BRIAN BUFFINI: Well, the top of the morning to you. Welcome to The Brian Buffini Show. We have two very special guests on the program today trying to get the message out in regards to housing during this time of coronavirus. Very honored to have Secretary of Housing and Urban Development, Dr. Ben Carson. Dr. Carson, welcome to the program. We’re delighted to have you.
BENJAMIN CARSON: Thank you. I’m delighted to be with you.
BUFFINI: We have the commissioner for the Federal Housing Commission himself, the Assistant Secretary for HUD, Brian Montgomery. Commissioner Montgomery, thank you for joining us also. I really appreciate you guys being on today.
BRIAN MONTGOMERY: Thank you.
BUFFINI: Great stuff. I want to give a little background on both you gentlemen just to give our audience a big overview. Dr. Carson, born in Detroit, Michigan, graduate of Yale and the University of Michigan medical school. He became the youngest chief of pediatric neurosurgery at age 33.
Think about where you were at 33, I know where I was and I wasn’t there. In 2001, he was named by CNN and Time magazine as one of the nation’s 20 foremost physicians and scientists. Since 2017, he’s been the 17th Secretary of Housing and Urban Development.
Brian Montgomery is a Texan, a graduate of University of Houston and the University of Austin. He has served as the head of the FHA under three administrations. He’s responsible for the management of FHA’s $1.4 trillion mortgage insurance portfolio back when the word trillion was a new word.
Gentlemen, I really appreciate your being with us here today. Dr. Carson, I watched you on Saturday at the White House briefing and you went straight into — You talked about health and housing and how they go hand in hand, and we have a lot of housing-related questions for both of you guys today. As one of the nation’s foremost, respected physicians, I’d love to hear your insight on this pandemic at this time.
CARSON: Well, obviously, this is an unprecedented event in our country and across the world, because of the incredible nature of this particular virus, which is extremely contagious and moves at a very, very rapid pace. Fortunately, we have put together a task force, which is looking at every aspect of the disease. Looking at what’s happened in other countries, analyzing that data in order to provide the best information for the President.
This too will pass, that’s what people need to understand. It will come and it will go. It seems to have a particular predilection for elderly people or people with underlying medical conditions, particularly those that impact the immune adversely. We have to recognize that by shutting down the whole country, we also have some significant economic consequences. We’re going to have to fashion solutions that take everything into account. We don’t want to destroy one area to say that we’ve succeeded in another area.
BUFFINI: All right. Yes, crazy times. It is amazing also to see everybody coming together and everybody social distancing and doing these kinds of things. We sent a couple hundred of our employees home about a week ago, and it’s remarkable to see everybody getting their job done no matter what.
CARSON: I just wanted to say, people should understand that each one of us plays a significant role. One person can serve as a vector if they’re careless and infect, three other people very quickly, and those three infect three others and others, and it just goes on very, very quickly. That’s what we’ve seen in places like Italy, that’s what we’re seeing in New York right now, and people must take the social distancing very seriously.
BUFFINI: I heard one commentator say, “Act as if you have the virus at all times, and you’ll do the right thing.” That’s probably a good way to go.
CARSON: It is.
BUFFINI: Yes. Well, you mentioned as part of that press conference, that you talked about the American dream and you talked about having a safe home as part of health and home. I’d love your share your thoughts right now on what home ownership means to us as individuals, as families, and as a country?
CARSON: Well, having a place that you can call your own, a place that you can go to and be supported, you can’t put a value on that, it’s so vitally important. That peace of mind allows you to grow and to plan. If you’re always just trying to survive, that doesn’t happen. Also, recognize that home ownership is the number one mechanism of wealth accumulation in this nation.
The average renter has a net worth of $5,000. The average homeowner, a net worth of $200,000, that’s a 40-fold difference. That’s one of the reasons that we emphasize it, but we emphasize it in the right way. Things that were learned with the housing crisis, you don’t put somebody in a house they can’t afford it because they lose the house, their credit, and their future possibilities, that’s not a good thing.
Even though people were thinking, “If we can manipulate this and that and the other, and have the subprime interest rates, and then somehow we can get everybody into a home,” that makes sense absolutely no sense but we’re looking at other ways of doing. Commissioner Montgomery has done an amazing job over at FHA in terms of stabilizing the mutual mortgage insurance fund and a variety of things that were going askew to make home ownership sustainable once you have it.
BUFFINI: No question. I think it’s very important for people to understand that we’re in a radically different place going into this crisis than we were the mortgage crisis. We had record sales in February and February seems like two years ago but the economy is strong, the fundamentals are strong.
We recently interviewed Dr. Lawrence Yun, the chief economist for the National Association of Realtors. He’s just given us, the dynamics of where we are and how strong the banks are and how strong the real estate market as a whole. Maybe you guys could both comment for people because they see the stock market drop 30% in three weeks. It only affects about 50% of the population exposed to stocks. It makes everybody feel like the whole world is falling.
What I’ve been trying to share with people is your home value didn’t go down 30% in the last three weeks. The value of your home right now seems to be more important to anybody than ever before because we’ve been asked to stay home. Maybe I would ask both of you. I’ll start with you, Secretary and then I’ll ask you, Mr. Commissioner, maybe you could speak to your overall view of the housing market and the strength of it, even in the midst of this time of crisis.
CARSON: Well, in the last month, we had for single-family housing, the best month in more than 10 years. For the subsequent month, maybe we’re starting to see a little impact. We’re down 4.4% but it’s 4.4% based on a month that was record-breaking. If you look year over year, we’re still up like 13.4% on new home sales.
We have to face the reality; people aren’t going to be going out and looking at homes now because of the social distancing. Virtual tours of homes, I think, probably are going to see a big bump. Again, the key thing to recognize here is this is a blip. This too will past. The fundamentals remain the same, they are still strong. I think once this is all over, you’re going to see a continuation of improvements in the market.
We do still have shortages, of course in particular with the existing homes and it’s going to take a while for us to rectify that situation. It’s all moving in the right direction.
BUFFINI: You bet. Commissioner Montgomery, maybe you can speak to what we’re talking about. The strength of the overall housing market as a sector right now.
MONTGOMERY: Sure, absolutely. Well, you had mentioned the 2008 crisis and you’re very correct. That was over a very shaky real estate market. This go around, as the secretary articulated, while none of us wanted this to happen and hope it ends quickly, thankfully, it’s during a rather strong housing market. Certainly with people at home, the secretary’s right, it will be difficult to search for a home. And a lot of this happened as we were experiencing a refinance boom.
Obviously, interest rates have gone down to their historic lows. How many times have we heard that? We’re also wanting to make sure that we could keep the oil flowing if you will for the borrowers who are trying to refinance. We’ve had operational and processing challenges as the industry but the key thing we want to make sure is people understand as the Secretary had said, No one should lose their home as a result of this.
Yes, FHA and obviously, the GSC, VA and USDA, home buying programs wanted to make sure that given everything families are worried about now, we wanted to help calm them, to let them know they don’t have to worry about their home right now. We all collectively hit the pause button for at least 60 days for the foreclosure moratorium. There’ll be other things announced here fairly soon.
BUFFINI: Yes. Remarkable, by the way. I think that’s a phenomenal thing to help steady the ship and give people that peace of mind. Maybe we can speak to that. Mr. Secretary at the press conference, Saturday. You mentioned foreclosure cessation for 60 days, I believe? Then also evictions for 60 days, is that correct?
CARSON: Yes. That’s correct. We want it to stop in their tracks any foreclosures or evictions that were going on. We also wanted to emphasize to people that we have a relationship with the services and we’ve asked them to exercise forbearance. If that doesn’t happen automatically, if you foresee an issue with your mortgage payment, you need to contact your servicer. They will work with you.
We have a variety of things in the toolkit that happen before you would start even talking about foreclosures and things of that nature. Those things are the first things that we want to begin to talk about, including some of the things that we use in cases of disasters.
For instance, we can tack your mortgage payment on to the end of your regular mortgage at no interest. Then when you either sell or some other major change occurs, then you pay that off. There’s a variety of things that can be done.
BUFFINI: Yes. I want to tap into this for a second because we have tens of thousands of realtors, touch millions of homeowners. One of the things we saw in the 2008 downturn was someone lost their job or their spouse lost a job and they knew they were in trouble. But 50% of people did not contact their lender — who were in trouble — because they were embarrassed and they didn’t reach out.
This is important for everyone to understand. You guys have taken great steps to reach out to all of your relationships. Many of these banks have decided they’re going to cooperate and be supportive, as well as the actual dynamic of forbearance itself. You still have to contact your lender if you think you’re going to miss a payment or if you’re going to get behind on a payment. It’s still– you have to call them and let them know, is that correct?
CARSON: That’s correct. People should not be embarrassed. We recognize that this is a widespread problem. Your neighbor may look like they’re very prosperous, but really they are thinking the same thing you are now. Get in there.
BUFFINI: Yes, right. No doubt.
Well, again, it’s a powerful stuff. First of all, I can only imagine the amount of work that’s going on behind the scenes to get something like this done and the size and the scope of the housing market and what you folks are doing. Remarkable.
Speaking on behalf of the real estate industry, I just can’t thank you guys enough for what you’re doing. We know on the front lines of real estate, this is belly-to-belly business, and it’s real life people and it’s something that’s so important to them. Government people are not often thanked and acknowledged, and I just want to thank you guys.
CARSON: Well, I have to tell you, I always say, we have the ugliest building, but the best people. They have been working overtime. Night and day. Some at the building, some from home, every single day. We recognize that we have an obligation to the people that we serve, and we’re going to make sure it is fulfilled.
BUFFINI: Oh, that’s brilliant stuff. My wife is always — who by the way, I think she’s a bigger fan of yours than she is of mine, Dr. Carson. She prays for you all the time. Her dynamic is, she always says to me, “This has come to pass, it hasn’t come to stay.” We actually did our interview with Dr. Lawrence Yun, we actually entitled our episode, “This too shall pass.” I think that’s very important for everybody to know. Commissioner Montgomery–
CARSON: Well, thank your wife for her prayer.
BUFFINI: If you have Beverly Buffini on your side, she has the direct phone line. You’re in good stead there. Commissioner Montgomery, in parts of the country, FHA is really an essential part of the housing offering. Do you see as we come out of this — I know we have this huge stimulus package going on, we have all of these moving parts right now — do you see any changes to FHA underwriting guidelines in the coming months?
MONTGOMERY: Here at the short term, we’re obviously concerned that folks are worried about losing their home. As the Secretary mentioned, we want to be that voice of steady and calm. We typically deploy those tools we have, by the way, following a large-scale natural disaster like a hurricane. It’s easy to point and say, “Well, the hurricane hit Florida or hit Texas or something,” and we can immediately look at the amount of inventory that’s going to be impacted.
This is something altogether different. We’ve never had to deploy these tools, coast to coast. We will be ready to deploy those as needed. Again, we want to make sure homeowners understand that. We’re also looking at ways — since we do largely exist without congressional support, we largely exist on the revenue created from premium collection and as the secretary mentioned our mutual mortgage insurance fund. We want to make sure that whatever we do is done to make sure that borrowers that are accessing FHA are ready to buy, but also get them the tools if they’re not quite ready to buy through home buying counseling and things of that nature. We just began to deploy the new condominium rule that makes it a little easier for borrowers to access FHA, and we made some changes to our reverse mortgage program elsewhere.
In terms of other changes given, obviously, what’s going on in the market here of late with this refinance boom and obviously, we’re in the middle of this pandemic, we’re going to probably pump the brakes on some of the other changes going forward. Again, we just want to be mindful that we have to balance our books here at FHA to not be a drain on the taxpayers.
BUFFINI: You bet. On a little longer term, because again, this is going to pass. I would love your take on this both of you gentlemen. As robust as our housing market was going into Coronavirus, we were still mired in a housing shortage. Do you see the ongoing housing shortage impacting the ability of the first-time buyer, for example, to get in a home and getting people out of the rental cycle longer than their parents were in it. People are stuck in that rental cycle. You mentioned Secretary Carson, it’s $5,000 net worth versus $200,000 net worth. Do you think there will be an opportunity coming out of this where perhaps states might loosen some of the regulations — like in California it’s very hard to build anything. Do you think there’s any solutions for that? Do you think there are any ways that we can stimulate new housing growth, to meet the needs, since there’s going to be pent up demand?
CARSON: Yes. I’m actually encouraged about that. We have started our national bus tour, driving affordable housing across America tour and talking with local officials and state officials about what they can do to remove some of the regulatory barriers that are preventing the building of affordable housing. I think we’re making very, very good progress.
The other thing that is so important, we are a very innovative people, an entrepreneurial people. The advances that have been made with manufactured housing, people used to think of trailers and doublewides, we’re talking about things that look every bit as nice as any site build. It’s less expensive, can be put up much more quickly.
We’ve thought about it as a rural solution, but it’s now a good urban solution as well. Accessory dwelling devices, a whole host of modular homes, 3D printable homes. All of these things have come online. They are ready to go. All we have to do is remove some of the regulatory barriers that prevent them from being utilized and that’s happening more and more. I’m optimistic that we’re on the verge of making some real good progress there.
BUFFINI: That is exciting. One of the things that’s good news is millennials view modular homes as cool, as opposed to our generation who think of it as a trailers. They think of it as a cool, less impact on the environment and all these things. I think that is a great way and I think we’re going to see more and more of that.
CARSON: FHFA topping price index shows that they accumulate value at about the same rate as the home. A great entry point, accumulate value, and then trade up.
BUFFINI: Love it. We love that. As real estate professionals, we love that. We have a few minutes left here. One question on behalf of the real estate community. What can we do right now with our customers in the marketplace to support not only what you guys have going on with fair housing programs, but to support the real estate homeowner at this time? What would you ask of us at this time so we can step up as professionals and support what’s going on in our country?
CARSON: I would just say first of all, we enjoy tremendously the relationship we have with the National Association of REALTORS®. I think you guys are great. It’s really about education and helping people to know what their rights are and who is covered. Some people think Fair Housing Act is only about subsidized housing, it’s not. It’s about all housing, public and private throughout the country.
Sometimes discriminatory practices occur out of habit or people just don’t really think about it. Getting people to really talk about this and engage and understanding who the protected classes are and what their obligations are toward them, I think makes all the difference in the world. We’ve been accused at HUD of pushing fair housing to the background, that’s not true at all. We do it in a way that we want to see it actually work. We want to see results, and not just a bunch of bureaucratic accumulation.
BUFFINI: Okay, I’ll wrap this up real quick. I appreciate you guys’ perseverance. Let me ask two last questions here and I’m going to direct it to you, Dr. Carson. One of the things you mentioned at the press conference on Saturday, was that you’re watching these levels of unity that are just so impressive on all fronts, both in government, in government business partnerships, and then also with the people themselves coming together, communities coming together.
We have a group of individuals who are the rock to their communities, but they need a little reassurance too. I think it’d be great if you could speak to this unity that you’re witnessing, that you’re on the inside, we’re on the outside looking in. It would be great if you could just share what you’re witnessing in that regard.
CARSON: Well, the number of companies that have stepped up and offered to produce whatever we need producing and to change their production lines has been very impressive. Even more impressive than that has been neighbors helping neighbors. For instance in Henderson, Kentucky, the Housing Authority of Henderson turned their local Envision Center into a meal distribution point.
The schools were closed and a lot of those kids, they get their meals at school. This is an example of how people are just reaching out. For the most part, we Americans are peaceful people who care about their neighbors, that’s something I discovered when I was running as president. A lot of good people. That’s not the ones you see on the 6:30 news. You see people pouring water on police’s heads and being hateful and trying to stop other people from talking. That’s not who we are. It’s so important for us to recognize that, not allow ourselves to be changed by the purveyors of hatred and division.
BUFFINI: No, that’s so good. We have thousands and thousands of agents that we were able to coordinate right before the stay in place orders came in that were putting together little pop by gifts as we call them, of hand sanitizers, necessary foods, those kinds of things. Then they distribute them on the doorsteps of their older clients and older homeowners that they had in their client base. Over 4,000 real estate agents did this. It was actually a remarkable thing and reached just tens of thousands of homeowners. Fantastic stuff.
CARSON: That is so important. Absolutely.
BUFFINI: Lastly, as a physician your number one priority has always been caring for people. I would just say, what words of encouragement do you have for our audience this time, physically, emotionally, and even spiritually. I know you’re a man of deep faith. What words of encouragement do you have for us?
CARSON: The words are already there. They’re in our pledge of allegiance, one nation under God. It’s in our national anthem. At the end of that first stanza where it says, “The land of the free and the home of the brave.” You can’t be free unless you’re brave. It’s on every coin in our pocket and every bill in our wallet that says, “In God we trust.”
What we need to do is recognize that it doesn’t matter what your faith is, godly principles of loving your fellow man, caring about your neighbor, developing your God given talents to the utmost so that you become valuable to the people around you. Having values and principles that govern your life. That’s who we are. If we do that, there is no issue that can conquer us as a people.
BUFFINI: That’s amazing. Fantastic. I’m ready to go do 50 push-ups and do whatever I can for my country. Thank you, Mr. Secretary. Thank you, Commissioner Montgomery. We so appreciate you guys. Thank you to everyone who’s working in that ugly building and doing phenomenal work for the housing sector.
We’re going to do our part to shore up housing. We’re going to do our part to shore up our customers and we’re going to do our part to make sure that when we come out of this that homeownership, that dream of homeownership, that transforms people’s lives is going to be more available for more people. Thank you for being part of our program today, gentlemen. God bless you.
CARSON: Keep up the great work.
BUFFINI: Thank you so much.
CARSON: Keep up the great work all of you. Thank you. Bye-bye.
MONTGOMERY: Thank you.
BUFFINI: Well, what an honor it was to have those two men join us today. I think it’s important in this world we live in — There’s so much criticism of everything and everyone at all times. It’s important to know there really are some fantastic talented people working on our behalf and getting it done. That was inspiring stuff for me. I hope this has been helpful for you.
I hope this has been encouraging for you. Maybe there’s someone you need to send this message to. Consume it yourself. Now more than ever, share it with a friend. Share our interview with Dr. Lawrence Yun called this too shall pass. It’ll give people confidence and hope. If people are sitting at home right now and they’re consuming negative media around the clock, it’s going to have a negative effect on them.
Let’s put something good in their heads. Let’s put this information in their heads. Let’s share these podcasts with people so we can reach as many people as possible. I’m going to share the Irish blessing with you today as we sign off. I hope this has been encouraging, insightful, educational, and gives you hope and encouragement in a time of trouble.
May the roads rise up to meet you. May the wind always be at your back. May the rain fall soft upon your fields, and the sun shine warm upon your face. Until we meet again, as Dr. Carson said, may God hold you in the hollow of his hand. We’ll see you next time.