Shaun Donovan, the country's new secretary of housing and urban development, is a Harvard University-trained architect who plied the affordable housing trade as an undersecretary in the Clinton administration and as head of New York City's subsidized housing endeavors.
The 43-year-old HUD secretary spoke with St. Petersburg Times reporter James Thorner on Thursday, hot off of President Obama's Wednesday introduction of a new $75 billion foreclosure prevention plan. Here are excerpts of the conversation:
In light of the foreclosure crisis, what if any changes would you propose to the Community Reinvestment Act to avoid unsound lending? (The act is a 1977 law that encourages lenders to make loans to lower income residents of the inner cities.)
I think it's one of the ingredients the president made clear in his speech. We need to fundamentally rethink the way we regulate the system. Clearly there was a failure to provide clear, transparent information to consumers. I think CRA is an example of that. You have had large changes in the mortgage market since the law was introduced and the regulatory system has not kept up. But the focus right now is to get out of the current crisis.
You were successful in limiting foreclosures to only a handful when you worked in New York. How applicable is that experience to limiting foreclosures in Florida and the nation?
I think it's very applicable. You need a back-to-basics approach, fundamental common sense values. We got ourselves into a period when we forgot those values, and everyone thought there was a quick buck to be made. A mortgage that's no more than 31 percent of one's income is a widely accepted standard. It worked in New York, and it will work in the new plan.
Florida was once thought of as a low cost state. Now it has an affordable housing problem. How can the federal government help?
Clearly we've got to stabilize the foreclosure crisis there. In Tampa-St. Petersburg alone, 7.7 percent of all loans are either 90 days delinquent or in foreclosure, far higher than the national rate of 5.2 percent. I think the recovery bill has a lot to offer. There's $2 billion in neighborhood stabilization funding. One thing we forget is that more than a third of the victims of foreclosure are renters. There's $1.5 billion in emergency shelter grants to help the most vulnerable victims of foreclosure.
If this housing and mortgage bailout fails, what other weapons are at your disposal?
I think one thing the president made clear is that this is no longer just a mortgage crisis. Our economic crisis is about jobs and the stability of the whole financial system. The three legs of the stool are the housing plan, the recovery bill signed on Tuesday, as well as the financial stability plan Treasury Secretary (Timothy) Geithner announced last week. All have to work together to be successful.