[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
HOUSING OVERSIGHT: TESTIMONY OF
THE HUD AND FHFA INSPECTORS GENERAL
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HOUSING AND INSURANCE
of the
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
June 26, 2024
__________
Serial No. 118-97
Printed for the use of the Committee on Financial Services
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
56-623 PDF WASHINGTON : 2026
HOUSE COMMITTEE ON FINANCIAL SERVICES
PATRICK McHENRY, North Carolina, Chairman
FRENCH HILL, Arkansas, Vice MAXINE WATERS, California, Ranking
Chairman Member
FRANK D. LUCAS, Oklahoma SYLVIA R. GARCIA, Texas, Vice
PETE SESSIONS, Texas Ranking Member
BILL POSEY, Florida NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri BRAD SHERMAN, California
BILL HUIZENGA, Michigan GREGORY W. MEEKS, New York
ANN WAGNER, Missouri DAVID SCOTT, Georgia
ANDY BARR, Kentucky STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas AL GREEN, Texas
TOM EMMER, Minnesota EMANUEL CLEAVER, Missouri
BARRY LOUDERMILK, Georgia JAMES A. HIMES, Connecticut
ALEXANDER X. MOONEY, West Virginia BILL FOSTER, Illinois
WARREN DAVIDSON, Ohio JOYCE BEATTY, Ohio
JOHN W. ROSE, Tennessee JUAN VARGAS, California
BRYAN STEIL, Wisconsin JOSH GOTTHEIMER, New Jersey
WILLIAM R. TIMMONS, IV, South VICENTE GONZALEZ, Texas
Carolina SEAN CASTEN, Illinois
RALPH NORMAN, South Carolina AYANNA PRESSLEY, Massachusetts
DANIEL MEUSER, Pennsylvania STEVEN HORSFORD, Nevada
SCOTT FITZGERALD, Wisconsin RASHIDA TLAIB, Michigan
ANDREW R. GARBARINO, New York RITCHIE TORRES, New York
YOUNG KIM, California NIKEMA WILLIAMS, Georgia
BYRON DONALDS, Florida WILEY NICKEL, North Carolina
MIKE FLOOD, Nebraska BRITTANY PETTERSEN, Colorado
MICHAEL LAWLER, New York
ZACHARY NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDREW OGLES, Tennessee
Matthew Hoffmann, Staff Director
------
SUBCOMMITTEE ON HOUSING AND INSURANCE
WARREN DAVIDSON, Ohio, Chairman
MONICA DE LA CRUZ, Texas, Vice EMANUEL CLEAVER, Missouri, Ranking
Chairwoman Member
BILL POSEY, Florida NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri RASHIDA TLAIB, Michigan
RALPH NORMAN, South Carolina RITCHIE TORRES, New York
SCOTT FITZGERALD, Wisconsin AYANNA PRESSLEY, Massachusetts
ANDREW R. GARBARINO, New York SYLVIA R. GARCIA, Texas
MIKE FLOOD, Nebraska NIKEMA WILLIAMS, Georgia
MICHAEL LAWLER, New York STEVEN HORSFORD, Nevada
ERIN HOUCHIN, Indiana BRITTANY PETTERSEN, Colorado
C O N T E N T S
----------
Wednesday, June 26, 2024
OPENING STATEMENTS
Page
Hon. Warren Davidson, Chairman of the Subcommittee on Housing and
Insurance, a U.S. Representative from Ohio..................... 1
Hon. Emanuel Cleaver, Ranking Member of the Subcommittee on
Housing and Insurance, a U.S. Representative from Missouri..... 3
STATEMENTS
Hon. Maxine Waters, Ranking Member of the Financial Services
Committee, a U.S. Representative from California............... 4
WITNESSES
Hon. Rae Oliver Davis, Inspector General, Department of Housing
and Urban Development (HUD).................................... 4
Prepared Statement........................................... 7
Hon. Brian M. Tomney, Inspector General, Federal Housing Finance
Agency (FHFA).................................................. 38
Prepared Statement........................................... 40
APPENDIX
RESPONSES TO QUESTIONS FOR THE RECORD
Written responses to questions for the record from Hon. Rae
Oliver Davis (45-51)
Representative Warren Davidson............................... 76
Representative Scott Fitzgerald.............................. 79
Representative Maxine Waters................................. 81
Written responses to questions for the record from Hon. Brian M.
Tomney (52-55)
Representative French Hill................................... 83
Representative Brad Sherman.................................. 84
Representative Scott Fitzgerald.............................. 85
Representative Maxine Waters................................. 86
LEGISLATION
H.J.Res. ------, providing for congressional disapproval under
chapter 8 of title 5, United States Code, of the rule submitted
by the Department of Housing and Urban Development and the
Department of Agriculture relating to the "adoption of energy
efficiency standards for new construction of HUD and USDA-
financed housing".............................................. 87
HR 7302, the "Contracting Accountability and Transparency (CAT)
Act"........................................................... 89
H.R. ----------, the "NeighborWorks Transparency and
Accountability Act"............................................ 91
H.R. ----------, an act to enhance the oversight authorities of
certain Inspectors General..................................... 93
HOUSING OVERSIGHT: TESTIMONY OF
THE HUD AND FHFA INSPECTORS GENERAL
----------
Wednesday, June 26, 2024
U.S. House of Representatives,
Subcommittee on Housing and Insurance,
Committee on Financial Services,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:05 a.m., in
room 2128, Rayburn House Office Building, Hon. Warren Davidson
[chairman of the subcommittee] presiding.
Present: Representatives Davidson, Posey, Norman,
Fitzgerald, Flood, Lawler, De La Cruz, Houchin, Timmons,
Cleaver, Waters, Tlaib, Pressley, Garcia, Horsford, Pettersen,
Waters, and Green.
Chairman Davidson. The Subcommittee on Housing and
Insurance will come to order.
Without objection, the chairman is authorized to declare a
recess of the committee at any time.
This hearing is entitled ``Housing Oversight: Testimony of
the HUD and FHFA Inspectors General.''
Without objection, all members will have five legislative
days within which to submit extraneous materials to the
chairman for inclusion in the record.
I now recognize myself for 5 minutes to give an opening
statement.
HON. WARREN DAVIDSON, CHAIRMAN OF THE SUBCOMMITTEE ON HOUSING
AND INSURANCE, A U.S. REPRESENTATIVE FROM OHIO
Today, we will hold another hearing to bring accountability
to government agencies and regulators, a top priority for me as
a subcommittee chairman in this Congress. It is a critical
theme as the Nation continues to experience one of the toughest
housing markets that we have had.
Testifying are the Inspectors General of both HUD, Housing
and Urban Development, and FHFA, the Federal Housing Finance
Agency, whose work has been invaluable to Congress and to the
American people.
Inspectors General are in a unique position to ask tough
questions, dig deeper, and ultimately root out waste, fraud,
and abuse in the Federal Government. Fundamentally, they hold
the government accountable for doing what the law says, whether
or not people agree that it should be the law.
When it comes to HUD and FHFA, these two Inspectors General
have their work cut out for them.
Ms. Oliver Davis and her team have uncovered many
deficiencies at HUD, including the failure of several public
housing agencies to deliver on HUD's mission statement to
provide decent, safe, and sanitary housing.
We recently held a hearing on this very topic, and I can
say that both sides of the aisle were appalled by things going
on in our Public Housing Authority. The conditions for many
residents of public housing are simply unacceptable, which is
why the committee has considered several bills to hold Public
Housing Authorities accountable.
We all know that these problems are likely just the tip of
the iceberg for HUD. However, I have introduced my own bill to
create a bipartisan commission that would take a broader look
at HUD, and their job will be to evaluate the entire agency,
provide recommendations to Congress to make HUD work more
efficiently and effectively, frankly, to update the
authorizations, many of which have lapsed, and to hopefully
make some improvements of dealing with benefit cliffs and kind
of a standardized income asset test that would address things
that Secretary Fudge pointed out in dialog when she came to
testify in January.
When it comes to government regulators like FHFA, which
oversee about 70 percent of the Federal housing market through
Fannie Mae and Freddie Mac, the first rule should be to do no
harm. I cannot say that FHFA is following that rule too clearly
these days.
Now is an especially crucial time for FHFA to provide
stability and certainty and transparency in housing markets.
American families seeking affordable housing need a safe and
steady hand behind the wheel. Instead, they are getting a
confused study in contrast.
On the one hand, FHFA has made so-called mission activities
front and center for its stated objective to, quote, promote
affordable housing. On the other hand, it has rolled out a
pricing grid that would reduce affordability for creditworthy
borrowers. On the other hand, FHFA finalized a rule to require
approval and public comment for the Government-Sponsored
Enterprises' (GSEs') new products and activities.
FHFA is supposed to promote home ownership and help first-
time borrowers. In an effort to do that, they have green lit a
title insurance waiver program that has no transparency--and it
is not clear that it will--instead of helping, cause harm to
these borrowers.
They are now considering a risky second-lien, actually have
decided to move forward with a second-lien proposal for
existing homeowners that would essentially add more debt
against a secured asset and not just expose the borrowers to
problems with their own mortgages but expose the entire
mortgage-backed securities market to additional risk and
potentially cause a lot of harm.
If only there were a precedent to learn from. Clearly there
is, in fact, precedent, and this is something we have no input
from any constituency saying the second liens on mortgages is
in real demand in the market. I have no one coming and saying,
``Congressman, as chairman of Housing and Insurance, you have
to get this done.''
Instead, everyone is sounding the alarm. Can we not learn
from the benefits of history and they are not even following
their own product development process--product approval
process.
So the list is long. I hope today's hearing will provide
more clarity on FHFA's recent decisions. Even well-intentioned
policies should not come at the expense of safety and soundness
of the housing market.
I look forward to hearing the testimony of both HUD and the
FHFA Inspectors General (IGs). I thank you both for your work
and for the opportunity for Congress to perform the essential
oversight of your activities as Inspectors General.
I now recognize the gentleman from Missouri, the ranking
member of the subcommittee, Mr. Cleaver, for 4 minutes for his
opening comments.
HON. EMANUEL CLEAVER, RANKING MEMBER OF THE SUBCOMMITTEE ON
HOUSING AND INSURANCE, A U.S. REPRESENTATIVE FROM MISSOURI
Mr. Cleaver. Thank you, Mr. Chairman.
I will begin by declaring that we will never--never--reduce
or eradicate poverty until we adequately address the deficit in
affordable housing.
Housing is less affordable today than at any point in
modern history. The lack of affordable housing has fueled a
national crisis of fair and affordable housing and
homelessness.
HUD is on the front lines in responding to the devastating
impacts of this crisis. Today, HUD helps provide decent, safe,
and affordable housing to more than 4.3 million--4.3 million--
low-income families through its public housing, rental subsidy,
and voucher programs.
FHFA ensures the enterprises remain financially sustainable
while providing market stability for renters and borrowers,
especially for underserved populations and communities.
Since 2008, FHFA has served as a conservator for the
enterprises following their insolvency due to poor management
and investment decisions, including failure to hold sufficient
capital and purchases of predatory subprime mortgages.
In May 2024, FHFA issued its final Fair Lending, Fair
Housing, and Equitable Housing Finance Plan Rule. The Equitable
Housing Finance Plans direct the enterprises to assess lending
disparities in their respective portfolios and to establish a
plan to enhance the availability of fair and affordable housing
and mortgage lending to low-to moderate-income families and
people of color.
The rule will help increase public transparency and
accountability for the enterprises and reinforce oversight of
unfair and deceptive practices to FHFA's fair housing and fair
lending oversight programs.
This is historic work. Together, both the HUD and the FHFA
Offices of Inspector General (OIGs) play critical roles in
advancing the integrity, accountability, and effectiveness of
HUD and FHFA, respectively, and their Federal housing and
finance programs.
We are fortunate to have the perspective of HUD Inspector
General Oliver Davis and FHFA Inspector General Brian Tomney
before the subcommittee today. The HUD and FHFA OIG are both
mandated to combat fraud, waste, and abuse.
Contrary to claims of HUD's inefficiencies, HUD, under the
Biden-Harris Administration, has worked diligently to address
outstanding recommendations from OIG, including those resulting
from harmful policies enacted under the Trump Administration.
I look forward to this exchange today.
Thank you, Mr. Chairman.
Chairman Davidson. Thank you, Mr. Cleaver.
I now recognize the ranking member of the committee.
HON. MAXINE WATERS, RANKING MEMBER OF THE FINANCIAL SERVICES
COMMITTEE, A U.S. REPRESENTATIVE FROM CALIFORNIA
Ms. Waters. Thank you very much, Mr. Chairman.
Housing is the number one domestic issue and a priority for
voters all across the political spectrum. When Americans spend
on average 30 to 50 percent of their income on housing, it is
no wonder that their paychecks do not go far as they should.
Yet, MAGA Republicans are ignoring Americans' calls to build
more housing and cut costs.
While I value the insights of the Inspectors General here
today, they cannot offer Congress legislative solutions to act
on but they do not need to either, because we already know what
to do.
This committee needs to get serious and pass my bills, H.R.
4233, to create over a million affordable and accessible homes;
H.R. 4232, to end homelessness; and H.R. 4231, to restore the
American dream of home ownership.
I thank you. I yield back, and I await the testimony of the
Inspectors General to see if they can help us create more
housing or maybe they are here for something else. I do not
know.
Thank you. I yield back.
Chairman Davidson. I thank the ranking member.
Today, we welcome the testimony of Hon. Rae Davis Oliver--
or Rae Oliver Davis, my apologies--Inspector General of the
Department of Housing and Urban Development, and Hon. Brian M.
Tomney, the Inspector General for the Federal Housing Finance
Agency.
We thank each of you for taking time to be here today. Each
of you will be recognized for 5 minutes to give an oral
presentation of your testimony. Without objection, each of your
written statements will be made part of the record.
Mr. Davis, you are now recognized for five--Ms. Davis, my
apologies. It does say Mr. here. Ms. Davis, my apologies. You
are now recognized for 5 minutes for your oral remarks.
STATEMENT OF RAE OLIVER DAVIS, INSPECTOR GENERAL, DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT (HUD)
Ms. Oliver Davis. Thank you.
Good morning, Chairman Davidson, Ranking Member Cleaver,
and members of the subcommittee. Thank you for inviting me to
testify about oversight of the U.S. Department of Housing and
Urban Development.
HUD plays a critical role in every American community,
providing billions of dollars for rental assistance, preventing
homelessness, disaster recovery programs, and economic
development.
HUD also creates important affordable housing and home
ownership opportunities by ensuring trillions of dollars of
mortgage loans and creating liquidity for those loans through
Ginnie Mae's mortgage-backed securities program.
Our country faces significant and complex challenges in the
housing space today. Housing is more expensive now than ever.
There is not enough affordable housing to meet the demands of
American communities. Nearly all of the affordable housing
stock that receives HUD funding is old and needs major repairs.
Economic conditions have slowed the pace of new
construction and transactions that would leverage private
investment to increase the affordable housing supply. Interest
rates remain high and make mortgages less affordable. These
conditions also create liquidity crunches for many of the
independent mortgage banks that HUD relies on to service loans
and provide payments to investors.
There is legitimate concern about the impact that an
economic downturn could have on servicers' ability to operate
and whether Ginnie Mae will have to take on the responsibility
for servicing portfolios like it did in 2022 with the collapse
of reverse mortgage funding.
Several aspects of these challenges are not within HUD or
the Federal Government's control. My office's oversight is
focused on the things that HUD can and should control.
We want to help HUD maximize the outcomes that its programs
and funding generate and strengthen HUD's ability to prevent
fraud, waste, and abuse that robs communities and families of
the resources they need.
My testimony today will highlight key areas where HUD can
improve the integrity and efficiency of its operations, as well
as the effectiveness of its programs in producing for the
families and communities it assists.
We have identified many meaningful HUD actions that can be
taken, including over 30 open recommendations across its
programs that we have labeled as priority recommendations.
For example, in its oversight of safety hazards in assisted
housing, HUD needs to ensure that property inspections are
performed within required timeframes and that complaints about
health and safety risks in multi-family properties are resolved
timely.
HUD also needs to take action to require property owners to
document their determinations not to use lead-safe work
practices when performing maintenance on properties that
disturbs lead-based paint and enhance its process for
monitoring how property owners correct emergency health and
safety deficiencies identified during inspections.
HUD also needs to act immediately to better protect
employees of HUD contractors from retaliation for reporting
fraud, waste, and abuse on mismanagement that affect its
programs.
Our office has identified that whistleblower protections
extended to the employees of Federal contractors in 2013 by
Congress are not available for employees falling under
thousands of long-term HUD contracts, HUD assistance contracts.
Many whistleblowers work at the same housing providers that
HUD is challenged to oversee, and they deserve the fullest
protection under the law when reporting matters, such as
financial irregularities and specific and substantial dangers
to public health and safety affecting low-income housing.
Our office has also recommended HUD to do more to enhance
controls that prevent fraud before it ever occurs. HUD needs to
take the basic steps of identifying how programs could be
defrauded and taking actions to mitigate those risks, then
testing how well those controls work and taking actions to make
them even stronger.
HUD also needs to ensure that its over 40,000 contractors
and grantee partners are held accountable for assisting in
fraud detection and prevention.
Similarly, HUD is chronically challenged with understanding
the extent to which proper payments are made in its two largest
rental assistance programs. HUD has been unable to estimate the
proper amount of improper payments in these programs for the
past 7 years. Funds spent in these programs total more than $45
billion in Fiscal Year 2023 alone. That is over two-thirds of
HUD's expenditures.
Estimating the improper payments is the first step to
finding why they occur and creating a plan to reduce them.
To conclude, I am proud of the hard work of my dedicated
staff and the robust oversight that our teams provide to our
stakeholders.
I am looking forward to working with this subcommittee in
the future, and I welcome any questions that you may have.
[The prepared statement of Ms. Oliver Davis follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Davidson. Thanks, Ms. Davis.
Mr. Tomney, you are now recognized for 5 minutes for your
opening statement and oral remarks.
STATEMENT OF BRIAN M. TOMNEY, INSPECTOR GENERAL, FEDERAL
HOUSING FINANCE AGENCY (FHFA)
Mr. Tomney. Thank you.
Chairman Davidson, Ranking Member Cleaver, and honored
members of the subcommittee, thank you for the opportunity to
appear today to talk about the meaningful work that my office
is doing for the benefit of the American homeowners.
I am honored to appear with my distinguished colleague, Rae
Oliver Davis, Inspector General with the Department of Housing
and Urban Development.
Although each of our agencies has a unique mission and
different work streams, we share many of the same oversight
goals.
It has been a little over 2 years since I became the FHFA
Inspector General in early 2022. During that time, we have
issued more than 60 reports covering topics such as enterprise
supervision and conservatorship, the Federal Home Loan Bank
System, nonbank seller/servicers, business resiliency,
appraisals, and the crucial area of cybersecurity.
Our findings largely demonstrate that FHFA is achieving
better administrative and management results and maturing as an
agency and a regulator. At the same time, we have identified
areas where the Agency can improve and continue to progress. In
those cases, we have offered recommendations, all of which the
Agency has committed to implement.
In addition to the work of our report teams, our
investigators play a significant role in protecting the
Nation's mortgage markets through civil and criminal
investigations of mortgage fraud and other financial crimes. We
have routinely partnered with investigators from HUD and the
Federal Deposit Insurance Corporation (FDIC) OIGs, the Federal
Bureau of Investigation, and Federal and State law enforcement
agencies. Our investigations often focus on fraud involving
loan originations and modifications, short sales, and
residential mortgage-backed securities, or RMBS.
We also continue to investigate pandemic fraud, often
schemes that targeted the Paycheck Protection Program. Here we
have seen fraudsters use illegally obtained Paycheck Protection
Program (PPP) loans to take out millions in fraudulent
mortgages and steal from multiple Federal Home Loan Bank member
banks.
In the past few years, our Office of Investigations has
reported more than 150 convictions or pleas and more than $2.2
billion in criminal and civil penalties.
In 2023, our investigators, working with other Federal law
enforcement partners, played a pivotal role in the resolution
of one of the last cases from the financial crisis. Investment
bank and financial services company Union Bank of Switzerland
(UBS) agreed to pay almost $1.5 billion in penalties to settle
a civil action relating to underwriting and issuing RMBS in
2006 and 2007.
Just a few months ago, we also completed one of the largest
PPP conspiracy cases up to now. After more than 2 years of
complex work, 17 conspirators were sentenced for their roles in
fraudulently obtaining and laundering millions of forgivable
PPP loans.
My team and I also take allegations of fraud against
vulnerable people seriously, and when we have the jurisdiction
to pursue justice for the victims, we are committed to doing
so.
In one recent example, we investigated and supported the
prosecution of three co-conspirators in a $7 million fraud
scheme that targeted vulnerable people. This included elderly
homeowners in financial distress who were just trying to stay
in their homes.
Sadly, although the fraudsters were found guilty and
sentenced to 6, 10, and 25 years, all of the victims still lost
their homes.
Looking toward the future, our reporting will continue to
focus on areas of highest risk. Whenever appropriate, we will
offer actionable recommendations to improve FHFA's operations
and oversight. Some of this work will build on findings in
previous reports; some will represent an expanded facet of
oversight. I look forward to sharing the results of this work
with you in the future.
While I cannot comment on our ongoing investigations, I can
assure you that we remain vigilant in investigating and
prosecuting fraud that affects our Nation's housing finance
system.
In all of our work, we remain focused on our mission.
I thank the subcommittee for the opportunity to testify
today, and I am happy to answer any questions you may have.
[The prepared statement of Mr. Tomney follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Davidson. Thank you, Mr. Tomney, for your opening
statement.
We will now turn to member questions. I recognize myself
for 5 minutes for questioning.
Ms. Oliver Davis, I want to thank you for highlighting in
your opening remarks the whistleblower protections that are out
there. Just last month, we had hearings where two of our
witnesses were basically driven out of Public Housing
Authorities for basically blowing the whistle on the things
that are going wrong there. So thank you for highlighting that.
I just want to know about the Hatch Act. The Biden
Administration issued an executive order to have every Federal
agency engage in voter registration.
Is voter registration part of the HUD mission?
Ms. Oliver Davis. Thank you for that question, Mr.
Chairman.
In reference to the Hatch Act, normally we would turn over
allegations around the Hatch Act to the Office of Special
Counsel, and I have not seen any guidance out on that at the
Department as of yet.
Chairman Davidson. I do not think you will see any coming
from the administration about that at this time, but, frankly,
in the past, Inspectors General have held people from both
parties liable for violations of the Hatch Act. In fact, that
has happened just as recently as the last administration within
HUD.
I would ask that you take a look at the Hatch Act,
particularly with respect to voter registration drives and the
potential for ballot harvesting drop boxes at HUD properties.
Could you do that?
Ms. Oliver Davis. I am happy to look into that issue and
find out more about it.
Chairman Davidson. I think it lines pretty well outside the
mission of Housing and Urban Development. So I really
appreciate that.
I have introduced a bill, as I mentioned, a bipartisan
commission to review HUD's organization to make recommendations
for needed reforms. I think we can all agree, given the state
of public housing, the gaps in overseeing billions of dollars
of grants and overall delays, conditions in the public housing
units, and, frankly, actual crime that thankfully is being
prosecuted by the Department of Justice, that HUD is not
functioning as efficiently or effectively as the American
people expect them to.
If we could get this commission enacted, would you agree to
work with the commission to the maximum extent possible to help
in the evaluation of this?
Ms. Oliver Davis. I would be happy to meet with the
commission and learn how our oversight could be impactful, yes.
Chairman Davidson. Yes. Thank you.
We are hoping to get that commission funded through
appropriations and across the finish line but it has two
members from each party. They cannot cut spending. They cannot
launch new stuff, but they could refine the current programs
and update the authorizations, which is a big issue within HUD.
Mr. Tomney, I want to thank you for highlighting the
conservatorship issues. One of the deficiencies in the current
administration is they have not delivered a report that is
required by law to say what is the plan to end conservatorship,
and that has not happened for quite a long time.
Now, the Secretary of Treasury is responsible for
delivering the report, but of course the people that would be
involved in it are the GSEs themselves within FHFA.
Have you seen any activity working toward fulfilling that
legal obligation?
Mr. Tomney. Thank you for the question, Mr. Chairman.
Obviously, the conservatorship topic has been one for
virtually 16 years now, that has a lot of complexity to it.
Chairman Davidson. Almost old enough to be an adult but are
they complying with the law that says give us a plan? Have you
seen any activity going on that says they are working toward
that?
Mr. Tomney. I have not seen anything. We have done some
work in that space from our oversight perspective to confirm
that FHFA itself, as it relates to conservatorship decisions,
is for the most part properly documenting the decisionmaking
process while they are in----
Chairman Davidson. Yes. Thank you, and I would just ask you
to give attention to that because it is a statutory obligation.
I sent you a letter in advance of this hearing questioning
FHFA's use of the so-called new product rule. Fannie and
Freddie are required by statute and by regulation to gain the
approval of the Director of FHFA before introducing any new
product, something that is incredibly important.
Recently Director Thompson used the new products rule to
approve risky, unnecessary programs to allow Freddie Mac to
purchase second mortgages. They mostly used it to kind of
change the mandate and mission of the Federal Home Loan Bank.
So do you think that the 30-day public comment period is
enough and are they complying with it?
Mr. Tomney. Thank you. Thank you for your letter last week
and your thoughts that you expressed in it.
I am certainly familiar with both of the recent new
products that have been approved, as well as the recent rule.
We have not done any work yet in that space. We are
currently going through our risk assessment process now to plan
for future products moving forward and to the extent that we
evaluate this space, we will certainly be able to consider
that.
Chairman Davidson. They seem to be timed very selectively,
ahead of like the State of the Union or a Presidential debate
or something like that.
There is not demand from the public. There is not a comment
period where they could weigh in and say this is a bad idea. So
I would ask you to give attention to that.
The other part is there are pipelines in the process--there
are products begging for approval that have been in the process
for years, and they cannot get a decision out of FHFA. So it is
very selective. I do not think they are complying with the new
product rule, and I would ask you to look at that.
My time has expired. I now would like to recognize the
gentleman from Missouri, Mr. Cleaver, who is also the chair of
the Subcommittee--the ranking member of the Subcommittee on
Housing--for 5 minutes.
Mr. Cleaver. Thank you, Mr. Chairman.
Ms. Davis, is registering voters a political act? I mean, I
know telling residents in public housing how to vote is, but
the registration part.
Ms. Oliver Davis. Congressman, I am not sure I can be
helpful in this area. I do not really have all the facts. I do
not have expertise in this particular area to offer.
I am happy to listen to the member, the subcommittee
members' concerns on this, and learn more if I can.
Mr. Cleaver. I am not concerned. Having lived in public
housing, I know I do not ever remember my parents going up to
the office to get a ballot on how to vote.
The other issue: The Biden-Harris Administration inherited
1,733 recommendations left open and unaddressed by the previous
administration. On this past March, the administration had
closed 253 OIG recommendations, reducing the total number of
open recommendations to 820.
As HUD continues to implement the OIG's recommendations,
substantial investments are needed to strengthen its programs
and oversight capabilities.
Do you agree with the fact that resources are needed to
address the problems that have been exposed?
Ms. Oliver Davis. We have identified and we have tried to
reflect that in our ``Top Management Challenges'' report this
year. The capacity is a major concern for the Department,
capacity in terms of skill sets, people, resources, technology.
Certainly, they need additional capacity to hold their program
partners accountable.
Mr. Cleaver. When the HUD Secretary was here she spoke
publicly about--and I have spoken with her about this
privately--that many of the things that the Department receives
criticism for not having done and the directions to get certain
things done are simply beyond the capacity of HUD with the
current allotment from Congress.
Mr. Tomney, I know the OIG office does not get into the
congressional prerogative of the funding. However, if the
recommendations from you continue to pile up, is that not going
to create an--do damage to HUD ever catching up with all the
recommendations?
Ms. Oliver Davis. We certainly take that into account as we
start new work. I mean, the same can be said of, frankly, my
resources and my portfolio. There is an enormous program that
we have to oversee.
So we have to risk-base our work. We have to make sure that
we get the critical parts of HUD's portfolio and make very
smart, very focused recommendations.
Things like Ginnie Mae with a trillion-dollar portfolio, we
were in the past pretty much focused just on the financial
audit. We now have an audit team that looks primarily at Ginnie
Mae.
We are trying to be very good stewards of our resources and
make very good recommendations.
Mr. Cleaver. Yes. I agree that, as the recommendations go
unaddressed because there are not the dollars for HUD to
address them, the same thing applies to the OIG, does it not?
Ms. Oliver Davis. It does. We can always do more with more
and there is always more to do, frankly.
Mr. Cleaver. Does your office also monitor issues that
tenants may be raising? I mean, do you look into tenants
organizations, welfare rights organizations who also registered
concerns and raised issues?
Ms. Oliver Davis. Well, first and foremost, we certainly
have a hotline, and we get a remarkable amount of input and
outreach from tenants.
We have also been doing community outreach. Just yesterday,
I was out in DC with the D.C. U.S. Attorney meeting with
community groups, which we hope will touch tenants and get to
tenants, talking about our initiatives, our lead initiatives,
our sexual misconduct initiatives out in housing.
So we are taking into account tenants and meeting quite a
bit with individuals that can speak directly to their concerns.
Mr. Cleaver. Thank you.
I yield back, Mr. Chairman.
Chairman Davidson. Thank you, Mr. Cleaver.
Floor votes have been called. We will try to get through a
few more rounds of questions and then it is the intention for
the committee to recess to allow members to vote and
immediately resume the hearing as soon as these votes are
finished.
With that, I recognize the gentleman from South Carolina,
Mr. Norman, for 5 minutes.
Mr. Norman. Thank you, Mr. Chairman.
Thank you for appearing today.
I think your comment about the importance of correcting the
mismanagement and I guess fraud that is within the division--
what kind, a question for both of you, what do we need to do in
Congress to speed up the process? I notice you had commitments
that were going to improve or I guess look into the complaints.
What kind of timetable and what kind of, I guess, ramifications
if they do not comply?
Ms. Oliver Davis. Congressman, are we talking about open
recommendations? Yes.
One thing that we have done at HUD OIG is we have really
focused in on priority recommendations. As other members have
cited, we have a large number of recommendations that we have
made at the Department. What we try to do is really focus on
the ones that can make the most difference.
I would draw the subcommittee's attention to those. Things
like elevated blood levels in children in public housing,
things like IT concerns over security when there is personally
identifiable information (PII) at risk.
In terms of the recommendations, we have a process that we
follow internally, and sometimes that process leads to
agreement and sometimes it leads to disagreement.
One thing that I am very much hoping to do as the head of
my agency is be in control of the closure of those
recommendations. I want to be in the position to look at what
HUD is doing and say whether or not they have satisfied my
recommendation. That is something I do not necessarily have the
authority to do right now.
Mr. Tomney. Thank you for the question.
Obviously, there is a scale difference between HUD and FHFA
as far as our open recommendations. As of just yesterday, we
were only at 42 and within the last 2 years since I have taken
office, the FHFA has closed 98, and of that, about half of
those were ones that were recommended during my tenure.
Director Thompson came to me early on, on her own, and
acknowledged the open recommendations and committed to me that
she was working to close them and implement them as quickly as
possible.
By and large, I have been pleased with the response that we
have gotten from the Agency, and certainly nobody on my staff
has raised any particular concern.
So we are working to close them as fast as possible. Some
are easier than others. Some could be just a quick update of
training to a certain group of people. Others could involve IT
infrastructure changes that will just take time.
All in all, I have been pleased with the closure pace in my
Agency.
Mr. Norman. They are not only giving you responses, they
are giving you actions that are correcting the recommendations
to make the Agency better?
Mr. Tomney. Correct. So the process is that once we make a
recommendation, it is on FHFA to then implement that.
Once FHFA believes that they have fully implemented it,
they reach back out to the team, the audit team or the
evaluation team that made the recommendation.
We make the determination of whether they have satisfied
that recommendation. Once they do, we then close the
recommendation as implemented.
Mr. Norman. Okay.
Congressman Davidson had mentioned the Hatch Act. What is
literally taking place is at pretty much every government
agency they are giving out voter registration forms. I am from
South Carolina. We are checking into are these illegals.
A lot of them, the Federal Government under Biden has given
Social Security numbers, given driver's licenses. Basically, it
is a registration to vote when it is illegal on the face of it.
We are looking into that now.
Are you aware of this and do you condone this?
Mr. Tomney. I have certainly not seen that. I have
certainly seen the Hatch Act warnings from my office come out
to remind folks to be mindful of it, particularly in an
election year. I have not seen this in my office, and it has
not been an issue that has been raised to me.
Ms. Oliver Davis. Sir, I am not aware of it as well.
Likewise to my colleague, we train on the Hatch Act internally.
We discussed it, but I am not aware of this activity. I am not.
Mr. Norman. Okay. Thank you for your time. Hopefully we
can--I am in the home building business. I do not know what
affordable housing is anymore and particularly with the way we
are with providing housing for the illegal aliens, we have a
problem all over this country, affordable problem.
Thank you so much.
Chairman Davidson. Thanks, Mr. Norman.
I now recognize the gentlewoman from California, Ms.
Waters, who is also the ranking member of the full committee,
for 5 minutes.
Ms. Waters. Thank you very much, Mr. Chairman.
I would like to direct this question to Ms. Rae Oliver
Davis.
I am looking at an article from The Washington Post, July
28, 2019, and it is where President Trump characterized
Representative Elijah Cummings' Baltimore-based congressional
district as a rodent-infested mess where no human would want to
live.
Also, I am looking at the fact that the President just a
few days ago made a similar statement about Baltimore. It
appears that the Kushner family own thousands of apartments
that were considered rat infested and other kinds of problems.
Do you know whether or not those rat-infested apartments
owned by Mr. Kushner are still in Baltimore?
Ms. Oliver Davis. I cannot speak to those specific
properties or the specific units.
Ms. Waters. I cannot hear you.
Ms. Oliver Davis. I cannot speak to those specific
properties or the specific units.
Ms. Waters. Have you had complaints about rat-infested
apartments in Baltimore, Maryland, or in Virginia, that were
owned by Mr. Kushner or his family?
Ms. Oliver Davis. I would need to do some internal data
gathering to verify whether or not we, in fact, had complaints
about that.
Ms. Waters. The President just a few days ago said it was a
mess, it was terrible.
Have you thought about looking into it, since the Vice
President--I mean, the former President--said that it was a
mess, Baltimore was a mess?
Ms. Oliver Davis. We have a pretty robust portfolio in
terms of decent, safe, and sanitary issues involving public
housing in HUD-assisted housing, and we are always looking to
hear about more issues. We are certain they are out there.
Ms. Waters. How long have you been Inspector General?
Ms. Oliver Davis. Since the beginning of 2019.
Ms. Waters. Have you conducted any investigations on rat-
infested apartments in Virginia or in Baltimore?
Ms. Oliver Davis. We have, again, a remarkable--we have a
remarkable portfolio in this area.
I cannot speak to specifics on rats or mold, although we do
hear about that quite a bit nationwide. That is not an unusual
complaint that we would get.
We are looking at unit conditions across the board. Voucher
programs that are participating, we are looking at unit
conditions in specific properties, Rental Assistance
Demonstration (RAD) conversions. We are certainly in the Public
Housing Authority (PHA) space and multi-family. We are doing a
lot of work.
Ms. Waters. Did the former President's comments catch your
attention just a few days ago and give you cause to want to
take a look and see what was happening in this place he called
a mess, the city of Baltimore?
Ms. Oliver Davis. Frankly, you are raising my awareness to
those comments today.
I hear comments daily that are extremely concerning to me
about the state of HUD housing and specific landlords and PHAs.
Ms. Waters. Is it unusual to hear about a city that is a
mess who maybe have apartments that are participating in
Federal resources that would cause you to take a look, and
particularly if the accusation came from high places?
Ms. Oliver Davis. I understand the sense of urgency around
this, and we are paying attention daily to what we read and
hear, and I am happy to keep dialoguing with you on this,
absolutely.
Ms. Waters. If, in fact, any of these rat-infested
apartments are owned by the Kushner family, would you be
hesitant to investigate them and take a look because of who
they belong to?
Ms. Oliver Davis. We are not hesitant to look into any
allegations, especially in this arena. That is not how we
operate. We are completely independent and it does not factor
in.
Ms. Waters. Have you ever followed up on rat-infested
apartments?
Ms. Oliver Davis. In general?
Ms. Waters. Anywhere.
Ms. Oliver Davis. In general? Well, I think that is a
pretty common thing that we hear about, frankly, in the course
of our audits and investigations. It is not unusual.
Ms. Waters. The reason I raise these questions is because
when we deal with housing we find that so many people are
undermined, under taken care of. We find that people in high
places do not get investigated, that we know about thousands of
apartments in this country that are infected where nothing is
going on from any Inspectors General.
It sounds as if you do not know anything about what you do
with rat-infested apartments owned by anybody. Is that right?
Ms. Oliver Davis. Well, when it comes to those type of
allegations, we reflect them in our audit work. We talk about
how HUD is responding to those type of things. Like, for
instance, we have done two audits recently talking about how
HUD is dealing with both life-threatening situations and non-
life-threatening situations.
Chairman Davidson. The gentlelady's time has expired.
Ms. Waters. Thank you.
Chairman Davidson. It is now time for members to make their
way to the floor. As a reminder, we will immediately resume the
hearing after votes.
The committee stands in recess.
[Recess.]
Chairman Davidson. The Committee on Housing and Insurance
will come to order.
I now recognize the gentleman from Wisconsin, Mr.
Fitzgerald, for 5 minutes of questions.
Mr. Fitzgerald. Thank you, Mr. Chair. I am going to go
quickly here, so bear with me.
I am sure you are aware the Administrative Procedure Act
defines a rule as an agency statement that is, quote, of
general or particular applicability and future effect designed
to implement, interpret, or prescribe law or policy.
FHFA's bi-merge requirement would affect participants in
the housing finance market. It also is a major change in policy
from the longstanding tri-merge requirement.
I am concerned that under Director Thompson's leadership
the FHFA seems to be hiding kind of behind their role as the
conservator of Fannie Mae, Freddie Mac to skirt requirements of
the American Planning Association (APA).
Mr. Tomney, does your office have any plans to investigate
the FHFA and whether or not they are following APA with its
policy change announcements?
Mr. Tomney. Thank you for the question.
We have not done work in that specific space. As I said to
the chairman earlier today, we are currently engaged on a risk
analysis leading into future products and so, hearing from
stakeholders like yourself today is certainly something we will
be looking at, and we are happy to work with you, and stay
tuned.
Mr. Fitzgerald. Thank you.
Former Director Mark Calabria issued a proposed rule of
prior approval for enterprise products proposed rule. That was
subsequently finalized by Director Thompson. This rule is an
important guardrail, as you know, to ensure that the GSEs do
not inappropriately expand their footprint in the housing
market and displace true private capital.
FHFA's 2023 report to Congress noted that between April 28,
2023, and April 28, 2024, during that year FHFA completed its
review of ten new activities and, based on factors set forth in
the regulation, determined that three should be treated as new
products that merit public notice and comment.
Do you plan to issue a report assessing compliance with
prior approval for enterprise products final rule?
Mr. Tomney. It is certainly something we are looking at. We
have not made that decision yet, but I am certainly familiar
with the topic that you are speaking about, and it is going to
be a continued topic for us moving forward.
Mr. Fitzgerald. Last Friday, the FHFA conditionally
approved a pilot for Freddie Mac to purchase closed-end second
mortgages, a proposal that I guess you could say was opposed by
Members of Congress and the industry and some consumer groups
as well.
Will you issue a report on the pilot to determine whether
the objectives of the pilot were met and that FHFA fully
adhered to the regulation?
Mr. Tomney. Thank you.
It is certainly something we are considering and will be
speaking about in the coming weeks as we plan our future
products.
Mr. Fitzgerald. IG audits of the Community Development
Block Grant Disaster Recovery Program have determined that the
time to deliver program funds to grant recipients varied
greatly between 20O1 and 2022 and trended upwards.
This funding has always been implemented pursuant to
appropriations language, which makes changes to the underlying
Community Development Block Grant (CDBG) statutory
requirements.
To Ms. Davis, how does the discrepancy between CDBG
requirements and appropriations language affect the timeline
for allocating CDBG direct funds?
Ms. Oliver Davis. Well, thank for that question.
I think the complications with Community Development Block
Grant Disaster Recovery (CDBG-DR) are the simple fact that the
program does not have permanent authorization, so it does not
have as much predictability.
We have long sought permanent authorization. We have seen
progress. We have had our previous two Secretaries, both former
Secretary Carson and former Secretary Fudge, endorse that, say
they support permanent authorization.
We have seen progress at the Department. They now have a
consolidated notice that they issue. Sometimes grantees are
working at multiple notices at any given time while in the
process of having an urgent need trying to execute funds,
trying to build capacity.
Mr. Fitzgerald. How could they make that process more
efficient.
Ms. Oliver Davis. Permanent authorization would certainly
help. It would certainly help with the timeliness and the
deliverability of the funds. It would.
Mr. Fitzgerald. What do you think about State and local
governments taking on a larger share of the mitigation?
Ms. Oliver Davis. Well, we need to make sure we are
ensuring that there is proper monitoring and we are assisting
the subrecipients, because it never just stops with the
grantees. This is a very decentralized process.
Mr. Fitzgerald. Very good.
Last year, the FHFA undertook a comprehensive review of the
Federal Home Loan Banks, calling it the first such review in
over 90-year history of the Federal Home Loan Banks (FHLB)
system, a statement that kind of ignores the multiple times
that Congress has reviewed and made statutory changes to the
system. We are kind of use to that, I guess, in Congress.
The report calls for several changes to the system,
including to its mission and usage.
Has the Inspector General, Mr. Tomney, has the Inspector
General reviewed the FHFA's mandate to make such changes absent
clear congressional directives to do so?
Mr. Tomney. Thank you for the question.
I am certainly familiar with the report.
Chairman Davidson. The gentleman's time has expired. I ask
you to respond in writing to the question.
Mr. Fitzgerald. Very good. Thank you.
Chairman Davidson. I thank the gentleman.
The gentlewoman from Michigan, Ms. Tlaib, is now recognized
for 5 minutes.
Ms. Tlaib. Thank you so much, Mr. Chair.
I want to talk about lead exposure within HUD.
Inspector General Davis, we have a saying in my district: A
child cannot learn if they are hungry. Also, a child cannot
really learn, cannot thrive, if they are being poisoned, being
exposed to lead and so much more.
In Detroit, I know 90 percent of the housing stock was
constructed before 1980, and that is only about 2 years after
lead-based paint was banned. As of 2020, we have learned that
more than one in twenty children in Detroit tested positive for
elevated blood lead levels.
So this is an issue of all types of housing, even in the
private industry where I think it is like 20 percent of private
housing units alone have also lead-based hazards.
So, Inspector General Davis, can you discuss some of your
recommendations? Because even though the Biden Administration
has announced a tremendous amount of investment in lead
abatement, implementation matters, and we just have not seen it
on the ground.
Can you discuss some of the recommendations OIG has had for
HUD in terms of lead-based hazards in public housing?
Ms. Oliver Davis. Well, thank you so much for drawing
attention to this issue.
This is part of my environmental justice initiative that I
released last year. We have been working very closely with the
Department of Justice. They have actually included us in their
environmental justice policy. We have been working so closely
over time now.
In terms of lead, we have made a number of priority
recommendations that remain open that we think will make a
difference.
First and foremost, we want the Department to get their
arms around the problem. We want them to understand the number
of units that might potentially have lead and that is so that
they can adequately resource their oversight of that issue.
We are also looking at some of the tools they have in place
to track elevated blood lead levels like you are talking about.
They have a tool in place, but we know there are variances in
it. For instance, we see elevated blood lead levels (EBLLs)
concentrated in certain States.
We know that, to your point, that housing stock is old
throughout the country. So it would be unusual to see just
certain States have a higher level of EBLL. So we think they
need to address that issue.
We are also----
Ms. Tlaib. Did you look at the Capital Fund formula at all?
Ms. Oliver Davis. I am sorry?
Ms. Tlaib. Capital Fund formula grants.
Go ahead and finish your thought, because I do want to talk
to you about that, because even when we do find it, right, I
mean, we are great at studying and finding out that there is a
problem.
I know for HUD estimates I think addressing any health
hazards in public housing is about 15,000 per unit, but the
Capital Fund Formula Grant Program are less than 25 percent of
that amount on average.
Ms. Oliver Davis. Anything that we can do to combat this
problem, I would be willing to talk to you further about,
certainly.
Ms. Tlaib. Yes, I think that is something to look at,
because, again, we can keep throwing money at it because we
know there is a problem, but on the ground, the way we are
doing it, I do not know if it has actually been effective.
Switching gears for just a moment, Inspector General
Tomney. FHFA is responsible for ensuring enterprises and
Federal Home Loan Banks operate in a safe and sound manner.
Climate-related risks impact the enterprise and FHL Bank
mortgage loan portfolio's investments.
For example, the Congressional Budget Office (CBO)
estimates that homes with federally backed mortgages already
face an annual flood damage of 9.4 billion. I mean, I saw one
of my neighbors, a very small neighborhood in my community,
being flooded almost four times just in one summer.
Has FHFA made progress on recommended actions to
incorporate climate-related risks with what you have looked at?
Mr. Tomney. Thank you for the question.
We have certainly looked at disaster risk and the portfolio
for some time now. We have issued a white paper on the topic.
We are actually conducting a review right now of the flood
insurance compliance to ensure that both Fannie and Freddie are
ensuring that properties within a flood zone have the proper
insurance.
So that is underway right now. I am happy to report on that
in the coming----
Ms. Tlaib. Is that, when you all review, is flood mapping
something you look at?
Mr. Tomney. We do not. Our auditors and evaluators will
ensure that----
Ms. Tlaib. It is still connected, though, Inspector
General. I mean, when you talk about access to insurance, one
of the things that I hear from my constituents is the flood
maps that the Federal Emergency Management Agency (FEMA) uses
are so outdated.
Mr. Tomney. What is interesting is that historically Fannie
and Freddie, because of the mandatory flood insurance, have not
had a lot of exposure. Their risk tends to lie elsewhere, but I
think as flood zones change and need to be reconsidered, there
could be more risk in the future there.
Ms. Tlaib. Thank you both.
Chairman Davidson. I thank the gentlewoman.
The gentleman from Nebraska, Mr. Flood, is now recognized
for 5 minutes.
Mr. Flood. Thank you, Mr. Chairman.
I would like to start with FHFA's approval of a couple of
potentially worrying private programs. The FHFA's approval of
Freddie Mac's proposal to purchase second mortgages and their
Fannie Mae title acceptance pilot are both potentially
problematic ways of pushing the GSEs into other private markets
that have nothing to do with their core mission.
As we know, Inspectors General are not necessarily in a
policymaking role, but they are a good source of oversight, and
in some cases we have questions about whether FHFA is following
its own rules.
In a Senate Banking hearing, Director Thompson indicated
that the pilot did not have to go through the products rule
because it was a, quote, unquote, credit underwriting decision.
Mr. Tomney, could the OIG review instances where FHFA
bypassed the prior approval for enterprise products rule by
labeling a GSE program simply a, quote, unquote, credit
underwriting decision?
Mr. Tomney. Thank you for the question.
We have not looked at that, particularly since the new rule
was finalized last year. We are currently going through our
process to plan new products in the coming months and toward
the end of the year, and this topic is one I am familiar with,
and we are certainly going to keep talking about it.
Mr. Flood. Well, thank you.
It would be exceptionally unnerving if the FHFA could use
this, quote, unquote, credit underwriting decision to excuse--
to avoid compliance with the new products rule. Frankly, you
could classify any number of activities as related to credit
underwriting. Where does the loophole end, is one of my
questions.
The GSEs are already housing behemoths that have their
hands in all parts of our housing ecosystem. If they are able
to offer new products without even going through the new
products rule, then we are going to see them continue to
expand.
Everyone on this committee is well aware that the GSEs are
not fully private entities. They are still in conservatorship.
If they are interested in expanding into new markets, they
should be spun out of conservatorship first.
They cannot have their cake and eat it too by remaining in
place with implicit Federal backing and also cannibalize
existing markets that have nothing to do with their charter.
Neither the pilot nor the second mortgage pilot have
anything to do with expanding access to housing or affordable
housing. In fact, the second mortgage pilot could run directly
contrary to those goals by speeding up inflationary pressures
that are already making our housing market incredibly
expensive.
I would like to briefly pivot to HUD.
Last month we had two witnesses testify regarding waste and
fraud at the public housing authorities. In both cases, the
people that came to testify in front of the committee
experienced retaliation for telling their stories.
My understanding is that Congress already passed a law
protecting against this kind of retaliation for contractors,
subcontractors, grantees, and subgrantees. That statute is
Title 41, Section 4712 of the United States Code.
Ms. Davis, would public housing authorities which receive
Federal appropriations be subject to those protections from
reprisal?
Ms. Oliver Davis. Yes, they should be. They should fall
under 4712 as employees of a grantee.
Mr. Flood. I know there has been an issue with amending
contracts before and after the passage of this law in 2013. In
the case of our witnesses last month, one was actually hired
well after the 2013 cutoff. That individual indicated they were
not aware of any whistleblower protections in place for them.
For someone, particularly someone who is not a Federal
employee, how are they made aware that these anti-reprisal
rules apply to them?
Ms. Oliver Davis. That should fall within the
responsibility of the Department as the contractual
relationship and the grantee relationship stand.
Mr. Flood. Okay.
Do you have any data on how many times the OIG office has
actually pursued a legitimate whistleblower anti-reprisal
claim? Like, how many times has an investigation resulted in a
successful outcome for the whistleblower?
Ms. Oliver Davis. I do not have that data.
That said, I am certain the committee knows how important
whistleblowers are both to you, to your constituents, certainly
to every IG in their work and so, we have reflected the
limitations that we have with the Housing Assistance Payments
(HAP) contracts in the recent management alert, but I do not
have the specific data about the numbers for you.
Mr. Flood. All right. Thank you very much.
With that, Mr. Chairman, I yield back.
Chairman Davidson. I thank the gentleman.
The gentlewoman from Texas, Ms. Garcia, is now recognized
for 5 minutes.
Ms. Garcia. Thank you, Mr. Chairman.
I want to thank both of the witnesses for being here today,
and thank you for your good work.
I want to start by first clarifying some of the comments
that were made earlier by some of my colleagues.
It did not surprise me that both of you were not aware of
any Hatch Act--direct Hatch Act violations at public housing or
properties owned or financed by your organizations and it did
not surprise me that you were not aware of any harvesting of
any voters.
It seems to me something that the secretary of State of
Mississippi said in response to the President's recent
executive order. In fact, he was afraid, he said, of--well, I
am not going to use the word. I call them undocumented
immigrants. Others use some inhumane terms that begin with
``I'' and also ``convicted felons.''
Are you all, either one of you, aware--just a yes or no, I
do not want to hear about expertise or anything, just yes or
no--are you aware of any allegations or complaints having been
made to any one of your agencies, either directly or
indirectly, about voter fraud or voter harvesting or Hatch Act
violations?
Mr. Tomney. No.
Ms. Oliver Davis. No.
Ms. Garcia. No. Well, I am not surprised, because I am not
sure that anybody can cite any. Certainly this secretary of
State did not. Obviously, it has gotten some of my colleagues'
attention.
The other one that struck me was that someone suggested
that Biden, referring to the President of the United States,
was going around handing out voter cards--again, to
undocumented immigrants--and handing out driver's licenses.
Are you all aware of that happening at all at any one of
your facilities?
Mr. Tomney. No.
Ms. Oliver Davis. No.
Ms. Garcia. Well, I am sure you are not, because, in fact,
President Biden cannot hand out driver's licenses. That is
something that the States do. It is a privilege to drive in
these States and it is up to the States. So the President has
nothing to do with it.
Certainly I do not think anyone would intentionally give an
unauthorized immigrant, knowing that they are not citizens, a
voter registration card. I mean, that is against all rules, or
at least the rules in my State in Texas.
So it seems to me that all this is just a lot of nonsense
to distract from the real housing crisis and the affordable
housing crisis that is going around in America.
The last thing I did want to clarify is that my colleagues
need to remember that the Housing and Community Development Act
of 1980 does allow eligible mixed status families to apply for
housing.
Again, it is mixed status families. In other words, someone
has to be a citizen to apply. So I just want to make sure that
we do not mix apples and oranges here.
The housing crisis really is about affordability, and it is
important that people that are eligible for any of this housing
are people that are, of course, first eligible, because then
hopefully it helps us with the prices on other housing.
I know in Harris County, where I live, Hispanic home
ownership has grown by 47 percent since 2010. However, Black
home ownership has been declining. So that too is a very
serious issue.
The affordability gap in this area alone has grown by 275
percent. So it is not getting better, it is getting worse, and
that is what we should be focused on.
In my county, the affordability is benchmarked by
affordable for someone earning a house--earning household of
$100,000 a year. Get real. That is not really the average
person, at least not in my district.
So what are we doing to promote equitable access to home
ownership for prospective home buyers?
I will start with you, ma'am.
Ms. Oliver Davis. Well, HUD has a number of ways that they
are encouraging home ownership. Certainly, FHA extends access
to credit to eligible lenders, and they have some policies they
have rolled out in order to encourage home ownership.
What we do in our oversight is look at the eligibility
requirements and ensure that they are being met so that they do
not put the fund at risk. We have made priority recommendations
on large group of loans, things like individuals that have
delinquent tax debt, individuals who perhaps are subject to a
Federal offset because of child support.
We think that is a way to protect the fund, and that is the
way to help the Department to continue to extend access to
eligible homeowners, like you said.
They also do counseling before and after the purchase of a
home. We have some ongoing work there to see if we can judge
the performance of that counseling that HUD offers and how well
it serves the individuals and if they have performance goals
around that, whether or not they are being met.
We have grants, certainly, that are being extended. Puerto
Rico home buyers program is one that encourages home ownership.
Chairman Davidson. The gentlewoman's time has expired. I
would ask Ms. Oliver Davis to just respond further in writing
if you would like to continue to follow up.
I thank the gentlewoman from Texas.
Ms. Garcia. Thank you.
Chairman Davidson. Now another gentlelady from Texas, Ms.
De La Cruz, is recognized for 5 minutes.
Ms. De La Cruz. Thank you, Mr. Chairman, and thank you to
our witnesses for being here today. I do appreciate it.
I welcome today's hearing as part of this committee's
effort to restore consistent and annual oversight of our
Nation's housing regulators. This oversight is critical to
ensuring the agencies under our jurisdiction focus solely on
their core missions.
In line with our committee's 50-to-zero vote in support of
my legislation, H.R. 7280, which is the HUD Transparency Act, I
continue to advocate for the passage of this important piece of
bipartisan legislation.
What it does is it requires the Inspector General to
testify before Congress annually. You are aware of it. Although
it is not in place right now, I really appreciate your
appearance today before us. So thank you for coming before us.
Ms. Oliver Davis and Mr. Tomney, earlier this year we had
the former HUD Secretary before this committee, and a lot of
this was brought up concerning waste, fraud, and abuse.
The HUD Secretary made a statement that really disturbed
me, and what she said was, in part, I quote, I wish someone
would tell me where the waste, fraud, and abuse is.
Wow.
I think the work you have both published tells us--or tells
the former Secretary--exactly where and how much misconduct has
taken place and is currently taking place.
So my question to both of you is quite simple. What role do
whistleblowers play in the work that you do to uncover this
waste, fraud, and abuse?
We will start with Mr. Tomney.
Mr. Tomney. Thank you for the question.
Whistleblowers and people coming forth are very important
to us. We have our hotline that receives dozens and hundreds of
tips throughout the year. There are all types of different
mechanisms for folks, including hearings like this, to be
educated on exactly what an OIG does.
It is very important. Our Office of Investigations has done
great work in following the fraud, waste, and abuse that has
been reported.
Ms. De La Cruz. Ms. Oliver Davis, do you agree with his
statement?
Ms. Oliver Davis. Oh, certainly. They are essential to us.
They see and hear things that we simply cannot.
Ms. De La Cruz. Would you say that the HUD Secretary was
aware of these statements, of the things that they have seen
and have reported back?
Ms. Oliver Davis. I know that the Department is aware of
whistleblowers, and I know they are aware of the importance of
whistleblowers in our work.
We issued a management alert recently stating that
employees of contractors that serve under HAP contracts are not
being recognized for potential protections under the
Whistleblower Act in HUD.
So that is something that we are raising awareness within
the Department. It is something that is very important.
Ms. De La Cruz. It would be fair to say that the HUD
Secretary would be aware that there is waste, fraud, and abuse,
correct?
Ms. Oliver Davis. I believe so. I believe that is right.
Ms. De La Cruz. Thank you.
With that, Ms. Oliver Davis, along those lines, I also want
to bring up a management report that you issued to the then-
Deputy Secretary, and now Acting Secretary Todman, in May 2023
after the HUD OIG identified that there was a significant gap
in whistleblower protections for contractor employees pre-2013
that do not include congressionally enacted anti-retaliation
provisions, referred to as Section 4712.
Could you tell us some of the recommendations that you have
for this?
Ms. Oliver Davis. Yes, absolutely.
One of the recommendations we have is that the Department
get their arms around the scope of this problem. We identified
it in the context of HAP contracts. There are thousands.
I am fearful that perhaps this is also a present problem
throughout HAP's portfolio. We are asking HUD to attend to that
and to let us know.
We are also asking HUD to go to their partners that have
these contracts in place and ask them to consent to amend the
contract to protect the very contract employees that they are
employing.
Ms. De La Cruz. Thank you. I yield my time.
Chairman Davidson. Thank you, Ms. De La Cruz.
The gentleman from Nevada, Mr. Horsford, is now recognized
for 5 minutes.
Mr. Horsford. Thank you to the chairman and to the ranking
member, and thank you to our witnesses for appearing to discuss
your work today.
Your offices are crucial as we continue to work to address
the glaring lack of safe, clean, and, most importantly,
affordable housing throughout the country.
In my home State of Nevada, we are bearing the brunt of
this country's affordable housing crisis as low-income renters
in Las Vegas and southern Nevada face the most severe shortage
in the country.
There are only 13 affordable and available rental homes for
every 100 households living in southern Nevada, according to
the National Low Income Housing Coalition's 2024 Gap Report.
During the current shortage of available housing, the most
vulnerable are compelled to compete for the severely limited
supply, which leads to seniors and working families having to
pay nearly half of their monthly income on rent.
At the same time, those payments do not go nearly as far as
they used to for folks who are looking to own their own homes.
Since 2022, the average monthly mortgage payment throughout
southern Nevada has increased an astounding 47 percent.
At events all across my district, I hear from constituents,
really across the entire income distribution, who are
struggling to find a way to put a roof over their head and to
know that priority is important to all of us and to HUD.
The work that your offices undertake is vital to that
mission as your oversight ensures that we are maximizing the
efficiency of every dollar that we spend to enhance our
Nation's affordable housing stock.
Additionally, I want to applaud your recent efforts on
prioritizing tenant safety and keeping a close eye on
property's ability to handle emergency preparers, which will
ensure that people are not just housed but that they can do so
with dignity.
However, before we can even get to that point, we need to
have a data-driven understanding of how to best efficiently
deploy the limited resources that we invest in affordable
housing.
That is why my legislation, the Housing Market Transparency
Act, would empower HUD to collect and centralize tenant-focused
data, such as habitability standards, as well the most recent
inspection data for HUD-assisted properties.
Inspector General Davis, would you please discuss some of
the strategies that your team would be better able to implement
to mitigate potential hazards and address inefficiencies if HUD
kept a centralized repository for this health and safety
information from State housing agencies?
Ms. Oliver Davis. We have touched on a very problem part of
HUD's portfolio in rental assistance. We are looking constantly
not only at the lack of units available and the vouchers that
go unused, but also, as you have pointed out, the safe and
sanitary issues that seem to permeate HUD's portfolio.
We are looking not only at HUD's oversight with respect to
each of these in making recommendations, but we are actually
looking beyond HUD at the grantee level, looking at living
conditions within each of the program areas.
Mr. Horsford. What other data points would you recommend
HUD begin collecting to inform your efforts to provide safe
housing and to continue HUD's efforts around tenant
protections?
Ms. Oliver Davis. Well, as I mentioned earlier, we still do
not have an accurate account of lead and how it affects the
housing portfolio. We do not actually know where lead is in the
portfolio, and lead is a huge problem, of course, for young
people under 6.
I think we are looking and talking a lot about voucher
utilization, that is a big thing. We have learned that the
Veterans Affairs Supportive Housing (VASH) program, the PHAs
are having some difficulty making sure the vouchers are
utilized to the best of their ability, to see that our veterans
are housed.
HUD is working on optimizing the voucher program in
general. I think we need to look beyond those efforts at the
performance of that program, the long term, and see how it is
serving the public.
Mr. Horsford. Thank you.
I just wanted to close by also raising that my bill would
also address collecting information around consumer lending
data. I want to commend the ranking member, Mr. Cleaver,
because he and I led a letter demanding answers to reporting
that the Navy Federal Credit Union had engaged in potentially
discriminatory lending practices by approving Black applicants
at significantly lower rates.
I know we are still working to fully underscore the racial
impact of that, and I hope that my colleagues on this committee
would join with us and cosponsor the Housing Market
Transparency Act. It is good legislation.
With that, I yield back.
Chairman Davidson. Thank you, Mr. Horsford.
The gentleman from New York, Mr. Lawler, is now recognized
for 5 minutes.
Mr. Lawler. Thank you, Mr. Chairman.
Housing affordability is a serious crisis in our Nation
right now. We are over 6.5 million units underbuilt at the
moment, with mortgage rates at multi-decade highs, limited
supply, and continued supply chain and construction issues.
For many, it is the most difficult time to purchase a home
in a generation.
These, among other factors, have forced many potential
homebuyers into the rental market, driving up rental demand and
prices with it.
At such a critical time and so many families struggling to
get by, so many vulnerable and low-income Americans are relying
on access to decent, safe, and sanitary housing from Public
Housing Authorities.
That is why your offices are so crucial and it is so
important to have you here today and to make sure your work is
being seen.
It is horrifying but so important to be hearing of these
instances of waste, fraud, corruption, and abuse, and issues
causing HUD's inability to provide decent, safe, and sanitary
housing.
The New York City Housing Authority is by far the largest
public housing authority in the Nation, consisting of almost
180,000 apartments. As such, it received over $2.8 billion of
Federal funding in 2023 through a range of different Federal
programs.
New York City Housing Authority (NYCHA) has a long history
of mismanagement and corruption, which has created unsafe and
unacceptable living conditions for thousands of residents.
Inspector General Oliver Davis, I mentioned last year when
you appeared here that I was pleased to see the role you and
your team played in the arrest of 70 current and former NYCHA
employees for a variety of offenses as part of one of the
largest pay-to-play schemes in history.
Following up on that, what actions can HUD take to further
compel NYCHA to make serious and sustainable reforms?
Ms. Oliver Davis. Well, we have a whole host of priority
recommendations in our portfolio that apply to PHAs in general
which would also apply to NYCHA. They need to hold NYCHA
accountable in that way. They need to work with the monitor who
is in place to get data on the present circumstances and then
hold their feet to the fire with those outstanding
recommendations.
I also think, as we go forward, the implementation of
National Standards for the Physical Inspection of Real Estate
(NSPIRE), while it is good in theory, we will all be anxious to
see how it rolls out and to see if it does answer all these
problems that are known in the public housing arena.
Mr. Lawler. What lessons can we learn from the failures of
NYCHA to prevent similar corruption and lawlessness at other
housing authorities?
Ms. Oliver Davis. I think fraud risk management is
something that we have been doing a lot of work in, and we are
in fact in the process of doing a fraud risk management audit
at NYCHA.
Certainly, PHAs need some flexibilities, but they have to
have some controls in place and they have to have some
guardrails that people cannot twist through. I am hoping that
audit will be very beneficial certainly to NYCHA and to other
PHAs.
Mr. Lawler. So to that end, obviously in addition to the
rampant mismanagement, waste, and corruption, HUD requires PHAs
like NYCHA to address life-threatening exigent health and
safety issues identified in inspections within 24 hours.
How is HUD monitoring and tracking whether PHAs are
actually adhering to inspection results and correcting these
serious health deficiencies in units?
Ms. Oliver Davis. This is one of our priority
recommendations that comes from an audit we did of HUD's
oversight of PHAs and how they are dealing with corrective
action following Real Estate Assessment Center (REAC)
inspections. It is inconsistent, it is sometimes nonexistent,
sometimes they are not getting the documentation.
In addition to the results from REAC, they are not ensuring
that self-inspections take place. That is a very important
thing that we have in place because REAC only does a percentage
or a sample of units.
Mr. Lawler. Are there any consequences when they are not
meeting the 24-hour requirement?
Ms. Oliver Davis. That is a good question. I would need to
look into what consequences.
Of course HUD always has the ability to hold them
accountable. In this space we have difficulties because we,
again, to your point about the housing crisis, we only have
some units that are available.
I think often HUD is reluctant sometimes to hold people
accountable because they do not have other places to put
people.
We also have instances where we just do not have the
capacity. We see capacity issues in that way as well. We see
inconsistencies in the field holding PHAs accountable.
Mr. Lawler. In terms of field, I mean, has HUD's field
staff monitored PHA's self-inspection requirements? Are people
going in and doing monitoring in the field?
Ms. Oliver Davis. I do not know if they are actually going
in person. There is some monitoring that is taking place but it
is inconsistent. That is why we are calling for a nationwide
inspection standard and that is why I think the NSPIRE rule
could be helpful, but we need to see how it is going to
perform.
Mr. Lawler. Thank you for your work.
I yield back.
Chairman Davidson. I thank the gentleman from New York.
The gentleman from South Carolina, Mr. Timmons, is now
recognized for 5 minutes.
Mr. Timmons. Thank you, Mr. Chairman.
I want to thank both of the witnesses for being here today.
Inspector General Tomney, you may be aware that earlier
this year the White House directed FHFA to revive a pilot
program relating to title insurance waivers.
While I hold concerns with the end goals of the pilot
program itself, I hold even deeper concerns as to how Doma
Holdings, the chosen vendor for the program, obtained this
contract.
To recap, when FHFA was considering this pilot last year
Doma was on the brink of bankruptcy and faced potential
delisting from the New York Stock Exchange. Furthermore, the
company's technology is not innovative and ranks low within the
industry.
The only distinguishing feature of Doma appears to be its
political connections, notably with former Treasury Secretary
Larry Summers serving on its board and being a shareholder.
Despite Director Thompson's recent claim that no vendors
have been chosen for the pilot program, my office has reviewed
documents shared with mortgage lenders by Fannie Mae which
explicitly named Doma Holdings as the vendor for their new
title waiver pilot program.
I am happy to provide these documents to you and your staff
if you are unaware of their existence.
Credit is due to Director Thompson. When I inquired about
this questionable arrangement last summer, she testified that a
partnership between Fannie Mae and Doma, quote, does not sound
safe or sound, end quote.
Shortly after our hearing, she contacted the CEO of Fannie
Mae and instructed her to suspend the pilot program because of
the hearing. Months later, that decision was overridden by the
White House.
So, Mr. Tomney, this is my question. As the FHFA's
Inspector General, I urge you to investigate what led this
pilot program to be revived despite FHFA's objections just last
year. The public deserves to know who at the White House
directed FHFA to revive this program and whether Larry Summers
communicated with administration officials.
The question is, are you currently investigating this and
if not, will you commit to doing so?
Mr. Tomney. I would certainly welcome you sharing that
information with my staff.
As I have mentioned a short time ago, we are currently
planning our future products. To the extent that there would be
any open investigations, it is nothing that I would be able to
speak to in this setting.
I welcome you and your staff to provide that information to
mine. I appreciate it.
Mr. Timmons. We will get you those documents.
One more point. Additionally, a recent Politico article
reported irregularities in Doma's stock price immediately prior
to President Biden's announcement of the title insurance waiver
program during his State of the Union address.
While I am confident that the Securities and Exchange
Commission (SEC) is examining this apparent insider trading, is
the FHFA investigating whether nonpublic information was shared
with Mr. Summers or other members of the Doma board?
Mr. Tomney. Again, I do not have any information on that.
Again, I welcome you sharing anything with my staff.
Mr. Timmons. Thank you.
This is just really troubling. I mean, we will get you the
Politico article and you can see how the stock price jumped
right before the announcement. The speech was not yet made
public. The speech was clearly shared within somebody within
the administration, with the public. That was then traded on.
It is a huge violation of trust, a huge violation of law.
What is even worse, in my opinion, is that this program
should not exist. Like, we will not even talk about the merits
of the program but the fact that the Biden Administration is
clearly doing the bidding of political insiders is what causes
the American people to not have trust in our institutions.
We have to hold these people accountable. We have to earn
their trust and this does not earn their trust, it does not
earn my trust. So I appreciate you looking into it.
There is not a question about whether the law was broken.
It does not take a person that prosecuted white collar cases
for 5 years, like myself, to look at the Politico article and
look at the clear undue influence that has been clearly--I
mean, it is shocking that we have not done anything else.
So I ask you to look into this. I ask you to help restore
the American people's trust in our institutions. I will get you
all of this information and thank you again.
Mr. Chairman, I yield back.
Chairman Davidson. Thank you, Mr. Timmons.
I would like to thank our witnesses for your testimony
today.
Without objection, I would like to enter the following
documents into the record, as noted by a handful of people who
made such motions.
Chairman Davidson. Without objection, all members will have
five legislative days within which to submit additional written
questions for the witnesses to the chairman, which will be
forwarded to the witnesses for their response.
I ask our witnesses to please respond as promptly as you
are able to those questions you could not finish or those
submitted afterwards.
[The information referred to can be found in the appendix.]
So the hearing is now adjourned.
[Whereupon, at 12:03 p.m., the subcommittee was adjourned.]
A P P E N D I X
June 26, 2024
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[all]