[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
                DEPARTMENTS  OF  VETERANS  AFFAIRS  AND
                 HOUSING  AND  URBAN  DEVELOPMENT,  AND
                  INDEPENDENT AGENCIES APPROPRIATIONS
                                FOR 1999

========================================================================

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             SECOND SESSION
                                ________

            SUBCOMMITTEE ON VA, HUD, AND INDEPENDENT AGENCIES

                    JERRY LEWIS, California, Chairman

TOM DeLAY, Texas                     LOUIS STOKES, Ohio
JAMES T. WALSH, New York             ALAN B. MOLLOHAN, West Virginia
DAVID L. HOBSON, Ohio                MARCY KAPTUR, Ohio
JOE KNOLLENBERG, Michigan            CARRIE P. MEEK, Florida
RODNEY P. FRELINGHUYSEN, New Jersey  DAVID E. PRICE, North Carolina
MARK W. NEUMANN, Wisconsin           
ROGER F. WICKER, Mississippi         

NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.

  Frank M. Cushing, Paul E. Thomson, Timothy L. Peterson, and  Valerie 
                      L. Baldwin, Staff Assistants
                                ________

                                 PART 6

                     DEPARTMENT OF HOUSING AND URBAN
                               DEVELOPMENT

                              

                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
49-345                      WASHINGTON : 1998
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             For sale by the U.S. Government Printing Office            
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                       COMMITTEE ON APPROPRIATIONS                      

                   BOB LIVINGSTON, Louisiana, Chairman                  

JOSEPH M. McDADE, Pennsylvania         DAVID R. OBEY, Wisconsin            
C. W. BILL YOUNG, Florida              SIDNEY R. YATES, Illinois           
RALPH REGULA, Ohio                     LOUIS STOKES, Ohio                  
JERRY LEWIS, California                JOHN P. MURTHA, Pennsylvania        
JOHN EDWARD PORTER, Illinois           NORMAN D. DICKS, Washington         
HAROLD ROGERS, Kentucky                MARTIN OLAV SABO, Minnesota         
JOE SKEEN, New Mexico                  JULIAN C. DIXON, California         
FRANK R. WOLF, Virginia                VIC FAZIO, California               
TOM DeLAY, Texas                       W. G. (BILL) HEFNER, North Carolina 
JIM KOLBE, Arizona                     STENY H. HOYER, Maryland            
RON PACKARD, California                ALAN B. MOLLOHAN, West Virginia     
SONNY CALLAHAN, Alabama                MARCY KAPTUR, Ohio                  
JAMES T. WALSH, New York               DAVID E. SKAGGS, Colorado           
CHARLES H. TAYLOR, North Carolina      NANCY PELOSI, California            
DAVID L. HOBSON, Ohio                  PETER J. VISCLOSKY, Indiana         
ERNEST J. ISTOOK, Jr., Oklahoma        ESTEBAN EDWARD TORRES, California   
HENRY BONILLA, Texas                   NITA M. LOWEY, New York             
JOE KNOLLENBERG, Michigan              JOSE E. SERRANO, New York           
DAN MILLER, Florida                    ROSA L. DeLAURO, Connecticut        
JAY DICKEY, Arkansas                   JAMES P. MORAN, Virginia            
JACK KINGSTON, Georgia                 JOHN W. OLVER, Massachusetts        
MIKE PARKER, Mississippi               ED PASTOR, Arizona                  
RODNEY P. FRELINGHUYSEN, New Jersey    CARRIE P. MEEK, Florida             
ROGER F. WICKER, Mississippi           DAVID E. PRICE, North Carolina      
MICHAEL P. FORBES, New York            CHET EDWARDS, Texas                 
GEORGE R. NETHERCUTT, Jr., Washington  ROBERT E. (BUD) CRAMER, Jr., Alabama
MARK W. NEUMANN, Wisconsin             
RANDY ``DUKE'' CUNNINGHAM, California  
TODD TIAHRT, Kansas                    
ZACH WAMP, Tennessee                   
TOM LATHAM, Iowa                       
ANNE M. NORTHUP, Kentucky              
ROBERT B. ADERHOLT, Alabama            

                 James W. Dyer, Clerk and Staff Director
















DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT, AND 
              INDEPENDENT AGENCIES APPROPRIATIONS FOR 1999

                              ----------                              

                                         Wednesday, March 25, 1998.

              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                               WITNESSES

HON. ANDREW CUOMO, SECRETARY
SAUL RAMIREZ, ACTING DEPUTY SECRETARY
JON COWAN, CHIEF OF STAFF
JACQUIE LAWING, DEPUTY CHIEF OF STAFF FOR POLICY AND PROGRAMS
HAL DECELL, ASSISTANT SECRETARY FOR CONGRESSIONAL AND INTERGOVERNMENTAL 
    RELATIONS
GAIL LASTER, GENERAL COUNSEL
ROD SOLOMON, SENIOR DIRECTOR FOR POLICY, PROGRAMS AND LEGISLATIVE 
    INITIATIVES, OFFICE OF PUBLIC AND INDIAN HOUSING
JACKIE JOHNSON, DEPUTY ASSISTANT SECRETARY, OFFICE OF NATIVE AMERICAN 
    PROGRAMS
KEVIN CHAVERS, PRESIDENT, GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
WILLIAM P. APGAR, ASSISTANT SECRETARY-DESIGNATE, POLICY DEVELOPMENT AND 
    RESEARCH
PAUL LEONARD, DEPUTY ASSISTANT SECRETARY FOR POLICY DEVELOPMENT
EVA PLAZA, ASSISTANT SECRETARY FOR FAIR HOUSING AND EQUAL OPPORTUNITY
MARK KINSEY, ACTING DIRECTOR, OFFICE OF FEDERAL HOUSING ENTERPRISE 
    OVERSIGHT
DAVID JACOBS, DIRECTOR, OFFICE OF LEAD HAZARD CONTROL
SUSAN GAFFNEY, INSPECTOR GENERAL
RICH KEEVEY, CHIEF FINANCIAL OFFICER
DAVID GIBBONS, DEPARTMENTAL BUDGET OFFICER
WILLIE GILMORE, DEPUTY ASSISTANT SECRETARY FOR RESOURCE MANAGEMENT AND 
    OPERATIONS

                       Chairman's Opening Remarks

    Mr. Lewis. The hearing will come to order.
    Mr. Secretary, let us at the beginning, while we express 
our appreciation for your being with us, there was a conference 
that involved a few minor little things called offsets this 
morning and that has delayed a number of us. It wasn't that Mr. 
Stokes and I were conspiring against you when we walked in 
together.
    Secretary Cuomo. I never imagined such, Mr. Chairman.
    Mr. Stokes. I'm not going to tell if you don't.
    Mr. Lewis. You got it.
    Mr. Secretary, first, thank you very much for being with us 
this morning. These are very difficult times for all of us, and 
particularly as we look at our efforts to think through where 
we have been with the Department of Housing and Urban 
Development and where we should be going. I think we have many 
levels of exchange as well as questions to ask each other, and 
this is the beginning point of that for this year, in a formal 
way, at any rate.
    So starting out, HUD has proposed a budget which envisions 
significant increases in almost every program. The request of 
$25 billion is contingent upon a number of savings offsets 
which add up to about $4.6 billion. Many of those offsets 
require legislation that could be rather controversial.
    In addition to that, the request proposes a decrease for 
the elderly and disabled. This is not unusual. I have yet to 
see a President who did not propose reductions in programs they 
obviously know the Congress will increase, so that they could 
put money in other accounts where they anticipate possible 
decreases. But, nonetheless, it is a piece of the dance that we 
are about here.
    It is important that we, as early as possible, start 
dealing with the real figures. And so in reality the HUD 
request is closer to $30 billion, which would reflect a $6 
billion increase over 1998. No doubt we will be discussing 
these increases not just in the course of the hearing but, as I 
have indicated, at other levels of communication as well.
    In addition to all this, HUD is undergoing a huge 
reorganization of its staff and its offices. As you know, Mr. 
Secretary, in 1995, about the time I was surprised to have this 
job, Congress was about challenging HUD to reevaluate the way 
it conducts its business or perhaps to face dissolution.
    There were a number of people around this town who for a 
number of years suggested that perhaps the people we purport to 
serve out there in the communities might be better off if we 
didn't have a HUD, setting aside the question of how much of 
that money we spend on that bureaucracy itself. Major 
programmatic reforms were enacted through the appropriations 
process, paving the way for programs to become more flexible 
and more efficient. We have worked together in connection with 
many of those things.
    As a consequence, you proposed and are now implementing a 
major reorganization of HUD's huge Federal bureaucracy. Let me 
say that I feel very strongly about the need for that 
redirection and reorganization, and I also feel very positively 
about the Secretary in terms of his commitment to that effort.
    These issues have nothing to do with what is the dance on 
our floor when you are talking about real services for real 
people who have real needs. And so I am very appreciative of 
that level of work.
    HUD's mission is to provide as many affordable housing 
opportunities to people as possible, and to assist communities 
in creating strong and stable economic bases. These missions 
can be met only if the Department is administratively and 
programmatically more efficient.
    Your attempt to reorganize HUD, as I have said, is 
certainly taking us down a pathway that is a new direction. 
Reorganizations are not easy. They are not simple but not easy, 
either. They are unsettling for people who work at HUD and for 
the beneficiaries of HUD's programs.
    But, similarly, reorganizing programs and personnel can 
lead to very positive outcomes, especially when all 
stakeholders buy into the thought that that change isimportant. 
And for HUD, positive outcomes are imperative.
    The programs must become more performance-driven rather 
than process-driven. Grants must be leveraged with more outside 
funds. Red tape must make way for flexible programs that 
require accountability, and outdated and ineffective financial 
systems must be replaced with systems that allow the taxpayer 
to know where and how their money is being spent.
    When these steps are taken, the people who should benefit 
from HUD's programs will benefit from those programs. A 
successful reorganization will also lead to increased 
credibility for HUD to press forward with new policy agendas.
    In this regard I am pleased HUD followed the 
recommendations of this subcommittee to explore the application 
of advanced building technologies to the construction and 
rehabilitation of homes. As the country's leading housing 
agency, HUD should lead the effort to utilize new and advanced 
technologies in the construction trades.
    During today and tomorrow this subcommittee will consider 
these topics and a host of others, from the FHA loan limitation 
debate and the mission of the FHA single-family program, to 
Section 8 rental programs, its renewal needs and its excesses. 
Section 8, to say the least, provides a challenge for all of 
us.
    I wanted to mention in a formal way, Mr. Secretary, that 
there probably has not been a Member of the House who has spent 
more energy in his career attempting to impact housing 
programs, and made a commitment to especially home ownership 
opportunity for the poorest of the poor, than my colleague 
Louis Stokes. As you know, Congressman Stokes has chosen not to 
seek reelection, but I wouldn't want his commitment in this 
subject area to go unnoticed in a formal way.
    So with that, Mr. Secretary, it is my privilege to call 
upon Louis Stokes.

                    Opening Remarks From Mr. Stokes

    Mr. Stokes. Thank you very much, Mr. Chairman, and I very 
much appreciate your very kind and warm remarks.
    Mr. Secretary, I certainly want to join the Chairman in 
welcoming you before our subcommittee for your second year in a 
row. Before I make my formal statement, I want to take just a 
moment to thank you once again for your recent visit to 
Cleveland, Ohio. It was time we were given a full Empowerment 
Zone grant from the Department. You and Vice President Al Gore 
made a great hit in our city, and I want you to know that the 
citizens of my congressional district are deeply appreciative 
of the consideration that has been given our city in that 
respect.
    Secretary Cuomo. Thank you, Congressman. The pleasure was 
mine.
    Mr. Stokes. Mr. Secretary, you are to be commended for the 
budget you have put forth for fiscal year 1999. While I do not 
agree with everything in that budget, I do agree with a great 
many things that it does contain.
    The 1999 HUD budget tries to address some of the most 
serious problems facing urban America, problems such as the 
urgent need for more affordable housing, the lagging economic 
growth in many of our central cities, the need to increase home 
ownership among minorities and women and inner city residents, 
and the continuing problem of housing discrimination. The steps 
you propose are modest ones, especially relative to the need, 
but they do seem to be steps in the right direction and worthy 
of this subcommittee's serious consideration.
    I also think that you are to be commended for your emphasis 
on improving management at HUD and combatting fraud and abuse 
in HUD programs. I look forward to hearing more about the 
status of those efforts and whether they are beginning to show 
positive results.
    Needless to say, this subcommittee will once again be 
operating under some fairly tight fiscal constraints, but I do 
hope we will be able to give support to at least some of the 
initiatives that are being proposed in your new HUD budget. I 
look forward to your testimony this morning and the opportunity 
to be able to pose some questions to you relative to various 
parts of your budget. Again, I welcome you.
    Secretary Cuomo. Thank you.
    Mr. Stokes. Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Stokes.
    Mr. Secretary, we are used to having, especially in this 
room, people come armed with all kinds of support sitting 
around them at the table. I have noted your pattern in the past 
and am appreciative of that. I do see an army out in the 
audience. Just would you all presume that you have been 
introduced, and in the meantime, Mr. Secretary, your entire 
statement will be included in the record, and you can proceed 
as you wish.

                   Secretary Cuomo's Opening Remarks

    Secretary Cuomo. Thank you very much. Thank you very much, 
Mr. Chairman, for the kind remarks, and let me second much of 
the sentiment in your opening statement. I think your 
perspective on the Department is exactly right. I would also 
like to thank the Ranking Member for his good assistance and 
leadership this past year. He is going to be a tremendous loss 
to the committee, as the Chairman pointed out, and he is going 
to be a loss to the Department. His stewardship and friendship 
has been a valuable asset for all of us at the Department, and 
I would like to thank him for that.
    Mr. Stokes. Thank you very much.
    Secretary Cuomo. Mr. Chairman, I would also like to thank 
the Committee staff who has been excellent to work with over 
this past year. The progress the Department has made has been 
due to the good work of this Committee. Any legislative 
advancements we have made have been done by this Committee, and 
I can't thank you enough for that.
    As you pointed out, we have the full team here from HUD. We 
want to make sure that we can answer any questions that you 
might have, and then some, so we have a very full 
representation from the Department. I won't go through the 
whole list, but suffice it to say I am sure during the course 
of today and tomorrow, you will have a chance to meet most of 
the senior officials, and I am looking forward to that.
    We have a quick presentation that we thought would be 
helpful to give an overview, a context for where we are with 
the Department, Mr. Chairman, before we get on with specific 
questions.

                        progress of hud reforms

    In 1997, the mandate was clear, as you pointed out: Fix the 
Department of Housing and Urban Development. We heard you when 
you spoke about the management and the deficiencies therein. We 
heard you specifically, Mr. Chairman, when you said, and I 
quote, ``It seems to me that HUD is at a crossroads. Either it 
can continue down the same path, or it can change directions 
and recreate itself into an effective agency.'' We chose the 
path that said ``effective agency.''
    We had a two-step process, if you will, to simplify our 
overall strategic goals. Step one was to clean HUD's ownhouse. 
Before we can go out and build homes, provide homes for other 
Americans, we had to clean our own house, get our management house in 
order. Step two was then getting back into the mission of the 
Department, getting back into the housing business.
    On step one, we have done an extraordinary amount of work, 
I think any objective source would say, on the management. The 
Department today is smaller and better than it was this time 
last year. The work force is down to about 9,000. We have a 
phased downsizing plan that can get us to 7,500 or thereabouts 
in the year 2002. We would need legislative changes to 
consolidate programs to do that. But we have a HUD today at 
about 9,000 people that is better and stronger than it has ever 
been, and a plan to get us to the 7,500.
    We have done a tremendous amount on waste, fraud and abuse. 
We announced about a year ago, Mr. Chairman, what we called the 
zero tolerance for waste, fraud and abuse campaign. We did that 
with the Attorney General, and we brought in the FBI under 
Director Freeh, and set up a special unit. There has been a 325 
percent increase in debarments. Debarments are when we find a 
bad landlord, we have a bad relationship, we are not getting 
the product that we contracted for. Again, there has been a 325 
percent increase in debarments.
    And people will tell you that there is a new culture about 
the Department and a new feeling in the industry, where 
landlords and owners know that we are going to enforce these 
contracts. And we believe that they are living up to the 
contracts in expectation of that enforcement at a higher rate 
than ever before.
    We are about to commence the first national evaluation of 
our portfolio. We own public housing projects. We have single 
family, multifamily projects. We have never had before a 
national inspection and evaluation system. We now will have a 
system where we will physically inspect all the properties, 
financially inspect all the properties, and be able to rate our 
portfolio, rank our portfolio for the first time ever.
    We are also getting our financial house in order. We had 89 
separate financial management systems, which would have been 
bad enough except the 89 systems didn't talk to each other, so 
we couldn't come up with a consolidated balance sheet. We are 
working through the integration of those systems.
    We have a new focus on the Department where we say we have 
two jobs. One is to maintain and restore the public trust, make 
sure we administer the tax dollar well, and the second is to 
facilitate community-based redevelopment plans. And we have a 
new talent, a new expertise we call community builders to do 
that facilitation, to do that intervention with the community.
    And we have had a technology revolution at the Department, 
using the Internet, using new forms of technology to interface 
with the customer, kiosks, Internet transmissions so we can 
inform the customer, the neighborhood resident, of what we are 
doing without them having to come down to the Department. You 
have before you some of the samples of the software. In the 
mapping software, where we have mapped all of the HUD projects 
across the country in a database, you can see exactly where the 
taxpayer dollars are going.
    That was all step one. That was cleaning up HUD.

                           booz allen report

    The question then became, about January, how do we get a 
good assessment of where we actually are in this management 
reform and the management transition? And we had a number of 
reports out there, some at odds, variance, to be sure. GAO had 
an opinion, the IG had an opinion, the Department had an 
opinion. And at that time, we talked about getting an 
independent, objective, credible evaluation of where we were 
with the management, the staffing, et cetera.
    I said to this Committee in January that we would go out 
and contract with Booz Allen, have Booz Allen come in, review 
everything we were doing, and report back. The report we are 
proud to issue today, Mr. Chairman, first, we are pleased to 
have gotten it done because we spoke to the Committee about it, 
and we are pleased to have gotten it done on a timely basis. We 
are also pleased with the results of the Booz Allen report, 
which was very favorable to the status of the reorganization.
    The summary quote, if you would, and I quote on page 11 of 
the report, ``HUD appears to have an excellent vision for the 
new HUD, and in early 1998 appears to have made significant 
progress towards achieving the many management reforms that are 
critical to making the Department function effectively.''
    The report goes through the entire reorganization. It talks 
about the establishment of the enforcement and assessment 
centers which are at the hub of our evaluation system.
    Mr. Lewis. Mr. Secretary, if I could just interrupt you at 
that point.
    Secretary Cuomo. Yes.
    Mr. Lewis. The report has just come in--at least to our 
office, so we haven't had a chance to really look at it in 
depth. To say the least, there will be some review between 
today and tomorrow, but frankly I don't want us to have a 24-
hour review that says to us, ``Let's find out where we can 
criticize or they criticize so we can dwell on that.'' I am not 
sure that would be constructive. So we may want to find other 
mechanisms for us, in smaller committee form or whatever, to 
sit down and discuss that report with you.
    Secretary Cuomo. It would be our pleasure, Mr. Chairman. 
But you will see, when we do go through the report, it is very 
comprehensive. It talks about the new centralized functions; 
the restructuring of the management processes; the retraining 
of staff which we have made a priority, getting the skills 
among our work force; development of information and management 
systems; and the design and establishment of the new internal 
controls.
    The report also speaks about the staffing plan, which is 
what we had discussed back in January. We were talking about 
possible locations and there was a discussion of where those 
locations should be. They basically say that by the current 
plan, anticipating again the legislative changes that we have 
discussed, we would have approximately 7,700 employees in the 
year 2002. We estimated about 7,500 in the year 2002, but there 
is going to be a lot of changes between now and then.

                           1999 budget themes

    That was all step one. Your priority, our priority, making 
the Department work. And I think the Committee's salutation 
last year was exactly right: Fix HUD, and then we will talk 
about doing more and good things that need to be done in the 
community. We believe, given the progress we have made the 
first year, we can now start that dialogue about getting back 
into the business of HUD and getting back into the business of 
the communities.
    There are two themes in this 1999 Budget, which as 
theChairman pointed out, is an aggressive budget and a comprehensively 
aggressive budget.
    First is housing and homeownership. We want to get back 
into the housing business. We are essentially out of the 
housing business as a Nation. We have a chart that is going to 
point that out, but we are the Department of Housing, one 
caveat: We don't produce any housing.
    The second point is, that runs through the Budget, putting 
the ``UD'' back in HUD, the urban development. At one time, HUD 
as very active in economic development. The old UDAG program 
did phenomenal things in cities and distressed communities all 
across the country. HUD has lost that capacity over the years, 
and we think we need it now more than ever, even with this 
strong economy, making sure we are getting jobs back in cities.
    On the first point, Mr. Chairman, on the economic 
development side, the economy is going very, very well with 15 
million new jobs. But if you look at where those jobs are being 
created, only 13 percent of those jobs are being created in 
central cities. The overwhelming majority of the jobs are being 
created in suburban and rural America.
    That situation is compounded when you look at the 
challenges of welfare reform. We have tens of thousands of 
people coming off welfare in the next few years. Most of those 
people are in central cities. The question is, where are the 
jobs going to be for people coming off welfare? Welfare reform 
was not about kicking people off assistance. It was helping 
people to independence.
    There was a story in the Washington Post and in the New 
York Times yesterday, that took me aback, that said some of the 
numbers are starting to say we are not getting people into jobs 
coming off welfare. Recipients are reaching the sanction, they 
are reaching the time limit, and they are being kicked off but 
they are not being put into jobs. When you look at the job 
disparity between city and suburbs, we are saying we have to 
start to work with cities to create those jobs back in cities.
    The City of Philadelphia, for example, which has done 
extraordinary work over these past few years with Mayor Ed 
Rendell, in the strongest economy in history, the City of 
Philadelphia still lost 600 jobs over the past 2 years. The 
City of Philadelphia needs 50,000 jobs for people coming off 
welfare. It is hard for one to imagine how these numbers are 
going to add up. Detroit is in the same case. St. Louis is in 
the same case as well as other cities all across the Nation. 
That is why we want to get back into the economic development 
business, Mr. Chairman.
    On the housing side the story is even more stark. If you 
look at what we have done as a Nation, we have produced 
hundreds of thousands of units every year of affordable 
housing. In 1978, 300,000 units; 200,000 units; going back as 
far as they kept numbers, we always produced more units than we 
lost with the Section 8 program, public housing program, et 
cetera.
    Every year in history, recession, strong economy, forget 
the politics, Democrat, Republican, as a President and as a 
Congress, every year we produced more housing until 1996. In 
1996, for the first year since they kept numbers, production 
went to a net negative, and we now actually lose more units of 
affordable housing every year than we produce. That is going to 
be our legacy as a housing department. That was in 1996, 1997, 
1998.
    Maybe you could argue, well, the economy was going so well 
you didn't have to produce units because the private sector was 
doing it, and there would be no need for Government to do it if 
the private sector was. Actually, the reverse is true. The need 
for affordable housing, as documented by what is called the 
``worst case housing needs,'' is 5.3 million families, the 
highest need since they have been keeping numbers.
    So the two facts that are coincident, number one, 
production is at its lowest, and number two, the need is at its 
highest. That in a nutshell is the story of housing in this 
Nation, and the story that we want to change in this 1999 
Budget.
    Homeownership--we have done extraordinary things in the 
area of homeownership as a Nation. The homeownership rate is at 
its highest in history, 66 percent, but still, Mr. Chairman, we 
have a significant gap in homeownership between cities and 
suburbs and among different racial groups.
    In the suburbs, the homeownership rate is 73 percent; in 
cities, it is 49 percent. Homeownership among whites is 71 
percent; homeownership among households headed by women is 51 
percent; households among African Americans is 43 percent; 
Hispanics, 41 percent. We also have to do something to address 
those disparities, and that is where the FHA comes in and comes 
in in a big way.

                         1999 budget highlights

    To recap the highlights of our budget, on the housing and 
homeownership side we want to increase the homeless assistance 
$327 million. The homeless programs are working, Mr. Chairman. 
Any community across the country will tell you that. We have a 
new approach, continuum of care. It is about devolution, it is 
about turning back to the communities. We want to invest in 
those programs that are working.
    For the public housing program we are now at 100 percent of 
operating expenses in our Budget for the first time in many 
years. Normally we have given public housing a fraction of what 
they need to operate. This year we are at the full operating 
subsidies level.
    We have a proposal to increase the HOME program and create 
a HOME bank which would allow a local government to leverage up 
to five times its annual HOME amount. It would get a big boost 
in money for affordable housing without actually costing us any 
more money, by allowing the local government to borrow against 
its future home funds.
    We would like to raise the FHA loan limits, as the 
Committee knows. We think that would be the most dramatic way 
to help homeownership among cities and minorities and it 
actually makes the taxpayer money. Our FHA loan limit increase 
proposal, increases the FHA loan limits, gets more people homes 
and makes the taxpayer money, so it is a win-win situation in 
our opinion.
    We also seek to increase the fair housing budget. There is 
still discrimination which is very much alive and well in the 
housing industry. There is a report in the newspaper today that 
documents it again in this area. The discrimination has now 
been institutionalized, and we want to be very aggressive, 
pursuant to the President's ``one America'' initiative, in 
rooting it out.
    On the urban development side, the economic development 
side, Mr. Chairman, we are proposing $400 million for the 
Community Empowerment Fund, which is basically an extension of 
our EDI program, EconomicDevelopment Initiative. That is a 
program, Mr. Chairman, that helps mayors create jobs, and that is what 
every mayor wants, especially in light of welfare reform, especially in 
the way the normal economy is moving and the disparity in urban job 
creation.
    We are asking for 50,000 welfare-to-work vouchers. 
Understanding that we are not going to be able to create all 
the jobs we need in cities, let's start thinking about mobility 
strategies where we can take the family on welfare and move 
them closer to the job. That is what we would do with the 
welfare-to-work vouchers.
    We are proposing an increase of the CDBG program, which is 
a well-proven institutional strength of the Department.
    The budget proposes to double the amount of money for 
Brownfields from $25 million to $50 million. Last year, the 
number one priority of the United States Conference of Mayors 
was to fight brownfields. What is happening in a lot of the 
cities is you can't redevelop the land because there is a toxic 
stain, and we need funds to clean it up so we can actually get 
those new businesses in, and that is the Brownfields 
initiative. We would double it from $25 million to $50 million, 
which is still, Mr. Chairman, a drop in the bucket on need. 
This need would be in the hundreds of millions of dollars.
    And for regionalism, we propose $100 million. If there is 
an overall context that these initiatives are going to have to 
take place in, it is a regional context. We have been talking 
about it for years. It is truer now than ever before, but we 
have never done anything about it. We have never actually made 
it happen. We have to get the cities and the counties working 
together. We have to get the metropolitan areas working 
together.
    And we want to start a program in HUD through a set-aside 
of CDBG, $100 million, where we make awards to those local 
governments that are working cooperatively. If we have the City 
of Cleveland and they are doing cooperative planning with the 
Cuyahoga County and they have a metropolitan plan, let's reward 
those types of partnerships and relationships. We have to get 
past those boundaries between cities and counties. We want to 
do that affirmatively.
    That is our Budget, Mr. Chairman. Two final comments, if I 
might, on recent developments that the Chairman referred to.

                     opposition of section 8 offset

    First on the House action of yesterday, the $1.9 billion, I 
would like to quote from a letter that Frank Raines has sent to 
Chairman Bob Livingston, with the Committee's permission:
    ``The Administration would vigorously oppose an amendment 
that requires offsets for this emergency legislation. 
Supporting our troops in the field and providing assistance to 
victims of natural disasters at home both clearly fall in the 
category of needs that ought to be met through emergency 
legislation. Therefore, they clearly deserve to be funded 
quickly, fully, and without additional offsets.
    ``Any legislation requiring additional offsets could force 
unacceptable reductions in important domestic programs. In 
addition, any amendment that would finance defense requirements 
with reductions in domestic programs would be a breach of the 
firewalls, and that would violate both the letter and the 
spirit of last year's bipartisan agreement.''
    Mr. Chairman, when the letter speaks to sacrifice of 
important domestic programs, the $1.9 billion which has been 
taken from the Section 8 program, if that is not replaced, 
210,000 families could lose Section 8 assistance--210,000 
families. And these families, Mr. Chairman, as you know well, 
if they lost that Section 8 assistance, they could literally be 
homeless.
    So the Administration is fully supportive of the goals of 
the supplemental, but feels equally strongly that we did not 
require an offset, the law does not require an offset, and to 
jeopardize the well-being of 210,000 families as a financial 
measure we disagree with strongly.

                    reduction in section 202 funding

    The second point that the Chairman raised which is very 
well taken, the glaring difference in the HUD Budget between 
the preliminary impression of this Committee and the Budget we 
submitted is that our Budget reduced the amount for the senior 
housing, the 202 program, Mr. Chairman. If there is one 
difference between us in our approach, that is it, the best I 
can determine, and I look forward to the discussion of the 
other differences. But if I had to pick out at this point a 
glaring difference, I would say it is the 202 program.
    The 202 program, interestingly, could be funded by funds 
that have been identified in a GAO report which has been 
submitted to the committee this day, where GAO says they have 
looked at our books and our accounting. As the Chairman knows, 
we are doing significant management work and reform work and 
financial work, and as we do more financial work, we are 
tightening up our books and we are actually freeing up more 
money.
    GAO comes in and says they believe that there is $691 
million from what is called the Mod Rehab program that they 
believe could be available for this year, and that would be in 
addition to what we have discussed thus far. Mr. Chairman, that 
$691 million could go to restore the 202 program and then some. 
So the glaring difference, the 202, might at the end of the day 
not be that big a difference between the committee's point of 
view and the HUD budget submitted.
    I also understand, Mr. Chairman, the overall context and 
the challenge of the $1.9 billion, as well as the overall 
allocation. But just within the HUD budget sphere, if youwill, 
given what we now know from GAO, we would be able to make that Budget 
whole. I think that is, while there is a lot between today and final 
passage, I think it gets us off on a very good footing.
    I want to thank the Committee for the time to make that 
presentation. I want to thank you again for all the great work 
we have done together over this past year. I look forward to a 
good discussion on the Budget this year and an even better 
upcoming year.
    Thank you, Mr. Chairman.
    [The information follows:]


[Pages 12 - 32--The official Committee record contains additional material here.]



                 use of section 8 reserves for offsets

    Mr. Lewis. Thank you very much, Mr. Secretary.
    I appreciate the number of members who are in attendance at 
this point. It is an indication of the importance the Committee 
holds the work of the Department.
    I was afraid for a moment there that you weren't going to 
mention the developments of yesterday in your formal statement. 
On the other hand, I was sure you wouldn't really disappoint 
me.
    Let me say I want to move quickly from my point of view in 
terms of time to home ownership and FHA. Before going to that, 
let me say that the use of excess reserves under Section 8 as 
an offset is an item that I discussed in public as well as 
private meeting yesterday, and have some concern about as well.
    I am assured that for the remainder of the 1998 fiscal 
year, that there are reserves that will allow us to go forward 
with the programming needs as it relates to Section 8. There is 
not any question that there is a problem that looms further 
beyond that point.
    Of course that is not a new thing to you and I, for it was 
this committee that began as much as three years ago screaming 
about the need to pay attention to Section 8. But when you have 
a convenient pool of money that doesn't appear to be absolutely 
required at this moment, and you are in the business of having 
a new experience with offsets, offsets essentially saying that 
if we are going to commit to spending increases in X or Y 
category, we are going to say to everybody, where are the 
monies going to come from, whether it is from the taxpayer or 
whether it is from other spending reductions or what.
    Offsets are the new order, and perhaps not a bad order in 
the sense that we really do need, as you were talking about 
cleaning up HUD, we are talking about maybe cleaning up first 
Congress and then the Federal Government in terms of what we do 
with people's dollars. So it is a beginning point of a very, 
very serious reexamination of the way we have been doing 
business across the government, not just in HUD.
    There is no doubt that we have a challenge and a problem 
with Section 8 that is a huge challenge. We began the fix last 
year. I personally have a commitment from the leadership at the 
highest level through the appropriations process that those 
funds will be available. But the challenge to the rest of 
Congress to provide other sources of offset, if you will, is 
going to be a very interesting and serious test indeed.

                       increasing fha loan limit

    Moving from there, however, the justifications submitted by 
HUD stated a goal of increasing the proportion of units in 
multifamily rental projects insured by FHA that are affordable 
to households with incomes below 60 percent of area median 
income. How? Will this require additional subsidies for 
financing? If so, where will those subsidies be found?
    Secretary Cuomo. Mr. Chairman, if the Committee allows, I 
would like to ask Richard Keevey to join us at this time. He is 
the Chief Financial Officer for the Department.
    Mr. Lewis. Mr. Keevey.
    A minor little question, Mr. Keevey, how?
    Mr. Keevey. Good question, Mr. Chairman, could you repeat 
it, please?
    Mr. Lewis. Yes, I would be happy to. The justification 
indicates that we want to increase the rental projects insured 
by FHA for those lower income people. How will we increase and 
will this require additional subsidies for financing and, if 
so, where will these subsidies come from?
    Mr. Keevey. The performance indicator you are referring to 
deals with increasing the proportion of families living in FHA-
insured projects whose income are below 60 percent of area 
media. As such, the subsidy rate of $81 million requested 
encompasses the need to increase these rental units.
    Mr. Lewis. And the $81 million credit subsidy will provide 
for the expansion that you are talking about?
    Mr. Keevey. Yes, sir.
    Mr. Lewis. HUD requested an increase in the FHA loan limits 
to the Fannie Mae and Freddie conforming loan limit. 
Effectively this request means that FHA single family loan 
limit will be raised from $170,362 in high cost areas and 
$86,317 in low cost areas to one nationwide limit of $227,150.
    The Administration estimates the proposal will generate 
approximately $212 million in savings offsets. Concerns have 
been expressed that increasing the loan limits will give FHA an 
unfair advantage of the market place and will enable it to 
compete inappropriately with the private sector. Will 
increasing the loan limits result in less business for mortgage 
insurance companies?
    Secretary Cuomo. No, it will not, Mr. Chairman. What it 
will do is it will allow more people to qualify for home 
ownership. The way FHA works in many ways defies the charge 
that it could possibly compete with the private sector. If you 
believe in the market place then let the market place work. FHA 
charges a higher premium for its mortgage insurance than any 
private company. If you believe in the market place then why 
would any one go to FHA and pay a higher premium if they could 
get a private mortgage?
    They would not. That is the concept of the market place and 
that is why I do not see how the private sector companies can 
argue that there is a competition because it defies the basic 
point of the market place.
    What it will do, however, is it will allow people who would 
not qualify otherwise to get an FHA mortgage and then buy a 
home. The support for this proposal, Mr. Chairman, is from the 
groups who would only support a proposal which generated 
additional home buying, the home builders supportthe proposal. 
Why? Because they will build more homes. The mortgage brokers. Why? 
Because they will make more mortgages.
    So, we are trying to increase the net number of people who 
will be eligible for homeownership and who will buy homes. That 
is good for the economy, that is good for neighborhoods, that 
is good for the families who own the homes and it is good for 
the taxpayers. This is a proposal that makes money for the 
taxpayers and gets more people homes. So, we consider it a win-
win.

                 gses concerns over fha limit increase

    Mr. Lewis. Why then, Mr. Secretary, are the Government-
sponsored entities, Fannie Mae and Freddie Mac concerned that 
their business will be adversely impacted by such a proposal?
    Secretary Cuomo. Obviously, Mr. Chairman, I would not want 
to speak for them but if one were to say there is some risk 
that there might be a----
    Mr. Lewis. Just give us a guesstimate.
    Secretary Cuomo. Well, if I had to hypothesize, if one were 
to think that FHA might make a mortgage that would otherwise go 
to a private company that might concern the GSEs because they 
do not do the secondary market on FHA loans. Ginnie Mae does 
the secondary market on FHA loans. The GSEs only do the 
secondary market on a private loan.
    So, if there was any loss, whatsoever, from FHA to a 
private company then that could be theoretically a loss to the 
GSEs. But their position, again, I do not want to speak for 
them, Mr. Chairman, they are very capable of speaking for 
themselves, but that would be my guess at the situation.
    Mr. Lewis. Surely Fannie and Freddie differ from the FHA 
market, different in more ways than that which you outline. As 
you suggested the market place will work and if it is going to 
cost more in terms of X or Y to go to an FHA facility then 
another avenue, the market place would affect that.
    Why? How do they differ further than just that which you 
have outlined?
    Secretary Cuomo. FHA charges a higher premium. FHA takes a 
person with what would be apparently a more risky credit 
history than a private company would. FHA allows a lower down 
payment loan. And that is why FHA winds up making home buying 
possible for people who the private market could not serve.
    FHA requires a lower down payment, will work with 
individuals with somewhat riskier credit history, and is 
willing to work with the buyer to figure out how to make the 
finances work and what kind of house they can get into. We have 
homeownership counseling programs. So, there is a cooperative 
relationship also.

                                fha fees

    Mr. Lewis. You know, Mr. Secretary, to take you and I to 
the edge of the very delicate and difficult--FHA charges a 
higher premium. FHA also pays a higher fee which attracts 
people who are helping to find loans for people sometimes to 
the market place in a different way.
    Now, this is ancient history and the rules and the process 
have changed a bit. But I can remember when I personally bought 
my first house but I had spent a little time in another market 
place and I considered an FHA loan. I remember they required 
that we put cement down on the edge of the lawn and there were 
a lot of costs involved that were beyond that. And I said, I do 
not want to do all that stuff. So, I went to another market. 
But if I had been in a little bit of a different category I 
might not have been able to go to another market.
    What role do the fees play to maybe distort the market 
place and should we be considering--this is not the policy 
committee--but should we at least consider those differences 
that affect especially those low-income people who seeking 
mortgages?
    Secretary Cuomo. Well, the FHA has certain requirements 
about the construction and safety and soundness of the home 
which we think are good requirements. They are good for the 
home buyer to make sure they are getting a quality home, a home 
that is going to stand the test of time and so that they do not 
have a problematic situation where they bought a house that is 
structurally unsafe and they have to pay a mortgage now but the 
house is uninhabitable.
    So, the FHA does have some standards, Mr. Chairman, but I 
think far and away the standards serve the home buyer well and 
the nation well by having a quality housing stock out there. 
And there has been some suggestion that because Ginnie Mae pays 
a higher fee there may be an incentive for people to ``steer'' 
towards Ginnie Mae. I do not believe there is any evidence, 
whatsoever, that would back that up.
    I do not believe that mortgage brokers do that. And, again, 
I believe in the market place, Mr. Chairman, and I believe in 
private sector companies and if you had a broker who was 
steering people to FHA when it was not in their best interest 
the market place would catch up with that person and the word 
would get out and that person would no longer be in a position 
to do business.
    So, I believe FHA's strongest argument is actually the 
market place. You would not go to FHA that charges a higher 
premium unless you had no other options. A person who would 
steer against the best interest of their client and customer is 
a person who is going to be out of business, the market place 
will make sure of it.

                increase in fha limits and market shares

    Mr. Lewis. I would like to make one more point before 
yielding to my colleague. I am taking more time than I should 
here, but this whole subject area is very important to the 
decisions we will be making in the months ahead.
    Statutorily, lenders who originate an FHA insured mortgage 
receive 44 of 50 basis points for servicing fees associated 
with FHA insured origination. The fee exceeds the private 
sector where the fee is between 20 and 26 basis points 
depending upon the risks connected with the loan.
    How many times have the FHA loan limits increased in the 
last 10 years and when the limits increased did FHA's market 
share increase? And, conversely, did the private market share 
decrease?
    Secretary Cuomo. We will get you the numbers on the market 
share. I am going to ask Kevin Chavers to join me, Mr. 
Chairman. But on your point about the Ginnie Mae fee. That 
references back to the point I was discussing earlier where one 
of the arguments and opposition is, well, since Ginnie Mae pays 
a higher fee it may steer people to FHA. That suggests that 
mortgage brokers are not acting in the best interest of their 
client. I reject that as a premise, as someone who works with 
mortgage brokers, we do a lot of work with the industry, I do 
not believe it. It has not been any experience that I have 
seen. And there is no evidence that anyone can point to that 
says that is the case.
    Ask anyone who raises--give me one piece of hard evidence 
rather than supposition. Again, these are private sector 
companies that would be raising it. It defies the concept of 
the market place.
    Basically what it is saying is that you have a broker who 
is steering people to a financial institution which is contrary 
to their best interests. Well, then if the market place works 
that will be a person out of business because the word will get 
out and I do not believe it could be sustained over any period 
of time. There is no evidence to suggest it whatsoever and, 
experientially, we have no reason to believe it is true.
    But on the specific question about the share of the market, 
I will ask Mr. Chavers from Ginnie Mae.
    Mr. Lewis. Mr. Chavers.
    Mr. Chavers. Good morning, Mr. Chairman.
    I would just like to point out one clarification. The 
comparison of the role of Fannie and Freddie as compared to 
that of Ginnie Mae is not completely accurate. Indeed, it is 
apples and oranges. Ginnie Mae acts as a guarantor of 
securities, not an issuer and not a purchaser of the loans as 
Fannie and Freddie does.
    As a consequence, the role that Ginnie Mae plays is 
slightly different and the role that the lender plays is 
slightly different than that of Fannie and Freddie.
    In the Ginnie Mae program the lender takes on the risk of 
passing through payments to investors whether they receive them 
from the underlying borrowers or not. As a consequence, there 
is a slightly lower guarantee fee that we charge or, in the 
converse, a higher servicing fee to the lender to compensate 
the lender for that additional risk.
    The other additional role that the FHA/Ginnie Mae historic 
marriage has facilitated, is that of being in all markets at 
all times, notwithstanding, the prevailing economic conditions 
around the country. As we would expect, private sector 
participants make rational economic decisions to leave certain 
markets during economic downturns.
    A prime example would be during the oil patch economic 
downturn of the early 1980s where private sector mortgage 
insurers left that market because of the risk involved. FHA and 
Ginnie Mae remained in those markets to ensure stability in 
those markets. So, it is a slightly different comparison, Mr. 
Chairman.
    Mr. Lewis. I am still interested in the answer to the 
question, how many times have FHA loan limits increased in the 
last 10 years; and when the limits were increased, did FHA's 
market share increase or decrease relatively?
    Secretary Cuomo. Since 1977, Mr. Chairman, the loan limit 
for FHA has been indexed to the GSEs. The last time the loan 
limit increased was 1994 where there was an adjustment for the 
floor and an indexing for the floor.
    Going beyond that, I am going to have to get you that 
information, Mr. Chairman, we do not have it right now. But I 
think what the Chairman is getting at--and I can give you this 
number--since 1992, even as the high cost area loan limit 
increased from 124 to 170, the share of FHA insured mortgages 
going to low-income borrowers went from 15 percent to 20 
percent.
    Over the same time period, first-time borrowers accounted 
for an increasing share of FHA activity going from 65 to 75. 
So, when the loan limits went up, the low-income percentages of 
FHA went up as did first-time home buying go up. Between 1992 
and 1996, FHA's floor, the lower level, increased from 67 to 78 
and its high cost ceiling increased from 124 to 155.
    Mr. Lewis. All right. If you would expand on that for the 
record, because that is important material to all of us.
    [The information follows:]

    Question. How many times have loan limits increased in the past 10 
years? When they did, did FHA's market share increase and did private 
market share decrease?
    Answer. Congress establishes limits on the loan amounts that FHA 
can insure. The limits include a ``floor,'' the base limit that 
generally applies across the country; and a ``ceiling,'' or an upper 
limit for high-cost areas. Between the ceiling and the floor, FHA can 
set FHA limits for specific areas based on area median home sales 
prices.
    During the 1980s, the floor stood at $67,500, and the ceiling was 
$124,875. Effective December 1992, Congress raised the high-cost area 
ceiling to $151,725. In the fall of 1994, Congress indexed the floor to 
38 percent of the conforming loan limit, raising the floor to $77,197. 
In addition, Congress indexed the ceiling to 75 percent of the 
conforming loan limit, raising the ceiling to $152,362.
    In December 1996, the conforming loan limit increased slightly; the 
FHA floor and ceiling adjusted based on that increase to $81,548 and 
$160,950 respectively.
    Finally, in response to another increase in the conforming loan 
limit in late 1997, the FHA floor currently stands at $86,317 and the 
ceiling at $170,362.
    As the chart below indicates, there seems to be no consistent 
correlation between increases in FHA loan limits and increases in FHA's 
share of the total housing market:

------------------------------------------------------------------------
                   FHA insurance limits                      FHA market 
-----------------------------------------------------------  share total
                                                               housing  
               Year                   Floor     High-cost      market   
                                                            (percentage)
------------------------------------------------------------------------
1991..............................    67,500       124,875         16.60
1992..............................    67,500       124,875         12.70
1993..............................    67,500     1 151,825         13.20
1994..............................    77,197     2 152,362         14.80
1995..............................    77,197       152,362         11.70
1996..............................    77,197       152,362         14.80
1997..............................    81,548     3 160,950         14.60
1998..............................    86,317     4 170,362       5 16.80
------------------------------------------------------------------------
1 Effective December 10, 1992.                                          
2 Effective October 24, 1994.                                           
3 Effective December 5, 1996.                                           
4 Effective December 31, 1997.                                          
5 For month of January, 1998.                                           

    It is interesting to note that since 1992, even as the high-cost 
ceiling increased from $124,875 to $170,632, the share of FHA-insured 
mortgages going to low-income borrowers increased from 15.7 percent to 
20.1 percent.

    Mr. Lewis. I note to the Members that we are not obviously 
the authorizing committee and increasing the loan limits is an 
authorizing responsibility. I cannot imagine that anybody would 
suggest that appropriators ought to carry forward that load but 
strange things happen in this process and, so, I am sure we 
will be discussing this further.
    Mr. Stokes.

             impact of section 8 rescission on future needs

    Mr. Stokes. Thank you, Mr. Chairman.
    Let me start with a question relative to the action taken 
yesterday by the full Appropriation Committee with reference to 
the Section 8 rescission of $1.9 billion. Granted the 
rescission of $1.9 billion in the 1998 bill will not create any 
major problems. But I do not think that is the point we should 
be looking at.
    What I think we need to be looking at is the fact that it 
is my understanding that the Section 8 program is growing. As a 
consequence of it, I think we need to look at how much is going 
to be needed in the program for fiscal year 1999, fiscal year 
2000, fiscal year 2001 so that we can measure the impact of the 
rescission of the $1.9 billion from the Section 8 reserve fund 
in terms of what is the impact following fiscal year 1998.
    And then I think we have to take into consideration also 
that when we talk about fiscal year 1999, we are talking about 
roughly 7 months from now when the new year begins, October 1. 
So, can you discuss it for us from that viewpoint?
    Secretary Cuomo. Congressman, I could not agree more with 
the thrust of the sentiment that you are raising. I think this 
is a dangerous, dangerous precedent. It is an apparently easy 
fund of money but it is a precious fund. And the Ranking 
Member's point is exactly right. We need $8.9 billion in 1999. 
We need $13 billion in the year 2000. We need $15 billion in 
the year 2001. That is just to renew what we have. So, the 
number is going up.
    The $1.9 billion which was taken yesterday represents 
370,000 units. And there is no leeway for error here. If you do 
not renew a Section 8 certificate for a family, chances are 
better than not that they wind up on the street and there is 
not a cushion of time, there is not a bank account that they 
can fall back upon. This is almost a direct causal 
relationship.
    If a certificate is not renewed, a family can become 
homeless. We are talking about 370,000 families in a problem 
that has increasing financial need over the next few years, not 
diminishing.

                          who section 8 serves

    Mr. Stokes. I think it would be helpful, also, Mr. 
Secretary, if you would describe to the Subcommittee the type 
of people who are served under the Section 8 program. Give us 
some idea of the age range, the income range, whether we are 
talking about families, children, things of that sort. I think 
it is important to put into the record who Section 8 serves.
    Secretary Cuomo. The Ranking Member's point is very well 
taken. We will put in for the record the exact specifications 
on who the certificates and vouchers are going to. But, 
Congressman, as a general rule these are truly the most 
vulnerable among us. These are senior citizens who rely on 
those Section 8 programs, literally as a life-line. These are 
families, young women with children, who are trying to work 
their way off welfare now with welfare reform. This is the unit 
they have to keep their family safe.
    We are putting pressure on the system by welfare reform to 
begin, the premise of which is well taken, to get them jobs and 
independence. But literally they have no resources to fall back 
on. There is no safety net. This is the safety net we are 
talking about. And there is nothing beyond this. If they do not 
have the Section 8 voucher, I do not believe it is an over-
dramatization to say that the likely scenario would be 
homelessness.
    [The information follows:]

                               Section 8

    Question. What are some of the key demographic characteristics of 
the families served by the Section 8 rental voucher and certificate 
programs; e.g., age, income, household size?
    Answer. Some of the key demographic characteristics of Section 8 
families are:
    Income:
    Average annual household income: $9,100.
    Percentage of households under $5,000 annual income: 19%.
    Percentage of households with $5,000 to $20,000 annual income: 77%.
    Percentage of households with over $20,000 annual income: 4%.
    Percentage of households with wages as main source of income: 28%.
    Percentage of households with welfare as main source of income: 
25%.
    Family Composition:
    Percentage of households where family head/spouse 62/older: 16%.
    Percentage of households where head/spouse 62/older or disabled: 
34%.
    Percentage of households with children under age 18: 66%.
    Percentage of households with children and a single parent: 57%.
    Average number of people per household: 3.
    Minority/Ethnicity:
    Percentage of Black households: 39%.
    Percentage of Hispanic households: 15%.
    Percentage of minority households (Black, Hispanic, other): 58%.
    Percentage of non-minority households: 42%.

                        fha loan limit increase

    Mr. Stokes. Now, if we can turn, Mr. Secretary, to the FHA 
program that you just discussed with the Chairman. One of the 
arguments that I have heard, and perhaps you can answer this, 
is that when you increase the cap from the current amount of 
$80,000 to $120,000 or $180,000, that youare taking FHA out of 
the category it is supposed to serve. That there are no people in the 
category that they are serving who need mortgages at the higher rate.
    I have heard this argument. How do you answer that?
    Secretary Cuomo. Well, I do not think it is an either/or 
Congressman. It is not that because FHA would now be serving a 
person who might have a somewhat higher income they would not 
be serving the lower-income. We would continue to serve the 
very low-income. We would also be serving people who are 
somewhat higher in income but who still cannot afford a home, 
which is really the distinguishing characteristic that we are 
trying to get at here.
    These are people who cannot be served by the private market 
in buying a home. Again, it is not an either/or. Well, if you 
went a little higher in the income, then you would not be doing 
the people at the lower-income. You would do both. Which, by 
the way, FHA historically always did and that is why it has 
been financially sound and financially self-sufficient.
    If you push the FHA to the very bottom of the income level, 
only the riskiest of the most risky loans, FHA will not be 
financially sound in the long-term.
    Right now FHA is basically a break-even operation. Because 
the overall portfolio balances the risk. The lower limits, 
pushing FHA down to the further end of the spectrum endangers 
the very security and sanctity of the FHA fund to begin with.
    Mr. Stokes. So, is it a safe statement to say that you do 
not see where raising the FHA loan limit would divert FHA 
resources away from the agency's primary mission of serving 
low-and moderate-income home buyers?
    Secretary Cuomo. Not in any way.

                          homeownership zones

    Mr. Stokes. Now, Mr. Secretary, your budget proposes $25 
million for homeownership zones. How does this program work? 
Tell us what it is intended to accomplish?
    Secretary Cuomo. It would be my pleasure, Congressman, just 
a further number on the previous question.
    Mr. Stokes. Sure.
    Secretary Cuomo. The HMDA data, the Home Mortgage 
Disclosure Act data of 1996 shows 350,000 households, 
approximately 1 in 8 applicants, were denied credit in the 
conforming conventional market. These denials limit home buying 
opportunities for both minorities and white. That is 350,000, 
and 1 in 8 were denied by the conventional market. That is who 
we want to get to with this FHA loan limit increase--the 1 in 8 
who has been denied by the conventional market.
    On the homeownership zone proposal, Congressman, one of the 
needs we have heard from cities on the housing side of the 
agenda is the ability to do large-scale homeownership as a 
community revitalization tool. In other words, not going in and 
doing one or two homes on a block but going in and doing 75 
percent of the block.
    There is a theory of community development fostered by the 
Nehemiah Project that said, sometimes to do community 
renovation you have to go in with a large enough enterprise 
that you basically change the dynamic in the community. If you 
go in and just put a few homes, the community will overwhelm 
what you are trying to do. You have to go in with enough 
energy, enough resources, enough scale that you basically 
create your own dynamic in communities--one hundred homes, 200 
homes, 300 homes, large-scale redevelopment. That is what 
homeownership zones would do.
    There has been a tremendous interest this past year for 
every one dollar we put out we had four or five requested and 
we are looking to further that next year.

                       housing counseling program

    Mr. Stokes. Now, you are also requesting an increase from 
$20 million to $25 million for housing counseling programs. 
Tell us what sort of counseling does this program provide, whom 
does it serve and how grant funds are allocated?
    Secretary Cuomo. We have two purposes, Congressman. One is 
to get as many people into homeownership as possible. We think 
of the housing programs now in a continuum--moving people up to 
homeownership. The highest housing program is home ownership 
and housing counseling is one of the ways we do that. Talk to 
people about options and financing and help them find out if 
they are capable of buying their own home.
    The second goal is that people who buy homes, we want to 
make sure they are capable of staying there. That they have 
taken into consideration what it is like to make a mortgage 
payment every month, that they have all their expenses because 
we do not want people getting into homes only to default.
    And those are the two goals, getting people into home 
ownership but making sure that they are capable of managing the 
finances of the home ownership. That is what the housing 
counseling program does. It is basically done by nonprofit 
groups on the local level. We have some intermediaries who also 
provide the service.

                       continuum of care services

    Mr. Stokes. Mr. Secretary, when you made your presentation 
to us this morning--and, by the way, it was an excellent 
presentation.
    Secretary Cuomo. Thank you, Congressman.
    Mr. Stokes. It was very, very informative.
    But I understand that an evaluation of HUD's new continuum 
of care approach for homeless assistance showed that more 
people were being assisted as a result.
    Is this true? And, if so, tell us how do you do it and what 
is it about the continuum of care that makes services to the 
homeless more effective?
    Secretary Cuomo. Continuum of care, we started about 4 
years ago, Congressman, and at that time we had separate 
individual homeless programs. And basically what the continuum 
of care said was, rather than have the Federal Government 
dictate these categorical programs we will go to the local 
community and say, you tell us what you need and we will make 
the Federal funds fit your problem rather than vice versa.
    The caveat to the local community was, the performance 
measure to the local community was, make sure you cooperate and 
you bring in all the different elements on the community level 
and the system works. That there is emergency outreach, there 
is shelter housing, there is then transitional housing and 
there is then permanent housing. You have to have the entire 
continuum in place for any of the pieces to work.
    We have had 4 years of experience with it. It has worked 
very well with local communities. They are excited about it. 
The competitive nature, I think, increases the level of play 
across-the-board. We had an evaluation done by Columbia 
University that came in and said, while we doubled the budget 
at that time, we were getting about, serving about as many as 
14 times as many homeless people for two times the money.
    So, it is working from a community level and the 
academicevaluation we have also suggests that it is working 
numerically.

                         extent of homelessness

    Mr. Stokes. I think it would be good also as you talk about 
homelessness--and I know this has been one of your areas of 
concern for some time even before becoming the Secretary. I do 
not think everybody in this country understands the extent of 
homelessness in our country today.
    I think it would be helpful if you would, firstly, give us 
some idea of the extent of homelessness; and then give us some 
idea as to whether it is increasing or decreasing?
    Secretary Cuomo. Congressman, we estimate--first of all, it 
is a very hard problem to quantify. It is a very hard problem 
to define and then to quantify. There have been attempts to 
count the homeless in the nation and there has been a lot of 
controversy about those counts. Are they inclusive, are they 
exclusive?
    Suffice it to say we use an estimate of about 600,000 
people homeless at any given time. That number is somewhat 
deceiving because there is a corollary that says as many as 7 
million people may have been homeless over a 5-year period. So, 
there is a lot of turnover within that 600,000.
    It is now a national problem. It is no longer an urban 
problem. At one time we thought it was a big city problem, it 
was a New York, Los Angeles, Chicago problem. It is an urban 
problem, it is a rural problem, it is a suburban problem, it is 
a growing problem for young families. It is a problem for 
children who are in hotels and motels.
    So, no one is immune. It is nationwide. I would put a 
caution flag on the use of the numbers, Congressman, but any 
count says it is significant and we must do something about it.
    Mr. Stokes. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Stokes.
    Mr. Walsh.

                    budget offsets needed for troops

    Mr. Walsh. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for your testimony. It is good to 
see you this morning. You raised the issue of the supplemental 
and, as you know, this subcommittee came up with almost $2 
billion in offsets. These offsets include Section 8 reserves. 
And, as you know and we know, these are reserves; no one will 
be affected immediately but next year when the contracts come 
up we will have--and I know the Chairman is committed to this 
and the Committee and the Congress is committed to this--we 
will have to come up with the money to make sure that no one 
loses their home and we will do that.
    But the President has put us in this position. The 
President of the United States has not been responsible and he 
has put the Congress in this position. The President knew full 
well what the cost of having troops in Bosnia for years and 
years and years has been. Those troops have been there and the 
President told us he is going to get us out of Bosnia by 
Christmas. That was at least two, possibly three Christmases 
ago.
    So, the President, by being irresponsible, by not paying 
for the deployment of those troops has put Congress in this 
position three years in a row.
    Now, we have done, I think, the responsible thing by 
providing offsets for those expenditures. The offsets have been 
coming out of the non-deployed troops. We have been taking 
money out of the non-deployed troops, putting it into the 
deployed troops in Iraq and Haiti and Bosnia. But that money is 
gone. We are now in a situation where we are not properly 
arming, clothing, sheltering our troops who are non-deployed, 
in addition to those who are deployed.
    So, we are put in a box. What is development here is a 
parent-child relationship. The President being the child. The 
President has all these assets and he moves them around. This 
President has deployed troops 22 times in his administration, 
more than all other Presidents since World War II. And he has 
not paid for them.
    He comes to Congress to come up with these emergency 
supplemental bills. The money from the Section 8 program is 
paying for the troops in Bosnia, who have been there for years 
now. And, so, the Congress has got, somebody has got to be 
responsible in this relationship, so, we come up with the 
money.
    And it puts us between a rock and a hard place. And we do 
not like to be doing this. We do not like to be taking money 
from programs that you have described as necessary and we would 
agree with that. We do not like to have to do this but the 
President has put us in this position.
    The President is putting those people who have Section 8 
contracts at risk. I want to make that clear. This is not our 
choice. This is our responsibility.
    Were you suggesting that we should not offset these 
expenditures for the troops in Bosnia and Iraq?
    Secretary Cuomo. Yes, yes. I think, obviously we have a 
very clear and distinct difference of opinion, Congressman, on 
what is responsible and what is irresponsible and what the law 
requires.
    Mr. Walsh. It is not responsible to offset expenditures 
forward-deployed troops?

         administration's position on offsets for supplemental

    Secretary Cuomo. Our position is that the law says this is 
an emergency legislation. That you do not need an offset for an 
emergency legislation. And that it is not responsible----
    Mr. Walsh. Did the President know that those troops were 
going----
    Secretary Cuomo [continuing]. In my opinion to put, take 
210,000----
    Mr. Stokes [presiding]. I really think you ought to provide 
the Secretary the courtesy of replying to your questions before 
you interrupt him. I think out of fairness he is entitled to 
that.
    Mr. Walsh. Well, I just want to get a point clarified.
    Mr. Stokes. You have done that several times. Well, but let 
him answer your question. I think out of fairness he is 
entitled to that.
    Secretary Cuomo. Thank you, Congressman.
    Mr. Walsh. Go ahead.
    Secretary Cuomo. Congressman, it is a New York tradition 
where we do not let the other one finish. [Laughter.]
    Mr. Walsh. It is just like home.
    Secretary Cuomo. The Administration's position is that this 
is emergency legislation and it does not require offsets. And 
the use of the Section 8--and the Congressman is right--it is 
not necessary to use of the Section 8 funds this year this year 
being 1998.
    But next year they are necessary. And $1.9 billion is a 
large sum and 210,000 families is a large number and the 
immediacy of a crisis that they would be in if we could not 
find the $1.9 billion would be very, very real.
    And we find that risk irresponsible. And our position is 
that, yes, legally this is emergency legislation and we did not 
need offsets.
    Mr. Walsh. Well, if we do not offset those expenditures, 
those predictable expenditures, then they go on the credit card 
just like they have in the past. If we do not offset them it 
means we do not pay for them. If we do not pay for them we 
borrow the money. If we borrow the money we put it into the 
national debt. If we put it into the national debt we pay 
interest on that money and sooner or later you are going to pay 
five times as much for those expenditures as you are now.
    So, what we have been forced to do by the President's 
irresponsible action is we have been forced to raid the Section 
8 housing funds. And now we are putting Americans, people who 
need housing the most, at risk. I just want to draw the point 
that it is the President's--it is a direct result of the 
President's lack of responsibility in putting these troops 
forward and not funding them that we are forced into this 
position.
    Secretary Cuomo. Congressman, obviously we have a distinct 
difference of opinion. You say this was predictable. Part of 
the supplemental goes to fund natural disasters. Was it 
predictable that El Nino would have a storm in California, 
would drop rain and hail in parts of the country? I would not 
consider El Nino predictable.
    And, hence, it is an emergency piece of legislation; and 
hence, it does not require offsets; and hence, you did not have 
to put 210,000 families at risk of being homeless to the tune 
of $1.9 billion. But, obviously, we have a difference of 
opinion.
    Mr. Walsh. Clearly. And Chairman Lewis, I am sure, knows 
this better than anyone, El Nino is not predictable. Although 
California was making plans to deal with El Nino before it 
came, to their credit.
    But fully better than two-thirds of these expenses are 
military costs to support troops who have been in the field for 
years. And to not fund them is irresponsible.
    And when we are put into this position to offset or not 
offset and we decide to offset we are also affecting the future 
for those kids, those kids that you spoke about with concern, 
we are concerned too. Because if we do not pay for this they 
are going to.
    So, Mr. Chairman, I believe I made my point. At least I 
feel I did. [Laughter.]
    I will hold my specific questions until later and give 
everybody else an opportunity to comment.
    Thank you.
    Mr. Lewis. Thank you, Mr. Walsh.
    Mr. Stokes might suggest that I left the room on purpose, 
far be it from me to----
    [Laughter.]
    Secretary Cuomo. That was a conspiracy from this morning, 
Mr. Chairman.

              effect of rescission on section 8 recipients

    Mr. Lewis. Mrs. Meek.
    Mrs. Meek. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary----
    Secretary Cuomo. Thank you.
    Mrs. Meek [continuing]. And members of your staff who are 
here. It is very difficult for me to sit here and try and make 
a comparative analysis among two different kinds of situations. 
I cannot politicize this situation. If you were to go home with 
me every weekend you could see the results of what HUD is doing 
in our communities and why those people need housing and why 
the poor and the disadvantaged and the disabled and the 
homeless need it.
    And they do not know what an offset is. And if they knew 
about it, there is no way that they could respond to it.
    Now, I have been around a long time and I am hearing these 
arguments that it is the President's fault, and really I do not 
care who is the President of the United States, I do not really 
care. But what I do care about is that we have homeless people, 
we have poor people, we have people who have no place to live 
living on the bridges, living any place they can find to live.
    I cannot come here to Washington and tell you that I am 
going to vote for a budget offset from the military. You can 
look at me and tell that I am a hawk. I was around during World 
War II. I voted for every military bill that we have had. Any 
one of my members can tell you. I think I am one of the few so-
called liberals who did so, if I can ever be labeled as 
anything.
    All I can say is I voted for every military bill since I 
have been here because I think we need military preparedness 
and no one has ever asked me to offset it with anything. And I 
voted also for the emergency bills that came up. We do not even 
know when they are coming up. We do not know when a hurricane 
will strike, we do not know when there is going to be a 
tornado. If you go to Central Florida with me and see how those 
poor people living, not enough money to live in a house, but 
living in a prefabricated house, Mr. Secretary, living in 
mobile homes, and how their homes have been devastated.
    Government has something to do there and I cannot offset 
it. I cannot find an offset for it. I am interested in those 
people getting back in their homes.
    I am interested in Government helping to make them whole. 
So, it is very hard for me to sit here and say to you that I 
can in any way make some kind of justification for our removing 
monies from Section 8 housing. We have people who, if they 
tried to get some place to rent without some kind of a 
government subsidy, could not. Even with a voucher they cannot 
find anything because people do not want to be bothered with 
them, Mr. Secretary.
    That is why I am glad to see that you are doing some 
community outreach--I guess you call them community builders.
    Secretary Cuomo. Yes.
    Mrs. Meek. You have a fancy name for them. But they have 
got to get out there and get their hands, their feet dirty and 
their hands wet because that is who you are dealing with. And I 
am so glad. I meet every other week with my housing people, 
those who live in public housing. It is not like living in a 
condo, it is quite different and those who live in the Section 
8, it is quite different.
    So, I am here to say to Congress, look, you got to be 
responsible for these people. I do not want to hear arguments 
about the military because I am with them all the way. But I 
want you to know that those offsets are not required at this 
point. Offsets are not required for an emergency and we know 
it. These people up here at the dais have been here in Congress 
longer than I have. So, they know offsets are not required.
    So, all of this, as I see it, is completely 
politicalsnookering. We are saying to the American public, we have got 
to snooker you into thinking that we have got to be responsible for 
these military changes in Bosnia. The people of Bosnia need some help. 
Any humanitarian will know that they need it. And if you have ever been 
there and if you have ever seen it on TV you will know that they need 
help.
    So, I do not want to hear anything about Bosnia or Somalia. 
I could go on and on and on with all kind of acronyms and all 
kind of countries; the bottom line is that those were emergency 
situations, this is an emergency situation.
    So, it is hard for me, even though Mr. Stokes has tried to 
train me to be nice, I cannot. I have to say----
    [Laughter.]
    Mrs. Meek [continuing]. We have got to face these 
situations. And we have got to assist HUD in trying to renew 
itself. I am so glad to hear everything you have given us here, 
trying to read it all at one time. I see some good stuff here. 
I know we cannot fund it every way you want it; it will not be 
funded that way.
    But I came to appeal for those little people who are not 
here, who do not understand what an offset is and who will 
never understand it, and say, let us look at some of these 
needs that have been validated. You go out there and you can 
see them, you do not have to go very far to see them what HUD 
is doing.
    I am glad HUD is getting into this business, getting really 
down to assessing some things, getting really down to cutting 
out some of these abuses. The people who are abusing this 
system are not these poor people who are living under bridges.
    I have heard so many Presidents, I have read so many 
budgets, I have heard so many requests, always the first people 
you look at are those poor people living under bridges, and 
those who live in public housing.
    So, I am appealing to this committee and to you, that those 
are the people that you have got to look out for now. And I am 
glad to see that you are trying to help the poor-middle income 
people. Some of them are medically poor as well as poor from 
other reasons even though they may be making a good salary.
    So, my message is that I am distressed by the fact that we 
are thinking about trying to offset the needs of the poorest 
and the most stressed people in this country with the 
military's needs. We cannot do that. I mean morally we cannot 
do it. And certainly we do not need to do it as far as our 
budget and this committee is concerned.
    I have lots of questions and I have taken all my five 
minutes talking but I had to do it. And, Mr. Chairman, when I 
come back around, I will ask my questions.
    If I do not, I will put them in the record.
    Thank you.

                            section 8 crisis

    Mr. Lewis. Mrs. Meek, I have always known that you would 
ask your questions one way or another and you certainly are 
welcome to the record or otherwise.
    Mr. Secretary, before I pass the time off elsewhere, I 
think I would like to repeat this, however. The section 8 
crisis was a crisis looking for somewhere to happen that nobody 
would focus upon until this Subcommittee asked GAO to do an 
evaluation of that circumstance and help us with the reserves 
question.
    At the same time, this Secretary was looking at the same 
thing. Now, the crisis came to reality in the mind's eye of our 
Committee as some of that information came forward only last 
year, even though we have been talking about for a number of 
years.
    These reserves do provide some convenience for some but 
there is not any doubt that the challenge between now and the 
beginning of the next fiscal year is very real and we are going 
to all have to meet that together and I have commitments that 
we will be meeting it with help from other levels.
    Having said that, please, let me call on Mr. Frelinghuysen, 
who has been more than patient.

             unused section 8 funding for elderly; disabled

    Mr. Frelinghuysen. I thank you, Mr. Chairman.
    Mr. Secretary, good morning. I hope that you are aware that 
as we meet this morning there is approximately $90 million in 
Section 8 certificate and voucher funding for people with 
disabilities sitting unused at your agency.
    As you may know if your staff briefed you properly, I asked 
some of the very questions that last year that I am going to be 
asking you this morning.
    This Committee, largely due to the leadership of Mr. Lewis 
and Mr. Stokes and Members but specifically, yours truly, added 
these dollars to HUD's fiscal year 1997 Budget, 1998 Budget to, 
among other things, replace the loss of HUD public and assisted 
housing that has been designated as elderly only. While these 
dollars sit at HUD, people with mental retardation, mental 
illness and other disabilities sit at home in our home States 
on large waiting lists with their parents, in some cases or in 
institutions waiting for some place to live.
    I want to ask you, Mr. Secretary, why these Section 8 funds 
have been held hostage at HUD? Who is responsible for holding 
up the expenditure of these funds and what specific plans do 
you have for assuring that these funds are made available to 
people with disabilities immediately?
    Secretary Cuomo. Congressman, I cannot give you a full 
retrospective at this point on the history of the program. I 
can get you that information if you would like.
    But at this point the way the funds are made available, as 
the Congressman knows, is through a NOFA, Notice of Funding 
Availability. The NOFA for these funds will go out in the next 
6 or 7 weeks. That will then make the funds available. Groups 
can then apply for them.
    Last year, as the Congressman knows, we accelerated the use 
of the funds with your help. We added a provision in the Act 
which allows housing authorities to use the funds generally for 
disabled households if the resources would otherwise go unused.
    So, the NOFA will go out in the next 6 or 7 weeks and at 
that point the funds will be applied for and we are going to 
expedite the disbursing of those funds.
    Mr. Frelinghuysen. Why has it been slow? You are about to 
send out a notification for possible use for the funds, but why 
has it been so slow? I do not understand it.
    Secretary Cuomo. Congressman, I do not----
    Mr. Frelinghuysen. We have raised the expectations. We 
obviously do not like the idea that we would pit the elderly 
against those with disabilities, in some cases, elderly people 
are disabled. But this committee placed a great emphasis no 
expediting these type of expenditures because there are in each 
of our States and members on this panel here today as well as 
others know that there is an incrediblewaiting list problems. 
Somebody has been screwing up the works and ought to be held 
responsible.
    I would like to know who has been messing up this program 
and whether you will give us your firm commitment that these 
dollars are going to be out on the street.
    Secretary Cuomo. Congressman, you have the firm commitment 
and I do not think it was a question of a personal act or lack 
of commitment to this approach. This was a very delicate 
issue--the ``income mixing'' between senior citizens and the 
disabled. It was a policy that said we should put both together 
in one building, senior citizens and people who are disabled. 
That was a very well-intentioned policy at the time. In 
practice, it did not work as well as we had hoped.
    The disabled definition, as the Congressman knows, includes 
people who have substance abuse problems, mental health 
problems et cetera.

                       delay in issuance of nofa

    Mr. Frelinghuysen. You know, we can talk about that but in 
reality there may be a few bad actors that have drug and 
alcohol related issues but there is a huge constituency out 
there that you and I know coming from the New York/New Jersey 
Metropolitan area, that are outstanding citizens who want to 
live independently with dignity and I think somebody should 
have worked out this situation long before now.
    The problem is now that I think only $2.5 million of the 
money has been spent out of $90 million and from the 
Committee's perspective and knowing this committee this will 
not happen, when you unexpended funds it is difficult for me as 
a member of Congress or, for that matter, groups that are 
active, the ARCs, the National Alliance for the Mentally Ill, 
for them to advocate for more money in this budget cycle if the 
Department has not gotten the $90 million out there.
    Secretary Cuomo. We have a different impression, 
Congressman, and I will get it justified. I am not under the 
impression that there was any delay in the NOFA for these funds 
beyond the normal process. The Department, as you know, goes 
through an annual process where were put out a notice and then 
there is a competition and we make a selection and we disburse 
the funds. And actually the notice is going out earlier this 
year than last year.
    Mr. Frelinghuysen. Well, it did not make any difference to 
send the notice out last year because it was so damn 
complicated nobody could apply and benefit from the utilization 
of the funds.
    Secretary Cuomo. Okay. But then we have different issues, 
Congressman. I thought your point was the timing and on the 
timing of it this year is going to be faster than last year. On 
the complication that may very well be. That may be a different 
issue. But I thought you were inquiring about the timing.
    Mr. Frelinghuysen. Timing in life is everything. And we 
have raised expectations since this committee said this is an 
important constituency. It should not be lumped in with the 
elderly. There may be a few people, as I said a few minutes 
ago----
    Secretary Cuomo. Right.
    Mr. Frelinghuysen [continuing]. Who might prevent an easy 
resolution but it really goes to the credibility of your 
Department that we cannot get this program moving. And that is 
one of the reasons that I asked, and through the good works of 
Chairman Lewis, that the GAO follow-up on your testimony last 
year and my request last year to find out and what, let me ask 
you what have you learned from the GAO study relative to issues 
relative to housing for people with disabilities?
    Secretary Cuomo. We do not have the final----
    Mr. Frelinghuysen. One of the things that GAO was going to 
identify working with you is what are the barriers out there in 
current Federal policy that are preventing disabled people from 
getting these types of benefits to which they are very much 
entitled?
    Secretary Cuomo. I do not believe we have the final report 
from the GAO at this time, Congressman. As soon as we do, it 
will be our pleasure to review it and then I will get back to 
you.
    But let me say this: I share your concern. This is a very 
needy population. These funds are just a drop in the bucket 
compared to what they need. The Department will do everything 
it can to expedite the funds. We want to get them out, and we 
want to get them out quickly.
    Obviously, we also want to get them out right. We do not 
want to move the money so quickly that we do it irresponsibly 
and then we have another problem on the back end, questions 
about who actually got the funds and what safeguards did we 
have in place, et cetera. So----
    Mr. Lewis. Mr. Secretary, I wonder if I could just--I hate 
to do this. Mr. Frelinghuysen--we are not the policy 
committee--but he is a very, very solid conscientious Member 
who has done some homework here and I can understand responses 
last year but the problem persists.
    Now, it is very clear, Mr. Secretary, that your staff at 
least has had a chance to respond with a draft. And you know 
you never get the final report until later. And what he is 
really asking is what have we begun to learn at least about the 
problem that seems to be worse now than----
    Mr. Frelinghuysen. And it is germane since the motto of 
your presentation is you are making the Department work.
    Secretary Cuomo. Yes. No, I understand your point, 
Congressman, I do not see how that is justified with the facts 
that the NOFA is going to go out faster this year than it went 
out last year.
    Mr. Frelinghuysen. But, in reality, it was so damn 
complicated that nobody was eligible for the money. Tell me if 
that is not true? It was so complicated that potential 
applicants could not qualify.
    Secretary Cuomo. Yes. I had not heard that, Congressman, 
but if you believe that is the case I do not question your 
facts.

                  loss of hud-assisted elderly housing

    Mr. Frelinghuysen. Well, let me follow-up--I think my five 
minutes is almost up--but I want to follow-up on my previous 
question by asking why HUD has not made more of an effort to 
measure the loss of privately-owned HUD-assisted housing 
occurring because of the implementation of the elderly-only 
housing? In many communities in New Jersey and other States 
these properties were the only affordable housing units for 
people with disabilities in those communities.
    I understand that in some States, like Massachusetts, the 
disability community estimates that 60 percent of the units 
previously available to people with disabilities are now 
restricted to elderly households. Could you tell us, this 
committee, today how many units of assisted housing have been 
lost for people with disabilities?
    Secretary Cuomo. I do not know, Congressman, and I do not 
know that we do not capture that data but I will find outand I 
will report back to you, personally. And if we do not capture the data, 
we will.
    [The information follows:]


[Pages 52 - 54--The official Committee record contains additional material here.]



    Mr. Frelinghuysen. All right. I have further questions in 
this line but I think my time is up.
    Thank you, Mr. Chairman.
    Secretary Cuomo. Thank you, Congressman.
    Mr. Lewis. Mr. Secretary, I do not normally do this but I 
have a good deal of respect for the work that you are 
attempting to do. I feel that somebody in the backdrop back 
there--I know there is some sensitivity about certain kinds of 
housing. That there are issues here that border right onto 
lines that almost become political. But this is a legitimate 
area of concern.
    Secretary Cuomo. Sure.
    Mr. Lewis. And this member, obviously, was going to ask 
these questions. Somebody did not help us very much in 
connection with that and I do not want him just raising hell in 
my committee next year.
    Secretary Cuomo. Mr. Chairman, I will make it a point to 
get the information, I will get back to the Congressman 
forthwith.
    Mr. Lewis. I just do not want him to take on like my 
friend, Mrs. Meek. [Laughter.]
    Secretary Cuomo. Neither do I, Mr. Chairman. [Laughter.]
    Mr. Lewis. I mean she is tough.
    Mr. Price.

                      offsets in supplemental bill

    Mr. Price. Thank you, Mr. Chairman.
    Mr. Secretary, I would like to add my welcome to you and 
your colleagues to the Subcommittee.
    Secretary Cuomo. Thank you, sir.
    Mr. Price. I think I should say a few words about this 
emergency spending issue that we have been discussing back and 
forth. I will not try to match Mrs. Meek's rhetorical fire 
power or, for that matter, Mr. Walsh's, but I think it needs to 
be said that if a Member wants to indict the Administration for 
some kind of irresponsibility in this matter, then that 
indictment would apply equally to President's Reagan and Bush 
and to Congresses in recent years. It is not a new thing to 
fund natural disasters or overseas military operations on an 
emergency basis. That has been standard practice for many 
years.
    I do not believe any of us would want to deny that in the 
past this emergency designation has been abused. Sometimes it 
has been used too loosely to justify mid-session expenditures.
    But this bill, this supplemental appropriations bill that 
we were debating in the Full Committee yesterday is tightly 
drawn. And it has, of course, been a matter of public knowledge 
that it was only at the last minute under severe political 
pressure within the Republican conference that this list of 
offsets was devised.
    This is not something that the majority was planning on all 
through this process. This list of offsets was cooked up at the 
last minute, a set of domestic offsets for mainly military 
spending, and was put out under some well-publicized pressures 
within the Republican conference. And it is quite a list, this 
list of offsets. It hits the programs which this committee 
oversees especially hard.
    The National Service, Americorps program, already modestly 
funded. In my State, I certainly can testify that this has been 
an important program for young people and for the communities 
they serve, gravely threatened by this proposed offset. And 
then even more, the damage threatened to Section 8, to housing, 
as has been well documented, here this morning.
    Now, the supplemental bill does retain the emergency 
designation, despite the offsets, and that the reason for that 
became quite clear in our discussion in Full Committee 
yesterday. The reason was that the majority wants to breach the 
firewalls between the defense and domestic spending and that 
can only be done technically if the emergency designation is 
retained. But that is a precedent I believe that defenders of 
the military budget, as well as defenders of these domestic 
programs may well come to regret.
    The raiding of Section 8 housing, of National Service, of 
education and other programs in order to fund this emergency 
spending is a gross breach of the firewalls concept and I would 
say most dangerous in terms of the precedent that it would set.
    I do not know if you have further comments that you would 
like to make on this but I think it needs to be said that this 
emergency approach is not something that is new or unique with 
this administration and it is also true that up until a very 
few days ago there was a bipartisan plan on its way to approval 
to fund this disaster relief and the military operations on an 
emergency basis.
    Secretary Cuomo. Congressman, if I might at the risk of 
energizing Congresswoman Meek again, I could not agree more 
with what the Congressman is saying. I think the 
administration's position is clear. This is emergency 
legislation and that is why it does not require offset.
    To use domestic programs to fund this breaches the firewall 
and it would also breach the letter, if not the spirit, of last 
year's balanced budget agreement. I do believe I heard from 
Congressman Walsh what I would consider agreement in terms of 
the Section 8 funds, which is at this point the Section 8 funds 
are not needed today at this moment but they will be next year. 
And we have to make sure that wehave them restored next year. 
That we have that $1.9 billion back because nobody wants to jeopardize 
those 210,000 families.
    My added point is--and this is what I was trying to express 
to the Chairman earlier--that $1.9 billion should not come out 
of HUD's hide. This is one of the best HUD budgets in 10 years. 
We did our homework last year. We are now getting back into the 
business that we are supposed to be in. The nation will be 
getting back into the housing business with this HUD Budget. It 
is inexcusable that since 1996 we have abandoned the housing 
business. We are asking for 100,000 new vouchers, only 100,000 
new vouchers to get us at least back into the housing business.
    If anyone thinks that $1.9 billion would then be restored 
through the HUD Budget, I think that would be dangerous and 
unfair. The $1.9 billion has to be apart and aside from any 
discussion about the HUD Budget. I am even more enthused by GAO 
today saying, there is $691 million more in HUD's Budget. Which 
means, Congressman, we could have the entire HUD Budget that we 
have discussed: the Administration's proposals and then restore 
the 202 cuts from the GAO and have the entire HUD Budget in 
place. And this $1.9 billion has to be separate and aside, it 
should not come out of Section 8 or any other program.
    Mr. Lewis. Does this mean the Secretary is suggesting we 
are going to get an authorizing bill this year?
    Secretary Cuomo. The Secretary would not make any 
representation or suggestion, Mr. Chairman, as to authorizing 
bills.

                combining home/section 202/811 programs

    Mr. Price. Thank you, Mr. Secretary.
    I want to pick up on an issue relevant to Mr. 
Frelinghuysen's discussion, although not the same thing. It has 
to do with the telescoping of the Section 202 and 811 programs 
into the HOME program and trying to explore with you the 
implications of that.
    As you may recall, we had a long discussion last year about 
the virtues of the HOME program and fortunately this 
subcommittee and the Congress were able to increase the HOME 
budget. I am a strong believer in that program. I know it is 
probably the most flexible kind of support we can provide for 
affordable housing, it leverages all kinds of private sector 
money and nonprofits with a minimum of regulation and red tape. 
I just think it is one of the most efficient ways of promoting 
affordable housing that we have, this HOME program.
    In my district, alone, 1,000 homes and apartments valued at 
nearly $60 million have been produced using HOME funds by just 
one agency, the North Carolina Housing and Finance Agency. So, 
I am a big believer in HOME.
    I do want to ask you, though, what the rationale is and 
what the implications are of lumping together the Section 202 
elderly housing program and the Section 811 housing for 
disabilities program into HOME. If you could just walk us 
through how this funding is going to work, will the final 
combined HOME Budget be more or less than the currently 
separated budgets? My reading indicates that it will not be.
    You are proposing something like $333 million for elderly 
and disabled activities combined. Whereas the current budget 
for 202 is $645 million; the current, budget for 811 is $194 
million.
    So, what are these activities going to look like and what 
assurance can we have that the focus we now have on housing for 
the disabled and for the elderly will be retained under this 
new arrangement?
    Secretary Cuomo. Congressman, when the Department had to 
put together the Budget, obviously, we had to make many tough 
choices and these were all very tough choices. The choice 
between the 202 program and the HOME program and economic 
development and having to choose one over the other leaves no 
good solution.
    What our Budget suggested was rolling the 202 program into 
the HOME program and supplementing it with vouchers. It had two 
principles which it was advocating.
    Number one, combining all the resources into the HOME 
program so that the local governments would have more 
flexibility and authority, devolution, to use a word. Put all 
the affordable housing funds in one program and then say to the 
governor and to the mayor, here they all are, you can plan the 
use, you can allocate accordingly, senior housing, et cetera.
    That was first of all; and, second of all, it was the 
increased use of vouchers for senior citizens which, as the 
Congressman knows, is a more cost-effective way of providing 
units.

               funding for section 8 vouchers for elderly

    Mr. Price. And where does that appear in the Budget now? Is 
that an increase in or a designation of a certain number of 
Section 8 vouchers?
    Secretary Cuomo. Yes. There were two components. We have 
the roll-up of the Section 202 and 811 programs into the HOME 
program and additional units under a set-aside under Section 8 
vouchers.
    In our proposed budget we would produce 8,839 Section 8 
vouchers and, construct 1,500 units for a total of 10,000 
units. Under the current budget, we only produced 6,000 units 
under the 202 program. So, actually the number of units for 
seniors would go up, when you count the vouchers, and the cost 
would come down. The trade-off is that you are not constructing 
units the way you do under 202; you are just renting units 
under Section 8. And that is the trade-off.
    Mr. Price. An acceptable trade-off in your view?
    Secretary Cuomo. Again, these are all difficult choices, 
congressman. The GAO testimony is actually interesting to me 
because it might moot, if the Committee deems it, the choice. 
If the GAO is right and we believe that it is right, that there 
is $691 million in the HUD Budget, the committee's desire to 
restore the 202 funding could be done from that $691 million 
that GAO identified.
    Mr. Price. What about Section 811 and disabled housing? Do 
you, is your reasoning similar in that case?
    Secretary Cuomo. Same basic reasoning, Congressman. And, 
again, the $691 million that GAO identified is more than enough 
to restore the 202 and 811 and then some. The restoration is 
about $580 million give or take, so, therefore, the 691 is more 
than enough.
    Mr. Price. GAO has identified this funding. Can you clarify 
how that, what implication that has for our current 
deliberations?
    Secretary Cuomo. Well, as you heard in the opening 
presentation, we have been doing a lot of management work, a 
lot of financial reform work and as we are tightening up our 
financial systems and structures, we are actually ``finding 
funds`` that we either could use for other purposes or that we 
may not need.
    GAO says there is a minimum of $691 million in what is 
called our Mod Rehab accounts that they believe is available 
for use. And that is over and above the Budget that 
wesubmitted. The Budget that we submitted did not fully cover the 202 
program. The Committee could use the $691 million to make up the 
shortfall in the 202 program.
    GAO, by the way, also refers to an additional $500 million 
that we have not even discussed, over and above the $691 
million.
    Mr. Price. But you are suggesting that you would have no 
objection to those funds being applied to continuing the 202 
and the 811 programs at something close to their present level?
    Secretary Cuomo. Congressman, when we submitted the budget 
we did not have the $691 million available to us. So, we stand 
by the budget we submitted. There may be funds that are on the 
table that were not there when we submitted the budget.
    Mr. Price. Thank you.
    Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Price.
    Mr. Knollenberg.

                  FHIP FUNDING AND PROPERTY INSURANCE

    Mr. Knollenberg. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary. Thank you for your testimony.
    Incidentally just one comment about increasing the loan 
limit. I find that some of my friends are for increasing it, 
some are against it and some are in the middle. So, if I am to 
be with my friends, I am going to have a problem, I think, but 
we will get to that.
    I want to discuss the FHIP, FHAP situation, the Fair 
Housing Initiatives Program and the Fair Housing Assistance 
Program which, as you well know, are two different things.
    And it is no secret that I have been critical of the way it 
has been handled and one of the reasons I have some criticism 
is the fact we believe we observed the statute most literally 
by saying that the statute does prohibit discrimination in the 
sale, rental and financing of housing and yet, the statute 
makes no reference at all to the business of insurance.
    So, in the 1998 bill there was report language that was 
added which says, with respect to appropriations for 
enforcement the Fair Housing Act under the Fair Housing 
Initiatives Program, the FHIP portion, not the FHAP, these 
funds should be used only to address such forms of 
discrimination in the sale, rental and financing of housing as 
they are explicitly identified and specifically described in 
Title VIII.
    Now, this language was included in, as I say, the 1998 
appropriations bill and the statement clearly indicates that we 
intended that FHIP funding not be used for activities relating 
to the enforcement of the Fair Housing Act against insurers. 
Was that your understanding of that statement?
    Secretary Cuomo. Congressman, this is Assistant Secretary 
Eva Plaza who has joined us at the table. This is an issue that 
the Assistant Secretary has been working on and with your 
permission I would ask her to respond.
    Mr. Knollenberg. Okay.
    Ms. Plaza. Thank you. Good afternoon.
    Congressman, we heard you loud and clear, first of all, and 
we believe that we have adhered to your concerns with respect 
to funding of property insurance discrimination in the FHIP 
program. There is certain case law that controls and the case 
law that we follow is that basically all discrimination would 
be funded under a FHIP program, any activities involving any 
kind of discrimination.
    Mr. Knollenberg. Well, I understand that but in terms of 
gathering what it is that you are saying I know that in a 
letter we received on one date, this is not the first year we 
have done this; we have done it for a couple of different 
years--the letter of response that we got from you folks. I 
think that was signed by a Mr. DeCell, III, that person is in 
the room, I take it?
    And I think both of these letters were, in fact, signed by 
Mr. De Cell. What I am concerned about----
    Secretary Cuomo. He changed his name.
    Mr. Knollenberg. One letter says in 1997, it is clearly 
stated that HUD's--this is the response that we received--that 
HUD's notification of funding ability would state, and I quote, 
``activities relating to application of the Fair Housing Act to 
property insurance will not be funded under any of the three 
initiatives.''
    Now, subsequent to that and about two months later we 
received a letter saying that FHIP funds would not be used for 
narrowly focused enforcement activities. These two statements 
appear to be inconsistent. One says, we are not going to do it. 
The other says, well, we will only do it for narrowly focused 
activities.
    And apparently again, there is report language and I side 
with Mr. Frelinghuysen who brought up the fact that some report 
language that was in the bill was not necessarily adhered to in 
his case. And I see a pattern perhaps here that it is also in 
this case.
    So, I am wondering is that HUD's view? What is HUD's view; 
and, if not, why did HUD agree or ignore, rather, our intent in 
this case?
    Ms. Plaza. Well, yes, Mr. Congressman. First of all, let me 
just be very clear about where we are now. And from my 
understanding, where we have always been and that is that FHIP 
grants that focus on a single issue, such as property insurance 
will not be funded. In the past that was the case.
    The kinds of grants that we will fund in this year and 
future years will be broad-based grants, requests for money 
from these nonprofit organizations to cover all kinds of 
housing discrimination.
    We will not be funding any grants that only target 
insurance companies.
    Secretary Cuomo. Which I took it, Congressman, was the 
point last year, that we had been funding grantees who were 
focusing exclusively on the insurance industry. And what the 
Assistant Secretary is saying is we changed that policy. We 
only fund groups that have a broader agenda. However, the 
courts have said that in insurance is one of the activities 
covered under the fair housing, so you cannot disregard what 
the courts say, but we are not funding specifically on that 
purpose.

                  fhap funding for states involvement

    Mr. Knollenberg. The question I have is, there is the other 
agency, the FHAP agency is out there. That program is available 
to bring about a devolution, if you will, to the States to take 
care of some of these matters. But we do not see that money 
increasing into that. We see it increasing rather into the FHIP 
program. I wonder why are we not doing more to bring about some 
State involvement? The program is there.
    Secretary Cuomo. Well, Congressman, I agree. And we are 
actually doing both in this Budget. We are trying to bring more 
States in and we would increase the FHAP budget, wewould also 
increase the FHIP, pardon the acronyms, but this budget would do both.
    They both play a very important role but I would agree with 
the Congressman, the more devolution the more States we can get 
in to take responsibility, the better.
    Mr. Knollenberg. Well, as you know, Mr. Secretary, the 
States have, all 50 States and the District of Columbia do have 
in force the kind of housing laws that could be utilized and 
FHAP--I hate to use that as well, but that is it--the FHAP 
should be, I think, given greater emphasis and wherever 
possible allow the States to play a role in those things.
    So, I appreciate what you saying. It just seems to me that 
those two statements from the individual over a time frame of 
60 days, one was very focused on a specific, what you will not 
do and then we come back with a statement that seems to modify 
that somewhat.
    You can go to the letter, itself, and I can refer to verse 
and scripture, whatever you need, but we will be looking 
forward to--because on the Senate side, Senator Bond and I are 
both going to our respective floors and made the complaint 
about this.
    And so it is in the record there as well. So, we would like 
to see some movement in the direction of a consistency that we 
can rely upon. And I do appreciate your responding.
    I also want to thank all of you, Mr. Secretary, and others 
and the Deputy Secretary for coming today.
    You do have a difficult program to administer and I do not 
deny that at all. But we want to just help you follow the line 
of our direction and that is why the report language, if it is 
not going to be adhered to, we would like to know why. That is 
the question we are asking.
    Secretary Cuomo. Thank you, Congressman. We will and we 
are. On the specific question about the FHAPs, we propose $8 
million more on the FHAP program. We would then be under 
contract with about 30 States which would increase the number 
of States that we have. So, I could not agree more and we will 
follow the report language and we will get back to you with a 
more specific report on the issues that we discussed today.
    Thank you.
    Mr. Lewis. Thank you, Mr. Knollenberg.
    Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman, very much.
    Welcome, Mr. Secretary. Good to have you before our 
subcommittee.
    Secretary Cuomo. Thanks. Good to be here, Congresswoman.

                    furthering job creation efforts

    Ms. Kaptur. Mr. Secretary, thank you for your testimony, 
which I was not present to personally hear but have read it. I 
had a conflicting meeting this morning. I have several 
questions that I will submit for the record, but some I will 
ask you directly, and they are rather practically oriented. On 
pages four through seven of your testimony, you talk a lot 
about jobs and community empowerment. And recently I have been 
talking with several of the members of Congress, such as 
Congresswoman Millender-McDonald of California and Congressman 
Joe Serrano of New York, about some of the unemployment issues 
facing residents of their district, many of whom live in public 
housing, and what the possibilities would be of our creating 
several demonstration efforts across the country, centered in 
these public housing developments, that would focus on job 
development for those residents using Federal procurement as a 
linchpin.
    For example, DOD acquisitions might become the basis for a 
sewing cooperative in Los Angeles or computer board 
manufacturing might make sense in New York City. I am wondering 
if we might use your convening authority and some of your staff 
to meet with a delegation of members who represent districts 
that are extremely low-income, to take a look at the array of 
resources beyond your department that could have a bearing on 
creating some job opportunities on-site, not just moving people 
to suburbs as your testimony does talk about, and I support 
that. But many of these individuals are locked into their 
residential areas in many ways, so it is going to be hard for 
them to find work without first having an opportunity to learn 
a skill that can then be used to launch into something else. 
Would you be open to that?
    Secretary Cuomo. Oh, it would be our pleasure, 
Congresswoman. And just to clarify, in the opening 
presentation, we talked precisely about the point that the 
congresswoman makes. I see HUD's mission today, in this 
environment with our challenges, more or as much on the urban 
development side, the UD in HUD, as the H. We need urban 
development and jobs as much as we need housing, especially 
with the pressure put on us from welfare reform.
    And we suggest two tracks, the 50,000 welfare-to-work 
vouchers which say a lot of the jobs are being created in the 
suburbs, let us figure out how to get a person closer to the 
job and use a Section 8 voucher to do that--that is track A. 
But track B is create the jobs in the cities. That is our EDI, 
Economic Development Initiative/Community Empowerment Fund 
proposal, $400 million which is in the budget which will not 
create the kinds of jobs we need, the number of jobs we need in 
cities.
    Congressman Stokes pointed out that even though this is one 
of the most aggressive HUD budgets in a decade, it is still a 
relatively modest step compared to the scale that we need to 
accomplish. But we have the Community Empowerment Fund, $400 
million to do that type of work. This would fund economic 
development activities, job creation activities, micro-
enterprise, credit unions, community development banks, joint 
venture funds. So that is our Community Empowerment Fund 
proposal.
    On the specific point the Congresswoman raises about the 
procurement, it would be my pleasure to convene that exercise. 
We have the Community Empowerment Board, headed by the Vice 
President, who has been involved in this issue. But that would 
be a good forum to discuss the use of Federal procurement and 
how we link that to job development in central cities.
    Ms. Kaptur. Yes. I appreciate your openness on that. So 
many of our industries--for example, in New York, as you know 
well, the apparel industry has moved offshore. And I can tell 
you, as a female shopper in this country, the price of clothing 
really has not gone down and I would love to start some sewing 
cooperatives around this country. And I think people like Kathy 
Lee Gifford would want to hire some of these good workers. 
[Laughter.]

                 deinstitutionalization of mentally ill

    And we would like to find a way to do that. So, Mr. 
Secretary, you can do important things in your work and we look 
forward to helping you on that
    Secretary Cuomo. Thank you.
    Ms. Kaptur. Secondly, in the area of homelessness, I amvery 
supportive of your efforts and you really have done an enormous amount 
in this area. Again I am wondering if you would be willing to use your 
convening authority across agencies for the following. I have long been 
concerned about the deinstitutionalization of patients from mental 
hospitals--that dates back several decades now--and that the major 
houser of homeless, mentally-ill people are now our prisons and our 
jails across this country. There was a big article recently in the New 
York Times, in fact, about that.
    We know that at least 40 to 50 percent of homeless 
individuals in this country are veterans, most of whom are 
mentally ill with often complications of drug and alcohol 
addiction. This is a very serious problem and we are losing 
people every day across this Nation. Now, I know HUD has in the 
past had some emphasis on homes for the mentally ill and so 
forth, but it is extremely complex to deal with this 
population. Again I am wondering, would you be willing to serve 
as the convener between the Department of Justice and those 
that run the prisons, our Veterans Department, which has some 
incredible psychiatric counseling programs for our veterans, 
trying to reach out to the homeless across America, the 
Department of Health and Human Services and NIMH, all of whom 
have a piece of this but generally do not work together? I 
would very much like to see some type of interagency initiative 
here and guidance for the country in this area. And so much of 
the homelessness problem is really a problem of the mentally 
ill.
    Mr. Lewis. Ms. Kaptur, would you yield?
    Ms. Kaptur. Yes, Mr. Chairman.
    Mr. Lewis. I am sorry to do this to the Secretary or to my 
members, but I was going to close today with this very, very 
point. And your suggestion of convening authority is a very 
imaginative application of responsibility. I am not sure, Mr. 
Secretary, whether we have talked about this. I know I did with 
the previous secretary, a good deal.
    When I was a greenhorn in the state legislature, we passed 
a bill that eliminated, essentially, or made it much more 
difficult for people to be in institutions such as mental 
institutions. The theory being that we put people there and 
threw the key away and the problem disappeared. Thus we were 
going to have them out of institutions, back in the communities 
where there were clinics. The institutions all but closed down. 
The local clinics were never fully realized and the problem did 
not disappear. It became, starting in California, replicated 
across the country, State after State deinstitutionalized and 
left these people in the streets. And these people are often 
emotionally disturbed, alcohol and drug abuse is prevalent 
today. So what could be Housing and Urban Development 
responsibilities and problems are probably a problem of 
decisions that we have made that we have never been willing to 
reexamine, and what better place for the persons worried about 
the homeless most to exercise such authority as well as 
responsibility. I thank the Gentlelady.
    Ms. Kaptur. Mr. Chairman, I am, as usual, very admiring of 
your interests and your leadership in this area. And I guess I 
personally will feel like a failure as a Member of Congress if, 
by the time I leave, I do not really make a difference in my 
own way. I am trying to get those who have the power to make a 
difference to address this issue. If I have a hero beyond those 
in this room on this issue, it would have to be Dr. Fuller 
Torrey, who is based at St. Elizabeth's Hospital here in 
Washington and has written books such as Nowhere To Go and who 
has been trying to get changes on the medical, the housing, as 
well as the justice front, for many, many years. And with the 
Chairman's interest and support, and I know the members of this 
subcommittee and certainly my own, I would hope that we could 
shape a better future for many of these people who, in many 
ways, do not have the ability to cry out to us because of their 
own medical situations
    Secretary Cuomo. Well, Congresswoman and Mr. Chairman, I 
could not agree more with the point that you have raised. This 
homeless term really has become a catch-all for a lot of sins 
and a lot of problems that we are trying to deal with. We had 
that great notion of deinstitutionalization, which was the 
right idea, which said get them out of institutions and into 
community-based residences. One caveat, we never built the 
community-based residences. So they came out of institutions 
and now they are on the street, and we thought that we solved 
the problem when we deinstitutionalized.
    So now we had to recognize it as a different problem. It 
came to be called the problem of the homeless. And there is a 
serious need for community-based mental health under the 
homeless caption, as well as other needs. You have a need for 
substance abuse facilities in this Nation. We only provide a 
fraction of the necessary substance abuse facilities. You have 
a need for domestic violence training. My home State, the State 
of New York, the number one cause of homelessness is domestic 
violence. But we now call all of those issues homelessness. 
Mental health, we call it homelessness; substance abuse, we 
call it homelessness; mental illness, chemical addiction, we 
call it homelessness; domestic violence, we call it 
homelessness, which, I think, is okay as long as we understand 
the different subpopulations and the different needs. But then 
we also have to understand the scale we are going to have to 
bring that to.
    We are asking for a $327 million increase, which is a baby 
step in the direction that we have to go. It would bring the 
Budget to the highest level ever, but it would only start to 
bring us to the type of scale. The good news is with this 
continuum of care and the work we have done the past 4 years, 
we have identified the need, we have identified the groups and 
the expertise. We know how to do this now. We know how to 
provide community-based mental health. We just need to do more 
of it.
    Ms. Kaptur. Mr. Secretary, I want to say that some of the 
money we need is being misspent or not wisely spent through the 
Bureau of Prisons in housing people who are mentally ill. 
Within the VA, for example, an individual patient in Cook 
County, Illinois will be readmitted to a hospital there 17 
times in the last 10 years. We are misspending money all the 
time, and one of the reasons for the request to have an 
interagency discussion of this is I think some of these dollars 
could be more carefully applied and better used to deal with 
the reality of that person trying to live. Housing people in 
prisons is very expensive, and treating people in these 
hospitals is very expensive.

               college of experts and community builders

    Actually, housing them with proper psychiatric follow-up is 
much cheaper. So perhaps starting in small ways, we could 
really create a change. I appreciate your ear on that. The 
third question for this round deals with a question I had asked 
last year. And now you have Father Hacala on your staff over 
there at HUD and I commendyou for that.
    We had talked before--and even when Secretary Cisneros was 
in place--about creating some type of learning network across 
the country to teach personnel working with community 
development corporations how to run them, how to manage housing 
projects, how to deal with essentially not-for-profit 
development and sometimes for-profit management. The training 
site could be modeled on the New Communities Corporation in 
Newark, New Jersey.
    I have talked with Congressman Payne of Newark on this, and 
he is very open to this. We would very much like to host such a 
discussion, working with you and with Father Hacala, up at New 
Communities some time this spring. And I am wondering if within 
HUD there has been any discussion since last year about how to 
make it easier for personnel who generally are younger or 
transitioning from another occupation into one of these 
development organizations, to get them up to speed and to see 
what is possible to do faster. Have you been able to achieve 
any success on that?
    Secretary Cuomo. Congresswoman, we were so excited by your 
idea, that we actually appropriated it--pardon the pun--and it 
is now a HUD idea, you see.
    We are doing it on two levels. Number one, we have 
established something we call the College of Experts, where we 
have contracted with some of the most creative not-for-profits, 
community-based corporations across the country, and we pay 
them, in essence, to train other CDCs, et cetera.
    One of the senses I quickly got as Secretary was everybody 
is reinventing the wheel, and we are not sharing the knowledge 
that we are gathering effectively enough. The New Communities 
is such an example.
    So we have a College of Experts with technical assistance 
money. We will actually fund the best to teach the rest.
    We are then doing something else, which I mentioned in the 
presentation, which very much builds on the same point. 
Monseigneur Baroni would have been excited by it. Something 
called the Community Builders, which does two things. HUD needs 
new expertise and new infusion of talent. We have not had a 
significant infusion of new talent in HUD in over 10 years, and 
I think the entire organization has paid a price for that.
    We want to hire 230 new hires who know the state of the art 
in community development. The state of the art in economic 
development. The state of the art in housing programs, and how 
to use the low-income housing tax credit, and mortgage revenue 
bonds, and how to set up a community development bank. 230 new 
hires. Again, net, we are downsizing, but within that, 230 new 
hires. We will have them at HUD. We will only ask them to give 
us 2 years; an option up to 4 years. We will train them in the 
HUD programs, and then they can go back into the community and 
we will hire a new class.
    So there will be rotation, there will be a turnover, and 
people who are in not-for-profit CDCs can come into HUD for 2 
years, bring their expertise, understand how HUD works, how the 
Federal Government works, and then return back to the 
community.
    So there can be a training, there can be a synergy among 
the groups, and HUD, raise the training across the board. So it 
is something we are excited about.
    Ms. Kaptur. Well, I am just very excited at that kind of 
follow-through and you certainly have this Member's support, 
and to the extent that we can be kept informed of your 
progress, we will try to be helpful. I thank you very much and 
will suspend during this round.
    Secretary Cuomo. Thank you very much.
    Mr. Walsh [presiding]. I thank the Gentlelady for her 
questions.
    We will now go to the gentleman from Ohio, Mr. Hobson.
    Mr. Hobson. Thank you, Mr. Chairman.
    Mr. Walsh. If I could just explain. As soon as Mr. Hobson 
completes his questions, that will complete this round, and 
then we will reconvene at 2:00 p.m.

                                 respa

    Mr. Hobson. Mr. Secretary, I have about four areas that I 
would like to discuss with you and I have a submission at the 
end that I would like to submit for the record, and hope you 
will read some time, from Mr. Greenspan.
    I first would like to thank the Inspector General, Susan 
Gaffney, for her timely response to requests I made concerning 
the audit of the Springfield Metropolitan Housing Authority. It 
has been very helpful to the community. It is nice to see an 
agency react, and I think as a result of this we will have a 
more effective agency for the community, which I think is 
important.
    In 1997, Congress wrote letters to HUD asking for clarity 
on the treatment of real estate settlement procedures, RESPA, 
and payments made by lenders to mortgage brokers. On October 
16th, 1997, HUD issued a proposed rule that did not clarify the 
legality of such fees.
    Why was this clarification omitted from the proposed RESPA 
broker rule, especially since the intent of the rule making was 
to give brokers and lenders a break from class action law 
suits?
    Why did HUD require lenders and brokers to disclose lender-
paid fees in the final 1992 RESPA rule, without offering 
assurances that such payments were legal under RESPA?
    And finally, does HUD intend to clarify that lender-paid 
mortgage broker fees are not illegal per se?
    Secretary Cuomo. Congressman, I have asked Gail Laster, who 
is the General Counsel for the Department to join us. Just so I 
understand the question. Are we referring to the yields spread 
premiums?
    Mr. Hobson. Yes.
    Secretary Cuomo. The HUD rule that we put out, Congressman, 
basically provides a safe harbor, if you will. It says there 
should be disclosure. From the consumer point of view, we want 
total disclosure as to what the relationship is between the 
broker and the consumer. There can be a number of 
relationships, but the consumer should know what the 
relationship is. Is the broker working for the consumer? Is the 
broker working for himself or herself? Is the broker working 
for a bank?
    Everyone, all the parties should have that clarity going 
into the relationship, and we say that there can be a number of 
relationships, but let us understand what it is. And then the 
rule says if there is clarity, and if you say I am not 
representing you, the buyer, but I am just trying to make the 
best fee I can for myself, that that disclosure provides, in 
essence, a safe harbor.
    But let me ask the General Counsel to comment on your 
question.
    Ms. Laster. Yes. Good morning.
    Mr. Hobson. Good morning.
    Ms. Laster. I would just say, Congressman, that, first of 
all, it is a proposed rule. It was proposed in October 1997. It 
has not gone to final. There was a 60 day notice and comment 
period, and we have received some 9,000 comments.
    Mr. Hobson. I understand that.
    Ms. Laster. So we are reading through them, but we have yet 
to do a final rule.
    Mr. Hobson. Okay. Well, you have got another one. 9001. 
Okay? [Laughter.]
    All right. This is a different subject, so you do not have 
to worry.
    Ms. Laster. Thank you.

                 FHA LOAN LIMIT--UNDERWRITING CRITERIA

    Mr. Hobson. Can you tell me, Mr. Secretary, under the 
change to the--and I am taking a position on this--like 
everybody else, we have friends on all sides of this issue, on 
increasing the loan rate, or the loan amount.
    What would be the income level of a person who gets a 
$227,150 mortgage under your current underwriting criteria?
    Secretary Cuomo. I will get you that information, 
Congressman.
    [The information follows:]

    Question. (Hobson) What is the income level of an individual who 
would qualify for a $227,000 home loan?
    Answer. Under the FHA's flexible payment-to-income ratio of 31 
percent for new homes, a purchasing household would need to earn 
between approximately $68,000 and approximately $88,000 depending on 
interest rates, to qualify for a home loan of $227,000. Under more 
restrictive private mortgage insurance guidelines including a 31 
percent payment-to-income ratio, the purchasing household would have to 
earn between approximately $75,000 and approximately $97,000, depending 
on interest rates.

INCOME REQUIRED FOR $227,150 LOAN USING FHA AND PMI QUALIFYING STANDARDS
                        AT VARYING INTEREST RATES                       
------------------------------------------------------------------------
                                                      Income     Income 
                                                      needed     needed 
                Rate  (percentage)                   for FHA    for PMI 
                                                     loan of    loan of 
                                                     $227,150   $227,150
------------------------------------------------------------------------
6.75..............................................    $68,022    $75,310
7.00..............................................     69,491     76,936
7.50..............................................     72,472     80,237
8.00..............................................     75,510     83,601
9.00..............................................     81,741     90,499
10.00.............................................     88,155     97,600
------------------------------------------------------------------------

    However, if the FHA loan limits are raised to the conforming loan 
limit, FHA anticipates the average new loan amount will be $142,000. 
HUD anticipates that very few new loans will be for more than $200,000, 
and FHA will continue to serve only borrowers who are not well served 
by the private mortgage insurance industry. Other borrowers who have 
stronger applications and who therefore have the option of obtaining a 
home loan from the PMIs, which generally offer mortgage insurance at a 
lower price than FHA, will continue to choose PMIs over FHA.

    Mr. Hobson. I think it is around, in the 80-some-thousand 
dollar range, which is one of the problems that a lot of people 
have, and where I live, that is not a low-income person.
    Secretary Cuomo. Yes.
    Mr. Hobson. In my district.
    Secretary Cuomo. I understand that we have friends on both 
sides of this issue. We all do. But let us make sure we 
understand the facts, because the $227,000 is very misleading, 
Congressman. We are trying to do two----
    Mr. Hobson. That would be the nationwide limit, right?
    Secretary Cuomo. Well, yes; but we are trying to do two 
things with this proposal. Number one, raise the loan limits. 
Number two, come up with what we call a uniform income level. 
Right now, we have 250 different income limits for FHA 
depending on where you live.
    It makes the program very cumbersome to deal with from a 
mortgage broker point of view, and from a lender point of view.
    If you are in Springfield it may be one rate; if you are in 
Chicago it is another rate; if you are in Syracuse it is a 
third rate.
    It would be much easier if it were one rate across the 
country, just from an operational point of view. We then picked 
the highest possible rate across the country as the level, 
which is $227,000. It does not mean you would use that level in 
practice across the country. The level in two-thirds of the 
Nation is $86,000 per year right now. $86,000.
    Mr. Hobson. I know because I fought to move some of mine up 
in some of my areas.
    Secretary Cuomo. Okay.
    Mr. Hobson. So I have been on both sides of this thing.
    Secretary Cuomo. All right. So two-thirds of the Nation is 
$86,000. What is called the high-cost areas are now $170,000 
and the $170,000 are really the areas that would go to the 
$227,000. In practice, where the level is now, $86,000, you 
would not start to make $227,000 loans. If anywhere, it would 
be in the high-cost areas where the cost is now 170, and it 
would go to $227,000.

                RESOURCES FOR FY 2000--FINANCIAL SYSTEMS

    Mr. Hobson. Thank you. The other, just comment that--and I 
do not want to get into a prolonged discussion on this--is that 
while some people think that you would have better loans at 
that higher level and may reduce your overall default, it may 
go up, too, because there is some history in those larger 
loans, if they are not underwritten appropriately, even in the 
private sector the default rates are up. But I do not want to 
get into that.
    I do not really want to get into that discussion here, now. 
I want to talk about two other things.
    First of all, I am going to ask my year 2000 question in 
case I run out of time.
    This year, I have asked every agency that appears before 
the Subcommittee about the 2000 computer software problem.
    Does your agency anticipate a computer problem with the 
year 2000? If so, what are you doing to address the potential 
problem, and do you have adequate budgetary resources to 
correct any problem that you anticipate?
    We do not want people coming back here, later, saying, 
``Oh, nobody ever asked us about this, we did not anticipate 
this, and we need more money to do this job.''
    Secretary Cuomo. I will ask, Congressman, the CFO who has 
been overseeing the project, to give you an update, but my 
impression is yes, there is a problem, B, we are on top of it, 
and we are handling it, and we believe we will be able to 
address it before it becomes imminent.
    But Rich, is that a fair assessment?
    Mr. Keevey. Congressman, I think that is a correct 
assessment. We have sufficient resources, and this year we are 
spending approximately $18.5 million for year 2000. We divided 
up the systems into those that are most critical, that we need 
to get done no matter what, and those systems that can----
    Mr. Hobson. Just remember, we are asking you now, and some 
of us are going to be here later when this comes around, 
because I have been dealing with FHA in my private business 
sector for over 30 some years, as some of you know, going way 
back, and there are lots of old systems and stuff that we did 
not think about back in those days.
    Mr. Keevey. That is right, and it is just not a problem 
internal to HUD. We have to implement a lot of interfaces out 
there, for example, in the FHA community people send us data, 
we have to make sure that their systems are conforming with our 
systems.
    We have a lot of oversight going on in this area from GAO, 
from OMB. We have tried to set up milestones as to where we hit 
certain systems at a certain time. We are scheduled to get 
everything done no later than July of this year and then 
December 1998 we will have everything even verified, and then 
we will have a year remaining to double and triple check it.
    Mr. Hobson. And then we will find the real problem.
    Mr. Keevey. Yes. In my world, the----
    Mr. Hobson. Well, at least you will try to minimize 
whatever we run into and I appreciate that. But I am just 
asking everybody that because this could be a major problem, 
especially in an agency like yours.
    This is a long statement but I want to get it in the record 
right now.
    Last summer, the Agency announced a reform plan to 
consolidate recordkeeping and program activities, and focus 
more on assessing housing stock and controlling fraud and 
abuse.
    Several months later, the HUD Inspector General issued a 
report raising serious questions about whether the plan will be 
effective, or even, say, the Government agency--by the way, she 
did not ask me to ask you this question so do not worry about 
it.
    Several of the IG's findings are in my mind and disturbing, 
especially the claim that the target reduction in workforce was 
selected without analyzing the impact of the workload or 
mission of the Department.

               COST BENEFIT ANALYSIS FOR STAFF REDUCTION

    How did the Agency select its target workforce reduction 
number? What will the impact of such a reduction be on the 
Agency?
    Do you anticipate that by offering buy-outs you will lose 
quality senior staff with significant expertise?
    How will HUD deal with such losses? Also the IG report 
asserted that HUD did not perform a cross-benefit analysis of 
the reform proposal to determine if money would be saved or if 
new additional spending will be required for contractors.
    I do not know if this is a true statement or not. Did the 
Department neglect to conduct a cost-benefit analysis? And 
frankly, it seems to me this would be important part of any 
reform plan, if one has not been done.
    Secretary Cuomo. Yes. Congressman, we reviewed the 
Inspector General's report. We took some points, incorporated 
them, and we left others behind, and I said to the Committee at 
that time, that there were a number of different opinions on 
the reform plan, and keep in mind the context.
    This is a very ambitious reform plan. This committee made 
clear, as did the authorizing committees last year, that HUD 
needed significant reform, and we came up with a very ambitious 
plan.
    The IG had one opinion, the GAO had one opinion, the 
Department had a third opinion, and basically the discussion 
with the Committee was which is the right opinion. I said at 
that time let us go get an independent qualified evaluator, and 
we went to Booz-Allen to come up with the report. That is the 
report that I released today, when we began this hearing, 
Congressman, and the report is quite extensive.
    But I think it is fair to say that the report says the 
overall track of the reform is right, we have made good 
progress on it, and speaks specifically to the staffing which 
it says on our current track, we would need about 7,700. We had 
estimated about 7,500.
    So we feel that the report speaks volumes about the 
intelligence of the reform measures that we have undertaken.
    We did do a cost-benefit analysis. That was published in 
the Federal Register, and I believe the report also refers to 
that.
    And if I might, Congressman, quickly, on the FHA because I 
do not want to belabor the point, but just to responddirectly.
    The FHA proposal scores savings as OMB believes, about $227 
million. On your point about the higher-end loans being riskier 
or loans or not, obviously we believe they are not riskier 
loans because we believe we make money on them. 227. CBO 
recently scored the same premise at $212 million.
    So HUD's number is $227 million, CBO's is $212 million, and 
in this game that is very, very close, and when CBO believes 
that and is in accordance with OMB----
    Mr. Hobson. It is a strange world.
    Secretary Cuomo. It is a strange world, but this time the 
strangeness works to our advantage, so we will take it this 
time.

                 Greenspan comments on offsets and caps

    Mr. Hobson. I understand. And I do not want to get into a 
political discussion that we are having about off-sets again, 
but I do want to submit to you, I am going to give you a copy 
of it. I sit on another committee, I sit on the Budget 
Committee, and I am going to submit it for the record, Alan 
Greenspan's comments about not doing off-sets and the 
importance of the caps. I do not want to get into the rhetoric 
again on it, but I would hope, as I said to the Secretary of 
Defense, that you will read it because it is very important as 
we go through this whole discussion. Thank you very much.

                             Morning Recess

    Secretary Cuomo. Thank you very much, Congressman.
    Mr. Walsh. Mr. Hobson, thank you for your questions.
    Mr. Secretary, that ends this round of questioning. Thank 
you for the thoughtfulness and thoroughness of your responses, 
and we look forward to seeing you at 2:00 o'clock.
    Secretary Cuomo. Thank you.

                           Afternoon Session

                            FHA Default Rate

    Mr. Lewis. Mrs. Meek, do you mind if we start? Mr. Stokes 
is spending time at several committees, and I know he would 
forgive us.
    So, Mr. Secretary, welcome back. I am sorry for the delay. 
You never can tell about these important votes.
    Mr. Secretary, I am going to go back to FHA, again, for I 
want to dwell on that just a little while.
    Many are concerned that increasing FHA's loan limits will 
increase the delinquency rates of FHA-insured loans, thus, 
adversely impacting the safety and soundness of the Fund. In 
connection with that, I have noted that the counseling efforts 
that are part of your programming bode pretty well, in terms of 
the impact they can have and what happens with the marketplace 
out there.
    I know that the Department does not do the counseling 
relative to FHA facilities that are funded by way of FHA, but 
their default rates are troublesome, to say the least. So I am 
interested in some reaction or interaction about that.
    Secretary Cuomo. Mr. Chairman, the FHA default rate is 
higher than the conventional default rate.
    Mr. Lewis. How much?
    Secretary Cuomo. It is close to double, I believe, but that 
is somewhat misleading because the FHA, by definition, takes a 
higher risk on the loan--a riskier loan. FHA makes a loan that 
the private market would not make. That is, basically, the 
function of FHA.
    In the reciprocal, we charge a higher premium because we 
are taking a risk that the private market does not make, but 
that is the essence of the FHA. Now, on this loan limit 
proposal, it is the interchange that we had with Mr. Hobson. 
What is interesting here is, both OMB and CBO say we make money 
on the higher loan limits. We would not make money on the 
higher loan limits if there was a higher default. OMB scores it 
$227 million. CBO scores it $212 million. So they are both 
saying there will be less defaults, we will make more money on 
the higher loan limits.
    Mr. Lewis. I enjoyed your response, but my question really 
went to that portion of the portfolio that does have higher 
default rates and what we could do about improving those 
circumstances, and that was why I addressed the counseling 
question. The counseling is done by way of those who are 
delivering FHA loans.
    That, obviously, is a little different than what appears to 
be a pretty good program internally. So that is kind of what I 
wanted to just have you think about out loud.
    Secretary Cuomo. Our goal is to get the default rate lower 
and still serve the people we want to serve. Mr. Chairman, we 
could easily make the default rate lower, just do not make as 
risky, as aggressive a loan.
    Within our mandate, we want to bring the default rate down. 
That is housing counseling. That is making sure the people we 
put into homes are prepared to be in those homes; that they 
have gone through the financial planning, and the financial 
training, they know what the costs are going to be, they have 
worked with a counselor who has gone through their finances and 
assured that they can enforce it.
    That is what our efforts are about.

                        FHA--Housing Counseling

    Mr. Lewis. That is what your counseling is about.
    Secretary Cuomo. Yes.
    Mr. Lewis. I am not sure that is what FHA counseling is 
about.
    Secretary Cuomo. Well, in 1996--let me give you what the 
experience has been from Fannie Mae and MGIC, et cetera. In 
1996, HUD, Fannie Mae, MGIC, and other private and nonprofit 
organizations created the American Home Education and 
Counseling Institute, which is training and counseling 
providers so we can have a national network of these types of 
counselors. But that is the service that FHA is looking to 
bring to bear.
    Mr. Lewis. Let me just inject this thought. We can decrease 
the requirements on the part of people who want to buy, by way 
of FHA, if they are willing to go through some counseling.
    Secretary Cuomo. Yes.
    Mr. Lewis. The question is whether those counseling 
processes are of the quality of the kind that we have in your 
internal programs, and it is that sort of examination, have 
somebody help us with that to see if we can improve what they 
are doing by way of having them learn more about what you are 
doing.
    Secretary Cuomo. You are saying, Mr. Chairman, that the 
internal HUD programs may not be as good as----
    Mr. Lewis. They are better than--it appears they may be. In 
other words, the counseling provided, et cetera, has a 
different quality and mix. I do not have expertise here either, 
but that is what I am hearing, and so let us have somebody 
examine it and let us talk about it, and we can affect what 
they do qualitywise, et cetera.
    Secretary Cuomo. Okay. We have the appropriate people here 
now, Mr. Chairman, if you would like to get the sense.
    Bill, would you like to or----
    Mr. Lewis. Identify yourself for the record.
    Mr. Apgar. Bill Apgar.
    Secretary Cuomo. He is pending Senate confirmation, Mr. 
Chairman, so he is not so eager to identify himself, you see. 
[Laughter.]
    But it is too late, Bill.
    Mr. Lewis. I am asking you as a private citizen. 
[Laughter.]
    Mr. Apgar. As a private citizen, last fall when I was at 
Harvard we did an extensive evaluation of home buyer 
counseling, and there are a lot of good programs out there. 
Neighborhood Works, run by the National Revitalization 
Corporation is one of the most excellent ones and a lot of 
people are getting together, as the Secretary suggested, HUD, 
Fannie, MGIC to try to put some focus to these counseling 
programs.
    Too many times a group will come forth and say we have 
counseled a borrower, stamp them approve, and nothing real has 
happened. For these programs to work, they have to have 
significant counseling, standardized curriculum, something that 
will really help the household do it.
    Mr. Lewis. When you eventually are confirmed, maybe from 
the outside you might bring into the Agency that there are some 
ideas relative to the counseling that work within the Agency, 
and by other groups like Neighborhood Reinvestment, and maybe 
if we encouraged FHA, like mortgage bankers, to adopt we might 
have--the synergism sometimes has an effect and all kinds of 
contributions can be made.
    Mr. Apgar. For sure. FHA requires counseling for borrowers 
that get this reduction in mortgage premium.
    Mr. Lewis. Correct.
    Mr. Apgar. And most of those counseling programs are 
through the programs like the Fannie Mae program, and so we 
insist on good quality counseling, and that should be the 
industrywide standard. I agree.
    Mr. Lewis. If you could bring even to those very fine 
programs some of the ideas from places like Neighborhood 
Reinvestment, that might even help more.
    Mr. Apgar. Right. Good.

                           Foreclosure Rates

    Mr. Lewis. Thank you.
    I have some questions about foreclosure rates, et cetera. 
We actually know some of that. If you could just supplement the 
record and make sure that we are in sync regarding that 
information, I would appreciate it.
    Secretary Cuomo. It would be a pleasure, Mr. Chairman.
    Mr. Lewis. Can you tell me what happens in the 
neighborhoods where a significant number of HUD properties have 
fallen into foreclosure.
    Secretary Cuomo. We are trying to do two things with the 
FHA simultaneously; one is increase the loan limits to get us a 
broader market share and to serve more people who need homes.
    The second is to improve the overall operations of FHA, and 
we have made quite a bit of progress this past year. The first 
automated underwriting system in the history of FHA is one of 
the moves in that way.
    One of the areas that we have to focus on is what we call 
the disposition of real estate owned; that often, after a 
period of time from which a person defaults on the loan and FHA 
disposes of the property is too long, Mr. Chairman. The 
property falls into a state of disrepair and often jeopardizes 
that community.
    Mr. Lewis. I would kind of like to probe that a bit; the 
length of time and some of that. So go ahead.
    Secretary Cuomo. I am then going to ask Bill Apgar to join 
us again, as a private citizen, of course.
    Mr. Lewis. Of course.
    Secretary Cuomo. Because he has the rates.
    But we are literally, as we speak, preparing a rule that 
will be out in the next couple of weeks that will revolutionize 
the real estate owned disposition process. Right now a house 
falls into disrepair, and we internally each local office, 81 
local offices, contracts for the disposition of that piece of 
property. We will contact a local broker, we go through the 
sealed bid process, which in the industry is arcane, if I may 
say.
    We are going to revolutionize the whole process, put it out 
for national bid--essentially privatize it. We will look for a 
private company to come in and do that real estate disposition 
for us, which will reduce the amount of time from foreclosure 
to resale, and then we will not have that type of problem that 
we have in San Bernardino, for example.
    Mr. Lewis. Right.
    Secretary Cuomo. Where they say the property languishes for 
too long and falls into a state of disrepair.
    Mr. Lewis. Well, it sure seems to me that we need to 
rethink that process because it is apparent to anyone that 
would look that it does not work, and the ill service does a 
lot more than just leave the property in disrepair and HUD with 
a bag of worms. It leaves people without housing that otherwise 
could work very well in the marketplace.
    So, really, rethinking our preconceived notions about that 
whole subject area the Committee would like to help and 
participate in.
    Secretary Cuomo. Mr. Chairman, it would be our pleasure, if 
I might. We are going to put out this notice and, basically, 
what we are going to say to private-sector companies is you 
tell us the best way that we can do this. We have about 60,000 
properties per year that are in this process, and we are going 
to ask for all sorts of creative private-sector ideas, and then 
we will pick the best one.
    It would be our pleasure to work with the Committee in that 
process.
    Mr. Lewis. Thank you.
    Mrs. Meek.

                      Section 202/811 Home Merger

    Mrs. Meek. Thank you, Mr. Chairman.
    Mr. Secretary, if you remember, last year the 
administration cut 202 significantly and, of course, I 
wasunhappy then and I am not happy now. I am dismayed by the fact that 
you are crushing 202 and 811 housing into the HOME program. I just do 
not understand why the Administration, yourself included, wants to go 
that route.
    In my opinion, 202 is one of the best programs, one of the 
most proven programs that HUD has ever had. It is cost-
efficient, it is well maintained, it has a very good image 
throughout the country, and it brings in services so that the 
elderly can stay out of nursing homes.
    You have talked a lot here today about continuum of care. 
There is no better continuum of care than you would find with 
the 202 program because it does take care of the low-income 
elderly, and certainly I am a strong proponent of that.
    Your proposal, which you explained to us this morning, for 
$109 million for new development is an 83 percent cut from the 
$645 million that you proposed for fiscal year 1998. It is 
misleading for you to say in your proposal that you are 
actually increasing the units by more than 10,000. But $109 
million will not buy 10,000 units. It will only buy, according 
to our estimates, about 1,500 units. Even if my math is 
incorrect, it will not buy 10,000 units. That is an 83 percent 
cut.
    So you are talking about--and you spoke about this before, 
Mr. Secretary--$50 million for vouchers, but that is in 
existing housing. That is not on new housing. That is existing, 
which makes it even more difficult. These are two different 
things that we are talking about here, two different 
dimensions.
    I hope that we can continue to keep 202 and the elderly 
housing, 811, as well. The Chairman and this Committee knows 
that I have pushed very hard for those programs, and Mr. 
Frelinghuysen has also. We have a very strong sensitivity 
toward 202 because of what it has done in terms of the 
continuum of care.
    I would like to share with you the story of a woman who is 
in my district. She lives now in a 202 housing unit. But before 
she got there, she was living in a small rental apartment and, 
of course, she was told that she would have to move. Now, this 
is one of those kind of stories, Mr. Secretary, where you can 
put a name or face on the problems that we are talking about.
    She lives in Robert Sharp Towers, and it is a Section 202 
facility that is in my district, the 17th Congressional 
District, and it is sponsored by the National Council of Senior 
Citizens, just like the Mildred and Claude Pepper Towers. That 
is sponsored by the National Council of Senior Citizens.
    Betty is 72 years old. Once she had a fairly good career. 
She was a dental health hygienist, a technician, and she has 
been on the waiting list for about three years for a Robert 
Sharp Towers home. It was a very good day for Betty when she 
was told she finally made it to the top of the waiting list and 
she had just until the end of that month to stay in the 
apartment where she was.
    Her income, Mr. Secretary, was just $473 a month on Social 
Security. She was barely making it because her rent in this 
little studio apartment was $400 a month, so you can see she 
was not making much. She had very little furniture. Her 
apartment was very sparsely furnished with things people had 
given her or whatever she could get there.
    She was lonely and isolated where she was. When she found 
that the rent was going up, which can go up any time it wants 
to, she knew she had to get out. She has no family, and that is 
typical, particularly in Miami because a lot of young people 
leave their parents there and go on about their business. But 
she has no family.
    She was widowed for a few years after she was married. 
There were no children. There is no one to care for Betty. But 
the people there at the Robert Sharp Towers have pretty much 
given her things to try to take care of her and donated items 
to her.
    Most of the people at Robert Sharp Towers, Mr. Secretary, 
have never received any public assistance. They have never been 
on welfare. They have never received anything. They have pretty 
much worked their way through, but now they are old, and they 
find themselves without enough income to live out their final 
years, and many of them spent their whole lifetime savings, 
perhaps, taking care of their husbands before their husbands 
died.
    Betty's story is a long one, Mr. Secretary. She has 
osteoporosis, and she is not in good shape. Now that she is in 
Robert Sharp Towers, her income and her rent are manageable. 
But if she were to have to go back to one of those little 
studio apartments where her Social Security would be so near 
her rent, it would be very, very difficult.
    You know what else happened, sir? Robert Sharp Towers has a 
service coordinator, which you talked about in one of your 
other presentations to this Committee. That service coordinator 
looks out for her.
    We talk about the coordination of resources. Well, that 
coordinator helps her out. Also, HRS looks out for her. She has 
a case manager which comes in from the State of Florida from 
the Department of Children and Family Services. They are 
looking out for her. She gets her food stamps. It is a long 
story, but this is just an example of the collaboration of 
services that one can get when you are in 202 housing.
    She can see the doctor regularly. She does not have to 
worry because they have mobile units that travel back and forth 
to these senior citizens housing.
    What will happen to the other Betty's--not this one, but 
there are many more Betty's in the 17th Congressional 
District--with this 83 percent cut that you have capsulized-
that is the only word I have--in funding here? And that is 
something that is bothering me. We had to fight last year for 
this kind of money, and this year you came and you put it all 
together.
    I want to tell you something, with senior housing, I do not 
trust a block grant. I do not trust county government. I do not 
trust words of good intent. Because if we did not get some kind 
of earmark or something from the Federal Government, some of 
these elderly people would not be served. They cannot go down 
and talk before the County Commission. They do not have anyone 
to go down and advocate for them.
    So I just want to know, what is your rationale? I have 
heard you talk about it in numbers, but I want to put a face on 
it to show you really cut. That was no small cut.

               rationale for home/section 202/811 merger

    Secretary Cuomo. Congresswoman, I hear exactly what you are 
saying, and the rationale was this: We wanted to do a couple of 
things in this Budget, and we faced all tough choices.
    No. 1, we wanted to get back into the housing business. We 
are the Department of Housing, except, as I said this morning, 
we do not build housing. As a nation, we provideless affordable 
housing than at any time since we began keeping numbers, so we wanted 
more vouchers--100,000 more vouchers.
    We wanted to have an urban development tool to create jobs 
because people are coming off welfare, except the problem is 
there are no jobs for the people coming off welfare. We wanted 
to do that.
    We wanted to do more for the homeless, as we discussed this 
morning. It is a program that is working. It is a need that is 
growing.
    With the 202 program, we then had the idea to put it 
together with the HOME program and use vouchers and actually 
produce more units, more living opportunities, using the 
vouchers.
    But as I said this morning, the Chairman is in a different 
position than I was. The Committee is in a different position 
than I was because you do not have to make that tough a choice.
    GAO, since the Budget we put in, says that there is $691 
million more in the Budget. So you are looking at a much 
different circumstance than we were looking at when we put 
together the budget, and you do not have to make the choices 
that we made because there is $691 million more.
    What I was saying this morning is the $691 million more 
than makes up for the cut in the 202 program. So within that 
HUD Budget you can do everything we talked about in our 
proposal, plus fully fund the 202 program, plus have money left 
over at the end of the day.
    Mrs. Meek. Now, you are putting yourself in my place.
    Secretary Cuomo. Your place happens to be better than the 
place I am in, Congresswoman.
    Mrs. Meek. Yes, but you have pushed it on us. You have done 
what you have to do. We will do what we have to do later. I was 
trying to see the rationale for you doing what you have already 
done.
    Secretary Cuomo. But when we did it, we did not have the 
$691 million that GAO has identified since that time.
    Mrs. Meek. But that is funny money, Mr. Secretary. I will 
keep moving on. But it sounds like funny money to me. But not 
being an expert in budgetary matters, it sounds like funny 
money. You just found out about that; is that correct?
    Secretary Cuomo. No. The GAO came in, did an audit. We are 
doing significant work on our financial systems, and as we are 
doing more work, and we are making more reforms, we are freeing 
up funds. We are identifying other uses of funds, and the GAO, 
which is a very conservative, as you know, the arbiter and 
auditor of our finances, came in and has identified an 
additional $691 million that would be available.
    We concur with what the GAO found, and we identified that 
ourselves working with the GAO. But that is significantly 
different than when we put the budget together.
    Mrs. Meek. Right. I will close that particular question by 
going back to putting a face on this problem.
    Where Betty lives now there are 270 people waiting on the 
waiting list, and I am sure most of them will die before they 
get to the point where she is. It is a problem, not only in 
Miami-Dade County, but throughout the nation.

                   fha loan limit--effect on mmi fund

    My second question has to do with FHA loan limit. The 
Chairman asked the first part of the question. My question is 
would you make some remarks on the financial impact of 
increasing the FHA loan limit and how it would affect the 
Mutual Mortgage Insurance Fund.
    Secretary Cuomo. The loan limit, which we began to discuss 
this morning just to give it a perspective, the average FHA 
loan, if the loan limits were increased the way we propose, the 
average FHA loan would go from $85,000 to $89,000. That would 
be the average loan, $85,000 to $89,000. It would go up 4.2 
percent.
    The average FHA home-buyer income would go from $40,000 to 
$42,000. So it is not like we are talking about giving loans to 
people making $80,000 a year. The average income would go from 
$40,000 to $42,000 per year.
    FHA's total volume of business is anticipated to increase 
by about 6.8 percent from 850,000 loans to 908,000. So we are 
talking about 58,000 additional loans on a base of 850,000.

                     fha loan limit--national level

    Mrs. Meek. One more question. Why did you streamline it so 
that all of the loans are based on a national level? You 
limited the whole nation to a single level. What is the 
rationale?
    Secretary Cuomo. The thought there, Congresswoman, was the 
people we do business with, the lenders, the brokers, find it 
an operational burden to have so many different loan limits. We 
might have one limit in Miami, another limit in Dade County, 
another limit in the county next to Dade.
    What the brokers are saying is FHA is too tough to do 
business with. Can you not have one loan limit? For an 
operational ease, we came up with that one loan limit and, 
also, because we want to make the FHA more user friendly, so we 
can do more business.

                              cdbg program

    Mrs. Meek. My last question of this round is CDBG is 
running amok in some places. It is an excellent program. I want 
to know how does HUD monitor that program, if it does. It has 
become a relief act in some places for the mayors and the 
politicians, and they are using it for any number of things, 
when you designed it for low income and people to make jobs 
creation.
    So I would like to know if HUD is able to, in some way, 
give some credibility to this program on accounting level.
    Secretary Cuomo. We do, Congresswoman. The CDBG program 
started in 1974. It has been supported by both Republican and 
Democratic administrations since then. It really is, I think, 
to this day, the model which most of us would hold out. It 
devolves to the local community the actual decision making, but 
it has Federal goals and regulations. They cannot just use CDBG 
on anything they want. It is a block grant. That does not make 
it a blank check. It has to go to either people of low- or 
moderate-income, or to clear slum or blight. So there are very 
real Federal regulations and requirements.
    If you suspect that a local government is not using it in 
accordance with those laws, we routinely monitor this, but if 
we hear that there is any possible misuse of the funds, we will 
get on it right away.
    Mrs. Meek. I will give you an example. I do not think it is 
misuse or abuse, but my local government will not allow any of 
the small business people in my district to use 108s or any of 
those other HUD funds, but they can bail out Pan Am with 
something like $5 million. Before I could turn around and look, 
Pan Am had gone belly-up.
    Yet the small business people in my district cannot get 
108s because there are guidelines, but no one is watching and 
they are allowing local government to use CDBG monies for more 
than distressed communities.
    Secretary Cuomo. What we found, Congresswoman, is that it 
is often that the locality does not know how to use the money 
as opposed to they are not willing to use the money.
    If we can help get the county some technical assistance, 
get some experts down there who know how to set up small 
business loan pools, it would be our pleasure to do that.
    Mrs. Meek. They know, Mr. Secretary. It is just that there 
is no one saying, look, this is not a worthwhile use of the 
monies. They know, but they know it is money that they can draw 
down from HUD and use it to build big skyscrapers and rescue 
airlines when they have poor people who do not have housing and 
who do not have jobs.
    Thank you, Mr. Secretary.
    Secretary Cuomo. Thank you very much, Congresswoman.
    Mr. Lewis. Thank you, Mrs. Meek.
    Mr. Frelinghuysen.
    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    Mr. Secretary, the individual on your right I would like to 
recognize, Rich Keevey, came out of New Jersey a number of 
years ago. You have got somebody who is highly competent, who 
worked with me when I was a State legislator. I am glad you 
have brought him aboard as your chief financial officer.
    Secretary Cuomo. And we are also going to put him in charge 
of the NOFA for the 811 program, I want you to know.
    Mr. Frelinghuysen. I am very happy to hear that. 
[Laughter.] This is my time. Thank you, Mr. Keevey. [Laughter.]

             section 202/811--home programs and non-profits

    Somebody stopped me in the hall during the break, and they 
said why are you just concentrating on issues that affect the 
disabled. I think I can say on behalf of everybody here present 
we are keenly interested in the overall HUD Budget, whether it 
has to do with FHA or community development block grants, HOPWA 
money, AIDS residential money, Brownfields.
    But I do have a keen interest, and I want to follow-up on 
some more questions that relate to concerns of people with 
disabilities.
    Mr. Secretary, both Mr. Price and Ms. Meek have made 
reference to your collapsing the Section 811 program into the 
HOME program and increasing the portion of the program that is 
directed towards tenant-based rental assistance from 25 percent 
to 50 percent.
    Is it the Department's view that congressional 
authorization is needed to make those types of fundamental 
changes?
    Secretary Cuomo. Yes.
    Mr. Frelinghuysen. Do you, at some point, plan to submit a 
specific legislative proposal to Congress?
    Secretary Cuomo. Both the movement of the 202 and 811 
programs into the HOME program, and what we call the HOME Bank 
program, which would allow a locality to leverage up to five 
times its Home Grant, would need authorizing legislation.
    Mr. Frelinghuysen. So you are in the process of promoting--
--
    Secretary Cuomo. Yes, sir, Congressman.
    Mr. Frelinghuysen. One of the things, and this has been 
referenced before indirectly by Ms. Kaptur, to a certain 
extent, who put forward the idea that there should be sort of a 
giant convening of interested parties. I got the impression 
from her remarks that these would be largely governmental 
entities that should be working together rather than at cross 
purposes.
    One of the things that makes Section 202 and 811 programs 
so successful is the role played by nonprofits. I get the 
impression, through this sort of reorganization of collapsing 
Section 811 into the HOME program and so forth, that you, in 
some ways, may be eliminating the important role that 
community-based nonprofits for advocates for the aging and 
those with disabilities have played in both those programs.
    Would you address that issue for a moment? I think it is 
all great to get ahold of the mayors and have them be active, 
but some of the people who really know these issues are people 
that I am sure that you have worked with. I would like some 
reassurance that these types of advocacy groups are, in fact, 
within your family.
    Secretary Cuomo. Congressman, very much so. As a matter of 
fact, the thrust of the Department happens to be opposite your 
suggestion.
    We are looking to work more and more with not-for-profits 
and community-based corporations. I come from a not-for-profit 
background. We set up the Center for Community and Nonprofit 
Partnerships, which is a special Center, which is what 
Congresswoman Kaptur was referring to--Father Joseph Hacala 
runs it--just to reach out to not-for-profits and bring them 
into the Department. We are seeking to develop more 
collaborations than ever before.
    Not-for-profits and community-based corporations are an 
extraordinarily effective service delivery mechanism, and we 
want to do more and not less with them.

                          section 202/811 NOFA

    Mr. Frelinghuysen. I appreciate that reassurance.
    The Housing and Community Development Act of 1992, as you 
are aware, allows for public housing authorities to designate 
housing. Since that year, fewer than 100 public housing 
authorities have received approval to designate housing. Can 
you explain what criteria HUD uses to determine which public 
housing authorities receive approval.
    Secretary Cuomo. Yes, I can, Congressman. If I could just 
clarify the discussion we had on your concern this morning, on 
which we did not have all of the information at that time. 
During the break we went back and, as best I can determine in 
the relatively short period of time I had to look at it, the 
thrust of your comments was correct, Congressman.
    We did put out a NOFA last year that was a fairly complex 
NOFA--Notice of Funding Availability. It was trying to track 
the law at that time. Due to the good efforts of your office, 
we have made that law simpler, but the NOFA that went out last 
year was a complicated NOFA. It dealt with both public housing 
and assisted housing, but it was connected to the designated, 
this was problemmatic especially for assisted housing, and we 
just did not get enough responses for the funding. Period.
    Mr. Frelinghuysen. I do not get that impression. I 
certainly got the impression that it was so complicated that 
some people resigned themselves to their fate and did not 
apply.
    I think the question which we look at here is that we are 
going to be moving ahead with trying to get these funds out 
into the community, and I would like to sort of re-ask one of 
the questions I asked this morning: What is the likelihood of 
getting the 1997 and 1998 dollars out there to those whoneed it 
so we can address some of these waiting issues?
    Secretary Cuomo. Yes. I had said this morning 6 to 7 weeks. 
We can do it within 4 weeks. This will be a much simplified 
NOFA. It will be a general use NOFA for disabled individuals or 
disabled families. So we think we will get a faster and broader 
response.

                         pha-designated housing

    Mr. Frelinghuysen. And to my question that you held in 
abeyance, can you explain what the criteria HUD uses to 
determine which public housing authorities receive approval? 
Because I am surprised how few public housing authorities have 
actually designated housing. I just wonder what your 
perspective was.
    Secretary Cuomo. The numbers that we have, Congressman, are 
in 1997 there were 43 plans approved, which designated 9,300 
units.
    Mr. Frelinghuysen. Could you give us an idea as to what 
are--
    Secretary Cuomo. The criteria of those designations?
    Mr. Frelinghuysen. Yes.
    Secretary Cuomo. I cannot----
    Mr. Frelinghuysen. And, more importantly, how it breaks out 
in terms of elderly and those slots that are available for 
people with disabilities.
    Secretary Cuomo. Let me ask Rod Solomon to join us, if I 
can, Congressman.
    Mr. Solomon. Good afternoon, Congressman.
    Mr. Frelinghuysen. Good afternoon.
    The criteria are set in the designation statute. They 
require the housing authorities to look at housing needs and 
goals, other resources in the community and various other 
matters of that kind. The plan requirements were simplified 
substantially by HUD, after concerns were raised of the nature 
that you are raising now, about a year ago. The numbers, 
although still relatively small, did go up from 17----
    Mr. Frelinghuysen. You are talking about those for the 
disabled.
    Mr. Solomon. The designation approvals went up from 17 
plans approved in 1996 to 43 in 1997. So there was an increase 
there.
    Mr. Frelinghuysen. I love to see plans increased, but what 
about the----
    Mr. Solomon. Approvals, this is.
    Mr. Frelinghuysen. Yes, approvals, and how do they relate 
to designated or disabled. I understand that with the New York 
Housing Authority that they have restricted almost 10,000 units 
for elderly-only tenants.
    Mr. Solomon. Congressman, it is true that most of the 
approvals have been for units designated for the elderly. I 
think that the legislation which you sponsored, that we have 
been talking about to provide certificates and vouchers in 
connection with the disabled, is going to be the major 
additional resource.
    Mr. Frelinghuysen. Legislation is one thing, and what is 
good about it is that the Secretary has made a personal 
commitment to see what we can do to get a higher degree of 
enlightenment, not forgetting, of course, that home rule is 
important. But I do think we need to make a case for more 
access and less restrictions.
    Thank you, Mr. Chairman. Thank you both.
    Mr. Solomon. Thank you, Congressman.
    Mr. Lewis. Thank you, Mr. Frelinghuysen.
    Mr. Stokes.

                       gse lending for minorities

    Mr. Stokes. Thank you, Mr. Chairman.
    Mr. Secretary, I want to go back for a moment to the FHA 
cap discussion that we had this morning. I have got a couple of 
concerns here because, as was stated by the Chairman this 
morning, this is a matter that logically belongs before the 
authorizing committee and this is a matter with the 
Appropriations Committee taking it up.
    I think we have to delve pretty deeply into it if we are to 
know what exactly to do.
    One of my concerns is I have been given a paper that I 
understand was given from Fannie Mae, which they tell me this: 
``Fannie Mae's commitment to affordable housing and minority 
home ownership.''
    Obviously, minority home ownership is an area in which I am 
vitally concerned. Let me read some factual data here to you, 
and then I will ask you to comment.
    It says, ``FHA's single-family mortgage insurance program 
was created to encourage lenders to make Government-backed 
loans to borrowers who need FHA's lower down payment 
requirements and less stringent underwriting standards to get 
into a home. While FHA plays a valuable role in reaching 
borrowers, including minority and other underserved borrowers 
who cannot obtain mortgage financing through the private 
market, the numbers show that the conventional market reaches 
more minority borrowers than does FHA.
    ``1996, the most recent year for which we have FHA data, 
Fannie Mae, working with banks, thrifts, mortgage companies, 
and credit unions provided $25.8 billion in housing finance to 
help over 267,000 minority families, including over 62,000 
African American families, achieve home ownership.
    ``This $25.8 billion exceeded FHA's 1996 service to 
minorities by more than $3.6 billion. The combined efforts of 
Fannie Mae and Freddie Mac further demonstrate the private 
market success in serving minorities.
    ``Fannie Mae and Freddie Mac have helped more minority 
families achieve homeownership than FHA. Fannie Mae and Freddie 
Mac in 1996 together financed over 412,000 homes for minority 
families, compared to almost 280,000 by FHA. These 412,000 
homes include 101,602 homes for African Americans, compared to 
105,246 by FHA; 149,170 homes for Hispanic Americans compared 
to FHA's 149,795; 111,094 homes for Asian American families 
compared to 19,351 by FHA; and 50,497 homes for Native 
Americans, Alaskan Natives and other minorities compared to 
5,417 for FHA.''
    They then say, ``The same is true at or below the FHA loan 
limits. Fannie Mae and Freddie Mac in 1996 financed homes for 
an estimated 303,000 minority borrowers compared to 279,809 
homes financed by FHA.''
    Then they have a note at the bottom that says, ``The Fannie 
Mae and Freddie Mac lending data noted here comes directly from 
reports each corporation files annually with the Department of 
Housing and Urban Development, pursuant to P.L. 102-550.''
    Along with it is a lot of other data that has been sent to 
my office, including a Columbus Dispatch editorial, which I 
will just quote one statement from. It says, ``Housing and 
Urban Development Secretary Andrew Cuomo and a coalition of 
mortgage bankers, builders, and real estate agents want to 
raise the ceiling on federally insured home loans to 
$227,150.'' And then it goes on, and on, and on.
    Now, I pose this question because if the members of this 
subcommittee are to try and do what is right here, it is 
veryimportant that we have the factual data upon which to operate, and 
I am particularly concerned about this type of data relative to 
minority homeowners, and I want your comments.
    Secretary Cuomo. I am very happy that the Congressman 
raised the issue because I think it is right that we have all 
of the information on the table. And, frankly, the more 
information we have on the table, in my opinion, the more 
powerful the argument to raise the FHA loan limits.
    This discussion, and let us be frank, if we might, this 
discussion is not about whether or not the GSEs or the private 
companies are making good-faith efforts to do good things for 
minority borrowers. There are many good programs, outreach 
programs, fairs, pamphlets that are going out saying we should 
help minority home ownership. The undeniable fact is that there 
is a tremendous gap between urban home ownership and suburban 
home ownership, white home ownership, and black home ownership, 
white home ownership and Hispanic home ownership, as well as 
the other sub-groups of minorities.
    That is a fact. Seventy-two percent home ownership among 
whites and 46 percent among African Americans, 44 percent among 
Hispanics. That gap is too large. Frankly, it is not an excuse 
to say, Well, a lot of people are having a lot of fairs and 
running a lot of programs to try to do a lot of good things. 
Great. No one is saying that they are not making good efforts, 
but the result is what we question. We have more to do.
    FHA is a vehicle to do it. It is a vehicle that can provide 
more savings to the taxpayer, can strengthen communities, put 
more people in homes. Why not, when you have that disparity, 
you have that gap, why would you not want to address it? The 
denial rate in the private market for African Americans is 
twice what it is for whites, twice. That is the fact. Why would 
you not address it?
    The Washington Post today, front page, has a story that 
says a fair housing group did a survey. Forty percent of the 
lenders discriminate against African Americans. You have a tool 
called the FHA that can make a difference. Why would you not?
    There are many private groups doing good work to try to 
make a difference, yes. Have they made enough of a difference? 
No. Can we do more? Yes. Is FHA an answer? Yes.
    That is what I would say to that, Congressman. I would also 
ask private citizen Apgar on the specific numbers if he might 
have a comment, if it is okay with the Congressman.
    Mr. Stokes. Certainly. I would be delighted to hear from 
you, sir.
    Mr. Apgar. Thank you. Apgar, from New Jersey, Mr. 
Frelinghuysen. [Laughter.]
    But we have looked at the data on the GSE lending as well, 
and when you have studied GSE lending patterns compared to FHA 
lending patterns, you reaffirm the fact that, essentially, the 
private market activities is serving separate markets than the 
type of activity that the FHA is involved with.
    The numbers that were cited in the information that you had 
is similar to information that we received from Fannie Mae and 
Freddie Mac, and when you take that public data, which they 
reference, and you tabulate it, you realize that, of course, 
the bulk of minority lending that is cited in there is to 
African American households or Hispanic households who are 
capable of making 20 percent down payment loans or higher. 
These are particularly not high-risk loans. They are good 
loans. They are loans that ought to be made. They are easily 
made by the private sector and Fannie and Freddie are doing a 
good job of it.
    Fifty-eight point six percent of all of the loans that are 
cited in that document you read are by folks who make more than 
20 percent down payment or higher.
    In contrast, the vast majority of FHA loans are low down 
payment loans. Almost two-thirds of FHA loans are to households 
who make down payments of 5 percent or less. Only 2 percent of 
the loans by GSEs are made to households who can make down 
payments of 5 percent. Only 8 percent of the loans made by 
private mortgage insurers are in that low down payment variety.
    So the GSEs are doing a good job at solving the problem for 
folks who have significant down payment to make. FHA stands 
ready to make loans to folks who have limited down payment 
capacity.
    Secretary Cuomo. Congressman, we are not talking, if I 
might, about rich African Americans, rich Hispanics, et cetera. 
There is no question but that the private market is serving 
them.
    We are talking about getting to people who cannot be served 
by the private market because their credit history may be 
somewhat checkered. Just so you know, 42 percent of all African 
Americans who buy a home buy it through the FHA. Forty-two 
percent, which, to me, is an outstanding figure.
    Mr. Stokes. Yes, but that is why I cite these other 
figures. That being true that they service the lower income, 
why would you not have a higher minority ownership rate?
    How can they cite that they give more loans to minorities 
than FHA does under these circumstances?
    Mr. Apgar. Well, in the low down payment category that I 
was speaking of, FHA in 1996 made 134,000 low down payment 
loans--5 percent or less down payment. The GSEs both made 
11,000 low down payment loans. So we dominate in the low down 
payment area.
    Why the homeownership disparity persists is, in part, 
because lenders have been slow to come to recognize the power 
of the minority market. FHA has significantly increased its 
minority lending and has led the way.
    GSEs are following and, in fact, there has been some 
progress in improving access to capital in minority communities 
broadly defined. But there is a lot of work left to be done to 
close that gap. There is still significant discrimination in 
the markets. There are still many people who, but for a credit 
problem or the inability of getting a down payment, could 
become homeowners if they could get that loan. FHA stands ready 
to make those loans.
    Secretary Cuomo. But, Congressman, there is no doubt that 
on the lower income, on the minority side, FHA by far, is the 
primary lender. 141,000 compared to 11,000 for both GSEs.

                fnma position on fha loan limit increase

    Mr. Stokes. One further question to clear up some 
confusion. Has Fannie Mae always taken this particular position 
relative to an increase in the FHA maximum or have they had a 
different opinion?
    Secretary Cuomo. Well, I believe, Congressman, when the 
Chairman was mentioning about the difference between the 
authorizing committee and the Appropriating Committee, I 
believe in 1992 and 1994 this Committee adjusted, actually,the 
loan limits. I am not sure--I do not want to speak for the GSE 
position--but I believe that they had a different position than they do 
this year in either 1992 or 1994.
    Mr. Stokes. Do you know what that position was?
    Secretary Cuomo. I do not know, Congressman, but I can find 
out what their position was or we can contact them to get it 
from them.

                      public housing capital fund

    Mr. Stokes. I would appreciate it if you would expand upon 
that in the record for us.
    [The information follows:]


[Pages 87 - 88--The official Committee record contains additional material here.]



    Mr. Stokes. Let me move quickly, then, to another area that 
we have not talked very much about. It is an area that I have 
spent a great deal of time on over the years because I have a 
very special interest in it, as you know, public housing.
    A study was done for HUD several years ago that suggested 
about $4.5 billion per year would be needed in public housing 
capital assistance to deal with normal wear and tear and 
eliminate the backlog of substandard public housing within a 
decade.
    Your budget requests only $2.5 billion for the Public 
Housing Capital Fund. Do you have an estimate of the backlog of 
capital needs in public housing?
    Secretary Cuomo. Congressman, it is a 2 percent increase. 
Again, there were many good programs, many needs here, and we 
were trying to do the best we can with the limited resources 
that we had.
    I do not have, as we sit here, a catalogue on the backlog 
of capital repair needs, but I can get one.
    Mr. Stokes. I guess my concern is, with only a 2 percent 
increase, and I understand you say that you are trying to do 
the best you can to budget, but at the same time I have to look 
at what your 2 percent increase will do in terms of the 
backlog.
    Tell us what is the backlog. Do you have that information?
    Secretary Cuomo. I am getting that number right now, 
Congressman. But, also, when you talk about the resources to 
needs, we have 5.3 million families in this country who are 
quote/unquote part of the ``worst case housing needs.'' We are 
only proposing 100,000 new vouchers against a 5.3 million base. 
You have waiting lists across this country that are closed; 
that if they were opened, you would have year-long waiting 
lists.
    So the mismatch between resources and need in this area is 
astonishing. The backlog is about $20 billion. Twenty billion 
dollars is the estimated backlog, and we have a study underway 
now.
    Mr. Stokes. At the rate we are talking about here, a 2 
percent increase, we are talking about being well into the next 
century before anything can be done in this area.
    Secretary Cuomo. Yes. The short answer is, yes, 
Congressman. Again, we have the HOPE VI program, which is a 
program that meets the same basic need and, in general, again, 
the resources-to-need in any of these programs is only a drop 
in the bucket.
    Mr. Stokes. I would be delighted to yield my colleague.
    Mrs. Meek. Is it not true, Mr. Stokes--I know I have heard 
it--that HUD is no longer in the business of public housing?
    Mr. Stokes. Yes. I think it goes without saying that when 
the Secretary addressed his presentation this morning he 
indicated that he wanted to put HUD back into housing. I think 
we know that we have undergone a number of years where the 
intent was to take Government out of housing and particularly 
public housing, there being very little base for people here 
who are urging public housing.
    So I think your point is well taken.
    Mrs. Meek. Thank you.

                             troubled phas

    Mr. Stokes. What about troubled housing authorities, Mr. 
Secretary? Can you tell us roughly how many housing authorities 
are currently on your troubled list?
    Secretary Cuomo. There are about 56 out of 3,400, 
Congressman.
    Mr. Stokes. Is that number now going up or down?
    Secretary Cuomo. It has been relatively stable. It is down 
somewhat.
    Mr. Stokes. Let me ask you about the public housing--the 
Chairman has very gently nudged me that I have exceeded my 
time, and I will at this time----
    Mr. Lewis. No, you can just go right ahead with that. That 
is all right.

                        drug elimination grants

    Mr. Stokes. Just one little question then, Mr. Chairman. 
Thank you.
    I understand that HUD has not yet awarded a substantial 
part of the Public Housing Drug Elimination Program funds that 
were appropriated for fiscal year 1997, apparently, because 
HUD's evaluators did not find enough applications worthy of 
funding. This is surprising, in view of the great need for 
efforts to prevent and combat drug abuse.
    How much, Mr. Secretary, of your fiscal year 1997 
appropriation for Public Housing Drug Elimination has not been 
awarded?
    Secretary Cuomo. Congressman, when we had the competition 
we did not get enough what we believed were suitable 
applications for the funding. The actual numbers, where there 
were 889 applicants for $278 million, only 533 applications 
were competitive enough to award for $200 million. The 
remaining amount will be awarded this fiscal year. The NOFA 
will go out in the next several weeks.
    Mr. Stokes. Give us just some idea what type of 
shortcomings were found in the applications for funding.

               FNMA POSITION ON PRIOR FHA LIMIT INCREASES

    Secretary Cuomo. I would ask Rod Solomon if he could give 
us that information.
    While Rod is coming up, Congressman, your specific question 
is what was the position of Fannie Mae and Freddie Mac in the 
past. We have a letter from Fannie Mae in 1992, which suggests 
when the Appropriations Committee raised the loan limits that 
Fannie Mae was supportive of them. But I will let the letter 
speak for itself and will give the Congressman a copy of this 
letter.
    Mr. Stokes. I ask to make it part of the record.
    [The information follows:]


[Pages 91 - 92--The official Committee record contains additional material here.]



                      Drug Elimination Grants NOFA

    Mr. Solomon. Yes, Congressman. The NOFA for fiscal year 
1997 asks for more specifics about exactly what is going to be 
done with this money, what other community organizations are 
involved, what kinds of funds would be leveraged, what goals 
will be met, expenditure of past year funds, et cetera.
    I think if you desire more details than that, we should get 
you more details for the record.
    Mr. Stokes. If you would put that in the record for me, I 
would appreciate it.
    [The information follows:]


[Pages 94 - 105--The official Committee record contains additional material here.]



    Mr. Solomon. Thank you.
    Mr. Stokes. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Lewis. Before you leave, it is my understanding that a 
major element in all of this is that there is a requirement 
that there be a law enforcement element in a facility where 
funds are going to be received and that a lot of public housing 
authorities were not responsive in connection with that.
    I can understand that need but, nonetheless, to have this 
gap, there is maybe $300 to $350 million sitting in the pipe 
there and God knows there is a problem out there that the 
public is concerned about.
    Secretary Cuomo. It is not necessary, Mr. Chairman, that 
the funds have to go to a law enforcement community. There 
could be so-called hard or soft costs. The program could be law 
enforcement, hard costs, lighting, fencing, et cetera, or it 
could be a social service program, training program, 
alternative program if it has a drug elimination purpose.
    Mr. Stokes. That is what I was trying to get at; what type 
of shortcomings were found in the funding applications that 
created this type of an excess amount of money.
    Mr. Lewis. Let us get pretty specific for the record. I 
think all of the members would be very interested in this, for 
image and reality is pretty close here. The image is that we 
have got a drug problem and there is need for elimination on 
these. At the same time----
    Mr. Stokes. Particularly in public housing. That is 
correct.
    Mr. Lewis. That is right.
    Mr. Stokes. They have a problem with drugs.
    Mr. Solomon. We certainly understand the urgency of getting 
this money out. There was far more demand than the money 
available. Again, it is a significant, but relatively small 
amount that is held over. We want to be sure, for instance, 
that if we are funding law enforcement activities they augment 
what the community is supposed to do anyway and not replace it. 
We will get you more information for the record.
    Mr. Lewis. If I could supplement, just for a moment.
    Could you be, just off the top, very specific. How much was 
appropriated for this?
    Mr. Solomon. $290 million.
    Mr. Lewis. And how much was expended?
    Mr. Solomon. $200 million for public housing. There was 
also money awarded, I believe, in assisted housing. It is not 
all for public housing.
    Secretary Cuomo. Mr. Chairman, we are going to contact the 
person who ran the competition last year, and----
    Mr. Lewis. I understand. I understand there is $300-plus in 
the pot that is still sitting there. So that says to me there 
is a big, not hole, but a hole somewhere.
    Mr. Solomon. Mr. Chairman, there was a substantial amount 
that shows on your books as carried over, but that was awarded 
just at the beginning of the fiscal year, last calendar year.
    Mr. Lewis. All right. We will clarify that then and be 
talking with you.
    Mr. Stokes. Thank you, Mr. Chairman.
    Mr. Lewis. Mr. Knollenberg.

                          Manufactured housing

    Mr. Knollenberg. Mr. Chairman, thank you.
    Just a quick question starting off, and then I will get 
into another a little more detailed.
    Regarding the increase in loan limits, I know that the 
fastest growing type of housing, apparently, is manufactured 
housing. They tell me over a third of all homes, since 1990--
and I am not sure if that was a 1990 census--but it continues 
to climb and over a third of single family units were 
manufactured housing.
    Is there anything that you are doing to promote 
manufactured housing as a part of your home ownership goals?
    Secretary Cuomo. Yes, we are quite a bit, Congressman.
    First, I think it is one of the most exciting potentials 
for affordable housing. The state of the art has changed 
dramatically when it comes to manufactured housing. What were 
trailer homes a decade ago now you can go into a manufactured 
housing unit, and I defy you to tell that it was a manufactured 
housing unit rather than stick construction on site.
    We have been working closely with the industry. They had a 
couple of concerns about the way HUD was running theprogram. 
They had some questions about the contractors that we were using to 
administer the program, and they wanted to go through a full renewed 
competition on the contract, and we are about to do that.
    We have also told them we would like to work with them, 
just use of the bully pulpit, if you will, getting the word out 
about manufactured housing, and the advances that have been 
made. It is no longer the quote/unquote ``mobile homes'' of 10 
years ago.
    We have had quite a few efforts the past few months, 
something called the PATH Initiative, Partners in the 
Advancement of Technology and Housing. We are bringing them in 
as part of that. So we have a good relationship, and we are 
looking forward to doing more.
    Mr. Knollenberg. Do you intend to increase the limits? Are 
you recommending that those limits be increased for 
manufactured housing as well?
    Secretary Cuomo. Which limits are those, Congressman?
    Mr. Knollenberg. For the manufactured housing or is that a 
part of the greater whole?
    Secretary Cuomo. It would be the same limit. It is part of 
the FHA program.

                            Current HUD FTES

    Mr. Knollenberg. The next question has to do with some 
numbers that you have laid out in your written testimony on 
page 2, at the bottom of the page, in case that is available to 
somebody, but I am having a hard time following these numbers, 
in particular, when I compare that to the actual production 
sheet that I have as well, which is Exhibit 5. It looks like 
this. I can get the exact reference.
    But you state, and I am just trying to clarify these 
numbers, and I will get to my point in a moment. You say that 
HUD's work force is now approximately 9,000 down from 10,500. 
That was at the end of 1996. I do not have the 1996 numbers. I 
do have 1997 numbers here if they are right.
    To date, HUD has posted and filled 1,100 positions for your 
new organizational structure, while executing 1,000 buy-outs. 
When I add all of those up and do the subtraction, I still wind 
up with 10,600 people. Tell me where I am wrong.
    Now, if you look at this what is called ``The Budget 
Justification Manual,'' it states that the actual number today 
is more like 10,117. That was 1997. In 1998 it is going to be 
9,900. So the numbers--I am just trying to get to some accuracy 
in reflection here because it appears as though, in your 
written testimony, the numbers do not agree, and they do not 
agree with each other in that particular paragraph.
    Secretary Cuomo. Let me ask Mr. Keevey to respond, if I 
might.
    Mr. Keevey. Let me give you the specific numbers based upon 
the most accurate information we have. I think you may be 
looking at some budget documents that were based upon 
projections in the Budget, and we have done a lot of downsizing 
since that time.
    Mr. Knollenberg. If that will take a lot of time----
    Mr. Keevey. No, it will take just one second.
    As of September 1996, the end of fiscal year 1996, we had 
10,643. As of September 1997, the end of fiscal year 1997, we 
had 9,639. Today, we have 9,001. So there has been a 
significant reduction, about 1,600. There was about 1,000 buy-
outs during the last few months.
    Secretary Cuomo. Excuse me one second. Congressman, I think 
the confusion is the 1,100 could be read to be new hires, an 
additional 1,100, where it says posted 1,100, but they were 
filled from within the work force.
    Mr. Knollenberg. Okay. That was not clear at all here.
    Secretary Cuomo. Yes. I just saw that.

                                Buyouts

    Mr. Knollenberg. Let me get to the specific question. I 
appreciate that information.
    Relative to the buy-outs, you say there is 1,000 buy-outs. 
My question is about those specific buy-outs. No. 1, the nature 
of them, was it a cash buy-out, plus education benefits, plus 
health benefits, plus relocation benefits, anything else?
    Secretary Cuomo. Congressman, the buyer package that was 
offered last year that I believe had a maximum cash grant of up 
to $25,000 it depended on the length of service, but it was a 
one-time cash payment up to $25,000, depending on the length of 
service.
    Mr. Knollenberg. No other benefits extended?
    Secretary Cuomo. No, sir.
    Mr. Keevey. If the individual was retirement eligible, 
then, of course, he would have the normal retirement package, 
but there is no relocation proviso.
    Mr. Knollenberg. With respect to anybody that has been 
rehired, could any of those new hires, those rehires, possibly 
have come from the ranks of those that were given a bonus?
    Mr. Keevey. No.
    Secretary Cuomo. Absolutely not.
    Mr. Keevey. Correct.
    Mr. Knollenberg. The reason I am asking is we have had some 
occasion to see evidence of that, not with HUD, but in some 
other agencies. So I am asking the question for a reason.
    Relative to the question that was just raised by the 
Ranking Member and the Chairman and a discussion that took 
place here, when it comes to these dollars.
    I saw something in the paper USA Today, and you may want to 
discount this or comment on it, and it was just one of those 
breezy kind of articles that was talking about the new program, 
the Urban Peace Corps.
    I do not want to challenge my good friend Mr. Walsh here 
because he was not in the Urban Peace Corps, but he was in the 
Peace Corps, and I just want to get to the basis of one comment 
that was made in that article about it would not cost any more 
money to provide the funding for some 250 people. I suspect 
that it would have to come from within because it is not new 
money.
    Secretary Cuomo. That is exactly right.
    Mr. Knollenberg. Is this one of those places where the 
money is in the pipeline and you would be transferring people 
out of the existing HUD structure into this new proposal?
    Secretary Cuomo. No, no. These are 230 people who will be 
hired from the outside.
    Mr. Knollenberg. Not from the inside.
    Secretary Cuomo. Not from the inside.
    Mr. Knollenberg. How is it not going to cost more money?
    Secretary Cuomo. Net, when you add in those 230 people, we 
are still downsizing.
    Mr. Knollenberg. So you are reflecting that against the 
backdrop of the larger number then, the total number.
    Secretary Cuomo. Yes, sir.
    Mr. Keevey. This does not cost us any additional money then 
is presently in our current budget. But, becauseof the 
significant downsizing we achieved, we have sufficient dollars to----
    Mr. Knollenberg. If we did not fund this program, then you 
would have that much more money. Am I to believe that?
    Mr. Keevey. That is theoretically correct, but part of the 
overall restructuring was to provide for this downsizing and, 
at the same time, add back key areas where improvements were 
needed.
    Mr. Knollenberg. Was the restructuring architecture along 
the line of including the Urban Peace Corps concept?
    Secretary Cuomo. Oh, yes.
    Mr. Knollenberg. That is written in.
    Secretary Cuomo. Oh, yes, Congressman. To bring the 
Department down the way we are bringing it, and I heard the 
Committee last year when they said they wanted to see a smaller 
HUD, but to bring the number down the way we are bringing it 
down, we have to do a few things. We need more training of the 
existing staff. We needed some new hires to bring in expertise 
from the outside. We had to consolidate several functions. We 
have to consolidate programs to get down to the 7,500.
    So this was one of the management changes we had to make to 
facilitate the downsizing.
    Mr. Knollenberg. The other thing I noted, and I do not know 
how this is accomplished, but you are also going to, via your 
union agreement, have a deferral, no layoff before the Year 
2002. That is all going to be accomplished with these same 
numbers? No layoffs whatsoever.
    Mr. Keevey. That is the plan.
    Secretary Cuomo. Yes, sir.
    Mr. Knollenberg. I guess what I would like to have, and you 
can submit this in writing, I will just request it, is the 
number of buy-outs since 1996, the number of people in those 
buy-outs, and the specifics--you have already indicated that--
but, specifically, if there was anything at all in addition to 
a cash grant, anything whatsoever, we would like to have that 
for the record.
    [The information follows:]

    Question. Provide the number of buyouts since 1996 and whether HUD 
provided anything in addition to cash payments. (Knollenberg)
    Answer. The number of buyouts since 1996 is 1,001. In addition to 
paying out buyout payments, HUD has paid the annual leave lump sum 
leave payments to the departing employees. HUD has also paid the 
additional 15 percent contribution to the Civil Service Retirement and 
Disability Fund for each buyout paid to an employee covered by the 
Civil Service and Federal Employees Retirement Systems. The amount of 
this contribution is based on the employee's final basic pay.

    Secretary Cuomo. Fine.
    Mr. Knollenberg. Thank you very much.
    Secretary Cuomo. Thank you.
    Mr. Knollenberg. Mr. Chairman, thank you.

                           training for staff

    Mr. Lewis. Thank you, Mr. Knollenberg.
    Before I move on, you are in line, but in reacting to Mr. 
Knollenberg's area of questioning, you and I have had an 
opportunity to talk just briefly about the rush of new 
personnel and how we get good people to do ``X'' and ``Y.''
    I am not sure how to say this gently. People like the 
Neighborhood Reinvestment Corporation take people with certain 
levels of experience and do a fabulous job of training them to 
do another job in the same field, develop another expertise, 
but without necessarily creating a great deal of overhead, 
whether it be rental space or tuition or otherwise. Do you hear 
what I am saying?
    I am very concerned about making sure that we have thought 
through how one might organize.
    You come from a not-for-profit background, and there are 
people with talent and expertise in not-for-profit environments 
who might be able to do training. I am not looking for 
conclusions here, but this has just come into my mind's eye, 
and I have heard some suggestions as to what we might be 
thinking about that might be of concern to the broader 
community beyond this Committee.
    Secretary Cuomo. Mr. Chairman, I agree with the thrust of 
the point. It is a challenge that we are working on at the 
Department now.
    We need a new infusion of talent in the Department. We are 
downsizing and, plus, we have not brought in that new talent in 
over a decade. The entire industry has changed in that time. It 
is not easy to attract that kind of talent to Government 
service, unfortunately, especially to attract it to the 
Department of Housing and Urban Development.
    So the training package for new people who are coming in, 
new hires, as well as the training package for the existing 
work force is very important. We are experimenting with a lot 
of different ways to get that done economically, but also as an 
attractive asset to attract people to the Department.
    Mr. Lewis. I agree with that. In another totally different 
circumstance, we have been talking with people who have 
expertise in software engineering. We have a problem when they 
come out of school, and they start at $45,000, and 30 days 
later somebody hires them away or 90 days later at a 30 percent 
increase, and then they turn over again. So training is 
terrific, but you have got to be careful about the premium you 
pay and how long you keep them.
    Secretary Cuomo. Actually, the Community Builders Program 
that we touched on this morning, Mr. Chairman, was announced a 
couple of weeks ago. We have an advisory board put together, 
academic universities, not-for-profit organizations, on just 
how to do this. We are going to be asking people for a 2-year 
commitment.
    It is likened somewhat to the Peace Corps. We will invest 
in you, but you have to give us 2 years. We then have an option 
for another 2 years on mutual satisfaction.
    Mr. Lewis. I am sure we will have a chance to talk about 
this in some depth.
    Secretary Cuomo. Yes, I would welcome it.
    Mr. Lewis. Sorry. Mr. Price?
    Mr. Price. That is all right, Mr. Chairman. Thank you.
    Mr. Secretary, I would like to spend a couple of 
minutestalking about an initiative that was in last year's 
appropriations bill and ask you for a status report.
    After extensive discussions with affordable housing 
organizations, your staff, the authorizing committee, Chairman 
Lewis, Mr. Stokes, and Subcommittee staff, we drafted a 
secondary market demonstration project funded with $10 million 
in HOME funds, and this program was ultimately accepted by the 
Senate and included in the final legislation.
    This program would allow three organizations, which you 
would select, with experience in managing loan portfolios to 
purchase from banks portfolios of loans made to low-wealth 
borrowers.
    These are the types of loans that do not conform to the 
Fannie Mae standards and, therefore, typically, cannot be sold 
on the standard secondary market.
    The funds appropriated will be used as capital reserves and 
will leverage the purchase of $100 million in loans.
    The second and equally important component of this program 
is the data tracking element. One of the requirements of 
receiving funding is the ability to track the performance of 
the loans in the portfolio. The ultimate goal is to obtain 
sufficient data to convince the conventional secondary market 
of the viability of purchasing loans that the market now 
considers too risky.
    We are confident that this will work out. Anecdotal 
evidence suggests that low-wealth borrowers who oftentimes are 
the first to purchase a home in their family are actually more 
diligent at repaying the loan because of their pride of 
ownership.
    So I hope this program will provide the hard data to back 
up that assertion. I believe it will.
    I am proud to note that just the creation of this program 
has begun discussions in the private sector of trying this type 
of program nationwide.
    So, Mr. Secretary, I would like, today, for you to tell me 
how things are progressing with the implementation of this 
program. I know you need some time to figure out the best way 
to run it, but I am interested in your time table; who is in 
charge of making the program happen within the Department; are 
you planning to put out a request for comments in the near 
future; and at what point do you think you will be ready to 
receive applications?
    Secretary Cuomo. Congressman, first, we are very excited 
about this concept, by and large, and we would like to take the 
opportunity to commend you for your leadership in this area.
    If we could develop a secondary market in this arena, it 
could have a profound impact on the way we provide affordable 
housing in this nation. This is very creative. It is 
unorthodox, obviously, which is one of the things that makes it 
as intelligent as it is.
    We are in the process of putting together a Notice of 
Funding Availability. We should have that out in about 5 or 6 
weeks. It will be created, as the Congressman suggests, as if 
we are looking to get a group who can help us develop and sell 
actually on the secondary market, but simultaneously put 
together the data so we could attract the private market to 
this secondary market stimulation.
    We also have a proposal, which we call the HOME Bank, which 
allows a local jurisdiction to take a loan of up to five times 
its HOME funds. We have spoken about the HOME program at 
length.
    But the HOME Bank would allow a local jurisdiction to take 
a loan up to five times its HOME allocation, come up with a 
large sum of resources to do large-scale development, and then 
they could repay it from the HOME program.
    It would be the counterpart to the 108 loan program with 
CDBG, which is working very well, and we are exploring both the 
HOME Bank and your secondary demonstration project together.
    But the short answer is 4 to 6 weeks we will have a notice 
out the door.
    Mr. Price. A Notice of Funding, and then what happens after 
that?
    Secretary Cuomo. Then we will have a certain amount of 
time--about 60 days--for a group to respond. We will then go 
through a selection. We will then be in business.
    Mr. Price. So we should be in business with the three 
grantees designated by early fall?
    Secretary Cuomo. Yes, we should be.
    Mr. Price. Good. Well, I appreciate your responsiveness and 
the way you have moved to put this together. I look forward to 
being apprised of the status of the project and how it 
develops.

                          occupancy standards

    Let me now turn to a question regarding occupancy standards 
for apartments.
    In 1988, Congress outlawed discrimination based on family 
status, and over the last ten years HUD has been trying to 
interpret exactly how that applies to rental property owner and 
how many people should be allowed in a single unit.
    In 1991, an internal memo, the so-called Keating 
memorandum, indicated that two persons per bedroom was a 
reasonable guideline for regional councils to follow--not a 
hard-and-fast rule, but a rule of thumb.
    In 1995, the Department created a formula based on square 
footage in determining how many people could inhabit a 
particular apartment, and that formula was later abandoned, I 
understand, because it produced results that sometimes allowed 
eight to ten people in a two-bedroom apartment.
    Since that policy was revoked, there has been little in the 
way of guidance beyond this 1991 internal memorandum to help 
apartment owners determine what is and what is not 
discrimination when it comes to renting to families and, as you 
probably know, there have been some reports of inconsistent 
guidance coming from HUD field offices.
    I wonder if you could tell the Subcommittee where this 
issue stands at the Department now. Are there proposed 
regulations in the works and can rental apartment owners expect 
to have clear guidance from HUD on this issue?
    I want to stress that I am not advocating any particular 
solution to this problem, but I am concerned that rental 
apartment owners are faced with considerable uncertainty and 
may, in fact, be open to lawsuits because the Department's 
interpretation of the law is not sufficiently clear.
    Secretary Cuomo. Congressman, my understanding of this 
issue is that, when there was the so-called Keating memorandum, 
there was clarity. The Department then at one point undertook 
to go through the rulemaking process and change the Keating 
memoranda. That then created an instability and an uncertainty.
    The Department abandoned that effort, went back to the 
Keating memoranda, and we lost some people in the shuffle. They 
did not know if we were going through a rulemaking, if we were 
going back to the memoranda. We have since made itclear, and we 
are still in the process of making it clear, that we do not have any 
intention at this time to do any rulemaking. We will stay with the 
memoranda. If there is any uncertainty, it is that we have not fully 
communicated that.
    But where we are now is we would stay with the memoranda, 
communicate that clearly, and see if that does not provide the 
clarity that the industry is looking for.
    Our initial impression is that is what they want.
    Mr. Price. Now, the Keating memorandum invokes a two-
person-per-bedroom standard, but indicates some flexibility. 
How much uncertainty does that point of reference leave?
    Secretary Cuomo. Well, it is hard, Congressman, to come up 
with a hard-and-fast formula. Period. I think everybody 
understands that.
    So I think the two-person-per-bedroom with some reasonable 
flexibility, taking into consideration the specific 
circumstances and configuration of a living unit, is the best 
closure we are going to come up with.
    When we tried to come up with a more definitive formula, 
the square footage formula, that did not work well. I was not 
the Secretary at the time. I was the Assistant Secretary in 
Community Planning and Development, but I heard it through the 
walls that it did not go well.
    So I do not know that where we are now is not the best 
place we can be.
    Mr. Price. Do you think there is anything to these 
accusations of inconsistent guidance coming from your field 
offices? Is that a problem that you think can be corrected?
    Secretary Cuomo. Yes, I do, Congressman, because I believe 
what happened is we lost them in the shuffle between going to 
new rulemaking and abandoning the memoranda, and then going 
back to the memoranda. So we just have to communicate where we 
are.
    Mr. Price. Let me just ask you, as you prepare for the 
completion of the record after this hearing, that if there is a 
very clear statement of your intent and the content, the 
requirements of that memorandum that you intend to abide by, 
that if you could enter a formal statement of that in the 
record I think that would be helpful to have that in black and 
white.
    Secretary Cuomo. It would be our pleasure, Congressman.
    [The information follows:]

    The Fair Housing Act prohibits discrimination against families with 
children but permits ``reasonable'' restrictions on the number of 
persons who can occupy a housing unit. HUD has no rule interpreting 
``reasonable restriction.'' Instead, the Department follows a 1991 
memorandum issued by former General Counsel Frank Keating (known as the 
``Keating Memorandum'').
    The Keating Memorandum, dated March 20, 1991, states that 2 persons 
per bedroom will be presumed reasonable, but requires consideration of 
a variety of circumstances, including size and configuration of the 
unit and age of the children in making a determination that a two-
persons-per-bedroom policy is reasonable under the Act.
    In addition, the Keating Memorandum states that:
    ``If a dwelling is governed by State or local governmental 
occupancy requirements, and the housing provider's occupancy policies 
reflect those requirements, HUD would consider the governmental 
requirements as a special circumstance tending to indicate that the 
housing provider's occupancy policies are reasonable.''
    On April 26, 1996, Congress included the following provision 
directing use of the March 20, 1991, Keating Memorandum in HUD's fiscal 
year 1996 appropriations bill (P.L. 104-134, 110 Stat. 3121).
    ``Sec. 224. None of the funds provided in this Act many [sic] be 
used to take any enforcement action with respect to a complaint of 
discrimination under the Fair Housing Act (42 U.S.C. 3601, et seq.) on 
the basis of familial status and which involves an occupancy standard 
established by the housing provider except to the extent that it is 
found that there has been discrimination in contravention of the 
standards provided in the March 20, 1991, Memorandum from the General 
Counsel of the Department of Housing and Urban Development to all 
Regional Counsel or until such time that HUD issues a final rule in 
accordance with section 552 of title 5, United States Code.
    While subsequent appropriations bills contained no such 
restriction, the Department continues to adhere to the Keating 
Memorandum in considering occupancy cases.

    Mr. Price. Thank you. Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Price.
    Mr. Walsh.

                       FHA Foreclosed Properties

    Mr. Walsh. Thank you, Mr. Chairman.
    I would like to ask some questions, again, on the FHA loan 
program and the expansion thereof, and I would like to 
associate myself with the remarks of Congressman Stokes as 
regards FHA.
    Apparently, there will not be any authorization for this, 
so we will be dealing with it; is that fair to say, Mr. 
Chairman?
    Mr. Lewis. I think, perhaps, we will be authorizing an 
entire housing program or portfolio, if there is to be a 
housing program and portfolio. [Laughter.]
    Mr. Walsh. So I need to learn a little bit more about this 
issue.
    I refer to an article in my hometown paper, the Syracuse 
Post Standard. It headlined, ``FHA Loan Program too Lax SUN 
Says.'' Sun is Syracuse United Neighbors. I believe they are an 
affiliate of the National People's Action, who have been 
critical of this. I will just read a couple of paragraphs.
    It says, ``When Clare McGrath looks out the window of her 
West Lafayette home in Syracuse, she is frustrated by the 
number of vacant, boarded-up homes. We are tired of it. We want 
something done. We are worried about kids getting in and 
setting fire. That is something that could wipe out the whole 
block.''
    And then further on, another SUN organizer says, ``We see a 
vast number of defaults on FHA loans in low-income 
neighborhoods,'' said Phil Prean, SUN organizer, ``And we see a 
vast increase in FHA mortgage-insured houses changinghands, 
one, two, three times. The end result is we have vacant houses which 
equate to crime and vandalism.''
    Obviously, that is anecdotal. But we do have, I represent 
Syracuse, certain neighborhoods have a relatively high number 
of abandoned houses and a relatively high number of those are 
FHA mortgage foreclosures.
    In light of that, some of the opponents of the 
expansionists have said that one of the reasons that you are 
expanding the program is to get more solid investors into the 
program and, ultimately, broaden the program into the suburbs 
as opposed to the inner city.
    Would you comment on that?
    Secretary Cuomo. Two different points, Congressman. First, 
do we want to raise the loan limits to strengthen the FHA Fund, 
make taxpayers--the proposals call for about $227 million? Yes. 
Stronger FHA Fund. That is a side benefit.
    The primary benefit is more people buy homes, who now 
cannot buy homes. One in eight people are turned away from the 
conventional market. Higher denial rate for minorities, higher 
denial rate for people in cities. FHA can serve them. That's 
the primary goal.
    Is there a secondary benefit that says the FHA Fund will be 
stronger, and the taxpayers will make $227 million? Yes. I 
think that is a good thing, not a bad thing.
    The second point is, and this is anecdotal, but you will 
hear this, there are run down homes in neighborhoods, yes. Some 
of them are owned by FHA, yes. It takes too long for FHA to 
dispose of a piece of property. Yes.
    Unrelated to the loan limits. The point is, FHA is not 
doing the best job it can in moving the real estate owned. Once 
a person defaults on a mortgage, we get back the property in 
foreclosure. It then has to be resold.
    We have to do a better job on that. Forget the loan limits. 
With or without the loan limits, we have to do a better job on 
that.
    And we will announce, literally, in the next couple of 
weeks, an entire overhaul of that, where we want to privatize 
that function. The way we now do it is archaic.
    First of all, we do it ourself, out of 81 offices. We got 
through the sealed bid mechanism, where we basically auction 
off the homes. We're dealing with thousands of different 
brokerage companies across the country.
    The state of the art has progressed well beyond where we 
are. We do not have any business, in my opinion, being in the 
real estate disposition business. Let us contract it out, let 
us bring in some national companies, or maybe do it on a 
regional basis, and move that real estate faster.
    You will always have defaults. Any bank, lending 
institution will have defaults. The question is how well you 
handle them, and how quickly you move them. And that's where we 
have to do a better job.
    Let alone the loan limits. But one should not preclude the 
other either.
    Mr. Walsh. If you took the advice of some of these 
neighborhood organizations, they would suggest that some of 
these homes should not have been sold in the condition that 
they were sold in in the first instance, that the FHA should 
have done a better job with the prospective buyer, of doing 
inspections of these homes.
    Some of them, people who have never bought a home before, 
go in and they see this place, and they fall in love with it. 
Then they do not know the problems. They do not see that the 
furnace is broken, that the foundation is saturated with water, 
that the roof is leaking, that the windows in many cases are 
not insulated and need to be, and that sort of thing.
    Is there anything that HUD can do to insure that the 
prospective buyer is aware, and that these inspections are 
done?
    Secretary Cuomo. Congressman, it is caveat emptor, let the 
buyer beware. We cannot immunize buyers against basically 
making a bad deal. But we can do better than we are now doing.
    Housing counseling has been very helpful in this. We were 
discussing it before. Where you offer counseling services to 
prospective buyers, and one of the functions is this is how you 
should check out a home.
    We also allow people up to $200 to do an inspection on a 
home, and we plan to be more vigilant in advocating the need 
for an inspection.
    So we can do better. I am not saying we can make sure 
everybody buys a good home, but we can do better than we are 
now doing.

                FHA fund vs. private sector competition

    Mr. Walsh. There was also criticism from the other side 
that says that by expanding the program, government will be 
competing more with the private sector, and having an unfair 
competitive advantage. How do you respond to that?
    Secretary Cuomo. Again, Congressman, I do not see that 
argument. We are seeking to serve a market that is now 
unserved.
    Everybody will agree that there is a great disparity in 
home ownership between suburban/urban and whites and 
minorities; that there is a refusal rate of people who go to 
the private market and the private market says we cannot do 
business with you. About one in eight.
    We want to give a mortgage to that one out of eight, and 
that is where we are going. And the concept of competition with 
the private market--I mentioned this this morning and I will 
mention it again--if they believe in the market place, FHA 
cannot be a competitor, because FHA charges a higher premium.
    Why would you go to FHA which charges a higher premium if 
you had a lower cost private market alternative? It defies the 
concept of the market place. So literally the private sector 
company would have to be arguing that the private sector does 
not work, that the market place does not work.
    For some irrational reason, people are going to FHA, they 
are paying this higher premium, they are dealing with these 
longer time limits, even though they could have gone to a 
private company and gotten better service for less. Why? Why?
    There is no logical response, especially for a private 
sector company that is making this great principled argument 
about government competing with the private sector.
    Mr. Walsh. I do not disagree with you. I just thought you 
would like the opportunity to explain. [Laughter.]
    Secretary Cuomo. I do. We all enjoy life through different 
mechanisms, and I enjoy this. Thank you.
    Mr. Lewis. Would the gentleman yield just for a moment?
    Mr. Walsh. I would be happy to yield.
    Mr. Lewis. Just to have a little more excitement, part of 
the discussion relative to competition is that there are those 
in the market place who believe that people who are not just 
very low-income people, people at a moderate level, whomay 
choose not to make a more sizable down payment, save for another 6 
months or a year, and have a more sizable down payment, will use FHA 
instead, and thus a distortion of the competition and the market place.
    Secretary Cuomo. I have not seen numbers on that, Mr. 
Chairman, that they may prefer to make a lower down payment----
    Mr. Lewis. Like my dad says, first house, young kid, as 
little down as possible. Keep it for 30 years, use the equity 
to move up. That was a classic pattern of old. But if you are 
looking at the market place, if you are making loans that 
involve 20 percent or otherwise, some would suggest the 
competition could be adjusted, changed, stilted, if a person of 
moderate income would go to FHA instead because they want to 
make a lower down payment instead of exercising their 
capability to save the money and make a larger down payment.
    And that might affect loss ratios and otherwise.
    Mr. Apgar. But, again, the way the mortgage insurance 
premiums are structured, you would pay more money total to make 
a low down payment loan. Obviously if you can make a 20 percent 
down payment or larger, then you do not need to have any 
mortgage insurance at all. You are free of that.
    And as your mortgage down payment goes down, you need to 
pay higher and higher mortgage insurance, and that offsets 
whatever advantage there would be of making low down payment 
loans.
    So there are strong economic incentives for people to not 
buy the house outright, but certainly to make a larger down 
payment than would be typical of the FHA borrowers, if they 
have the economic means to do so.
    Mr. Lewis. Yes, but the standard wisdom was a low down 
payment, sure, you got an extra premium because of insurance, 
et cetera. But you turn the place in three years, in a growth 
market, and take the equity and run, do something else.
    I can understand that discussion in the market place. I 
would just like to know whether you can address the specifics 
of that really happening.
    Mr. Apgar. Okay. My guess is during the go-go days of the 
1980s when people anticipated house appreciation was strong, 
there might have been added incentive to have highly leveraged 
acquisition.
    But now when most expectations are that house prices at 
best would keep up with inflation, maybe outdo it a little bit, 
the advantage of having highly leveraged purchases is 
substantially eroded.
    And so then the value of having that low down payment 
mortgage is just not as great as it might have been, say, in 
California, where you could have rapid increases in house 
prices as the common expectation.
    Mr. Walsh. I now refer to an article that was in the 
Washington Post, Federal Page, February 18th, which states--and 
this, again, is getting back to the expansion of FHA.

                        increase in fha defaults

    In 1997, the number of failed FHA mortgages rose sharply, 
by almost 17 percent. Someone could argue that the reason you 
are expanding to higher incomes and larger mortgages is to mask 
that failure in the existing program.
    Secretary Cuomo. Two points to that, Congressman. First, 
there was an increase in the default rate for two basic 
reasons. One, which is the economy in California, with all due 
respect, Mr. Chairman, was problematic, and we had a higher 
claim rate in California.
    And the FHA takes a different stance than many private 
sector companies do. When a city or region gets into trouble, a 
lot of the private sector companies just pull out, and they 
actually make it worse for that region. This happened in 
Houston, et cetera, when oil was a problem. The private guys 
pull out, make a bad situation worse. FHA, stays in. So we have 
a higher default rate in California because of a problematic 
economy, and we had a problem with a product called ARMs, 
adjustable rate mortgages, which we believe we have since 
corrected.
    But this ARM product that we offered that had an adjustable 
rate, when the higher rate kicked in, we had a higher default 
rate. And we believe the ARM problem is corrected.
    But I want to put this in context. Overall, the health of 
the FHA Fund is very, very strong. We just had a Price 
Waterhouse audit of the FHA, and they were very confident of 
the strength of the FHA Fund. So, while there was an increase 
this year, that increase has to be within the perspective and 
the overall numbers on FHA are all good, and we can give you 
the Price Waterhouse study that will speak to that.
    Mr. Walsh. What do you anticipate your failed mortgage rate 
would be for 1998?
    Secretary Cuomo. I am going to ask Bill to get that number. 
I believe the projection for 1998 is down. Just further on the 
Price Waterhouse study, they report that the FHA capital ratio 
actually increased from 2.5 in 1996 to 2.8 in 1997. Both 
figures far surpassed the 2.0 percent targeted by Congress for 
the year 2000.
    So we were supposed to be at 2.0 in 2000. We were at 2.5. 
We went up to 2.8. So the Fund is getting stronger, and we are 
ahead of targets.
    Mr. Apgar. If I could just add, what is important to FHA, 
of course, is how many mortgages claim--that is, make a claim 
against the FHA Fund. Many mortgages may be in default, i.e., 
90 days in arrears, but most defaulted mortgages eventually 
cure, meaning they work it out and get back to where they are 
back on a payment schedule.
    Again, in 1997, 70,000 loans claimed. That was, in fact, up 
from 1996, but just recognize that 1996 was the all time low--
or ten year low in terms of number of claims. So, 1997, even 
though it was up compared to 1996, was still the best claim 
rate in over, third best claim rate in over ten years.
    Early indications are in 1998 that claims rates are 
starting to come down. At least that is the experience in the 
first quarter of the year. Again, the reasons are we are 
starting to improve the experience with the ARMs portion of the 
portfolio. The California economy is beginning to recover, and 
in particular home prices in California are going back up.
    So the interest of the home buyer, who having difficulty to 
walk away from their obligations, is limited, because in fact 
now there is more equity behind the homes. And so we believe 
that those two factors will lead to improvement in the overall 
claims experience in the years ahead.
    Mr. Walsh. Very good. Thank you, Mr. Chairman. Thank you, 
Mr. Secretary.
    Secretary Cuomo. Thank you, Congressman.
    Mr. Lewis. Thank you, Mr. Walsh. Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman.
    Well, Mr. Secretary, I hope you had a good lunch. Youhave 
been up there a long time.
    Secretary Cuomo. Very nice, thank you.

                            section 202/811

    Ms. Kaptur. I wanted to ask you, last year we provided the 
Department with about $654 million for new development in the 
Section 202 program for the elderly and the disabled, and I am 
curious as to whether all of that money has now been committed.
    And I am interested in knowing how many groups, applicants 
applied, and then how many were funded? What percent? If you 
could give me a sense of that, please.
    Secretary Cuomo. The 202 funds, and we will check for the 
specific numbers, Congresswoman, but the 202 funds, we put out 
a NOFA last year, we made the selections. There were 405 
applications, 155 selections, 17,000 units requested, 6,000 
actually funded.
    There were approximately three applicants for every one 
awardee.
    Ms. Kaptur. Three applicants for every awardee. I was 
interested in this because is it your sense that there is a 
waiting list for individuals to move into projects that are 
sponsored by 202 around the country?
    Secretary Cuomo. Yes. In any of the programs that we run, 
we always get a multiple of applications for the number of 
awards. For example, a three to one ration in 202. For every 
one winner, there are three applicants.
    That happens to be, actually, a very low ratio. You take 
the Economic Development funds, we often have seven, eight, ten 
applications for every one granted. Homeless funds, also. Very 
high demand on the Homeless funds.
    So the three to one is a relatively low ratio for the 
Department.
    Mrs. Meek. Would the gentlelady yield?
    Ms. Kaptur. I will be happy to yield to the gentlewoman.

                      home/section 202-811 merger

    Mrs. Meek. A recent GAO study on housing for the elderly 
found that for 1992 to 1995 the Section 202 program funded 
1,400 elderly housing projects, while HOME funded only 30. And 
I said that to back up the other information I am going on now, 
that the Secretary has proposed capsuling 202 into HOME.
    But their productivity of homes for seniors would not be as 
high.
    Ms. Kaptur. Well, I was going to ask the Secretary, in your 
history in the housing area, I mean, the 202 program obviously 
is one that has received pretty high marks among housers in 
terms of its ability to both result in real new units, as well 
as management over the long term.
    Would you not agree it has been one of the better managed 
programs that has been sponsored through Federal auspices over 
the years?
    Secretary Cuomo. Yes. And, Congresswoman, I do not want to 
argue against the 202 program. As I said in response to 
Congresswoman Meek's question, we had tough choices. We did not 
have enough money to make all the priorities we would have 
wanted.
    There is no doubt that if we had more funding, that we 
would have fully funded the 202 program. There is also no doubt 
that there is a different budget situation today than there was 
when we put together the budget.
    But our choice was this: if you want to provide units more 
economically, it is less expensive to provide units through 
vouchers than through construction. 202 is a construction 
program. And it is a very fine program, but it is expensive to 
construct the units.
    It is less expensive to provide the housing through a 
voucher. So our proposal said, roll 202 into HOME. Let the 
construction be done in HOME, and provide vouchers for the 
seniors, rather than the new construction.
    Ms. Kaptur. Mr. Secretary, I wanted to ask you, with the 
proposal you have submitted to us, was that the same as the 
proposal that HUD initially submitted to OMB when you made your 
original budget request?
    Secretary Cuomo. Congresswoman, we consider the discussions 
between the Department and OMB squabbles that we keep within 
the family, so we will just speak to the Budget that----
    Mr. Lewis. I beg your pardon, Mr. Secretary? [Laughter.]
    Secretary Cuomo. We will just say that that is the Budget 
from the Administration.
    Ms. Kaptur. You obviously are aware that 202 does result in 
the construction of new units as opposed to putting vouchers 
out there for existing units. So this is a part of the budget 
that I have a particular problem with, knowing what has 
happened in my own community, particularly management over the 
long term.
    Mr. Frelinghuysen talked about good balance between those 
who have governing positions in public offices, and working 
with non-governmental groups, and I think some of the church 
related sponsorships in these 202's are fantastic, as well as 
in our nursing homes.
    And one of my concerns in this regard, I think I read 
somewhere in the testimony where it said that you were going to 
turn the oversight of this to State and local governments. Did 
I read that correctly?
    Frankly, that bothers me when I think about, especially 
since our local government cannot even get the restaurants 
inspected. Actually, every city has problems--in that regard. 
And trust the States on nursing homes?
    Secretary Cuomo. The proposal was, Congresswoman, that we 
would put it into the HOME program. The HOME program is then 
administered by the State or the city, depending on the area. 
And just as they now administer the HOME program, which is 
regarded as a highly successful program, they would be doing 
senior citizen housing within that program.
    Mr. Lewis. Excuse me, gentlelady. One might put a question 
like you are asking in terms of who would you like to have your 
mother's rest home inspected by.
    Ms. Kaptur. Yes, having been through many of these 
facilities.
    Mr. Lewis. If you would like me just tag on there for a 
moment.
    Ms. Kaptur. Go ahead, Mr. Chairman.
    Mr. Lewis. Mr. Secretary, earlier when Ms. Kaptur asked 
that question about what the Department proposed and what OMB 
disposed and then proposed, I must be straight with you, that 
other agencies--we have 22 agencies and commissions before us.
    The question that she poses has been asked many times by 
different members in different ways. I have never heard that 
response before.
    Secretary Cuomo. What have you heard, Mr. Chairman?
    Mr. Lewis. They have responded rather directly and said, 
no, or yes or otherwise. Maybe we will think about this 
overnight and have her ask it again.
    Secretary Cuomo. Okay.
    Ms. Kaptur. You know, when something is not broken, you do 
not try to fix it in some way that you have not thought out 
well. Before we tinker around within the 202 program and try to 
do something else with it, both on the management side and the 
number of units and so forth, I think this Committee really has 
to deliberate, Mr. Secretary.
    I think you want to deliver good housing to seniors. I have 
not noticed that there are fewer senior citizens coming of age 
in our country. In fact, the last time I looked there were more 
of them edging up, and they are going to live longer.
    So I would guess that the numbers on the waiting lists are 
going to get longer in this program.
    Secretary Cuomo. Yes. Congresswoman, if I could, I 
understand the need for the 202 housing, but if you were to put 
it on a scale, and balance it--if you wanted to do just number 
of units versus need, if you put the 202 on one side, and the 
tough choice between construction and vouchers, and on the 
other side you put 5.3 million families, of which our proposal 
only suggests 100,000 new vouchers, against 5.3 million, no 
construction.
    One hundred thousand vouchers against the base of 5.3 
million. That is our total proposal. I would be curious as to 
hear which way you think the scale tips.
    Ms. Kaptur. In terms of whether----
    Secretary Cuomo. Resources versus need. Because that is the 
decision we were making. Our budget--we were only asking for 
100,000 new vouchers, against a need of 5.3 million worst case 
housing needs.
    We have $400 million in economic development, when you have 
cities who do not have a tenth of the jobs they need for people 
coming off welfare.
    We only put in $327 million more for homeless, which we 
discussed this morning. That is mentally ill, that is domestic 
violence, that is substance abuse. And the cost of the 202 
program is about $580 million, more than the homeless increase.
    And our proposal actually gets more units using vouchers 
than you are going to get through 202 construction. So my only 
point is that these are all very touch choices, but they are 
not black and white choices either.
    Ms. Kaptur. You do not get additional housing units out of 
it in the country.
    Secretary Cuomo. You do not get additional new construction 
units, but you are not getting any additional new construction 
units for the 5.3 million people.
    Ms. Kaptur. I would not disagree with you at all there.
    Secretary Cuomo. Okay.

            Credit and Financial Services for Public Housing

    Ms. Kaptur. I will ask that question again tomorrow, Mr. 
Chairman. I wanted to ask you, last year I had inquired about 
HUD's role in providing credit and financial services for 
public housing facilities in disadvantaged neighborhoods.
    And I am curious as to whether HUD, over this past year, 
has made any efforts in that regard. In fact, I think I asked 
Secretary Cisneros this same question. And whether or not there 
are, especially in view of welfare reform, affirmative efforts 
being made in conjunction with the National Credit Union 
Administration, and others to get terminals in these sites, and 
to provide credit counseling, et cetera, for families.
    Because I would just remind the Committee and the 
Secretary, that there was a time when if you tried to save 
money, under the old welfare system, you were discouraged from 
doing that.
    And I remember when I first arrived in Congress, I had this 
bright idea of trying to create homeowners out of people who 
had been renters. And I said, great, we will put it on a 
sliding scale. For every dollar somebody saves who is on 
welfare in public housing, we will match it by three, and we 
will do a sliding scale, we will do a second mortgage.
    They said, well, you cannot do that, because people in 
public housing are not allowed to save money. This is the 
craziest system I ever heard of. How are you ever going to get 
people out?
    Secretary Cuomo. Yes.
    Ms. Kaptur. And so my question really is to what extent has 
anyone at HUD, especially the Credit Union people who are used 
to doing a lot of consumer counseling, making those services 
available. Have you got any star places in the country one can 
look to that have really put terminals in all of their 
facilities?
    Secretary Cuomo. Congresswoman, in general, the entire 
Department has moved more towards the economic development 
side. In the presentation I did this morning, I said we want to 
stress the U-D in HUD, the urban development. Given the way the 
economy is going, and the demands from welfare reform.
    We have the EDI proposal, Economic Development Initiative 
proposal, which is relatively new for the Department. We are 
seeking $400 million more there. We have redone the CDBG 
program, so it is more easily used as an economic development 
program.
    And we have the EDSS, Economic Development and Social 
Services program under Public Housing, which does economic 
development in public housing. Credit unions, micro-enterprise 
loans, community development banks, cooperative forms of 
financial management are all eligible under any of those 
programs.
    We have not pushed credit unions, per se. We have done a 
lot of work with community development banks as a general 
framework--micro-enterprise under their Grameen type programs 
within that rubric, but no work that I am aware of with credit 
unions per se. But it is eligible under any of them.
    Ms. Kaptur. I am a big credit union supporter, and I have 
lectured others, as they are forced to listen to me during 
their testimony on this subject. And I tried to convince the 
Clinton administration of this a long time ago before they came 
out with that CDFI proposal.
    But I think credit unions are the best community 
development financial institution we have in the country, with 
a very long history and track record. And lots of volunteer 
effort, lots of free counseling to those who would want to move 
into this.
    And if you take any community, and I like to use Monsignor 
Linder up there in Newark, because I have just been so 
impressed with the credit union that was chartered up there, 
which is a community development credit union, within that 
area, even putting a terminal in the local supermarket, and 
that whole area had been redlined for years.
    But you start putting these terminals in the seniors 
buildings, 202 projects, the supermarket where the local people 
shop and so forth--all of a sudden, you are capturingevery 
welfare dollar, every veterans' dollar, every subsidy dollar that goes 
back to work, in those communities for small loans, for college loans, 
whatever and ultimately for mortgage loans.
    And I would also point out to the Secretary that I have 
heard, although I cannot verify this, that in some places in 
the country where this has been tried, if you have an 
individual who sits on a local housing board who may work for a 
bank in the private sector, they do not recuse themselves from 
votes when the local authority tries to initiate a credit 
counseling service, or a local credit union.
    And I just think the Secretary would be well advised by 
this member to look into this, and to make sure that credit is 
captured on behalf of those who need to pull themselves up the 
ladder of economic opportunity.
    And I think HUD can really encourage its developments 
around the country to be engaged in this, and there are a few 
examples that I know exist where this is happening.
    Secretary Cuomo. Congresswoman, I agree with you on the 
concept of the credit union, because it meets both needs that 
we are trying to accomplish. Number one, it brings economics 
into that neighborhood. Very often you cannot find a bank, or 
any financial institution in the entire neighborhood. People 
have to go to these check cashing places, and pay exorbitant 
fees.
    So it brings in an economic system. And it also brings a 
community development system. The credit union, by definition, 
creates community. There is a mutuality, which is the same 
thing the Grameen Bank actually gets to.
    It is interesting, the parallel. Grameen Bank just said we 
are going to be co-signatories, as the fundamental premise, and 
we are now bound--we are inter-connected, we are inter-related, 
we are inter-dependent through a financial mechanism. That is 
what a credit union does.
    But we will do more work on it over this coming year, and I 
will report back to the Congresswoman as she sees fit. But I 
agree with the overall concept and the thrust.
    Ms. Kaptur. Within the Credit Union Administration, the 
Chairman and others here helped us to create this special 
Community Development Credit Union Revolving Loan Fund, where 
the interest now--it's over $6 million, which is not a lot, but 
it does a lot of good--and technical assistance can come off 
the interest from that.
    That can have an impact in a number of these neighborhoods. 
So it is a very specialized type of credit union within the 
broader array of credit unions that exist.
    Mr. Chairman, is my time up?
    Mr. Lewis. I believe we were going to try to let the 
Secretary out sometime near 4:00 o'clock, and we had a vote at 
the end of the lunch period. But we probably should wait until 
tomorrow and not do too much more.
    I want to do one more thing before we leave. In the 
meantime let me say to the gentlelady that I have enjoyed these 
very provocative questions, and I hope that we might revisit 
this before we have the CDFI hearing next year, and maybe you 
would remind me of this discussion.
    Ms. Kaptur. Thank you, Mr. Chairman.

                     Decrease in IG Funding Request

    Mr. Lewis. Thank you.
    Mr. Secretary, what I would like to do now, if you will 
stay where you are, but perhaps make room, I would like to have 
the IG come up for just a moment.
    Mr. Secretary, so that you will know, the Members on both 
sides of the aisle were loaded with questions today, and I 
noted them writing additional questions as we went forward with 
the discussion. Tomorrow should be very interesting.
    But moving right along, Ms. Gaffney, I appreciate a little 
time here. The Administration's request for salaries and 
expenses for the Inspector General's Office was not increased 
for inflation as were the other salary and expense accounts.
    Furthermore, the Inspector General is mandated by Congress, 
which provides $10 million in fiscal year 1998 to carry out the 
Urban Fraud Initiative. Consequently, the request results in an 
actual decrease.
    Is the decrease in funding for the Inspector General's 
Office due to decreased duties or responsibilities?
    Ms. Gaffney. Absolutely not. There is, to my knowledge, no 
basis whatever for that decrease. A decision was simply made to 
do that.
    Mr. Lewis. All right.
    Ms. Gaffney. Unrelated to workload.

                         urban fraud initiative

    Mr. Lewis. There are areas of special interest that the 
Committee has provided for the Inspector General over time 
here. Would you take a moment and indicate to us what plans 
does the IG's Office have for the Urban Fraud Initiative?
    Ms. Gaffney. We have selected three locations. The idea, 
which was really an idea that you helped us come to, is to go 
into targeted locations and instead of looking at samples, 
cases, look broadly at all HUD funding and activities in the 
location over a period of time, to look for pervasive fraud 
schemes.
    Mr. Lewis. Ms. Gaffney, I would prefer that we not discuss 
where those locations are at this moment.
    Ms. Gaffney. Okay. We have selected the locations.
    Mr. Lewis. I know that. I would prefer that we not have 
that location at this session. I think there are some other 
things we need to talk about.
    But in the meantime, please proceed.
    Ms. Gaffney. We have selected the locations. We will next 
week be selecting the team leaders and the deputy team leaders. 
We have announcements out for the next layer of staffing. We 
have acquired space in the three locations for the teams.
    I expect that the teams will be up and running early this 
summer. We have also embarked, as part of that initiative, on a 
major computer endeavor, which for the first time will truly 
enable us to use analytic techniques to identify fraud and to 
track people through various schemes and through locations.
    We, just yesterday, got a series of bids for people who 
will help us construct requirements for that system, and I 
think we will have issued an award, hopefully, for the 
construction of that system by the end of this fiscal year.

                          operation safe home

    Mr. Lewis. What are the results of Operation Safe Home?
    Ms. Gaffney. The results of Operation Safe Home are, let's 
see. There are two major parts of Operation Safe Home. The 
first is fighting violent crime in public housing. And the 
second is trying to combat equity skimming in multi-family 
insured housing.
    In the area of violent crime, we have now been engaged--the 
HUD-OIG agents--in more than 300 task forces with Federal, 
State and local law enforcement targeting public and assisted 
housing.
    Those task forces have made more than 14,000 arrests. This 
is, I must tell you, Mr. Chairman, a huge success story.We are 
a little office, but the Federal Government was ignoring crime and 
drugs in public housing. They did not even recognize it for what it 
was, and we have been able to change that focus.
    The FBI, the DEA, the Marshals, the Secret Service, they 
know what we are, they know we have to protect this investment. 
It is really paying off. I am tremendously proud.
    The second part is equity skimming in insured public 
housing. There we are going after owners and management agents 
who siphon off funds from the project illegally instead of 
putting the money back in the projects. Projects deteriorate.
    Physically, crime moves in. We have targeted some of the 
biggest people in the industry, and as part of this process we 
have to date recovered more than $70 million. But the important 
thing is it is a consistent message.
    We are going after this. We are going after it, and the 
industry is very upset with us. They now are doing training 
sessions in how to fight the HUD OIG.
    Mr. Lewis. Well, I just say I was going to ask you the 
question of the number of dollars. And I would hope that the 
Members would focus on this piece of our overall hearing and 
testimony today.
    Mr. Stokes, we are about to close down the hearing for 
today. We have extended the Secretary's time longer than I 
expected. But we asked the IG to come up in order to talk about 
a few areas, including the Urban Fraud Initiative, as well as 
Operation Safe Home.
    And that testimony kind of becomes the tip of the iceberg, 
at least of my interest. So I do not know if you have 
additional questions for the IG, or whether you want to extend 
this at another time. But it is a very interesting and 
apparently productive subject here.
    Mr. Stokes. Not at this time, Mr. Chairman. I do not have 
any questions.
    Mr. Lewis. I notice that you stayed around all day today 
and that you will probably be around tomorrow as well.
    Ms. Gaffney. I certainly will be.

                       affirmative action at hud

    Mr. Lewis. So we may further discuss this privately and get 
back with you.
    Mr. Secretary, we are going to be back at 10:00 o'clock in 
the morning.
    I did want to add just one additional question. I did not 
save this until Mr. Stokes came in the room, because I did not 
know he was coming back. But I would like to end the session by 
asking you this question.
    I have gone through your portfolio of personnel, et cetera, 
and I do not see the kind of data I was looking for relative to 
the status of HUD's condition as it relates to a broad topic 
that one might describe as affirmative action.
    But I would nonetheless like to know what you can tell me 
here, and maybe add for the record, relative to HUD's 
employment base, as it relates to people who are employed of 
minority background, African-American, Asian, Hispanic, women.
    I look at the audience, and it is interesting, it is hard 
for me to recognize all my Hispanic friends.
    Secretary Cuomo. Well, Mr. Chairman, we are very proud of 
the record we have. I will get you the numbers on both career 
and political. But I happened to be with the Hispanic Caucus 
last week, so I recall the numbers off the top of my head.
    We had one of the highest levels of Hispanic appointments 
among the political officials, which are the ones directly 
within my control, of any Federal Department. Actually, number 
one or number two, of any Federal Department in number of hires 
among Hispanic people.
    So we were very proud of that. But I will come tomorrow 
morning at 10 o'clock with the numbers on the career staff by 
those breakouts, if it pleases the chairman.
    Mr. Lewis. I would be interested in that. That would be a 
good way to start our hearing, and I would be especially 
interested in what you would describe for us, whatever level 
you want to describe it at, but I think you will get the drift.
    I would be interested in those break outs specifically as 
they relate to executive level staff.
    Secretary Cuomo. Executive and by office, so we can see 
exactly who is where.
    Mr. Lewis. That would be very helpful.
    Mr. Stokes. Mr. Chairman, I would just like to applaud you 
for the leadership you have given in this particular area.
    I think it is so important, coming from the Chairman of 
this Committee, but not just for this agency, but for every 
agency coming before us, to show a concern as has been 
evidenced by numerous hearings.
    And so I look forward to tomorrow morning, Mr. Chairman.
    Mr. Lewis. It should be known in the record, Mr. Stokes, 
that you have not made an impression on me, but Jay--that is, 
his bride--has had a big impact on me. [Laughter.]
    Mr. Lewis. Anyway, it has been a very worthwhile day, and 
we appreciate you all being with us for this extended period of 
time. And for now we are adjourned until tomorrow morning at 
10:00 a.m. here, in this room.
    Secretary Cuomo. Thank you.
                                          Thursday, March 26, 1998.

                         staff diversity at hud

    Mr. Lewis [presiding]. The meeting will come to order.
    Good morning, Mr. Secretary.
    Secretary Cuomo. Good morning, Mr. Chairman.
    Mr. Lewis. I anticipate, Mr. Secretary, that members will 
begin to arrive here shortly, and when there are more members 
here, we may recess the committee for a very short period of 
time to have a private conversation.
    But in the meantime, yesterday, as we left each other, 
among other things, there was on the table a prospect of 
discussing diversity in the Department and what has been not 
only the policy, but the development over time in the 
Department. So why don't we begin there?
    And, Mr. Stokes, if you'll share this time with me--we're 
anxious to hear the Secretary.
    Mr. Stokes. I'll be glad to, Mr. Chairman.
    Secretary Cuomo. Well, thank you very much, Mr. Chairman. 
It's a pleasure to be here again, Ranking Member.
    The diversity story at the Department is a story that we 
are very proud of. There are a number of ways that we can 
compare the information. But three quick comparisons: If you 
look at HUD versus the overall civilian labor force, HUD is 
about 40 percent male, where the civilian labor force is about 
54 percent male. HUD is about 33 percent African American, 
where the civilian labor force is about 10 percent African 
American. HUD is about 6.5 percent Hispanic employees; the 
civilian labor force is about 8 percent. On the PAS's, which 
are the senior political appointees, presidential appointees, 
about 50 percent are Caucasian, about 25 percent African 
American, about 25 percent are Hispanic.
    And if you look at how HUD compares to the other Cabinet 
departments, HUD is actually second among all the Cabinet 
departments in political appointees among African Americans. 
We're third among all Cabinet departments in total number of 
Hispanic appointees, and third in total number of female 
appointees.
    Compared to other Cabinet departments, we are about 48 
percent women; other Cabinet departments are about 45 percent 
women. We're about 20 percent African American; other Cabinet 
departments are about 13 percent African American. We're about 
11 percent Hispanic, whereas the other Cabinet departments are 
about 7 percent.
    Mr. Chairman, if you compare us to the civilian workforce, 
we do exceptionally well. If you compare us to the other 
Cabinet departments, we do exceptionally well. And when you 
look at the senior political appointees of the Clinton 
administration, we do even better.
    We obviously have these numbers for you, Mr. Chairman, and 
other cuts of them, if you would desire.
    Mr. Lewis. We would appreciate having those in the record.
    [The information follows:]


[Pages 131 - 132--The official Committee record contains additional material here.]



    Mr. Lewis. Mr. Stokes.
    Mr. Stokes. Thank you, Mr. Chairman. Just a couple of 
questions of the Secretary.
    Can I have those figures again on women?
    Secretary Cuomo. Women, we are third among the major 
Cabinet departments, 15 major Cabinet departments, we're third 
in the total number of women. This is by percentage. Some 
Cabinet departments are bigger than HUD, not necessarily 
better, but bigger. We're third in the number of women by 
percentage. We are 48 percent female, whereas the other Cabinet 
departments have an overall of 45 percent.
    Mr. Stokes. And in terms of the women, do you have a 
breakdown in terms of African American women, Hispanic women, 
et cetera?
    Secretary Cuomo. I do not have that. I do not have that 
here, Congressman, but I can get that for you. Women, HUD 
versus the civilian labor force, is about 59 percent versus 45 
percent.
    Mr. Stokes. All right, would you get those figures for us 
for the record----
    Secretary Cuomo. Yes, sir.
    Mr. Stokes [continuing]. And that breakdown?
    [The information is on pages 131-132.]
    Mr. Stokes. Now what about SES positions? You didn't 
mention those. Do you have SES categories?
    Secretary Cuomo. We have SES career and noncareer. We have 
both.
    Mr. Stokes. All right.
    Secretary Cuomo. SES executive, noncareer, 48 percent, 
male; 51 percent, women; 22 percent, African American; 7 
percent, Hispanic.
    Mr. Stokes. On the 51 percent women there, do you have a 
breakdown there of----
    Secretary Cuomo. Of what, Congressman?
    Mr. Stokes. African American women, Caucasian women----
    Secretary Cuomo. I do not have----
    Mr. Stokes [continuing]. Hispanic women?
    Secretary Cuomo. I do not, but I can get that for you.
    Mr. Stokes. All right.
    [The information is on pages 131-132.]
    Mr. Stokes. Now you said SES noncareer?
    Secretary Cuomo. SES noncareer, are the numbers I just gave 
you, sir.
    Mr. Stokes. All right, now is there another category of 
SES?
    Secretary Cuomo. There's SES career appointees.
    Mr. Stokes. All right, can we have those?
    Secretary Cuomo. That is 31 percent, female; 28 percent, 
African American; 4 percent, Hispanic. And these are rounded-
off numbers that I'm giving you, obviously, Congressman.
    Mr. Stokes. And I suppose there also you do not have a 
breakdown in terms of the female----
    Secretary Cuomo. Not with me, but I will get it for you, 
sir.
    [The information is on pages 131-132.]

                   affect of downsizing on minorities

    Mr. Stokes. In terms of your reductions of the agency, 
which are being done by all the agencies, of course, one of the 
problems that comes up with reference to minorities is 
oftentimes they are the last hired, and therefore, when 
reductions come along, they're the first to have to go out on 
the reduction aspect of an agency. Are you finding that to be a 
problem at your agency?
    Secretary Cuomo. We are not finding, Congressman, any 
disproportionate impact on any racial group from the 
downsizing. Now our downsizing has been through buyouts. We 
have not laid off anyone; we don't plan to lay off anyone. So 
these are people who opted to leave because the buyout was an 
incentive. But we don't have any evidence whatsoever of any 
racial disparity of people who are taking the buyout. But, 
again, we're not laying off anyone. So it's not a case of first 
in, last out.
    Mr. Stokes. Okay. Thank you very much, Mr. Secretary. Thank 
you, Mr. Chairman. I appreciate your inquiry into this area.
    Mr. Lewis. Thank you, Mr. Stokes.
    Let me say, first, Mr. Secretary, that I appreciate the 
response, but I also am very appreciative of the pattern of the 
Department. I have for some time been working in my own caucus. 
We have Democrat and Republican caucuses during the year, and 
within my own I've been on the forefront of attempting across 
the country to get our people to stimulate and give support to 
women running for Congress to change the pattern of the 
Republican conference. If you look at the whole Congress, I 
must say, in terms of these issues, we don't compare with a lot 
of the work that's being done in our departments and otherwise, 
but that's almost ``a smiling aside,'' if you will. But in the 
meantime, it's a very important item and issue. The Department 
is to be congratulated the effort that's been made over some 
time.
    Mr. Stokes had been a leader in terms of at least 
discussing these matters on the public record. While he is 
leaving us this year, I don't think there's any chance the 
issue will go away insofar as this committee is concerned 
anyway. So I appreciate very much your response.
    Secretary Cuomo. Mr. Chairman, I appreciate that, and it's 
a story that we're proud to tell. As I mentioned, we are No. 1, 
No. 2, and No. 3 in number of Blacks, Hispanics, and women 
among all the Cabinet departments. So I'm very proud of that 
fact.
    And I thank this Committee for its leadership, and you 
personally, Mr. Chairman. Last time we were in this room you 
raised the same issue. That helped raise the awareness of it in 
the Department. You also at that time, Mr. Chairman, as I'm 
sure you'll recall, looked around the room when you were 
talking about the Native American programs, and at that time 
you remarked that you did not see a Native American at the 
Department of Housing and Urban Development. I would also point 
out, Mr. Chairman, if you looked around the room at the HUD 
staff this time, it would be different. We have Jackie Johnson, 
who now runs the Indian programs, and we thank you for bringing 
that to our attention.
    Mr. Lewis. You had her come visit me. [Laughter.]
    Secretary Cuomo. That was a coincidence, Mr. Chairman. 
[Laughter.]

                     minorities in key ig positions

    Mr. Stokes. May I raise one further question, Mr. Chairman?
    Mr. Lewis. Sure. Sure, Mr. Stokes.
    Mr. Stokes. I've been given a copy of a letter that was 
sent from Congress Elijah Cummings of Maryland to Congresswoman 
Maxine Waters, chairperson of the Congressional Black Caucus, 
in which he raises a question about the lack of minorities in 
key positions at HUD, and specifically, within the Office of 
the Inspector General. He says, ``Housing trade press have 
noted that several talented African Americans were passed over 
for positions at HUD, and the HUD staff have been frustrated by 
what appears to be a pattern of discrimination in hiring and 
promotions.''
    Can you respond to this with reference to the Inspector 
General's Office?
    Secretary Cuomo. I do not, Congressman, have numbers here 
office by office. I don't know if the Inspector General has----
    Mr. Stokes. Can the Inspector General give us some 
information on that? Ms. Gaffney.
    Ms. Gaffney. Mr. Stokes, I don't have the statistics with 
me, but I have just reviewed our affirmative action report for 
1997 and our plans for 1998. My recollection is, with respect 
to the civilian labor force, in the past year manifest 
imbalances that were eliminated in terms of representation of 
Hispanics and African Americans. We no longer have those 
imbalances. The remaining areas where we are below the civilian 
labor force percentages are, as I remember, Asian and Indian 
males and females. Overall, our percentage of women is 55, and 
all I can tell you is, with respect to Hispanics and African 
Americans, we are above the civilian labor force. But it was 
only in 1997 that we made those gains.
    Mr. Stokes. 1997? I appreciate what you're saying to us, 
and I know that you'll provide us with an accurate breakdown 
for the record.
    [The information in on pages 137-147.]
    Mr. Stokes. But let me just ask you this: At the top level 
of your Department, does that African American population there 
extend up to the top ranks in your office?
    Ms. Gaffney. We have--let me include me and the SES 
contingent----
    Mr. Lewis. You can't include you, no.
    Ms. Gaffney. I cannot include me? [Laughter.]
    All right.
    Mr. Lewis. No, you certainly can.
    Ms. Gaffney. Let me just talk about the SES. I'm sorry, I'm 
going to have to count them up in my head. We have one African 
American male; two white females, and four white males.
    Mr. Stokes. That's at the top level of your Department, did 
you say? All right. Well, if you'll provide us the breakdown 
for the record, I'd appreciate it.
    Ms. Gaffney. We surely will.
    Mr. Stokes. And I'd like to yield at this time, Mr. 
Chairman, to Ms. Meek.
    Mrs. Meek of Florida. Thank you, Mr. Stokes.
    Inspector General, I, too, have received some very negative 
reports regarding your office relative to your not having 
Blacks in the top management positions. The concerns I have are 
specifically centered upon African Americans and the fact that 
many of your investigations so far, which you are allowed to 
arbitrarily select as the Inspector General, were targeted 
toward cities where Black mayors were over those cities. Now 
whether or not that has any pattern or not--I did want to bring 
that to your attention. The fact is that I'm continually 
receiving this criticism of the office in terms of your 
relationship with African Americans, particularly in top 
management positions in your office, and it is something that 
as a member of this subcommittee I will continually have 
interest and concern in, whether it's African Americans or not. 
But at this point it happens to be African Americans who feel 
that they have been unfairly treated in many instances in terms 
of promotions and in terms of hiring in your office. I didn't 
get those criticisms of any other office in HUD.
    Ms. Gaffney. Mrs. Meek, I would just say to you that when I 
went to the HUD Office of Inspector General, diversity was a 
major emphasis and has continued to be a major emphasis. Our 
office, I think the whole makeup of the Office of Inspector 
General has changed dramatically in the last four years, but I 
will tell you this: In all honesty, there is a great deal of 
pent-up anger. There were people who worked in that office for 
10 or 20 years under circumstances that were not good, and that 
anger does not go away easily. I promise you I am doing what I 
can do.
    Mr. Lewis. I think the point that you're making is very 
important. We'll be discussing some of this in another venue in 
a few moments, but----
    Mrs. Meek of Florida. I thank the gentleman for yielding.
    Mr. Lewis. I appreciate it.
    Ms. Meek, I think it's important to say this: I've only had 
this job for three years, but I served with Mr. Stokes for a 
number of years, and we have been discussing this subject area 
for a long time. We've never--this is the first time I've ever 
heard us discuss specifically the IG, but I think it's healthy 
that we're doing this, and we should be doing it for all of our 
agencies. But, in the meantime, I don't know the history of the 
preceding four years, and we need to know more about that. So I 
appreciate your at least raising that specter. We'll try to 
make some evaluation independently as well.
    Mr. Stokes. If I might, Mr. Chairman, I might say to the 
Inspector General, Ms. Meek and I may want to meet with you 
regarding some of these matters that are being brought to our 
attention.
    Ms. Gaffney. I would be delighted, truly.
    Mr. Stokes. Okay.
    Ms. Gaffney. And I will provide you all the background I 
can. Truly, I would appreciate your help.
    [The information follows:]


[Pages 137 - 147--The official Committee record contains additional material here.]



    Mr. Stokes. Sure. Well, then, we'll certainly look forward 
to a chance to meet with you.
    Secretary Cuomo. And, Congresswoman, I promise you an 
office-by-office breakdown, because it's important for the 
Department overall to have the right representation, I want to 
make sure it is in every office, and we'll be working on that 
also. We will not tolerate any office at HUD where there is not 
affirmative action and people of all racial makeups moving up.
    Mr. Stokes. Chairman, this has been a good discussion in 
this area.
    Mr. Lewis. I think it has been. Thank you.
    Mr. Stokes. I appreciate your indulgence on it.
    Mr. Lewis. Yes. Now I'm going to--not all the members are 
here that I'd like. Some may very well come in here shortly, 
and if so, I'll have them for a very short time, but it's 
unusual, and I hope that all in the audience will bear with us. 
I'm going to recess the committee for a few minutes and ask the 
members to go with me to a meeting room across the hall, so we 
can have a discussion.
    [Recess.]
    Mr. Walsh [presiding]. All right, we'll re-begin the 
hearing, and the chairman should be back presently.
    We'll go now to questions from the gentleman from 
Wisconsin, Mr. Neumann.

                    homeownership goals for fha fund

    Mr. Neumann. Thank you, Mr. Acting Chairman.
    There's two areas that I'd like to address this morning, if 
we could, and I know there was some discussion on it yesterday. 
I saw it both on C-SPAN and I've read your testimony regarding 
it. If I could start with the FHA loan limit discussion----
    Secretary Cuomo. Please.
    Mr. Neumann. I recently read an article--I had it faxed to 
me from the magazine, and in the article they quoted you as 
saying something to the effect that only 5 percent of new homes 
are financed with FHA-insured mortgages, and that you're 
expecting the new loan ceiling to qualify 3 million new 
homeowners over the next five years. They go on to say that you 
plan to restore FHA to its ``former glory.'' The agency 
accounted for 24 percent of home mortgage volume in 1970, down 
from 45 percent in the nineteen forties. But rising home values 
eventually outpaced the FHA loan limits, and by 1996 your 
market share dropped to 10 percent.
    Would you explain to the committee, first off, if this is 
being reported accurately, and this was in the Professional 
Builder magazine. I did see the article myself. What are your 
thoughts in terms of what portion of the total number of home 
loans FHA should be involved in and what's your goal as you 
look forward?
    Secretary Cuomo. Yes, it's my pleasure, Congressman. The 
article, the way you paraphrase it, is, by and large, accurate. 
Somewhat misleading might be the phrase that you used, ``return 
FHA to its former glory.''
    Mr. Neumann. No, it's in the article. I didn't----
    Secretary Cuomo. No, I understand that. If ``former glory'' 
is interpreted to mean FHA should be 40 percent of the market, 
obviously, I didn't mean that. FHA was about 40 percent of the 
market at one time. Given the sophistication we have as a 
finance industry now, you don't need an FHA at 40 percent of 
the market, but you do need the FHA to do the job that you need 
done. And the job of FHA is to help people who the private 
market is not serving.
    We had a discussion yesterday. It is inarguable but that 
there is a disparity in homeownership rate between city and 
suburb, between Black and White, Hispanic/White, et cetera. 
That disparity is unacceptable, in our opinion. We want more 
homeownership for the Nation. We want more people in homes, we 
want to use FHA as a vehicle to get to that population that the 
private market does not serve.
    Our loan limit proposal targets that area--people who could 
buy a home who are unserved by the private market, who could be 
in a home because of FHA. One out of eight people right now is 
turned down by the private market, who we believe could be 
qualified. That's where we want to use FHA----
    Mr. Neumann. So your intent, then, would be to go from 10 
percent of market share to 22 percent of market share, give or 
take? Let's see, one-eighth is----
    Secretary Cuomo. No, not even close to it.
    Mr. Neumann. Twelve plus 10 would be----
    Secretary Cuomo. Our basis now is about 850,000 loans, give 
or take, per year. This proposal the way it's scored by both 
CBO and OMB would only increase about 50,000 loans per year. So 
it is not, as a volume of business, it's not overwhelming.

                        fha loan limit increase

    Mr. Neumann. Is your proposal to raise--to have one 
constant rate nationwide of $227,150?
    Secretary Cuomo. That is the proposal, yes. Misleading, if 
I might, Congressman, in it sounds like we're saying in the 
two-thirds of the Nation where the limit is now $86,000 we 
would begin making loans at the value of $227,000. Obviously, 
that's not what we're talking about. The $227,000, the single 
limit, is an operational issue. The optics on it are very bad. 
It makes it sound like we're going from $86,000 to $227,000, 
which is not the case.
    Mr. Neumann. Let me--and express this for members that are 
here also--express my grave concern with this proposal, in 
spite of the fact that it's supported by two organizations that 
I'm very closely affiliated with because it's my business 
background--that's realtors and homebuilders. The concept of 
the government, through FHA, stepping back in and being more 
involved in the industry I was in and intend to go back to at 
some point in the future is a very troublesome concept to me.
    Private mortgage insurance in the private sector is doing a 
great job of providing low downpayment loan opportunities for 
many, many, many people in the private sector. I have a grave 
concern any time we expand a government program that would 
replace private sector industry that now exists through 
competition. My fear in this proposal--and, again, in spite of 
what I have heard from both homebuilders and realtors, two 
groups that I am very familiar with--my underlying fear is 
that, as the government steps back in and starts providing 
these loans that would have otherwise been provided from the 
private mortgage insurance. I know you say your intent is 
that's not where they're going to come from, but the facts are 
a certain portion of what you're talking about are going to 
come from mortgages that would otherwise be provided through 
private mortgage insurance.
    When I was in the building industry, private mortgage 
insurance was the key to providing opportunities for our 
homeowners to buy our homes. That was the key. It was not FHA. 
It was not the government. It was private mortgage insurance 
that allowed our low downpayment people to buy one of our 
homes. A huge portion of my business--we were building about 
120 homes a year--needed private mortgage insurance. And my 
fear--and to the members who do not come from the housing 
industry--my fear with what they're suggesting we do here is 
that the negative impact on private mortgage insurance is going 
to have more of a negative impact on homeownership in this 
country than the positive impact that you're setting out to do. 
It's a classic case of where the government sets out to do 
something that on the surface sounds good, proper, and a great 
objective, but the outcome of what they do is that it shuts 
down a private sector portion of the market that is absolutely 
instrumental in the survival of real estate.
    So I would just express to you my grave concerns in this 
area, and my concern that what you do is going to, in fact, 
impact private industry through the private mortgage insurance 
companies. It seems to me that when I go back to practice 
homebuilding again, which I intend to do perhaps as soon as 
next year, and if not, somewhere down the line--whatever the 
people decide--but when I go back into that private sector 
industry, I know I can survive without you. I also know I 
cannot survive without private mortgage insurance, and I would 
encourage your agency to take a second look at this proposal 
and see if you can't come up with something that is not going 
to impact the private mortgage insurance companies as much as 
what you're suggesting.
    And if I could throw out a suggestion that came from one of 
the folks that was in my office yesterday--it was a realtor. 
That realtor lives in the corner of three counties. So he's 
working in three counties in Wisconsin, has three different 
loan rates--which is very difficult to deal with.
    The suggestion came that perhaps what we could set the loan 
rate per State, but at different levels. So don't go nationwide 
with the $227,000/$150,000 number, but perhaps to do something 
in between here. That way the State of Wisconsin all gets one 
number at something that's reasonable for the State of 
Wisconsin.

                       number of fha loan limits

    Secretary Cuomo. Well, Congressman, two quick points, if I 
might: No. 1, on the loan, single loan, limit, we now have 250 
loan limits nationwide.
    Mr. Neumann. Right.
    Secretary Cuomo. It's very difficult to administer. All the 
realtors will tell you----
    Mr. Neumann. Right.
    Secretary Cuomo [continuing]. That it makes FHA much less 
competitive in the marketplace because it's too cumbersome to 
deal with.
    Our goal would be a single loan limit like the GSE's have. 
That's the standard in the trade. Our goal is,obviously, the 
optimum, and I could see someone saying that at least 50 limits would 
be better than 250 limits.
    I am at a loss, though, Congressman, why you conclude that 
the PMI's would be hurt by the FHA loan limit increase. Our 
premise, as you stated correctly, is that these are people who 
the PMI's would not serve.
    Mr. Neumann. My point is that as you increase that loan 
amount, you are going to start picking up people who builders 
like myself would have figured out how to serve them through 
the private sector. If we get into a $200,000 price range in 
the State of Wisconsin and you bring me a buyer that only has 3 
percent down, by the time I've got that buyer's home built I 
would have figured out how to have that buyer at 5 percent, and 
we would have gotten them into a loan that would have qualified 
under private mortgage insurance. This is the real world.
    And when we were doing this, we figured out how to get them 
so they did qualify for private mortgage insurance. By opening 
this door that you're now proposing here, we wouldn't do that. 
We'd put them in an FHA loan.
    My point is, the outcome there is a loss of a mortgage that 
would have been handled in the private sector, and the new 
mortgage that is now held in the public sector. That's where 
I'm coming from on this.
    Secretary Cuomo. I understand, but how about the 
reciprocal, Congressman, which is there are people now who 
can't get a mortgage----
    Mr. Neumann. Right.
    Secretary Cuomo [continuing]. Who could get a mortgage with 
FHA.

                        respa--revised form 97-1

    Mr. Neumann. And to the extent that we're talking about 
some of the innercity areas, where I have heard from 
homebuilders that these limits do not work for them, I support 
your efforts in those areas. I hate to see us jumping from 
$86,000 to $227,000 in the State of Wisconsin. I guess that's 
what I'm expressing. I would certainly appreciate you taking a 
look at it and considering a state-by-state level.
    I have a second area, if I could bounce into it fairly 
quickly, and it also relates to business experience that I come 
from. When we were building homes, one thing that we found to 
be to our buyers' advantage would be for a mortgage broker to 
actually come to our place of business and provide our buyers 
with the service of doing the loan application onsite. So we 
would literally be in a model home; the mortgage banker or 
mortgage broker could come right to the home, do the 
application, provide the service to the client that the client 
didn't have to come back during a working day and go to a bank. 
So they were providing this service.
    What I'm understanding is that RESPA prohibits referral 
fees for these mortgages, which I understand, but it does allow 
for payment of services actually performed. Now the mortgage 
broker that came to our homes and took the loan applications 
onsite on a Sunday, so my buyers didn't have to take off of 
work to go to the bank on a Monday, did provide a service for 
our buyers.
    My question is, I understand that there is a form policy 
statement 97-1 that's been drafted by your agency that 
recognizes the services of a mortgage banker--broker, rather--
I'm sorry, a mortgage broker, that recognizes these services as 
a service as opposed to a referral fee. What's happening out 
there in the real world right now is there are lawsuits being 
brought against mortgage brokers, trying to get back the broker 
fees. The debate is whether it's a referral fee or a fee for a 
service provided. Again, coming from the industry--this is 
where I live and where I'm eventually going back to--this is 
clearly a service, in my opinion, and I'd just appreciate your 
comment on policy statement 97-1.
    Secretary Cuomo. Well, Congressman, in general, I believe 
we come from the same philosophical point of view. If the 
broker is performing a service, they show up on a Sunday and 
they have a meeting with clients, they left their home, they 
left their family, that's a service; they should be compensated 
for that service. We're trying to draw the distinction between 
a referral fee, which is where they're not providing any 
service--this is just a referral of business--versus fair 
compensation for a service rendered.
    We just put forth a mortgage broker rule for comment. We 
have 9,000 comments in the Department, and we are now in the 
process of going through these comments. They raise many of the 
points that you just raised, Congressman, and we'll be 
continuing to review them over the next several weeks. 
Hopefully, in a month or so, we will be at a point where we can 
have discussions--it would be my pleasure to have the 
discussions with you, if you're interested--on exactly these 
types of issues and start to draw our conclusions.
    Mr. Neumann. Okay, I'd sure appreciate it if you could keep 
us posted. It would be nice, Mr. Chairman, if we could reach 
some sort of a solution to this particular problem before we 
mark up our appropriations bill this year so that we could 
possibly address the problem otherwise in the bill.
    Mr. Lewis [presiding]. Let me say that I think it's very 
helpful to the Committee. Frankly, I would have guessed, Mr. 
Neumann, that you might have been coming down on a different 
position on this issue. The dialog that you've carried forward 
here was very helpful. This latter point, no question the 
Committee will be discussing it further before we get through 
the process. In the meantime, I think we probably ought to move 
on, but I would welcome additional questions regarding this 
because of your very special background and appreciate your 
participating.
    Mr. Neumann. Thank you, Mr. Chairman.

                         section 8 certificates

    Mr. Lewis. Mr. Stokes.
    Mr. Stokes. Thank you, Mr. Chairman.
    Mr. Secretary, how effective are section 8 certificates 
involved in meeting housing needs? In particular, do you find 
that some people are unable to use their certificates because 
they cannot find landlords who will accept them? And tell us, 
do you have any data regarding what percentage of certificates 
and vouchers are turned back unused because the recipient could 
not find a place to use them?
    Secretary Cuomo. As a general rule, Congressman, the 
section 8 vouchers work well. They allow mobility. They allow 
people to move where they would like. Especially now with the 
pressures of welfare reform, we think mobility is very 
important. And by and large, they work, and in most markets 
they work.
    If you take New York City out of the equation, they're 
successful in about 87 percent of the cases where people go to 
use vouchers. New York City happens to be an anomaly nationwide 
in that the success rate for vouchers tends to be much lower. 
It's only about 62 percent of the time. But even when you 
factor in New York, it works well about 80 percent of the time. 
And in the program, Congressman, there is a caveat that says, 
if we believe the voucher isn'tworking, because the payment on 
the voucher is too low, we can raise that payment, and we have done 
that in some cases; San Francisco is a notable one.
    But, by and large, it works well. It's not perfect by any 
stretch of the imagination, but the numbers would say it's a 
success.
    Mr. Stokes. Recent VA/HUD appropriation bills have 
contained a provision which required a three-month delay 
between the time a section 8 voucher or certificate is turned 
in and the time it's reissued to a new family. What has been 
the impact of this 3-month delay? Can you tell us, does it 
reduce the number of families you can assist and lengthen 
waiting lines? And do you favor continuing this policy?
    Secretary Cuomo. The 3-month delay, Congressman, is 
basically a budgetary device. It saves us three months' worth 
of funding, obviously. It, at the same time, has a very real 
cost, which is fewer families are getting housing. This harkens 
back to the discussion of yesterday, where we're the Department 
of Housing except we, as a Nation, have gone out of the housing 
business. We're not producing more housing, not in section 8, 
not in public housing. Our affirmative step into housing this 
year is only 100,000 vouchers against a base of 5.3 million. 
So, when you add the delay on top of it, it makes a bad 
situation worse. We estimate that it stops about 40,000 
families from getting the assistance they need, and we're 
against it.
    Mr. Stokes. So, tell us, what do you do when you find a 
section 8 housing project in poor physical or financial 
condition or find an owner who's been abusing the program? Are 
there actions HUD can and does take, short of terminating 
section 8 housing assistance and giving vouchers to the 
residents? And tell us, what efforts does HUD make to prevent 
the displacement of residents in these situations?
    Secretary Cuomo. As the Congressman knows, we're commencing 
a nationwide evaluation system of our entire portfolio, which 
we don't have currently. It will be a physical assessment, 
combined with a financial assessment. We'll then rate and rank 
the entire portfolio. When there is a problem with a project, 
we step in. If people are living in poor conditions, we step 
in. If there's a possibility of fraud or waste on the project, 
we step in. The last thing we want is to have to, what's 
called, voucher-out the project, where we give people vouchers 
and we have them move out. That is the last thing we want to 
do. We don't want to lose any housing stock, if possible. We're 
not building any; we don't want to lose any.
    At the same time, we're not going to be held hostage by the 
owners to that possibility. At one time the owners knew how 
desperate we were for housing stock, and that we didn't want to 
lose it. So they would be recalcitrant in improving the stock. 
So we won't be held hostage. We want the buildings fixed. We 
want a fair deal for the taxpayer. But we want to save those 
units whenever possible.

                 section 8 vouchers for welfare to work

    Mr. Stokes. Let me ask you this: In my community, as well 
as around the country, people are beginning to try to evaluate 
how welfare-to-work is working. You mentioned in your 
presentation yesterday some things about welfare-to-work, but, 
in particular, you're proposing that 50,000 new section 8 
vouchers be provided specifically to help people make the 
transition from welfare-to-work. Tell us the rationale for this 
proposal. How would the vouchers be allocated? Would there be 
any mechanisms for coordination between this housing program 
and other welfare-to-work efforts in various communities?
    Secretary Cuomo. Congressman, a couple of quick points, if 
I might: No. 1, welfare reform is the right philosophy; it's 
the right goal, I'm sure we all agree at this point. I have a 
personal anxiety level about how well it can work. It is a 
grand experiment, but with tremendous consequences on both 
sides.
    There was an article recently in The Washington Post and 
The New York Times that suggested that people aren't 
necessarily moving off welfare into jobs; they're just running 
up against a time limit, and they're getting sanctioned from 
the welfare system. That's not what welfare reform is supposed 
to be about. We're supposed to be getting people into jobs.
    One of the problems is the mismatch between the number of 
jobs and where they are created. People coming off welfare tend 
to be in the central cities--Cleveland. The jobs being created 
that are accessible to the person coming off welfare tend to be 
in the outer suburb--Cuyahoga. The question is, how do you get 
a person from the city of Cleveland to Cuyahoga? We're working 
on a number of strategies, transportation strategies. Secretary 
Slater, has a significant amount of money, about $600 million, 
for reverse commutes.
    One of the goals would be, one of the avenues would be to 
use vouchers, section 8 vouchers, that could possibly move 
people closer to the job. That's what the 50,000 welfare-to-
work vouchers are. We would run them through a competition. 
Housing authorities would be the expected applicant, and we'd 
say to the housing authority, ``You tell us how you're going to 
use these vouchers to get people in jobs and how you would use 
these vouchers in concert with the other measures, reverse 
commute, training programs, et cetera.''
    Mr. Stokes. Thank you very much, Mr. Secretary. Thank you, 
Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Stokes.
    Mr. Frelinghuysen.

                       pha entrepreneurial income

    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    Mr. Secretary, good morning.
    Secretary Cuomo. Good morning, Congressman.
    Mr. Frelinghuysen. Many of us are visited in Washington by 
our public housing authorities, and a group from New Jersey was 
down last week, and some of the questions relate to concerns 
that they've raised with me, and I suspect raised with other 
Members of Congress.
    The Department has recently notified all public housing 
agencies that they will be not allowed to retain income that 
they've generated from entrepreneurial activities. Could you 
comment on that issue? I see it that some of those public 
housing authorities, most of the ones I represent, are pretty 
well run. They have a good record, good track record, and many 
of them make a plea with me that there are certain things that 
the Department's doing relative to entrepreneurial activities 
that are fairly discouraging. And I just wondered if you could 
talk about the issue of whether well-run public housing 
authorities that are seeking non-Federal revenue sources to 
strengthen their operation--whether your Department is doing 
anything to discourage them?
    Secretary Cuomo. Congressman, first, your general point is 
well taken. Most housing authorities are well-run in this 
Nation. Public housing really has gotten a bad reputation,and 
it's an unfair one. Of 3,400 housing authorities, only 56 are 
``troubled.'' Fifty-six of 3,400 is a pretty good success rate, I 
think, in any business, private sector or government. So public housing 
overall is a success. This is an issue that we're working through right 
now. We're going to have to come up with a better answer over the next 
few months. We're going to have to publish a regulation on the matter. 
I don't have personal familiarity with it, but we don't want to 
discourage entrepreneurial activity. If we can encourage the 
entrepreneurial activity of the public housing authority and let them 
keep a portion of the resources, that would be my inclination.

                         rental income increase

    Mr. Frelinghuysen. I would encourage you to do that, if 
that's reasonable. I understand a lot of these things are tied 
up with what are called PFS calculations, Performance Funding 
System calculations. Goodness knows, we don't need to hear what 
all goes into that this morning, but I would certainly ask that 
you look into it, and you've given us indication that you will.
    Secondly, will HUD analyze the effect of their requirement 
that local public housing authorities automatically increase 
their anticipated rental income by 3 percent each year, what's 
defined as rental income? I hear an echo in the rear of the 
room which sounds fairly positive----
    [Laughter.]
    Secretary Cuomo. That nameless voice, yes.
    Mr. Frelinghuysen. Yes, thank you.
    Secretary Cuomo. The answer is, yes. We're not quite sure 
who said it, Congressman, but the answer is yes. [Laughter.]
    Mr. Keevey. It's built into the existing formula, that we 
would increase it by that amount.
    Mr. Frelinghuysen. Yes. Thank you, Mr. Keevey. Thank you, 
Mr. Secretary.
    Secretary Cuomo. Thank you, Congressman.

              public housing management assessment program

    Mr. Frelinghuysen. Thirdly, will HUD's new proposed Public 
Housing Management Assessment Program--how will HUD's new 
proposed Public Housing Management Assessment Program affect 
the Nation's public housing authorities? Will it have the 
effect of creating more troubled housing authorities at a time 
when HUD's administrative capacity is being reduced by your 
acknowledged staff reductions?
    Secretary Cuomo. No, Congressman. The point about the 
assessment is twofold: (A) As I said at the beginning of this 
dialog, the story of public housing in this Nation is a success 
story, an overwhelming success story. We need a better way to 
separate the high-performers from the low-performers. We want 
to deregulate the high-performers. If a housing authority is 
doing well, God bless them. Give them the funds; let them run 
it. If a housing authority is troubled, and is not using the 
funds well, we want to know. We want to know early in the 
process, and in and do something about it. We need an 
assessment system to do that.
    Our current assessment system really doesn't do it. As a 
matter of fact, our current assessment system doesn't even have 
a physical inspection of the inventory. So we have a proposed 
assessment system that makes what is, in our opinion, an 
intelligent delineation of the portfolio. High-performers would 
get more deregulation; poorer-performers we would step in 
faster.
    The last thing we want are more housing authorities for HUD 
to be running. HUD cannot run them, not just with our current 
staffing or our proposed staffing. We shouldn't be in the 
business today of running troubled housing authorities. It is 
not a good answer that a local housing authority failed, and 
HUD is going to step in and run it. It is the exact opposite 
direction that we should be going. So, if anything, I want to 
move away from that.

                            resident incomes

    Mr. Frelinghuysen. And, lastly in this line of questioning 
is: Has HUD undertaken any survey to determine the actual 
percentage of residents having incomes at the proposed income 
targeting levels of 30, 50, 60, and 80 percent?
    Secretary Cuomo. We have that data available. If the 
Congressman would like a copy of it, I can get it to you.
    Mr. Frelinghuysen. I'd like that very much.
    [The information follows:]

  Impacts of Selected Policy Proposals on Revenues of Public Housing 
                              Authorities

            [All impacts are in millions of current dollars]

         Income targeting and termination of federal preferences

1998..............................................................  +483
1999..............................................................  +146
2000..............................................................  +254
2001..............................................................  +365
2002..............................................................  +483
2003..............................................................  +590
                        -----------------------------------------------------------------
                        ________________________________________________
      Total.......................................................+1,921

Source: Calculated with a PD&R operating subsidies budget model by Barry 
Steffen. Housing authorities are assumed to fill 25 percent of vacancies 
resulting from turnover with households in a higher income group 
(incomes higher by 10% of median income, or $4,000). Under these 
assumptions, income targeting provisions of H.R. 1447 fail to become 
binding constraints within the budget horizon.
---------------------------------------------------------------------------

       18-month disregard of earned income for certain unemployed

1998..............................................................    -8
1999..............................................................   -17
2000..............................................................   -34
2001..............................................................   -27
2002..............................................................   -20
2003..............................................................   -17
                        -----------------------------------------------------------------
                        ________________________________________________
      Total.......................................................  -123

Source: Calculated from CBO estimates of same policy in certificates and 
vouchers, spreadsheet produced 5/23/97 by Carla Pedone using data from 
SIPP. (Multiply line 61 by 1.25/1.477).
---------------------------------------------------------------------------

                            $25 minimum rent

1998..............................................................     0
1999..............................................................    +3
2000..............................................................    +3
2001..............................................................    +3
2002..............................................................    +3
2003..............................................................    +3
                        -----------------------------------------------------------------
                        ________________________________________________
      Total.......................................................   +15

Source: Calculated by Mark Shroder taking current appropriations policy 
(minimum rent anywhere from $0 to $50 at PHA discretion) as baseline. 
Occupied units in the average month are assumed to be 92 percent of 
total units. A 10 percent sample of the MTCS between August 1996 and 
February 1997 showed 247,000 households paying less than $50 per month. 
Calculations showed an average per unit-month gain among these tenants 
paying less than $50 per month (from increasing the minimum rent to $25 
where it is presently lower) of $1.88 and an average per unit-month loss 
(from lowering the minimum rent to$25 where it is presently higher) of 
$0.77, for a net gain of $1.11 per month over 247,000 units.

    Mr. Frelinghuysen. Thank you very much, Mr. Secretary, Mr 
Chairman.
    Secretary Cuomo. It's a pleasure.
    Mr. Lewis. Thank you, Mr. Frelinghuysen.
    I might mention that it is not logical for us to presume we 
can run housing authorities that have failed across the 
country. At the same time, to have mechanisms in place to help 
people better model those programs and figure out how we find 
the Gilmores of the world and train them, et cetera--all of 
that is a piece of the discussion that needs to go forward.
    Ms. Kaptur.

review of fha loan limit increase by national people's action committee

    Ms. Kaptur. Thank you, Mr. Chairman.
    Mr. Secretary, welcome back.
    Secretary Cuomo. Hi.
    Ms. Kaptur. I know I'm probably the only one that hasn't 
asked about the FHA loan limit question, and I intend to do 
that now. [Laughter.]
    Before I served on this committee, I happened to chair the 
VA Housing Subcommittee and learned a great deal in that, and 
did some fairly controversial things, such as institute an 
indemnification fee for the first time on the insurance side, 
where the lending institution had to assume greater risk. At 
one point in the history of the VA, when they had a very 
troubled portfolio, that was not the case, and the defaults 
were significant. It has made substantial difference, saving 
hundreds of millions of dollars to the taxpayers at this point.
    I just wanted to say that both you and I believe very much 
in a public role in promoting housing construction in this 
country, and also mortgage insurance. Obviously, we've reached 
different conclusions about the wisdom of raising the FHA loan 
limit, and I just wanted to place that on the record, and to 
say that I think it is very important--I don't trust the 
private sector quite as much as Mr. Neumann does, having served 
here long enough to have weathered the savings and loans 
crisis, when the institutions got in trouble and then they ran 
to the taxpayers for help; having weathered the Mexican 
financial crisis, when the speculators got in trouble and they 
ran to the taxpayers for help, and now facing the Asian 
financial crisis, and watching some of our biggest institutions 
run to the government for help, and also watching the major 
financial institutions of this country--lending and insurance--
redline neighborhoods across this country, moving deposits 
elsewhere, and disinvesting major segments of this economy.
    Now having said all that, I view the government's role as 
encouraging responsibility among our private sector partners, 
and therefore, I would humbly suggest that, whatever is done 
with FHA, encourage that responsibility, including risk-
sharing, as a way of helping FHA deal with defaults.
    I also learned from that VA experience that the highest 
defaults were not in the mid- or lower-range loan levels, but 
rather at the highest loan levels. So I am concerned that by 
raising the limit we will merely encourage a lack of 
responsible lending and insuring by the private sector, and 
more problems for FHA down the road.
    I will submit to your attention the letter that was sent to 
me by one of my heroines, Gail Cincotta of Chicago, that I've 
known for over 25 years now. I respect her. I tried to get her 
to come to Washington at one point, but she's chosen to stay in 
the neighborhoods of this country. I think National People's 
Action has put forward a very responsible proposal to try to 
deal with FHA's financial difficulties. I am sure that people 
in the Department have reviewed it, but I think it's more 
realistic in terms of helping FHA meet its financial 
difficulties and dig its way out.
    I'm wondering if the Secretary has considered the 
recommendations of National People's Action. And I know not 
everyone in the organization dresses every day like we do, but 
I think their experience is very real. They do not support the 
raising of the loan limit, and knowing the Secretary's 
commitment to neighborhood development, does it trouble you at 
all that you have come forward with this particular proposal in 
view of the fact that many of the organizations that support 
you and your efforts do not agree with your conclusion on 
raising the loan limit?
    Secretary Cuomo. Congresswoman, I have the highest respect 
for Gail Cincotta. I disagree with her on this, and I think if 
we were to take a poll of where community groups were on this 
proposal, I think you would find more are supporting the loan 
limit proposal than are not supporting it.
    Gail Cincotta had two points, basically, in her letter to 
me, if my recollection serves me. One is, yes, we have to serve 
more low-income minorities better, but rather than raise the 
FHA loan limits, the way to do that would be to raise the GSE's 
affordable housing goals. HUD regulates the GSE's and we set a 
number that the GSE's must subscribe to in a threshold of 
minority and urban loans. Gail's point was we should just raise 
the number of loans that they must do, and that's the way to 
handle this problem.
    The argument against using FHA said that FHA now has some 
operational problems in the disposal of real estate, basically. 
I agree with Ms. Cincotta on that, but I think the solution is 
to remedy the operational problems, which you have to do in any 
event. We'd have to remedy those operational problems if we 
raise the loan limit or we don't raise the loan limit. As a 
matter of fact, we are remedying those operational problems. We 
are going to revolutionize the way we dispose of real estate. 
We're going to privatize the entire process. We're doing that 
in a number of weeks anyway. To stop progress because we 
haven't taken care of the operational problem I don't think 
makes sense. To then go to the GSE's, FANNIE and FREDDIE, and 
try to raise their affordable housing goal as a way to serve 
this need, if we think there's been a lot of dialogue around 
this issue, I promise you there will be more dialogue about 
raising their affordable housing goals. If this loan limit 
doesn't work, it might be something that we have to turn to, 
but I think the fastest and best way to do it is with an FHA 
loan limit increase.
    Ms. Kaptur. How are you going to institute market regimen 
as you raise that loan limit, knowing that the greatest default 
is at the highest end of the borrowing scale?
    Secretary Cuomo. Congresswoman, I just have a factual 
disagreement with you on that. All the definitive sources that 
we can find, all the evidence would suggest the exact opposite. 
Price Waterhouse, who is our auditor for FHA, says there are 
lower defaults on the higher loans. The OMB and CBO scored this 
proposal to make money. They couldn't be scoring it to make 
money if they thought you were going to have more defaults. 
They're actuallyconcluding the opposite. This is a money-maker, 
this batch of loans. So CBO, OMB, and Price Waterhouse, who are 
auditors, conclude the opposite.
    Ms. Kaptur. I'd like to see over what period of time 
they're making those adjustments because our facts are 
completely different, and I can tell you----
    Secretary Cuomo. It would be my pleasure, Congresswoman.
    Ms. Kaptur [continuing]. From the VA experience, it is 
exactly the opposite.
    May I ask you also, what additional risk are you asking the 
private sector to assume in your proposal on the insuring side? 
Are you not going to give them 100 percent guarantee?
    Secretary Cuomo. We would. This is a 100 percent guarantee 
program.
    Ms. Kaptur. Well, Mr. Secretary, I----
    Secretary Cuomo. It operates a little differently than the 
VA----
    Ms. Kaptur [continuing]. Have to tell you I really do think 
that alone should give us pause for thought. I would take a 
look at the way that--over what period of time OMB, knowing 
OMB, looks at where money is being brought into the government 
versus where it's being taken out, and what time horizon 
they're looking at. I would be very willing to share 
information with you and your associates, based on our 
experience with the VA, but I am very concerned that we're on 
different song sheets here.
    I encourage you, with FREDDIE and FANNIE, to get them to 
meet their public obligations, but I have a serious concern--
and one of the issues in Ms. Cincotta's letter deals with 
management and helping people work out of their impending 
default situations. I think that is a very worthy set of 
recommendations. It's recommendation No. 2 in their paper, and 
I would really look forward to further conversations. I don't 
want to hold Mr. Price up here for his questions. We will have 
more on this later.


[Pages 161 - 164--The official Committee record contains additional material here.]



    Mr. Lewis. Well, thank you for your input, and I must say, 
Mr. Secretary, you can see that the questions run across the 
committee relative to a broad spectrum. So the discussion will 
be a lively one as we go forward.
    Mr. Price.

                   community centers outreach program

    Mr. Price. Thank you, Mr. Chairman.
    Mr. Secretary, I know we have very limited time here. I 
want to comment quickly on the Community Outreach Partnership 
Centers Program, and then ask you a follow-up question on the 
regulation of mortgage broker fees.
    I do want to note, though, that although at this time of 
year, in particular, it's hard to get the University of North 
Carolina at Chapel Hill and Duke University to work together, 
we've managed it--or you've managed it--with this $400,000 
grant from the Community Outreach Partnership Centers Program. 
These universities are going to be working together in West 
Durham assisting public housing residents with supportive 
services; for example, the transportation and child care costs 
associated with job training. They're also going to be 
establishing an innovative neighborhood construction company to 
train and employ neighborhood residents, and also to improve 
the area.
    So we're enthused about this program, and what I'm going to 
ask you to submit for the record is just an indication of your 
aspirations for this program, what your preliminary assessment 
would be of the successes and shortcomings, and also some 
indication of what additional funding would allow you to do in 
terms of reaching out to more communities. But we do appreciate 
the work that you've done in launching that and our opportunity 
to participate in it in North Carolina.
    Secretary Cuomo. It would be our pleasure, Congressman. 
It's a program we're very excited about, and we've had good 
success, and I'll get that to the Congressman.
    Mr. Price. Good.
    [The information follows:]

                 Community Outreach Partnership Centers

    Provide an Assessment of successes and problems; 
aspirations for the program; how additional funding would be 
used.
    In the first 14 years of the Community Outreach Partnership 
Centers program (COPC), 61 colleges and universities have 
received grants to undertake a wide range of outreach and 
technical assistance including: helping to create and nurture 
small businesses; working with junior high school students on 
drug prevention programs; and providing design services for 
housing developments. These activities have proven that 
colleges and universities are important players in solving 
local problems.
    The problem has also successfully tapped previously 
untapped sources of funds to address these problems. The $30 
million in appropriated funds has brought in over $35 million 
in non-Federal funds.
    Most importantly, the participating colleges and 
universities have made commitments to continuing to work with 
neighborhoods they are assisting long after their grants are 
over. Thus, COPC is just the beginning of the relationship with 
local communities.
    While HUD's budget request for FY 1999 for the program is 
$7.5 million, the demand for the program is much larger than 
this amount. Each year, approximately 110 applications are 
received, with only about 15 funded. Many superb applicants 
have to be turned away. If more money were available for the 
program, it would certainly be put to good use.

                              respa ruling

    Mr. Price. I was one of those, following up now on your 
discussion with Mr. Neumann, I was one of those who joined a 
few thousand others in sending comments regarding HUD's 
proposed regulations on the disclosure of mortgage broker fees 
under RESPA. My letter's dated December 15, and I hope, amid 
those thousands, it will receive some attention. [Laughter.]
    Secretary Cuomo. I'm sending a copy over to the Committee 
of all the 9,000 comments. [Laughter.]
    Mr. Price. In that letter I acknowledged that the current 
disclosure forms leave something to be desired. I think 
everyone agrees on that. They, for example, don't clarify that 
brokers can receive fees from lenders.
    I also indicated that, once the full disclosure of fee 
information is made available to a borrower, it is going to 
remain incumbent on the borrower to comparison-shop, and that 
the bottom-line test for a disclosure form ought to be whether 
it provides clear information to facilitate comparison-
shopping.
    Last year a Federal Reserve survey of borrowers indicated 
that borrowers generally have three bottom-line concerns: 
What's the interest rate? What will my monthly payment be? And 
how much am I going to need to pay at closing? Regardless of 
whatever the role of a mortgage broker might be in a particular 
transaction, those bottom-line numbers are what is required.
    Now you were saying to Mr. Neumann that you're now going 
through these thousands of comments. What is the next step, 
though? That was not entirely clear to me. Are you considering 
publishing a revised proposed rule before going to the final 
rule stage?
    And let me just ask you the second question; you can 
respond all at once. In light of the comments you received, and 
the Federal Reserve survey, are you considering simplifying the 
proposed disclosure form in a way so that it clearly states the 
established interest rate, the monthly payment, the closing 
cost, which, after all, is what comparison-shopping basically 
requires?
    Secretary Cuomo. The short answer is, yes, Congressman, 
that's what we're trying to get to in the form, plus one other 
fact, which is: Who the broker represents. I've gotten all 
sorts of horror stories at the Department. People go to a 
mortgage broker. They think the mortgage broker is working for 
them. Why? Because they analogize the mortgage broker to a real 
estate broker, and they think the mortgage broker is working 
for them. The mortgage broker comes back and he says, ``I got 
you this mortgage. It's at 7 percent. This is the 
downpayment.'' They assume that that's the best mortgage the 
broker could get for them. It then turns out that that wasn't 
the best mortgage they could get at all. The broker is actually 
working for a mortgage company and is trying to sell their 
product, which would be fine. Our only point is, let the buyer, 
let the consumer know who the mortgage broker represents. If 
the mortgage broker represents the consumer, fine. If the 
broker represents the company, fine. If the broker represents 
himself or herself, fine, but just let there be disclosure on 
that fact, as well as the others you mentioned. That's what 
we're trying to get at.
    And we agree with you that the consumer will shop, which, 
by the way, is the very logic we use to support the FHA loan 
limits. FHA charges a higher fee. If the buyer shops and they 
have an alternative in the private market, they will not go to 
FHA. If the marketplace works, they'll only go to FHA when they 
have no other recourse. And that's the answer to Mr. Neumann's 
question. If you believe in the private market, give the buyer 
the information; let the buyer shop. If they can go to a PMI, 
Magic from Wisconsin, they will. If they can't go to the 
private company, then they go to FHA because FHA charges the 
higher fee.
    Mr. Price. Where are we with this rulemaking on the 
mortgage broker fee matter? Are we looking perhaps at a revised 
proposed rule that will be available for comment?
    Secretary Cuomo. That is one of the options that we're 
looking at, Congressman.
    Mr. Price. But you've not yet determined whether that will 
be the option----
    Secretary Cuomo. We have not yet. We want to finish going 
through all 9,000 comments. We're going to send the copies over 
to the committee for their response, and then we'll make a 
decision.
    Mr. Price. All right. I know we're out of time. Thank you, 
Mr. Chairman.
    Mr. Lewis. Mr. Secretary, please, you've been very 
professionally gentle in your reaction to today's unusual 
schedule, but, as you know, this is the time when the 
Supplemental Bill is being refined. Our meeting earlier was 
very unusual. I can't remember the committee ever doing this 
before--leaving at 11:30 when you expect to be here at least at 
noon. It's because we're having what I call a sparrow's 
meeting; the Speaker calls them cardinal's meetings. 
[Laughter.]
    We may possibly be discussing affairs that relate to the 
interests of all in this room, and I think I probably ought to 
be there. But, in the meantime, with your leave, we're going to 
recess the Committee and come back to this room at 1:30. Thank 
you.
    Secretary Cuomo. We're at your disposal, Mr. Chairman. 
Thank you.
    [Recess.]
    Mr. Lewis. Well, the meeting will come back to order.
    Mr. Secretary, patience one more time.
    Secretary Cuomo. It's a pleasure.
    Mr. Lewis. We appreciate it.
    Our membership will come along. We had a series of votes on 
the floor, and as you know, sometimes there's controversy about 
these matters, but I also have talked a little with Mr. Stokes 
about proceeding on items like this.
    One of the good parts of all of today's schedule is that we 
have actually, beyond solving some problems, we probably have 
saved you a lot of pain because many, many of the questions we 
were going to ask are going to be on the record or for the 
record now rather than on the record.
    Secretary Cuomo. We appreciate that, Mr. Chairman. 
[Laughter.]

              expansion of tenant-based section 8 program

    Mr. Lewis. So let me begin. HUD is requesting $585 million 
in budget authority to support a total of 103 incremental 
vouchers. HUD is proposing to add 50,000 vouchers to help 
families make the transition from welfare to work, 34,000 
vouchers for homeless individuals or families, 10,600 for 
various uses, such as witness relocation and the settlement of 
litigation, and 8,800 vouchers for the elderly and disabled. 
What is the long-term budget impact of expanding the tenant-
based section 8 program?
    Secretary Cuomo. Mr. Chairman, throughout the presentation 
and the questionings, we have been going back to the 5.3 
million families on the worst-case needs, and the 100,000 
vouchers that would start to get us back on the positive side 
of the ledger. Again, what is most striking to me is that we 
don't build housing in this Nation. The vouchers would get us 
on the positive side of the ledger for the first time since 
1996, which was a deviation in history. The $585 million would 
be this year; the outyear costs would go into the overall 
renewal base. It would be, in 1999, $16.1 million and, in 2000, 
$16.2 million.
    Mr. Lewis. Okay. And what strategy has HUD developed to 
administer the new vouchers requested for welfare-to-work and 
the elderly?
    Secretary Cuomo. Welfare-to-work would be done through a 
competition, where we'd go to the housing authorities. We'd ask 
for the best plans across the Nation which put all these 
different welfare-to-work pieces together, and come up with a 
comprehensive strategy, and then we'd award funding to the 
housing authorities.
    Mr. Lewis. And further, has HUD obtained input from the 
Department of Health and Human Services about the needs of the 
population that would be targeted to receive HUD's welfare-to-
work vouchers and how these needs have been traditionally 
addressed?
    Secretary Cuomo. Yes, Mr. Chairman, we're working with HHS 
and the Department of Transportation to come up with a 
comprehensive package on the Federal side, and we will then be 
encouraging. Indeed, the winners of the vouchers would be those 
local housing authorities that came up with comprehensive 
strategies on the community level.

     excess budgetary authority in section 8 project-based programs

    Mr. Lewis. Okay. The administration has requested $10.8 
billion for renewals of section 8 rental assistance, $1.3 
billion for section 8 amendments, $60.3 million to support 
10,655 new section 8 incremental units, $373 million for multi-
family enforcement and to fund 32,000 units for tenant 
protection activities, and $20 million for regional opportunity 
counseling. The total request is decreased by $3.6 billion of 
excess section 8 reserves which are not being used for families 
currently receiving section 8 assistance.
    Further, HUD has devoted 2 years and a substantial amount 
of its financial staff time to identifying and quantifying the 
excess budgetary authority in its section 8 tenant-based and 
moderate rehabilitation programs. This effort was fruitful, 
allowing HUD to reduce its request for new budget authority.
    Are there similar amounts of excess budget authority in 
section 8 project-based programs?
    Secretary Cuomo. Not that we have identified at this time, 
Mr. Chairman. GAO is coming in over the next couple of months. 
We'll be working with them to go through those accounts on 
another scrub, but there is not any additional savings beyond 
which we've identified to the committee at this time.
    Mr. Keevey. That's correct. If you may recall reading the 
GAO report, they make reference to their ongoing review. They 
make reference to additional monies in the HUD Budget, but in 
general that is in an account that is short in the long-run, 
budget authority versus outlay commitments. So we would expect 
that same analysis to support that current position. But as the 
Secretary said, that probably won't be done until the middle of 
August.

                              over-leasing

    Mr. Lewis. Okay. For many years HUD allowed housing 
authorities to use their excess reserve funds to augment the 
number of certificates and vouchers contained in a PHA's HAP 
contract. As a result, many PHA's have over-leased a 
significant number of units. How many units have been over-
leased and what is the cost of fully funding those units?
    Secretary Cuomo. Mr. Chairman, I thank you for asking that 
question. We discussed this on the Senate side, and there was a 
misimpression of the facts that I would appreciate the 
opportunity to clarify.
    First, the term ``over-leasing'' is wrongly applied to this 
situation. Over-leasing suggests that they leased over the 
amount they were allowed to lease, which is not the case. The 
policy of the Department for many years was that housing 
authorities got a number, a dollar number, not a unit number, a 
dollar number, and then they could lease as many units as they 
could up to that dollar number, including their reserve account 
within that dollar number.
    In 1996, we began all the work on the reserve account. We 
then changed the policy. We said, you can no longer use your 
reserve account to lease against.
    Mr. Lewis. And you did that when?
    Secretary Cuomo. In 1996, 1997. We have grandfathered in 
those units that were leased because that was the policy up 
until that point, but we have stopped it. The total number of 
units involved is about 52,000.
    Mr. Lewis. And do we know what the cost is?
    Mr. Keevey. Approximately $295 million.
    Mr. Lewis. Okay. What is HUD's policy for dealing with--
well, you've answered that question really. Will there be 
instances where families who are depending upon this kind of 
assistance that really was a reflection of this extension will 
have assistance cut off?
    Secretary Cuomo. No. We could have taken another policy 
route, Mr. Chairman, which is to say, any of those units leased 
against the reserves we need back. That would have displaced 
families, and that caused housing authorities and many people 
great concern. Our policy was we would grandfather them in.
    But, again, this was not over-leasing. That is a misnomer. 
This was leasing as allowed by the Department, the law, and 
everybody was aware of this situation for years.
    Mr. Lewis. Okay, well, separating out the semantics of what 
one's interpretation of over-leasing might be versus others' 
interpretation, what is inappropriate about that policy, and 
how many units have been what some have described to be over-
leasing?
    Secretary Cuomo. There are 52,000 units on a base of 1.4 
million units. That's a total universe--52,000 on 1.4 million. 
The 52,000 are units leased against the reserve accounts, which 
was the policy, which is no longer the policy, but which are 
grandfathered in.
    Mr. Lewis. And you've already spoken to the families in 
terms of----
    Secretary Cuomo. Yes.
    Mr. Lewis [continuing]. Being negatively affected. You 
suggested that families would not be cut off, isn't that 
correct?
    Secretary Cuomo. Yes, sir.
    Mr. Lewis. There certainly is a limitation that's being 
placed on families who would have been in that line. At the 
same time we're talking about requests for new incremental 
section 8 assistance, and there is some difficulty I'm having 
there.
    Secretary Cuomo. What happened is this--Mr. Chairman, I'm 
stating to you the final position of the Department. There was 
discussion and an interim position, which was, we want the 
units back that were leased against the reserve amount. We 
wanted to take those certificates out of circulation, which 
would have reduced the number of certificates 52,000. That 
created somewhat of an uproar. We re-evaluated the policy. 
Instead of retrieving those 52,000, we grandfathered them in, 
and now include them in the base.
    Mr. Lewis. Yes. The question is, does that mean that 
contracts will be amended?
    Secretary Cuomo. The contracts would be renewed. I don't 
believe they would be amended.
    Mr. Keevey. Ultimately, they would be.
    Mr. Lewis. They would be amended?
    Secretary Cuomo. Yes.
    Mr. Keevey. Yes.
    Mr. Lewis. Yes, okay.
    Secretary Cuomo. I change my opinion. They would be 
amended. [Laughter.]

                          section 8 amendments

    Mr. Lewis. Okay, I've got you. Yes, I do that from time to 
time myself, almost every other moment.
    Every year the administration requests a substantial amount 
of funding for section 8 amendments. This year the request is 
for $1.3 billion. What are section 8 amendments? How is this 
amount derived? And for how many years do you estimate you will 
need to make this request? And what will happen if the total 
amount is not appropriated?
    Secretary Cuomo. I'm going to ask Rod Solomon, with the 
committee's indulgence.
    Mr. Lewis. Mr. Solomon. Is this Rod's issue? Rod, feel 
comfortable to provide preliminary to your answer, if you'd 
like, if this is not your area of expertise.
    Secretary Cuomo. Rod's on the tenant-based side. This is 
both on the tenant-based side and the project based side, Mr. 
Chairman. I don't know specifically which portfolio you're 
referring to. Rod is from Public Housing, so he's on the 
tenant-based side.
    Mr. Solomon. Yes, Mr. Chairman. First, I appreciate your 
saying that. It is actually----
    Mr. Lewis. I noticed that we kind of caught you in 
difficulty a little bit yesterday from time to time. 
[Laughter.]
    Secretary Cuomo. Rod has had a long 2 days, Mr. Chairman. 
[Laughter.]
    Mr. Solomon. The section 8 amendment question is 
essentially project-based for fiscal year 1999. It's really the 
necessity, especially on some of these longer-term contracts, 
to make sure there's enough money in the contract to carry out 
the year-to-year rent increases and obligations that we already 
have to the owners and the program.
    Mr. Lewis. Well, I was asking beyond the $1.3 billion to 
be----
    Mr. Keevey. Mr. Chairman----
    Mr. Lewis. Yes.
    Mr. Keevey [continuing]. I think I should jump in.
    Mr. Lewis. Okay.
    Mr. Keevey. I thought your question was going toward the 
tenant side, but I think the question is why is there 
additional monies, if you will, in the project-based side of 
the equation?
    Mr. Lewis. And how's it derived, and for how many years 
will we expect it?
    Mr. Keevey. Right. Basically, it goes back to the point I 
was making earlier in terms of the long-term budgetory 
projection of dollars needed for the project-based. There is a 
gap of BA between long-term needs and dollars presently 
available. What the Department has been doing over the years is 
incrementally filling that gap, so that there would be 
sufficient BA in each year. What we've done in this year is 
asked for some additional dollars, so that we could close that 
gap sooner.
    Mr. Lewis. And if all of that is not appropriated, that 
impacts the repetivity of the----
    Mr. Keevey. The long-range integrity of that account, 
right. I think the gap is somewhere between $24 billion in 
contract need versus $16 billion in budget authority, but that 
part of the equation is what the Secretary referred to with 
regard to GAO reviewing the long-term impact of that account.

                   section 8 project-based amendments

    Mr. Lewis. Okay. Just a little more on this: According to 
HUD's budget request, HUD plans to offset its $1.73 billion 
section 8 project-based, a minimum request, by $463 million, 
when HUD recaptures unneeded balances that remain on expired 
housing assistance contracts and uses these amounts to offset 
current needs for amendment funding for other contracts. 
However, a November 1997 analysis prepared by HUD shows that 
estimated recaptures from expiring section 8 project-based 
contracts will be $1.5 billion instead of $463 million.
    Moreover, a more recent analysis that HUD prepared, in 
response to errors identified by the GAO, indicates that fiscal 
year 1998 recaptures may be about $2.6 billion. Does HUD plan 
to reduce its fiscal year 1999 budget request for section 8 
project-based amendment funding to reflect the more current, 
quote, ``recaptured data,'' which can be used to offset 
amendment needs?
    Mr. Keevey. That's the same issue that we have been talking 
about, Mr. Chairman.
    Mr. Lewis. Yes, sir.
    Mr. Keevey. And further on in the report, you would note 
that GAO has not made a conclusion yet, because they're looking 
at preliminary numbers, and even if there were balances, there 
are still needs in the long-run for this account. We have 
agreed, together with GAO, that it would be premature to 
discuss any final conclusion of these----
    Mr. Lewis. Well, certainly, in terms of a dollar amount, 
but you see the trend at any rate, the pattern, it seems to me, 
that could give you some idea that there are going to be 
additional needs, but, on the other hand, our question is, how 
much do you need to hold in reserve, in view of our overall 
circumstance?
    Secretary Cuomo. That is a good question, Mr. Chairman, if 
I might. There is no doubt that, long-term, we have a 
shortfall. The question is, short-term, what are we looking at? 
And we'll have a number from GAO in June-Julyish.

                    project-based contracts estimate

    Mr. Lewis. Okay. It is suggested by laymen in the business 
that money is tangible, but in a bill like ours, where HUD 
accounts are very complex and have difficulty in many forms, 
there are also other subjects around that aredifficult that 
range from EPA to veterans' medical care. So we have to be concerned 
about that.
    According to HUD, some project-based contracts are 
overfunded while others do not have sufficient funding to 
provide assistance payments through the terms of the contracts. 
What is the Department's current estimate of its net funding 
needs for all the existing project-based contracts, and how did 
you make that estimate?
    Secretary Cuomo. This is the net number that we're looking 
at long-term. Long-term we have a shortfall; there's no doubt. 
It's the same issue, Mr. Chairman. Long-term we have a 
shortfall. Short term we may have this immediate overage, which 
is what we're working with GAO to find out.
    Mr. Keevey. The dollars are only available for other 
projects related to that contract.

                    section 8 incremental assistance

    Mr. Lewis. Okay. Well, let me close this out quickly. The 
budget request is $60.3 million for new section 8 incremental 
assistance. How much of this money is for the family 
unification program and witness relocation program, portable 
reimbursements, and the settlement litigation?
    Mr. Keevey. We don't have an allocation for----
    Mr. Lewis. Give us that for the record.
    [The information follows:]

    Question. Provide the number of new incrementals for the 
family unification program, witness relocation, portability 
reimbursement and settlement of litigation. (Lewis)
    Answer. The FY 1999 request for family unification, witness 
relocation, portability reimbursement and settlement of 
litigation is $60.3 million to support 10,655 units.

    Mr. Lewis. Thank you.
    Mr. Stokes. Oh, he's gone. [Laughter.]
    Well, for goodness sakes, hello, Mrs. Meek. How are you?
    Mrs. Meek of Florida. Good, Mr. Chairman.
    Mr. Lewis. Then you're recognized, if you feel good.
    Mrs. Meek of Florida. Good afternoon.
    Secretary Cuomo. Good afternoon.

                           grants for florida

    Mrs. Meek of Florida. Mr. Secretary, I know there's very 
little input that you and your staff can help with this, but 
I'd like to report it, in the event there's someone in U.S. HUD 
who can help my county relative to some of the grants that they 
applied for, and for which they were turned down. I would like 
to be able to help them in the future with this kind of thing.
    They applied for HOPE VI for $23 million; drug elimination, 
$2.8 million; safe neighborhoods for $500,000. Then they went 
on to tell me the impact of the refusal of these grants.
    What I wish you could do, Mr. Secretary, is to have someone 
come to see me and help me find out what happened to them with 
these grants and how I can assist them or what they need in 
terms of the next application period. Certainly this is an 
objective process, but the more we know about some of the 
criteria, I'm sure that we can help in some way with these 
kinds of things. I don't know what all the details were, but 
they did--the drug elimination grant would cause them to lose 
25 police; the HOPE VI, 700 public housing units. And I have a 
very good housing authority. Renee Rodriguez is, in my 
opinion--of course, I'm a little biased--one of the best in the 
country in terms of housing directors. They are suffering 
because of the loss of these grants. I'd appreciate it if you 
could help me with that.
    Secretary Cuomo. It would be our pleasure, Congresswoman. 
First, I don't think it's any reflection on the housing 
authority or the local government. We have, for we are way 
oversubscribed in the number of applications compared to those 
we actually fund. We have four, five, six, seven to one--seven 
applications for every one winner.
    But I think the most constructive exercise is to have 
people go through the application with the housing authority, 
see what was done well on the application and what was not done 
well, and how they can improve. So, hopefully, they have better 
fortunes in the next competition.
    Mrs. Meek of Florida. And one more question: Is there an 
appeal process in HUD?
    Secretary Cuomo. Sure, there's an appeal process.

                             adker vs. hud

    Mrs. Meek of Florida. All right, thank you.
    My next question is one which may not be relevant to this 
meeting, but this is perhaps the only time I can really ask 
this. About 11 years ago in Overtown a lady who was a civic 
activist by the name of Anne Marie Adka--she was the unofficial 
mayor of Overtown. Overtown is in the middle of my district and 
one of the poorest sections. Two of the poorest sections are 
Overtown and East Little Havana, which is in my district. Well, 
this one came out of Overtown.
    I would like to know--and if you can't discuss it, I can 
understand that. My notes tell me that this is a pending legal 
case, but it's been going on for 11 years, which means it's not 
pending. It's an 11-year-old civil rights case. It's called 
Adka v. HUD, which African American public housing residents 
brought against HUD and Dade County alleging that HUD and Dade 
County segregated the public housing system.
    I also understand that a neutral blue ribbon panel with 
representatives chosen by all parties found that many of HUD's 
actions contributed to segregation there and recommended a 
comprehensive remedy to desegregate public housing, but that 
the proposals that were put together by this blue ribbon panel 
have not been implemented. The questions they are asking me: 
Why hasn't HUD settled this case and implemented the 
recommendations of the blue ribbon panel?
    Here's another caveat to that: It says that it looks as if 
HUD has recently made an offer to the plaintiffs and hopes to 
resolve the case by settlement. However, HUD's proposal 
included some elements which would perpetuate segregation. 
Also, plaintiffs responded positively to the offer within one 
week of receiving it, and requested only clarification. 
Although costs are rapidly mounting at the rate of over 
$300,000 per month, HUD has yet to respond to the plaintiffs. 
Can you clarify that for me, please?
    Secretary Cuomo. Yes, Congresswoman. It is, as you point 
out, it is currently the subject of ongoing litigation. So what 
we can say is limited, but let me say this: Henry Cisneros was 
very active in settling litigations. His position, which I 
think was well-taken, was: We don't want to be in the business 
of defending discriminatory acts, if the housing authority 
perpetuated them. So he was very active in settling litigation. 
This is one of the few cases that we were unable to settle over 
the past 4 or 5 years.
    My goal would be to settle this case. We'll work very, very 
hard to make that possible. There are some glimmers of hope, 
although this is a very complicated situation, as you can well 
imagine. But I'm optimistic, cautiously optimistic, that over 
the next couple of months we'll have a positive outcome.
    Mrs. Meek of Florida. Thank you. Mr. Secretary, I also 
indicate that I understand that part of this offer--and I won't 
carry this any further, but I want you to know that, according 
to the information from the people in Overtown, HUD's proposal 
included some section 8 vouchers for public housing, and that 
HUD claims that 1,000 to 1,500 vouchers that were previously 
available for relief of these people are no longer available. I 
understand that that may be because they may have turned down 
some earlier settlement offers by HUD.
    Well, I heard your answer, Mr. Secretary. I look forward to 
some more clarification of this, so that I could talk to the 
residents of HUD. The woman who filed this case is dead now, 
but there are others who are in this case. I'd like to have it 
clarified.
    Secretary Cuomo. If I may, Congresswoman, again, because of 
the situation we're in, I don't want to comment on any 
suggested settlement, but, as the Congresswoman knows, HUD 
could have very well had section 8 vouchers that we could have 
used as part of a settlement, had someone accepted the 
settlement on a timely basis. If the housing authority didn't 
accept them, they would have lost them at the end of the year.

                          habitat for humanity

    Mrs. Meek of Florida. Thank you. All right. Thank you, Mr. 
Secretary.
    My next question is really a comment. I think that Habitat 
for Humanity, which this committee and our chairperson worked 
so assiduously to see was funded--I think it was something like 
$16.7 million for the Habitat for Humanity Program under the 
Housing Opportunity Program. Habitat is one of the best 
connections that HUD has made in terms of viability in the 
communities.
    I'd just like to know; you're requesting $20 million for 
this in your budget, this time under CDBG, for Habitat for 
Humanity. I would like to know, what did you do with the $16.7 
million that you got last time?
    Secretary Cuomo. The Department shares the Congresswoman's 
support for the Habitat concept. It is an extraordinary example 
of how we can do this. It is the best of volunteerism, which is 
pointed to by a lot of our colleagues as the way to go--
volunteerism, plus government support. It is a partnership, 
volunteerism and government. It says that volunteerism, in and 
of itself, can't do it, but you put volunteerism together with 
Government resources, and you have a good formula.
    This program received about $16 million in funding. We have 
proposed an increase in funding, and the funds will go for 
general Habitat purposes, housing construction across the 
country. There is no single use for the funds.
    Mrs. Meek of Florida. Have you spent it?
    Secretary Cuomo. The drawdown--they've drawn down 
approximately 50 percent of the funding since 1996, and are now 
increasing the rate of drawdown.

                              brownfields

    Mrs. Meek of Florida. Thank you. That's a very good 
program.
    I'm also concerned about brownfields. That's a program 
that's almost a secret. It's well-kept in terms of what HUD 
does in that regard. Last year Congress appropriated $25 
million to HUD for brownfields redevelopment, and in your 
budget you want to double that to $50 million. Can you tell me, 
tell the Committee, how you've used the $25 million which you 
were appropriated, and now that you want to double it, how do 
you intend to use the $50 million? And how did you decided how 
to distribute these funds?
    Secretary Cuomo. First, the subject of brownfields--and we 
applaud the Congresswoman's leadership on this issue. Last year 
the United States Conference of Mayors made brownfields their 
No. 1 priority, based on the point that we can't redevelop any 
of these urban areas because there is no new land unless we 
clean up the sites that exist. EPA had taken the lead in 
brownfields in what the locality had to do to clean it up, but 
there weren't any programs or funds to actually get the work 
done and redevelop it. HUD came in, $25 million last year, 
because of the Congresswoman's leadership. We want to double 
that to $50 million this year. The notice of funding on the $25 
million is going to go out literally in the next few weeks. It 
will go out by competition. We're looking for partnerships--
EPA, HUD, and Treasury, which has a tax incentive package for 
investments on brownfields, but these will be cleanup and 
redevelopment projects.
    Mr. Lewis. Mrs. Meek.
    Mrs. Meek of Florida. Yes, sir?

                          habitat for humanity

    Mr. Lewis. Would you yield just for a moment?
    Mrs. Meek of Florida. Yes, I'll yield to the gentleman.
    Mr. Lewis. Both of us have had great experiences with 
Habitat, and we know the House that Congress built; they've 
been agreed on and all that stuff----
    Mrs. Meek of Florida. That's right.
    Mr. Lewis. But they also have always operated as an 
independent-of-government, private organization, and because of 
a very unusual circumstance in 1995 the authorizing committee 
and our committee gave them a one-time-only grant----
    Mrs. Meek of Florida. Yes.
    Mr. Lewis [continuing]. And then the next year we didn't 
have any money, and the following year they came back for more. 
I wonder whether they weren't better off when they weren't 
looking to us, because they've done so well on their own. So 
I'm asking myself the question outloud, as I'm asking the 
Secretary--I mean, you know, once we start feeding just a 
little bit, suddenly that which was good and private, and where 
volunteers got in and people raised money, suddenly we've just 
got another little element out there. Both of us, maybe not 
formally for this meeting our bill, we ought to be asking 
ourselves that question: Wouldn't they be better off if they 
went back to their independence?
    Mrs. Meek of Florida. Well, I don't think Mr. Fuller would 
like that so much.
    Mr. Lewis. Well, Mr. Fuller wouldn't, but----
    Mrs. Meek of Florida. He's for keeping, you know----
    Mr. Lewis. But there are people at very high levels within 
his organization who say, ``We think we were better off.''
    Mrs. Meek of Florida. I don't know. When I see what they do 
in some of these communities, I just have to say, Mr. 
Chairman----
    Mr. Lewis. And they've been doing it for years----
    Mrs. Meek of Florida. That's right.
    Mr. Lewis [continuing]. Without the money.
    Mrs. Meek of Florida. I think it's something--I think that 
kind of partnership should be developed strongly by government. 
I hate to disagree with you, Mr. Chairman. I was told never to 
disagree with the chairman.
    Mr. Lewis. I appreciate that. [Laughter.]
    But, you know, you've seen how well some of these programs 
that we leave alone work.
    Mrs. Meek of Florida. Absolutely, yes, I have.
    Secretary Cuomo. Congresswoman, if I may, I was also told 
never to disagree with the chairman. [Laughter.]
    But I would also beg the exception. As a matter of fact, I 
often wear a HUD and Habitat pin on my lapel as the model of 
government and volunteerism working together.
    Mr. Lewis. If you had a chance, you'd wear a HUD and 
Neighborhood Reinvestment pin, too. [Laughter.]
    Secretary Cuomo. That's exactly right.

                              brownfields

    Mrs. Meek of Florida. That's true.
    So, well, the chairman kind of stifled my question. 
[Laughter.]
    So you're still asking for the $50 million, right?
    Secretary Cuomo. Yes, we are, right.
    Mrs. Meek of Florida. So what are you going to do with it?
    Secretary Cuomo. We're going to use $50 million for the 
redevelopment of the brownfields. This would be the cleanup and 
reuse. It could be any economic development-related purpose 
that is creating jobs on that site, sponsored by private 
companies and the local government.
    Mrs. Meek of Florida. Thank you.
    Secretary Cuomo. Thank you, Congresswoman.
    Mr. Lewis. Thank you, Ms. Meek.
    Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman.
    Mr. Secretary, I have several smaller questions here, 
although I will have more followup on the FHA program, because 
I've just gone back to my files in my office----
    Secretary Cuomo. Please give it to me.

                      public housing grown produce

    Ms. Kaptur [continuing]. And checking those numbers on 
default rates at the highest levels, and your data--and I'd 
like to see what Price Waterhouse did in book its numbers 
because they truly are out of step with every other piece of 
information I have over the last 15 years on the performance of 
these funds, insuring funds.
    Last year I inquired about HUD's initiatives to view its 
properties, especially the public housing-owned developments 
around the country, as places to begin micro-enterprises, 
including the production of food through greenhouses and fruits 
and vegetables. First, for the residents, and then where these 
developments were located attendant to farmers' markets, to 
actually get some of the residents, many of whom are women, 
involved in sales at some of these marketplaces. To your 
knowledge, has HUD followed up in any way with the U.S. 
Department of Agriculture or the Food Marketing Institute, and 
has any progress been made at any of the sites around the 
country in helping people raise good produce close to home, and 
perhaps even marketing that in some locations?
    Secretary Cuomo. Congresswoman, there are two points. Let 
me answer the second first. We do not have an example of 
funding a supermarket or green grocer or agriculture co-op 
within public housing. We have funded many supermarkets, 
shopping centers, strip malls, commercial developments in 
proximity to public housing or in concert with public housing. 
The activities would be eligible under a number of our 
programs. CDBG could do it; the EDI program could do it; the 
EDSS program could do it. But to my knowledge, we have not yet 
undertaken a specific project within public housing.

                        fha loan limit increase

    And to quickly jump, Congresswoman, not to use your time, 
but back to the FHA for one second, just so we're clear, 
because I want to make sure there's no misunderstanding--our 
point on the FHA loan limits is while the GSE's work very hard, 
and have many outreach efforts to try to get to this minority 
disparity, and while they have a very good PR campaign to reach 
out and fairs and shows and pamphlets, the disparity exists. It 
is stunning--30 points; the homeownership rate for minorities 
is like 30 points less than whites. Redlining is alive and 
well. The urban homeownership rate is much, much more lower 
than the suburban rate. FHA is the vehicle that reaches that 
gap. We've put up some numbers on a chart.
    [The information follows:]


[Pages 179 - 180--The official Committee record contains additional material here.]



    Secretary Cuomo. Congressman Stokes was making the point 
that the GSE's do a large number of minorities. The GSE's make 
a large number of loans to minorities because they make a large 
number of loans, but the loans they're making are to minorities 
with higher incomes. When the borrower is financially sound, 
they make the loan. When you look at the lower income loans, 
the GSE's only made 142,000 loans below median, which is 5 
percent of their portfolio--5 percent of their portfolio. FHA, 
it's 24 percent of the entire portfolio.
    Do GSE's make minority loans? Yes, good minority loans to 
higher-income minorities. When the color is green, they make 
the loans. The question is, what happens to the below-median 
minority who are making those loans, and that's where FHA would 
be targeted.
    On the higher defaults, Congresswoman, we just have a 
factual difference. I'll give you the Price Waterhouse study. 
I'll give you the CBO scoring. I'll give the OMB scoring. OMB 
and CBO both agree, OMB scores this at 227; CBO scores it at 
212. So they're coming out to, obviously, very close to the 
same number, and Price Waterhouse; maybe they're all wrong, 
Congresswoman, but, I'lltell you the truth, I would be 
surprised.
    Ms. Kaptur. I sent one of my staff members back to try to 
pick up some of the GAO studies we had done, and he wasn't able 
to do it over the lunch hour.
    Secretary Cuomo. Okay.
    Ms. Kaptur. But I'd be real curious whether they're looking 
to the budget in the way that OMB thinks, or if they're really 
looking at mortgage performance over a 30-year period, because 
we have a real fundamental disconnect here on the factual basis 
for raising that limit, and I appreciate your comments there, 
Mr. Secretary, very, very much.
    Secretary Cuomo. Thank you.
    Ms. Kaptur. And we will submit information to you, and I 
know you will submit information to us.
    I mean, fundamentally, what I'm saying is that the people 
who are in the mid-range of the market, if they're firemen or 
teachers, they're more likely to pay those mortgages off than 
people who are highly levered at the upper end of the market, 
and the losses are greater at the upper end simply because 
people are more indebted. I mean, that is historic in this 
country in terms of homeownership and mortgage performance. So 
I really don't understand where the----
    Secretary Cuomo. Well, Congresswoman, just to put this in 
perspective, this $227,000 is a very deceiving number. No one 
is talking about going to give loans to people who are making 
$80,000 per year. We believe the average loan will go from a 
person making $40,000 to $42,000. So we're talking about a 
household making $42,000 per year. That's the loan we're 
talking about making. And the Price Waterhouse opinion is not 
just based on estimates or hypotheticals. It is from the actual 
review of our data. When they look at our portfolio, the higher 
loans tend to be performing better.
    So, again, we have a factual disagreement and I would look 
forward to working with the Congresswoman on it.
    Ms. Kaptur. Thank you. Going back to the----
    Mr. Lewis. Ms. Kaptur, before you do that----
    Ms. Kaptur. Yes, go ahead.
    Mr. Lewis. Just for the record, at this point, in case 
we're reviewing it in the context of your discussion, the 
$40,000 to $42,000 a year is kind of the 80 percent of the 
median income of this region, which is like $62,000 a year 
income. But just so all of us do keep it in perspective, the 
average income of those people who live in Indian housing is 
like $5,000 per year, and those people who we would categorize 
among the poorest of the poor have average incomes in public-
assisted housing of $7,500 to $10,000 a year. It's really 
important to know that in terms of these programs, especially 
when we've got lines of people who are not receiving services 
who we'd like to serve, the people on that lower income are 
certainly in the line. I understand about balancing portfolios, 
and I understand about making sure that FHA is a healthy 
reserve account, et cetera. But the people we are looking to 
serve here are covering quite a range, all the way to the point 
of 80 percent of the median income in this region is pretty 
high compared to those Indians.
    Secretary Cuomo. With the Chairman's indulgence, what is 
nice about this is it's no cost to us. It's not one at the cost 
of the other. We're actually doing both. We're actually making 
more funds. We're actually helping the economy, getting more 
people in housing.
    Mr. Lewis. I remember when we've talked in an entirely 
different environment there was a discussion about, my dad says 
there ain't no free lunch.

                    produce grown in public housing

    Ms. Kaptur. Reclaiming my time----
    [Laughter.]
    I wanted to just go back to the issue of good nutrition for 
people who reside in many of these developments around the 
country, and so you know where I'm coming from, Mr. Secretary, 
as ranking member on the Agriculture Appropriations 
Subcommittee, I have noted that in traveling around the country 
the access to good food for people who reside in many, many 
public housing developments is quite meager, and fundamentally 
because our major chains have redlined cities, too, and some 
rural areas. I really do believe on some sites there is the 
possibility of actually producing food. There are some places 
in the country that have been greenhouses, where fresh fruits 
and vegetables are produced. Frankly, even in Chicago, it's 
amazing to go through some of the public housing developments 
and see how many people have come up from Mrs. Meek's part of 
the country----
    Mrs. Meek of Florida. They have greens, I know.
    Ms. Kaptur [continuing]. That's right--or the deep South. 
And I'm not saying HUD should do this, but I think HUD can 
cooperate with agencies like, departments like the Department 
of Agriculture, where we have a number of programs. The problem 
has been that the Department of Agriculture doesn't see public 
housing developments as possibilities, and the ability for 
Cornell and for Ohio State or any other land grant institution 
to make a difference in these developments is vast.
    In some cases where we're working very hard with the Small 
Business Administration and others to establish micro-
enterprise among women, for example, the growth of herbs to be 
used in New York restaurants by certain developments that would 
have property that is owned by the authority itself is amazing. 
It is amazing the money that can be made in providing for 
food--first, for the people that live there, but also 
developing markets for those goods in those cities and 
communities.
    So the point I want to get across to you isn't that I'm 
asking that HUD develop supermarkets, although you know where 
that can happen, I just hope there's a terminal in the 
supermarket that goes into the credit union account----
    [Laughter.]
    Across the street in the public housing development. But I 
do think in the production of food can be done in some places, 
but I really think it's amazing what I've seen happen in some 
of the demonstration projects I visited around the country. 
They have happened by accident, and not because of the 
sensitivity on the part of HUD, to really help local people. 
It's a very self-affirming kind of activity as well. With some 
of our new greenhouse technologies, it's amazing whatcan be 
done with hydroponics and all.
    So I just pass that out as an idea, as somebody who serves 
on the Agriculture Appropriations Subcommittee and who has seen 
the redlining of communities across this country by the retail 
stores. Some of this you can't do yet, like raise hogs inside 
public housing developments. We're going to figure out a way to 
do that, but there is just a heck of a lot that can be done 
here to provide produce, and it isn't being done in most cases, 
because USDA doesn't see you. You ought to go have lunch with 
Dan Glickman.
    Secretary Cuomo. As a matter of fact, Congresswoman, I went 
with Dan Glickman; he took me on a tour of a farmers' market 
that he had by the Department of Agriculture in the parking lot 
of the USDA, and we talked about what we could do together. He 
informed me that there are a number of public housing 
authorities that actually are doing food raising gardens. San 
Francisco, Philadelphia, and New Orleans all have food gardens. 
So it is an activity that is underway. It's an eligible 
activity under our programs, and we'll make sure that we get 
the word out in our material that this is eligible, and see if 
we can't generate more interest in food production in public 
housing.
    Mr. Lewis. You'll really have to forgive me; Willy Brown's 
an old friend of mine; I'd like to check to see what he's 
growing in those gardens. [Laughter.]
    Secretary Cuomo. It's an herb garden, I understand. 
[Laughter.]
    Ms. Kaptur. It's happening, it's definitely happening in 
California. I can verify that.

                 insurance for nonprofit cdc employees

    Mr. Secretary, last year I also inquired about the problem 
that many employees in not-for-profit community development 
corporations had with accessing health insurance. The tenure is 
sometimes even affected by their inability as small enterprises 
and not-for-profits to ensure their workforce. I'm wondering 
whether HUD was able in the last year to approach the 
Department of Health and Human Services to attempt to address 
this particular situation, perhaps creating an umbrella policy 
across the United States, to which many of these employees 
could belong.
    Secretary Cuomo. To the best of my knowledge, 
Congresswoman, we haven't talked to HHS about that, but we will 
forthwith about a health insurance umbrella policy that the 
local CDC's could join into.
    Ms. Kaptur. In every city and many rural areas, there isn't 
an automatic policy that can be written because they tend to be 
very small. If you were to lump them together on a national 
basis, you have a lot of people who need health insurance. It 
is an insurable group, and I think it would help to retain 
tenure in many of these organizations across the country.
    Secretary Cuomo. I believe the United Way agencies do that, 
that if you're a United Way not-for-profit, they have an 
umbrella organization that does the health insurance, but we 
can explore more and get information to the Congresswoman.
    Ms. Kaptur. All right, I thank you very much for that.

                  not-for-profit fair housing agencies

    Ms. Kaptur. Let me ask you, on a totally different area, 
the Fair Housing Act, there's been legislation introduced in 
this Congress, H.R. 3206, that states that fair housing 
provisions shall not prevent local control of residential uses. 
I'm wondering if the Secretary or any of his advisors has an 
opinion as to how this legislation might affect the efforts of 
HUD and not-for-profit fair housing agencies to address 
discrimination.
    Secretary Cuomo. We have serious questions and problems 
with the bill, Congresswoman. Fair housing is a priority for 
this President, this administration, and for our Department, 
and we think the bill would have serious drawbacks to making 
the Fair Housing Act work.
    Ms. Kaptur. All right, thank you for that, Mr. Secretary. 
That's all my questions at this point, and I certainly thank 
you for your openness. It's fun to have a Secretary of HUD like 
this, because he's really out there trying and all of his 
staff--I see a lot of younger faces. Even though you said you 
haven't had any new people in 10 years, there are a lot of 
young people out there----
    Secretary Cuomo. Well, they started younger--but that was a 
year ago. It's been a long year, Congresswoman. [Laughter.]

                       tenant protection funding

    Mr. Lewis. Thank you, Ms. Kaptur.
    Mr. Secretary, the budget requests $373 million for tenant 
protections which will be used to provide funding for 
preservation, property distribution, opt-outs, and portfolio 
re-engineering. As of March 18, $378.3 million of previously 
appropriated funds were unspent in this account. Why have you 
requested so much additional funding when there's $378 million 
available for these purposes, and do you expect to obligate all 
of these funds during this fiscal year?
    Secretary Cuomo. I'm going to ask Paul Leonard to respond, 
Mr. Chairman.
    Mr. Leonard. It is correct that we have in the past 
estimated what our needs were, assuming that there were not 
going to be any funds available for the preservation program, 
and assuming a more timely enactment of our mark-to-market, 
comprehensive mark-to-market legislation. As you know, last 
year was the first year that the Congress ultimately provided 
no additional funding for preservation grants, and the bill 
that you all passed last year also enacted the mark-to-market 
legislation. As a result, we have had lower-than-expected 
demands for the tenant protections that we have provided. 
However, we have noticed some uptick in the amount of 
prepayments that have occurred in the preservation inventory, 
and will be moving forward to implement the mark-to-market 
legislation for which we feel there will be some sufficient 
claims on those tenant protection vouchers.
    Mr. Lewis. Thank you. So you do expect that all ofthese 
funds would be obligated by the end of this fiscal year--by the fiscal 
year?
    Mr. Leonard. I'm not sure whether we expect that they will 
all be obligated by the end of the fiscal year. However----
    Mr. Lewis. The total would be in the neighborhood of 760 or 
so.
    Mr. Leonard. I mean, again, it is my understanding that we 
are expecting that all of the funds will be claimed and will be 
needed for the purposes for which they were originally 
appropriated. If not by the end of the fiscal year, then 
sometime thereafter.
    Mr. Lewis. If there is carryover funding, shouldn't it be 
made available for tenant protections needed in the public 
housing programs, specifically HOPE VI program, which must set 
aside annually $90 million for tenant protections?
    Mr. Leonard. Well, I think that that's something that we're 
willing to take a look at. However, our----
    Mr. Lewis. It wasn't a ``yes,'' huh?
    Mr. Leonard. Well, our first and foremost concern is being 
caught short and not having sufficient tenant protections 
available for what is a relatively difficult and speculative 
prediction to make about the level of prepayments and the level 
of section 8 opt-outs that will occur in the project-based 
section 8 inventory. So we want to be conservative about what 
our assumptions are and have tenant protections on hand to 
protect those tenants before we begin to allocate them for any 
other purposes.

                                hope vi

    Mr. Lewis. Can you tell me how many HOPE VI sites would 
receive funding with the $90 million and what would be the 
leveraging impact?
    Mr. Leonard. We estimate that the $90 million would be 
providing 10,000 certificates, both for replacements under the 
HOPE VI program, but also for other replacement section 8 
assistance for other public housing demolitions that would 
occur.
    Mr. Lewis. I really am asking how many HOPE VI sites would 
receive funding under the $90 million, and what would be the 
leveraging impact of that $90 million?
    Secretary Cuomo. Elinor Bacon, Mr. Chairman, who runs the 
HOPE VI program for us.
    Mr. Lewis. Ms. Bacon.
    Ms. Bacon. The maximum grant last year was $35 million and 
that would make probably three more grants. The leverage this 
year was 3 to 1.
    Mr. Lewis. You do grow some herbs with HOPE VI, don't you? 
[Laughter.]
    Thank you.
    Secretary Cuomo. Not that we admit, Mr. Chairman.
    Mr. Lewis. Mr. Stokes, I've kind of left you hanging 
several times. Just go right ahead.

                       community empowerment fund

    Mr. Stokes. Thank you, Mr. Chairman. I had to run next door 
to my other hearing.
    Mr. Secretary, your budget proposal is $400 million for the 
new Community Empowerment Fund. Tell us what this new program 
is and tell us how it differs from your currently existing 
programs.
    Secretary Cuomo. The need in the cities that we're talking 
about, the communities we're talking about, is job creation, 
job creation, job creation. Any mayor, any county executive 
will point out, Congressman, that that's what they need. You 
put on top of it the needs of welfare reform, some frightening 
information, in my opinion, these past few days about what's 
actually happening to the people coming off welfare. It says we 
need jobs in central cities. We have to do something about the 
numbers that say most of the new jobs are going out to the 
suburbs and rural America.
    We need an economic development tool to help create jobs in 
cities. We call it the Community Empowerment Fund, $400 
million. It builds on the history of the Department with the 
old UDAG program, which did great, great things. It also builds 
on the recent history of the EDI program, Economic Development 
Initiative Program, which we've had for the past few years and 
has worked very, very well. It is a grant program that spurs 
economic development, job creation, and works with the CDBG 108 
loan program. We've had extraordinary success with it. We've 
done several billion dollars in economic development financing 
without a single default to the Federal Government.

            service coordinators for elderly funding request

    Mr. Stokes. Last year we heard testimony about the 
importance of service coordinators in housing for the elderly 
and disabled, about concerns that grants for these service 
coordinators might not be renewed. In response, the 
subcommittee specifically earmarked some funds for this 
purpose.
    Have you requested sufficient funds in your fiscal year 
1999 Budget for renewal of existing grants for service 
coordinators for the elderly and disabled?
    Secretary Cuomo. I believe we have, Congressman. We have a 
total of $20 million that has been allocated to services for 
the elderly and the disabled.
    Mr. Stokes. All right. This funding, Mr. Secretary, for 
service coordinators for the elderly and disabled has been 
provided as part of a larger program called Economic 
Development and Social Services. Will housing authorities 
seeking renewal of the service coordinator grants be required 
to enter the competition for this larger program or will there 
be a special mechanism for handling the renewals?
    Secretary Cuomo. There will be a set-aside to handle the 
renewals, Congressman.

                        healthy homes initiative

    Mr. Stokes. Okay. Your request includes $25 million for a 
Healthy Homes Initiative. I understand this initiative 
partially involves a program of inspections for lead-based 
paint hazards and also involves research demonstration and 
education efforts to help control childhood diseases caused by 
housing-related factors, such as toxic molds. Of course, this 
is an area that I've long been interested in and have talked 
with you on other occasions about.
    Can you tell us more about this initiative, why it's 
needed, and what it would do?
    Secretary Cuomo. Yes. As the Congressman knows, given his 
long history in this area, the Department is responsible for 
the lead-based paint disclosure and enforcement of the 
disclosure. When the program was sent over to the Department, 
we didn't really have the resources we needed to do the kind of 
enforcement that I think this Committee would want the 
Department to be doing around this important issue. The Healthy 
Homes is really the recognition of the enforcement 
responsibility we now have by law, and in all due candor to 
this Committee, we are not fully completing as we speak.
    Also, this area has been evolving from a focus just on 
lead-based paint to other childhood related diseases--asthma, 
et cetera, the toxic molds--which tend to be related to 
thelead-based paint area, and we would evolve likewise at the 
Department.

                            lead-based paint

    Mr. Stokes. You're also asking for funds to continue HUD's 
existing lead-based paint hazard reduction program at its 
current level of $60 million. Am I correct that the problem of 
lead-based paint remains a serious problem in some areas? And 
if so, can you share with the subcommittee any information you 
have regarding the continuing prevalence of lead poisoning 
among children?
    Secretary Cuomo. Congressman, I can get you the specifics 
for the record and the data, but if I could just tell you 
experientially, while the numbers tend to be going down 
because, obviously, as time progresses, fewer and fewer units 
are older; fewer and fewer units have used lead-based paint--
the damage that is done when any child is exposed to lead is so 
severe and so significant that I think the Department should be 
diligent. That's what the law wanted when it was passed in the 
first place, and I want to make sure that we're living up to 
the expectations of the law.
    So I will get the specific data for the record, but it is 
still a serious problem, even though the overall numbers are 
going down.
    [The information follows:]


[Pages 188 - 200--The official Committee record contains additional material here.]



    Mr. Stokes. Correct me if I'm wrong, but I understand that 
HUD's lead-based paint program concentrates on abating lead 
hazards in privately owned, low-income housing where the owners 
do not have the resources to do this abatement work without 
some assistance. Am I correct in that?
    Secretary Cuomo. That is correct, sir.
    Mr. Stokes. Okay. Do you have any estimate of how many more 
housing units are in need of this type of assistance?
    Secretary Cuomo. I might ask David Jacobs to respond, 
Congressman. Dave runs the lead-based paint program.
    Mr. Stokes. Sure. Mr. Jacobs, we'd be pleased to hear from 
you.
    Mr. Jacobs. Thank you. In 1995, we convened as task force 
which took a look at that issue, and that task force concluded 
that there were 64 million houses that have lead-based paint; 
20 million houses that have lead-based paint hazards, and of 
those houses, 3.8 million have children under the age of 6. Of 
those houses, roughly half a million have inadequate cash flow 
to privately finance lead hazard control work, and those are 
the houses that the grant program targets.
    Mr. Stokes. Let me ask you this: What are the consequences 
if lead-based paint abatement work is not done?
    Mr. Jacobs. Well, the likelihood of lead-based paint 
hazards being present, of course, increases, and therefore, the 
children who live in those units, as the Secretary mentioned, 
suffer irreversible and lifelong decrements in learning 
ability, intelligence, and behavioral difficulties.

                    fair housing programs increases

    Mr. Stokes. Thank you very much.
    I need to get into an area that was touched upon yesterday 
in some respects, but I think it's important for me to bring my 
own perspective to this area. Your budget proposes a 
significant increase in HUD's fair housing grant programs. Tell 
us the purpose of these increases and to what uses the funds 
will be put.
    Secretary Cuomo. Congressman, the President has made 
fighting racism a priority for his administration, and I 
applaud his courage in doing so. He has what's called the One 
America Initiative, which is a dialog that brings people to a 
higher and better understanding.
    The Department of Housing and Urban Development is a 
significant part of that One America Program, in that we are 
the keepers of the Nation's fair housing law. We recently 
signed an agreement, by the way, with the United States 
Department of Agriculture, where we're also now doing the fair 
housing enforcement in rural America for the USDA. These are 
laws that have been on the books for 30 years. These are laws 
that are central to our progress in this area. As the President 
says, we'll never come together unless we can live together. In 
my opinion, sir, there is still discrimination in the housing 
market. It is institutionalized. In many ways it's worse than 
it's ever been; redlining is still alive and well. There is 
still discrimination with the sale of homes, the financing of 
homes, the location of homes, and we don't even realize it 
anymore.
    You can talk to people in the industry who now just assume 
it is so--because a person happens to be a certain nationality, 
they would assumedly want to live in a certain neighborhood and 
would not want to live in another neighborhood.
    One of my personal priorities is enforcing the fair housing 
laws at HUD. We've been talking around it with this FHA loan 
limits. The denial rate among mortgages is double for African 
Americans what it is for whites. That is not a coincidence. It 
is institutional discrimination, in my opinion. We have the 
laws; let's enforce the laws.
    To do that, we're going to need more funds through what we 
call the FHIP and the FHAP programs. FHIP agencies are private 
agencies that do testing, et cetera. It was a FHIP agency that 
we work with that did a report in this market that said 40 
percent of the lenders they tested discriminate against African 
Americans and Hispanics. We fund those types of tests. We want 
to do more of them. FHIP is the private fair housing 
organization. FHAP's are state agencies that do the enforcement 
within their own states. We also want to do a national audit to 
find out the kind of discrimination we're talking about and the 
extent of it.
    Mr. Stokes. In that context, Mr. Secretary, so that people 
understand the full scope of discrimination, in addition to 
race and sex discrimination, do you find discrimination, say, 
against people who have disabilities or discrimination against, 
say, families with children? Are there others--within the scope 
of discrimination, are you finding other examples?
    Secretary Cuomo. Certainly, sir. Discrimination among 
people who are disabled, family discrimination, as you pointed 
out also, beyond just race and sex, and sexual orientation.

                              fhip grants

    Mr. Stokes. You mentioned the FHIP program, which makes 
grants to organizations to promote compliance with fair housing 
laws. What sorts of organizations receive these grants? For 
example, do they tend to be national or local organizations, 
and do they include local government agencies?
    Secretary Cuomo. The FHIP tend to be local organizations, 
Congressman. They'll do testing. They'll do educational 
campaigns. There will be information campaigns about people's 
rights. We also fund the FHAP agencies. We now have about 30 
State agencies under contract. We have about 50 local agencies 
under contract. We have about 33 states covered.
    Mr. Stokes. What kind of activities are carried out with 
the Fair Housing Initiative Program, the FHIP grants?
    Secretary Cuomo. A case that I referred to yesterday, the 
Fair Housing Council in Washington, D.C., did testing of 
lenders who give mortgage loans. Testing can be where they will 
send in a white person with a balance sheet; they'll send in an 
African American with the same balance sheet, and they'll see 
if there's a different result. There is a significant disparity 
in the denial rate for African Americans, and the FHIP agencies 
will do that type of testing, can then come back and do 
educational assistance, et cetera.

                  discrimination in property insurance

    Mr. Stokes. There's been some controversy--and I'm sorry 
that all my colleagues are not here because I know that a 
couple of my other colleagues have an interest in this area--
there's been some controversy surrounding the role of HUD's 
fair housing programs in preventing discrimination in property 
insurance. What is the Department's position regarding the 
application of the Fair Housing Act discrimination in providing 
insurance?
    Secretary Cuomo. Our position is, Congressman, that 
insurance has been deemed by the courts to be covered by the 
Fair Housing Act. As a matter of policy within the Department, 
we do not seek to fund FHIP grantees who focus on a specific 
activity, insurance included. We're looking for broader 
activities to be funding, and we don't seek to fund any group 
that focuses just on insurance. But it is a covered act under 
the Fair Housing Act.
    Mr. Stokes. All right. And am I correct that the position 
of the Department is supported by court decisions?
    Secretary Cuomo. Yes, sir, you are.
    Mr. Stokes. Mr. Secretary, is there reason to believe that 
discriminatory practices in property insurance have been a 
serious or a widespread problem?
    Secretary Cuomo. There's evidence that would suggest that, 
sir, yes.
    Mr. Stokes. And haven't there been some major insurance 
discrimination cases and complaints brought recently that have 
resulted in settlements or compromises, suggesting that there 
was, indeed, merit to the charges?
    Secretary Cuomo. Congressman, Assistant Secretary Eva Plaza 
is here, who is the Assistant Secretary for Fair Housing, if I 
could refer the question to her?
    Mr. Stokes. We'd be pleased to hear from her, Mr. Chairman.
    Ms. Plaza. I don't know that I can add much more than what 
the Secretary has already said, but, in essence, there have 
been some recent settlements, particularly in this area, with 
major insurance companies, that have been brought by our FHIP 
partners here in the local area and throughout the United 
States. Under the Fair Housing Act, we are required to 
conciliate cases, and we take every opportunity to conciliate 
the cases, short of full-fledged trials. So that's what has 
happened recently with probably the most major insurance 
companies nationwide.
    Mr. Stokes. And you would agree with the Secretary meant 
that this is a fairly widespread problem?
    Ms. Plaza. All of the evidence that has been brought to my 
attention since I took this office would bear that out. It is 
most definitely a problem, and I believe that now, however, 
insurance companies know that we're looking very, very 
carefully and very closely at them. And I think that they have 
taken very strong measures very recently to try to address 
systems, their internal systems, so that they don't, in fact, 
unintentionally end up discriminating against people of color, 
minorities and people of color, people with physical 
disabilities.
    Mr. Stokes. Thank you very much. I guess, gracious. 
[Laughter.]
    Ms. Plaza. De nada.
    Mr. Stokes. You've got to teach me some of this stuff. 
[Laughter.]
    It sounds good.
    Mr. Chairman, you have been very generous with my time. I 
have some other questions, but I don't know what you want to 
do.
    Mr. Lewis. I think I'll proceed a little bit further.
    Mr. Stokes. Okay, thank you.

                       hope vi and hud reform act

    Mr. Lewis. Thank you very much.
    Mr. Secretary, we've provided $550 million for severely 
distressed housing, otherwise known as HOPE VI, $457 million 
for grants, $93 million for tenant protections. How does the 
HUD Reform Act impede the work that HOPE VI programs are doing?
    Secretary Cuomo. How does the HUD Reform Act impede the 
work?
    Mr. Lewis. Impede the work that HOPE VI program is doing.
    Secretary Cuomo. I don't know that the HUD Reform Act, Mr. 
Chairman, is any more or less an imposition on the HOPE VI 
program than it is on any other competitive programs. You know, 
the HUD Reform Act is very strict and limiting about how the 
Department can run a competition.
    Mr. Lewis. As you know, we talked earlier about leveraging, 
and we talked about the value of the flexibility within HOPE 
VI. So I'm just wondering about that interplay, and that's how 
I come to the question of, how does the Reform Act perhaps 
affect that?
    Secretary Cuomo. Let me refer to Elinor Bacon, who runs the 
HOPE VI program, Mr. Chairman.
    Mr. Lewis. Sure, Ms. Bacon.
    Ms. Bacon. Mr. Chairman, in our experience, how it has 
affected it is that we are not allowed to look at anything 
except what is given to us in the application. In other words, 
we can't, after the application is submitted, go out and 
discuss the application with the locality or the housing 
authority. And so we are restricted to what we see in the 
application.
    Mr. Lewis. All right. I guess this question kind of swirls 
around maximizing opportunities for flexibility and leveraging, 
and the like. A further question would be, should there be 
better coordination between HOPE VI grantees and HUD, and can 
we expect to see better coordination as we go forward?
    Ms. Bacon. Between the grantees and HUD itself?
    Mr. Lewis. The grantees and HUD.
    Ms. Bacon. I've been actually very pleased with the 
coordination and cooperation. I'm not quite sure what you're--
--
    Mr. Lewis. I'm thinking about, as we go forward with the 
reform process, I'm worried about some stilting that might 
affect, impact that negatively. We're really talking about 
continuing an excellent environment, if, indeed, there is one.
    Secretary Cuomo. What it does not allow, Mr. Chairman, the 
HUD Reform Act doesn't allow any back-and-forth.
    Mr. Lewis. Right.
    Secretary Cuomo. You can't, as Elinor was saying, you can't 
go to the site; you can't have a dialog; you can't make a 
counterproposal. You're limited to the face of that 
application. It's not just HOPE VI, by the way. It's any 
competition. So if you wanted to go back to the applicant and 
say, ``I like this. I don't like this. How about you do this,'' 
you're foreclosed from any of those conversations.
    Mr. Lewis. And would you suggest that we'd be better off if 
we had more flexibility in terms of going back and forth?
    Secretary Cuomo. I would, Mr. Chairman. I understand the 
purpose of the HUD Reform Act. It was passed at a time when 
there was a lot of focus on abuses at the Department, but it is 
very limiting, and I believe in many cases you get less of a 
product because of it.
    Mr. Lewis. What do you think?
    Ms. Bacon. I certainly agree. I think that it would be very 
useful to be able to go back and forth and really work with the 
localities in developing their applications.
    Mr. Lewis. Okay. Through legislative changes, the Congress 
has attempted to create an atmosphere that encourages PHA's to 
utilize other sources of funding, like tax-exempt bonds, tax 
credits. Why aren't more PHA's utilizing these resources?
    Secretary Cuomo. I believe--and I'll refer to Elinor, but I 
believe, especially in the HOPE VI program, Mr. Chairman, most 
are merging all the different funds and putting all these 
different programs together to do one development.
    Mr. Lewis. Would PHA's be very competitive for tax credits, 
for example?
    Ms. Bacon. They are extremely competitive, and we've found, 
for instance, last year, I would say, virtually--I don't know 
the exact percentage, but, say, 90 percent of the applications 
did include tax credits.
    Mr. Lewis. Where there are limitations, is HUD working to 
diminish or eliminate----
    Secretary Cuomo. The limitation really wouldn't be from 
HUD. The tax credits are administered through the State 
entities, and they're highly competitive on the State level, 
but I don't believe it's a HUD goal. The administration has 
proposed more low-income housing tax credits this year, which 
could allow public housing authorities or any entity, actually, 
to use it more next year.

                        native american program

    Mr. Lewis. Okay. Shifting gears a bit, Indian housing, the 
administration requests $600 million for Native American 
housing assistance. This level of funding remains equivalent to 
fiscal year 1998 funding levels. Recently, HUD released the 
final rule governing the Native American Housing Assistance and 
Self-Determination Act of 1996, which requires that HUD be 
better monitors of this program. What sort of mechanisms have 
been put into place to more effectively monitor the Native 
American housing programs, including the block grant, section 
184 and title 6 loan guarantee programs?
    Secretary Cuomo. This is going to be a new experience for 
us, Mr. Chairman. It's something we're looking forward to. As 
you know, it totally revamped the way we do business and the 
programs, and it's been an exciting year to live through. We 
have Jackie Johnson who's with us now, who's going to be 
running the program, and I would ask her for her thoughts on 
your question.
    Ms. Johnson. Thank you very much.
    Mr. Chairman, I'm really excited about where we're going 
with the new Native American programs. In particular the 
negotiated rulemaking helped us work with our clients, our 
customers, the tribes, to be able to help them understand their 
responsibilities and the accountability that needs to happen in 
the program to make it successful. In addition, the Office of 
Native American Programs, the department which I am currently 
in charge of, is going through its reorganization to address 
these issues in the way that we're developing our organization, 
dealing with public trust, dealing with monitoring and 
compliance, workload allocation, as well as remote and onsite 
monitoring issues that are necessary.
    The Department, in addition to the IG's report, has gone 
through negotiated rulemaking and incorporated a number of the 
recommendations from the IG, and the rest of them are being 
evaluated for our reorganization.
    Mr. Lewis. In a little more detailed--we touched on it 
earlier, but what is the average income of a Native American 
compared to the average income of a public housing resident?
    Secretary Cuomo. If we could submit that for the record, 
Mr. Chairman?
    Mr. Lewis. We kind of used the figures earlier. It's $5,000 
average versus $7,500 to $10,000, something like that, but if 
you could really make sure that I'm correct for the record, it 
would be----
    Ms. Johnson. Significantly lower. As you know, many reports 
have stated that the Native American population is the poorest 
of the poor in this Nation. In addition to that, the Native 
American population has a high dependency upon HUD programs, in 
many of the communities 80 to 90 percent of their communities 
depend upon HUD programs for their only source of housing.

                       job rate in indian country

    Mr. Lewis. We only have a few minutes left. I might as well 
discuss this with Ms. Johnson, but it just raises an 
interesting point that ought to be laid out there for all of us 
to think about. Within my own community, not actually my 
district, but my own community, we have a small, little tribe, 
delightful friends, only about 100 people, but their gambling 
programs bring in $100 million a year. I've often wondered, 
among the States that make up the Indian nations, if there 
shouldn't be a little equity that relates not to our Federal 
programs, but rather a different kind of Federal program. Just 
a thought.
    Ms. Johnson. I'd love to discuss it with you. [Laughter.]
    Mr. Lewis. Let's see, what is the job rate in Indian 
country compared to the job rate in other parts of the United 
States. You thought I was through with you, huh? [Laughter.]
    Ms. Johnson. Yes, I did. You said you just had a few more 
minutes.
    Mr. Lewis. Yes, when the next bells ring, I'll give you a 
break. Okay?
    The job rate in Indian country compared to the job rate 
across the country?
    Ms. Johnson. Unemployment is significantly higher. I don't 
have those ratios, and we'd be glad to give them to you.
    Mr. Lewis. Yes, we need to have those in the record.
    [The information follows:]

    Question. What is the average income for a Native American 
living in Indian housing?
    Answer. Decennial Census data for 1990 show that in 1989, 
median annual household income for Native Americans living on 
reservations was $19,865. For all races, that figure was 
$30,056. Data obtained from the HUD Multifamily Tenant 
Characteristics System is consistent, showing that, as of 
February, 1997, the average annual household income for Indian 
families in the Mutual Help Homeownership Opportunity Program 
was $20,012. Factoring out California and Alaska reduces that 
figure to less than $15,000. According to a recent General 
Accounting Office report (GAO/RCED-98-49, ``Native American 
Housing: Homeownership Opportunities on Trust Land are 
Limited,'' issued February, 1998), Federal agencies provide 
nearly all of the housing, both rental and owner-occupied, 
developed on Indian reservations.
    Question. What is the unemployment rate in Indian country?
    Answer. According to the 1990 Decennial Census, the 
national average unemployment rate for Indian adults living on 
reservations was 14.9 percent. For all races, the national 
average was 6.3 percent. Using the same source, the 
unemployment rate for Native Americans was highest in the 
Southwest and Great Plains regions with averages in excess of 
25 percent.

                  economic obstacles in indian country

    Mr. Lewis. What are the obstacles to community and economic 
development in Indian country?
    Ms. Johnson. Lack of the private financing; financial 
institutions don't have a presence; a lack of economic 
development which is absolutely critical in looking to some of 
the initiatives that HUD has. I'm sure that in my new position, 
we'll be able to look to see how we can partner with some of 
those initiatives within the Department.
    Mr. Lewis. You know, the Secretary and I have discussed, 
and he's mentioned several times here today, the Grameen Bank, 
which is kind of the symbol for a lot of us who would like to 
roll the drum and say there are different ways. But, seriously, 
among Indian country there are people who are doing 
substantially well who could pool together some funding and do 
some lending, and it wouldn't take very much to create some 
obvious avenues, if, indeed, there are no lending programs 
available, et cetera. I mean, infrastructures develop because 
people want to help those who need it, and those who need it 
create a demand. Demands take many forms.
    Ms. Johnson. If I could, on that note, Mr. Chairman, we've 
had this discussion----
    Mr. Lewis. Yes.
    Ms. Johnson [continuing]. Previous to this, and I am still 
just as committed in trying to look for that presence of a 
financial institution, and the presence of the secondary market 
within that area. I'm sure the Secretary would appreciate your 
support in that.
    Mr. Lewis. We'll watch with interest.
    I'm going to maybe finish this section just by a couple 
more questions. What are the obstacles to utilizing the section 
184 loan guarantee program, and do some Indian reservations 
have more obstacles than others?
    Ms. Johnson. Yes. First of all, it's economics. When 
there's no economy, there's obviously very few people who can 
afford a 184 loan program. It reaches, as the FHA program does, 
a lower market, but when the market's too low to reach, it 
can't.
    The second major obstacle is the timeframe for being able 
to get a loan processed, and we are trying to develop 
initiatives with the Bureau of Indian Affairs. Kevin Gover has 
agreed to work on a pilot program where we might be able to 
increase the timeframe--or decrease the timeframe for BIA's 
approval of the land trust agreement.
    Mr. Lewis. If we can have others who may have questions on 
this subject area supplement for the record--otherwise, I'm 
going to have Mr. Stokes miss this vote, and there's less time 
than I thought.
    We're in recess.
    [Recess.]

                                homeless

    Mr. Lewis. We come back to order.
    Sir, I think we're going to move right along here. Mr. 
Secretary, in the next order of discussions I'd like to move to 
homeless programs. So what is the leveraging ratio for the 
homeless programs and how much money do HUD's homeless 
initiatives bring in from outside resources that are dedicated 
to providing services for homeless families?
    Secretary Cuomo. All in all, Mr. Chairman, it's about 2 or 
3 to 1 when you count all the other resources that are brought 
into the programs.
    Mr. Lewis. And can you give me an idea how much money? How 
many dollars?
    Secretary Cuomo. Well, the program itself is in the range 
of $800 million. So we would leverage about another 1.6.
    Mr. Lewis. Do you have a system in place that can measure 
that ratio that you're talking about?
    Secretary Cuomo. Yes, we have the specific applications and 
we know what the programs are and what other funds are going 
into those programs.
    Mr. Lewis. How do you evaluate the quality of services 
provided through the continuum of care?
    Secretary Cuomo. Well, two ways. First, on the competition, 
when we decide which ones to select, it is a national 
competition. The competition is ferocious, and only the best 
win. Once a program is funded, then we go and we monitor and we 
follow up and we inspect.
    Mr. Lewis. Does all of that help you know whether the 
services have changed a homeless person's circumstances longer-
term or long-term, permanently?
    Secretary Cuomo. We have studies that have been done on 
this. The continuum of care relies on local governments and 
State governments to make the actual prioritization and 
selections. There have been many studies that have tracked 
homeless families that have come through homeless shelters, 
transitional housing, and been placed in permanent housing, and 
that show when you address the underlying problem that prompted 
the homelessness in the first place, and the person receives 
the appropriate care, you make a real difference in that 
person's life.
    Mr. Lewis. We discussed a good deal of that yesterday, but 
along those same lines, it's very important that we be dealing 
with the whole problem and solution to the whole problem, but 
in connection with some of those significant pieces, are there 
sufficient affordable homes available to persons once they've 
taken advantage of the continuum of care?
    Secretary Cuomo. No.
    Mr. Lewis. Okay. How many families are repeat users 
ofcontinuum of care?
    Secretary Cuomo. I could get you the number, Mr. Chairman, 
how many people are within the system for a period of time, 
repeat users. There are some people who fall in and out of 
homelessness.
    Mr. Lewis. Yes.
    Secretary Cuomo. But, more, there are people who use every 
stage of the continuum--who come in from the emergency shelter 
and then our transitional housing, and then are in permanent 
housing programs.
    Mr. Lewis. I assume that the permanent housing programs 
save money in the long run, if you could----
    Secretary Cuomo. Yes, sir, it's not even close. One of the 
reasons we propose 34,000 vouchers for what we call the 
permanent housing component of the continuum of care is because 
we now have a real infrastructure of emergency programs and 
transitional programs. The question is, where is the permanent 
housing. We talked about the 5.3 million families. We don't 
want to just put a homeless family on a waiting list for 
another three years. The 34,000 vouchers could then work with 
the continuum and get people out of the transitional housing.

                    supportive services for homeless

    Mr. Lewis. Okay. In fiscal year 1996, about 50 percent of 
the competitive grant funds HUD provided for homeless was spent 
on supportive services as opposed to direct housing assistance. 
What is HUD's rationale for allocating such a large percentage 
of its competitive grant funds for supportive services?
    Secretary Cuomo. We don't allocate. The local government 
does, and we put the funding where the need is. Your point, Mr. 
Chairman, if a person is mentally ill, and you're only 
providing four walls, you're not helping that person. If the 
local city, the county, says, ``We want to get mental health 
services to this person and we need a case worker,'' then so be 
it. And if that turns out to be 50 percent of the funds, then 
so be it. For us to sit here in Washington and say, well, no 
more than 30 percent of the money should be used for services, 
no more than 40 percent should be used for hard costs, those 
would be arbitrary, in my opinion. That would be top-down. That 
would be a Federal cookie-cutter. I'd much rather leave it to 
the local communities.
    Mr. Lewis. If there's some validity to that discussion that 
we had yesterday, the idea that was being presented by Ms. 
Kaptur that involves using your good offices to bring agencies 
together, maybe even bring State agencies together, to rethink 
all this, is an important item worth considering.
    Secretary Cuomo. I agree 100 percent. Mr. Chairman, I'd 
rather do it by collaboration and partnership than by Federal 
mandate.
    Mr. Lewis. Does HUD coordinate with the Department of 
Health and Human Services to provide supportive services for 
the homeless?
    Secretary Cuomo. Yes, sir, we do.
    Mr. Lewis. What has been the outcome of it?
    Secretary Cuomo. We have the Interagency Council for the 
Homeless, which is co-chaired by HSS and VA, Veterans' Affairs. 
HUD serves as the chairperson. We have come up with a number of 
program linkages where we actually put HUD funds together with 
HHS funds and we administer them jointly. Also, we've come up 
with a lot of informational material on how community groups 
can use programs together.

                           homeless vouchers

    Mr. Lewis. The administration has requested $192 million 
for tenant-based assistance to move persons from homeless 
facilities to permanent housing. What formal strategy has HUD 
developed for administering the 34,000 new vouchers for the 
homeless population requested in Fiscal Year 1999's budget? 
Does HUD have the resources at the headquarters and field 
office levels needed to administer these vouchers, and who's 
eligible to receive the assistance?
    Secretary Cuomo. Yes, sir, these are the 34,000 vouchers, 
which, as we mentioned before, would be used as the permanent 
housing takeout on the continuum of care. No homeless system in 
any community will work unless you have an avenue for permanent 
housing, and these vouchers would start to do that. We'd 
administer it through public housing authorities, which is what 
we now do. We'd have a competition. It would be linked to the 
continuum of care, but it would go through housing authorities.
    Mr. Lewis. I have some other questions on the subject area 
for the record, if you would respond to those as well.

                                 hopwa

    Mr. Lewis. The administration has requested a $21 million 
increase in funding for HOPWA, and estimates that additional 
cities will become eligible for the grant based upon the 
incidence of AIDS in a community. What is the status of the 
report on the formula requested by this subcommittee in Fiscal 
Year 1998 for appropriations measure?
    Secretary Cuomo. The report has been submitted, Mr. 
Chairman. The report recommends that there be no change in the 
current HOPWA formula, but the report is complete and was 
forwarded to the Committee and the Senate Committee yesterday.
    Mr. Lewis. Yesterday. [Laughter.]
    Well, can you tell us----
    Secretary Cuomo. Coincidental, Mr. Chairman, I can almost 
assure you. [Laughter.]
    Mr. Lewis. Better than tomorrow. [Laughter.]
    What are the findings that will be contained in this 
report?
    Secretary Cuomo. The report shows that 68 percent of the 
HOPWA funds are being spent on housing-related services, 
construction rental assistance, et cetera; 20 percent go to 
services, supportive services; the remainder are used 
foractivities such as housing counseling and information and 
administration. We recommend no change in the current HOPWA formula.
    Mr. Lewis. Discuss with us some leveraging. What goes on 
with leveraging there?
    Secretary Cuomo. I don't have the leveraging for the HOPWA 
program here, but I can find out for the committee.
    Mr. Lewis. Okay, for the record, we'd be interested in 
taking a look at that.
    [The information follows:]

    HUD's report of March 24, 1998, provided the following 
information:
    Leveraging of Other Resources. HOPWA grantees have 
generally carried out HOPWA activities with a significant 
amount of other assistance, including accessing health-care and 
other supportive services to ensure that clients are in 
appropriate systems of care. The development and operating 
costs of housing assistance also generally involves 
collaboration with other resources and funding sources.
    One measure of the amount of other resources that are used 
in support of HOPWA activities is provided under the criteria 
for selection of competitive grants. In each of the five 
national competitions to date. HUD has reviewed the level of 
commitment of other resources in awarding grants. These 
resources have included cash funds available to the project 
from the applicant or proposed sponsors as well as from other 
State, local and private sources. In addition, other non-cash 
resources, such as contributions of professional services, 
volunteer contributions made by individuals (eg. which was 
valued at $10 per hour of volunteer time, under the FY97 NOFA), 
and the donations of property and leasehold interests augment 
HOPWA-funded activities. In FY97, ten percent of the 
competitive rating points were determined by leveraging and the 
$19.6 million that was awarded with federal funds was more than 
matched by documented resources of over $22.8 million.
    On a cumulative basis, the five national competitions have 
been used to select 108 grants, for $84,171,000 in HOPWA funds. 
These 108 projects documented contributions of $110,423,728 
from other sources, including voluntary contributions of 
donated time and in-kind services from thousands of Americans. 
These leveraged resources represent 131 percent of the 
cumulative amount of federal funds awarded under these notices.
    HOPWA formula allocations are part of area consolidated 
plans that form the basis of new partnerships between HUD and 
the States and local governments that administer these grants. 
The activities that are carried out with HOPWA funds are 
required to be consistent with the area's strategic plan that 
considers area needs and local resources and the other 
community development programs that are part of this process. 
This federal partnership with States and communities can best 
work to build responsive programs by recognizing unique 
characteristics, resources, involved citizens, public and 
private entities, administrative structures and public 
processes that exist within each area.
    Programs that address the needs of persons with HIV/AIDs 
also involve close collaboration with the programs and planning 
bodies that administer AIDS-related health-care and services 
under the Ryan White CARE Act. During the past three years HUD 
has participated in a variety of interdepartmental and 
intergovernmental collaborations to maximize the use of HOPWA 
funds and avoid duplication of activities. HUD helped draft the 
housing elements of the President's National AID Strategy with 
several other Federal departments, engaged in a joint 
evaluation of programs under the Multiple Diagnoses Initiative 
with HHS, and worked with HHS to develop technical assistance 
materials for housing and service providers. As noted, HUD 
initiated a consolidated planning process that requires all 
communities that receive funds under that process to address 
the needs related to persons living with HIV and AIDS in 
connection with other programs and area resources.

                    regional connections initiative

    Mr. Lewis. HUD is proposing to setaside $100 million of its 
fiscal year 1999 community development block grant to funds for 
Regional Connections Initiative, RCI. The purpose of RCI would 
be to stimulate the development of coordinated regional 
strategies that promote economic empowerment of a region's low- 
and moderate-income residents. Why is HUD proposing the 
Regional Connections Initiative in spite of the draft report on 
regionalism of the National Academy of Public Administration, 
which does not recommend a significant Federal role at this 
time to address regional issues?
    Secretary Cuomo. Two things: First, Mr. Chairman, I believe 
that the regional context is going to be the context in which 
many of these things are going to work. If we don't get cities 
to cooperate with the surrounding counties, none of this will 
work. That's what all the demographic patterns say. That's what 
the revenue basis says. That's what welfare-to-work is showing 
us. If we can't draw a larger circle than that tight, initial, 
concentric circle, none of these efforts will work. We have to 
expand the context. It has to be a regional context. We've been 
talking about this for 10 years. It's not making the type of 
progress that it should. I don't consider this an overly 
significant Federal role. We're not talking about regional 
governments; we're not talking about putting funds together and 
funding regional governments. We're talking about a $100 
million program that is part of CDBG----
    Mr. Lewis. Is that why it's CDBG rather than a separate 
funding with a general appropriation----
    Secretary Cuomo. Yes, sir, it would be $100 million. It 
would be an award program that goes to jurisdictions that come 
up with joint plans. We would administer it with the Conference 
of Mayors, the United States Conference of Mayors, and NACO, 
National Association of County Officials, through the 
Sustainable Communities Joint Center. So it wouldn't be a 
significant burden to HUD, but as a step, major policy step, I 
think it could do extraordinarily good things.
    Mr. Lewis. Don't most States and cities have organizations 
like councils of government, regional government organizations, 
chambers of commerce, and so on? I'm really asking, in view of 
that mix out there already, why RCI's?
    Secretary Cuomo. I think, Mr. Chairman, there are a number 
of groups out there that for years that have talked about 
regionalism, but everything the Federal Government does cuts 
against regionalism. We talk about cooperation, larger planning 
areas, and then we fund and require plans on the exact opposite 
basis. This would be the first time the Federal government 
starts to put money where its mouth is, and starts to award the 
regional plans. We can look for those larger contexts.
    I also believe that NAPA said, Mr. Chairman, that the 
Federal government shouldn't have an overly significant role in 
this. I don't know that they went as far as to say no role 
whatsoever, but a modest role, and we think this is in keeping 
with that.
    Mr. Lewis. Issues such as the out-migration of business and 
residents from cities to suburban areas, uneven development, 
and other issues related to regional development are problems 
that have developed over a period of time, and are not likely 
to be solved easily or quickly. Does HUD envision RCI as a 
long-term effort to address that kind of issue?
    Secretary Cuomo. I see it as a long-term initiative to 
begin to foster this dialogue and make it real. The concepts 
are all clear to everyone. You'll have mayors talk about it, 
county executives talk about it. We are less good in 
implementing it and actualizing it. What does it actually mean 
to have a metropolitan plan, and how does a city official 
actually work with the county official? This would start to get 
some best-practices, convenings to talk about this subject 
matter, hail some best-practices that's learned from what 
Detroit is doing and Louisville is doing. I think it's a very 
important first step.
    Mr. Lewis. Well, what kinds of steps within that important 
first step will you be taking to see that funds will be used to 
accomplish the program objectives and goals of the RCI?
    Secretary Cuomo. We would be working with the Conference of 
Mayors and NACO. We would put together a list of criteria of 
what we believe are the best practices, foster that dialogue, 
and then next year, the following year, after funding, do the 
first awards program, where we pick out the 10, 15, 20 best 
regional models in the country, and we give them a dollar 
award.
    Mr. Lewis. Do you expect them to request funding or 
appropriations for RCI in future years?
    Secretary Cuomo. Yes, I would, and just to show you that 
this concept, your point about Habitat before, this concept is 
working now, and there's an energy behind it even without the 
funding. We're working with the mayors and the county 
officials, and we're coming together to discuss these types of 
things. We would like to get some resources to actually make it 
a reality.
    The CDBG program is appropriate, Mr. Chairman, because CDBG 
is $4.6 billion--$4.6 billion--and everything it does 
reinforces the boundaries. We ask a city to give us a 
consolidated plan all within its boundaries. We ask a county to 
give us a consolidated plan all within its boundaries. And then 
our rhetoric says, and, by the way, don't forget, you should be 
cooperating one with the other. But, meanwhile, $4.6 billion is 
digging those boundaries deeper into the ground. This would be 
a $100 million set-aside on that program that starts to award 
and foster a contrary dialogue.
    Mr. Lewis. Do you have some expectancy of the size of these 
grants and what size city would be eligible for such a grant?
    Secretary Cuomo. We were initially estimating in the range 
of $2 million per grant.
    Mr. Lewis. Would rural areas be candidates for these 
grants?
    Secretary Cuomo. Yes, sir.
    Mr. Lewis. What percentage of funding do you think will go 
to rural areas?
    Secretary Cuomo. A minimum of 20 percent.

                   napa report on regional strategies

    Mr. Lewis. What did NAPA suggest in their report about 
regional strategies?
    Secretary Cuomo. I believe, Mr. Chairman--I don't have it 
in front of me--that the NAPA report suggests a modest amount 
as a Federal effort, and I believe the $100 million on a $4.6 
billion program is in keeping with a modest amount.
    Mr. Lewis. Mr. Stokes asked some questions in the area of 
EDI, and he kind of got to the fundamental questions there. I 
have some questions that I'll use to supplement that, if you'll 
respond to those for record.

                              home program

    Mr. Lewis. Let me ask, the President has requested $1.9 
billion for the HOME Program, which includes a setaside of $1.4 
billion for HOME, $25 million for housing counseling, $109 
million for supportive housing for the elderly, $50 million for 
new section 8 vouchers for the elderly, $174 million for 
supportive of housing for the disabled. In addition, the 
administration has requested authority to create a new loan 
guarantee program that would be limited to loans no more than 
$100 million.
    What is the leveraging ratio of the HOME Program?
    Secretary Cuomo. The HOME Program grants leverage 
approximately $1.80 for every $1 of HOME funds.
    Mr. Lewis. Okay, not quite two. Okay. Is the leveraging 
based on the use of outside sources of capital?
    Secretary Cuomo. Yes, sir.
    Mr. Lewis. What are some of those sources that you'd 
expect?
    Secretary Cuomo. Tax credits. The HOME Program is very 
often used in concert with the low-income housing tax credit 
program.
    Mr. Lewis. Okay. How many new homeowners have been created 
with HOME funds? I kind of sense you don't know and----
    Secretary Cuomo. I want to say--I would rather not venture 
a guess, Mr. Chairman, and get you the number for the record.
    Mr. Lewis. Why don't we discuss it for the record, because 
if we don't know or can't figure it out, then maybe that has a 
point that needs to be discussed.
    Secretary Cuomo. The HOME Program, as you know, Mr. 
Chairman, as a block grant, has a number of uses. They can use 
it for rental subsidy. They can use it for rehabilitation. They 
can use it for new home construction.
    Five point nine billion dollars in HOME funds have been 
committed under written agreements. Of this total, $4.7 billion 
in HOME funds and $8.5 billion in other public and private 
funds have been committed to projects yielding 279,000 units. 
Over 166,000 units have been completed, and 36,000 families 
have received tenant-based rental assistance.
    Mr. Lewis. Okay, so we've got numbers of families, numbers 
of rental units, et cetera--if you'll make sure that that's 
clear for the record?
    Secretary Cuomo. Yes.
    [The information follows:]

    Question. How many new homeowners have been created with 
HOME funds?
    Answer. Since the beginning of the program, 91,126 (as of 
9/30/97).

                        home loan guarantee fund

    Mr. Lewis. The President has requested a home loan 
guarantee program to complement the existing HOME Program. 
According to HUD, this loan guarantee program will be used 
primarily to finance large-scale housing development. 
Commitment authority is limited to $100 million, and credit 
subsidy needs of $11.1 million. What is the difference between 
this loan fund and the section 108 loan guarantee fund?
    Secretary Cuomo. The same principle, different program. The 
108 program works against CDBG, says to a locality: You get 
your CDBG funds and we'll give you a loan of up to five times 
your CDBG for CDBG activity. We have done billions of dollars 
in economic development work under the 108 program, zero 
Federal defaults, zero claim on the Federal treasury. The HOME 
Bank Program would be the same counterpart. A local 
jurisdiction gets an annual HOME allocation, which gives them 
the ability to have a loan of up to five times that amount, so 
they could do a large-scale housing project, if they wanted. It 
would work exactly the same as the 108 program, just a 
different program.
    The credit subsidy is $11 million, which is an initial 
estimate on potential defaults. We've started out relatively 
small because this is a case of first impression, and we want 
to see what the actual experience is.
    Mr. Lewis. Well, 108 doesn't work well without enhancements 
like EDI. We're wondering, can't localities choose to use 108 
to do large-scale housing developments?
    Secretary Cuomo. You cannot--under the 108 program, you can 
only do CDBG-eligible activities, which means you couldn't do 
the type of housing that you can do under the HOME Program.
    Mr. Lewis. Do you believe that the proposed HOME Loan 
Guarantee Program will be successful without additional credit 
enhancements?
    Secretary Cuomo. I believe, to the extent we are talking 
about it, yes. When you say, Mr. Chairman, that the 108 program 
isn't widely used without EDI, you're correct, but it is used 
to the hundreds of millions of dollars without a cash 
enhancement. And here we're talking about a relatively modest 
beginning with the HOME Program.
    Mr. Lewis. Okay.
    Secretary Cuomo. Also, just for the Chairman's information, 
as you know, CDBG does not allow you to build new housing. 
Therefore, the 108 program does not allow you to build new 
housing. So if you wanted to build new housing, you would need 
the HOME Program, and hence, the HOME Bank. You can do rehab 
under CDBG, but you can't do new construction.
    Mr. Lewis. Let's see, Mr. Stokes, do you have some 
additional questions?
    Mr. Stokes. I think I just have about one more question and 
then maybe a comment.
    Mr. Lewis. Okay, just go right ahead. Proceed, and I'll 
close down here shortly.

                          contractor services

    Mr. Stokes. Okay. Secretary, concerns have been raised that 
HUD is increasingly contracting out for services simply because 
it does not have enough in-house staff to carry out its 
operations. Further concerns have been raised that this 
contracting might be done without adequate intention to cost-
effectiveness or without analysis whether it would be less 
expensive to carry out the activity in-house.
    For example, a recent report from the HUD Inspector General 
stated, and I quote, ``Management's contracting environment 
needs to change to seek ways to emphasize cost-consciousness 
and to assure the best value for dollars spent. Because HUD 
managers did not have the staff to complete the product or 
service in-house, the question, `what will it cost?' was often 
not seen as an issue.''
    Do you believe there's merit to these concerns?
    Secretary Cuomo. Yes.
    Mr. Stokes. And what is HUD doing to make sure that it 
contracts out only when it is cost-effective to do so and then 
receives good value for dollars spent?
    Secretary Cuomo. Two points, Congressman, if I can: No. 1, 
we want to contract out when contracting out makes sense. HUD 
does many tasks which require a high level of expertise that I 
would, frankly, rather go out and buy rather than try to 
duplicate in-house. If we have a technical accounting task or 
physical inspection task, I would rather buy those services 
outside. A high-technology task where the wisdom in the 
industry turns over quickly, I would rather contract out for 
those rather than trying to duplicate that talent inside the 
Department.
    But when you contract out, then you have to make sure the 
procurement methodology is sound and works well. And the IG's 
point in the past has been, we don't have the best procurement 
procedures in place. I agree with the IG on that principle, and 
we're going through a process of procurement reform now. We've 
just hired a new procurement officer who shows a lot of 
promise, and we're excited about that. But it's not an 
``either/or.'' We have to be able to contract out. We can't do 
everything in-house, especially in an environment where we're 
downsizing, and we shouldn't be doing everything in-house 
anyway. It's not prudent business.
    But when we do contract out, we have to do it well. Just as 
a point of information, Congressman, our contracting this year 
is actually less than it was last year. So our contracting has 
come down this year, not up. Going forward, we do look forward 
to contracting out significant tasks that were either done in-
house or, frankly, never done before,like this evaluation of 
the portfolio; we just didn't do it. Something called contract 
administration, where we oversee these financial contracts, we want to 
contract that out. We're basically not doing it at the level we need to 
do it now.
    But contract out those tasks that you need to; make sure 
you have the right procedures in place.
    Mr. Stokes. Do you do cost comparison between in-house 
performance and contracting out before deciding to enter into 
large new contracts?
    Secretary Cuomo. As a general rule, yes.

                    section 8 problems in cleveland

    Mr. Stokes. Mr. Chairman, I think that's exhausted my 
questions. I do want to take a moment, though, Mr. Secretary, 
and express my appreciation to you regarding section 8 problems 
that we're having out in Cleveland. You took time on your 
recent visit out there to meet with them on one part of it, and 
you've assigned Harold DeSales and Gloria Cousar to work on the 
other facet of it. And I want you to know they've done an 
excellent, very efficient, professional job for us, and we're 
working on that. It's under control. I just want you to know I 
appreciate it.
    Secretary Cuomo. Thank you very much. It's our pleasure, 
Mr. Congressman. That's why we're here.
    Mr. Stokes. Mr. Chairman, I think we've had good hearings, 
and----
    Mr. Lewis. I've been very pleased with the hearings.
    I want to cover just a couple of subjects very briefly, and 
we'll close it down.
    Mr. Stokes. Go right ahead. I'm finished.

                             mark-to-market

    Mr. Lewis. During fiscal year 1998, significant legislation 
was enacted to reduce the cost of renewing section 8 project-
based assistance called mark-to-market. Can you give us an idea 
of what the status of that legislation is? Have we all learned 
very much from our 1996 demonstration program?
    Secretary Cuomo. We learned from the mark-to-market 
legislation, first, Mr. Chairman, that anything is possible, 
and the good work of this Committee proved that to all of us. 
Just getting it passed was truly a remarkable feat, and I 
believe the HUD history books will show that the main issue 
that HUD had to face was this mark-to-market problem, and this 
Committee solved that problem for us, and we'll be eternally 
grateful for that.
    Since then, we are now implementing the legislation. It is 
not an easy task, but we're moving ahead with it. We have a 
director for the office who is now being vetted by the White 
House. We've had focus groups where we've met with over 400 
industry group people on how this should be working. We have 
some experience in the demonstration program. So we are moving 
ahead. As I said, the caution flag is that this is a very 
tricky endeavor that we've undertaken together, but we're 
moving ahead.
    Mr. Lewis. Well, thank you for that.

                          fnma and freddie mac

    Mr. Lewis. The Office of Federal Housing Enterprise 
Oversight is responsible for overseeing the safety and 
soundness of FANNIE MAE and FREDDIE MAC. When will we be ready 
to issue the capital standards for FANNIE MAE and FREDDIE MAC?
    Secretary Cuomo. I would ask Mark Kinsey, who is the Acting 
Director, if he would respond, Mr. Chairman.
    Mr. Lewis. Sure.
    Mr. Kinsey. Mr. Chairman, our plan is to complete a notice 
of proposed rulemaking internally for the risk-based capital 
standard by the end of this fiscal year, and then we would 
submit that to OMB for interagency clearance. My discussions 
with OMB suggest that we should be able to get this rule 
cleared in the 3-month period that they have to clear such 
rules. After it is cleared by OMB, it comes up to the Hill for 
a 15-day mandatory review period, and then after that period, 
it gets published in the Federal Register. We expect probably 
by the end of January of next year for it to be in the Federal 
Register.

                  partnership for advancing technology

    Mr. Lewis. The 1999 budget request requests $50 million for 
the Office of Policy Development and Research. This request is 
an increase of $13.5 million. Of the increase, $10 million is 
proposed for a new initiative called Partnership for Advancing 
Technology in Housing, or PATH. PATH is designed to improve the 
technology infrastructure of housing in the United States and 
to encourage the use of new and advanced technologies in the 
construction of homes to improve their quality, durability, 
environmental efficiency, as well as affordability. How will 
the $10 million be spent this year?
    Mr. Apgar. Thank you. Your question suggests you know a lot 
about PATH, which you should, since many would say it came of 
this Committee and your energy that the PATH program was 
created and assigned to----
    Mr. Lewis. With little interest, yes.
    Mr. Apgar. Yes. The PATH program is already started, in 
anticipation of fiscal year 1999 funding. We're using current 
PD&R funds to begin some initial, modest efforts to bring the 
PATH partners together. We're working cooperatively with the 
homebuilding industry, manufactured housing, building material 
manufacturers, and others that are concerned about the 
homebuilding industry, to identify a program of research, 
demonstration, and outreach.
    The key elements, as you suggest, are not only to develop 
new and enhanced technologies, but to make sure that the 
technologies that exist are being utilized and widely 
disseminated in the building industry. The focus is on both new 
construction and new homebuilding, but also bringing these new 
technologies into the rehabilitation of the existing stock.
    With the increase that comes with the fiscal year 1999 
funding, we hope to expand this program of outreach, 
dissemination, of focus on new technological development, and 
in a more expanded way building on our initial efforts this 
year.
    Secretary Cuomo. There's a lot of excitement, if I may, Mr. 
Chairman, about this effort. We've had the first several 
meetings. The Department of Energy is a partner, the 
President's Advisor on Science and Technology, the industry. I 
think it can do a lot of good.
    Mr. Lewis. We've spent a lot of time thinking about a 
variety and mix of areas potentially impacted by these 
technologies and the importance they have across the country. 
Yesterday I spent a lot of time not on housing per se, but what 
we were able to do or not do with hospitals with hospitals 
across the country, existing circumstances were there are 
earthquake safety questions, new hospital construction, where 
you have all these same elements as well. Across the 
marketplace we need to be stimulating these opportunities.
    I'm interested especially in the place for these 
technologies in the construction or rehabilitation of low-
income housing stock. Could you just comment on that and their 
applicability to the construction industry as well?
    Mr. Apgar. Well, one of the things that our friends in the 
building industry remind us is, if we're going to get mass 
utilization of any of these new technologies, it has to work in 
affordable housing. They have to move the best of technology 
out of sort of the boutique or showcase homes, which have all 
the latest technology, and into the mass market.
    Through our best-practices program, we hope to identify 
promising areas where we can provide affordable examples of the 
new technology and bring it to homes of modest needs. Just 
early this month I was out in Albuquerque at the invitation of 
the President of the National Association of Homebuilders and 
the local homebuilders association out there, where they were 
producing energy-efficient homes that were recycling a large 
share of the building materials that were left over on the 
site--a remarkable achievement in a sustainable development. 
And these homes were being sold in the price range of from 
$90,000 to $140,000, affordable to a modest family in the 
Albuquerque market. So this shows that it can be done. You can 
get both sustainable housing, energy-efficient housing, and 
affordable housing, if you put your mind to assembling the 
right technology and moving into the marketplace.
    Mr. Lewis. It's my view that there are many places in the 
United States where alternative buildings make sense, like 
straw bale, cob, and adobe, et cetera. I presume that you would 
agree with that, to some extent at least. Do inspection codes 
around the country make room for alternative building 
materials?
    Mr. Apgar. That's always an obstacle. Whether the new 
building materials is rediscovering something that's been there 
forever or some new product, getting it moved into the market 
can often be a problem for the codes and standards. Actually, 
New Mexico had some innovative work in trying to get materials 
like straw bale housing approved by local code inspectors. So, 
yes, it is a problem, but it is certainly a barrier that we can 
overcome, if we work with building inspectors and local 
officials around the country to make it happen.
    Mr. Lewis. Yes, we discussed before, I think, the 
frustration some of us have had in southern California just 
getting some architects, as well as builders, to even consider 
that alternatives relative to their impact on earthquake safety 
make sense. It's awfully hard to change the way you pound a 
nail.
    Mr. Apgar. Yes. One of the things we're doing on that is, 
for new technologies, one of the problems is, if there is 
failure, often the new material will be utilized for many 
months before the failure is recognized and adjusted. So we're, 
essentially through the National Association of Homebuilders 
Research Center, producing a website which will track new 
product development. People can wire-in or dial-in and talk 
about any issues relative to the use of that new product. So 
that builders will be able to make adjustments before the new 
product generates substantial losses for misapplication.
    Mr. Lewis. Let's see, I think that really kind of covers my 
questions, but I do note with interest that Mr. Apgar, upon 
confirmation, will do his best to keep us on the path. 
[Laughter.]
    Mr. Apgar. Thank you, sir.
    Secretary Cuomo. The straight and narrow one, Mr. Chairman. 
[Laughter.]

                              Adjournment

    Mr. Lewis. In the meantime, the last couple of days have 
been extended beyond that which I expected, maybe even that 
which might be reasonable, but certainly, I think, all of those 
who have spent most of those two days with us appreciate that 
these are very difficult times. But the thing that impresses me 
the most, Mr. Stokes, as well as Mr. Secretary, is that there 
are an awful lot of people at this table, as well as in a group 
like this, who are committed to seeing our housing programs 
work more effectively. If we continue on that path, indeed, I 
think we can have a big effect upon the availability of housing 
for all Americans.
    So with that, it's been a very excellent meeting, and we 
appreciate your helping us.
    Secretary Cuomo. Our pleasure. Thank you very much, Mr. 
Chairman. Thank you, Ranking Member.


[Pages 221 - 521--The official Committee record contains additional material here.]




















                               I N D E X

                              ----------                              

              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                                                                   Page
1999 Budget Highlights...........................................     9
1999 Budget Themes...............................................     7
Adjournment......................................................   219
Adker vs. HUD....................................................   173
Administration's Position on Offsets for Supplemental............    44
Affect of Downsizing on Minorities...............................   134
Affirmative Action at HUD........................................   127
Afternoon Session................................................    71
Booz Allen Report................................................     6
Brownfields....................................................175, 177
Budget Justification.............................................   242
Budget Offsets Needed for Troops.................................    43
Buyouts..........................................................   108
CDBG Program.....................................................    78
Chairman's Opening Remarks.......................................     1
College of Experts and Community Builders........................    65
Combining HOME/Section 202/811 Programs..........................    57
Community Centers Outreach Program...............................   165
Community Empowerment Fund.......................................   186
Community Outreach Partnership Centers...........................   165
Continuum of Care Services.......................................    42
Contractor Services..............................................   215
Cost Benefit Analysis for Staff Reduction........................    70
Credit and Financial Services for Public Housing.................   122
Current HUD FTES.................................................   107
Decrease in IG Funding Request...................................   125
Deinstitutionalization of Mentally Ill...........................    63
Delay in Issuance of NOFA........................................    49
Discrimination in Property Insurance.............................   202
Drug Elimination Grants..........................................    90
Drug Elimination Grants NOFA.....................................    93
Economic Obstacles in Indian Country.............................   207
Effect of Rescission on Section 8 Recipients.....................    45
Excess Budgetary Authority in Section 8 Project-Based Programs...   168
Expansion of Tenant-Based Section 8 Program......................   168
Extent of Homelessness...........................................    42
Fair Housing Programs Increases..................................   201
FHA--Housing Counseling..........................................    72
FHA Default Rate.................................................    71
FHA Fees.........................................................    35
FHA Foreclosed Properties........................................   115
FHA Fund vs. Private Sector Competition..........................   117
FHA Loan Limit--Effect on MMI Fund...............................    78
FHA Loan Limit--National Level...................................    78
FHA Loan Limit--Underwriting Criteria............................    67
FHA Loan Limit Increase....................................40, 149, 178
FHAP Funding for States Involvement..............................    60
FHIP Funding and Property Insurance..............................    59
FHIP Grants......................................................   202
FNMA and Freddie Mac.............................................   217
FNMA Position on FHA Loan Limit Increase.........................    85
FNMA Position on Prior FHA Limit Increases.......................    90
Foreclosure Rates................................................    73
Funding for Section 8 Vouchers for Elderly.......................    58
Furthering Job Creation Efforts..................................    61
Grants for Florida...............................................   173
Greenspan Comments on Offsets and Caps...........................    71
GSE Lending for Minorities.......................................    82
GSES Concerns Over FHA Limit Increase............................    35
Habitat for Humanity...........................................176, 176
Healthy Homes Initiative.........................................   187
HOME Loan Guarantee Fund.........................................   214
HOME Program.....................................................   214
HOME/Section 202-811 Merger......................................   120
Homeless.........................................................   208
Homeless Vouchers................................................   210
Homeownership Goals for FHA Fund.................................   148
Homeownership Zones..............................................    41
HOPE VI..........................................................   185
HOPE VI and HUD Reform Act.......................................   204
HOPWA............................................................   210
Housing Counseling Program.......................................    41
Impact of Section 8 Rescission on Future Needs...................    38
Increase in FHA Defaults.........................................   118
Increase in FHA Limits and Market Shares.........................    36
Increasing FHA Loan Limit........................................    33
Insurance for Nonprofit CDC Employees............................   183
Job Rate in Indian Country.......................................   206
Lead-Based Paint.................................................   187
Loss of HUD-Assisted Elderly Housing.............................    51
Manufactured Housing.............................................   107
Mark-to-Market...................................................   217
Minorities in Key IG Positions...................................   135
Morning Recess...................................................    71
NAPA Report on Regional Strategies...............................   213
Native American Program..........................................   205
Not-For-Profit Fair Housing Agencies.............................   184
Number of FHA Loan Limits........................................   150
Occupancy Standards..............................................   113
Offsets in Supplemental Bill.....................................    55
Opening Remarks from Mr. Stokes..................................     3
Operation Safe Home..............................................   126
Opposition of Section 8 Offset...................................    10
Over-leasing.....................................................   169
Partnership for Advancing Technology.............................   217
PHA Entrepreneurial Income.......................................   154
PHA-Designated Housing...........................................    81
Produce Grown in Public Housing..................................   182
Progress of HUD Reforms..........................................     5
Project-Based Contracts Estimate.................................   172
Public Housing Capital Fund......................................    86
Public Housing Grown Produce.....................................   177
Public Housing Management Assessment Program.....................   156
Questions for the Record.........................................   221
Rationale for HOME/Section 202/811 Merger........................    77
Reduction in Section 202 Funding.................................    10
Regional Connections Initiative..................................   211
Rental Income Increase...........................................   155
Resident Incomes.................................................   156
Resources for FY 2000--Financial Systems.........................    69
RESPA............................................................    66
RESPA--Revised Form 97-1.........................................   151
RESPA Ruling.....................................................   166
Review of FHA Loan Limit Increase by National People's Action 
  Committee......................................................   157
Secretary Cuomo's Opening Remarks................................     4
Secretary Cuomo's Written Statement..............................    12
Section 202/811..................................................   119
Section 202/811--HOME Programs and Non-Profits...................    80
Section 202/811 HOME Merger......................................    75
Section 202/811 NOFA.............................................    81
Section 8 Amendments.............................................   170
Section 8 Certificates...........................................   152
Section 8 Crisis.................................................    48
Section 8 Incremental Assistance.................................   172
Section 8 Problems in Cleveland..................................   216
Section 8 Project-Based Amendments...............................   171
Section 8 Vouchers for Welfare to Work...........................   154
Service Coordinators for Elderly Funding Request.................   186
Staff Diversity at HUD...........................................   129
Supportive Services for Homeless.................................   209
Tenant Protection Funding........................................   184
Training for Staff...............................................   110
Troubled PHAS....................................................    90
Unused Section 8 Funding for Elderly; Disabled...................    48
Urban Fraud Initiative...........................................   125
Use of Section 8 Reserves for Offsets............................    33
Who Section 8 Serves.............................................    39
Witnesses........................................................     1