CHARLOTTE, N.C. -- The U.S. has come a long way toward a housing market recovery since the pre-recession era of reckless, federal Housing and Urban Development Secretary Shaun Donovan said Monday in Charlotte, but still has a long way to go.

Donovan spoke at the National Foundation for Credit Counseling s annual leadership meeting, held at the Westin Hotel uptown. He recounted the atmosphere when he took office in 2009, when foreclosures were rising and home values were falling.

It was terrifying, Donovan told the audience of credit counselors. I remember that feeling today, of that cliff we were literally falling off of.

He said a $25 billion national mortgage settlement the government reached earlier this year with major lenders is key to helping struggling homeowners avoid foreclosure.

New consumer protections agreed to in the settlement require lenders to respond promptly to homeowners, to provide a single point of contact for homeowners questions and not to foreclose on homeowners while they are still seeking to negotiate with their lenders, a practice known as dual-tracking.

Deal takes effect Tuesday

Those provisions take effect Tuesday. The banks were reluctant to enter into a $25 billion settlement, said Donovan. But the settlement will ultimately help lenders as well by stabilizing the market and preventing a repeat of the housing crisis.

Everyone was hurt by this crisis, he said. Our financial system and our banking system were hurt as well.

Charlotte-based Bank of America bears the largest part of the settlement, owing $11.8 billion total. San Francisco-based Wells Fargo, which bought Charlotte-based bank Wachovia in 2008, owes $5.3 billion toward the settlement.

That settlement has helped make reducing the principal owed on mortgages a priority, instead of just reducing homeowners monthly payments, Donovan said.

We changed the game from payment reduction to principal reduction, he said. This is actually a good thing for lenders too. Borrowers are more likely to actually pay.

Donovan also echoed President Barack Obama s calls this weekend for Congress to pass legislation that would make refinancing at lower interest rates easier for many homeowners.

We need to build support around the country, said Donovan. Republicans have objected, in part because the proposals would cost an estimated $5 billion to $10 billion.

While millions of homeowners remain underwater on their mortgages, Donovan said the lowest points of the housing crisis are behind. He pointed to encouraging statistics, such as rising home sales prices. The S&P/Case-Shiller composite index released last week showed average U.S. home prices gained 1.2 percent in July compared to the same month last year.

In Charlotte, home prices rose 0.9 percent in July from June and 2.2 percent from a year ago.

Now isn t the time to mess with the popular mortgage interest deduction, a tax break that s meant to encourage homeownership, said Donovan. It s one of the most popular tax breaks, but also one of the costliest, with a 10-year price tag of more than $1 trillion, according to the Tax Policy Center.

Obama s reelection campaign has suggested in ads that Romney would eliminate the deduction.

It s important right now that we focus on taking the recovery and helping and strengthening it, said Donovan. There will be time in the future to talk about a major overhaul of our tax code.

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