There's a new HUD head...so whats the plan?

This past Saturday President-Elect Obama named his Secretary of Housing, and given that about 1.4 million Americans wound up in foreclosure in 2008, it's a pretty important post.

Shaun Donavon, former housing commissioner in New York, graduated from Harvard with graduate degrees in Public Policy and Architecture, and has served in the Department of Housing and Urban Development in the past.

Mr. Donovan has experience in all facets of the affordable housing market, having worked in both the nonprofit and private sectors and in academia as a scholar of housing policy. He has even worked as an architect in New York and Italy.

People have, understandably, been asking him how he plans to tackle the housing crisis. Apart from those who already lost their homes in 2008, hundreds of thousands more are on the brink of foreclosure. A successful plan to combat these foreclosures has not yet been implemented.

Back in July a plan called Hope for Homeowners was created to insure up to 300 billion dollars of 400,000 troubled homeowners risky loans by swapping for "conventional 30-year fixed-rate loans with lower rates". The problem, though, is that the program is voluntary for lenders, who probably have felt they could get more money by abstaining. Only 100 applied in the first month of the program, and participation hasn't been much better since, largely because in the current plan,

lenders have to take a big loss. They must absorb the difference between the current mortgage’s value and a new loan for 90 percent of the house’s current appraised value.

That doesn't sound like very a hopeful scenario. An alternate way to help homeowners that Secretary-appointed Donovan says he is "looking very closely at" is having the Federal Deposit Insurance Corporation (FDIC) injecting money directly into the troubled mortgages.

Currently, since the proposal of the $700 billion Troubled Asset Relief Program (TARP) was proposed, $350 billion have been in the works, with "$189 billion having been [spent] in 257 banks in 42 states and Puerto Rico". This past Monday, the Senate approved of the second $350 billion, with one plan drafted by Barney Frank appropriating at least 40 billion of that amount to home foreclosure prevention.

Anyway, all in all, the new Secretary of Housing has a lot on his plate, and a whole bunch of peoples' home security in his hands.

Mr. Donovan, 42, would have an automatic place on the boards that oversee the $700 billion Troubled Assets Relief Program, an economic recovery fund, and the agency restructuring Fannie Mae and Freddie Mac, the home loan repurchase giants.

Hopefully he'll be able to get the money where it needs to go.