UPDATE 1-Obama picks N.Y. official to run US housing dept
(Recasts, adds reaction)
CHICAGO, Dec 13 (Reuters) - Barack Obama on Saturday named New York's top housing official to run the federal housing department -- a Cabinet agency the president-elect said is increasingly important due to America's economic problems.
In his weekly radio address, Obama said he would nominate Shaun Donovan to be Secretary of Housing and Urban Development, the department charged with helping Americans find affordable housing.
Obama, who takes office on Jan. 20, said the HUD secretary would have an essential role in helping to address the nation's economic problems, which were sparked initially by the subprime mortgage crisis.
"To end this economic crisis, we must end the mortgage crisis where it began," said Obama. "This all started when Americans took out mortgages they couldn't afford. Some were reckless, aware of the risks they were accepting. But many were innocent, tricked by lenders out to make a quick buck."
He said one in 10 families who owns a home is now in "some form of distress" -- the most ever recorded.
"This is deeply troubling. It not only shakes the foundation of our economy, but the foundation of the American Dream," Obama said. "There is nothing more fundamental than having a home to call your own."
He said he has charged his economic team with finding new ways to help more families stay in their houses.
As commissioner of housing in New York, Donovan led the effort to create the largest urban housing plan in the United States, helping hundreds of thousands of people buy or rent their homes, Obama said.
Donovan, 42, also worked for HUD during the Clinton administration, where he ran a multibillion-dollar housing-subsidy program.
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Outside of government he has worked at Prudential Mortgage Capital Co (PRU.N) as managing director of its FHA lending and affordable-housing investments. Donovan was also a visiting scholar at New York University, where he researched and wrote about the preservation of federally assisted housing.
Obama's choice of Donovan was praised by his former colleagues from HUD and lawmakers who said his experience made him uniquely qualified to run the department.
"The next housing secretary will be at the center of a growing storm," said Sen. Patty Murray, a Democrat from Washington and chair of the Transportation, Housing and Urban Development Appropriations Subcommittee.
"President-elect Obama has chosen a leader with experience both in housing finance and in HUD's traditional mission of caring for our neediest families," she said.
This week the National Commission on Fair Housing and Equal Opportunity issued a report saying U.S. housing is still racially segregated 40 years after civil rights laws were approved to end unfair practices.
The report said the segregation contributed to the subprime mortgage crisis.
The seven-member commission, which based its findings on hearings held in five U.S. cities, said minorities were denied access to traditional home loans, which drove them into costlier subprime mortgages.
When defaults on the subprime loans began to climb in 2007, they hit the entire housing market, laying the foundation for the global economic slide and rising U.S. unemployment rates.
Obama said Donovan "understands that we need to move past the stale arguments that say low-income Americans shouldn't even try to own a home or that our mortgage crisis is due solely to a few greedy lenders"
"He knows that we can put the dream of owning a home within reach for more families, so long as we're making loans in the right way, and so long as those who buy a home are prepared for the responsibilities of homeownership." (Editing by Todd Eastham)
