[Senate Hearing 107-244]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 107-244


                       NOMINATION OF MEL MARTINEZ

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

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                                   ON

        NOMINATION OF MEL MARTINEZ, OF FLORIDA, TO BE SECRETARY
            U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                               __________

                            JANUARY 17, 2001

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs

                                _______

                  U.S. GOVERNMENT PRINTING OFFICE
77-196                     WASHINGTON : 2002

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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  PAUL S. SARBANES, Maryland, Chairman

CHRISTOPHER J. DODD, Connecticut     PHIL GRAMM, Texas
JOHN F. KERRY, Massachusetts         RICHARD C. SHELBY, Alabama
TIM JOHNSON, South Dakota            ROBERT F. BENNETT, Utah
JACK REED, Rhode Island              WAYNE ALLARD, Colorado
CHARLES E. SCHUMER, New York         MICHAEL B. ENZI, Wyoming
EVAN BAYH, Indiana                   CHUCK HAGEL, Nebraska
JOHN EDWARDS, North Carolina         RICK SANTORUM, Pennsylvania
ZELL MILLER, Georgia                 JIM BUNNING, Kentucky
                                     MIKE CRAPO, Idaho
                                     DON NICKLES, Oklahoma

           Steven B. Harris, Staff Director and Chief Counsel

             Wayne A. Abernathy, Republican Staff Director

                  Jonathan Miller, Professional Staff

                    Jennifer Fogel-Bublick, Counsel

      Brian J. Gross, Republican Deputy Staff Director and Counsel

         Melody H. Fennel, Republican Professional Staff Member

   Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator

                       George E. Whittle, Editor

                                  (ii)


                            C O N T E N T S

                              ----------                              

                      WEDNESDAY, JANUARY 17, 2001

                                                                   Page

Opening statement of Chairman Sarbanes...........................     1
    Prepared statement...........................................    43

Opening statements, comments, or prepared statements of:
    Senator Gramm................................................     2
        Prepared statement.......................................    43
    Senator Dodd.................................................     8
    Senator Allard...............................................    11
    Senator Reed.................................................    13
    Senator Enzi.................................................    15
        Prepared statement.......................................    44
    Senator Bayh.................................................    16
    Senator Miller...............................................    18
        Prepared statement.......................................    45
    Senator Stabenow.............................................    18
    Senator Corzine..............................................    19
        Prepared statement.......................................    45
    Senator Schumer..............................................    46
    Senator Bunning..............................................    46
    Senator Ensign...............................................    47
    Senator Carper...............................................    34

                               WITNESSES

Bob Graham, A U.S. Senator from the State of Florida.............     2
Bill Nelson, A U.S. Senator from the State of Florida............     4

                                NOMINEE

Mel Martinez, of Florida, Secretary-Designate, U.S. Department of 
  Housing and Urban Development..................................    20
    Prepared statement...........................................    47
    Biographical sketch of nominee...............................    50
    Response to written questions of:
        Senator Sarbanes.........................................    58
        Senator Dodd.............................................    61
        Senator Bennett..........................................    62
        Senator Shelby...........................................    63
        Senator Reed.............................................    65
        Senator Stabenow.........................................    68
        Senator Corzine..........................................    69
        Senator Crapo............................................    71

              Additional Material Supplied for the Record

Letter from Senator Connie Mack to Senator Paul Sarbanes 
  supporting Mel Martinez to be Secretary of Housing and Urban 
  Development....................................................    74
Letters from various institutions supporting Mel Martinez to be 
  Secretary of the U.S. Department of Housing and Urban 
  Development....................................................    75

                                 (iii)

 
                       NOMINATION OF MEL MARTINEZ

                   OF FLORIDA TO BE THE SECRETARY OF

                     HOUSING AND URBAN DEVELOPMENT

                              ----------                              


                      WEDNESDAY, JANUARY 17, 2001

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                   Washington, D.C.

    The Committee met at 10 a.m., in room SD-538 of the Dirksen 
Senate Office Building, Senator Paul Sarbanes, (Chairmen of the 
Committee) presiding.

         OPENING STATEMENT OF CHAIRMAN PAUL S. SARBANES

    Chairman Sarbanes. The hearing on the confirmation of Mel 
Martinez as the Secretary of Housing and Urban Development will 
come to order.
    Mr. Martinez is currently County Chairman of Orange County, 
FL, a very significant executive position at the local 
government level. I think Orange County has about 850,000 
population.
    Prior to this, Mr. Martinez had served on the Orlando 
County Housing Authority board of directors, including 2 years 
as its chair in the mid-1980's, as Vice President of the 
Catholic Social Services of the Diocese of Orlando throughout 
the 1980's, as President of the Orlando Utilities Commission 
from 1994 to 1997, and was a leading lawyer in his community 
for the last 25 years or so. He served the community in many 
ways as a volunteer member of numerous organizations.
    He came to the United States at age 15 as a refugee from 
Cuba. So he has a very compelling and inspiring life story and 
I hope, Mr. Martinez, you will outline that for us in your 
opening statement to the Committee.
    In order to accommodate the President-elect, a number of 
committees are meeting this morning to consider nominees. There 
are a number of such hearings going on in various Senate 
Committee hearing rooms. Obviously, a number of Members of this 
Committee serve on other committees and may not be able to 
attend all of this hearing. And so, people will be coming and 
going in the course of the hearing. It doesn't show any lack of 
respect for our nominee. I hope he understands that. But to 
have other nominees for whom they also have to show some 
respect.
    Before I move forward to hear the opening statements from 
Mr. Martinez's two Senators from Florida, I just briefly want 
to welcome to the Committee our new additions.
    Senator Zell Miller of Georgia joined the Committee at the 
end of the last Congress. He has moved up very fast in terms of 
seniority on this Committee. We are delighted that he is with 
us and we very much look forward to his service.
    We have three additions on the Democratic side to the 
Committee--Senator Carper of Delaware, who was on the Banking 
Committee in the House when he served in the House, and a 
former Governor.
    Senator Debbie Stabenow from Michigan, who joins us from 
the House side.
    And Senator John Corzine of New Jersey, who of course 
brings some very valuable experience to the work of this 
Committee.
    And on the Republican side, we will have added to the 
Committee Senator John Ensign of Nevada, who also served in the 
House on the Ways and Means Committee.
    We very much welcome the new Members. I am sure that they 
will enjoy their work on this Committee.
    Before turning to Senators Graham and Nelson for their 
introductions, and then, once they conclude, we will go to 
opening statements by Members of the Committee, I will ask 
Senator Gramm if he wants to say anything.

                 COMMENTS OF SENATOR PHIL GRAMM

    Senator Gramm. Well, why don't I, as a courtesy to our two 
colleagues, who I know need to be in 15 other places, why don't 
I let them go ahead and give their introduction and then I will 
give my opening statement, Mr. Chairman.
    Chairman Sarbanes. I want to recognize our two colleagues 
from Florida to introduce the nominee.
    Senator Graham, we will turn to you. And then we will hear 
from Senator Nelson.
    Bill, that is the way it works. You are the new kid on the 
block. You have to go second.
    Senator Nelson. Senator Graham has made sure that I 
understand that.
    [Laughter.]
    Senator Gramm. You are going to do all right here, Nelson.
    [Laughter.]

   STATEMENT OF BOB GRAHAM, A U.S. SENATOR FROM THE STATE OF 
                            FLORIDA

    Senator Graham. Mr. Chairman, Members of the Committee, I 
appreciate this opportunity to introduce an exceptional human 
being and a long-time personal friend, Mel Martinez.
    I am confident that Mel Martinez will serve America as well 
as he has his home community and will bring great pride to 
President-elect Bush for his leadership in the important 
Department of Housing and Urban Development.
    Mr. Chairman, in your opening remarks, you have already 
covered several of the items that I was intending to bring to 
the Committee's attention. So I will summarize those issues 
that have not been previously covered.
    Mr. Chairman, you mentioned that Mel Martinez has a 
compelling personal story. It is the story of America. A family 
coming to this country, seeking freedom and liberty and the 
opportunities.
    In this case, it was a divided family, because like many 
others in Cuba, in the early 1960's, the parents were unable to 
leave.
    And so, through the good work of the Catholic Church and 
the U.S. Department of State, arrangements were made for the 
children to leave.
    This was known as Operation Peter Pan, a fitting name 
because these children's parents were, indeed, sending their 
sons and daughters off to a kind of never-never land which they 
hoped would fulfill the promise of a better life. For Mel 
Martinez, it certainly has. After he finished high school in 
Orlando, he went to college and finally graduated from Florida 
State University College of Law in 1973.
    For 25 years, Mel and his wife Kitty have raised a family 
with three beautiful children. Mel has practiced law and they 
have been actively involved in the Orlando community.
    After a number of civic activities, in 1998, Mel offered 
himself for the position of Chairman of Orange County, FL. That 
position, Mr. Chairman, is essentially the chief executive 
officer of a county which has in excess of 800,000 people, with 
all of the challenges that come with a rapidly developing urban 
area.
    Mr. Martinez has been responsible since his election to 
that position for providing the residents with government 
services, including public safety, neighborhood development, 
social services, and public works. Under his leadership, Orange 
County has begun addressing problems such as overcrowded 
schools, funding for after-school programs for children in 
partnership with the YMCA and the Boys and Girls Clubs.
    He has worked with the private sector to create new health 
care clinics and services for senior citizens. He has held 
leadership positions in other agencies and organizations. He is 
now the Chairman of Governor Jeb Bush's commission on managing 
our State's rapid growth.
    Mel has presided over the Orlando Utilities Commission, the 
Greater Orlando Aviation Authority, and perhaps most relevant 
for today, the Orlando Housing Authority.
    In that position, one of the things that Mel has done is to 
show a deep sensitivity to all of the components of the housing 
authority, especially the residents themselves.
    Out of Mel's personal experience, he has developed a strong 

empathy with those who are striving to achieve, and that has 
been 
reflected in the manner in which he has carried out his 
responsibilities at the Orlando Housing Authority. I am 
confident it will characterize his service as Secretary of the 
Department of Housing and Urban Development.
    Mr. Chairman, I wish to congratulate Mr. Martinez for his 
nomination. This is an opportunity to use the experience which 
he has gained to help many more of our most vulnerable and 
least advantaged citizens.
    I strongly urge his confirmation before this Committee and 
hope that, expeditiously, Mr. Martinez will be moved into full 
service as Secretary of the Department of Housing and Urban 
Development.
    Thank you.
    Chairman Sarbanes. Thank you very much, Senator Graham.
    Senator Nelson.

  STATEMENT OF BILL NELSON, A U.S. SENATOR FROM THE STATE OF 
                            FLORIDA

    Senator Nelson. It is a privilege for me to be here for my 
friend, Mel. And also to call the attention to the Chair that a 
letter was sent and would be part of the record from Senator 
Connie Mack on behalf of Mel.
    It is such a privilege for me to be here on behalf of a 
personal friend whom I have known for going on 3 decades as a 
wonderful family man, as a consummate professional, and as a 
community-involved citizen before he ever offered himself for 
public service.
    Indeed, one example of that is when I ran for Congress and 
joined Senator Graham in the class of 1978, Mel Martinez----
    Chairman Sarbanes. A very auspicious class, that class.
    Senator Nelson. An auspicious class.
    [Laughter.]
    Senator Gramm. An old class.
    [Laughter.]
    Senator Nelson. Mel Martinez and his wife Kitty went door-
to-door for me in the Nelson's Neighbors campaign. That is just 
one example of him lending a hand to help in his community. 
Another good example is, without any fanfare as the Chairman of 
Orange County, the position to which Senator Graham has already 
referred, the chief executive position of a major metropolitan 
county.
    Just before Christmas, my wife and I had a food 
distribution to the poor and to the hungry in Orlando. And who 
was out there in the line scooping up beans and bagging them, 
along with a number of community leaders, both in the private 
sector and public sector, but Mel and Kitty. I think that 
indicates a heart for public service. And whenever we find that 
in a person, that is worth rewarding.
    I think it is going to be a great reward for America, that 
one of ours from the Sunshine State, we are sending to 
Washington to be in a very important position for this Nation.
    Thank you, Mr. Chairman.
    Chairman Sarbanes. Gentlemen, thank you both very much.
    I know you have competing demands on your time and we 
certainly are pleased to excuse you. But thank you very much 
for appearing to introduce the nominee.
    Senator Graham. Thank you very much, Mr. Chairman.
    Chairman Sarbanes. I am pleased to be able to hold this 
hearing on the confirmation of Mr. Martinez.
    I met with Mr. Martinez in my office last week and found 
him to be serious, thoughtful, and committed to the enterprise 
he is about to undertake.
    I was much encouraged by the statement he made when first 
nominated, when he said, ``I will work hard to ensure that 
every American has every opportunity to have affordable 
housing.'' And I look forward to working with you to achieve 
this important goal.
    I want to take just a moment or two this morning to review 
the progress HUD has made in recent years, as well as to set 
out some of the challenges which I think Mr. Martinez will be 
facing at the department.
    HUD has had a history of being a troubled agency. While 
many of its programs do a good job of providing decent homes to 
millions of poor and working families, it has proven to be over 
the years a difficult department to manage.
    In fact, in 1994, HUD was put on the General Accounting 
Office's--the GAO--High Risk List, the only agency to be so 
listed.
    However, as a result of concentrated efforts by Secretary 
Cuomo and his top staff, I understand that the GAO will 
announce this afternoon that HUD is now off the high-risk list.
    This result was achieved by some tireless work to correct 
the problems in financial oversight, procurement systems and so 
forth, and I think Secretary Cuomo has really tried to address 
the managerial issues within his department. And I am pleased 
that just before he departs, the GAO has reached the judgment 
that they made significant progress, sufficient to take the 
department off the high-risk list. This is by no means to say 
that all of HUD's problems have been solved. I do not want the 
nominee to start relaxing too much in terms of what he is 
taking over.
    But it does mean that Mr. Martinez will take over a 
department with a management system in place that is moving HUD 
in the right direction.
    I believe his primary job will be to sustain this progress 
and continue to move forward on this important management 
issue. Let me also emphasize a couple of the reforms which have 
taken place at HUD which I think are important.
    First, they have undertaken the physical inspection of 
public and assisted housing. And I very much hope that this 
will be kept in place. I think it gives HUD a good way to get a 
handle on its inventory, to avoid or to move quickly to deal 
with the deterioration of properties and to avoid a descending 
situation, a downward spiral in terms of managing their 
inventory.
    Second, the Federal Housing Administration, the FHA, has 
played an important role in helping us reach historically high 
levels of homeownership, including record levels among Black 
and Hispanic families.
    FHA has offered millions of Americans the opportunity to 
take part in the American dream of homeownership. In order to 
keep this dream alive, I think we need to continue HUD's 
efforts to identify and sanction lenders who consistently make 
bad loans and the appraisers who misstate the values of these 
homes engaged in these really deplorable practices.
    In the last Congress, I introduced legislation to codify 
this program, which is called Credit Watch, and I hope we can 
review that legislation this year as we move forward.
    Third, we need to continue the work HUD has only just 
started, working with the Treasury Department to fight 
predatory lending by enforcing fair housing laws and other 
statutes, by working with the Congress to develop new tools to 
fight these abusive practices.
    To sustain the progress in management noted by the GAO, Mr. 
Martinez obviously will have to hire capable assistant 
secretaries and other staff with demonstrated competence in 
their fields.
    I understand from our conversation that the incoming 
Administration has given him the authority and the room with 
which to do this in terms of the flexibility to hire qualified 
staff, and obviously, that is very important. Many of those 
people will appear before this Committee for confirmation. We 
wish you well in that endeavor.
    I want to conclude by noting that one of Secretary Cuomo's 
significant accomplishments was the success he had in making 
housing an important issue within the Clinton Administration, a 
success reflected in recent years by the increase in budget 
resources for HUD to carry out its programs.
    Mr. Martinez will face the challenge to convince his 
colleagues at OMB--that omnipresence--which you will soon come 
to fully appreciate--to convince his colleagues at OMB of the 
importance of sustaining these budget improvements.
    Much of what we seek to accomplish, whether it is better 
education, more effective job training, getting people from 
welfare to work or other efforts to empower people, rests upon 
people having an affordable place to live in a safe and stable 
neighborhood. We wish you well in that very important endeavor.
    We have received a number of letters in support of the 
nominee. And I ask unanimous consent that they be placed in the 
record. Without objection, so ordered.
    Very quickly, from the Appraisal Institute, the Council of 
Large Public Housing Authorities, the National Association of 
Housing and Redevelopment Officials, the National Association 
of Realtors, the National Affordable Housing Management 
Association, the Public Housing Authority's Directors 
Association, a very thoughtful letter from a young man now with 
the Greater Boston Legal Services who worked with Mr. Martinez 
previously in Orlando, Habitat for Humanity, the Consumer 
Mortgage Coalition, and the National Association of 
Homebuilders.
    And in a sense, foremost in my own thinking, from our 
former colleague, Senator Connie Mack of Florida. And I will 
just quote briefly from his letter.
    Senator Mack says, outlining his past experience with you:

          I have found him to be an exceptional individual who has the 
        intelligence, integrity, and compassion to guide this agency 
        and serve its constituents.

    Senator Gramm and I are intent to try to move this 
nomination forward as promptly as we can.
    In that regard, I ask that members of the Committee, and I 
will repeat it later for others who come in, submit any 
questions they may have, any written questions they may wish to 
submit to Mr. Martinez, to the Committee by the close of 
business today, if at all possible.
    We would like to get these questions to the nominee. Mr. 
Martinez, I hope you are able to respond to these as promptly 
as possible, so that we can distribute the answers to the 
Members of the Committee as we take your nomination under 
consideration.
    With that, I will now turn first to Senator Gramm for his 
opening remarks, and then we will recognize the other Members 
of the Committee who are present with us.
    Senator Gramm.
    Senator Gramm. Mr. Chairman, first of all, let me thank you 
for holding this timely hearing. It would be my goal to try 
early next week to have a vote on this nomination if in fact 
all of the questions have been answered, obviously, I will 
check with Senator 
Sarbanes and with Members of the Committee to see if we might 
do this as early as Monday afternoon. But in any case, we will 
try to find a time convenient to the majority of the Members of 
the Committee.
    I would like to thank you, Mr. Chairman, for your input 
into our legislative activities in the last Congress. I think 
some in the media coverage of events suggested that we were 
somehow in partisan conflict. But the reality is that we had a 
very active legislative agenda last year. We passed perhaps the 
most important banking bill in 60 years. And on final passage 
we had virtually a unanimous vote--with only a very small 
number of people in opposition. And every major action we took 
in the end was a bipartisan action.
    I think the lesson of that--to both of us--is that we need 
to make an effort to be more bipartisan to begin with, since we 
always end up there anyway.
    I want to pledge my commitment to that effort. I want to 
say to the new Members of the Committee that I look forward to 
working with you. And as Chairman after the 20th, I will be 
looking for good ideas, whether they come from Democrats or 
Republicans.
    I hope to have an opportunity to visit individually with 
each of our new Members to talk about their agenda and what 
they want to do. And I look forward to working with each of 
you.
    Mel, I want to welcome you before the Committee. I cannot 
think of an agency that would be more difficult to run than 
HUD.
    On the other hand, I do believe there is a bipartisan 
consensus that we want to get the taxpayers' money's worth for 
the effort that we have undertaken to provide housing--quality 
housing--to provide an environment in which the maximum number 
of people can go on and build and buy their own homes and lead 
productive lives.
    I would like, from my own point of view, simply to ask you 
to learn what the agency does, to they to make every program 
within its jurisdiction work, whether you agree with them or 
not.
    And once you have tried to make them work and have learned 
whether they really work, then I would urge you to come back to 
this Committee and ask us for the legislative changes to 
maximize your ability to get your job done.
    I think it is fair to say that we are open to changes in 
HUD, which has many different programs instituted at many 
different times under many different circumstances.
    Going through and consolidating and rationalizing, I 
believe, would be very productive. So I want to say that I am 
excited about your appointment, and you bring a practical 
experience at the local level which is very much needed. Your 
compelling life story is a clear message to anybody anywhere in 
America, that if you work hard, you can succeed in America. 
This is a country where, routinely, ordinary people do 
extraordinary things. And that is really the American story.
    Your life is a clear example of how America works. And 
quite frankly, I think it is important that there be people out 
front that other people can look up to as role models.
    So I want, first, to pledge my support for your nomination. 
Second, I look forward to working with you and hope you will 
feel free to work with this Committee in partnership to seek 
any changes you need to do your job. And Mr. Chairman, thank 
you again for holding the hearing.
    Chairman Sarbanes. Well, thank you very much.
    If I could just take a moment, I want to just follow up on 
one thing that Senator Gramm said about the work of the 
Committee in the last Congress.
    A lot of attention was focused on the Financial Services 
Modernization bill. That obviously was an extremely important 
piece of legislation. There were some sharp divisions, but, in 
the end, we in effect reconciled them and moved that 
legislation through.
    Aside from that piece of legislation, the other legislation 
reported out of this Committee was all done by overwhelming 
margins, without any real division--the Export Administration 
Act, the manufactured housing legislation, the rural television 
legislation.
    We had important other housing legislation and the 
regulatory relief bill. The Committee was able to work 
together, I think in a very constructive and effective fashion. 
That is not always, I think, been fully recognized.
    And I join the Chairman--well, I am anticipating our 4 days 
here--joining Senator Gramm in making that point.
    Senator Dodd.

            STATEMENT OF SENATOR CHRISTOPHER J. DODD

    Senator Dodd. Thank you very much. For the next 72 hours, I 
get to call you Mr. Chairman, which is a pleasurable 
experience.
    I say that with all due respect to the incoming Chairman on 
Saturday at noon as well, my good friend, Phil Gramm. And let 
me commend both of you for the last Congress' work.
    The work of this Committee is complicated work. It is not 
work that always attracts the kind of instant analysis that we 
see on the nightly news.
    It is hard to get people's attention when you start talking 
about some of the arcane subjects that involve the jurisdiction 
of the Banking Committee. But they play a critical role in the 
economic and social well-being of this Nation.
    I have been deeply appreciative of the work of both of you 
and the other Members of the Committee and look forward to that 
same kind of relationship in this Congress.
    Let me also join in welcoming the new members to the 
Committee, people I have known for some time. I think you are 
going to make a wonderful contribution to this Committee and 
its work.
    Let me also commend, Mr. Martinez, your predecessors. Henry 
Cisneros, who I know you know, from Texas, did a remarkable 
job at HUD and was largely responsible for beginning the 
process that resulted in the news that will be announced either 
today or tomorrow, and that is what Senator Sarbanes, the Chairman, 
has pointed out, HUD is coming off the agencys at-risk list.
    Andrew Cuomo, his successor, has done a terrific job as 
well. He worked with all of us up here through some difficult 
issues.
    I should actually begin with Jack Kemp. I think Jack Kemp 
did a very fine job, began a process of really putting HUD back 
on track again. So there have been some very fine people who 
have taken on these issues and worked hard.
    I was intrigued reading The Washington Post this morning--
the story about your involvement back in Orlando when you were 
head of the housing agency and how you stood up for low-income 
people at a time when issues of shelter were at stake. That 
means so much more.
    Rhetoric comes kind of easy during the process. Everybody 
has nice things to say and that is all well and good. But I am 
always impressed with what people have done. That speaks much 
louder to me than a lot of rhetorical flourishing about 
friendships.
    And your activities when issues of housing have been 
involved where you have had a leadership role, you have spoken 
up for people who do not always have a voice. And I commend you 
for that. So I look forward to working with you in this coming 
Congress on a number of issues.
    Your personal story, as Senators Sarbanes and Gramm have 
said, is a very, very compelling one. Senator Gramm said all 
who were born in this country, and that is certainly true. But 
we have also been enriched by people who haven't been born in 
this country, who come to America. It is the great strength of 
our country. It is the great diversity and the fact that our 
doors are open to people from around the globe.
    You are a wonderful example, and your family obviously is, 
of tremendous courage and strength and sense of purpose. It is 
a pleasure to have you in the public sector and your commitment 
to those issues that you have already demonstrated during your 
service in Florida.
    These hearings obviously provide us a quick opportunity to 
kind of hear you talk about some of the things you care about. 
But it is also worthwhile for nominees to get a chance very 
briefly to hear about the issues that we concern ourselves 
with.
    You and I had a very good meeting last week and I had a 
chance to outline a couple of them. But let me just mention 
very briefly a couple of issues again that I am very much 
interested in, and based on your background and things you have 
said, I believe you are as well.
    As I said earlier, HUD has really done some remarkable 
things in the last few years. We are seeing homeownership rates 
now at the highest levels in the history of this country, in 
excess of 67 percent. We have increased homeownership by nine 
million people in the last 8 years--truly a remarkable record 
and obviously, a reflection of the kind of economic times we 
are in. We have also seen record levels of homeownership in 
urban centers. African-Americans and Hispanic and Latino 
families in this country, which is again, a very positive 
indication.
    The volume of Federal Housing Administration loans has 
doubled in recent years. FHA has now about 6.7 million 
mortgages in its portfolio.
    FHA has gone from a $2.7 billion deficit to a current value 
of more than $16 billion, and that is certainly a wonderful 
legacy to inherit as you come in as the new Secretary of HUD.
    HUD has also recognized the changing needs of an aging 
population by producing the Housing Security Plan for Older 
Americans. We have made progress, but a lot is yet to be done. 
I just want to mention a couple of areas.
    As I mentioned to you the other day, the National Housing 
Act was truly a bipartisan effort. Housing issues have 
historically been bipartisan issues--decent, affordable shelter 
which you have already articulated, has been a common 
commitment of most people in public life, with the exception of 
a few years where this became a highly divisive issue. I think 
we are back to the time again when people care about those 
points.
    One of the areas of paradox in all of this, of our recent 
prosperity, is that a lot of low-income people in this country 
have not all enjoyed this remarkable increase in wealth in our 
country.
    And for an awful lot of people, safe and affordable housing 
is more elusive than ever in this Nation. And that is because 
the cost of housing has outpaced the increase in wages in many 
of our urban centers.
    My State is a good example of that. It is always listed as 
the most affluent State in America on a per-capita income 
basis. And yet, the cities of Bridgeport, Hartford, New Haven, 
the smaller cities, were also listed as some of the poorest 
cities in America.
    Here is a State the size of San Diego County that has some 
of the greatest wealth in the country, and some of the most 
serious poverty right next door to each other.
    It is a difficult issue because that wealth in effect 
contributes to some of the difficulty that low-income people 
have in being able to afford decent shelter.
    Public housing is a particular concern of mine in this 
area. In some parts of the country--the northeast, the 
midwest--the age of public housing has necessitated the 
demolition of many units that have become too deteriorated to 
be rehabilitated.
    Federal policy has tried to provide public housing 
residents with vouchers, as you know. But, frankly, there are 
not enough of those vouchers to go around.
    And further, in high-cost housing markets, vouchers have 
not always been useful to low-income families because they 
cannot find landlords who are willing to accept the vouchers. 
And even with vouchers, they may find the rent to be out of 
their reach. So it is a complex issue. I know you are sensitive 
to it. And I look forward to working with you on it. So we need 
more vouchers. We also need to invest in capital maintenance, 
rehabilitation, and funding to ensure that public housing units 
remain habitable.
    There are a lot of creative programs around the country 
that are already underway that I think will be worthwhile 
taking a look at.
    Finally, in this context, and there are many other issues, 
but assisted housing--again, you and I talked about this. I 
think this will be one of the great issues in the next 25 or 30 
years that we have to deal with. And that is, how we provide 
decent, affordable shelter for people who may need something as 
little as someone to visit them once a week, to people who need 
24-hour care.
    And obviously, from Florida, you are probably more 
sensitive to this than others because the population of older 
Americans, the concentration of older Americans that have lived 
in your State or moved to your State.
    And yet, I think it is one of the really serious issues 
that we are going to face. And the earlier we begin to address 
it, I think the better off we will all be.
    I mention to you as well that, once things settle down a 
little bit for you, we want to invite you to come up to the 
cold north. I know the temptation to go back down to Florida, I 
do not blame you during this time of year. But we would like to 
invite you to come up and see and visit some of these areas. As 
I say, you have already expressed an interest in working on, to 
get a first-hand knowledge of this.
    I have mentioned already to a few of my mayors over this 
past weekend that I was very impressed with our conversation, 
impressed with, as I say, your personal history, but also your 
commitment as a public official in Florida to the issues that 
are certainly at the center of the job of Secretary of Housing 
and Urban Development. And they are truly excited about the 
prospect of you coming up and getting to know them and getting 
to know some of the problems we face in Connecticut and 
throughout the Northeast and Midwest.
    And with that, I look forward to strongly supporting your 
nomination, Mel, and I hope you will feel free to call on us, 
to be involved with us, to engage the Committee, the staff, its 
members.
    I have always found, historically, that secretaries who do 
that avoid an awful lot of problems if they maintain those 
strong open lines of communication.
    And certainly, you have given us every indication based on 
your previous public experience that that is the way you like 
to work, and I look forward to having that partnership with 
you, welcome to the Committee, and I look forward to hearing 
your statement.
    Mr. Martinez. Thank you.
    Chairman Sarbanes. As you plan your trip to Connecticut, 
don't forget Maryland and Texas in your thinking.
    [Laughter.]
    Senator Allard. He may want to take a ski trip to Colorado, 
too, Mr. Chairman.
    Mr. Martinez. Yes, that is right.
    [Laughter.]
    Chairman Sarbanes. All of us.
    Senator Dodd. Every Member of this Committee wants you in 
their State.
    [Laughter.]
    Mr. Martinez. There are some nodding heads back here on 
that one.
    [Laughter.]
    Senator Dodd. I think Colorado's going to win out on this 
one.
    [Laughter.]
    Chairman Sarbanes. Thank you Senator Dodd.
    Senator Allard.

               STATEMENT OF SENATOR WAYNE ALLARD

    Senator Allard. Mr. Chairman, I would like to join you and 
other Members of the Committee in welcoming Secretary-designate 
Mel Martinez to the Banking Committee, and I look forward to 
hearing his statement and listening to him respond to questions 
from members of the Committee.
    During the last 2 years, I have served as Chairman of the 
Subcommittee on Housing and Transportation. And during this 
time, chaired over a dozen hearings on various programs at the 
Department of Housing and Urban Development.
    I know that HUD has tremendous responsibilities and 
tremendous challenges.
    The job of HUD Secretary is going to be difficult. I agree 
with Senator Gramm in that regard. But I am convinced that you 
are the man for the job.
    As Chairman of Orange County, Mr. Chairman, Mel Martinez 
has managed a government of 6,000 employees and a large budget.
    Mel has also been chair of the Orlando Housing Authority 
and president of the Orlando Utilities Commission.
    And during the past year, he has served as chair of the 
Florida Growth Commission, where he tackled many issues dealing 
with growth and affordable housing.
    In my view, the past experiences of Mel Martinez prepare 
him for the management challenges at HUD. And as we all know, 
HUD is a difficult agency to run. There has been progress in 
tackling, I believe, many of the problems at HUD. But much more 
remains to be done.
    I would urge you, Mr. Secretary, to work closely with the 
Congress and Members of this Committee, the General Accounting 
Office, and the Inspector General and housing organizations as 
we continue to look at ways at how we can improve HUD. We all 
have a common goal and that is to see that HUD is run well. 
This is in the interest of taxpayers, as well as the 
beneficiaries of the programs. It will help us to maximize 
HUD's resources as we work to provide assistance for affordable 
housing.
    As you get settled into your new position, I recommend that 
you consider the consolidation of some of HUD's more than 300 
programs. I think we should consider shifting some of those 
programs to State and local governments. In my view, previous 
examples of this have been successful. The best thing that can 
be done is to focus on the core mission of HUD, which is 
affordable housing.
    Last year, as was pointed out by some of my colleagues, 
Congress was able to pass a significant homeownership bill. I 
look forward to working with the new Secretary as HUD writes 
regulations and implements the new law.
    In particular, I want to call attention to the manufactured 
housing portions of the legislation. These provisions 
streamline safety and construction standards for manufactured 
housing.
    This legislation will help to alleviate the shortage of 
affordable housing and I look forward to working with you as 
HUD implements the changes that are necessary. Another portion 
of that legislation dealt with the issue of regulatory barriers 
to affordable housing. This is an area that is of great 
interest to me.
    In my view, government at all levels--Federal, State and 
local--should be very cautious when adding new regulations, 
fees and red tape that increase the cost of housing.
    Several other issues are very important, such as the health 
of the FHA fund. I have asked the GAO to study the health of 
the fund under difficult economic scenarios.
    They are conducting what is best described as an economic 
stress test. Their report will be released in February and I 
look forward to working with you as we review legislative and 
administrative options for the FHA fund. If we find that there 
is a surplus, my preference is to lower borrowing costs by 
rebating excess premiums to homeowners.
    Last year, significant concerns were raised concerning the 
expenditure of funds and living conditions in parts of the 
Puerto Rico housing agency. By the way, this is the second 
largest, housing authority after New York City.
    This was a big issue in the recent governor's election in 
Puerto Rico. The governor ran on a platform that included 
reform of the housing authority.
    HUD has begun to respond to these concerns and I want to 
work with you to improve conditions in Puerto Rico and other 
housing authorities where living conditions are unacceptable.
    Finally, I hope to work with you to modernize some of the 
regulations at HUD. In particular, simplifying the disclosure 
requirements under the Real Estate Settlement Procedures Act, 
otherwise known as RESPA.
    We need to modernize and clarify these regulations. This is 
important as we work to provide the most relevant and useful 
information to homebuyers.
    The current paperwork can be confusing and we may be able 
to find ways to provide more precise education to consumers in 
order to protect against improper practices.
    Mr. Chairman, let me conclude by stating my support for 
Secretary-designate Martinez. I have sat down and had an 
opportunity to visit with him. I believe he is an excellent 
choice for HUD Secretary. I hope that he will receive the 
unanimous support of this Committee.
    I would also urge that we do whatever is necessary to see 
that he is confirmed and in place as soon as possible, 
hopefully on Inauguration Day. And Mel, I look forward to 
working with you in the 107th Congress.
    Mr. Martinez. Thank you.
    Chairman Sarbanes. Thank you very much, Senator Allard.
    Senator Reed.

                 STATEMENT OF SENATOR JACK REED

    Senator Reed. Thank you very much, Mr. Chairman.
    I would like to commend and thank you and Senator Gramm for 
scheduling this hearing. I also welcome the new Members to this 
Committee and certainly welcome Mr. Martinez.
    Mel, it was a pleasure to meet with you last week. Your 
personal characteristics are obvious and outstanding. And you 
bring to this job interesting perspectives as head of a large 
county in Florida, and as a former Chairman of a public housing 
authority. I am eager to hear your views on housing policy.
    Our Nation has come a long way since the Housing Act of 
1949, where we committed this Nation to a goal of a decent home 
and a suitable living environment for every American.
    Today, we might amend that phrase by also including a safe 
and affordable home for every American. And we have made 
tremendous progress.
    We have increased homeownership. We have improved the 
quality of housing stock. We have developed a strong tax and 
financing system to support housing in this country. And we 
have a strong and stable economy that undergirds our housing 
policies.
    But despite this progress, a number of people have been 
left behind and serious challenges remain in ensuring that all 
Americans have safe and decent and affordable housing.
    In fact, there are increasing numbers of families 
throughout this country who do not have access to such housing 
and we have a situation in which the number of households with 
significant housing needs remains at an all-time high.
    In a report to Congress issued by HUD in March of 2000, HUD 
noted that despite continued economic expansion, worst-case 
housing needs have reached an all-time high of 5.4 million 
families. And in the same report, we learned that housing that 
is affordable to the lowest-income Americans continues to 
shrink.
    In fact, the number of rental units affordable to extremely 
low-income families decreased by 5 percent since 1991, a loss 
of over 370,000 units.
    The report also noted that worst-case housing needs have 
increased dramatically, particularly in minority households, 
during the 1990's. All of this is mentioned to emphasize the 
importance of the job that you will take on in the next few 
weeks. These are issues that I have long cared about, coming 
from Rhode Island, where we are basically a city-State, and the 
decisions made by HUD impact every facet of our lives in Rhode 
Island.
    If you are approved as Secretary of HUD, you will play a 
very important part in helping develop our Nation's housing 
policy and our Nation's urban policy. And I believe, working 
together, we truly have an opportunity to make a difference in 
the lives of the families of this country. If we work carefully 
and cooperatively, we can make a difference and I believe we 
will make a difference. I would also like to urge you to 
maintain the recent management successes of HUD.
    As the Chairman has noted, and others have noted, the GAO 
is reversing their determination that HUD is a high-risk 
agency. That is good news. But there are still significant 
challenges and great tasks ahead in terms of making sure that 
we have an efficient and humane Department of Housing and Urban 
Development.
    I know and I hope that you will continue the progress that 
we have made in managing HUD. I also hope that you continue to 
stimulate the creation of more affordable housing.
    Again, back in my own State of Rhode Island, it has been 
estimated that 46 percent of renters are unable to afford a 
two-bedroom apartment at the current fair market rent. And that 
is a staggering statistic.
    Part of it is working together to ensure that HUD has the 
funding necessary to carry out its mandate of providing safe 
and decent housing for all Americans. And I know and hope that 
you will carry out this mandate.
    Finally, I would be remiss without mentioning one of my top 
priorities. I had a chance to chat with you about this in my 
office.
    Lead poisoning is one of the most significant environmental 
threats to children in this country because we have housing 
stock that is saturated with lead paint. We have to do 
something.
    This agency has taken upon itself with funding requests and 
with regulations to address this problem. And I hope, working 
together, we can make progress. And as I look at your own 
wonderful family, I suspect you will take this mission on, not 
just with your head, but also with your heart. And I thank you 
for that.
    We have daunting and critical issues ahead. I look forward 
to working with you. And finally, just for the record, when you 
visit Senator Dodd, you can fly into T.F. Green Airport in 
Warwick, RI, which is the gateway to southern New England.
    Thank you.
    Mr. Martinez. Thank you very much.
    [Laughter.]
    Chairman Sarbanes. And remember, you do not even have to 
use a plane to visit Maryland.
    [Laughter.]
    Senator Enzi.

              STATEMENT OF SENATOR MICHAEL B. ENZI

    Senator Enzi. Thank you, Mr. Chairman. I want to thank you 
for holding this hearing so promptly so that we can get on with 
this important area of American life.
    Housing of course is part of the American dream and I am so 
pleased that Mr. Martinez has been nominated for this 
secretarial position. One of the reasons that I am really 
excited about it is because he has local experience.
    A lot of times here in Washington, we think on the Federal 
level and sometimes we even give States a little bit of credit 
for doing something. But the people really live at the local 
level. And particularly when it comes to housing.
    You bring some experience on the ground with people that 
have been going through the turmoil of searching for housing 
and hoping for affordable housing.
    And when we met, we also talked about the importance of 
homeownership. I mentioned that at one time I was mayor of a 
boom town. And one of the problems when a town is growing 
rapidly is having housing for people. But I got to notice that 
when people got to own their own home, their attitudes about 
the community changed drastically.
    They became more involved, more concerned, more 
participating. They actually created a community by having a 
little piece of the American dream. And that is what you have: 
the opportunity for America.
    I guess one of my roles on this Committee, though while it 
is called urban, is to bring up the rural aspect that is 
covered by it just as well.
    Wyoming, of course, is one of those two square States out 
there and we are anxious to have you not only slip into 
Colorado, but then drift up into Wyoming for a little fishing 
and maybe even some hunting.
    [Laughter.]
    Seeing Yellowstone and Grand Teton National Park on the 
way.
    [Laughter.]
    But while you do that, you will notice how rural we are. 
The sides of our State are about 300 miles on a side. Our State 
only contains 480,000 people. So we have a lot of wide open 
spaces. But we have people who are just as concerned about 
homeownership and affordable housing as any place in America.
    We also have the Wind River Indian Reservation, which is 
the only reservation in the United States that has two tribes 
on the same reservation who were formerly warring tribes. They 
have some significant housing needs there that I know that you 
will take a look at.
    Finally, I would commend you for your experience in 
management. We talked a little bit about the Government 
Performance and Results Act and the mechanism it has for 
continuing the improvement in HUD and making sure that 
everybody there understands that you know what a customer is. I 
hope that you will help us to find out what the job of HUD is 
and how we will know when it is done. And so, I commend you on 
your nomination and I would ask that my full statement be in 
the record.
    Mr. Martinez. Thank you, Senator.
    Chairman Sarbanes. Thank you, Senator Enzi.
    Senator Bayh.

                 STATEMENT OF SENATOR EVAN BAYH

    Senator Bayh. Thank you, Chairman Sarbanes, for convening 
these hearings. It is good to be with you and I thank you for 
your leadership.
    Chairman-to-be Gramm, it is good to be with you once again.
    Mr. Martinez, I want to thank you for your presence here 
today and for your patience, your willingness to listen to all 
of us once again after having paid so many courtesy calls.
    Frankly, I was sitting here wondering how you were going to 
do your job, having received so many invitations to visit so 
many places. But I am sure you will be able to balance all the 
competing demands for your time.
    I very much appreciated your coming to see me. And 
particularly, I wanted to remark upon your pledge of 
bipartisanship, which I thought was particularly appropriate.
    Housing and the issues you will be addressing should not 
and need not be partisan in any way. It takes all of us working 
together, Members on both sides of the aisle, to fully realize 
the American dream of quality affordable housing for every 
citizen. And I very much appreciated your heartfelt pledge to 
operate in that manner.
    On behalf of the people on our side of the aisle, I wanted 
to extend the hand of friendship and say that we are here to 
work with you to accomplish that objective in good faith. And 
so, I thought that that was an excellent way for you to begin.
    I want to also remark, as most of my colleagues have, on 
your compelling personal story. And it is wonderful to see your 
family sitting behind you today. I am sure you are bursting 
with pride and we will introduce them in a few moments. I want 
to thank them. I know you would not be here today without their 
support. So it is good of them to be with you.
    I hope you will be more than just a caretaker. I suspect 
that you will be more than just a caretaker, but an advocate. 
Particularly given the history on the part of some in your 
party for actually advocating the abolition of the department 
you will now be heading.
    I think it is up to you to make a compelling case to them 
about the vital, important mission of this department. And I 
know you will. I would encourage you along those lines because, 
as my colleague, Senator Reed, just finished reciting, there is 
much unfinished business.
    Even at a time of unparalleled prosperity and the highest 
incidence of homeownership in the history of America, too many 
are still struggling to make ends meet and to realize the 
American dream of affordable housing.
    With the economy possibly slowing and the business cycle 
not yet having been repealed, at least as far as I know, we 
will face some downturn sometimes in our economy, which will 
add additional stress to those who are struggling to reach that 
objective. So your emphasis on affordable housing I think would 
be very well placed.
    You and I talked briefly about the concept of smart growth. 
I encourage you once again in that regard.
    We both agreed that this is very much a quality of life 
issue for many in our country. And intelligent growth in ways 
that help to foster the other values we hold dear I think is 
something that you would be well advised to pursue, and I 
commend you for having pursued that already.
    I have something of a home State interest in this regard, 
having had two mayors of our largest city, Mayors Hudnutt and 
Goldsmith, having taken up this issue. So I commend you for 
your interest in that regard.
    Finally, I would say that your building on your compelling 
personal story as an immigrant to our country, I know you would 
feel a special sensitivity about the need to be on the look-out 
and to fight any vestiges of discrimination against anyone for 
reasons of race, religion, or other factors.
    I know that is an important part of the American dream and 
story and one that you would share, given your own personal 
background. And I would commend that to you as well. It is 
important that we send that signal to all Americans, that 
opportunity is available to them and that the vestiges, the 
unfortunate vestiges of the past are exactly that--in the past.
    Finally, I would just remark upon your courage. There is 
one aspect of your personal biography that has not been 
remarked upon here. But as a prominent and successful trial 
attorney, you may find yourself lonely sometimes in the new 
Administration.
    [Laughter.]
    But I want to commend you for that and can only hope that 
they will solicit your views on matters other than housing 
policies.
    [Laughter.]
    Thank you very much, Mr. Martinez. I look forward to 
working with you.
    Mr. Martinez. Thank you.
    Chairman Sarbanes. Thank you, Senator Bayh.
    Senator Miller.

                STATEMENT OF SENATOR ZELL MILLER

    Senator Miller. Mr. Chairman, it is an honor to be a Member 
of this Committee and to be a part of this important 
confirmation hearing. I am pleased that the work we are 
undertaking today pertains to such important issues for our 
country--affordable housing and the development of our urban 
centers.
    As a Senator representing the State of Georgia, these 
issues have great impact on areas such as Atlanta and Augusta, 
Savannah and Columbus. But they also affect rural populations, 
traditionally, the most economically challenged in Georgia.
    Housing needs are not just limited to the big cities. For 
example, in the suburbs of Georgia, throughout the last decade, 
we saw a decline in the number of units affordable to low-
income families. And today, over one third of households facing 
worst-case needs are in Georgia's suburbs.
    Don't misunderstand me. Economic development initiatives 
are still needed greatly in Atlanta and other cities around the 
country. We must continue to fight urban poverty and the many 
social ills it brings to this Nation.
    But I also believe, as the nominee approaches this job, 
that you must do so with the outlook of not serving just one 
sector of America, but all of America--urban and rural.
    Mr. Martinez, I have followed your public career in my 
neighboring State. You are an excellent choice for this 
position and I look forward to strongly supporting you. And 
also, as you well know, you have received all these invitations 
from other States. But Atlanta and Georgia is on your way home.
    Mr. Martinez. That is right.
    [Laughter.]
    Thank you.
    Senator Miller. Thank you, Mr. Chairman.
    Chairman Sarbanes. Thank you, Senator Miller.
    Senator Stabenow.

              STATEMENT OF SENATOR DEBBIE STABENOW

    Senator Stabenow. Good morning. Thank you, Mr. Chairman. It 
is a pleasure to be with you and on the Committee. It is an 
honor to serve with my colleagues and Ranking Member, soon-to-
be-Chairman, Gramm, I look forward to working with you as well. 
I must tell you that I relish my seniority over Senator 
Corzine.
    [Laughter.]
    We have to take what we can as we move. And so, I am 
pleased to have some small seniority.
    Senator Bayh. I was down there last year, John. There is 
hope.
    [Laughter.]
    Senator Corzine. It is a nice seat. I like it.
    [Laughter.]
    Senator Stabenow. As we proceed and as everyone has invited 
you to their State, I would urge that you start in Michigan and 
buy a wonderful new car from our auto industry and drive. And 
we would be happy to offer you the opportunity to do that. In 
fact, the North American Auto Show is currently going on and I 
would love to have you come see all the opportunities.
    I share with my colleagues the sense of pleasure at your 
nomination and the impressive resume and experience that you 
bring.
    Obviously, someone who has combined experience and 
management skills with advocacy, which is certainly appealing 
to me, and I think to all of us. It was a pleasure to have you 
in my office and to have the opportunity to talk about issues 
of concern to Michigan.
    Certainly, there are issues that you will decide every day 
that directly affect real people--a senior citizen in Michigan, 
a young family wanting to buy a home, to make sure that their 
children have shelter, the disabled, the homeless. There are 
issues every day that will touch real people in the area that 
you will serve. And I think that is very significant.
    We have challenges that I am very concerned about, whether 
it is Section 8. Whether it is our seniors and the fact that 
the population goes up and yet, the funding for housing for our 
low-income seniors has gone down in real dollars by 48 percent 
in the last 6 years. That is a challenge for all of us to 
address together.
    The homeless--on any given night, there are 750,000 people 
on the streets of our cities and rural communities. Again, 
homelessness has gone up. And yet, the resources have gone down 
and we have challenges there together.
    I agree with my colleagues that it is the great American 
dream and that we need to do everything we can to make 
homeownership available to every family and every individual.
    I would also encourage you to continue support for 
enterprise zones. Detroit has very effectively applied their 
enterprise zone. And I would be very anxious to have you come 
and visit to see what positive impact there has been as a 
result of that designation. Also, the enterprise communities.
    Flint, an urban area, and Lake County, a rural area, both 
having been designated and received opportunities as a result 
of that designation. I think it is critical that we work 
together in a bipartisan basis. I think by the strong support 
on both sides of the aisle in this Committee, you see that you 
have the support to work across the aisle to get things done.
    I am very pleased to support your nomination. And with your 
impressive background, you truly fit the ideals of living the 
American dream. And I am very hopeful that, together, we will 
be able to give the opportunity to every American to have that 
same American dream fulfilled.
    Thank you.
    Chairman Sarbanes. Thank you, Senator Stabenow.
    Senator Corzine.

              STATEMENT OF SENATOR JON S. CORZINE

    Senator Corzine. Thank you, Chairman Sarbanes.
    It is terrific to be here. It is a great honor to be part 
of this Committee and serving with you. And I look forward to 
serving with Chairman-to-be Gramm and all the Members.
    Given my private sector background and interests and, maybe 
more importantly, the needs of our State, I really think this 
assignment and particularly the area, Designee Martinez, with 
regard to housing, is truly going to be a joy of opportunity.
    Today's hearing really does deal with one of the most 
important jurisdictions of the Committee that is important to 
our country and State and for myself.
    Like many parts of the country, and I would like to 
actually join you on some of these trips, particularly the ski 
trip, the trip to the beach and some of the other places, New 
Jersey really does suffer from a real shortage of decent, 
affordable housing. I think we talked about it yesterday.
    The rental costs in New Jersey are the highest in the 
country. We also have some of the poorest and most concentrated 
senior communities in our country, where affordable public 
housing is an important ingredient. We desperately need the 
support of this Committee, of your department, and the country.
    And I look forward to working cooperatively in a bipartisan 
way to address these issues and the mission of the department, 
both for my constituents, and for others around the country 
that have the same needs.
    You and I had a terrific conversation. I think this is a 
clear example where people can work in partnership to get 
things done. I know your personal experiences will make a real 
difference in accomplishing the needs of the Nation.
    I think the President-elect made a very, very positive and 
great choice in having someone who has the background, the 
experience, and the real embracement of the American promise 
that your life exhibits.
    So I mostly want you to know that I want to work 
cooperatively and in detail on the kinds of things that are in 
the mission statement, making sure that we service the needs of 
our people and provide that affordable housing. And I look 
forward to supporting your nomination and look forward to 
working very closely with you in the years ahead.
    Mr. Martinez. Thank you, Senator.
    Chairman Sarbanes. Thank you very much, Senator Corzine.
    I want to thank my colleagues for their statements. And 
now, Mr. Martinez, I would like to ask you to stand in order to 
take the oath before we hear your statement.
    Do you swear or affirm that the testimony that you are 
about to give is the truth, the whole truth, and nothing but 
the truth, so help you God?
    Mr. Martinez. I do.
    Chairman Sarbanes. Do you agree to appear and testify 
before any duly-constituted Committee of the Senate?
    Mr. Martinez. I do.
    Chairman Sarbanes. Thank you very much.
    We are now prepared to hear your statement. And of course, 
we very much hope you will, at the appropriate time, present 
your family to the Committee as well.
    Mr. Martinez. Yes, sir. I will do that.

                   TESTIMONY OF MEL MARTINEZ

                   SECRETARY-DESIGNATE OF THE

        U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Mr. Martinez. Thank you very much, Chairman Sarbanes, and 
Senator Gramm and Members of the Committee.
    Thank you very much for allowing this timely hearing to 
take place on my confirmation. It is great to be before you 
this morning.
    First of all, I would like to express my gratitude to 
President-elect Bush for the honor that he has bestowed upon me 
and the responsibility that he has given me an opportunity to 
do on behalf of the people of America.
    It is a very humbling experience and it is a great honor, 
and I am extremely grateful to him as he has asked me to be the 
Secretary of the Department of Housing and Urban Development.
    And at this time, Senator, with your indulgence, I would 
like to introduce my family. It is with their love and support, 
as Senator Bayh stated, that it is possible to carry out the 
important public responsibilities that are before me.
    First of all, I would like to introduce my wife Kitty. And 
my children, Lauren, John and--I guess Andrew had another 
hearing to attend.
    [Laughter.]
    Young Andrew was here and may come back.
    [Laughter.]
    But anyway, he is the youngest in the family. Also my 
brother Ralph, who also has his own compelling story, is here 
with us today. And his wife Becky and their children.
    Chairman Sarbanes. We are very pleased to have them all 
here. We certainly welcome them to the Committee. I just 
forewarn them, it is not always this easy, I want you to know.
    [Laughter.]
    Mr. Martinez. Senator, I have had an opportunity, as has 
been mentioned, to live the American dream. I have had an 
opportunity to, after arriving here as a youngster at the age 
of 15, scared and alone, to enjoy the fruits of what America 
has to offer and to be a beneficiary of what this country has 
to offer.
    And since something has been said about me and what I have 
done, what I would like to do in talking about that aspect of 
my life is, frankly, talk about the others who have touched my 
life and who made all of this really possible for me.
    First and foremost is my parents, who had the fortitude to 
make that gut-wrenching, difficult decision to send me out of 
the country and to love me enough to be away from me at a time 
when it was the best thing for me.
    Beyond that, there are others who have really touched my 
life in different ways. There was a young priest in Miami, now 
Monsignor Walsh, who undertook this program called Pedro Pan.
    There have been others. Obviously, the social worker, Mr. 
Aglio, who touched my life and placed me in foster homes in 
Orlando. And obviously, my foster parents.
    I have often just marveled at their fortitude and their 
strength in simply asking that I be placed or offering their 
home to a stranger who did not speak the language and about 
whom they really knew next to nothing.
    So the fact is that it is those people that are the real 
heroes in my life and who have really made a difference and 
made it possible for me to be here today. And it is really 
about that that I want to tell you about the compassion and 
charity of the American people.
    We are a good people and I am proud to now have an 
opportunity for my life to touch that of others in a way that 
mine has been improved and made better by what others did for 
me. In my public life, Senators, I have had an opportunity to 
fight for inclusion, to fight for opportunity for others.
    When I chaired the Orlando Housing Authority, I never 
really anticipated that I would have the opportunity to some 
day in my life be the Secretary of Housing and Urban 
Development. But it came natural to me to try to do for others 
what had been done for me--inequality, unfairness, lack of 
opportunity, voices that needed to be heard. I sought out an 
opportunity to hear them.
    We included before it was a Federal mandate the residents 
at our meetings of the Orlando Housing Authority, which was an 
important thing in order for them to know what was happening in 
their lives. We would go in our board meetings to each of the 
housing authority complexes and meet in their community room.
    This gave them an opportunity to come and hear the work of 
the authority, to, frankly, from just being informed, to making 
a complaint about a screen door that did not close or a 
refrigerator that was not working. And in that, I think that we 
were empowering them to better their own lives and to maybe 
have a sense of reaching up and doing better in their lives.
    I also worked hard to build the senior housing project. The 
Orlando Housing Authority has been a well-run authority. And 
from that and the savings the authority generated from managing 
the Section 8 program, we were able to build a housing project 
for elderly and single mothers. These were really positive 
achievements and things that I took with a great deal of pride 
as we were able to do those. I later moved to public service 
and elected office, as Chairman of Orange County.
    I have to say that we have faced there a lot of the 
challenges that prosperity and growth can bring. Not unlike 
Atlanta, Senator Miller, where we have seen sprawling 
neighborhoods and suburban neighborhoods. We have seen some of 
our central cities perhaps not be as healthy as we would like 
for them to be. And we have seen the challenge of affordable 
housing be a real significant problem.
    So we have tackled the problems of overcrowded schools, of 
growth, tried to come up with more innovative ways of growing 
as a community, to ensure that the quality of life is 
maintained, in spite of the fact that changes are coming and 
changes are fast. But I do believe that at the end of the day, 
quality of life is what growth management is about, and that is 
what we attempted to do.
    Housing affordability has been a crisis where I come from. 
The affordable housing index for people in our community has 
been difficult to attain.
    But in any event, those are some of the things that we have 
attempted to accomplish and much has been done in the two that 
it has been my privilege to serve the people of Orange County 
since they elected me to that office. And I have been guided as 
I have done that with what I in my heart felt was the right 
thing to do, not necessarily the politically expedient thing to 
do. And I do believe that those are the things that I will do 
if confirmed by the Senate as Secretary of Housing and Urban 
Development.
    Senators in my jobs, I have been a consumer of HUD. I have 
been at the receiving end of HUD programs. I have understood 
the local government's frustrations in not being able to access 
the bureaucracy and not having clear links of how we do things.
    But whether it be in public housing or in the community 
development block grants that are so vital to strengthening 
local communities, or to the housing block grants, those are 
all things that I have touched in my local government role, and 
I look forward to now having an opportunity to interact with 
our local partners to ensure that things are done in a way that 
makes their job more successful.
    The population of Orange County has been mentioned to be 
about 860,000. I was proud to be elected to that office by the 
people of Orange County. But it has then been my responsibility 
to manage a staff of over 6,000 people, while at the same time 
serving on the airport authority, a large, and I know some of 
you who have visited there, beautiful airport which has allowed 
Orlando to be one of the real gateways to the world.
    We have also worked in challenges of developing our 
community in a way that would allow for growth to be compatible 
with a quality of life that I can remember when I grew up as a 
youngster in Orange County in the early 1960's.
    But the challenges of housing and the challenges of all of 
these urban problems and obviously, also of some rural and 
growth problems are now my responsibility, if you would be good 
enough to confirm me.
    I do believe that those will be responsibilities that I 
will attempt to tackle with a lot of enthusiasm. I, far from 
being a caretaker, intend to be a very active secretary, 
assuming your confirmation.
    Unquestionably, there are problems at HUD. It has been 
obvious to me that HUD is a designated high-risk agency.
    The news today or tomorrow will be indeed good. But there 
is no question but that in addition to the fact that HUD, as an 
agency, may not be at high risk, that there are going to be HUD 
programs that continue and will continue to be at high risk. So 
while much progress has been made, much really remains yet to 
be done. And I am very mindful of that.
    I believe that my predecessor in office, Mr. Cuomo, and 
others before him--Secretary Kemp, Secretary Cisneros--have all 
made steady progress. But more must be done. These management 
challenges must be met and I intend to meet them head-on.
    It would be my greatest joy that at the conclusion of my 
term at HUD, that HUD would not be considered a high-risk 
agency, not only as an agency, but also in the programs that 
HUD administers. The institution must be indeed strong to carry 
out the very important mission that HUD has for the American 
people.
    I believe that unless HUD is a strong agency, that the 
mission of HUD cannot be properly and effectively carried out. 
So it must have institutional strength. It must have the 
fortitude itself in order to credibly carry out the mission.
    One of your statements mentioned that in past years, the 
discussion about perhaps HUD disappearing. Those questions, 
those issues are best answered, Senators, not with rhetoric, 
but with action. And I think that the best statement that one 
can make about why HUD is an agency that must be supported is 
by the way in which HUD conducts its own business and its own 
affairs.
    I have met with the GAO. I have met with the General 
Accounting Office. We have had an opportunity for a very 
lengthy briefing. It was very enlightening. I learned a great 
deal about their thoughts and their concerns. Certainly, there 
are some things about which GAO and also the HUD Inspector 
General, have agreed need improvement.
    First, the FHA single-family mortgage insurance risk is 
something that continues to be of concern.
    Second, the impact and continuing evolution of the HUD 20/
20 management reforms.
    And third, the failure to integrate financial and 
information systems, even after a long period of time trying. 
Let me just assure you that each of these three areas, if 
confirmed by you, will be areas that will have my highest 
priority. We will ensure that we delve into each of these 
problem areas to try to find some success, to try to find how 
we bring a better resolution to those.
    Senators I believe that the core of compassionate 
conservatism is to manage the affairs of an agency like HUD in 
such a way that we can be there to help those in need. And I 
believe that to be my challenge and my task.
    I agree that the worst housing need numbers are growing and 
the inventory of affordable housing is indeed shrinking. We 
have over the last 10 years spent some $10 billion on the 
homeless. But still, too many live on the streets.
    The elderly housing problem, as has been pointed out by 
Senator Dodd, also Senator Graham of Florida spoke to me 
passionately about that and I think it is something that we 
must address.
    I am well aware of those problems that are faced today by 
what I call and others have called our greatest generation, the 
people who took me in when I got here, the people who made it 
possible for a program like Peter Pan to exist, the people who 
not only won the cold war, but also set in motion the wonderful 
prosperity that we have enjoyed as they reach their senior 
years.
    We must find a way that we can allow them to afford 
reasonable housing in a caring way, that can also give them the 
assistance that they would need in their elderly years. And 
while we have had record homeownership in recent years, there 
are some groups that continue to chronically be left behind. 
And it will be my priority to ensure that we find a way for 
African-American households and Hispanic households to also 
enjoy the fruits of the American dream that I have been so 
blessed to be able to enjoy.
    President-elect Bush has spoken on some of these issues in 
what he has called the new prosperity initiative. His 
initiatives are very focused on expanding homeownership.
    Congress enacted prior to the conclusion of the last 
Congress Section 8 voucher assistance for downpayments. This is 
something that I assure you will receive my attention and very 
timely implementation. It is a very positive initiative to 
assist folks to acquire and have their first home.
    The American Dream Downpayment Fund, which will be a $1 
billion fund of matching grants, is something that I know the 
President-elect is very interested in discussing with the 
Congress.
    Also, investor-based tax credits and a $1.7 billion fund 
over 5 years to encourage construction and rehabilitation in 
distressed communities. The need is great across the country, 
as is obvious by your various invitations for me to visit your 
home States.
    I do trust that as we do that, that you will look elsewhere 
when we talk about the HUD travel budget, which might be indeed 
significant if I am to keep up that schedule.
    [Laughter.]
    But, in any event, it is important for us to work together. 
I think that together with the Congress, much can be done. 
Working with this Committee--I look forward to working with you 
to tackle all of these difficult issues. There are others who 
are our partners in this task as well. There are mayors, our 
county executives, and other local officials and governors 
around the country. But also a very important group to me, and 
I know to the President-elect, which is our faith-based groups 
and our not-for-profits.
    You know, Senators, when I worked hard to expand our after-
school programs to every middle-school child in Orange County, 
we did not do so by explaining the bureaucracy.
    What we did is we worked with our not-for-profit sectors. 
The Boys and Girls Clubs and the YMCA in Orange County now run 
our after-school programs, which are very successful and having 
wonderful results. And it is those kinds of partnerships that I 
think can really lead to great success in areas like we are 
discussing here today.
    So I know that together we can and together we will meet 
these challenges of housing affordability, housing 
availability, and also community renewal, which are the core 
mission of HUD.
    I do, Senator Gramm, quite agree with you that we have to 
mind our knitting, we have to be very tasked on our core 
mission so that we can reach that potential that ultimately is 
there for us and look at ways that we might be able to combine 
programs and to merge those things which it makes sense to do 
in a joint sort of effort.
    I am in my life a testament to the promise of America and 
without question, it is my goal and my passion now to try to 
transfer that to those in America who have yet to taste the 
wonderful fruits of that prosperity. I can remember with great 
pride what my mother and father had as our family purchased 
their first home in America, with the help of the FHA which 
made that possible. And in fact, I know in my own life, as 
Kitty and I have enjoyed living in our home and raised our 
family there, what a difference and a transforming experience 
it can be for someone to own a home.
    I think homeownership is at the root of good citizenship. 
And I do not have any question that if we can make more 
homeowners out of our American people, that we will be making 
better citizens, more committed community builders, as we go 
forward to try to meet all of the challenges.
    Mr. Chairman, Senator Gramm, Members of the Committee, we 
unquestionably have much work to do. The Department of Housing 
and Urban Development must continue to evolve into a more 
efficient and more effective institution. At the same time, for 
low-income families and distressed communities across the 
country, the opportunity need is great.
    Working as partners, I am confident that we can meet these 
challenges and if confirmed by you, I will work in a bipartisan 
manner working with Republicans and Democrats to advance our 
common goals.
    It is my belief that our mission at HUD is not a Republican 
or a Democratic mission, but, rather, an American mission. And 
with your help, and with the grace of God, I believe that we 
can and will succeed.
    Thank you, Senators.
    Chairman Sarbanes. Thank you, Mr. Martinez, for a very 
comprehensive statement. We will now take our rounds of 
questions.
    I worked closely with Senator Mack, our former colleague 
from Florida--former only by a few days--in 1998, on wide-
ranging public housing reform legislation, which was passed 
overwhelmingly on a bipartisan basis.
    That law, which was supported by public housing authorities 
and low-income advocacy groups alike, provides for increased 
flexibility at the local level, new opportunities for public 
housing authorities to partner with private developments, and 
strong commitments to continue to serve extremely low-income 
families.
    We are very committed to having the implementation of this 
law fully carried through. And I would like you to give us your 
view on working with the resident groups, the PHA's, and the 
Congress in order to accomplish this objective.
    Mr. Martinez. Senator, I am delighted to answer that.
    I think it is very important to continue that trend. I am a 
great believer in partnering at the local level to reach 
solutions, and also partnering with the private sector.
    In Orlando, as we speak, there is a Hope VI project going 
forward which has, of course, private developer partnership and 
which has been I think the building of great success.
    Again, I believe that it is crucial that as we attempt to 
forge these partnerships, that we make HUD a customer-friendly 
place and that we allow the PHA's at the local level to somehow 
cut through some of the bureaucratic issues that delay some of 
these projects or bring their implementation, frankly, not in a 
timely fashion.
    One of the problems that the Orlando projects has had is 
that the cost of money to a developer is a very significant 
issue. So working more like business in the business of 
government is part of what I think we need to do to make those 
programs successful.
    But I am very committed to them. I look forward to working 
with you and with the other members of the Committee, as well 
as with our local PHA's, to see them to fruition in a 
successful way.
    Chairman Sarbanes. I appreciate your reference to the Hope 
VI program because that is extremely important in eliminating 
some of the most dilapidated public housing. And we are 
replacing it across the country with mixed-income housing, 
which I think most people agree is a vast improvement over the 
previous situation. You are going to have to fight for the 
money for those programs, though, as you well appreciate.
    Mr. Martinez. Yes, sir.
    Chairman Sarbanes. When there is a foreclosure, the 
property goes into the hands of HUD, which then undertakes to 
resell it. This is under the FHA.
    After 3 years of increases, HUD's portfolio of single-
family properties began to decline in 2000. However, it appears 
that the older properties in the inventory are very slow to 
move.
    Now GAO has recommended that HUD use specific incentives or 
penalties to encourage contractors to reduce the number of 
properties that are in the inventory for longer than 6 months. 
What is your view of that GAO recommendation?
    Mr. Martinez. Senator, GAO was good enough to brief me 
thoroughly on that issue. It is quite clear that there needs to 
be more done to ensure that particularly the older stock is 
moved quickly.
    What can occur clearly is that as the older homes continue 
to be in foreclosure and not back into homeownership, that that 
creates a deterioration in the areas where these houses are 
that impacts the neighborhood, that impacts the whole area.
    So I think that is a real priority and a real important 
thing that we must do, is to supervise these contracts in a way 
that they can effectively move the stock particularly of the 
older houses out of this inventory. And I think also, frankly, 
as we may be viewing an economic cycle that is not as favorable 
as we have had, that perhaps more foreclosures could even be 
forecasted. And I think it is important that we be prepared to 
aggressively move forward to ease that stock of oversupply and 
to ensure that HUD does what it needs to do to monitor the 
contractors and to ensure that they are doing what the contract 
calls for them to do.
    Chairman Sarbanes. Now HUD has put in place recently a 
program by which it transfers to local governments or 
nonprofits significant portions of the FHA inventory at a 
discount. Some local groups have raised concerns that the 
discounts are not adequate to allow the home to be brought up 
to code and then sold at local market prices.
    Will you work with groups like the Neighborhood Housing 
Services, the Enterprise Foundation, and the Local Initiatives 
Support Corporation, all of which have I think done really 
exemplary work in trying to address our housing needs?
    Will you work with such organizations in order to try to 
address this problem of turning over properties to these 
nonprofits in order to upgrade and move the housing stock?
    Mr. Martinez. Certainly, Senator. And I think showing some 
flexibility in the administration of programs like that is 
necessary in order to have the kinds of results that I think we 
must have. But I certainly will address that issue and look 
forward to perhaps seeing some results that we can report back 
to you.
    Chairman Sarbanes. Well, thank you very much. My time's up.
    I do want to note, Secretary Rubin, the Secretary of the 
Treasury, has taken on the chairmanship of the Local 
Initiatives Support Corporation, which we very much appreciate, 
and I think is some indication of the quality of that 
organization and the Enterprise Foundation, the Neighborhood 
Housing Service. There is some very good expertise that has 
been built up in the nonprofit sector with respect to housing.
    Senator Gramm.
    Senator Gramm. Thank you, Mr. Chairman.
    Mel, first of all, let me thank you for your excellent 
opening statement. I think it is clear that we are going to 
have a good working relationship with you.
    I do think, with the economy getting softer, we are likely 
to have more property come into HUD ownership than we have had 
in the boom times of the last 4 or 5 years.
    I come from a State where, in the 1980's, we had tens of 
thousands of people who simply walked off and left mortgages 
and houses, which then came into the ownership of the Federal 
Government. And looking back at that experience, it is clear 
that the best thing that we did was simply to go ahead and put 
that housing on the market and sell it and get it into private 
hands where it could be managed.
    I think as you look at our experience during the 1980's, 
where literally in a city like Houston we came into the 
ownership of 30,000 or 40,000 housing units at any one time, 
that our efforts to try to manage those versus getting them 
into the hands of people who would invest their money, was not 
very successful. But that is something that we have to look at, 
and it seems to me that it is an area for you to go back and 
look at.
    In discussions of your nomination and media coverage, there 
was only one issue raised, and I wanted to give you an 
opportunity to give us your response. And that was that you 
applied for a license from the FCC and were turned down.
    I do not know that every time we are turned down, we are 
required to give a public accounting. I remember when I was a 
freshman in college, I had this great idea of writing Sophia 
Loren about going out with me. It was a brilliant idea, I 
thought.
    [Laughter.]
    And I thought it would be so novel, she might do it. But as 
it turned out, she rejected me. No one's ever asked me to 
justify why she did not think it was a good idea.
    [Laughter.]
    But give us sort of a summary of your application for the 
license and the rejection and any information you think we need 
to have on it.
    Mr. Martinez. Certainly. Thank you, Senator. I would 
certainly be happy to do that.
    In the early 1980's, it was suggested that perhaps a new 
station would be coming to the Orlando area and that a group 
might be put together to apply for a license.
    Bottom line--what happened is that there were eight 
competing applicants for this license. Out of the eight 
applicants, there could only be one winner. The FCC at that 
time had a competitive type of system that they would engage in 
where basically you would just look at each applicant in terms 
of the way in which they would fill what was called the public 
interest, the best public interest.
    Our application did not make it and the rationale by which 
one had to be picked and seven others denied in our particular 
case had to do with the corporate structure that had been set 
up.
    I had been willing to be an investor in this venture, but I 
was not willing to leave my law practice to become a full-time 
radio or television station manager or employee. Full 
integration was awarded higher credit.
    We set up an A and B type stock holder relationship in the 
corporation. I say we. The lawyer handling the matter did. I 
was just an investor as a B stockholder.
    Ultimately, it was felt by the administrative law judge 
that a competing applicant had a better application because all 
of those investors were also going to be full-time managers of 
the station.
    Our class A and B situation, it was found that while some 
of 
us in the B class did exercise some managerial type of interest 
in 
the matter, we were not going to be full time at the business 
of the 
corporation. We were never denied the license for any reason 
other than the fact that a competing applicant had what they 
perceived at the time under the rules at that time to have a 
better application.
    Our application was found to be sufficiently good that, had 
they not had slightly more points, we could have easily been 
awarded the license.
    Senator Gramm. Well, thank you for clarifying that point. 
And Mr. Chairman, I don't have any further questions.
    Chairman Sarbanes. Senator Reed.
    Senator Reed. Thank you very much, Mr. Chairman.
    Let me return again to the issue I brought up in my opening 
statement, which is the exposure of children to lead poisoning.
    A staggering 190,000 children in the country have been 
estimated to have elevated lead levels. And that is primarily 
due to the housing they live in. And for many families, low-
income families, they have a choice between any housing at all 
and housing that harms the health of their children.
    In major cities like St. Louis and Baltimore and Milwaukee 
and Chicago, over 20 percent of the children screened have 
elevated lead levels. All of this has produced a response by 
HUD over the last several years. Beginning in 1993, HUD's 
office of lead hazard control has awarded about $550 million in 
competitive grants to communities to abate lead. And so we have 
established an infrastructure around the country.
    But the issue that we face today is will we continue and 
build on that record? And I hope today, Mr. Secretary, that you 
can commit to us that you will seek as a minimum, and I 
emphasize minimum, at least the $100 million that was 
appropriated last year 
for the office of lead hazard control in HUD. Could you do 
that, Mr. Secretary?
    Mr. Martinez. Certainly, Senator. I think that is an 
important issue. I know you feel passionately about it. I 
certainly can well understand that when we are talking about 
young lives, a 10-year timespan by which this scourge may be 
out of our housing stock, while a short time in bureaucratic 
years, is a lifetime to a child who might become prey to this 
sort of affliction. So I have to tell you it is something that 
I, when it comes to children, I feel deeply about and I think 
is something that will have my heart as well as my attention.
    Senator Reed. Thank you very much, Mr. Martinez.
    Let me also pick up on a point that you raised which is a 
common concern of all of us here. And that is homeownership, 
particularly among low-income communities, particularly among 
minorities in this country because, as your statement points 
out, there is a significant differential in homeownership in 
the majority community and homeownership in the minority 
community. One thought and proposal that I have advanced is a 
homeownership tax credit.
    Essentially, it would give tax credits to financial 
institutions if they agree to provide zero interest second 
mortgages that would be payable in 25 years, presumably when 
the property is sold. This would allow a lessening of 
downpayments and would make homeownership much more affordable. 
I wonder if you would be very interested in pursuing this 
approach, as well as other approaches.
    Mr. Martinez. Yes, Senator. I think not only does it have 
my interest, but I think it also has the interest of the 
President-elect. And I think I will have his support and 
assistance as we seek to obtain that type of new initiative to 
increase homeownership. It is clear that the largest barrier to 
homeownership is the down payment. And so, if we can facilitate 
that in any way that we can, particularly in partnership with 
the private sector, I think that is something that we would be 
well advised to do.
    Senator Reed. Thank you. Another aspect of the housing 
dilemma we face is not just making existing homes and rental 
properties affordable. It is creating and building new homes 
and new rental properties.
    Have you ever thought or given additional thought to a 
housing trust fund, some proposal in which we would reserve 
money and commit that money to actually stimulating the 
construction of new housing units?
    Mr. Martinez. No, Senator. That is not something that I 
have had any first-hand information on or work with. But I look 
forward to coming back to you on that issue and if we can work 
together and get more of your ideas on that, I am certain that 
it is something that we can look into and follow up on.
    I think that anything we can do to not only look to the 
affordability of housing, but also to the availability of 
housing, it is part of what we must do. We must look at both 
ends of the spectrum, affordability and availability.
    Senator Reed. There has been discussion in these questions 
with respect to the FHA. Could you elaborate on your vision for 
the FHA, what you feel the challenges are and what you would 
like to see FHA become in the next several years?
    Mr. Martinez.There is two or three areas to talk on that. 
One is, certainly the GAO right now has under study what the 
appropriate level of surplus might be on the FHA fund, if there 
is a surplus. I think it is very important that we await that 
report before making any commitments. One of the questions that 
I have asked is whether a 2 percent reserve level is an 
adequate reserve level.
    I frankly do not have a final judgment on that. But I think 
it is a good question to ask and I think that we need to work 
with those who would have some expertise in the area to counsel 
on what the proper level of reserves might be. So that is one 
area. We need to look at that.
    In addition to that, I think that financial institution 
counseling at the front end of homeownership, teaching people 
how to be good homeowners, how to maintain their properties. 
But also, how to manage their financial lives in a way that 
would allow them to meet their commitments.
    I think that is something that can help on this foreclosure 
problem we were speaking of earlier because, frankly, we are 
looking at it at the front end, not only at the back end, and 
what to do with foreclosed properties. So those would be two 
areas in which I would hope the FHA can have a very active role 
and help with those two areas of concern.
    Senator Reed. Thank you very, very much, Mr. Martinez, and 
good luck.
    Mr. Martinez. Thank you, Senator.
    Chairman Sarbanes. Thank you, Senator Reed.
    Senator Allard.
    Senator Allard. Thank you, Mr. Chairman.
    I would suspect, Mel, that as a local official, you have 
had some experience in dealing with Federal regulations and 
rules that come down. And as I mentioned in my opening 
statement, this is an area that I would like to have you take 
some time to review. I would like to have you discuss with the 
Committee some of your thoughts about reducing too many 
mandates from Washington coming down on local officials. And 
also, I might have you comment a little bit on RESPA--the Real 
Estate Settlements Procedures Act.
    I have had an opportunity to sit in on some closings on 
some homes in Colorado. I do not expect it is much different in 
Florida. The homebuyer has a stack of papers about like so 
(indicating) to go through. That is a stack of 6 inches of 
papers there.
    Obviously, they have to sign many of those papers. But in 
the closing process, they do not obviously have an opportunity 
to read all those papers. I think they are overwhelmed by 
information.
    And I often think in my own mind, if somehow, we could 
shorten that stack, of information that they have to review, 
they would have a better understanding of what their commitment 
is and perhaps this would help considerably. And I thought you 
might just in general talk a little bit about how you are going 
to approach these issues.
    Mr. Martinez. On the second issue, I think it is not just 
about the opportunity to be informed, but it is the opportunity 
to really know what it is you are signing and the important 
information that may be contained there, obviously, a closing 
on a home is the largest single financial transaction in the 
lives of most Americans.
    We need to do whatever is necessary to ensure that, 
particularly people who are buying their first home, have a 
good sense of understanding of what it is they are doing, what 
it is that is truth in lending, if you will, but what it is 
that their financial obligation 
is and what it is that their true interest rates that are going 
to 
be charged.
    So I think those issues are important. I think it is 
thinning out the regulatory morass that they have to have in 
front of them. But at the same time, being better informed. And 
perhaps, again, some counseling with some folks would be a good 
thing at that front end or that closing time of that 
significant financial decision.
    With respect to the HUD bureaucracy from a local 
perspective, I think, obviously, all local officials and I know 
Senator Enzi would appreciate this, we hate unfunded mandates. 
You hate to be told what to do and at the same time not have 
the funds with which to do it.
    Sometimes the very cost of just the paperwork and the 
production of the request for a grant really discourages some 
local entities from even applying because, frankly, it just 
seems to be such a daunting task.
    I was just intrigued when the director of our area of 
affordable housing in county government told me that we were in 
the market for someone who was a HUD expert so that that HUD 
expert could come into county government and be paid by us just 
so that we could communicate effectively with HUD, so that we 
could effectively access the agency.
    Frankly, that is something that I have very little patience 
for. And I am not sure what answers I would have in terms of 
turning something like that around, but I think it is something 
that we have to address. It should not require a HUD expert to 
apply for a HUD grant. I do not think that we are any--although 
it has been challenged recently--any dumber in Florida than any 
place else.
    [Laughter.]
    But the fact is that we really should be able to thin out 
the bureaucracies for people to be able to more directly access 
HUD.
    Senator Allard. I want to compliment you on the fact that 
you have already taken a first step that I think is important. 
You have had an opportunity to meet with the General Accounting 
Office, which is an organization that we have worked with 
closely. I wonder, have you thought any more about where you 
may go as you look to the management issues there at HUD?
    We have looked at the fact that they are considered ``High 
Risk'' by the Inspector General, as well as GAO. Both have 
given somewhat unfavorable testimony. But they also say that 
since that testimony, there has been some effort to improve 
some of the programs at HUD. Maybe you can share with us some 
thoughts where you may turn for management advice.
    Mr. Martinez. Senator, no doubt that there have been 
successes at HUD. No question about that.
    And the prior secretaries, including Secretary Cuomo, ought 
to be commended for those. But as I talk with GAO, really, much 
more needs to be done.
    When we look at the 20/20 management reforms, one of the 
areas in which I believe we must try to seek guidance is 
whether or not all of those reforms are having the desired 
effect. The re-
duction in manpower at HUD, which was very significant and 
deep, may not be the best way for the future management of 
HUD to continue.
    In other words, certainly no further cuts would be prudent. 
In addition, it may be that the manpower currently in place is 
not sufficient to properly manage things like the FHA contracts 
on foreclosed homes, so that we can effectively impact how HUD 
does business. There have to be people on hand to be able to do 
that.
    So I know that there has been a current undergoing study by 
the National Association of Professional Administrators. I look 
forward to seeing what that study would reveal about where HUD 
currently is on management.
    I do not look to go in to revamp HUD, but to come in and 
look at what has been working in the reforms on management and 
what needs to be redirected in a different arena, in a 
different area, to ensure that we get the result that I think 
all of us want.
    Senator Allard. Thank you.
    Thank you, Mr. Chairman.
    Chairman Sarbanes. Thank you, Senator Allard.
    Senator Miller.
    Senator Miller. It was an excellent and comprehensive 
opening statement. You answered many of my questions. There is 
one area I would like to get a little bit more of your thinking 
on because I know you have had some experience in it and have 
given it some thought.
    Right now, as you know, government at a lot of different 
levels is being forced to tackle the problem of managing 
growth. You have had to do that in Orange County. Atlanta, one 
of the fastest-growing cities in the Nation, is struggling with 
that right now with all kinds of competing demands, not just 
providing adequate and affordable housing, but also controlling 
property taxes, maintaining an efficient transportation system 
and preserving open spaces. And you can go on and on.
    We have been told that in the next 50 years, the U.S. can 
expect to face the same problems that Atlanta is dealing with 
because the Nation's population will grow by 50 percent over 
the next 50 years. So this is something that is going to be 
with us for a long time.
    My question is, as Secretary of HUD, what do you think the 
role of the agency should be in helping communities plan for 
managed growth? Are there any services that you believe HUD 
could and should provide to local and regional communities to 
help with this problem?
    Mr. Martinez. Senator, I do not think there is any question 
but that is part of the mission of HUD. I do not think it has 
been at the forefront of what HUD has done in the past. But I 
do believe that under my administration, assuming the Senate's 
confirmation, that I would have an opportunity to bring those 
talents that I have developed and the skills that I have 
acquired, and the experiences that I have had in the local 
level in managing growth to ensure that we can begin that 
dialogue on a national level. It is about not creating the 
failed cities of the year 2020 today. It is about finding ways 
in which we can grow in a way that allows for quality of life 
to be what we want it to be in a prosperous America.
    I think Atlanta is a prime example of the problems of 
abundance, frankly. And Orange County is not too far behind.
    Issues of air quality. I know that some of the things that 
Atlanta has had to do have been drastic and severe in terms of 
dealing with some of these very, very significant issues. But, 
Senator, I think the way in which I might be able to best lead 
in this area and where I would intend to go with the issue is 
to look for partnership and inter-agency relationships.
    The problems that Atlanta has faced as it looks to manage 
its growth are really problems that go beyond the scope of HUD, 
but where HUD might play a lead role. They are really problems 
where we need to talk to Secretary-designee Thompson in the 
area of transportation. Where we need to be talking--I am 
sorry. HHS. Because they are human problems. They are people 
problems.
    We also need to look to the Department of Transportation. 
We need to look to EPA as we look at environmental concerns.
    They are so prevalent in Florida, rich in wetlands and 
other very, very dear and areas worth preserving. So it really 
is a multidisciplinary issue. It is something that cannot just 
reside within the confines of HUD. But where HUD might play the 
lead role in seeking assistance from these other agencies in 
ways that we can get this debate, get this discussion about how 
we grow in America on a higher plane and really on the radar 
screen where it has not been on a national level.
    Senator Miller. That is good. Thank you.
    Chairman Sarbanes. Senator Enzi.
    Senator Enzi. Thank you, Mr. Chairman.
    I just want to comment that I have been really impressed 
with the depth of knowledge and the very positive manner in 
which the questions have been answered.
    I thank Mr. Martinez for the opportunity to meet with him. 
I will have other questions at later dates on more specific 
things that he is doing. I do not have any questions at the 
moment. Thank you.
    Chairman Sarbanes. Thank you very much.
    Senator Carper.
    Before you came, we expressed our pleasure at the new 
Members who are coming onto the Committee. And of course you 
are one of them. We are very pleased to have you join this 
Committee.
    We know you have had experience with these issues when you 
served in the House of Representatives and then of course 
experience with them as the Governor of the State of Delaware. 
We are really pleased that you are coming on to help us with 
our work.
    Now others have made opening statements. You may want to do 
that as well and then proceed to your questioning.
    Senator Carper. Mr. Chairman, thank you. I am delighted to 
be here. I had the pleasure of serving on the Banking Committee 
in the House for 10 years and the Housing Subcommittee for 10 
years. These are issues I care about. We welcome our designee 
and we wish you well and thank you for your stewardship in 
Florida and for your presence here today and your testimony.
    I want to express my thanks to the Chairman for his 
encouragement, encouraging me to seek membership on this 
Committee. I am delighted to be here with my old governor 
colleague, Zell Miller, and to have a chance to get to know 
Senators Allard and Enzi better in the years to come.

              COMMENTS OF SENATOR THOMAS R. CARPER

    Senator Carper. And I think I will go right to the 
questions.
    Mr. Martinez. Sure.
    Senator Carper. Let me start off by reflecting back. 
Senator Miller and I wore other hats as governors. We served in 
the National Governors Association.
    One of the great things about the National Governors 
Association is that we established a clearinghouse for good 
ideas. It was called the Center for Best Practices.
    And the idea was that 50 States, 50 laboratories for 
democracy. A lot of us have similar problems that we face. And 
what we did is we took our best practices and shared them with 
everybody else.
    Sometimes you look at Federal agencies and we are pretty 
good at the business of writing rules and regulations. Maybe 
not quite so good at figuring out what is working and to be 
able to distribute and share that information in an effective, 
timely way with others around the country. Let me just ask your 
thoughts on how we might do that better and how you might 
pursue that as Secretary of HUD?
    Mr. Martinez. Senator, I come from a State where I think we 
have taken great pride, whether it be on issues of growth 
management or many other issues. Really, in fact, some really 
good government issues where I think Florida has led the way. I 
do believe that it is important that we share the knowledge and 
we share the opportunities for doing things in yet a little 
different way.
    I have had the opportunity to chair the governor's task 
force on growth management in Florida. And in doing so, we have 
come up with some things there that are going to be reported in 
the next few days to the Florida legislature, which I think are 
innovative, which I think are cutting edge and which I think 
may be things that the whole Nation may wish to look at.
    And so, I do believe in innovating. I believe in borrowing 
good ideas. And I think, frankly, that is the greater part of 
wisdom, is not in reinventing, but in borrowing from others who 
have done something particularly well. So I would look forward 
to that opportunity. And perhaps the Center for Better 
Practices is something that we should expand to Federal 
agencies as we try to serve the public interest in a different 
arena.
    Senator Carper. I had the pleasure of serving as the 
Chairman of the NGA and later, as Chairman of the Center for 
Best Practices. It is one I am going to come back to with you 
again in the future and would urge you to pursue it and would 
offer whatever help that I can.
    Mr. Martinez. I would look forward to working with you on 
that and your ideas on that would be really most welcome.
    Senator Carper. Thank you. Let me ask--Zell Miller already 
asked my question on the smart growth. So I am going to leave 
that one alone for now. But when I was in the House, we looked 
at public housing as a lifetime entitlement. We said, you know, 
we do not think that is what it was intended to be.
    Just like welfare. It was not intended to be a lifetime 
entitlement. But for a lot of people, it became that. And the 
reason why welfare became a lifetime entitlement is because we 
set up, through the best of intentions, a system of incentives 
and disincentives where people are actually better off 
financially for staying on welfare than they were in getting 
off of it. I think we have done a similar kind of thing with 
public housing in many instances.
    In the State of Delaware, we took advantage of an 
opportunity to experiment more broadly with housing and to take 
a page from what we have done in welfare reform in this 
country.
    What we have done is limit it, time limit it, to generally 
3 years, the amount of time people can spend in public housing 
in our State. Not all of it, but a lot of our public housing, 
because that is managed by the State housing authority.
    And we made it possible for folks, as they increased their 
earning power, their education, their earning power, and their 
income, to not see their rent payments go up. But, rather, 
instead of that incremental increase in rent to be paid to 
their housing authority, it would simply go into an escrow 
account and could be drawn from later on to provide for a 
security deposit on an apartment, a downpayment of closing 
costs on a house.
    I just want to ask. This is something that we have been 
given the opportunity to sort of lead the way on. Let me just 
ask if you are familiar with initiatives of this kind, 
generally your acceptance of this kind of experimentation. What 
do you think of it?
    Mr. Martinez. Senator, first let me say that when I served 
as a local housing official in the Orlando Housing Authority, 
that one of the saddest things that I remember seeing, frankly, 
was a nice gentleman who was at one of our housing meetings 
with his grandchild. He shared with me how he had lived in 
public housing since he was his grandchild's age.
    And I thought, how sad, that three generations of Americans 
had yet found not the way to move out of that situation and 
into a life that would bring them more joy and happiness and 
prosperity. And so, I have always been taken by the idea that 
public housing ought to be transitional. It ought to be there 
for those that need it. And frankly, Senator, there are some in 
our society who will always need to be in some sort of living 
condition that is other than as we would have it.
    But at the same time, for those who have an opportunity to 
move out of this situation, it is something that we should 
encourage and we should work hard to help them to do.
    I do not think it is something that we can do in a way that 
does not show the kind of compassion I think we must have for 
those who may not know how to get out of the situation.
    But I would look forward to working with you. I am not 
familiar with the programs that you mentioned, but I would look 
forward to working with you. I am very, very receptive to 
those. I think it is part of, as I stated earlier before you 
came, about the fulfillment of the promise of America which has 
been so true in my life.
    And quite frankly, I think we need to help others to reach 
that and getting folks off of welfare or getting them into 
housing that is not public housing, is part of that 
compassionate way in which we have to help folks in our society 
that heretofore have been denied the opportunity or foreclosed 
from the opportunity of having their own home.
    Senator Carper. Thank you. I look forward to working with 
you on that.
    Mr. Martinez. Thank you.
    Senator Carper. Let me ask one other question if I could, 
Mr. Chairman. We have a lot of financial institutions in our 
little State.
    I tell people we raise more chickens per capita in 
Delaware. We have more corporations than any State in the 
country. We build more cars per capita in Delaware. We also 
have more banks per capita in our State.
    Chairman Sarbanes. But you do not have a lot of per capita, 
thought.
    [Laughter.]
    Senator Carper. But we have a lot of chickens, cars, banks, 
and corporations.
    [Laughter.]
    Those financial institutions in our State have an 
obligation under the Community Reinvestment Act to invest in 
all segments of our community. Some of those banks are sort of 
traditional community banks and others are especially banks, 
credit card banks, wholesale banks, and so forth. But 
collectively, they have helped make it possible in our State to 
provide a homeownership rate which actually approaches 75 
percent.
    The national average I think is closer to 65 percent. And 
they have been a wonderful partner, particularly with the 
reduction of Federal dollars for housing, a wonderful partner 
of ours in our little State to make homeownership a reality. I 
would just be interested in hearing your views on the Community 
Reinvestment Act and what role you see it playing in rebuilding 
our communities and making housing--homeownership, rather--
possible for all of us.
    Mr. Martinez. Senator, I think CRA have a very important 
role to play in community building and allowing all Americans 
to reach the dream of owning a home.
    One of the things that I have done in the private sector is 
serve as the director of a bank. And it is in that role I know 
that at times it can be a headache for the private sector to 
fulfill the CRA requirements. But I also know it is the right 
thing to do and it is a good thing for communities.
    I think access to credit and the opportunity for fair, 
frankly, credit, is one of the ways in which we should help 
Americans reach that dream of homeownership. It can come 
through some counseling. It can come through working with 
credible and serious financial institutions.
    One of the issues I know this Committee has concerned 
itself with is predatory lending. I think it is an abhorrent 
practice. It is something that I, in my local government 
official role, fought feverishly to see end in ways which were 
different than this Committee would face, but which were also, 
nonetheless, preying on our most vulnerable. So I think CRA is 
important. I think CRA is something that I believe has made and 
can continue to make a difference in the lives of many 
Americans seeking their first home.
    Senator Carper. Mr. Martinez, thank you again for being 
with us today and for sharing your thoughts and your life with 
us if you are confirmed. We talked about in this short time 
three things that I am going to come back to you again if you 
are confirmed, and I think you will be.
    One of those is how do we better ensure that HUD serves as 
a clearinghouse for what is working in our country to improve 
the lives and the quality of lives and improve opportunities 
for housing. The notion of public housing as a transitional 
entitlement, not as a lifetime entitlement.
    And finally, CRA, how we can make sure that, while not 
imposing undue burdens on financial institutions, trying to 
meet the responsibilities under the law, how can we ensure that 
CRA continues to benefit people in all 50 States--your State 
and mine.
    Mr. Martinez. Thank you, Senator.
    Senator Carper. Thank you very much, Mr. Chairman.
    Chairman Sarbanes. Thank you, Senator Carper.
    I have a few more questions, so we will begin a second 
round, I will say to my colleagues, if others have some 
questions that they yet want to ask.
    Mr. Martinez, I was going to ask you about predatory 
lending, but you made a very strong and forthcoming statement 
in response to Senator Carper. So I will forego that, only to 
underscore how pressing a problem I think this is.
    We have had a very serious problem in Baltimore on the 
flipping and the predatory lending. And a lot of things are 
underway in order to try to address it.
    HUD is in a position to play, I think, a major role in 
doing this. Actually, HUD and the Treasury just issued a 
report. And we hope you will carry through--are you familiar 
with that report?
    Mr. Martinez. Senator, only that I have heard there is such 
a report and I know that you have great interest in this issue. 
But I have not had an opportunity to review the report.
    Chairman Sarbanes. Well, I commend it to you and I hope you 
will be able to carry through on some of its recommendations.
    Mr. Martinez. I certainly will do that.
    Chairman Sarbanes. This is an outrageous situation. People 
are being manipulated and exploited. And we need to bring it to 
a halt.
    In my opening statement, I mentioned the importance of 
physical inspections, these real estate assessment centers 
which HUD has established in order to have an accurate picture 
of the condition of the public and privately-owned housing 
which receive Federal funds. What is your view of the physical 
inspection program?
    Mr. Martinez. Senator, I think it is a necessary management 
tool. I think it is a very important thing for those who live 
in the housing that is being inspected. I think that what we 
must do is to find a way that we can decentralize the 
administration of this program in such a way that would allow 
for regional variations in what is acceptable.
    But I think that with some fine-tuning of the 
administration of it, that it is something that has my full 
support. I believe it is essential for the management of the 
public housing stock that we do that. And so, I intend to 
continue to move forward aggressively in that and fine-tune the 
system so that it works evenly and in a credible way throughout 
the country.
    Chairman Sarbanes. The GAO, I might note, is extremely 
supportive of maintaining the physical inspection program and 
thinks it is a very worthwhile and important initiative. And I 
am pleased to hear that you are of a similar mind.
    With respect to affordable housing, most of our focus here 
has been on homeownership, and that is important because I 
share the view that you add a quality of responsibility and 
interest on the part of the homeowner. We want to boost those 
numbers.
    However, the HUD worst-case housing needs study, as well as 
the national low-income housing coalition study called ``Out Of 
Reach,'' indicates that the families facing the most serious 
housing needs are people with incomes below 30 percent of 
median, people that need help finding affordable rental units.
    I would like to draw you out a bit on your view of trying 
to provide additional affordable rental units on the premise 
that, as desirable as it is to move people into homeownership, 
it is not possible to do it, at least not over the immediate 
future, and we have to have rental alternatives for people. 
What is your view of that?
    Mr. Martinez. Senator, one of the things that I did as 
Orange County executive was to task an affordable housing task 
force early in my administration. One of the things that they 
brought back as a finding was that 43 percent of the renters in 
our community could not afford a market-rate rental. It is 
indeed something that I have had to live with first-hand.
    I understand the problem. I understand the concern. I think 
that what we must do is encourage, whether it be through 
continued tax credits or other ways, the marketplace to 
continue to provide affordable housing units.
    We obviously must continue to keep the Section 8 contracts 
that we have, encourage their continuation, and make sure that 
we, in all that we do, are trying to satisfy that need.
    There is no question but that there is a continuing need 
for affordable housing. And I understand that it is not just 
about homeownership, but it is also about providing for those 
who cannot own a home, an affordable place to live.
    Chairman Sarbanes. Do you appreciate how serious a budget 
challenge the renewal of the Section 8's is in terms of both 
the vouchers and the project-based--I mean, you have the 
immediate problem of just renewing what we are providing, let 
alone expanding that. And that is a very large budget challenge 
and I think it is going to be a big part of the role you must 
play within the Administration as you interact with the OMB and 
others on important budget questions for the department.
    Mr. Martinez. Mr. Chairman, no question that that is so.
    I yesterday had the opportunity to meet with your colleague 
from Maryland, Senator Mikulski. And she was very good to give 
me a very sobering bit of instruction on the budget process.
    As of my meeting with her yesterday, that now has become my 
number one priority in the transition. And I assure you that 
the OMB group that is preparing the transition themselves will 
be hearing from me often, frequently, and forcefully. She even 
asked me to find out what 302(b) was. And I have already begun 
the education process into what 302(b) might be.
    Chairman Sarbanes. I think one of the sources of the HUD 
administrative difficulties--and I have to go back some time 
now--back beyond any of the secretaries that were mentioned 
here today who have been trying to improve HUD's 
administration--Kemp, Cisneros, Cuomo--is that HUD was being 
used as a patronage place and people were being put into 
responsible positions for political reasons without the real 
competence or the demonstrated expertise to handle the jobs 
they were being given.
    I am interested to know sort of how much latitude you think 
you are going to have to fill these important positions within 
the department and what your attitude is in terms of the sort 
of people you need to get in there to help you run this agency?
    Mr. Martinez. I have been very, very fortunate that Vice 
President Cheney, who has chaired the transition for this 
Administration, has made it very clear to me that he considers 
the management at HUD a high and significant priority that can 
only be fulfilled if we surround the new Secretary with 
capable, competent people to carry out the mission.
    I am very encouraged by the array of folks that would be 
interested and, frankly, I am also pursuing some folks who have 
not expressed an interest, but who we might be able to recruit. 
And I think in doing so, we will come up with a very strong 
team. But I cannot under-emphasize the importance I place in 
putting a good, strong management team to carry out this very 
difficult mission.
    This Administration is very cognizant that HUD does pose 
some serious management challenges and I think they will assist 
me in surrounding myself with the kinds of people that are 
going to help me carry out that mission.
    I also must tell you, one thing I am very interested in 
doing is to have a very diverse look to the management of HUD. 
I think it is important that this particular agency reflect the 
people that it seeks to serve.
    Chairman Sarbanes. Well, I am encouraged to hear that. I 
think Secretary Cuomo has made very substantial strides. Part 
of that was obviously contributed to by his ability to draw 
into HUD some really top-notch professionals from across the 
country who were recognized within the industry as just being 
outstanding performers. I think you are going to need that kind 
of help. And I really encourage you in your efforts to attract 
it to the department.
    Senator Allard, do you have any further questions?
    Senator Allard. Mr. Chairman, I do not have any more 
questions. I have a few that I would like to submit for him to 
respond to in writing. I just want to congratulate you on a 
very fine hearing. I think you have done a great job.
    Chairman Sarbanes. Thank you.
    Senator Carper, do you have anything further?
    Senator Carper. One last quick one, if I could. The issue 
of low-income tax credits, which was I think being discussed in 
the last Congress, and it may have been dealt with and included 
in the final package.
    Is that correct, Mr. Chairman?
    Chairman Sarbanes. It was included, yes.
    Senator Carper. I do not know how familiar you are with 
their use or utilization. But if you have any thoughts about 
how we might use low-income tax credits more creatively, I 
would be interested in those thoughts. And if that is not a 
fair question----
    Mr. Martinez. No, it is not an unfair question, Senator. 
But it is one that I would prefer to get back to you on. I am 
not really--at this point, I do not have any bright ideas that 
I can share with you on how I am going to make that work 
better. So I would prefer to work with you down the road. And I 
note that that is an area of interest to you.
    I think it can be very important to the outcome that we are 
trying to obtain. But at this time, I really do not have any 
additional information I can share with you.
    Senator Carper. You realize that, as a result, I may not be 
able to support your nomination.

    [Laughter.]

    Mr. Martinez. Well----

    Senator Carper. Just kidding. Just kidding.

    Mr. Martinez. Well, there is only four left. So----

    [Laughter.]

    Senator Carper. You are way ahead. You are way ahead.

    Mr. Martinez. Senator Dodd just came back.

    Senator Carper. All right. Thank you.

    Chairman Sarbanes. Senator Enzi.

    Senator Enzi. [Nods in the negative.]

    Chairman Sarbanes. Any further questions?

    Senator Dodd. Well, you probably answered them. And if you 
haven't, I will submit them.

    I apologize for running back and forth. We have General 
Powell downstairs. We have just really completed the opening 
statements in that Committee. So it will go on to this 
afternoon. So consider yourself fortunate.

    Mr. Martinez. Yes, sir, I do.

    [Laughter.]

    Senator Dodd. I will submit them with your permission, Mr. 
Chairman, if they haven't already been asked.

    Chairman Sarbanes. All right. As I indicated earlier to my 
colleagues, we hope that Members can submit any further 
questions they have in writing by the end of the day.

    And Mr. Martinez, we hope you will respond to them as 
quickly as possible so that the Members will have the benefit 
of your answers as we try to move the nomination forward. Let 
me make this final observation for the record.

    All of Mr. Martinez's papers have been submitted to the 
Committee that are required and they are available for review 
by Members. I know many members have already reviewed them.

    Mr. Martinez, I want to get one thing on the record, 
though, before we bring the hearing to a close.

    First of all, I take it you are aware of and have agreed to 
meet the conditions required by the Office of Government Ethics 
in order to bring you into compliance with ethical standards.

    Is that correct?

    Mr. Martinez. That is correct, Senator. A memorandum has 
been signed by me.

    Chairman Sarbanes. Right. And I think that memorandum is on 
the record for Members of the Committee to inspect if they so 
choose. If there are no further comments, we very much 
appreciate this opportunity to interact with, I think it is 
safe to say, the Secretary-to-be, and we look forward to 
working with you in a positive and constructive fashion.

    Mr. Martinez. Well, Mr. Chairman, if I might just say a 
word of thanks to you and the way you have conducted the 
hearing. But also, in your courtesy in seeing me, and all the 
Members of the Committee.

    I just want to thank all of you for giving me this 
tremendous opportunity and this high honor. And I am grateful 
to each of you.

    Thank you.
    Chairman Sarbanes. Good luck to you.
    The hearing is adjourned.
    [Whereupon, at 12:10 p.m., the hearing was adjourned.]
    [Prepared statements, biographical sketch of the nominee, 
response to written questions, and additional material supplied 
for the record follow:]

              PREPARED STATEMENT OF SENATOR PAUL SARBANES

    I am pleased to be able to hold this hearing on the confirmation of 
Mr. Martinez. I met with Mr. Martinez in my office last week, and found 
him to be serious about and committed to the enterprise he is about to 
undertake. First and foremost, I was encouraged by his statement when 
first nominated, when he said:
    ``I will work hard to ensure that every American has every 
opportunity to have affordable housing.''
    Mr. Martinez, I look forward to working with you to achieve this 
goal.
    I want to take a few opening moments this morning to review the 
substantial progress HUD has made over recent years, as well as to set 
out what I see as the challenges facing Mr. Martinez and the 
Department.
    HUD has had a history of being a troubled agency. While many of its 
programs do a good job of providing decent homes to millions of poor 
and working families, it has proven to be a difficult Department to 
manage.
    In 1994, in fact, HUD was put on the General Accounting Office 
(GAO) ``high risk'' list, the only agency to be so listed. However, as 
a result of concentrated efforts by Secretary Cuomo and his top staff, 
I understand that the GAO will announce this afternoon that HUD is now 
off the high risk list. They achieved this result by working tirelessly 
to correct the problems in financial, oversight, procurement systems, 
and the like. It is widely known that Secretary Cuomo has devoted 
significant time and effort to address these managerial issues.
    This is by no means to say all of HUD's problems have been solved. 
But it does mean that Mr. Martinez will take over a Department with a 
management system in place that is moving HUD in the right direction. I 
believe his primary job, and I hope he will agree, is to sustain this 
progress.
    Let me emphasize a couple of these reforms. First, I believe it is 
extremely important to continue the physical inspections of public and 
assisted housing.
    We need to continue to support the Federal Housing Administration 
(FHA), which has played an important role in helping us reach 
historically high levels of homeownership, including record levels 
among black and Hispanic families. FHA has 
offered millions of Americans their opportunity to take part in the 
American dream of homeownership. To keep that dream alive, Mr. Martinez 
needs to continue HUD's efforts to identify and sanction lenders and 
appraisers who consistently make bad loans. Last Congress, I introduced 
legislation to codify this program, which is called ``Credit Watch.'' I 
hope to have Mr. Martinez' help in passing that legislation this year.
    We need to continue the work HUD has only just started, with the 
Treasury Department, to fight predatory lending, by enforcing the fair 
housing laws and other statutes, and by working with the Congress to 
develop new tools to fight these abusive practices.
    To sustain the broad progress noted by the GAO, Mr. Martinez will 
have to hire capable Assistant Secretaries and other staff who have 
demonstrated competence in their fields. I know that Vice-President 
elect Cheney committed to Mr. Martinez that he would have the 
flexibility to hire such qualified staff. I urge Mr. Martinez to do so.
    I want to conclude by noting that one of Mr. Cuomo's significant 
accomplishments is the success he had in making housing an important 
issue inside the Clinton Administration, a success that was made 
concrete by increasing budget resources for HUD over the past several 
years.
    Mr. Martinez will face the challenge of convincing his colleagues 
at OMB of the importance of sustaining the budget success achieved 
under Secretary Cuomo. Much of what we seek to accomplish, whether it 
is better education, more effective job-training, getting people from 
welfare to work, or other efforts to empower people, rests upon the 
premiss that people have an affordable place to live in a safe and 
stable neighborhood.
    I want to inform my colleagues that it is my intention to work with 
Senator Gramm to ensure that this nomination is approved by the full 
Senate as quickly as possible after we receive the formal papers from 
the President on January 20.

                               ----------

                PREPARED STATEMENT OF SENATOR PHIL GRAMM

    Senator Phil Gramm made the following statement today at the 
hearing of the Senate Committee on Banking, Housing and Urban Affairs 
on the nomination of Mel Martinez to be Secretary of the Department of 
Housing and Urban Development: I want to thank Senator Sarbanes for 
holding this timely hearing. It is my intent to have a vote on this 
nomination early next week.
    I also want to thank Senator Sarbanes for his input in the 
Committee's legislative activities in the last Congress. I think people 
got it down in the media coverage of events in the last Congress that 
we were somehow in partisan conflict, but the reality is we had a very 
active and successful legislative agenda in the last 2 years. We passed 
perhaps the most important banking bill in 60 years, and the final 
passage of that bill was virtually unanimous. Every major action we 
took was, in the end, a bipartisan action.
    I think the lesson of that is that we need to make an effort to be 
more bipartisan to begin with since we always end up there anyway. I 
want to pledge my commitment to that effort. I want to say to the new 
Members of the Committee that I look forward to working with you. As 
Chairman, I will be looking for good ideas, and I do not care if they 
come from Democrats or Republicans.
    Mr. Martinez, I want to welcome you. I cannot think of an agency 
that would be more difficult to run than HUD. On the other hand, I do 
believe that there is a bipartisan consensus that we want to get the taxpayers' money's worth for the effort that we have undertaken to 
provide quality housing and to provide an environment in which the 
maximum number of people can go on to build and buy their own homes.
    I would ask you to learn what the agency does, to make an effort to 
make every program within its jurisdiction work, whether you agree with 
them or not. Once you have tried to make them work and have learned 
whether they work, then I would urge you to come back to this Committee 
and ask us for the legislative changes to maximize your ability to get 
your job done.
    We are open to changes at HUD. The department administers many 
different programs instituted at many different times under many 
different circumstances. Consolidating and rationalizing those programs 
could be a very productive thing to do. I am excited about your 
appointment. I think you bring a practical experience at the local 
level, which is very much needed. Your compelling life story is a clear 
message to anyone that if you work hard, you can succeed in America. 
This is a country where routinely ordinary people do extraordinary 
things. Your life is a clear example of how America works.
    I want to pledge my support for your nomination. I look forward to 
working with you, and I hope you feel free to come and work with this 
Committee in partnership to seek any changes you need to do your job.

                               ----------

             PREPARED STATEMENT OF SENATOR MICHAEL B. ENZI

    Thank you, Mr. Chairman, for conducting this hearing today to 
consideration the nomination of Mel Martinez as the next U.S. 
Department of Housing and Urban Development Secretary. Mr. Martinez's 
commitment to housing and community development has created a network 
of people, not only in Orange County, but nationwide that is excited 
and knowledgeable about these public policy issues. This excitement and 
knowledge has encouraged community leaders nationwide to find solutions 
to their housing and community development needs.
    Homeownership is often portrayed as an integral part of the 
``American dream.'' Raising the home ownership rate is the goal and 
desire of most community leaders and social activists in this country. 
As an economic indicator, the housing market component impacts many 
sectors of the economy. For example, wages and tax revenues are 
generated by the creation of jobs from housing construction. 
Homeownership can improve the economy by making citizens self-
sufficient and more stable. Homeownership rates have increased 
nationally over the past couple of years. Industry sources predict the 
market to continue to grow, though slowed somewhat by decreased demand. 
Increases in housing sales coupled with the high rate of homeownership 
point to a healthy outlook for the United States housing industry.
    In my home State of Wyoming, 70 percent of the population in 1998 
owned homes, ranking Wyoming 22nd among the 50 States. Nevertheless, 
rural States need better assistance in establishing homeownership 
opportunities for their constituents. Some States have begun these 
reforms on their own admission. Because Wyoming does not have one 
single State housing agency, Wyomingites have mobilized their 
initiatives in order to ensure greater homeownership in my State. For 
example, HUD, the Wyoming Community Development Association, Habitat 
for Humanity, Housing Partners Incorporated, Fannie Mae, and the Bureau 
of Indian Affairs have come together to create an Indian Housing 
Coordinating Committee in order to facilitate better access to 
affordable housing for the Arapaho and Shoshone tribes on the Wind 
River Reservation. Mr. Martinez's confirmation as HUD Secretary would 
ensure these consumers, organizations, and manufacturers alike would 
enjoy reforms that call for an increase of safe and affordable housing 
nationwide, especially for the more rural areas of our country like 
Wyoming.
    In closing, I support the confirmation of Mel Martinez as Secretary 
of the U.S. Department of Housing and Urban Development. Thank you, Mr. 
Martinez, for taking time out of your busy schedule to meet with us and 
I definitely look forward to further discussing housing and community 
development issues with you and your staff in the months to come.

                               ----------

               PREPARED STATEMENT OF SENATOR ZELL MILLER

    Mr. Chairman, It is an honor to be a Member of this Committee and 
to be a part of this morning's important confirmation hearing for Mel 
Martinez to be Secretary of Housing and Urban Development. This is my 
first hearing with the Banking Committee, and I am pleased that the 
work we are undertaking today pertains to such important issues for our 
country--affordable housing and the development of our urban centers.
    As a Senator representing the State of Georgia these issues have 
great impact on areas such as Atlanta, Augusta, Macon and other 
metropolitan areas across my State. But they also affect rural 
populations, traditionally the most economically challenged in Georgia. 
Housing is not limited to the big cities. For example, in the suburbs 
of Georgia throughout the last decade we saw a decline in the number of 
units affordable to low-income families. Furthermore, today over one-
third of households facing ``worse-case'' needs are in the suburbs.
    Economic development initiatives are still needed greatly in 
Atlanta and other cities around the country. We must continue to fight 
urban poverty and the many social ills it brings to this Nation. I 
believe as the nominee approaches this job, he must do so with the 
outlook of not serving just one sector of America, but all of America--
urban and rural. I look forward to hearing your testimony, Mr. 
Secretary-designate, and also to your responses to the Committee's 
questions.
    Thank you Mr. Chairman.

                               ----------

              PREPARED STATEMENT OF SENATOR JON S. CORZINE

    Thank you, Chairman Sarbanes. It is a great honor to be joining 
this Committee and serving with you, with Chairman-to-be Gramm, and all 
the Members. Given my private sector background, I am truly pleased 
about the assignment.
    As a new Senator, I will want to take some time before jumping into 
some issues, but our responsibilities overseeing the Nation's financial 
services industry, monetary policy and the housing sector are subjects 
I feel are home turf. I hope that through time I can make a real 
contribution. Today's hearing deals with one aspect of the Committee's 
jurisdiction that is a very important priority for the country, my 
State, and me.
    Like many other parts of the country, New Jersey suffers from a 
real shortage of decent, affordable housing in many communities. In 
fact, New Jersey's rental costs are among the very highest in the 
Nation. We also have some of the poorest and most concentrated senior 
communities in the country. These communities desperately need support 
for economic and community development. HUD can and should play an 
important role in addressing these problems. I look forward to working 
cooperatively with the Department to support their mission and help 
find solutions for my constituents and others with similar needs.
    Secretary-designate Martinez and I have had a good first 
conversation about these concerns. I know he has personal experience in 
efforts to support affordable housing, and I am very pleased that the 
President-elect chose someone who does.
    Obviously, the job of HUD Secretary is a huge challenge in many 
ways. The programs are complex. And the needs are diverse. The 
bureaucracy can be cumbersome. The problems are numerous.
    But perhaps the greatest challenge facing a HUD Secretary is the 
difficulty of sustaining housing as a national priority and, in 
particular, fighting for adequate funding. In many ways, HUD is at the 
mercy of the Office of Management and Budget, and Congress's budget 
priorities. You will need to be aggressive, creative and persistent to 
ensure that housing gets its fair share.
    The fact is, while the issue gets little media attention, more than 
5.4 million Americans either must pay more than 50 percent of their 
income for housing or live in severely inadequate conditions. And this 
number is increasing, as the real estate market outpaces the wages of 
working families. Today in many large cities, average blue-collar 
workers cannot come close to affording an average two-bedroom 
apartment. That is not right. And, as a Nation, we ought to do 
something about it.
    The Federal Government is now looking at projected surpluses that 
may exceed $5 trillion over the next 10 years. In my view, some of that 
surplus should be used to help those families who today cannot afford a 
decent place to live. Surely that is a higher priority than providing 
large tax breaks to the very wealthy.
    So, Mr. Martinez, you have a heavy responsibility. And I want to 
emphasize that I want to support you in your efforts. I hope you will 
fight hard for the people who will be relying on you. And if there ever 
is any way I can be of help in pursuing some of our shared objectives, 
I hope you will ask.
    Thank you, Mr. Chairman.

                               ----------

            PREPARED STATEMENT OF SENATOR CHARLES E. SCHUMER

    It is a pleasure for me to be here today, I want to congratulate 
HUD Secretary-designate Martinez on his nomination and thank him for 
being here today to answer questions from Committee Members.
    You come highly praised by political, industry and advocacy 
community leaders and your record of public service is a stellar one. 
Having also had the privilege of meeting with you to exchange views on 
the state of our Nations' housing and community development efforts, I 
am convinced of your commitment to improving and expanding housing 
opportunities for American families. For those reasons I am proud to 
extend my support for your confirmation.
    As you know, America has enjoyed a great deal of prosperity over 
the course of the past 8 years. More people than ever are investing, 
unemployment figures are at all time lows, and more families than 
ever--67 percent of all American households--own their homes. But there 
is a flip side to prosperity--and no where in America is the paradox of 
the strong economy more severe than in my State, New York, and 
particularly in New York City.
    Every day there, it becomes harder and harder for middle-class 
people to buy a home or rent a decent, affordable apartment--and the 
problem of predatory lending threatens to undermine the progress we 
have made toward developing underserved, lower-income and minority 
communities.
    Historically, our Nation has prided itself on its ability to 
provide decent, affordable housing for all its citizens. But the issue 
of affordable housing has been wrongfully moved to the back-burner of 
the national public policy debate, and HUD, which received increased 
funding during the Clinton Administration, still remains a woefully 
underfunded agency that struggles to meet its difficult and extremely 
important mission.
    Mr. Martinez, I truly hope you appreciate the severity of the 
housing crisis that plague cities and towns throughout New York and 
across America. It is my hope that you will commit yourself and HUD to 
the aggressive pursuit of solving the problems faced by millions of 
families in our great Nation. In this time of enormous prosperity, we 
must make every effort to ensure that all families have access to 
decent, affordable housing.
    In doing so, we reaffirm our commitment to the things that mean the 
most to us as Americans--strong families, quality education, a vibrant, 
robust economy and safe, livable communities.
    Thank you Mr. Chairman.
                               ----------

               PREPARED STATEMENT OF SENATOR JIM BUNNING

    Mr. Chairman, I would like to thank Mel Martinez for testifying 
today and I would like to thank you for holding this hearing in such an 
expeditious fashion.
    I strongly support the nomination of Mel Martinez to become the 
next Secretary of Housing and Urban Development. I believe he is yet 
another outstanding selection for President-elect Bush's cabinet. I 
hope that the Committee will quickly report his nomination to the 
Senate floor.
    Mr. Martinez has overcome many personal hardships to come to this 
point. In 1962, at the age of 15, Mr. Martinez was forced to leave his 
family and flee the tyranny of Castro's Cuba. He was able to survive 
because of the generosity of this great Nation and the people of 
central Florida. Four years later, he was reunited with his family and 
began to work to achieve his version of the American dream.
    He graduated from Florida State University College of Law, and then 
went on to build a successful law practice. He then decided to give 
back to the community that had given so much to him by becoming 
involved in public service and many charitable causes.
    Managing the Department of Housing and Urban Development is a 
daunting task, but I believe that Mr. Martinez is up to that task. I 
believe he will promote home ownership and help more and more Americans 
achieve the American dream. I also hope he will be able to streamline 
HUD and make it more responsive to its clients, while cleaning out some 
of the political cronyism we have seen there.
    I once again applaud you, Mr. Chairman, for holding this hearing. I 
believe Mr. Martinez is highly qualified to run HUD. I strongly believe 
his background, his experience and his management skills will make him 
an outstanding HUD secretary.
    Thank you Mr. Chairman.

                               ----------

               PREPARED STATEMENT OF SENATOR JOHN ENSIGN

    Mr. Martinez, please allow me to offer my congratulations on your 
nomination to the position of Secretary of Housing and Urban 
Development. Like my colleagues, I expect a quick confirmation process 
and I look forward to working with you and President Bush. I do not 
have any questions for you, but I do have a couple of 
Nevada-specific topics I would like to mention for your consideration.
    The results of the 2000 Census indicate that Nevada was the fastest 
growing State in the United States these past 10 years. While this is 
no surprise to anyone, Nevada will again likely outpace the other 49 
States in growth over the next 10 years. Because of this rapid growth, 
Nevada is at a disadvantage when it comes to the distribution of 
Federal formula funds that are based on population and/or poverty 
statistics. While in the next fiscal year Nevada will realize and 
increase in Federal formula funds due to the new 2000 Census figures, 
one of my priorities is to ensure that the population data used by 
Federal agencies is updated annually so that Federal formula funds 
follow population trends. This is very important to 
Nevada and my constituents. I hope to work with you to ensure that 
Nevada and other fast growing States receive their fair share of 
formula funds administered by HUD, particularly those funds from the 
CDBG and HOME programs.
    I anticipate that in the coming year the Southern Nevada Enterprise 
Community will seek to upgrade its status from that of an Enterprise 
Community to an Enterprise Zone or a Renewal Community. The upgrade is 
a high priority for the City of North Las Vegas, the City of Las Vegas, 
and Clark County. I am very supportive of the Southern Nevada 
Enterprise Community and the progress that has been made since 1994. 
There is much more that can be accomplished in southern Nevada through 
the tax incentives offered through the Enterprise Zone and Renewal 
Community Initiatives. I am pleased that you will have broad discretion 
to set the criteria for the Renewal Communities and hope you will 
consider my input on the Renewal Communities as you develop the 
criteria.
    Again, Mr. Martinez, congratulations on achieving such a high 
honor. I look forward to meeting with you soon and extend the 
invitation to visit my home State of Nevada in the near future. A visit 
would be heartily welcomed by my constituents in Nevada.

                               ----------

                   PREPARED STATEMENT OF MEL MARTINEZ

                       Secretary-Designate of the
            U.S. Department of Housing and Urban Development

                            January 17, 2001

    Mr. Chairman, Senator Gramm, and distinguished Members of the 
Committee, thank you for the opportunity to appear before you today. 
And thank you Senators Graham and Nelson, for your kind introductions.
    Let me begin by expressing my profound gratitude to President-elect 
Bush for his friendship and his confidence in asking me to be a part of 
his Administration. I am humbled and honored to be nominated by 
President-elect Bush as Secretary of Housing and Urban Development.
    With your indulgence, Mr. Chairman, I would like to introduce my 
wife Kitty and our three children, Lauren, John, and Andrew. It is with 
their love and support that, if confirmed, I will find the strength to 
undertake this important responsibility.
    Mr. Chairman, I come before this Committee with a strong set of 
beliefs that were shaped by my life of living the American dream. I 
arrived in this country as a teenage refugee from Cuba with nothing but 
faith in God and myself, and the conviction that America, like nowhere 
else in the world, was a place where hard work and a life of principle 
would be rewarded.
    I spent my first days in America in a government refugee camp, and 
I have seen and experienced hardship firsthand. But I also know how 
desperately those living in hardship just want the chance, the 
opportunity, to build a better life. And I know the compassion and 
charity of the American people--people like Walter and Eileen Young and 
June and the late Jim Berkmeyer, who volunteered through their churches 
to provide places for me to call home for 4 years until my family was 
reunited here in freedom.
    Throughout my life, I have witnessed the greatness of America, and 
the genuine goodness of the American people. In my public life, I 
strive for inclusion and the elevation of ideals over politics. As a 
new member of the Orlando Housing Authority, I pushed for the rights of 
public housing tenants to be part of Authority board meetings, more 
than a decade before the implementation of a similar Federal 
requirement. As Authority Chairman, I pushed for 5, long years for the 
construction of new affordable housing facilities financed by Authority 
investments for elderly and single mother low-income households.
    For the last 2 years, I have been the elected Chief Executive of 
Orange County, FL, one of the fastest growing large metropolitan areas 
in the country. As Chairman, I was confronted with overcrowded schools, 
crime and drug abuse, a growing senior citizen population, traffic 
congestion, mass transit challenges, and the need to make additional 
commitments to preserving environmental lands. And what we pledged we 
would do, we were able to accomplish, even in the short 2 years that I 
served. Sometimes it was not the most politically expedient thing to 
do, sometimes the vested special interests did not like what we did, 
but in the end, for our community, it was the right thing to do.
    From each position, I bring an important perspective as a consumer 
of HUD programs, both in public housing administration as well as dealing 
with community development and housing block grant programs at the local 
level. So I take this next step in my life with the experience of managing 
a county government staff of over 6,000, and representing 860,000 of my 
fellow Floridians, but most importantly, with what I hope is a strength of 
character defined by my past and demonstrated by my deeds.
    With the Senate's approval, I will take up housing and community 
development challenges in America. Over the last few weeks I have met 
with many Members of this Committee, and I look forward to meeting with 
many more of you in the weeks to come.
    I have also met with the United States Comptroller General, and 
spent several hours with him and his staff discussing the issues 
surrounding the Department of Housing and Urban Development. I have 
been nominated to lead an agency that has been chronically designated 
as high risk. And while there have been some areas of improvement, 
during my stewardship of this office, significant program areas of high 
risk remain to be addressed.
    My first priority will be for HUD to continue to put its own house 
in order, so we have the institutional fortitude to provide the housing 
and community renewal opportunities needed by so many families and so 
many neighborhoods. The Department of Housing and Urban Development 
must be healthy itself, if we are to deal with the challenges before 
us. While former HUD Secretaries Kemp, Cisneros, and Cuomo have built a 
foundation for strength, there are a great many areas of institutional 
weakness that must be addressed. GAO and the HUD Office of Inspector 
General have identified similar program and management areas needing 
the most improvement, including: the Federal Housing Administration's 
single family mortgage insurance risk; the impact and continuing 
evolution of HUD's 2020 management reform effort; and the failure to 
integrate financial and information systems. With Senate confirmation, 
I will make addressing each of these issues a high priority as 
Secretary of Housing and Urban Development.
    But HUD's management challenges do not mean that we will shrink 
from the housing and community renewal challenges integral to HUD's 
core mission. Part of putting compassionate conservatism into action 
means using resources efficiently, so there is the means to treat with 
compassion those in need.
    There are a great many families and communities in need of 
opportunity. HUD has found that the number of Americans with worst case 
housing needs is growing. And at the same time, HUD's inventory of 
affordable housing is shrinking. Despite spending over $10 billion on 
homelessness over the last 10 years, too many still live life on the 
streets. America is also growing older as the sons and daughters of the 
greatest generation age into retirement years. Our grandparents and our 
parents helped build this country's greatness and deserve the peace of 
mind to know that they will be taken care of, and can live in safe and 
decent homes and neighborhoods. And despite record high levels of 
homeownership, African-American and Hispanic American homeownership 
rates remain below 50 percent. That is not acceptable, and it is 
something I intend to address. Unless we make sure that everyone is 
participating in this great economic expansion and until we ensure that 
barriers to homeownership are torn down for everyone, until then, our 
job is not done.
    In recognition of these challenges, during his campaign, President-
elect Bush proposed ``the New Prosperity Initiative,'' to expand 
homeownership opportunities to low-income families and renew distressed 
areas in communities across the country. Just a month ago, with this 
Committee's help, Congress enacted one of President-elect Bush's 
proposals, allowing low-income families and individuals with 
disabilities to use Section 8 rental vouchers toward homeownership. I 
pledge to you the timely implementation of these important initiatives.
    The President-elect also proposed the creation of more than 1 
million Individual Development Accounts by providing tax credits to 
financial institutions that match the savings of low-income earners, 
who can withdraw the matched funds tax free to finance a home, a 
business or education. Obtaining downpayment and closing costs, in most 
cases, is the primary barrier low-income families face when trying to 
buy a home. To address this problem, President-elect Bush has pledged 
to establish the ``American Dream Down Payment Fund'' to provide $1 
billion of matching grants to lenders over 5 years to help as many as 
650,000 unassisted low-income families become homeowners. To increase 
the supply of affordable housing and rid communities of vacant 
properties, the President-elect has proposed $1.7 billion over the next 
5 years in investor-based tax credits to encourage the construction and 
rehabilitation of single family homes in distressed communities. If 
confirmed, I look forward to working with this Committee on many 
aspects of these initiatives.
    Finally, the issues relating to how we grow and develop as 
communities must be part of our discussions during the next few years. 
If confirmed, I intend to initiate a national dialogue on the 
challenges of growth and its impact on quality of life issues. These 
are issues of importance and deserve careful study and consideration.
    In every community, from inner city Chicago, to the West's Silicon 
Valley corridors, from the Orlando suburbs, to the rural Iowa 
community, the opportunity need is great. It is over the next several 
weeks that, if confirmed, I will explore how to meet this opportunity 
need, to see where we should be going with housing and community 
renewal policy. A key part of this process will be continuing 
discussions with Members of this Committee, to learn from your 
experience, to better understand what the issues are that we will be 
confronting together as partners. We will be partners, and I look 
forward to a very close relationship with Congress and this Committee.
    In addition, as a former local government official, I expect to 
work closely with our partners at the grassroots level, from mayors, 
local officials and governors, to non-profit and faith-based 
organizations, housing advocate and industry groups. Together, we can 
meet the challenges of housing affordability, availability, and 
community renewal so that all people can truly achieve the American 
Dream.
    I am a living testament to the promise of America. It is our 
responsibility to help fulfill the promise of America for people from 
all walks of life, throughout this great country. I came to America 
with a suitcase and the hope of a better life. I know the value of 
homeownership because I have witnessed its great power throughout my 
entire life.
    I can still remember the pride my dad and mom had when they bought 
their first home in America with the help of FHA. It seems like 
yesterday that Kitty and I bought our first home, the home where we 
have raised our children and where we lived life as part of a 
community.
    Owning your own home is the American Dream, and I intend to fight 
for those who do not yet own a home, so they can live the American 
Dream and experience the transformation that can happen in a life 
through homeownership.
    Mr. Chairman, Senator Gramm, Members of this Committee, we have 
much work to do. The Department of Housing and Urban Development must 
continue to evolve into a more efficient and more effective 
institution. At the same time, for low-income families and distressed 
communities across the country, the opportunity need is great. Working 
as partners, I am confident that we can meet these challenges together. 
If confirmed, I will work in a bipartisan manner, working with 
Republicans and Democrats to advance our common goals. It is my belief 
that our mission at HUD is not a Republican or Democrat mission, but 
rather an American mission and with your help we can and we will 
succeed.

















  RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES FROM MEL 
                            MARTINEZ

Q.1. As you know from your experience in Florida, we will face 
a huge challenge in meeting the affordable housing needs of our 
elderly population. The Census Bureau estimates that there will 
be a 55 percent increase in the number of elderly people (65 
and older) to 58 million people by the year 2020. As of 1998, 
there were already over eight people waiting for every 
available unit of elderly housing. What ideas do you have as to 
how the Federal Government can help meet this growing need?

A.1. As I stated in my opening remarks ``America is also 
growing older as the sons and daughters of the greatest 
generation age into retirement years. Our grandparents and our 
parents helped build this country's greatness and deserve the 
peace of mind to know that they will be taken care of, and can 
live in safe and decent homes and neighborhoods.'' I believe we 
as a country must col-
lectively ask ourselves how will we meet the housing needs of 
America's aging population. To this end, I commend the previous 

Congress, and in particular this Committee for creating the 
``Commission on Affordable Housing and Health Care Facility 
Needs of Senior Citizens in the 21st Century''. As you know, 
the Seniors Commission was formed recognizing the growing 
numbers of Americans over 65 years of age, and the need to 
develop comprehensive aging-in-place strategies that link 
affordable shelter with compassionate services through public-
private partnerships. I believe we already have one exemplary 
public-private partnership at HUD and that is the Section 202 
Supportive Housing Program for the Elderly. Also, I commend you 
and the previous Congress for making reforms to this program to 
allow the conversion of certain units to assisted living units. 
However, as we look to the future more has to be done and our 
country must be prepared. I look forward to working closely 
with the Congress and the Congressional Seniors Commission to 
work on these issues together.

Q.2. The single-family FHA program has been one of the most 
important contributors to the increase in the homeownership 
rate, particularly among the first time and minority 
homebuyers. That is part of the reason, along with the strong 
economy, that we have reached historic levels of homeownership.

    FHA has a strong, bipartisan base of support. In 1998, the 
Congress raised the FHA loan limits, again, with strong 
bipartisan support, in order to make the program more useful in 
high cost areas. From time to time, efforts are made to 
undermine FHA by means-testing it, thereby making it 
unavailable to middle class Americans, or by creating extra 
paperwork or other burdens to put FHA at a disadvantage.

 Will you maintain the FHA program as a viable and 
    cost-effective choice for American homebuyers?
 Will you resist efforts to narrow the program, raise 
    barriers to its use, or reduce its availability to a wide 
    range of American homebuyers?

A.2. Senator, I agree with you that FHA has been one of the 
most effective Federal programs that has helped millions of 
American families achieve the American Dream of Homeownership. 
The mortgage finance industry is the engine that generates 
capital to build and own homes and apartments and is the 
primary vehicle for translating the products and services of 
HUD to consumers in the homeownership marketplace. I pledge to 
continue HUD's partnership with the mortgage finance industry.

Q.3. You have clearly made a name for yourself nationally by 
your effort in Orange County to stop urban sprawl and 
controlled growth. With the Nation's population expected to 
grow 50 percent in the next 50 years, America's communities 
face the challenges of planning for and managing growth.

    (a) Do you see a role for HUD in helping communities plan 
for and manage growth?
    (b) There have been concerns raised that the kind of strong 
growth limits you have enforced could have a negative impact on 
affordable housing. How do you respond to these concerns?
    (c) Do you support Federal efforts to provide resources to 
encourage regional planning to address needs such as housing 
affordability and transportation, such as is provided in the 
HUD Regional Connections Initiative?

Q.3a. Do you see a role for HUD in helping communities plan for 
and manage growth?

A.3a. Managing growth and development is primarily a local 
issue, and the Federal Government should have no role in making 
land use and growth management decisions. However, we have seen 
that many localities have been unprepared for growth and are 
grappling with ways to meet the demands created by growth, such 
as traffic congestion, loss of open space, and overcrowded 
schools. And having been unprepared for growth, some localities 
adopt measures that can unduly restrict the production of 
needed housing or permit only expensive housing. HUD could play 
a useful role in providing localities with technical assistance 
and technical grants to increase their planning capabilities so 
they won't find themselves surprised by growth and unprepared 
for it; but there should be no mandates to follow any Federal 
planning prescriptions. HUD could also be a clearinghouse for 
making better known the ``best practices'' that communities 
have created for planning for growth. It is from the local 
level that the ideas will come, but HUD can play a role in 
assisting communities build a capacity for planning and 
consensus building.

Q.3b. There have been concerns raised that the kind of strong 
growth limits you have enforced could have a negative impact on 
affordable housing. How do you respond to these concerns?

A.3b. I share these concerns that restricting growth can have 
an impact on the cost of housing, and we need more affordable 
housing built. But communities are also rightly concerned about 
protecting the qualities of their neighborhoods that attracted 
them there in the first place. There are good reasons for 
managing growth in order to maintain good schools with 
reasonable class sizes, preserve some open spaces, and protect 
sensitive natural environments. What each community must 
determine is how to find a balanced approach that protects the 
quality of life without stopping new housing construction. 
Managing growth does not mean stopping growth. In Orange 
County, there was no housing moratorium. We responded on a 
case-by-case basis to respond to a school crisis situation.
    While many suburban areas are having a difficult time 
dealing with rapid growth, there are great opportunities to 
provide new affordable housing in older areas of our towns and 
cities that have unused capacity of roads, parks, and schools. 
Producing new housing in older neighborhoods is one approach 
that could help meet the demand for affordable housing.

Q.3c. Do you support Federal efforts to provide resources to 
encourage regional planning to address needs such as housing 
affordability and transportation, such as is provided in the 
HUD Regional Connections Initiative?

A.3c. As our metropolitan areas grow, some of the challenges of 
growth and development can best be addressed from a regional 
perspective. Yet local governments are most responsive to 
citizen needs, and the power to regulate land use through 
zoning and other measures should remain with local governments. 
That being said, the Federal Government can be a valuable 
partner in providing expertise and resources to encourage 
partnerships between city and suburban governments to address 
issues such as roads, mass transit, and the need for affordable 
housing throughout a metropolitan area.

Q.4. A spatial mismatch has developed between the location of 
most entry-level jobs and the location of most affordable 
housing where new job entrants are likely to live. 
Specifically, while two-thirds of all new jobs are located in 
the suburbs, three-quarters of welfare recipients live in the 
central cities and rural areas. Several Federal agencies are 
developing strategies to bridge this gap. For example, the 
Department of Transportation administers the Job Access and 
Reverse Commute program, which provides grants to transit 
providers to support increased public transportation services 
for those leaving welfare or those facing reverse commuters 
(i.e. commutes from central city to suburban locations). Grant 
recipients under this program work cooperatively with human 
services agencies, employers, and State and local governments 
to improve access to top jobs for low-income families.

 As Secretary of HUD, would you be supportive of this 
    and similar programs designed to address the spatial 
    mismatch between the location of affordable housing and the 
    increasingly suburban growth.

A.4. I certainly recognize the spatial mismatch problem that is 
confronting many welfare recipients and former recipients as 
they strive to establish themselves in the ranks of the 
American workforce. I believe that HUD, like other Federal 
Government agencies, should work to remove barriers that 
prevent these citizens from finding and holding jobs. Congress 
indicated its concern when it approved incremental vouchers for 
a welfare-to-work voucher program. I plan to look closely at 
how those vouchers have been utilized and how effective that 
program has been. I will also look at other possible 
initiatives.

Q.5. What will your top priorities be as Secretary of the 
Department of Housing and Urban Development?

A.5. One of my highest priorities will be a thorough review of 
HUD's current management structure to ensure that resources and 
staff are connected to mission and outcomes.
    Based on discussions with Members of this Committee and 
GAO, I believe there are some areas where HUD 2020 has 
strengthened the Department, and at the same time there are 
areas where HUD 2020 has perhaps not been as successful.
    I will also focus on the upcoming budget. I will work to 
ensure that HUD's current budget and its programs are properly 
managed so that vulnerable populations--seniors and persons 
with disabilities, homeless, and low-income families--can be 
adequately served with existing resources.

RESPONSE TO WRITTEN QUESTIONS OF SENATOR DODD FROM MEL MARTINEZ

Q.1. Do you plan to continue physical inspections? Do you have 
any thoughts on how to improve the inspection process?

A.1. Based on my GAO briefing, I believe HUD's oversight of 
public housing has consistently progressed under former 
Secretaries Kemp, Cisneros, and Cuomo. A key element of HUD 
2020 was to centralize assessment of all HUD housing into a 
single, state-of-the-art organization with the creation of the 
new Real Estate Assessment Center. I believe on the surface 
this is a proper initiative for HUD to take--HUD should have a 
system for inspecting its investments. As I understand it, the 
Public Housing Assessment System (PHAS) was required by the 
public housing reform legislation, which this Committee should 
be commended for. However, I do understand that the new system 
is producing subjective and sometimes arbitrary results. I have 
been briefed on these problems and I will direct early 
attention to evaluate PHAS effectiveness and consider extending 
PHAS compliance waivers if appropriate.

Q.2a. A significant part of the ongoing effort to reform public 
housing is embodied in the HOPE VI program, which has helped 
finance the demolition of some of the most dilapidated public 
housing and its replacement with mixed-income housing. Are you 
familiar with this program? What is your view of the program?

A.2a. I believe the concept behind the HOPE VI program is 
sound, however, I do understand that the concern with the 
program has been the perceived excessive per unit cost. HOPE VI 
funds are used for demolition of existing units, site 
remediation, and construction of new public housing units. As a 
result, when the total cost for a HOPE VI project are divided 
by the number of new units which resulted, the total 
development costs (TDC's) what it would cost to purchase a 
single-family home in these areas. The Baltimore Sun ran a 
series of articles criticizing the per unit costs of a HOPE VI 
development in Baltimore. As a result, Members of Congress 
expressed concerns with the HOPE VI program from a cost 
standpoint.
    In order to address the cost issue, the public housing 
reform act amended the statutory definition of ``development 
cost'' to exclude the costs associated with demolition of or 
remediation of environmental hazards associated with public 
housing units that will not be replaced at the project site. 
The program expires at the end of this fiscal year. I expect 
that the Administration will engage in constructive discussions 
with the Congress on the experience of the program to date.

Q.2b. Over the past several years, HUD and the Congress have 
worked together to fund an increase in the number of new 
housing vouchers. Will you continue to advocate for increased 
budgets for HUD within the new Bush Administration in order to 
meet the great need for affordable housing?

Q.2c. Will you work to ensure full funding for the public 
housing program, which serves extremely low-income families, 
and high percentages of children and the elderly?

A.2b&c. With regard to funding increases for housing vouchers 
and full funding for the public housing program, I have not 
studied the full magnitude of the HUD budget, and look forward 
to those deliberations.

Q.3. Can you share your thoughts about how housing policies 
might be developed to improve the way we work with senior 
citizens?

A.3. As I stated in my opening remarks ``America is also 
growing older as the sons and daughters of the greatest 
generation age into retirement years. Our grandparents and our parents 
helped build this country's greatness and deserve the peace of mind to 
know that they will be taken care of, and can live in safe and 
decent homes and neighborhoods.'' I believe we as a country 
must collectively ask ourselves how will we meet the housing needs 
of America's aging population. To this end, I commend the previous 
Congress, and in particular this Committee for creating the 
``Commission on Affordable Housing and Health Care Facility 
Needs of Senior Citizens in the 21st Century''. As you know, 
the Seniors Commission was formed recognizing the growing 
numbers of Americans over 65 years of age, and the need to 
develop comprehensive aging-in-place strategies that link 
affordable shelter with compassionate services through public-
private partnerships. I believe we already have one exemplary 
public-private partnership at HUD and that is the Section 202 
Supportive Housing Program for the Elderly. Also, I commend you 
and the previous Congress for making reforms to this program to 
allow the conversion of certain units to assisted living units. 
However, as we look to the future more has to be done and our 
country must be prepared. I look forward to working closely 
with the Congress and the Seniors Commission to work on these 
issues together.

   RESPONSE TO WRITTEN QUESTIONS OF SENATOR BENNETT FROM MEL 
                            MARTINEZ

Q.1. Mr. Secretary, I know I speak for everyone in the desire 
to see home ownership expand to 70 percent of all Americans and 
particularly to increase homeownership for minorities. How can 
FHA work in tandem with the private sector to achieve this 
goal, and are you willing to explore such public-private 
partnerships to help us achieve this goal?

A.1. FHA has been one of the most effective Federal programs 
and has helped millions of American families achieve the 
American Dream of Homeownership. The mortgage finance industry 
is the engine that generates capital to build and own homes and 
apartments and is the primary vehicle for translating the 
products and services of HUD to consumers in the homeownership 
marketplace. I expect to continue HUD's partnership with the 
mortgage finance industry.

Q.2. Mr. Secretary, what is the best way to draw on the 
expertise of the private sector and leverage your objective at 
HUD to achieve the greatest effectiveness?

A.2. I understand that on the multifamily side, FHA has 
experience with risk sharing arrangements. I also understand 
that FHA has been working with our private sector finance 
partners to develop single-family risk sharing arrangements. If 
confirmed, I will see that these discussions continue with the 
private sector to develop single-family risk sharing approaches 
that benefit the American consumer and provide financial 
stability to the FHA fund.

Q.3. Mr. Secretary, in light of the current environment are you 
going to evaluate the impact of an economic downturn on the FHA 
funds, both single-family and multifamily? A recent article 
indicates that the single-family fund may have some problems 
due to a premium cut that was just implemented. We must make 
sure the FHA fund remains strong.

A.3. I agree with you that the FHA fund must remain strong. It 
must remain strong to benefit prospective American homebuyers. 
As I said in my opening statement, I will wait to review the 
pending GAO study, which will report on FHA's capital adequacy 
under various economic conditions. I understand this report is 
due to be released next month.

Q.4. Mr. Secretary, Ginnie Mae is one of the most successful 
parts of the Department. Have you given thought to ways in 
which Ginnie Mae could expand what it purchases to increase 
homeownership opportunities?

A.4. I agree that Ginnie Mae is an important part of the 
housing mosaic, which brings needed capital back into the 
government-assisted mortgage markets. I have not given any 
specific thought into ways to expand Ginnie Mae, but if it is 
beneficial to the American homebuyer and if it meets a need 
that is not being met by our private sector partners, it is an 
approach I am willing to examine.

   RESPONSE TO WRITTEN QUESTIONS OF SENATOR SHELBY FROM MEL 
                            MARTINEZ

Q.1. Mr. Martinez, one of the most challenging aspects of the 
job of a cabinet level secretary is setting priorities for the 
agency. I have a strong concern regarding the level of 
attention that the Department of Housing and Urban Development 
pays to our Nation's rural areas. It is very important to me to 
know that you will pay significant attention and dedicate 
resources to the problems and concerns regarding the lack of 
housing and development in rural America. What are your views 
regarding this situation? Will the Department, under your 
leadership, undertake efforts to sufficiently include rural 
America in its mission?

A.1. If confirmed, housing and community development in rural 
areas as coordinated with the Department of Agriculture's Rural 
Housing Service will be a key component of HUD's mission under 
my stewardship. According to HUD's Worst Case Housing Needs 
report released in March 2000, 32 percent of very low-income 
non-metropolitan renters suffered from worst case housing 
needs, and 54 percent of extremely low-income non-metropolitan 
renters suffered similar needs. At the same time, between 1991 
and 1997, the number of housing units in non-metropolitan areas 
affordable to extremely low-income renters declined by 5 
percent. Although not under HUD's jurisdiction, affordability 
contracts with Rural Housing Service housing developments are 
beginning to expire and presents the Department of Agriculture 
(DOA) with a problem similar to HUD's recent Section 8 ``opt-
out'' challenge. I expect to work with DOA on this issue to 
offer any assistance the Department may appropriately provide.

Q.2. Last year, I sponsored legislation to modernize the 
requirements under the National Manufactured Housing 
Construction and Safety Standards Act of 1974 because I believe 
that manufactured housing presents one of the most viable means 
to address our Nation's affordable housing issues. This bill 
has been signed into law. In as much, as the Secretary of 
Housing and Urban Development, the ball would now be in your 
court. It is my hope that you would dedicate the necessary time 
and resources to moving forward with implementation of the new 
law. Please advise me regarding your views concerning this 
matter.

A.2. If confirmed, one of earliest priorities as Secretary will 
be the implementation of provisions included in the recently 
enacted ``American Homeownership and Economic Opportunity 
Act.'' Included in the law are provisions designed to modernize 
the requirements under the National Manufactured Housing 
Construction and Safety Standards Act of 1974. As you well 
know, manufactured housing contributes more than $30 billion 
annually to our Nation's economy and produces nearly one in 
four single-family homes sold each year. I understand that this 
particular legislation was under consideration for nearly 8 
years. The Committee should be commended for its role in moving 
forward with this important initiative, which was strongly 
supported by the industry as well as the major consumer groups 
including AARP. I expect to move forward with implementation of 
these provisions as soon as is possible.

Q.3. Due in large part to a thriving economy, the national home 
ownership rate, reached an all-time peak of 67.1 percent in the 
first quarter of 2000. However, the recent growth in home 
ownership still leaves many age groups below their peak home 
ownership rates of the late 1970's and early 1980's. One cause 
is the diminishment of housing affordability over the last 25 
years. A large part of the blame for such lack of affordability 
must be placed on burdensome regulations and their unnecessary 
costs, which end up being paid by home buyers.
    During the 106th Congress, legislation was passed, and 
ultimately signed into law, which began to address the problem 
of regulatory barriers to housing affordability, but there is 
more work to be done. One provision, that ultimately was not 
included in the final housing bill, would have required a 
housing impact analysis before the implementation of any new 
Federal regulation to determine whether the regulation would 
have a significant negative impact on the cost and availability 
of housing. If a proposed rule would have such an impact, then 
an opportunity would be given to other groups to offer an 
alternative that would achieve the stated objective of the 
regulation, with less of an adverse impact on housing 
affordability.
    Would you support and encourage the development and im-
plementation of such an analysis to help assure that housing is 

affordable to all? What are your specific views on the issue of 
affordable housing? How will you work to assure that burdensome 
regulations do not hinder the ability for Americans to afford 
safe, decent housing?

A.3. As a former county official, I am aware of the burdens 
that multiple layers of regulations can place on housing 
affordability. If confirmed, it is an issue I will carefully 
consider, to ensure that we do not stifle affordable 
homeownership, but at the same time we are providing necessary 
protections to the consumer. I look forward to working with 
Congress on the issue of a housing impact analysis requirement 
to encourage affordable housing and provide more Americans with 
the opportunity to afford decent, safe housing.

         RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED

                       FROM MEL MARTINEZ

Q.1. Will you continue to support implementation of HUD's new 
lead-safe housing regulation, promulgated on September 15, 
2000, which creates steps for removing lead-based paint hazards 
from federally owned and assisted housing?

A.1. According to Department statistics, more than 800,000 
children younger than 6 years old living in the United States 
have lead levels in their blood above the level of concern set 
by the Centers for Disease Control and Prevention. Many of 
these children are in families of low-income and are living in 
old homes with heavy concentrations of lead-based paint. As a 
father of three, the issue of lead-safe housing is of 
particular importance to me. If confirmed, I intend to 
carefully review the new regulations to ensure they are the 
most effective means to provide lead-safe housing, and at 
present have no plans to reverse the rule's implementation.

Q.2. What should be the goals of Freddie Mac and Fannie Mae, 
and are we measuring there progress effectively?

A.2. As you know, HUD recently published affordable housing 
goals for Fannie Mae and Freddie Mac. I have not reviewed this 
regulation and as such I have no opinion as to what the proper 
goals should be or whether HUD is measuring their progress 
effectively at this time. However, I assure you I will place a 
high priority on HUD's oversight of the housing-related GSE's.

Q.3. As you note in your statement, despite spending over $10 
billion on homelessness over the last 10 years, too many still 
live life on the streets. Is homelessness growing because the 
homelessness system is ineffective? Actually, it appears that 
through HUD's Continuum of Care process, much progress has been 
made and the vast majority of people who become homeless exit 
the system relatively quickly and do not return. On the other 
hand, mainstream programs that can prevent and end homelessness 
like welfare, health care, mental health care, substance abuse 
treatment, veterans assistance, appear to be failing and 
shifting the cost and responsibility for helping the most 
vulnerable people to the homeless assistance system.
    If such cost shifting is going on, how could you as HUD 
Secretary help reverse this cost-shifting and help refocus 
mainstream programs on preventing homelessness from occurring 
in the first place?

A.3. The most important role HUD should play on the issue of 
homelessness is one of bricks and mortar, by providing 
permanent housing solutions to those without homes. If 
confirmed, I expect to work closely with the Department of 
Health and Human Services and other agencies on the social 
service side of the homeless challenge, including mechanisms to 
prevent homelessness in the first place.

Q.4. What plans do you plan to undertake as Secretary to 
establish a Federal housing policy for people with disabilities 
with extremely low incomes, especially people who rely on 
Supplemental Security Income (SSI) as their sole source of 
monthly income?

A.4. According to statistics compiled by the Consortium for 
Citizens with Disabilities (CCD) and the Technical Assistance 
Collaborative Inc., individuals with disabilities receiving SSI 
benefits must pay, on a national average, 98 percent of their 
SSI income in order to be able to rent a modest one-bedroom 
apartment at HUD's Fair Market Rent. In addition, the CCD Task 
Force has estimated that at least 1.8 million non-elderly adult 
SSI recipients may have worst case housing needs. Clearly, 
there is great need for affordable housing for individuals with 
disabilities across the country. If confirmed, I intend to work 
closely with housing for individuals with disabilities advocacy 
groups and Congress to develop a comprehensive strategy for 
housing individuals with disabilities with compassion, and in 
recognition of their oftentimes unique housing needs.

Q.5. Section 8 vouchers, while very important, cannot be the 
sole response to the housing crisis facing people with 
disabilities. Expanded housing production targeted to people 
with disabilities is also needed to 10 create housing with 
accessible features; 20 limit reliance on private landlords who 
frequently discriminated against people with disabilities; and 
30 create a permanent supply of non-profit owned rental housing 
available to people with disabilities.
    At the present time, very little housing is being developed 
for people with disabilities. For example, Section 811 
Supportive Housing for Persons with Disabilities program funded 
only 1,600 units of housing last year--less than half the 
number during the last year of the previous Bush 
Administration. People with disabilities have also not faired 
well with respect to other Federal housing production programs. 
An unpublished HUD report (authored by Abt Associates) 
documents that people with disabilities rarely benefit from the 
HOME, Community Development Block Grant or Federal Low Income 
Housing Tax Credit financed projects. Further, on the demand 
side, this need for production is expected to increase as 
States move forward in transitioning individuals from 
institutions into the community consistent with the LC v. 
Olmstead decision of the Supreme Court.
    What efforts will HUD take under your leadership to 
increase Federal support for production of permanent housing 
very low-income people with disabilities?

A.5. If confirmed, I expect to fully support HUD's Section 811 
supportive Housing for Persons with Disabilities as well as 
work closely with housing for individuals with disabilities 
advocacy groups and Congress to develop a comprehensive 
strategy for housing individuals with disabilities with 
compassion, and in recognition of their oftentimes unique 
housing needs.

Q.6. What efforts will you take as HUD Secretary to ensure that 
HUD ``mainstream'' programs such as HOME and CDBG are better 
focused on extremely low-income people with severe disabilities 
to ensure that all programs are made truly ``affordable'' to 
people with incomes below 20 percent of median? What guidance 
can HUD give to agencies responsible for compiling local 
consolidated plans to ensure that the disability community is 
more actively involved in the process of directing HUD 
resources at the local level?

A.6. As a former county official, I have first hand experience 
with HUD programs like CDBG and the HOME program, as well as 
dealing with the local consolidated plan process. If confirmed, 
I expect to work with community-based advocacy groups on ways 
housing and community development block grant funds can more 
effectively provide opportunities for individuals with 
disabilities. In addition, I expect to work to ensure that the 
disability community has a voice in the local planning process 
so that underserved populations have affordable housing 
opportunities.

Q.7. HUD is responsible for ensuring compliance in its programs 
with the Fair Housing Act Amendments of 1988 and Section 504 of 
the Rehabilitation Act of 1973--including the removal of all 
barriers and impediments which impact people with disabilities 
accessing affordable housing programs. In the past, HUD has 
been slow to ensure that people with disabilities are not being 
discriminated against when public housing agencies and private 
owners of HUD assisted housing seek to restrict occupancy to 
households age 62 and older. What measures do you feel are 
needed at HUD to promote leadership in ensuring full compliance 
and enforcement of the accessibility provisions of the Fair 
Housing Act Amendments of 1998. Do you support training and 
technical assistance for the disability community regarding the 
reasonable accommodation and reasonable modifications 
provisions of the Fair Housing Act and Section 504 of the 
Rehabilitation Act?

A.7. As Secretary of HUD, if confirmed, I will work to ensure 
compliance with the Fair Housing Act. Training and education 
programs for community-based groups, including non-profit 
organizations, could be an important mechanism for reducing 
housing discrimination for individuals with disabilities, and 
it is a tool I will carefully consider.

                RESPONSE TO WRITTEN QUESTIONS OF

           SENATOR DEBBIE STABENOW FROM MEL MARTINEZ

Q.1. I wanted to ask you about the housing challenge that we 
are facing with our seniors. With the upcoming retirement of 
the baby boom, there will be tremendous needs for a diverse 
housing stock for many of our seniors who are on fixed incomes. 
Regrettably, the programs designed to help seniors with 
affordable housing have declined 48 percent in real terms over 
the last 6 years. Will this program and others that help 
seniors be a priority for you as you advocate for HUD's 
priorities in Congress?

A.1. As I stated in my opening remarks ``America is also 
growing older as the sons and daughters of the greatest 
generation age into retirement years. Our grandparents and our parents 
helped build this country's greatness and deserve the peace of mind to 
know that they will be taken care of, and can live in safe and 
decent homes and neighborhoods.'' I believe we as a country 
must collectively ask ourselves how will we meet the housing needs 
of America's aging population. To this end, I commend the previous 
Congress, and in particular this Committee for creating the 
``Commission on Affordable Housing and Health Care Facility 
Needs of Senior Citizens in the 21st Century''. As you know, 
the Seniors Commission was formed recognizing the growing 
numbers of Americans over 65 years of age, and the need to 
develop comprehensive aging-in-place strategies that link 
affordable shelter with compassionate services through public-
private partnerships. I believe we already have one exemplary 
public-private partnership at HUD and that is the Section 202 
Supportive Housing Program for the Elderly. Also, I commend you 
and the previous Congress for making reforms to this program to 
allow the conversion of certain units to assisted living units. 
However, as we look to the future more has to be done and our 
country must be prepared. I look forward to working closely 
with the Congress and the Congressional Seniors Commission to 
work on these issues together.

Q.2. I am sure you are familiar with the Enterprise Zones 
program at HUD. I was pleased that Detroit was selected as an 
Enterprise Zone in the first round in 1994. Unfortunately, in 
the latest round, the City of Flint was not selected as an 
Enterprise Zone, even though they put together a solid 
proposal. It had to settle for an Enterprise Community 
designation. Many of our Enterprise Zones have made great 
progress in economic revitalization. But many more communities 
want the same chance. Cities like Flint desperately need major 
assistance. As you may know, Buick City recently closed in 
Flint costing the city 3,000 jobs. Would you be willing to 
consider supporting a new round of Enterprise Zones that give 
cities like Flint hope for the future.

A.2. The Community Renewal Tax Relief Act of 2000 enacted last 
year creates a Round III competition for the Empowerment Zone 
initiative. Round III includes the designation of 9 new 
Empowerment Zones, and 40 new ``Renewal Communities.'' Renewal 
Communities provide pro-growth tax benefits and regulatory 
relief including zero capital gains rate on sales of assets 
held for more than 5 years, increases expensing for small 
businesses, a 15 percent employment wage credit for each worker 
and commercial revitalization reductions for taxpayers who 
rehabilitate or revitalize buildings in the designated area. 
Congress has stipulated that the rule governing the 
competitions must be issued by April 15, 2001.

Q.3. There are 750,000 homeless people in the United States on 
any given night. The most recent research shows that as many as 
3.5 million Americans may spend some time homeless each year. 
Unfortunately, the main program that provides funding for 
homelessness prevention, is down 13 percent in real terms over 
the last 6 years. Shouldn't we be doing more to fight this 
problem?

A.3. As I stated in my opening remarks, despite spending over 
$10 billion on homelessness over the last 10 years, too many 
still live life on the streets. The most important role HUD 
should play on the issue of homelessness is one of bricks and 
mortar, by providing permanent housing solutions to those 
without homes. If confirmed, I expect to work closely with the 
Department of Health and Human Services and other agencies on 
the social service side of the homeless challenge, including 
mechanisms to prevent homelessness in the first place.

                RESPONSE TO WRITTEN QUESTIONS OF

            SENATOR JON S. CORZINE FROM MEL MARTINEZ

Q.1. What role do you believe Fannie Mae and Freddie Mac should 
play in the promotion of homeownership?

A.1. Fannie Mae and Freddie Mac play an important role in 
public/private partnerships that will help expand 
homeownership. Secretaries Kemp and Cisneros set the standard 
for this type of partnership. For example, Fannie Mae's 
commitment to invest a trillion dollars in expanding mortgage 
lending to low- and moderate-income borrowers was one piece of 
HUD's national effort to raise homeownership in these 
populations. Fannie Mae and Freddie Mac also helped support the 
policies underpinning the creation of Enterprise Zones.
    I believe the GSE's can work with HUD in the following 
areas to enhance HUD's mission, including:

 Homeownership Vouchers and Tax Credits. Fannie Mae and 
    Freddie Mac could provide mortgage financing for homes 
    covered by the voucher and tax credit initiatives included 
    in the President-elect's campaign platform.
 National Summit on Minority Homeownership. The 
    national homeownership rate is 67 percent, but the minority 
    homeownership rate is under 50 percent. Fannie Mae and 
    Freddie Mac 
    can help convene a national session to construct a policy 
    agenda 
    with policymakers, lenders, and local groups across the 
    political spectrum.
 Regulatory Relief. The new housing bill creates a 
    clearinghouse function at HUD and authorizes a grant 
    program to fund local partnerships to dismantle local 
    regulatory barriers. Fannie Mae can collaborate with HUD in 
    setting up the clearinghouse and providing it with examples 
    from the partnerships it has established across the 
    country.

Q.2. As you know, debt held by Government Sponsored Enterprises 
(GSE's) has grown substantially in recent years. Are you 
concerned about this? Do you believe that the existing 
mechanisms for overseeing GSE's are sufficient or should they 
be strengthened?

A.2. I have not studied the GSE debt issue, and have no 
specific opinion at this time. I believe, the important 
question is whether the GSE's are achieving the mission 
Congress has established for them in a safe and sound manner.
    As the mission regulator for Fannie Mae and Freddie Mac, 
HUD has responsibility for ensuring that the two companies meet 
the affordable housing goals and other statutory requirements 
established by Congress. The Office of Federal Housing 
Enterprise Oversight (OFHEO), an independent agency within HUD, 
is responsible for overseeing the companies' safety and 
soundness.
    I understand that OFHEO runs a rigorous examination program 
focused solely on these two companies, with several times more 
examiners than in other Federal bank examination programs. In 
every year that OFHEO has reported its exam results to 
Congress, Fannie Mae and Freddie Mac have very received the 
highest possible marks for safety and soundness. I also 
understand that this view of the companies' safety and 
soundness is shared by other regulators, including Federal 
Reserve Chairman Alan Greenspan, who testified in July 2000 
that these companies are ``well-run institutions'' with ``very 
good risk management procedures.''
    It is also important for any company to be transparent and 
subject to market discipline. In October, the two companies 
announced with House Capital Markets Subcommittee Chairman 
Richard Baker a set of voluntary initiatives to enhance market 
discipline and capital. Chairman Baker noted that with these 
commitments, the two companies ``exceed any standard for any 
domestic or international financial model anywhere.''

Q.3. HUD has established a program to evaluate the physical 
condition of public housing, and I believe it important the 
housing authorities be held accountable for the quality of the 
housing they provide. At the same time, I have heard from 
housing authorities in New Jersey who are concerned about the 
way the existing assessment program is being implemented, and 
believe that it is producing subjective and sometimes arbitrary 
results. Would you be willing to take a close look at this 
program and consider whether its implementation needs 
improvement?

A.3. Based on my GAO briefing, I believe HUD's oversight of 
public housing has consistently progressed under former 
Secretaries Kemp, Cisneros, and Cuomo. A key element of HUD 
2020 was to centralize assessment of all HUD housing into a 
single, state-of-the-art organization with the creation of the 
new Real Estate Assessment Center. I believe on the surface 
this is a proper initiative for HUD to take--HUD should have a 
system for inspecting its investment. As I understand it, the 
Public Housing Assessment System (PHAS) was required by the 
public housing reform legislation, which this Committee should 
be commended for. However, I do understand that the new system 
is producing subjective and sometimes arbitrary results. I have 
been briefed on these problems and I will direct early 
attention to evaluate PHAS effectiveness and consider extending 
PHAS compliance waivers if appropriate.

Q.4. Public housing residents throughout New Jersey have 
benefited from the Public Housing Drug Elimination Program, 
which provides funds for improved security, along with a 
variety of community-based prevention and treatment 
initiatives. The program has enjoyed broad, bipartisan support 
in the Congress. Do you support this program? Would you be 
willing to consult with me before proposing any significant 
changes to the program?

A.4. HUD's Public Housing Drug Elimination Program (PHDEP) 
supports a wide variety of efforts by public and Indian housing 
authorities to reduce or eliminate drug-related crime in public 
housing developments. Based on this core purpose, I certainly 
support the program. Knowing the interest of your predecessor, 
former Senator Lautenburg, I would certainly be happy to consult with 
you before proposing any changes to the program.

Q.5. Do you have any new proposals for addressing the problem 
of homelessness?

A.5. I am very aware of past Congressional efforts to 
legislatively combine the existing HUD McKinney/Vento Homeless 
Assistance programs into a block grant. In fact, last year's 
VA/HUD Appropriations report language directed that the 
authorizing committees pursue this goal. I pledge to work with 
the Congress and build on the successes of the Continuum of 
Care initiative and provide a legislative regime, which assures 
decentralized local decision making with maximum input from 
local non-profit homeless providers.

Q.6. It has been reported that you have opposed an ordinance 
that would prohibit discrimination against Orange County 
workers on the basis of their sexual orientation. Is this 
report accurate and, if so, would you please explain your 
opposition to the ordinance. Can you assure the Committee that, 
as HUD Secretary, you would oppose any discrimination against 
any HUD employee or any other individual on the basis of their 
race, gender, ethnic background, national origin or sexual 
orientation?

A.6. I did not oppose an ordinance prohibiting discrimination 
against Orange County workers on the basis of their sexual 
orientation. Orange County has very strong anti-discrimination 
policies in the areas of hiring, promotion and other job 
opportunities. Additionally, Orange County established a 
professional standards office with responsibility for 
investigating any complaints regarding discrimination or other 
allegations of unfair treatment of employees and citizens. The 
office reported directly to the County Administrator's office 
and worked closely with the Federal EEO offices to insure 
timely resolution of any complaints of discrimination. If 
confirmed, as Secretary I will enforce Federal regulations 
regarding anti-discrimination against any HUD employee of any 
other individual on the basis of race, gender, ethnic 
background, national origin or sexual orientation.

                RESPONSE TO WRITTEN QUESTIONS OF

              SENATOR MIKE CRAPO FROM MEL MARTINEZ

Q.1. As HUD Secretary, you will be in charge of the Office of 
Lead Hazard Control. In recent years, Congress has appropriated 
millions of dollars to this office to address issues relating 
to health problems stemming from exposure to lead-based paint 
older U.S. homes. Approximately $100 million has been 
appropriated for this office this fiscal year. Questions have 
arisen about whether the current programs in place to address 
this health problem have been effective in serving their 
intended population, particularly children facing the risk of 
lead-based paint exposure. In your capacity as the Secretary of 
HUD, what are your plans to ensure the Office of Lead Hazard 
Control is more successful in dealing with this health problem, 
especially in low- and moderate-income housing nationwide? Do 
you see community-based, public-private partnerships that focus 
efforts on reducing exposure risks as an important part of any 
solution?

A.1. According to Department statistics, more than 800,000 
children younger than 6 years old living in the United States 
have lead levels in their blood above the level of concern set 
by the Centers for Disease Control and Prevention. Many of 
these children are in families of low-income and are living in 
old homes with heavy concentrations of lead-based paint. As a 
former county official, if confirmed as Secretary, I would want 
to explore moving to a more community-based approach that would 
use education, training and lead reduction measures to address 
this serious problem. In this way, we can empower community 
leaders and local organizations to more effectively educate 
people about the dangers posed by lead-based paint and train 
local groups in using appropriate reduction and mitigation 
measures.

Q.2. In your written testimony and during your opening remarks, 
you noted that ``. . . despite record high levels of home 
ownership, African-American and Hispanic American home 
ownership rates remain below 50 percent.'' You expressed your 
commitment to work to address this situation so that ``. . . 
barriers to home ownership are torn down for everyone. . . .'' 
I appreciated this statement because in Southern Idaho, 
Hispanic home loan borrowers are rejected at twice the rate of 
other borrowers, 33 percent versus 17 percent. Many factors 
contribute to this current situation, but I am interested in 
working together to improve it. Can you please share some of 
your thoughts on how we can work to achieve this shared goal?

A.2. Expanding opportunities for homeownership to populations 
that are underserved will be among my highest priorities at HUD 
if confirmed. One possible way of reaching these populations is 
to provide greater access to FHA, through reductions in up-
front mortgage insurance premiums and other mechanisms. Late 
last year, HUD issued regulations that reduce up-front 
insurance premiums by one-third, eliminate annual premiums 
after a homeowner has built 22 percent equity in the home, and 
pay premium refunds to current FHA borrowers. I will closely 
monitor the impact of these changes. In early February, the 
General Accounting Office is reporting to Senator Wayne Allard 
on an analysis of the FHA Mutual Mortgage Insurance (MMI) Fund 
under various economic conditions. Based on that analysis as 
well as review of HUD's fiscal year 2000 Actuarial Review of 
the MMI Fund released in the last few days, I intend to explore 
ways to expand homeownership opportunities to underserved 
populations through FHA.

Q.3. You are no doubt aware that Idaho has a significant rural 
population. With this in mind, I am extremely interested in 
working with you to identify new and innovative ways to address 
home ownership challenges facing rural Americans. What are your 
plans to examine this situation and make sure that the housing 
needs of our rural population are addressed?

A.3. Housing and community development in rural areas will be a 
key component of HUD's mission under my Administration if 
confirmed. According to HUD's Worst Case Housing Needs report 
released in March 2000, 32 percent of very low-income 
nonmetropolitan renters suffered from worst case housing needs, 
and 54 percent of extremely low-income nonmetropolitan renters 
suffered similar needs. At the same time, between 1991 and 
1997, the number of housing units in nonmetropolitan areas 
affordable to extremely low-income renters declined by 5 
percent. And although not under HUD's jurisdiction, 
affordability contracts with Rural Housing Service housing 
developments are beginning to expire, and presents the 
Department of Agriculture (DOA) with a problem similar to HUD's 
recent Section 8 ``opt-out'' challenge. I expect to work with 
DOA on this issue to offer any assistance the Department may 
appropriately provide. In addition, on the issue of 
homeownership for rural Americans, one area I am particularly 
interested in exploring is a greater focus on homeownership 
counseling for families with FHA mortgage insurance. Education 
and counseling could be an important tool to expand 
homeownership opportunities in rural areas.















































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