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



 
                     OVERSIGHT OF THE DEPARTMENT OF

                     HOUSING AND URBAN DEVELOPMENT

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


                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 11, 2008

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 110-97



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

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

        Jeanne M. Roslanowick, Staff Director and Chief Counsel

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 11, 2008...............................................     1
Appendix:
    March 11, 2008...............................................    51

                               WITNESSES
                        Tuesday, March 11, 2008

Jackson, Hon. Alphonso, Secretary, U.S. Department of Housing and 
  Urban Development..............................................     5

                                APPENDIX

Prepared statements:
    Brown-Waite, Hon. Ginny......................................    52
    Jackson, Hon. Alphonso.......................................    53

              Additional Material Submitted for the Record

Frank, Hon. Barney:
    Written responses to questions submitted to Hon. Alphonso 
      Jackson....................................................    62
    Letter from the American Civil Liberties Union (ACLU), dated 
      March 10, 2008.............................................    78
    Statement of the Municipal Securities Rulemaking Board 
      (MSRB), dated March 12, 2008...............................    82
    Letter from the National Association of Housing and 
      Redevelopment Officials (NAHRO), dated March 11, 2008......    99
Ellison, Hon. Keith:
    Written responses to questions submitted to Hon. Alphonso 
      Jackson....................................................   105


                     OVERSIGHT OF THE DEPARTMENT OF



                     HOUSING AND URBAN DEVELOPMENT

                              ----------                              


                        Tuesday, March 11, 2008

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:03 a.m., in 
room 2128, Rayburn House Office Building, Hon. Barney Frank 
[chairman of the committee] presiding.
    Members present: Representatives Frank, Waters, Maloney, 
Velazquez, Watt, Meeks, Moore of Kansas, Capuano, Clay, 
McCarthy of New York, Baca, Lynch, Scott, Green, Cleaver, 
Ellison; Bachus, Jones, Biggert, Miller of California, Capito, 
Feeney, Hensarling, Neugebauer, Marchant, McCarthy of 
California, and Heller.
    The Chairman. I apologize for the little delay. The hearing 
will come to order. This is the annual hearing on the budget of 
the Department of Housing and Urban Development, specifically 
the budget that was submitted. We will later this week be 
voting on a somewhat different version, but this is our chance 
to talk about it with the Secretary. Mr. Secretary, welcome. 
Thank you for accommodating our schedule.
    Secretary Jackson. Thank you, Mr. Chairman.
    The Chairman. I want to begin by saying that the budget 
that the President submitted is not disappointing, because I 
had no expectations, but it is seriously inadequate to the job 
that this country faces, particularly in light of the subprime 
crisis.
    Now let me say, Mr. Secretary, we will be asking you about 
the budget, and you are a loyal member of this Administration 
and I do not expect you to share your innermost thoughts, and 
indeed, it would be inappropriate. You are a member of the 
Administration, and I understand your obligations. It is not my 
impression that this is a budget that reflects what the people 
who have operating responsibilities of HUD would have liked, 
and so when I talk about its severe shortcomings, I really am 
describing, I believe, decisions made elsewhere. But we need to 
talk about the consequences.
    The cutbacks that we see in programs like Community 
Development Block Grant (CDBG) would have been distressing in 
any period. They are especially distressing this year when we 
have at the city level in particular the consequences of the 
subprime crisis and the foreclosures.
    I will be speaking later to the National League of Cities 
and I will be expressing my sympathy for the problems not of 
their making which have landed in their laps. One of the 
problems they have now is a good deal of foreclosed property, 
property that used to pay taxes, now not only does not pay 
taxes, but consumer services; police services, fire services, 
and building inspection services.
    To propose reductions in Community Development Block Grant 
funding in the face of this is as stark an abdication of what 
the Federal Government's responsibility ought to be to our 
partners in governance at the local level as I could imagine.
    There are also reductions proposed for the construction of 
housing for the elderly and for the disabled. These are grave 
errors, in my judgment. One of the things we learned, I 
believe, from the subprime crisis is that a shortage of 
affordable rental housing has consequences beyond simply the 
denial of opportunity for people to live good lives, but there 
was a push factor into this housing situation.
    Basically, we have a national policy that has decided to 
fund a war in Iraq, a very expensive war, which I thought was a 
mistake from the outset, while making substantial reductions in 
other programs. One of the jobs of this committee is to help 
show the consequences of those cuts. I will also be talking to 
you, Mr. Secretary, about a very specific issue, and that is 
the situation in Mississippi concerning money that this 
committee initiated in a collaboration between our colleague 
from North Carolina, Mr. Watt, and our former colleague from 
Louisiana, Mr. Baker. They took the lead in trying to put some 
money toward alleviating the plight of people, particularly 
lower income people, who were hurt by Hurricane Katrina in 
Mississippi. That has not worked out as we thought, but I 
understand that there may be frankly some flaws in the way we 
did that legislatively and I will be looking to you to see that 
we--assuming some disasters will come again--legislate better 
for it.
    But the basic point of this statement is to say that in the 
current situation with urban America in a difficult situation, 
with urban America bearing the brunt of the national crisis, it 
really is outrageous that the Administration, to fund its war 
in Iraq, comes forward with a budget that so substantially 
underfunds these important urban initiatives.
    Finally, let me say, and I am glad the whole team is here, 
there are some areas of agreement and at 5:00 today, the 
ranking member and I will be once again going over to the 
Senate to see if we can work out an FHA bill. We are hoping 
that we can do that. The Commissioner is here. That is a 
collaborative effort that I hope will go forward.
    But we cannot, in this hearing, focus on other things to 
the exclusion of our deep unhappiness. I will just summarize. 
To cut Community Development Block Grants, which has been such 
an important program dating from the days of Richard Nixon, 
that provides such important support to the cities, when they 
are under the extreme stress brought about by the subprime 
crisis, is one of the most blatantly uncompassionate examples 
of public policy imaginable.
    And the one thing that gives me some solace is that it is 
clear to me that it will be ignored by the Budget Committee. It 
will be ignored by the Appropriations Committee, and I think we 
can confidently predict that in an overwhelmingly bipartisan 
way, the Appropriations Committee will ignore this budget to a 
great extent, and I doubt very much when it comes to the Floor 
with the President's priorities repudiated that there will be 
any substantial Republican effort to restore them.
    The gentleman from Alabama.
    Mr. Bachus. I thank the chairman for convening this 
oversight hearing of the Department of Housing and Urban 
Development. Let me begin by welcoming Secretary Jackson back 
to the committee.
    Secretary Jackson. Thank you.
    Mr. Bachus. I have always found your testimony to be 
insightful, and I look forward to hearing your assessment of 
the state of America's housing markets. Immediately after your 
testimony, I will be leaving to address the Conference of State 
Treasurers, and Secretary Paulson speaks right after I do, and 
then we're on a panel. And even though I don't mind being late, 
I don't want to make him late.
    I look forward, as I say, to hearing your testimony and 
your assessment of the state of America's housing markets and 
the role that HUD, and particularly the Federal Housing 
Administration, can play in helping to stabilize these markets 
during the current downturn. You have been a forceful advocate 
for legislation to modernize the FHA, and I know you share my 
view that it is long past time for the Congress to get a bill 
to the President's desk that will allow FHA to assist more 
Americans seeking to buy a home or refinance an existing 
mortgage.
    In recent years, the housing market has fueled this 
Nation's economy as Americans bought and refinanced homes in 
record numbers. Now nearly 70 percent of American families own 
their own home. But recently we have seen a growing inventory 
of unsold properties that has resulted in falling prices. A 
sharp rise in the number of foreclosures has caused investors 
to reassess the risk inherent in the housing market, which in 
turn has constricted the availability of mortgage credit.
    Many Americans are struggling to make their mortgage 
payments, and a growing number of homeowners find themselves in 
a negative equity position with the size of their mortgages 
exceeding the current value of their homes. These are difficult 
times, and it's not surprising that some are beginning to look 
to the Federal Government for solutions to the serious problems 
that exist in the housing sector.
    As I previously stated, I believe it is important that 
before we authorize any broad new government intervention into 
the mortgage market we make sure that we're not creating new 
moral hazards that we will pay for dearly later, and above all, 
that we're being fair to all Americans.
    There are millions of homeowners who have carefully 
budgeted and planned to pay for their homes and are doing so, 
and we should think very carefully before we ask them to 
subsidize those who weren't so careful or are now having second 
thoughts about financial decisions that were made when everyone 
believed housing prices would climb forever. Whatever action we 
take should not penalize those homeowners who are making 
sacrifices to honor their obligations and their contract and 
keep their families in their homes, or those who are renting 
while they try to accumulate the necessary savings to achieve 
homeownership.
    It doesn't seem fair to shift the risk and responsibility 
that investors, lenders, and borrowers willingly and eagerly 
assumed when home prices were on the way up to the great 
majority of taxpayers who were not party to these mortgage 
transactions now that prices are going down.
    Mr. Secretary, we would welcome your views on what effect a 
multi-billion-dollar Federal program to assume troubled 
mortgages could be expected to have on FHA's safety and 
soundness. We also hope you will update the committee on your 
efforts to reform housing programs under HUD's jurisdiction and 
make them more efficient and cost-effective, and particularly 
on your recent initiative to reform and simplify implementation 
of the Real Estate Settlement Procedure Act, RESPA. We have 
obviously been down the RESPA reform road in this committee 
before, and I'm anxious to hear from you today how this latest 
proposal differs from previous efforts.
    Mr. Secretary, we thank you again for being here. I look 
forward to your testimony.
    Secretary Jackson. Thank you very much.
    The Chairman. The gentlewoman from California, the Chair of 
the Housing and Community Opportunity Subcommittee, is now 
recognized for 3 minutes. Ms. Waters.
    Ms. Waters. Thank you very much, Mr. Chairman. I think this 
is an important hearing that we're having today. We have so 
many important questions that have been generated by members of 
this committee, and it is no secret that there is a great 
difference of opinion about this President's budget and the 
direction that many of us would like to see our government take 
on behalf of working people and poor people.
    For the 8th straight fiscal year, the Administration's 
budget slashes programs that provide housing and supportive 
services to our country's poorest, disabled, and elderly 
households. It underfunds the Section 8 Housing Choice Voucher 
Program, starves local housing authorities of the resources 
they need to sustain and modernize public housing stock, and 
cripples the Community Development Block Grant program.
    Allow me to summarize just a few of these proposals. 
Funding levels for HUD 811 supportive housing for the disabled 
and HUD 202 supportive housing for the elderly are cut by 32 
percent and 27 percent, respectively. If enacted, these 
reductions would leave these programs at funding levels 40 
percent below their Fiscal Year 2001 appropriations. The budget 
reduces funding for the maintenance and modernization of aging 
public housing units of $400 million relative to Fiscal Year 
2008. Collectively, the President's Public Housing and 
Operating Subsidy requests for public housing would cut this 
essential program by fully one quarter in comparison to its 
Fiscal Year 2001 appropriation.
    HUD remains determined to continue an unsustainable policy 
of incrementally funding Project-Based Section 8 contracts, 
which threatens the participation of thousands of private 
owners in the program. The budget once again proposes to 
eliminate the HOPE VI program, which the House of 
Representatives recently voted to reauthorize on a bipartisan 
vote of 271 to 130.
    Finally, the budget zeros out the Section 108 local 
guarantee program and basically ends with the Community 
Development Block Grant program being cut by $657 million 
compared to last year. If enacted, the President's budget would 
put CDBG funding at about one-half its appropriation in Fiscal 
Year 2001.
    From a technical budgeting perspective, the analysis I have 
seen suggests that we can't count on a large recapture in the 
Section 8 program to make it easier to bail out as it 
recaptures--well, let me just go to the second point. Second, 
the Nation is today in a housing crisis unlike any since the 
Great Depression, much less in comparison to prior fiscal years 
under President Bush. In light of skyrocketing foreclosure 
figures across the country, with block after block of homes 
already sitting abandoned in some cities, it simply boggles the 
mind that the President would put before Congress a Fiscal Year 
2009 budget that disinvents in the Federal affordable housing 
and community development safety first.
    Mr. Chairman, instead of completing my statement, which is 
rather long, I'm going to yield back my time so other members 
will have an opportunity for an opening statement. But I think 
that the sense of where I'm coming from with this budget is 
captured in the limited time that I had to make the 
presentation. Thank you very much.
    The Chairman. I thank the gentlewoman. We were going to 
have another opening statement from the ranking member of the 
Housing Subcommittee, but in the interest of time, if there is 
no objection, we will allow her a couple of extra minutes when 
she gets to her 5-minute question period so that she can 
preface her 5 minutes of questions with an opening statement. 
If there is no objection, we will proceed that way. Mr. 
Secretary, please go ahead.

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

    Secretary Jackson. Thank you, Chairman Frank. And I want to 
thank you and Ranking Member Bachus and the members of this 
committee for this opportunity to appear here today.
    Mr. Chairman, I am here to present the Fiscal Year 2009 HUD 
budget. But before I do that, Mr. Chairman, I want to thank you 
and the entire committee for the priority given to FHA 
modernization. And I agree with you, Mr. Chairman, that we need 
the legislation right away. As you and your Senate colleagues 
finish work on this important legislation, I should mention the 
Administration's priority with respect to what's in the final 
bill.
    First, the legislation must allow HUD to address the recent 
explosion of loans where a seller provided buyers with 
downpayment assistance and then is added to the price of the 
home. These loans have a foreclosure rate 2 to 3 times the 
norm. They are costing hardworking Americans their homes, and 
these types of loans have pushed FHA to the brink of 
insolvency.
    Second, Congress should allow FHA to proceed later this 
year with some flexibility in setting premiums. I assure you, 
we have no intentions of increasing premiums on the bread-and-
butter customers. But a few modest changes will strengthen 
FHA's ability to offer a safe alternate to homeowners who want 
to refinance out of high-cost subprime loans and will actually 
allow us to reduce premiums from our potential homeowners with 
lower incomes.
    Such legislation would fit in well with the general 
direction of the President's budget. The proposed budget is 
fiscally sound, representing a historical investment of $38.5 
billion for the programs at HUD. This is an increase of more 
than $3 billion, or 9 percent over last year's budget. The 
budget is almost $1 billion more than our current budget 
authority. The funding will be timely and on target for people 
served by the Department. We need this budget to maintain 
current homeownership and stimulate new purchases. It will help 
us expand our current efforts.
    And let me put the budget in context. Last year, the 
President and I introduced FHA Secure to help more Americans 
facing foreclosure to refinance into safe and more secure FHA 
loans. We did this using the current regulatory authority. And 
we have been able to make FHA available to more qualified 
families. There has been a noticeable increase in the number of 
closings. We believe that FHA Secure will help about 300,000 
families refinance into affordable FHA insurance. FHA Secure 
has proven to be extremely valuable.
    Mr. Chairman, you should also know that in only 5 months 
from September 2007 through January 2008, FHA has pumped more 
than $37.5 billion of much-needed mortgage activity into the 
housing market as of today. More than $14.7 billion of the 
investment came through FHA Secure. FHA modernization would 
greatly assist our effort. As you know, the economic stimulus 
package provided a temporary 10-month window. We now announce 
the new loan limits--we announced new loan limits last week. 
They will help hundreds of thousands of people nationwide in 
this country.
    But this is no substitute for FHA modernization, which 
would raise the loan limit permanently and also provide other 
important changes that would benefit American homeowners. In 
addition to these actions, we also take steps to ensure it is 
easy for homeowners to understand the fine print when they do 
sign on the dotted line. That's why we are committed to RESPA. 
We're in the process of publishing the Real Estate Settlement 
Procedure Act rules and hope it will bring much needed 
transparency to the home buying process.
    Now the budget will work in concert with these actions. For 
instance, the proposed budget appropriately increases the 
funding for housing counseling. America needs the President's 
request for $65 million in the budget for housing counseling. 
These funds, in addition to NeighborWorks America's $180 
million, provide great services to those who reach out. Many 
Americans facing foreclosure would have greatly benefitted from 
housing counseling. We know it works. Last year 96 percent of 
the households that saw HUD-approved housing counseling and 
completed the program avoided foreclosure. This fund will help 
partially address the crisis and prevent another such situation 
in this country.
    We also need to continue government efforts to partner with 
the private sector to help build back the housing market. The 
HOPE NOW Alliance is a good example. HOPE NOW is a private 
sector volunteer industry efforts to address foreclosure 
through freezing interest rates and working directly with 
financially troubled homeowners. I also commend a recent effort 
by the HOPE VI Alliance members to provide temporary pause for 
homeowners in foreclosure proceedings. These actions provide 
direct assistance to those who need it right now. They are the 
sort of responses providing quick help for the homeowners 
today.
    As in the past, Mr. Chairman, the largest part of the 
budget is for affordable rental housing. Combined, this budget 
seeks more than $29 billion for our rental assistance program, 
which we expect will help more than 4.8 million households. We 
are mindful of the continuing need for more affordable rental 
housing, especially for low- and moderate-income workers still 
finding themselves priced out of the market in many of our 
cities. We need to maintain the units currently available and 
expand the numbers. The budget will help us do that.
    Finally Mr. Chairman, the homeless must not be forgotten. 
We are making strides to cut the number of chronic homeless 
within our continuum of care approach. For the first time ever, 
we saw a decrease in the number of chronic homeless last year, 
a drop of 12 percent. We must continue the progress. Our budget 
once again seeks to increase the homeless programs to continue 
this good work.
    Mr. Chairman, I know that you are mindful of the need to 
help our Nation's homeless veterans. Americans are deeply, 
profoundly grateful for the service and sacrifice these 
veterans have made. In this proposed budget, there is a request 
for $75 million for our Veterans Affairs Supportive Housing 
program. Prior to 2008, this Program had not been funded since 
1993. Working with the Veterans Administration, we will create 
an additional 9,800 vouchers for Fiscal Year 2009. This will 
bring the total to approximately 20,000 homeless veterans being 
served through housing and social service needs.
    Overall, this is a good budget for the Department--
balanced, reasonable, approachable, and workable. It will allow 
us to operate within the framework of cooperation and 
partnership with related Federal agencies and other levels of 
government and nonprofit agencies.
    Mr. Chairman, as we proceed through the budget process, I 
look forward to working with you and the members of the 
committee and thank you for listening.
    [The prepared statement of Secretary Jackson can be found 
on page 53 of the appendix.]
    The Chairman. Thank you, Mr. Secretary. Let me begin with 
one very important point that is very much an issue now. You 
mentioned in your written testimony, and you also said orally, 
``By temporarily increasing FHA loan limits we can back more 
safe, sound mortgages in high-cost States and help homeowners 
trapped in exotic subprime loans to hold on to their houses.'' 
That is now being discussed. What would the consequence be if 
in the FHA modernization bill we did not take action and the 
loan limit went back to what it was, $362,000? What impact 
would that have going forward?
    Secretary Jackson. I think, Mr. Chairman, it would have a 
devastating effect on places like Virginia all the way back to 
Maine, Vermont, Utah, all the way back to California. I was out 
in California with Governor Schwarzenegger and announced the 
$729,000. The Realtors were overjoyed, because finally we will 
be able to help people within those markets. As of to date, we 
would not be able to help any persons out west or the east 
coast for that matter if we went back to $360,000.
    The Chairman. Thank you. And I think frankly, having gone 
to the higher limit, if we were now to drop back that would be 
exactly the kind of destabilizing, ``Oh there goes the 
unreliable government again.'' I should also add that some have 
argued, ``Oh well, don't help--don't go to the higher limits,'' 
which are median prices; they are not for wealthy people in 
some parts of the country, given the house prices. Because 
people say well, that will come at the expense of the low-
income people. But in fact, the Congressional Budget Office 
gives us a positive score when we do that, so that in fact 
generates money that we can use for the increased FHA 
counseling, for instance, that we are all in agreement with. So 
it is exactly the opposite, the argument that if you raise the 
limits you somehow take it away from lower income people. You 
increase the resources within the FHA for that purpose.
    Let me say with regard to the rate setting--and I 
understand your point, and I will tell you this--I'm not going 
to ask you for any extensive comment. If there was no OMB, we 
would be a lot more willing to give you the freedom. But when 
you are, Mr. Secretary, free at last you come back here, and we 
will talk about giving you some of that authority. But right 
now there is something over there to stick with, the same 
motif, and I don't think we can afford you that.
    Let me turn to the issue of Mississippi, because I want to 
be honest. I was critical when you gave the waiver to the 
Mississippi, and we discussed it; you were available. But I now 
believe that a large part of the problem came with our 
drafting. And I was pleased, frankly, and I'm going enter into 
the record your letter dated January 25th--or at least I 
received it on January 25th, I don't know when it was actually 
sent--to Governor Barbour in which you say--as you grant him 
the permission to divert funds from CDBG to a port project. And 
you say, ``Although economic development is important, the port 
expansion will create jobs and serve as a significant regional 
economic driver, I remain concerned that this expansion does 
indeed divert emergency Federal funding from other more 
pressing recover needs, most notably affordable housing.'' And 
then you mention they try to put some money in. In the future, 
when we do this kind of legislation, would you advise us to be 
more--to give you more discretion to say, ``yes,'' or ``no,'' 
and to in fact have some ability to say, ``Well, no. That's not 
a good diversion?'' Would you respond? What would your advice 
be? And, you know, we are going to have emergencies in the 
future. What should we do?
    Secretary Jackson. As I said to you when I spoke to you, 
Mr. Chairman, and also responding to the chairwoman of the 
subcommittee's response, I think it would be a positive step 
that we have more flexibility to approve what occurs. At this 
specific time, the language was very clear.
    The Chairman. I think this is a rare case where what you 
need is more flexibility to disapprove. That's because as you 
interpret this--and we can have some differences --but I do 
think--
    Secretary Jackson. I think I made it very clear in that 
letter that I would prefer that--
    The Chairman. Right. There is one criticism that I would 
make of the procedure, Mr. Secretary, and that is that we 
didn't find any record that--it did give you the power to grant 
the waiver, but they didn't actually ask for a waiver, as we 
can see it. It just wasn't done in a formal way. The problem 
there is that, even if we did this badly, we want to make it 
very clear that this is not what CDBG was meant to do, and we 
don't want to set the precedent that this is an appropriate use 
of Community Development Block Grant funds. We would have liked 
to have the waiver actually document what did and didn't 
happen. And I think, even by their own admission, the 
percentages of 50 percent for low- and moderate-income people, 
51 percent of the jobs for low- and moderate-income people, 
that Mississippi didn't comply with that. Now, I agree we could 
have done a better job of giving the ability to resist that. 
But I do think it should have been documented better.
    With that I'm going to turn to the ranking member of the 
subcommittee who was here, and we are going to give her 3 
minutes for her opening statement, and then her 5 minutes for 
questions or 7 minutes for a really long question. Ms. Capito.
    Ms. Capito. Thank you, Mr. Chairman. And thank you, Mr. 
Secretary. I'd like to welcome you back to the committee. As 
the ranking Republican on the Housing and Community Opportunity 
Subcommittee, I have a particular interest in two programs I 
want to talk about.
    First, I want to commend you for your commitment to the 
housing for the disabled. The Section 811 program provides 
assistance to expand the supply of housing equipped with 
supportive services for persons with disability. The Fiscal 
Year 2009 budget requests $160 million for the Section 811 
program budget, a $35 million increase over the 2008 budget 
request. This program is especially important to my 
constituents in the second congressional district of West 
Virginia. It's my hope we'll continue to improve this for the 
21st century.
    The other program I'd like to talk about is the President's 
budget of $540 million for the supportive services for the 
elderly, the Section 202. Up to $80 million of these grant 
funds will be targeted to the service coordinators who will 
help elderly residents obtain supportive services from the 
community. Last year, with bipartisan support, this House 
passed H.R. 2930: Section 202 Supportive Housing for the 
Elderly Act of 2007, on a motion to suspend the rules. But 
while we were drafting this legislation, I had heard concerns 
from many housing advocates in my district about the ability of 
rural States to use all of the funds, because the program 
included a mandated allocation of a percentage of funds to non-
metropolitan areas. For a small State like West Virginia, this 
could mean a loss of four to five units, because it is 
difficult to find developers willing to work on such small 
projects in rural communities. Thankfully, we were able to 
correct this problem by moving the mandated allocation from the 
State level to the regional level, and I thank you for working 
with us on that. I look forward to continuing the work on 
ensuring that rural seniors receive the benefits of affordable 
housing, and I urge the Senate to take action on this Section 
202 legislation.
    I want to applaud the Secretary's innovative approach to 
financing Sections 202 and 811. The President's Fiscal Year 
2009 budget requests $10 million and $15 million mixed 
financing demonstration projects for Section 811 and Section 
202. These projects will remove some barriers from using low-
income housing tax credits and will help develop more units to 
serve our most vulnerable populations. Mr. Secretary, again 
we're very pleased to have you here, and I look forward to 
working with you. And I'd like to ask you a couple of questions 
if I may.
    Secretary Jackson. Thank you.
    Ms. Capito. First of all, last year in testimony before 
this committee, there was a bit of a controversy in terms of 
the late housing assistant payments, and I think we did a 
temporary fix to try to patch that up. In your testimony, you 
described how you're going to be updating your aging IT 
infrastructure with $313 million of a budget request for 
working capital. Will this help resolve some of these problems, 
and what is the status of that particular issue right now?
    Secretary Jackson. We have come very close to resolving it. 
We have clearly enough funding to go into 2009 to make sure 
that all of the providers are paid on time. It is important 
that we upgrade our capital improvement system. We're pretty 
close to being on top of this subject, and I think that if we 
can get monies for our information technology fund we can 
really address this issue very clearly. But one of the 
priorities that I have made to not only the chairman here, but 
also the chairman on the Senate side is that we are going to do 
everything to make sure that there is continuity, so that the 
providers will be paid in a timely manner, and we will not have 
this issue again facing us as we did the last couple of years.
    Ms. Capito. I think we were all stunned, and I in 
particular, to realize that you were waiting in the mail for 
things to arrive and things to be date stamped and all those 
sorts of things when in this day of technology so many things, 
including our tax returns soon, are done online. So I 
appreciate any movement you can do on that and keep us up-to-
date.
    The Chairman. That is a very good point. Look, when we get 
into the budget process or the appropriations process, we are 
often tempted to go to some of the administrative accounts to 
fund the things that have more political appeal: ``Oh, let's 
cut this thing.'' I'm struck by this. I think we probably--I 
hope we can have a kind of bipartisan alliance on this 
committee to protect the IT account, for example. Because we 
can predict when an appropriations bill comes to the Floor, 
giving the allocation that somebody is going to say, ``Well, 
let's do more Section 8,'' or other things that will have some 
political appeal. And I would look forward to working together. 
Maybe we can go to our friends on the--the appropriators 
generally do the right thing. And then on the Floor, these 
things are kind of easy pickings. I would hope we could work 
together and agree on the Floor that we would, in a bipartisan 
way, defend these unglamorous but very necessary accounts. I 
thank the gentlewoman.
    Secretary Jackson. Mr. Chairman, I truly appreciate that. 
Because right now, we are funded to about 9 months, and this is 
very critical. We have cut down on the number of IT systems 
that we had in HUD, and the quicker we get this resolved, the 
less problems we are going to have making sure that this does 
not happen to the providers.
    Ms. Capito. Thank you. I have one last question then. I had 
a meeting in my home office with some constituents and a 
developer who uses the low-income housing tax credits to 
develop some very nice properties in our State. And they are 
extremely concerned about the credit crunch and how this is--
what do I want to say? It's becoming an issue not only in 
housing and in mortgages but into the ability or the 
willingness of developers to want to jump into this. Are you 
finding that nationwide? And how are you going to address this?
    Mr. Secretary. Yes. And let me have Brian Montgomery speak 
to that specifically. It is becoming a problem.
    The Chairman. Commissioner, why don't you come up? We will 
have the Commissioner speak to it. And I took some of the 
gentlewomen's time, so the time will be standard.
    Mr. Montgomery. Yes. There has been a constriction of the 
use of tax credits. It varies State by State. I think a couple 
of months ago, tax credits were probably getting 90 or 93 cents 
on the dollar. I think you're seeing that down, down to 80 or 
82 cents on the dollar. So some States are looking for better 
uses of the tax credits. And I mean the beauty of the program 
is the fact that States make the decision, but you see a 
shortfall in some States. Other States don't know what to do 
with it, which is why we propose those two demonstration 
projects to better target via a set-aside, a qualified 
allocation plan, whatever, the use of credits for Sections 202 
and 811 for elderly and disabled housing.
    Ms. Waters. Let me ask the gentlewoman to yield again, 
because as the members already know and the staff has been 
talking, we have been collaborating since last January with the 
Ways and Means Committee. And we expect soon to have 
legislation that will take the low-income housing tax credits 
requirements and those that come from the appropriations 
process, like Sections 811 and 202, and mesh them better. 
Everybody I have ever talked to who has tried to get them 
together tears their hair out because the Congress has given 
them somewhat inconsistent rules, and we hope--and think this 
would be virtually unanimous--it will save a lot of time and 
energy in the private sector. We hope fairly soon, and we're 
just waiting for Joint Tax to give us their reports, to have 
legislation that will make it possible for a developer who is 
trying to use low-income housing tax credits and the 
appropriations process to have them work together in a much 
easier, less frictional fashion.
    Ms. Capito. I think that's a good collaborative effort, and 
I certainly support that. And I--
    The Chairman. Okay. We'll probably have our piece--it's 
going to be done--the member should know--Ways and Means is 
going to do their piece, and we will do our piece. I expect it 
to pass through markup; I think it will be overwhelmingly 
supported; and then the Rules Committee will merge the two.
    Ms. Capito. And finally, I'd just like to make a comment 
that FHA modernization, I think, is something that we can't 
keep stuck in the mud here. We have--it has broad-based, I 
think, collaborative feeling that this is a lifeline to some 
people who are having difficulty with their housing. It also is 
something whose time is well past due, and something that we 
need to do. So I would encourage the members of the committee, 
and I want to thank HUD for their ingenuity and energy in 
trying to move this forward with the rest of us. Thank you.
    Secretary Jackson. Thank you all.
    The Chairman. The gentlewoman from California, the Chair of 
the Housing Subcommittee.
    Ms. Waters. Thank you very much, Mr. Chairman. Mr. 
Secretary, as you know, the unmet needs in the Gulf Coast are 
still overwhelming. Whether we talk about Mississippi or New 
Orleans, we still have people who are displaced living in other 
sections of the country. Many would like to return. The housing 
production certainly has not been what many of us believe it 
could have been. You recently got some surveys back. As you 
know, I have been focused on public housing. You got a survey 
back that talked about who wanted to come back and who did not 
want to come back. And in that survey you talked about 35 
percent of those who lived in public housing didn't really want 
to return to public housing. Can you explain to me how you 
intend to accommodate even the 35 percent? What are you going 
to do with the other 65 percent who may be out there on Section 
8? And where are you in your dismantlement of public housing 
units? Have you renovated any of those units? And can I get a 
correct count on the offsite public housing that you're 
supposed to have, where the numbers change quite often, as I 
try and check on what you have that's scattered housing? Can 
you help me understand how you're meeting these needs? And also 
help me to understand what kind of assurances did you have from 
Governor Barbour about diverting the $600 million to a port, 
when I don't think the assurances were there to tell you how 
he's going to met the unmet needs in Mississippi for housing? 
Can you help me understand this?
    Secretary Jackson. Sure. I think that's a fair question. 
Let me answer Mississippi first. In approving the $600 million 
for the port, one of the things that we did extract from 
Governor Barbour and the State of Mississippi is an additional 
$200 million, which brings the limit up to $350 million that is 
used for low- and moderate-income workforce housing. And we'll 
be happy to share that with you, because it's very clear--
    Ms. Waters. Where does the $250 million come from?
    Secretary Jackson. He had $150 million already in there, 
and we asked for an additional $200 million, which he added to 
the process. So we have $350 million right now for low- and 
moderate-income workforce housing.
    Ms. Waters. That's in phase two?
    Secretary Jackson. That's in phase two. Yes.
    Ms. Waters. $350 million left over?
    Secretary Jackson. That's what we made--I won't say we made 
him--asked him to allocate, and he did.
    Ms. Waters. Go ahead, please.
    Secretary Jackson. Okay. I can't tell you the intricacies 
of the studies that we had done. All I know is we tried to be 
extremely fair. We had a very diverse group of people who put 
the questions in place to be used by the University of Texas, 
and one of the persons was a person who was very intricately 
involved in bringing the lawsuit, so we tried to include 
everyone. And we wanted to make sure that there was no 
deceptive practice on the part of anybody, that we got as fair 
and accurate answers as we could. And we think we have gotten 
that. For those persons who want to come back, we are going to 
do everything in our power to make that happen. To date, there 
is no one who is in public housing or on a voucher who does not 
have a place to stay or live today. And we're going to make 
sure that occurs until the public housing is rebuilt, because I 
think that would be somewhat cynical if we didn't do that. So I 
believe we're doing everything in our power. And lastly, let me 
say this to you. I respect and agree with you that I want 
everyone who wants to come back to have an opportunity to come 
back. I don't want to deter anyone from coming back to their 
home.
    Ms. Waters. Mr. Secretary, why can't you fill the so-
called, ``scattered housing'' that you have claimed over the 
past 2 years that you have with people who want to return?
    Secretary Jackson. If there is anyone who wants to return, 
we are doing everything in our power really to get them back.
    Ms. Waters. Why can't you get--how many scattered units do 
you have available?
    Secretary Jackson. I don't have the answer right off the 
top of my head. I'll be happy to get--
    Ms. Waters. Can you guess?
    Secretary Jackson. No. I don't want to make a guesstimate.
    Ms. Waters. Do you have any units available in any of the 
other public housing, like the Gouest or any of those? Do you 
have any available units?
    Secretary Jackson. We still, right now, have about a little 
over 250 units that are available. All we have to do is move 
the stove in, the air conditioning in. That's all that's 
necessary.
    Ms. Waters. Mr. Secretary, you have been telling me that 
you have had units available for the past year-and-a-half or 
so. Why can't you move people back who want to return to those 
units and put them in those units, whether they're scattered or 
whether they're in the public housing?
    Secretary Jackson. Well, I will say this. I think that if 
you read the survey, many of the people do not want to come 
back to those units.
    Ms. Waters. Let's just talk about the 35 percent who do 
want to come back. And the units that you have told me that you 
have had available for the past almost 2 years? Why can't you 
connect people with available units? Whether it's scattered or 
whether it's in public housing, it doesn't matter. Why can't 
that happen?
    Secretary Jackson. I can't make people do what they don't 
want to do. I don't have that authority or that power. We have 
asked if they want to come back. We're willing to pay for the 
lease counseling, the lease. We're willing to do everything. 
We're willing to move them. But if they do not want to come 
back I can't--
    Ms. Waters. No. I'm only talking about those who want to 
come back. I went to Texas, and I met with groups of people who 
desperately wanted to come back. I did casework trying to 
connect those people with HANO and HUD to get them back. I 
can't seem to find a way to get HUD or HANO to take the people 
who are ready, want to come back, and where you claim you have 
units to put them in, to get them connected with those units. 
What does it take?
    Secretary Jackson. Well, I will say this. We're doing 
everything in our power. And I would respectfully disagree.
    The Chairman. If the gentlewoman would yield, let me 
propose this: We are out of here, but when we come back, Mr. 
Secretary, I think we will ask you to send up an Assistant 
Secretary, somebody with the power here and have a meeting. We 
will be ready. And we would ask you to come up here and when we 
come back, and let's have a--we will have a special session 
just on this one issue.
    Secretary Jackson. I'll be happy to do that.
    The Chairman. And we will do our documentation when we come 
back in April.
    Secretary Jackson. Mr. Chairman, and Chairwoman Waters, any 
documentation that you need will be happily provided.
    Ms. Waters. I appreciate that. You can imagine my 
frustration over the length of time I have been working on this 
issue.
    The Chairman. I understand. And I--
    Ms. Waters. And what I need, which I cannot get, is I 
cannot get documentation of units available, whether they are 
scattered or whether they are in housing developments. I cannot 
get a description of the process by which they take people who 
are supposedly online or inline to return to tell me how they 
do that.
    The Chairman. I think that is a fair point, and I know how 
long we've been working. That data should be available. Could 
we get that fairly soon?
    Secretary Jackson. Absolutely.
    The Chairman. When we get that fairly soon--I'd like to get 
it within a few days--and depending what it looks like, we may 
just have to have a public hearing on that one topic. But we 
would like to get the data, the gentlewoman's questions, 
specifically answered as soon as possible.
    Ms. Waters. The last question, Mr. Chairman, is how many 
public housing units have you demolished?
    Secretary Jackson. To date, I can't tell you that, because 
we just started the process.
    Ms. Waters. No. The process started about 3 or 4 months 
ago, didn't it?
    Secretary Jackson. On one development. Not on all of the 
developments.
    Ms. Waters. How many have you destroyed so far?
    Secretary Jackson. I don't know, as of to date.
    The Chairman. So shouldn't somebody be keeping track of 
that, Mr. Secretary?
    Secretary Jackson. Well, that's locally. I can--
    The Chairman. No. But you're local. You're the--you run a 
housing authority.
    Secretary Jackson. Right. I can get that for you.
    The Chairman. I'm troubled that you don't have it, to be 
honest.
    Secretary Jackson. No. I really don't. And I'm not going to 
tell you that I--
    The Chairman. I understand that. But that would seem to be 
something that--there are a lot of people behind you. We didn't 
expect you to have it all in your head, but you have a row of 
people behind you.
    Secretary Jackson. How many have we demolished? Which one 
is that? At Cooper, Ms. Bloom said that it's 15 percent of the 
site to date that has been demolished.
    Ms. Waters. And what about Lafitte?
    Secretary Jackson. Nothing has been done to--
    Ms. Waters. What about St. Bernard?
    Secretary Jackson. St. Bernard has just started.
    Ms. Waters. How many have been demolished at St. Bernard?
    Secretary Jackson. I don't know exactly.
    The Chairman. Well, Mr. Secretary, we are going to run out 
of time here. But let me just say this. You know we have had 
some differences, and your inability to tell us how many have 
been demolished, frankly, is going to reinforce the feeling 
that some of us have that there really has not been enough 
evaluation of these. I mean demolishing public housing 
shouldn't be done without a lot more care. The gentlewoman from 
Illinois.
    Mrs. Biggert. Thank you, Mr. Chairman. Let me ask one--
first of all--I have a couple of questions, so I'm going to try 
and rush through them. Once again, the Administration has 
prioritized comprehensive reform of the FHA single-family 
mortgage program, including a shift in the risk-based premiums, 
which would allow FHA to serve the low- to moderate-income 
borrowers. Both the House and the Senate have approved FHA 
reform legislation, but they take different approaches to 
authorize in the risk-based premiums. The upfront and annual 
premium caps are very different. And the Senate bill has a 
moratorium for 1 year. Of the two proposals, which do you think 
is the best approach to the FHA modernization? If you can 
comment on that. And what, if anything, would you like to see 
added to the final FHA reform bill?
    Secretary Jackson. As I said before, my only concern is 
with the ability for FHA to have risk-based pricing. I think 
that we will work with both the House and the Senate. What we 
want more than anything else, and I think the chairman spoke to 
that a few minutes ago, is the ability to have an acceptable 
loan limit, so that we can touch those parts of the country 
that we were unable to touch until the stimulus package came 
into being. So that, to me, is the most critical part, because 
having traveled to the West Coast last week, I know how elated 
people were in California and Nevada that finally the loan 
limit had been increased.
    Mrs. Biggert. Well, there are several ideas floating around 
for the housing stimulus package, and some proposals suggest 
expanding FHA Secure. And if the final modernization bill is 
signed into law, could you expand FHA Secure to help more 
borrowers without jeopardizing the financial security of the 
FHA program? I am worried about, and it has been talked about, 
if you need credit subsidy or raise premiums should this be 
passed.
    Secretary Jackson. And I think that's a fair question, 
Congresswoman. We're not going to do anything that would 
jeopardize the existence of the program. We think that we must 
be extremely judicious in exercising all of the options that we 
have to make sure that FHA remains a viable alternate to help 
people pursue their dream of homeownership. It has been around 
for 75 years. We have had some down periods. But as I said in 
my testimony a few minutes ago, we have done almost some $37 
billion worth of injection of finances into the system since 
this process has started with the downturn. And we think it's 
only going to get stronger if we have the opportunity to help 
other homeowners. So I think we will make quite a great 
impression to the economy if given the opportunity with the 
high-loan limit.
    Mrs. Biggert. But should Congress be concerned about the 
health of the fund?
    Secretary Jackson. Well, I think that we should all be 
concerned about the health of the Fund. Do I think the Fund is 
going to be insolvent? I don't think so, and I hope not. And 
we're going to do everything in our power to make sure it 
doesn't happen.
    Mrs. Biggert. Thank you. Then I'm going to come back to my 
issue that has always been of concern to me and that's the 
homeless. We have had hearings on this. And the 
Administration's homeless consolidation proposal does not 
include children or families in the definition of chronic 
homelessness, and this has been of concern. Aside from the 
budget considerations, why is it difficult to categorize 
families and children as chronically homeless? And how do the 
living patterns of the homeless families, and particularly 
children lacking permanent housing, compare with homeless 
single individuals? I know what you're doing for the veterans, 
and I think that this is a very important issue too. But I'm 
really concerned about the families and children.
    Secretary Jackson. Congresswoman, let the Deputy Secretary 
speak to that issue, please.
    Mr. Bernardi. Congresswoman, the definition of chronically 
homeless is an individual who has been out on the street for a 
certain period of time and has had recurring incidents. We 
believe firmly that our budget also takes care of families with 
children; 50 percent of the budget goes to families with 
children. But only the chronic homeless is dealing with that, 
stopping that recidivism, getting these hard street individuals 
off the street permanently, providing them not only with 
emergency housing but then transitional and permanent housing. 
And in the final analysis, they utilize about 50 percent of the 
budget. So the goal is to make sure that the chronically 
homeless are--that we reduce that number substantially. And we 
have. I think the Secretary mentioned that we reduced that by 
12 percent from 2005 to 2006. But at the same time our 
resources are there. And each year in this Administration since 
2001, we have had a substantial increase in the amount of money 
that we use for homelessness.
    Mrs. Biggert. Well, I appreciate your answer, but I think 
this is--you know what came up in the hearing too is whether it 
could be expanded to include people who either double-up or are 
living in hotels or motels, because of housing. And McKinney-
Vento for example, reauthorization, takes a much different view 
of the definition. And that bill does so. I just don't know why 
we can't expand the definition of chronically homeless.
    Secretary Jackson. Congresswoman, I think you can. I mean 
Congress has the power to expand. And if they do, we will 
implement it.
    Mrs. Biggert. That's a good answer. Thank you. I yield 
back.
    Mr. Bernardi. But if I may, when it comes to families with 
children, the homelessness there doesn't last that long, 
fortunately. In many instances transitional housing services 
are provided, and you see those folks move on. It's the 
chronically homeless who are constantly there and utilizing the 
resources.
    Mrs. Biggert. Well, I think from the testimony that we have 
had that it's not--that's not necessarily true. The concern I 
have is that everybody expects that they are immediately 
finding a home, but in reality in some of the cases that we 
have--
    The Chairman. Will the gentlewoman yield? Just to direct 
you to one of--some these predate a foreclosure crisis. And as 
we know, one of the problems with foreclosures is that tenants 
are evicted. You know, there are innocent tenants who are 
sitting there, and their landlord got foreclosed. Is that 
having an impact on the homeless problem? It would intuitively 
seem to be. That as you increase evictions--
    Secretary Jackson. Yes. That is clear, because there are 
renters who were not aware that the owners of the homes were in 
foreclosure.
    The Chairman. And in some cases, they hare given very 
little notice. We are trying to deal with that in our bill, but 
I would think in support of what the gentlewoman said that 
those would be families--that a family would find itself 
evicted with no preparation, no notice; they didn't know what 
was going on with the lender. And they have 30 days to vacate. 
And I would guess that would be part of this problem.
    Mrs. Biggert. And I would just--to yield back--say that I 
really think that--I would argue that homeless children should 
be our top priority. And then I would yield back.
    Secretary Jackson. Thank you.
    The Chairman. The gentlewoman from New York, the Chair of 
the Financial Institutions and Consumer Credit Subcommittee.
    Mrs. Maloney. Thank you. I'd like to ask a few questions 
about one of the most successful programs to help deserving 
people with housing in New York City and probably across the 
country, which is Section 8. You have not asked for the $9 
billion that is needed to fully fund Project-Based Section 8. 
And my question is why are you just asking for funding through 
this fiscal year, through September 30th, and why not for the 
full 12 months? Because owners of buildings that would be 
getting this Section 8 are very nervous, will not take it now, 
because they have no confidence that the program is going to be 
fully funded. So it appears to me that the policy that you're 
following is a way to de-fund or unravel Section 8 for Project-
Based housing.
    Secretary Jackson. I would respectfully disagree with you, 
Congresswoman. I think that if you had said that a year ago, 
you would have been absolutely correct. We have begun to 
address that issue. And I think the chairman asked that just 
before you came in. We feel very comfortable that every 
landlord or provider knows now that they are going to be paid, 
and paid timely.
    Mrs. Maloney. Now how do they know that they are going to 
be paid timely if you're only funding it through September 
30th?
    Secretary Jackson. No, it is funded to the 2009 period.
    Mrs. Maloney. It is funded through 2009?
    Secretary Jackson. Yes. It is.
    Mrs. Maloney. With how much money?
    Secretary Jackson. I'm not sure how much money. I think 
it's totally funded where we will pay every provider.
    Mrs. Maloney. Can you get us how much you put in the 
budget?
    Secretary Jackson. I'll be more than happy to.
    Mrs. Maloney. To pay every provider through 2009?
    Secretary Jackson. I sure will.
    Mrs. Maloney. Because I feel that it's estimated to be $9 
billion, yet it's not in your budget, as I understand. Or your 
proposed budget.
    Secretary Jackson. I'll be happy to get that for you. 
There's no problem.
    Mrs. Maloney. And the tenant-based formula. In the tenant-
based formula, why is the Department going back to the old 
formula based on data that is 2 years old? And as I understand 
it from the central staff of the committee, this would result 
in a loss of over 100,000 vouchers across the country, and many 
of course would be in New York City. So why are you basing it 
on a formula that is 2 years old, thereby lowering the number 
of vouchers?
    Secretary Jackson. We're not, Congresswoman. What we have 
done is budget-based. We're no longer using unit-based costs 
to--
    Mrs. Maloney. You no longer use--pardon me? The what?
    Secretary Jackson. Unit-based.
    Mrs. Maloney. You no longer use the tenant-based? You're 
just doing project-based?
    Secretary Jackson. No. Budget-based. We're giving the 
housing authority a budget to work with so they'll have more 
flexibility in how they manage the program. We went off the 
unit-based pricing 2 years ago, and that's what they're 
speaking in reference to.
    Mrs. Maloney. So you no longer fund Tenant-Based Section 8?
    Secretary Jackson. No. We do, but it's budget-based. It's 
not based on units, as it had been the past.
    Mrs. Maloney. And when you say units, you mean tenants?
    Secretary Jackson. No. Units.
    Mrs. Maloney. Excuse me. You know--I don't see what you've 
changed. You say you no longer fund Tenant-Based Section 8, 
where the tenant can shop for the Section 8 housing?
    Secretary Jackson. We do.
    Mrs. Maloney. But you've changed it to unit-based?
    Secretary Jackson. No. It was unit-based to the housing 
authority. They got a number of units. Let's say that Fort 
Worth, Texas, got 400 units.
    Mrs. Maloney. So in other words, your Section 8 can only go 
to public housing?
    Secretary Jackson. The Section 8 program is funded and 
actually administrated by the public housing agency. The 
tenant-based. It's not administered by anyone else. The 
project-based is to a project that has been developed.
    Mrs. Maloney. But in New York, at one point, they could 
take a Section 8 voucher and go to any housing project. The 
tenant made the decision of where they went.
    Secretary Jackson. No. They didn't go to any housing 
development. They went to a market-rate apartment somewhere in 
the City of New York.
    Mrs. Maloney. Exactly. But they made that choice. The 
tenant made that choice. So you have taken it away from the 
tenant making the choice and giving it the public housing 
project. Is that what you're saying?
    Secretary Jackson. No. That's not what I'm saying.
    Mrs. Maloney. What are you saying?
    Secretary Jackson. I'm saying that the program is always 
administered from the housing authority, period. They have to 
allocate the voucher to the person.
    Mrs. Maloney. Right.
    Secretary Jackson. The person has the flexibility to go 
shop the voucher around to find the apartment that he or she 
wants to live in.
    The Chairman. And that hasn't changed?
    The Secretary Jackson. That has not changed.
    Mrs. Maloney. But have the number--the vouchers have fallen 
by 100,000--according to central staff--that you're providing.
    Secretary Jackson. No. Because it's budget-based, we're no 
longer having unit-based. We're not giving the housing 
authority of New York City units. We're giving them a budget, 
and they can operate within that budget structure.
    Mrs. Maloney. Well, I have been told that it will be a loss 
of 100,000 vouchers. Whether you call it a unit or a tenant-
based or a housing authority based, and any cutback in Section 
8 is bad news for public housing, period.
    Secretary Jackson. We've increased the budget each year, so 
I really feel comfortable that New York, as other areas, can 
operate. And I've had this conversation before.
    Mrs. Maloney. So the number of Section 8 vouchers going to 
New York and other places is increasing this year?
    Secretary Jackson. We've increased the budget by $100 
million.
    Mrs. Maloney. Does that mean 100 more tenants will be able 
to afford housing?
    Secretary Jackson. It's according to what section of the 
country you're in, because you have a higher per capital plan 
in New York than you would have in Dallas, Texas. It's 
according to where you live.
    Mrs. Maloney. My time is up, thank you.
    The Chairman. The gentleman from California.
    Mr. Miller of California. Thank you, Mr. Chairman. I have 
been a developer for over 35 years, and you and I have talked 
about recession, Mr. Secretary. And I think at the time if you 
have a significant housing recession, at that time it's the 
worst anybody has ever seen, they say.
    Near the 1980's, I remember when the prime rate went to 21 
percent, and you couldn't get a loan. It was awful. During the 
1990's, when it was awful also starting in about February/March 
of 2000, it was awful for a long time. And the problem was 
within those recessions we had high unemployment.
    This time it is also bad again, and it's not surprising 
that we have all-time record foreclosures, because we have all-
time record homeownership at the same time. And much of the 
problem we face today is in the subprime market, which is 
expanded. And most of those loans should be considered 
predatory, because when you make a loan to somebody you know 
can't pay it back, it is problematic.
    Chairman Frank touched on something that he and I worked 
very hard on for a long time, and that is raising conforming in 
high-cost areas and FHA in high-cost areas. And your statement 
I think is most proper saying that this temporary increase will 
help a lot of people out there who are stuck in the exotic 
loans to be able to maintain homeownership.
    That I think is absolutely true, but would not it also be 
applicable to say doing this permanently would in the long run 
help a lot of people in the future be able to buy a home, 
understanding that FHA and Freddie Mac and Fannie Mae have good 
underwriting standards? They are not going to you know, 
decrease those in any way, shape, or form. Would it be a good 
program to continue permanently rather than just on a temporary 
basis?
    Secretary Jackson. Congressman, yes. And I think I said 
that to the chairman when he asked.
    Mr. Miller of California. I just wanted to hear you say it 
again, because I have been waiting for a long time to hear you 
say that.
    Secretary Jackson. I agree, I agree.
    The Chairman. We need you to say it really loud so they 
hear it in the Senate.
    Mr. Miller of California. Some don't have ears.
    Secretary Jackson. Absolutely, I think that it would be a 
major plus. And that is why we want it at an acceptable level, 
and that is why we want FHA modernization passed. And I think 
the stimulus package demonstrates that when we raised it to the 
limit that we did.
    I was out in your State last week, and it was unbelievable 
when I gave the answer to Los Angeles and Orange County, 
because immediately the Realtors realized that they would be 
able to refinance into a safe, secure loan with FHA.
    Mr. Miller of California. It has a huge positive impact. In 
fact, Barney and I suffered the banks fighting us for years. 
And I have heard many Presidents and CEO's of banks saying what 
a great program it is to do this, because when they sell high-
cost areas they can buy a home in the low-cost areas, but they 
can't move out of the high-cost to move into a low-cost.
    Another area that I have some concerns with, I remember we 
all fought for the American Dream Downpayment Assistance 
Program that we implemented. And we talked, we gave speeches. 
And a lot of the arguments we heard in favor of that was to 
pattern it after the private sector downpayment assistance 
program. Now there seems to be an argument today that program 
is awful, it's horrible, the foreclosures are extremely high.
    I mean, of the nonprofit downpayment assistance program 
they probably put a million people in homes who wouldn't have a 
home otherwise. And some argument is being made that perhaps 20 
percent of those might be in some problematic stage. That still 
leaves 800,000 people in homes who wouldn't be in the homes.
    But when I met with the Commissioner, I had a concern when 
they said that the foreclosure rate was higher than the 
nonprofit, you know, private sector downpayments assistance 
programs. And I said, ``Can you give me the data showing what 
percentage are in trouble on the private sector versus what 
percentage are in the American Dream Downpayment systems?''
    I was supposed to get that, but then about a week later, 
they came back and said, ``Well, the information is not 
available to us to give to you.'' Can you please explain to me 
how then HUD believes that the private sector is undergoing 
extremely high percentage of foreclosures and not American 
Dream Downpayment Assistance Act when we don't have the data in 
HUD differentiating the two?
    Secretary Jackson. I wish I could, but Congressman I cannot 
comment, because this matter right now is under current 
litigation.
    Mr. Miller of California. I thought those were all settled.
    Secretary Jackson. No.
    Mr. Miller of California. Oh, so there are two lawsuits 
that have been resolved, but there are still more underway?
    Secretary Jackson. I cannot comment as the Secretary.
    The Chairman. Excuse me, Mr. Secretary, but I know that 
people often say that. Has any judge ordered you not to comment 
on this?
    Secretary Jackson. Yes, sir.
    The Chairman. Can I see the order from the judge?
    Mr. Miller of California. They have, they have yes. But I 
didn't know I couldn't talk about the program in general. I 
knew I wasn't going to speak specifically to the litigation, 
which I wasn't trying to do. My concern is that I believe the 
private sector is doing a good job. And they put a million 
people in homes who would otherwise not have a home.
    And if we are saying that there is a problem in that 
sector, if we mandate that they have the same identical 
underwriting standards as HUD uses on the American Dream 
Downpayment Program, if they use the same standards, the same 
underwriting, the same appraisal standards, why would one be 
problematic when the other one is not if they are using the 
same standard?
    I know you can't answer this, but this is a real concern 
for me, because I remember hearing speeches when I voted for 
the American Dream Downpayment Assistance Program that this 
worked so well in the private sector that we need to expand it 
by having government get involved, because we can put all these 
people in homes who could not otherwise afford a home. Look at 
how much more we can do by involving the government.
    And if we just look at the numbers, I mean it seems like 
there is something we could do. Let me ask you another question 
then. I heard arguments saying that the MMFI and the HUD's 
budget is problematic because of the high foreclosure rate. Is 
there a minimum capital ratio that is for the MMIF, percentage-
wise?
    Secretary Jackson. Brian.
    Mr. Montgomery. The capital ratio that Congress sets for 
the MMIF fund is 2 percent, and currently we are at about 6 
percent.
    Mr. Miller of California. That is what I thought. And my 
concern Mr. Chairman is, and the information given to me, if we 
require 2 percent and I checked the data and you had 6 percent, 
and your projections between 2007-2014 that your actual 
increase 50 percent. How can there be a problem if we are 
triple the requirement that we are supposed to have currently?
    I mean, I would honestly expect that the foreclosure rates 
for people who don't have any money would probably be higher 
than people who have money. So if a person doesn't have 3 
percent down, and they want to participate in the American 
Dream Downpayment Assistance Program, we are going to give them 
3 percent. Or if they want to participate in the private 
sector, somebody other than the government is going to give 
them 3 percent.
    And I would, I would actually expect that the foreclosure 
rates would be higher for people who don't have any money. And 
Mr. Secretary, you and I have talked about helping people get 
into houses. So I really would like the data when you get it, 
because I am having trouble understanding--
    The Chairman. Well let me, we are going to run out of time, 
but see if they have a response for the gentleman--
    Mr. Miller of California. Oh, okay. I don't believe you 
can, but okay.
    Secretary Jackson. We will try to, we will get it to you 
today.
    The Chairman. As long as you have a court--
    Secretary Jackson. You have a 6 percent, that's--
    The Chairman. I can't imagine that a court order would 
interfere with the transmission of factual data.
    Secretary Jackson. No.
    Mr. Miller of California. You said the funds at risk, you 
are required to have a 2 percent and you have a 6, I don't see 
a risk.
    Mr. Montgomery. If I could respond to that, the Credit 
Reform Act requires those loans, a book of business made in 
that fiscal year beyond budget. Yes, over the net present value 
of those loans, over the life of those loans, yes, we have a 
great capital reserve meeting over those 30-year programs. 
Based on our modeling right now, we will keep $21 billion more 
than we will pay out.
    For credit reform requires again, those books of business 
beyond budget for that year, and this year is where the problem 
is.
    Mr. Miller of California. Well, I would expect there to be 
a problem--
    The Chairman. Your time has expired.
    Mr. Miller of California. Oh, that's too bad, thank you.
    The Chairman. The gentlewoman from New York.
    Ms. Velazquez. Thank you, Mr. Chairman. Secretary Jackson, 
local governments rely on CDBG to create fertile environments 
for families and jobs to grow in our communities. The City of 
New York for example, uses it for everything from going after 
landlords and cleaning up the Bronx river to providing funding 
after the 9/11 attacks to help businesses and the community to 
get back on their feet. However, the President's budget will 
cut funding for CDBG by nearly 20 percent. How do you expect 
States and cities to continue their economic development 
activities given the proposed cuts?
    Secretary Jackson. We have put before you on a number of 
occasions proposals to revamp the Community Development Block 
Grant to make sure that it addresses the needs of cities that 
really need the program. I don't doubt for one moment that New 
York needs the program, but there are certain cities around 
this country that don't.
    And I think it is very important that we begin--
    Ms. Velazquez. You are telling me that there is no city 
across America that does not need funds to promote economic 
development?
    Secretary Jackson. Yes.
    Ms. Velazquez. And create jobs?
    Secretary Jackson. Yes, yes.
    Ms. Velazquez. So why are you cutting the budget for CDBG?
    Secretary Jackson. I said there are certain cities that 
from our perspective do not need the concentration of Community 
Development Block Grant Funds.
    Ms. Velazquez. Which cities?
    Secretary Jackson. Like Palm Beach, Florida, one of the 
richest cities in the country.
    Ms. Velazquez. So then why can't you use the entire, that 
money to increase the investment of resources to continue to 
promote economic development and job creation at a time when 
the economy is suffering so much?
    Secretary Jackson. That is a very excellent question. If 
you--
    Ms. Velazquez. Yes, because it could respond to the intent 
of the stimulus package.
    Secretary Jackson. May I answer please?
    Ms. Velazquez. Yes, sure.
    Secretary Jackson. If you would pass the proposed 
legislation that we have, we would be able to use the money by 
specifically pinpointing those cities that deserve it most. And 
that is all we are saying, is that the formula that we have had 
since 1974 does not fit the needs of major cities today, and I 
would like to zero in on those cities.
    The best example I can give you is Canton, Ohio, where I 
know you have severe problems, or Dayton, Ohio, which I was 
just at, you have severe problems, or portions of New York City 
where you have severe problems.
    Ms. Velazquez. Have you proposed legislation to this 
committee?
    Secretary Jackson. Yes, I have.
    Ms. Velazquez. Well, I'll look into that. Sir, most of our 
Nation's public housing developments range in age from 40 to 70 
years old and are getting older everyday. For seniors and 
families in public housing, one more year adds to the cost of 
needed repairs.
    So these needs are so great that your agency has encouraged 
PHAs to borrow funds from the capital market to pay for their 
current repair needs. PHAs use public housing Capital Fund 
grants to pay for both the repair needs and the financing. In 
the President's Fiscal Year 2009 budget however, he is 
proposing to cut Public Housing Capital Fund grants by over 
$400 million. It is a 17 percent decrease from last year. Can 
you explain why you urge PHAs to borrow on one hand and cut 
their means to borrow with the other?
    Secretary Jackson. Let me say this, that back in the early 
1990's, we had what we called the Commission on Severely 
Distressed Public Housing. We came to the conclusion that there 
were 88,000 subprime units in this country and they should be 
demolished. To date, we have demolished 150,000. So a lot of 
housing authorities have less units than they had.
    And I think that the capital funds that they had, it kept 
pace with that. Also, what is very, very important is this: 
Many of the properties that are in these major cities have 
increased so much in value that they can issue bonds to make 
sure that the property is maintained. And we can still pay the 
payment back to us to make sure that the property sustains 
itself.
    I think that having done that myself, I don't have a 
problem.
    Ms. Velazquez. So the Federal Government is running away 
from its responsibility--
    Secretary Jackson. No.
    Ms. Velazquez. --to provide for capital funds to keep those 
projects.
    Secretary Jackson. No. I would not say we are moving away 
from our responsibility. I think we have the appropriate amount 
of capital funds going to the major housing authorities in this 
country. I think that if they use innovativeness and use their 
bonding power, they can address their needs.
    Also, it is important that we are going to asset-based 
management. You know we have many housing authorities around 
this country that buildings are sitting empty and we are paying 
people for them.
    Ms. Velazquez. It is okay, you have an excellent question 
for every answer. My last question sir, your agency estimates 
the percentage of elderly heads of households assisted by HUD 
to be 35 percent in New York, 35 percent in Chicago, 34 percent 
in Boston, and 31 percent in Los Angeles. Can you tell me in 
what ways HUD is identifying any program or creating any 
program to provide services to the aging population within 
public housing?
    Secretary Jackson. I am sorry Congresswoman, I really 
didn't get the question.
    Ms. Velazquez. There is a growing need, special needs for 
those who live in public housing who are becoming seniors. And 
they live in public housing, they are not on Section 202. So 
what types of programs do you have in place to address the 
health needs and other services that are going to be required 
by this aging population?
    Secretary Jackson. Well I will tell you that our 
responsibility as the Department of Housing and Urban 
Development is to provide them housing, decent, safe, and 
sanitary conditions. We don't address the medical issues or the 
issues that might come from living in assisted living. That is 
not something that is within our mandate.
    Ms. Velazquez. Okay, maybe you need to introduce 
legislation to do that.
    The Chairman. Mr. Secretary, I may have missed something. I 
thought you said there were 88,000 distressed units, of which 
150,000 have been demolished. So we demolished what, 62,000 
non-distressed units?
    Secretary Jackson. No. What happened, as the years went by, 
more and more units were distressed, and they took that into 
consideration and began to demolish those units.
    The Chairman. How many were replaced, do we know?
    Secretary Jackson. We have had a substantial number of 
those--
    The Chairman. We don't know?
    Secretary Jackson. No.
    The Chairman. All right. That reinforces my view that there 
is a lack of concern here. When we know more about how many 
were destroyed than we know about how many were replaced, I 
think that is symptomatic of an undervaluing of the existence 
of the units.
    Secretary Jackson. No sir, I would disagree.
    The Chairman. Well then, why don't we know how many were 
replaced?
    Secretary Jackson. Because we have outstanding right--to 
date, $1.4 billion dollars in HOPE VI monies that were supposed 
to do those units that have not been used as of today by how--
    The Chairman. I have seen it, but that doesn't--you still 
should know how many were replaced if we are concerned about 
that. We are trying to fix up the HOPE VI program.
    Secretary Jackson. As of to date, 60,000 have been 
replaced.
    The Chairman. Well, you got that answer in a hurry, thank 
you.
    Secretary Jackson. I got it from my person.
    The Chairman. Credit, those people are doing something 
sitting back there. The gentleman from Texas.
    Mr. Neugebauer. Thank you. Mr. Secretary, it is good to 
have you here again. And I was glad to hear you say that FHA 
has underwritten about $37 billion worth of mortgages to help 
bring some additional liquidity. Were all of those loans made 
to refinance subprime loans that were already on the books?
    Mr. Montgomery. Between October 1st and January 1st, the 
number is about $38 billion that we have injected into the 
market. About $15 billion of that is FHA secure. So $38 billion 
total, $15 billion of that is FHA secure.
    Secretary Jackson. That is the new program that the 
President, the Congressman, and I announced in August.
    Mr. Neugebauer. You know one of the things that I think has 
been kind of interesting and obviously, many of us are ready to 
get the FHA reform bill passed and get to making FHA even more 
than it is today. But I think it is kind of interesting, we 
have had diminished interest in FHA, and now all of a sudden we 
have a bunch of folks who are in trouble and everybody is 
looking for someone to come in and just step in and fill some 
of those voids.
    My big concern here is that we do not want to diminish the 
solvency of FHA. I just want to be on the record and be very 
clear to you that as we are underwriting these loans, I hope we 
are learning lessons from the past here. And how we got into 
this dilemma was the fact that we were not appropriately 
underwriting many of these loans. And in many cases, the risk 
being taken far exceeded the potential return on that mortgage.
    So I'm hopeful that as you are looking at those, and 
certainly I think with the additional loan limits, that is 
going to open up some new avenues for you. But I think it's, we 
need to be very clear here that we have to get back to basics 
with housing. How we got in the housing jam today is that we 
got very creative in one way but we got very careless in 
another way.
    And I think it's more the carelessness than the creative. I 
am not opposed to creativity. But when you start not getting 
appraisals and not verifying people's income and their assets. 
And I have heard this term used, and I think it has been used a 
lot here lately, we are putting people in homes who ordinarily 
couldn't afford one, and we thought that was a good thing.
    Secretary Jackson. Right.
    Mr. Neugebauer. But what we do to people when we put them 
in a home that they can't afford is we set them up for failure. 
And so we have to be very careful here as we make policy in 
this Congress that we are not putting people in a home that 
they can't afford, but that we are giving people an 
opportunity. And when we start talking about downpayment 
assistance and where we are, basically putting people into a 
home that have no equity, no skin in the game if we would.
    I think we have to be very careful of that. The principle 
that most Americans grew up in is you save up money so that you 
can own a home, and until you do that you live in other forms 
of housing. And that's the reason you are the Secretary of 
Housing, that homeownership is one aspect of housing, but we 
have been talking about others.
    Which brings me to my question, what is the status, and we 
have heard a lot about other agencies of what their loan 
portfolios are. What does the FHA portfolio look like? What are 
your delinquency rates? What are your foreclosure rates and are 
you within your statutory requirement?
    Secretary Jackson. Right.
    Mr. Montgomery. Our foreclosure rate is a little less than 
2 percent. A lot of the problems that you are seeing in the 
subprime market you are not seeing within the FHA program. We, 
our delinquency rate is about 6 or 7 percent, but that also has 
a lot to do with the fact that FHA has excellent loss 
mitigation programs, which is a technical term for foreclosure 
prevention.
    The last thing that we want to do is foreclose on an FHA 
borrower, so we have various steps along the way when a 
borrower gets in trouble to prevent them from going to 
foreclosure. As a matter of fact, families who hit a rough spot 
and go through the program, 2 years later, 92 percent of them 
are still in their homes, and that is a good record, we think.
    Mr. Neugebauer. And as far as your reserve requirement in 
statutory, what is your number today?
    Mr. Montgomery. The capital reserve requirement is 2 
percent, we are at a little more than 6 percent, somewhere 
around $20 billion. But again, that is not to be confused with 
what the Credit Reform Act requires. Our long-term outlook is 
good using the capital reserve standard. But again, from the 
Credit Reform Act, the fact that we are taking in too many 
higher-risk loans, that is what threatens our solvency for this 
year.
    Mr. Neugebauer. And when you say you are taking too many, 
do you believe you are taking too many?
    Mr. Montgomery. Well, these are not the refinancings that 
are causing us to go more positive in our credit subsidy. Quite 
frankly, a lot of the conventional FHA refinancings that we are 
doing right now, which we have done 117,000 in the last 5 
months, have a decent amount of equity in it. Again, it is more 
borrowers, purchase borrowers who are using the seller-funded 
activity that are the higher-risk loans now.
    They have default rates, or rather claim rates 2\1/2\ times 
higher than those who don't have that type of assistance.
    Mr. Neugebauer. Thank you.
    The Chairman. If I may, the gentleman pursued a very useful 
line of questioning. And this is the second time, Commissioner, 
that you have noted a pessimism on the Credit Reform Act that 
does not appear to be based in the economic reality of your 
reserves. And I wonder whether you might be willing to work 
with us on a better appraisal.
    This sounds like a case where if we mark-to-market, it 
would go up rather than down. So I think maybe on a bipartisan 
basis, we might want to work with you to see, because this is 
the second time you have mentioned that the credit, and answer 
the question if you weren't--other. But it does look like the 
Credit Reform Act may be unduly restrictive and might in fact 
lead to an argument for increases when the economic reality 
doesn't require them.
    So I think that is something that if the gentleman from 
Texas is interested in, we will be working on. And I think that 
was very useful, thank you. The gentleman from North Carolina.
    Mr. Watt. Thank you, Mr. Chairman, and welcome Secretary 
Jackson. I just want to raise one line of questions, and then I 
am going to give you an opportunity to explain your overall 
plan here. But I want to raise the totality of the concerns 
about fair housing enforcement activities, and then have you 
kind of help us understand how this all fits together.
    If I am looking at the budget, we go from $50 million to 
$51 million for Fair Housing, $50 million to $65 million for 
Housing Counseling, and $33.5 million to zero for NCBI LISC 
enterprise. I assume those would be the three programs in which 
you would have the most impact on fair housing. I have 
information that suggests that 13 fair housing groups that were 
funded previously were not funded in the last round of Fair 
Housing Grants that were made and 26 Fair Housing Centers 
either have closed or are at risk of closing due to lack of 
funding.
    I have concerns about what, in the context of the 
Mississippi transfer of funds to the port, what plans you made 
for fair housing in that context. And then I have something 
that suggests, or confirms I guess, which you can refute if 
it's not the case, that HUD changed its Fair Housing Handbook 
to prohibit employees to say that a complaint, or prohibit the 
filing of anonymous complaints about housing. It has to be 
attributed to somebody now so that they can be identified and 
potentially retaliated against.
    I am just, I know you have a strong commitment to fair 
housing.
    Secretary Jackson. That is correct.
    Mr. Watt. So there must be something in this context that 
is a plan for aggressive fair housing enforcement. It is just 
escaping me.
    Secretary Jackson. Okay, I understand.
    Mr. Watt. Can you use the rest of my time to kind of 
explain what your vision is? And I see you have somebody who is 
working with you on that. So you all help me to understand what 
your plan is.
    Secretary Jackson. Thanks, Mr. Watt. I would like for Kim 
Kendrick, who is the Assistant Secretary for Fair Housing and 
Equal Opportunity to have a chance to address that issue.
    Mr. Watt. She is prettier than you and probably knows more 
about it too. So I am delighted to have her in.
    Secretary Jackson. I won't debate that with you.
    Ms. Kendrick. Good morning, sir. Well, let me address first 
the number of fair housing groups. You said 13 have lost their 
funding. That is probably correct. But one of the things that 
we did this year, what we have done for the last 3 years is we 
are now funding groups for 3-year cycles. So we have 45 groups 
that now have funding for 3 years instead of just having groups 
that are funded at 1 year.
    One of the problems with just funding groups for 1 year is 
that if they lose their funding then we lose the ability of 
those groups to enforce the Fair Housing Act across the 
country. So what we have decided to do with the money that we 
have available is to fund groups for 3-year cycles. That gives 
them the ability to stay in business for that number of years. 
As a result of that, because we do have a budget, we do 
unfortunately, lose some of those groups.
    Mr. Watt. We don't appropriate but for 1 year. How do you 
do that?
    Ms. Kendrick. It is paid for.
    Mr. Watt. So basically that means you have groups that are 
able to do fair housing enforcement. They have the expectation 
that they can do it for 3 years, but that last year they still 
are going to have some insecurity. And then parts of the 
country that don't have any groups doing fair housing 
enforcement for any years. So I still don't understand how that 
gives you a more effective plan.
    Ms. Kendrick. I don't think we have two States that, we 
have three States that don't have any fair housing laws right 
now. But we still have the Federal Fair Housing Act, which 
means that our Federal Fair Housing Act covers the entire 
Nation. So even though we may not have local groups on the 
ground, we have our own HUD groups on the ground there. So we 
have enforcement powers for all 50 States. We don't have any 
State where we don't have any enforcement power, so even though 
we may not have individual fair housing, independent fair 
housing groups, we do have a Federal presence in those States.
    Mr. Watt. I don't know where that comes in this budget 
then. We have a net reduction if I put all three of those 
categories together; where I would expect fair housing to be 
most involved, there is a net reduction of over $15 million.
    Secretary Jackson. Congressman, let me say this. When you 
talk about LISC enterprise that was not fair housing, that was 
an allocation made that, in fact, we were making grants to them 
to help build more affordable housing around the country. And 
Congress insisted that we do this on a competitive basis, and 
that is done on a competitive basis.
    And basically that is what you see.
    Mr. Watt. Well you can't compete for zero dollars here, 
though. I mean--
    Secretary Jackson. But that was not for fair housing.
    Mrs. Maloney. [presiding] The gentleman's time has expired 
and additional questions can be placed in writing.
    Congressman Capuano.
    Mr. Capuano. Thank you, Mr. Secretary for being here. Mr. 
Secretary, I want to start out by saying that I like some of 
the budget proposals you've had. I certainly like the increase 
in fair housing. I really like the increase, the proposed 
increase in housing counseling and downpayment grants and self-
help habitat. There are several things here that I like and 
support. But, of course, I'm not going to focus on that, 
because that's good job. Now let's move on to the stuff I don't 
like.
    On the CDBG block grants, you pointed out Palm Beach, 
Florida, as a potential city that maybe shouldn't qualify under 
your judgment, and that's fair. Do you plan on denying them 
CDBG block grant money this year?
    Secretary Jackson. No, I don't have the authority to do 
that.
    Mr. Capuano. So you have no discretion in that matter?
    Secretary Jackson. No.
    Mr. Capuano. So that because you don't like a few cities, 
you're now going to cut back 18 percent on every other city in 
America because you don't have the discretion that you think is 
right?
    Secretary Jackson. No. That's not what I'm saying. I said 
we have proposed legislation before you.
    Mr. Capuano. I understand that, but the legislation hasn't 
passed, and when it passes, that's fine. I'd like to--are there 
elderly that you don't like getting money as well, Section 202 
money?
    Secretary Jackson. No. We have demonstration programs that 
are going on where we're leveraging the money, and we think 
that all of those developments now are in full swing. I think 
we have about 250 Section 202s and we have about 202 Section 
811s in progress of being developed right now.
    Mr. Capuano. So all seniors and disabled people have 
appropriate and adequate housing in America?
    Secretary Jackson. Well, I don't think we're going to ever 
get to that point, Congressman.
    Mr. Capuano. I don't think so either. That's why I don't 
support a 26 percent and a 32 percent cut in those programs. 
Have we solved all the lead paint problems in America?
    Secretary Jackson. No we have not.
    Mr. Capuano. There's no lead paint anywhere?
    Secretary Jackson. No we have not.
    Mr. Capuano. But a 20 percent cut. Brownfields--all the 
brownfields in America are all cleaned up?
    Secretary Jackson. Well, we really feel that that's not 
really our responsibility, and I've said that on a number of 
occasions here before you.
    Mr. Capuano. So it's not our responsibility to make healthy 
neighborhoods?
    Secretary Jackson. No. I think that is one of the other 
agency's responsibility. Our responsibility is to provide 
decent, safe, and sanitary housing, and we're going to continue 
to do that.
    Mr. Capuano. That's fair enough. I don't agree with you, 
but I respect the difference of opinion. I want to move on 
because, I mean, we're going to have some differences of 
opinion on budgetary matters and priorities, and I understand 
that. But it's the lack of discretion and the ability of 
discretion that really troubles me, because I think that's 
really what it's all about. Once you get to a bottom line, it 
really does depend on your discretion and the discretion of the 
people who work for you. And I will tell you that the letter to 
the Governor of Mississippi was troubling to me. I just want to 
ask. When you say that you have little discretion--in your 
letter, you said you have little discretion--does that mean no 
discretion? Or does that mean little discretion?
    Secretary Jackson. I think the legislation was very clear. 
It said ``we shall.'' It didn't say ``we may.''
    Mr. Capuano. So that you don't have little discretion. You 
have no discretion?
    Secretary Jackson. Basically, no discretion.
    Mr. Capuano. All right. Because ``little discretion'' 
troubles me, because I always argue with people that when you 
have a little discretion, use it. And especially when you go on 
to say you're concerned that there may be significant unmet 
needs of affordable housing, which I agree with, but I'd like 
to know what is it that you think that is unmet in the region?
    Secretary Jackson. Well, I don't think that everything has 
been provided to low- and moderate-income people that should be 
provided for housing or infrastructure. So I totally agree with 
you. But had I had my d'ruthers, I probably would have said, 
sir, I don't think we should be using this money and I would 
not approve it. But I didn't have that kind of authority.
    Mr. Capuano. I appreciate that, but again, when I see the 
word ``little discretion,'' that means there's something. That 
means there's something you hang your hat on. And I would 
prefer, especially if I believe in something, if I have 
something to hang my hat on, unless I know I'm absolutely not 
going to win, I push for what I believe in, and if I lose in 
court or I lose later on, so be it. But if you really felt 
strongly about it that the people in that area had not been 
fairly met, their needs hadn't been met, I would have suggested 
that you should have done what you think is right and let the 
Governor of Mississippi chase us.
    Secretary Jackson. Well, Congressman, I would say that 
under normal circumstances, that would be the case. But when 
you ask your general counsel what is the authority that you 
have to authorize this and they tell you that clearly there is 
none, then you have to do exactly what they say.
    Mr. Capuano. Well, two things happen. Number one, I've had 
general counsel, and when the general counsel tells me that I 
can write a letter that says I have little discretion, that 
means my general counsel has told me I have something. And then 
I turn to my general counsel and say, well, thank you for your 
advice. I'm the boss. This is what we're going to do. And your 
general counsel says, okay, I understand. As long as I can 
defend you and I can't tell you you're breaking the law. And if 
your general counsel then quits the next day, well, then maybe 
you went a little too far.
    Secretary Jackson. Well, I think under normal 
circumstances, I would agree with you again. But when the 
legislation is very clear, and that's what they're there for is 
to interpret the legislation that you passed, and you all 
passed this legislation and that's the interpretation.
    Mr. Capuano. Then I would suggest that the next letter you 
write should clearly say, ``I have no discretion,'' as opposed 
to little discretion. But I also want to talk about the next 
batch of money. Now I will tell you that, you know, I have, 
hey, let's talk. I have some needs in the Boston harbor, and 
I'd love to expand it. Can we talk? Do you have any extra money 
that you have some discretion over that, you know, would help 
low- and moderate-income people? It would create jobs.
    Secretary Jackson. If you'll pass the legislation, we'll 
authorize it.
    Mr. Capuano. I would if you give me some money.
    Secretary Jackson. Well, we don't give money. You give us 
the money.
    Mr. Capuano. So if I do that with an earmark to Boston 
harbor, you're all set?
    Secretary Jackson. Well, if you pass it, yes.
    Mrs. Maloney. The gentleman's time has expired. Additional 
questions can be placed in writing. Congressman Clay.
    Mr. Clay. Thank you, Madam Chairwoman. Mr. Secretary, good 
morning.
    Secretary Jackson. Good morning.
    Mr. Clay. I visited New Orleans with my family in November 
of 2007, and the tourist area looks as if nothing had happened 
to it, and that part of the City was still beautiful. Then I 
toured the devastated areas of the City that was caused by the 
hurricane. I was shocked and appalled by the ghost town that I 
observed.
    Commercial streets had heavy traffic. However, the shopping 
centers were deserted. There were no grocery stores, no drug 
stores, and not too many schools were open. No Burger Kings, no 
McDonald's, no Kentucky Fried Chicken. Parking lots were 
overgrown with grass, and residential streets were deserted. 
Sometimes one house on a block was occupied. Sometimes one 
would go three blocks before seeing an occupied house. There 
were no children playing and very few children to be seen at 
all.
    What happened? I remember the speech that President Bush 
made at Jackson Square that promised to rebuild the City. What 
happened to all of the promises that he made? And why is over 
60 percent of the pre-hurricane population, why is it still not 
back in New Orleans? What has happened to the billions and 
billions of dollars that were poured into the City for its 
rebuilding?
    Secretary Jackson. Congressman, I think that's a fair 
question. What I can tell you is this: We allocated the money 
to the State of Louisiana. They set up the Louisiana Recovery 
Authority, which was to administer the money. President Bush 
made it clear to us that we were not to dictate what occurs in 
that State; that was the Governor's responsibility.
    To date, they hired an agency called--a group called ICF. 
They were to disburse money, help people get back in their 
homes. They have paid them an extraordinary amount of money, 
but we have not seen the results of what has been accomplished 
in that process. So I can't sit here and debate with you that 
as I travel back and forth to New Orleans, I can't debate with 
you that things are not where I want them to be, because 
they're not where I want them to be. I would think with the 
amount of money that we allocated to Louisiana, they should be 
further ahead than where they are.
    And I think that the present Governor, Governor Jindahl, 
will tell you that, that we--I won't say we--for some strange 
reason, the money was not used very well, and I'm not sure what 
kind of audit is being done at this point on the ICF to 
demonstrate the amount of money that they were paid compared to 
the assistance that they gave many of the residents in New 
Orleans.
    Now with the process of bringing people back home, I can't 
speak to everyone, but we have done everything in our power for 
those who were on subsidies, whether it was public housing or 
Section 8, to get them back. In fact, in many cases, we were 
paying 150 percent over market rate, some places 170 percent 
over market rate, because we want to do everything that we can 
in our power to get people back who want to come back home. I 
think that's the only right thing to do, and the President has 
instructed us to continue to do that.
    And that's why we did the survey at the request of 
Chairwoman Waters. She wanted a survey to see who wanted to 
come back home. We did the survey. And we had some of the 
people who basically were suing us as part of the survey team, 
because we wanted a balanced answer to the question.
    Mr. Clay. Is that indicative of why the President's point 
man left? I just read recently where he resigned from, you 
know, from being the liaison to the White House over the 
reconstruction of the Gulf Coast.
    Secretary Jackson. I can't tell you specifically, but I can 
say this about my friend, Don Powell. He was very frustrated in 
working with Louisiana, very frustrated.
    Mr. Clay. I can imagine. Can we move on to Mississippi? 
There's one issue--and my colleagues have brought up the issue 
of the money for building docks and dredging the harbor, but 
why was $25 million diverted to a project in northern 
Mississippi that was not in the affected area, and how do we 
account for these dollars?
    Secretary Jackson. I don't know exactly what you're 
speaking in reference to, but if you'll tell us, I will be 
happy to get--
    The Chairman. If the gentleman would yield, it is a Toyota 
plant in northern Mississippi that is getting some money.
    Secretary Jackson. I will get an answer. Do you have an 
answer? This is Nelson Bregon--
    Mr. Clay. Good morning.
    Secretary Jackson. --the General Assistant Secretary of 
Redevelopment and Planning.
    Mr. Clay. Good morning.
    Mr. Bregon. We do not have a proposal right now from the 
State of Mississippi to undertake any activity or project 
related to a Toyota plant. We have heard the same thing you 
have heard, but the State of Mississippi has not provided us 
with any information. They have not put a request through a 
disaster plan, which is what they have to do for us to look and 
concur with whether in fact this is an eligible activity and it 
meets the other program guidelines.
    The Chairman. If the gentleman would yield, I did have a 
meeting with Governor Barbour, and I think the Secretary may 
have indicated to Governor Barbour that it would make the 
Secretary's life a little easier if the Governor came and 
talked to us, and if so, I think that was a reasonable--
although it would have made all of our lives easier, frankly, 
if Governor Barbour had talked to our colleague, Bennie 
Thompson, and I think they finally did that, and I think the 
Governor was deficient in not having done that before.
    But when he spoke to me, he told me that as of now, the 
Toyota plant that people have talked about, that the funding 
there is going to come out of some State funds that were freed 
up by something else, and I think some of this conversation--I 
don't know what originally was planned there.
    But I think some of the conversation that has happened may 
have influenced the decision for it not to come out of these 
funds but to come out of the State funds. So as of now, 
apparently they are talking about State funds for this, 
although I am not convinced that was their original intention.
    Mr. Clay. Thank you, Mr. Chairman. I yield back.
    The Chairman. The gentleman from California.
    Mr. Baca. Thank you very much, Mr. Chairman. Mr. Secretary, 
San Bernardino and Riverside County, which is my area, has the 
highest foreclosure rate in the country. As you know, the 
committee is working on housing stimulus legislation to help 
stabilize the housing market. I have introduced legislation 
similar to a bill introduced by Chairman Dobbs in the Senate 
that establishes a family foreclosure rescue corporation that 
will buy mortgages from the originators and finance loans based 
on reduced value of properties, making the payments more 
manageable for the homeowners, and that's important to all of 
us to maintain that American dream and stabilize and be in your 
home.
    This proposal is to create a temporary institution to help 
stop the crisis. The concept has support from the conservative 
American Enterprise Institute and the liberal Center for 
American Progress. What are your thoughts? And would this be 
something you would support?
    Secretary Jackson. Congressman, I really think that if we 
can get FHA modernization with the high loan limits, at an 
acceptable loan limit, we can address the issues in San 
Bernardino the same as Compton, the same as the others. I 
really believe that if we can reconcile, as the chairman has 
tried to do with the Senate side, and I hope it comes to 
fruition this afternoon, we can help.
    It was clear when I was in California last week for the 
announcement of the loan limit at $729,000 that the Realtors 
were very pleased. And immediately they said that they can 
resolve many of the problems that you've just talked about if 
we keep the loan limit at an acceptable level. We don't have to 
have any other bills. If we just reconcile FHA modernization, 
we can address many of the issues that you are faced with.
    Mr. Baca. It's essential, because most of the people right 
now are, you know, facing this crisis, the drama of being 
displaced, being homeless, not having a place to go. And we 
need to take immediate action, because someone who is in a home 
will not have a home anymore. And when they get these payments, 
who knows what's going to happen? I just saw some comedian 
movie the other day of some foreclosures that were going on, 
and they're going around robbing banks or whatever just to 
survive. And I said, you know, we don't want to get into that 
kind of a crisis where many of our individuals are now looking 
at how do they stay in their home? How do they maintain their 
mortgage payments that they have? And we have one solution, and 
hopefully that's another one.
    Another question that I have is that the President's Fiscal 
Year 2009 budget contains an 18.3 percent cut in the CDBG 
program. What is the rationale for a cut of this magnitude?
    Secretary Jackson. Well, as I--
    Mr. Baca. Question number one.
    Secretary Jackson. As I said to the Congressman a few 
minutes ago, we believe that there's a proposal before you all 
to be able to zero in on those cities that are much in need of 
Community Development Block Grant funds. To date, we're still 
operating on a formula that was set in 1974. That formula today 
is not applicable to what is occurring in this country today.
    I mean, we have major cities in this country today that are 
suffering, whether it's Dayton, Ohio, whether it's Canton, 
whether it's Detroit, where if we could specifically point the 
money in the direction for 2 or 3 years to bring those cities 
back, it would be more positively--more positive--
    Mr. Baca. Isn't that saying that we need to increase it, 
not cut it, and redirect the money? I mean, that's what I'm 
hearing you say at one point. If we need to direct it to those 
cities that do need it, and if there are cities that don't, 
then we need to redirect that and put the additional funding 
that is there to assure that it's there for those cities that 
need it.
    Secretary Jackson. I don't disagree. I think we have the 
funding at the level that we have if we can direct it to the 
cities that are most in need. And only you can do that. Our 
proposal is--
    Mr. Baca. But directing it doesn't mean that we have a 
cutback. And we have a cutback right now of 18.3 percent, and 
then there also has been a total--and it comes out to 44.9 
percent since the year 2001. It seems like we continue to cut 
when there's still a need in other cities. I'm not saying that 
you're wrong and some of the cities don't need it. We need to 
redirect that. But increase the funding at a time when we're 
going into a recession, that we should be able to provide for 
many of the poor, the disadvantaged, or individuals who need 
this.
    Secretary Jackson. I'm not saying that you are wrong, 
Congressman. What I am saying--
    Mr. Baca. I'm glad you said that. I'm not wrong. Thank you.
    Secretary Jackson. But I am saying that I think that in the 
budget we have enough money to address the needs if we pass the 
proposed legislation that we've presented to you. Second of 
all, I guess I would disagree with you. I don't think we're 
going into a recession. I think the economy has--
    Mr. Baca. We're already in a recession. Okay. I'm sorry. I 
should have said we're already in a recession, not going into 
one. All right. Thank you for clarifying that.
    Secretary Jackson. Thank you.
    Mr. Baca. The next question that I have--
    The Chairman. Would the gentleman yield for a second? Mr. 
Secretary, let me see if I understand you. As I understand the 
budget, it proposes the cut. It doesn't say change the formula 
and reallocate. Are you saying that if we were to adopt your 
change in formula and then took the extra money that was saved 
by that and put it to the other--the remaining cities, that the 
Administration would approve that?
    Secretary Jackson. No, sir, that's not what I said. I 
said--
    The Chairman. In other words, what you're proposing is that 
we cut out the cities you don't think should get it, but that 
would not be of any benefit to the other cities?
    Secretary Jackson. No. I think what I'm saying is that I 
think we have enough money allocated in the--
    The Chairman. Right. But the argument that if we cut from 
them, you could reallocate it, that's not what you're arguing?
    Secretary Jackson. No.
    The Chairman. So that even if we cut out the cities that 
you think don't need it, that wouldn't bring another penny to 
the ones that would still be eligible, correct?
    Secretary Jackson. What I'm saying to you--
    The Chairman. No, is that yes or no? That your proposal is 
to cut out money from the cities that you think don't need it, 
but not to provide any more than the budget for the ones that 
are already in it?
    Secretary Jackson. No. I'm saying to you, Mr. Chairman, 
that we would specifically zero in on those cities that we see 
are extremely devastated by the downturn and try to--
    The Chairman. I didn't see that in--but you're reducing the 
amount of money by ``X'' percent. I assume that was based on 
the cities that you thought didn't deserve it. So then the 
question is, that money then is reduced. What's left? Where is 
there money to give to anybody else? How do you give more money 
to the other cities?
    Secretary Jackson. We think that if we have the $3 billion 
that's in the budget we can address this with the recalculation 
of the formula.
    Mr. Baca. But there's a cutback in the budget.
    The Chairman. Yes. You're cutting out the cities that you 
think don't deserve it, correct?
    Mr. Bregon. Mr. Chairman?
    The Chairman. Yes.
    Mr. Bregon. The CDBG program distributes the money with a 
formula.
    The Chairman. No, we know that, sir.
    Mr. Bregon. So it's not--
    The Chairman. Excuse me.
    Mr. Bregon. --like we are taking--
    The Chairman. Excuse me. Stop. We know that.
    Mr. Bregon. So--
    The Chairman. No. Stop.
    Mr. Bregon. But the proposed formula--
    The Chairman. Please stop, because you're evading the 
question, and I don't think people should leave false 
impressions. The budget request is 18 percent below. Now I 
assume that cut was based on the calculation that there are 
cities that didn't deserve it. If you reduce the amount by 
taking out from the cities that don't deserve it, that doesn't 
give you any ability to reallocate it. You didn't ask for an 
ability to reallocate based on need. You asked to cut out the 
ones that you thought weren't needy, but nothing in there goes 
to increase the ones that are needy.
    Mr. Bregon. Yes. I mean, the formula would give more monies 
to communities that have a greater need, and it would--
    The Chairman. But you'd cut the overall amount?
    Mr. Bregon. Yes.
    The Chairman. How did you decide to cut 18 percent?
    Mr. Bregon. We know that the gap--we know that when we look 
at the new formula, if we look at the--
    The Chairman. No. I asked--excuse me, sir. I asked you 
questions. I'd like answers.
    Mr. Bregon. $400 million.
    The Chairman. How did you arrive at that amount to cut, 
based on what calculation?
    Mr. Bregon. No. The four hundred--
    The Chairman. No. How did you decide to reduce? What 
calculation led you to decide you could save that money?
    Mr. Bregon. Well, that decision was made on a budget--
    The Chairman. Oh, by OMB? Okay. That's the answer.
    Mr. Bregon. The formula I'm talking about--
    The Chairman. So let's not--all right. Now we know where it 
is. OMB told you that's all you can have. Let's not dance 
around and try and put a dress on OMB's decision. I thank the 
gentleman.
    Mr. Baca. Thank you. Reclaiming my time. Thank you very 
much for pursuing that, and I think we still have a lot of work 
because there's a lot of need out there, and hopefully we can 
reallocate it to those areas.
    The next question I have concerns the fact that the 
homeless numbers are growing in the Central City Lutheran 
Mission homeless shelters in San Bernardino in my district. 
Homelessness, as you know, boundaries no country. Thousands of 
men and women and children live in cars, on streets, in 
shelters, and in parks. In fact, a new survey shows that a 39 
percent increase since the year 2003, the rise of foreclosures 
will ultimately increase the numbers.
    Even though you increased the homeless assistance grant, 
your proposed cuts in community development grants, public 
housing, elderly housing, disabled housing, you also eliminate 
rural housing grants, funding for the LISCs and Enterprise in 
Section 108 of the CDBG loans. So doesn't the rest of HUD's 
budget proposal jeopardize visibility of the housing serving 
over 1 million extremely-low-income families?
    Secretary Jackson. No, Congressman, I don't. I think that 
we have allocated monies based on the needs and from our 
assessment. And also, we have seen the reduction in the 
homeless population of 12 percent for the first time. We can 
calculate exactly why and what means it takes to get the people 
off the street. So I think that we have tried to be as fair. 
The budget is--
    Mr. Baca. What does it take to get the people off the 
streets?
    Secretary Jackson. Well, there are programs. The best 
example I can give you is the PATH program in Los Angeles, 
which starts basically by taking the person off the street, 
cleaning them up, then giving them the psychological and 
medical help that they need, putting them through a training 
program, and then looking for a job for many of them. They have 
been very, very successful, to the tune of about 85 percent 
over the last 5 years.
    And I toured that program with Governor Schwarzenegger, I 
guess it was about a year-and-a-half ago, maybe 2 years--
absolutely awed by the effect that it has had. I think it's 
being replicated throughout the State of California. In fact, 
Governor Schwarzenegger just allocated monies to certain parts 
of the State to strengthen the program.
    Mr. Baca. Well, it's to have the shelters, and I also 
believe that, you know, we should also implement the kind of 
programs--I know this is done at the local level--is to go 
around and picking up all of the homeless during a certain 
period of time, taking them to these shelters and assuring that 
those shelters are available, cleaning them up, checking them, 
doing whatever, and then putting them back instead of keeping 
them out on the streets. These are some of the things that 
maybe cities and others should implement as well in terms of a 
curfew to allow that there will be a bus or someone that can go 
around picking them up. But you have to have the transportation 
to get them to the shelters as well.
    I know that my time has expired. Thank you very much, Mr. 
Chairman.
    The Chairman. I thank the gentleman. The gentleman from New 
York.
    Mr. Meeks. Thank you, Mr. Chairman.
    The Chairman. Mr. Secretary, we have, as you can see, I 
think six more members. If you can give us another 30 or 40 
minutes, we'll finish up. We appreciate your indulgence.
    Mr. Meeks. It is good to see you, Mr. Secretary.
    Secretary Jackson. It is good to see you.
    Mr. Meeks. I have concerns about what's happening with 
FHIP, with the budget in FHIP, the Federal Housing Initiatives 
Program, because it seems to me what is happening there is a 
significant cut at the time when we least can afford it. From 
what I understand, the proposed budget is listed at $26 
million, and HUD has called for $6 million of that funding 
level for a study on housing discrimination, leaving an 
automatic programmatic FHIP funding at just $20 million, which 
is less than the President's budget for FHIP in Fiscal Year 
2008, which was $21.8 million.
    So how can the Administration propose, and how, you know, 
how are you dealing with this slashed funding for a program at 
HUD aimed at educating consumers? With the crisis that we're 
currently having right now with subprime mortgages and subprime 
lending, here's a program directly aimed at consumers and yet--
so that we can avoid this--but yet it looks like we're having 
the slashing of the FHIP program. Can you tell me what's 
happening there? Do you know?
    Secretary Jackson. Congressman, I'll let Ms. Kendrick, who 
is the Assistant Secretary for Fair Housing and Equal 
Opportunity address that.
    Ms. Kendrick. Good afternoon. This is the Fair Housing 
Initiatives Program. Is that the program?
    Mr. Meeks. Yes.
    Ms. Kendrick. The Fair Housing Initiatives Program, I 
talked a little bit about this with Congressman Watt. And one 
of the things that we're doing in this program to address, 
because we do have a budget and what we're trying to do is work 
within that budget, because that's the budget that we've been 
given. And so what we're doing with that budget is we are 
funding our fair housing groups for multiple years.
    We're also using some of the money, the $1 million, to have 
a national campaign to address some of the issues you're 
talking about right now. For example, this year in Fiscal Year 
2008, we have a $1 million media campaign to address predatory 
lending, fair lending issues across the Nation. So what we're 
doing is we're using our money more wisely so that we can 
address these issues across the Nation instead of just 
developing these issues with the expertise within one group.
    Mr. Meeks. But what I'm finding is that a quarter of the 
country's fair housing centers are closing as a result of the 
lack of funding, where you reach out to people, where the 
people are. The places where the people need the help, you 
know, those places are going away because of no money. They're 
shutting down in our communities.
    Ms. Kendrick. Well, actually, we have 104 organizations 
that we funded last year, and we were able to keep all of those 
groups except for about 13 of those groups. But what we did, 
because we could not fund those 13 groups, we actually funded 
another 39 groups for 3 years, so we don't have this issue with 
those groups for next year, so depending on appropriations, we 
will be able to fund those 39 groups for another year and then, 
depending on appropriations again, fund those exact same groups 
for another year.
    So we will have those groups working 3 years so they are 
working on the fair housing issues across the Nation instead of 
coming to HUD and writing applications for each of those years. 
So we think that we're using our money a little bit more 
smartly.
    Mr. Meeks. So you're telling me that the centers across the 
Nation, the information that I receive, they're not going to be 
closed? The communities that I'm starting to hear from that are 
saying that there are centers where they were going to for 
information, that they're going away, you're telling me that 
those are--they are not going away? They're still going to be 
there?
    Ms. Kendrick. No. Some of those centers will go away, and 
I'm sorry that they will be going away, because they provide 
important functions in this Nation. But we will now have groups 
who will have--they will have 3-year funding so we won't have 
to worry about those 39 organizations going away next year, nor 
will we have to worry about them going away the following year.
    Secretary Jackson. See, one of the problems, Congressman, 
and I think you've asked a very critical question, is 
continuity. We are trying to create continuity, to make sure 
that there is some constancy in this process, where before they 
were funded for 1 year and they might not have been funded the 
very next year, and they didn't render the services that they 
could have performed had we been doing it on a--
    Mr. Meeks. But that's why I'm concerned about the cutting, 
because then you could keep those that we have and still focus 
on the continuity if we weren't having the cutbacks that we're 
having, which is in fact a decrease in this budget, in this 
very special effort. If we would keep it funded at least at the 
level that it was and then we can talk about the continuity so 
we can move on. But if you're cutting funds, and you're cutting 
back to have less, then it seems to me that it seems as though 
it is not a priority of HUD then to move.
    And I understood, I heard your line of questioning before, 
so--but, you know, just to me, given the climate in which we 
currently are in, if ever there's a time to try to educate a 
consumer about fair housing, it is now.
    Ms. Kendrick. And I think, Congressman, that that's what we 
want to do. We want to use our money smarter. We don't want to 
have the 39 organizations that we funded for 3 years, we don't 
want them to close next year. We don't want them to close the 
year after. So, therefore, these groups will be having a 
constant presence in those communities.
    We also have our fair housing staff that works in all 50 
States that are also addressing fair housing issues. In 
addition, we have opened a fair lending division to address 
particularly the issues on discriminatory lending and predatory 
lending. So we have a whole unit at HUD right now that's 
working on these issues, handling high profile cases and cases 
that will have a nationwide impact, not just impacts in one 
little community.
    Mr. Meeks. I'm out of time.
    Secretary Jackson. And also, Congressman, which is very 
important, we have allocated for the 2009 budget $65 million 
for housing counseling, and they do the same thing. We have 
2,300 counseling centers around the country. And we've also 
allocated to NeighborWorks $180 million, who also does very 
much the same thing. So we're covering the Nation. There's just 
no question about it, and it's very important.
    Mr. Meeks. So you're--and I'm going to leave it alone, but 
you're telling me you're covering the Nation with less money?
    Secretary Jackson. No. I just said that--
    Mr. Meeks. Well, we're having cutbacks, and we have to 
eliminate now so that we can have continuity, so we have to 
have less money.
    Secretary Jackson. No, Congressman. I just said that we 
have gone from $50 million in Housing Counseling, which does 
the same thing in many cases that fair housing does, to $65 
million. We've gone from $120 million to NeighborWorks to $180 
million. So we're addressing it. You might see it over here, 
but we're addressing it over here, too.
    Mr. Meeks. Thank you.
    The Chairman. The gentleman from Massachusetts.
    Mr. Lynch. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary, for appearing before us today. I want to go back--I 
have a similar situation in my district as Mr. Baca was 
describing, although perhaps not to the degree. But I just had 
a foreclosure prevention workshop. I put it together in my 
district at a local high school, and we brought in some 
mortgage experts, some banks. I had 400 people show up. I 
didn't do a whole lot of outreach, but we had 400 people show 
up, and it indicated to me the size of the problem we have.
    A lot of the people who came to that foreclosure prevention 
workshop in my district were seniors, and a lot of them were 
veterans. But because of the gaps in the Administration's 
program, this HOPE NOW program and some others, a lot of these 
folks weren't helped, so they have nowhere to turn, and they 
are getting thrown out of their homes. A lot of them are 
seniors. Like I said, a lot of them are veterans who served 
this country very well, very proudly. And now I see in your 
budget, the President's budget, that we're going to cut out 
$195 million out of Section 202 housing, senior housing. And I 
just think that it's disgraceful, quite frankly.
    I just--here we have a tidal wave of need. These folks have 
been in their own homes. We're having an unprecedented collapse 
in the housing industry. These folks are being thrown out of 
their homes. It's a very emotional time for all these families, 
and the very people they've come to ask for help, the people 
who should be here, are people in government. This is why 
government exists, to help folks out when they don't have any 
power and no leverage.
    These folks, some of them were living in their houses for 
15 or 20 years, and now they're basically facing the street. 
And here we are, the President has a policy to basically, you 
know, pull the net out from under them. We're going to cut in 
this budget, we're going to cut $195 million out of a senior 
housing program that's the core of our senior housing program 
when you have a lot of people being forced out of their homes 
and who otherwise would be relying on this for the first time 
in their lives?
    And also I see this veterans housing piece. And, you know, 
I just came back from my 7th visit to Iraq and Afghanistan, and 
we're seeing our folks coming back there who deserve our help. 
A lot of them are on their 3rd, 4th, or 5th tour, so they are 
completely separated from their prior employment. They're going 
to need some help as well. We have a lot of folks who are World 
War II veterans, or veterans of Korea, Vietnam, or the Gulf 
War, who need this stuff as well. And we're supposed to be 
there and to provide some type of assistance. And I see cuts. I 
see cuts, and I see total inadequacy on the programs that are 
being maintained.
    And, sir, I just have to ask you, what were you thinking? 
What is the President thinking in putting this agenda out, 
given the facts that we have right now, given the reality that 
our people, our constituents, the people that you and I serve, 
given what they're facing? How can you come up with a straight 
face and present this budget to the United States Congress?
    Secretary Jackson. Congressman, I have to respectfully 
disagree with you. We have 210 units--210 projects in the 
pipeline right now for seniors, and I think we have about 215 
in the pipeline in Section 811 for veterans. Secondly, we have 
allocated $75 million, which will create 10,000 more vouchers 
for veterans as they come home. And we expect to continue to do 
that, because that was a commitment that we made to Veterans 
Affairs. We have not increased the number of vouchers that 
veterans get since 1993. For the first time in our budget, we 
have that. So we are addressing this. We have a number of 
Section 811/202 projects that are going on today that will 
address the need.
    Lastly, let me say this to you about anybody within your 
district who needs help at this point in time, we have raised 
the loan limit to $729,000. FHA is standing, willing, and ready 
to work with anyone. I've traveled around this country, and I 
agree with you. I just came out of California where there were 
1,000 people sitting there. And when I told them that the loan 
limit had been raised in California, they stood up, because 
probably 800 of those 1,000 people could probably make a loan 
there with FHA, and FHA secure, where before we passed the 
stimulus package. That was not the case. We could not deal with 
the market.
    So I am extremely sympathetic, but I think that the budget 
addresses that and I can say it with a straight face that we're 
leveraging the money with developers for the Sections 202 and 
811. If I had thought for one moment, because I am extremely 
partial toward senior citizens and veterans, so I would not in 
my mind do anything to hamper their abilities to come back into 
this country and have a decent, safe place to live after 
sacrificing so much for us.
    Mr. Lynch. Well, I have to tell you, that's not what I see 
in my district. I see on average at my senior, my Section 202 
housing developments, senior housing, I probably see between 
100 and 200 people on the waiting list, and those folks on that 
waiting list aren't getting any younger. And every once in a 
while, a unit might open up.
    Secretary Jackson. Well--
    Mr. Lynch. Let me just finish. And I just finished a tour 
with my veterans agents. In Massachusetts, every town has a 
veterans agent to watch out for them. And we're scrambling 
right now. We're putting folks in nursing homes and basically 
warehousing them just until we can find a suitable home for a 
lot of our veterans, and they, quite frankly, they deserve 
better than that. And I just don't see anything in this budget 
that offers them hope in the near term. And you might have 
stuff in the pipeline, but my folks can't live in a pipeline. 
They're looking for housing right now. And it's a crisis 
situation.
    And by the way, you know, I probably have in New England, 
probably $3- to $5 billion worth of variable loans that are 
going to reset. Thank God right now the rates are pretty low, 
but some of these mortgages, the spreads are pretty big on 
them, and it's going to push more people into foreclosure. So, 
you know, this is not--this wave is just beginning to hit, and 
I'm very, very troubled by the trend, and I'm also troubled by 
the information in this budget.
    Mr. Chairman, I know my time has expired.
    The Chairman. The gentleman from Georgia.
    Mr. Scott. Thank you very much, Mr. Chairman, and Mr. 
Secretary, welcome to the committee.
    Secretary Jackson. Thank you.
    Mr. Scott. I appreciate your service. Let me talk about a 
couple of things here. I want to talk about Section 8. I want 
to talk about a major concern of my constituents. I've just 
completed a series of town hall meetings in my district, you're 
familiar with my district. You've helped me on a number of 
occasions there, which I appreciate.
    But these complaints fall into two areas. The first area is 
that there's a lack of HUD inspections and compliance with 
inspection and code enforcement with Section 8 housing that is 
in my area.
    The other issue is that municipalities are circumventing 
the HUD concentration rules. In other words, residents in my 
district are alleging that certain local housing authorities 
are issuing Section 8 vouchers to eligible individuals but then 
are steering those voucher holders to other nearby communities. 
For example, the Atlanta Housing Authority would issue the 
voucher, but the individual would be steered into Clayton 
County or into South Fulton County.
    This presents a major issue. So we have two of them here, 
the steering of those into an area, and then when you get them 
in there, the folks are not keeping up their property. They're 
not forced to do it, and I have a serious problem. So I want to 
address that, and I need your help, somebody on your staff to 
assign to work with my staff so we can make sure this is right.
    Because I asked the question in the meeting, the same 
question I think you're going to ask me in a minute when you 
get to respond. Are you sure these are Section 8 housing? Or 
are they just low-income renters from absentee landowners? And 
they say unequivocally that they're Section 8. We've had a few 
meetings in the office and I came to that conclusion myself.
    Then the next question, is it a myth or is it a reality 
that as a result of all the tearing down of all of the housing 
projects inside the City of Atlanta that these folks are being 
dumped into nearby Clayton County and South Fulton County? And 
then of course the question of whether or not with this 
unfortunate mounting number of foreclosures, are private 
investors buying these up--houses for cheap, as they're doing, 
and then renting them out to low-income buyers?
    Regardless of what the complications of the matter happen 
to be, my constituents have a problem, and they are blaming the 
Federal Agency--HUD. We have to find out where your Section 8 
housing is, why and if they're being targeted out of the City 
of Atlanta into the suburban areas, and how we get a plan 
developed to go forward.
    Secondly, we need to find who is the front line entity for 
code enforcement. Because it is a terrible shame in my suburban 
district where people have invested their hard-earned money 
years back, come into a community, paid $300-, $400-, or 
$500,000 for homes, and because of no fault of their own, 
because Atlanta's tearing down their housing projects, folks 
have to go someplace, and they're being steered and dumped into 
an area, and the property not being kept up.
    So we have a major, major dilemma that I'd like for you to 
address on each of those three points if we could, unless you 
and I get a plan together where we can go and make sure that 
these houses are being kept up. Could you respond?
    Secretary Jackson. Yes. Congressman, I agree with you in 
the sense that I can't tell you specifically about your 
district. But what you've just described is similar to what was 
described to me by Commissioner Jack Johnson in Prince Georges 
County, Maryland, with the onset of many of the public housing 
developments being demolished here in the District, and people 
being shipped there.
    If that is the case, we will work with you wholeheartedly, 
because I don't believe that people should go into communities 
where people have worked hard--whether it be police officers, 
nurses, teachers, principals--to acquire their home, and then 
see people come in and not take care of the property. So I will 
tell you that I will have our person in Atlanta, who is the 
Acting Regional Director, work with you directly.
    And I have no compunction at all coming to deal with the 
Atlanta Housing Authority, because if they are doing what you 
allege they're doing, that is the wrong thing. I think they 
should make every effort before they send a person out into one 
of these communities that they have all of the proper training. 
One of the things that occurred when I was running the Dallas 
Housing Authority is I would not send people out there without 
having a 3- or 4-time counseling session with them for them to 
understand that they're going into a community that is 
stabilized, and they should understand their responsibility 
going into that community.
    Second of all, I think it's very important that you don't 
send people into the community who are going to sit there all 
day long and watch television. You hope that at least people 
will have a productive job and do something that will be 
positive and add something to the community. So you will get a 
great deal of sympathy from me on this process, because I think 
it's wrong to send people into communities if they're going to 
destroy the community.
    Mr. Scott. During my 2-week recess coming up, I want to set 
up a meeting in my district office to address this, so who is 
that person that you will assign to meet with us so we can 
really go at this problem?
    Secretary Jackson. She will be the acting region--Pat, what 
is it? Pat Hoban Moore.
    Mr. Scott. Pat?
    Secretary Jackson. Hoban, H-o-b-a-n Moore. And I will call 
her and tell her that she should get in touch with you.
    Mr. Scott. Okay. We'll follow up and I'll have my staff get 
in touch and we'll set a meeting up. Thank you, sir.
    The Chairman. The gentleman from Texas.
    Mr. Green. Thank you, Mr. Chairman. Thank you for hosting 
the hearing, and thank you, Mr. Secretary, for being here. I 
want to thank Mr. Montgomery, Mr. Secretary, in your presence. 
He has been very helpful, and I am confident that you have in 
him someone who has your best interests at heart.
    Mr. Secretary, I want to thank you for coming to Houston 
and announcing your initiative to fight discrimination in 
housing as it related to the Katrina evacuees.
    Secretary Jackson. Right.
    Mr. Green. I thought that was a good thing to do, and I 
believe that it has been helpful, which is a good segue into 
the FHIP program, the Fair Housing Initiative Program, that is 
being cut, $26 million proposed, $6 million of that will be cut 
from the program. Actually, I guess it's still a part of the 
budget, but it goes to a study, which means that in the final 
analysis, as it relates to FHIP, in my opinion, there is a cut.
    I know that the Assistant Secretary spoke well as she 
talked of how we can fund 39 programs for 36 months, 3 years, 
as opposed to 52 programs for 36 months, which would be 3 
years. And I guess that's where we have a difference in 
thought, because I'm hopeful that we can fund all of the 
programs, including the Greater Houston Fair Housing Center, 
which is not receiving any funding this year, would like to see 
that program get some funding.
    I think the $52 million funding level is one that would 
allow us to do the very same thing that the Assistant Secretary 
has referenced, but to do it with all of the programs, and that 
way make sure that we get all of the programs doing the thing 
that they do best, which is helping us with housing concerns. 
And especially the Fair Housing Initiative Program, which 
allows us to do testing. Testing is by far the best way for us 
to impact discrimination in housing.
    Secretary Jackson. That's correct.
    Mr. Green. There really is nothing else that comes close to 
testing. And we need to pour more of our money into testing 
because we get the empirical evidence to support litigation 
when necessary, negotiation most of the time, and a means by 
which we can resolve problems a good deal of the time.
    My understanding is that we had about 27,000 housing 
discrimination complaints, of which about 18,000 were resolved. 
And the resolutions, a good many of them, came from these 
centers that are funded. So my appeal to you is this: Let's try 
to fund all of them as opposed to fund some of them. It's 
difficult to select one child over another. It's difficult to 
select one of these centers over another. Let's try to fund all 
of them. And because I know where we will end up, I have one 
question. Here is the question. If we fund--if we fund to the 
$52 million level in Congress, will you be sending the money 
back?
    Secretary Jackson. No. I'm--let me say this to you. One 
thing I have learned from my encounter with the Financial 
Services Committee is that if you allocate monies and say you 
want it spent, I will spend the money. I mean, that's--see, I 
understand--I know the chairman once got upset with me when I 
told him that I understand Article I, Section 9, that says 
Congress is the authorizer and the appropriator. So I 
understand that when you authorize and appropriate, you want us 
to do what you said to do.
    Mr. Green. Well, I'm pleased to hear you say that, and I 
understand that OMB has an impact on the process. But I'm 
hopeful that you will continue to encourage an expansion, and 
if we can continue to fund, maybe at some point that we'll 
connect and get this done. But it is important that we fund 
these programs.
    Secretary Jackson. Thank you.
    Mr. Green. It is. And because time is of the essence, I 
will yield back the balance of my time. Thank you, Mr. 
Chairman.
    The Chairman. The gentleman from Missouri.
    Mr. Cleaver. Thank you, Mr. Chairman. Thank you for being 
here, Mr. Secretary.
    Secretary Jackson. Thank you.
    Mr. Cleaver. If we can go back a little to the Governor 
Barbour letter, as a mayor, you would probably expect me to go 
here, and I won't disappoint you. I have some concern that the 
CDBG funds that Governor Barbour used and reprogrammed, which 
you did not have the authority to direct or redirect.
    When money goes to the State, certainly in Missouri, the 
Class B and C cities are the ones who then competitively apply 
for those dollars through the State as opposed to HUD. And the 
first class cities in our State--St. Louis, Kansas City, 
Springfield--would get the direct CDBG grant. And then there 
are requirements to the CDBG grants, and one, and perhaps the 
most significant and the most irritating, is the requirement 
for a public hearing.
    And my concern is that when these dollars went directly to 
Governor Barbour, and then he reprogrammed it to some kind of 
port restoration program, that there was no public hearing, 
which in fact violates the rules of Community Development Block 
Grant. And so, I mean, if there was a public hearing, just so I 
can tell my former colleagues, many of whom are in town now for 
the winter meeting, that the HUD guidelines were in fact 
followed.
    Secretary Jackson. Let me say this to you, then I'll let 
Nelson Bregon go in depth. From my understanding with the 
legislation, no public meeting was required. I mean, we were 
told what to do in the legislation, and it was not a matter, 
Congressman, of whether we may. They said we shall. And I think 
if you want to further address--
    Mr. Bregon. Congressman, you are correct. There are 
citizens participation requirements in the CDBG program, and 
those also apply to the supplemental appropriation which the 
State of Mississippi receives. What the Secretary has the 
authority under the waiver authority of the supplemental 
appropriation was to perhaps be more flexible on the public 
hearing.
    There was a public hearing held in Mississippi, and usually 
what the State does is they give a 30-day notice to the 
citizens advertising a public hearing.
    Mr. Cleaver. Okay.
    Mr. Bregon. In this case, that 30-day notice did not occur, 
but they did hold a public hearing, and we have a certification 
to that effect.
    Mr. Cleaver. Yes. I went into Mississippi. I asked that 
very question. No one could answer it. People did say they were 
given some kind of a notice but that it was a very short 
notice, and that people in Mississippi who hold public office 
said they knew nothing about an actual hearing that took place. 
Am I correct?
    Mr. Bregon. The State has told us that they have had public 
hearings. We can definitely look into it. We can ask them for 
copies of the transcripts of those hearings and make those 
available to you.
    Mr. Cleaver. So individuals actually came to the public 
hearing?
    Mr. Bregon. I don't know whether individuals actually went 
to the public hearings, but they did advertise a public 
hearing. They held a public hearing. Many times, cities have 
public hearings and nobody shows up. So I'm not able to tell 
you--
    Mr. Cleaver. I have never--
    Mr. Bregon. And you know as a former mayor--
    Mr. Cleaver. In 8 years, you can't get in city hall when 
there's a CDBG public hearing. And so I'm stunned that in the 
aftermath of the worst storm in U.S. history, that same thing 
didn't happen if in fact people were notified.
    My concern is that $600 million was sent into Mississippi 
for one purpose. It ended up being used for another purpose. 
And the other issue is in the letter, the language says the 
additional $100 million brings the State of Mississippi's total 
financial obligation--it's irrelevant. I guess the concern is, 
the word ``additional.'' It says, ``This additional $100 
million.'' My understanding is that this additional $100 
million came out of Phase 2 of the Homeowners Assistance 
Program.
    Secretary Jackson. That's correct.
    Mr. Cleaver. Which means that it's not $100 million 
additionally.
    Secretary Jackson. Yes, it is, in the sense that what we 
were trying to do, and I think I explained it to the chairman, 
we were trying to zero in to make sure that we have enough 
money to make sure that low- and moderate-income and working 
families have an opportunity to rebuild, and even rentals, the 
people who own rental housing, have the ability to rebuild.
    I will say this to you, Congressman, as I said to the 
chairman. I'm not disagreeing with you. I just--I did not, as I 
told the Congressman, I don't have the authority.
    Mr. Cleaver. Yes.
    Secretary Jackson. If I had the authority or the 
flexibility, I probably would have said no. But I didn't have 
the authority or the flexibility based on what your General 
Counsel's office told us.
    Mr. Cleaver. Well, we need to change that, Mr. Secretary. I 
mean, you need that responsibility, and we need to change that. 
And also, I'm still not real sure, and I don't want to take up 
the time now, about the public hearing. I mean, something needs 
to be in your discretion--maybe it shouldn't be a discretion 
there, that a public hearing has to be held and they're untidy. 
I mean, you know how they go. I mean, I don't know a mayor in 
the country unless he's schizophrenic who is happy for a public 
hearing, but that's the way it happens.
    Secretary Jackson. That's true.
    Mr. Cleaver. Thank you, Mr. Chairman.
    The Chairman. I don't think you have to tell the Secretary 
about how sometimes people wish they didn't have to come to 
public hearings. I think he knows that.
    [Laughter]
    The Chairman. But let me just take 1 minute before I go to 
the gentleman from Minnesota. We had a request from the 
American Civil Liberties Union to submit a letter to the record 
in which they express their continuing concern that women who 
are the victims of domestic violence in public housing find 
themselves evicted under an, I think, inappropriate 
interpretation of the one strike rule. And I would ask you to 
take a look at that letter.
    Secretary Jackson. I sure will.
    The Chairman. And secondly, the National Association of 
Housing and Redevelopment Officials has submitted a letter 
which I ask unanimous consent to put in the record as well, 
which I think summarizes the views of many of us, at least on 
this side. NAHRO believes that the Administration's 2009 budget 
request, if adopted, would continue a pattern of large-scale 
disinvestment in our Nation's irreplaceable inventory of 
affordable housing and would undermine efforts to sustain 
vibrant communities.
    Let me just emphasize, because I know the gentleman from 
Missouri's questions are absolutely right, part of the problem 
here, Mr. Secretary, and I realize we didn't draft this 
legislation. The legislation was drafted in a prior Congress, 
and if it was up to us, and in the future, it will be drafted 
more clearly to give you that discretion, but part of the 
problem is it does appear that they didn't actually formally 
apply for a waiver, that there was a procedural problem there, 
and if the had actually been made to apply for the waiver 
rather than have it granted without formal application, the 
problems that the gentleman from Missouri talked about could 
have been addressed. So even with the little discretion that 
you had, more could have been done to make them go through the 
steps, and that would have at least focused some attention. And 
there we are.
    The gentleman from Minnesota.
    Mr. Ellison. Mr. Secretary, you were talking a little while 
ago about maintaining the neighborhoods and making sure they 
continue to look good and trying to avoid things that might 
promote people to misuse property, so I kind want to get your 
thinking around the zero funding for HOPE VI. Could you talk 
about how zeroing out HOPE VI will impact our public housing 
infrastructure?
    Secretary Jackson. I think, again Congressman, I think 
that's a fair question, and let me tell you my concern is right 
now we still have outstanding $1.4 billion in HOPE VI monies 
that has been outstanding for more than probably 8 to 10 years, 
some of it has been. What I have suggested is to recapture that 
money and allocate it out to those cities who have performed 
very well, and you have a city that has performed very well. So 
I would have no problems at all making sure that the money is 
used wisely.
    But we cannot continue to fund a program that has, out of 
the 260 or so that we've funded, only 75 have been completed 
since the beginning of the program in the early 1990's. That's 
my only concern. And I will tell you that I was part of the 
Committee that created--the Committee for Severely Distressed 
Public Housing--that created the HOPE VI program. And, in fact, 
I've said it on a number of occasions, we were in Chicago one 
night when we came up with that name, at least I did, Housing 
Opportunity for People Everywhere. It's what it stands for. So 
I believe in the program and I don't want anyone to think that 
I don't believe in the HOPE VI program. Where it has worked, it 
has worked well. You have two cities--Minneapolis and St. 
Paul--where it has worked well. But if we could get people to 
spend the money, I'd be the first to go.
    Mr. Ellison. If I may, Mr. Secretary, thank you for that 
explanation. I want you to know that I just talked with my 
folks in Minneapolis and we're looking at $223 million in 
capital needs that will become severely distressed if not 
addressed soon and the Glendale building, which I don't expect 
you to know, but you might, near Prospect Park, which is a 
Minneapolis area, there are 182 units on the verge of being 
dilapidated and eligible for HOPE VI. So I guess my thing is, I 
guess my question is, is withholding and zeroing out the money 
the only way to make those other jurisdictions spend the money. 
Do you understand my question? So if the problem is that they 
won't spend it, don't you have any carrots and sticks to make 
them do that rather than defund the program?
    Secretary Jackson. I really wish I had. If I had it, I'd 
use it today or yesterday, because I believe that where this 
program has worked well, there are still great needs. And I 
wouldn't doubt when you said that you have--I know a couple of 
your HOPE VI--I wouldn't doubt--I know the executive director. 
He's a very fine person. They'd use the money. But I don't have 
the ability to recapture the money, to redistribute the money. 
The money sits there, and in many cases it's been, the 
administrative fees have been used up and they can't bill.
    Mr. Ellison. Yes, but we still have the zero when it comes 
to the budget number and I just think that it's a drastic way 
to solve a problem of not making some of these other 
jurisdictions get after spending that money, you know what I 
mean? I think that what ends up happening is you punish the 
good doers and you don't really punish the bad doers because 
they're really not using the money anyway.
    Secretary Jackson. Now that, I won't disagree with you. 
Sometimes I have to sit and think about that situation and 
there are so many cities that I think could really--
    Mr. Ellison. What if you had some other tools, like you 
could--what if you had, for example, just go to those 
jurisdictions and say, you're not using this money. You might 
have it withdrawn if you don't use it rather than having--
because when you talk about a zero dollar figure, that impacts 
everybody.
    Secretary Jackson. Well, I will tell you we zero it out 
each year but you all put the money back in each year.
    Mr. Ellison. I know, but when you zero it out, I mean, what 
does that say? That makes a statement. I mean, a budget is a 
moral document in my opinion. It states what we care about as a 
society; what we think is important and also what we think is 
not important.
    Secretary Jackson. Well, I would disagree with you. I'm 
with you. I think it's very important but I have to use 
judgment and that's my judgment. I think that's where we 
disagree. We're not going to disagree about the importance of 
what the program produces. I can't argue that with you.
    Mr. Ellison. Well, Mr. Secretary, I would respectfully just 
ask if you could look at other ways of making people comply 
with the money; use the money they got rather than zeroing it 
out. Let me just ask another question if I have time. People in 
my area are concerned about rescinded funds being recycled into 
existing Section 8 contracts. I have some background I could 
share with you, but do you know what I'm talking about right 
now? Let me give you a little background because I didn't want 
to read this whole long paragraph if you already knew what I 
was talking about.
    Secretary Jackson. Is it the reserve fund?
    Mr. Ellison. Yes, I think it is the reserve fund. There 
have been a series of letters going back and forth between the 
public housing authorities and my district and Corva Corby and 
Tim Thompson and they're concerned locally about this concern 
because they're concerned about how HUD applies recision 
measures to funds, which are covered by section 8(b)(B). Does 
that give you any more clarification?
    Mr. Ozdinec. Good afternoon, Mr. Congressman.
    Mr. Ellison. Good afternoon, sir.
    Mr. Ozdinec. I'm Milan Ozdinec. I'm the Director of the 
Office of Public Housing and Voucher Programs at HUD.
    Mr. Ellison. Okay. Do you understand?
    Mr. Ozdinec. Yes, I believe you are talking about the net 
restricted assets.
    Mr. Ellison. Yes.
    Mr. Ozdinec. Currently there is about $2.2 billion that 
sits in Housing Authority's bank accounts as it relates to 
Section 8. These are monies that Congress has previously 
appropriated and housing authorities retain those funds to use 
for HAP payments and for administrative fees. Last year the 
Congress in the appropriations process used $723 million as an 
offset for housing authorities. For housing authorities that 
are above their cap, and the Secretary and Congresswoman 
Maloney talked a little earlier about the cap and how the 
budget process works as it relates to how the Congress 
appropriates the money. Well, in 2008, the Congress instructed 
us to use $723 million in an offset and take that money away, 
or offset that money with housing authorities that have net 
restricted assets that are called unusable. These are housing 
authorities that have leased up to their authorized amount so 
by law they cannot exceed that amount, but yet still have money 
in their bank accounts. So the instruction from the 
appropriations was to offset that money and force the housing 
authorities to use that money as opposed to new appropriations.
    The Chairman. Let me ask, was that part of what we did to 
hold some people harmless when we did the change in the funding 
formula?
    Mr. Ozdinec. Mr. Chairman, I'm not sure about holding 
people harmless. Of the $2.2--
    The Chairman. I mean, the authorities. There was some 
concern about the changes in the formula that we fought about 
several times and I thought there was some effort to use some 
of those funds so that nobody lost out as we went from one year 
to the next.
    Mr. Ozdinec. Indeed that's true, because these funds are 
unusable because--
    The Chairman. I mean, Dade County, for example, I think was 
our biggest issue about that.
    Mr. Ozdinec. Right, we've proposed in the last three 
budgets, I believe, to remove the caps, the authorized caps so 
that housing authorities could use that net restricted asset to 
indeed issue more vouchers; to go above what they were 
authorized. If housing authorities were good stewards with the 
money, if they stabilized their payment standards, improved 
their utility allowance, set a minimum rent at $10 or $20, they 
could indeed squeeze efficiencies out of their program and we 
wanted them by--
    The Chairman. Let me say to the gentleman it is a serious 
issue but it's one that we need to share with our--the 
appropriators have more to say about it than we do, and we will 
talk to them about it.
    Mr. Ozdinec. And we would love to have that conversation, 
Mr. Chairman.
    The Chairman. I thank you, Mr. Secretary. And we do all 
want to repeat that the chairwoman is very concerned about the 
figures on New Orleans--whether or not people want to return. 
We would hope to get those before the end of the week and then 
we will get back to you.
    [Whereupon, at 12:38 p.m., the hearing was adjourned.]
                            A P P E N D I X


 
                             March 11, 2008
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