HUD Secretary Interview

In an exclusive interview with MortgageDaily.com, U.S. Department of Housing and Urban Development Secretary Alphonso Jackson talked about what’s right at the Federal Home Loan Banking System and what is wrong at Fannie Mae and Freddie Mac. He also discussed FHA’s desired lending niche.

The housing chief said government-sponsored enterprises Fannie and Freddie need to do a better job of following their mandates to provide housing and home loans to “low and moderate income Americans.”

“We’re going to facilitate to make sure the GSEs … carry out their responsibility,” Jackson said in an interview with MortgageDaily.com. “They are charged to help low and moderate income Americans. They have not done that very well.”

But the Federal Home Loan Banks, which are also GSEs, have “done very well” even though they don’t have that mandate, Jackson said.

He made his comments after speaking in northern Kentucky near Cincinnati to a new group of homeowners who graduated from a homeownership course offered by The Brighton Center, a Newport, Ky., social services agency.

During the interview Jackson said despite the proliferation of so-called “exotic” mortgages on the market, the Federal Housing Administration, or FHA, is not likely to offer any of those products.

FHA is under HUD’s purview.

“We’re not going to compete with that market,” Jackson said. “We’re not trying to compete against the mortgage bankers.

“What we’re trying to do is address those persons who fall through the cracks. And there are millions of them everyday that can qualify for a market rate loan,” he said. “But because they don’t want to go through all the regulation they go to the subprime market. That’s who we are trying to address. We want those persons who are low and moderate income the opportunity to own a home.”

Making it easier for buyers to apply for loans is the best way for FHA to increase its market share, Jackson said.

“That’s been our biggest problem,” he said. “People don’t want to go through all those applications … to get a loan.”

That sends buyers to the subprime market, where it is easier yet often costlier to get a loan, Jackson said.

“They go to the subprime market thinking they are going to get a good deal because they” fill out less paperwork, he said. “But they end up paying a lot more interest than they should be.”

The FHA reform bill now working its way through Congress addresses that situation, he said.

“We’re going to do everything in our power to get that bill out,” Jackson said. “We can not continue to let a large group of people go to the subprime market for an 8, 9, 10 and 11 percent interest. When and if we get the bill we can service them at 5 percent and cut down on their notes.”