring in its wake? And how should we respond?
Third, how do we reach out to more borrowers in financial difficulty? We know the earlier the servicer and borrower start to work out a delinquency, the more likely the borrower is to avoid foreclosure. Yet, according to a Roper Survey commissioned by Freddie Mac, a majority of delinquent borrowers remain unaware of the availability of foreclosure alternatives, and do not contact their servicers out of embarrassment or fear. What is the best approach?
Fourth, while we agree that the focus should be on keeping families in their homes, at what threshold do we recognize that this is not possible? And if borrowers simply cannot afford the house they are living in, what steps can be taken to help families make the transition to less expensive homes or rental housing?
Finally, while there are available a number of private-public resources, how do we take services that are delivered locally (and often on a fragmented and usually intermittent basis) and create a coordinated and relatively seamless regional system?
The panels and experts we have lined up today should help us answer some of these critical questions. We'll also look at the current strategies and responses to foreclosure, and take a closer look at some recent legislative and regulatory proposals.
In fact, we're seeing some very creative thinking in this area. In Prince William, Fairfax and other counties, officials are considering loan programs that would enable county employees to purchase abandoned and foreclosed homes.
Working out the legal and practical aspects will obviously be a challenge, but this is the kind of innovative thinking we all need to discuss and consider in our sessions.
Why Freddie's a Sponsor
And Freddie Mac wants to be a key part of this discussion.
We're sponsoring this summit because of the critical role we play in the market.
Providing stability to today's mortgage markets is essential to our mission. The GSEs are almost single-handedly supporting the conventional, and now jumbo, mortgage markets today.
As a company we have worked very long and hard financing affordable, quality housing for America's families. Clearly, we do not want to see the gains in homeownership eroded. But we also want to make sure when someone buys a home, they will be able to stay there for the long term – in short, we want to create sustainable housing.
Also, as the region's largest philanthropist, we want to continue to build on the many years of investments we've made in helping vulnerable families in our community.
Equally importantly, we have a personal stake in this issue.
This is no academic exercise. Our employees live throughout the region in all of the counties represented here today. They too see foreclosure signs sprouting up in the neighborhood, and know of family members and friends facing foreclosure. So this issue affects all of us, not only on a business but on a personal level as well.
Moreover, we're actively engaged.
Freddie Mac starts from the proposition that foreclosure represents a potentially avoidable loss to everyone – from the homeowner, to the county, as it struggles with lost tax revenues. To help turn this situation around, we provide affordable mortgage products to lenders to refinance borrowers out of unaffordable loans…we direct our servicers to help delinquent borrowers … and we support consumer outreach programs to get more borrowers on the phone with their lenders to discuss workouts.
What We're Doing
Let me briefly provide some more detail.
Our Servicing and Asset Management group works with servicers every day to ensure that together, we do the best job possible for delinquent borrowers with Freddie Mac loans. On average, last year, we worked out – through forbearances, modifications and repayment plans – three and a half times as many mortgages as we had to foreclose on.
Under our basic contract with servicers, we require, not just recommend, that our servicers work with borrowers to try to solve troubled loans short of foreclosure. As a result, last year we entered into nearly 50,000 workouts that helped families stay in their homes. Today, our workout pace is running about 1,300 loans each week.
In my division at Freddie Mac, External Relations, our Corporate Relations and Housing Outreach team [headed by our SVP Dwight Robinson who is also with us today] are out in the community educating borrowers about their options. Every month they attend dozens of local mortgage clinics across the country and provide non-profits and local governments with financial literacy tools like CreditSmart and Don't Borrow Trouble.
They work hand-in-hand with various non-profit partners (including ACORN, Enterprise, NeighborWorks, Urban League, and La Raza), in efforts to help families avoid predatory lending and foreclosure, as well as prepare new borrowers for homeownership.
Moreover, our Government and Industry Relations group is working very closely with federal and state officials around the country on the foreclosure crisis. We're serving on foreclosure prevention task forces in Virginia, Ohio and elsewhere; we're testifying in state houses on what we see nationally and what we see working in the states; and we're supporting state foreclosure prevention clinics and other efforts in a variety of states.
Finally, the Freddie Mac Foundation, under the leadership of it's chairman, Ralph Boyd, is equally busy helping strengthen the safety net of services provided by local non-profit groups – as they continue to reach out to more families affected by foreclosure. Later this afternoon, he'll be discussing in more detail the new contributions the Foundation will be making.
Conclusion
In closing, Freddie Mac is just part of an overall regional (as well as national) effort to help communities and counties cope. What we hope to accomplish at this summit is to learn, and if possible, coordinate with you, our foreclosure prevention and intervention initiatives.
We want to be part of an overall regional strategy that will make a real difference in all the communities and counties we live in and serve.
We have assembled the experts, leaders, officials and funders. Now is the time to act.
Thank you again for joining us.
Freddie Mac is honored to be the sponsor of such an important summit.
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