WHEN: TODAY, WEDNESDAY, OCTOBER 20TH
WHERE: CNBC'S "SQUAWK BOX"
In a FIRST ON CNBC interview, Housing & Urban Development Secretary Shaun Donovan speaks with CNBC's "Squawk Box," today, Wednesday, October 20th.
All references must be sourced to CNBC.
KERNEN: I THINK WE'RE READY FOR OUR HUD SECRETARY, WHITE HOUSE REMAINING FIRM ON THE FORECLOSURE FRONT WARNING BANKS THEY WILL BE HELD RESPONSIBLE FOR ANY ILLEGAL MORTGAGE PRACTICES THIS COMING WEEKS AFTER ACCUSATIONS OF SHODDY PAPERWORK FIRST SURFACED. JOINING US NOW FIRST ON CNBC HOUSING AND URBAN DEVELOPMENT SECRETARY SHAUN DONOVAN, I DON'T ENVY WHAT YOU'RE TRYING TO DO, MR. SECRETARY. YOU HAVE TO STAY TOUGH ON AN INDUSTRY. ANYTHING THAT DELAYS WORKING THROUGH ALL THESE PROBLEMS SEEMS LIKE IT MIGHT HURT THE REBOUND IN HOUSING. SO IT IS A FINE LINE YOU'VE BEEN WALKING PRETTY EFFECTIVELY, I HAVE TO ADMIT, SO FAR.
DONOVAN: YOU'RE EXACTLY RIGHT. LOOK, WE HAVE TO MAKE SURE WE GET TO THE BOTTOM OF THESE ISSUES AS QUICKLY AS POSSIBLE.WE'RE BRINGING TOGETHER TODAY, AS PART OF ONGOING COORDINATION, ALL THE AGENCIES IN THE ADMINISTRATION, ALL THE INDEPENDENT REGULATORS, TO COORDINATE AND MAKE SURE WE'RE GETTING TO THE BOTTOM OF THE PROBLEMS AS QUICKLY AS POSSIBLE. AT THE SAME TIME, WE HAVE TO MAKE SURE THAT BANKS THAT NEED TO BE HELD ACCOUNTABLE, MAKING MISTAKES, THAT THEY STOP THOSE PROCESSES, THEY FIX THEM AS QUICKLY AS POSSIBLE. ON THE OTHER HAND, WHERE WE HAVEN'T FOUND ISSUES, WE NEED TO MAKE SURE THAT HOMEOWNERS THAT ARE SITTING IN LIMBO RIGHT NOW, WAITING TO BUY HOMES, NEIGHBORS WHO ARE SEEING HOMES SIT VACANT IN THEIR COMMUNITIES, THAT WE MOVE FORWARD. RECOGNIZE WE HAVE BETWEEN ONE-THIRD AND HALF OF ALL HOME SALES IN CERTAIN STATES IN THIS COUNTRY THAT ARE FORECLOSURES. THAT BALANCE IS KEY. I THINK IT'S IN EVERYBODY'S INTEREST TO FIX THESE PROCESSES AS QUICKLY AS POSSIBLE, TO GET TO THE BOTTOM OF IT. THAT'S EXACTLY WHAT WE'RE DOING, THROUGH THIS STRONG ENFORCEMENT TACTIC WE HAVE TAKEN IN A COORDINATED COMPREHENSIVE WAY.
KERNEN: I UNDERSTAND BANK OF AMERICA, BRIAN MOYNIHAN HAS A DOG IN THE RACE. HE HAS A HAND IN THE GAME OBVIOUSLY WHEN HE WAS ON YESTERDAY, HE SAID, THEY HAVE LOOKED AT THOUSANDS OF PEOPLE LOOKING AT MANY MANY MORTGAGES.THEY HAVEN'T REALLY FOUND ANYTHING THAT CERTAINLY WOULD RISE TO THE LEVEL, I REALLY THINK OF CRIMINAL FRAUD, NOW WE HEAR THE FBI IS INVOLVED.WHAT WOULD RISE TO THE LEVEL OF CRIMINAL FRAUD AND DO YOU REALLYTHINK ANYTHING LIKE THAT IS WIDESPREAD IN THE MORTGAGE INDUSTRY WITH WHAT WE'RE DEALING WITH TODAY?NOT A COUPLE YEARS AGO, RIGHT NOW.
DONOVAN: LOOK, THESE INVESTIGATIONS THAT ARE GOING ON THAT YOU TALKED ABOUT, THE ATTORNEYS GENERAL, DEPARTMENT OF JUSTICE, THE FINANCIAL FRAUD TASK FORCE, LOOKING AT THESE, ARE AROUND A VERY SPECIFIC ISSUE, WHICH IS WAS THERE INTENTIONAL FRAUD THAT HAPPENED?I THINK THE REAL ISSUE THAT WE'RE FOCUSED ON IS SOMETHING WE'VE BEEN LOOKING AT FOR A LONGER PERIOD OF TIME. WE BEGAN A REVIEW AT FHA EARLIER THIS YEAR, AROUND CONCERNS. I THINK THE REAL ISSUE THERE IS ARE BANKS DOING WHAT THEY ARE REQUIRED TO DO BY FHA AND WHAT THEY SHOULD BE DOING TO KEEP PEOPLE IN THEIR HOMES. THE ISSUES THAT BOFA REALLY STOPPED THEIR PROCESS OVER WAS SPECIFICALLY AROUND AFFIDAVITS. I THINK THOSE, THEY'RE OBVIOUSLY REVIEWING THOSE, TRYING TO MAKE SURE THEY CORRECT THE PROCESS. I THINK THE BROADER ISSUE WE'RE LOOKING AT, ARE THEY DOING EVERYTHING THEY CAN TO KEEP PEOPLE IN THEIR HOMES AND REALLYWHAT FHA REQUIRES THEM TO DO. IT'S EARLY YET. I WOULD SAY, BASED ON WHAT WE HAVE SEEN SO FAR, THESE ARE ISSUES SPECIFIC TO CERTAIN INSTITUTIONS, THIS IS NOT ACROSS THE BOARD PRACTICES. THERE HAVE BEEN CONCERNED THAT THE WHOLE MORTGAGE INDUSTRY MAY BE IMPLICATED HERE. THAT IS NOT WHAT WE'RE SEEING.WHAT WE'RE SEEING IS PARTICULAR INSTITUTIONS NOT DOING THEIR PROCESSES IN THE WAY THEY SHOULD. AND AT THE SAME TIME, WE'RE ALSO SEEING THAT THE UNDERLYING LEGAL FOUNDATION FOR THE MORTGAGE MARKET, THERE ARE CONCERNS ABOUT CHAIN OF TITLE, AROUND MERS OTHER THINGS.WE'RE NOT FINDING ANY EVIDENCE OF UNDERLYING STRUCTURAL ISSUES IN THE MORTGAGE MARKET THAT WOULD MAKE SECURITIZATION SUSPECT OR OTHERWISE.THIS IS ABOUT PARTICULAR INSTITUTIONS NOT DOING THEIR JOBS. WE HAVE TO RESOLVE THOSE AS QUICKLY AS POSSIBLE, RUN THEM TO GROUND AND GET THEM FIXED. THAT'S EXACTLY WHAT THE PRESIDENT AND I AND ALL THE AGENCIES MEETING TODAY ARE FOCUSED ON.
QUINTANILLA: MORE BROADLY, MR. SECRETARY, WOULDN'T YOU AGREE THE BANKS ARE iN THIS TUG-OF-WAR WITH INVESTORS WANT THEM TO GET IT DONE AS QUICKLY AS POSSIBLE, MODIFICATIONS, FORECLOSURES AND EITHER NEW RULES OR GENERAL POLITICAL PRESSURE TO TAKE THEIR TIME, BE MINDFUL OF EVERYTHING, MAYBE EVEN DO IT MORE SLOWLY. HOW ARE BANKS SUPPOSED TO RIDE THAT BALANCE?
DONOVAN: LOOK, AT THE END OF THE DAY, AS I SAID BEFORE, IF THERE ARE PROBLEMS IN THESE PROCESSES, THAT'S THE ISSUE, THEY HAVE TO BE FIXED, THEY HAVE TO BE FIXED AS QUICKLY AS POSSIBLE. EVERYBODY HAS AN INTEREST IN RESOLVING THE UNCERTAINTY HERE, FINDING THE PROBLEMS, FIXING THEM AS QUICKLY AS POSSIBLE. THAT'S WHAT WE'RE FOCUSED ON. WE'VE BEEN CLEAR WHERE PROBLEMS HAVEN'T BEEN FOUND, WE NEED TO CONTINUE TO MAKE SURE THE MARKET IS RECOVERING AND WE NEED TO MAKE SURE HOME BUYERS CAN CONTINUE TO BUY HOMES AND THAT WE CONTINUE THIS RECOVERY WE'RE IN, WHICH IS FRAGILE. I DON'T THINK THERE IS A FUNDAMENTAL TENSION IN GETTING THESE ISSUES RESOLVED AS QUICKLY AS POSSIBLE AND FIXING THEM. ULTIMATELY, WE WILL HAVE CONFIDENCE, HOME BUYERS WILL HAVE CONFIDENCE, THE MARKET WILLHAVE CONFIDENCE WHEN WE GET TO THE BOTTOM OF THESE ISSUES QUICKLY AND FIX THEM AS QUICKLY AS POSSIBLE. THAT'S THE MOST IMPORTANT THING HERE AND WHAT WE'RE FOCUSED ON.
GUEST HOST JOHN ROGERS: SECRETARY DONOVAN, LOOKING FORWARD, HOW DO YOU VIEW THE FUTURE? HOW LONG WILL IT TAKE UNTIL WE GET BACK TO A NORMAL RECOVERY WHERE HOUSING IS GOING UP IN A NICE, STEADY WAY THAT IT ALWAYS HAS IN THE PAST WHERE INDIVIDUALS CAN HAVE CONFIDENCE IN THE FUTURE OF HOME PRICES?
DONOVAN: WELL, FIRST OF ALL, WE HAVE TO RECOGNIZE THE PROGRESS THAT WE MADE. IN JANUARY OF '09, HOUSE PRICES HAD BEEN DOWN 30 STRAIGHT MONTHS. THERE WAS AN EXPECTATION THAT LAST YEAR PRICES WOULD BE DOWN ANOTHER 6% TO 10%. THAT DIDN'T HAPPEN.ACTUALLY, THE CASE-SHILLER INDEX WAS UP 3% TO 4% THIS PAST YEAR. AND WE'VE SEEN DELINQUENCIES COME DOWN.WE'VE SEEN FORECLOSURE STARTS DOWN ABOUT 30%.WHAT A LOT OF PEOPLE DON'T RECOGNIZE, AMERICAN HOMEOWNERS GAINED OVER A TRILLION DOLLARS IN EQUITY FROM APRIL OF LAST YEAR THROUGH THIS SUMMER. $14,000 ON AVERAGE PER HOMEOWNER. SO WE HAVE DONE A LOT THROUGH ALL OF THE COORDINATED ACTIONS WE'VE TAKEN ON INTEREST RATES, THE HOME BUYER TAX CREDIT, TO GET THIS MARKET TO A MORE STABLE POINT. THE FUNDAMENTAL ISSUE NOW IS WE'VE GONE FROM A SITUATION WHERE IT WAS BAD LOANS DRIVING THE PROBLEM TO A BROADER NEED FOR THE ECONOMY TO CONTINUE CREATING JOBS. WE'VE HAD NINE STRAIGHT MONTHS OF PRIVATE SECTOR JOB CREATION.THAT STARTED TO HELP. THAT'S HELPED TO BRING DELINQUENCIES DOWN.WE NEED TO CONTINUE TO DO THE THINGS THE PRESIDENT'S FIGHTING FOR TO MAKE SURE THAT WE CONTINUE TO CREATE JOBS THIS THIS COUNTRY.WE'VE GOT TO HAVE SOME COORDINATED ACTION AND HELP FROM CONGRESS TO GET PROGRAMS IN PLACE, TO HELP MAKE SURE THAT WECONTINUE TO CREATE THOSE JOBS.
KERNEN: THANK YOU, SECRETARY DONOVAN.WE APPRECIATE YOUR TIME THIS MORNING. THANKS.
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