As many already know, I have started my new appointment as I. Donald Terner Distinguished Professor in Affordable Housing and Urban Policy in the Department of City and Regional Planning with the College of Environmental Design here at UC Berkeley. I wanted to take the opportunity to introduce myself, say “hello” and share a bit about what I’m working on and looking forward to in the coming semesters.
As an alumna of the Master’s of City Planning program, this is somewhat of a homecoming. I have returned to the Bay Area from my role in the Obama Administration as Assistant Secretary for Housing and Federal Housing Commissioner at the U.S. Department of Housing and Urban Development (HUD). As FHA commissioner during the worst financial crisis since the Great Depression, and one precipitated by the housing collapse, it was a challenging and fascinating time to work in housing and in the federal government. Leading FHA, my work focused on stabilizing the housing market and the agency itself by providing critical access to credit and developing new responses to the rental affordability crisis, including Choice Neighborhoods and the Rental Assistance Demonstration program.
It is a very exciting time to be jumping in at Berkeley. In addition to my teaching and research roles, I’m also honored to be serving as co-chair of the Policy Advisory Board of the Fisher Center of Real Estate and Urban Economics in the Haas School of Business. These roles are providing the opportunity to connect with the tremendous network of students and faculty across campus, and take advantage of the wealth of resources UC Berkeley has to offer.
As I’ve settled in here on campus, I’ve also had the chance to attend and speak at several off campus events about my work in the Administration and reflect on the current state of the housing field. Most recently I was back in Washington speaking at the Mortgage Banker’s Association Single Family Rental Finance Summit. Last month, I provided testimony to the California Assembly’s Committee on Housing and Community Development, addressed the Association of Bay Area Governments at their State of the Region Symposium, and spoke to the Emerging Leaders Peer Network (an initiative of the Non-Profit Housing Association of California). In February, I spoke at the The Real Estate and Law Symposium at Stanford University, and in January, I sat on a panel for Zillow, as they kicked off their National Housing Tour.
Here on campus, I was invited to address students, faculty and alumni at the Berkeley Circus Soiree, where I spoke about the enormous responsibility and intellectual challenge of being at the center of the federal government’s response to the housing crisis, and what was involved in shaping that response. I offered my thoughts on some of the challenges and opportunities we’re contending with in the housing field here in the Bay Area, as well as in California, and the country as a whole.
These ideas and reflections are in part what is shaping my vision and thoughts for the development of a new housing center here at Berkeley. Though still in the early stages of formation, I look forward to more formally don the hat of Faculty Director in the coming months with our official launch. The center will be a collaboration among the College of Environmental Design, the Institute of Urban and Regional Development, and the Fisher Center on Real Estate and Urban Economics, and we will examine the latest developments in housing and real estate policy, finance, and practice. The center will serve as a resource to highlight what’s working and what’s possible, both locally and nationally, and will conduct research, convene people and ideas, and support interdisciplinary collaboration around the innovations that can push the housing field forward.
Because one of the main goals of the center is to generate research and ideas that are both rigorous and timely, we intend to keep our finger on the pulse of the field through ongoing and deep engagement with practitioners, community members, scholars (from across this and other institutions), and other members of the public. To that end, I’m excited to be continuing with a busy speaking engagement calendar in the coming months. Look out for reflections from those events in the near future, and follow me on twitter @carolgalante4 for the latest updates. It has been a great first few months in my new role here at Berkeley, and I look forward to a very exciting and fruitful year!
President Obama’s announcement that the Federal Housing Administration will lower the cost of its home loans by one-half of a percentage point (.50 basis points) should be very welcome news. Home loans will now be within reach for many more hard working and responsible families who have been left on the sidelines of the economic recovery.
This cost reduction is good for homeowners and would-be homeowners, communities still struggling to recover from the recession, and the economy more generally. The National Association of Realtors reports the first-time homebuyer has been largely absent during the economic recovery. The inventory of homes at the lower end of the price spectrum — those traditionally accessed by the first-time homebuyer — are the most difficult to find
Further, low- and moderate-income borrowers, and black and Hispanic households in general, have a particularly hard time obtaining mortgage credit today.* The lower cost of credit for FHA borrowers moving forward means that more homes will be affordable for more people. That means an average annual savings of $900 on a typical FHA loan of $180,000 — meaning that up to a quarter million new home buyers will now, for the first time in a long while, be “in the money” to purchase a home.
This also means that over the next several years, two million homebuyers will save on their monthly housing expense, enabling them to invest more in other aspects of their families’ future, such as education. Not only will individual families benefit from this new housing affordability, but a virtuous cycle is created that will begin to further stabilize neighborhoods and strengthen the overall economy.
As a result of many actions over the past six years, the economy and housing market have made significant progress. Now is the time to share those gains and opportunities more broadly with the American people, while at the same time continuing to strengthen the housing market recovery.
All of this is possible now because of the foundational changes to the housing-finance system initiated post-financial crisis by the Obama Administration. As a prime example, the Consumer Finance and Protection Bureau has put in place rules of the road that mean the dangerous and predatory lending products that led to the crisis can no longer be offered.
And FHA took its own steps to ensure prudent underwriting standards were put in place, along with a strong risk-management culture that has been embedded into the operations of the agency. FHA actions included raising mortgage insurance premiums to be sure that anticipated losses, plus reserves for unanticipated costs, are accounted for. Even after the reductions announced by the President, FHA mortgage premiums will remain 70 percent higher than before 2009.
Further, because of underwriting and other policy changes made, the performance of loans being insured today (and in the last several years) is far stronger. FHA will still be charging more for much better loans than in the years before the crisis. All this means FHA can reduce costs for borrowers, while continuing to add substantially to its reserves and financial health.
I know firsthand how hard it is to make rapid and complex changes to a large and important government agency like FHA. I am extremely proud of the work that has been done that enables these mortgage insurance premiums to be lowered. And I am even more proud of the FHA team that made it happen. Their work is government service at its best.
A strong FHA can now, in turn, strengthen families, communities and the economy.
— Carol Galante, I Donald Terner Distinguished Professor in Affordable Housing and Urban Policy, and former Assistant Secretary for Housing/FHA Commissioner
* Sharygin, C. A. (2013). Class and Color in the Credit Crunch. Washington, DC: Urban Institute.