[Congressional Record Volume 143, Number 1 (Tuesday, January 7, 1997)]
[Extensions of Remarks]
[Page E18]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            LEGISLATION TO ELIMINATE MISMANAGED HUD PROGRAM

                                 ______
                                 

                         HON. RICHARD H. BAKER

                              of louisiana

                    in the house of representatives

                        Tuesday, January 7, 1997

  Mr. BAKER. Mr. Speaker, recent allegations involving fraud in the 
Single Family Homes for Homeless Initiative and the mismanagement of 
the program by the Department of Housing and Urban Development [HUD] in 
New Orleans--in particular, the division of Community Planning and 
Development--have fueled concern over abuse of taxpayer assets.
  After significant investigation, I introduced H.R. 4085 in the 104th 
Congress, a bill to eliminate the program. Two other Subcommittee 
Chairmen of the House Banking Committee--Spencer Bachus of the 
Subcommittee on General Oversight and Rick Lazio of the Subcommittee on 
Housing and Community Opportunity--cosponsored the legislation with me. 
The bill effectively shuts the program down and returns the homes to 
taxpayers.
  We introduce the same bill today to continue our efforts in the 105th 
Congress to overhaul the program for those most in need of hosing and 
to eliminate fraud and mismanagement in the Federal Government.
  Earlier this year, I contacted the Inspector General of HUD, an 
independent office designed to oversee the department, and requested a 
comprehensive investigation of Safety Net, Inc., and its participation 
in the homeless program. In addition, I requested a full investigation 
of the HUD Office in New Orleans, particularly Community Planning and 
Development.
  The program is more accurately described as the Homes for Homeless 
Initiative of the Single-Family Property Disposition Program. Here is 
how the program works: If a person defaults on the mortgage payments of 
his/her home and the home has an insured mortgage by the Federal 
Housing Administration [FHA], then the Federal Government becomes the 
owner of the home. In other words, in case of default, HUD pays the 
mortgage to the bank, acquires the property, and is required to dispose 
of it.
  For most of these acquired properties, HUD leases the properties to 
nonprofits to serve homeless persons. An acquired property is leased to 
a nonprofit for $1 a year for up to 5 years. The home is to be provided 
for those persons who are homeless. One major restriction is that the 
tenant must have an income that is 50 percent of the median income (in 
Baton Rouge $19,146 for a family of four).
  The nonprofit can purchase the home at any time for 10 percent below 
the appraised fair market value, as established at the time the $1 
lease is signed. It is possible to sell the home well below present 
market value 5 years after the initial appraisal. A nonprofit is 
restricted from reselling to anyone other than a low income homebuyer 
(defined at $31,450 for a family of four).
  The Sunday Advocate alleges that Safety Net, Inc., violated many of 
the rules of the homeless disposition program. In addition, it may have 
broken some of the laws required to participate in the program. I have 
requested that the investigation answer these allegations.
  It is also alleged that the HUD Office in New Orleans failed 
miserably to monitor the program and the participation by Safety Net, 
Inc., for 5 years. I have asked the Inspector General to investigate 
the HUD Office as well.
  Moreover, the U.S. Attorney's Office in Baton Rouge has responded to 
the case by opening an investigation to determine whether a criminal 
prosecution is warranted. The U.S. Attorney's Office is working in 
concert with the Inspector General's Office.
  As a senior member of the Subcommittee on Housing and Community 
Opportunity, I have long been an advocate of reform of the HUD acquired 
Single-Family Property Disposition Program. In 1992, I sponsored an 
amendment and passed into law a requirement that HUD must try first to 
sell the property in the private market to the highest bidder. I 
believe that our first priority is to recover as much taxpayer money 
for the acquired home. If we cannot sell the property to maximize 
taxpayer return, we should use our acquired properties in the most 
effective manner possible to house our most disadvantaged citizens 
without a home.
  To continue rigorous oversight of this program, I requested that the 
Banking and Financial Services Committee conduct a hearing on this case 
and other abuses of this program to guarantee that we do not waste 
taxpayer monies and to insure we provide for our most needy citizens. 
Chairman Bachus has travelled down to Baton Rouge and together, we 
conducted an oversight hearing in Louisiana on August 24.
  I am committed to prosecuting fraud and reforming our Federal 
Government. Moreover, I believe we can provide a safe, decent home for 
our most underprivileged citizens while maintaining accountability for 
taxpayers.

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