CHICAGO — In naming his choice for housing secretary, President-elect Obama on Saturday rounded out his economic team and gave new prominence to the mortgage crisis that has dragged the country into a recession.
The selection of Shaun Donovan as secretary of Housing and Urban Development puts the current New York City housing commissioner at the forefront of one of the more nettlesome economic challenges confronting the new administration: the soaring foreclosures that are threatening homeownership nationwide.
"We need to approach the old challenge of affordable housing with new energy, new ideas, and a new, efficient style of leadership," Obama said upon naming Donovan during his Saturday radio address. "We need to understand that the old ways of looking at our cities just won't do.
"This plan will only work with a comprehensive, coordinated federal effort to make it a reality," Obama said. "We need every part of our government working together — from the Treasury Department to the Federal Deposit Insurance Corp., the agency that protects the money you've put in the bank. And few will be more essential to this effort than the Department of Housing and Urban Development."
Donovan, head of New York's Housing Preservation and Development Department, is a former Clinton administration HUD official with a national reputation for curtailing low-income foreclosures, developing affordable housing and managing the nation's largest housing plan.
"Mr. Donovan's background prepares him to address the extremely difficult challenges our country faces in helping Americans find affordable housing," said Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking, Housing and Urban Affairs Committee.
The Federal Reserve estimates that lenders are on track to initiate 2.25-million foreclosures this year, more than doubling the annual pace before the crisis set in. What's more, falling housing values and a plunging stock market have contributed to $2.8-trillion in lost household wealth in the third quarter.
Donovan joins a team led by Tim Geithner, Obama's nominee for Treasury secretary, and Larry Summers, who will chair Obama's National Economic Council. Obama has his team working on an ambitious economic recovery plan that includes saving or creating 2.5-million jobs over two years.
Obama wants to use the second half of a $700-billion financial industry rescue plan to help stem foreclosures. Congress this year also put in place a $300-billion program designed to let troubled homeowners swap risky loans for more affordable ones, though few have applied. Moreover, homeowners have continued to default on mortgages despite government efforts to lower interest rates and modify repayment terms.
With one in 10 U.S. homeowners delinquent on mortgage payments or in foreclosure, Obama said Donovan will bring "fresh thinking, unencumbered by old ideology and outdated ideas" at the Housing and Urban Development Department to help resolve the housing and economic crisis.
If confirmed by the Senate, Donovan would become the nation's top housing official in the midst of the worst recession in decades.
Nominee's focus: affordable homes
Shaun Donovan has hands-on experience with an issue important to President-elect Obama: affordable housing. As commissioner of the city's Department of Housing Preservation and Development, Donovan, 42, has received widespread acclaim for his effort to add 165,000 reasonably priced homes to New York's ultra-expensive housing stock by 2013.
The $7.5-billion program eschews heavy taxpayer spending on big, bleak, government housing projects in favor of smaller, mixed-income developments built by private investors or nonprofit groups.
A Harvard-educated native New Yorker with masters degrees in public administration and architecture, Donovan has worked as an architect in New York and in Italy. He was an assistant secretary for multifamily housing at HUD during the Clinton Administration, and then a visiting scholar at New York University.