[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]




 
                  U.S. DEPARTMENT OF HOUSING AND URBAN
                 DEVELOPMENT'S FISCAL YEAR 2008 BUDGET

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 14, 2007

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 110-14


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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            RICHARD H. BAKER, Louisiana
CAROLYN B. MALONEY, New York         DEBORAH PRYCE, Ohio
LUIS V. GUTIERREZ, Illinois          MICHAEL N. CASTLE, Delaware
NYDIA M. VELAZQUEZ, New York         PETER T. KING, New York
MELVIN L. WATT, North Carolina       EDWARD R. ROYCE, California
GARY L. ACKERMAN, New York           FRANK D. LUCAS, Oklahoma
JULIA CARSON, Indiana                RON PAUL, Texas
BRAD SHERMAN, California             PAUL E. GILLMOR, Ohio
GREGORY W. MEEKS, New York           STEVEN C. LaTOURETTE, Ohio
DENNIS MOORE, Kansas                 DONALD A. MANZULLO, Illinois
MICHAEL E. CAPUANO, Massachusetts    WALTER B. JONES, Jr., North 
RUBEN HINOJOSA, Texas                    Carolina
WM. LACY CLAY, Missouri              JUDY BIGGERT, Illinois
CAROLYN McCARTHY, New York           CHRISTOPHER SHAYS, Connecticut
JOE BACA, California                 GARY G. MILLER, California
STEPHEN F. LYNCH, Massachusetts      SHELLEY MOORE CAPITO, West 
BRAD MILLER, North Carolina              Virginia
DAVID SCOTT, Georgia                 TOM FEENEY, Florida
AL GREEN, Texas                      JEB HENSARLING, Texas
EMANUEL CLEAVER, Missouri            SCOTT GARRETT, New Jersey
MELISSA L. BEAN, Illinois            GINNY BROWN-WAITE, Florida
GWEN MOORE, Wisconsin,               J. GRESHAM BARRETT, South Carolina
LINCOLN DAVIS, Tennessee             RICK RENZI, Arizona
ALBIO SIRES, New Jersey              JIM GERLACH, Pennsylvania
PAUL W. HODES, New Hampshire         STEVAN PEARCE, New Mexico
KEITH ELLISON, Minnesota             RANDY NEUGEBAUER, Texas
RON KLEIN, Florida                   TOM PRICE, Georgia
TIM MAHONEY, Florida                 GEOFF DAVIS, Kentucky
CHARLES WILSON, Ohio                 PATRICK T. McHENRY, North Carolina
ED PERLMUTTER, Colorado              JOHN CAMPBELL, California
CHRISTOPHER S. MURPHY, Connecticut   ADAM PUTNAM, Florida
JOE DONNELLY, Indiana                MARSHA BLACKBURN, Tennessee
ROBERT WEXLER, Florida               MICHELE BACHMANN, Minnesota
JIM MARSHALL, Georgia                PETER J. ROSKAM, Illinois
DAN BOREN, Oklahoma

        Jeanne M. Roslanowick, Staff Director and Chief Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 14, 2007...............................................     1
Appendix:
    March 14, 2007...............................................    45

                               WITNESSES
                       Wednesday, March 14, 2007

Jackson, Hon. Alphonso, Secretary, Department of Housing and 
  Urban Development..............................................     6

                                APPENDIX

Prepared statements:
    Carson, Hon. Julia...........................................    46
    Sires, Hon. Albio............................................    48
    Waters, Hon. Maxine..........................................    49
    Jackson, Hon. Alphonso.......................................    57

              Additional Material Submitted for the Record

    Secretary Jackson's responses to questions submitted by Hon. 
      Joe Baca...................................................    66
    Secretary Jackson's responses to questions submitted by Hon. 
      Ruben Hinojosa.............................................    74


                  U.S. DEPARTMENT OF HOUSING AND URBAN
                 DEVELOPMENT'S FISCAL YEAR 2008 BUDGET

                              ----------                              


                       Wednesday, March 14, 2007

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:07 a.m., in 
room 2128, Rayburn House Office Building, Hon. Barney Frank 
[chairman of the committee] presiding.
    Present: Representatives Frank, Waters, Maloney, Velazquez, 
Watt, Moore of Kansas, Capuano, Hinojosa, McCarthy, Baca, 
Lynch, Miller of North Carolina, Green, Cleaver, Moore of 
Wisconsin, Sires, Ellison, Klein; Baker, Manzullo, Biggert, 
Miller of California, Capito, Hensarling, Neugebauer, Bachmann, 
and Roskam.
    Also present: Representative Meek.
    The Chairman. The committee will come to order. This is a 
hearing on the Department of Housing and Urban Development, and 
we are pleased that Secretary Jackson has once again joined us.
    Pursuant to the rules, we're going to have opening 
statements of 16 minutes, 8 minutes on each side, and I will 
begin with my 5 minutes.
    Obviously with the change in majority control, there are 
going to be some differences in housing policy. In fact, I 
think it is in housing policy more than in any other area under 
this committee's jurisdiction that the last election will have 
some impact.
    In particular, many of us believe that the time has come to 
get the Federal Government back in the business of either 
preserving or constructing affordable housing units. The 
Section 8 program and its various components does add equity to 
the housing market. It gives people who don't have enough money 
to afford decent housing the ability to do so.
    But with current policy where it is mostly on a year-by-
year basis, what the Section 8 voucher program does is add to 
the demand for housing in a way that is unlikely to increase 
the supply so that we both add equity but we also have an 
upward pressure on price.
    We see this particularly in, for instance, New Orleans, 
where the physical destruction of so many rental units has 
caused a special problem. And that's why, when this committee 
brought out a bill previously which will go to the Floor next 
week, we talked about trying to start construction of some 
units. Particularly, for example, project-based Section 8 units 
so that a developer can get a 20-year commitment to us, 
literally take that commitment to the bank and begin to build 
the housing.
    Simply providing rental assistance in an area like New 
Orleans, where so much of the rental housing has been 
destroyed, does not accomplish what we need to accomplish. New 
Orleans is obviously the worst case because of the hurricane, 
but there are other places, so we will, in these coming 2 
years, be focusing on what we hope will be sensible housing 
production.
    I want to address one of the great obstacles to housing 
production, which is cultural lag. If we asked many Americans, 
including many who serve here, to think about federally funded 
housing, they would see large sterile towers with far too many 
low-income people packed in and too few services; they'd see 
Pruitt-Igoe in St. Louis or Cabrini Green or Columbia Point.
    The point we need to make is that we have long since 
stopped making those mistakes. We also want to be clear--those 
units were never the idea of the poor people who lived in them. 
That was the idea of society as to how to warehouse and keep 
them.
    We have the capacity, working particularly with private 
developers, both profit and nonprofit, to have Federal help so 
that housing is constructed in a way that is good for the 
people who live there and good for the neighborhoods in which 
those people live, and we will be working on that.
    One initiative of which I am particularly proud, and Mr. 
Secretary, this is where I think we would have cooperation. 
Without any new money being voted, and money is always going to 
be a problem, members of the staff of this committee are 
working with the members of the staff of the Ways and Means 
Committee, under the supervision of Chairman Rangel, so that 
the tax-supported housing programs work as seamlessly as 
possible with the appropriations-based programs.
    In many parts of the country, such as the one that I 
represent, the low-income housing tax credit is a good thing, 
but it does not get the rents low enough, given the various 
costs. If you can have the low-income tax credit or housing 
revenue bond work closely with HOME, with HOPE VI when we get 
that going again, or HOPE whatever, with other housing 
programs, then you can get more bang for the buck.
    And so without in any way increasing appropriations, we can 
cut down on the transaction costs, legal fees, and other fees; 
we can speed it up. And in housing of course, time is money; 
the more quickly you can build, the better off we are. That's 
one of the areas where we will be working.
    One of the other areas we want to work on, and I want to 
say, Mr. Secretary, and I will get to this, that many of us are 
appreciative of your decision regarding Starrett City. You 
stepped in to prevent the loss of affordable units in New York 
City when they were needed, and I hope we can work in the 
future to take the principle you acted on there and generalize 
it.
    That is, it is difficult, as you all know, to build new, 
affordable housing, because people have what I think is often 
an irrational resistance to it. The importance of preserving 
those subsidized units that have already been built, as you are 
doing in Starrett City, is that you avoid one of the most 
serious problems and one of the most serious expenses. 
Subsidized housing that has already been built, if we can 
preserve them going forward as subsidized units, not just for 
the tenants, we avoid all the zoning issues; we avoid all the 
political battles. Also, of course, it may be cheaper than 
building from scratch.
    And, therefore, one of the things we want to do, and we 
look forward to working with you, is an inventory of all the 
housing now under various restrictions where those restrictions 
are going to expire. We recognize that the owners have legal 
rights that we should not try to interfere with, but I believe 
it is more efficient in a number of areas to try to either buy 
these owners out or provide them incentives so that we preserve 
the units.
    Our policy has been to protect the tenants, but then when 
the tenants moved or died or whatever, we lost the unit. I 
would like to take the principle on which you quite correctly 
acted in Starrett City, and see if we can nationally, working 
together, do the maximum to preserve units. I think it will be 
the least expensive way to do affordable units in a number of 
categories.
    My last point is this, and then I'll recognize members on 
the other side. We know, we think, what we can do to prevent 
future predatory lending, which has caused so many problems. I 
notice Senator Dodd, to his credit, has announced that he's 
interested in this, and I think that it's one of the areas 
where he's been taking a lead and deserves credit for it.
    Are there things we can do for the people who have already 
been trapped? There may or may not be. I'd like to be able to 
do a little bit. Certainly we know that the regulators have 
been wishing guidance to the banks, urging them to show 
forbearance where possible. And we're certainly going to be 
asking Fannie Mae and Freddie Mac, to the extent that these 
things are in their portfolio, to not only show forbearance, 
but to also look at whether or not there's anything we can do 
for the current victims. We also, of course, will be working 
together for the future.
    And next, the Chair recognizes for 5 minutes the gentleman 
from Texas.
    Mr. Neugebauer. Well, I thank you, Mr. Chairman. And 
welcome, Secretary Jackson; it's always good to have a fellow 
Texan before the panel here.
    Let me begin by welcoming Secretary Jackson back to the 
committee to discuss the state of America's housing markets and 
to report on the President's budget proposal for the Department 
of Housing and Urban Development.
    One of Secretary Jackson's main priorities since assuming 
his responsibilities in 2004 has been to make HUD programs 
function in a more cost-effective and efficient manner while 
still serving those in need. The recent decision by the 
Government Accountability Office to remove both HUD's single-
family mortgage insurance and the rental housing assistance 
programs from the GAO's list of government programs at high 
risk for waste, fraud, abuse, and mismanagement demonstrates 
that the Secretary's efforts are making a real difference in 
changing the culture at HUD.
    Secretary Jackson should also be commended for his 
continued leadership in helping Americans realize the dream of 
homeownership.
    Over the last several years, the Administration has sought 
to change the direction of many of our Nation's housing 
programs. Rather than merely addressing the symptoms, the 
Administration has proposed changes designed to promote 
economic opportunity and ownership and encourage greater self-
sufficiency among our citizens. This budget continues the 
President's commitment to increasing homeownership, and 
fostering an ownership society.
    The housing market has driven the Nation's economy over the 
last several years as Americans bought and refinanced homes in 
record numbers. Today, nearly 70 percent of all American 
families own their homes.
    The benefits of homeownership are well documented. 
Homeownership is not only the key to financial independence, 
but it creates stakeholders who tend to be active in charities, 
communities, churches, and other civic-minded pursuits. 
Homeowners are more likely to vote and take an interest in 
local issues. And families owning a home are often in a better 
position to offer children a more stable living environment.
    While highlighting the many benefits of homeownership, we 
must also acknowledge that there are many people in today's 
society who are not yet ready to own a home. Mr. Secretary, I 
appreciate your efforts on both of these fronts, to expand 
homeownership and to assist those who are not yet equipped to 
take this big step.
    The President's budget also continues to emphasize 
improvements to the FHA program, designed to increase 
homeownership in low-income communities. Since 1934 more than 
34 million Americans have become homeowners through FHA, 
however in recent years the FHA program has not kept pace with 
the changing technology or the needs of many families it was 
chartered to serve.
    The housing approved bipartisan legislation in last 
Congress to allow FHA to engage in risk-based premium pricing, 
boost the amount of availability for FHA-insured mortgages, and 
provide more down payment options. These important reforms 
would expand the reach of FHA programs so that more families 
have access to homeownership.
    Mr. Secretary, once again, we are very pleased to have you 
before the committee. I look forward to working with you 
throughout the coming year.
    The Chairman. I apologize. I was being bipartisan. Next, I 
will recognize my colleague and neighbor, the gentleman from 
Massachusetts, Mr. Lynch, for 3 minutes.
    Mr. Lynch. Thank you, Mr. Chairman. I want to thank the 
Secretary for coming before us to help us with our work. As 
many of our colleagues will note today, this budget, the 
President's budget, has many troubling aspects to it from the 
standpoint of a former tenant of public housing like myself.
    In view of these changes, I think it provides some of the 
most important governmental services in general--the housing 
department. I am disheartened that year after year, it seems 
we're discussing more cuts to the HUD budget, and I believe 
that since the Bush Administration took office, and including 
the proposed budget, programs have been slashed, including 
cutting disabled housing by 51 percent by one estimate. Elderly 
housing programs have been cut by 38 percent, and CDBG grants, 
which are also a source of benefit to a lot of people in public 
housing in our inner cities have been cut by 43 percent.
    Those are just the programs that have been reduced; I won't 
have time to mention the programs that have been cut. I feel 
that we should be moving in a different direction. We have seen 
an erosion of healthcare security for working families. We've 
seen an erosion of job security for a lot of working families. 
We've seen an erosion of pension security. Those protections 
are the very events and aspects of life here in America that 
will cause families to have to resort to public housing. And 
yet now, with this budget, I see us pulling the rug out from 
under the housing programs as well.
    I think the Section 8 voucher programs are an essential 
element of public housing, especially in districts like mine 
and the chairman's, with high real estate values where 
homeownership is much more aspirational for the neediest of 
families. In Boston, we have a waiting list of 15,000 families, 
and there is a 50,000-deep list across Massachusetts for 
Section 8 vouchers from the DACD alone. How do you propose we 
take care of these families with a budget that cuts $90 
million?
    The community development block grants are to be cut by 20 
percent. Again, these funds are used by communities to meet 
those critical development and infrastructure needs around 
affordable housing. These cuts will specifically affect my 
district by taking away a critical $300,000, and we're 
scrambling to make up that loss.
    Finally, in closing, the proposed budget eliminates funding 
completely for the Brownfields Rural Housing and Economic 
Development Grants and Section 108 CDBG loan guarantees. I just 
think we're going in a completely wrong direction, and I look 
forward to hearing your responses to that in your testimony.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. I thank my colleague. Your neighbor and the 
gentlewoman from Illinois, the ranking member of the 
Subcommittee on Housing and Community Opportunity, is now 
recognized for 3 minutes.
    Mrs. Biggert. Thank you, Chairman Frank, and welcome back, 
Secretary Jackson. For the past few years we have been honored 
to have you here during the month of March to review the 
President's budget proposal. Our discussions during this annual 
hearing are always lively, but they are in fact serious, and 
very important to me, my constituents, and millions of 
Americans who count on HUD and Congress to promote safe, 
decent, and affordable housing.
    We on the committee are acutely aware of the many difficult 
HUD management and budget challenges, especially those inherent 
in the Section 8 program. I congratulate you, Secretary 
Jackson, for your leadership and for taking steps to strengthen 
HUD's management and performance. HUD received a clean audit 
for the 7th consecutive year, and GAO removed HUD from its 
high-risk government programs list for the first time in over a 
decade. I am sure that was no easy task, so congratulations to 
you and your team.
    As for the President's fiscal year 2008 budget proposal, I 
am heartened by the fact that the President acknowledges the 
need to reform several HUD programs that aim to end 
homelessness, foster homeownership, and when renting is the 
most viable option, provide individuals and families with 
rental assistance, and provide housing counseling to help 
homeowners, for example, avoid foreclosure. I couldn't agree 
more with these goals.
    However, I couldn't disagree more with the proposed cuts to 
Federal housing programs that are tailored to meet the housing 
needs of the disabled and our seniors, Section 811 and 202 
programs. Cutting in half the budgets for these two programs in 
the absence of comprehensive reform constitutes a great 
disservice to our seniors and disabled citizens.
    About one-third of the residents in my congressional 
district are elderly. That figure will only grow as the Baby 
Boomer Generation continues to age. In order to ensure that my 
constituents are well served in 2008, I will support level 
funding this year for Sections 811 and 202 as we work to reform 
these programs, but I would like, Mr. Secretary, a commitment 
from you today that we will work together to review and reform 
Section 811 and Section 202 programs.
    In addition, I look forward to working with you, Ranking 
Member--I was going to say Bachus, but I am looking at Mr. 
Neugebauer here--and Chairman Frank and Chairwoman Waters to 
strengthen Federal housing programs, including FHA, Section 8, 
GSEs, those that aim to end homelessness, and those like the 
American Dream Down Payment that give a helping hand to first-
time homebuyers.
    Again, welcome, Secretary Jackson. I look forward to your 
testimony.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. I thank the gentlewoman. We've been joined by 
the chairwoman of the Subcommittee on Housing, and she has 
graciously deferred a statement at this point.
    Mr. Secretary, please go ahead with your statement. Without 
objection, any written material you want to insert will be put 
into the record.

    STATEMENT OF THE HONORABLE ALPHONSO JACKSON, SECRETARY, 
          DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Secretary Jackson. Thank you very much, Chairman Frank, 
Ranking Member Bachus, and distinguished members of the 
committee. I thank you for the opportunity to be here to 
discuss the President's 2008 Budget. It's a good budget, and I 
encourage you to give it your support.
    The President is very concerned about helping all Americans 
have access to affordable housing that is decent and dignified, 
and his $32.2 billion budget for HUD, an increase by $1.6 
billion over last year's request, demonstrates that concern.
    I want to highlight how the President's budget would help 
HUD achieve the mission Congress has assigned us, particularly 
in three areas: helping more Americans own their homes, 
especially those who thought homeownership was out of their 
reach; helping those not ready or willing to own their home 
find decent rental housing in this country; and making 
necessary reforms to multiple program areas, including FHA, 
public housing, community development block grants, and 
homeless programs.
    Our first area, Mr. Chairman, is helping Americans achieve 
the dream of homeownership. Under President Bush's leadership, 
this Administration has achieved new records in the rates of 
homeownership. Today more than 75 million families, or nearly 
70 percent of all Americans, are homeowners, the largest number 
of Americans ever to own their homes.
    But many low-income Americans struggle to overcome the 
single greatest obstacle to homeownership, the cash down 
payment and the closing costs. That is why the Administration 
proposed an additional $50 million to continue funding the 
American Dream Down Payment Initiative. Added funding has 
helped more than 21,000 families to purchase their first home, 
of whom approximately 50 percent were minorities.
    The Administration request is a $25 million increase over 
2007. Additionally, the Department is requesting $1.97 billion 
in FY 2008 for the Home Investment Partnership Program, which 
is the largest Federal block grant to State and local 
governments designed to produce affordable housing for low-
income families.
    More than ever, potential homebuyers need assistance to 
make smart homeownership choices. That is why the President has 
proposed another $50 million for housing counseling. Housing 
counseling is the most cost-effective way to educate an 
individual.
    This budget also provides $367 million in Section 184 loan 
guaranteed under the Indian Housing Loan Guarantee Program to 
increase homeownership in the tribal areas. Our second focus, 
Mr. Chairman, is helping low-income families find decent, 
affordable rental housing.
    At HUD, we realize that homeownership may not be a viable 
option to everyone. That is why the largest component of HUD's 
budget promotes safe and affordable rental housing. The 2008 
budget supports rental housing for nearly 4.8 million people 
through public housing, and Section 8 and other assistance 
programs, including $575 million in funding for support of 
housing for the elderly, 202 program; and $300 million in new 
grant funds for housing assistance related to support of 
services for low-income persons with HIV/AIDS and their 
families.
    The third focus, Mr. Chairman, is laying the groundwork for 
reform of some of HUD's most vital programs to better serve 
those in need. The Federal Housing Administration needs to 
improve the ability to reach traditionally under-served buyers, 
which will also help increase minority and first-time 
homebuyers.
    Too many individuals and families have been steered into 
high-cost, high-risk loans, particularly minorities, first-time 
homebuyers, and families with less than perfect credit. 
American homebuyers need FHA. That is why the legislation to 
modernize it is so critical, and I appreciate that this 
committee understands the urgent need to bring FHA into the 
21st Century.
    The President also proposed an innovative reform to the 
Section 8 voucher program. The reform will allow the public 
housing authorities that have been good stewards of the 
taxpayers' money to assist more families. We estimate that 
180,000 more families will be able to get rental assistance.
    Another way to strengthen the community would be to reform 
the Community Development Block Grant program. It has become 
increasingly clear that an outdated formula that once measured 
the needs of urban America no longer reflects the modern needs 
of today's cities, large suburban counties, and States. Some 
high-need areas receive smaller grants than they should, and 
some low-need areas receive larger grants than they need.
    The Department will continue to pursue a formula of 
fairness by supporting a new formula that will more effectively 
target the Community Development Block Grant funds to areas of 
greatest need in the 21st Century.
    Ending chronic homelessness remains a priority. Since 2001, 
the Bush Administration has awarded more than $9 billion to 
help homeless individuals move beyond life on the street. To 
provide further supportive housing options for the chronically 
homeless, the 2008 budget will provide $1.59 billion, an 
increase of $50 million over last year. We will also be 
proposing legislation to change consolidated HUD homeless 
programs to improve the efficiency and effectiveness of the 
delivery of these critical, needed funds.
    In conclusion, Mr. Chairman, the Administration's 2008 
budget makes good progress towards successfully realigning the 
Federal Government priorities to fit the Nation's changing 
needs. This budget also lays the groundwork for program reforms 
like FHA, Community Development Block Grants, homeless grants, 
and Section 8, and it will enable HUD to continue along the 
path to greater efficiency and effectiveness.
    As noted a few minutes ago, HUD improved program management 
capacity. I would like to mention, as the Congresswoman did, 
that HUD was removed from the Government Accountability 
Office's list of high-risk agencies. This occurred in 1994, and 
finally, we were removed.
    This is a good budget, Mr. Chairman, and I respectfully 
urge Congress to adopt it. And I am now available to answer 
questions from you and other members of the committee.
    [The prepared statement of Secretary Jackson can be found 
on page 57 of the appendix.]
    The Chairman. Thank you, Mr. Secretary. I want to express 
publicly what I just said to you, that I appreciate, and I know 
Ms. Waters does as well, the cooperation we got from your staff 
as we were working on the bill dealing with the aftermath of 
the hurricane. We understand there are policy differences, and 
we'll continue to press them, but the staff of HUD was very 
helpful technically; the bill was improved it its technical 
aspects by your staff's cooperation. I want to acknowledge the 
good work that they did.
    Secretary Jackson. Thank you.
    The Chairman. I also want to repeat--and I know my 
colleague from New York, Ms. Maloney, will feel this way as 
well--that many of us were very pleased, as I said, with what 
you did with Starrett City, and some of us would have hoped 
that the City of New York might have been wanting to do that 
with Stuyvesant Town or Peter Cooper Village.
    I guess the mayor of New York has a different view about 
the affordability of public housing in Manhattan versus 
Brooklyn. I wish he was more amenable to it in Manhattan, but 
Brooklyn is okay; it is better than nothing.
    But that's the point I wanted to touch on with you for the 
future. Obviously we have our differences. The proposed cuts in 
CDBG--I know the President proposed a cut in CDBG. I do not 
think there are 10 Members of Congress who will pay serious 
attention to that proposal, and I don't plan to be one of them 
now.
    Similarly, I don't think we're going to cut back on the 
proposals to construct housing for the elderly and for the 
disabled. You know, in particular, when you're talking about 
housing for the disabled, the market is simply not going to be 
able to shoulder that on its own. That is a legitimate issue of 
market failure in technical economic terms.
    But I do want to talk about the issue that I mentioned 
about acting on the Starrett City principle. Look, we're all 
aware that the voucher program has a mixed impact because it 
does provide some equity, but in areas where there is a 
shortage of rental housing, the voucher program has an upward 
price impact. That's why we will be talking some about 
production.
    But let me talk to you about preservation, and I would hope 
we could work together on this issue quite seriously, Mr. 
Secretary. The principle that you acted on with regard to 
Starrett City, as I understand it, was you were not going to 
give approval to the extent that you had the right not to--in 
some cases you don't have that legal right--but that you would 
use your legal authority, in appropriate cases, to prevent the 
loss of affordable units, i.e., not simply protecting existing 
tenants, but also preserving the number of units so that when 
that one tenant moved out, the units were still there. Is that 
an accurate description of the principle that you acted on?
    Secretary Jackson. Yes.
    The Chairman. Well, could we work together to generalize 
that? As you know, we had the GAO do a study for us. There are 
hundreds of thousands of units of affordable housing that were 
built in the 1960's and 1970's with Federal funds. You and I 
weren't part of this. A decision was made then, which I regret, 
but I have enough recent decisions to worry about that I 
regret, without trying to spend too much energy on 30- and 40-
year-old ones.
    Many hundreds of thousands of units that are now available 
for people of moderate income, generally, not the lowest 
income; we have to deal with that elsewhere. We could lose them 
to the market. Of course, I think what has happened is, not 
surprisingly, people in the 1960's and 1970's hadn't fully seen 
the extent to which public tastes would differ, that living in 
central cities would become more desirable than it was, 
gentrification, and various other things.
    We now have hundreds of thousands of units at risk, if we 
don't act, of going from an affordable status to the pure 
market. My view is that the most efficient use we could make of 
dollars would be to try to buy up the right to take those out. 
Some of these are in the Ways and Means area, for instance, 
Exit Tax Relief. I'm told that would be very important.
    Could we work together? I would hope that you would 
designate the appropriate people at the Assistant Secretary 
level to work with our staff. I would hope that we could say, 
let's figure out what it would cost to preserve virtually all 
of those units. There would be some where the neighborhood had 
changed so much it wouldn't make sense, or the units might have 
deteriorated, but I think that we ought to set a goal of 
preserving the great bulk of those units as affordable. We 
should at least figure out how much it would cost and what 
legal authority we would need.
    And I'd like to work with the States there, too. That's why 
the Starrett City thing was important. A number of States, the 
Mitchellama in New York, or Massachusetts have also done this. 
I would hope we could look at all of the programs that have 
been put forward to preserve affordable housing and try and 
maximize that. Is that something you think we could work on?
    Secretary Jackson. Yes, I do. And we're very fortunate, Mr. 
Chairman, to have the Assistant Secretary for Policy, Research, 
and Development, Darlene Williams, who is extremely good at 
this. I would like nothing better than to work with you because 
I agree with you--where we can preserve we should. We should 
not let units go back into the market.
    As you know, we had a case, I guess it was about 3 years 
ago in Massachusetts, where we tried very hard to keep that 
unit affordable, but eventually they paid off the loan, and--
    The Chairman. Right, we understand. People have a legal 
right to do that. We're not abrogating the rights of contract. 
I do think, however, that we have a right and we certainly had 
this legislation before. We could, I think, get a right of 
first refusal on the books, and in many cases--well, in some 
cases it won't happen.
    In my experience, most of the people who built this housing 
had an inclination to build this housing. If they wanted to 
just be in the conventional market, they could have done that 
right away. Some of them are non-profits. A lot of them would 
be willing to work with us. We're not trying to take away their 
rights without paying for them.
    I think per unit, if we're trying to have more units than 
we otherwise would have, it would be cheaper to work with them 
and buy out that right rather than to start from scratch, so we 
will work with the Assistant Secretary, and I appreciate that.
    It's probably going to cost us some money, but I think it 
would be money well spent. As I said, it avoids one of the 
biggest obstacles we now have with building affordable housing, 
which is neighborhood resistance, because we're talking about 
preserving units that were already built.
    I appreciate that, Mr. Secretary. We're going to take you 
up on that.
    Secretary Jackson. Thank you.
    The Chairman. The gentleman from Texas.
    Mr. Neugebauer. Thank you, Mr. Chairman.
    Secretary Jackson, last month members of our committee held 
some field hearings in New Orleans, as you may know, and 
members of the panel toured several of the public housing 
developments that in many cases are uninhabitable at this 
particular point in time. Since Katrina, what progress has been 
made toward improving these units so that families who wish to 
return will have a safe place to live?
    I understand that HUD has partnered with groups like 
Enterprise and Catholic Charities to redevelop some of this 
public housing into healthier communities. Why is it taking so 
long to move these plans forward?
    Secretary Jackson. First of all, as the chairwoman of the 
subcommittee is well aware, we are in a major lawsuit right now 
in New Orleans, and we cannot--we've just gotten the go ahead 
to move forward. Before that, we could not make any moves until 
the judge made a decision. We immediately put almost 1,200 
units back online, and then we were asked to put another 1,000 
units online, which we are doing. And then we talked to the 
chairwoman of the subcommittee and she asked us if we could 
possibly have 3,000 units, and we're in the process of doing 
that.
    The key to it is that we're going now from State to State 
to try to find persons who will be willing to come back to the 
units. Now it's important to know that we're willing to buy out 
the leases; we're willing to move them. We're making sure that 
if they want to come back they can come back, because it is 
clear to us as to many of you who were there that there's a lot 
of work to be done and there's not enough people to supply the 
person-power to get that work done.
    We were also asked to look at doing a major survey. We have 
hired a person who is nonpartisan, who is very open with the 
major university to look at bringing people back and why 
they're not coming back in great numbers.
    Now lastly you ask, why has it taken so long? Many of the 
units were very much in ill repair, and we tried to repair 
them; some of them were under water, some were not. But at the 
same time, we have a very unique opportunity where we finally 
have monies to redo many of those developments that should have 
been redone years ago.
    It's important to note that before Katrina we had done 
Desire, which had sat there for almost 20 years; we had done 
Full Florida; and we were almost through with Fischer, so it 
wasn't something that we agreed to do initially.
    When we took it over, we said that we wanted the quality of 
life for the persons who live in public housing in New Orleans 
to change, and I do not believe, as I said both to Chairman 
Frank, and to Chairwoman Waters of the subcommittee, I do not 
believe that we should alienate low-income people from the rest 
of society, and I think that clearly we must integrate them 
both socially and economically if we have an opportunity. We've 
been presented with an opportunity to do that, and that's the 
only reason that I want to do it. But I will work with the 
committee to try to get as many residents back who want to come 
back.
    Mr. Neugebauer. Moving to the CDBG question, we also were 
down there and we heard that, as you understand, Congress has 
appropriated nearly $16 billion in CDBG money for the Gulf 
Coast recovery, and some of that money is geared towards 
bringing some of that housing back. But right now only $1.2 
million of that money has been distributed to families to 
rebuild. What's going on there?
    Secretary Jackson. Congressman, your guess is as good as 
mine. It is clear, we have met with parties who are given the 
authority to make the compensation of these monies to other 
people.
    I will say this. I think it's a very cumbersome process 
that they've created in Louisiana. It's going to be very 
difficult from my perspective to move quickly and judiciously 
in this area, and I instructed members of our staff, just 
yesterday, to talk with the governor's staff to try to expedite 
this process.
    As you know, in Mississippi, we've allocated 10,000 checks 
to people, and they are in the process of rebuilding. Well, 
we've spent almost $100 million in Louisiana, and we have only, 
I think, given out about 500 checks. That is totally 
unacceptable, and we will continue to work.
    It's important to note that the President made it very 
clear that each State has the responsibility of addressing the 
issues. When you gave us the money, you gave us great latitude 
to let the States have the right to decide how they were going 
to spend the money, and we've tried to do that with 
Mississippi, Louisiana, and Alabama.
    Mr. Neugebauer. Just one quick FHA question. You know, we 
passed H.R. 5121, the Expanding American Homeownership 
Opportunities Act of 2006, overwhelmingly; do you think that 
FHA is a safer mortgage product for those subprime borrowers 
out there than, say, the subprime private marketplace?
    Secretary Jackson. Mr. Congressman, there is no question. 
All we have to do is read the news articles over the last week, 
and we realize that companies like New Century and others have 
created serious problems in this subprime market. The only way 
that we're going to be able to address that is if we modernize 
FHA to go back and do what it did in 1934, to address the needs 
of low- and moderate-income people.
    We believe that clearly we can do that; we can do it so 
that we'll be able to address the needs of our constituents in 
California, which it can't now; the market has been out-priced.
    I'm convinced that the best way we can go to save low- and 
moderate-income Americans is to modernize FHA, and I'm very 
pleased that last time the House passed the bill at 416 to 7. I 
just hope that we immediately begin the process again because 
we believe that we cannot continue to let this market do what 
it's doing because a lot of people are in foreclosure, and 
we're working hard to keep people from going into foreclosure.
    You know, some people say, well, we look at a 30-day 
snapshot, and there are a lot of people. Usually we look at 90 
days. That's when the real problem happens in this country. If 
they haven't made it in 90 days, they're in serious trouble. 
And I think we have a wonder with FHA to cure this problem and 
cure it very quickly.
    Mr. Neugebauer. Secretary, thank you for those good 
answers.
    The Chairman. The gentlewoman from California.
    Ms. Waters. Thank you, very much. Good morning, Mr. 
Secretary. It's good to see you.
    Secretary Jackson. Good morning.
    Ms. Waters. And I want to thank you for the work that you 
have done in trying to solve this very difficult problem in 
Louisiana. I thank you for the time that you spent with me in 
your office and I also thank all of your staff. It is a 
difficult one, but I do think we can solve it, and I do not 
want to rely even on the supplemental appropriations that we 
have here because the President said he's going to veto it.
    I don't want to put anything in there that is not going to 
pass, but I think that based on the work that you have already 
done and that we have done, we can get the residents back who 
want to come back into those rehabilitated units. And I think 
you already have said that you have enough money in your 
pipeline to be able to do that.
    Secretary Jackson. Yes.
    Ms. Waters. I think you have already agreed that you would 
do 3,000 units; is that right?
    Secretary Jackson. That's correct.
    Ms. Waters. So I think that despite the fact that, you 
know, the lawsuit was filed and the advocacy groups were a 
little bit unhappy, things are working out. I thank you for 
your cooperation on that, and I want you to know that it needs 
to be understood that we have asked for one-on-one replacement 
in any redevelopment that you do, but we have done nothing to 
say that you should not get together with the city and the 
residents and plan for our redevelopment.
    We were interested in getting people back in, and we think 
it's in the best interest of everybody that you do a plan that 
will incorporate several things, including one-on-one 
replacement. As Mr. Frank has always said, get those new units 
online before you start tearing down the others, and I think 
everything will work out fine.
    Now having said that, let me back up and ask you about 
CDBG. Do you still have the authority to help direct that 
money, given that you had given it to the governor's office in 
both Louisiana and Mississippi? Do you still have some way by 
which you can influence--helping to expedite what they're 
doing?
    Secretary Jackson. Let me say this first before I answer 
that question. I want to publicly thank you very much for 
interceding and trying to resolve the matter in Louisiana 
because I think without you in the session it might have gotten 
a little more out of whack than what it was, so I really 
appreciate that, first.
    I am exerting all the moral influence I can to get this 
money spent. When you all passed the legislation it gave the 
States wide latitude with the money. We could send them the 
money. We had to approve their plan, once they submitted the 
plan.
    We approved their plan, and they had to implement the plan 
exactly as they said they would. That's probably the only 
leverage, if they don't do it, that we have over them. We can 
say, you're not doing what you agreed to do in your plan, but 
other than that, the first group of monies, it's--we have very 
little authority. But in the second group, we have quite a bit 
of authority with the second round and the supplement that you 
have. We have quite a bit more authority to impose our will 
upon them.
    So we're doing everything in our power. In our office, we 
have met with ICF, we have met with Shell, we have met with the 
governor's staff, and we are doing that again today to try to 
stress that it's very, very important that we compensate these 
people as quickly as possible.
    Ms. Waters. Mr. Secretary, in Louisiana I'm wondering, 
based on the number of applications that have been filed, over 
109,000 and the very few--when we were there about 775 had been 
completed. I'm told they've added some to that.
    Secretary Jackson. Right.
    Ms. Waters. But it seems to me that if there is some way 
that you could use that information to determine that they have 
not followed their plan because they are not producing in a way 
that is very helpful, they're not expediting, please take a 
look at that.
    And two other things I don't know whether you can look at, 
but we--I discovered that they didn't know how to do 
appraisals, I don't think. They basically started out doing 
appraisals not based on the value of the house that was there 
prior to Katrina, but post-Katrina, after the houses had been 
turned over, blown over. So is there some way you could look at 
that?
    And also, clearing titles. They certainly don't know how to 
clear a title, and I know that there are some complications 
there because houses have been passed down not in a legal way. 
You know, through the years, the families have done this. But 
you can't hold up replacing those homes and getting homeowners 
back if they can't clear titles. So I wish that you and 
whatever experts you may have at your disposal would take a 
look at appraisals and clearing titles and see if you can find 
a way to use whatever leverage you might have to help them 
expedite this program.
    Now having said that--and it's wonderful that we are moving 
forward with public housing, and everything I think is going to 
be okay. I have to tell you, I'm still unhappy about CDBG, and 
a few of the other programs that have to get cut, too, and all 
of the public housing I have to pay attention to; we had some 
cuts there that I'm going to try to restore.
    But also, Mr. Secretary, we need social services in all of 
our public housing developments. I know that's a vision of 
yours with redevelopment, but we're not going to redevelop 
these thousands upon thousands of units within the next 20 
years; it's just not going to get done. So we can't say that 
those who are not online for regional development are not going 
to get social services.
    What can we do to replace things like the drug intervention 
program that we had in public housing, that we have lost? What 
can we do for helping to direct people to healthcare services 
for providing space for some after-school tutoring?
    I know we can do something, and I'd like for you, even if 
we could find more money to do it, you to design something, or 
if we--you don't design something and we find money for it, 
that you will take advantage of it, and that if we can't find 
money that you will look at what you have and do something to 
put some social services in these housing projects that are not 
going to be developed any time soon.
    Secretary Jackson. I do not object to anything that you 
just stated, and I'll be more than pleased to sit down with 
you, and sit down with the chairman, and try to work through 
the process. And if you find the money, yes, I'll be more than 
happy to implement programs.
    We have some ideas, and I'll be pleased to share them with 
you. I am in agreement. I was just in Los Angeles and had a 
chance to see Imperial Court and others, and it disturbs me 
tremendously when I see young kids afraid to walk to school. I 
think there's something we're going to have to do within our 
powers to correct that, and I'll work with you wholeheartedly.
    Ms. Waters. Thank you very much, Mr. Chairman. I yield 
back.
    The Chairman. The gentlewoman from Illinios.
    Mrs. Biggert. Thank you, Mr. Chairman. Mr. Secretary, the 
HUD's FY 08 budget calls for removing the voucher cap so that 
unspent balances can be expended on vouchers above the cap. 
Could you explain how this policy move could make the program 
more effective and efficient and allow PHAs to serve more 
people?
    Secretary Jackson. Yes. And to get into the details, I'd 
like for, Congresswoman--for my Assistant Secretary to come up 
and speak to that matter.
    Mr. Cabrera. Congresswoman, essentially what we have 
currently is a budget-based system. And in there, there are--
    Mrs. Biggert. Okay. Could you identify your name and title 
for the record, please? I know you've just been here, but once 
again.
    Mr. Cabrera. I'm Assistant Secretary Orlando Cabrera. I'm 
Assistant Secretary for Public and Indian Housing.
    Currently, as part of the appropriations model, there are 
caps that attach to the allocations that keep public housing 
authorities from exceeding a cap in many circumstances, and 
that cap affects something called the Undesignated Fund 
Balance. So in our proposal, the cap would be removed and 
therefore PHAs would be able to fully utilize the amount of 
money that was appropriated to them.
    On top of that, the President's 2008 budget states 
essentially that it is a prospective re-benchmarking. It is 
moving forward. So we would look at re-benchmarking; re-
benchmarking wasn't the issue. The issue is to do it forward 
from this point in time.
    Mrs. Biggert. Thank you. Mr. Cabrizzi, if I could just 
follow up on that.
    This would be 2008, so really the CR that was passed, a lot 
of those vouchers that were within the cap would be removed. 
For example, in my area we're losing about $8 million in the 
different counties because they have a cap and they're not able 
to access that money, so those would be gone and they'd have to 
start over again with having it.
    Mr. Cabrera. Correct. It wouldn't be because of the cap 
there--it's the House Joint Resolution, the language that was 
passed. And the spending resolution states that money is going 
to be redirected. It's not that it's been so much removed based 
on certain utilization rates. Therefore because it didn't take 
into account certain issues, that's the net effect. So yes, for 
example, DuPage County, as I recall, does lose Section 8 
allocation.
    Mrs. Biggert. Thank you. I called you Mr. Cabrizzi. I meant 
to say Cabrera.
    Mr. Cabrera. It's all right. I've been called worse.
    Mrs. Biggert. Thank you. Then, Mr. Secretary, in the 
current draft of the GSE Reform bill, there's a new affordable 
housing fund language, and this language tasks HUD with 
reestablishing a formula to allocate funds to States and the 
Indian tribes, and the language permits the States to determine 
what organizations will receive these funds. Do you support 
this new language?
    Secretary Jackson. Is that in the legislation?
    Mrs. Biggert. This is in the current draft of the GSE 
reform bill. We have not considered it here, but it's going to 
be introduced soon.
    Secretary Jackson. I have to tell you, I have not seen that 
language, so I'm not really, Congresswoman, in a position to 
comment.
    Mrs. Biggert. Okay. Maybe you could let us know afterward. 
That would be great.
    Secretary Jackson. I will be happy to. I will look at the 
language and I will get back to you.
    Mrs. Biggert. Because I'd also like to know, should the 
language specify where the affordable housing funds should go 
within each State, and then should HUD play a more expanded 
role in the affordable housing fund than the bill envisions? If 
you could get back to us on that, I'd appreciate it.
    Then, let's see, I just have a minute. The Section 8 
Disability Fund, why doesn't the Administration support full 
funding for the Section 811 program?
    Secretary Jackson. We do. At this present time, we have a 
lot of the units in the process of being built, and we believe 
that the allocation that we made will continue the progress 
that is being made. I don't see this as a cut or not 
supporting. We do support 202 and 811, there's no question 
about it, because those persons who are seniors deserve the 
best that we can give them, and those persons who have certain 
disabilities deserve the best, and we will continue to do that.
    Now I know some will say, ``Well, you cut the program.'' 
But initially, when we came in, the program was not moving, 
Congresswoman; it was at a standstill. To date, we have it back 
online, we are allocating monies, and we will continue to do 
that. We'll make sure that the program works.
    Mrs. Biggert. All right. Thank you. I yield back.
    The Chairman. The gentlewoman from New York.
    Mrs. Maloney. I thank the gentleman for yielding and for 
having this truly important hearing on affordable housing, and 
I thank Secretary Jackson for your help with Starrett City. We 
are deeply grateful; thank you.
    But every day that I pick up a paper now, there's a new 
story about the crisis and volatility in the subprime market. 
Today in the Wall Street Journal, the headline reads, 
``Subprime Fears Spread Sending the DOW Down 1.97 Percent.'' 
The Washington Post lead article today is, ``Mortgage Report 
Rattles the Markets.'' And just yesterday, Mr. Secretary, the 
Mortgage Bankers Association reported that the number of risky 
borrowers who missed payments climbed to a 4-year high.
    The number of foreclosures on all homes jumped to the 
highest level in nearly 4 decades, and even homebuyers who 
relied on loans insured by the Federal Housing Administration 
are having record default rates, so we truly have a crisis of 
affordable housing in this country.
    At the same time that we're facing this housing crisis, 
funding for public and other affordable housing has been cut 
from the President's budget, and I just cite the CDBG program. 
It was cut $700 million; that's $58 million to New York City. 
So my question to you is, what is HUD doing to ensure that 
those who were exposed to predatory mortgage practices are able 
to refinance or otherwise stay in their homes?
    Secretary Jackson. Congresswoman, I think that's a very 
fair question, and let me say this. We are doing everything in 
our power, in our moral persuasion, to try to keep foreclosures 
from occurring but because many are low- and moderate-income--
    Mrs. Maloney. But what are you doing to keep the 
foreclosures from occurring?
    Secretary Jackson. We are asking banks, we are asking 
others to--Fannie Mae, Freddie Mac, to have forbearance, to 
look at the situation. We don't have the power to dictate to 
them what they should do, but we're doing everything in our 
power, and that's one of the reasons that I said earlier that 
the FHA modernization legislation is so important because if we 
can do this, we can stop a lot of the problems that we're 
facing today.
    Mrs. Maloney. Maybe we'll move that legislation, but what 
is the Administration doing with regard to providing assistance 
now to the families with FHA-insured loans as they likewise 
report record default rates?
    Secretary Jackson. I must tell you that we are working 
every day with families who have FHA loans and we have not seen 
the record-breaking number of FHA foreclosures. We see 
foreclosures in the--
    Mrs. Maloney. Okay. But what are you doing to help them? 
You say you're working with them, but exactly what are you 
doing with them?
    Secretary Jackson. We counsel and work with them. We don't 
foreclose immediately like you've seen some of the others do at 
30 days. We go 90 days, 120 days.
    Mrs. Maloney. 90 to 120 days? That's good, and what else?
    Secretary Jackson. That's all we can do is to try to work 
with them and make sure they work out. We can't, in essence, 
provide them with money, but we can work with them. And if we 
can work with them, usually 90 to 120 days, we save a lot of 
families from going into foreclosure.
    Mrs. Maloney. I think this committee would be very 
interested in the numbers you're seeing in FHA, and if they're 
different from what's being reported in the press, I'd like to 
see that.
    Secretary Jackson. I'll be happy to do that, because I must 
tell you, Congresswoman, a lot of things I read in the press 
it's beyond my comprehension when I--
    Mrs. Maloney. Okay. Getting back to what we can do, what 
are you doing to help those who lose their homes now have 
access to other sources of affordable housing? Obviously, Mr. 
Secretary, people would not have been going into risky, 
subprime loans if the affordable housing was there, and as we 
all know we cannot have affordable housing without a Federal 
role. And what we see are repeated cuts in the affordable 
housing program, so what are we going to be doing?
    Some people are estimating--and again, you're saying the 
press is wrong, and I hope they are wrong, but we have to pay 
attention to what some of these independent groups are 
reporting. Some of them are estimating that 2.2 million 
Americans will lose their homes in this current subprime 
crisis, and what are we going to be doing to help those people? 
If they lose their home, what are we going to do; let them 
sleep on the street? We have to have alternatives for them and 
should be planning, so what plans do you have to respond to 
this crisis that we're reading about every day in the paper?
    Secretary Jackson. First of all, Congresswoman, I would 
disagree with you. I don't think it's our responsibility to 
tell people how they want to refinance their home or how they 
will finance their home. I do believe that if we do the FHA 
modernization--
    Mrs. Maloney. Well, calling a point of privilege, I wasn't 
saying that we should tell them how to finance their home or 
refinance their home; I was saying that if they could get into 
affordable housing, they would not be going into risky loans. I 
don't think anyone supports people going into loans that they 
can't afford; it certainly does not help the consumer, would 
you agree?
    Secretary Jackson. No, that's not true, Congresswoman, 
because many people do not want to deal at this present stage 
with FHA because it's so cumbersome, so they are going into the 
subprime loans. That's one of the reasons that I am just very, 
very concerned with this process. We want to change that. I 
agree with you. They shouldn't go into these loans. But many of 
these persons, like we just read in the paper the other day, 
prey on minorities--blacks and Hispanics--and when they sign 
these notes, they say it's 3 percent, but when you look at it 
it's actually 8 or 9 percent.
    They enter these agreements on their own. Now, we have done 
a lot of investigation through FHA--I mean, I'm sorry, through 
fair housing, equal opportunity--and we're beginning to come 
down on a number of these subprime lenders. That's what we can 
do. But we can't--
    Mrs. Maloney. Congratulations. Could you give us a report 
to this committee on who you came down on? Did you come down on 
Sentry? It's reported that they may be going bankrupt. They had 
a story about an 80-year-old woman who had a loan for $800; 
they refinanced it for her, to help her, so that now her 
payment was $4,000. She obviously lost her home.
    Secretary Jackson. That's right.
    Mrs. Maloney. So what are you doing? Seriously, I would 
love to see this in writing, because this is a huge crisis in 
the country. And if you've been going after these people, I 
think we should know about it.
    Secretary Jackson. I'll be happy to do it--give it to you.
    Mrs. Maloney. Have you taken steps against Sentry?
    Secretary Jackson. I can't tell you specifically against 
Sentry. I don't know exactly, but I'll get that information to 
you very quickly.
    Mrs. Maloney. Well, my time is up. And all I can say is, 
millions of people are turning their eyes to you and hoping 
that HUD can help with affordable housing; it's one of the 
biggest challenges that we confront in this country.
    Thank you.
    The Chairman. The gentlewoman from West Virginia.
    Mrs. Capito. Thank you, Mr. Chairman. And I'd like to thank 
Mr. Secretary for being here today. I'd also like to thank you 
and your agency for the help that you have given my local 
community, Charleston, West Virginia, to try to rebuild units 
and try to work with the desires of the city and the county 
which were sort of counter to what HUD's practices were. But we 
worked it out, and I really appreciate it, and that project is 
moving forward very well to provide affordable, safe housing to 
a lot of West Virginians.
    Secretary Jackson. Thank you.
    Mrs. Capito. I'd like to kind of put my question to what my 
colleague was talking about in terms of people who are falling 
prey to subprime lenders and are unable to meet those 
obligations. I know that we appropriated a lot of money for 
housing counseling. Can you talk about how that's rolling out? 
Are you seeing any results from that? And do you think this is 
an effective mechanism to help people who have fallen into this 
situation?
    Secretary Jackson. I really do. And let me say this to you. 
When President Bush was first elected, we were spending about 
$8 million a year on housing counseling. Today we're spending 
close to $50 million. And we've seen the results, because more 
people are keeping their homes because they understand the 
nuances of when you get a home what is expected and required of 
you in providing the necessary care for that home.
    Also, we're not putting people in homes, Congresswoman, who 
really can't afford them. We are saying to them, it might take 
you a year through our program to get you ready for a home, but 
the moment you move in, you will be ready to keep that home and 
stabilize that home. I believe that clearly that is not the 
case that the Congresswoman talked about in the subprime 
market. They're going in and really--it's very disheartening 
what they're doing to a lot of people because, if you think 
about it, many of us are well educated, and we don't read all 
the papers when we sign a loan. So many of these people are not 
going to read the papers either, and they sign the loans and 
they get duped in other words.
    So our position is, is we're working with housing 
counseling groups around this country. They've been very, very 
accessible. We're working with a lot of faith-based groups 
around the country that are counseling people for housing. And 
we've seen the results. People are keeping their homes, the 
ones that we have worked with. We gave you an example of the 
21,000 who have gone through the housing counseling program and 
used the American Dream Down Payment. They're stable in their 
homes, and that's what our job is.
    Mrs. Capito. Right. Thank you. One last question on the 
CBDG. Obviously, I don't support this cutback on the CBDG 
either, but in the notes, you mentioned that they had--that the 
program had gone away from its original mission and there was 
some question as to whether funds were being allocated into the 
original mission of the community block grant, and you wanted 
to see some changes and some competitiveness grants going to 
those communities that were most adept at using their 
resources. Certainly I live in a community that really relies 
on this. I just don't see the justification for it.
    Secretary Jackson. Let me say this to you. I won't say that 
the program has gone awry. That would really be inaccurate. 
What we have said is that there are certain communities that 
are receiving block grant monies that we really don't believe 
should be receiving them.
    Mrs. Capito. Like, for example, because they have higher 
income levels--
    Secretary Jackson. That's right.
    Mrs. Capito.--or they're too big, or--
    Secretary Jackson. Right. They have--it's a very wealthy 
community but they have pockets of poverty. Well, my position 
is, take your city, for example, it has more than a pocket of 
poverty. It has great poverty. And I think that if we can 
reallocate the money to where it's needed most, we can do the 
most good. You can take the chairwoman's area, some of the 
areas she represents. I mean, if we had block grant monies 
rather than going to Bellevue, Washington, or Palm Beach, 
Florida, going directly where they should be going, I think 
we'd see better allocations.
    Secondly, if we see a project that is going well and know 
it's going to take 3, 4, or 5 years to make sure it works, we 
can use this competitive part of the grant to say, okay, 
Charleston, if you're going to do the port, if you're going to 
do this, we're going to work with you for the next 5 years 
until it gets done. I think that's what we should be doing. We 
should look in depth. You know, we can dot over here and dot 
over there and really get nothing done, or we can concentrate 
in areas where we really have serious problems and get it done. 
That's exactly what I'd like to do, and that's what the 
legislation is asking to do.
    But I don't think that Bellevue, Washington, should be 
receiving block grant funds, nor do I think my home town, 
Dallas, should be paying housing inspectors with block grant 
funds. They should be paying them out of the city coffer, and 
they're not doing it. So, my position is, we're spending a lot 
of money, and we're not getting the benefit of that money. If 
we can concentrate the money where it should be concentrated, I 
think we'll see great things happening. And that's not to say--
and I want to make it clear--that's not to say that block grant 
doesn't work. I'm the first to say that I've seen too many 
great projects from the block grant program.
    Mrs. Capito. Thank you, very much. Thank you, Mr. Chairman.
    Mrs. Maloney. [presiding] Thank you very much. Ms. 
Velazquez?
    Ms. Velazquez. Thank you. Mr. Secretary, I just would like 
to acknowledge publicly the work and your role on Starrett 
City, New York.
    Secretary Jackson. Thank you.
    Ms. Velazquez. But I would like to ask you regarding the 
budget, the fact that the budget proposes again this year to 
limit TANF protection vouchers to only occupied units rather 
than all units in a subsidized building. This is at a time when 
units being lost to opt outs and demolition are at historic 
levels. In New York City, more than 5,000 units were lost in 
2005, and another 15,000 are threatened today. Further, in 
2003, HUD's survey states that 5.1 households face worst case 
housing needs. Can you explain the rationale for a policy that 
reduce the overall supply of affordable housing?
    Secretary Jackson. I can, Congresswoman, but I'd like, if 
you want the specific, to get the Assistant Secretary to give 
you specifics.
    Mr. Cabrera. Congresswoman, our methodology for dealing 
with Section 8 this year is to propose that the caps be 
relieved and that the pot of money which is known as 
undesignated fund balance be made available to PHAs to utilize. 
Expanding that capacity gives PHAs greater flexibility to 
address a lot of the issues that you've addressed.
    Ms. Velazquez. Sir, can you tell me how you plan to replace 
subsidized housing that is going to be lost as a result of that 
policy?
    Mr. Cabrera. In the case--the struggle with New York, I 
think, is that in many cases, they have housing that's really 
Mitchellama--they're really Mitchellama units. They're State-
subsidized units. And I think what they're trying to struggle 
with is how to deal with the States, the formerly State-
subsidized units in a Federal context. That is a policy issue 
that's difficult to do. It would mean extending Federal 
appropriation to cover State-subsidized units in a particular 
way.
    Secretary Jackson. Let me say this to you, Congresswoman, 
because I think the question that you raise is so valid. When 
we have the authority, as we did in Starrett City, we will do 
what we have to do to make sure that those units are preserved. 
But when they are State units, we don't have the authority. 
That has to be done from your governor and from your mayor.
    And so when we have this sale that the chairman alluded to 
a few minutes ago in New York early on in this year, I did pick 
up the phone and talk to the housing commissioner and said I 
really think that this is not a good way to do this by letting 
this go back to private hands when you have many people who 
still need that housing. But that was all I could do is use the 
moral persuasion, because it was left to the city.
    Ms. Velazquez. But in that case, it's a Mitchellama, right?
    Secretary Jackson. Right.
    Ms. Velazquez. And we have a lot of developments in New 
York City that despite the fact that they are Mitchellama, they 
also have 236 mortgages.
    Secretary Jackson. And when they do--
    Ms. Velazquez. Those are Federal.
    Secretary Jackson. I'm saying to you that we will do 
everything in our power, as we did with Starrett City to make 
sure that it doesn't happen.
    Ms. Velazquez. Okay. Mr. Secretary, nearly every day we see 
articles and news reports documenting the rising foreclosure 
and delinquency rates. Some of the gains made in homeownership 
among low-income households and minorities are in turn being 
erased. What steps is HUD taking to ensure that these trends do 
not impact families who have or plan to buy a home with 
assistance from an American Dream Down Payment Act grant or 
other HUD assistance?
    Secretary Jackson. Congresswoman, as I said to the other 
Congresswoman from New York, we went from $8 million for 
housing counseling to $50 million, and we are making sure that 
we work with those persons who want the opportunity to own a 
home so that they will understand all of the nuances of what it 
takes to be a homeowner. And we've been very successful with a 
number of the 21,000 who have come through the American Dream 
Down Payment--
    Ms. Velazquez. Sir, if you'll allow me, there is a 
disparity in terms of the money that you are providing for the 
housing counseling. Yes, there was an increase by 19 percent, 
but when you compare the money that is granted or given to the 
Dream Down Payment Act, that represents an increase of 50 
percent. So what is HUD doing to ensure that families have 
access to housing counseling programs? You're not putting 
enough money into the housing counseling program.
    Secretary Jackson. Well, I would say that in 2001 when we 
came into office, you were putting $8 million. Today we're 
putting $50 million. And I think that that--we are addressing 
more than 600,000 families a year with that money compared to 
addressing about 40,000 in 2001. So, maybe from your 
perspective it's not enough, but I think--
    Ms. Velazquez. It's not enough when you could be--
    Secretary Jackson. Well, but we made--
    Ms. Velazquez.--you gave an increase of 50 percent to the 
Dream Down Payment Act, and only 19 percent to the housing 
counseling.
    Secretary Jackson. No, no. See, I think, Congresswoman, 
you're mixing apples and oranges. The American Dream Down 
Payment is to help people with the closing costs and down 
payment. It has nothing to do with housing counseling. Housing 
counseling--
    Ms. Velazquez. Of course, I know that. So, on the one hand, 
you are helping people to buy their homes, but on the other 
hand, you're not putting enough money to provide housing 
counseling to prevent foreclosure.
    Secretary Jackson. Well, I guess I disagree with you.
    Ms. Velazquez. Of course you're going to disagree with me. 
CBDG is cut by more than $700 million. Under the current 
distribution formula, New York City will lose $58 million. I 
understand that HUD is proposing a new formula. Will this make 
up for the cuts, and when can we expect to see this proposal?
    Secretary Jackson. Let me say this to you. I just answered 
that to the Congresswoman from West Virginia. We have cities 
that are receiving large sums of monies, that I really don't 
think should be receiving those monies. I think we should 
concentrate the block grant program to those cities most in 
need where we have the highest rate of poverty, where we have 
the highest rate of the ability to make substantial changes in 
the quality of life for people. And in this case, we are trying 
to reallocate that based on where we see the greatest poverty 
need, not pockets of poverties in wealthy areas. That's a 
totally different situation.
    So if we--if the proposal is accepted by Congress and 
passed, then, yes, I think that clearly those areas where the 
greatest needs are will be addressed.
    Ms. Velazquez. Thank you, Mr. Chairman.
    The Chairman. The gentleman from California.
    Mr. Miller of California. Thank you, Mr. Chairman. Welcome, 
Secretary Jackson.
    Secretary Jackson. Thank you.
    Mr. Miller of California. And the reason I do that, in 1994 
I know HUD was put on a high risk list. And I know in January, 
you guys were removed from that list, and I think a lot of that 
is due to your leadership. You know, we talk about a lot of 
things up here on the dais. I've been involved in the building 
industry for over 35 years, and you and I have had lengthy 
conversations.
    Oftentimes we talk about subprime, we blur the line between 
that and predatory. We talk about affordable housing, and we've 
had lengthy conversations, even in my district, on the 
difficulties of providing affordable housing. But it's so 
complex. It's not just the Federal Government. It's State and 
local government. There's so many issues involved in affordable 
housing, and we're talking about risky loans. You know, there's 
a real problem in the subprime market, but I don't want to talk 
about that. I want to talk about the jumbo market that many of 
my people in California have been put into because GSEs can't 
lend in California. And I have a--it's called a map of misery 
that Business Week put out, and you can't see it.
    Secretary Jackson. Right.
    Mr. Miller of California. But the most miserable area in 
the United States is California.
    Secretary Jackson. That's correct.
    Mr. Miller of California. And 18.1 percent of all fixed-
rate loans in 2005 came through the jumbo market. But if you 
look at conforming, 82 percent were fixed-rate loans. So, the 
problem we are facing in California is in the jumbo marketplace 
because the GSEs can't compete.
    And I thank, Mr. Frank, the chairman, for working with me. 
We've been trying for several years to raise, you know, limits 
in high-cost areas and introduce FHA in those high-cost areas. 
But on the jumbo market, 34.9 percent of the loans made in 2005 
were interest only, and 23.9 were negative ARMs. There's a 
problem there.
    Secretary Jackson. That's correct.
    Mr. Miller of California. And that's a problem we can do 
something about. We need to take and change the way the system 
has been going out there. We need to look at these high-cost 
areas and say how do we provide more opportunity for GSEs to 
compete in those areas and provide a good fixed-rate loan 
that's more affordable, more creative in some ways, and even an 
FHA to help people who don't have the down payment that they 
need to get into homes.
    What's your opinion on that? Where do think we've failed?
    Secretary Jackson. Well, first of all, let me say this, 
that you're correct. That's one of the reasons, I'll go back, 
that we need FHA modernization legislation, so we can address 
the needs of persons in California. In fact, Congressman, I'd 
say from Utah all the way back to California, from Virginia all 
the way back to the East Coast, we have the same problem. And 
so if we can modernize FHA, we can address that issue, 
especially for low- and moderate-income persons.
    Now my concern is the same concern that was raised by the 
chairwoman from New York. I'm so afraid of these interest-only 
loans, these subprime loans, and I think that clearly we need 
to do everything we can through moral persuasion to try to keep 
the banks, Fannie Mae and Freddie Mac, from foreclosing on 
these loans.
    Many of these persons have been put in a position that they 
didn't understand when they signed those papers; they did not 
know what they were getting into. So our task is to make sure 
that where there was clearly predatory lending taking place, we 
take every action possible to bring those companies down. But 
where it wasn't, we need to try to work with the companies and 
the banks and Fannie Mae and Freddie Mac to make sure that they 
don't foreclose on the loans.
    As I said before, at FHA, we try to go out 90 days to 120 
days to make sure the person can get back on their feet and 
afford the loan. And I think that's really what we can do at 
this point.
    Mr. Miller of California. I applaud you, and I think that's 
a great way to look at it, and to try to do everything you can 
to get buyers who own homes past that difficult stage to be 
able to make their payments. But in certain States like 
California, the people I represent, and Joe Baca represents, 
don't have the opportunity to participate in these programs 
that I think are doing a very good job.
    Our people are stuck in a jumbo market, and the 
conventional marketplace, I think, needs to be retained. I'm 
not arguing that. There's an absolute place for a jumbo market, 
but there's a place in this country where conforming should be 
raised because house prices went up so much that the people we 
represent who are paying the same taxes as everybody else in 
this country can't benefit from these programs that truly 
provide a lower interest rate, a better opportunity to get in 
with less down.
    But don't you think--I mean, we seem to be pointing 
fingers. I think we need to point fingers back at ourself here 
in Congress. We have been arguing this for years. I know Barney 
has been arguing the same thing for years, that we need to 
provide that opportunity, but we have failed in doing that. 
Don't you think that the market would be in a stronger 
situation and buyers would be in a better position to make 
their payments if we had afforded more opportunity for them to 
benefit from these loans?
    Secretary Jackson. Well, Congressman Miller, I'm not going 
to indict the Congress.
    Mr. Miller of California. I'll do that for you.
    Secretary Jackson. I still understand Article I, Section 9, 
and it simply says that all of the appropriators--
    Mr. Miller of California. Let me change the question. Do 
you think that people would be benefitting from these programs 
if we made them more accessible to more parts of this country?
    Secretary Jackson. I think this. I think it was a year ago 
that I testified that we have tremendous regulatory barriers in 
many of the eastern and western States. That if Congress would 
make an effort to relieve those regulatory barriers, do low-
income tax credit to give--for developers to come in and 
develop, yes. Right now in California, I think, before the 
house comes out of the ground, it's about $109- to $120,000. If 
you do incentives, low-income tax incentives for developers, 
that could probably be cut by 40 to 50 percent.
    Mr. Miller of California. Let me say on FHA so nobody 
misunderstands, we make money on FHA. FHA is not a gift. So I'm 
not up here proposing any gift to anybody, and even if it cost 
taxpayers a dollar. But Mr. Chairman, I think we need to focus 
on what we can do as a Congress to benefit the marketplace and 
create stability, and I would encourage you to move the bills 
we've introduced forward.
    The Chairman. I thank the gentleman. I just have one 
question, if the members would indulge me. He said he had a map 
of misery. Was that the governor's redistricting plan for 
California that you're--
    [Laughter]
    Mr. Miller of California. I wish that's all it was. It's a 
misery map on people who bought homes and are suffering today.
    The Chairman. Well, I appreciate that. And I also--Mr. 
Secretary, did I understand you correctly to say that you were 
not going to indict Congress?
    Secretary Jackson. Absolutely not.
    The Chairman. I think if you could speak for some of your 
cabinet colleagues, that would be very reassuring to some of my 
members.
    Mr. Miller of California. Thank you, Secretary Jackson. I 
appreciate your comments.
    The Chairman. The gentleman from North Carolina.
    Mr. Watt. Thank you, Mr. Chairman. Welcome, Mr. Secretary. 
It is good to see you again.
    Secretary Jackson. Thank you.
    Mr. Watt. I want to try to deal, if we have time, with two 
subjects that you and I go back on quite a ways. First of all, 
I want to thank you and your department for providing to us the 
information about every HOPE VI project that is in--every city 
that has gotten a HOPE VI grant and money that is in the 
pipeline, because you and I will acknowledge publicly that 
we've talked about how to get money out of the pipeline into 
some usable system.
    And if you look at it in gross, it looks like it may not be 
as bad as you all have made it out to be, but when you look at 
the specifics of what has happened in some of these 
localities--and I'm sure I will step on some of my colleagues' 
toes, including my own, as I look at these numbers--we haven't 
done too well in some respects. So let me ask you a series of 
questions related to that.
    Number one, has HUD done a grant-by-grant analysis of where 
every grantee of a HOPE VI grant is, and why if there's still 
money in the pipeline, it's still there?
    Secretary Jackson. Yes. We basically know why the money is 
not spent, where it's not spent.
    Mr. Watt. Okay. Now I'm looking at this chart, and I'm 
going back to 1993. There's still $5,548,000 left from 1993. 
Every single one of them says that the unit construction is 100 
percent complete, yet there's money still outstanding. And one 
of those, so as not to pick on anybody else, is Charlotte, 
North Carolina, which has 9 percent still in the pipeline.
    The unit construction is indicated as complete, and the 
information we've been given is that it's being used for 
community and supportive services in Charlotte. This analysis 
that you've done, I'm sure, would indicate all of that. How do 
we get this out of that pipeline and officially into some other 
category so we can consider that closed?
    Secretary Jackson. Just what we suggested a month ago to 
the Appropriations Committee. Clearly, you have the right to 
recapture the money and tell us directly what you want done 
with the money.
    Mr. Watt. But in this case, it's being used for something 
that you all have authorized, obviously. What I was told was 
that it was used for community and supportive services. And I 
assume that when you say unit construction 100 percent complete 
and it's complete, it's still being used in connection with a 
HOPE VI-approved undertaking, but it's still showing money in 
the pipeline from 1993. How can we get it out of that pipeline 
and into an approved use that doesn't keep it showing up on the 
books, so to speak?
    Secretary Jackson. Congressman, I don't have the specifics 
about the development in Charlotte, but if you want me to, I'll 
be happy to look at it and get back to you.
    Mr. Watt. Well, what I'd like is to--for you to look at 
every one of these projects that still has money in the 
pipeline.
    Secretary Jackson. Well, we have--that's what I'm saying.
    Mr. Watt. So let me ask a more general question. Do you 
feel that HUD has the sufficient authority at this point to 
recapture money that has been in the pipeline for over 10 
years--it would be over 10 years, going back to 1995 maybe?
    Secretary Jackson. No, there's no capture authority that's 
given to us in--
    Mr. Watt. So, do you think it would be a good idea for us 
to put in the new HOPE VI reauthorization bill some specific 
recapture provision, and what would you recommend that 
recapture provision say? Because we don't want to go back and 
start just recapturing any money. There's money out there. I 
didn't see any of these things that weren't at least partially 
completed, so, we don't want overkill.
    Could we get some language from you all that might help 
address this in a way that is not just a mechanical way if 
you're over 10 years, then your money automatically gets 
recaptured, but instead does it on a project-by-project basis?
    Secretary Jackson. We'll be happy to work with you, yes, 
because we've suggested some form of recapture. And, so, yes, 
we would be. I think that if we can recapture some of this 
money and allocate it to those housing authorities that have 
performed very well, it will be a positive step.
    Mr. Watt. I think I will run out of time before I get to 
talk about Section 8, but maybe I can submit some questions for 
the record, which I've asked you off the record. Anyway, how 
are we ever going to get Section 8 vouchers accepted in parts 
of the community that are not now accepting Section 8 vouchers 
and it's distorting--I mean, it's having all kind of negative 
consequences because a particular segment of the community is 
just unwilling to take a Section 8 voucher? Do you have any 
ideas on that?
    Secretary Jackson. I really don't, because that's to each 
local community. When I was in Dallas, I was very fortunate 
that we were able to send vouchers all over the City of Dallas, 
but in certain areas, there is great resistance.
    Mr. Watt. But there has to be some public--I mean, if our 
whole philosophy was to provide public housing, go away with 
constructing public housing and go to a voucher system that 
disbursed people all over the community, that was the Federal 
policy--
    Secretary Jackson. That's correct.
    Mr. Watt. There ought to be some way to play that Federal 
policy out. And the question I'm asking is, is HUD giving any 
thought to how that gets played out, not on a local community 
by local community basis, but are there some policy things we 
can do in the legislation to make that Federal policy be played 
out in a more effective way?
    Mr. Scott. [presiding] The gentleman's time has long 
expired, but if you could briefly answer that.
    Secretary Jackson. Yes, I think you do have the power as 
Congress to legislate it, but we at HUD do not. So our position 
is, is that again, we'll use all of our moral persuasion to try 
to--
    Mr. Watt. If--we can legislate, you can propose, and if you 
have some ideas, I think we would like to have those ideas just 
like we would like to have those ideas in how you would--
    Mr. Scott. The gentleman--
    Mr. Watt.--put in legislation a recapture provision in HOPE 
VI.
    Secretary Jackson. Okay.
    Mr. Scott. The gentleman from North Carolina is definitely 
my dear friend, but his time has definitely expired. Thank you. 
The Chair now recognizes the gentlelady from Ohio, Ms. Pryce.
    Ms. Pryce. Thank you very much, Mr. Chairman, and thank 
you, Mr. Secretary. It's been a long morning for you, and I 
will try not to be too trying; I really appreciate you being 
here. But let me refocus once again on an issue that was 
brought up by Ms. Capito, Ms. Velazquez, and some others.
    There are many on this committee, I think, who would like 
to really know how the new formula is going to affect their own 
communities, and the beauty in the past of the CBDG program has 
been in its flexibility. It allows communities to use the money 
for their own community development needs, needs that, you 
know, HUD here in Washington may have no idea what they are. 
And it's unclear at this point, without seeing the formal 
legislative proposal, what impact the formula change would have 
on the effectiveness of the CBDG.
    And so my first question is, is there any data? Have you 
accumulated data that you can make available to us to help us 
understand how this is actually going to impact our own 
communities?
    Secretary Jackson. Yes. The formula changes have been 
published, so it's clear what we perceive as the answer to the 
question. So, yes, if you haven't seen them, we'll be happy to 
get them to you.
    Ms. Pryce. Is it published in legislative language? Do you 
propose to legislate on this issue?
    Secretary Jackson. Yes.
    Ms. Pryce. If you do--what I have seen isn't legislative 
language. Do you have legislative language? Do you propose to 
introduce it? And if so, when will this committee get a look at 
it so we can have our input?
    Secretary Jackson. I will get back to you. I know we have 
it in language, but I'm not sure whether it is in legislative 
language yet.
    Ms. Pryce. Okay. But there is data?
    Secretary Jackson. There is data, yes, ma'am.
    Ms. Pryce. And you said you have circulated that?
    Secretary Jackson. Yes, ma'am.
    Ms. Pryce. Okay. I haven't seen how that will exactly 
affect Columbus, Ohio, and so I look forward to digging that up 
wherever it is. And I also--you know, the process through which 
the Administration is going to make this change is very 
important to us on this committee, especially.
    The chairman has made a focus on affordable housing one of 
the key priorities of this committee and this Congress, and I 
think that the proposed changes coming through HUD really need 
to be developed here in this committee, as well as in your 
organization, and we'd appreciate that opportunity, Mr. 
Secretary.
    Secretary Jackson. No, and I agree with you. I do not think 
that we should operate in a vacuum, and I do not plan to 
operate in a vacuum, because I have a great deal of respect for 
the Financial Services Committee. And so we will work with you, 
as I've told the chairman; we will work with him.
    Ms. Pryce. All right. Thank you.
    Mr. Scott. The gentleman from California, Mr. Baca.
    Mr. Baca. Thank you very much. Mr. Secretary, I have a 
couple of questions. The proposed budget of HUD for the year 
2008 would fund HUD at $35.2 billion, a decrease of $3.14 
billion from the current 2007 fiscal year.
    With rising rents, more homeless, more seniors, rising 
construction costs, and rising housing costs, how can it be 
that the costs will be lowered by $3.14 billion?
    Secretary Jackson. Well, Congressman--
    Mr. Baca. Especially in California, where we have 37 
million people now.
    Secretary Jackson. Congressman, the budget, as you said, is 
$35.2 billion, and that's an increase of $1.6 billion over our 
request from last year. So we're not decreasing the budget; 
we're increasing the budget.
    Mr. Baca. But it's not based on the inflation or the growth 
of the total population, too, as well, and the need for 
housing. Even though it may appear to be an increase, it's a 
slight, but not overall, based on the total population and the 
demands and the need.
    Secretary Jackson. Well, I'm not sure what you mean by the 
total population. We think we've calculated it based on the 
population that we serve.
    Mr. Baca. Well, I don't--I believe that it has, and even 
with California, because even California has a higher number of 
population than we had before, and there's a greater need.
    And yet, you know, questions were asked earlier about 
foreclosures. We've had a lot of foreclosures in the area, yet 
there's a greater need in that immediate area, and the majority 
of the foreclosures have been in the Hispanic and the African-
American communities in that area.
    Because of the adjustable variables in that area, there's a 
tremendous need, especially in my county, in San Bernardino 
County, and Riverside County, where there has been a high 
number of foreclosures, more so than probably any other county, 
and we have the lowest income level in the immediate area.
    Secretary Jackson. I can't speak specifically, Congressman, 
about your area, but I will say this to you. We believe that 
this budget addresses the needs of the population that we work 
with and serve.
    Now I think the Congresswoman from New York raised the 
issue about foreclosures. We work very, very hard at FHA to 
make sure that we don't have a large number of foreclosures. 
But people having dealt with the subprime market over the last 
10 years, I share your concern, that we have some serious 
problems and we're using our moral persuasion to work with 
banks, to work with Fannie Mae and Freddie Mac to not foreclose 
on those loans, to try to help these persons get back on their 
feet and keep their homes.
    Mr. Scott. The gentleman's time has expired.
    Mr. Baca. Just a quick question. It'll be short.
    Mr. Scott. Very quick, very.
    Mr. Baca. All right. Thank you. I'm sponsoring, along with 
Senator Boxer and other leaders, important national and State 
anti-gang legislation. HUD used to fund anti-gang programs 
directly such as the Public Housing Drug Elimination Program, 
yet no such programs now exist. What plans do you have to 
combat crimes at HUD properties? Are there any plans?
    Secretary Jackson. Congressman, when we did that, in many 
cases, the housing authorities were not necessarily using the 
money for anti-gang, anti-drug problems. They were calculating 
it into their budget. So we didn't take the money away. We 
simply redubbed the money and put it back in the budget and 
said if you choose the money for this purpose, that's fine. If 
you don't, you don't have to. The key to it is, is they were 
not using it as they should have been in the first place.
    Mr. Scott. Thank you, Mr. Secretary. The gentleman from 
Illinois, Mr. Manzullo.
    Mr. Manzullo. Thank you. Good morning, Mr. Secretary.
    Secretary Jackson. Good morning.
    Mr. Manzullo. About a year ago you announced that HUD would 
be proposing new rules soon to address the Real Estate 
Settlement Procedures Act, otherwise known as RESPA. To date, 
there has been no new proposal. Is it still your plan to offer 
a proposed RESPA rule, or is it dead?
    Secretary Jackson. It is not dead. And let me say this to 
you, as I said to you a year ago, I'd much rather do it right 
than quickly. We're still talking to a number of the people in 
the industry and trying to come to what I perceive as a 
consensus. I don't want to introduce a bill and then have the 
bulk of the population that it affects resist the bill like we 
had done before.
    I think we're pretty close, Mr. Congressman, to coming up 
with a solution as it relates to RESPA, and I hope that when I 
come before you next, a month from now, we can resolve this.
    Mr. Manzullo. Well, you know, when I chaired the Small 
Business Committee, we held several hearings on RESPA, and I 
guess what was really disconcerting is the fact that on two 
occasions, once just before the Christmas break, and another 
one during the August break, RESPA came up with its proposed 
rules when Members of Congress were not in town. I came back, 
held a hearing the first week of January when nobody expected 
that, and obtained from you a promise that a middle-of-the-
night, crammed-down-the-throat RESPA rule would not happen 
again. Do I have your word again that you won't--
    Secretary Jackson. Absolutely.
    Mr. Manzullo.--do timing like that?
    Secretary Jackson. I will not in any way do what was done 
before.
    Mr. Manzullo. I appreciate that. How many people at HUD are 
working on this RESPA issue?
    Secretary Jackson. It comes under the FHA Commissioner and 
the Assistant Secretary for Housing. We have a group called the 
RESPA group, and I think to date it's composed of about eight 
people, if I remember correctly.
    Mr. Manzullo. It's about eight people? One of the things 
that we would like to see done, but I know it may be difficult 
when we're working with proposed rules, is maybe just before 
you're ready to put things down in writing, if there is an open 
meeting with all the parties and Members of Congress to give us 
an idea of what it will look like before it's rolled out, then 
perhaps we can work on a consensus basis at that point.
    Secretary Jackson. I would appreciate that very much.
    Mr. Manzullo. Thank you, very much.
    The Chairman. The gentleman from Georgia.
    Mr. Scott. Thank you very much, Mr. Chairman. Mr. 
Secretary, let me first of all start out by thanking you for 
the help that you gave to me and to my constituent. We had a 
very, very serious issue with a predatory lending case 
involving Mr. and Mrs. Leroy Tremble in my district, and you 
came immediately to the phone, and got on this. You put your 
Assistant Secretary, Ms. Kimberly Kendrick, onto it, and it was 
because of your effort and involvement that we saved her home 
because they got their loan adjustment.
    Secretary Jackson. Thank you.
    Mr. Scott. I want to thank you for that. It wouldn't have 
happened without your input. I also want to thank HUD in my 
home district of Fulton County. We had an issue of Section 8. 
As you know, one of the recurring issues is the lack of code 
enforcement that go into Section 8. The property goes down. We 
were able to get some response there. I certainly hope you'll 
pass that along to the Fulton County housing authority.
    Secretary Jackson. Thank you, very much.
    Mr. Scott. I appreciate that. Now I'd like to ask you three 
quick questions. The first one deals with our veterans. Our 
veterans are coming home from Iraq with extraordinary brain 
trauma injuries. They fall within the category of our disabled, 
and what concerns me is that many of these veterans with 
disability rely on government assistance for housing.
    Now, the President's new budget proposed for 2008 allocates 
$125 million for Section 811 programs. This is the major source 
of funding for rent subsidized housing for people with 
disabilities, which affects our veterans. My concern is that 
this $125 million represents a 47 percent cut in the budget. I 
want to make sure you're aware of that at the very time when we 
need more, not less, especially for our veterans coming, and 
this is a program chiefly for that. It just doesn't make sense 
that we are cutting the very funds needed to protect and house 
our veterans who have these disabilities. I wanted to bring 
that to your attention, and ask if you could work with that. 
What do you think of that, very quickly. I have two more 
questions with my time.
    Secretary Jackson. Sure. Congressman, we have a lot of 
housing in the 811 in the pipeline. We have allocated monies 
that we think will carry us for the next fiscal year to get 
those units. We will do the same thing. We're not in any way 
reneging on our initial belief that we have a moral obligation 
for 811 when persons serve our country. That is not the case. 
But to allocate monies as we have in the past and let it sit 
for year after year after year without being obligated just 
doesn't make sense. So we are taking a very cautious approach, 
but we have not stopped building houses. We have not stopped 
taking care of the disabled.
    Mr. Scott. Okay. The very point is, with a 47 percent cut, 
the Democrats have control now in terms, and we will make our 
input known, and we will strongly resist a 47 percent cut. But 
I would be very interested to work with you as we go forward to 
make sure, even as we go forward, we don't want any of our 
veterans, no one with a disability, but most assuredly, we made 
that mistake before, with Vietnam veterans sleeping on the 
street.
    Secretary Jackson. Right.
    Mr. Scott. Even some Iraqi veterans, and from Desert Storm, 
sleeping on the street. We talked about that before. This has 
to stop. And when you look at it in the face of a 47 percent 
cut--let me get on to my next one, which is the Section 8 
voucher.
    I have a particular issue that I have heard from complaints 
from some of the housing authorities in many of the towns that 
I represent. As you know, I represent suburban Atlanta. I 
represent a lot of the towns there.
    They're having difficulty in being reimbursed for money 
that they must put forward when a recipient uses a Section 8 
voucher in their city, rather than in the city where it was 
originally issued.
    What they're telling me is that the originating cities are 
not being forthcoming in sending reimbursements. Has HUD been 
made aware of this problem?
    Secretary Jackson. I have not, Congressman.
    Mr. Scott. Okay. Well--
    Secretary Jackson. But I'll be happy to look into it. And 
if you'll tell me the cities, I'll be happy to look into it.
    Mr. Scott. Okay. Marietta, also Ostel in Cobb County, and 
we'll get some of that information to you to be specific. They 
were just in my office just recently talking about the 
difficulty they're having in being reimbursed again for money 
that they have to put forward when the recipient uses Section 8 
vouchers in their city rather than in the city where it 
originally--
    Secretary Jackson. No, I understand.
    Mr. Scott. Yes. Okay. Now the third question, my final 
question, goes to HOPE VI. As you know, that's a baby with me, 
and we're going to save that program. That I think is the 
greatest program that we have there, and I know that you and I 
have been working with this.
    The HOPE VI housing program has continued to be a target 
for President Bush; I cannot for the life of me understand why. 
As a matter of fact, when I saw him personally, I asked him. 
And I said, ``Mr. President, this is your program. This is a 
program that Jack Kemp and the Republican Party put forward. It 
is the most successful program, and there's no city that's been 
more successful at it than my City of Atlanta.''
    Secretary Jackson. No question.
    Mr. Scott. And so with that, what are your thoughts on this 
new legislation that has been introduced in the Senate to 
extend the HOPE VI program for 5 years with certain additional 
criterion? I want your thoughts on this new program and the 
additions included that we feel are improving the program, and 
addresses some of the concerns that you brought out in our last 
meeting. Would you please respond?
    Secretary Jackson. I have not seen the legislation, but the 
only caveat I'd add to that, Congressman, is this. Over the 
last 4 years of the HOPE VI program, one of the criteria that 
we required is for the housing authorities to try to get a 
developer who can leverage the package so that we're not only 
building units, but we're building commercial space and other 
space around it. That's the only caveat I'd add today to--and 
we've been pretty successful.
    To date, out of 237 of the HOPE VI programs that we've 
allocated, 65 have been built, so we have about 172 that are 
still in the pipeline that have not been done. But I will tell 
you, those that have been allocated over the last 4 or 5 years 
are doing very well because we put a requirement on them that 
they work with a developer. And that's the only caveat I would 
say if you make the decision or you all make the decision to 
reinstate the HOPE VI program. Don't let it go as it did before 
where the housing authority by themselves tried to develop it, 
because many of them can't.
    And if you'll notice in your City of Atlanta, and I must 
say this about Renee Glover, she was wise enough to have 
developers work with her on each one of those developments and 
they got done very quickly, very efficiently. And one thing to 
be noted, she took a--
    The Chairman. You need to wrap it up, Mr. Secretary.
    Secretary Jackson. She took a housing authority that had 
1,300 employees, and now she has 350, and she's financially 
solvent.
    The Chairman. The gentleman from Texas.
    Mr. Hensarling. Thank you, Mr. Chairman, and welcome, Mr. 
Secretary.
    Secretary Jackson. How are you doing?
    Mr. Hensarling. It's springtime back home, and the 
Mavericks continue to win.
    Secretary Jackson. And I'm going to try to get to see them 
pretty soon.
    Mr. Hensarling. You should. You should. Seventy-five 
million families now are homeowners, almost 70 percent of all 
Americans.
    Secretary Jackson. That's correct.
    Mr. Hensarling. That is the greatest percentage that we've 
had in our Nation's history. What are the policies that 
accounted for this? You have something to brag about.
    Secretary Jackson. Well, first of all, President Bush, in 
my mind, has been probably the greatest housing homeownership 
president in the history of this country in the sense that even 
though we've been in the process of a war, he has not cut back 
on his effort to make sure that every American who wants to own 
a home has an opportunity to own a home.
    And he specifically challenged us, in August of 2002, to 
create 5.5 million new minority homeowners, specifically 
African Americans and Hispanics. To date, we've created 3.5 
million of those homeowners. Clearly, we couldn't have done it 
without the housing counseling money being increased. We 
couldn't have done it without the American Dream Down Payment. 
We couldn't have done it without HOME. So he's put in place a 
number of programs that have helped us to increase 
homeownership in this country.
    Now, to say that, again, I will reiterate, Congressman, 
that we need to pass FHA legislation to address issues in the 
chairwoman's area of California and the chairman's area of the 
East. And I think with that, we can increase homeownership even 
more and take many of these low- and moderate-income people out 
of the subprime market that is really hurting us today.
    Mr. Hensarling. Mr. Secretary, I understand that two of the 
proposals will be to reduce the statutory minimum 3 percent 
down payment and to move to some type of risk-based formula on 
the premium. Speak to me about the correlation of those 
polices, their impact on default rates.
    Secretary Jackson. Sure. We believe that we have a 
mechanism, Congressman, that we can analyze the risk that's 
going to be taken--that we will be taking. And it doesn't mean 
that we're going to give people loans who can't afford to 
retire the mortgage. We're not going to do that. I'll be happy 
to send you the analysis that we've made that we're going to 
use, the criteria that we're going to use to make sure that a 
person who presents some problems might end up getting a loan 
for 3 or 4 percent, and if they end up taking a loan in play 
for the next 4 years, we'd reduce the interest rate.
    For those persons who qualify, they might end up with a 1 
percent loan. So we have the criteria in place. I can't 
specifically give you every detail of it, but I'll be happy to 
send it to you.
    Mr. Hensarling. But to some extent, isn't the flip side of 
this great homeownership rate we have some fairly alarming 
default rates as well? And I'm--are we really doing right by an 
American family if we help to put them into a home and 
unfortunately, 18 months later, they can't keep that home?
    Secretary Jackson. Yes, we would be. But let me say this to 
you, Congressman. That's not what we're doing at FHA. That's 
the problem that we're facing right now that's been enumerated 
by a number of your colleagues here today with that subprime 
market. Many of these persons did not want to deal with FHA, so 
they went to the subprime market. And I must tell you, when you 
look at the amount of paperwork that we have to deal with at 
FHA, I probably wouldn't want to deal with it either.
    So that's why we're trying to modernize it, so we can have 
the flexibility that a bank has or anyone else has to evaluate 
the loan and then make our decision as to whether or not we 
lend.
    Mr. Hensarling. The Administration is proposing I think 
doubling the funding for your housing counseling program. Can 
you speak to me about its success?
    Secretary Jackson. We've been very successful. When 
President Bush challenged us to create 5.5 million new minority 
homeowners, one of the things that I said to him is that in 
order to do that, people must understand what it takes to own a 
home, what is required of them to own a home, and we don't need 
to put people in homes who are subsequently going to lose those 
homes.
    We have been very successful over the last 5 years really 
using nonprofit, faith-based organizations to counsel people on 
homeownership rather than those for-profit areas that had been 
counseling them. So we've had a very, very good rate of not 
having a great deal of foreclosure, because people do 
understand. They know that they're going to have to have 
certain requirements in the process of owning a home, and 
they're going to have to put monies aside for something that 
might happen to that home.
    Mr. Hensarling. I'm almost out of time. You may have 
covered this earlier, but the thought behind lifting the cap on 
the Section 8 vouchers, is that principally to release funds 
that these PHAs are already sitting on but can't use? Or what's 
the rationale?
    Secretary Jackson. That's correct. They're sitting on it, 
but they can't use it today. And we're saying, let them use it.
    Mr. Hensarling. Okay. Thank you, Mr. Secretary.
    The Chairman. The gentleman from Texas.
    Mr. Green. Thank you, Mr. Chairman. Mr. Chairman, I assure 
you, I consider it a privilege to serve with you and under your 
leadership. I appreciate the vision you shared earlier and 
associate myself with it entirely.
    I want to thank the chairwoman of the Housing Subcommittee 
because she did hold field hearings in Louisiana, and she not 
only held the hearings, but we had site visits, and we had an 
opportunity to have direct communication with the Katrina 
survivors. It means a lot to talk to people and get a first 
hand understanding of what is happening to them.
    I want to thank you, Mr. Secretary, for a number of things, 
for coming to Houston and for announcing that you were going to 
engage HUD in the fight against discrimination in housing as 
related to the Katrina evacuee's.
    A number of circumstances developed. I appreciate very much 
the fact that you were there to help persons being 
discriminated against.
    I also would like to thank you for the extension of the 
203(k) program as it relates to New Orleans, Louisiana, such 
that persons can have more than 6 months or 12 months to 
renovate. The extension time has now gone to 18 months. This 
means a lot to persons who are living in Houston and trying to 
relocate back home to New Orleans.
    We have approximately 100,000 persons in the Houston area 
who are survivors, evacuee's, depending on who is counting, of 
course; approximately 20,000 in the Ninth Congressional 
District, the District that I have the honor of representing in 
Congress.
    My hope is that you and I will continue to do some 
additional things, to work together so that we can help many of 
these persons and other persons in the City of Houston as well.
    For fear that I will forget, let me start with the 
inspectors. You indicated that CDBG money is being utilized to 
pay inspectors in one city. I have some concern with this. I am 
concerned that there may be other areas where CDBG money is 
being utilized that perhaps we should look at and see if we can 
find a way to address.
    If you would, re-visit with me for just a moment the 
question of inspectors, and then if you would, share with me if 
there are other areas comparable to this such that we might 
have an opportunity to address these other areas.
    Secretary Jackson. Thank you very much, Congressman.
    The Community Development Block Grant funds are very 
flexible, but I think the desire, if you look at the 
legislation that you all passed back in the 1970's, it was 
clear that it was to be used to develop economic development 
within those areas of poverty that had not been addressed 
before.
    If we do that, then it means putting infrastructure in, 
working with areas that are undeveloped that need to be 
developed, both from a housing perspective and an economic 
development perspective. In many cases, in a lot of cities, 
that has not been done.
    I never use another city other than the city I am from, 
Dallas, when I talk about this because I know what the 
inspectors are being paid out of block grant money.
    I do not think they should be paid out of block grant 
money. I think that should be a city responsibility. The block 
grant money should be going to places like west Dallas and 
south Dallas, where we have the highest rate of poverty in that 
City.
    In many cases, you have great bickering that occurs between 
the council and the money is not getting there.
    I can tell you a city that I visited that I saw block grant 
money working at its best, of course, he's the congressman and 
no longer the mayor. Kansas City was one of the cities that we 
used as a prime example of how block grant money should be 
spent.
    They did it in the most poverty ridden areas and the 
development area. That is what I think the block grant money 
should be used for. That is why we want to re-allocate the 
formula.
    Mr. Green. Do you have some other examples of how it is 
being used comparable to what is happening in Dallas? Any other 
examples we have with inspectors?
    Secretary Jackson. Yes, sir.
    Mr. Green. I do not want you to mention cities. I just need 
the information. I am concerned about this and would like to 
address it.
    Secretary Jackson. Yes. I know cities that are using it in 
areas that it should not be used in--areas that are not pockets 
of poverty or not close to pockets of poverty.
    Mr. Green. Can you provide me with the information on this 
after the hearing perhaps in some codified document? Is that 
acceptable to you?
    Secretary Jackson. Yes.
    Mr. Green. Let me mention another area. In Houston, we had 
a good number of persons who were living in apartments. They 
were assured--the City was assured by FEMA that FEMA would pick 
up the tab for their living in Houston.
    FEMA cut the contracts short, and without a long 
explanation, the persons were then put in a position who were 
leasing property, such that they did not have security 
deposits, lots of damage was done, and we plan to do what we 
can to correct this problem.
    Is there something that HUD can do in the interim while we 
are working on this to help persons who were involved in this 
process and to lend a helping hand at a time of need?
    Secretary Jackson. I do not think so, Congressman, to be 
very honest with you. The way the program was designed, FEMA 
has control. They assigned us those persons who were either on 
a Section 8 voucher or public housing. We have addressed those 
needs. Neither one of those programs have been cut off. We are 
still funding those today.
    If many of the people who were displaced were not in one of 
the two programs that we administer, there is really not 
anything that we can do.
    Mr. Green. I just mention this in closing, which is 
important. We will take it up here. This is important. We 
talked about counseling. I appreciate counseling persons with 
reference to homeownership.
    This hurricane has presented a unique circumstance, and we 
have many persons who are suffering. They are really suffering 
to the extent that they cannot talk about what happened to them 
without literally crying. People are depressed and they are 
hurting.
    I do not know exactly how we can address this. I am 
mentioning it to you because the word ``counseling'' came up. 
This is an apples and oranges comparison.
    We have to find a way to provide some counseling of a 
different sort, such that these persons who are depressed can 
receive adequate counseling, too.
    Mr. Chairman, I thank you for the time and I will yield 
back.
    The Chairman. Thank you. Mr. Secretary, we have some votes. 
Would it be possible to come back in 45 minutes for us to 
finish up? I appreciate that. We have members, some of our most 
conscientious members, and I thank you.
    We will go then to vote. We will reconvene as soon as the 
votes are over. It will be about 45 minutes.
    Before you go, Mr. Secretary, with regard to the gentleman 
from Texas, one of the issues that was presented to us in the 
hurricane bill was some proposal to provide some HOME money or 
something for the City of Houston.
    I know you know that the City of Houston, I think, has 
really been extremely decent in helping people.
    Could you designate a staff member to work with the 
gentleman from Texas, the gentleman from California, and I, and 
we might think of something appropriate--we are doing things 
for Louisiana and Mississippi. It does seem to me that Houston 
has a claim on some additional help. If you could work with us 
on that, we would appreciate it.
    Secretary Jackson. I will make sure, Mr. Chairman. I will 
have Scott Keller do that.
    The Chairman. Thank you. The other thing I would just say 
is this. I met yesterday with the people from the League of 
Cities, and they raised an issue. They are worried about scam 
artists now sort of swooping in on people who are in 
foreclosure or potential foreclosure with a ``we buy homes'' 
thing, and people being sort of lured into buying homes 
unnecessarily. They asked me about some possible means of 
getting the word out, and it seems to me that you are best able 
to do that.
    There is a letter that I asked them to send to me so I 
could share it with you. We would like to work with you and the 
League of Cities for some public service announcements for some 
way to kind of protect people who are vulnerable from being 
made even more vulnerable.
    There are other things we have to do on the policy side. It 
did seem that HUD was best able to do this. We will be 
following up with your staff on this as well and with the 
League of Cities. I think you would agree that this is 
something we could work on together.
    Secretary Jackson. I agree.
    The Chairman. Thank you. We will reconvene in about 45 
minutes. Mr. Secretary, I appreciate your indulgence.
    [Recess]
    The Chairman. We will reconvene. Mr. Secretary, I 
appreciate you staying around. Some of the members said that 
they will be back. I will ask you only to wait a few more 
minutes. If none come, I will tell you with our thanks that we 
are through. I apologize for the absent members. They were told 
12:45. I will give them 5 more minutes, if that is okay. If no 
members show up, we will allow you to leave.
    You did get that letter. We will be glad to work with you. 
The League of Cities and I certainly agree that HUD would be 
the appropriate one to start doing some of these announcements.
    I guess they are particularly worried about Indianapolis--
the Mayor of Indianapolis said that they were putting up 
posters all over the City.
    Now our colleague from Miami is here. I would ask unanimous 
consent, and I cleared this with the Republicans, so there are 
no objections to allowing him to ask you some questions.
    I will now recognize the gentleman from Miami who will ask 
you some questions on the topic, which will come as no surprise 
to you, Mr. Secretary.
    Mr. Meek?
    Mr. Meek. Thank you very much, Mr. Chairman. I want to 
thank you and the ranking member for allowing me to be a part 
of the committee today and to ask a question of the Secretary, 
whom I consider a friend.
    Also, Mr. Chairman, I want to thank you and the ranking 
member for the committee work that has been done thus far as it 
relates to a number of issues that are facing Americans in the 
housing arena, and I look forward to seeing a lot more of that.
    Mr. Secretary, it is good to see you and your team again. 
We have been talking for several months now, and as you know, 
in Miami Dade County, we had a number of issues that we have 
been facing.
    Last fall, there was a story that broke, ``House of Lies,'' 
in the Miami Herald, dealing with not only HOPE VI dollars, but 
Section 8 mismanagement, but mainly on the housing finance end, 
where a lot of things went wrong.
    There was no accountability. Funds were mismanaged. 
Managers were incompetent or corrupt or both. There was concern 
that Section 8 was going to people who did not meet the 
criteria. All of those issues were alive and well.
    The Miami Herald has won quite a few awards based on that 
series. After that, not only myself but members of local 
government, responsible individuals, people of good will, came 
together and we met with you and some of your team here in 
Washington to inform you of the reforms that were going to take 
place.
    Six members of upper management were fired and removed, and 
there are two investigations that are ongoing.
    I personally asked for the Inspector General of HUD to look 
into the matter, and you encouraged that activity to take place 
also.
    Also, we had a number of local reforms, working with the 
advocacy community and those that are displaced. The 1,178 
residents of Scars Harbor homes that were residents of the HOPE 
VI Project were up in arms, but now are working hand-in-hand 
with the local government in Miami Dade County.
    Mr. Chairman, I am going to enter for the record, for 
brevity purposes here, so I will not verbally have to go over 
all this--
    The Chairman. Without objection, the gentleman may 
introduce anything he wishes.
    Mr. Meek. Thank you. I would like to introduce the February 
28th letter that the Congressional delegation from Miami Dade 
County put together for Secretary Jackson to consider, not 
entering into a cooperative endeavor agreement with Miami Dade 
County because of the reforms that have taken place signed by 
myself, Mr. Mario Diaz-Balart, Mr. Lincoln Diaz-Balart, and 
also Ms. Wasserman Schultz.
    There are also a couple of articles that have been written. 
The articles that have been written, all the people who have 
been working, and have come together as a community, I have 
gone to all of these workshops.
    The residents, the advocacy community, the mayor, and the 
county commission all feel that we are on the right track; all 
of the folks are working together.
    The Miami Herald has been the overseer of this and 
following this process similar to the Walter Reed Washington 
Post story that is now causing a number of people over in the 
Department of Defense to move around.
    I say all of this, Mr. Secretary, to say that I would be 
the first one as a Member of Congress, and the individual who 
represents the people of the HOPE VI Project in Miami Dade 
County, and also a member of the delegation, to be the first to 
ask for Federal intervention if I did not feel they were taking 
the necessary steps to bring about change.
    The Miami Herald editorial that was just released this week 
asks HUD to slow down because the housing director used to be a 
former employee of HUD, and went into troubled areas.
    I raise the question, Mr. Chairman, because out of the last 
10 years, not the Jacksonville office of HUD, not the Miami 
office of HUD, or the Federal office of HUD, found Miami Dade 
County as being a troubled housing agency.
    I would go further to say that I am concerned and I have 
shared with you the concerns that I believe of the activity of 
HUD in Miami Dade County, of a number of officials, the 
Secretary of Public Housing, who is here today, several 
meetings he has had there, and many of the officials in Miami 
Dade County feel a little bit out of the loop.
    The State prosecutor has contacted me wanting a copy of the 
audit report. I hope she has a copy of it now.
    A number of individuals feel that it has now gone to a 
level of personalities. There is really not a great need for a 
takeover.
    The mayor has said in a public statement, Mr. Chairman, and 
I am going to be closing in 1 minute, if I am allowed to do so, 
has said that he is willing to work with HUD to work out an 
agreement outside of a cooperative endeavor agreement.
    The other issue that I guess that is of concern here, too, 
Mr. Secretary, is the fact that HUD did have oversight. It did 
not happen. Many of the issues that were uncovered in your own 
audit report were already uncovered by the Miami Herald and 
have already been addressed, many of them.
    The document has been helpful for reforms, but it has 
brought together the congressional delegation, has brought 
together, with the exception of one member who has not said 
that she wants or is against the takeover, and it has brought 
together the advocacy community, the residents, and Miami Dade 
Housing.
    We look for a perfect world because we know in housing, we 
need almost a perfect world for it to work for everyone.
    I come again being humble and meek to ask you to please 
reconsider the letters that have been sent to Miami Dade County 
to go into a cooperative agreement, just to take a look at it.
    I am saying this, Mr. Chairman, in all fairness to the 
Secretary, he has been open. Every time we wanted to meet, he 
has met with the local officials. He has been very forthcoming 
of his opinion on what he would like to do.
    I would ask again and put it into the record of the 
committee all of the attempts and all of the reforms that Miami 
Dade County has made, and there are a number of residents in my 
District who are very, very concerned about taking this out of 
the public eye, having some sort of manager making the 
decisions over HOPE VI and Section 8 dollars, and a war between 
Miami Dade County and U.S. HUD, which is almost unnecessary.
    It is like lining up 2,000 dominoes and then U.S. HUD comes 
after all this work has been done and thumps a domino and 
knocks all of them down, and now we have to place every last 
one of them back up again.
    I will close with that, Mr. Chairman. Mr. Secretary, I 
would ask again if you would reconsider or work with the Mayor 
of Miami Dade County to see if there can be a management 
agreement outside the cooperative agreement that would allow 
Miami Dade County to have the governance and work with them if 
there is an independent board spirit that is there, work with 
them through the process, but the takeover will smash the 
dreams and the hopes of all the people who are involved, 
including those of us in Washington.
    Secretary Jackson. First, thank you, Congressman. I can 
tell you that we are not going to take it over. That is not in 
any way within the spirit of what I think is realistic at this 
point in time.
    I have not seen the letter, so I cannot tell you today what 
I am going to do, but I can say this to you, that my major 
concern is just with the residents, to make sure that things 
are done properly.
    I have had a chance to evaluate some of the material in the 
audit, and it is very disturbing.
    I will talk to you before I make the decision. I will make 
the decision fairly soon.
    Mr. Meek. Mr. Chairman, I want to thank you for the time. 
Mr. Secretary, you and your team are welcome to personally come 
down and meet with the folks from Miami Dade County before the 
final decision.
    Secretary Jackson. I am coming down.
    Mr. Meek. I would love to be there.
    Secretary Jackson. I am coming down. I will get you the 
date, to meet with both the mayor and the county manager. I 
have set a date. Do you know when it is, Scott? March 22nd, I 
will be in Miami to meet with both the mayor and the county 
manager.
    Mr. Meek. I guess I will be there, too. Thank you, sir. 
Thank you, Mr. Chairman.
    The Chairman. The gentlewoman from Wisconsin.
    Ms. Moore of Wisconsin. Thank you, Mr. Chairman. Thank you, 
Mr. Secretary, for being so patient.
    Secretary Jackson. Thank you.
    Ms. Moore of Wisconsin. I was listening very carefully to 
your testimony. I do want to thank you and the Administration 
for acknowledging the need to close the minority housing gap, 
particularly in the African-American communities as it relates 
to homeownership.
    You did cite in your testimony, written and verbally, that 
you thought that the best way to create more affordable 
homeownership opportunities was to help with down payments, 
which certainly is very helpful, and closing costs through HOME 
and the American Dream Down Payment initiative.
    I guess my question is while these are very helpful 
instruments, because people do have an acute cash flow problem 
as it relates to down payment costs, what the real problem is 
in terms of staying in a house is the long term amortization 
over 30 years and those monthly payments that come due.
    What we have found is that some deep subsidies in these 
homes up front that lowers not only the purchasing costs but 
lowers the financing costs is what is most helpful to people.
    Having said that, we had the GSE reform before us before, 
which would have created an affordable housing fund of $500 
million per year.
    The Administration was very opposed to that, but that would 
have been a great program to seed deep subsidies, so that 
someone getting into an $85,000 home would perhaps get a 
$15,000 subsidy.
    It would not bring down the housing values to the 
surrounding neighborhoods because you would actually be paying 
the purchase price with the deep subsidy, but a long term 
amortization would make it much more affordable.
    I guess I want you to respond. I think that is a much more 
aggressive way to prevent defaults and foreclosures as we have 
seen happen.
    I would like to ask you about that and then I want to ask 
you a couple of other questions about elderly housing and 
disabled housing.
    Secretary Jackson. Sure. I am well aware that one of the 
terms that the chairman has introduced as it relates to the 
reform of GSEs is that there will be an affordable housing 
amount set aside.
    If Congress does that, then yes, I think it will have a 
significant impact on low- and moderate-income housing. There 
is just no question about it.
    Other than that, I really do not know much about it. I will 
tell you that if we are the persons to implement it, we will do 
exactly what you all tell us to do. If we are not, then I still 
think it will have an impact on low- and moderate-income 
homeowners.
    Ms. Moore of Wisconsin. Having said that, since you agree 
that it would really be very helpful, I would hope that you 
would use your position as advisor to the President on housing 
issues to really indicate to him how far such an affordable 
housing fund would go toward alleviating the minority 
homeownership gaps, since you indicated earlier in your 
testimony that you believed he has done more than any other 
President, if I did not hear you incorrectly, toward this end.
    Secretary Jackson. Yes.
    Ms. Moore of Wisconsin. Perhaps it could be something of a 
legacy for him if he were to do this.
    I want to follow a line of questioning that Mr. Scott had 
started a while back before the break, when he talked about 
Section 811 disabled housing cut to the tune of 51.3 percent, 
and I would like to talk about the cut to Section 202, elderly 
housing, at 37.6 percent.
    I guess I am feeling rather puzzled as to how these budget 
decisions are made, given the demographics in our country. 
People are living longer with disabilities. We have had our 
500th amputee come home from the wars of Iraq and Afghanistan.
    Certainly, I am a baby boomer. I am so looking forward to 
not cutting grass and shoveling snow at some point. As we age, 
we do need elderly housing.
    You indicated that the reason--you said to Mr. Scott that 
you are still producing disabled housing but you are being more 
conservative and not putting those funds in this budget this 
time because you are spreading, I guess, the wealth somewhat.
    What I would submit to you, Mr. Secretary, and want you to 
respond to, is that there are waiting lists. There are waiting 
lists in my town, and the only reason the waiting lists are not 
bigger is because we have stopped taking applications for 
elderly housing and disabled housing.
    I guess I need to understand that the demographics speak to 
the need to do more elderly and disabled housing, so I am very 
puzzled and baffled as to why that is the case.
    I just want to add as a commentary and want you to respond 
to, it is great that we are doing more for homelessness, for 
people coming out of prison, wonderful.
    My fear is that we are increasing the expenses toward those 
activities, decreasing them to people like the elderly and 
disabled, Section 8 housing. We do not want to set up kind of a 
class warfare where when you have done everything right, you 
get your funds cut. You are coming out of prison, you get the 
help.
    I am concerned about the housing policy, and I would like 
you to respond.
    Secretary Jackson. First of all, let me say I agree with 
you, Congresswoman. Nor do I want to set up class warfare 
because I do not think that is the way we should be doing it. 
We should not sectionalize people and say that ``A'' gets 
something at the expense of ``B.''
    What I said, and I still stick to this, is that when we 
first came in, we had a huge backlog of 202/811s that were not 
being produced, that we had allocated monies for 3, 4, or 5 
years earlier.
    We took a slower pace. At this point, we have a number of 
units, elderly units, 811 units, in the pipeline.
    This allocation that we made will be allocated to the next 
period when people come in, notification for availability. If 
we continue down the road that we are continuing on, spending 
the money at a timely rate, then yes, you will see an increase 
in the budget activity.
    I want to spend the money first. It is the same thing that 
I made with the argument with Congressman Watt about HOPE VI. 
We have done about 65 HOPE VI, but we still have 172 standing 
out there with almost $2 billion.
    Why should we continue to fund it? It is not that I want to 
cut the program. It is not that I do not believe it is serving 
a phenomenal purpose. It is not that I do not believe that we 
do not have a shortage where we do.
    We have to find developers who are willing to develop these 
projects. To date, it has not been an overwhelming process. We 
have some and we will continue to work with them.
    I can assure you. I am a baby boomer, too. I expect to live 
20 or 30 more years. I am very, very concerned.
    Lastly, I will say this. If there is a population that I am 
more sensitive to than any other population, that is the 
elderly and the physically and mentally handicapped. I think we 
have an obligation to those soldiers who have given their lives 
for our freedom, to make sure that they have an opportunity to 
live in decent, safe, and sanitary housing.
    I feel the same way about the elderly, those persons who 
have worked all their lives, they might have been able to own a 
home, they might not be able to afford one now. It is our 
obligation to make sure they live in decent, safe, and sanitary 
developments.
    Ms. Moore of Wisconsin. Mr. Chairman, 30 seconds, I have a 
follow up question from something he said.
    The Chairman. Very quickly. We are 3\1/2\ minutes over.
    Ms. Moore of Wisconsin. Yes, sir. You said you cannot find 
developers who want to do the elderly and disabled housing. Is 
it because they cannot make any profit out of it? Are we are 
not providing a deep enough subsidy? What do you attribute that 
lack of interest to? I cannot believe people do not want to 
make money.
    The Chairman. The gentleman will answer.
    Secretary Jackson. I think in today's market, it is a very 
lucrative housing market. Developers are developing where they 
can make the most profit. At the same time, we are getting more 
developers coming in for 202 and 811, but not at the pace and 
rate that I would like to see it.
    The Chairman. The gentleman from Missouri.
    Mr. Cleaver. Thank you, Mr. Chairman. I am a baby boomer, 
too. I have no plans of dying at all.
    [Laughter]
    Secretary Jackson. You are close to God, so you would know.
    Mr. Cleaver. I have one question. I would like to take this 
opportunity to just express appreciation to our chairman, Mr. 
Frank, and most especially to the chairwoman of the 
subcommittee, Ms. Waters, who was probably the first elected 
official outside of Louisiana to come into New Orleans after 
the hurricanes hit, and for the work she did, and I want to 
express appreciation to you for the cooperative spirit with 
which you have dealt with this whole issue. We thank you very 
much for your cooperation.
    Secretary Jackson. Thank you.
    Mr. Cleaver. My only question is with regard to the rural 
loan program. Do you think it is possible to revitalize the 
rural loan program without enacting any legislation? Are there 
things that can be done administratively to do it?
    Secretary Jackson. I think it has to be legislative. I do 
not think that we can do it administratively. I will ask. I 
will tell you what I will do, Congressman, to give you a 
specific answer. We might be able to do it administratively, 
but I am just not sure.
    I will make sure--today is Wednesday--that by Friday, you 
will have an answer. I will talk to your chief of staff and 
have our Assistant Secretary, Pam Patenaude, get back to you.
    Mr. Cleaver. Thank you. I yield back the balance of my 
time.
    The Chairman. I thank the gentleman.
    Thank you, Mr. Secretary. You have noted your 20 or 30 more 
years. You have spent more of it here than we had a right to 
ask you to, and the hearing is adjourned.
    Secretary Jackson. Thank you so much.
    [Whereupon, at 1:12 p.m., the hearing was adjourned.]


                            A P P E N D I X



                             March 14, 2007


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