U.S. Department of Housing and Urban Development Secretary Shaun Donovan joined Bloomberg TV’s Adam Johnson and Alix Steel on “Lunch Money” and said the U.S. government will keep working to ensure mortgage services are doing enough to improve treatment of borrowers at risk of foreclosure. He said that no progress will be “100% perfect.”

Shaun Donovan

 Shaun Donovan video and transcript below

On interest payment rates rising to 4-percent: “We had a rise over the last 15 months of $2.5 Trillion. That makes an enormous difference, not just to those families, but to our economy. I don’t see interest rates rising to 4% stopping that. Obviously, if rates were to rise another couple of points that has the potential to be a serious barrier, but the tick up we have seen, even though it is significant, I don’t see as derailing process because we have so many other underlying fundamentals that are strong.”

Sec. Donovan on how he interprets the results that four of the five banks failed at least one of the 29 metrics in HUD’s report:

“Honestly, they are mixed. We are seeing progress. Robo signing, which made this problem so visible to the American people to being with; the monitor found we made real progress there. The kinds of fees and other hidden charges that were being assessed on families just to have a mortgage modification, real progress there too. Where we are not seeing as much progress as we would like is the timeline and responsiveness of the banks to problems that come up around loan modification. Getting documents and making sure you are getting the right response on time to homeowners; those kinds of things continue to be problems.”

On the criticism that borrowers are expected to be perfect when it comes to their documentation but banks are allowed little leeway:

“Any process that you have isn’t going to be 100 percent perfect all the time given the extensiveness of the fines and other consequences of not meeting these standards. There is a little bit of leeway there but let’s be clear, these are demanding, tough standards. They become the standards that are going to be used by the Consumer Financial Protection Bureau across all mortgage servicers in the future starting in January of next year. We believe these standards are tough but also strike a balance of saying we want to get it perfect just about all the time and make sure homeowners are getting what they deserve.”

On what took so long to get a study commissioned by HUD like this done:

“The biggest news today is the fact we are putting out this information alone. This is the first time ever we have had a consistent, comprehensive set of metrics, and they are public. Homeowners and communities were devastated by these practices but investors were hit dramatically as well. It is critically important that those who want to have confidence they are putting their money into mortgages know that the banks and institutions that are servicing these mortgages are doing it in the right way and having this kind of public consistent, comprehensive information for the first time is a critical part of rebuilding confidence in our mortgage system overall. It makes a huge different for families and communities and also for investors putting money into mortgages.”

On what’s next for the banks if they do not make changes:

“This system was set up to get these problems fixed. Any problem that is identified, the banks have to put together what we call a corrective action plan, if they overcharge borrowers of if they made mistakes, they had to go back and fix those mistakes. Joe Smith is going to be measuring every 90 days to make sure servicers are doing what they said. If he goes back the next time and they have not fixed the problem after it was identified once, he can impose million dollar or even $5 million fines each violations. If that does not work, both the federal partners here and state attorneys general have the ability to ring these lenders back into court. All of the remedies are there, not only penalties, but prosecution and all the various remedies we have in court. Those are the steps we are going to go through. Let’s remember, the primary focus here is to fix the problem. What the report shows is we have made real progress. There are many of the practices that were wide spread during the crisis that have been fixed, but we still have a ways to go and that’s why the settlement was a three year process and we are going to keep at it until we don’t have any failures at all across these metrics.”

On NY State Attorney General Eric Schneiderman’s statement that the system is still riddled with inefficiencies and systemic problems:

“Look at what the report today shows. We do have systemic problems in a set of areas, particularly around the problems and these servicers able to get documents, get answers quickly to homeowners? We know for example even though a single point of contact has been set up by all the banks, the right hand sometimes does not know what the left hand is doing. They are not able to get answers quickly or effectively. They might not even get the right answers to people. Those kinds of things remained serious issues and we need to see this fixed. I agree with many of the complaints we have seen. The difference here though is for the first time ever, we have a rigorous public way of reviewing and evaluating these things. Before, we had to rely on anecdotes, Attorneys General or the press finding particular issues. For the first time with this report, we have a systematic way of understanding whether these banks are performing and whether we have a systemic problem and a path to fix it.”

On his take of interest payments rising to about 4-percent:

“Let’s recognize we have made real progress in the housing market. The President has said the housing market is leading our economic recovery, whether you look at the numbers of construction jobs created… We had a rise over the last 15 months of $2.5 Trillion. That makes an enormous difference, not just to those families, but to our economy. I don’t see interest rates rising to 4% stopping that. Obviously, if rates were to rise another couple of points that has the potential to be a serious barrier, but the tick up we have seen, even though it is significant, I don’t see as derailing process because we have so many other underlying fundamentals that are strong. Obviously, it is something we want to watch and we want to make sure we continue to do things like helping families refinance while we still have relatively low interest rates. 4-percent is a low interest rate relative to historical standards. It is still a good deal to buy a home and to refinance today with these low interest

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