Governor Launches Program to Help Communities Hard-Hit by Foreclosures

SECRETARY BONNER: Okay, I think we are ready to get started. I want to say good morning to everyone. I'm Dale Bonner, Secretary of the California Business, Transportation and Housing Agency. I want to say thanks to everybody for coming out this morning to announce but also celebrate the culmination of many months of hard work and effort to bring a little measure of relief to those who are suffering the impact of our mortgage crisis.

Everybody knows that the subprime and housing crises have been slowing down our economy and the program we're announcing here today is just one step that we can take to help turn things around. Since the crisis began the Governor has been pushing us all to be proactive, innovative and aggressive in trying to help California families and communities and businesses who are impacted by the crisis.

And today, the California Housing Finance Agency, the other administrative partners and the Governor's Task Force on Non-Traditional Mortgages and a number of our federal and private sector partners, are showing that government does have the capacity to learn and to experiment and to adapt creatively to threats and opportunities. And, by reaching out across jurisdictional lines, we have all shown that we can develop and in fact have developed, a very broad coalition of state, federal, private-sector partners who have come together really to build this program that we're talking about this morning. And we're very excited, because the more we can do to help solve the housing crisis, the more we're going to do to help the California economy.

So it's very exiting to be here this morning to hear from some of those who have been very instrumental to putting the program together. We have some of the families who are going to benefit, or stand to benefit from the kind of program we're announcing today this morning.

No one has been more passionate on this issue than my boss and that's why it gives me great pleasure to introduce to you this morning the Governor of the state of California, the People's Governor Arnold Schwarzenegger. (Applause)

GOVERNOR SCHWARZENEGGER: Thank you very much, Dale, for the nice introduction. It's always nice to have you be part of these kinds of celebrations, because you have been one of the most active Secretaries that I can think of, so thank you so much for all the great work you have been doing.

And I want to thank also a few other people that are here today; Terri Parker from our California Housing Finance Agency. And then we have Supervisor Vogel here with us and Jeffrey Hayward from Fannie Mae, we want to thank them also for being here. And Secretary Marín, I thank you also very much. Commissioner DuFauchard is also with us here from our Department of Corporations. And then there is one other person, Julie Keene from CitiMortgage, thank you also for being here today. And a lot of them will be speaking right after me.

But anyway, it is great to be here, because I love when we all recognize that people have a lot of problems that are in homes and cannot make their payments. And I think it's very important, as a state that we all work together, with the private sector and with the non-profit sector. And I think that we have seen over and over again that when we all work together, that that's when we can really provide the most help.

And so we also know that foreclosures do not just devastate homeowners but devastate whole neighborhoods and in some neighborhoods rows and rows of homes are vacant, they are empty and this attracts, of course, crime and drives down property values, hurts local businesses and hurts the local economy and it hurts also the economy of the whole state of California.

So this is why I'm very happy to be here today to announce this $200 million program administered by my Housing Finance Agency to help pump up -- and we all know a little bit about pumping up -- to pump up those areas most in need of economic stimulus. It will provide up to 1,000 below-market, fixed-rate loans for first-time homebuyers to purchase foreclosed properties in communities hardest hit by the housing downturn. This is not for investors or for speculators; this is specifically for people that really in need of those of kinds of homes. In fact, there's a home that is right behind me here that is eligible and falls into this category.

We also have, of course, a bunch of families here today -- which is really great to have you, thank you for being here today -- that have been affected by the kind of things that we have already done for homeowners, that almost got into foreclosure and we helped them out to stay in their homes.

So I want to thank, of course, the four lenders, because without them this wouldn't be possible. They have agreed to partner with us and to discount these homes so they are more affordable for the average family. Those companies are Fannie Mae, CitiMortgage, Home Equity Servicing and Wells Fargo. We want to thank them very much for coming in and being our partners and helping those people. They don't think just about their own business, they think about the people that they are working with and I think this is really great and very selfless.

This program is funded with tax-exempt bonds and at no cost to the taxpayers and it is available, like I said, for first-time buyers and not for investors or speculators. We want to fill up these empty homes and neighborhoods with stability and create again energy in those neighborhoods as quickly as possible and this program is a great step in the right direction. It will help revitalize communities and at the same time provide great, great opportunities for more families here in California to become part of the American Dream and to experience that American Dream.

Now, today we are taking action to help areas already affected by foreclosure but since last year my administration has, of course, taken many other steps, because we didn't want to just sit there and see people suffer. We urged, for instance, the federal government to raise federal home loans, which of course they did. But now the important thing is that we fight for it, to keep that increase permanent.

We also reached a voluntary agreement with major lenders to freeze interest rates for at-risk homeowners and we launched a $1.2 million campaign to educate people about options to avoid foreclosure. Recent reports show that in April and May the numbers of loan modifications in California has increased significantly, so that means that a lot of people were helped because of those kind of agreements and the campaign that we launched.

Then two weeks ago, I signed a bill, which was SB 1137, which requires lenders to contact homeowners and discuss restructuring options. So I'm confident this will help even more Californians now with this $200 million that are available, that we are announcing today.

And, of course, there is no magic bullet here, there is not one solution that can help the situation. I think the more we go and tackle this problem from all the different angles the better it is, the more we can help in this housing crisis. But working together, using every tool, I think this is what will help our struggling homeowners and our struggling communities, to push through these tough times to a brighter tomorrow.

So again I want to thank everyone for being here today, I want to thank all of you for being here today and letting us use your neighborhood.

And now I would like to bring out Terri Parker to say a few words about all of this. Thank you very much. (Applause)

DIRECTOR PARKER: Thank you, Governor. I would like to begin my remarks by thanking you personally for your leadership in challenging all of us in the California housing industry to create these kinds of programs to help the citizens of our state, particularly in this environment where we all say that there is more affordability in home ownership these days than there has been in California in over a decade.

So, during times like this, with the kinds of news about subprime and people losing their homes and the real impact on communities, it's exciting to be here with all of you today to have really good news to report. The California Housing Finance Agency has developed this Community Stabilization Home Loan Program and as the Governor said, we plan to turn $200 million of non-taxpayer dollars into the opportunity for over 1,000 first-time homebuyers to realize their dream of home ownership.

Under the guidelines of this program first-time homebuyers not only will get a reduced sales price but a reduced special interest rate on their mortgage. They will also get to have the advantage of six months of mortgage coverage if they happen to be in a situation where they are involuntarily become unemployed. Further, we're requiring all of our first-time homebuyers to have homebuyer counseling to make sure that they're really prepared to take on this new responsibility. So we feel that this program will allow borrowers not only to get into their home but, most importantly, to stay there for the long term.

The California Housing Finance agency has been offering solid, reliable financing like this for over 30 years. We've invested over $18 billion in non-taxpayer funds to help California's families live in a home of their own, with a mortgage of their own that they can afford. In fact, this month we are celebrating our 150,000th first-time homebuyer from all the numbers of homebuyers we have served over the many years of our existence.

We're very proud of those numbers but numbers only lay the foundation of a dream. It's really the people who make things happen, people like the financial institutions who are here and partnering with us today to create this unique program. People like Secretary Bonner of the Transportation and Housing Agency and Secretary Marin, State Consumer Affairs, who have challenged all of their departments directors, like myself and my colleagues, to come up with creative, innovative programs within their own sphere of influence to help the people of California. And people like Governor Schwarzenegger, who has helped turn a 'what if' into a solid, unique business transaction.

I'd like to thank all of them for their support. And I hope that the next time there is an event in this particular location that it is a moving van, moving a family into this house and having them be part of this community's future.

And now I would like to take a moment and introduce County Supervisor Ken Vogel, who represents the Fourth District and is also chairman of the local County Supervisors Board. (Applause)

SUPERVISOR VOGEL: Thank you, Terry and thank you for the chance to say a few comments this morning. A lot of times it's great to be number one but in a situation where Stockton is competing with Detroit to be number one in foreclosures in the country, that's a time we want to put behind us. Stockton and other areas of our county, from Manteca, Lathrop and Mountain House, to name only a few, have really been affected by the foreclosures in this state. Within this last year there were over 5,600 foreclosures here in San Joaquin County.

This initiative by the Governor, the Community Stabilization Home Loan Program, gives us an opportunity to start to turn the consequences of these foreclosures around in a very positive way. Seemingly abandoned homes that have dotted our neighborhoods have not only been eyesores but have affected the character and morale of the communities where they are located. This program will help to resurrect these properties and also to help the residents of San Joaquin County, as the Governor said, achieve the American Dream, a home of their own. We have many hardworking families here in our area that deserve this chance.

All elected officials in this county -- and I see some here -- and community leaders have wrestled with the impact of these foreclosures and I'm very hopeful that the Governor's program will be very successful and maybe even expanded in the future. Thank you, Governor, for moving to address this need, we appreciate it. (Applause)

And now I'd like to introduce Jeffrey Hayward, senior vice-president, Community and Lending Development for Fannie Mae, one of the people that is going to help make this happen. Jeffrey? (Applause)

JEFFREY HAYWARD: It is indeed an honor and a privilege to join the Governor and all the other distinguished participants today for this event. Fannie Mae is proud to supplement the robust measures taken by the Governor to help stem the impact of the foreclosure crisis here in California. From the moment we heard that the Governor and the California Housing Finance Agency were planning to do what they are doing, we were compelled to participate. It's the right thing at the right time.

You see, time is not our friend in this crisis, because every day that we wait another house becomes vacant, there's an opportunity for crime, there's an opportunity for blight and there's an opportunity for despair. I admire how quickly this program went from concept to execution. That is real leadership that others can admire. The Community Stabilization and Home Loan Program is here and it's here today. Foreclosed properties will turn into home ownership opportunities for first-time homebuyers who were shut out because of the escalating prices during the boom.

So Fannie Mae is joined with the CalHFA and the Governor and we are helping in three ways:

The first way is we are helping to reduce the interest rate to the borrower by use of a special financing tool called a Liquidity Facility.
Secondly, we are offering more favorable credit terms than otherwise available in the marketplace.
And thirdly, we are contributing our list of properties in zip codes identified by the California HFA and we're providing price flexibility.

Our partnership in this program is directly linked to our national initiative, called 'Keys to Recovery', which is focused on stabilizing neighborhoods by bringing liquidity, stability and affordability to neighborhoods around the country. We are taking the further steps to keep borrowers in their homes, to keep the flow of capital for new homebuyers available and to help return vacant properties back to service.

In addition to our neighborhood efforts we are in California every day buying both single-family and multi-family loans. As a matter of fact, since we've begun buying jumbo conforming loans we have bought more of those kinds of loans in the state of California than any state in the United Sates.

I want to say thank you to the Governor for making this a priority here in this state and also raising the issue to national prominence. Before I end, I would like to congratulate the California HFA and recognize Terri Parker for her outstanding leadership. Terry won the prestigious National Public Service Award this year and it's easy to see, with programs like this, why she was chosen. (Applause)

This is not the first or the last time we will work with the state and our partner, the California HFA, to do what we can to make sure that tomorrow is a brighter day than today. Thank you very much and I'm going to ask the Governor to come back to take questions. (Applause)

QUESTION/ANSWER:

GOVERNOR:           Well, thank you very much. If there are any questions about any of this, please feel free. Yeah?

QUESTION:              Governor, in terms of the housing crisis, how would you rank that when you look at all the different factors involved in contributing to what's a very bad budget situation this year? How would this particular factor rank?

GOVERNOR:           Well, I think that we know, when you look at a $15.2 billion deficit, then you add the $2 billion that we have for reserves, it's altogether $17.2 billion. And you see that our economy, because of our economic downturn, we have seen our revenues decline by $7 billion of what they were anticipated for this last year. So we can see it's a half/half. You know, half is the economy and half is because of our dysfunctional budget system.

So what we have to do is be aware of that. That means that we have to live within our means, we can only use money that we have and everyone has to tighten their belt. But at the same time, the state of California has to recognize and the legislators have to recognize that we have to fix our broken budget system, because this is one of the only places in the United States that does not put a serious rainy day fund aside so that we have money available when there is a decline, that we can supplement the decline in revenues.

And I think that if we can fix that. That's actually the bigger challenge than fixing just the budget for this year because there are many options for the legislators to fix the budget this year but there's only one option when it comes to fixing the dysfunctional budget system and that is to make a commitment that we are going to put a rainy day fund aside, anything after 5 percent of growth every year, because we see that the average over the last 10 years was growth of 5 percent in revenues, a 5 percent increase in revenues and so therefore we should not go beyond that spending.

QUESTION: Governor?

GOVERNOR:           Yes, please.

QUESTION:              Today is Day 21, as you know, of the budget impasse. We understand that later today you may have a Big Five Meeting. The legislature, for the most part, is out on vacation. What will you tell the leaders about the apparent lack of urgency regarding getting a state budget done?

GOVERNOR:           Well, I think that is extremely important that we get a budget done this week, because I think the people of California are disappointed about the fact that the legislature does not have a budget. The people are very much aware of the fact that I have met my constitutional deadline on January 10th to hand in my Budget Proposal and on May 14th to hand in my budget, May Revise Proposal. And so I think it is time for them also to make their deadline and it's very important that we move forward. Hopefully they met over the weekend, hopefully they met this morning and hopefully they will continue meeting and not leave until they have a budget.

Now, as far as the rest of the members are concerned, you know, I don't think that everyone has to be in the Capitol to sit around and wait for the negotiations, because not 120 are participating in the negotiations. But the important players that are negotiating the budget are at the Capitol and are working.

Yes, please.

QUESTION:              We've heard a lot of talk about the sales tax and things like that driving the budget. Would you sign a budget that included a sales tax?

GOVERNOR:           I'm not negotiating in public. I'm only interested in one thing and that is for the Democrats to recognize that they have to live within their limits and within their means. And I think it's important also for the Republicans to recognize that this year needs additional revenues, because we have a $17.2 billion deficit altogether and therefore the only way we can meet that challenge is by having additional revenues.

I have proposed and made it very clear that I am against raising taxes. And therefore I proposed the $5 billion from our lottery, because we have a lottery that is underperforming right now. It's a great asset that we have as a state, the people have voted for it but it's underperforming, it's performing with technology up until 1984 technology. Now, that is ludicrous and therefore I recommend to modernize the lottery and therefore take those increases in revenues and take future revenues and use it this year for the budget. This way we don't have to raise taxes.

It's a simple thing but obviously I'm not the only one that is running the state. There are 120 legislators, so we all have to kind of come together. They have good ideas, I have my ideas and I think if we bring those ideas together we will come up with a good compromise. In the end, where there is a will there is a way. So I think this should be the week where we do the budget, where we have an agreement and then move forward to show to the people of California that we are working for them and that we can be effective.

Yes, please.

QUESTION:              You had suggested last week in an interview that the leadership ought to be locked in a room until there was a deal. Were you serious about that?

GOVERNOR:           Well, as you remember, I even went, two months ago or so, even further than that and I said that the leaders and those that are negotiating the budget ought to be locked in a room together with me and that no one should be allowed out, not even to go to the bathroom. And I think that would speed up the process very quickly, so that was my suggestion, because I think we should terminate this problem once and for all.

Thank you very much, all of you, for being here today. (Applause)