[Senate Hearing 110-]
[From the U.S. Government Publishing Office]


 
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES 
                  APPROPRIATIONS FOR FISCAL YEAR 2009

                              ----------                              


                        THURSDAY, MARCH 13, 2008

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:30 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Patty Murray (chairman) presiding.
    Present: Senators Murray, Lautenberg, Bond, Specter, and 
Allard.

              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                        Office of the Secretary

STATEMENT OF HON. ALPHONSO JACKSON, SECRETARY
ACCOMPANIED BY:
        BRIAN MONTGOMERY, COMMISSIONER, FEDERAL HOUSING ADMINISTRATION
        PAULA BLUNT, GENERAL DEPUTY ASSISTANT SECRETARY, OFFICE OF 
            PUBLIC AND INDIAN HOUSING
        NELSON R. BREGON, GENERAL DEPUTY ASSISTANT SECRETARY, OFFICE OF 
            COMMUNITY PLANNING AND DEVELOPMENT
        MILAN M. OZDINEC, DEPUTY ASSISTANT SECRETARY FOR PUBLIC HOUSING 
            INVESTMENTS

               OPENING STATEMENT OF SENATOR PATTY MURRAY

    Senator Murray. This subcommittee will get to order, and I 
want to thank the Secretary for coming a half-hour early and I 
apologize. We had votes early this morning, so we had to move 
up the time. I know Senator Bond will be here as well, so I'll 
go ahead and start my opening statement and we'll start moving 
in that order so we can get to some questions in a few minutes.
    Today we are going to hear testimony from the Secretary of 
Housing and Urban Development, Alphonso Jackson. The principal 
mission of Secretary Jackson's agency is to address the housing 
needs of our most vulnerable citizens. My colleagues on this 
subcommittee and I take our responsibilities towards these 
citizens, as well as all taxpayers, very seriously. We believe 
it is our duty to protect and expand the opportunities for the 
neediest in our society, provide hope for people struggling to 
keep a roof over their heads, and redevelop blighted 
neighborhoods in partnership with our mayors and our Governors.
    But in recent months the mortgage crisis has really tested 
HUD's ability to keep people in their homes and carry out its 
mission, and its performance has been totally inadequate. The 
mortgage crisis threatens the housing and credit markets 
throughout the economy. Millions of families are at risk for 
foreclosure. The administration has the responsibility to do 
everything in its power to prevent this crisis from spinning 
further out of control. Yet its solutions, such as the FHA 
Secure program and the HOPE Now Alliance, will help just a few 
hundred thousand borrowers at most.
    Today, as I usually do, I reviewed in advance the formal 
testimony that Secretary Jackson submitted for this hearing. I 
have to say that I agree with some observations and I disagree 
with most of the rest. I agree wholeheartedly with the 
Secretary when he says that his 2009 budget request, quote, 
``is measured in more than dollars; it is measured in the lives 
we touch.'' But as I read the President's budget request for 
HUD, I'm very concerned because it doesn't touch nearly enough 
lives, and even while the number of people in need is growing 
quickly every day.
    This budget proposes to cut Housing for the Elderly by more 
than a third and it proposes to cut Housing for Persons with 
Disabilities by almost the same amount. The President's budget 
proposes to completely eliminate funding for the HOPE VI 
program, which tears down the most decrepit public housing 
facilities and replaces them with modern, safe mixed income 
housing.
    It proposes to cut the Public Housing Capital Fund by 
almost a fifth, which would reduce our efforts to keep public 
housing sanitary and safe for tenants. It proposes to slash 
Housing Counseling for distressed homeowners by 60 percent, 
even though there is an unprecedented demand for help. And its 
budget proposes to cut Community Development Block Grants by 18 
percent, more than $650 million, at a time when the economic 
downturn is forcing our cities and towns to slash their own 
local budgets and slow down their own community investments.
    The cuts to just these six programs total $1.6 billion. So 
yes, I agree with Secretary Jackson that we should measure this 
budget, as he says, by the lives we touch. But in the midst of 
a national housing crisis the effect of this budget will be to 
hurt those most in need, rather than to provide a helping hand 
to a more stable and secure future.
    Secretary Jackson will tell us in his opening statement 
that his budget proposal reflects America's compassion and 
commitment. Well, I think the American people feel compassion 
and they are committed to helping needy senior citizens, 
disabled, and people at risk of losing their homes. But that's 
exactly what this budget does not do. This budget reflects a 
lack of compassion and commitment demonstrated by the Bush 
Administration and its misguided budget priorities.
    Perhaps to me the most egregious statement in the 
Secretary's testimony is his observation that ``The President 
has been a strong proponent of funding for housing 
counseling,'' and that's a quote. The reality is the President 
has fought our efforts to increase this funding every step of 
the way. Almost every observer of the mortgage foreclosure 
crisis in both the public and the private sectors has 
emphasized the urgent need to expand housing counseling 
resources. At a time when the threat of foreclosure looms over 
the heads of literally millions of families, it is essential 
that we get the word out that they do have options. Too many 
families are ignoring their lender's calls. Too many families 
fear that nothing can be done, and too many families are left 
at home, hoping and praying that things will just work 
themselves out.
    This committee recognized that problem last year, even 
while the Bush administration complained about our efforts and 
issued veto threats. The fact is this committee on a bipartisan 
basis had to fight the administration even to provide an 
additional $180 million to expand housing counseling through 
the NeighborWorks America. When the committee added this money, 
we got letters from OMB that threatened to veto our 
appropriations bill, and those veto threats specifically cited 
the counseling money as an example of excessive and unnecessary 
spending.
    OMB Director Nussle told us that our expanded effort could, 
and I quote, ``produce adverse consequences, including 
interfering with existing efforts by private and public 
entities to address mortgage foreclosures.''
    And the White House opposition has continued since then. 
Just a few weeks ago, our majority leader introduced an 
amendment to the stimulus bill that would boost our housing 
counseling resources by another $200 million.
    Now, the reality is we are still not meeting the needs that 
are out there today. Even our historic funding increase last 
year will only reach 450,000 families when we know as many as 2 
million families need this help. But what was the White House's 
response to Senator Reid's proposal? Another veto threat, 
saying it's excessive funding.
    As I said earlier, the administration's 2009 budget request 
actually cuts total resources for Housing Counseling by more 
than 60 percent in the coming year. So I don't see how anyone 
can say the President has supported that effort. And this, as I 
said, is not just a partisan fight. In the last 7 years, this 
subcommittee has consistently had to rewrite the HUD budget to 
ensure that critical programs serving our citizens and 
communities are not slashed or dismantled. That's been true 
under the leadership of Senator Bond and of myself. And it is 
an example of the administration's lack of dedication to 
helping low-income and working families and its failure to 
invest in our communities.
    Now, an equally important responsibility of this 
subcommittee is to keep an eye on how our tax dollars are being 
spent, so I want to turn to that. Earlier I said I agreed with 
Secretary Jackson that his budget should be measured in the 
lives it touches. Unfortunately, allegations have surfaced 
recently that HUD funds have in fact touched the lives of some 
of Secretary Jackson's personal friends. We have read the 
allegations of cronyism by Secretary Jackson. We have read 
allegations that he inappropriately interfered in hiring and 
contracting, and we have read allegations that he tried to 
dictate the spending decisions of public housing authorities to 
benefit his acquaintances.
    I know Secretary Jackson has grown tired of reading those 
allegations questioning his character. I've grown tired of 
reading them, too. I believe they've taken a real toll on the 
morale of HUD employees and the credibility of HUD's 
leadership.
    Many of these allegations are currently being investigated 
by the HUD Inspector General and the Department of Justice. I 
want to point out that Secretary Jackson has been charged with 
absolutely nothing. Our system of governance and justice 
presumes innocence and Secretary Jackson is owed that 
presumption.
    That said, as part of this hearing I do intend to ask 
Secretary Jackson some direct questions regarding his conduct 
as Secretary, how he has administered funds provided by the 
subcommittee, and how he has interacted with other HUD staff 
whose salaries are paid for by this subcommittee. I expect the 
Secretary to provide direct answers. Our oversight 
responsibilities require no less and I appreciate the 
Secretary's cooperation.
    With that, I will turn to Senator Allard for his opening 
comments.

                   STATEMENT OF SENATOR WAYNE ALLARD

    Senator Allard. Madam Chairman, I want to thank you and 
Ranking Member Bond for providing a hearing to hear the fiscal 
year 2009 budget of the Department of Housing and Urban 
Development. I would also like to welcome Secretary Jackson to 
the subcommittee. Secretary Jackson, we appreciate you making 
time in your busy schedule to be here, especially since this is 
your second morning in a row testifying before the Senate.
    HUD has a long history of problems. For years it was the 
only Cabinet-level agency on GAO's high risk list. However, I 
want to take this opportunity to publicly commend Secretary 
Jackson and now Secretary Martinez, who was there before him, 
for his progress on this point. Last year the remaining HUD 
programs were removed from GAO's high risk list. This is a 
tremendous accomplishment and represents a great deal of work, 
and I would encourage Secretary Jackson, all the dedicated 
staff at HUD to remain focused on maintaining the positive 
direction.
    Certainly one of the biggest challenges HUD faces is the 
tight fiscal scenario. This is a constraint shared by nearly 
all agencies. No one denies that the budget for HUD or any 
other agency, for that matter, is insufficient to meet every 
single perceived need in this country. Increasingly, the 
definition of a need seems to be a bottomless well. I believe, 
though, that this budget strikes a reasonable balance at 
meeting the most pressing needs while still being responsible.
    I support the administration's decision to pursue fiscal 
responsibility for these times. It would be irresponsible to 
continue to overspend and leave a mounting debt for future 
generations.
    It is easy to look at the proposed HUD budget and complain 
that it lacks money. Certainly needs are great and in a perfect 
world we would have the money to meet all needs. However, the 
administration has had to make some very difficult choices, and 
the choices at HUD were, I'm sure, no exception in their 
difficulty. The budget is evidence of these difficult choices 
and I commend the administration for facing reality and not 
simply taking the easy way out.
    I want to reiterate a position that I have put forward at 
previous meetings, but I believe bears repeating: HUD's success 
as an agency is not defined by a budget number. More money does 
not necessarily mean more people are served or that people are 
served any better. This would seem to be especially true when 
reviewing the effectiveness of HUD's programs as determined by 
the PART analysis. Forty-five percent of HUD's funds are spent 
on programs we either know are failing to produce results or we 
have no way to tell whether they are producing any results.
    Why do we talk at such length about the dollars going to 
HUD, but fail to look at what is coming out the other side? I 
for one intend to keep looking at both sides of the equation.
    I appreciate the opportunity to do this, to do so at this 
hearing. Mr. Secretary, your testimony will be helpful to this 
subcommittee and it will be helpful as we begin the 
appropriation process.
    Thank you, and thank you, Madam Chairman.
    Senator Murray. Senator Lautenberg?

                STATEMENT OF SENATOR FRANK R. LAUTENBERG

    Senator Lautenberg. Thank you, Madam Chairman, for holding 
this hearing. We welcome Secretary Jackson here. We have to ask 
questions about why it is, when one of the most difficult 
things for young people growing up and ultimately winding up 
often in difficult situations out on our streets, while we 
spend over $3 billion each and every week on the war in Iraq 
and supplementals to support that in addition to that, and we 
turn our backs on the housing needs for people who lack the 
income to get themselves into normal routine housing.
    So these are tough times for families struggling to keep 
their homes now. Thousands of families may lose their homes 
because they were sold risky subprime mortgages. And instead of 
realizing the American dream, more than 35,000 households in 
New Jersey may have their homes taken away.
    That's why I co-sponsored the Foreclosure Prevention Act to 
help homeowners refinance their loans and to be able to afford 
their payments and keep in their homes. Our bill would also 
provide an additional $4 billion in community development block 
grants, known as CDBG, for local governments to purchase 
foreclosed properties and to renovate them to improve 
neighborhoods. CDBG invested more than $98 million into New 
Jersey's neighborhoods last year, creating vibrant and safe 
communities, new homes and shops, new jobs, and more 
opportunities, and a better atmosphere totally.
    But while we were trying to do our part in the Congress, 
the American people are not getting enough help from the other 
side of Pennsylvania Avenue, where the housing for President 
Bush is more than adequate. Despite the acknowledged success, 
President Bush wants to cut funding for CDBG by nearly $1 
billion, and he also wants to cut funding for public housing. 
New Jersey has more than 38,000 public housing units and the 
average income of those residents is $12,000 a year, $250 a 
week. How can you afford decent housing with that? You've got 
to have help from our Government. Without these public housing 
units, these men, women, and children would literally be out on 
the streets.
    We're spending billions and billions, almost into the 
trillions, on housing and restructuring Baghdad and other 
cities in Iraq, and yet we're willing to turn loose young 
people on the streets who are so demoralized by the places 
they're forced to live in. And yet the President's budget 
request is nearly $900 million short of what our housing 
authorities need to patch leaky roofs, fix heating systems, and 
to make other repairs to their residents' homes.
    Finally, Madam Chairman, the President's budget falls short 
when it comes to the section 8 program, a program that's worked 
very well over the years. Section 8 is the Federal Government's 
most important program for low-income families trying to find 
decent and safe homes in the private market by making up the 
difference between what the resident can afford to pay and the 
actual rent.
    Once again, the President's budget is more than $1 billion 
less than what America's families need to succeed in their 
goals for life. In New Jersey alone, these cuts would cost 
3,000 people their housing assistance and possibly their homes. 
Every child, every individual, and every family deserves a safe 
and affordable place to call home, and if the President wants 
to see America's homeowners and public housing residents 
through these tough economic times, his budget doesn't reflect 
that interest.
    I look forward to working with this committee to make sure 
our public housing residents, the section 8 program, and our 
housing authorities get the resources they need to succeed. Mr. 
Secretary, I hope that you'll communicate your concerns for 
public housing, for affordable housing, to the White House and 
to the President and let them know that this is something that 
must be done to help keep stability and reasonable fairness in 
our society.
    So we welcome you here, Mr. Secretary. But there are a lot 
of questions that are going to have to be answered.
    Thank you.
    Senator Murray. Thank you, Senator.
    Senator Specter, do you have an opening statement?

                   STATEMENT OF SENATOR ARLEN SPECTER

    Senator Specter. Yes. Thank you, Madam Chairman.
    I join the subcommittee in welcoming Secretary Jackson here 
today. He has a job of enormous importance, housing and urban 
development, which has a very, very heavy impact on my city. 
Public housing is a matter of the utmost importance as it seeks 
to provide decent accommodations for people, a very important 
factor, providing a home, providing a basis for family, for 
school.
    We have a very high crime rate in Pennsylvania, especially 
in Philadelphia, and adequate and affordable housing is very 
important. Beyond the overall concern I have for the housing 
issues, there has been a matter that's very contentious between 
the Department of Housing and Urban Development and the 
Philadelphia Housing Authority, something that the Secretary 
and I have discussed personally. There is an issue which could 
cost Philadelphia $50 million at the end of this month unless 
it is resolved.
    Senator Casey and I undertook to try to mediate the 
dispute, spent a little more than an hour on November 1, in my 
office, a very rancorous, cantankerous, bitter meeting, which 
perplexed me. And I asked the parties to go get it worked out, 
but if they didn't I would try again.
    On December 11, I sat down with them again for an hour, and 
there have been some very sharp accusations in that matter, 
which I hope we do not have to go into. What I want to do is I 
want to see the matter resolved. There is litigation now. It's 
costing the United States Government a lot of money to hire a 
lot of expensive lawyers, and taking up the time of the United 
States District Court for the Eastern District of Pennsylvania. 
And we're all on the same team.
    I was very much concerned to read in the Washington Post 
yesterday some e-mails which pertain to this matter between two 
of the Assistant Secretaries of HUD. This is what they said, 
``Would you like me to make his life less happy?''--I think 
referring to Carl Greene, the head of the Philadelphia Housing 
Authority. ``If so, how?'', Orlando J. Cabrera, then Assistant 
Secretary at the U.S. Department of Housing and Urban 
Development, wrote about Philadelphia Housing Director Carl 
Greene. Kim Kendrick, an Assistant Secretary who oversaw 
accessible housing responded, ``Take away all his Federal 
dollars.'' She typed symbols for a smiley face at the end of 
her January 2, 2007 note. Cabrera then wrote back a few minutes 
later, ``Let me look into that possibility.''
    The Philadelphia Housing Authority Director Greene says 
that this is in retaliation for his refusal to comply with a 
request, or really a demand, made by the Secretary, and there 
are alleged calls from the mayor.
    I hope we don't have to get into the details of it, and I 
hope we're able to get it worked out. But I have some important 
questions. I noticed in your statement, Mr. Secretary, that you 
will only take written questions. Well, that's not 
satisfactory. This is a subcommittee of the United States 
Senate, charged with putting up billions of dollars for your 
Department, and there are some very important questions that 
have to be answered. And I say that in a context that I don't 
like. You and I have worked very closely together, and when I 
wrote to you yesterday I scratched off ``Mr. Secretary'' and 
put ``Al'' and signed it ``Arlen'' because you and I have an Al 
and Arlen relationship.
    But when $50 million is at stake and the kind of 
allegations that are involved here, I hope we don't have to get 
to the bottom of it. What I hope is we can settle it.
    Thank you, Madam Chairman.
    Senator Murray. Senator Bond, I apologize for starting 
ahead of time with the votes going on. Do you want to make your 
opening statement?

            OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. I might as well, and begin by apologizing to 
you, my colleagues, the Secretary, and those here. This morning 
a wreck on North Capitol of a school bus put me about 45 
minutes behind. So this is the day when I could least afford to 
be 45 minutes behind, but I appreciate your going ahead, and 
again my sincere apologies.
    I thank you, Madam Chairman, for having this hearing. I 
believe Senator Murray has already noted this is likely the 
last time we will have the pleasure of receiving testimony from 
Al Jackson, the Secretary of HUD. I would say also, the 
Secretary's a good friend. We worked together in previous 
transmogrifications and I hope that he will be able to provide 
closure for a number of HUD programs, most especially public 
housing reform, lead-based paint, as well as providing 
demonstrated leadership on the subprime mortgage crisis.
    These are no small challenges that have to be resolved. 
Nevertheless, I hope that this hearing will assist us in 
crafting an appropriations bill that will assist in meeting at 
a minimum the housing and community development needs of the 
Nation.
    HUD continues to face a slew of funding and programmatic 
issues which are not likely to be resolved for a number of 
years into the future. This statement is not intended to 
detract from any accomplishments of the Secretary, but it is an 
honest assessment of HUD as it continues to have problems, many 
of which are long-term and, to be quite frank, require a lot 
more funding than the administration is willing to commit.
    Unfortunately, many of HUD's programs are part of a safety 
net to assist many low- and very low-income families with 
greatest needs, including seniors and persons with 
disabilities. In many cases these are persons who are unable to 
help themselves, through no fault of their own. These are the 
people we all want to help.
    Unfortunately, HUD's problems are not just a question of 
inadequate funding. I believe strongly that HUD does not have 
adequate staffing or expertise to ensure that its programs can 
work effectively. This coupled with the risk of many impending 
retirements from the senior ranks also means that HUD will have 
difficulty conducting the necessary oversight to prevent fraud, 
abuse, and negligence in its programs.
    On top of these problems, HUD has admitted that its IT 
systems are antiquated, underfunded, flat-out do not work as 
expected. That's a real hat trick, and that is a serious 
problem, which not only compounds HUD's program failures, but 
it further enhances the risk of fraud, abuse, and loss of 
program income.
    Nevertheless, I congratulate Senator Murray for her 
aggressive efforts to ensure that the final fiscal year 2008 
appropriations bill included language that provides a separate 
appropriation for each of HUD's primary offices. Frankly, I 
think that was an excellent move. With HUD's assistance and 
this information, our subcommittee should be able to make 
constructive funding decisions on staffing requirements once we 
understand which offices are overfunded and which are 
underfunded. The bottom line is that we need to help ensure 
that HUD staff is allocated to the office with the most needs, 
where they can provide the best expertise.
    I also expect HUD to make personnel recommendations for HUD 
offices consistent with staffing needs within the next 2 months 
to the House and Senate Committee on Appropriations.
    For another year, I must express extreme disappointment 
with the proposed administration HUD budget for fiscal year 
2009. For example, the administration has increased overall 
funding by some $600 million in fiscal year 2009, with an 
advanced appropriation of $400 million, for 2010 project-based 
assistance. Unfortunately, HUD has been short-changing its 
long-term rental contracts to preserve and pay existing section 
8 project-based needs and now we find ourselves in a $2.4 
billion hole. That's unacceptable. HUD's approach is to fund 
2009 needs through bits and pieces despite a legal obligation 
to fund fully all housing for the entire term of the contract, 
many of which begin in 2009, but stretch into 2010.
    Not only is this approach of dubious legality, but it 
creates a financial burden of $2.4 billion from 2009 into 2010 
without any clear way to pay for the obligation without short-
funding other important programs or possible shortfalls in 
long-term contracts.
    Public housing has its concerns, but I'm pleased that the 
Public Housing Operating Fund received an increase. I assume 
these funds will operate to assist PHAs in meeting their asset-
based management requirements. More funds are needed, but this 
is a start. Nevertheless, cutting the Public Housing Capital 
Fund by some $400 million is counterproductive, especially 
since public housing will only result in higher costs later by 
failing to address deteriorating needs, which will only get 
worse.
    The administration wrong-headedly continues to request the 
elimination of HOPE VI. While I would support certain reforms 
to expedite demolition and streamline construction with HOPE 
VI, I do support HOPE VI, which has transformed communities 
throughout the Nation, building mixed housing that has 
leveraged new investments, economic development, stable 
communities, from which hospitals, schools, and jobs have 
grown, often resulting in an increase in the tax base and a 
reduction in crime.
    I know, Mr. Secretary, you're quite familiar with Murphy 
Park and the King Louis Developments in St. Louis, which took 
some of the most uninhabitable, dangerous high rises and 
converted them into mixed use viable communities with decent 
housing on a mixed income basis.
    I think we should look at HUD through a gestalt process 
whereby we take public housing as a whole, with a goal to fix 
all PHA problems as a totality, and we're going to have to do 
that regardless of costs.
    Even more drastic, section 811 housing for persons with 
disabilities would be gutted, from $237 million in fiscal year 
2008 to a meager $65 million under the 2009 budget request. 
These are people who rely on this program and in many cases 
this housing represents the primary focus around which services 
and related programs are provided.
    Equally serious, the administration seeks significant 
reductions to the section 202 elderly housing program. In the 
section 202 program, the administration proposes a cut of $195 
million from a 2008 funding level of $730 million. People are 
getting older. Our population's getting older. The demand and 
the need for this housing are growing, not contracting.
    For the sake of time, I will highlight only several other 
important issues and leave other issues for later resolution. 
But in particular, HUD's FHA Single Family Mortgage Insurance 
program has always been a concern of mine, especially since 
homeownership appears to be a bigger priority to the 
administration than affordability and foreclosure. To some 
extent, I will tell you quite frankly I think the emphasis on 
homeownership helped to drive the foreclosure crisis we're now 
in. We were warned about it. Zero down payments, all these 
wonderful ideas to give people who couldn't afford housing the 
opportunity to get into the housing didn't do them any good 
when we put them in housing they couldn't afford, no matter how 
many gimmicks up front, whether it was seller financed Nehemiah 
or no down payments provisions.
    I think we all need to recognize that homeownership is a 
great goal, but it's not achievable for everyone. Rental 
housing has its place and in many cases it's more affordable 
and realistic for people and families in this country. I've 
lived in rental housing and there is nothing wrong with that if 
you are not in the position to buy a house and ruin your credit 
when you can't make the payments.
    In addition, I emphasize an agreement I have with FHA. 
Namely, FHA is not intended to bail out either homeowners or 
lenders regardless of negligence, predatory lending, or 
whatever. In other words, FHA is not permitted to refinance 
mortgages at mortgage costs that are above the current value of 
the property. FHA could obviously refinance mortgages at the 
actual appraised value and I would urge FHA to do so.
    My real concern here is the appraisal system is flawed and 
to some extent to blame for the housing crisis we're now 
facing. It's certainly a worthwhile discussion that may result 
in the need for legislation or State action. I'd be very 
interested to see how FHA plans to deal with appraisals.
    In particular, FHA needs to report quarterly to the House 
and Senate Committees on Appropriations on appraisal reforms. I 
do expect people guilty of fraud to be barred from the 
appraisal program, perhaps even including fines and jail 
sentences.
    If we do not see action and FHA losses actually increase, 
it might be time for a new FHA corporation or a new housing 
GSE. If that sounds harsh, just talk with families who've lost 
their homes.
    One of the major problems facing HUD and FHA is seller down 
payments. In general, this is where seller-funded nonprofits 
provide down payment assistance to families in order to qualify 
for FHA mortgage insurance. Unfortunately, this practice, while 
it's done well for the sellers, allowing them to sell the 
property, but if it results in inflated real estate prices and 
the risk of default then the FHA winds up holding the bag.
    In fact, the costs to the FHA have been dramatic. From 2000 
to 2004, these loans as a percentage of FHA's business grew 
from 6 to 30 percent, with approximately a 35 percent default 
rate. In fact, without some change in the law or HUD practice, 
seller down payments will cost as much as $1.4 billion in 
appropriations to pay for losses in 2009. Unfortunately, courts 
have not been receptive to HUD's attempt to ban the practice, 
justifying the most recent decision on procedural grounds.
    Finally, there is a local issue where three relevant 
Federal agencies are required to meet the basic requirements of 
legislation that identifies and makes unutilized and 
underutilized public lands available on preference to homeless 
providers. HUD conducts the initial analysis; Health and Human 
Services provides the application with a preference to any 
homeless provider. The biggest problem in Missouri is a certain 
homeless provider who repeatedly appears to have gotten 
priority for HUD excess properties. The provider has no 
relation to any other homeless provider in Missouri, never 
participated in the Federal homeless funding or local continuum 
of care. There has never been any comprehensive attempt to 
administer these facilities in a professional manner.
    Among the troubling issues, there have been reports of 
rapes committed by employees, theft, as well as a recent knife 
and chain saw attack by a psychiatric patient. Equally 
troubling, the Springfield facility is near a school, which 
clearly poses some risk to the students.
    Unfortunately, the Government appears unable to implement 
its responsibilities as to excess properties for the homeless. 
I know any major change would cause concern. My suggestion and 
compromise is not to eliminate the program, but to tie the 
program, this program, to homeless participants and the Federal 
continuum of care to ensure the excess property will be used 
effectively and appropriately.
    I initially supported the law because of the past bias 
against housing the homeless in almost any community. 
Nevertheless, not all Federal properties are appropriate. We 
almost ended up with a homeless shelter in St. Louis that was 
an obsolete Social Security building in the downtown district, 
which was going through revitalization, and if they made that 
the largest homeless shelter in the Nation it would have doomed 
the revitalization efforts of downtown St. Louis. That's only 
one example of property decisions made under a poorly 
administered law.
    Madam Chairman, I apologize for the length of my statement, 
but, as you may have noted, I have a lot of concerns dealing 
with HUD. I thank you and my colleagues and the Secretary for 
the indulgence.
    Senator Murray. Thank you very much, Senator.
    Secretary Jackson, if you will give your opening statement.

                   STATEMENT OF HON. ALPHONSO JACKSON

    Secretary Jackson. Thank you very much, Chairwoman Murray. 
And I want to thank Ranking Member Bond and the members of the 
committee for the opportunity to appear before you today.
    Madam Chairman, I am here to present the fiscal year 2009 
HUD budget. But before I do that, I want to thank you, Madam 
Chairman and the entire subcommittee, for priority given to FHA 
Modernization. We need the legislation right away. As you and 
your colleagues finish work on this important legislation, I 
should mention the administration's remaining priorities with 
respect to what's in the final bill.
    First, the legislation must allow HUD to address the recent 
explosion in loans where the seller provided buyers with down 
payment assistance and then add the price into the home. These 
loans have a foreclosure rate three times the norm. They are 
costing hard-working 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 our bread and 
butter customers, but a few modest changes will strengthen 
FHA's ability to offer safe alternates to home owners who want 
to refinance out of high-cost subprime loans and will actually 
allow us to reduce the premium for our potential home owners 
with low income.
    Such legislation would fit well into the general direction 
of the President's budget. We need actions that are positive, 
solutions to complex problems that confront home owners in the 
housing market, like FHA modernization and the Government-
sponsored enterprises.
    The proposed budget is fiscally sound, representing a 
historical investment of $38.5 billion for 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. This funding will be timely and 
on target for people served by this Department. We need this 
budget to maintain the current home ownership and to stimulate 
new purchases. It will help us expand our current effort.
    Let me put the budget in context. Last year President Bush 
and I introduced FHA Secure to help more Americans facing 
foreclosure refinance into safer, more secure FHA loans. We did 
this using the current regulatory authority. As we have been 
able to make the 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-insured mortgages. FHA Secure has 
proved to be extremely valuable.
    Madam Chairman, you should also know that only in 5 months, 
from September 2007 through January 2008, FHA has pumped more 
than $37.5 billion of much-needed mortgage activities into the 
housing market. More than $14.7 billion of that investment came 
from FHA Secure.
    FHA modernization would greatly assist our effort. As you 
know, the economic stimulus package provided a temporary 10-
month window. We announced the new loan limits last week when I 
was in California. This will help hundreds of thousands of 
people nationwide, perhaps as many as 250,000. But this is no 
substitute for the FHA modernization, which would raise 
appropriate loan limits permanently and also provide other 
important changes that would benefit American home owners.
    At a time of high foreclosure, FHA is helpful in other 
ways, such as a strong loan loss mitigation program which has 
saved hundreds of thousands of homes from going into 
foreclosure.
    In addition to FHA-related actions, we are also taking 
steps to ensure it is easy for home owners to understand the 
fine print when they do sign on the dotted line. That's why we 
are committed to RESPA reform. We're in the process of 
publishing a new Real Estate Settlement Procedure Act rule and 
hope it will bring much-needed transparency to the home buying 
process.
    Now, the budget will work in concert with other actions 
that we must take. For instance, the proposed budget 
appropriately increases funding for housing counseling. America 
needs the present request for $65 million in the budget for 
housing counseling. Those funds, in addition to the $180 
million provided to NeighborWorks, will serve our constituents 
very well.
    Many Americans are facing foreclosure. We know that we can 
stop these foreclosures and housing counseling works very well. 
This funding will help partially address the crisis and prevent 
such a situation in the future. It will get the job done. We 
want to make sure that housing counseling services get the 
funds they need, now and in the future, and can manage the 
funds they get.
    We also need to continue Government efforts to partner with 
the private sector to help build back the housing market. The 
Hope Now allowance is a good example. Hope Now is a private 
sector voluntary industry effort to address foreclosure through 
freezing mortgage interest rates and working directly with 
financially troubled home owners.
    I also commend a recent effort by six Hope Now Alliance 
members to provide a temporary pause for home owners in the 
foreclosure process. These actions provide direct assistance to 
those in need right now. These are the sort of responses that 
provide quick help for home owners.
    As in the past, Madam Chairman, the largest part of our 
budget is for affordable rental housing. Combined, this budget 
seeks more than $29 billion for the rental assistance program, 
which is expected to help more than 4.8 million households. We 
are mindful of the continuing need for more affordable rental 
housing. Especially low- and middle-income workers still find 
themselves priced out of the real estate market. We need to 
maintain the units currently available and expand their 
numbers. This budget will help us do that.
    Finally, 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 that process. Our budget once 
again seeks an increase for homeless programs to continue this 
good work.

                           PREPARED STATEMENT

    Madam 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 of our 
Nation's veterans. In this proposed budget there is a request 
for $75 million for our Veterans Affairs supportive housing 
program. Prior to 2008, this program has 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 of approximately 20,000 homeless veterans to be 
able to be served through social service and housing.
    Overall, I believe that this is a good budget and I look 
forward to working with you to carry out this. Thank you very 
much.
    [The statement follows:]
              Prepared Statement of Hon. Alphonso Jackson
                              introduction
    Thank you, Chairwoman Murray, Ranking Member Bond, and the members 
of the subcommittee for this opportunity to appear today.
    Madam Chairwoman, the budget for the Department of Housing and 
Urban Development (HUD) represents an investment in the American people 
by the American people. This investment is measured in more than 
dollars. It is measured in the lives we touch, whether in creating and 
protecting sustainable homeownership, preserving affordable rental 
housing, helping the homeless, or revitalizing our cities.
    The budget reflects America's compassion and commitment. The 
President's budget will ensure housing assistance for those in need, 
preserve and promote homeownership by addressing subprime mortgages, 
strengthen communities by sustaining homeownership gains, make further 
progress towards ending chronic homelessness, and continue the trend of 
improving HUD's management and performance.
    Almost every American is touched by our programs, directly or 
indirectly. And there are few things more personal or cherished as the 
house or apartment where we live, watch our children grow up, and where 
we grow old. Our budget is about promoting new homeownership and making 
the American dream possible. The budget is about protecting families 
already in homes. It is about expanding affordable rental housing. It 
extends funding and services to those in need, including the disabled, 
veterans, the homeless, people with HIV/AIDS, and elderly and disabled 
people affected by hurricanes Katrina and Rita. Further, it continues 
to support and encourage community growth and revitalization.
    I believe we have a good budget. It is fiscally sound, supports our 
mission, and fits in well with the overall vision for the President's 
entire fiscal year request. My Department would receive an historic 
investment, $38.5 billion. This is an increase of more than $3 billion, 
or 9 percent, over last year's proposal. The budget is almost $1 
billion more than our current budget authority.
    Let me break this down in more detail.
                      ensuring housing assistance
    I am pleased that the budget strongly ensures housing assistance 
for those in need. As in the past, the largest part of our budget is 
for affordable rental housing. Combined, this budget seeks more than 
$29 billion for our rental assistance programs which we expect will 
help more than 4.8 million households. We are mindful of the continued 
need for more affordable rental housing, especially as some low-and-
middle-income workers find themselves priced out of the real estate 
market in many cities. We need to maintain the units currently 
available and this budget will help us do that.
    The budget increases primary housing programs by providing $7 
billion to renew all project-based rental contracts and $400 million 
for an advance appropriation to bridge renewal funding into 2010. This 
will help provide housing assistance for nearly 1.3 million low-income 
tenants.
    We also increase housing choice vouchers, reaching over 2 million 
low-income families, while removing the cap on the number of housing 
units that Public Housing Authorities may assist.
    The budget also supports public housing operations with a request 
for $4.3 billion, the highest proposed funding level in history. This 
will cover the necessary operating expenses for 1.2 million public 
housing units.
    The proposed budget also seeks $300 million for persons living with 
HIV/AIDS. This funding would provide housing and care for 70,500 
people.
    The proposed budget also contains $3 billion in Community 
Development Block Grant (CDBG) funding for States and local 
governments. We have once again asked Congress to revise the outdated 
funding formula for this program. With appropriate revisions, we can 
distribute resources more efficiently and fairly, making this funding 
more effective and helpful.
    Madam Chairwoman, let me also add some comments about the recovery 
effort from Hurricanes Katrina, Rita, and Wilma. The disaster was 
unprecedented. Recovery will take many years. We have been deeply 
involved in these recovery efforts.
    You should know that HUD has funds available of nearly $20 billion 
throughout the gulf coast region to assist in recovery. States have 
spent approximately $8.5 billion to date. So far, more than 110,000 
homeowners in Louisiana and Mississippi have received financial 
assistance from HUD. We know that there is more to do--much more. We 
have learned much and worked through some enormous difficulties. But 
progress is noticeable.
    The American people should be proud of their investment and their 
compassion. If anyone wants to see America's heart, they should go to 
the gulf coast, where so many people have given generously of their 
time, their love, their patience, and their courage.
    The gulf coast is coming back, and one important reason is a 
fundamentally sound approach to recovery.
    When Hurricanes Katrina, Rita, and Wilma devastated the gulf coast, 
many of our most vulnerable citizens lost the only homes they had 
known. We recognized last year that some of those families affected by 
the storm needed additional time to recover, which is why the 
administration transferred the responsibility for housing these 
families from Federal Emergency Management Agency (FEMA) to HUD under 
the Disaster Housing Assistance Program (DHAP) and extended Government 
housing assistance another 18 months to 30,000 families.
    The President is also requesting $39 million to ensure that the 
elderly and disabled families displaced by the 2005 gulf coast 
hurricanes remain protected at the conclusion of DHAP. These Disaster 
Displacement Assistance vouchers will provide permanent affordable 
housing to eligible elderly and disabled families, while the remaining 
storm victims who are not on fixed incomes continue on the path to 
self-sufficiency.
    The Department will administer these vouchers as part of the 
section 8 Housing Choice Voucher Program. We will make rental 
assistance payments on behalf of these families, whether they have 
relocated or returned home.
                 preserving and promoting homeownership
    Promoting homeownership remains one of the central goals of this 
administration. We have to get the housing market back on track. We 
know that homeownership is good for families, the community, the 
Nation, and the world. Homeownership equals empowerment, wealth 
creation, independence, and fulfillment of the American Dream. It gives 
the family a stake in the community. Homeownership is a source of 
pride. It is particularly important for America's minority communities, 
which historically have lower rates of homeownership.
    Clearly, the housing crisis is a powerful challenge. After the 
unprecedented, historic gains in homeownership between the start of the 
decade and 2005, there has been a downward trend in homeownership. The 
troubling rates of foreclosure and other housing indices reveal more 
than a statistical drop or figurative decline. They tell us of families 
losing their homes, of people losing their investments, and of dreams 
stolen away.
    The causes are many. But the subprime situation is often the 
reason. But not all subprime loans are bad. Subprime loans broadened 
the availability of credit and led to housing investment for those who 
previously had less than perfect credit. And the majority of subprime 
loans are still being paid on time. About 20 percent of subprime loans 
are problematic. This means that many families cannot afford their 
subprime loans. Some families are on the edge of a financial abyss. The 
rapid rate of foreclosure threatens to continue unless appropriate 
actions are taken.
    This budget will help HUD in its efforts to address the housing 
crisis. It will give us the tools we need to continue our work. We must 
reverse the downward trend in housing indices and homeownership. We 
must help homeowners retain their homes. We must also look to the 
future because we must increase the number of families who own their 
own homes. And we must retain the sizable increase in minority 
homeownership. As you may recall, in 2002, the President challenged the 
Nation to create 5.5 million new minority homeowners by the end of this 
decade. And we have made substantial progress: 3 million more minority 
families have become homeowners since 2002. We must build on that 
progress.
    Of course, the President's stimulus package will help. I'm grateful 
Congress has given this package its support. 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.
    We also need the President's request for $65 million in this budget 
for housing counseling. Why? Well, we have learned that housing 
counseling makes a powerful difference in homeownership and foreclosure 
avoidance. You see, many of the failed loans were a surprise because 
the homeowner didn't read the fine print and didn't understand the 
contract. Housing counselors could have helped the homeowner gain a 
better perspective about affordability and balanced expectations. 
Families must buy homes they can afford. They must understand the 
contracts--have an especially clear idea of the features of financing 
and the ramifications of resets, and the terms and the timelines. 
Prospective homeowners must have a prudent mortgage, not a ``suicide 
loan.'' We must remove the mystery, confusion, and vagueness from the 
process. There must be full disclosure, understandable information, and 
a transparent process.
    That's why we need housing counselors to be fully engaged in the 
process. Housing counselors are an important line of defense against 
foreclosure. They can enlighten homeowners and help prospective owners 
determine the affordability and appropriateness of a mortgage. They can 
explain the contract and answer questions.
    The President has been a strong proponent of funding for housing 
counseling, and has worked with you to more than double the funding for 
housing counselors since the start of this administration. Now, given 
the magnitude of the crisis we face, it is important to expand funding 
for housing counseling. The President's request in this area is 
paramount to prevent future foreclosures.
    These funds, in addition to the President's request of $180 million 
for the Neighborhood Reinvestment Corporation, provide great services 
to those in need. And we now know that spending in this area is a sound 
investment, saving the Nation from expenses related to foreclosures, 
lost revenues, slowdowns in business spending and new housing 
construction, and declining home values.
    The administration is also taking steps to ensure it isn't as hard 
for homeowners to read the fine print when they do sign on the dotted 
line. That's why we are committed to reform of the Real Estate 
Settlement Procedures Act (RESPA). We hope to publish a new RESPA rule 
in the coming days. Our goal is to bring much needed transparency to 
the home-buying process.
      strengthening communities by sustaining homeownership gains
    The President has also requested a substantial increase of $263 
million for our HOME program. This would bring the funding level up to 
nearly $2 billion for the Nation's largest block grant program 
specifically designed to produce affordable housing. This request 
includes $50 million for the American Dream Downpayment Initiative, 
which provides flexible housing assistance, and increases affordable 
housing and minority homeownership. Since the inception of the HOME 
program 16 years ago, almost 812,000 units of affordable housing have 
been created.
    We also need to support other efforts to maintain current 
homeownership and stimulate new purchases. In August 2007, the 
President and I introduced an effort, FHASecure, to help more Americans 
facing foreclosure refinance into a safer, more secure Federal Housing 
Administration (FHA) loan. We did this using current regulatory and I 
am pleased to report that the program is helping many families avoid 
foreclosure. There has been a noticeable increase in the number of 
closings with FHA. Two months ago, there were 2,500 closings a month 
with FHA. Now, there are 4,500 closings a week! By year's end, we 
expect FHA will be able to help more than 300,000 families refinance 
into affordable FHA-insured mortgages.
    Madam Chairwoman, you should also know that FHA has mailed letters 
to hundreds of thousands of at-risk homeowners to urge them to 
refinance with safer, more affordable FHA-backed mortgages. These 
letters are being sent to homeowners who already have or soon will 
confront the first reset of their adjustable rate mortgage, and are 
currently living in locations subject to FHA loan limits. We will be 
sending these letters out to about 850,000 at-risk homeowners.
    But we could do so much more with legislation to modernize the FHA. 
Congress needs to quickly complete work on a bill that will immediately 
give us authority to expand FHA's ability to serve the very type of 
borrowers who were lured into high-cost, high-risk loans. We need to 
make the minimum down payment more flexible, create a fairer insurance 
premium structure, and permanently increase FHA's loan limits. This 
will allow more families to use FHA, perhaps hundreds of thousands of 
families. We need FHA modernization as soon as possible. Every day of 
delay places qualifying homeowners at unnecessary risk. Our estimates 
indicate that FHA modernization could help as many as 250,000 more 
families by the end of 2008.
    We asked for this bill 2 years ago to help us avoid the mortgage 
crisis. But now we need it to help address the crisis.
    I am also pleased that the mortgage industry has stepped forward to 
help. Treasury Secretary Paulson and I have worked closely with the 
mortgage industry to address the housing crisis in another way: enlist 
proactive industry cooperation. The industry worked with the 
administration to develop a program called the HOPE NOW Alliance to 
help homeowners at risk of foreclosure. The Alliance has implemented a 
plan that could help up to 1.2 million homeowners avoid foreclosure 
over the next 2 years by providing systematic relief that includes 
modifying or refinancing existing loans, moving borrowers into 
FHASecure loans, and implementing a 5-year freeze on interest rate 
resets for subprime loans. The industry has already assisted 370,000 
homeowners. HOPE NOW has contacted more than half a million borrowers 
in the second half of 2007.
    There are other actions that will help. So, you'll see the budget 
has a sharp increase for our Self-Help Homeownership Opportunity 
Program (SHOP) that works with organizations like Habitat for Humanity 
and others to build housing through sweat equity.
    Fair housing practices are an important aspect of homeownership. 
This year marks the 40th anniversary of passage of the Fair Housing 
Act. Our budget provides $51 million to protect the right of all 
Americans to be free from housing discrimination based on race, 
religion, gender, sexual orientation, family status, or disability. 
This is an increase of $1 million over the current appropriated level.
    I also hope you will notice our new Fair Lending Division. This 
office will examine questionable mortgage practices and investment 
complaints from homebuyers. It is an important addition--a new way to 
directly address unfair practices.
    This new division has already made an impact. Recently, HUD awarded 
grants totaling approximately $1 million for the development of 
strategies to address lending discrimination. These grants were awarded 
to State agencies in Ohio, Massachusetts, Colorado, and Pennsylvania, 
States with some of the highest rates of foreclosure in the Nation. The 
agencies in these four States are developing ``best practices'' for 
intake procedures, investigation techniques, and education and outreach 
activities for their mortgage lending enforcement programs. These 
``best practices'' will be made available to all State and local 
agencies in the Fair Housing Assistance Program (FHAP).
                      ending chronic homelessness
    And the homeless must not be forgotten. We are making strides in 
reducing chronic homelessness with our ``continuum of care'' approach. 
We are working to provide assistance across the entire spectrum of 
homelessness. This continuum of care is vital because homelessness is a 
complex, difficult, multi-dimensional problem, both for those who are 
homeless and for those who are working to meet the needs of the 
homeless.
    Our national effort to end homelessness has been steadfast, with 
strong commitment and investment. Since 2001, HUD has awarded 
approximately $10 billion in funding to support the housing and service 
needs of the homeless.
    We are working especially hard to stop the revolving door for the 
chronically homeless. Early on in this administration, President Bush 
set a goal to end chronic homelessness in America. If we are to be 
successful, we must help break a cycle of circumstances and behaviors 
that consistently place the chronically homeless on the streets.
    And there is evidence that we are making progress. The investment 
by HUD and local communities is working. In November, HUD announced 
that, across the country, local communities saw a nearly 12 percent 
drop in the number of individuals who literally call the streets their 
home, nearly 20,000 fewer persons living on our streets. This was good 
news. It shows that the hard work of thousands of people is paying off, 
that our efforts can make a powerful, positive difference.
    Of course, we still have a long way to go before ending chronic 
homelessness. There are still people living on the streets, many of 
them are mentally ill, addicted to alcohol and/or drugs, or physically 
disabled. These are the most vulnerable among us, the hardest-to-house 
and the hardest-to-serve. The chronically homeless are people who are 
homeless for more than a year or who continue to cycle back into 
homelessness. They are people who need serious, sustained assistance to 
overcome their homelessness.
    Madam Chairwoman, I know you are mindful of the need to help our 
Nation's homeless veterans. Americans are deeply, profoundly grateful 
for the service and sacrifice of our Nation's veterans. In the proposed 
budget, there is a request for $75 million for our Veterans Affairs 
Supportive Housing Program (VASH). Prior to fiscal year 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, bringing the total to approximately 20,000 homeless veterans 
being served through housing and social services and double the number 
of available housing vouchers.
          continuing hud's improved management and performance
    Finally, I would like to discuss the management of the Department. 
For the first time since 1994, the Government Accountability Office 
(GAO) removed HUD's single-family housing mortgage insurance and rental 
housing assistance programs from the list of High-Risk Federal 
programs. I am very proud of that fact.
    I am also very pleased that HUD achieved a clean opinion in its 
2007 financial statements, continuing a multi-year trend.
    We need to build upon this progress. So, Madam Chairwoman, I also 
want to mention that the $313 million included in the request for our 
Working Capital Fund will enable the Department to make critical 
upgrades to our aging information technology (IT) systems. If we want 
to improve the delivery and control of the Department's significant 
program resources for the benefit of the people and communities we 
serve, then it is imperative that we have sufficient funding for IT 
systems modernization efforts. The $65 million reduction of our 2008 
request for IT funding was devastating. That reduction has stopped 
practically all HUD systems modernization efforts.
    Madam Chairwoman, this subcommittee should know that without 
sufficient funding, we will be unable to modernize FHA's 25 year old 
mainframe systems to effectively support FHA program reforms. We will 
be unable to improve the automation of the section 8 Project-Based 
Assistance contract renewal and payment processes. We will be unable to 
effectively implement asset management improvements over the public 
housing stock. We will continue to manage our $16 billion a year 
Housing Choice Voucher Program through a cumbersome spreadsheet process 
rather than an automated database that can provide timely information 
for HUD and Congressional oversight. HUD has demonstrated the ability 
to successfully use its limited IT funding. I urge you to support the 
budget request for IT funding.
                               conclusion
    Overall, this is a good budget for the Department . . . balanced, 
reasonable, appropriate, and workable. It allows us to operate within a 
framework of cooperation and partnership with other Federal agencies, 
State and local governments, and non-profit initiatives. The American 
people count on HUD . . . count on us for direct assistance, grants, 
professional administration, and high-quality public service. With this 
budget we meet those expectations. With this budget we can get the job 
done.
    I also want to thank the employees at HUD for their extraordinary 
service during a very trying and difficult period. Madam Chairwoman and 
members of the subcommittee, I am sure that you would be extremely 
impressed by the day-to-day work product of our employees. I am very 
proud of my colleagues at HUD.
    Madam Chairwoman, as we proceed through the budget process, I look 
forward to working with you. I thank you and the subcommittee for your 
consideration of this budget request.

                      SELLER DOWN PAYMENT PROGRAM

    Senator Murray. Thank you very much, Mr. Secretary.
    We will have 5-minute rounds, and I'm told that we may 
start voting as early as 10:30, so I will try and make mine 
short so we can get to everybody.
    Mr. Secretary, HUD's budget assumes that there will be 
major reforms to the FHA Single Family Housing program and I'm 
told that if these reforms are not enacted this year the MMI 
Fund could potentially face a $1.4 billion shortfall. We're 
also told this is largely the result of the defaults of the 
seller down payment program. What are your views on the seller 
down payment program and its impact on the solvency of the FHA 
fund?
    Secretary Jackson. Chairlady, we really believe that the 
seller down payment program, if we are still forced to carry 
it, will create severe problems for us, on the brink of 
insolvency for this year. We have heavy reserves, but this year 
it's creating a problem. As I said when I was reading the 
statement, it's three times higher than our default rate. We're 
about two and one-half and they're three times higher. It is 
presenting serious problems.
    Senator Murray. What is the default rate for the program?
    Secretary Jackson. What is that?
    Mr. Montgomery. The foreclosure rate is 2.3 percent and the 
default is about 6.3 percent.
    Secretary Jackson. Foreclosures--well, come and tell the 
chairlady.
    Mr. Montgomery. Brian Montgomery, FHA Commissioner.
    Our overall foreclosure rate the last quarter of 2007 is 
2.3 percent. The default rate is about 6.3 percent.
    Senator Murray. What is it costing the taxpayer to run this 
program compared to the standard FHA mortgage program?
    Mr. Montgomery. The Secretary is exactly right. These loans 
that have seller-funded down payment assistance are two and 
one-half, three times more likely to default. As you know, part 
of what we've been trying to do is to sound the alarm on just 
how volatile these loans are. We proposed a rule, too, that 
would eliminate that type of assistance, but were stopped, sued 
and stopped in two court decisions last week.
    Senator Murray. Let me ask you, Mr. Secretary. Last week 
the U.S. District Court for the District of Columbia vacated 
the HUD final rule that prohibited the Seller Down Payment 
Assistance Program you're referring to from acquiring an FHA 
guarantee. How does that court decision affect HUD's ability to 
ensure the solvency of the FHA Fund?
    Secretary Jackson. Chairlady, I'm not sure that I can 
answer that because the judge in his opinion said exclusively I 
was not to deal with the process. He excluded me out of the 
process. Brian can answer it for you, but I cannot.
    Senator Murray. Well, let me get an answer in writing from 
you, because I do want to ask one more question on my time and 
turn it to Senator Bond.
    [The information follows:]

                       Seller Downpayment Program
    The Department is re-publishing the Notice of proposed rulemaking 
in order to allow for additional comment on information that further 
explains and supports HUD's proposal to prohibit seller-funded down 
payment assistance. In its proposal, HUD is advising the public that 
the current practice that allows for seller-funded down payment 
assistance is having a serious negative impact upon the overall 
financial health of the FHA Fund. The Senate's FHA modernization bill 
also prohibits this type of assistance.

                                  HECM

    Senator Murray. HUD's Housing Equity Conversion Mortgage, 
the HECM program, provides elderly home owners the option of 
taking out a reverse mortgage on their home in order to meet 
their financial needs today, providing them with the 
flexibility to use that equity in their homes for what they 
need, health care, home repairs. As we're watching our elderly 
population struggle with this economic downturn, this program 
has become increasingly important to them. In fact, it is the 
fastest growing loan program within FHA.
    We are seeing some pretty distressing news reports, 
including one by AARP, of unscrupulous sales agents who are 
selling older home owners annuities, long-term care insurance, 
investments, home repairs, that are very high in cost and low 
in value to the consumers, and sometimes these schemes are done 
with the collaboration of lenders participating in the HECM 
program.
    What steps is your Department taking, Mr. Secretary, to 
crack down on these abusive practices directed at HECM 
borrowers by sales agents and lenders?
    Secretary Jackson. You're absolutely correct, chairlady, 
and we are doing everything with the Office of Housing to seek 
out these persons. We're very, very concerned about this 
process because we do a large number of HECM loans. And I am 
very, very committed to senior citizens that they don't lose 
their homes. So we are making every----
    Senator Murray. Are you taking any action against any of 
the lenders?
    Secretary Jackson. I can get that information for you. I 
know that our Assistant Secretary has taken some action. I'm 
just not sure how much action we took.
    Senator Murray. Okay. I'd like that back in writing, then.
    Secretary Jackson. I will make sure I get that for you.
    [The information follows:]

               Housing Equity Conversion Mortgage (HECM)
    Over the past 2 years, FHA has taken major steps to mitigate risk 
in its Home Equity Conversion Mortgage program. During fiscal year 
2007, FHA reviewed 90 mortgages and a total of 4,572 HECM loan files, 
uncovering findings in half of the loans examined. FHA issued findings 
letters to these mortgagees notifying them of the deficiencies.

                      PUBLIC HOUSING CAPITAL FUNDS

    Senator Murray. Senator Bond?
    Senator Bond. Thank you very much, Madam Chairman.
    I'm very much concerned about the Capital Funds for public 
housing. Apparently a 2000 ABT study estimated the annual 
accrual needs of capital. When you inflate them to 2009, it 
looks like they are being budgeted at about 79 percent of the 
need, which I understand to be about $20 billion. There are 
multi-billion dollar backlogs existing.
    Do we have an adequate estimate or a reasonable estimate of 
what those needs are, and how do you plan to maintain this 
large inventory of housing into the future if we're not meeting 
the ongoing needs?
    Secretary Jackson. Senator Bond, I really believe that we 
do, and I will give you the overview and I will have Paula come 
and give you the depth.
    As you know, when we created the Commission on Severely 
Distressed Public Housing back in the late 1980s, early 1990s, 
we said that there were about 88,000 severely distressed public 
housing units in this country. As of to date, we have 
demolished 150,000. We've built back some 60 or 70,000.
    Senator Bond. Thanks in large part to HOPE VI in some 
areas.
    Secretary Jackson. No question. And you know you will not 
get an argument with me about HOPE VI.
    Senator Bond. Just because I set it up, I appreciate your 
willingness to agree.
    Secretary Jackson. You won't get an argument.
    But I will let Paula give you the details.
    Senator Murray. Please. We're concerned about it.
    Ms. Blunt. Just to add to that, I would like to say that 
we're still using the figures from the 1998 study that you were 
talking about, and we are in the process of procuring services 
to do a new capital needs study and that will be under contract 
by next month. So we will have a real more current estimate of 
what those modernization needs are.
    Senator Bond. Based on that previous estimate, what is the 
general range of the needs and how much of that is funded in 
this budget?
    Ms. Blunt. I'm not sure. I guess we would have to get back 
to you on that. I'm not sure of the exact dollar amount in 
terms of those needs right now.
    Senator Bond. That's what I'm very worried about. Frankly, 
until OMB understands these needs are a critical investment, 
we're going to see the stock decline and we're going to face 
even greater costs in the future.
    Secretary Jackson. What we've done, Senator, is given the 
housing authorities permission to use their bond authority in 
many cases, to use their reserves to make sure that they do the 
capital replacement.

                     PUBLIC HOUSING OPERATING FUND

    Senator Bond. That's a band aid. That's a band aid but it 
isn't curing the underlying infection.
    Let me turn to the Operating Fund. There is $4.3 billion in 
the request. How much of these funds will be dedicated to 
ensure proper training of asset-based management and how ready 
are the PHAs to take it on? Is this something they have the 
ability to do?
    Secretary Jackson. I think so. As you know, Senator, even 
before we moved to asset-based management, when I was in St. 
Louis and Washington, DC and Dallas, I basically practiced 
asset management. Those assets that were not viable we got rid 
of and only managed those that were viable. That's all we're 
asking again for the housing authorities around the country to 
do.
    I think they have the ability to do that, and we will 
assess that process.
    Ms. Blunt. If I could just add to that, as you mentioned 
the technical assistance and training, we have $5.9 million 
that we're suggesting for that. Just as early as yesterday, we 
sent out invitations to the industry to come meet with us in 
order to talk about what they feel the best use of that money 
is in terms of what kind of technical assistance that the 
housing authorities need in this transition to asset 
management. We're in the first stages of that, as you know.

                                HOPE VI

    Senator Bond. I will have a bunch of questions on section 8 
and FHA, but I'm not going to pass up HOPE VI without asking 
you how we can keep it alive, how we can facilitate 
development. Have you considered new bonding authority, 
continued redevelopment through an alternative program? How do 
we get rid of the distressed housing?
    Secretary Jackson. Senator, let me say this. Of the 270-so 
grants that we have made on the HOPE VI, 75 have been completed 
to date since 1990. We have outstanding right now about $1.4 
billion. I would love to somehow recapture the money and send 
it to cities that have performed well.
    Senator Bond. Well, I would agree----
    Secretary Jackson. I just think that----
    Senator Bond [continuing]. But if they're not doing the 
job----
    Secretary Jackson. We have some cities with HOPE VI moneys 
that are 10 years old that have not been spent. If we could 
just capture those between 5 and 10, we could probably get $600 
million out of this process or more. So I think that the money 
is there and we should utilize it for those cities that are 
performing well.
    Senator Bond. I believe we've tried to get that done, but 
your staff has been resisting because it's a difficult choice. 
But we need to continue to talk about that.
    Secretary Jackson. I'll be happy to.
    Senator Bond. If you'll support it, maybe you can pass that 
word down to some of the folks who work for you.
    Secretary Jackson. I will do that.
    Senator Bond. Thank you very much, Mr. Secretary, Madam 
Chairman.
    Senator Murray. Senator Specter?

           PHILADELPHIA, PA/UNIVERSAL COMMUNITY HOMES DISPUTE

    Senator Specter. Thank you, Madam Chairman.
    Mr. Secretary, did you call Mayor Street about the dispute 
that Philadelphia Housing Authority was having with Universal 
Community Homebuilders?
    Secretary Jackson. Senator, I did speak to the Mayor, but 
not about any dispute.
    Senator Specter. What did you speak to the Mayor about?
    Secretary Jackson. Just the completion of the HOPE VI 
project, that's all.
    Senator Specter. But you're saying that you did not talk to 
him about the dispute PHA was having with Universal Community 
Homes?
    Secretary Jackson. Senator, I've said to you that I spoke 
to him about the completion of the project, that's all.
    Senator Specter. Nothing about Universal's unhappiness with 
having this piece of property not turned over to them?
    Secretary Jackson. Senator, I've just told you the truth.
    Senator Specter. So you're saying that didn't enter into 
your conversation at all with Mayor Street?
    Secretary Jackson. Senator, I have told you the truth and I 
think that the person who spoke to him mostly was our staff 
member, Dominic Bloom, who spoke to him.
    Senator Specter. Do you know what your staff member told 
Mayor Street?
    Secretary Jackson. Just we were concerned about the 
completion of the project.
    Senator Specter. Anything about Universal Community Homes 
being unhappy that the land wasn't turned over?
    Secretary Jackson. Senator, I have told you the truth, and 
I think you and I have a relationship. I have not lied to you 
and I'm not lying to you now.
    Senator Specter. Did anyone from Universal contact you 
concerning PHA's refusal to turn over that ground?
    Secretary Jackson. If they did, I mean, I can't remember, I 
really can't. I don't think--I can't remember. I don't want to 
say no, I just can't remember.
    Senator Specter. A possibility that they did?
    Secretary Jackson. I can't remember.
    Senator Specter. Mr. Secretary, you have these e-mails, 
three e-mails on January 12, 2007. The e-mails are ``Would you 
like''--this is Mr. Cabrera: ``Would you like me to make his 
life less happy,'' referring to Carl Greene. What reason would 
Mr. Cabrera have for wanting to make Carl Greene's life less 
happy?
    Secretary Jackson. I think you would have to ask Mr. 
Cabrera.
    Senator Specter. Well, I will.
    When you saw these e-mails, albeit only 2 days ago, didn't 
they arouse some concern or suspicion on your part that 
something was amiss if they're out to make Carl Greene's life 
unhappy?
    Secretary Jackson. I think if you look at what I said, what 
I submitted to you last evening, Senator, it said I think it 
was made out of frustration, and I made that very clear to you. 
I think that you and I have had lots of discussion on this 
matter and we had not come to a resolution, and I was working 
directly with you to try to get a resolution. And I think that 
many of our staff people, as I said, were operating on a very 
frustrated level.
    Senator Specter. Well, what were the frustrations if not 
retaliation?
    Secretary Jackson. I can't answer that, sir. I just think 
that, as I said to you before, we had been trying to work the 
accessibility out, as in my memorandum to you; work it out, 
that's all we are trying to do, to make sure that the civil 
rights of the disabled are covered. That's all we're talking 
about.
    Senator Specter. Well, Mr. Secretary, you have these e-
mails, ``Would you like me to make his life less happy? If so, 
how?'' on January 12. You have a response, ``Take away all of 
his Federal dollars,'' on January 12. A response to that, ``Let 
me look into that possibility,'' on January 12. Then on January 
12 your Department tells PHA that they might be in danger of 
losing a lot of money.
    Isn't that an extraordinary coincidence----
    Secretary Jackson. Senator----
    Senator Specter [continuing]. If not causally connected?
    Secretary Jackson. Senator, as I stated to you earlier, I 
will make every endeavor to answer the questions, but I don't 
know the intricacies. That's why when I--it was not there to 
insult you. That's why I said that if there were questions, 
please, if you can tell me what they are I will go back and 
have the staff answer those questions for you. I really don't 
know all of the intricacies.
    As I said to you in the memo, I saw this as of Tuesday. Am 
I concerned? Yes. But I don't know all the intricacies.
    Senator Specter. You say you are concerned, yes, and what?
    Secretary Jackson. I don't know all the intricacies of what 
occurred. That's why I'm saying that's why I'd like to get back 
to you, to find out what occurred, why it occurred, and have 
the staff answer your questions.
    Senator Specter. Well, Mr. Secretary, I will pursue that 
with you. But on this state of the record, the question is what 
were these Assistant Secretaries doing? And when you have this 
exchange of e-mail about making his life unhappy and taking 
away the funding and ``I'll look into that,'' and then the same 
day they take action which now is amounting to a potential loss 
of $50 million, that's just too much of a coincidence. It all 
happens on the same day.
    These aren't collateral frustrations or something else. 
This is simultaneous. That kind of timing is very, very 
forceful evidence that they're taking action to take away the 
money, making his life unhappy, and they're doing it for this 
reason.
    Secretary Jackson. Senator, again, as I stated to you 
earlier, I will be happy to get back to you. As I stated in the 
memorandum to you, I saw this for the first time on Tuesday, 
and I am making every effort to get to the bottom of it.
    When you sent me the letter--and I really appreciate it 
because you did say ``Al''--that's why I responded so quickly, 
because I thought that, to try to get to the bottom of it. I 
don't know all the answers at this point.
    Senator Specter. Well, Mr. Secretary--just another minute, 
Madam Chairman--I will take you up on your offer. Then you're 
willing to sit down with me and Mr. Cabrera and Ms. Kendrick 
and get to the bottom----
    Secretary Jackson. Mr. Cabrera's no longer with us.
    Senator Specter. Well, I know he's no longer with you. I 
will invite him. Will you encourage him to come?
    Secretary Jackson. I have no problems at all.
    Senator Specter. Thank you very much.
    One addendum, what I would really like to do at the meeting 
is to spend our time to see if we can't solve the controversy. 
I would a lot rather deal with the substance of this issue and 
get $50 million for housing for the poor in Philadelphia than 
air a lot of laundry.
    Secretary Jackson. Senator, we have been trying to resolve 
that. I think the staff has been working very hard to resolve 
that. But I would tell you this. I'll do whatever you ask 
because I have a great deal of respect, but I don't think we 
can sit down and resolve the problem when a lawsuit was brought 
against us. It would be very difficult.
    Senator Specter. No, no, you're not right about it. The 
case can be settled. The parties can come together. The judge 
would be delighted.
    Thank you very much, Mr. Secretary. Thank you, Madam 
Chairman.
    Senator Murray. Thank you very much, Senator.
    Senator Lautenberg.

                       PUBLIC HOUSING MAINTENANCE

    Senator Lautenberg. Thank you very much, Madam Chairman.
    Mr. Secretary, we're all upset, frustrated, if I may use 
your own terminology, with what's happened in the funding needs 
for the maintenance of public housing. What we see is 
technology gone awry.
    And despite the housing authorities' alarm about public 
housing in crisis, especially with rising utility and 
operational costs, despite that, President Bush's budget falls 
$850 million short of what is needed just for the maintenance 
needs of public housing. How can these authorities provide 
decent affordable housing that thousands of people depend on 
when they don't have the money to make the basic repairs? What 
should they do?
    Secretary Jackson. I think, Senator Lautenberg, that's a 
very fair question. I believe that since we have demolished 
almost 150,000 units in this country since 1990, we believe 
that we still have enough capital funds, with the bonding 
authority, with the reserve, and, as Mrs. Blunt said a few 
minutes ago, with we're doing the second portion of the study 
for the capital needs. If this study comes out that there's 
more capital needs, I will be the first to defend that process 
and come before you.
    Right now, I think we have enough capital needs, and if I'm 
wrong I'll be the first to admit I'm wrong.
    Senator Lautenberg. Why is that taking review now? 
Shouldn't it have taken place before the budget was presented? 
Were you consulted before you got your budget for the year?
    Secretary Jackson. We do this on a, I think it's about 
every 8 or 10 years we do the study. What is it?
    Every 10 years, and this is the time for us to do it and so 
we're doing it again.
    Senator Lautenberg. Now, what happens every 10 years?
    Secretary Jackson. We do a study, Senator, to decide what 
the capital needs are for all of the housing authorities, the 
2,300 housing authorities around the country.
    Senator Lautenberg. For a 10-year cycle?
    Secretary Jackson. Yes, for a 10-year cycle.
    Senator Lautenberg. Anybody hear about inflation or growth 
in population or any of those things?
    Secretary Jackson. Yes, sir.
    Senator Lautenberg. I'm not sure what a 10-year cycle does, 
a 10-year review does.
    And this has been reviewed by my colleagues. Last April in 
front of this committee you said to me that you hadn't touched 
one contract, and that was after the IG, Inspector General, 
looked into allegations that you injected political favoritism 
into Government contract awards. Now an investigation is taking 
place for asking a housing authority official in New Orleans to 
provide a contract to a friend. And there are new questions 
about your involvement in a controversy involving a friend and 
the transfer of property in Philadelphia. I think Senator 
Specter covered that.
    How do you feel about those comments now?
    Secretary Jackson. Senator, I will say that I think it is 
best, with all the misinformation that has been put out right 
now, to simply let the investigators do their job quickly and 
expeditiously as possible. Therefore, I am going to let the 
investigators complete their work before I make any public 
comment.
    I am confident that when the dust settles and the 
investigators finish their work, the allegations will be put to 
rest. But I would like to just continue to try to do the work 
that I've done to provide decent and affordable housing. That's 
really where I am.
    Senator Lautenberg. Your statement, Mr. Secretary, doesn't 
match with the budget that's being sent here now to us. We 
can't get the job done. We can't provide decent, affordable 
housing. You say that you support it, but how can we do that 
without the funds necessary?
    Secretary Jackson. I really think, Senator, that the funds 
are sufficient to carry out this responsibility. I guess I'm in 
a very unique situation, having been the only HUD Secretary to 
run a housing authority. I ran three housing authorities. And I 
truly believe that the funds are sufficient, and that I have 
worked with the people in the industry to make sure that the 
funds are.
    You know, the question is can you always use more? The 
average person will say yes, there's no question about it. But 
I think that clearly sir, they have enough tools to work with 
to carry out and produce safe, decent, sanitary housing for low 
and moderate-income people.
    Senator Lautenberg. You suggest--and I'll take just a 
moment more, Madam Chairman, if I may. You suggest that there's 
a lot of misinformation out there. You--I quoted you here. Are 
you saying that these were--this was not your statement that 
you haven't touched a contract, and this was after the 
Inspector General looked into allegations? Is that the 
misinformation you're----
    Secretary Jackson. No, sir, that's not. When I said that to 
you, I specifically said that--I think it's a quote--``I have 
not touched a contract,'' which means that I cannot originate a 
contract, I cannot cancel a contract. Those are handled by the 
contract review board and others in the agency. I will be 
happy, if you want to, to show you the process that is used.
    Senator Lautenberg. Well, I would hope, Mr. Secretary, you 
knew what was coming at this hearing. You knew the questions 
that were going to be asked. And to be able to defend what took 
place at the same time insufficient funds to carry out a 
serious responsibility to provide safe and affordable housing 
is very disappointing.
    Thank you, Madam Chairman.
    Secretary Jackson. Thank you.
    Senator Murray. Senator Allard.

                            SELLER FINANCING

    Senator Allard. Thank you, Madam Chairman.
    I want to follow up a little bit on what Madam Chairman had 
asked you about, seller finance. I think it's important that we 
draw a distinction between seller financed down payment and 
what would be referred to as legitimate gift down payment 
assistance, which creates real equity, the latter creating real 
equity in the home. Can you say a few words on the beneficial 
forms of down payment assistance? And then I'd like to have you 
comment a little bit about the American Dream Down Payment Act 
that we both worked on.
    Secretary Jackson. Surely. I'd like Brian to do that for 
you if it's okay with you, Senator.
    Senator Allard. Yes.
    Mr. Montgomery. Yes, sir. Brian Montgomery, the FHA 
Commissioner.
    Sir, are you talking about the volatility of the seller-
funded, or----
    Senator Allard. Well, there are two down payment assistance 
categories. There's the seller finance, where you have your 
problems, and then there's what we call sort of gift down 
payment assistance----
    Mr. Montgomery. Yes, sir.
    Senator Allard [continuing]. Which is the kind of 
assistance that's promoted by the American Dream Down Payment 
Act. I think that it's important that the committee understand 
the difference between those two types of down payment 
assistance.
    Mr. Montgomery. Yes, sir. Thank you. There are several 
groups of borrowers that use FHA. There are those families that 
tend to save the money themselves, sock it away; when they have 
enough money for a down payment they apply for an FHA loan. 
There are others who use the seller-funded down payment 
assistance, which I think we've addressed that issue. And then 
there are those that use assistance from units of local 
government, State and local housing finance agencies.
    It's no surprise that the lowest claim rates are those that 
save their own money and then purchase a home. Those that use 
assistance from local housing finance agencies and others; the 
claim rate is about one and one-half times larger than it is 
for those who use their own funds. But it jumps up to two and 
one-half, almost three times more likely to go to claim, when 
families use the seller-funded down payment assistance.
    Senator Allard. Okay. On the American Dream Down Payment 
Act, what are you proposing for that program in your budget?
    Mr. Montgomery. That is under a different office in HUD, 
sir, but I believe its $25 million.

                                  ADDI

    Mr. Bregon. Good morning, sir. My name is Nelson Bregon. 
I'm the General Deputy Assistant Secretary in the Office of 
Community Planning and Development. We administer the American 
Dream Down Payment Initiative under the HOME program.
    For that program, originally the administration had 
requested $200 million. It has been funded at $50 million. Now, 
for 2008 we received $10 million in funding for that program. 
That money is distributed by formula. It goes to participating 
jurisdictions. There are about 600 of them, and those 
participating jurisdictions use the moneys as down payment 
assistance for low income residents.
    Senator Allard. I see.
    Mr. Bregon. Of that portfolio, I think about 12 percent are 
FHA-guaranteed. Then Mr. Montgomery has the numbers as to the 
default rate on the ADDI program is similar to the regular 
portfolio of the FHA.
    Senator Allard. I see, okay. Thank you.
    Secretary Jackson. Thank you.

                                 RESPA

    Senator Allard. I want to move to RESPA if I might.
    Secretary Jackson. Yes, sir.
    Senator Allard. I understand that the proposal that you're 
working on now is close to 270 pages--I guess this is a rumor 
on the street--and that the good faith estimate, which was 
previously proposed would be one page long, is now somewhere 
around four pages, another rumor on the street.
    Further, a new form of comparing GFE and HUD is apparently 
being introduced and real estate closings will now have to have 
a script read explaining aloud loan terms and fees.
    It doesn't sound like simplification to me. I know that's 
what one of your goals was. And I wondered if you might explain 
those rumors.
    Secretary Jackson. Well, let me say this, Senator. It is 
simplification, but I will let Commissioner Brian go into depth 
with it.
    Senator Allard. Okay.
    Mr. Montgomery. Thank you, sir. The 278-page preamble will 
be published tomorrow in the Federal Register. However, today 
it is available for public viewing at the offices of the 
Federal Register, so I can discuss it in some instance.
    While the preamble is long, we are updating a 34-year-old 
statute, the Real Estate Settlement Procedures Act. We think 
that it's implicit from what we've seen the last several years, 
that there's better disclosure to the borrower, there's greater 
certainty of costs, so we avoid the sticker shock between the 
good faith estimate today and what ends up on the HUD-1 
statement. You can talk to some of the consumer groups, as I'm 
sure you have, and they will share multiple instances of 
families who witnessed and experienced that sticker shock 
first-hand.
    So our guiding principle is that we wanted to develop a 
good faith estimate, a standardized form that takes some of the 
best of what other organizations have proposed, from what we've 
seen in best practices, and make it a document that not only 
fully articulates to the borrower what they're getting into, 
but also provides them a document that they can now do what 
very few borrowers do, and that is shop for the best deal that 
they can get.
    Senator Allard. Was the process simplified?
    Mr. Montgomery. Yes, sir, absolutely. And I want to say----
    Senator Allard. Less paperwork, so when you're closing, 
instead of it being this, it's more like this?
    Mr. Montgomery. We are doing our best to do that, sir. It 
may shorten by a quarter of an inch. I can't promise you much 
more than that. But I will say this: We've conducted extensive 
consumer testing and the consumers have been telling us that 
they like the standardized form. They like the fact--none of 
us--very few of us have degrees in finance, and when you see 
terms in a closing document, we've all experienced that process 
in our life and I don't think any of us when we leave that 
closing table feel 100 percent good about what we've just done. 
Now, the euphoria of owning your home may overtake that. But 
you put your best faith into the system.
    We are trying to get to the heart, where consumers leave 
that settlement table where they've had it explained to them 
and they say, you know, I feel good about what I've just done. 
The closing script that would be read along with the HUD-1 
statement is the single most item that consumers told us they 
like the most, because now it's being explained to them in 
plain, simple English what they were doing.
    Senator Allard. Thank you, Madam Chairman.

                             HUD OVERSIGHT

    Senator Murray. Thank you, Senator.
    Mr. Secretary, obviously there are a number of issues in 
front of this committee regarding the budget that are extremely 
important. However, as I said in my opening statement, this 
subcommittee has a tremendously important oversight role for 
every dollar appropriated by it. And as you have heard, your 
agency is operating under a cloud right now. I know, as I said 
in my statement, you're tired of the allegations, we're tired 
of them. I think it's important that we clean up some of that 
and want you to answer a series of questions that I have as 
openly and as honestly as you can. Our committee has the 
responsibility for taxpayer dollars and I would like you to 
answer in the spirit of that.
    Mr. Secretary, you did testify before us last year that you 
have never involved yourself in any contracts with HUD. You 
said: ``I have not touched one contract, not one.'' I would 
like you to address the allegations regarding your involvement 
in the hiring of William Harrison to serve as a construction 
manager at the Housing Authority of New Orleans. Since 2002 
your agency does run that authority in receivership.
    Mr. Harrison reportedly is a personal friend of yours and 
received between $400,000 and $500,000 through a no-bid 
contract for 18 months of work. That's a good bit more money 
than you make as the Nation's top housing official. Mr. 
Harrison has told the press that he believes he was hired for 
this position because of your involvement.
    It's alleged that you personally involved yourself in 
seeing to it that Mr. Harrison was paid on a timely basis. 
Finally, it has been alleged that members of your senior staff 
slapped the wrist of certain officials at the Housing Authority 
of New Orleans that questioned the hiring of Mr. Harrison.
    Mr. Secretary, did you personally recommend Mr. Harrison to 
be employed by the Housing Authority of New Orleans, as he 
asserts?
    Secretary Jackson. Chairwoman, I think it is best, with all 
the misinformation being put out there right now, to simply let 
the investigators do their job quickly and expeditiously as 
possible. Therefore----
    Senator Murray. You have an opportunity to----
    Secretary Jackson. Therefore----
    Senator Murray. You have an opportunity to set the record 
straight here and I'm asking you a direct question.
    Secretary Jackson. Therefore, I'm going to let the 
investigators complete their work before I make any public 
comment.
    Senator Murray. Well, it is alleged that you personally 
called one of your employees, Mr. Donald Babers, to complain 
that Mr. Harrison was not getting paid in a timely way by the 
Housing Authority of New Orleans. He is your appointee on the 
HANO board of directors. Have you personally complained to Mr. 
Babers, to any HUD contractor, or to any other individual 
currently or formerly employed by HUD regarding whether Mr. 
Harrison was getting paid or the pace at which he was getting 
paid?
    Secretary Jackson. Again, chairlady, I think it is best, 
with all the misinformation that is being put out there right 
now, to simply let the investigators do their job quickly and 
expeditiously as possible.
    Senator Murray. Mr. Secretary, you have an opportunity 
before this committee that has oversight of your agency and the 
tax dollars that we appropriate, to clean this up, and I would 
ask you to answer honestly if you could for us this morning.
    Secretary Jackson. Therefore, I'm going to let the 
investigators complete their work before I make any public 
comment.
    Senator Murray. Well, did you ever discuss with Mr. Thorson 
any HUD contractor or any other individual currently or 
formerly employed by HUD the matter pertaining to Mr. 
Harrison's contract and whether or not it should be signed?
    Secretary Jackson. I think it is best to let the 
investigators complete their work, and I will say again that I 
think it is important that they complete that work and I will 
let them do that before I make any public comment.
    Senator Murray. So it is clear you'll not answer any 
questions about New Orleans. Let me ask you about the Housing 
Authority of the Virgin Islands. It's had a very troubled 
history and it's also operated by your agency in receivership. 
It's alleged that you personally advocated the hiring of a 
friend of yours, Mr. Michael Hollis, by a company called Smith 
Real Estate Services, which was a HUD contractor on the Virgin 
Islands. Mr. Hollis reportedly had no experience in public 
housing, but a short time following his employment as the HUD 
contractor Mr. Hollis was hired directly by HUD to be executive 
director of the Virgin Islands Housing Authority, at a 
compensation level that is reported to have exceeded a million 
dollars.
    Mr. Secretary, did you ever have a conversation with any 
HUD contractor or any individual currently or formerly employed 
at HUD regarding the merits of hiring Mr. Hollis for either the 
position at Smith Real Estate Services or the position with the 
Virgin Islands Housing Authority?
    Secretary Jackson. Again, chairlady, I think it's best, 
with all the misinformation that's being put out there right 
now, to simply let the investigators do their job as quickly 
and expeditiously as possible. Therefore, I'm going to let the 
investigators complete their work before I make any public 
comment.
    Senator Murray. Did you have any conversations with your 
Assistant Secretary, Orlando Cabrera, or anyone else currently 
or formerly employed, or any HUD contractor, regarding the 
compensation level that Mr. Hollis would receive?
    Secretary Jackson. I think it is best, with all the 
misinformation being put out there right now, to simply let the 
investigators do their job----
    Senator Murray. You won't comment on any conversations 
regarding Mr. Hollis's contract?
    Secretary Jackson [continuing]. Investigators do their job 
as quickly and expeditiously as possible. Therefore I'm not 
going to comment, any public comment, until they finish their 
work.
    Senator Murray. Well, Mr. Secretary, as you can imagine, 
it's very difficult for this subcommittee. We have 
responsibility to take care of our responsibility of oversight. 
You control an agency that spends millions of taxpayer dollars. 
Your agency's operating under a cloud at this point. I think 
that it is imperative that you clear up these questions as 
quickly as possible so that we can continue to serve our 
taxpayers, and I hope that by submitting these to the record 
that you will reconsider and answer the questions to the 
committee.
    Secretary Jackson. Thank you very much, chairlady.
    Senator Murray. Thank you, Mr. Secretary.
    Senator Bond?
    Senator Bond. Madam Chairman, I would only say that with an 
ongoing investigation, we sought to get information from the IG 
about it. They told us this was an ongoing investigation and 
they would not comment with it. When there is an ongoing 
investigation, I would have to say that if potentially serious 
charges may come out of it, was I representing someone in 
Secretary Jackson's position I would have to tell him, instruct 
him not to answer questions, to allow the investigation to be 
finished.
    Having said that, we will be, obviously, following very 
closely the results of that investigation and what comes out. 
When that investigation closes, then, if appropriate, I think 
once that is resolved then we should have answers to all of 
these questions. But given the circumstances, I, as an attorney 
who's represented some people who were in trouble, I'd have to 
tell you that I would have a strong edict not to get out ahead 
of it.
    Now----
    Senator Murray. Senator, I totally understand your 
statement. However, the IG has not told this committee that we 
can't conduct our oversight.

                               SECTION 8

    Senator Bond. Oh, no question about it, we can conduct our 
oversight. But all I said was the IG, when we asked about it, 
the IG said it's an ongoing investigation. The IG's office 
would not tell us about this investigation. We have oversight 
responsibilities and I have a whole bunch of serious questions 
that go, not to these particular allegations.
    For example, I am concerned about section 8. With $14.3 
billion budgeted, what percent of the authorized vouchers will 
this amount pay for? And how many section 8 funds are 
available, but are unused because of the caps in place? If you 
could prepare us a map showing where there has been more money 
made available above the caps, that we can work with you to 
figure out how to help you allocate those funds to make sure in 
a shortfall of section 8 funds that they go where they are most 
needed?
    What's the situation with the caps, where some PHAs have 
more money available than the caps?
    Secretary Jackson. I will let Milan Ozdinec, who controls 
the program, Senator, discuss that with you.
    Mr. Ozdinec. Good afternoon, Senator. How are you? It's an 
honor to be here.
    As you may know, there is about $2.2 billion today sitting 
in accounts called net restricted assets. These are funds that 
were previously appropriated by this body as well as the House 
to provide housing authorities with HAP payments as well as 
administrative fees. Of that $2.2 billion, approximately $800 
million of that are funds that are above the caps, that is 
funds that housing authorities may not use because they're at 
their authorized amounts of units.
    We, as you may know, have advocated for the past 3 years to 
having the caps removed and to allow housing authorities that, 
for example, had done all the right things, reduced payment 
standards, improved their utility allowances, provided minimum 
rents, to reduce their costs so that they could serve more 
families.
    As you may also know, in last year's budget, in 2008, the 
Congress instructed the Department to offset the appropriation 
by $723 million of that unusable cap money. So housing 
authorities that had been at their caps and have money in their 
net restricted assets we will in fact offset in 2008.

                               FHA SECURE

    Senator Bond. Well, it would be nice to be able to let the 
PHAs have all the section 8 money they need. But given the 
budget we've been presented, there is such a squeeze that we 
may not have that luxury. It would be great to have the well-
performing PHAs rewarded, but the shortfalls we have are 
serious.
    Let me turn very quickly, Mr. Secretary, to the FHA, and 
you may want to call up the FHA Commissioner. Number one, I 
assume you'll be refinancing mortgages at their current value 
only. What steps are you going to take to assure the appraisals 
are accurate? Do you have the staff and expertise for FHA to 
ensure that this program runs efficiency?
    This is a big concern.
    Mr. Montgomery. Absolutely, Senator, and we share in that 
concern. With the FHA Secure product, again these are 
conventional FHA refinances we're talking about here. Probably 
95, 97 percent of those are subprime, subprime ARMs. We are 
very aware of the declining housing markets in this country. 
Therefore we require a new appraisal prior to the transaction 
occurring to ensure that we have the best snapshot in time of 
what that home is worth.
    Moreover, in markets that are weak, that are called 
declining markets, severely declining markets, we require two 
appraisals, two appraisals, to make sure again that some of 
what you see is happening in the subprime market does not occur 
in FHA.
    Senator Bond. Thank you, Madam Chairman.

               ADMINISTRATIVE AND JUDICIAL RECEIVERSHIPS

    Senator Murray. Mr. Secretary, the President's budget 
includes $10 million to fund administrative and judicial 
receiverships. HUD currently has six public housing agencies 
under administrative receivership, in other words under your 
control, complete control. The Department often uses these 
funds to contract with outside vendors that, according to your 
budget justification, have the specialized knowledge and 
expertise needed to address specific deficiencies in housing 
authority performance.
    Can you give me examples of the types of contractors you're 
looking for to assist a public housing authority under 
receivership?
    Secretary Jackson. Ms. Blunt will answer that for you.
    Ms. Blunt. I'm sorry, the last time I did not identify 
myself. I'm Paula Blunt, the General Deputy Assistant Secretary 
for Public and Indian Housing.
    When we go into, when we take over a housing authority that 
goes into receivership, we usually do an assessment to see 
where the needs are. Many times they vary from housing 
authority to housing authority. The financial-related matters 
is a big one, so usually many times we may have a contractor 
come in that can provide financial assistance. Section 8 is 
one. Many times if the housing authority is having severe 
problems with their section 8 program, we may bring someone in 
there to help with that.
    But when we bring the contractors in, not only do they help 
to fix the problem, but they train the staff also so that they 
can eventually have those skills, be able to do that, so we can 
return the housing authority to local control.
    Senator Murray. Okay. Mr. Secretary, when you hire those 
contractors do you set specific performance measures or 
milestones, and how do you establish the value for the services 
that they provide?
    Secretary Jackson. That is done out of Public and Indian 
Housing.
    Ms. Blunt. Yes, we do establish standards----
    Senator Murray. But it is under your control, correct, Mr. 
Secretary?
    Secretary Jackson. All of HUD is under my control.
    Senator Murray. Right. So can you tell us how those 
specific milestones are met?
    Secretary Jackson. I think that Ms. Blunt can tell you, 
because they're the persons who carry out the program.
    Ms. Blunt. Yes. They are--when the contract is set, there 
are specific standards, milestones that must be met. They are 
part of the contract, and they will vary according to what the 
needs of that housing authority and the expertise that we need.
    Senator Murray. What safeguards do you have in place so 
that those contractors actually have the experience?
    Ms. Blunt. We do a review. We go through our Office of 
Procurement and Contracts, which has review of the experience. 
There are panels that review the applications that come in and 
the panels actually make those decisions and they are forwarded 
for signature, approval.
    Senator Murray. So they are required to have experience 
within the work frame of----
    Ms. Blunt. Yes.
    Senator Murray [continuing]. What you're contracting them 
for?
    Ms. Blunt. Definitely.
    Senator Murray. Did you do that for the Virgin Islands?
    Ms. Blunt. We do that for all of our contracts.
    Senator Murray. Did you do it for the Virgin Islands?
    Ms. Blunt. I specifically didn't, but yes, they are done 
for all contracts. There's an established process in the 
Department through our Office of Procurement and Contracts 
where there are certain things that have to be met. If you 
could look, think of it in terms of a job application. When 
someone applies for a job, there are certain things, criteria--
--
    Senator Murray. Did your Department do that for the Virgin 
Islands?
    Ms. Blunt. Yes, we did.
    Senator Murray. Mr. Secretary, you have PHAs that have been 
under HUD's control for years and years, a few of them for over 
a decade. If a PHA has been under HUD's control for several 
years, what would be the rationale for an emergency-based non-
competitive sole source contract?
    Secretary Jackson. I think you'll have to ask, have to ask 
the entity that gave the contract.
    Ms. Blunt. Many times we may run--from time to time we run 
into a situation like that, and it could be the emergency 
situation. Without calling names, we have a situation that 
recently came about where there was no staff left at a housing 
authority to perform the functions and it was necessary to get 
someone in there right away to take care of the needs of those 
residents and that housing authority. So in that case you don't 
have the time to go out for the long, lengthy contract process 
in terms of bringing in competitive bids or whatever. We take 
them off one of the lists that we have and give them, award the 
contract to someone that has the expertise.
    Senator Murray. And was that the case in the Virgin Islands 
as well?
    Ms. Blunt. I'm sorry?
    Senator Murray. Was that the case in the Virgin Islands as 
well?
    Ms. Blunt. I'm not definitely sure. I would have to check 
on that. I think it was a sole source contract, so that 
probably is. If it was that kind of contract, that is what 
would have happened.

                       MIAMI-DADE HOUSING AGENCY

    Senator Murray. The Miami-Dade Housing Agency, Mr. 
Secretary, has recently come under your control and we're 
seeing news reports related to the mismanagement and wide scale 
potential fraud of HUD funds. Can you tell us HUD's actions to 
date with Miami, including what HUD staff you've placed on the 
ground and who you've contracted with to assist in this effort?
    Secretary Jackson. I can't tell you that. I'm sure Ms. 
Blunt can.
    Ms. Blunt. Yes. We've been working with the local 
government there in Miami-Dade and others to take care of the 
situation. That happened to be one of the ones I was referring 
to where the staff had been pulled from the housing authority 
and we had to do an emergency contract to get someone in there 
that could take care of those needs. We're still in the process 
of doing the things that need to be done to bring everything 
together, but we do have a contract there, a contractor there. 
We have HUD staff there. We have a HUD person there working 
diligently on a day to day basis to do what needs to be done to 
work with that housing authority.
    Senator Murray. Senator Bond.

                          HOMELESS FACILITIES

    Senator Bond. Thank you, Madam Chairman.
    I have just three questions that I want to wind up my 
formal questions, the rest for the record. I mentioned, Mr. 
Secretary, the problem we were having with the underutilized 
and unutilized public lands and buildings for the homeless. I'd 
be interested to know what criteria you have for making these, 
this housing available to the homeless or rejecting it. Do you 
have standards about putting homeless shelters next to schools, 
and how many people on your staff are responsible for 
implementing this program?
    Mr. Bregon. Good afternoon, sir.
    Senator Bond. Good afternoon. It has not quite turned into 
afternoon. We've been at this, but it's getting there.
    Mr. Bregon. It seems like a long time.
    Sir, the Department of Housing and Urban Development under 
the McKinney-Vento Act, is responsible for looking at, under 
the BRAC program, any military bases, any military properties 
that are surplus properties, or any other Federal land that 
becomes available.
    What we do first is we publish a list in the Federal 
Register, a notice that indicates to the public which sites are 
available.
    Senator Bond. Do you make any judgment about whether those 
sites would be suitable before you publish the list?
    Mr. Bregon. We do not. We just publish the list and then we 
request proposals. Usually the local communities create a local 
redevelopment authority and those agencies are the ones that 
submit proposals to us saying, that land, we would like to use 
it for a park, we would like to use it for a public facility.
    In that process, the homeless providers also have an 
opportunity to look at that facility. What we do is we look at 
the need of the homeless in that particular area and make a 
determination whether in fact there is a homeless need.
    Senator Bond. Well, one of the things in the instances I 
cited, this was something that the local authorities were very 
dead set against, and they pointed out the lack of continuum of 
care.
    How many people are implementing that program?
    Mr. Bregon. That is serviced out of our Special Needs 
Office. We have one individual that looks at the plans and they 
look at the data that we have available to determine what are 
the housing needs for that jurisdiction.
    Senator Bond. Do they look at whether that is an 
appropriate selection, site for homeless?
    Mr. Bregon. What they do is they work with the local 
redevelopment authority and say, there is a housing need and 
perhaps you can negotiate with that group.
    Secretary Jackson. Let me say this, Nelson. I see what the 
Senator is getting to.
    Senator, let me go back and see how we can----
    Senator Bond. I think on this one there's a little 
disconnect between what I'm hearing and what we saw.
    Secretary Jackson. I understand. I remember the incident 
that was in the papers.

                                 HECMS

    Senator Bond. There are several incidents now. The 
incidents are multiplying.
    Let me jump to HECMs. I understand Australia is a year 
ahead of us. They've addressed a number of predatory lending 
issues. What are the key issues facing HECMs? HECM fees are 
high. It seems to be perhaps unduly lucrative. Has HUD taken 
any steps to reduce the cost of HECMs?
    Mr. Montgomery. Brian Montgomery again, sir.
    We've been working diligently with AARP, with the National 
Reverse Mortgage Lenders Association, I daresay refereeing in 
some cases those discussions about how we can bring down the 
origination costs for reverse mortgages. While this product has 
been around 20 years and it has seen its growth rise 
dramatically of late, it is still a niche product by and large. 
That may change in 5, 10, 15 years. So they are certainly more 
time-consuming than a forward mortgage product.
    I think there are some legislative remedies. We just want 
to be mindful, though, that lenders--if you do low origination 
costs, we don't want to make sure they try to make it up 
somewhere else. So those discussions continue, and I think we 
are in agreement that we need to bring those origination fees 
down.
    Senator Bond. Do you need legislation? Do you have 
legislative recommendations, or do you have recommendations 
against legislation that's being considered? Should we act? 
What should we not do?
    Mr. Montgomery. I just think we need to be mindful of the 
teeter-totter effect, that if we lower the origination cost 
lender, as they do, and that's the way business is, that 
they'll drive up costs somewhere else.
    But I do agree going forward as this product continues to 
grow in popularity, this issue needs to be addressed, as it is 
now. But I would like to share later on some requests and some 
suggestions with this committee and how we could do that.
    Senator Bond. I would hope you will. My cohort is--the 
folks who are still alive at my reunions are all becoming more 
and more interested in HECMs, and I wanted to make sure my 
classmates are well served.
    Thank you very much.
    Mr. Montgomery. Thank you, sir.
    Senator Bond. Mr. Secretary.
    Secretary Jackson. Thank you.

                             HUD OVERSIGHT

    Senator Murray. We all share that concern, Senator Bond. 
Thank you.
    Mr. Secretary, I do want to go back because again I do 
believe this committee has oversight. I do have a question I 
want to ask you regarding Philadelphia. You did answer Senator 
Specter's question. It has been alleged that you personally 
intervened on several levels to try to get a certain parcel of 
land that's been controlled by the Philadelphia Housing 
Authority to be sold to Mr. Kenny Gamble, an acquaintance of 
yours. It's alleged you not only instructed your regional staff 
to look into the matter, but you personally called Mayor Street 
of Philadelphia to encourage him to force the Philadelphia 
Housing Authority to sell that parcel to Mr. Gamble.
    I want to ask you a separate question: What conversations 
have you had with any HUD contractors or any individuals 
currently or formerly employed at HUD regarding Mr. Gamble's 
issues with the Philadelphia Housing Authority and whether or 
not this parcel of land should be sold to Mr. Gamble?
    Secretary Jackson. You know, chairlady, I think it's best, 
with all this misinformation that's being put out right now, to 
simply let the investigators do their job as quickly and 
expeditiously as possible.
    Senator Murray. I think I've heard that response, Mr. 
Secretary.
    Secretary Jackson. Therefore--therefore, I am----
    Senator Murray. But I have to tell you, it is very 
frustrating to me that you sat here and answered Secretary 
Specter's question regarding the phone call forthrightly and 
honestly. I have given you the opportunity to do that now on a 
number of questions as well. Yet you refuse to answer me on 
those questions. It's very frustrating when you did answer 
Senator Specter.
    Secretary Jackson. I think it is--I think it is very 
frustrating to me. There's an ongoing investigation.
    Senator Murray. Yet you answered Senator Specter's 
question.
    Secretary Jackson. And I think that we should simply let 
them do their job, and once that's done----
    Senator Murray. But this committee does have a 
responsibility of oversight. We are responsible for doing that. 
It's frustrating to hear no responses.
    Secretary Jackson. And I respect you, chairlady, but I 
don't think I can answer.
    Senator Murray. Thank you, Mr. Secretary.

                    ADDITIONAL SUBMITTED STATEMENTS

    The following statements from the National Association of 
Housing and Redevelopment Officials and Hector Pinero before 
the Committee on Banking, Housing, and Urban Affairs have been 
submitted for inclusion in the record.
    [The statements follow:]
     Prepared Statement of the National Association of Housing and 
                        Redevelopment Officials
    Thank you for holding an oversight hearing on HUD's fiscal year 
2009 budget. The 23,000 members of the National Association of Housing 
and Redevelopment Officials (NAHRO) look forward to working with you 
and the committee to ensure that our Nation's housing and community 
development needs are adequately addressed as part of the fiscal year 
2009 budget and appropriations process.
    Following a detailed review of the administration's 2009 budget 
presentation, we believe the request not only calls into question the 
underlying justification for critical program funding cuts in fiscal 
year 2009, but also raises a more fundamental question regarding the 
administration's plans to address well-documented and long-deferred 
housing and community development needs. A full listing of NAHRO's 
funding recommendations to help address current needs is attached to 
this letter. We have also attached several charts demonstrating the 
impact of the president's budget on HUD programs. We hope you find this 
information to be helpful.
    Housing has taken center stage of late as many families face 
foreclosure resulting from questionable, sub-prime lending practices. 
As the ``first responders'' to local housing needs, local housing 
agencies have already been called upon to assist families caught up in 
this crisis. Community development agencies are already searching for 
ways to help devastated neighborhoods to recover. Our members stand 
ready to continue to assist families and communities in need. Going 
forward, we welcome the opportunity to work with the committee to 
design and later implement pragmatic responses to this crisis.
    However, as the committee is also well aware, the Nation's housing 
and community development needs are much larger than the mortgage 
crisis we now face. Consider the fact that nearly 14 million American 
families face severe housing needs, paying over 50 percent of their 
incomes toward housing costs or living in substandard housing. In 
communities nationwide, families face daunting waits for scarce rental 
housing assistance. In fact, on any given night, nearly 750,000 people, 
many of them children, are homeless.
    In short, 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 by 
cutting or eliminating programs to revitalize our Nation's community 
infrastructure.
    In recent years, we have made the committee aware of our questions 
and concerns regarding significant funding reductions contemplated in 
affordable housing and community development programs. These questions 
are raised once again by the President's fiscal year 2009 proposal. 
Going forward, we believe the larger question before the Congress is: 
what resources are necessary to sustain current levels of assistance to 
families and communities, and how as a Nation do we begin to make 
progress toward addressing unmet needs? For example, how will we 
preserve 1.1 million units of public housing, renew all vouchers, 
maintain vital community and economic development services, and address 
the millions waiting for some form of assistance to secure decent 
housing? These are the questions your committee, along with your 
colleagues on the Budget and Appropriations Committees in both houses, 
must, in our opinion, resolve to address.
    Among the more striking examples found in this budget which we 
believe to be emblematic of the challenges and concerns noted above is 
the administration's request for basic public housing operations. The 
Department's own budget justification states that $5.3 billion is 
necessary to subsidize the 1.1 million families living in public 
housing, yet its budget request inexplicably asks for just $4.3 
billion. We believe that the rationale for this and other 
contradictions in the budget request is best explained by the 
administration and we hope that more will be learned during your 
hearing. It is safe to say, however, that the fiscal year 2009 budget 
request, which would fund local agencies' public housing operations at 
just 81 percent of need, would constrain local agencies' ability to 
administer public housing in a responsible way and, as a result, 
underserve those most in need. In sum, we believe this budget denies 
residents the quality of life in public housing that they deserve.
    There are several additional recommendations in this budget request 
that merit reversal. For example:
  --Disinvestment in Public Housing Infrastructure.--The budget 
        proposes $2.024 billion for the Capital Fund, a $415 million 
        (17 percent) decrease compared with the amount provided by 
        Congress for fiscal year 2008 ($2.438 billion). This 
        recommendation has been put forward for the second year in a 
        row despite the fact that the HUD's own estimates of long term 
        deferred maintenance are between $18 and $20 billion.
  --No Disaster Planning for Public Housing.--Within the Capital Fund 
        account, the budget does not request funding for public housing 
        disaster relief. The budget narrative states that ``FEMA 
        disaster assistance is available for any needs that are not 
        covered by the required property insurance.'' Despite HUD's 
        assertion, however, disaster assistance from FEMA for PHAs has 
        not been forthcoming in recent years. Differing HUD and FEMA 
        interpretations of the agencies' Memorandum of Understanding 
        (MOU) have meant that neither agency has stepped in to provide 
        the funding necessary in a major disaster, save HUD's limited 
        allocation of emergency capital funds.
  --HOPE VI Eliminated.--The President's budget proposes, once again, 
        to zero out funding for the HOPE VI program. Instead, the 
        administration intends to spend out the ``remaining balance'' 
        in the program, which amounts to more than ``$1.4 billion as of 
        the end of 2006.'' Except for unawarded grants from fiscal 
        years 2007 and 2008, however, this $1.4 billion is already 
        committed to previously awarded grants. It is not available for 
        new projects and awards as the administration seems to imply.
  --Deep Reductions in CDBG Formula Grants.--The President's fiscal 
        year 2009 proposal would fund Community Development Block Grant 
        formula grants at $2.934 billion, a $659 million (18 percent) 
        cut. This proposed cut is actually $865 million (24 percent) if 
        one considers the administration's unrealistic proposal to 
        offset fiscal year 2009 funding by rescinding $206 million in 
        prior-year, special-purpose grants. Amounts available to local 
        communities would be further reduced if Congress adopted the 
        administration's proposal to set-aside $200 million of the 
        remaining CDBG funding to support competitive ``challenge 
        grants'' for communities pursuing targeted neighborhood 
        revitalization.
  --Elimination of Economic Development Programs.--The budget proposes 
        to eliminate the section 108 Community Development Loan 
        Guarantee program, the Brownfields Economic Development 
        Initiative (BEDI), and the Rural Housing and Economic 
        Development (RHED) program, arguing that ``these programs are 
        duplicative'' and that ``their activities are eligible to be 
        funded by CDBG and other Federal programs.'' Because they are 
        valuable components of the Federal community and economic 
        development toolkit and should remain available to States and 
        localities, NAHRO has consistently called upon Congress to 
        fully fund HUD's economic development programs. The section 108 
        program, for example, allows an entitlement community to borrow 
        up to five times the amount of its most recent CDBG formula 
        allocation in order to finance large-scale physical improvement 
        projects. HUD's own Office of Community Planning and 
        Development, during a recent briefing for public interest 
        groups, suggested that the section 108 program could be 
        valuable to communities as a ``source of funding to address 
        problems created by the sub prime crisis'' noted above. All 
        three programs received funding under the Fiscal Year 2008 
        Omnibus Appropriations Act.
  --Insufficient Housing Voucher Assistance.--HUD's budget assumes 
        $14.161 billion in fiscal year 2009 appropriated funds for 
        rental housing assistance voucher renewals, to be augmented by 
        $600 million in agencies' net restricted assets, for a total of 
        $14.8 billion. NAHRO's preliminary estimate is that $15.4 
        billion will be needed to support the voucher program in fiscal 
        year 2009. When compared with PHAs' voucher expenditures in 
        calendar year 2008, HUD's budget request would leave the 
        program significantly under funded at levels insufficient to 
        cover inflation, let alone the renewal of approximately 14,000 
        incremental vouchers appropriated in fiscal year 2008.
  --Underfunding Effective Administration of the Voucher Program.--
        HUD's budget request includes $1.4 billion for Housing Choice 
        Voucher administrative fees, including $1.34 billion for 
        ongoing fees of existing vouchers and up to $40 million for 
        PHAs that need additional funding to administer new vouchers in 
        fiscal year 2009. The nominal increases in these accounts, 
        however, will be insufficient to fully pay for needs for both 
        ongoing and new vouchers, leading to likely downward prorations 
        of administrative fees. Without sufficient funding for 
        administration, local agencies will not be able to maximize the 
        efficiency of available rental assistance dollars, will not be 
        able to maintain program integrity, and will not be able to 
        provide families with the services and support necessary to 
        find appropriate housing.
  --Short-funding Project-Based Section 8 Contracts.--HUD's budget 
        would provide $7 billion for the section 8 project-based multi-
        family housing program for fiscal year 2009, representing a 
        $682 million increase (10.8 percent). In addition to the $7 
        billion, the budget proposes a $400 million advance 
        appropriation, which would become available on Oct. 1, 2009, to 
        bridge renewal funding into fiscal year 2010. Recent HUD 
        estimates of the amount needed to fully fund renewals for the 
        full 12 months of the contract term rather increments through 
        September 30, 2009, have cited the need as $8.1 billion. NAHRO 
        is concerned that the short-funding of contracts as proposed by 
        the Department may increase owner uncertainty and hasten the 
        loss of affordable housing.
    Taken together, the budget request provides no assurance that well-
documented housing and community development concerns will be resolved 
in fiscal year 2009. This, in our opinion, places our invaluable 
affordable housing infrastructure at risk and thwarts our ability to 
undertake necessary revitalization of our neighborhoods and 
communities. Some will contend that larger, unrelated budget pressures 
necessarily limit funding for these accounts. However, those familiar 
with the Nation's housing and community development assets fear that we 
will pay an even greater price for years of disinvestment in this 
infrastructure if we fail to recognize the economic downside of our 
inaction and continue to underfund these accounts.
    Our public housing stock represents a 70-year commitment to provide 
decent, safe, and affordable housing in this country. Local housing 
agencies, with few exceptions, preserve this inventory in a responsible 
and cost-effective manner. However, this is an older inventory that, 
like any other form of real estate, will deteriorate if its needs are 
unmet. The longer these needs are unaddressed, the more the cost of 
repairing the infrastructure grows. If let go too long, the price tag 
to sustain this inventory will become too great a burden on the Federal 
budget. At that point, absent a plan to provide new affordable housing, 
families will, quite possibly, be displaced.
    Thank you for this opportunity to outline our concerns and advance 
our recommendations on the fiscal year 2009 HUD budget. Under your 
leadership, the committee has worked hard in recent years to improve 
upon a series of bad HUD budgets. We look forward to working with you 
once again this year to ensure that America's affordable housing and 
community development needs are addressed in fiscal year 2009.

                                 NAHRO FISCAL YEAR 2009 FUNDING RECOMMENDATIONS
                                            [in millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                     NAHRO
                          Program                             2008 Enacted    2009 Proposed   Recommendation \1\
----------------------------------------------------------------------------------------------------------------
Public Housing Operating Fund.............................           4,200            4,300            \2\ 5,300
    Elderly & Disabled Service Coordinators...............             [15]             [16]                  50
Public Housing Capital Fund...............................           2,439            2,024                3,500
    Resident Opportunity & Supportive Services............             [40]             [38]                  55
HOPE VI...................................................             100   ...............                 800
Safety & Security.........................................  ...............  ...............                 310
Tenant-Based Rental Assistance (Sec 8 Vouchers), Total....      \3\ 16,391       \3\ 15,881   ..................
    Housing Asst. Payments................................     \3\ [14,695]     \3\ [14,161]          \4\ 15,400
    Admin Fees............................................          [1,351]          [1,400]               1,540
    FSS Coordinators......................................             [49]             [48]                  72
    Tenant Protection Vouchers and Administration.........           [$200]           [$150]             ( \5\ )
Project-Based Section 8...................................           6,382            7,000              ( \5\ )
Community Development Fund................................           3,866        \6\ 3,000   ..................
    Community Development Block Grant formula grants......          [3,593]      \6\ [2,934]               4,500
Brownfields...............................................              10   ...............                  25
Rural Housing/Econ. Dev...................................              17   ...............                  25
Sec. 108 Loan Guarantees..................................               5   ...............                   7
HOME......................................................           1,704            1,967   ..................
HOME Formula Grants.......................................           1,628            1,901                2,000
    ADDI set-aside in HOME................................             [10]             [50]  ..................
HOPWA.....................................................             300              300                  300
Homeless Assistance Grants................................           1,586            1,636          ( \7\ \8\ )
Affordable Housing Production                               ...............  ...............          \9\ 1 ,000
----------------------------------------------------------------------------------------------------------------
\1\ NAHRO requests are for stand-alone programs only. Blank indicates no position.
\2\ Reflects the administration's own estimate of need.
\3\ TBRA figures displayed on a program-year basis, consistent with appropriations bill language. HUD documents
  display figures on a fiscal year basis, which blend program years.
\4\ Renewal of existing and incremental vouchers based on 2007 calendar year voucher leasing and cost data
  through September 30, 2007, inflated by blended BLS Consumer Price Index, Urban (CPI-U), Rent of Primary
  Residence component. Assumes a 96 percent utilization rate.
\5\ Fully Fund.
\6\ The President's budget nominally requests $3.000 billion for the CD Fund for fiscal year 2009. However, it
  offsets this amount by presuming the cancellation of $206 million in fiscal year 2008 Economic Development
  Initiatives and other earmarks within the fund. The combination of the request and rescission results in a net
  fiscal year 2008 appropriations request of just $2.794 billion for the CD Fund.
\7\ NAHRO's proposed funding level for Homeless Assistance Grants is for existing McKinney-Vento programs and
  does not include the administration's proposed $50 million set-aside for the Samaritan Initiative.
\8\ At least $1,636.
\9\ Affordable Housing Production should be derived from sources other than appropriations if possible.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 ______
                                 
 Prepared Statement of Hector Pinero Before the Committee on Banking, 
Housing, and Urban Development on Behalf of the National Leased Housing 
Association, National Multi Housing Council, and the National Apartment 
                              Association
    Chairman Dodd, Senator Shelby and distinguished members of this 
committee, my name is Hector Pinero and I am senior vice president of 
Related Management Company. My firm manages 26,000 apartments of 
affordable and market-rate housing in 135 locations in 13 States from 
New York to California. I am responsible for the affordable housing 
portfolio in the New York metropolitan area. Today I am representing 
the National Leased Housing Association (NLHA) the National Multi 
Housing Council (NMHC) and the National Apartment Association (NAA).
    NLHA represents the interests of 600 member organizations involved 
in federally assisted rental housing including developers, owners, 
lenders, housing agencies and nonprofits. NLHA's members provide 
affordable rental housing for over 3 million families.
    NMHC represents the interests of the larger and most prominent 
firms in the multifamily rental housing industry. NMHC's members are 
the principal officers of these organizations and are engaged in all 
aspects of the development and operation of rental housing, including 
the ownership, construction, finance and management of such properties.
    NAA is the largest national federation of State and local apartment 
associations, with nearly 200 affiliates representing more than 51,000 
professionals who own and manage more than 6 million apartments.
    We commend you, Chairman Dodd, for your leadership, and we thank 
the members of the committee for your valuable work addressing the 
important issue of housing and the Federal budget.
                    fiscal year 2009 proposed budget
    On February 4, the President unveiled his fiscal year 2009 budget. 
The President's plan would fund the U.S. Department of Housing and 
Urban Development (HUD) at $38.7 billion, which according to the Center 
on Budget and Policy Priorities, is $330 million above current levels, 
but insufficient in light of the housing affordability issues plaguing 
this country. The HUD budget continues to strain efforts to provide 
decent and safe affordable housing. Over the years, HUD spending has 
declined significantly, illustrated by the fact that HUD's budget in 
1974 was nearly $70 billion (in today's dollars) as compared to the 
$38.7 billion being proposed for fiscal year 2009. Clearly, such cuts 
are indicative of the reduced commitment of the Federal Government to 
affordable rental housing in favor of failed homeownership policies.
    We would like to focus our testimony on two programs that are the 
cornerstone of federally assisted housing, the section 8 tenant-based 
rental assistance program, also known as the Housing Choice Voucher 
program and the section 8 project-based programs.
                        project-based section 8
    The project-based section 8 programs, enacted more than 30 years 
ago, have provided effective and enduring shelter for millions of low-
income families. In addition to making possible the construction or 
rehabilitation of housing units dedicated to low-income occupancy for 
extended periods, the program reduces the rent burden for low-income 
residents living in those properties.
    My company, Related Management, has its headquarters in New York 
City and owns and manages about 26,000 units of multifamily housing in 
13 States from New York to California. Our section 8 project-based 
inventory totals 11,287 units in 64 projects.
    In our opinion, the section 8 subsidy mechanism is the most 
effective housing subsidy ever devised by Congress. It is an elastic 
subsidy that can reach the very poorest families and keep their rent 
burden proportionately the same as the rent burden of families with 
more income.
    However, for section 8 to be an effective program, HUD must comply 
with its contractual promise to housing providers to make timely 
monthly assistance payments. These assistance payments cover the 
difference between tenant rent contributions, generally set at 30 
percent of a tenant's adjusted income, and the HUD-approved rents for 
the property. The tenant rent contribution generally pays for only a 
small portion of the costs of running a property, including debt 
service payments. Without assistance payments from HUD a building 
cannot continue to operate and serve its residents.
    While HUD has been late sporadically in making payments over the 
past several years due to its antiquated computer systems, it was not 
until last summer that a major disruption in payments occurred. From 
June through September, late payments were widespread over most of the 
country. The negative impact of HUD being delayed in meeting its 
contractual obligations has both short- and long-term consequences, 
which we will discuss along with our recommendations to the committee 
for addressing the problem.
    In the case of our company, for example, we billed HUD in June 2007 
for $9.8 million in assistance payments for the month of July. Almost 
one-third of our bill, or $3.1 million, was not paid by July 31, and 
about 20 percent or $2 million remained unpaid until November. One of 
our properties, in San Diego, received no funds for the period of July 
through November, for a total of $875,000. No doubt many other owners 
have been hit harder than us, but any late payment at any time is 
indefensible.
    Owners do what they can to cope during these periods of nonpayment, 
such as drawing funds from a replacement reserve and other reserves if 
they exist, borrowing funds, delaying payments to vendors, and making 
personal contributions. However, not all properties have the ability to 
make ends meet when HUD fails to make timely payments, resulting in 
notices of default, inability to pay operating expenses, deferred 
maintenance, etc.
    Late Housing Assistance Payments (HAP) not only affect the 
operations of a project but also make more difficult the preservation 
of these aging projects through sales, often to nonprofit or other 
preservation purchasers that commit to long affordability periods, and 
through rehabilitation, usually with proceeds from the low-income 
housing tax credit.
    Purchasers, lenders, and tax credit investors have been put on 
alert that the Government may not perform under its contracts, and they 
will act accordingly to protect their interests, assuming they continue 
to participate at all. We have attached to our testimony a list of 19 
adverse consequences of delayed or insufficient HAP funding. We think 
it will be helpful to explain the circumstances that resulted in the 
late HAP debacle.
    In the mid-to-late 1970s and early 1980s, when the section 8 
project-based programs were first developed, the monies for the HAP 
contract (be it 20, 30 or 40 years) were funded up front. For example, 
the costs of a 20-year contract were appropriated during the first year 
of the contract. Further, the subsidy amounts were based on the total 
rental costs at the time and did not consider the tenant contribution, 
which left wiggle room for rent increases during the contract term. 
When the first of the 20-year contracts started to expire around 1994, 
it was the first time in 20 years that Congress needed to make an 
appropriation to subsidize the properties. Congress agreed to fund the 
renewals, but only at rents not to exceed comparable market rents 
(hence the Multifamily Assisted Housing Restructuring Act (MAHRA), 
which provided the Mark-to-Market program and ultimately the Mark-Up-
to-Market program).
    As the number of HAP contracts renewing under MAHRA continued to 
increase and more appropriations were needed, instead of HUD requesting 
additional funds in its budget request, the Department chose to ask for 
less funding than was actually required to renew the contracts. This 
approach masked the true costs of contract renewals, but it was 
successful for a number of years because HUD was able to recapture 
previously appropriated funds remaining in HAP contracts that were 
about to expire. When most of the 20-year contracts expired around 2001 
and 2002, the availability of recaptured funds diminished. HUD's need 
for increased funding for section 8 renewals should have been reflected 
in its budget proposals around that time, but again HUD chose to mask 
the true costs.
    To enable the renewal of contracts without sufficient 
appropriations, HUD chose to renew the HAP contracts with less than 1 
year of funding. For example, if a contract expired in December 2005, 
HUD would provide 9 months of funding until September 30 (the end of 
the fiscal year) instead of providing the full 12 months of funding up 
front. Essentially, it was bifurcating the 12 months of funding over 2 
fiscal years. In this example the remaining funding for the contract 
would have been provided after October 1 (the new fiscal year) at which 
time 3 months of funding would be added to the contract for a total of 
12 months. Until last year, this practice was invisible to the owners. 
However, in the fall of 2006, HUD's Chief Financial Officer (CFO) 
determined that such partial funding of contracts could not continue as 
the CFO believed this approach to be a violation of the Antideficiency 
Act (ADA), a law that is intended to ensure that appropriated funds are 
not mishandled. This new interpretation of the law by the CFO (which, 
incidentally, was not put into writing until requested by Members of 
Congress more than a year later) resulted in HUD reverting to funding 
renewals for the full 12 months in advance and not in increments.
    Because the HUD fiscal year 2007 budget request was based on its 
previous practice of partially funding contracts, there were 
insufficient funds appropriated by Congress, thus creating a large 
shortfall. The result of the shortfall was a delay in funding to 
thousands of section 8 properties. When HUD realized in May 2007 that 
it would not have sufficient funding to renew all of the contracts 
expiring in fiscal year 2007, HUD's Office of Housing eventually 
reached a compromise with its CFO office to revert to partial or 
incremental funding of renewal contracts as long as the renewal HAP 
contract was amended to reflect the fact that partial (and not 12-
month) funding was being provided at the time the renewal contract is 
executed. In other words, if HUD disclosed to the owner that only 
partial funding was being provided, the CFO deemed that HUD was not in 
violation of the ADA.
    HUD's policy of incrementally funding (or funding for less than 12 
months) continues in the current fiscal year (fiscal year 2008) because 
of insufficient appropriations. Further, the President's fiscal year 
2009 request does not include sufficient monies to put section 8 
contract renewals back on a 12-month funding track. Insufficient 
funding coupled with HUD's inefficient payment process and questionable 
disbursement systems is likely to create financial disruptions to 
section 8 properties for the foreseeable future.
    The perception a partially-funded contract creates is devastating. 
It is of a government struggling to keep its financial house in order. 
Until recently, several years of predictability and stability in the 
section 8 renewal process have led purchasers, lenders and investors in 
section 8 properties to rely on long-term section 8 renewal contracts, 
even though they are subject to annual appropriations, as sufficient 
backing for their investment. They assumed the appropriations risk in 
these contracts because they thought the risk was minuscule. They are 
not so sure anymore.
    There are other more technical, but serious, concerns with short 
funding commitments. These contracts purport to bind an owner to 
providing section 8 housing for 1 year. If HUD funding stops after 4 
months, is the owner bound to continue to comply with section 8 rent 
and other rules without receiving assistance payments? If the owner can 
get out of the contract will it be bound by the 1-year tenant notice 
statute, which will prevent the owner from raising rents for 1 year 
after an opt-out notice to the tenants? Will the tenants be eligible 
for enhanced vouchers if the contract is abrogated? Will HUD wait until 
the 1-year notice period has elapsed before awarding enhanced vouchers 
to the tenants, as has been its recent policy? Will there be sufficient 
funding for all enhanced vouchers?
    All of these concerns will influence an owner's decision to remain 
in the program or to opt out, as well as decisions about whether to 
purchase and rehabilitate section 8 projects. At a minimum, owners will 
more likely give routine notices to tenants that they intend not to 
renew a section 8 contract, in order to reduce their exposure period 
during which they do not receive assistance payments but cannot raise 
rents. These opt-out notices will cause anxiety among tenants who will 
be placed in a continual state of uncertainty as to whether they will 
lose their homes or not.
    Unless the industry has confidence that the Government is committed 
to adequate and timely funding, the section 8 inventory is likely to 
shrink in size. Nor will it get the new investment needed to preserve 
these properties as affordable housing and to keep them affordable far 
into the future.
    What can this committee do to help rectify the damage done to the 
section 8 inventory? First, it can exercise close oversight over the 
process HUD uses to make section 8 assistance payments, as well as how 
budgetary needs are calculated. The Secretary should be directed to use 
a portion of the appropriated working capital funds for this purpose. 
Second, legislation should be enacted to: impose a penalty on HUD when 
its payments are more than 30 days late; remove any requirements that 
owners receive HUD permission to use reserves to pay their mortgages 
and employees when HAP payments are late; and require HUD to notify 
owners when late payments are anticipated. Third, the committee should 
urge that sufficient appropriations be provided for fiscal year 2009 to 
avert the use of a succession of short-term funding obligations by HUD.
                        housing choice vouchers
    We would also like to express our strong support for the section 8 
Voucher Program. Housing Choice Vouchers enable nearly 2 million 
households of low- and very-low-income families and the elderly to 
achieve decent, safe and affordable housing. The program has been 
successful because it provides choice to families, allowing them to 
rent decent and safe apartments in the communities that are near their 
schools, churches and workplaces. It also has the benefit of reducing 
the concentration of poverty. Vouchers also enable the private sector 
to partner with housing agencies to improve the housing stock in 
communities as well as protect tenants during market rate conversions. 
Vouchers are an essential tool for the provision of housing assistance 
and are supported by the owner community. Related Management is a 
strong supporter of this program and currently leases to 1,600 voucher 
holders.
    We are concerned about the future of the program because HUD's 
budget proposes to reduce funding for the voucher program by nearly 
$500 million, offsetting the reduction by relying on unused reserves, a 
move that the Center on Budget and Policy Priorities (CBPP) believes 
will result in the loss of at least 100,000 vouchers. Further, the 
proposed budget recommends using a funding formula that would base 
fiscal year 2009 funding on the costs per voucher (plus inflation) from 
fiscal year 2007 instead of the previous 12 months. This is 
unacceptable to our members because such an approach will result in 
additional shortfalls, jeopardizing housing assistance currently in use 
by tens of thousands of low-income families. It is imperative that the 
2009 funding cycle be based on leasing and cost data for the most 
recent Federal fiscal year as provided for fiscal year 2008 by the 
Omnibus Appropriations Act (H.R. 2764) that President Bush signed into 
law on December 26, 2007. This is a fair formula that maximizes the 
amount of dollars provided by the appropriations process and ensures 
program stability.
                  the broader national housing crisis
    The current situation in the for-sale housing market is an 
unfortunate turn of events that is made even more unfortunate by the 
fact that it was completely foreseeable and preventable. For decades 
the Government has pursued a ``homeownership at any cost'' housing 
policy. Many Government officials, like other participants in the 
housing sector, mistakenly assumed that house prices would always go 
up. So they enticed people into houses they could not afford, and they 
forgot the rarely spoken truth that there is such a thing as too much 
homeownership.
    Now we are seeing the consequences of that misguided policy. For 
years, we and others have been predicting this meltdown. We have been 
warning policymakers that pushing homeownership so aggressively could 
be disastrous not only for the hard-working Americans lured into 
unsustainable homeownership, but also for our local communities and our 
national economy.
    That is exactly what is happening now. People are losing their 
homes, local communities are struggling with blight and crime, and our 
national economic growth is at risk. We understand that policymakers 
are worried that this situation might spill over into the broader 
economy, and we support efforts to help our country avoid a housing-
induced recession.
    The mortgage market meltdown represents a failure of Government 
oversight and regulation. Despite repeated warnings, nothing was done 
to prevent it. On the contrary, the Federal Government gave a ``green 
light'' to this bubble by trying to push homeownership without limits 
and even trying to create a federally insured no-downpayment mortgage.
    Unfortunately, while there was much the Government could have done 
to prevent this crisis, there isn't much it can reasonably do now to 
alleviate it. What it can do, however, is recognize its own mistakes 
and ensure that this doesn't happen again. And that means, among other 
things, recognizing that homeownership isn't the right housing choice 
for all households at all points in their lives. Housing our diverse 
Nation well means having a vibrant rental market along with a 
functioning ownership market. It's time we adopt a balanced housing 
policy that doesn't measure success solely by how much homeownership 
there is.
                               conclusion
    I thank you for the opportunity to testify on behalf of the 
National Leased Housing Association, the National Multi Housing Council 
and the National Apartment Association, and wish to offer our 
assistance to the committee as you continue your important work.
  some implications of inadequate funding of project-based section 8 
                               contracts
NLHA
    If Congress fails to appropriate sufficient funds for fiscal year 
2008 to make all contractual section 8 payments, in original and 
renewal contracts, this failure will be regarded by participants in the 
section 8 program, other housing programs, other Federal programs, and 
the capital markets as a default by the United States in its perceived 
moral obligation. The section 8 contract has already been devalued even 
without a default by sustained talk of inadequate funds, widespread 
late payments in 2007, and the inability of HUD to provide 1-year 
extension contracts because of insufficient funds. A quick and decisive 
fix may salvage some of the damage.
    The following are several specific adverse consequences:
  --Lenders will be less willing to make long-term loans for 
        refinancings or purchases of section 8 projects, transactions 
        that help in the rehabilitation and preservation of the 
        projects.
  --Investors and syndicators will be less willing to purchase low-
        income housing tax credits, which are key to the sale and 
        rehabilitation of those projects.
  --To the extent the above players continue to participate, it will be 
        on more onerous terms and with a more rigorous selection 
        process to assist only projects that would be viable if section 
        8 payments terminated.
  --Owners who economically can opt out of the section 8 program will 
        plan to do so and will do so at the first opportunity.
  --Owners can also stop providing section 8 housing even prior to 
        contract expiration if HUD fails to provide assistance 
        payments.
  --Tenants will become anxious about the potential loss of their 
        subsidy and homes. The elderly are particularly susceptible to 
        those concerns. Some will move out and live with their 
        families, thus losing their eligibility for tenant protection 
        vouchers when an owner opts out.
  --Owners will select the highest-income tenants they legally can 
        select in order to mitigate the impact of missed or reduced 
        assistance payments.
  --The cost of enhanced vouchers and other tenant protection vouchers 
        will soar, or, alternatively, all tenants will not be protected 
        if there is an opt-out.
  --There may be an increase in defaults on FHA-insured mortgages 
        covering section 8 projects.
  --Affordability use restrictions for projects that have been 
        restructured in the mark-to-market program, which run 30 years, 
        would be converted to permit higher-income tenants to be 
        served.
  --Fifty-year affordability use restrictions for LIHPRH projects and 
        existing use restrictions for ELIPHA projects would be 
        terminated and the projects rented to market tenants if HUD 
        cannot provide all the contractual section 8 payments.
  --For those projects remaining in the program, there will be an 
        increase in deferred maintenance, depletion of replacement 
        reserves, and little likelihood of obtaining tax credits for 
        rehabilitation.
  --Prices realized by HUD in selling foreclosed properties with 
        section 8 subsidies would decline.
  --If Congress authorizes the conversion of rent supplement and RAP 
        contracts to section 8, there will be few takers.
  --Participation and continued participation in other housing programs 
        involving multi-year subsidies, such as project-based vouchers, 
        tenant-based vouchers, and participation in the 202/811 
        programs would decline, or the quality of participants would 
        decline.
  --The lack of sufficient section 8 funds will also thwart the 
        refinancing of older section 202 projects for the elderly and 
        disabled that have section 8 subsidies. Many of these projects 
        are 20 to 30 years old and can be preserved for another long 
        period with recapitalization and rehabilitation, but lenders 
        and investors would be wary of participating.
  --The ability of public housing agencies (PHA) to borrow funds for 
        capital improvements, secured by future appropriations to the 
        capital fund, would be made more difficult and costly.
  --Participation in non-housing Federal programs, dependant on ongoing 
        Federal subsidies, would be compromised if participants felt 
        the United States defaulted in the major section 8 program.
  --There are broader implications in the capital markets. A default by 
        the United States in any area could send further shock waves to 
        the already shocked markets. Would this be the end of the 
        perceived Federal backing of Fannie Mae and Freddie Mac 
        obligations, and if so, would that increase borrowing costs for 
        home purchases and refinancing? Would the hint of default by 
        the United States raise borrowing costs for Treasury?

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Murray. At this time, if the members have any 
additional questions, please submit them for inclusion in the 
record.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
            Questions Submitted by Senator Richard J. Durbin
                      housing discrimination study
    Question. Historically, how has HUD funded the Housing 
Discrimination Study? Why is HUD requesting funding for the HDS through 
the Fair Housing Initiatives Program account?
    Answer. Congress has appropriated the funding under the Fair 
Housing Initiatives Program (FHIP) to support its housing 
discrimination studies. Beginning in fiscal year 1999, Congress gave 
HUD the authority to use the FHIP budget to support these studies. To 
date, HUD has issued three decennial housing discrimination studies. 
The first in 1977 was funded through non-FHEO program funds.
    However, the Housing Discrimination Study (HDS) 2000 study, as 
appropriated by Congress, was funded through FHIP. Specifically, $7.5 
million, $6.0 million, and $7.5 million were appropriated in HUD's 
fiscal years 1999, 2000 and 2001, budgets respectively. Consistent with 
the 2000 study, in fiscal year 2009 HUD continues to use this funding 
methodology in requesting funds for the 2010 HDS study.
    HDS is a tool that HUD uses to make or change fair housing policy 
by providing evidence of housing discrimination in America through a 
comprehensive research approach that includes using standard testing 
methods. HDS data helps HUD understand the nature of housing 
discrimination and the extent of the problem, as well as to identify 
the groups that are more impacted by acts of housing discrimination. 
This data helps HUD in determining the most effective strategies in 
meeting its fair housing mission. HUD has used the results of the 
housing discrimination studies to design new education and outreach 
initiatives and in making decisions for fair housing with most 
activities funded with FHIP resources.
                              fhip grants
    Question. Last year, how many private fair housing groups applied 
for FHIP grants, how many received grant funding, and how many were 
denied? Of those that were denied, what were the reasons for denial?
    Answer. In fiscal year 2007, HUD made $18.1 million available under 
the Fair Housing Initiatives Program (FHIP) Notice of Funding 
Availability (NOFA). This funding was divided between two initiatives: 
the Education and Outreach Initiative (EOI) and the Private Enforcement 
Initiative (PEI). This broke down as $4.1 million for EOI and $14 
million for PEI.
    EOI provides funding for education and outreach programs to inform 
the public about their rights and responsibilities under the Fair 
Housing Act. HUD awarded the $4.1 million under EOI to 32 groups out of 
127 groups who applied for grants under EOI. Of the 95 groups who did 
not receive awards, 4 were ineligible for various reasons, and 36 had 
scores below the threshold minimum established by the Office of 
Management and Budget (OMB). The remaining 55 groups had qualifying 
scores but did not receive funding either because their score was not 
competitive enough for funding or because a higher scoring group in the 
same geographic area received funding.
    In order to achieve the broadest geographic scope with the 
Department's education and outreach funding, the Department took into 
consideration not only the applicant's scores, but also where the 
applicant was located. This funding strategy allowed HUD to make EOI 
awards in 32 different States.
    In addition, the Department awarded $1 million for a national 
education and outreach campaign on lending discrimination, which will 
reach approximately 100 million people throughout the country. The Ad 
Council reported that one-quarter of the public viewed one of the 
Department's previous public service announcements.
    PEI supports the investigation and resolution of housing 
discrimination allegations handled by private fair housing 
organizations. These organizations conduct testing where discrimination 
is suspected and assist the public in resolving complaints through 
informal means. When necessary these groups file complaints with HUD 
and in Federal court on behalf of victims of discrimination.
    In fiscal year 2005, at the urging of several fair housing 
organizations, including the National Fair Housing Alliance, HUD added 
the Performance-based Component to PEI. Performance-based funding 
provides 3-year grants to top-performing enforcement organizations. 
These organizations must have exceptional experience and excellent 
performance reviews. The multiple-year funding encourages them to take 
on larger cases of housing discrimination and allows for better 
strategic planning by the organizations.
    Funds to performance-based groups now account for 73 percent of PEI 
funding. In fiscal year 2007, of the $14 million awarded under PEI, the 
Department first had to reserve $6.5 million for 25 top-performing 
groups who received a performance-based grant in fiscal years 2005 and 
2006. That left $7.4 million to be awarded in new grants under PEI. The 
Department received 101 applications for this PEI funding. Of these 101 
applicants, 30 were ineligible, and 18 had scores below minimum 
threshold level established by OMB. Of the remaining 53 applicants 
qualified for the PEI funding available in 2007, 14 groups received 
their first year allocation of performance-based funding, and an 
additional 16 organizations received general PEI grants.
    The 2007 PEI grants support fair housing enforcement in 25 States. 
This includes four States where there is no substantially equivalent 
State or local fair housing law---Nevada, Alabama, Mississippi, and 
Wisconsin.
    In addition to enforcement efforts, all PEI recipients are required 
to use 10 percent of their funding for education and outreach efforts. 
This leverages an additional $1.4 million in education and outreach 
dollars on top of the $4.1 million the Department has already awarded 
under EOI. Education and outreach by PEI groups is particularly 
effective, because information about fair housing rights is provided by 
the local group that someone can turn to if those rights are violated.
                              fhip funding
    Question. Why has HUD requested less funding for FHIP in fiscal 
year 2009 compared to the fiscal year 1994 funding level, even as 
housing discrimination persists in this country? Please explain the 
reasons for this diminished request and how HUD can expect to fulfill 
the promise of the Fair Housing Act in light of the fact that the 
number of complaints filed with HUD and its fair housing partners is 
less than 1 percent of total fair housing violations; a HUD study shows 
that knowledge of fair housing laws has not improved and is critical to 
pursuing alleged violations; HUD is unable to fund private fair housing 
centers who score highly on the agency's own performance scale; and the 
predatory lending practices highlighted by the recent mortgage crisis 
disproportionately victimize racial minorities, a class protected under 
the Fair Housing Act.
    Answer. For fiscal year 2009, HUD requested $26 million for Fair 
Housing Initiatives Program (FHIP). In fiscal year 2009, $19.2 million 
of this funding will be made available to fair housing organizations 
through competition, with $6 million going to a study the Nation 
conducts every decade to measure the level of housing discrimination. 
All these funds go either directly to enforcement of the Fair Housing 
Act, education of the public regarding their rights and 
responsibilities under the Act, or research that will help best target 
these funds in the future. Moreover, the 2010 Housing Discrimination 
Study (HDS) will enlist and compensate private fair housing 
organizations in conducting the proposed research. In the study 
conducted in 2000, private fair housing groups received approximately 
68 percent of the funding set aside for the study. The Department 
expects the same with the 2010 study. Therefore, the study would 
provide an estimated $4.08 million to fair housing groups, in addition 
to the $19.2 million directly allocated to the groups.
    HUD does not believe its fiscal year 2009 FHIP budget of $26 
million is an inappreciable amount. The requested amount is 
appropriately balanced to workload needs and continuing and evolving 
fair housing efforts. We also do not think one can make an appropriate 
comparison between this year's FHIP budget and one from 1994. First, 
the funding amounts are roughly the same, and second, the overall 
amount to fair housing organizations will likely exceed the 1994 level, 
given the additional amount provided through research testing for HDS 
2010.
    Though housing discrimination continues to persist, the 
Department's studies show that HUD, State, and local agencies, and the 
private fair housing advocacy community, have also done a lot to 
address the problem. HUD's HDS from 2000 shows that the overall level 
of discrimination that African-Americans and Hispanics face has 
declined from 1989 as a result of these efforts. Nevertheless, the 
Department each year requests a budget that allows HUD, State and local 
agencies, and private fair housing groups to tackle the evolving 
problem and the new forms such discrimination takes. The fiscal year 
2009 budget, we believe, will meet this challenge.
    In addition to the support HUD's annual budget provides for the 
short-term needs of fair housing groups, this budget also sustains the 
long-term needs of existing groups through its Performance-Based 
Component. Private fair housing groups, including the National Fair 
Housing Alliance, advocated for this component, and HUD began funding 
it in fiscal year 2005. In fiscal year 2007, this funding now accounted 
for 73 percent of FHIP's $1.4 million enforcement budget, providing the 
top-performing groups with 3 years of funding. This allows for broader 
testing and more systemic investigations by these groups.
    FHIP's enforcement budget promotes the activities of the private 
groups, assists them in bringing in more allegations, and expands fair 
housing outreach by requiring that enforcement grantees spend 10 
percent of their grant on education activities. In fiscal year 2007, 
this means that the groups will expend approximately $1.4 million 
marketing their services and educating the housing industry. These 
leveraged funds add to the $4.1 million in the budget allocated 
strictly for education and outreach grants.
    State and local agencies in the Department's Fair Housing 
Assistance Program (FHAP) are also an integral part in the Nation's 
fulfillment of its fair housing objectives. These agencies handle 
approximately 75 percent of the complaints filed in the United States. 
For fiscal year 2009, HUD has requested $25 million to support fair 
housing investigations and education by its State and local partners. 
This funding is tied largely to the complaints these groups receive 
each year. As complaints to these agencies have increased, the 
Department has had to increase the amount budgeted for these 
organizations in order to keep pace.
    In fiscal year 2008, HUD and State and local FHAP agencies received 
more than 10,000 complaints under the Fair Housing Act or a 
substantially equivalent State or local law. In almost one-third of the 
complaints, whether at HUD, or at one of the 108 State and local 
agencies, the agency obtains a positive result for the complainant, 
either through a finding of discrimination or resolution between the 
parties. In 2007, conciliation agreements and settlements provided more 
than $4.76 million in monetary relief to victims of discrimination. 
This is addition to other relief that agencies obtain for the 
complainant, such as providing the victim with the desired unit or 
accommodation, a reduction in the amount of rent or in the interest 
rate on loans, and retrofits that make a property accessible to persons 
with disabilities.
    In addition to individual complaints, HUD has stepped up its use of 
Secretary-initiated enforcement in its efforts to proactively address 
and eliminate housing discrimination. This means if only a small share 
of the public is filing complaints, the Department is not waiting to 
receive a formal housing discrimination complaints but is vigorously 
pursuing cases where there is reason to believe that a person or entity 
has committed a discriminatory act. In fiscal year 2007, HUD filed 16 
Secretary-initiated investigations or complaints. These addressed a 
variety of issues including widespread race discrimination in the New 
York rental market; housing providers who excluded families with 
children; discrimination against African-American and Hispanic mortgage 
applicants; and religious discrimination among real estate agents. The 
Department has filed 4 Secretary-initiated complaints or investigations 
in fiscal year 2008.
    To further the Department's mission of ensuring fair housing, HUD 
has taken a number of strategic initiatives to enhance fair housing 
enforcement including creating a lending division to conduct fair 
lending investigations. The division initiates investigations when 
lending patterns or other information suggests discrimination by a 
lender, but no individual has come forward to file a complaint. In 
addition, the Department has reassigned to the division HUD's fair 
lending oversight of Fannie Mae and Freddie Mac to ensure their 
underwriting policies and practices comply with fair lending laws. The 
Department is pursuing six nationwide Secretary-initiated 
investigations into independent mortgage companies for discrimination 
based on race or national origin in the making of loans, the pricing of 
loans, and for policies that have a discriminatory effect.
                           fair housing laws
    Question. How does HUD plan to increase public awareness of 
existing fair housing laws?
    Answer. As explained in more detail below, HUD uses an array of 
strategies, including print (e.g. posters, pamphlets and brochures) and 
electronic media (e.g., internet, television, radio), advertisements in 
movie theaters, on buses, taxis, public buildings, and meetings, 
conferences, seminars, etc., to increase public awareness of the Fair 
Housing Act. In fiscal year 2007, HUD, with its Fair Housing 
Initiatives Program (FHIP) and Fair Housing Assistance Program (FHAP) 
partners, conducted fair housing education and outreach programs and 
activities that reached approximately 50 million people, which is about 
16 percent of the population of the United States. Going forward, HUD 
will continue to use these and other methods to promote its fair 
housing mission.
  --National Slogan.--HUD started to consistently use the slogan, 
        ``Fair Housing It's Not an Option, It's the Law,'' in fiscal 
        year 2006. We determined that mixed messages and multiple 
        slogans confused the general public. Therefore, HUD has 
        utilized the same slogan in fiscal years 2007 and 2008 and will 
        continue to use it in fiscal year 2009.
  --Fair Housing Initiatives Program (FHIP)--Education and Outreach 
        Initiative (EOI).--The FHIP was created under the Housing and 
        Community Development Act of 1987. One of the goals of the FHIP 
        is to educate the public and the housing industry on their 
        rights and responsibilities under the Fair Housing Act. Each 
        year since 1987, HUD has awarded funds to fair housing 
        organizations under EOI to meet this goal. In fiscal year 2007, 
        approximately $2.6 million was awarded to 32 fair housing 
        organizations to conduct fair housing education and outreach 
        programs and activities. In the fiscal year 2008 HUD budget, 
        Congress appropriated $24 million for the Fair Housing 
        Initiatives Program. For the EOI Awards, $2.8 million has been 
        set aside for EOI awards. In addition, Private Enforcement 
        Initiative-General Component ($19 million) has a requirement 
        that 10 percent of the funds, about $1.9 million, be used for 
        education and outreach activities. HUD has requested additional 
        funds for FHIP in fiscal year 2009.
  --National Media Campaign.--In April 2002, HUD released a study of 
        fair housing laws, ``How Much Do We Know?'' The report gauged 
        what the public knew about fair housing laws. The Study found 
        general awareness, with one-half of the public able to 
        correctly identify six or more of the eight scenarios that 
        described illegal conduct. However, while many persons were 
        conscious of fair housing protections, 83 percent did nothing 
        about it when confronted with an act of housing discrimination. 
        Following this awareness study, HUD, in fiscal year 2003, 
        developed a national media campaign to educate the public on 
        fair housing. Since 2003, HUD has awarded funds for a national 
        media campaign. We believe that a national media campaign is an 
        effective mean of promoting the fair housing because it 
        provides a consistent message and it provides information to 
        the entire country. Our national campaigns have been 
        particularly effective. For example:
    --In fiscal year 2006, HUD launched a national campaign to inform 
            individuals who were displaced by Hurricanes Katrina and 
            Rita of their fair housing rights and how to file housing 
            discrimination complaints. The message of the public 
            service announcement (PSA) was, ``the storm isn't over.'' 
            This PSA encouraged hurricane evacuees and other members of 
            the public to call HUD's housing discrimination hotline if 
            they suspected they had been denied housing for 
            discriminatory reasons.
    --In fiscal year 2007, HUD awarded a grant to Pacific News Service, 
            a not-for-profit organization with specialization in radio, 
            television, and print media for minority and ethnic 
            populations, to provide an education and outreach program 
            on fair lending, to education the public of the fair 
            lending requirements of the Fair Housing Act. Pacific News 
            Service partnered with the National Community Reinvestment 
            Coalition (NCRC), a Fair Housing Initiatives Program 
            recipient and a nationally recognized non-profit 
            organization with expertise in fair lending issues. A PSA 
            with actor Dennis Haysbert as the fair lending 
            spokesperson, has been distributed to all HUD Fair Housing 
            Assistance Program and Fair Housing Initiatives Program 
            partners and to approximately 1,800 national cable and 
            commercial television networks for airing. The PSA is 
            available in both English and Spanish and it is closed 
            caption. Additionally, fair lending posters have been 
            produced in English, Spanish, Russian, Arabic, Chinese, 
            Vietnamese, and Korean. The posters have been distributed 
            to our Fair Housing Initiatives Program and Fair Housing 
            Assistance Program partners. They will also be available 
            through HUD/Fair Lending Web site.
    --In association with the fair lending media campaign, NCRC will 
            conduct 12 fair lending forums in the following cities: 
            Atlanta, Georgia; Boston, Massachusetts; Charlotte, North 
            Carolina; Chicago, Illinois; Columbus, Ohio; Denver, 
            Colorado; El Paso, Texas; Fresno, California; Philadelphia, 
            Pennsylvania; Washington, DC; Cleveland, Ohio; and Detroit, 
            Michigan. These 12 cities were selected because they were 
            identified as cities with high foreclosure rates. The first 
            forum begins in Atlanta, GA, on May 17, and the last 1 
            forum is scheduled for Detroit, MI, on September 20. We 
            estimate that the lending forums will reach approximately 
            6,000 households and will result in an increase of public 
            knowledge on the fair lending requirements of the Fair 
            Housing Act, how to avoid predatory loans, and what options 
            are available to homeowners facing foreclosures. In 
            addition to the NCRC staff, the forums will feature HUD 
            staff, and HUD approved HUD housing counseling agencies.
    --In fiscal year 2008, HUD designated $1 million of the Fair 
            Housing Initiatives Program appropriation for a national 
            media campaign. The funds will be awarded through the FHIP 
            NOFA again to address discriminatory and predatory lending. 
            Consistent with is strategies since 2003, HUD, in its 
            fiscal year 2009 proposed budget, requested $1 million for 
            a national media campaign.
  --Media Activities.--In fiscal year 2007, as detailed in HUD's fiscal 
        year 2007 Fair Housing Annual Report to Congress, HUD undertook 
        the following media activities to increase the public's 
        knowledge of fair housing laws:
    --From April 6, through 12, 2007 and October 26, through November 
            2, 2007, HUD sponsored two fair housing advertisements that 
            appeared in over 100 movie theaters, on more than 1,000 
            screens throughout the country. HUD spent approximately 
            $17,000 in its movie theater advertisements that reached 
            approximately 1.5 million movie goers. This is at a cost of 
            about $0.011 per person. This marketing technique is a cost 
            effective method of informing the public about the Fair 
            Housing Act and HUD's toll free numbers. During June 2008, 
            HUD will place the lending PSA, described above, in movie 
            theaters across the Nation. Because HUD believes the use of 
            the movie theaters is a cost effective method to reach 
            large number of people, it will continue to utilize this 
            source of marketing during fiscal year 2009.
    --Samples of news articles and interviews follow:
                  As a result of HUD's outreach efforts, the April 15, 
                2007, issue of Parade magazine contained an article on 
                fair housing. The article advised readers that housing 
                discrimination is illegal and provided several examples 
                of unlawful discrimination, such as charging higher 
                rent to tenants based on race or religion or refusing 
                to accept families with children. The article also 
                provided HUD's housing discrimination hotline, 1-800-
                669-9777. Parade has a circulation of more than 35.5 
                million.
                  On September 28, 2007, Gannett News Service ran a 
                featured article on fair housing. USA Today had 
                multiple stories, including a prominent main story that 
                included quotes from Assistant Secretary Kim Kendrick. 
                The story was largely about HUD's education and 
                outreach efforts led to increased fair housing 
                complaints. The estimated circulation for Gannett 
                Newspapers is 7.2 million readers. For complete details 
                on the Gannett News Service on ``Closed Doors: Housing 
                Discrimination Complaints on the rise across the 
                country,'' please go to: http://gns.gannettonline.com/
                apps/pbcs.dll/section?Category=HOUSING
                  On July 16, 2007, Assistant Secretary Kim Kendrick 
                was featured on ``The Federal News Drive'' with Mike 
                Causey and Jane Norris on Federal News Radio. Ms. 
                Kendrick discussed the fair lending provisions of the 
                Fair Housing Act.
                  On February 17, 2007, the CNN program Open House 
                aired a segment on housing discrimination. The segment 
                featured an interview with Nannatte Bishop, an African-
                American woman who filed a complaint with HUD alleging 
                that Fifth Third Bank denied her application for 
                mortgage loan because of her race. Approximately 
                665,000 viewers watched this episode.
                  On a monthly basis, starting with the June 2006 
                through June 2007, Essence Magazine featured an article 
                on 12 steps of the home buying process. Assistant 
                Secretary Kim Kendrick served as one of 12 members of 
                an advisory board throughout the 12 steps. The name of 
                the Office of Fair Housing and Equal Opportunity 
                appeared in all 12 issues of Essence. Assistant 
                Secretary Kendrick was featured in three steps. For 
                instance, Step 3: Learn About the Mortgage Industry, 
                included information on the home buying process and 
                five ways individuals can protect themselves from 
                unfair lending practices and predatory lenders. On a 
                monthly basis, Assistant Secretary Kendrick provided 
                guidance to each of the three families. Essence has a 
                monthly circulation of approximately 1,066,000.
    --One way to raise public awareness of fair housing laws is for HUD 
            to publicize cases that result in significant housing or 
            monetary relief on its Web site and through press releases. 
            By publicly announcing all of its charges and major 
            conciliations, we hope to re-enforce the public's trust of 
            HUD's fair housing enforcement mission. FHEO's Web site 
            statistics show that it receives from 4,000 to 20,000 hits 
            per day.
    --Letters to the editors from Assistant Secretary Kendrick appeared 
            in the Sunday Los Angeles Times (approximately 1.2 million 
            readers) and Times Picayune (approximately 262,000 
            readers).
    --Fair Housing Op-Ed. During April 2007, an op-ed piece written by 
            HUD appeared in four African-American newspapers. The op-ed 
            appeared in the Pittsburgh Courier, Dallas Examiner, 
            Louisville Defender, and East of the River newspaper, which 
            together reach more than 60,000 readers.
    --Assistant Secretary Kim Kendrick appeared in an article in the 
            Federal Times which has an estimated circulation of 38,000. 
            In the article, Assistant Secretary Kendrick discussed her 
            role as the Administration's top enforcer of the Federal 
            fair housing laws.
  --Fair Housing Month--2007, 2008, and 2009.--During the April 2007 
        Fair Housing Month, HUD and its FHIP and FHAP partners 
        sponsored and participated in over 250 events. Many of these 
        events will be duplicated in fiscal year 2008 and fiscal year 
        2009. Some of the more innovative events include:
    --Charleston Human Rights Commission and the Huntington Human 
            Relations Commission--both FHAP funded agencies--erected 
            several Fair Housing Month billboards in their cities. 
            Also, the Charleston, WV, Human Rights Commission placed 
            advertisements on the tops of taxi cabs to raise awareness 
            of fair housing. It is estimated that approximately 51,000 
            people may have seen these taxi advertisements.
    --For the second year in a row, Philadelphia skyline was lit by 
            HUD's Fair Housing Month slogan as it scrolled around the 
            top of the 28-story building of the Philadelphia Energy 
            Company (PECO). PECO displayed the slogan on the evenings 
            of April 13, 14, 15, and 16. In bright letters that are 38 
            feet high, Fair Housing: It's Not an Option; It's the Law 
            is scrolled around all four sides of the downtown 
            skyscraper.
    --During the Fair Housing Month 2007, the LA Times and San Diego 
            Union Tribune each ran fair housing ads four different 
            times in their newspapers. Displaying HUD's Fair Housing 
            message, ``Fair Housing: It's Not an Option; It's the Law'' 
            for free.
    Additional information about HUD's 2007 Fair Housing Month events 
may be found on the following website: http://www.hud.gov/offices/fheo/
FHMonth/2007FHM-Events.pdf
  --Disaster Response.--HUD strongly believes that it has a 
        responsibility to ensure that persons affected by disaster are 
        not victimized when searching for a new place to call home. As 
        a measure of prevention and pro-action, FHEO collaborated with 
        a group of Fair Housing Assistance Program (FHAP) and Fair 
        Housing Initiative Program (FHIP) agencies and other fair 
        housing professionals to develop a fair housing toolkit for 
        emergency preparedness. Toward this end, FHEO engaged Emergency 
        Management and Special Needs Consultants to facilitate 
        roundtable discussions to define the role of fair housing in 
        disaster preparedness planning identify the challenges that 
        fair housing professionals face in responding to disaster 
        situations, develop disaster-related education and outreach 
        initiatives, develop communication strategies, and coordinate 
        enforcement efforts. The final result was a ``Fair Housing 
        Disaster Toolkit for Emergency Preparedness'' for fair housing 
        professionals. The toolkit was issued in July 2007 and was 
        distributed to over 800 participants of HUD's 2006 National 
        Fair Housing Policy Conference. A copy of the toolkit continues 
        to be available through the following website: http://
        www.hud.gov/offices/fheo/library/FHEO-DisasterToolkit.pdf
  --Fair Housing Exhibit Booth.--The purpose of the Fair Housing 
        Exhibit Booth is to provide fair housing information to the 
        general public, housing, real estate, lending, insurance, and 
        civil rights professionals at their national conferences and 
        meetings. In fiscal year 2007, HUD operated the Fair Housing 
        Exhibit Booth at 12 events throughout the country, including 
        national conferences held by the National Association for the 
        Advancement of Colored People, the National Association of Home 
        Builders, the National Council of La Raza, the National Bar 
        Association, National Black Family Reunion, and the 
        Congressional Black Caucus. It is estimated that approximately 
        500,000 people were reached through HUD's Fair Housing Exhibit 
        Booth.
  --Participation in Conferences and Events.--Another way that HUD 
        increases the public's awareness of the Fair Housing Act is by 
        participating in conferences and other events held by HUD 
        offices, housing industry groups, and fair housing groups 
        throughout the Nation. For example, during fiscal year 2007, 
        staff has participated in the following conferences:
    --Education Conference and Lone Star Expo sponsored by the Texas 
            Apartment Association in Houston, TX;
    --National Community Reinvestment Coalition Conference, Washington, 
            DC;
    --Housing and Development Law Institute's Conference, Washington, 
            DC; and
    --National Coalition for Asian and Pacific Americans Community 
            Development Conference, Honolulu, HI.
    Just recently, from April 8, through 11, 2008, HUD held its 2008 
National Fair Housing Policy Conference in Atlanta, GA, to commemorate 
the 40th anniversary of the Fair Housing Act. Approximately 1,000 
people attended the Conference. The next national fair housing policy 
conference will be held in June 2010.
  --Accessibility First.--In January 2003, HUD launched Fair Housing 
        Accessibility FIRST, a FHIP-funded program that provides 
        training and technical assistance on the Fair Housing Act's 
        accessibility requirements to architects, builders, developers, 
        and other others involved in the design and construction of 
        multifamily housing. Approximately 7,500 people have attended 
        the training since 2003. In fiscal year 2007, when asked the 
        number of multifamily housing units on which the attendees were 
        working, the attendees reported a total of 329,543 multifamily 
        units in which they were assisting with the development, 
        design, or construction. As a result of the training, we expect 
        these units will be built in compliance with the accessibility 
        standards of the Fair Housing Act.
  --40th Anniversary of the Fair Housing Act.--The Assistant Secretary 
        and FHEO senior staff were interviewed CNN Radio, with over 
        2,000 worldwide affiliates; CNN Espanol Radio (with over 9 
        domestic and 20 internationals bureaus); NPR--All Things 
        Considered (with 11 million listeners), and Fox News Atlanta. 
        During the separate interviews, Assistant Secretary Kendrick 
        and staff discussed the 40th anniversary of the Fair Housing 
        Act and the Reverend Dr. Martin Luther King, Jr.'s dream of an 
        ``open society.''
  --Fair Housing Education in America.--On April 16, 2008, HUD launched 
        a new initiative, ``Fair Housing Education in America Day.'' 
        This national education project is designed for 4th through 6th 
        grade students for them to hear from fair housing experts who 
        present lessons on fair housing requirements. It gives 
        teachers, parents, and their children a basic understanding of 
        the Fair Housing Act. The goal of this initiative is to start 
        the conversation about fair housing opportunities at a young 
        age. It's critically important to teach future generations of 
        renters and home buyers about their rights under fair housing 
        laws. Over 50 schools nation wide registered to participate in 
        this inaugural event. Additional information on Fair Housing 
        Education in America Day may be obtained through the following 
        website: http://www.hud.gov/offices/fheo/fheducationday.cfm. As 
        this Initiative was successful, HUD plans to continue this 
        Initiative on the 3rd Wednesday of April for fiscal years 2009 
        and 2010.
                         housing discrimination
    Question. What concrete steps will HUD be taking to increase the 
percentage of persons who file complaints in response to the belief 
that they have been victims of housing discrimination?
    Answer. HUD's fair housing mission is to eradicate housing 
discrimination. HUD plays several roles in this mission: (1) to 
increase public awareness of the Fair Housing Act; (2) to educate 
housing providers on their rights and responsibilities under the Fair 
Housing Act to reduce the number of occurrences of housing 
discrimination; and (3) to enforce the provisions of the Fair Housing 
Act.
    HUD believes that persons cannot report housing discrimination 
unless they understand their fair housing rights and the recourse 
available to victims of discrimination. In order to increase the 
percentage of persons that report housing discrimination, HUD has 
engaged in media campaigns and other activities to raise public 
awareness of fair housing. These activities are described in the answer 
responding to Senator Durbin's question, ``How does HUD plan to 
increase public awareness of existing fair housing laws?''
    Moreover, HUD has conducted many of these activities in languages 
other than English in order to reach persons with limited English 
proficiency. For example, in fiscal year 2004, HUD, in conjunction with 
the Advertising Council, launched a fair housing education campaign 
through a series of public service announcements. This campaign 
consisted of two television advertisements, two radio advertisements 
and two print advertisements, in English and Spanish.
    Additionally, in fiscal year 2005, HUD produced five new fair 
housing radio advertisements. Two of these advertisements were in 
Spanish and two of these were in Cantonese, Hmong, Korean, and 
Vietnamese. Starting in fiscal year 2005, HUD also produced fair 
housing print advertisements in Arabic, Bengali, Cantonese, Hmong, 
Khmer, Korean, Punjabi, Thai, Urdu, and Vietnamese.
    Furthermore, HUD's 2005 Study--``Do We Know More Now?''--concludes 
that unless a person who has been discriminated against can see 
benefits in filing a complaint, he/she is unlikely to do so. Therefore, 
HUD makes a conscious effort to publicize the outcomes of its fair 
housing enforcement efforts to help encourage persons to report housing 
discrimination. HUD believes that publicizing the results of its 
enforcement efforts helps build public trust in its enforcement 
efforts, and, in turn, increases the likelihood that persons will 
report housing discrimination.
    In February 2007, the CNN program Open House aired a segment on 
housing discrimination. The segment featured an interview with 
Assistant Secretary Kim Kendrick and Nannatte Bishop, an African-
American woman who filed a complaint with HUD alleging that Fifth Third 
Bank denied her application for mortgage loan because of her race. HUD 
negotiated a $125,000 settlement in this case. An estimated 665,000 
people may have viewed this broadcast.
    HUD is also building the public trust in its enforcement efforts by 
training the approximately 500 full-time investigators employed by the 
more than 100 State and local government agencies that are certified 
through its Fair Housing Assistance Program (FHAP). In fiscal year 
2004, HUD opened the National Fair Housing Training Academy (the 
Academy) to provide training and certification to ensure that FHAP and 
now HUD investigators have the necessary skills to conduct thorough and 
timely investigations.
    The Academy offers a 5-week program, which covers fair housing 
laws, investigative skills, negotiation skills, litigating fair housing 
cases, and many other topics. After completing the 5-week program, the 
investigators must pass a comprehensive examination in order to receive 
a certificate of completion from the Academy. At of the end of fiscal 
year 2007, a total of 174 investigators have completed the 5-week basic 
training course.
    However, HUD is not simply waiting for persons to file complaints. 
HUD has increased the use of its Secretary-initiated enforcement 
authority to eliminate discriminatory housing practices. Under the Fair 
Housing Amendments Act of 1988, the Secretary of HUD, in the public 
interest, has the authority to conduct an investigation and file a 
complaint when there is reason to believe that an alleged 
discriminatory housing practice has occurred or is about to occur, even 
when no aggrieved person has filed a complaint. HUD also uses its 
Secretary-initiated enforcement authority when it receives an 
individual complaint, but believes there may be additional victims of 
the discriminatory act or wants to obtain broader relief in the public 
interest.
    Secretary-initiated enforcement authority allows HUD to take 
proactive measures to eliminate housing discrimination and ensure equal 
housing opportunity. In fiscal year 2007, HUD filed 12 Secretary-
initiated complaints and launched four additional Secretary-initiated 
investigations. These investigations include a complaint against a 
management company alleging that it refused to rent to African-
Americans, a complaint against brokerage organizations alleging that 
they limited their membership on the basis of religion, and a complaint 
against housing providers alleging that they prohibited families with 
children.
    At the same time that HUD is increasing public awareness of the 
Fair Housing Act, HUD is taking steps to work with its housing industry 
members to reduce housing discrimination. For example:
  --In fiscal year 2000, HUD signed a memorandum of understanding (MOU) 
        with the Department of Justice and the Department of the 
        Treasury setting forth procedures each signatory agency would 
        follow in reporting Fair Housing Act violations. The MOU also 
        outlined options for fair housing education for those involved 
        in the financing, construction, and operation of low-income 
        housing tax credit properties. For example, to help ensure that 
        residential rental housing built with low-income housing tax 
        credit was accessible to persons with disabilities. Since the 
        implementation of this MOU, HUD staff members have participated 
        at numerous meetings of State housing finance agencies to 
        educate them on the accessibility requirements of the Fair 
        Housing Act. This MOU is still in effect.
  --In fiscal year 2003, HUD signed an MOU with representatives from 
        the National Association of Realtors, the National Association 
        of Real Estate Brokers, the National Association of Hispanic 
        Real Estate Professionals, and the National Association of 
        Asian American Real Estate Professionals to work together to 
        increase minority homeownership and address housing 
        discrimination. As part of the MOU, the real estate 
        associations provide fair housing information to their members 
        and partner with HUD and private fair housing organizations to 
        distribute fair housing information to minority communities. 
        This MOU is still in effect.
  --In January 2003, HUD launched Fair Housing Accessibility FIRST 
        (Fair Housing Instruction, Resources, Support, Technical 
        Guidance), a FHIP-funded program that provides training and 
        technical guidance on the Fair Housing Act's accessibility 
        requirements to architects, builders, developers, and others 
        involved in the design and construction of multifamily housing. 
        FIRST consists of a comprehensive training curriculum that is 
        accredited by the American Institute of Architects and various 
        local professional groups.
  --In fiscal year 2007, FIRST training sessions were held in 
        Birmingham, AL; Tucson, AZ; San Jose, CA; Washington, DC; 
        Atlanta, GA; Boise, ID; Chicago, IL; Frankfort, KY; Lake 
        Charles, LA; New Orleans, LA; Portland, ME; Biloxi, MS; 
        Jackson, MS; Bismarck, ND; Buffalo, NY; Cleveland, OH; Eugene, 
        OR; Philadelphia, PA; Corpus Christi, TX; Houston, TX; and San 
        Antonio, TX. In total, FIRST conducted 22 training sessions and 
        trained 1,351 persons.
  --HUD continues to fund the FIRST program at $800,000 in fiscal year 
        2008 and has requested $800,000 in its fiscal year 2009 budget 
        to continue this program.
  --In fiscal year 2007, HUD and the Texas Apartment Association (TAA) 
        signed a Memorandum of Understanding (MOU) pledging to work 
        together to conduct fair housing training and outreach to 
        rental housing providers and renters in the State of Texas. As 
        part of the MOU, HUD's FIRST program has conducted two training 
        sessions on the accessibility requirements of the Fair Housing 
        Act to TAA members. This MOU is still in effect.
  --In fiscal year 2008, HUD plans to negotiate an MOU with the 
        National League of Cities to collaborate to increase inclusive 
        and diverse communities and strengthening financial education 
        at the local levels. One of the goals of the MOU is to increase 
        understanding of the Fair Housing Act and how fair housing is 
        good business for local communities when dealing with unfair 
        lending and predatory lending practices. It is anticipated that 
        the MOU will be signed by the end of August 2008.
    Complaint filing in fiscal year 2006 exceeded 10,000 for the first 
time since HUD began to gather statistics. It is likely that the 
increase was a direct result of these and other education and outreach 
programs and activities. HUD expects that the number of complaints will 
continue to grow as it carries forth education and outreach activities, 
but at the same time acts of housing discrimination may decrease as a 
result of HUD's partnerships with housing industry groups and 
associations.
                                 hopwa
    Question. Why is HUD requesting the same level of funding for 
fiscal year 2009 as in fiscal year 2008 for the HOPWA program, even as 
demand for housing services among persons living with HIV/AIDS 
increases?
    The $14 million increase from fiscal year 2007 to fiscal year 2008 
will help HOPWA city and State grantees expand the number of clients 
assisted by an estimated 3,500 households, from 67,000 to 70,500. The 
administration's fiscal year 2009 request proposes to protect this 
increase in light of financial constraints which represents a high 
priority over other pressing needs. HOPWA is a highly effective and 
targeted program, and resources create and maintain stable housing for 
very low-income persons and dramatically improve their access to the 
available health-care and HIV treatments.
                             hopwa funding
    Question. How many jurisdictions will be funded with fiscal year 
2008 dollars, both nationwide and specifically in IL? How many 
jurisdictions is HUD projecting to fund with fiscal year 2009 dollars, 
both nationwide and specifically in IL? How will the change in the 
number of jurisdictions affect the individual levels of funding for 
jurisdictions?
    Answer. The HOPWA program targets housing resources to States and 
cities to address pressing needs for a vulnerable population, low-
income persons with HIV/AIDS and their families. Ninety percent of 
HOPWA funding is distributed by formula to qualifying States and 
metropolitan areas, and the remaining grant funds are distributed 
through the competitive grant process.
    Formula Grants.--The HOPWA formula grant allocations, which entail 
90 percent of the program, are based on AIDS data provided annually by 
the Centers for Disease Control and Prevention (CDC). For fiscal year 
2008, the formula portion of the HOPWA program serves 127 
jurisdictions: 40 States, 1 county, and 86 cities. Furthermore, four 
new areas qualified for the fiscal year 2008 allocation: Bakersfield 
(CA), Palm Bay (FL), Tulsa (OK), and the State of Nebraska.
    Fiscal year 2008 grantees in Illinois are the State of Illinois and 
the Chicago-Naperville-Joliet Metropolitan Statistical Area (MSA) 
Division. The city of St. Louis, MO also provides HOPWA assistance in 
Illinois parts of it's MSA.
    Although the Department has not yet received CDC data for 2008, the 
Department estimates that several new jurisdictions will become 
eligible for HOPWA formula funding for fiscal year 2009. The 
eligibility of jurisdictions is dependent up the application of CDC 
data and the definitions of metropolitan statistical areas. We cannot 
predict at this time how many, if any, of the new jurisdictions will be 
in Illinois.
    The addition of new formula areas does not have much of an affect 
on funding levels overall as most of the new areas were already 
included as part of the prior year allocations to their State. Of the 4 
new areas in fiscal year 2008, the State of Nebraska was the only area 
not previously part of the formula programs, and received $306,000, a 
net impact of one-tenth of 1 percent on the overall formula.
    Competitive Grants.--The HOPWA program's competitive grants have a 
3-year duration and can be renewed if successful in providing permanent 
supportive housing. Two grantees in Illinois received awards during the 
fiscal year 2005 competition grant cycle and have indicated their 
interest in renewing their grants during fiscal year 2008. The 
Department is currently reviewing these and would expect to make 
selection in the next few months in accordance with grant renewal 
procedures. Additionally, there are five permanent housing grants in 
Illinois that would be eligible for renewal in fiscal year 2009, as 
these grants are now operating under 3-year awards made in the fiscal 
year 2006 grant selection.
                             moving to work
    Question. Members of the Illinois congressional delegation sent you 
a letter on December 11, 2007, requesting a minimum 5-year extension to 
the Chicago Housing Authority's 10-year Moving to Work agreement with 
HUD. Please explain why HUD has not responded to the December 11, 2007 
letter, as of March 25, 2008.
    Answer. The Department responded to the letter on February 19, 
2008. Please see letter below.

  U.S. Department of Housing and Urban Development,
   Office of Congressional and Intergovernmental Relations,
                                 Washington, DC, February 19, 2008.
The Honorable Richard J. Durbin,
United States Senate,
Washington, DC 20510-1304.
    Dear Senator Durbin: On behalf of Secretary Alphonse Jackson, thank 
you for your letter of December 11, 2007, requesting an extension of 
the Chicago Housing Authority's (CHA) Moving to Work Demonstration 
(MTW) agreement, which will expire in 2010. Since the demonstration was 
authorized in 1996, the Department of Housing and Urban Development has 
worked closely with the participants in the MTW demonstration to 
provide the flexibility to design and test various approaches for 
providing and administering housing assistance to achieve the three 
objectives outlined in the authorizing statute.
    Over the last year and a half, the Department has collaborated with 
the MTW agencies, including CHA, to develop a standard Amended and 
Restated MTW Agreement (Restated Agreement) for all MTW agencies. This 
Restated Agreement will ensure both that the flexibility that MTW gives 
is retained and that the demonstration provides the measurable outcomes 
as required for those MTW agencies extended by the 2006 Appropriations 
Act. Should Congress choose to expand the number of agencies eligible 
to participate in MTW, the Restated Agreement would better enable the 
Department to manage the larger number of agencies taking advantage of 
MTW flexibilities.
    The final version of the Restated MTW Agreement was mailed to CHA 
and the other MTW agencies on January 4, 2008, and agencies have 120 
days to execute the agreement. Under the Restated MTW Agreement, the 
MTW demonstration will continue until 2018, which will allow the 
Department to fully evaluate the impact of initiatives developed under 
the demonstration.
    Thank you for your interest in the Department's programs. If I can 
be of further assistance, please let me know.
                                          Mark A. Studdert,
                                General Deputy Assistant Secretary.
                        moving to work agreement
    Question. According to CHA, HUD has informally agreed to extend the 
agreement in meetings. Can you confirm this understanding and provide a 
timeline for formally extending the agreement?
    Answer. The final version of the standard Moving-to-Work (MTW) 
Agreement was mailed to the Chicago Housing Authority (CHA) and the 
other MTW agencies on January 4, 2008, and agencies have 120 days to 
execute the agreement. Under the standard MTW Agreement, the MTW 
demonstration will continue until 2018, which will allow the Department 
to fully evaluate the impact of initiatives developed under the 
demonstration. CHA has advised us that it is considering the Agreement 
and will act on it shortly.
                              homelessness
    Question. How does HUD expect to meet the administration's 2001 
goal of ending chronic homelessness in 10 years given its funding 
request for fiscal year 2009, which is inadequate to cover the cost of 
permanent housing renewals let alone fund the addition of new projects?
    Answer. HUD originally set forth a goal of ending chronic 
homelessness by 2012. As we and the U.S. Interagency Council on 
Homelessness worked with communities across the Nation, city after city 
became engaged in taking on this challenge to end chronic homelessness. 
Not all communities implemented their plan in the same year. To secure 
political will and resources required more time for some communities 
than it did for others. Every year additional communities commit to the 
10 year goal. Significantly, there is Federal, State and local 
commitment to achieve this bold goal. Communities are tracking the 
number of chronically homeless so that they can measure their progress. 
Communities are also securing Federal, State and local government and 
private resources to develop housing for this population. As a result 
of these efforts, nationally we saw an 11.5 percent reduction in 
chronic homelessness between 2005 and 2006. The 2007 figure is 
scheduled to be released in June and we expect to see further 
reductions.
    HUD has employed creative incentives to encourage grantees across 
the country to use the limited HUD funds available for new units to 
specifically target the chronically homeless and thereby help meet the 
administration's goal. The Department has designated a portion of the 
competitive funds to be awarded to Continuums of Care (CoC) that set as 
their first priority, a permanent supportive housing project for the 
chronically homeless. In addition, HUD has created a reallocation 
process within the competition that allows CoCs to negotiate the 
elimination or reduction of grants that either no longer serve the need 
of the homeless in that community or have found alternative subsidy. 
They are thereby enabled to use the newly available funds to create 
additional new permanent support housing programs. These incentives 
have an incremental but cumulative impact on these production goals.
    Finally it is important to note that while we continue to make 
progress in ending chronic homelessness, we also continue to provide 
funding for renewal projects. HUD estimates that the 2009 homeless 
assistance request is sufficient to fully fund all permanent housing 
renewals and to provide a limited amount of funds to develop new 
projects to help end chronic homelessness.
                      permanent supportive housing
    Question. Please provide a status update on how close the agency is 
to the benchmark of 150,000 units of permanent supportive housing.
    Answer. Former HUD Secretary Mel Martinez set a goal that as a 
Nation we create 150,000 permanent supportive housing units for 
chronically homeless individuals. The definition of a chronically 
homeless individual is a single, unaccompanied person with a disabling 
condition who has either been continuously homeless for more than a 
year or who has experienced at least four episodes of homelessness in 3 
years.
    While it is a challenging goal, HUD has instituted several 
incentives to meet it, such as providing extra funding for Continuums 
of Care that set as their first priority for funding a permanent 
supportive housing project for the chronically homeless. This incentive 
has led to a tremendous increase in the number of units for this target 
population.
    At the end of 2006, Continuums of Care reported that about 40,000 
new permanent supportive units were in place for the chronically 
homeless. In 2007, HUD funded approximately 4,000 additional permanent 
supportive housing units for this same population. These units do not 
include thousands of transitional housing units for the homeless 
created with HUD funds since 2002. These units also do not include 
funds awarded under the Emergency Shelter Grants program.
    Moreover, in 2008, Congress appropriated the HUD VASH (HUD VA 
Supportive Housing) program, which will create 10,000 more units for 
homeless veterans, many of whom are chronically homeless. Finally, the 
President has requested $75 million in the fiscal year 2009 budget 
which would provide for approximately 10,000 additional HUD VASH 
vouchers for homeless veterans.
    Question. How does HUD plan to reverse the trend of fewer new 
units? What plans are there to ensure HUD meets the 10-year goal of 
establishing 150,000 units of permanent supportive housing?
    Answer. The percentage of funds needed to operate renewal projects 
increases each year. The renewal burden for fiscal year 2006 was 84 
percent of funds awarded, and in fiscal year 2007 the renewal burden 
was 86 percent of funds awarded. However, the administration has 
requested and Congress has appropriated increased funding since 2001 
for HUD's homeless programs, which has allowed HUD to continue to 
increase the number of new units created each year. With continuing 
appropriations increases, HUD will be able to continue to create even 
more new units of permanent supportive housing as well as transitional 
housing to help homeless families and individuals move to greater self-
sufficiency.
    In order to meet the ambitious goal of establishing 150,000 new 
units of permanent supportive housing for chronically homeless persons 
that are to be developed by HUD and our State and local partners, HUD 
focuses on this population in the (CoC) application by awarding 
``bonus'' funds to communities that propose new permanent housing for 
chronically homeless persons. In addition, HUD awards more points to 
communities that demonstrate an emphasis on creating new housing units.
    However, HUD is not working alone to meet this goal. In the annual 
(CoC) application, HUD provides incentives for State and local 
governments and the private sector to provide resources to develop 
permanent housing for the chronically homeless and for other homeless 
populations. Moreover, the Interagency Council on Homelessness has been 
working to help communities create local 10-year plans to end chronic 
homelessness. While many of the units created under these plans are 
funded by HUD, States as well as local communities are working to find 
additional funding sources to create new units of permanent supportive 
housing.
                            rapid re-housing
    Question. Does HUD plan to continue the rapid re-housing 
demonstration funded by Congress in fiscal year 2008? If not, please 
explain.
    Answer. The Rapid Re-housing initiative was funded in 2008 as a 
one-time only demonstration program. The administration has not 
requested additional funds for this demonstration in fiscal year 2009. 
Included in the appropriation is funding to conduct a rigorous 
evaluation to determine the effectiveness of different local programs 
participating in the demonstration. The grant awards will be made later 
this calendar year. Once awarded, selected demonstration sites will 
begin collecting data on the homeless families. Our review of the 
eventual study results should provide very useful insights as to which 
interventions are actually effective. These findings will help inform 
future programming and use of limited resources.
                         reducing homelessness
    Question. What is HUD's strategy for reducing the number of 
homeless families?
    Answer. HUD's performance objective related to homelessness 
underscores our commitment to serving homeless families. It is to ``End 
chronic homelessness and move homeless families and individuals to 
permanent housing'' (emphasis added). We require each community to 
annually enumerate and report to HUD on the size of their homeless 
family population. To address this local established need and to 
achieve HUD's performance objective, HUD provides each year significant 
funding to communities to assist their homeless families. Approximately 
half of all persons assisted by HUD homeless programs are persons in 
homeless families.
    With the recent expansion of the HUD VA Supportive Housing (HUD-
VASH) Program to sites across the Nation and the demographics of Desert 
Storm era veterans, it is anticipated that many homeless military 
families will be housed through this specialized HUD section 8 program.
    The new $25 million Rapid Re-housing for homeless families 
demonstration initiative will also provide valuable insights into how 
communities and we as a Nation can most effectively help homeless 
families.
    HUD's commitment to improve its programming for homeless families 
is reflected in the Department's efforts to better understand both the 
particular needs of homeless families today and how to best serve them. 
Several studies are underway or planned to help inform HUD and the 
Nation on this important subject. For instance, a study to be conducted 
by HUD's Office of Policy Development and Research entitled ``The 
Impact of Various Housing and Service Interventions on Homeless 
Families'' is in the early stages of being conducted. Once completed, 
the results will help inform future homeless family housing and service 
policies.
                      homeless assistance funding
    Question. What percentage of homeless assistance funding is 
currently going directly to families?
    Answer. Data on homelessness provided by each community to HUD 
indicate that approximately 40 percent of all homeless persons are 
members of homeless families. Significantly, just over 40 percent of 
all of HUD's competitive homeless funds benefit homeless families. As 
such, HUD resources are well aligned with meeting the needs of homeless 
families.
                       family unification program
    Question. How and when will the Family Unification Program vouchers 
be issued?
    Answer. We expect the Family Unification Program vouchers to be 
issued between September and October 2008. HUD staff is currently 
working on the Notice of Funding Availability, which will explain the 
application procedures.
                   hud-va supportive housing vouchers
    Question. How and when will the HUD-Veterans Affairs Supportive 
Housing vouchers be issued?
    Answer. We expect to provide funding to housing authorities by the 
first week of May 2008. The actual issuance of the vouchers will depend 
on the referral of homeless veterans to housing authorities by the U.S. 
Department of Veterans Affairs. Eligibility for the program is 
determined by the Department of Veterans Affairs and not the housing 
authorities.
                                 ______
                                 
              Questions Submitted by Senator Arlen Specter
                             moving to work
    Question. Secretary Jackson, I understand that the Department has 
already informed the Philadelphia Housing Authority that it will not 
extend its successful Moving to Work Demonstration program beyond March 
31, 2008, under similar terms and conditions. Is it true that the 
Department has granted similar extensions 30 times since 2000 and never 
denied a request for an MTW extension until now?
    Answer. On February 8, 2002, the Philadelphia Housing Authority 
executed a Moving-to-Work (MTW) Agreement with the Department that 
expired by its own terms on March 31, 2008. Starting in the first 
quarter of 2006, HUD began the process of standardizing the MTW 
agreements it had with the housing authorities participating in the MTW 
program. In November 2005, Congress passed legislation that mandated 
extensions of current MTW agreements that would otherwise expire by 
September 30, 2006, and also called for data collection ``so that the 
effect of Moving-to-Work policy changes on residents can be measured.'' 
(section 320(b) of the Transportation, Treasury, Housing and Urban 
Development, the Judiciary, the District of Columbia and Independent 
Agencies Appropriations Act of 2006) (Pub. L. No. 109-115, 119 Stat. 
2396 (Nov. 30, 2005)) (``section 320(b)).
    The Department's development of standardized agreements was 
consistent with this Congressional mandate: one of the Department's 
principal objectives in developing the standardized agreement was to 
improve and reinforce requirements for tracking, reporting, and 
evaluating the effectiveness of the MTW program in achieving the goals 
of the MTW legislation. In addition, through the standardized MTW 
agreement, the Department sought to clarify the submission and approval 
processes, and to develop standard operating procedures for the 
Department's interaction with all MTW agencies under the program.
    The Department has extended MTW Agencies under their current terms 
in 15 instances over the past 3 years, all involving PHAs in a 
different position than Philadelphia Housing Authority. The Department 
extended 13 MTW Agreements during the first 9 months of 2006 under the 
mandate of section 320(b). Because the Philadelphia Housing Authority's 
MTW Agreement did not expire during the period covered by section 
320(b), the Philadelphia Housing Authority does not fall within the 
category of PHAs that were to receive this statutorily mandated 
extension.
    In addition to the 13 PHAs covered by the 2006 extension provision, 
the Department has extended MTW agreements for two other housing 
agencies since September 30, 2006. Each of the PHAs in those instances 
is in a different position than Philadelphia Housing Authority, as each 
of those extensions was granted before the Department finalized and 
adopted the new, standardized MTW agreement. In December 2006, the 
Department extended the MTW for Pittsburgh, Pennsylvania for 3 years to 
December 31, 2009. The Department also extended the MTW agreement for 
Minneapolis, Minnesota for a 7-month period to allow for completion of 
the standardized agreement. The Minneapolis Housing Authority has now 
signed the new, standardized agreement. The Department has offered to 
execute the standardized agreement with PHA, as with any other 
participating housing authority, but Philadelphia Housing Authority has 
refused that offer.
                        moving to work extension
    Question. Without the MTW extension, Philadelphia Housing Authority 
understands that as of April 1, 2008, it will no longer be eligible to 
receive as much as $50 million in Federal assistance, including 
approximately $25 million in section 8/housing choice voucher funds. Is 
that your understanding? Can you assure me that the Philadelphia 
Housing Authority will continue to receive the same allocation of 
Federal funds if its MTW designation is not extended?
    Answer. The Department does not agree that the Philadelphia Housing 
Authority would lose $50 million in funding because of this transition. 
The Department has made a comparison of the Philadelphia Housing 
Authority`s funding under both the MTW agreement and current 
regulations and can find no basis for such a claim. Indeed, even the 
legal declarations made by the Philadelphia Housing Authority as part 
of its lawsuit against the Department only reference the $13,050,000 
associated with the diversion of over 2,000 units worth of Housing 
Choice Voucher funding (MTW Activity Vouchers) for other purposes in 
support of the Philadelphia Housing Authority's public housing program. 
Even as the Philadelphia Housing Authority makes the transition to 
become a traditional non-MTW housing authority, it does not 
automatically lose this funding. Rather, the $13 million would be 
applied towards the Philadelphia Housing Authority's traditional 
Housing Choice Voucher Program, allowing it to provide 2,000 units of 
much-needed housing assistance to the low-income residents of 
Philadelphia.
                         housing discrimination
    Question. What concrete steps will HUD be taking to increase the 
percentage of persons who file complaints in response to the belief 
that they have been victims of housing discrimination?
    Answer. HUD's fair housing mission is to eradicate housing 
discrimination. HUD plays several roles in this mission: (1) to 
increase public awareness of the Fair Housing Act; (2) to educate 
housing providers on their rights and responsibilities under the Fair 
Housing Act to reduce the number of occurrences of housing 
discrimination; and (3) to enforce the provisions of the Fair Housing 
Act.
    HUD believes that persons cannot report housing discrimination 
unless they understand their fair housing rights and the recourse 
available to victims of discrimination. In order to increase the 
percentage of persons that report housing discrimination, HUD has 
engaged in media campaigns and other activities to raise public 
awareness of fair housing. These activities are described in the answer 
responding to Senator Durbin's question, ``How does HUD plan to 
increase public awareness of existing fair housing laws?''
    Moreover, HUD has conducted many of these activities in languages 
other than English in order to reach persons with limited English 
proficiency. For example, in fiscal year 2004, HUD, in conjunction with 
the Advertising Council, launched a fair housing education campaign 
through a series of public service announcements. This campaign 
consisted of two television advertisements, two radio advertisements 
and two print advertisements, in English and Spanish.
    Additionally, in fiscal year 2005, HUD produced five new fair 
housing radio advertisements. Two of these advertisements were in 
Spanish and two of these were in Cantonese, Hmong, Korean, and 
Vietnamese. Starting in fiscal year 2005, HUD also produced fair 
housing print advertisements in Arabic, Bengali, Cantonese, Hmong, 
Khmer, Korean, Punjabi, Thai, Urdu, and Vietnamese.
    Furthermore, HUD's 2005 Study--``Do We Know More Now?'' concludes 
that unless a person who has been discriminated against can see 
benefits in filing a complaint, he/she is unlikely to do so. Therefore, 
HUD makes a conscious effort to publicize the outcomes of its fair 
housing enforcement efforts to help encourage persons to report housing 
discrimination. HUD believes that publicizing the results of its 
enforcement efforts helps build public trust in its enforcement 
efforts, and, in turn, increases the likelihood that persons will 
report housing discrimination.
    In February 2007, the CNN program Open House aired a segment on 
housing discrimination. The segment featured an interview with 
Assistant Secretary Kim Kendrick and Nannatte Bishop, an African-
American woman who filed a complaint with HUD alleging that Fifth Third 
Bank denied her application for mortgage loan because of her race. HUD 
negotiated a $125,000 settlement in this case. An estimated 665,000 
people may have viewed this broadcast.
    HUD is also building the public trust in its enforcement efforts by 
training the approximately 500 full-time investigators employed by the 
more than 100 State and local government agencies that are certified 
through its Fair Housing Assistance Program (FHAP). In fiscal year 
2004, HUD opened the National Fair Housing Training Academy (the 
Academy) to provide training and certification to ensure that FHAP and 
now HUD investigators have the necessary skills to conduct thorough and 
timely investigations.
    The Academy offers a 5-week program, which covers fair housing 
laws, investigative skills, negotiation skills, litigating fair housing 
cases, and many other topics. After completing the 5-week program, the 
investigators must pass a comprehensive examination in order to receive 
a certificate of completion from the Academy. At of the end of fiscal 
year 2007, a total of 174 investigators have completed the 5-week basic 
training course.
    However, HUD is not simply waiting for persons to file complaints. 
HUD has increased the use of its Secretary-initiated enforcement 
authority to eliminate discriminatory housing practices. Under the Fair 
Housing Amendments Act of 1988, the Secretary of HUD, in the public 
interest, has the authority to conduct an investigation and file a 
complaint when there is reason to believe that an alleged 
discriminatory housing practice has occurred or is about to occur, even 
when no aggrieved person has filed a complaint. HUD also uses its 
Secretary-initiated enforcement authority when it receives an 
individual complaint, but believes there may be additional victims of 
the discriminatory act or wants to obtain broader relief in the public 
interest.
    Secretary-initiated enforcement authority allows HUD to take 
proactive measures to eliminate housing discrimination and ensure equal 
housing opportunity. In fiscal year 2007, HUD filed 12 Secretary-
initiated complaints and launched four additional Secretary-initiated 
investigations. These investigations include a complaint against a 
management company alleging that it refused to rent to African-
Americans, a complaint against brokerage organizations alleging that 
they limited their membership on the basis of religion, and a complaint 
against housing providers alleging that they prohibited families with 
children.
    At the same time that HUD is increasing public awareness of the 
Fair Housing Act, HUD is taking steps to work with its housing industry 
members to reduce housing discrimination. For example:
  --In fiscal year 2000, HUD signed a Memorandum of Understanding (MOU) 
        with the Department of Justice and the Department of the 
        Treasury setting forth procedures each signatory agency would 
        follow in reporting Fair Housing Act violations. The MOU also 
        outlined options for fair housing education for those involved 
        in the financing, construction, and operation of low-income 
        housing tax credit properties. For example, to help ensure that 
        residential rental housing built with low-income housing tax 
        credit was accessible to persons with disabilities. Since the 
        implementation of this MOU, HUD staff members have participated 
        at numerous meetings of State housing finance agencies to 
        educate them on the accessibility requirements of the Fair 
        Housing Act. This MOU is still in effect.
  --In fiscal year 2003, HUD signed an MOU with representatives from 
        the National Association of Realtors, the National Association 
        of Real Estate Brokers, the National Association of Hispanic 
        Real Estate Professionals, and the National Association of 
        Asian American Real Estate Professionals to work together to 
        increase minority homeownership and address housing 
        discrimination. As part of the MOU, the real estate 
        associations provide fair housing information to their members 
        and partner with HUD and private fair housing organizations to 
        distribute fair housing information to minority communities. 
        This MOU is still in effect.
  --In January 2003, HUD launched Fair Housing Accessibility FIRST 
        (Fair Housing Instruction, Resources, Support, Technical 
        Guidance), a FHIP-funded program that provides training and 
        technical guidance on the Fair Housing Act's accessibility 
        requirements to architects, builders, developers, and others 
        involved in the design and construction of multifamily housing. 
        FIRST consists of a comprehensive training curriculum that is 
        accredited by the American Institute of Architects and various 
        local professional groups.
  --In fiscal year 2007, FIRST training sessions were held in 
        Birmingham, AL; Tucson, AZ; San Jose, CA; Washington, DC; 
        Atlanta, GA; Boise, ID; Chicago, IL; Frankfort, KY; Lake 
        Charles, LA; New Orleans, LA; Portland, ME; Biloxi, MS; 
        Jackson, MS; Bismarck, ND; Buffalo, NY; Cleveland, OH; Eugene, 
        OR; Philadelphia, PA; Corpus Christi, TX; Houston, TX; and San 
        Antonio, TX. In total, FIRST conducted 22 training sessions and 
        trained 1,351 persons.
  --HUD continues to fund the FIRST program at $800,000 in fiscal year 
        2008 and has requested $800,000 in its fiscal year 2009 budget 
        to continue this program.
  --In fiscal year 2007, HUD and the Texas Apartment Association (TAA) 
        signed a Memorandum of Understanding (MOU) pledging to work 
        together to conduct fair housing training and outreach to 
        rental housing providers and renters in the State of Texas. As 
        part of the MOU, HUD's FIRST program has conducted two training 
        sessions on the accessibility requirements of the Fair Housing 
        Act to TAA members. This MOU is still in effect.
  --In fiscal year 2008, HUD plans to negotiate an MOU with the 
        National League of Cities to collaborate to increase inclusive 
        and diverse communities and strengthening financial education 
        at the local levels. One of the goals of the MOU is to increase 
        understanding of the Fair Housing Act and how fair housing is 
        good business for local communities when dealing with unfair 
        lending and predatory lending practices. It is anticipated that 
        the MOU will be signed by the end of August 2008.
    Complaint filing in fiscal year 2006 exceeded 10,000 for the first 
time since HUD began to gather statistics. It is likely that the 
increase was a direct result of these and other education and outreach 
programs and activities. HUD expects that the number of complaints will 
continue to grow as it carries forth education and outreach activities, 
but at the same time acts of housing discrimination may decrease as a 
result of HUD's partnerships with housing industry groups and 
associations.

                          SUBCOMMITTEE RECESS

    Senator Murray. We will recess subject to the call of the 
Chair.
    [Whereupon, at 11:17 a.m., Thursday, March 13, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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