More needs to be done to help homeowners cope with steep home price declines and underwater mortgages, HUD Secretary Shaun Donovan said at an event hosted by the National Journal Wednesday.
While more than 13 million homeowners have taken advantage of various government refinancing programs since April 2009, 1 in 5 Americans still owes more on a mortgage than the home is worth, the "single most lasting scar" of the financial crisis and housing market meltdown, he said.
"There is more to be done," Donovan added, urging Congress to take action on policy proposals by the Obama administration designed to expand refinancing and loan modification programs outside government-backed loans and help more homeowners take advantage of rock-bottom interest rates.
"Still, millions of homeowners who've done the right thing and paid their bills can't refinance because they're underwater," he said. "We need Congress to act on this proposal. There is no reason why families with FHA loans or loans backed by the GSEs should be the only ones to get help."
Refinancing more mortgages isn't the only way to tackle the legacy of "negative equity," Donovan said, praising efforts by various government housing agencies to repurpose government-owned foreclosures into marketable rental properties, thereby reducing housing supply and stabilizing home prices.
"With the rental market recovering fast and about a quarter of a million foreclosures owned by HUD and the GSEs, we have a real opportunity to be creative about how we address the shadow inventory," Donovan said. The shadow inventory is a term used to describe homes that are either in foreclosure or likely to be in foreclosure.
Just this week, the Federal Housing Finance Agency announced the first major bulk sale of government-owned foreclosures, a move Donovan touted as only the first step in a "smart national program" to help manage the country's foreclosures and ease the pressure distressed properties put on communities and the housing market.
"We've made important progress in recent months to get our housing market back on track and reverse the cycle of negative equity…but that doesn't mean by any means we're done," Donovan said. "We still need Congress to act to ensure that every responsible family in America, regardless of who owns their loan, has the opportunity to refinance.
"We still need to get to the bottom of this housing crisis," and turn the page on "an era of recklessness that has left so much damage in its wake," he added.