[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]





                      OVERSIGHT OF THE DEPARTMENT
                    OF HOUSING AND URBAN DEVELOPMENT

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 20, 2004

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 108-89


                    U.S. GOVERNMENT PRINTING OFFICE
96-527                      WASHINGTON : 2004
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
DOUG BEREUTER, Nebraska              PAUL E. KANJORSKI, Pennsylvania
RICHARD H. BAKER, Louisiana          MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio                  DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice Chair   JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                GREGORY W. MEEKS, New York
JIM RYUN, Kansas                     BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio           JAY INSLEE, Washington
DONALD A. MANZULLO, Illinois         DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North          MICHAEL E. CAPUANO, Massachusetts
    Carolina                         HAROLD E. FORD, Jr., Tennessee
DOUG OSE, California                 RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois               KEN LUCAS, Kentucky
MARK GREEN, Wisconsin                JOSEPH CROWLEY, New York
PATRICK J. TOOMEY, Pennsylvania      WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut       STEVE ISRAEL, New York
JOHN B. SHADEGG, Arizona             MIKE ROSS, Arkansas
VITO FOSSELLA, New York              CAROLYN McCARTHY, New York
GARY G. MILLER, California           JOE BACA, California
MELISSA A. HART, Pennsylvania        JIM MATHESON, Utah
SHELLEY MOORE CAPITO, West Virginia  STEPHEN F. LYNCH, Massachusetts
PATRICK J. TIBERI, Ohio              BRAD MILLER, North Carolina
MARK R. KENNEDY, Minnesota           RAHM EMANUEL, Illinois
TOM FEENEY, Florida                  DAVID SCOTT, Georgia
JEB HENSARLING, Texas                ARTUR DAVIS, Alabama
SCOTT GARRETT, New Jersey            CHRIS BELL, Texas
TIM MURPHY, Pennsylvania              
GINNY BROWN-WAITE, Florida           BERNARD SANDERS, Vermont
J. GRESHAM BARRETT, South Carolina
KATHERINE HARRIS, Florida
RICK RENZI, Arizona

                 Robert U. Foster, III, Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    May 20, 2004.................................................     1
Appendix:
    May 20, 2004.................................................    61

                               WITNESSES
                         Thursday, May 20, 2004

Jackson, Hon. Alphonso, Secretary, Department of Housing and 
  Urban Development..............................................    10

                                APPENDIX

Prepared statements:
    Oxley, Hon. Michael G........................................    62
    Gillmor, Hon. Paul E.........................................    65
    Harris, Hon. Katherine.......................................    66
    Matheson, Hon. Jim...........................................    68
    Ney, Hon. Robert W...........................................    70
    Velazquez, Hon. Nydia M......................................    73
    Jackson, Hon. Alphonso.......................................    75

              Additional Material Submitted for the Record

Frank, Hon. Barney:
    National Association of Affordable Housing Lenders letter to 
      Assistant Secretary Liu, April 26, 2004....................    93
    National Conference of State legislatures letter to Senator 
      Sarbarnes, May 17, 2004....................................    94
    Section 8 Activity because of HUD's April 22 notice..........    98
    Section 8 Activity following HUD's May 18 Announcement of a 
      ``Fix''....................................................   102
    Support letter for H.R. 4263 from various organizations, May 
      13, 2004...................................................   104
    Wayne County Housing Authority letter, May 7, 2004...........   105
Watt, Hon. Melvin L.:
    A Decade of Hope VI: Research Findings and Policy Challenges.   106
Jackson, Hon. Alphonso:
    Written response to questions from Hon. Spencer Bachus.......   171
    Written response to questions from Hon. Barney Frank.........   172
    Written response to questions from Hon. Mark Green...........   174
    Written response to questions from Hon. Katherine Harris.....   180
    Written response to questions from Hon. Carolyn B. Maloney...   176

 
                      OVERSIGHT OF THE DEPARTMENT
                    OF HOUSING AND URBAN DEVELOPMENT

                              ----------                              


                         Thursday, May 20, 2004

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to call, at 10:08 a.m., in Room 
2128, Rayburn House Office Building, Hon. Michael Oxley 
[chairman of the committee] presiding.
    Present: Representatives Oxley, Baker, Royce, Ney, Kelly, 
Green, Shays, Miller of California, Tiberi, Feeney, Hensarling, 
Garrett, Barrett, Harris, Renzi, Frank, Waters, Sanders, 
Maloney, Gutierrez, Velazquez, Watt, Carson, Meeks, Lee, 
Inslee, Moore, Capuano, Hinojosa, Lucas of Kentucky, Clay, 
Israel, Baca, Miller of North Carolina, Emanuel, Scott, Davis 
and Bell.
    The Chairman. [Presiding.] The committee will come to 
order. The committee is meeting today to hear from the 
Secretary of Housing and Urban Development on the operations of 
the department and its budget request for fiscal year 2005.
    Pursuant to rule 3(f)(2) of the rules of the Committee on 
Financial Services for the 108th Congress, the Chair announces 
that he will limit recognition for opening statements to the 
Chair and Ranking Minority Member of the full committee and the 
Chair and Ranking Minority Member of the Subcommittee on 
Housing and Community Opportunity, or their respective 
designees to a period not to exceed 16 minutes, evenly divided 
between the majority and minority. Prepared statements of all 
members will be included in the record.
    The Chair recognizes himself for an opening statement.
    Today, the Financial Services Committee welcomes the newly 
confirmed Secretary of Housing and Urban Development, Alphonso 
Jackson, on the occasion of his first time testifying as the 
HUD Secretary. Secretary Jackson, congratulations on your 
confirmation. We look forward to working with you to address 
America's housing needs and to improve our nation's 
communities.
    The committee has jurisdiction over the budget for the 
Department of Housing and Urban Development. The department 
administers programs such as the Community Development Block 
Grants, HOME, HOPE VI, public housing, section 8 voucher 
programs, the Federal Housing Administration and the housing 
goals for both Fannie and Freddie. Over the past few years, 
this committee and the Administration have continued to seek 
bipartisan ways to make existing housing programs work better. 
In 2003, we enacted the American Dream Downpayment Act that 
would benefit 45,000 new homeowners annually. The committee 
enacted legislation to increase FHA multifamily loan limits, 
which addresses the acute issue of affordable rental housing in 
high-cost areas.
    At a time when our homeownership rate is the highest ever 
at 68 percent, President Bush has inspired us to make 
homeownership happen for even more Americans. We must address 
the lagging minority homeownership rates since less than 50 
percent of African Americans and Hispanics are homeowners. The 
zero downpayment legislation would allow zero downpayment loans 
and financing of the settlement costs for an estimated 150,000 
first-time homebuyers each year. I want to thank Congressman 
Tiberi and Congressman Scott for introducing that legislation.
    While ownership policy is the best avenue for strengthening 
families and improving communities, part of American society is 
not yet ready to pursue homeownership. There are several ways 
to create new rental housing opportunities, however any new 
approach is hampered by the potential hemorrhaging of the 
section 8 rental housing subsidy program. Unless we take 
dramatic steps to reform the section 8 voucher program, it 
would eventually consume the entire HUD budget. Without 
meaningful reform, the good work achieved by other housing 
programs could be compromised.
    Recently, articles have appeared in local newspapers 
stating that the section 8 housing voucher program in some 
communities is running out of money. I am concerned that 
vouchers are being revoked and that tenants may have to leave 
their homes. Equally troubling is the impact on conventional 
lenders and rating agencies's decisions to finance assisted 
housing. Members on both sides of the aisle are anxious to hear 
from you about what steps are being taken to address this 
situation.
    This committee has been following GSE regulatory reform 
efforts closely. Thanks to Subcommittee Chairman Baker's hard 
work, over 100 witnesses have testified on these issues and 
several policy goals have been achieved. The Senate Banking 
Committee approved a bill that was not supported by the 
Administration or the GSEs. We will be interested to know if 
the Administration's perspective on GSE reform evolved since 
the Senate activity. It seems the Administration does not want 
a viable legislative product that could move through the House 
and Senate, but would rather attempt to enforce discipline on 
the GSEs through regulation. I am very interested in HUD's 
efforts to improve its role in the oversight of the GSEs.
    HUD has proposed several new affordable housing targets for 
the GSEs and has eliminated the ability of the GSEs to receive 
additional credits for certain projects. These new proposals 
significantly raise the levels of affordable housing 
transactions the GSEs must meet. The stated purpose of these 
changes is to encourage Fannie and Freddie to be lenders in the 
affordable housing field. I look forward to your analysis of 
why these changes are needed and how these goals will be 
achieved.
    HUD is in the process of reviewing unusual transactions by 
the GSEs to meet the previous affordable housing goals. This 
committee is also looking at these transactions and examining 
whether they were appropriate. I hope that we can work together 
to ensure that the affordable housing goals are properly met.
    I also want to bring to your attention an issue raised at 
the Housing Subcommittee field hearing in Columbus, Ohio that 
was chaired by Subcommittee Chairman Bob Ney. While the hearing 
was primarily focused on affordable housing issues and the 
section 8 program, there was a call from the majority of the 
witnesses about the Community Development Block Grant Program. 
Many believe the allocation formula is outdated and does not 
account for the growth of cities. I understand that the 
department has conducted a study of the CDBG formula. I am 
hopeful that you will discuss whether the formula is in need of 
a change either today or in writing at a later date.
    I would be remiss not to mention reform of the real estate 
settlement procedures act. I sent a letter in December to your 
predecessor regarding the department's proposed rule, which was 
later withdrawn. We all support the goal of simplifying the 
homebuying process and making it less expensive for consumers. 
I am hopeful that you will address the department's future 
intent regarding the development of a new proposed rule.
    Just before I conclude, I applaud the Administration for 
continuing to work on its goal to end homelessness. 
Representatives Renzi and Matheson have introduced the 
Samaritan Initiative Act. This initiative combines HUD's 
permanent housing funding with assistance from the Departments 
of Health and Human Services and Veterans Affairs for services 
like substance abuse treatment and primary care.
    Mr. Secretary, thank you again for being here today. Again, 
congratulations on your confirmation and we look forward to 
your testimony.
    I now recognize the Ranking Member, the gentleman from 
Massachusetts, Mr. Frank.
    [The prepared statement of Hon. Michael G. Oxley can be 
found on page 62 in the appendix.]
    Mr. Frank. Thank you, Mr. Chairman and Mr. Secretary.
    We are in the midst of a serious crisis involving the 
section 8 voucher program. I know that Assistant Secretary Liu 
has said that a handful of the nation's housing agencies would 
not have enough money, but either they cannot count or he 
can't. I guess maybe I would suggest as a fundraising device we 
display Assistant Secretary Liu's hands because they are 
apparently an interesting phenomenon. They must have dozens and 
dozens and dozens and dozens and dozens of digits, because I 
have been besieged, as have other members, with concerns from 
both parties. We have, and I would ask to put this into the 
record, a resolution from the standing Committee on Economic 
Development, Trade and Cultural Affairs, from the National 
Conference of State Legislatures, in which they are strongly 
critical of the department's section 8 program. ``Be it 
resolved that the National Conference of State Legislatures 
calls on HUD to withdraw the April 22 notice about section 8 
and begin a consultation process.''
    [The following information can be found on page 98 in the 
appendix.]
    I know that others have said, well, this is what the 
appropriators have said, but of the two Chairs and two Ranking 
Members on the Appropriations Committee, to my knowledge only 
one has really said that he is in agreement with what HUD is 
doing. Senator Mikulski, the Ranking Democrat, has been very 
critical. Senator Bond, the Chairman in the Senate, has said he 
thought that it was not being carried out in the right way. 
Senator Sarbanes has been very critical, and I ask unanimous 
consent to put all their statements in the record.
    The Chairman. Without objection.
    Mr. Frank. What we have is this: From Richard Nixon until a 
few months ago, the section 8 program, the voucher program, was 
one in which municipalities and States, whoever administered 
it, housing authorities, were given money and guidelines to run 
the program. If they kept within the guidelines, they were 
reimbursed for their costs. And I believe since the program was 
begun at the initiative of the Nixon Administration, the number 
of people served by the voucher program has never dropped from 
one year to the next. We have never gone back in terms of the 
number. The level of increase has varied.
    The municipalities have been told to do the right thing in 
terms of how they administer it, but then having done that, 
they got their costs. Last November, HUD worked with some of 
the appropriators, bypassing entirely this authorizing 
committee, and secured a fundamental change in this program, 
section 8. For the first time, the program was capped and 
housing authorities and others who administered it were not 
given, we are now told, the authority to continue the number of 
people who they had been serving, but had a limited amount of 
money capped by last August's amount of money plus an inflation 
factor, a very rigid one.
    The way in which this was promulgated is very troubling. 
HUD, which helped draft this legislation, probably drafted it, 
did this on November 30. It was not in either bill, as I 
recall. It was put in in conference. So HUD knew this from 
November 30 on. The appropriations were not actually passed 
until February. It was part of the overall bill. It was April 
22 when this really quite new interpretation went to the 
communities. There was a great deal of disruption and upset and 
I ask unanimous consent to put in the record lists of dozens 
and dozens of communities in 25 States which have felt 
seriously disarranged by this.
    [The following information can be found on page 104 in the 
appendix.]
    It is not simply the way in which it was done. It is the 
consequence. Essentially communities were told on April 22 of 
this year that retroactively they were going to have less money 
for section 8 vouchers than they thought they were going to 
have. The response of many of them was they would have to evict 
people. We had a very serious problem with some of the most 
vulnerable people in this society now being told that they 
faced eviction. A great deal of chaos ensued.
    Now, as I understand it, HUD recently, and I am going to 
have to ask you to explain this to us because there is still a 
great deal of uncertainty, ambiguity and confusion about this, 
HUD is now telling people, well, they are going to redo the 
formula in ways that while there will still be limits, it may 
not in the best case require any evictions.
    But communities continue to tell us, recent articles about 
Houston, about other places, that they are going to be faced 
with too little money to continue to serve the number of people 
they are serving, so that even if evictions are avoided, and I 
guess there have been a couple of evictions already and people 
threatened with eviction, but even if evictions can be avoided, 
which I hope, because that would be particularly cruel, housing 
authorities are going to face the following choices.
    Either they are going to have to, when people give up their 
vouchers in the normal attrition, retire those vouchers from 
circulation, so they will be serving fewer people, or they will 
have to reduce the rents to landlords, greatly damaging this 
program by making the responsible landlords less willing to 
participate; or they will have to raise minimum rates on the 
poorest people around; or, and I just got this from the city of 
Fall River, they will have to go against one of the fundamental 
purposes of this program. That is, they will have to find 
cheaper apartments.
    Fall River is suffering, they tell me, Fall River, 
Massachusetts, because some of their section 8 certificate 
holders, their voucher holders, have gone from the city of Fall 
River to wealthier areas where the rents are higher, but 
because they were not in those areas a year ago, they do not 
get compensated for that. So Fall River is now telling people, 
well, you cannot move out of the city elsewhere. The purpose of 
de-concentration, of avoiding packing poor people is now being 
undercut. The result of this is the most substantial damage to 
the section 8 program, people not wanting to participate.
    I will say in closing, Mr. Secretary, I am troubled because 
reading some of your quotes on this, one, you referred to the 
fact that we have a wartime budget, which confirms what some of 
us fear, that the demands of Iraq and elsewhere are cutting 
into important domestic needs. But secondly, you said in the 
Dallas Morning News on April 14, quote, Mr. Jackson said he 
sympathizes, but we have to restructure section 8. The poorest 
recipients stay in the program five to eight years, tying up 
vouchers that higher income people could shed more quickly. The 
suggestion that one way to resolve this problem of housing the 
poor is to house people who are less poor seems to me to go 
directly contrary to what we ought to be doing.
    I will be asking you for some specifics, but I am very 
troubled that as a result of HUD's actions, pre-dating your 
secretaryship, but continuing under it, we have this section 8 
program which has been a major source of housing assistance now 
major source of chaos and trouble and difficulty for tenants, 
for landlords, for lenders and for municipal officials.
    The Chairman. The gentleman's time has expired.
    The Chair is pleased to recognize the Chairman of the 
Housing Subcommittee, the gentleman from Ohio, Mr. Ney.
    Mr. Ney. Thank you, Mr. Chairman.
    I want to also welcome Secretary Alphonso Jackson to his 
first authorizing hearing, and also Chairman Oxley for holding 
this important hearing to examine both the programs and the 
budgets specific to the Department of Housing and Urban 
Development.
    Last year through bipartisan cooperation, the committee and 
the Administration were able to enact 11 bills into law that 
today are making housing programs work better than they have, 
again, on a bipartisan basis and through your leadership, Mr. 
Chairman and Ranking Member, we have been able to do that.
    Of those enacted, of course, last year the American Dream 
Downpayment Act and the proposal to raise the FHA model family 
loan limits are helping thousands of individuals and families 
to realize the dream of homeownership. In an effort to continue 
the goal to increase minority homeownership, on May 5 of this 
year the Housing Subcommittee approved H.R. 3755, the FHA Zero 
Downpayment Act. I want to commend our Ranking Member, 
Congresswoman Maxine Waters of California for her leadership, 
and members from both sides of the aisle working on this bill. 
It was introduced by Congressman Tiberi and Congressman Scott 
and would eliminate the downpayment requirements for certain 
families and individuals who buy homes with FHA-insured 
mortgages. It is a fiscally prudent bill and represents I think 
another important step forward in helping all Americans achieve 
the dream, and working with this committee and with the 
Administration we have been able to move this bill along the 
path.
    While homeownership is a desired goal, for many Americans 
and many in today's society they are not yet ready for one 
reason or another to own their own home. It is therefore 
prudent that we continue to pursue all alternatives to make 
sure that affordable rental housing is also available. As you 
know, the section 8 housing assistance program is the major 
vehicle for providing rental assistance to low-income families 
and individuals. Today, the section 8 program encompasses I 
believe half of HUD's budget. The rising costs of providing 
rental assistance is due in varying degree to expansion in the 
program, the costs of renewing expiring long-term contracts, 
and the rising costs in housing markets across the country.
    The day of reckoning is coming fast. If we do not address 
the increasing costs of this program, it will continue to 
consume the HUD budget. I trust we can engage in a meaningful 
dialogue with all of our colleagues, both sides of the aisle 
and the Administration to find a solution to the escalating 
costs of the section 8 program. Of course, that is going to 
also have to involve the housing authorities and the advocacy 
groups that deal with housing. Not a day goes by that I do not 
talk to a constituent or a person who has a concern about the 
problems inherent to the program.
    I am anxious to hear from the Administration about their 
latest proposal for a flexible voucher program which I know the 
Secretary will be speaking about. I believe aspects of this 
proposal have some merit, but it remains to be seen whether 
this is the solution or not to the section 8 program. 
Nevertheless, we have to find a solution and it has to be done 
soon.
    Before I close, I also want to turn my attention to a 
proposed rule to raise Freddie's and Fannie's housing goals. It 
is clear this is an issue that will have a profound impact on 
America's housing policy and profound ramifications. In 1992, 
Congress passed legislation establishing the existing housing 
goal structure. In my estimation, these goals have been a 
tremendous success story for the department, and more 
importantly for the homebuying consumer and those renting 
apartments in the United States. Recently, HUD proposed raising 
the low-mod goal from 50 percent up to 57 percent by 2008.
    I look forward to hearing from the Secretary this morning 
on the rationale for the increase. I represent rural Ohio, as a 
lot of people know, where the average loan purchased by Fannie 
Mae and Freddie Mac is still around $100,000. My focus is to 
make sure these companies fulfill their congressional mandate, 
and that is important that they do fulfill their mandate to 
serve as a liquidity source in markets at all times.
    I intend to pay careful attention to this proposed HUD 
rule, as I know everybody else will be, to make sure there is 
no adverse impact on the well-functioning housing market in the 
United States. I want these companies to serve more families 
and they should. I also worry about a rule where companies are 
on the point of forcing a potential credit allocation to the 
low end of the market, and negatively affects middle-income and 
also middle-class America.
    So I do have some concerns. I have other items in here, Mr. 
Chairman, so I will come to a conclusion, but if I could put 
them in for the record without objection.
    The Chairman. Without objection.
    Mr. Ney. My concern is that this proposed rule could force 
the GSEs to set higher interest rates for mortgage refinancing, 
which is what we do not want.
    In closing, let me say that the federal government, 
consumers and the housing industry are linked by our mutual 
goal of creating housing opportunity for Americans. We have 
much to achieve together for the American people, and our best 
hope of being successful is to work in close concert with each 
other, guided by the same high standards and principles. I do 
appreciate the Secretary being here today, and thank you for my 
time, Mr. Chairman, and your work on this issue.
    [The prepared statement of Hon. Robert W. Ney can be found 
on page 70 in the appendix.]
    The Chairman. The gentleman's time has expired.
    The gentlelady, the Ranking Member of the Housing 
Subcommittee, Ms. Waters.
    Ms. Waters. Thank you very much, Mr. Chairman.
    Good morning, Secretary Jackson. While I congratulate you 
on your confirmation as HUD Secretary, I do not know whether 
you should be happy or sad. You have been given control of an 
agency with a disastrous proposed budget that takes us 
backwards in so many important ways. A budget that, for 
example, seeks $1.633 billion below the amount that HUD itself 
projects is needed to renew all section 8 housing vouchers. If 
enacted, your section 8 budget proposal will dislocate 
households and force many public housing authorities to raise 
rents and lower subsidies to needy seniors, persons with 
disabilities, and families with children.
    This funding level would result in 250,000 fewer vouchers 
being funded if housing authorities choose to maintain the 
current level of subsidy for those vouchers that they do 
maintain. If housing authorities choose instead to maintain the 
same number of vouchers currently authorized nationally, the 
average section 8 tenant's rent would have to increase by an 
average of about $850 per year. In Los Angeles, the city 
housing authority would have to issue 5,336 fewer vouchers and 
the county housing authority would have to issue 2,457 fewer 
vouchers if they choose to make up the funding shortfall by 
reducing the number of vouchers that they fund.
    If they issued the same number of vouchers, the city of Los 
Angeles would have to raise the average tenant's rent by $933 
per year, and the county housing authority would have to raise 
the average tenant's rent by $977 per year in order to absorb 
the impact of the Bush Administration's proposed funding level.
    Mr. Secretary, I would need at least an hour to talk to you 
about all of the ways that this proposed budget fails to meet 
America's pressing needs for housing, but let me try and 
summarize some of my principal concerns. Hopefully, we can 
cover more of the issues during the question period.
    HUD's budget for CDBG block grants fails to keep pace with 
inflation, and zeroes out funding for brownfields, empowerment 
zones and CDBG section 108 loans, a program that is especially 
important to me. I put a lot of time in on section 108, and the 
city of Los Angeles has been able to use section 108 as have 
cities in this country for economic development. I am really 
concerned about that.
    Your budget cuts public housing funding by $182 million, 
rescinds $675 million in funds that could be used to preserve 
affordable housing; zeroes out funding for HOPE VI and proposes 
to let 50 housing authorities operate without statutory tenant 
protections. It proposes a $35 million cut for lead paint 
grants, and to zero out funding for rural housing and economic 
development grants which received $25 million in funding year 
2004.
    I do not know how much you were involved in this budget, 
but I know some of your reputation. I have met and talked with 
you before, and I expect that you will provide the leadership 
to correct what are many problems with this budget. This is a 
very serious business. As I sit talking to you today, there are 
1,500 households in Los Angeles who are not receiving 
assistance, whose vouchers were cancelled by the city housing 
authority because the vouchers that they waited so many years 
to receive were not funded. This is just not acceptable. HUD 
should be using its central reserve fund and taking whatever 
other steps are required to ensure that these families receive 
housing assistance.
    Your proposal is to block grant section 8 funds to the 
local PHAs, eliminate the guarantee that at least the same 
number of units will continue to be served, and end the 
targeting requirements that helped to ensure that section 8 
vouchers are directed to those low-income residents with the 
greatest needs. Again, it was mentioned on April 22 of this 
year. HUD announced that it will no longer reimburse housing 
agencies for their actual costs, but instead will renew 
quarterly voucher funding based on an agency's per cost in 
August, 2003, adjusted only by a regional housing inflation 
factor.
    It is completely improper and unacceptable for HUD not to 
renew vouchers at payments high enough to keep pace with rent 
increases. It is simply unconscionable for HUD to adopt 
policies that will result in evictions, the non-renewal of 
vouchers, or require greater contributions from low-income 
section 8 tenants who really cannot afford it. HUD's contract 
renewal policies must cover the true increases in housing costs 
in Los Angeles and other communities. HUD must replenish PHA 
reserves as the department has done in the past, as the 
department has not only done in the past, but to cover 
unanticipated cost increases. HUD should rescind the April 22 
notice and return to policies that will protect those that 
Congress intended to help through the section 8 program.
    Finally, let me say a word about homeownership and GSEs. 
Now, I know some people are going to take great exception to 
this.
    The Chairman. Could the gentlelady conclude please?
    Ms. Waters. One additional minute.
    The Chairman. Without objection.
    Ms. Waters. In addition to this very difficult budget that 
you have to deal with, there is a fight that is going on that 
has been going on here with the GSEs. You all know and you 
understand very well what the confrontation is with FM Watch 
and the GSEs. It is about market share. There are any number of 
ways that have been concocted by the Administration to try and 
weaken the GSEs.
    This business of increasing the goals for low-income 
housing looked like it was a good thing when I first looked at 
it. But now that I have examined it, and I was involved in 1994 
in increasing those goals, and I believe in increasing the 
goals and getting as much as we can, but when you take away the 
points that the GSEs receive for reaching those goals, it makes 
me wonder whether or not this is just another FM fight, or 
whether or not you are really serious about this, Mr. 
Secretary.
    The purchase of these mortgages from Washington Mutual and 
other places expands housing ownership opportunities. If you 
are going to take away the points and redefine how they can 
reach the goals, I am not sure that you are really serious 
about expanding the goals and having them reach them. I want 
you to think about that, and I certainly do not want you to be 
used as a point person in this fight against the GSEs. Let the 
markets work. Either these other financial institutions can 
step up to the plate and do what they need to do, but coming to 
government in so many ways to do this is totally unacceptable.
    Thank you, and I yield back the balance of my time.
    The Chairman. The gentlelady yields back.
    The Chair recognizes the gentleman from Texas for the 
purpose of introducing our witness.
    Mr. Hensarling. Thank you, Mr. Chairman.
    It is a great privilege and honor that I welcome my friend, 
my fellow Texan and fellow Dallasite, Secretary Jackson, before 
this committee. I want to congratulate him on his recent 
confirmation. I want to share with the committee my belief and 
the belief of many others that no one has brought more housing 
experience to this position as has Secretary Jackson. 
Specifically, he brings over 25 years of housing experience in 
both the private and public sectors to this office. From 1989 
to 1996, Secretary Jackson was the president and CEO of the 
housing authority of the city of Dallas, which constantly 
ranked as one of the best-managed large-city housing agencies 
in the country during his tenure. He has served with 
distinction on a number of national and State commissions, 
including the National Commission on America's Urban Families 
and the National Commission on Severely Distressed Public 
Housing.
    On a more personal background note, Secretary Jackson I 
know grew up in a family of very modest means. He was the 
youngest of 12 children, but through hard work, through 
principle, through opportunity he has risen. He has managed not 
only the Dallas housing agency, but also was the president of 
the American Electric Power Company, a $13 billion utility 
company in Texas. All of Dallas, all of Texas is proud of you, 
sir. We welcome you to this committee and we look forward to 
hearing your testimony and look forward to your principled 
leadership at HUD.
    Thank you, Mr. Chairman.
    The Chairman. I thank the gentleman.
    So we will turn now to Secretary Jackson. Mr. Secretary, 
welcome to the committee and you may proceed.

 STATEMENT OF HON. ALPHONSO JACKSON, SECRETARY OF HOUSING AND 
                       URBAN DEVELOPMENT

    Secretary Jackson. First, thank you, Congressman 
Hensarling.
    Chairman Oxley, Ranking Member Frank, distinguished members 
of this committee, thank you very much for inviting me here 
this morning. I am honored to discuss with you the fiscal year 
2005 budget proposed by President Bush for the Department of 
Housing and Urban Development.
    Mr. Chairman, in order to reserve time for the possible 
questions that I will be asked, I would like to focus my 
opening statement on some key priorities that I think are very 
important to discuss. I would like to ask you to allow me to 
submit the full statement for the record.
    The Chairman. Without objection.
    Secretary Jackson. Thank you.
    Before I start the testimony, I would like to say this 
morning that I am concerned with some of the issues that were 
raised. So in that effort, I think it is important for me to 
first state that in an effort to be more effectively 
implementing the provisions of the 2004 omnibus bill act, I 
have directed Mr. Michael Liu, the Assistant Secretary for 
Public and Indian Housing, to apply the full 2004 inflationary 
factor, what HUD refers to as the annual adjustment factor, to 
each housing authority agency's funding level of 2004. This 
adjustment to the funding formula will be retroactive to 
January 1, 2004 and will provide housing agencies more of their 
funding up front, rather than late in 2004. Again, this is good 
news for those agencies that have fiscal years ending in June 
and even in September. All agencies were notified of this 
funding calculation change on May 18 of this year.
    The second piece of good news I want to announce is that 
HUD is going to replenish the program reserve for approximately 
500 housing agencies, depleting their reserves in 2003 and 
qualifying for restoring of funding. HUD is using approximately 
$150 million in carryover central fund money from 2000 for this 
purpose. I want to be clear, HUD is not restoring 2004 
reserves, but only 2003 reserves for legitimate costs incurred 
in 2003. HUD will notify the agencies eligible for the 2003 
reserves fund to date.
    These two new actions by HUD, as well as additional 
clarification of information already sent to the agencies this 
week regarding their funding, will significantly improve the 
financial situations for most, if not all, of the agencies. It 
will enable them to manage their programs within the funding 
amount provided by Congress for 2004 and provide the needed 
assistance to their families that they serve.
    The program funding within the $31 million HUD budget will 
create new opportunities for those seeking affordable housing 
and the American dream of homeownership, while generating 
stability and prosperity in many communities in this country. 
The key priorities it addresses are central to the President's 
plan to help make America a more secure, more prosperous and 
more hopeful country. Housing, of course, is vital to our 
national prosperity and remains the linchpin of the economy 
today.
    The housing market generated robust activities through 
2001's recession and today housing continues to fuel the 
ongoing economic recovery of this country. Homeownership last 
year reached an all-time high of 68.6 percent, and fourth 
quarter 2003 statistics reveal that for the first time a 
majority of minorities own their homes in this country, 50.3 
percent. HUD's fiscal year 2005 budget will empower our 
department to build on these successes as we seek to increase 
homeownership, promote decent affordable housing free of 
discrimination, encourage participation of faith-based and 
community organization, and HUD's grant program and embrace the 
highest standard of ethics, management and accountability.
    Let me first discuss homeownership. In June 2002, President 
Bush announced an aggressive plan to increase the number of 
minority homeowners by 5.5 million by the end of this decade. 
Today, more than 1.5 new minority homeowners have been created 
in the United States since we initiated this proposal in 2002. 
HUD is proposing several new and expanded initiatives to 
continue increasing overall homeownership, while targeting 
assistance to help minority families experience the economic 
and social benefit of owning a home.
    As a first step, HUD proposed to fund the American Dream 
Downpayment initiative at $200 million in the coming fiscal 
year. The Congress showed great leadership in enacting 
President Bush's American Dream Downpayment proposal last year. 
By fully funding the fiscal year 2005 initiative, we will help 
40,000 families cross what has been represented as the single 
biggest hurdle in homeownership, that is high downpayment and 
closing costs.
    The Administration is proposing legislation that would 
create a new mortgage product targeted at first-time 
homebuyers. That is the zero downpayment mortgage, which would 
allow consumers to qualify for an FHA loan without having to 
come up with cash for downpayment and settling costs. The zero 
down proposal has generated a great deal of interest among the 
industry and the consumers. We estimate that it will help 
150,000 families a year purchase their first home.
    It would be structured to assist the creditworthy, cash-
poor working individuals who have been excluded from purchasing 
their first homes. Most of these families can afford monthly 
payments, but because of the circumstances have simply not had 
enough to save for the downpayment. HUD has designed this 
program to minimize default and to protect the mutual mortgage 
insurance fund. FHA has made a conservative financial 
assumption regarding this program.
    In order to cover the cost of the program, families who 
qualify for the zero downpayment plan would be charged a 
modestly higher insurance premium on their home loan. For 
example, for a $100,000 mortgage, a zero downpayment borrower 
would pay approximately $50 a month more than a regular FHA 
borrower. There would be no net cost to the FHA mutual mortgage 
insurance fund.
    The President's budget projects that an additional $19 
billion in mortgage commitment will generate revenues of about 
$180 million the first year of this program. Borrowers would be 
held to the same underwriting guidelines as those for FHA 
standard 3 percent downpayment mortgages. They must meet the 
same payment-to-income, debt-to-income ratio and the same 
credit standards.
    To further minimize the risk, the proposal for the zero 
downpayment program includes a housing counseling requirement. 
Specifically, participants would be required to satisfactorily 
receive one-on-one housing counseling from HUD-approved housing 
counseling agencies before they enter into a sales contract. I 
want to thank Representative Tiberi for introducing the zero 
downpayment legislation in the House, and I want to 
congratulate Chairman Oxley for holding a successful bipartisan 
full committee markup yesterday.
    To promote the production of affordable single-family homes 
in the area where such housing is scarce, the Administration is 
proposing a tax credit of up to 50 percent of the cost of 
constructing a new home or rehabilitating an existing home. Our 
request of $65 million for the Self-Help Homeownership 
Opportunity Program, as we call SHOP, would more than double 
the funds SHOP received in 2004, to help produce 5,200 new 
homes for very low-income families.
    Along with boosting homeownership, HUD proposed a budget 
that will continue to promote the production and accessibility 
of affordable housing for families and individuals to rent in 
this country. Three major rental programs collectively help 
approximately 4.5 million households nationwide. Our major 
program is the section 8 program, which provides both tenant-
based funding through the housing choice voucher program, and 
project-based rental assistance through HUD's public housing 
program. The Administration is proposing to reform the housing 
choice voucher program to make it more effective, efficient and 
able to meet the needs of low-income families that depend on 
this program.
    Today, the section 8 program lacks any incentive for 
families to transition out of the program and begin to live 
independent lives. In addition, the program is unsustainable at 
the current growth level. Pre-voucher costs have increased at 
an alarming rate of 23 percent in just the last two years. The 
Administration's new flexible voucher program will serve at 
least as many Americans at the 1.9 million families currently 
serving through the housing choice voucher program.
    More importantly, our proposed reform will help families 
move out of assisted housing and into self-sufficiency. The 
HOME program is a key initiative for addressing this shortage 
of affordable housing in America. In fiscal year 2005, we are 
proposing a total of $2.1 billion, which includes $200 million 
for the American Dream Downpayment initiative to help expand 
the nation's supply of affordable housing. Participating 
jurisdictions have substantial discretion to determine how to 
spend and use the funds.
    HUD is committed to providing American cities as a viable 
hub of commerce in making the communities better places to work 
and to raise our families in. The fiscal year 2005 budget 
provides States and localities with tools they can use to 
improve their economic health and promote community 
development. Perhaps the greatest strength of these economic 
development tools, which include the highly successful 
Community Development Block Grant Program, is the way in which 
they encourage local decision making to address developmental 
priorities.
    Through our budget, HUD will strengthen its efforts to 
protect the nation's most vulnerable, those individuals and 
families who truly need government assistance. The HUD budget 
for 2005 will benefit adults, children from low-income 
families, the elderly, those with physical and mentally 
handicapped disability, victims of predatory lending, families 
living in housing contaminated by lead-based paint hazards, and 
persons living with HIV-AIDS.
    In the coming fiscal year, the Administration will continue 
to work to meet the challenge of homelessness that confronts 
many Americans. The President has made an unprecedented 
Administration-wide commitment to eliminate chronic 
homelessness. This commitment is reflected in the fiscal year 
2005 budget request through proposals such as the Samaritan 
initiative, which will provide additional options and services 
to homeless people living in the streets.
    Finally, Mr. Chairman, our budget creates new opportunities 
to improve HUD's performance in its critical-need housing and 
community development programs. I know that this subject is 
particularly important to the committee. I can assure you that 
we share your concerns. We continue to make progress. This will 
remain the top priority in the years to come. I want to thank 
each of you for supporting our efforts and we welcome your 
guidance as we continue to move forward.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. Alphonso Jackson can be 
found on page 75 in the appendix.]
    The Chairman. Thank you, Mr. Secretary.
    Let me begin by asking about RESPA reform. We all share the 
goal of simplifying the home buying process. I constantly 
hearken back to when I was practicing law and involved in real 
estate closings and the madness that occurred in that process, 
and my clients not understanding what was going on. I know that 
the RESPA reform effort was withdrawn. What plans, if any, do 
you have of revisiting that issue? And could you give us a 
timeline if that is the case?
    Secretary Jackson. Surely. Thank you very much for the 
question.
    I made a decision after critically reviewing the proposal 
and the process that had taken place. I asked at that point in 
time that OMB return the RESPA proposal back to us. It was my 
feeling, even though I cannot discuss the specifics with you, 
it was my feeling and my belief that the proposal had not had 
the necessary input, and a consensus that would be appropriate 
to move it forward.
    We have the staff at this point still reviewing it 
internally. We have a meeting weekly discussing the RESPA 
proposal. We expect that after having conversation with the 
industry, with Congress, as I assured you, Mr. Chairman and 
Chairman Allard, we will then look at the possibility of coming 
back out with a new proposed rule after having input from you 
and the industry. I have not set a timetable because still we 
have not answered a number of questions that have been asked of 
us by OMB.
    We hope to have those questions answered probably in the 
next 30 to 45 days, and at that point in time we will get in to 
discuss with you and others your concerns that you have and 
take those concerns into consideration. Then I will be in a 
position to give you a timetable of when we expect to reissue 
the rule.
    The Chairman. I thank you, Mr. Secretary. I think you will 
find some willing participants on this side in regard to a 
solid RESPA reform effort, with input from the Congress. I 
appreciate your openness and ability to work with us. We look 
forward to that effort.
    Let me ask you about the GSE programs. We have recently 
received documents relating to HUD's examination of GSE 
programs. The documents comment on proposed guidelines for some 
programs and seek additional information on others. Is this an 
effort by HUD to exercise its program approval authority over 
the GSEs?
    Secretary Jackson. Yes, it is. I think it is very unique 
because we have been criticized over the years for not 
exercising that program authority. I think the GSEs serve a 
real functional purpose, but Mr. Chairman, the GSEs have an 
implicit government guarantee. Their goals are to serve low-and 
moderate-income people in this country. What I am about to say 
to you today are not figures that we have invented. They are 
figures that they have conveyed to us. They are not leading the 
market. They are following the market. Our position is that 
they should be the leaders of the market in addressing the 
needs of low-and moderate-income people.
    Today, I want to make it very clear because people have 
said that this is a new effort. No, since Secretary Martinez 
and I have been there, and I have been the Deputy Secretary and 
the Chief Operating Officer, we have spoken on numerous 
occasions with the heads of the GSEs and told them our concerns 
about not leading the market, and what we expected out of them. 
We still expect that. The difference is that as the Secretary, 
I am going to make every effort to enforce it. We do not care, 
nor do we have any desire to regulate this top-end of their 
market. But what we are saying in essence is that we want you 
to serve low-and moderate-income people in this country, which 
your charter mandates that you do. That is the only thing we 
asked them.
    The Chairman. Some would say that the program approval 
process may indeed stifle innovative products going to market. 
How would you answer that?
    Secretary Jackson. If their investments in derivatives have 
not stifled them, I do not see how we are going to stifle them 
asking them to serve low-and moderate-income people.
    The Chairman. Do you think that HUD needs new tools to 
review GSE programs? If so, what would they be?
    Secretary Jackson. I think that the Administration has put 
forward a proposal for regulating the GSEs. We are in full 
support of that proposal. I think our responsibility is to set 
the housing affordable goals to make sure that the GSE meets 
those.
    The Chairman. Are you referring to a legislative proposal 
or an administrative proposal?
    Secretary Jackson. Administrative, which was put forth this 
year. We are very supportive of a strong regulator still today. 
But our goal today is to make sure that the GSEs simply meet 
their housing goals and their mandate to serve low-and 
moderate-income persons. That is what I am most concerned about 
today, and that is why we have been making every effort since I 
have been here to work with the GSEs. It is very different 
today because I guess I come with a very tremendous knowledge 
and background with the GSEs, having been in housing for so 
long. I do believe that they have the capability to meet those 
goals without any reservations at all.
    The Chairman. Thank you, Mr. Secretary.
    The gentleman from Massachusetts.
    Mr. Frank. Mr. Secretary, in my 24th year, I do not startle 
easily, but you have accomplished that. I think I heard you say 
that there was an implicit government guarantee of the GSEs. 
One, I must tell you as a high government official, when you 
say it, it is not implicit anymore. You just made it explicit. 
But secondly, I do not think there is, and I understood it was 
the policy of the Administration that there was not. Are you 
now promulgating a new Administration policy, having said that 
there is an implicit government guarantee?
    Secretary Jackson. No, I am not. I am just repeating what 
the GSE said to me when I was speaking to them, and I have met 
them on a number of occasions.
    Mr. Frank. They think there is an implicit government 
guarantee? And you agree with that? You just stated it.
    Secretary Jackson. No.
    Mr. Frank. Mr. Secretary, you did not say you were quoting 
them.
    Secretary Jackson. Congressman, yes, I repeated exactly 
what they said. I am not going to debate with you, Congressman.
    Mr. Frank. Well, do you think there is an implicit 
government guarantee?
    Secretary Jackson. That is not for me to decide. I just 
recounted what they said.
    Mr. Frank. Excuse me, Mr. Secretary, it is for you to 
decide. You are a high government official here. I think it is 
very important for us to make clear that there is not. I think 
you are adding to confusion here. You will not tell me that you 
do not think there is an implicit government guarantee?
    Secretary Jackson. I think my responsibility, Congressman, 
is what I said to the Chairman. I am here to make sure that the 
GSEs effectuate the affordable housing goals and that is what I 
am here to speak about.
    Mr. Frank. Let me say, Mr. Secretary, I am glad about that. 
In fact, I was very critical. HUD delayed a year in 
promulgating new goals. HUD had the right to promulgate new 
goals that could have taken effect this year, and delayed. So I 
am glad they are doing it. We are pushing for even more.
    I want to get back to section 8. On the reserves, very 
important, you said that you are going to provide $150 million, 
is that accurate, to replenish reserves, and the authorities 
will know as of today whether they are getting new reserves?
    Secretary Jackson. Yes.
    Mr. Frank. And where does the $150 million come from?
    Secretary Jackson. The $150 million, if I remember right, 
it came from carryover from 2003.
    Mr. Frank. Did you just find it? When did you find out that 
we had this carryover from 2003? Is it a carryover in section 8 
funding?
    Secretary Jackson. Yes, it is.
    Mr. Frank. And how long have you known that you had the 
section 8 funds?
    Secretary Jackson. We have known it from the beginning, but 
that is always----
    Mr. Frank. Why did you wait until now?
    Secretary Jackson. Every housing authority has a right at 
the beginning of the year to make a request for replenishing, 
when they spend 50 percent or more, and we answer that. A 
number of authorities did not do it this year, but still we 
felt it was imperative----
    Mr. Frank. I am troubled that you waited so long. I am glad 
that we are finally getting it.
    Let me ask you now on the inflation-adjusted. You say what 
you basically decided to do, you are sticking with the 2004 
fiscal year formula, but basically the housing authorities are 
going to get, am I correct, the same amount of money, but they 
are going to get more of it early than they would otherwise 
get?
    Secretary Jackson. Yes.
    Mr. Frank. What does that mean later? Are they going to run 
out of money? Does that mean that they are going to have 
trouble sustaining this, if you give them more money up front? 
Let me put it to you this way. Do you believe that all of the 
housing authorities that you deal with will be able with this 
funding formula and the new reserves to maintain the current 
level of section 8 certificate holders? That none of them will 
have to cut back on the number of vouchers they offer?
    Secretary Jackson. Surely. I do believe that. You asked a 
very important question. One of the reasons that we are doing 
it up front at this point, there are a number of housing 
authorities, as with my housing authority when I was in Dallas, 
that operate on a June-to-June schedule. This will help to 
empower those----
    Mr. Frank. I am glad you mentioned that.
    Secretary Jackson. May I finish please?
    Mr. Frank. Yes.
    Secretary Jackson.--who operate on a September-to-September 
schedule.
    Mr. Frank. Okay. But I just want to make clear, you do not 
believe now that any housing authority will have to either 
freeze vouchers, regain them by attrition or cut rents, or do 
any of that?
    Secretary Jackson. No, because I just received a letter 
from your housing authority in Boston who thanked us for making 
sure that would not occur.
    Mr. Frank. The city of Boston?
    Secretary Jackson. Yes.
    Mr. Frank. It is not mine. Mr. Capuano represents Boston. 
You can talk to him.
    [Laughter.]
    The city of Fall River, on the other hand, is very 
concerned, and I just heard from them. They have this problem 
where by your formula, they are being penalized because people 
who used to take vouchers in Fall River have now moved to more 
expensive areas and the formula does not pay for it. So I have 
to ask you this question. The language that is in the bill that 
made some changes, HUD supports that language? Does HUD think 
that is good language?
    Secretary Jackson. I am not sure what you are asking me.
    Mr. Frank. The language that was put in the bill, the 
language that has been somewhat controversial. Does HUD think 
that is good language? Do you want to keep that in the bill 
next year?
    Secretary Jackson. My position is this, I understand 
clearly article I, section seven. It simply says that Congress 
is the appropriator and the authorizer.
    Mr. Frank. And HUD has no position on this, Mr. Secretary?
    Secretary Jackson. May I finish?
    Mr. Frank. No, not with that silliness.
    Secretary Jackson. You asked me a question. Do you want we 
to answer?
    Mr. Frank. Yes, the question is, do you have a position on 
the language?
    Secretary Jackson. I carry out the mandate of Congress. 
That is what HUD's responsibility is.
    Mr. Frank. No, Mr. Secretary, you are not answering the 
question. And that is just disingenuous. I am sorry. The fact 
is that we all know what the Constitution is. You are trying to 
run out the clock by quoting the Constitution and we all know 
it. I asked you, does HUD have an opinion on this? The notion 
that the Constitution somehow prevents you from expressing your 
opinion is a dodge. What is HUD's opinion on the language? Do 
you want to continue it next year? The Constitution, I promise 
you, it is not unconstitutional for you to give your opinion. I 
guarantee it. I will get Scalia in here to reassure you.
    [Laughter.]
    What is your opinion as the chief housing officer on the 
desirability of including that language and continuing it?
    Secretary Jackson. My opinion as the Secretary of Housing 
and Urban Development is I am going to carry out the wishes of 
Congress.
    Mr. Frank. And you will not tell us what your wishes are?
    Secretary Jackson. I am going to carry out the wishes of 
Congress.
    Mr. Frank. And you will not express an opinion on what the 
policy ought to be?
    Secretary Jackson. Well, my position is----
    Mr. Frank. I am asking you what your position is.
    Secretary Jackson. I guess, Congressman, I do not think my 
position is really relevant at this point.
    Mr. Frank. All right. I am sorry, Mr. Secretary. I have 
another minute. You do not believe that the position of the 
Secretary of HUD on matters of housing policy is relevant? What 
do you do down there?
    Secretary Jackson. No, I do not think it is relevant to 
contradict the Congress. The Congress has said what it wanted 
done.
    Mr. Frank. Okay. Then let me ask you this, so you are 
telling me now that HUD will express no position on this issue 
when we take it up?
    Secretary Jackson. I am going to carry out the mandate of 
Congress.
    Mr. Frank. Do you really think just repeating that mantra 
when it is not relevant to the question is helpful, Mr. 
Secretary? My question is, do you have an opinion? I know you 
will carry out the mandate. The question is, do you think it is 
an appropriate mandate? Do you think we should change it or 
keep it going?
    The Chairman. The gentleman's time has expired.
    Mr. Frank. So has his patience.
    The Chairman. The gentleman from Ohio, Mr. Ney?
    Mr. Ney. Thank you.
    Let me move on to vouchers for a second. On page six of 
your testimony, you state that the current system fails to 
support families making the transition from public assistance 
to self-reliance and work, and doing so produces a number of 
families that could have been helped for a given amount of 
money. I am just wondering if you could elaborate a little bit 
of your view of the mission of section 8, but also, what do we 
envision people transitioning to? That is the real thrust of my 
question.
    Secretary Jackson. Congressman, if we go back to the 
history of the section 8 program, we know the history of the 
section 8 program has come in two phases. First, it was 
basically section 23, which was supposed to help construct, 
build, and we would support those private developers through a 
section 8 project-based program. In the 1980s, we decided that 
that program was absolutely too expensive so we said why don't 
we go to a voucher program. We did go to a voucher program, 
which in essence said, no longer are we going to be relegated 
to charging 30 percent of the adjusted gross income. If a 
family can afford to pay 40 percent or 50 percent, let's do it.
    One of the mandates during that process, when we started 
the voucher program, was that it was to be a transition program 
between public housing and self-sufficiency. It was never 
envisioned as the QHWRA proposal in 1998 did, that said it has 
to be 30 percent or less of median in order for you to be 
qualified.
    So initially, the program was set up as a transitional 
program. From my perspective, I think that it should be. I do 
not think that the section 8 program should be a secondary or 
substitute for the traditional public housing program, which in 
my mind has perpetuated a system where people have lived in it 
two or three generations. Does that mean that people are going 
to be able to immediately move out of public housing? No, I am 
not foolish enough to believe that. Does that mean that we 
should not make every effort to help families who can afford to 
move out of public housing or off of section 8 to do it, yes, I 
believe we should.
    See, I come with a very different perspective. I do not 
come in dealing with public housing residents or low-income 
people from a position of paternalistic and patronizing. I 
believe that low-and moderate-income people are human beings 
with the same sense of worth that I have and I should work with 
them. I do not think, having run three major housing 
authorities, I have never seen anybody who consistently and 
constantly wants to stay in public housing or stay on the 
certificate.
    So my goal when running those authorities was to help them 
move. Did we move all of them? No, but in the end I think we 
have made enough progress. I think we should make that our 
objective, the same as we have done with the American Dream 
Downpayment Program to try to make homeownership a major 
initiative. I think we should do the same thing when we are 
talking about moving people from public housing through section 
8. If we can avoid section 8, let's try to avoid it, but to 
self-sufficiency.
    Mr. Ney. Thank you. The other interesting thing for our 
Subcommittee, we had hearings and we were in different spots, 
Los Angeles and Columbus, Ohio and different areas, hearings 
here, on the proposal that Secretary Martinez had, which was 
the block granting. We did not get a lot of reactions from 
Governors, obviously, on that issue. Now, we have this 
proposal. I do not know what happens in quick session here or 
with the authorizing and appropriations.
    Who knows what is going to happen with this whole proposal. 
But I do know either we add money, or if we do not add enough 
money, then that section 8 pie still grows, and then it starts 
to come down to taking money away, if there is limited amount 
of money, from some of the homelessness programs and AIDS. Then 
you have entities fighting each other.
    So I know it is a balancing act in the amount of time that 
is left this year, and the appropriations process, and I do not 
know what all happens here again, or what makes it through the 
system or not in the Congress this upcoming year. But I do 
think at some point in time, we are going to have to get people 
together for more than just a hearing, but people together on 
all sides of this issue for, I do not want to say a debate, but 
a reasonable civil dialogue back and forth until we can try to 
see what is going to be happening to this, versus always trying 
to do it at the appropriations process or the authorizing 
process, every year for a 3-or 4-month period. Because it is 
either add money, and if we are not going to add ``sufficient'' 
money for what people say the demand is out there in the 
housing authorities, then that pie will continue to shrink the 
programs, and get programs pitted against programs.
    Thank you, Mr. Chairman.
    The Chairman. The gentleman's time has expired.
    The gentlelady from California, Ms. Waters?
    Ms. Waters. Thank you very much.
    Mr. Secretary, my staff took down your comments on the 
changes that you are proposing for section 8 and how you 
propose to deal with the crisis that we have now. We are going 
to check with our housing authority to see what this is going 
to do for those outstanding vouchers that we have. I am pleased 
that you are moving forward to try and deal with this problem.
    Let me ask you something about your overall budget. When 
did the budget that you submitted to OMB change to this budget 
that has now been proposed?
    Secretary Jackson. I am not sure what you are asking.
    Ms. Waters. HUD submitted a budget.
    Secretary Jackson. This is our budget.
    Ms. Waters. No, I am talking about the original budget to 
OMB. When did it change?
    Secretary Jackson. No, this is our budget.
    Ms. Waters. This is the one you submitted to OMB?
    Secretary Jackson. This is the budget that we worked with 
OMB to formulate. In answering your question, I do not think 
anyone is more concerned at serving the needs of low-and 
moderate-income people in this country than I am. You might be, 
but I guess I have run three housing authorities, so I am real 
concerned.
    Ms. Waters. No, you came from a family of 12. I came from a 
family of 13.
    [Laughter.]
    One of those housing projects, my family lived in in St. 
Louis.
    Secretary Jackson. I never lived in one. Okay.
    Ms. Waters. So you do not care more about this than I do. 
Okay?
    Secretary Jackson. All right. Well, we care almost equally, 
then.
    [Laughter.]
    So I am very concerned, and I will defer to you that you 
care more.
    Ms. Waters. Okay. Well, let me just say this. I was trying 
to find out, because I know that if you put together a budget, 
you did better than this, and somebody messed with it. Somebody 
changed it, but I am not going to keep on that.
    You said you know a lot about GSEs. I am really concerned 
about this, because again in 1994, I worked to increase the 
goals and they have been increased over about three times since 
1994. I am looking at what is happening now, and I am concerned 
that you are taking away points and credits that should be 
given to the GSEs, and that you are doing away with bonuses for 
some of the most challenging housing projects. You are raising 
the goals. I am trying to find out why you are doing this. Are 
you familiar, for example, with the WOW program that the 
Congressional Black Caucus is involved in?
    Secretary Jackson. Yes.
    Ms. Waters. Do they get points for that? Do the GSEs get 
points for that?
    Secretary Jackson. I cannot answer that. I have been with a 
number of your colleagues in their cities promoting the WOW 
program.
    Ms. Waters. You know, it is heavily supported by the GSEs. 
Also, do they get points for the $1.7 billion in low-income 
housing tax credits?
    Secretary Jackson. Yes, I think they do.
    Ms. Waters. That is a question that we really do have to 
resolve, because as I understand it, they will not.
    What about the mortgage revenue bonds? I understand there 
are about $6.2 billion in 2003 in mortgage revenue bonds. Do 
they get credit for that?
    Secretary Jackson. I will have to get back to you on that.
    Ms. Waters. Okay. What do you know about the anti-predatory 
lending guidelines that come out of Fannie Mae, for example?
    Secretary Jackson. We work well with them on that.
    Ms. Waters. Do you know that they do much better than some 
of the institutions in FM Watch. We are concerned about some of 
those institutions in FM Watch, who have some very, very 
discouraging predatory lending practices.
    What about manufactured houses? We have beat up on them 
about manufactured housing. They are transforming manufactured 
housing. Do they get credit for that?
    Secretary Jackson. They have not really transformed 
manufactured housing. That is not true.
    Ms. Waters. Oh, yes, they are working with us.
    Secretary Jackson. They might be working with you.
    Ms. Waters. This effort was led by Mr. Benny Thompson of 
the Congressional Black Caucus, working with Mr. Ney and 
others.
    Secretary Jackson. I think they are working with you, but 
you said they had transformed. They have not. We have not 
transformed manufactured housing.
    Ms. Waters. Well, if they had, would they get credit for 
it?
    Secretary Jackson. Yes. And the same, as I said before, if 
it qualifies as low-and moderate-income, we are not going to 
hesitate to give them credit, Congresswoman.
    Let me say this, because I think it is very, very 
important. No one, especially at HUD, is trying to penalize the 
GSEs. I can assure you of that. You asked about, is this new. 
No. I only use their figures. Now, they report the figures to 
us. We are not at liberty to discuss those figures publicly. If 
the chairmen of each one of those GSEs would like for us to 
submit those figures to you, then you would see what I am 
saying today, they are not leading the market.
    They are lagging behind the market. If you pay close 
attention, just the other day the Chairman of one of the GSEs 
specifically said that his organization was not doing or coming 
close to doing what they should be doing for low-and moderate-
income people in this country and that he was restructuring it 
to make sure that he addresses the needs that were raised by 
HUD on the affordable housing efforts. Those are their words.
    Ms. Waters. I do not know who said that, and I cannot 
debate with you about figures and information that I am not 
privy to or you say that I cannot have. Simply let me just say 
this, I join with anybody who is interested in expanding low-
income housing opportunities. Let me must say that the no 
downpayment, low downpayment, all of that, that is good stuff, 
but it is a drop in the bucket.
    Most of the folks who are poor are going to be renting and 
they need some assistance and this is not enough. We do not 
want people to believe that all of a sudden because we have 
these very minimal programs that we are going to transfer 
everybody into homeownership. We have to do everything that we 
can. We cannot make it harder.
    I do not know why when you look at these points or these 
bonuses, or however you calculate this, that if one of these 
GSEs buys a lot of paper, lots of paper from Washington Mutual 
or anybody else, why they will not count. I mean, to the degree 
that they can get rid of that paper, that expands homeownership 
opportunities.
    The Chairman. The gentlelady's time has expired.
    Secretary Jackson. Congresswoman, that does not expand 
homeownership, buying mortgages from Washington Mutual.
    The Chairman. The gentleman from Wisconsin, Mr. Green.
    Mr. Green. Thank you, Mr. Chairman.
    Let me join with others in welcoming you, Mr. Secretary, to 
the committee. We appreciate your time.
    Secretary Jackson. Thank you.
    Mr. Green. I do not get this opportunity very often, Mr. 
Secretary, so if you will indulge me, I want to ask you a 
couple of very specific questions that hopefully you can answer 
or perhaps have someone get back to me with.
    Mr. Secretary, your office I think is aware that in 
Janesville, Wisconsin, which is in Congressman Ryan's 
congressional district, the city council recently passed a 
resolution to provide the Salvation Army with federal funds in 
order to purchase an apartment building to use for transitional 
housing for the homeless. It has since been reported, 
unfortunately, that an amendment was added by the city council 
which forbids any and all religious activity conducted by the 
Salvation Army personnel related to this project. As far as I 
know, there is nothing in federal regulations that would 
preclude a faith-based organization from using federal dollars 
for this type of project as long as any voluntary religious 
activities are not paid for with the federal funds.
    I do know that my colleague, Congressman Ryan, has been in 
touch with folks in your office, and we are aware, both of us, 
that you are crafting a response for the city. My question is, 
I am wondering what the response might be. Do you know if your 
office has been able to provide that yet?
    Secretary Jackson. We have not sent the response back, 
Congressman, but I can answer it this way. Your interpretation 
of the regulation is absolutely clear. We will make that clear 
to the city that as long as the prohibition is not to be able 
to push any specific or one religion, but as long as it is 
providing a service to persons within that respective 
community, yes, it qualifies under our proposals and grants.
    Mr. Green. Great. I appreciate that. Obviously, the sooner 
we can get a formal written opinion, the better off. I agree 
with your view, and obviously neither Congressman Ryan or 
myself want to see this great project sidelined.
    Secondly, as your office also knows and you have stated on 
a number of occasions, the FHA Title I insurance program is in 
need of reform. The program is very important to the 
manufactured housing industry. I am concerned with some 
developments that have recently been brought to my attention. I 
am aware that HUD has contracted with Frontline Systems to 
prepare a report on ways to reform the FHA title I program. I 
also understand that Frontline submitted its report to HUD 
almost a year ago. As you may know, the manufactured housing 
industry has made a number of requests to try to see this 
report. Apparently, so far all those requests have been denied.
    I am anxious that this important information is not being 
shared with the very folks who want to find ways to reform the 
system and to stop the loss of lenders, which obviously is a 
concern for all of us. This report has apparently now been 
sitting in an in-box for almost a year, and there are lending 
shortages that are going on in the manufactured home market 
that I think are hurting the low-income borrowers that 
obviously all of us want to serve. Can you give us some idea 
when this report might be made public?
    Secretary Jackson. Congressman and Mr. Chairman, if it is 
okay, may I have Dr. Weicher, who is the Assistant Secretary of 
Housing, answer this for me?
    Mr. Weicher. Thank you, Mr. Secretary. I am John Weicher, 
Assistant Secretary for Housing and FHA Commissioner and 
responsible for the Title I program. We have been reviewing the 
report. It made a number of recommendations on both the 
manufactured housing program and the home improvement program. 
They are both part of Title I. We have made a commitment to 
provide that, to make that report public within the next 2 to 3 
weeks. We have had conversations with folks on the Senate side 
about this, and it will be out shortly.
    Mr. Green. Great. I appreciate that. That is very helpful 
indeed.
    Next, I would like to talk briefly about the section 811 
tenant-based funds. Mr. Secretary, as you know, several months 
ago a group of us on this committee wrote to you regarding 
HUD's implementation of the section 811 mainstream tenant-based 
rental assistance program. In the letter, we raised a number of 
issues related to the absence of any programmatic guidelines to 
housing agencies and nonprofit grantees that receive these 
funds.
    In response to the letter, HUD has indicated that it has no 
plans to issue any guidance to these agencies. I wanted to hear 
from you your reasoning as to that, and I was hoping that you 
would reconsider. I think these guidelines are extremely 
important to grantees and others who are involved in the 
section 811 mainstream tenant-based program.
    Secretary Jackson. I wanted to make sure that I was 
correct. I am sorry, Congressman. Since we provide those funds 
to public housing agencies, and they utilize them under their 
guidelines that they have set up. That is basically the way 
that we have done basically with the section 8 program.
    Mr. Green. Okay. Mr. Chairman, if I may have a chance to 
submit further questions for the record.
    The Chairman. Without objection.
    Mr. Green. Thank you, Mr. Secretary.
    Secretary Jackson. Thank you so much, Congressman.
    The Chairman. The gentleman from Vermont, Mr. Sanders.
    Mr. Sanders. Thank you, Mr. Chairman.
    Secretary Jackson, thank you very much for being with us 
this morning.
    Secretary Jackson. Thank you.
    Mr. Sanders. I must start off by saying that I regard it as 
slightly disingenuous for anybody here to be suggesting in any 
way that this Administration is serious in trying to deal with 
what amounts to a major crisis in this country in terms of 
affordable housing, a crisis that every American and certainly 
the Bush Administration should be ashamed of. More than 14 
million Americans are paying over 50 percent of their limited 
incomes in housing; 3.5 million people in this country will 
experience homelessness this year, including 1.3 million 
children and 500,000 veterans. And people are suggesting that 
we are serious about addressing the housing crisis?
    We have a ``war'' budget, but we have hundreds of billions 
of dollars for tax breaks for millionaires and billionaires 
while children sleep out on the street and people with a 
straight face tell us that we are addressing the housing 
crisis.
    The National Millennium Commission, which was chaired by a 
former Republican Member of Congress, Susan Molinari, suggested 
that we needed to build 150,000 affordable housing units every 
year. Last year, I asked Secretary Martinez, who was sitting 
where you are, how many affordable housing units HUD was going 
to build. He said 5,000. We need 150,000, and we are building 
5,000. Briefly, Mr. Secretary, how many affordable housing 
units are you going to build this year?
    Secretary Jackson. Let me say this to you, and I will 
answer your question.
    Mr. Sanders. I am asking you the question.
    Secretary Jackson. Okay. I said I would answer your 
question.
    Mr. Sanders. Okay.
    Secretary Jackson. If you will help us pass the single-
family housing tax affordable credit, we can build a lot of 
houses. With that, I want you to understand that the greatest 
barrier to affordable housing in this country is not the 
federal government. It is state regulatory barriers.
    Mr. Sanders. I have heard that speech 100 times.
    Secretary Jackson. Whether you want to hear it or not, I am 
just telling you.
    Mr. Sanders. I have heard it. We have all heard it.
    Thank you. My time, sir.
    Now, if you want to build affordable housing, you could 
support the legislation that I have introduced which has 212 
bipartisan cosponsors; which would build 150,000 units of 
housing every year, that is the National Affordable Housing 
Trust Fund.
    Let me go to another area, which has, by the way, support 
of 5,000 organizations throughout this country. Yesterday, Mr. 
Secretary, public housing authorities throughout my State of 
Vermont contacted my office to express their outrage by a HUD 
notice announcing the following cuts in section 8 
administrative expenses retroactive to January 1 of this year. 
We are a small state, not California; this is Vermont; a 
$262,000 cut representing 14.4 percent of the section 8 
administrative budget for the Vermont State Housing Authority; 
$180,000 cut for the Burlington Housing Authority, 19 percent 
of their budget; 17 percent for Winooski, 13 percent for 
Montpelier; et cetera.
    How are agencies supposed to administer programs when they 
are experiencing draconic administrative cuts?
    Secretary Jackson. I would say this, Congressman. We are 
administering the pro-rata share of the money based on what 
Congress has told us to do. I think that clearly your housing 
authority will benefit in Vermont like all of the others. I 
think I said that in the beginning of this hearing.
    Mr. Sanders. You said about the voucher program.
    Secretary Jackson. Right.
    Mr. Sanders. I understand that. You did not say about the 
administrative. What I am telling you is that the housing 
authorities in Vermont have told us there are going to be cuts 
by between 15 and 20 percent.
    Secretary Jackson. Okay.
    Mr. Sanders. This is not what Congress mandated.
    Secretary Jackson. We are distributing the money on a pro-
rata basis that Congress mandated.
    Mr. Sanders. That is not my understanding.
    Secretary Jackson. Well, that is a fact.
    Mr. Sanders. Can you justify to this committee how people 
are supposed to do their jobs when they are getting up to a 19 
percent cut in administrative allowances?
    Secretary Jackson. I can tell you that is the money that we 
have been allocated to pro-rata and that is what we are doing, 
Congressman.
    Mr. Frank. Would the gentleman yield?
    Mr. Sanders. Yes, I would.
    Mr. Frank. The gentleman is correct. What the Secretary 
talked about was the voucher funding and the reserves, but not 
administrative funding. So what the Secretary said earlier does 
not respond to the gentleman's question.
    Mr. Sanders. You did not answer my question, sir. Are you 
telling us you are concerned about affordable housing and you 
are cutting housing authority administrative capabilities by up 
to 19 percent? I assume this is national. I am sure it is not 
just Vermont.
    Secretary Jackson. What I am saying to you is that we are 
pro-rata-ing the money on the basis for the administrative fees 
that have been allocated by Congress, and your housing 
authority will receive their monies, too.
    Mr. Sanders. Can you give the members of this committee any 
assurances that you are going to look at that issue and you are 
going to try to rectify what is potentially a disastrous 
situation?
    Secretary Jackson. Congressman, you have my word. I will be 
happy to look at it. We are going to make every effort.
    The Chairman. The gentleman's time has expired.
    Mr. Sanders. Can I give you a call and you and I will chat 
about this?
    Secretary Jackson. You may, sir.
    Mr. Sanders. Okay. Thank you very much.
    The Chairman. The gentleman from Connecticut, Mr. Shays.
    Mr. Shays. Thank you, Mr. Chairman. I am happy to swap my 
time with my Chairman of the Capital Markets Subcommittee.
    Mr. Baker. I thank the gentleman for his courtesy.
    Mr. Secretary, I think you are doing an outstanding job. I 
regret the treatment you have received to date in this 
committee this morning because of your aggressive leadership in 
making changes that really count.
    Let me speak first to the GSE issue very quickly. GSEs are 
underperforming the market and the way to get to this number is 
to go look at what loans are held in portfolio. Those people 
who are low-income with lack of resources would be those people 
who would have low amounts of downpayment. They would be 95 
percent to 100 percent of LTV ratios. When you look at the 
GSEs's annual reports, which I have done, you find that less 
than 5 percent in Fannie and less than 4 percent in Freddie are 
typified by those types of loans. When you go to a commercial 
bank, it averages 11 to 13 percent nationally.
    Now, I am going to write the letter you asked for somebody 
to write, to make full disclosure of how HUD views now the 
conformity with those low-income housing goals which you 
stipulated you do not have the authority to release without a 
congressional request, because I think it is important for this 
committee to have the facts, whether they want to understand 
them or read them or not.
    Now, some will say the GSEs do not have the authority to 
initiate or originate loans. That is in fact the case, but they 
have the black box by which they determine who is approved or 
required to move into the secondary market, and you have to hit 
a certain score. The reason why those banks have 13 percent of 
those low-income loans in portfolios is because the GSEs will 
not buy them.
    So if they were innovative in leading the market instead of 
worried about double-digit rates of return for their 
shareholders and paying their executives, the top 20 which I 
happen to know make in excess of $1 million in salaries and 
benefits, we could help low-income people in this country by 
making a meaningful departure and taking the subsidy, which is 
valued by many at multi-billions of dollars for multi-years, 
including Alan Greenspan, the President, the OCC, the FDIC, 
anybody who has a ``C'' after their name who is a financial 
regulator. They will tell you that this deal is running 
sideways.
    We are taking taxpayer guarantee, implicit-explicit, it 
does not matter. You talk about removing the line of credit, 
markets go crazy. Gary Gensler in the Clinton Administration 
sat where you sat and said we ought to repeal line of credit. 
In that day, the stock price went down. Did it affect the 
interest rates on homeownership? Absolutely not. Did it hit the 
executives in their pocket? Absolutely. Why are they squealing? 
Because they are worried about losing their profit, not about 
helping poor people get housing.
    I have simply just had it. This argument is about not 
protecting market share. It is about protecting the way a 
corporate entity operates that makes profit at taxpayer 
guarantee. There is nobody that can convince a rational person 
that the explicit guarantee, the implicit guarantee, the 
sideways guarantee, does not in fact result in that enterprise 
making huge profit. If they were ever to lose money, is there a 
doubt by anyone on this committee that the taxpayer would be 
called on to pay off that?
    Let me jump one quick second. You are doing some innovative 
things. You have taken a look at a project down at Carville, 
Louisiana which provides resources between Job Corps, the 
National Guard and helping kids 16 to 18 years of age on the 
streets who otherwise would not get educational opportunity, by 
giving them a GED course in 5 months, giving them job training; 
90 percent graduate or are fully employed.
    It is a remarkable program, and I am asking, with the time 
I have left, on page 12 of your testimony which I have read 
thoroughly and I really appreciate. I think it is outstanding 
testimony. The department will provide $55 million in funds to 
support the resident opportunity and self-sufficiency program 
for residents of public and Indian housing. The main purpose of 
these funds is to provide a link between residents and services 
that can help them achieve self-sufficiency.
    We care about people. We do not want to house them in 
public housing and leave them there without the tools necessary 
to succeed in life. That $55 million is going to give people 
job skills. What I hope you will be able to take a look at that 
program, the youth challenge program down in Carville, 
Louisiana, and replicate that wherever you think advisable.
    I want to yield back my time to Mr. Shays for whatever use 
he might care to make of it.
    [Laughter.]
    Secretary Jackson. Congressman Shays, may I say I have had 
a chance to view the program and it is a phenomenal program. He 
is taking persons who had no perspective of what was going to 
happen to their lives and made them productive citizens. I 
would hope that that would be replicated around this country in 
every congressional district in this country. I think it is a 
very excellent program, especially where you have a high 
concentration of African Americans and Hispanics, the low-and 
moderate-income person.
    If you will notice, I never use the term ``poor'' because 
``poor'' is a State of mind, not a condition. That is what it 
is. I have a lot of wealthy friends who are poor. So I always 
say low-and moderate-income people because I think we should 
think about making them as middle-class as we can. I think that 
the program that the Congressman is talking about is one of 
those programs that is productive.
    Mr. Shays. Thank you. With the 15 seconds I have left, I 
just want to say that I wish that the other side of the aisle 
had let you respond to the questions they asked, because they 
are important questions. They ask you the questions, and then 
they do not allow you the chance to respond. I just wish you 
had that opportunity.
    I will look forward to questioning you in my round.
    Secretary Jackson. Thank you.
    The Chairman. The gentleman's time has expired.
    Mr. Frank. Mr. Chairman, can I just ask unanimous consent 
that the pace at which Mr. Baker spoke be established as the 
norm for the committee. I would feel a lot more comfortable.
    [Laughter.]
    The Chairman. Without objection.
    Mr. Baker. Mr. Chairman, I have a further request. The pace 
of speaking is one thing. The pace of understanding is entirely 
something else.
    [Laughter.]
    Mr. Frank. There are limits to what you can accomplish by 
unanimous consent.
    [Laughter.]
    The Chairman. I think we have proven that time and again.
    The gentlelady from New York, Ms. Maloney.
    Mrs. Maloney. Thank you. Welcome, Mr. Secretary.
    I would like to be associated with the comments of Ranking 
Member Frank on the overall section 8 program, the GSEs and 
other factors. But I would like to question you primarily on 
what this new formula, the devastating effect that it is having 
in New York City. I would say that every housing authority 
across the country, like New York City, is up in arms and their 
challenges are probably very similar to New York City's.
    Under this new formula, New York City alone will lose $55 
million out of their current budget for section 8. There are 
over 141,000 people on the waiting list for section 8, and 83 
percent of them have incomes less than $16,000 a year. They are 
no longer able to distribute vouchers available through 
attrition, and it has truly caused chaos in the tenants lives. 
I would say it has caused chaos in the private sector, those 
people that are willing to finance and work with the city and 
State and federal governments for affordable housing. They are 
now wanting to run away from their commitments.
    It has undermined the confidence in section 8 and one of 
its goals to de-concentrate the poor, but not only section 8. I 
am getting phone calls on section 202 saying, I no longer want 
to go forward with my 202 program that may be treated like the 
section 8 program, not funded and totally changed. This is a 
very, very serious problem. I agree with my colleagues who say 
you need a city, State and federal effort to build affordable 
housing.
    You came forward with two proposals today to try to be 
helpful, but in all due respect it appears to be more of 
spinning a problem than fixing a problem. In New York City, the 
annual adjustment factor which you mentioned, they were already 
counting on that. It seems that that was what they were 
supposed to get anyway. The only concession to the PHAs was 
basically nothing more than giving them their full year's 
inflation factor, their annual adjustment factor, throughout 
the year instead of making it at a graduated rate leading up to 
the total AAF. So they tell me that that does not help them at 
all with the $55 million gap.
    Then the second item that you mentioned, Secretary Jackson, 
that you would free up more of the 2003 central reserve funds 
to be used to reimburse the public housing authorities that had 
their own program reserves depleted in 2003. Well, that is New 
York City and probably many more public housing authorities 
across the country. But this money was always supposed to be 
replenished from the city's own depleted reserves. So New York 
City's public housing authority, your two new programs do not 
help them at all with the $55 million gap that they are facing. 
I understand from press report that there are eviction notices 
going out across the country because of this new formula 
change.
    So my question to you is, what are you going to do for the 
poor families in public housing in New York City and in other 
places across the country to make up this tremendous cut in the 
budget this year that is harmful? Then the next question is, 
what in the world are you going to do next year? Are you going 
to cut even more?
    In all due respect, your answer that the problem with 
building affordable housing is problematic regulation, we need 
affordable housing, we need the federal government. We need the 
continuation of one of the most successful programs for the 
poor this country ever developed, from President Nixon to the 
present. Every specialist will tell you it has been the most 
successful program for the poor.
    So this is a devastating change. But my question, your two 
points will not help New York City's crisis at this point. I 
predict it will not help other cities in the same position.
    Secretary Jackson. First of all, I appreciate your 
Statement, but I can tell you that there will not be an 
alarming number of cities who are facing the crisis that you 
just said. Secondly, it is important that we will address the 
issue in New York City and we have begun to address the issues 
in New York City. I think that we will reach conclusion on 
those. But I think it is important to understand how you say we 
are devastating the program. Until 1999, the program was 
budget-based. You got a budget. You did not get units. When I 
ran housing authorities, there was no unit-based authority. 
That was after 1998.
    So I got a pile of money and the money simply said that you 
have to allocate your units based on whatever we give you. We 
changed that and we have had an exponential growth in the 
program since then. The question is, the program cannot keep 
going at the rate that it is going. It is about 53 percent of 
our budget today. If we continue to go to program, then I would 
be facing you tomorrow with you saying to me, what are we going 
to do about the homeless programs; what are we going to do 
about HOME; what are we going to do about the CDB grants.
    The Chairman. The gentlelady's time has expired.
    The gentleman from New Jersey, Mr. Garrett.
    Mr. Garrett. Greetings.
    Secretary Jackson. Thank you.,
    Mr. Garrett. Just a couple of questions on some of the 
testimony that you have already given, some along the line from 
both sides of the aisle. It is my understanding that with 
regard to the rules that you have promulgated with regard to 
GSEs, that because of the existing housing goals, there is 
already in certain areas, not in every area of course, an over-
capacity of multi-family rental units that are currently left 
vacant. It is suggested that these high vacancy rates are 
basically an example of whenever the government becomes 
involved in trying to allocate scarce resources from one 
location to another, that you are going to have inefficiencies 
in the system that is better left to the marketplace to derive.
    So wouldn't it be better than to exacerbate this problem by 
placing additional burden on the system by stepping back?
    Secretary Jackson. No, because Congressman, if we do not 
ask the GSEs to adhere to their missions, it is clear from the 
past that they will not adhere to those missions. We believe 
clearly what we are asking them to do is to, under the 
congressional mandate, be the leader in providing low-and 
moderate-income affordable units under the mandate. We are not 
asking them to do anything differently. It was said a few 
minutes ago that, well, they buy portfolios. Well, those 
portfolios that they bought are already in use. They have not 
expanded the base. We are asking them to address the issues the 
congresswoman just said, the congresswoman from New York, to 
provide more affordable housing. The only way we can do that is 
say that we are not going to continually give you points for 
something that is artificial and not realistic, but we want you 
to lead the market.
    They come back and say, well, this is going to put us in 
jeopardy. I do not see how it is going to put them in jeopardy. 
We are not talking about the high end of their market that they 
do the secondary writing. We do not really care. We are just 
saying, address the charter mandate, and if you do that we will 
work with you. I do not think we are stifling. I am with you. I 
do not think we should stifle the enterprise market, but I 
think we should make them carry out their mandate.
    Mr. Garrett. Let me go to the other end of the line then. 
One of your opening comments, which drew some response, was the 
implicit government guarantee. Earlier on in hearings that we 
had last year, I guess it was, was discussion with regard to 
the line of credit, which I guess I am always told as a 
freshmen here, is just a small line of credit and one of the 
expressions they use, it is only a day's impact of revenue as 
far as the GSEs are concerned. So one of the questions in 
earlier hearings at the time was, if it is such a de minimus 
amount, why does that line of credit still exist? If you remove 
that, would that obviate the whole question that seems to go 
back on the other side of the aisle as far as whether there is 
or is not an implicit line of credit there?
    Secretary Jackson. I would think you would have the two 
chairmen of the GSEs. I do not think I am at liberty to really 
discuss that.
    Mr. Garrett. I will do what the other side said, do you 
have an opinion on it?
    Secretary Jackson. I think they should answer that 
question, Congressman, not me.
    Mr. Garrett. Does he have an opinion on it?
    [Laughter.]
    Secretary Jackson. No.
    Mr. Garrett. Okay.
    Secretary Jackson. I did not want to say it, but I think it 
is a good point to say it, as Dr. Weicher just said, as I told 
the congressmen here in my talking initially when I came in 
here with the GSEs, initially what was said to me about the 
implicit, but the market also believes that there is an 
implicit guarantee. I think you have heard it a number of times 
in the last 5 or 6 months in different papers. Whether there is 
or not, I think the people to answer that would be the GSEs.
    Mr. Garrett. Okay. Let me go down a totally different road 
on this. In the discussion of the burden that is placed by the 
States, not by the Congress, not by the federal governments, as 
far as the housing restrictions. Some make light of this, but I 
certainly see it from the realtor community, from the building 
community back in my home State in New Jersey, and I certainly 
see it from not only the regulatory side of the equation, but 
the entire taking side of the equation as well.
    That is, we see it in our State right now, the whole taking 
of private property, taking it off the lists entirely so you 
just cannot build any housing, whether it is high priced 
housing or even affordable housing even less, considering where 
they are trying to do this. Is there anything that either you 
are able to do or is there any suggestion that you may be able 
to make to Congress that we are able to do on the federal level 
vis-a-vis the States as far as this taking issue and also the 
regulatory side, that we could step up to the plate to make 
sure that there is land there and less restriction on the 
costs?
    Secretary Jackson. Before Secretary Martinez left, and I 
followed, we both agreed that in order for us to be effective 
in going to States in different locales to insist that they 
begin to relieve developers of these regulatory barriers, 
whether they are environmental, permit-wise or otherwise, is 
that we have to first do it at HUD. We are cleaning up our own 
process at this point.
    If you take, for example, California, the Congresswoman is 
leaving, before you leave, before you can even bring a house 
out of the ground, you are looking at somewhere between 
$105,000 and $115,000 with the regulatory barriers that you 
face. It is about $96,000 in New Jersey. So if we can break 
down those barriers with States, then I think we can make 
inroads.
    That is what we are doing with the single family affordable 
housing tax credit. We are giving those incentives to 
developers to go into the urban areas to develop and write-down 
almost 50 percent of what it takes to get that house out of the 
ground. But even if we do that, we are still going to have to 
have flexibility from the States, from the cities, and say that 
we are going to work with you to make sure that we can create 
affordable housing, as the Congresswoman from New York said.
    The Chairman. The gentleman's time has expired.
    Mr. Garrett. Thank you.
    The Chairman. The gentlelady from New York, Ms. Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Jackson, in your testimony you stated that ``HUD's 
lead-based paint program is the central element of the 
President's efforts to eradicate lead-based paint poisoning.'' 
You also stated that ``Funding for the lead-based paint will 
increase to $139 million from $136 million requested by the 
President for fiscal year 2004.'' When it comes to numbers that 
are provided by the Administration, they always make me uneasy, 
because I remember quite fresh the Medicare prescription bill 
numbers that were provided to us. Isn't it true that the 
program was funded at $174 million last year, so the 
President's request is in fact a cut of more than 20 percent, 
not an increase?
    Secretary Jackson. I am sorry. Yes it was, but Congress 
added the money to it. You all did.
    Ms. Velazquez. I am sorry?
    Secretary Jackson. You all added the money to it. It was 
at, I think, $136 million or $136 million.,
    Ms. Velazquez. $136 million.
    Secretary Jackson. Yes, and you all added the extra money, 
Congress did.
    Ms. Velazquez. But if the President is so concerned about 
protecting children in our nation, why didn't you request to at 
least maintain current funding levels for these programs?
    Secretary Jackson. That is because you all added the money 
because you wanted us to do some demonstration programs and we 
did.
    Ms. Velazquez. Because of us, so do not come here and tell 
us that the President's priority is to protect our children, 
when the President's request is totally inadequate.
    Secretary Jackson. That is from your perspective. I am 
saying that we think it is quite adequate, and I think it 
addresses what we are trying to do. I think that the programs 
around the country, a number of cities and States, have given 
us great accolades for addressing the lead problem.
    I guess that, again, I appreciate your asking that question 
because probably nobody has had to deal with lead more than I 
have in two specific areas, both St. Louis and in Washington, 
D.C. This Administration has funded the lead hazardous program 
better than any Administration in the years that I ran public 
housing. That is a fact.
    Ms. Velazquez. Well, you come here and you say that you had 
a request to increase funding, when in fact it was not. It 
seems to me that there is a contradiction, sir, in the 
Administration's demand to hold our schools accountable while 
retreating on efforts to protect children from lead poisoning, 
so that they can start school ready to learn.
    Secretary Jackson. I agree with you wholeheartedly, 
Congresswoman, and I am saying to you that----
    Ms. Velazquez. Okay. Let me ask you another question about 
the 203(k) scandal in New York, Harlem and Bushwick, one is 
part of my district, where so many people lost their homes, and 
now again you are going into the second round of selling those 
properties. Can you tell me whether the agency is implementing 
safeguards with these auctions to prevent a repeat of the 
203(k) scandals?
    Secretary Jackson. If it is okay, I would like Dr. Weicher 
to answer it. I know the answer, but I think he can give you 
more details.
    Ms. Velazquez. Sir, what is your plan to ensure that these 
families are not victimized one more time? We love to talk 
about accountability, but you created that mess in New York, so 
what are the safeguards that you are putting in place to 
protect those families?
    Mr. Weicher. Ms. Velazquez, let me start by saying that the 
mess was created in 1998 and 1999 and 2000. We in this 
Administration have been addressing that and cleaning it up. We 
have been working with the City of New York, with HPD, in their 
established programs and with developers that they have worked 
with who know how to do the job of rehabilitating these 
properties and who are ethical developers with solid 
reputations, to make sure that the work is done and done 
properly.
    Ms. Velazquez. Sir, let me say this to you.
    Mr. Weicher. Yes.
    Ms. Velazquez. I have been writing to you. I have been 
visiting with these tenants. I have been seeing these 
properties, and you are not taking care of that situation back 
in my district. It is a shame that either you or the City of 
New York, because you cannot just say I am going to give it 
back to the City of New York, and you just go ahead and do 
whatever. No one is accountable. I write to you. You do not 
deal with the issue. I write to HPD in New York. So you are 
giving these properties to New York with no type of federal 
regulations or anything. This is going to happen again.
    The Chairman. The gentlelady's time has expired.
    The gentlelady from Florida, Ms. Harris.
    Ms. Harris. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary. I am pleased to see you here. Thank 
you for taking the time to be with us today.
    Secretary Jackson. Thank you.
    Ms. Harris. As you know, I was honored to sponsor the 
American Dream Downpayment Act last year that the President has 
signed. As I travel the country, people are so anxious to begin 
the opportunity of homeownership, including where I pick up my 
dry-cleaning every single week on Capitol Hill. They say, when 
can we start?
    I understand you are in the process of crafting the 
regulations, but can you give us an update as to when you 
expect that people can begin this opportunity?
    Secretary Jackson. We have allocated the money to a number 
of cities. We hope that they will begin to disburse the money 
immediately.
    Ms. Harris. In the American Dream Downpayment Act, we also 
reauthorized HOPE VI with more accountable standards and 
allowing authorized Main Street programs throughout the country 
to be able to access some of those funds for affordable housing 
so our first responders can live in these small communities 
near where they work. I was disappointed to see that those 
funds were not allocated in the President's budget. Hopefully, 
we will address that.
    A second quick question, we are working in obviously a 
tight fiscal environment, much accountability, many 
efficiencies. I am a member in the freshman class, a co-founder 
of the Washington Wastewatchers Club. There was at one point $7 
billion that was identified by the HUD inspector general that 
was not used for its intended purposes. What types of programs 
do you have in place or are you planning to have in place to 
fight the waste, fraud and abuse which is at taxpayers's 
expense?
    Secretary Jackson. I think that is a very honest question. 
I must say that the Inspector General at HUD has been 
absolutely phenomenal. We have not always agreed, but he has 
kept HUD ethically true to the mission. Where there have been 
problems, he has brought them to us and we have worked with 
him. In the end, we might not have agreed from the HUD 
perspective, but he had to make a report. I can tell you that 
Ken Donohue, who is the Inspector General, has been absolutely 
excellent. We have not had any serious problems at HUD the last 
3 years.
    We have tried to clear up those problems that we have had 
each time we found them. It does not mean that some of the 
problems we have had in the field or region have not been, I do 
not want to say not serious, that is not the question. We have 
had problems, but we have addressed them very quickly and 
worked with the inspector general to clear them up. So please 
excuse me for saying ``not serious.'' I think that anytime we 
have fraud, waste and abuse, it is serious, but we have worked 
with him.
    Ms. Harris. Now to my real question, I want to turn you 
attention to HUD's new proposed affordable housing goals for 
the GSEs, the 57 percent of the loan purchases that are going 
to be made to borrowers that are below the area median income. 
I have a strong record of desperately caring about affordable 
housing, but I am concerned that these goals may put the GSEs's 
portfolio at risk. On the one hand we are constantly talking 
about the concerns that we have for the safety and soundness of 
these GSEs, and on the other hand I am concerned that we may be 
setting these goals unrealistically high.
    Secondly, if the targets and assumptions for these targets 
that are established are not correct, would the GSEs be forced 
to voluntarily lower their conforming loan purchase limits in 
order to assure that they hit those targets? Because if that 
were the case, I think it would be devastating in arenas such 
as Florida, New York and California where the costs are much 
higher.
    Secretary Jackson. I think that is a very legitimate 
question. But let me say this to you, Congresswoman, I think 
asking them to address their mandate to serve low-and moderate-
income people is less risky than investing in derivatives. I 
really do.
    Secondly, it is amazing to me that when you ask them to 
meet their mandate, they would say that it is going to affect 
their ability to carry out their mission or lower their 
abilities to make loans. That is their chartered mission, to 
address the needs of low-and moderate-income people in America. 
I would love to meet that mandate if I were doing as well as 
some of their top executives are doing. I would love to address 
the needs of low-and moderate-income people.
    Ms. Harris. You are not concerned that it is going to put 
their portfolios at risk at 57 percent?
    Secretary Jackson. No, I do not. I can tell you honestly, 
if I thought that, I would not do it. I do not want to 
jeopardize any one of the two GSEs, because I think they serve 
a very vital purpose for this country. I also think that it is 
their responsibility to address the needs. As I said before you 
came in, they keep talking about what they cannot do. They 
report to us quarterly.
    If we are wrong when we are saying they are not leading the 
market that they should be leading, all I would ask the two 
GSEs is give us permission to provide you with the data that 
they provide us. If they give us permission, then you will see 
they are not coming close to addressing the needs of low-and 
moderate-income people in this country. All we are saying is to 
do it.
    The Chairman. The gentlelady's time has expired.
    Ms. Harris. Thank you.
    The Chairman. The old right-hander from North Carolina.
    Mr. Watt. I assume that is me, Mr. Chairman.
    [Laughter.]
    The whole right-hander. I think that is the wrong 
characterization. Do not take that from my time.
    [Laughter.]
    Welcome, Mr. Secretary and thank you for being here today.
    Secretary Jackson. Thank you.
    Mr. Watt. Mr. Chairman, may I start by asking unanimous 
consent to submit for the record a report prepared by the Urban 
Institute and the Brookings Institution entitled A Decade of 
HOPE VI Research Findings and Policy Challenges.
    [The following information can be found on page 106 in the 
appendix.]
    The Chairman. Without objection.
    Mr. Watt. I get a lot of questions about the whole budget, 
but I have spent a lot of time focusing on this HOPE VI issue. 
I would like to focus my questions solely on that issue.
    Back in 1989 or 1990, something called the National 
Commission on Severely Distressed Public Housing did an 
assessment of public housing to identify severely distressed 
public housing units. It indicated that there were 86,000 
severely distressed public housing units.
    This report that I have just submitted for the record 
indicates that approximately 19,000 public and market-rate 
housing units have been generated under the HOPE VI program in 
the last 10 years. Giving the benefit of the doubt, let's round 
that to 20,000 units. What happened to the other 66,000 
severely distressed housing units that were identified?
    Secretary Jackson. Let me say this, because----
    Mr. Watt. I don't want you to say. I just want you to 
answer my question, Mr. Jackson.
    Secretary Jackson. I think I should clarify.
    Mr. Watt. I have a series of questions. I would like for 
you to answer the questions. I have heard you give speeches. I 
love to hear you speak. Today, I want you to answer my 
questions.
    Secretary Jackson. First of all, there are not 66,000. 
There are about 126,000 that are unbuilt today.
    Mr. Watt. Okay.
    Secretary Jackson. What has happened to this is that we 
have allocated the money to the housing authorities and the 
housing authorities have spent most of the administrative fees, 
but not spent on building the units. Secondly, what is 
important here is this, that there have only been 26 successful 
HOPE VI developments out of----
    Mr. Watt. Is your answer that instead of 86,000 today, 
after 10 years there are one-hundred-and-some thousand severely 
distressed housing units?
    Secretary Jackson. That is what we funded.
    Mr. Watt. Okay. All right. The question is, how many 
severely distressed housing units do we have today?
    Secretary Jackson. That is very difficult to answer.
    Mr. Watt. But the Administration apparently has concluded 
that the mission of HOPE VI has been met, I mean, I am quoting 
the President, and the gentleman behind you there, the last 
time he testified, told me that the mission of HOPE VI has been 
accomplished. I thought that mission was to replace those 
86,000 starting off, and any that were added subsequently.
    Secretary Jackson. The mission has been accomplished.
    Mr. Watt. Okay. So you are saying there are no severely 
distressed public housing units in the country?
    Secretary Jackson. Not according to the initial 86,000. We 
are well above that. Congressman, I think you have to 
understand you are talking to the person who wrote the 
legislation.
    Mr. Watt. I do not care who I am talking to, Mr. Jackson. I 
just want you to answer my question. I did not come here to 
hear you give me a speech. I am trying to find out how many 
severely distressed public housing units you have.
    Secretary Jackson. There were 86,000 in 1989.
    Mr. Watt. How many do we have today? That is the question I 
am asking, Mr. Jackson.
    Secretary Jackson. We funded more than 86,000.
    Mr. Watt. I did not ask you how many you funded. I asked 
you how many severely distressed public housing units do we 
have in the country today.
    Secretary Jackson. I will tell you, Congressman, we have, 
according to what the HOPE VI program was set out to be, we 
have none, if we said back in the study it was only 86,000.
    Mr. Watt. So your testimony is that there are no severely 
distressed housing units left in the country today. Is that 
what your testimony, Mr. Jackson?
    Secretary Jackson. I am not going to say that to you. I am 
not going to say that.
    Mr. Watt. Then please answer the question. How many 
severely distressed public housing units do we have in the 
country?
    Secretary Jackson. You answered the question yourself. You 
said there were 86,000 and I am telling you, we funded above 
86,000.
    Mr. Ney. [Presiding.] The time has expired.
    The gentleman from Connecticut?
    Mr. Shays. I am happy to pass a bit to hear my other 
colleagues ask questions. So I reserve my time.
    Mr. Watt. Would the gentleman yield me enough time to get 
my question answered?
    Mr. Ney. Does the gentleman yield?
    Mr. Shays. No. I am not using my time now. I am reserving 
my time, so ask another Republican.
    Mr. Ney. That is fine, the gentleman does not yield.
    Mr. Renzi?
    Mr. Renzi. I thank the Chairman.
    I want to let you know that Chairman Ney and Ranking Member 
Waters were kind enough to come out to the Navajo Nation. I 
appreciate your sending a representative out. I want to talk to 
you about Native American housing which is severely depressed.
    Secretary Jackson. That is true.
    Mr. Watt. Oh, no. None of that exists anymore in this 
country, apparently.
    [Laughter.]
    Mr. Ney. Is the gentleman requesting time or saying 
something?
    Mr. Watt. I have been requesting an answer for the last 5 
minutes. I just have not gotten it.
    Mr. Ney. The gentleman's time has expired.
    Mr. Frank. The gentleman from North Carolina is just 
severely distressed.
    [Laughter.]
    Mr. Watt. I am severely distressed, right.
    [Laughter.]
    You are absolutely right. I am severely distressed because 
we cannot get an answer. I thought this was a hearing to get 
the facts about what was going on.
    Mr. Ney. All Members of Congress are distressed at this 
point in time.
    The gentleman, Mr. Renzi.
    Mr. Renzi. Within section 184 of Title VI we have a 
situation where we are looking at a rescission of funds as it 
relates to programs that were supposed to be used extensively 
by Native Americans. I am sure you are aware of it.
    Secretary Jackson. Yes.
    Mr. Renzi. We are coming up on that time where that money 
is supposed to be going back. What are we doing to make sure we 
do not lose that money? What are we doing to make sure that we, 
next time the money is available, that we are fully able to 
utilize it?
    Secretary Jackson. I will ask Assistant Secretary Liu to 
help me, but it is clear we put the money back in place, 
because we realized that we had some serious problems, and I 
would like to let him speak to it.
    Mr. Renzi. Okay. I am not going to cut you off, but I had 
your answer at my hearing. Go ahead.
    Mr. Ney. Please state your name for the record.
    Mr. Liu. Assistant Secretary Michael Liu of the Office of 
Public and Indian Housing.
    Mr. Renzi. Go ahead.
    Mr. Liu. Congressman, I appreciate the time that we had a 
few weeks ago in Arizona. We are aggressively working with the 
Indian tribes to promote the section 184 program. We are having 
regional workshops and summits to build capacity among the 
tribes. We are expressing our concern with banks that are not 
currently----
    Mr. Renzi. I got it. I got it. I would appreciate it if you 
would look at putting as many counselors, opening up offices. I 
do not care what you have to do, but the idea that we are going 
to rescind $54 million, okay, that we did not use, there are a 
lot of conservative fiscal hawks around here who enjoy that on 
my side, but the reason we are not using it is because we do 
not have Native Americans who can even use the Internet to get 
a mortgage.
    Let me go into a situation we have over at BIA. I realize 
it is not under your jurisdiction, but I want you to be made 
aware of, there is a 113-year backlog at BIA on closing escrows 
on trust land, not fee simple land, but trust land. So we give 
sovereignty to the Native Americans. We then have to do the 
research to close the title. We have 113 man-year backlog, 
which means escrows are taking over 2 years. So even if we are 
Native American and we can qualify for the loan, sir, even if 
we can get through and get the 184 money, we still have 2 years 
to close on our home. Okay? I just want to make you aware of it 
that you have to help and you have to help put pressure on BIA 
to get this, because it is unacceptable out there.
    Ms. Waters said that the conditions are so deplorable in 
the Navajo Nation that they are as bad as they are in South 
Africa. Those are her words. We do not have to go and see third 
world conditions. We can see it right here in America, up on 
the Navajo.
    One of the things I also wanted to ask you real quick 
before I run out of time is, I think you have been kind enough 
to reach out and look at the possibility that under title VI, 
we are now looking at increasingly the guarantee, reducing it 
to 80 percent coming off that 95 percent guarantee, are you 
with me on this?
    Mr. Liu. Yes.
    Mr. Renzi. Okay. What is your position? What is your 
opinion on the idea of us going back to 95 percent guarantee so 
that we can have more private investments, better economic 
development, more jobs and more people owning homes in Indian 
Country? Are you willing? That is not a big stretch, is it?
    Mr. Liu. Yes. Congressman, we think that is certainly an 
issue that we will review and take back and work on.
    Mr. Renzi. If Congress came out and legislatively moved it 
back to 95 percent, would you oppose it?
    Secretary Jackson. We are going to carry out what Congress 
says.
    Mr. Renzi. Thank you, Mr. Chairman.
    Mr. Ney. The gentleman, Mr. Meeks?
    Mr. Meeks. Thank you, Mr. Chairman.
    We are working on a HOPE VI project, and I know that they 
are talking about eliminating some of the money, time is 
running out, the project is not finished. By the way, how many 
distressed housing is still currently in the United States of 
America? Severely distressed?
    Secretary Jackson. I will say this, that the 1989 study 
from the National Commission on Severely Distressed Housing 
says that there were 86,000 units.
    Mr. Meeks. In 2004, how many are there?
    Secretary Jackson. I would say that we have funded under 
the HOPE VI program to date 129,000 units.
    Mr. Frank. Will the gentleman from New York yield?
    Mr. Meeks. I yield.
    Mr. Frank. Let me just point out, Mr. Secretary, that 
assumes that even if you take that formulation, that no units 
became severely distressed in the 15 intervening years. Using 
the 1989 figure as the figure assumes that nothing became 
severely distressed in the last 15 years. So even on its own 
terms, it does not make sense.
    Secretary Jackson. Well, we have done 136,000, so obviously 
there have some that have been distressed. He asked me how many 
there were. I said clearly, Congressman, there were 86,000 when 
we began writing the legislation. To date, we have done 
136,000. Of those 136,000, we have only had 25 of those HOPE VI 
completed.
    Mr. Meeks. Do you know if there are any severely distressed 
housing in America today? Do you know? Yes or no?
    Secretary Jackson. I am sure there is distressed housing in 
America today.
    Mr. Meeks. Do you have any idea approximately how many 
there are?
    Secretary Jackson. I can tell you that there are 136,000. 
We funded that many.
    Mr. Meeks. There were 136,000.
    Secretary Jackson. There are 136,000, and of that 
probably----
    Mr. Meeks. So if there are 136,000 today, then the mission 
has not been completed with reference to HOPE VI, because there 
continues to be 136,000 severely distressed developments today.
    Secretary Jackson. No. I do think the mission has been 
completed, and I will tell you why I think it has been 
completed. I suggested that the program be discontinued and I 
will stick with that. That is because the program was started 
to address the need to integrate people both socially and 
economically into the fiber of this country.
    We have had 25 of those completed in the last 12 years. We 
have over $3.2 billion outstanding after allocating $5 billion. 
My position is this, some of these cities have had the money 7 
years, 8 years in the program. The HOPE VI have not been 
completed, nor has it been started. I do not think we should 
continue to fund the program that does not work.
    Mr. Watt. Will the gentleman yield?
    Does this reflect at all on HUD's oversight of HOPE VI? Or 
you are just saying HUD does not have anything to do with this, 
I guess.
    Secretary Jackson. No, I do not think it does because I 
have run housing authorities. You represent a city where you 
had probably the most illustrious HOPE VI other than Dallas. 
You had a person who made it work, and they did not have any 
impediment. Other cities have not.
    Mr. Watt. So the program does not work, then, because other 
cities did not make it work. That is what you are saying. And 
HUD did not oversee it to make the other cities make it work. 
That is what you are saying. So therefore it ought to be 
discontinued.
    Secretary Jackson. Let me say this to you, I think your 
analysis is correct.
    Mr. Meeks. Taking back my time. Let me ask another 
question. Let me go to New York City real quick with the time 
that I have left. You know, and I guess you told my colleague 
Carolyn Maloney that you will look into the $55 million 
shortfall that New York City has. But do you know that, going 
back to section 8, that right now that the HPD is not issuing 
any section 8 vouchers anymore?
    I have heard the conversation here today, the dialogue 
about reducing the amount of money that goes into section 8. 
That means that individuals who are now new people, we have 
some young people who were in foster homes, who are now turning 
18 years old, they are not eligible. They cannot obtain any 
section 8 housing, any section 8 vouchers because there are 
none, because of the shortfall in New York. Does HUD have any 
suggestion what we do with those kinds of individuals, or do we 
just allow them to be homeless?
    Secretary Jackson. Until 1998 under the QHWRA Act, persons 
like that took priority. That is not the case today. The law 
was changed. Everyone has to rise on the list.
    Mr. Meeks. So they should just be homeless.
    Secretary Jackson. You asked the question. I am saying, 
since 1998, you are asking us if we can do something about it, 
that is something that Congress has to do something about. If 
you want to change it.
    Mr. Meeks. So that is not part of HUD's mission at all.
    Secretary Jackson. Our mission is to implement any program 
as you say so.
    Mr. Meeks. Let me ask another quick question. You talk 
about homeownership, and I believe in home ownership----
    Mr. Ney. The time has expired.
    The gentleman, Mr. Miller of California.
    Mr. Miller. Thank you, Mr. Chairman.
    Welcome, Mr. Jackson. It is good to have you here today.
    Secretary Jackson. Thank you very much.
    Mr. Miller. I have enjoyed working with HUD over the years. 
RESPA is a huge issue for me. I have been in the development 
industry for over 30 years, and I will agree with you that the 
largest impediment to housing in this nation is state and local 
regulatory barriers. If you add ESA to that, I will agree 100 
percent with you.
    You started your talk today off with your goal is to make 
sure HUD meets their housing mandate. A lot of what we have 
said today would be applicable, because HUD is responsible for 
trying to build housing out there. But GSEs, Fannie Mae 
particularly, their goal is not to build houses. They do not 
build houses.
    Secretary Jackson. That is correct.
    Mr. Miller. They provide funding in the marketplace. In 
that area, they are restricted on how much they can loan. We 
call them conforming loan limits. As a matter of fact, I think 
conforming loan limits need to be raised in high-cost areas. I 
would really ask you to revisit this 57 percent mandate because 
what we are effectively doing is saying in a marketplace such 
as California, if you take a 57 percent mandate, of those loans 
that are made 57 percent have to be below the median, that 
means last year, for example, 49 percent of the loans made in 
California could not have been made. I want to speak positively 
about this, because this is very serious in California. The 
current median home price in California is $428,000.
    Secretary Jackson. That is correct.
    Mr. Miller. Based on that 57 percent mandate, last year the 
loan limits would have been nothing above $195,000. So what we 
are doing, instead of trying to provide housing in this nation, 
we are dealing with rationing the amount of funds available to 
the marketplace. That really, really bothers me because I think 
it creates a shortage of competition, because Fannie is going 
to apply this based on the mandate placed upon them, and that 
is 57 percent, when in areas like Barney Frank represents, 
Maxine Waters, Barbara Lee's and mine in California, we are 
going to wipe people out of the marketplace.
    If we want to provide affordable housing, that is HUD's 
oversight, but to take and limit the amount of money and 
basically calling it credit allocation does not make sense. If 
we had a limited pool of funds here that Fannie was dealing 
with in a year, and they were having to take and reject 
borrowers because they did not have the money. So we are trying 
to make sure that more low-income people, medium-income people 
receive the funds available through a GSE, if there were a 
limited pool of money, it would make a tremendous amount of 
sense to do what you are trying to do.
    But there is no shortage of funds out there. Fannie is able 
to make every loan requested upon them each year. So if that is 
the fact and it has been proven to be, why in the world would 
we go to Fannie and say, we want you to basically restrict the 
amount of loans you make because we are going to require an 
allocation of 57 percent to be below the median?
    If you were talking today about HUD meeting their housing 
goals, and there is an affordability crisis in this nation 
beyond belief. You have section 8 and then between section 8 
and what is available is a huge, huge difference in price. We 
are unable to fill this price range of homes because of what 
you said about state and local regulatory barriers and 
restrictions placed upon property owners. But for us to go into 
this 57 percent requirement on GSEs, it just seems like it is 
going to have a drastic impact on the market out there. If I am 
incorrect, please explain to me how it is incorrect.
    Secretary Jackson. Sure. Congressman, what I would like to 
do, because I think to give you a greater analysis of this 
would entail taking some time.
    Mr. Miller. I will take the time privately with you.
    Secretary Jackson. Okay. I will be happy to do that, 
because let me say this. The interpretation which you have 
given is not our interpretation. We are saying that we are not 
concerned with Fannie Mae or Freddie Mac, the high-end of the 
market. We are saying that that end of the market that you 
serve, we expect you to serve according to the three sub-
categories that we have given. I would like to just sit down 
with you and go through it. I think that we can make it very 
clear to you.
    Mr. Miller. I think I understand what you are saying, but 
the problem is you are dealing with an allocation and a 
restriction of funding within the marketplace when there is no 
shortage of funds. If there were a shortage of dollars and we 
are trying to force money into a given sector of the 
marketplace, then I would say okay, let's look at a formula. 
But when there is no shortage of money, to falsely create a 
percentage out there that has to be complied with by the 
lenders to force money into an area that there is no shortage 
of money in, means you are going to take money and restrict it 
in another area. You cannot meet 57 percent, and yet provide 
for those in the other area.
    Mr. Ney. The time of the gentleman has expired.
    Mr. Miller. I would love to talk to you privately.
    Secretary Jackson. I think we can. Thanks.
    Mr. Ney. The time has expired.
    The gentlelady from California, Ms. Lee.
    Ms. Lee. Thank you, Mr. Chairman.
    First, Mr. Secretary, let me just say quite frankly I am 
very amazed at some of the callous nature of your responses. 
When I was out of the room, and I just want to clarify that you 
said or did not say that being poor was not a condition, but a 
State of mind. Is that an accurate statement that you made, 
first of all, as the Secretary of HUD who is responsible for 
providing a safety net for the poor?
    Secretary Jackson. I do. I think ``poor'' is really a State 
of mind, not a condition, because if that was the case, I would 
not be sitting here.
    Ms. Lee. Yes, oh boy. Mr. Secretary, do you know there are 
over 3.5 million people who will experience homelessness. I 
guess that is the reason that you guys are cutting the homeless 
budget, the McKinney-Vento budget. I know there is $50 million 
in this new Good Samaritan initiative and it is something you 
are going to respond to, but that still does not get us to the 
$128 million that we need every year to end chronic 
homelessness. I assume that is why you seem to be just 
dismantling programs for the homeless.
    Secretary Jackson. We are not dismantling programs.
    Ms. Lee. Well, cutting programs for the homeless.
    Secretary Jackson. We have not cut. We have level-funded 
all of the programs.
    Ms. Lee. But don't you know that that is a cut?
    Secretary Jackson. No.
    Ms. Lee. Mr. Secretary, okay, you know, the second point. 
In California, 12 percent of the black population is 
unemployed; 7.9 percent of Latino population unemployed. The 
average income, for instance, in some areas, $38,000 or $39,000 
a year; average cost of a house, $400,000 to $450,000. Now, how 
do your initiatives which you are focusing on in terms of 
homeownership address these people who are barely surviving and 
need you?
    Secretary Jackson. I do not think necessarily that, if you 
are talking about homeless people, it addresses that.
    Ms. Lee. I am not talking about homeless. You answered on 
the homeless issue. I understand it is a State of mind. You 
clarified that in your budget.
    Secretary Jackson. No, I did not say that about homeless 
people.
    Ms. Lee. I am talking about now the working poor, and 
African Americans and Latinos in high-income areas where they 
need HUD, they need a safety net, they need section 8, they 
need low-income housing assistance, they need Shelter Plus, 
they need HOPE VI, they need all of the programs that your 
agency is supposed to be responsible for, and here you see 
these numbers just in California alone.
    Secretary Jackson. I am glad you asked that question, 
Congresswoman, because I too agree with you when you are 
talking about the working class, those who are 60 percent, but 
above 30 percent of median. I think they should have 
accessibility to the section 8 certificates and vouchers too, 
but under the present configuration of the QHWRA rule of 1998, 
they do not have it. So I am saying that if you agree with me, 
I think we should move toward the flexible voucher program 
which will address that issue.
    Ms. Lee. I am talking about expanding this. I am talking 
about not cutting. I am talking about your focus on 
homeownership. How do you intend for these people to become 
homeowners when in fact that is what your priorities are? That 
is what I asked.
    Secretary Jackson. I am saying to you that I do believe 
that with the flexible voucher program, which we have used in 
this country, we can move people toward homeownership because 
they will not be on those vouchers and certificates for a long 
time.
    Ms. Lee. When the average cost of a house is $400,000 to 
$450,000, how are you going to allow section 8 homeowners to 
qualify for that kind of a house and handle the note with no 
subsidies?
    Secretary Jackson. I think your question, again, is valid. 
I think there are two ways. First of all, I talked about the 
single-family affordable housing tax credit, which will 
basically help developers develop in areas like California, New 
Hampshire, Vermont.
    Ms. Lee. You will make the developers do affordable 
housing?
    Secretary Jackson. Do affordable housing. Second of all, if 
we can get rid of many of the regulatory barriers that we have, 
just in your State alone, as I said to the Congresswoman, 
before a home comes out of the State of California, somewhere 
between $104,000 and $115,000. If we can cut that in half, yes 
we can create affordable housing for people to live in. But we 
have to decide that this is what we want to do, and we have 
made the decision through the single-family affordable housing 
tax credit, and pushing States to get rid of the----
    Ms. Lee. Then why don't you take $3 billion or $4 billion 
out of the FHA reserves and do a production program and create 
some real affordable housing that can be done overnight?
    Secretary Jackson. Because those people who are paying 
their mortgage every day to FHA, that reserve is to cover them 
in case we have a catastrophe. I think that is what it should 
be.
    Ms. Lee. Yes, but the reserves are way over $3 billion 
right now.
    Mr. Secretary, final question is, just on the section 8 
vouchers, you have been responding to questions about that. I 
just want to ask you, in my area, the city of Alameda, there 
are going to be $800,000 or so under just in June based on the 
formula that you had come up with. I would like some 
clarification from your department with regard to certain 
areas, including the city of Alameda. Okay? I have just got to 
say to you I am very disappointed in your responses today, Mr. 
Secretary, and I hope that you begin to understand that 
``poor'' really is not a State of mind, but there are some 
economic conditions that create poverty.
    Mr. Ney. The time has expired.
    The gentleman from Ohio.
    Mr. Tiberi. Thank you, Mr. Chairman. Mr. Secretary, thank 
you for being here today. Thank you for your call yesterday. 
Congresswoman Pryce and I want to thank you for your dealing 
with the Columbus situation.
    Secretary Jackson. Thank you.
    Mr. Tiberi. I actually would like you, and I know you are 
pretty busy, to come out to Columbus because we have a housing 
authority that has been pretty innovative in dealing with 
section 8 vouchers. We have a Rebuilding our Lives program with 
an organization called the Community Shelter Board that has 
really been a leader in attacking homelessness.
    Homelessness is not just about shelter. It is about many 
other things dealing with services to these folks who are 
homeless. This program has just been an outstanding national 
model. We would love to have you to look at not only that, but 
also some of the innovative things our housing authority is 
doing with section 8.
    A concern I have with the section 8 program, I think you 
mentioned it; I think Chairman Ney mentioned it; is how the 
budget of section 8 is expanding so rapidly it is impacting 
other programs. One of those programs that I have expressed a 
concern about is the community block grant program. I have the 
2000 study in front of me. We had a hearing in Columbus and the 
mayor and the council and other community leaders in Columbus, 
Ohio rightfully made an argument that the current formula for 
community block grant really negatively impacts newer cities. 
For instance, in your own numbers, the 2000 numbers, Columbus 
is the largest city in Ohio. The metropolitan area of Columbus 
is the second largest in Ohio, to Cleveland, but yet Akron, 
Cincinnati, Cleveland and Dayton all receive more CDBG money 
than Columbus.
    So I would hope that the study that you have undertaken 
most recently that we have not seen yet, that has not been 
released yet, takes a look at this hopefully, and hopefully 
will address the needs of cities like Columbus, growing new 
cities that are mostly in the south and west, but happen to be 
in other parts of the country as well, and how your budget is 
going to impact the growth of CDBG.
    Secretary Jackson. Thank you, Congressman. We are extremely 
sensitive and well aware of that. We are trying to make sure 
that we address it in a very equitable and fair manner.
    Mr. Tiberi. The only other point, and I will yield back the 
balance of my time, is I want to thank you. I was a realtor 
before I came to Congress. I understand homeownership is a 
dream for many who unfortunately have not gotten there yet. 
Congressman Scott and I have introduced a bill. I heard the 
President this morning talk about the keys to homeownership, 
and certainly support your efforts at HUD to promote the zero 
downpayment bill. I want to thank you personally.
    Secretary Jackson. Thank you very much.
    Mr. Tiberi. I yield back.
    Mr. Ney. The gentleman yields back the balance of his time.
    I would note there are three votes, 15, 5 and 5 minutes. 
What we will do is we will take another question. We are going 
to hold strict to the time. But also, when we come back, only 
the members that are currently here, they will have the obvious 
priority to ask their questions. With that, I recognize the 
gentleman, Mr. Capuano.
    Mr. Capuano. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for coming today. I want to focus 
on the section 8 issue that we just passed up. As I understand 
it, in April HUD notified various state and local agencies 
across the country that an interpretation of some language 
would require them to retroactively cut certain parts of the 
section 8 program. The result of that was widespread, 
nationwide panic among at least 60,000 to maybe 200,000 people. 
The result of that was then that everybody was in a hue and cry 
across the country, all across party lines.
    In May, HUD basically said, no, we found the money, which 
to me indicates the money was never the issue, which is what I 
thought at the first part, and I do not think HUD ever said the 
money was the issue, but there was a language issue. I am just 
curious, what changed between April and May to have HUD change 
its opinion?
    Secretary Jackson. No, and I think that is a very fair 
question, Congressman. I do not think anything changed. I think 
that when we made the announcement according to our reading of 
the congressional mandate by Congress, we felt that clearly we 
had the reserves that were there to replenish for those who had 
asked for a replenishment, but there had not been very many who 
asked.
    Secondly, we felt that everyone who did not over-lease 
could operate within the guidelines that were set. It was clear 
that there were a number of agencies that over-leased. One of 
the first agencies that we heard from was from Los Angeles. We 
went out and worked with them and got them back basically into 
compliance.
    So the question was not that we did not feel that we could 
address the needs. It was that we felt that with the mandate 
that Congress had put forth, that the housing authorities could 
operate under it. Now, I want to clear it up because I have 
heard a lot of people say ``nationwide.'' We have almost 2,600 
housing authorities around this country. We have a number of 
housing authorities in major urban areas who are in the process 
of over-leasing or had vouchers on the street at the time. 
Clearly, most of those agencies had reserves that could address 
that need. Where we could, we worked with those agencies.
    So we have not in any way stopped working with agencies. We 
have been working with them from the inception.
    Mr. Capuano. So in the final analysis, and I appreciate 
that, there was never any real need to get well over 200,000 
families upset at the prospect of being evicted within a couple 
of months. I will tell you that in Massachusetts, well over 
2,000 families, actually more than that because no one knew how 
it was going to be implemented, went through two months of 
hell. I will tell you, I appreciate the fact that it has been 
worked out.
    I do not appreciate the fact that it was not worked out 
before an announcement was made. You drove these people through 
hell that they were going to lose their house, and it was 
unnecessary. I think it just simply shows some of the attitude 
in HUD.
    I will tell you that I had a whole series of other 
questions, but your comment that ``poor'' is a State of mind, I 
will tell you, stopped me in my tracks. I find it so offensive, 
I am almost speechless. I am actually speaking slower than 
Representative Baker for the first time in history.
    Apparently, you do not know anyone, right now, as we speak, 
within America, who is without a job, without the prospects of 
a job, facing eviction, not being able to pay their rent, not 
being able to pay their heat bill, not being able to pay their 
auto insurance bill, with no prospects of a job because they 
may or may not be non-white, living in an area with 15 to 20 
percent unemployment.
    If they are not poor, what is? I understand the definition 
of ``poverty of spirit,'' and that is a wonderful concept that 
has some place in our society for a wonderful after dinner 
discussion. But to not recognize the fact, the indisputable 
fact that there are real serious honest-to-God poor people in 
America disgusts me. The fact that you do not recognize maybe 
that any of them, that somehow simply by changing their concept 
of mind, they could get out of poverty. That is all it takes. 
Close your eyes and wish; change your attitude.
    To say that is a disregard of the history of mankind. To 
say that to me in my presence is insulting to the constituents 
that I represent that are poor. That does not mean they have a 
poverty of spirit. I do not know where or how you were raised, 
and I have no doubt that maybe you have had some struggles in 
your life and your family has, too. And you have risen above 
that and I appreciate it, but there are many who have not and 
you have insulted them.
    Thank you, Mr. Secretary.
    Mr. Ney. The time has expired. Let me just note, we are 
going to take a recess. The committee will go over and vote, 
and please come right back. Let me just make it clear who is up 
on the docket. We have on the majority side, Shays and Royce; 
on the minority side Israel, Scott, Davis, Carson, Hinojosa and 
Clay.
    The committee is in recess.
    [RECESS]
    Mr. Ney. The committee will come to order. We will begin 
again. The order that we have is Mr. Shays, Mr. Israel.
    Secretary Jackson. Mr. Chairman, may I ask a favor of you 
please?
    Mr. Ney. Yes, sir.
    Secretary Jackson. At the end of the hearing, one of the 
congresspeople was speaking to me. I would like to ask your 
permission or indulgence if I might be able to really elaborate 
on exactly what I said, because I do not want what I said to be 
misinterpreted.
    Mr. Ney. Without objection. Yes, Mr. Secretary?
    Secretary Jackson. I think I made a statement earlier when 
asked by one of the congresspeople my perception. I said that 
``poor is a State of mind, not a condition.'' That in no way 
eliminates my perception that there are people in poverty. I am 
well aware of that. But I think it goes back to a sense of how 
I was raised in the sense that as was stated when I was 
introduced that I am the last of 12 kids. My father had a 
fifth-grade education.
    I wonder if you will understand this. I think it was my 
ninth-grade year when I had just gone to Catholic school and 
many of the kids had a lot more than I had, and I came home and 
asked him why were we poor. Well, today with what he did to me, 
he would probably be accused of being a child abuser. He 
informed me that we were not poor. I will never forget what he 
said. He said that ``poor is a State of mind, not a 
condition.'' He said as long as there is hope, you can clearly 
make it in this country.
    Lastly, if you notice what I said when I said that, I said 
that I have a lot of friends who are very wealthy, but poor. I 
am talking about a mindset, not a person's economic set in this 
country, because I am well aware that there is poverty in this 
country and I want to do everything as Secretary of Housing to 
eradicate that poverty.
    Mr. Ney. Thank you for the clarification, Mr. Secretary.
    Mr. Israel?
    Mr. Israel. Thank you, Mr. Chairman.
    Mr. Secretary, welcome. I appreciate your clarification. I 
am sure you do not really believe that being poor is a State of 
mind.
    I want to share with you the plight of 50 families in my 
district who may be poor, not because of their State of mind, 
but because of the State of the bureaucracy at HUD. This is a 
unique situation in my district. This is not about funding or 
the lack of funding, and it is not about formulas. It is about 
50 people who are about to be thrown out on the street because 
a bureaucrat at HUD, perhaps not even while you were Secretary, 
told one of my community development agencies something which 
turned out not to be true. This is a crisis that needs to be 
solved.
    Let me briefly take you through this. This is my only 
opportunity to do that. Several years ago, the Community 
Development Corporation of Long Island was awarded 75 vouchers 
under the HUD section 811 mainstream tenant-based rental 
assistance program. Before that agency submitted its budget to 
HUD for the first year of the program, it became clear that the 
award figure provided by HUD was insufficient to support a 
lease-up of the full 75 units. The agency spoke with HUD and 
HUD indicated to the agency that at the time they could only 
lease-up 32 units, far below the 75, and the agency resubmitted 
their budget to HUD, again projecting 32 leased-up units.
    When HUD received this agency's budget, a HUD official 
contacted the Community Development Corporation and indicated 
both verbally and in writing that a higher authorized amount 
would be made available to this agency on Long Island, and that 
the agency should request a budget modification later in the 
year. HUD later approved that budget, and based upon that 
assurance the Community Development Corporation of Long Island 
proceeded to lease-up the full 75-unit allocation. Got me so 
far?
    Now, after that allocation has been leased-up to the 75 
units, HUD has said, well, we were wrong and the likelihood of 
obtaining an allocation for additional funding is bleak. 
Without sufficient funding to cover these rental costs, 50 
households face the specter of homelessness. From my 
perspective, this situation was caused simply because somebody 
at HUD gave somebody at the Community Development Corporation 
of Long Island wrong information, wrong advice, and the victims 
should no be these 50 families.
    So my question to you, Mr. Secretary, is rather simple. How 
can we work together in a constructive fashion to address this 
problem and ensure that these 50 families are not thrown out on 
the street, not because it is their State of mind, not because 
of funding formulas, not because of a broad national debate on 
the amount of available funds for section 8, but because of a 
simple bureaucratic mistake. How can we work together and what 
specific actions can I expect your office to take to work with 
me to solve this problem?
    Secretary Jackson. I cannot tell you right now the specific 
actions, but let me say this to you. I have encountered on a 
number of occasions where we have committed to something and 
reneged. Each time, we have tried to rectify it. I would like 
to know the specifics and I would ask you to get with Dr. 
Weicher and to let us know that. We will work through it with 
you. If it is our fault, then we will do everything in our 
power to rectify it. And that is a very different situation 
than we were talking about earlier today.
    Mr. Israel. It is different, and Mr. Secretary, I do have a 
letter that I will give to you to give to your staff, and my 
staff will be following up within several days. Thank you.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Mr. Ney. I thank the gentleman.
    Secretary Jackson. Thank you.
    Mr. Ney. Thank you.
    The gentleman from California, Mr. Royce.
    Mr. Royce. Thank you, Mr. Chairman.
    Firstly, I would like to commend our witness today on his 
good service to this country.
    Secretary Jackson. Thank you, sir.
    Mr. Royce. I think you have an outstanding background in 
housing. I think we are very fortunate to have you. I want to 
commend you also on your testimony and on your presence this 
morning in the face of Capitol Hill.
    Secretary Jackson. Thank you.
    Mr. Royce. I hope you do not take my following question as 
critical of your overall efforts, because you have done an 
outstanding job.
    I do, however, have a few concerns about an initiative HUD 
is currently proposing. I am concerned that the zero 
downpayment program may not be an appropriate policy to be 
enacted by the government per se. I am somewhat sympathetic to 
the goals of this program, but I am afraid that if we enact 
this zero down, we may be suffering from what Friedrich Hayek 
called the fatal conceit, where there is a belief that, in his 
words, ``man is able to shape the world around him according to 
his wishes.''
    Hayek and pretty much every other economist would tell us 
that a command-and-control role for government in the 
marketplace does not usually bring desired results over the 
long term. Many have argued for some time that to retain its 
market share, the FHA resorts to some questionable underwriting 
practices, and that those practices might put both the 
homebuyer and the taxpayer at greater risk.
    So to look at this new program, here you have a buyer that 
would be financing in essence more than 100 percent of the 
value of the home. I am afraid that this program might actually 
result in many more families being placed into default because 
some may not be able to afford over 100 percent of the value of 
their homes.
    Alternatively, I understand the FHA believes and predicts 
that it is going to make $180 million in profits on this 
program. My question is, Mr. Secretary, is FHA saying it is 
smarter than the market, which gives me great hesitation, or 
does the lack of participation from the marketplace in the zero 
down product suggest that there are more risks to the program 
than FHA's financial modeling predicts?
    Secretary Jackson. Thank you very much for the question. I 
do not think we are smarter than the marketplace. I will be the 
first to say that. But Congressman Royce, I really believe from 
my experience, and it might be limited, but my experience in 
Texas when I was running the Dallas Housing Authority, and then 
had the chance to sit for the Governor on a number of 
committees, that when a person or family is paying 50 percent 
or 55 percent or 60 percent of their income for rent, that if 
we can give them an opportunity to own their homes, even at 40 
percent of their budget, it is much better.
    So we are not going to change the underwriting guidelines. 
What we are saying is this, these persons will qualify. I have 
encountered so many families, especially Hispanic families, 
that want to own a home, but they do not have the downpayment 
or the closing costs. Now, I will tell you, the American Dream 
Downpayment Program which you all passed is excellent. But in 
my effort to be innovative and creative, we are trying to find 
other ways to get people into homes.
    To me, we are going to strictly scrutinize the persons that 
are coming in. I do not think our default rate will be any 
higher than it is in our regular program. If we see it, believe 
me, I had your same reservations when I was sitting down 
talking about the program. If it is, and I am the Secretary, I 
will come back and cut the program immediately. I think it is 
our responsibility to be very judicious with the taxpayer's 
money.
    Mr. Royce. Secretary Jackson, I thank you. I thank you for 
appearing again here today.
    Secretary Jackson. Thank you.
    Mr. Ney. I thank the gentleman.
    The gentleman, Mr. Scott.
    Mr. Scott. Thank you very much, Mr. Chairman.
    Secretary Jackson, I have two phases to my period of 
questioning.
    Secretary Jackson. Yes, sir.
    Mr. Scott. The first one concerns legislation that I am 
working on and this committee is taking very seriously, and we 
have put forward. The major lead sponsor is Chairman Ney. Of 
course, Chairman Oxley is working on this and also our Ranking 
Member, Barney Frank, and also myself. It has to do with 
financial literacy. In its form in our housing counseling 
program, we have put forward a very significant measure.
    As you know, we are having a serious problem with predatory 
lending. We have a serious problem with financial abuses. It is 
all targeted as a part of this program, the cornerstone of 
which is a 1-800 toll-free number with a live person on the 
other end. In addition to that, we set up local councils; we 
set up grants that could be made available to some of the 
groups, NAACP, AARP, other groups with credibility there.
    We would like to get your commitment today to this 
committee, to myself, that wants this bill passed and signed by 
the President, that you will implement this; the two-way 800 
number in its entirety.
    Secretary Jackson. When it is passed, you can be assured 
that I will do that, Congressman. We faced this before in 
another incident at HUD where we had numerous numbers and no 
one answered the phone. I am totally averse to that. I think 
that there should be a live person on the other end of the 
phone when people call.
    Let me say this to take it a little further. I cannot 
reiterate enough my feelings about if we are going to help low-
and moderate-income people own homes, that counseling is 
absolutely imperative that they have, because they have to 
understand, first of all, what occurs at closing and what to 
look for, and second of all, how they have to have reserves to 
make sure that they stay in their homes.
    Mr. Scott. I am so glad to hear you give that response. I 
appreciate your commitment. This committee does as well, 
because that two-way 800 number, to have that person, to get a 
human being on the other end of that phone is going to go a 
long way. That is the major infrastructure piece that we have 
in place.
    It also serves to help us have a good measuring device. We 
will be able to receive input, and therefore be able to design 
the literacy programs to fit the target group. If we have a way 
of them initiating the communications to us, we will know that. 
So I really appreciate that and look forward to working with 
you.
    The other part of my question goes to HOPE VI.
    Secretary Jackson. Yes.
    Mr. Scott. I represent Georgia, the Atlanta metro area. I 
think you may know Renee Glover, the director of our Atlanta 
Housing Authority, a wonderful program, one of the great, great 
success stories, as you know, in Carver Homes and the 
Centennial Olympic Village that we have, Eastlake. All of those 
are great programs.
    What we have, though, is we are in the middle of this. I 
want to lean on you, and I have been very, I do not want to say 
entertained, but I have been very well informed with this 
morning's presentation and your interaction with this 
committee. I want to establish as best we can a partnership. It 
is very interesting that you made the point that you helped to 
write this law. As you know, it was founded as a Republican 
vehicle. It was founded by Jack Kemp out of New York.
    Secretary Jackson. That is correct.
    Mr. Scott. It is one of the great stories, one of the great 
successes of the Republican Party in its efforts. Therefore, I 
am somewhat disappointed that there is any means of canceling 
this program. I can see adjustments. I can see where there have 
been some abuses. But why throw out the baby with the bath? In 
my own state, in Georgia, we would be very dramatically 
affected because we have programs in process. We have had great 
success there. I want to impress upon you to review your 
decision to be against this and do it in the name of your 
father's advice that you just said he gave to you, just 20 
minutes ago, when you gave your Statement to correct an 
impression that you gave.
    You said, ``my father told me that as long as there is 
hope, you can make it in this country.'' Let us keep HOPE VI 
alive, in the name of your father.
    Secretary Jackson. Thank you.
    Mr. Ney. The time of the gentleman has expired.
    Mr. Shays.
    Secretary Jackson. Thank you, Congressman. Thank you very 
much. I will look at it.
    Mr. Scott. Thank you.
    Mr. Shays. Mr. Secretary, welcome.
    I have been wrestling with a number of questions that I 
want to ask you, but HOPE VI was kind of on the top of my list. 
I have been trying to understand the Administration's 
opposition to HOPE VI for a number of years, because I find it 
bizarre. I speak from just the experience. We have a HOPE VI 
project in Stamford where upper-income, upper-middle-income, 
middle-income, lower-middle income, lower-income and destitute 
people live in the same units. When an upper-income person 
leaves that unit, you do not know who may go in, but it could 
be someone with no income.
    You see young African Americans and Hispanic kids seeing 
someone get into a nice car, but guess what, they are going to 
a nice job. They are seeing firemen and policemen. They are 
seeing what I think is just an extraordinary experience. They 
are seeing the real world that they were cut out from seeing 
when they lived in public housing.
    Secretary Jackson. That is true.
    Mr. Shays. What I am hearing as an argument is that the 
money has not been spent quickly enough. But when it is spent, 
it is spent well, is it not?
    Secretary Jackson. Yes. I will tell you, Congressman, that 
of the 136 projects that we funded, the 25 that have been 
completed have done very well. I would like to say something in 
answering your question to Congressman Scott and to Congressman 
Watt, nine of the successful 25 programs have been done within 
two cities, Atlanta and Charlotte.
    But at the same time, I think it is only fair for me to be 
candid with you. When we sat down, the five of us, at the 
request of the Congress and Secretary Jack Kemp, we envisioned 
this program to work extremely well very quickly. We have not 
had that.
    Mr. Shays. I accept that, but what I want to know is, you 
know, the money is not spent until the projects are under way, 
so the worst that happens is it is not spent, but when it is 
spent, it is spent so well. Of all the projects I have ever 
seen the government do, I am not exaggerating, this is the 
best. It is the best program. I feel real pride in it. And what 
was there before? What was there before was public housing that 
was smelly, dirty, just lots of poor kids. There was drug 
dealing. And now there is a swimming pool; there is a weight 
room; there are a lot of neat things.
    I just would again, in the name of your father or your 
mother or your grandmother or your great-grandmother, I would 
like you to review this. I think this is an awesome program. It 
is something that I think Jack Kemp and you and others did 
well. I think for some reason your assumption that it is not 
being spent has made you think that maybe we do not need it. I 
just would try to say, well, why isn't it being spent as 
quickly and what can we do to make it be spent more quickly.
    The other thing I just want to touch base with you on is, I 
have always questioned the logic of eliminating all public 
housing, which seems to be the direction, because when you have 
public housing, you know you have locked yourself in to a 
certain cost. We replaced it with section 8 vouchers in many 
cases. But it is just logical that the section 8 vouchers are 
going to cost more each year as the market goes up. It is kind 
of like why I bought my own home. I bought my own home so I did 
not have to pay more exorbitant rent. That same logic, it seems 
to me, applies with public housing.
    Don't you have a bit of concern that we have become so 
reliant on section 8s that ultimately we will not be able to 
afford them?
    Secretary Jackson. Yes.
    Mr. Shays. Okay. Thank you, Mr. Chairman.
    Mr. Ney. I thank the gentleman.
    Mr. Miller?
    Mr. Miller. Thank you, Mr. Chairman.
    Good morning, Mr. Secretary. Mr. Secretary, on page 17 or 
your testimony at the top of the page you devote two paragraphs 
to predatory lending. I would like to direct your attention to 
that. First of all, the rules that you talk about there, they 
apply only to FHA programs. Is that not correct?
    Secretary Jackson. I do not have the testimony.
    Mr. Miller. Can we stop the clock, Mr. Chairman?
    Mr. Ney. We have a copy that is coming to you.
    Secretary Jackson. Which page now?
    Mr. Miller. Page 17, the top two paragraphs, predatory 
lending.
    Secretary Jackson. Yes, thank you.
    Mr. Miller. First of all, the regs that you are talking 
about just apply to FHA programs. Isn't that right?
    Secretary Jackson. Yes.
    Mr. Miller. They do not apply more broadly to what is going 
on in the economy or happening to consumers generally.
    Second, a definition. There does not appear to be an 
agreed-upon definition of predatory lending. We have had 
hearings at which lenders have testified the operating 
definition of predatory lending appeared to be something bad 
that I do not do. I would like to get at what your definition 
of predatory lending is.
    These two paragraphs seem to mix up two things. One is 
selling houses at fraudulently inflated rates based upon 
fraudulent appraisals, et cetera. And then also borrowing by 
someone who is, as I think Mr. Weicher testified to in 
February, a consumer who owns their home, who is house-rich and 
cash-poor, who is in a home with a lot of equity, but is 
strapped for cash, and practices that target those consumers. 
That is what I am talking about. Could you tell us what of the 
regs that FHA or your department has enacted get at that second 
situation, the consumer who is in their home and is 
refinancing?
    Secretary Jackson. I can tell you, if you would like to go 
into detail, I think you would want a detailed answer for a 
short period. I will ask Dr. Weicher to do it for you.
    Mr. Miller. Okay.
    Mr. Weicher. Mr. Miller, we have a number of regulations. 
You are quite right. There is a distinction between the 
flipping regulations and the regulations addressing lending 
proper. We have a flipping regulation which we think is very 
effective.
    With respect to the lending regulations, what we have been 
doing is identifying individual practices of lenders which are 
damaging to people who are buying homes with FHA-insured 
mortgages. We have been either prohibiting those practices or 
we have been establishing rules as to what is exactly 
permitted.
    With respect to situations where people are borrowing more 
than they should be, what we have is essentially ratio 
guidelines as to how much of your income can be devoted to your 
mortgage payment. If your payment-to-income ratio is above our 
guidelines, then either there has to be a very good reason or 
we will not insure that mortgage.
    Mr. Miller. How about equity-stripping practices, up-front 
fees, the financing of up-front fees, single-premium insurance 
policies, credit insurance, otherwise, are those prohibited by 
your rules?
    Mr. Weicher. Single-payment premium credit life insurance 
certainly is prohibited. Excessive up-front fees are either 
prohibited or they come under the provisions of the HOPE, the 
homeowners equity protection act. In that situation, at that 
point, it is in the province of the Federal Reserve as to what 
is permissible. Those are not FHA loans.
    Mr. Miller. If you know some Federal Reserve regs on this, 
you know more than I do.
    Mr. Weicher. I am sorry?
    Mr. Miller. I am not aware of any Federal Reserve regs on 
that point.
    Mr. Weicher. I cannot give you the reference right here, 
but I can give it to you, Mr. Miller.
    Mr. Miller. Okay. Also, at various places in your testimony 
in February and the Secretary's testimony, there are various 
phrases used, predatory lending, abusive lending practices, 
deceptive and fraudulent practices. Do you use those terms 
interchangeably or do you mean something different by them?
    Secretary Jackson. They are interchangeable, but also 
different, because you can have fraudulent transactions that 
might not necessarily be predatory. But usually when you have 
predatory transactions, they are fraudulent in many ways.
    Mr. Miller. Okay. Well, particularly the phrase ``deceptive 
and fraudulent practices,'' I cannot help but notice how close 
that is to the phrase ``unfair and deceptive trade practices'' 
in section five of the Federal Trade Commission Act. Do you 
regard these practices that you prohibited as in violation of 
section five of the Federal Trade Commission Act?
    Mr. Weicher. Mr. Miller, it is coincidental that our 
definition is very close to the FTC's definition, but we have 
talked to them about that when we discovered that.
    Mr. Ney. The time has expired.
    We will now go on to the gentleman from Missouri, St. Louis 
to be specific, Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman. It is always good to see 
the Secretary, to spend the better part of my morning with you. 
I am glad to see you again, Mr. Secretary.
    Secretary Jackson. Thank you.
    Mr. Clay. In St. Louis County, we are going to lose between 
200 to 300 of slightly more than 6,000 vouchers in the section 
8 program. It is worse than that in St. Louis City. The county 
is going to be forced to use up their reserves to cover the 
shortfall of section 8 funding. You announced on May 18 that 
HUD will calculate payments for the first quarter of 2004 by 
applying a full year inflation adjustment over an agency's 
average per-unit cost in May through July in 2003, and pay that 
same level for each and every quarter of 2004.
    The frontloading of payments supposedly will ease the 
crisis. This is not seen as a solution in the First 
Congressional District of Missouri as our figures show that 
this will still result in a shortfall at the end of the year. 
This is only postponing the manifestation of the problem. Since 
you are already seeing evidence of States, Oregon for example, 
terminating voucher contracts, how is this announced efficiency 
supposed to work? Is it efficient to eliminate families from 
housing and place them in the streets? Is this a plan of the 
Administration to reduce section 8 rolls and place them on the 
homeless rolls?
    Mr. Clay. Congressman, let me answer the last part. No, we 
are not in any way trying to reduce the section 8 rolls or to 
throw any person who presently has a certificate or voucher in 
use out of the certificate or voucher.
    I do believe that those persons who have vouchers that are 
on the street that have not been utilized, if they are over the 
cap that has been set, yes, that does present a problem. I am 
not going to sit here today and tell you it does not. But any 
person who is in the process right now, on a voucher, housing 
choice voucher, they are not losing their voucher. We believe 
that the corrections that we talked about earlier this morning, 
that I talked about earlier this morning, will address the need 
in St. Louis County as it has addressed the needs in Boston and 
the other places.
    I think it does clear up the problem, because the shortfall 
as the housing authorities foresaw it, was this year. We have 
corrected that problem. I think that if the flexible voucher 
program is approved by Congress, then clearly we will serve as 
many people, almost the two million people we serve today, on 
the present program.
    Again, I go back to what I said earlier. I did not have a 
unit-based section 8 program. I had a budget-based, where until 
1998 they went to the unit-based. They gave us a budget. That 
is what we are doing to the housing authorities now. We are 
saying, you have a budget; utilize your budget and stay within 
that budget. That is the way I operated the section 8 program 
for almost 16, 17 years.
    Mr. Clay. Okay. Thank you for that answer.
    Let's go to GSEs. Are you familiar with an April 28 Wall 
Street Journal article entitled Regulators Hit Fannie, Freddie 
With New Assault.
    Secretary Jackson. Yes, I remember.
    Mr. Clay. Okay. In 2003, at Fannie Mae alone, investment in 
the low-income housing tax credit supported the production and 
preservation of over 37,000 homes, making them affordable to 
very low-income families. Additionally, mortgage revenue bonds 
financed affordable homes for nearly 98,000 families. Why don't 
these numbers count toward reaching the GSEs's housing goals? 
Don't we want to encourage these activities?
    Secretary Jackson. If they qualify, they will be used to 
count against them. But again, Congressman, I will simply say 
this, because the question has come up so many times today. 
What I would ask you or the other members of the committee to 
do is to ask the persons at the GSEs to give us permission to 
release the figures to you and let you judge yourself if they 
are meeting the goals of low-and moderate-income persons. We 
are restricted. We cannot. They give us quarterly those 
figures. I am willing to release them if the Chairman of each 
one of those GSEs says we can. They are not meeting their 
goals. They are not leading the market.
    Mr. Clay. I have heard what you said today that you follow 
the direction of this Congress. I find the timing somewhat 
peculiar, that at a time when section 8 and HOPE VI are being 
curtailed, and that the major force holding up the economy is 
housing, that OFEO and Treasury and now HUD have the GSEs in 
their scope. Why 6 months prior to the presidential election is 
there this drive for goals?
    Secretary Jackson. Well, Congressman, I will tell you, as I 
said to the Congresslady from New York and Congresswoman Waters 
and Congressman Frank, this is not new. I have been reiterating 
the housing goals and the sub-goals almost from day one coming 
in, because I thought then and I think now that they are very, 
very important to meet the low-and moderate-income guidelines 
that were set by Congress. It is not new.
    There is not a person probably in this room that is more 
supportive of the GSEs than I am. I think that they can do and 
have done a good job, but I think that clearly they can do a 
lot more to address the charter mandate group of people that 
they should serve. I am not in any way trying to restrict, halt 
them or hurt them. That is not the case, I can assure you of 
that.
    Mr. Ney. The time has expired.
    Would Mr. Davis like to yield to Mr. Clay?
    Mr. Davis. Not after two-and-a-half hours, Mr. Chairman.
    [Laughter.]
    Mr. Ney. Good answer, Mr. Davis.
    Mr. Davis. Thank you, Mr. Chairman.
    Let me try to go back and try to identify a little bit of 
new ground, Mr. Jackson, or at least a new question on some old 
ground. One thing that no one has really asked you today is 
this, you have heard from a lot of people on my side of the 
aisle about HOPE VI and the passion that certain Democrats feel 
around it. What is striking to me is that frankly there are a 
lot of Republicans, and not just Chris Shays, who has a fairly 
strong attachment to this program. Ms. Harris from Florida is a 
strong supporter of this program.
    Maybe most tellingly, you and I have a mutual friend in 
common in Secretary Kemp, your former boss. Based on my last 
conversations with him, he remains a supporter of HOPE VI. Can 
you for just a moment, I do not want a filibuster on this from 
you, but can you just give me some quick insight on why so many 
Republicans are as unenlightened as you are on this issue? On 
why so many Republicans are, from your perspective, as 
unenlightened as you are on this issue? Why do so many 
Republicans disagree with you on HOPE VI? What are they missing 
that you know?
    Secretary Jackson. I honestly do not know. I am just 
speaking, Congressman, from my perspective.
    Mr. Davis. Does that make an impression on you? Just to 
give you some history, as you know, last year we had the same 
discussion with Mr. Martinez, and ultimately the bipartisan 
forces that favored HOPE VI prevailed. Again, I give our 
colleagues on this side of the aisle their share of the credit 
for that. Does that move you at all, that so many people in 
your own party and of your own philosophy just do not agree 
with you on this, including Mr. Kemp?
    Secretary Jackson. Does it give me reason to think? Yes, I 
have thought about it.
    Mr. Davis. Does it give you reason to move?
    Secretary Jackson. No. I think that from my perspective, 
when you have authorities, 75 percent of them that have 
outstanding balances with their HOPE VI, that have gone on for 
more than 6 or 7 years, no.
    Mr. Davis. What is the primary structural reason for that, 
Mr. Jackson? If you had to give me very quickly one primary 
structural reason why so many of these HOPE VI's have not been 
completed, what is it?
    Secretary Jackson. I will tell you, in my mind it is that 
from the inception of the program when we wrote it, we told the 
housing authorities they should go out and get developers who 
would leverage the program and create the atmosphere that 
Congressman Scott just talked about, and Congressman Shays, 
both socially and economically integrate the communities. They 
did not do it. In the process of them not doing it, the money 
has sat there.
    Mr. Davis. Then Mr. Jackson, why don't you and the 
President simply come to Congress and give us a legislative 
approach that addresses exactly that problem, rather than 
throwing the whole program out?
    Secretary Jackson. Well, my position is, and this is my 
recommendation and I do not want you to keep saying ``the 
President.'' I think that after reviewing the program with 
you----
    Mr. Davis. I am saying ``the President'' because he signs 
his budget.
    Secretary Jackson. Yes, he does. And after a year being 
here looking at it, and having another chance to evaluate it, 
it was my perspective and the Secretary at that time, Secretary 
Martinez, that clearly with almost $3.6 billion outstanding 
then, it would be better to let the program continue in its 
present form. And if they show us that in fact that the program 
is moving in the direction, whether we reestablish HOPE VI or 
some program corollary to that, then we would be willing to do 
that.
    Mr. Davis. Let me shift gears in the time I have, to the 
GSEs for a moment. Something that I do not understand about 
your position, the Administration's position, Mr. Jackson. I 
hear your concern that the GSEs are not doing enough to meet 
their goal of providing affordable housing and to serve the 
mission. I understand that. What does that have to do with 
receivership?
    I will tell you why I make that point. I looked at 
Secretary Snow's letter where he lays out the primary reasons 
he favors GSE regulatory reform. He spends the whole second 
paragraph talking about receivership. There is nothing in the 
second paragraph talking about affordable housing goals. Later 
on, there is a reference to affordable housing goals. Can you 
enlighten me on what receivership and changing over to the 
receivership option has been a failure as it has to do with 
housing goals?
    Secretary Jackson. No, actually I cannot enlighten you 
about receivership. My only objective is to make sure that they 
meet the housing goals that they are chartered under.
    Mr. Davis. Have you seen the bill that was marked up in the 
Senate?
    Secretary Jackson. Yes.
    Mr. Davis. Do you agree with me that there are very few 
provisions in that bill? There is a lot that deals with 
receivership. There is a lot that deals with the identity of 
the regulator. Do you agree with me that there is very little 
in that bill that deals with affordable housing goals and 
expanding that mission?
    Secretary Jackson. The affordable housing goals were coming 
separate, and we have submitted----
    Mr. Davis. I did not ask you about that. I asked you about 
the Senate bill, just to get your opinion on that.
    Secretary Jackson. I support a strong regulator.
    Mr. Davis. But to answer my question, have you reviewed the 
Senate bill?
    Secretary Jackson. I have reviewed it. You mean the initial 
one?
    Mr. Davis. The one that was marked up a few weeks ago.
    Secretary Jackson. Yes.
    Mr. Davis. Do you agree with me that in a 39-page bill 
that, being charitable, maybe only two or three pages of it 
actually deal with the affordable housing mission, and that the 
bulk of it deals with receivership and the identity of the 
regulator?
    Secretary Jackson. No, I thought the bulk of the bill, and 
this will be a difference in our interpretation, dealt with an 
efficient and effective way to regulate the GSEs.
    Mr. Davis. I agree with that, but how much of the bill 
deals with the phrase ``improving affordable housing'' mission 
or the concept of improving the affordable housing mission?
    Secretary Jackson. I cannot get in depth of what it deals 
with, but I think the ultimate goal is to regulate them----
    Mr. Davis. I will tell you, if the chair will indulge me 30 
seconds since we are wrapping up, this is why I raise this, Mr. 
Jackson. I think Mr. Clay does raise an interesting point. We 
hear that the Administration is deeply concerned about 
improving the affordable housing mission, but yet the 
Administration appears to be supportive of a Senate bill that 
does not really address that issue. We hear that the 
Administration is concerned about safety and soundness, but yet 
the Administration has not identified a safety and soundness 
crisis. Those things do raise an obvious question of why the 
Administration is pushing this particular agenda, absent a 
crisis context.
    Just one final note, do you know of any scenario that leads 
you to think that the GSEs are more likely to collapse than, 
say, any major bank in this country?
    Secretary Jackson. No. Let me say this. I agree with you. 
That is not the issue. The issue is steel.
    Mr. Davis. What is not the issue? When you say that is not 
the issue, what do you mean when you say ``that is not the 
issue''?
    Secretary Jackson. You asked me if I believe that they were 
any more able in preventing themselves from collapsing.
    Mr. Davis. Right. Okay.
    Secretary Jackson. No.
    Mr. Davis. So you agree with me on that.
    Secretary Jackson. Yes.
    Mr. Davis. Okay.
    Secretary Jackson. But the issue is I do think that as we 
regulate banks or others, that a strong regulator is very 
important for the carrying out of the missions and making sure 
that they carry out their responsibility. That is all that I 
think.
    Mr. Davis. But just to close out and summarize, you do 
agree with me that there is no empirical evidence that the GSEs 
are any more at risk than any other financial institution.
    Secretary Jackson. I cannot tell you there is no empirical 
evidence. I can tell you that is----
    Mr. Davis. That is not your major concern.
    Secretary Jackson. My major concern is affordable housing 
goals.
    Mr. Davis. Okay. All right.
    Thank you, Mr. Chairman.
    Mr. Frank. Mr. Chairman?
    Mr. Ney. The gentleman?
    Mr. Frank. I just have to respond for 30 seconds on this 
Administration's concern about the affordable housing goals. 
The fact is that you had the legal authority to promulgate 
increased goals last year that would now be in effect. Your 
Administration failed to do that. Indeed, when we called 
attention to that failure, the original response from the 
department was, oh well, we are planning to do it. Only 
afterwards did they realize that the time has passed in which 
you could have done it for this year.
    So the fact is that there was no, a whole presidential term 
will have gone by in which the goals were left untouched, 
although you had the authority last year to increase them, and 
you deliberately did not exercise that authority and you 
promulgated them this year, but you had the legal authority to 
do it last year, let it go by. In fact, when we noted that, 
someone said, well, we are going to it, but it was too late for 
you to do it last year.
    So it is pretty clear to me that historically your interest 
in increasing the goals came after your desire to make other 
changes in the GSEs. Otherwise, I do not know why you would not 
have done it before. Let me ask you then, why did HUD not last 
year use its authority to promulgate those higher goals so they 
would already be in effect?
    Secretary Jackson. Congressman, I think that is absolutely 
a fair question. I will simply answer this way. It was an 
oversight on our part. I believe that the rules should be 
promulgated.
    Mr. Frank. It was an oversight. You forgot to raise the 
goals for the GSEs.
    Secretary Jackson. It was an oversight. I think your 
analysis is correct. It was brought to the attention, and 
immediately when it was brought to our attention----
    Mr. Frank. We brought it to your attention.
    Secretary Jackson. I agree with you. You brought it to our 
attention. But it was not that we had not been working on it.
    Mr. Frank. It is hard for me to believe, Mr. Secretary, 
that if this was really an important thing to you, that 
something that basic you would have just lost it.
    Secretary Jackson. It is very important to me. That is why 
we are working on it. I am the Secretary and that is why we are 
working on it.
    Mr. Frank. But you overlooked it last year.
    Secretary Jackson. I was not the Secretary last year.
    Mr. Frank. Okay, the Secretary overlooked it. You are 
clean.
    Secretary Jackson. No, I was part of the Secretary. I said 
``we'' and you are correct.
    Mr. Ney. And wrapping up briefly, 30 seconds, Mr. Scott.
    Mr. Scott. Thank you very much, Mr. Chairman, for your 
kindness on this question.
    Let me go back to HOPE VI just for a moment. I am not 
giving up on you. I am still there with you.
    Secretary Jackson. Yes, sir.
    Mr. Scott. Let us see if we cannot get an area with which 
we can work going forward. You have agreed that Atlanta is a 
success story. You have agreed that Charlotte is a success 
story; that Dallas, Mr. Shays and several of us on this 
committee. You also recognize the strong bipartisan Republican 
and Democratic effort here. It is a great success story.
    What I would like to implore of you is to look and see 
going forward if we cannot do what is fair. Why should we 
punish those projects in Atlanta and other places across this 
country that have been successful; that have done everything 
they were supposed to do, and have gone on and have made 
additional investments of which they are partially through with 
other HOPE VI projects, which would be jeopardized if the 
funding is cut.
    Cannot we come up with a process in which we can evaluate 
each on its own basis? Those programs that are totally 
failures, I agree with you. If they have failed, if they have 
not done, then we should use a set of circumstances to deal 
with them, but not throw the whole baby out with the bath. 
Let's find a way to keep those programs going that are 
successful, and then separate those others that have not and 
have failed, and work with those communities on maybe an 
alternative program, but to keep this program going where it 
has been successful.
    Could we get your commitment to work with this committee on 
that?
    Secretary Jackson. You can get my commitment to work with 
the committee. I cannot give you a commitment that it is going 
to be in the form of the HOPE VI. Maybe there will be a HOPE 
VII program, but we have tried and we will continue to try to 
look at ways to make sure that we invest in the cities, and 
that the cities have the opportunity to propagate programs.
    Again, I go back. Yes, I will look for ways to work with 
cities who have been very, very productive. We are doing that 
now with bond issuance that we are permitting cities like 
Atlanta, Chicago, Charlotte and others to do, because we 
realize that they have been very progressive. I think that it 
is our responsibility when we have progressive cities who are 
doing what they should be doing for low-and moderate-income 
persons, that we work with them in every way to make sure that 
they are carrying out their mission. I will continue to do 
that.
    Mr. Scott. Fine. Thank you. I look forward to working with 
you on that and the financial literacy.
    Secretary Jackson. Thank you.
    Mr. Scott. Thank you very much, Mr. Chairman.
    Mr. Ney. Thank you.
    And I want to thank everyone for participating. I would 
just make a closing comment, if I could. I do not want to get 
into the GSE debate, but I do think frankly that Treasury, and 
I have written a letter. I am speaking for myself here, but I 
think that as the whole debate started to go forth where we 
were going to discuss very serious issues about the future of 
housing and of course the controversy that has swelled up over 
this. I do think that, again a personal opinion, that Treasury 
just took the bill and completely scrapped it. The House will 
was completely unacceptable and then the Senate became 
unacceptable. Somebody made a comment about the Senate. 
Treasury finds the Senate unacceptable.
    So I do not know what they find acceptable, but I think 
they have put the kibosh, frankly Treasury did, on the whole 
ball of wax. I do not know if they intend to do it some other 
way. So this is not HUD. You see, I am giving you a break here. 
It is Treasury. I just think at some point in time we have to 
get together to talk the issue out. I think it was not fair, 
again, to a lot of the members on either side of the aisle, to 
do that, but it is just my opinion.
    I want to thank the members. I want to especially thank the 
Secretary for your time and your patience in coming before the 
Congress.
    Secretary Jackson. Thank you so much.
    Mr. Ney. With that, the committee will be adjourned. The 
record will be open, without objection, for 30 legislative days 
in which members can have additional questions or revise and 
extend remarks.
    [Whereupon, at 1:55 p.m., the subcommittee was adjourned.]


                            A P P E N D I X



                              May 20, 2004

[GRAPHIC] [TIFF OMITTED] T6527.001

[GRAPHIC] [TIFF OMITTED] T6527.002

[GRAPHIC] [TIFF OMITTED] T6527.003

[GRAPHIC] [TIFF OMITTED] T6527.004

[GRAPHIC] [TIFF OMITTED] T6527.005

[GRAPHIC] [TIFF OMITTED] T6527.006

[GRAPHIC] [TIFF OMITTED] T6527.007

[GRAPHIC] [TIFF OMITTED] T6527.008

[GRAPHIC] [TIFF OMITTED] T6527.009

[GRAPHIC] [TIFF OMITTED] T6527.010

[GRAPHIC] [TIFF OMITTED] T6527.011

[GRAPHIC] [TIFF OMITTED] T6527.012

[GRAPHIC] [TIFF OMITTED] T6527.013

[GRAPHIC] [TIFF OMITTED] T6527.014

[GRAPHIC] [TIFF OMITTED] T6527.015

[GRAPHIC] [TIFF OMITTED] T6527.016

[GRAPHIC] [TIFF OMITTED] T6527.017

[GRAPHIC] [TIFF OMITTED] T6527.018

[GRAPHIC] [TIFF OMITTED] T6527.019

[GRAPHIC] [TIFF OMITTED] T6527.020

[GRAPHIC] [TIFF OMITTED] T6527.021

[GRAPHIC] [TIFF OMITTED] T6527.022

[GRAPHIC] [TIFF OMITTED] T6527.023

[GRAPHIC] [TIFF OMITTED] T6527.024

[GRAPHIC] [TIFF OMITTED] T6527.025

[GRAPHIC] [TIFF OMITTED] T6527.026

[GRAPHIC] [TIFF OMITTED] T6527.027

[GRAPHIC] [TIFF OMITTED] T6527.028

[GRAPHIC] [TIFF OMITTED] T6527.029

[GRAPHIC] [TIFF OMITTED] T6527.030

[GRAPHIC] [TIFF OMITTED] T6527.031

[GRAPHIC] [TIFF OMITTED] T6527.032

[GRAPHIC] [TIFF OMITTED] T6527.033

[GRAPHIC] [TIFF OMITTED] T6527.034

[GRAPHIC] [TIFF OMITTED] T6527.035

[GRAPHIC] [TIFF OMITTED] T6527.036

[GRAPHIC] [TIFF OMITTED] T6527.037

[GRAPHIC] [TIFF OMITTED] T6527.038

[GRAPHIC] [TIFF OMITTED] T6527.039

[GRAPHIC] [TIFF OMITTED] T6527.040

[GRAPHIC] [TIFF OMITTED] T6527.041

[GRAPHIC] [TIFF OMITTED] T6527.042

[GRAPHIC] [TIFF OMITTED] T6527.043

[GRAPHIC] [TIFF OMITTED] T6527.044

[GRAPHIC] [TIFF OMITTED] T6527.045

[GRAPHIC] [TIFF OMITTED] T6527.046

[GRAPHIC] [TIFF OMITTED] T6527.047

[GRAPHIC] [TIFF OMITTED] T6527.048

[GRAPHIC] [TIFF OMITTED] T6527.049

[GRAPHIC] [TIFF OMITTED] T6527.050

[GRAPHIC] [TIFF OMITTED] T6527.051

[GRAPHIC] [TIFF OMITTED] T6527.052

[GRAPHIC] [TIFF OMITTED] T6527.053

[GRAPHIC] [TIFF OMITTED] T6527.054

[GRAPHIC] [TIFF OMITTED] T6527.055

[GRAPHIC] [TIFF OMITTED] T6527.056

[GRAPHIC] [TIFF OMITTED] T6527.057

[GRAPHIC] [TIFF OMITTED] T6527.058

[GRAPHIC] [TIFF OMITTED] T6527.059

[GRAPHIC] [TIFF OMITTED] T6527.060

[GRAPHIC] [TIFF OMITTED] T6527.061

[GRAPHIC] [TIFF OMITTED] T6527.062

[GRAPHIC] [TIFF OMITTED] T6527.063

[GRAPHIC] [TIFF OMITTED] T6527.064

[GRAPHIC] [TIFF OMITTED] T6527.065

[GRAPHIC] [TIFF OMITTED] T6527.066

[GRAPHIC] [TIFF OMITTED] T6527.067

[GRAPHIC] [TIFF OMITTED] T6527.068

[GRAPHIC] [TIFF OMITTED] T6527.069

[GRAPHIC] [TIFF OMITTED] T6527.070

[GRAPHIC] [TIFF OMITTED] T6527.071

[GRAPHIC] [TIFF OMITTED] T6527.072

[GRAPHIC] [TIFF OMITTED] T6527.073

[GRAPHIC] [TIFF OMITTED] T6527.074

[GRAPHIC] [TIFF OMITTED] T6527.075

[GRAPHIC] [TIFF OMITTED] T6527.076

[GRAPHIC] [TIFF OMITTED] T6527.077

[GRAPHIC] [TIFF OMITTED] T6527.078

[GRAPHIC] [TIFF OMITTED] T6527.079

[GRAPHIC] [TIFF OMITTED] T6527.080

[GRAPHIC] [TIFF OMITTED] T6527.081

[GRAPHIC] [TIFF OMITTED] T6527.082

[GRAPHIC] [TIFF OMITTED] T6527.083

[GRAPHIC] [TIFF OMITTED] T6527.084

[GRAPHIC] [TIFF OMITTED] T6527.085

[GRAPHIC] [TIFF OMITTED] T6527.086

[GRAPHIC] [TIFF OMITTED] T6527.087

[GRAPHIC] [TIFF OMITTED] T6527.088

[GRAPHIC] [TIFF OMITTED] T6527.089

[GRAPHIC] [TIFF OMITTED] T6527.090

[GRAPHIC] [TIFF OMITTED] T6527.091

[GRAPHIC] [TIFF OMITTED] T6527.092

[GRAPHIC] [TIFF OMITTED] T6527.093

[GRAPHIC] [TIFF OMITTED] T6527.094

[GRAPHIC] [TIFF OMITTED] T6527.095

[GRAPHIC] [TIFF OMITTED] T6527.096

[GRAPHIC] [TIFF OMITTED] T6527.097

[GRAPHIC] [TIFF OMITTED] T6527.098

[GRAPHIC] [TIFF OMITTED] T6527.099

[GRAPHIC] [TIFF OMITTED] T6527.100

[GRAPHIC] [TIFF OMITTED] T6527.101

[GRAPHIC] [TIFF OMITTED] T6527.102

[GRAPHIC] [TIFF OMITTED] T6527.103

[GRAPHIC] [TIFF OMITTED] T6527.104

[GRAPHIC] [TIFF OMITTED] T6527.105

[GRAPHIC] [TIFF OMITTED] T6527.106

[GRAPHIC] [TIFF OMITTED] T6527.107

[GRAPHIC] [TIFF OMITTED] T6527.108

[GRAPHIC] [TIFF OMITTED] T6527.109

[GRAPHIC] [TIFF OMITTED] T6527.110

[GRAPHIC] [TIFF OMITTED] T6527.111

[GRAPHIC] [TIFF OMITTED] T6527.112

[GRAPHIC] [TIFF OMITTED] T6527.113

[GRAPHIC] [TIFF OMITTED] T6527.114

[GRAPHIC] [TIFF OMITTED] T6527.115

[GRAPHIC] [TIFF OMITTED] T6527.116

[GRAPHIC] [TIFF OMITTED] T6527.117

[GRAPHIC] [TIFF OMITTED] T6527.118

[GRAPHIC] [TIFF OMITTED] T6527.119

[GRAPHIC] [TIFF OMITTED] T6527.120

[GRAPHIC] [TIFF OMITTED] T6527.121

[GRAPHIC] [TIFF OMITTED] T6527.122

[GRAPHIC] [TIFF OMITTED] T6527.123

[GRAPHIC] [TIFF OMITTED] T6527.124

