Too-tight credit has caused lenders to forego millions of mortgages and helped drive homeownership rates for minorities and millennials to record lows, Housing and Urban Development Secretary Julian Castro said.
Speaking to the Mortgage Bankers Association's
"Where do you want to be?" he asked them. "On the front lines? Or do you want to leave money on the table?"
Castro cited a March report from the Urban Institute that found 1.2 million more mortgages would have been made in 2012 alone if lenders had used credit standards from 2001, before the subprime mortgage boom.
As a result of tight credit, homeownership rates for minorities are at their lowest this century, and rates for those under 35 are the lowest they have ever been, he said.
While credit was overly loose during the boom years, "the pendulum has swung too far in the other direction," he said. At the same time, he said, communities of color will constitute three quarters of household growth formation over the next decade.
Castro said the government also has a role in boosting lending, and acknowledged lenders' frustration over regulatory uncertainty, especially in regards to the Federal Housing Administration, which has traditionally been the route for first-time, minority and low-mod income borrowers to get mortgages.
He touted HUD's new
"These steps should bolster your confidence in originating more loans with FHA," he told the lenders.
Borrowers are getting new tools to access FHA credit as well, he said. The agency's
The former mayor of San Antonio, who took over at HUD about three months ago, also touted a Ginnie Mae
Ginnie Mae also will help lenders feel more comfortable with making loans to veterans. Currently, VA guarantees only 25% of the loan amount. "That leaves a lot of lenders exposed," he said. But Ginnie will allow lenders to get additional insurance above the VA guarantee level.
"Reopening the doors of homeownership in America is one of the top priorities at my job at HUD" Castro said.
He added that not every sector of the real estate finance business was as gloomy as he painted single-family mortgages to be. Multifamily lending has increased, for instance.
"Homeownership must complement this," he said.