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HUD ACCOUNTABILITY 

HEARING 

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

JULY 13, 2016 

Printed for the use of the Committee on Financial Services 

Serial No. 114–98 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

DAVID SCHWEIKERT, Arizona 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on: 

July 13, 2016 ..................................................................................................... 1 

Appendix: 

July 13, 2016 ..................................................................................................... 59 

WITNESSES 

WEDNESDAY, JULY 13, 2016 

Castro, Hon. Julian, Secretary, U.S. Department of Housing and Urban Development .............................................................................................................. 5 

APPENDIX 

Prepared statements: 

Castro, Hon. Julian .......................................................................................... 60 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Vargas, Hon. Juan: 

Written statement of the National Fair Housing Alliance ........................... 64 

Written statement of the National Association of REALTORS® ................. 68 

Written statement of Laurie Goodman, Urban Institute .............................. 70 

Written statement of the Leadership Conference on Civil and Human 

Rights ............................................................................................................. 74 

(1) 

HUD ACCOUNTABILITY 

Wednesday, July 13, 2016 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 10:06 a.m., in room 

2128, Rayburn House Office Building, Hon. Jeb Hensarling [chairman of the committee] presiding. 

Members present: Representatives Hensarling, Royce, Garrett, 

Neugebauer, Posey, Fitzpatrick, Luetkemeyer, Huizenga, Duffy, 

Hurt, Mulvaney, Hultgren, Ross, Pittenger, Barr, Rothfus, Messer, 

Schweikert, Guinta, Tipton, Williams, Poliquin, Love, Hill, Emmer; 

Waters, Maloney, Velazquez, Sherman, Meeks, Capuano, Hinojosa, 

Clay, Lynch, Scott, Green, Cleaver, Ellison, Perlmutter, Himes, Sewell, Foster, Kildee, Murphy, Delaney, Sinema, Beatty, Heck, and 

Vargas. 

Chairman HENSARLING. The Financial Services Committee will 

come to order. Without objection, the Chair is authorized to declare 

a recess of the committee at any time. 

Today’s hearing is entitled, ‘‘HUD Accountability.’’ 

I now recognize myself for 3 minutes to give an opening statement. 

There has probably been no greater public policy mistake in 

housing than Washington trying to put people into homes they cannot afford to keep. It was clearly the number one reason our Nation 

suffered the second worst financial crisis in our history. 

Not 3 weeks ago HUD announced, after secret deliberations, that 

it again wants to double down on these failed policies and breach 

its fiduciary duty to hardworking taxpayers while doing so. Specifically, HUD has now announced what it describes as the ‘‘most significant changes ever to the Distressed Asset Stabilization Program, known as DASP.’’ 

DASP, as most committee members know, is a program that allows a pool of delinquent mortgages headed for foreclosure to be 

sold competitively on the open market. This is done in order to 

minimize losses to the FHA’s Mutual Mortgage Insurance Fund, or 

MMIF. 

Bidders are encouraged to work with borrowers to help bring the 

loan out of default. This is a challenge since the average loan in 

the pool has been in default for almost 21⁄2 years and has already 

been subject to numerous foreclosure mitigation measures. 

After no notice, no public comment period, no public debate, and 

no transparency, HUD announced it will no longer maximize taxpayer recovery by selling these mortgages through an open and 

2 

competitive bidding process. Instead, it will offer lower-price, ‘‘preferential bidding options’’ to ‘‘nonprofits and local governments,’’ or, 

more accurately, as many of us believe, to special interest groups 

and known political allies. 

Additionally, as part of HUD’s 11 specific changes to DASP, private purchasers will now be punished if they get stuck with a vacant property, thus assuring a decrease in private sector bidding. 

As a result, taxpayer recoveries through the DASP will be reduced, 

further exacerbating the financial stress placed on the FHA, which, 

lest we forget, recently required a $1.7 billion taxpayer bailout. 

What we are witnessing is nothing less than the gradual transformation of FHA from a mutual insurance program designed to 

help low-income, moderate-income, and first-time homebuyers, into 

a social program designed to help special interest groups. 

Why has all of this happened? Well, we had a recent report on 

April 12th. Politico published a story entitled, ‘‘Progressive Groups 

Target Julian Castro.’’ It stated in part, ‘‘A coalition of progressive 

groups are launching a preemptive strike against Castro aimed at 

disqualifying him from consideration to be Hillary Clinton’s running mate, attacking Castro on the relatively obscure issue of his 

handling of mortgage sales.’’ 

Just a few weeks later a story appeared in the very same publication entitled, ‘‘Veepstakes: Julian Castro Moves to Shore Up a 

Political Weakness.’’ The story goes on to say, ‘‘Julian Castro’s 

HUD announced significant changes Thursday to a Federal program that sold delinquent mortgages to private investors—a move 

that mollified progressive critics who threatened to undermine his 

Vice Presidential prospects.’’ 

Mr. Secretary, these are clearly disturbing reports, to say the 

least, and I hope and trust you will address them in your statement today. 

To conclude, it is surely worth repeating that there is no better 

foreclosure mitigation program than a job with growing wages and 

a bright future. Also, a bankrupt FHA and a bankrupt America can 

help no one stay in their home, much less afford them an opportunity to buy one in the first place. This attack on FHA’s insurance 

fund must be stopped. 

I now yield 5 minutes to the ranking member for an opening 

statement. 

Ms. WATERS. Thank you very much, Mr. Chairman. 

And thank you, Secretary Castro, for joining us today despite 

being called by the Majority on such short notice and in such an 

unprecedented and discourteous way. 

With this hearing, committee Republicans are hijacking a very 

important topic in order to launch attacks on the Secretary and the 

Department rather than substantively examine the issues impacting working people in this country. 

Through the Distressed Asset Stabilization Program, or DASP, 

the Federal Housing Administration sells the mortgages of underwater borrowers to private enterprises and nonprofits as a way to 

both help low-income borrowers struggling to pay their mortgage 

and minimize losses to the Mutual Mortgage Insurance Fund. Now, 

98 percent of the loans sold so far have been auctioned off to firms 

3 

like private equity funds; the rest have been sold to qualifying nonprofits with substantial experience in community development. 

The Administration, recognizing that this situation may not represent the best solution for borrowers, has proposed some modest 

changes to help ensure that individuals are better protected when 

their loans are sold and to help level the playing field when community-based organizations want to place bids. Apparently my Republican colleagues don’t like it when the Administration looks to 

support consumers. 

In fact, it seems as if the Republicans would like the FHA to act 

like the same private mortgage companies that cratered the economy and focused exclusively on the bottom line. But we know that 

is not how DASP or FHA was designed. 

The FHA has an obligation to the borrowers it serves, and that 

includes helping them stay in their homes. Nonprofit organizations 

are often best positioned to help borrowers do just that, but so far 

they have been kept on the sidelines of the DASP program. Instead, loans have consistently been sold to big business, even when 

news reports have indicated they are doing a poor job of providing 

loan modifications to borrowers. 

Further, the majority of loans sold through DASP are attached 

to properties in communities particularly hard-hit by the housing 

crisis or that are home to racial and ethnic groups that have lost 

a disproportionate share of wealth throughout the foreclosure crisis. So we must be mindful of neighborhood stabilization because 

the outcomes for these loans could make a significant difference in 

the pace of recovery for these vulnerable communities. 

That is why many stakeholders and Members of Congress, including several here on this committee, have been requesting 

changes to DASP that would increase nonprofit participation and 

help protect borrowers. 

I would like to point out that we do not yet know the full scope 

of the changes proposed by HUD, since we all only have a preview 

of the changes to come in the next sale of loans. But from what we 

do know, the changes planned are sensible and incremental. 

So at best this hearing is premature and at worst it is an attempt by Republicans to simply score political points for attacking 

the Obama Administration while protecting the interests of the one 

percent. 

I would also like to point out the urgency with which the Majority responded to the possibility that private investors might lose 

out on a small share of loans. This is our last week in session, and 

we are rushing to hold hearings on how to maximize Wall Street 

profits at the expense of struggling homeowners. 

Is this your poverty agenda, Mr. Chairman? Because we have not 

held a single hearing this Congress on issues that actually warrant 

our urgent attention such as the crisis of homelessness, or communities that are still struggling to recover from the Great Recession, 

or on discrimination occurring at private banks. 

What is more, Republicans continue to burden agencies with 

never-ending document requests and abusing their unilateral selfgranted subpoena power. Make no mistake: This is not only an effort to impair HUD and other agencies from doing their jobs, but 

4 

also to distract the American public from the real policy issues 

these agencies are working to address today. 

So, Mr. Chairman, I mentioned whether or not this is your poverty program because the Republican Caucus and the leadership 

have made a big issue out of having a poverty agenda. They have 

held a town hall; they have gone on national press. And I just want 

to know, is this your idea of a poverty program? 

Chairman HENSARLING. The time of the gentlelady has expired. 

Ms. WATERS. I yield back the balance of my time. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Missouri, Mr. Luetkemeyer, chairman of our Housing and Insurance Subcommittee. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

And welcome, Mr. Secretary. 

Mr. Secretary, we have talked candidly about the many programs at your Department that don’t work and are in desperate 

need of reform. This committee’s intent in passing H.R. 3700 was 

to help you transform some of those programs, and while I appreciate your continued strong support on H.R. 3700, I fear that you 

are now presently focusing your time fixing a program that isn’t 

broken. 

The Distressed Asset Stabilization Program is working, by your 

own admission. I think even your own statement today will say 

that. Since 2013 alone, FHA has sold more than 9,200 nonperforming loans. Your own estimates show DASP net recoveries over 

that period of $2.2 billion, or about $2,400 per unit, over what 

would have been collected without the program. 

The change your Department recently announced will pose a 

threat not just to American taxpayers but to first-time and low-income borrowers who depend on a strong FHA and Mutual Mortgage Insurance Fund. That is the same fund that taxpayers bailed 

out just a few years ago and it has only recently inched above the 

statutory capital ratio, while reserves are still well below the recommended level. 

Your changes undercut a competitive private market that has 

served homebuyers and the taxpayers and the public well. All of 

this is in direct contravention to the mission of DASP. 

According to your Department, the program is ‘‘one of a suite of 

position programs that aids in fulfilling the Secretary’s fiduciary 

responsibility to ensure that the MMIF remains financially sound.’’ 

With these changes you are, in my opinion, picking winners and 

losers and are turning an insurance program into a social welfare 

program. In doing so, you are endangering those families whom we 

are statutorily required to help. 

We are left to wonder why these changes have been made and 

what policy analysis has shown that keeping people in homes they 

can’t afford at the expense of other homeowners is a good idea. 

Mr. Secretary, we look forward to a better understanding of your 

decision-making process, and I thank you for appearing today. 

Mr. Chairman, with that, I yield back. 

Chairman HENSARLING. The time of the gentleman has expired. 

Today, we welcome the testimony of the Honorable Julian Castro, Secretary of the U.S. Department of Housing and Urban DevelVerDate Nov 24 2008 16:39 Mar 05, 2018 Jkt 025877 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 K:\DOCS\25877.TXT TERI
5 

opment. Secretary Castro has previously testified before our committee so I believe he needs no further introduction. 

Mr. Secretary, without objection, your written statement will be 

made a part of the record. 

And Mr. Secretary, you are now recognized for 5 minutes to give 

an oral presentation of your testimony. Thank you. 

STATEMENT OF THE HONORABLE JULIAN CASTRO, SECRETARY, U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) 

Secretary CASTRO. Chairman Hensarling, Ranking Member 

Waters, and members of the committee, thank you for allowing me 

this opportunity to discuss an initiative that is making an important, positive difference for American homeowners and their neighborhoods: HUD’s Distressed Asset Stabilization Program, also 

known as DASP. 

I look forward to a good conversation this morning, but first I 

would like to express my condolences to the Members whose constituents were most affected by the tragedies our Nation endured 

last week in Baton Rouge, Louisiana; in Falcon Heights, Minnesota; and most recently in Dallas, in my home State of Texas. 

The HUD team and I join with you in mourning the lives, both civilian and law enforcement, that were lost. 

My colleague, Attorney General Loretta Lynch, recently remarked that the response to these tragedies must be ‘‘calm, peaceful, collaborative, and determined action,’’ and the Obama Administration is eager to work with you to help make our communities 

safer for every citizen, including our police officers, while also ensuring that every American’s civil rights are protected. 

We come together this morning to discuss an altogether different, 

yet essential, public mandate: strengthening the Nation’s housing 

market in ways that protect homeowners, improve neighborhoods, 

and boost the United States economy. 

Without question, our Nation’s housing market has made remarkable progress since the Great Recession. Real residential investment, which includes new housing construction and home improvements, has grown by more than 8 percent for 6 straight quarters and continues to far outpace overall GDP growth. Sales of existing homes have climbed to their highest level in more than 9 

years. And homeowners’ equity continues to show sharp gains and 

is now nearly $7 trillion higher than when President Obama took 

office. 

And I am proud that HUD has been a part of this turnaround. 

Our agency has taken a number of steps to ensure that the housing 

market remains a bright spot in our economy. 

One important step has been creating DASP. It is innovative; it 

helps homeowners avoid foreclosure, it helps preserve strong neighborhoods; and it boosts the health of the Mutual Mortgage Insurance Fund. 

Since its launch in 2012, DASP has helped more than 10,000 

families who were on their way to foreclosure remain in their 

homes, and it has also helped another 15,000 homeowners avoid 

foreclosure altogether. That has had a major stabilizing effect for 

some of the communities that were hardest hit by the Great RecesVerDate Nov 24 2008 16:39 Mar 05, 2018 Jkt 025877 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\25877.TXT TERI
6 

sion, and it is a direct result of our efforts over the last 4 years 

to continually improve DASP’s effectiveness. 

Since the Program’s launch, HUD has modified DASP many 

times. We have implemented a 12-month moratorium on foreclosures, strengthened DASP’s neighborhood stabilization requirements, and made the Program more transparent and more competitive. In fact, no DASP note sale has been the same. All of the Program’s changes have helped ensure that it continues to meet the 

needs of our growing housing market. 

The same is true of the improvements we announced last week, 

including those aimed at encouraging more nonprofit investors to 

join DASP. 

Some have tried to single out these changes as being politically 

motivated. They were not. 

Many nonprofit groups have decades of experience in stabilizing 

neighborhoods, and HUD wants to put that expertise to work on 

behalf of the homeowners and communities who need it most while 

also maintaining the rigorous standards that have made DASP a 

success for the MMI Fund. And we have been engaging nonprofits 

since 2013. 

All of the program changes we will discuss today were designed 

with input from a broad range of stakeholders. All were assessed 

for how well they would fulfill our goal of strengthening neighborhoods. And all have been implemented with this committee’s counsel in mind, including your direction, Chairman Hensarling, that 

any changes to DASP further protect the health of the MMI Fund. 

I am proud of these changes. 

I am also proud that the FHA has constructed a very sound program. In the last fiscal year, DASP recoveries were 16 percent 

higher than recoveries on assets conveyed through the traditional 

foreclosure action or real estate owned process. And when you consider that DASP has contributed more than $2 billion to the MMI 

Fund above what would have otherwise been collected, it is clear 

that this innovative program is a significant reason why the Fund’s 

capital reserve ratio is now above 2 percent for the first time in 6 

years. 

DASP was created during a period of economic turmoil that was 

unprecedented in our lifetimes. Since its launch, the Program has 

helped preserve the dream of homeownership for thousands of families who had exhausted every other tool at the Federal Housing 

Administration’s disposal, while also strengthening neighborhoods 

all across our Nation and protecting taxpayers. 

Ladies and gentlemen, this is a good example of how public-private partnerships can and should work. Thank you, and I look forward to answering any questions you may have. 

[The prepared statement of Secretary Castro can be found on 

page 60 of the appendix.] 

Chairman HENSARLING. Thank you, Mr. Secretary. 

The Chair now yields himself 5 minutes for questions. 

Mr. Secretary, as you know, 12 USC 1711 requires the FHA’s 

Mutual Mortgage Insurance Fund to maintain a minimum 2 percent capital reserve ratio. Correct? 

Secretary CASTRO. That is true. 

7 

Chairman HENSARLING. And isn’t it true that for 6 years running, including 2 years on your watch, the MMIF illegally dropped 

below its statutory minimum? Do you not acknowledge this, Mr. 

Secretary? 

Secretary CASTRO. That is not accurate. 

Chairman HENSARLING. Well, isn’t it true that in September 

2013, due to its deteriorating fiscal condition, the MMIF received 

a $1.7 billion mandatory appropriation? Isn’t that correct, Mr. Secretary? 

Secretary CASTRO. Mr. Chairman, I think you said that for 2 

years under my watch, it was underneath 2 percent. That is not 

correct. 

Chairman HENSARLING. Okay. Was it ever under its legal minimum on your watch? 

Secretary CASTRO. I testified in early 2015 that within 2 years 

from that time we would get back over 2 percent. 

Chairman HENSARLING. It is a simple yes-or-no question: Did it 

drop below its legal statutory minimum on your watch? 

Secretary CASTRO. I guess the simple answer is that we are over 

2 percent now. 

Chairman HENSARLING. I think the simple answer is that you 

are avoiding the question, Mr. Secretary. Did it receive a $1.7 billion mandatory appropriation in 2013? 

Secretary CASTRO. In 2013, it did receive a mandatory appropriation. 

Chairman HENSARLING. Okay. Thank you, Mr. Secretary. 

You may not like the term, but most of us view that as a taxpayer bailout. It was the first time in history, if I recall correctly, 

Mr. Secretary. 

And isn’t it true that under 12 USC 1708 you have a ‘‘duty’’ to 

ensure that the Mutual Mortgage Insurance Fund remains financially sound? Isn’t that correct, Mr. Secretary? Do you— 

Secretary CASTRO. I certainly take that fiduciary duty very— 

Chairman HENSARLING. Okay, you acknowledge that is written 

into statute. So against the backdrop of an insurance fund that was 

illegally undercapitalized for 6 years that needed an almost $2 billion taxpayer bailout, a fund that you legally have a fiduciary duty 

to ensure remains financially sound—and this is important because 

millions rely upon this fund. A bankrupt FHA, an insolvent MMIF 

is helping no one get into a home. 

Anyway, against this backdrop you have now announced a new 

policy to give noncompetitive, no-bid, sweetheart deals to so-called 

community groups. And I guess, Mr. Secretary, my question is, in 

so doing what internal and external studies did HUD consult to ensure that these policies will not adversely impact the MMIF? Your 

testimony says that there are metrics, economic analysis, and studies that were used, but can you name two of them that you read 

and consulted and relied upon before making this decision? 

Secretary CASTRO. Thank you. That is a long question, Congressman. 

Chairman HENSARLING. Well, it is a simple question. Can you 

name me two studies that you relied upon? And if so, will you 

make them available to this committee? 

8 

Secretary CASTRO. As I stated in my written testimony, Mr. 

Chairman, we have made many changes to the DASP program 

since its inception, and what has happened is that after every note 

sale, our FHA staff has taken input from the investors, from stakeholders obviously, folks who have an opinion, including Members of 

Congress. 

Chairman HENSARLING. I am just curious, Mr. Secretary—studies that you specifically relied on, because the buck stops with you. 

Can you name two studies you relied upon? Because it seems to be 

common sense that if you are no longer going to allow the highest 

bidder to buy these properties, by definition there has to be an adverse impact on the MMIF, and you are saying there is not. 

Secretary CASTRO. What I am telling you is that, in fact, our 

folks rely on the input of stakeholders; they rely on the investors 

who bid on these properties; and, of course, they speak to Members 

of Congress and they look at different analyses— 

Chairman HENSARLING. So you heard from the investors who 

have bought these properties. You consulted with them prior to 

making these changes. Is that true? 

Secretary CASTRO. What was your question? 

Chairman HENSARLING. Did you consult with the investors prior 

to making this change? 

Secretary CASTRO. Absolutely. After the last note sale—and this 

has been an ongoing process— 

Chairman HENSARLING. Okay. I have a list of the entire historic 

list of investors. Did you consult with Neuberger Berman, Credit 

Suisse, PIMCO, Bayview, Lone Star, Angelo Gordon? Can you tell 

me which ones? 

Secretary CASTRO. Our FHA staff—not me personally, our FHA 

staff—has taken input for several years, including after the last 

note sale in the first quarter of Fiscal Year 2016 from an entire variety of investors, Members of Congress, and advocacy groups in 

crafting this policy. We also modeled this with the Office of Management and Budget, and so— 

Chairman HENSARLING. Okay. Did you accept any of their feedback, Mr. Secretary? 

Secretary CASTRO. —this is a very well-thought-out policy— 

Chairman HENSARLING. Did you accept any of the feedback of the 

investors? 

Secretary CASTRO. The FHA staff—again, this is done by the 

FHA staff—of course accepts the feedback of investors, of Members 

of Congress— 

Chairman HENSARLING. Do you know specifically what feedback 

they did accept? 

Secretary CASTRO. I think a number of these changes had been 

suggested by different groups, whether it was the National Association of REALTORS® or others, for several years. 

Chairman HENSARLING. Okay. But we would like for you to make 

available to this committee what the input was and what you accepted. My time is running out, but— 

Secretary CASTRO. Actually, Mr. Chairman— 

Chairman HENSARLING. —I don’t understand how in your testimony— 

9 

Secretary CASTRO. —we have already begun doing that. Congressman Duffy made a request for information and we have submitted 1,900 documents on very short notice. 

Chairman HENSARLING. I know, and— 

Secretary CASTRO. In fact, 2 business days of notice, and we have 

already given 1,900 documents. 

Chairman HENSARLING. Actually, Mr. Secretary, I wrote to you 

in March and told you if you made these changes we would have 

a hearing. You have had several months of notice. 

And I don’t understand how you can say in your testimony that 

these changes—‘‘the most important of which is increased competition and therefore maximizing recoveries for the Federal Government—maximize recoveries for the Federal Government when you 

no longer take the high bidder. You claim this has increased competition, but I don’t understand how. I don’t understand it, Mr. 

Secretary. 

My time has expired. 

The ranking member is now recognized. 

Ms. WATERS. Thank you very much. 

Mr. Secretary, I welcome you and I really mean it. Obviously you 

are under attack. You are under attack by the chairman of this 

committee and he won’t even allow you to answer the questions 

that he is asking you. And he started out on a subject that had 

nothing to do with what he said he wanted to have you before this 

committee about. 

So let me give you an opportunity to talk about what they claim 

they want to hear about, and that is how the DASP program is 

run, what you have tried to do with it. I yield the balance of my 

time to you to be able to be treated fairly. 

Secretary CASTRO. Thank you so much, Ranking Member Waters. 

As you know, we do have a fiduciary duty to the MMI Fund. 

That fiduciary duty at FHA also includes the duty to the borrowers 

that we serve through FHA-insured loans. 

The DASP program is an innovative way where there is an alignment of interests where, if it is done well, we can actually end up 

keeping more people in their homes, avoiding foreclosure, and by 

doing that, help preserve strong neighborhoods—the evidence bears 

this out—and also help build up the Mutual Mortgage Insurance 

Fund. So we want both of those goals to happen. 

And since this program began several years ago, after every note 

sale the FHA staff has met with the investors, and they have taken 

input from Members of Congress, and from different advocacy 

groups. They created what they call a parking lot of ideas of proposed changes and then have implemented some of those changes 

over time. 

So that is what we are trying to do. We are trying to make sure 

that more homeowners can stay in their homes—we avoid foreclosure, and also that by gaining more revenue through the DASP 

program than we would if we went the traditional route of REO, 

we are actually able to build up the Mutual Mortgage Insurance 

Fund. 

We have been very successful with regard to building up the Mutual Mortgage Insurance Fund. In fact, through this DASP program we have returned $2.2 billion over and above what we would 

10 

have if we had gone down the traditional REO route. However, we 

feel like there is work to do with regard to making sure that we 

keep more people in their homes. 

Those two things, even though they may seem like they are opposed to each other, actually oftentimes those interests are aligned. 

If we can keep more people in their home instead of going into the 

foreclosure process, then those private sector investors can actually 

make more money, a greater profit, and families can stay in their 

homes. 

So just to give you an example of this, of why we began to engage 

nonprofits, we want to make sure that we have organizations that 

are concerned—as concerned as possible about keeping folks in 

their homes and also strengthening neighborhoods. As you know, 

there are nonprofits that are very close to the ground, that have 

a connection to the community, that take a particular interest in 

a note sale in one city, one community, and want to do everything 

they can to preserve strong neighborhoods. 

Our preliminary data has shown that at least our biggest nonprofit who has been bidding has been 3 times as successful at keeping people in their homes as the average private investor. So you 

can see this is why we have an interest in this pilot project in expanding the number of nonprofits in this program. 

And again, these interests don’t diverge. Oftentimes the most 

profitable thing that can happen in this process is for somebody to 

stay in their home instead of going through the foreclosure process. 

As I said, we are excited about these changes. 

The last thing I would say is that we should put this into some 

context. Of all of the delinquent properties that are disposed of, 

DASP takes about 20 percent of those. And out of 106,000 notes 

that have been sold, 2,000 of those have been sold to nonprofits. 

Ms. WATERS. My goodness. Mr. Secretary, I am looking up on the 

screen. Are you telling me that an attempt to include nonprofits in 

the opportunity to bid is maybe all that we are trying to do? And 

is it true that 98 percent of the loans auctioned through DASP 

have gone to these private investors, the big boys on Wall Street, 

and only 2 percent have gone to the nonprofits? 

Secretary CASTRO. Yes. About 2,000 loans out of 106,000 have 

gone to nonprofits. 

Ms. WATERS. And now my Republican friends are crying because 

their friends on Wall Street don’t have 100 percent? 

You don’t have to answer that. I said it. 

Thank you, and I yield back the balance of my time. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Missouri, Mr. Luetkemeyer, chairman of our Housing and Insurance Subcommittee. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

Secretary Castro, as you were going through some of your explanation to the chairman a minute ago, you made the comment that 

you also consulted with Members of Congress with regards to this 

program. Who were the Members of Congress with whom you consulted? 

Secretary CASTRO. We would be glad to get you a list of those, 

and I imagine that it is probably well included in the request that 

Congressman Duffy has made. 

11 

Mr. LUETKEMEYER. Wait a minute. Time out. Now, my understanding was that these are Members of Congress whose advice 

you took on how to structure this program. Can you give me one 

name? 

Secretary CASTRO. Sure. Mr. Capuano, I know— 

Mr. LUETKEMEYER. Okay. 

Secretary CASTRO. —has spoken to our staff and been very vocal 

about this program. 

Mr. LUETKEMEYER. Now we know who— 

Secretary CASTRO. Again, Congressman Luetkemeyer, I don’t 

mean to—let me be clear: I am not saying that I have personally 

spoken to each and every one of these Congressional Members. 

Mr. LUETKEMEYER. I was just wondering— 

Secretary CASTRO. However, our staff has. 

Mr. LUETKEMEYER. I am just trying to figure out who are your 

advisors here from the standpoint that—is anybody on this side of 

the aisle an advisor to you on this? 

Secretary CASTRO. Frankly, the letter that we got from the chairman was very helpful in constructing this program. 

Mr. LUETKEMEYER. Okay. 

You also made a comment a minute ago that you have a fiduciary responsibility to the borrower. Can you point to the law and 

tell me where you have a fiduciary responsibility to the borrower? 

Now, you have a fiduciary responsibility to the taxpayer to make 

sure these loans are administered correctly, to make sure the taxpayer’s exposure is minimized. But where do you have a fiduciary 

responsibility to the borrower? 

Secretary CASTRO. I agree with you that we have a fiduciary responsibility to the Mutual Mortgage Insurance Fund, and in this 

program we see two goals based on the 1999 Act that created Section 601, which spoke about both return to the Mutual Mortgage 

Insurance Fund and also trying to keep borrowers in their homes 

and to promote strong neighborhoods. And that was part of the report that came out of the legislation that created 601, and so we 

see this— 

Mr. LUETKEMEYER. That is not in the statute. 

Secretary CASTRO. —as a responsibility that we have to do both 

of these things. 

Mr. LUETKEMEYER. Mr. Secretary, that is not in the statute, so 

that is stretching, again, the intent of the law beyond its intention. 

We are talking about—I think in your testimony here one of my 

questions that I was coming up with was what do you anticipate 

the percentage of nonprofit participation to be after your new rules 

are promulgated? In your testimony you indicate that there is a 

target of 10 percent. Is that correct? 

Secretary CASTRO. That is correct. 

Mr. LUETKEMEYER. Okay. Why do you believe that you don’t get 

10 percent right now? 

Secretary CASTRO. That is a great question. There are different 

reasons for that. 

Number one, there aren’t that many nonprofits right now that 

have the capacity to bid on a high number of loans. Most of the 

nonprofit bidding has been on a smaller number of loans. 

12 

And so one of the changes that we have made, introducing the 

ability of nonprofits to build in the national pool by what we think 

is an innovative way that won’t prejudice the sale with respect to 

for-profits, is to allow them more opportunity to bid in the national 

pool with up to 5 percent of the loans in that pool. 

Mr. LUETKEMEYER. Okay. 

Secretary CASTRO. So the answer to your question is that we 

think that this new opportunity is going to allow more nonprofits 

to shape their bids so that they can effectively compete in a better 

way. 

Mr. LUETKEMEYER. Mr. Secretary, I really don’t care who bids on 

these loans. I really don’t. I think if it is for-profits or nonprofits, 

as long as you vet them and it is a serious investor that can do 

a good job of working with the homeowner and recouping and making this all work, I really don’t care one way or the other. 

The problem I have, though, is whenever you structure the rules 

so that you wind up with a noncompetitive bidding process. I don’t 

understand—we are rigging the system here. 

Secretary CASTRO. Not at all. 

Mr. LUETKEMEYER. And you have in the past here a program 

that works. Your own documents show that you recovered $2.2 billion more—$24,000 per unit more than what you anticipated doing. 

Have you done any studies to figure out how much less you are 

going to make as a result of noncompetitive bidding? 

Secretary CASTRO. As I said, there was modeling that was done 

by OMB that found there would be no impact to the fund. In fact, 

just yesterday the Urban Institute, which the chairman cites in his 

letter as an authority, put out a note that said they don’t believe 

there is going to be an impact to the fund. 

And so we believe that we can accomplish both of these goals: 

that we can build up the Mutual Mortgage Insurance Fund; and 

keep more people—more families in their homes. 

Mr. LUETKEMEYER. Mr. Secretary, I hope you are right. I have 

serious, serious doubts. 

Competition is what drives those numbers. It is what has given 

you the ability to recoup the dollars that it takes to get your capital 

reserve up, and now you are doing the very thing, in my mind, that 

is going to undercut the program and hurt its viability and in the 

long run hurt your ability to increase your capital ratio. 

I yield back. Thank you. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Missouri, Mr. 

Cleaver, ranking member of our Housing and Insurance Subcommittee. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

First of all, Mr. Secretary, let me express my gratitude for your 

opening comments. Like you, Mr. Capuano and I were mayors. I 

had about 1,000 police officers in Kansas City during my term as 

mayor, and it is amazing that these police officers put themselves 

out every day. They are up at night so we can sleep in peace. 

And so I appreciate that as well as the fact that we have to do 

something about the lack of a relationship between minority communities and police. It is in the best interest of our country. And 

13 

if we can eliminate the enemies within, we will frustrate the enemies without. So thank you for that sensitivity. 

And having some experience with the Urban Corps, being mayor 

of Kansas City—and you have been there a number of times—we 

have 1,000 vacant properties in a 150-block area. One thousand. 

The reason is many of those homes were foreclosed and ultimately 

when they sat there a while we had to demolish them. So we have 

these vacant properties, which is a sore on the urban landscape. 

Had we been able to get those homes in the hands of a CDC or 

some kind of not-for-profit we could—number one—we might have 

been able to save the family; and number two, we could have saved 

the home before it deteriorated to the point where now the rehab 

cost exceeds the cost of the property in that location. So my appreciation is the fact that this program is trying to prevent those 

things from happening that I guess anybody in here who represents an urban core can see every single day. So I appreciate 

that. 

Now, the other thing, any time I see an article about HUD I read 

it, obviously for a lot of reasons. And the articles that the chairman 

mentioned, I never saw a quote from you in those articles. 

Did you secretly go and ask for an article to be written? Or did 

you send some minions to ask for an article? You can answer. I 

know— 

Secretary CASTRO. Of course we cannot control the way that 

these things are covered. We are focused on good policy—good, 

sound policy. 

Mr. CLEAVER. I want to associate myself with my friend from 

Missouri who said I don’t care who gets the purchases. I agree. I 

am not sure that is anything we ought to focus on as long as it is 

done fairly and in harmony with the laws and the rules and regulations. 

And in your 2016 progress report it is noted that for-profits purchased 98 percent of the loans through the auctions. And so even 

with the target at 10 percent, the vast majority of the loans still 

went to the for-profits. 

So even with this goal, what is the likelihood, based on past history, that all of a sudden the nonprofits are going to take over this 

program? 

Secretary CASTRO. It is still a real challenge for most nonprofits 

to be able to take on these notes. And that is part of the reason 

that the sales to nonprofits have been modest. And I have heard 

the frustration from different groups, from Congressman Capuano 

and others. And we have said that part of the challenge is capacity, 

but we are willing to do what we can in a sound way, a reasonable 

way, protecting the fund, make smart program improvements that 

allow nonprofits to competitively bid. 

It has to be said that they are not getting a discount; they have 

to meet the reserve price. So we believe that we can make important changes that allow them to competitively bid without sacrificing the stability of the Mutual Mortgage Insurance Fund. 

Mr. CLEAVER. Thank you. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from New Jersey, Mr. 

Garrett, chairman of our Capital Markets Subcommittee. 

14 

Mr. GARRETT. Thank you, Mr. Chairman. 

When you were here before this committee for the very first time, 

I think you were very new on the job, and I know you were asked 

a lot of questions, and a lot of specific questions, and at that hearing, being new on the job, you didn’t have specific answers to those 

specific questions. Now it has been some time and I guess we are 

still looking for specific answers, which apparently an hour into 

this hearing we are still not getting. 

The chairman asked a simple question, I thought—actually it 

was going to be my first question. In your testimony you refer to 

an abundance of literature on auctions modifications and the effects, and so on and so forth, and he said, can you name two out 

of the abundance of them that you cite? And your answer was no, 

you cannot name two studies that you— 

Secretary CASTRO. Actually, I didn’t—that was not my answer. 

That was not my answer, Congressman Garrett. 

He asked specifically which specific studies did we rely on. I am 

not here to warrant every specific study that our FHA staff relied 

on. 

I could speak for myself. I have looked at studies, for instance, 

from the Urban Institute, from the Center for American Progress. 

Obviously, I have had the opportunity to review the chairman’s letter. 

Mr. GARRETT. So those are a couple of studies. And did you rely 

upon the Urban Institute study for this? 

Secretary CASTRO. I don’t micromanage these individual programs. 

Mr. GARRETT. This is a significant— 

Secretary CASTRO. I try not to. So I want to be very careful that 

I think that the appropriate level of— 

Mr. GARRETT. I get that. 

Secretary CASTRO. —understanding is what the FHA staff who 

recommended this policy came up with. So— 

Mr. GARRETT. So the basic question— 

Secretary CASTRO. —do I believe that they relied on a whole 

number of stakeholders? Yes, I do. I know, for instance—the National Association of REALTORS®— 

Mr. GARRETT. I only have— 

Secretary CASTRO. —put forth a letter— 

Mr. GARRETT. —3 minutes left. So you have not been able to indicate to us the specific studies that you read and that you relied 

upon. You are relying upon your staff. Okay. 

Secondly, the— 

Secretary CASTRO. No, I said that I have read the Urban Institute study. I have read the— 

Mr. GARRETT. Let’s stop there. When did the Urban Institute 

study come out? 

Secretary CASTRO. I believe the Urban Institute study came out 

earlier in 2016. 

Mr. GARRETT. And so is that a study that you relied upon? 

You’re not sure? 

So in that study, as far as I know and what the reference that 

we have seen to it is, that study did not say that there will be addiVerDate Nov 24 2008 16:39 Mar 05, 2018 Jkt 025877 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\25877.TXT TERI
15 

tional revenue flooding to the program, to the mortgage fund, did 

it? 

No, it did not. 

Secretary CASTRO. The study, in fact, suggested some of the 

changes that are being made in this round of improvements. 

Mr. GARRETT. Specifically, the study— 

Secretary CASTRO. I will give you a specific example if you want. 

If you want specifics, it—we are implementing what is called a nowalkaway provision. It is something that was mentioned in the 

Urban Institute study. 

Since you want specifics, I just wanted to give you a specific answer— 

Mr. GARRETT. I want a specific answer to the question. The study 

did not say that by going to a no-bid process, you would actually 

maintain or increase the funds that flow to the mortgage fund, did 

it? 

Secretary CASTRO. We are not going to a no-bid process. 

Mr. GARRETT. The program that you have under DASP where 

you are going to allow for a minimum bid effectively allows them 

to bid at a price that is minimum when there are no other bidders— 

Secretary CASTRO. I think you are misunderstanding our approach. We are requiring bids. They are not getting a special discount. They have to meet the reserve price. 

Mr. GARRETT. But you do a— 

Secretary CASTRO. Just so that we can characterize it correctly, 

it is not the way that you are laying it out. 

Mr. GARRETT. Doesn’t it defy logic to say that if you are going 

to have less revenue coming into the fund that you are going to be 

able to meet the fiduciary responsibility to the fund? 

Now, let’s just do a side note there. Mr. Luetkemeyer makes that 

point: You do have a fiduciary responsibility to make sure that the 

fund is sound, correct? 

Secretary CASTRO. Oh, I absolutely do, sure. 

Mr. GARRETT. Right. And you do have a responsibility to make 

sure that it is able to meet its obligation, correct? 

Secretary CASTRO. I do. 

Mr. GARRETT. And right now the HUD has—back in 2013 there 

was a $1.7 billion taxpayer bailout to HUD. Is there any plan in 

place to actually pay that back to the taxpayers? 

Secretary CASTRO. Congressman, why are we talking about 2013? 

In 2016— 

Mr. GARRETT. Right. Because— 

Secretary CASTRO. —it is over 2 percent for the first time in 6 

years. 

Mr. GARRETT. The reason I am asking about 2013 is because that 

has not been paid back. That was 3 years ago. Do you have a plan 

to pay that back, and how does that plan coincide with this DASP 

modification, which does not allow for the same amount of revenue 

or increased revenue coming into HUD? 

Secretary CASTRO. As I mentioned earlier, folks who have looked 

at this in OMB, the folks who looked at this from the Urban Institute—in fact, they put out a note yesterday; that was the authority 

16 

that was cited in the letter—have said that there is not going to 

be a negative impact— 

Mr. GARRETT. But you did not rely upon that note yesterday. 

This program has been in place for some period of time. 

My time has expired. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentlelady from New York, Mrs. 

Maloney, ranking member of our Capital Markets Subcommittee. 

Mrs. MALONEY. Thank you, Mr. Chairman. 

And thank you for being here, Secretary Castro, and for your 

leadership and your words in Dallas. 

I also want to thank you for being responsive to the concerns 

that many of us on the Democratic side raised about the Distressed 

Asset Stabilization Program. Along with many Democrats, I signed 

a letter which was led by one of our colleagues, Mr. Capuano, and 

in that letter we requested changes to the program that would 

produce better outcomes for both borrowers and the local communities. And the changes that HUD announced last month were certainly responsive to those concerns, so I want to thank you for the 

steps that you have already taken in response to Mr. Capuano’s 

letter. 

My first question is about how HUD pools distressed loans in 

this program. As you noted in your testimony, when HUD sells 

pools of distressed mortgages they either sell national pools or 

neighborhoods stabilization outcome, or NSO, pools. But there is a 

critical difference because buyers of NSO pools are required to 

achieve more borrower and neighborhood-friendly outcomes for at 

least 50 percent of the loans. 

So my question is, how does HUD decide which loans will go into 

the NSO pools and which ones will go into the national pools? And 

when HUD puts together pools of loans that are for nonprofits only, 

how do they decide which of these loans go into those pools? 

Secretary CASTRO. Thanks a lot for the questions, Congresswoman. 

You are right, there are different types of pools, the largest being 

the national pool. There have also been neighborhood stabilization 

outcome (NSO) pools, and then these very small nonprofit pools. 

Just to give you a sense of the scale here, there have only been, 

in terms of the nonprofit-only not sales bidding within nonprofits 

only, 164 loans out of 106,721 loans sold, and about 1,850 NSO 

loans that have gone to nonprofits. So I want to give folks a sense 

of the scale. That is out of 106,000. 

Your question was how do we decide which—basically which 

notes go into which type of pool. Mostly that has been done with 

a concern, first, for geography. Second, more of the notes that go 

into NSO pools and the nonprofit pools are notes where we don’t 

have a vacant home, where we have families who are still living 

there, because that is the point is that these nonprofits can be 

more successful at keeping a family in their home. 

And also, geography, that we want to pool these loans, for instance in a City like Detroit or another community, where you can 

all get them together, and if you can keep those folks in their 

homes and achieve other outcomes you can actually end up proVerDate Nov 24 2008 16:39 Mar 05, 2018 Jkt 025877 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\25877.TXT TERI
17 

moting strong neighborhoods. Those are some of the factors that go 

into making that determination. 

Mrs. MALONEY. One of the rationales for the DASP program is 

that HUD can’t pursue some of the borrower-friendly resolutions 

that private sector investors can pursue, and therefore we need to 

sell these distressed loans to private sectors in order to access 

these borrower-friendlier outcomes. My question is basically, why? 

Can you please explain why we need to sell these mortgages to 

private investors in order to pursue borrower-friendly resolutions? 

Why can’t HUD pursue these borrower-friendly resolutions themselves? 

If there are better ways of resolving distressed loans then why 

do you have to sell to the private sector? Why can’t you let not-forprofits or HUD be the ones that pursue these better outcomes? 

Secretary CASTRO. Yes, so this was a question that we got from, 

of course, the advocacy groups on the left that to look at some of 

it would rather that we scrap the program. 

Here is why we believe the program has real merit, real value: 

because if it is done right there is actually, as the Urban Institute 

has said, an alignment of interests that if they do their modeling 

correctly these investors actually have an economic incentive, a 

profit motive to keep families in their home so that we can keep— 

because—basically because keeping them in their home is more 

profitable than going through the lengthy foreclosure process. That 

is the fundamental idea behind the win-win and the dual goals of 

this program. 

Now, I will say that there are individual instances where that 

doesn’t work as well as it should. We think nonprofits can step in 

in some of those instances. 

Chairman HENSARLING. The time of the gentlelady has expired. 

The Chair now recognizes the gentleman from Texas, Mr. Neugebauer, chairman of our Financial Institutions Subcommittee. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. 

And thank you, Mr. Secretary, for being here. 

As I listened to your testimony and the dialogues we have been 

having here, I think I hear a recurring theme, which is that your 

staff recommended this, your staff supported this. And certainly in 

any kind of chain of command you have staff to make recommendations to you. 

But in fact, I guess you are a staff member for the President of 

the United States. He has appointed you to be in a very important 

position because part of your oversight responsibility is that you 

are overseeing the largest mortgage insurance fund in the world, 

and that is a pretty big responsibility. And certainly you want to 

get staff to do that. 

I guess the question I have is, when I cast a vote up here and 

my constituents back home say, ‘‘I don’t like the way you voted,’’ 

they don’t find me telling them, ‘‘Well, that was my staff’s recommendation,’’ to be very comforting because, Mr. Secretary, quite 

honestly, the buck stops with you. Now, you may have people advising you, and again, you are in a very important position. 

And so I guess the question that I have is when you are looking 

at an insurance fund you are making—and you talked about under 

your watch it is now 2 percent and you—looking actuarially at 

18 

what the sustainability of the fund. Did you look at any models 

that would say that if we make these policy changes that we know 

what the impact is? Because you—in your written statement you 

say it is going to—you feel like it is a positive for the fund to make 

these changes. 

So I assume, then, that you looked at a model that somebody 

provided you which showed you that things get better. Is that correct? 

Secretary CASTRO. Yes. 

Mr. NEUGEBAUER. Can you furnish— 

Secretary CASTRO. Yes, so what I got was I got an assessment 

based on the work of FHA and OMB to model this to ensure— 

Mr. NEUGEBAUER. Yes. You got an assessment, but what I am 

looking for is as the CEO of HUD, what kind of concrete documents—what models did you personally look at to say, I think that 

is— 

Secretary CASTRO. Yes. So I have had the opportunity to look at 

the difference in the rate of return, some of the figures that I have 

talked about today, an assessment from OMB and FHA about 

whether this would impact the fund. And based on that, if you are 

asking me personally, why do I have confidence in this decision, it 

is because I have had the opportunity to digest that and also get 

the recommendation from my staff. 

Mr. NEUGEBAUER. Mr. Secretary, have you ever been to a property that would—these—that note is subject for sale? 

Secretary CASTRO. That was part of DASP? 

Mr. NEUGEBAUER. Yes. 

Secretary CASTRO. Not that I am aware of, no. 

Mr. NEUGEBAUER. Yes. So that is another recurring problem 

here. We have had other appointees and people come in here and 

talk about making major policy changes—for example, one of those 

was small-dollar short-term loans—and I asked that particular individual if they had ever actually been into a payday lending facility and visited with the customers. They had not done that. 

What you are saying is you have not been to properties that 

might be subject to DASP, and I am puzzled— 

Secretary CASTRO. Well, that is a different question. 

Mr. NEUGEBAUER. I am puzzled— 

Secretary CASTRO. Have I been to a property that might be subject to DASP or that was in the DASP process? I don’t think that 

I have been to one that was actively in the DASP process. Congressman, I have been to a lot of distressed neighborhoods, both as 

HUD Secretary and as mayor of San Antonio and in my life. 

And so I am quite confident that I have been to neighborhoods 

where we have distressed assets. But have I been to one that was 

actively in DASP at that time? I don’t believe so. 

Mr. NEUGEBAUER. I think another piece of that, the reason I 

wanted to see that model, is because one of the changes that you 

are proposing is that you make a longer waiting period for the purchaser of that note to be able to dispose of or foreclose on that 

property, so we have properties that already been, as the chairman 

said, 21⁄2 years in delinquency, and now we are going to add another year. 

19 

And the reason I wanted you to answer the question if you had 

been to one of those properties is because when you let a property 

sit in that condition for 21⁄2 or 31⁄2 years, you are on a very steep 

depreciation curve, which means that your realization of proceeds 

for that particular loan, whether you sell it or sell the property, diminishes pretty rapidly. 

And so I am very—as someone who has been in the real estate 

business for a long time, I would like to see how you make that 

business— 

Secretary CASTRO. Yes. With your experience then you would 

know that because of this alignment of interests and the way that 

the program actually works—and this was also in the Urban Institute note from yesterday, Mr. Chairman—when in 2015 we expanded the moratorium on foreclosure from 6 months to a year, 

that is not likely going to have an impact on a vast majority of 

properties that actually end up either in a modification or short 

sale or something other than strict foreclosure. It will impact some 

properties— 

Mr. NEUGEBAUER. It is going to affect the bid that I— 

Secretary CASTRO. —however— 

Mr. NEUGEBAUER. If I have to wait a year as opposed to 6 

months it is going to affect the bid that I am willing to pay for that 

note. 

Secretary CASTRO. But you are also pointing to why we need 

these nonprofits to do a better job of keeping people in their homes. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Massachusetts, 

Mr. Capuano. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

How are you doing, Mr. Secretary? It’s nice to talk to you again. 

Secretary CASTRO. It’s good to see you. 

Mr. CAPUANO. Mr. Secretary, just to clear up the first item that 

was brought up, the MMIF fund that went below 2 percent, I want 

to be clear that it is my understanding that the reason you were 

required to ask for an appropriation is because the law requires 

you to do so, number one. Number two, did any of that money ever 

get spent? 

Secretary CASTRO. It did not. 

Mr. CAPUANO. Not one penny got spent. So there was no bailout 

of the fund, no bailout of FHA, no bailout of HUD, no bailout at 

all by taxpayer funds. I just want to be clear about that. 

Secretary CASTRO. That is correct. 

Mr. CAPUANO. That is what I thought. 

After today’s hearing, you have a while longer here. I kind of 

want to start off by asking, do you see why you shouldn’t do anything halfway? When you do it halfway you are going to get kicked 

by them anyway, so why don’t you just do what we want you to 

do? 

No matter what you do, you can’t satisfy them. Two percent. ‘‘Oh, 

my God, 2 percent. That is terrible. You are ruining the entire 

world.’’ 

And for us, ‘‘Oh, 2 percent. Thanks. Like it. Better than nothing, 

but we want more.’’ 

20 

Why do we want more? I want more because the greatest study 

of mankind I have ever read is the Bible, and it says, ‘‘Do unto others as you would have them do unto you.’’ That is all I want HUD 

to do: treat these neighborhoods as you would want your neighborhoods to be treated. 

Have you ever shopped at Costco or BJ’s or Walmart? When you 

go in and you see 1,000 rolls of toilet paper for five bucks, you buy 

it. If you bought each of those rolls individually, wouldn’t it cost 

you more? 

Secretary CASTRO. Sure. 

Mr. CAPUANO. So people will pay more for an individual 

disaggregated item than they will for a big huge chunk of the same 

items. That is what I want HUD to do. 

Before your time they sold 17,000 single-family homes to Lone 

Star Fund. One batch of properties, one hedge fund—17,000. 

You could have gotten more money had you broken them up and 

sold them individually either to the neighbors or to the local community development people or anybody else. That is just general 

knowledge. That is all I want you to do. 

Yes, it is more paperwork for your people. We get that. But you 

would make more money, and they would be happy. Actually, they 

wouldn’t be happy. They should be happy, but they won’t be happy 

no matter what you do. 

And we would be happy because we are servicing our communities. 

I want you to act like Costco. Do what they do. Actually, do the 

opposite of what they do. Break it down. Sell it individually. 

Time is always short on these things. 

I do want to talk about one item. Former mayor, HUD Secretary, 

I am sure, like you, in my neighborhoods where I come from, there 

are a lot of people having immigration situations one way or the 

other from all over the world. I am constantly working on helping 

people become U.S. citizens and moving here. 

I have never worked on having a U.S.-born person renounce his 

or her citizenship. Have you ever helped anybody renounce their 

citizenship? 

Secretary CASTRO. I have not. 

Mr. CAPUANO. Have you ever heard of anybody renouncing their 

citizenship? 

Secretary CASTRO. No. 

Mr. CAPUANO. I haven’t. I have never known anybody who renounced their citizenship. 

Yet, you know who did? The guy who runs Lone Star. He has 

made billions on the DASP program. Billions. 

He just bought a $38 million condo in my district. I can see his 

condo. Yet, he renounced his U.S. citizenship. He was born here. 

And yet we reward him. I think that is a little ‘‘bass ackwards.’’ 

Again, I want to appreciate what you have done. Not criticizing, 

but my job is to push for more. And when you push for more we 

will be satisfied. And if you took this and got rid of it, you would 

get rid of the—they are not going to like what you do. 

That is what I don’t understand about the Administration. You 

think that when you do the right thing somebody on that side 

21 

would say, ‘‘Good job.’’ That isn’t going to happen. Not today, not 

next week. 

So therefore, do the right thing. Help our communities keep 

themselves whole by allowing these homes to be bought by people 

who care and know the individuals who live them and the individuals where they live. 

Thank you, Mr. Secretary. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Wisconsin, Mr. 

Duffy, chairman of our Oversight and Investigations Subcommittee. 

Mr. DUFFY. Thank you, Mr. Chairman. 

And welcome, Mr. Castro. 

I wasn’t going to go here, but just after Mr. Capuano’s questions, 

did Lone Star violate the rules of FHA? 

Secretary CASTRO. Not that I know of, Chairman Duffy. 

Mr. DUFFY. They did nothing wrong, correct? They did nothing 

wrong. They played by your rules and someone made some money, 

and maybe now the plan is that Mr. Capuano doesn’t like that so 

we want nonprofits maybe to— 

Mr. CAPUANO. No, I like it and I am happy— 

Mr. DUFFY. No, no, no, no. This is my time. 

Mr. CAPUANO. —if the gentleman would yield. 

Chairman HENSARLING. The time belongs to the gentleman from 

Wisconsin. 

Mr. CAPUANO. If the gentleman would yield, I would like to ask 

him a question. 

Ms. WATERS. Point of order. 

Chairman HENSARLING. The time of the gentleman from Massachusetts is out of order. 

The gentlelady will state her point. 

Ms. WATERS. The point of order is that he referred to the gentleman and he referred to him incorrectly. The gentleman should 

have an opportunity to defend himself. 

Chairman HENSARLING. It is not a point of order. It is not a proper point of order. 

Ms. WATERS. Well, I am making it one. 

Chairman HENSARLING. The time belongs to the gentleman from 

Wisconsin. 

Mr. CAPUANO. —Sean. 

Mr. DUFFY. Thank you, Mr. Chairman. 

Mr. Castro, I want to go to, again, your studies. You have had 

some questions on this, but your studies that you have done, if any, 

that analyze how these changes that are being made to the operation of DASP, how that will impact the fund and/or taxpayers. 

Have you done any studies at HUD? 

Secretary CASTRO. We have done analyses— 

Mr. DUFFY. Analyses, meaning studies? 

Secretary CASTRO. Well, analyses—when you say ‘‘studies,’’ do 

you mean longitudinal studies? Do you mean— 

Mr. DUFFY. What I mean is, have you studied the impact that 

this is going to have on the fund? 

Secretary CASTRO. We absolutely have studied the— 

Mr. DUFFY. And it is not going to have a negative impact on the 

fund? Is that your conclusion? 

22 

Secretary CASTRO. We believe that it is not going to have a negative impact, that in fact it can have a positive impact. 

Mr. DUFFY. So explain that to me because if we—you set a reserve, and traditionally we have profits and not-for-profits come in 

and bid on that reserve. If you exclude some of the for-profits in 

the bidding, you potentially won’t get the highest price. So how 

can’t that in the end impact the fund? 

Secretary CASTRO. Number one, there are going to be more bidders now. 

Mr. DUFFY. How so? 

Secretary CASTRO. Secondly— 

Mr. DUFFY. How so? 

Secretary CASTRO. Because we believe that by introducing more 

of these nonprofits into the bidding process in a way that does not 

interrupt the bidding of private sector investors that we are actually ultimately going to get a better outcome— 

Mr. DUFFY. So are these— 

Secretary CASTRO. —for the fund. 

Mr. DUFFY. —are these nonprofits right now precluded from bidding? 

Secretary CASTRO. Right now—remember that there are these 

three different pools. 

Mr. DUFFY. Right. 

Secretary CASTRO. There is national, there is NSO, and there has 

been the very small nonprofit-only that has only had 164 loans out 

of 106,000. 

Mr. DUFFY. But these nonprofits aren’t precluded from stepping 

in and bidding right now, correct? If you— 

Secretary CASTRO. They have not been bidding on the national 

pools. 

Mr. DUFFY. So— 

Secretary CASTRO. So they are bidding on up to 5 percent of the 

national pools. 

Mr. DUFFY. But they are not precluded, right? They might not 

be bidding, but they are not precluded. 

Secretary CASTRO. They will not be any longer, no. 

Mr. DUFFY. So you want to have nonprofits bid and you want to 

open it up to more nonprofits, great. But also open it up to for-profits so you can actually get the best price for the asset, right? 

Secretary CASTRO. We believe that we are going to get a very 

good price. We believe that because we are requiring that they at 

least meet the reserve, and if you have competitive bidding among 

the nonprofits that it is not going to hurt the fund in any way. 

Mr. DUFFY. You are concerned about destabilizing neighborhoods, 

is that right? If these loans are going to— 

Secretary CASTRO. Yes, I want to promote strong neighborhoods. 

Mr. DUFFY. And if this goes wrong you could destabilize neighborhoods. Is that correct? Is there a risk of that? 

Secretary CASTRO. If the program goes wrong? 

Mr. DUFFY. Yes. If your concern is if we have a lot of foreclosures 

in a certain area, that could destabilize a neighborhood, and that 

is why you want to have nonprofits step in and make sure that you 

keep that neighborhood strong. Is that right? Is that the theory behind this? 

23 

Secretary CASTRO. That is one of the reasons. Also, as I said, because if you take the example of our largest nonprofit bidder, it is 

almost 3 times as successful in actually keeping families in their 

homes. 

Mr. DUFFY. So isn’t it fair to say that the work of HUD, the work 

of FHA of putting people in homes that they cannot afford, is destabilizing neighborhoods? It is— 

Secretary CASTRO. Not at all. I— 

Mr. DUFFY. —your work at FHA, or your predecessor’s, that are 

putting people in homes— 

Secretary CASTRO. I would just disagree with that point. 

Mr. DUFFY. —that they can’t afford, and how you are going to 

step around the backside and say, ‘‘We have made mistakes. We 

now have to try to keep them in their home so we don’t destabilize 

the neighborhood.’’ 

My question for you is, have you changed your underwriting 

standards so you are now not going to put people in homes they 

can’t afford? 

Secretary CASTRO. Yes, Congressman, I would just say I disagree 

with you on the characterization of the program. These are folks 

who— 

Mr. DUFFY. You can’t have it both ways, though. 

Secretary CASTRO. —like many Americans, have been struggling 

as homeowners, and we believe that we can both protect the Mutual Mortgage Insurance Fund and build it up—and we have—and 

also try and keep more families in their homes. 

Mr. DUFFY. But— 

Secretary CASTRO. In other words, it is not just about the numbers on paper. This is about the people in those homes. 

Mr. DUFFY. I want to keep people in their homes too. I agree 

with you. 

But look at—the process that you go through of the 29 months, 

you have informal forbearance, formal forbearance, special forbearance, loan modification. 

Loan modification: one is balanced reamortization, one is interest 

rate change loan modification, which is a loan term extended, you 

have the HAMP program. There are seven things that you go 

through trying to keep people in their home over 29 months, and 

eventually if they can’t stay in their home why are we prolonging 

the process? What are you going to do but give their home to them 

for free? 

Secretary CASTRO. We owe it to the American people, to American families, to make every effort— 

Mr. DUFFY. I agree. And you have 29 months and 7 steps. If they 

can’t do it there— 

Chairman HENSARLING. The time— 

Mr. DUFFY. —let’s end the process. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Texas, Mr. Hinojosa. 

Mr. HINOJOSA. Thank you, Chairman Hensarling and Ranking 

Member Waters, for holding this important hearing. 

I also thank and welcome Secretary Castro for joining us this 

morning. 

24 

Mr. Secretary, while I am pleased that you are here to testify on 

this important matter of HUD’s Distressed Asset Stabilization Program, I am disappointed by the lack of respect shown to you by a 

few Members of the Majority. In my view, this is neither regular 

order nor is it the proper way in which we should treat a Cabinet 

Secretary or conduct the work of this committee. 

It seems to me that the Distressed Asset Stabilization Program, 

DASP, is a program with much potential to help struggling homeowners to stay in their homes. The program’s primary goals include 

stabilizing neighborhoods hard hit by the 2008 deep recession and 

fostering community revitalization. Unfortunately, the results of 

the program and whether homeowners are ultimately benefitting 

from DASP are not clearly known. 

Mr. Secretary, concerns have been raised that the proposed 

changes to the program will have a negative impact on the bottom 

line of the Mutual Mortgage Insurance Fund and to the taxpayers. 

To be clear, I want to know, will nonprofits be given a preferential 

price? Isn’t it true that nonprofits have to meet the reserve price, 

which is the market price? 

Secretary CASTRO. You are correct, Congressman. As I mentioned 

a little bit earlier, we are requiring that these nonprofits actually 

meet the reserve price, and so they are not getting a discount. I 

know that this has been one of the changes that has been suggested by others. 

We are taking, I think, a constructive approach to making 

changes to the DASP program, and so we are requiring that they 

meet that reserve price. We believe that provides protection so that 

the goal of keeping families in their homes can be better achieved 

through engaging these nonprofits. But at the same time we continue to build up the health of the Mutual Mortgage Insurance 

Fund, and you have a win-win on those dual goals that I have 

talked about. 

So, of course we very much are engaging these nonprofits, but 

also requiring that they meet that reserve price. 

Mr. HINOJOSA. HUD’s intent is going to be, as it progresses and 

succeeds, to help a lot of entities that benefit by those folks being 

in those homes and paying property taxes to the school district, to 

the community colleges, to the health districts, to many, many 

groups that give services to the cities, communities, and regions. So 

how will the proposed changes affect the bottom line of the Mutual 

Mortgage Insurance Fund? 

Secretary CASTRO. We believe that it is not going to have an impact on—these changes will not have a negative impact on the Mutual Mortgage Insurance Fund. Over the life of DASP it has contributed $2.2 billion more to the Mutual Mortgage Insurance Fund 

than the MMIF would have gotten through the traditional real estate owned process. 

So we believe that we have hit the right policy balance here of 

helping more families stay in their homes but also ensuring that 

we continue to do right by the Mutual Mortgage Insurance Fund, 

and that is what we are aiming for. 

Mr. HINOJOSA. Thank you for answering my question and getting 

it into the record. 

25 

Isn’t it true that hedge funds get a 50 percent discount at auction? 

Secretary CASTRO. That they get 50— 

Mr. HINOJOSA. Yes. 

Secretary CASTRO. It is true that bidders end up paying less than 

the—what is the—called the UPB, the unpaid principal balance, 

that all bidders, whether they are nonprofits or they are private 

sector hedge funds or others entities—yes, they end up bidding less 

than 100 percent of the unpaid principal balance, sure. 

Mr. HINOJOSA. Thank you. 

I am, however, encouraged by your Department’s recent announcement of some forthcoming changes to the program. In particular, I applaud the policy changes making principal forgiveness 

the primary option that investors must consider, including payment shock stipulations and making room for proven and missiondriven nonprofits to be able to bid on those loans. I look forward 

to learning more about these changes and to working with you to 

better improve the program. 

I yield back. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from South Carolina, 

Mr. Mulvaney, for 5 minutes. 

Mr. MULVANEY. I thank the chairman. 

Mr. Castro, I have a couple of different questions on a couple of 

different topics. 

You received a letter on May 12, 2016, from a variety of groups— 

I won’t read all of them: The Daily Cause; Democracy for America; 

MoveOn.org; The Other 98%; Action; Working Families Party—encouraging you to make essentially the same changes that you made 

about 3 weeks later. Is it your testimony, sir, that this letter had 

no influence whatsoever on your decision to change the DASP program? 

Secretary CASTRO. It is my testimony that that letter, like other 

letters that we have received, like the studies that I read from the 

Urban Institute and looked at from the Center for American 

Progress, the conversations I had from time to time with my staff 

and with Members of Congress, that all of that, both in my decision-making and in the FHA staff’s decision-making, has gone into 

formulating these changes. 

Mr. MULVANEY. Fair enough. And I guess it would be the same 

answer, then, for your meeting with Senator Elizabeth Warren, the 

letter you got from 45 U.S. Congress Members, which I assume 

were Members of the other party. It would be the same answer for 

that question, right? 

Secretary CASTRO. That all of the input has been taken into account. 

Mr. MULVANEY. Okay. 

Now, I want to talk about the process, because that is what I 

really don’t understand, because you are using a word in a way 

that I don’t understand in the English language, which is you are 

using the word ‘‘bid’’ in a way that I guess I don’t understand. I 

thought a bidding process was where a bunch of us would bid on 

something and then, using that bid process, the highest bidder, the 

26 

most qualified bidder, whatever, you would use that to sort of make 

a determination as to who wins. 

That is not how you guys are working it on this new program, 

right? You are somehow taking a piece of the pie and setting a reserve price and then sort of steering that to nonprofits. 

I have a couple of questions. How do you set the reserve price? 

Secretary CASTRO. Yes, so FHA sets that reserve price based on 

the unpaid principal balance. It doesn’t change the way that it sets 

that reserve price across these different pools. Again, I want to 

stress— 

Mr. MULVANEY. Do you publish the reserve price? 

Secretary CASTRO. Excuse me? 

Mr. MULVANEY. If I am bidding, if I am MoveOn.org and I want 

to bid on this do I know what the reserve price is before I bid? 

Secretary CASTRO. No, I don’t believe they do. 

Mr. MULVANEY. What steps do you take to make sure the reserve 

price doesn’t leak out of your office to these various groups? 

Secretary CASTRO. The steps that we usually take, the FHA staff 

is very careful to ensure that— 

Mr. MULVANEY. Would it be a crime for a member of your organization to leak that information out? 

Secretary CASTRO. Not at all. 

Mr. MULVANEY. Why not? 

Secretary CASTRO. Are you suggesting that a member of the organization is leaking something out? 

Mr. MULVANEY. I am asking if you think it is a crime if that 

would happen? 

Secretary CASTRO. We have no evidence of that, no. I have confidence in the FHA— 

Mr. MULVANEY. Have you examined whether or not that is happening? 

Secretary CASTRO. We have never received, as far as I know, any 

kind of complaint that that has ever happened. 

Mr. MULVANEY. Do you think that if you didn’t set the reserve 

price and you just opened up the bidding to everybody, that the 

amount that you would receive on the highest bid would be higher 

than the bid that ultimately is awarded to the not-for-profit 

groups? 

Secretary CASTRO. Congressman, I am not going to go on 

hypotheticals. All I know is the policy changes that we are putting 

in place, there is a reserve price. Whether they are nonprofit or 

they are a for-profit investor, they have to meet that reserve price. 

Again, when we operationalize these programs we want to make 

changes— 

Mr. MULVANEY. Have you ever sold a loan or a package of loans 

in the DASP program— 

Secretary CASTRO. —that can actually be put into effect and meet 

those new goals. 

Mr. MULVANEY. Have you ever sold a program to a not-for-profit 

group for less than you could have sold it to a private entity for 

profit? 

Secretary CASTRO. Have we ever sold a loan to a nonprofit— 

Mr. MULVANEY. A package of loans to a nonprofit for less than 

you could have sold that same package on the open market. 

27 

Secretary CASTRO. We probably have, yes. 

Mr. MULVANEY. When you did that, did you take any steps to 

make sure that the nonprofit was restricted on reselling that package on the open market? 

Secretary CASTRO. These nonprofits are doing this for the very 

fact that they want to keep families in their homes and promote 

strong neighborhoods— 

Mr. MULVANEY. But you also agree with me that they have the 

ability to resell those on the market at a profit. 

Secretary CASTRO. Actually, as part of the NSO pools they—there 

are certain requirements that they have to meet in terms of outcomes for these properties. So again, this program is very well constructed to make sure that we meet both of those goals. 

Mr. MULVANEY. And if they have met all those—if they met all 

those requirements they could resell those loans on the open market, couldn’t they? 

Secretary CASTRO. No, that is not what is happening. I am— 

Mr. MULVANEY. Do you restrict them legally from reselling the 

loans? 

Secretary CASTRO. I just mentioned that the point both for NSO 

pools and now for national pools when nonprofits bid is community 

redevelopment and keeping families in their homes. 

Mr. MULVANEY. And as long as they met those requirements they 

can resell the loans, can’t they? 

Secretary CASTRO. We have not seen that that has been an issue. 

Mr. MULVANEY. Do you prevent them from doing that legally? 

Secretary CASTRO. I would be glad to follow up with you on the 

instances if or when that has occurred. 

Mr. MULVANEY. Do you know whether or not you do this or not? 

Secretary CASTRO. I am not going to guess at that now. 

Mr. MULVANEY. So you don’t know. 

Secretary CASTRO. Like I said, I would love to follow up with you 

on it. 

Mr. MULVANEY. All right. I think that is all I have. 

Thank you very much, Mr. Chairman. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from New York, Mr. 

Meeks. 

Mr. MEEKS. Thank you, Mr. Chairman. 

I want to join some of my colleagues on this side in apologizing 

to you, Mr. Secretary, for what could have been an important hearing, but the way my colleagues on the other side are acting, it is 

really not an important hearing. But maybe it is because it is revealing to the American people who really wants to keep them in 

their homes, who really wants to make sure that families stay together, who really wants to keep communities together, and who, 

no matter what or how unscrupulous they may be for the opportunity to gain an extra dollar, don’t care about the middle class, 

don’t care about the hardworking person, don’t care about someone 

who is trying to have and live the American Dream. 

So maybe it is an important hearing because the distinction between the two is becoming clear. I know these hearings should be 

about real policy issues and not about politics, but apparently what 

I am hearing—and you are subject to it—you are just hearing the 

28 

differences, where one side cares about people and the other side 

just cares about money. 

But in your policy, Mr. Secretary, you are still making sure that 

you are maintaining the integrity of the dollar for the American 

taxpayer. You are not losing or throwing away money, but you are 

putting a process in because what do we know? We know that during the financial crises in a district like mine, that I am very 

thankful that you had the opportunity to visit not too long ago, 

where you had neighborhoods like St. Albans, Queens, and South 

Jamaica, et cetera, who were directly impacted because of the foreclosure crises. 

And I read the National Fair Housing Alliance. Many of these 

communities—these folks who, some women to them, who just 

wanted a dollar—these communities were targeted—targeted—for 

what they knew to be unsustainable subprime loans and subsequently experienced high levels of foreclosure so that they could 

make a profit, for they knew that these homes would go into foreclosure. 

As a result, the remaining homeowners in these communities 

have suffered tremendous loss of wealth. By one estimate, homeowners particularly in communities of color lost $1.1 trillion in 

wealth. So not just—we are talking about a whole host of people 

who have lost wealth at the expense of a few people who take away 

their citizenship or denounce their citizenship to the United States 

after making trillions of dollars. 

Half of all the wealth lost was as a result of foreclosure crises. 

The impact of this loss will be long-lasting, affecting not only the 

current generation of homeowners of color but also future generations. It is critical that we do all we can to prevent avoidable foreclosures and minimize the downward drag they exert on communities of color and the economy overall. This is from the National 

Fair Housing Alliance. 

So what you are trying to do is critical to the basic values of 

being an American—that American Dream, that homeownership— 

and trying to make sure that we have just a small part, from what 

I am hearing—a small part where you have someone who will 

make sure that there is fiscal stability and economic opportunity 

for someone to own the home but not someone whose first and only 

motivation is how much money can I make, like these articles we 

have read recently where these private equity firms—they don’t 

care about the individual. None of that is considered. 

When I think about myself, my parents, if it wasn’t for someone 

who wanted to go out of the way to make sure that they were able 

to buy a home in the first place, they would have never had one. 

But someone went out of their way to try to make sure that the 

principal, the money, and that is it. But money and people, making 

sure that they had the ability to stay in their home. 

That is what these nonprofits will do. They will go out of their 

way to give them the aid that they need to have and not be there 

just for the greed of making an extra dollar. 

So I compliment you with reference to this program. You have 

to try to figure it out. You are starting small, but if you see success—I think I heard Mr. Capuano said if you see success, do it. 

29 

And do it despite those who would criticize you. Do it because it 

is the right thing to do. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Florida, Mr. 

Posey, for 5 minutes. 

Mr. POSEY. Thank you very much, Mr. Chairman. 

Secretary Castro, I am having a hard time understanding how, 

when, and why HUD decided to make the changes in the Distressed Asset Stabilization Program we have been referring to as 

DASP, so let me just reiterate a timeline here. 

In April you gave an interview to the New Yorker where you defended the program. This is a copy of the article. The headline 

reads, ‘‘Secretary Castro Pushes Back Against Liberal Critics.’’ 

Your defense of the program was in response to a campaign activist 

who wanted to use the DASP program to sell troubled loans to 

community groups rather than private actors like banks. 

So here you are in April—late April, actually—giving a pretty 

spirited defense of the program that you had put in place, which 

I guess was pretty well received at that time, pretty much respected. And then in June, HUD and FHA announced the most significant improvements to date to the DASP program—now again, 

the most significant improvements to date. 

So in 2 short months, which is often considered overnight in government bureaucracy terms, we go from defending a program to 

making sweeping changes. And that is an unusually quick turnaround, I think we would both admit. 

And so I think it raises a lot of questions and concerns, chief 

among them how you can reassure taxpayers that HUD and FHA 

have put in sufficient time and effort and analysis to protect them 

when these significant changes were seemingly developed in as little as 2 months. And we are just talking about assuring taxpayers 

that they will be protected. 

Secretary CASTRO. So what was your question, Congressman? 

Mr. POSEY. No, actually it is a pretty simple one. Comparatively 

speaking, I thought this would be like giving you a break, actually. 

Secretary CASTRO. Well, yes, so you mentioned an April interview. I gave several interviews or commented on this not just to 

the New Yorker but I think to MSNBC and a couple of other outlets. And I think what you are doing is comparing apples and oranges. 

I pushed back against the idea that somehow we should just 

scrap this program. And the responsibility that I have is a fiduciary responsibility. I also have the responsibility, as someone who 

is proud of being liberal, but to operationalize programs in a way 

that meets those responsibilities and ultimately serves homeowners 

and also does what it should for the fund. 

So at no time did I ever say that, well, no improvements will ever 

be made to the program. In fact, the FHA staff began working on 

improvements as soon as the program came into being several 

years ago. And specifically, for this next note sale they started 

working on changes after the last note sale in the first quarter of 

Fiscal Year 2016. 

So quite apart from that characterization of my comments, it has 

been the case that we have been making improvements the whole 

30 

way through, and I never said that we wouldn’t make further improvements in the future. 

At the same time, where I push back is the idea that the program doesn’t have any value or that we can’t keep families in their 

homes. I believe that the program can work, that we can do the 

right thing, and the challenge for people in my position is to 

operationalize these programs effectively, and I believe that is what 

we are doing. 

Mr. POSEY. I guess the next question would be, if the contention 

is that HUD was contemplating changes to the program before the 

interview in April, why weren’t they mentioned, and wouldn’t it be 

a little bit of relevant information that would be known? 

Secretary CASTRO. Because I take very seriously our obligation, 

our responsibility not to go and speak at length about changes that 

are still within the process of being formulated. In fact, I did not 

share with any of the advocates or other outside groups any of the 

specific policy changes that we would be making in this round. 

There is a process that FHA goes through to get input and then 

also to contact Members of Congress and let them know what we 

are thinking about doing before we announce it. We did that in this 

case. We reached out, including to Chairman Hensarling. 

I take that very seriously, so I am not going to go out and speak 

in detail about things that we are doing when it is not the right 

time. 

Mr. POSEY. Thank you. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from California, Mr. 

Sherman. 

Mr. SHERMAN. Mr. Secretary, we heard from one of the other 

questioners pointing out that you get letters from MoveOn.org and 

one signed by 45 Members of Congress, and you indicated that you 

give that due consideration in making your decisions. When you get 

letters from Republican Members of Congress, when you hear their 

comments in this room, do you give that all due consideration to 

the extent those comments are insightful and factor those into your 

decisions? 

Secretary CASTRO. Of course we do. 

Mr. SHERMAN. Thank you, for the record. 

The PACE program is a good program in that it finances improvements of homes that save energy. But it can create a cloud 

on title and the whole mortgage process. 

I am told to expect a new announcement about the PACE initiative, and I wonder whether prior to making that announcement 

your Department will be looking at the budgetary implications and 

the potential impact on the Mutual Mortgage Insurance Fund. So 

are you going to be looking at those things before an announcement 

on PACE? 

Secretary CASTRO. We certainly will. Before we implement a 

PACE program, of course we would and have gone through significant analysis. We continue to formulate the best approach on 

PACE, but we look forward to following up with you and any other 

member of the committee who wants our thinking on that. 

Mr. SHERMAN. I will bring to your and your staff’s attention an 

exchange of letters I had with Richard Cordray to make sure that 

31 

when consumers sign up for these loans that they are fully aware 

of the situation and the effect it can have if they go to refinance. 

And I also will bring to your attention a bill which has passed several committees and one house of the State legislature in California—a bill so good that I testified in favor of it in Sacramento— 

that is designed to make sure that homebuyers are aware of the 

implications. 

I would like to more on to this Distressed Asset Stabilization 

Program. I ask unanimous consent to put in the record a letter to 

you from the National Association of REALTORS®. Chairman HENSARLING. Without objection, it is so ordered. 

Mr. SHERMAN. And I want to assure the committee that I have 

checked with Bernie. NAR is not a socialist organization. But they 

do point out that they urge the FHA to make investors work toward outcomes that will keep owner occupants in their homes and 

keep homeownership functioning in high-foreclosure neighborhoods. 

And I want to commend you for the decisions you make that 

achieve those objectives. 

The letter also points out that forcing borrowers to sell their 

home in online auctions may not be in the best interest either of 

those selling the home or buying the home, particularly when both 

parties may not be all that familiar with the process. It is one 

thing if you buy and sell homes by the hundreds because you are 

a hedge fund manager, and I hope that you will take a look at that. 

Finally, we are talking about recovery rates. Are you concerned 

that the HUD recovery rate from this program selling loans sometimes for less than their unpaid principal balance—does this pose 

any threat to the MMI Fund? 

Secretary CASTRO. It does not. Whether we go the REO route, or 

short sale route, third party sale route, or DASP, each of those includes a recovery rate that is less than 100 percent of the unpaid 

principal balance. So we want to design the program in a way that, 

again, meets those dual goals: keeping families in their homes; but 

also protecting the Mutual Mortgage Insurance Fund. We can do 

both of those things. 

Mr. SHERMAN. And I believe the fund has reached its mandated 

capitalization requirement early, so it is not like this fund is being 

depleted in a way that calls it into question. Do I have that correct? 

Secretary CASTRO. That is true. We are at 2.07 as our capital reserve ratio. 

Mr. SHERMAN. I yield back 14 seconds. 

Chairman HENSARLING. The gentleman yields back. 

The Chair now recognizes the gentleman from California, Mr. 

Royce, chairman of the House Foreign Affairs Committee. 

Mr. ROYCE. Thank you, Mr. Chairman. 

Secretary Castro, it is good to see you. Thanks for being with us 

today. 

I am going to pick up on the question that my colleague from 

California, Mr. Sherman, raised earlier on this PACE program. In 

August 2015 Principal Deputy Assistant Secretary Ed Golding, 

whom I see is with us today, announced anticipated guidance on 

FHA-insured financing for properties with these qualifying PACE 

loans. And as you know, the use of PACE super-liens has grown 

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32 

ditional risks for homebuyers and lenders who already face some 

significant hurdles. 

And if I could just ask you two questions on this, when is the 

Department’s actual guidance on PACE loans coming? And will implementation be made through a HUD mortgagee letter or via a 

public notice-and-comment rulemaking? 

Secretary CASTRO. Yes. Thanks a lot for the question, and it was 

good to connect with you recently, Mr. Chairman. 

We are excited about the potential for a PACE program. We believe that it can be a good way of encouraging folks to adopt energy-efficiency improvements to their homes. We know that there 

are several States that have been leaders in this, including your 

State of California. We also know that there are different ways to 

approach this, and so this has been part of the gestational period, 

if you will, for this PACE guidance. 

We anticipate very likely in the next several weeks that we will 

offer that. 

Mr. ROYCE. Okay. 

Secretary CASTRO. And I believe it is a mortgagee letter, but Ed 

can check me on that. 

Mr. ROYCE. Okay. 

Secretary CASTRO. But that is something that we are currently 

working on. 

Let me just say that you alluded to this with respect to the example of California, that that is still being discussed, whether it is 

a mortgagee letter or public notice and comment. 

Mr. ROYCE. Okay, well— 

Secretary CASTRO. With respect to California, there is a California approach; there are also States that take a different approach. And so part of getting to this guidance has been looking at 

a way that we can work with the States to empower them to pursue PACE, and also, again, protect the integrity of the Mutual 

Mortgage Insurance Fund. 

Mr. ROYCE. But it is create a cloud on title in the interim, so 

thank you. 

Moving over to the focus of the hearing, I do have a question on 

DASP. FHA Acting Commissioner Carol Galante said in 2012 that 

an important objective of DASP is to save considerable money for 

the FHA’s insurance fund. And I think you agree with that assertion. 

Twice in your written testimony you mention how the proposed 

changes to the program are going to maximize return—or recoveries to the Federal Government, and I am having a tough time understanding how this is possible. If the nonprofit DASP buyers are 

able to purchase loans at reserve prices that are lower than what 

would be hit under the current open bidding process, aren’t returns 

going to be lower logically? 

Secretary CASTRO. I don’t believe that is necessarily true. Also, 

I would point out—and this is something that I did not point out 

earlier—that assumes that the notes that these nonprofits are taking on would have been taken on by these private sector investors 

in a national pool. That is not necessarily the case. So we believe 

and OMB believes that it won’t have a detrimental impact on the 

fund. 

33 

Mr. ROYCE. Let me ask you one last question, then. How are you 

going to gauge success? 

Because if the relative rate of return, as compared to the traditional REO process, dips below the current 16 percent, is that then 

a setback? Or if it dips below 10, at that point do you have quantitative goals? At that point do you say, ‘‘Well, it used to be 16, and 

if the goal is to save considerable money for the FHA’s insurance 

fund then we should go back to the old policy?’’ 

My question is just to get to the objective of trying to set a standard here that will allow us to measure this. 

Secretary CASTRO. Yes. I— 

Mr. ROYCE. Will you go back and look at the rate— 

Secretary CASTRO. I think that you put your finger on something 

that is a factor that we will look at as we evaluate how we meet 

both of these goals of building up the Mutual Mortgage Insurance 

Fund and then also keeping more families in their homes. 

Mr. ROYCE. Right. But— 

Secretary CASTRO. So yes, we will look at that. 

Mr. ROYCE. But the relative rate of return is going to go down 

or it is going to stay the same or it is going to go up, and logically, 

if part of the mission is saving considerable money, that has to be 

put into the equation— 

Secretary CASTRO. Sure. 

Mr. ROYCE. —to balance the scale here. 

Secretary CASTRO. However, I think you would agree with me 

that if that rate of return were to go down there could be several 

reasons for that. And so we need to identify the reason for that— 

Mr. ROYCE. Right, because you could isolate these cases— 

Secretary CASTRO. Yes, but it may or may not be the fact that— 

Mr. ROYCE. —open bidding. 

Secretary CASTRO. —you have more nonprofits bidding. 

Mr. ROYCE. Right. Mr. Secretary, thank you. My time has expired. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Missouri, Mr. 

Clay. 

Mr. CLAY. Thank you, Mr. Chairman. 

And thank you, Mr. Secretary, for attending today’s hearing. I 

know that you are a busy person and you probably have better 

things to do than to be harangued by some of us in here. 

Let me ask about—countless reports identify the State of Missouri as one of the hardest hit by the foreclosure crisis. My hometown of St. Louis is a classic example of what is going on. In St. 

Louis you can see firsthand that predatory lending practices disproportionately harmed communities of color and that the housing 

market’s so-called recovery has not led to anything close to a recovery in our communities. 

One of the reasons why that is true is because the investors who 

purchase foreclosed properties in communities of color often fail to 

maintain those properties, leading to blight and tearing down the 

property values of every other nearby homeowner in the process. 

Until now, there has been no specific requirement in the DASP 

program that prevents investors from harming already distressed 

34 

communities by failing to maintain or walking away from the properties they purchased from the FHA. 

How do the series of changes to the DASP program that you recently announced address these issues? 

Secretary CASTRO. Thank you very much for this question and 

this concern that you are articulating about walking away—folks 

who hold these notes and these properties walking away and basically leaving the neighborhood to pick up the tab, with everything 

that is involved in the neighborhood blight that occurs. There is 

one study from Harvard that showed that when you have that kind 

of situation, there is between a $2,000 to $20,000 impact on the 

homes in the surrounding area. 

So one of the changes is what we call a no-walkaway provision, 

which says that when an investor gets ahold of one of these properties, they can’t just walk away. They cannot dump the property. 

One of the things that they can do is they could look for a nonprofit 

that is willing to take it on and then to do something productive 

with the property. 

But all of this is aimed at ensuring that we promote strong 

neighborhoods because it is one of these two goals that we have for 

this DASP program. To the extent that we can implement this nowalkaway provision, I think that, whether it is in St. Louis or 

many other communities, we are going to have stronger neighborhoods. 

Mr. CLAY. And when you think about the investors, wouldn’t it 

make good business sense to want to see those property values go 

up instead of allowing them to decline and allowing those neighborhoods to deteriorate? 

Secretary CASTRO. And this is the idea behind the program, that 

there should be an economic incentive there. And in most cases— 

I think in the majority of cases that is true and it does work the 

way that it should. In other words, it works better than if we had 

just gone into the foreclosure process. 

But sometimes it doesn’t work the way that it is supposed to, 

and this no-walkaway provision is meant as an extra layer of protection for those neighborhoods so that we can have more families 

that stay in those homes, or if we do have vacant properties something productive can be done with them that will help lift up the 

value of other people’s homes. 

Mr. CLAY. Right. I certainly support that approach and will be 

with you wholeheartedly. 

Thank you very much, and I yield back the balance of my time. 

Mr. GARRETT [presiding]. The gentleman yields back. 

Mr. Hultgren is now recognized for 5 minutes. 

Mr. HULTGREN. Thank you, Mr. Chairman. 

And thank you, Secretary Castro, for being here today. I appreciate it. 

I wanted to get a better sense of HUD’s rulemaking agenda coming up for the rest of the year. You have been an outspoken advocate of the Fair Housing Act. I wonder, in the remainder of this 

year do you anticipate that HUD will issue any additional Fair 

Housing Act rules or guidance or clarification? And if so, can you 

tell us regarding which issues? 

Secretary CASTRO. Yes. Thanks a lot for the question. 

35 

You are correct, I am a strong supporter of ensuring that we 

have robust enforcement of the Fair Housing Act. I was pleased to 

see the Supreme Court case last year, Inclusive Communities, that 

allow the disparate impact standard in Fair Housing Act cases. 

We rolled out the AFFH rule, affirmative furthering fair housing, 

which I see as unfinished business from the 1968 Fair Housing Act. 

You asked about guidance or other rules. So we have worked on, 

and I anticipate that we will continue to work on, for instance, 

guidance around reentry. We have let housing providers know that 

they should generally avoid blanket restrictions on someone—anyone who has any kind of criminal record, any kind of conviction. 

That is not to say that they can’t consider that in whether they 

offer a housing opportunity to someone, but that they need to take 

a more tailored approach which takes into account the link between that restriction and community safety. 

Mr. HULTGREN. Let me jump in here. So it sounds like there is 

going to be pretty active rulemaking coming up in the next couple 

of months before the end of this Administration. 

Let me shift a little bit because the time goes by so fast. As you 

have already testified, you are familiar with Section 202 of the National Housing Act of 1934. Isn’t that correct? 

Secretary CASTRO. Yes. 

Mr. HULTGREN. You said yes. 

Secretary CASTRO. Yes. I have not memorized it verbatim, but 

sure— 

Mr. HULTGREN. No, but you are familiar with it and you testified 

earlier that you were. Under the heading, ‘‘Fiduciary Responsibility,’’ Section 202 of the National Housing Act clearly states that 

the HUD Secretary ‘‘has a responsibility to ensure that the Mutual 

Mortgage Insurance Fund remains financially sound.’’ 

Do you believe that unilaterally approving changes to the Distressed Asset Stabilization Program that compromise the ability of 

taxpayers to get more of their money returned is a breach of your 

Section 202 fiduciary responsibility? 

Secretary CASTRO. I would just challenge the premise of that 

question. These are not detrimental changes to the fund, and so I 

disagree with the characterization of it as somehow detrimental to 

the fund. 

I believe, in fact, that we are fully carrying out our fiduciary 

duty both to the fund and also the goal of this program of trying 

to keep more homeowners from foreclosure. 

Mr. HULTGREN. Since its inception, pools of FHA-insured loans in 

default have been sold through the Distressed Asset Stabilization 

Program in a competitive manner. The significant changes you 

have unilaterally made, such as providing preferential treatment 

for select groups, I believe compromises the ability of taxpayers to 

get more of their money returned. This also means that my constituents in Illinois will be hit with higher mortgage insurance premiums when they go to purchase a home. 

How are nonprofit organizations that are mentioned in section 

five of HUD’s press release but described with no detail qualified 

as eligible organizations? Did you have a list of organizations in 

mind when declaring a preferential bidding option pilot? 

36 

Secretary CASTRO. Again, Congressman, of course I disagree with 

this characterization of preferential bidding. They have to meet the 

reserve price. 

However, we have had several nonprofits that have bid. I would 

be glad to get you a list. I believe that the largest nonprofit— 

Mr. HULTGREN. That would be great if you could get us a list. 

Secretary CASTRO. —nonprofit bidder has been Mercy Housing. 

Mr. HULTGREN. Okay. If you can get us a list of all of the organizations that you had in mind ahead of time. 

The Government Accountability Office has reported that FHA 

was not always following industry best practices when disposing of 

real estate owned properties, which contributed to the agency earning lower returns on such dispositions compared to the housing 

GSEs and other parties. What steps is FHA taking to ensure that 

its distressed loan sales are following industry best practices for 

such sales? 

Secretary CASTRO. Thank you for the question. 

We do take seriously that report from GAO. We strive to follow 

the recommendations, whether it is from GAO or a report from the 

inspector general at HUD. 

We believe that a good example of this are the changes that we 

have made to DASP and that the proof is in the pudding—the fact 

that in the last fiscal year alone that we got a 16 percent return 

that was higher through DASP than we would have through the 

traditional REO process. Even within that REO process, though, 

we look at the policy and our procedures to ensure that we are returning as much as we can to the MMI Fund. And I think good evidence is that for the first time in 6 years the fund is actually above 

the 2 percent required capital reserve ratio. 

Mr. HULTGREN. Let me ask you this really quick, with 20 seconds 

remaining: GAO’s work on real estate owned property has also indicated that FHA was not always analyzing the best approaches for 

disposition activities. What steps has FHA taken to ensure that the 

MMIF and taxpayers are receiving the best returns through the 

use of loan sales as compared to the other disposition methods? 

Secretary CASTRO. FHA has reviewed its internal approach to 

REO, as it has to the other types of sales, with an eye toward ensuring that we protect the integrity of the fund. And I’d be glad to 

follow up with you on more— 

Mr. HULTGREN. That would be great. 

My time has expired. I yield back. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Texas, Mr. Green, 

ranking member of our Oversight and Investigations Subcommittee. 

Mr. GREEN. Thank you, Mr. Chairman. 

I thank the ranking member, as well. 

And I thank the Secretary for appearing today. 

Mr. Secretary, I have a basic premise that I think can add some 

sense of understanding to the rationale that you are putting forth, 

and it is that we sleep in houses, generally speaking, but we live 

in our neighborhoods. And what you are attempting to do is save 

neighborhoods—and you will save homes as well, but save neighborhoods. 

37 

Like Mr. Cleaver, I have seen areas of this country where neighborhoods are lost—completely lost—because the traditional foreclosure process literally obliterated neighborhoods. I applaud you 

for your efforts to save these neighborhoods because when you save 

the neighborhoods, you save the schools, you save a tax base. 

Many communities in cities that I shall not announce because I 

would prefer that my colleagues address the concerns of their communities—but many cities have neighborhoods that are just completely, completely obliterated. So thank you for what you are attempting to do. 

Mr. Cleaver and I are sitting here and I could continue to hear 

him say 2 percent, and I agree with him. This is 2 percent of the 

loans thus far, and this program is still in its infancy. Is that a fair 

statement? Is it still in its infancy? 

Secretary CASTRO. These changes are new. We have been dealing 

with nonprofits since 2013, and so it is fairly new, sure. 

Mr. GREEN. And thus far, give us your rendition of how well you 

are doing with the program, if you would, please. 

Secretary CASTRO. I think, again, through the lens of trying to 

meet these two goals we are doing well—very well on returning 

more revenue to the fund, the MMI Fund—$2.2 billion more 

through DASP than we would have through our traditional real estate owned process, so we are pleased with that. However, we think 

that we can do more work on the other goal of ensuring that more 

homeowners actually stay in their homes and avoid foreclosure. 

So far about 10,000 folks have been able to modify and stay in 

their home and 25,000 have avoided foreclosure. And that has a 

good impact on the neighborhoods that you are talking about. It 

helps promote strong neighborhoods. 

We want to increase those numbers, and what we see is that 

these nonprofits—our largest nonprofit, for instance, has about 3 

times the success rate at actually keeping families in their home. 

So what we are saying is that in balancing these two goals it is 

worth expanding the footprint of nonprofits in DASP and that we 

can accomplish both of these things. 

Mr. GREEN. Thank you. 

I just want to mention one piece of legislation and then I want 

to deal with your reputation. 

The piece of legislation is H.R. 125, which deals with in-person 

servicing. This piece of legislation would allow us to have more inperson servicing. I think it is a great piece of legislation. We have 

found that in-person contact, face-to-face contact, which is required, 

can make a difference in terms of how people respond to efforts to 

help them mitigate. 

Now, let’s look at your reputation for just a moment. You inherited a house on fire, to a certain extent. You were the fireman who 

came it to put out the fire. 

You didn’t start the fire. The fire started with these exotic products and some other things that were going on in the economy. 

And I find it unfair to somehow accuse you of not putting the fire 

out quickly enough that Members of Congress started. This fire 

was started when we allowed certain things to happen, and you 

came in and you have done a stellar job putting that fire out. 

38 

So address this question of your allowing the fund to dip below 

the 2 percent level, if you would, with the time that I have left. 

Secretary CASTRO. Number one, to FHA’s credit, it was never 

part of the problematic types of loans that were part of the housing 

crisis—the NINJA loans, the no-doc loans. It has always had strong 

underwriting, and it even made improvements, though, after the 

2007–2008 timeframe. 

You are right, when I got to FHA we were underneath the 2 percent. When I testified here in early 2015 I said that we would get 

there within 2 years. We got there within a year. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from North Carolina, 

Mr. Pittenger. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

Mr. Castro, good afternoon. 

Mr. Castro, just for clarification, it was brought up by the other 

side that—making references to the Bible and that we should be 

doing this because the Bible tells us to. I have been involved in 

issues related to poverty for about 40 years and have read extensively through the scripture, and there are about 400 passages that 

relate to helping the poor in the Bible, but none of them relate at 

all to the government’s role in helping the poor. It is an individual 

thing. 

We have evolved in that, of course, since the war on poverty 

began in 1965 with President Johnson, and no doubt I am sure his 

intentions were there to do something good, but we have spent approximately $20 trillion since that time and that poverty needle 

hasn’t moved in a significant way. And I think the frustration you 

would hear from the American people that I am with is the enormous amount of resources that have, frankly, in many ways had 

an adverse effect, and the feelings that you are sensing today come 

in that context. 

There has been some communication, and in some measure we 

have—you have been denigrated by the questioning. Do you feel 

that way, by our side today? Have the questions been too hard for 

you? 

Secretary CASTRO. What is that? 

Mr. PITTENGER. Some of the Members have said that we didn’t 

treat you with adequate respect and you have felt some measure 

denigrated. 

Secretary CASTRO. No, no, no. Of course, I sometimes feel envious 

of my brother for getting to be a Congressman, but that is about 

it. 

Mr. PITTENGER. I will say to you that the concern we have in representing the taxpayers in this country is that they get the full 

measure of return for the investments they make. The American 

people are generous people. We are the most generous country in 

the entire world through nonprofits and through what we distribute around the world. And I think the concern that the overlay 

here with housing is found when we see that there is data showing 

that there are people making $100,000 or more who live in public 

housing. 

I was involved, Mr. Secretary, back in the mid-1990s—we had a 

pastor in Charlotte named Charles Mack, a wonderful AfricanVerDate Nov 24 2008 16:39 Mar 05, 2018 Jkt 025877 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 K:\DOCS\25877.TXT TERI
39 

American man, and he would charge hell with a water gun. He 

would go into these housing complexes and rescue these kids. And 

he came to me one day and said, ‘‘You know, Robert, I really would 

appreciate your help. I would like to build a place—have a place 

where I could bring these kids and have afterschool programs, an 

activity center.’’ 

And I had heard that there was a fund up here and so I said— 

and some friends, we came to Washington and we came up here 

4 times. It was called the Hope Fund in the mid-1990s, and we requested $1,200,000. We got the city council’s approval and the 

heads of major companies there, and at the end of the day, after 

about 8 months we came back with $22 million. Only in Washington could that happen. They ended up razing the previous housing and building a new one. 

I think that is the spirit of concern. When we see how you have 

made rule changes that don’t allow for as much accountability, 

don’t allow for competitive bidding out, it clearly is going to raise 

real concerns. And we feel that we are not being faithful as stewards of the dollars that the American people invest in us. 

And I think to me it is somewhat disingenuous to challenge that. 

What we are looking for is an open, honest conversation. 

We have about 80 poverty programs that are funded to the ex- tent of nearly $1 trillion a year, and no one can say that they are 

a great success. We have an extraordinary amount of dependency 

now that we didn’t have 40 years ago, and I think I really want 

you to appreciate that context. 

And so when you make these kinds of decisions you have to look 

at the backdrop. Are we willing to have an honest conversation 

about poverty, about housing, things that we can really do prudently to give greater accountability instead of unilaterally making 

some policy decisions that you know are going to stir the fire? And 

we need that kind of support. 

Secretary CASTRO. If I might, just a couple of points. Thank you 

for your comment. 

Number one is that there is a negative subsidy on the FHA of 

almost 4 percent. In other words, we make money for the taxpayers. So it is important to note that. This is a money-making operation for the taxpayers. 

Mr. PITTENGER. I can tell you, Mr. Secretary, with all due respect, it is called OPM—other people’s money. That is what is concerned is you are operating with somebody else’s money and we 

don’t see the sense of accountability for— 

Secretary CASTRO. Oh, we certainly do. There is a lot of accountability. 

Mr. PITTENGER. My time has expired. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentlelady from New York, Ms. 

Velazquez. 

Ms. VELAZQUEZ. Thank you very much. 

And, Secretary Castro, thank you for the work you do. 

Secretary CASTRO. How could I mistake that voice, Congresswoman Velazquez? 

Ms. VELAZQUEZ. I am sorry I wasn’t here to listen to your testimony, but I was on the Senate side. It is not often that we cross 

40 

to the other side, but I am sitting as a conferee on the National 

Defense Authorization Act. 

So I just want to take this opportunity to congratulate you and 

thank you for the work you do, especially for those among us that 

are most vulnerable in our country. 

Last month New York City announced a breakthrough collaborative purchase of FHA distressed loans for the explicit purpose of 

homeownership retention and affordable housing preservation. It 

seems that local governments can play a strong role in stabilizing 

their neighborhoods through access to DASP and through partnerships. 

Can you elaborate on how the recent DASP changes can give 

local government tools to strengthen their communities? 

Secretary CASTRO. Yes. Thank you very much, Congresswoman 

Velazquez, and thank you for your leadership, as well, on these 

issues of community revitalization. 

I spoke earlier of the different pools that exist. We also have 

what are called direct sales, and direct sales are basically sales of 

these properties in localized areas to local governments or entities 

affiliated with the local government. And the entire point there is 

community reinvestment—to stabilize neighborhoods, to make sure 

that a local government entity that has the best interests of those 

homeowners and the taxpayers in mind can get to work at lifting 

up those neighborhoods and keeping people in their homes. 

So as part of these changes we are enhancing that program and 

we are also going to enhance our outreach to do more of these direct sales. Frankly, sometimes there is a challenge in getting communities interested in taking on these properties because servicing 

is a challenging business and it is not something that a lot of local 

governments are used to doing. 

But New York City is one good example of a community that has 

expressed interest in this, and we look forward to working with 

more communities to make those kinds of direct sales. 

Ms. VELAZQUEZ. Yes. And I know that the office of the mayor has 

expressed interest in purchasing additional delinquent loans from 

the government through the DASP program. Is HUD currently 

working with the City of New York to purchase additional loans 

from the government? 

Secretary CASTRO. We are working with the City of New York, 

and we hope that is fruitful, constructive work that will do good for 

the homeowners in the neighborhoods there. 

Ms. VELAZQUEZ. And as part of the recent DASP enhancements, 

principal forgiveness is the first option investors must consider offering to borrowers when evaluating them for a modification. What 

steps will HUD take to ensure that a private investor is doing all 

he can to work with a borrower to forgive their mortgage principal? 

Secretary CASTRO. Yes, so as part of these changes what we are 

doing is strongly encouraging these—whether it is private or it is 

nonprofit that takes ahold of one of these notes, for them to offer 

principal forgiveness as a first option. This is significant. 

This is also something that FHFA announced a few months ago, 

but we are strongly encouraging this. They said that they would 

like these note-holders to consider it. 

41 

We believe that the practical effect of this can be that more 

homeowners, more families actually get to stay in their homes because of that principal forgiveness being the first step in the new 

waterfall that is in place—the loss mitigation waterfall. We are excited about that. We are going to monitor how well that works. 

Ms. VELAZQUEZ. Okay. 

Secretary CASTRO. And as we have done after every note sale, we 

are going to look at how we can make further improvements in the 

future. 

Ms. VELAZQUEZ. So my understanding is that you announced 

that you will be improving notification to borrowers that their loan 

can be sold. Can you explain to us what is the process in which 

HUD is notifying the borrowers? 

Secretary CASTRO. I didn’t quite catch your question. 

Ms. VELAZQUEZ. As part of a recent enhancement that you announced, it—that you announced that it will be improving its notification to borrowers that their loan can be sold. By what process 

is HUD intending to notify borrowers that their loan can be sold? 

Secretary CASTRO. So there is a letter that goes out when a borrower is 120 days delinquent, and what we decided to do and have 

proposed in these changes essentially is beefing up that letter, 

strengthening that letter to notify them of this. 

Ms. VELAZQUEZ. Thank you. 

Chairman HENSARLING. The time of the gentlelady has expired. 

The Chair now recognizes the gentleman from Kentucky, Mr. 

Barr. 

Mr. BARR. Secretary Castro, welcome back to the committee. 

Secretary CASTRO. It’s good to be here. 

Mr. BARR. Sir, would you agree that the underlying cause of the 

financial crisis was millions of Americans in homes with mortgages 

that they couldn’t afford to repay? 

Secretary CASTRO. I would say that was one factor, sure. 

Mr. BARR. It was at the core of the crisis, though, right? 

Secretary CASTRO. That was one factor, sure. 

Mr. BARR. Yes. Okay. 

I want you to walk through with me the FHA anti-foreclosure 

waterfall. Before lenders can assign a distressed mortgage to the 

DASP program, which is the subject of this hearing, the Distressed 

Asset Stabilization Program, lenders must follow a series of requirements, and I would refer you to the chart that is on the screen 

here. 

So first, lenders must go through informal forbearance, correct? 

Is that— 

Secretary CASTRO. Yes. You have it— 

Mr. BARR. First, the lender must go through informal forbearance, then formal forbearance, special forbearance, loan modification, a series of different loan modifications, and then HAMP, before assigning the asset for sale through the DASP program. Is 

that an accurate reflection of the process? 

Secretary CASTRO. It is accurate to say that we have a loss mitigation waterfall, that there is an obligation on the part of the lender to go through that waterfall, and also, to address your second 

question, that before any note can go into a DASP sale that the 

42 

lender warrants that they have completed that waterfall. That is 

correct. 

Mr. BARR. Right. And as you see on the right-hand side, the average length of delinquent pre-DASP is 29 months, so it is a pretty 

long process after default before foreclosure— 

Secretary CASTRO. It is about 27 months now, but yes, in that 

ballpark, sure. 

Mr. BARR. But in summary, it is a pretty prolonged, protracted, 

extensive process to do anything possible to avoid foreclosure, including at the very end of the process assigning these distressed 

mortgages for sale through the DASP program. And the point I 

guess I am getting at is, you know a lot of people in Washington— 

politicians and bureaucrats in agencies—wring their hands about 

putting borrowers in debt traps, and it looks to me like with this 

lengthy process that we are putting people in a debt trap. 

At what point does HUD—at what point does FHA recognize that 

these people might actually be in a home that they cannot afford? 

Secretary CASTRO. Thanks for that question. 

Number one, you are right that we go through this loss mitigation waterfall. That is a traditional part of FHA. 

You are also right that there is a commitment to try and keep 

American families in their homes and that DASP represents about 

20 percent of the way that we dispose of properties. 

I think what you are missing is—and this is the converse of I 

think where the advocacy groups are coming from—that you are 

also not going to get the payoff of DASP if you don’t go that— 

Mr. BARR. Let’s talk about those advocacy groups. And if you 

could put up another slide here, a website. Are you familiar with 

this website, sir, the dontsellourhomestowallstreet.org website? 

Secretary CASTRO. I have not been on that website, no. 

Mr. BARR. Have you heard of this website before today, before 

seeing it right here? 

Secretary CASTRO. Have I heard of the website? 

Mr. BARR. Have you heard of the website? 

Secretary CASTRO. Sure, sure. 

Mr. BARR. Who first notified you of this website and who is the 

sponsor of this site? 

Secretary CASTRO. I have no idea who the sponsor is. I think that 

I first saw it on Twitter. 

Mr. BARR. Have you ever met with any of the sponsors or individuals who are behind this website? 

Secretary CASTRO. I don’t know who is behind the website so I 

don’t know whether I have ever interacted with them. I am not 

clear on who put that website— 

Mr. BARR. Scroll down, if you would, to the very bottom. It is 

very critical of you, and if you can go up a little bit further you will 

see there that it refers to you as a rising star. Many people think 

of you as a rising star, but they are very upset that you are not 

including nonprofits in the DASP program sufficiently, and it says 

that you have been criticized by Elizabeth Warren and Congressman Grijalva and others. 

So my question is, did this website influence your decision to 

make changes to the DASP program? 

Secretary CASTRO. It did not. 

43 

Mr. BARR. Okay. What did prompt you to make the changes announced on June 30th that would—that set aside preferential bidding for nonprofits if it wasn’t this website? 

Secretary CASTRO. Yes, well these changes, as I mentioned earlier—many if not all of these changes have been suggested by different groups, including the National Association of REALTORS®, 

the Urban Institute, Congressmen and Congresswomen, Senators. 

So what prompted the changes is the next note sale was coming 

up. 

Mr. BARR. My time has expired, but I would like to know what 

the criteria is for how you select these nonprofits. 

I yield back. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Minnesota, Mr. 

Ellison. 

Mr. ELLISON. Secretary Castro, I want to say thank you for your 

service to our country. I think you have been doing a great job for 

our Nation. You did inherit a tough situation, and in that time you 

have been responsive. 

I can tell you that people in Minnesota are grateful for your work 

and we appreciate it every time you come to town. And whether 

they are businesspeople, developers, homeowners, or local government, you have built up a lot of good credibility with us and we 

thank you for that. 

I want to tell you that I support the recommendation that principal reduction should be an early option, a first option for these 

borrowers. In fact, I have introduced a bill, H.R. 3159, the Preserving American Homeownership Act, and it would require FHA 

to create a shared appreciation pilot program. This program would 

gradually reduce the principal balance of some loans in exchange 

for a share of the increase in the home’s value when the home is 

later sold or refinanced. 

Could you share your ideas with the idea of principal forgiveness 

for investors? 

Secretary CASTRO. We think that this makes sense. We think 

that—and the Urban Institute note yesterday touched on this briefly, as well. We believe that this introduction of a requirement that 

principal forgiveness go to the top of the new loss mitigation waterfall, that it makes sense for borrowers, that it is going to help keep 

more families in those homes, and that also it can be accomplished 

without sacrificing a negative impact to the Mutual Mortgage Insurance Fund. 

So this is something that—and I believe that report also notes 

this is something that some of these lenders were doing already. 

Some have already been doing it. This is just formalizing that. 

So we are going to put this into place; we are going to monitor 

how it works. My hope is that this is going to have a real impact 

on keeping more families in their homes, and it will achieve that 

even as we achieve the other goal of boosting the Mutual Mortgage 

Insurance Fund. We can do both of those things. 

Mr. ELLISON. Mr. Secretary, but the overall goal of just keeping 

people well-housed, whether they own that home or whether they 

rent, I just want to note that we have about 11 million families 

44 

who cannot afford their rent. Families earning under $30,000 a 

year can barely pay for anything else. 

So I just want to say that I think the program you are pursuing 

here, if you look at it as a part of a overall strategy to get people 

in good housing, is well-thought-out. 

Would you care to offer any of your thoughts on the rental crisis 

in our country? How serious is it? What should Congress be doing? 

We like to drill you with what you should be doing. 

Secretary CASTRO. Well— 

Mr. ELLISON. I wonder what you think a responsive Congress 

might be doing. 

Secretary CASTRO. What we see out there is a rental affordability 

crisis that doesn’t just exist in the usual suspect cities like Boston, 

San Francisco, or New York, but in towns big and small throughout this country. What we need to do, I believe, is to invest more 

in those things that will spur greater production, including enhancing LIHTC, which has been a big driver of affordable housing creation. 

We are pleased— 

Mr. ELLISON. Just for the folks watching at home, LIHTC is— 

Secretary CASTRO. Low-income housing tax credit. 

Mr. ELLISON. Right, right. 

Secretary CASTRO. We believe that more funding for the HOME 

program, which is in HUD’s budget—LIHTC is Treasury, but in 

HUD’s budget the HOME program; investing in more Housing 

Choice Vouchers and our traditional tools; lifting the cap on RAD, 

making sure that we have the right tenant protections in place, but 

lifting that cap on RAD; implementing successfully the National 

Housing Trust Fund and amplifying that in the future—all of these 

things I believe are things that we should be doing, that we ought 

to be doing more of. 

I applaud folks in this Congress who have taken strong steps to 

encourage Congress to do more. We hope that in the budget process 

that we will see more. There have been some bright spots—on 

youth homelessness, for instance. 

But overall, the amount of resources that we are investing is not 

by any means meeting the demand that is out there. 

Mr. ELLISON. On that front, Mr. Secretary, we do put a whole lot 

of money in housing if you include the mortgage interest deduction. 

I wonder what would happen if we looked at reconfiguring that. 

Secretary CASTRO. You have been a real leader on this issue, 

Congressman. 

Mr. ELLISON. Thank you, sir. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from New Hampshire, 

Mr. Guinta. 

Mr. GUINTA. Thank you, Mr. Chairman. 

And thank you, Mr. Secretary, for being here. 

I have a number of things I want to go over, but the first thing 

I want to ask, because we were both former mayors—when you 

served as a mayor not much was done in private, correct, in terms 

of governing your city? 

Secretary CASTRO. More specifically, what do you mean by that? 

45 

Mr. GUINTA. Non-public. Everything was done out in the open, 

in front— 

Secretary CASTRO. Yes. You have open records laws, FOIA laws, 

and so forth. 

Mr. GUINTA. Really the only thing that was done in private 

would be essentially issues relating to personnel matters. Is that— 

Secretary CASTRO. There are a few other exceptions, as you 

know, and that depends on the State, but sure, I— 

Mr. GUINTA. —like that, but everything else is public. 

Secretary CASTRO. —follow the premise of your question. 

Mr. GUINTA. Okay. So given that, and given the fact that a letter 

was sent to you from our chairman back in March about this particular program, I am concerned with the lack of transparency— 

and you may disagree, but I think Congress has a right to know 

what decisions and what information went into your decision about 

making this change on June 30th. 

So following up on Mr. Barr’s question, my question relative to 

that website that he posted is was there any staff or any advisor 

to you in the last 6 months who either verbally or in writing mentioned that website to you as you deliberated on these changes that 

you made on June 30th? 

Secretary CASTRO. Anybody who mentioned—who was an advisor 

or staff member who mentioned that website, no. They did, of 

course, mention that the advocates were making calls for changes, 

sure. But I can’t recall anybody ever specifically mentioning that 

website, no. 

Mr. GUINTA. So no discussion with any staff member or advisor 

who ever mentioned that website— 

Secretary CASTRO. Again, there were certainly folks who informed me about what the advocates were saying, and I— 

Mr. GUINTA. Advocates meaning the advocates of the website? 

Secretary CASTRO. The advocates who were claiming that the 

DASP program—who were progressive advocates claiming that the 

DASP program was not sufficiently including nonprofits. 

Mr. GUINTA. In your opinion, do you think that those people were 

associated with that website? 

Secretary CASTRO. Oh, I have no doubt that some of them were, 

but I don’t know if there is perfect overlap or how many— 

Mr. GUINTA. There was discussion, then, with your staff about 

that website and the impacts of that website. 

Secretary CASTRO. No. I never discussed that website with folks. 

Mr. GUINTA. But you discussed the advocates of that website 

with your staff. Aren’t they one and the same? 

Secretary CASTRO. In general, I discussed that there were groups 

who wanted nonprofits to have a greater role, sure. 

Mr. GUINTA. See, this is the frustration with Washington. People 

around the country feel like this is a closed process, that things 

like these changes that were made, which appear to some to be like 

no big contracts, feel like it is government that dictates these 

things, not the general public or the regular person. 

Secretary CASTRO. Not at all. 

Mr. GUINTA. You have claimed that you want to help that individual individual stay in a home. I don’t disagree with wanting to 

try to help somebody. I served on the NeighborWorks board in 

46 

Manchester, New Hampshire. I know you are familiar with that organization. They have a similar one in San Antonio. 

But the question I guess I would have is if you are looking at 

a discount ratio for the private sector versus the nonprofit sector, 

what would the difference be? Because there is going to be a difference. 

Secretary CASTRO. Your question is, if we are looking at the—you 

are using the term ‘‘discount rate?’’ 

Mr. GUINTA. Discount rate on the home. 

Secretary CASTRO. I don’t think that is the appropriate term to 

use. Are you saying, for instance, what is our recovery rate on the 

UPB? 

Mr. GUINTA. Okay, what is the recovery rate that you expect for 

the nonprofits? 

Secretary CASTRO. We expect that those recovery rates are going 

to be very similar to each other. 

Mr. GUINTA. But not the same. It is going to be less for the nonprofits, correct? 

Secretary CASTRO. I believe in some instances it may be more; 

in some instances it may be less. 

Mr. GUINTA. But overall with a nonprofit it is going to be less, 

correct? 

Secretary CASTRO. We will see. 

Mr. GUINTA. In the experience that I had as mayor it was always 

less with a nonprofit. It was never more, compared to the private 

sector. 

Secretary CASTRO. I think we have a disagreement. Even if that 

is true, what you get is a nonprofit that is 3 times better at keeping a family housed, and that is also important. 

Mr. GUINTA. What is the cost associated for the nonprofit to renovate that home versus the private sector? 

Secretary CASTRO. That depends on the home and the community, the level of disrepair— 

Mr. GUINTA. Would you be shocked to know that it is at least 30 

percent more? 

Secretary CASTRO. I think that is case-specific. 

Mr. GUINTA. It is not case-specific. Across the board it is at least 

30 percent more. 

Secretary CASTRO. I would disagree with you on— 

Mr. GUINTA. That is the fundamental problem here. When you 

talk about the $2 billion—or the $1.7 billion that you took in a bailout, and you said you have received now $2.2 billion— 

Secretary CASTRO. Congressman, there was no bailout. 

Mr. GUINTA. $1.7 billion, the mandatory appropriation, right? 

Secretary CASTRO. That was not a bailout. Sure. 

Mr. GUINTA. You call it a mandatory appropriation, but you 

could have returned the money. You decided not to. 

Secretary CASTRO. Congress calls it a mandatory appropriation, 

I don’t. 

Mr. GUINTA. Okay, well I call it a bailout. Now that money 

should be returned and you are going to have less money as a result of utilizing this nonprofit mandate. 

Secretary CASTRO. We have been successful with the MMIF 

Fund. 

47 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentlelady from Ohio, Mrs. Beatty. 

Mrs. BEATTY. Thank you, Mr. Chairman. 

And thank you, Ranking Member Waters. 

I also thank you, Mr. Secretary, for being here. 

I am going to take a different twist on my opening in saying I 

am glad you answered the question yes, that the questions weren’t 

too tough for you, and kind of even smiled with it, like a sign of, 

‘‘that is because I am the Secretary and I am ready.’’ And that 

made me feel a lot better because I was feeling, like many of my 

colleagues, that because of some of the articles I read—and, Mr. 

Chairman, I would like to enter them into the record—that this 

really was not about— 

Chairman HENSARLING. Without objection, it is so ordered. 

Mrs. BEATTY. —thank you—that this was really not about you or 

housing; this was politically motivated. 

Many of the articles that my colleague and the chairman on the 

other side participated in, talked about because your name had 

come up to possibly be considered as a Vice Presidential candidate. 

We have also heard statements here that this was such an abrupt 

change that you made. 

Then I hear my colleague say that almost 6 months ago we were 

talking about these changes because you and many of us were talking about how we welcome the idea of having not-for-profits. We 

have talked about it in this committee. So it wasn’t like this was 

silent and yesterday you announced something. 

So I wanted to make sure, Mr. Chairman, that the public also 

heard that. Even while we are sitting here a release just came out 

during this hearing, Mr. Chairman, that you issued. 

And I guess my question to you, Mr. Secretary, is going to be 

hardworking taxpayers—in both of these quoted statements it 

states that we are doing it against the hardworking taxpayer. Now, 

I come out of both worlds: I worked in the private sector; and I 

worked in housing for almost 30-some years as a public housing expert, and I was also very active on boards, chairman of boards of 

not-for-profits. 

And so in my opinion—and I want you to address it, being a 

mayor and being who you are—hardworking taxpayers, are not-forprofit organizers, chairmen of the boards, and the people that they 

give or put in these—are they not hardworking taxpayers? I am 

just stuck that I am hearing that we are doing what you are proposing at the—against or in the deficit to hardworking taxpayers. 

So can you share, maybe we can all hear it again, about the benefits of having not-for-profits who are out there every day with the 

individuals we are talking about? Because we are hearing the statistics and the numbers about how many people have lost their 

homes that they were put in. Oftentimes, that is because someone 

didn’t do the financial literacy that not-for-profits do a lot more; 

somebody didn’t do the due diligence of explaining to them how 

they maintain houses. 

And I am saying this as an expert in the field of housing of 25 

years and relocating people from public housing or those who have 

lost in the private market their house. 

48 

So could you share with us some of the thought process for this 

as it relates to what we are all supposed to be here committed to 

at the end of the day—the changes that help the people we serve? 

Secretary CASTRO. Yes. Thank you for the question. 

Several things: number one, that the MMI Fund is back over 2 

percent. It grew by $19 billion in 1 year, which was the fastest 

growth since 2012. So we are doing—we are meeting our fiduciary 

duty to the MMI Fund, to the taxpayers. 

But secondly, what I disagree with vehemently is that somehow 

the ‘‘taxpayers’’ are different from these folks who are living in 

neighborhoods and homes. These are your taxpayers. These are 

taxpayers in every single district that is represented by the folks 

on this committee, and so to say somehow that these are two separate people; they are the taxpayers. 

And what I resent is that too often, by excluding them from the 

idea that they are taxpayers, they are made to seem to be deadbeats. They are not deadbeats. They are hardworking Americans 

who oftentimes have fallen on hard times, and I am proud of the 

work that we are doing to try and keep them in their homes. 

Mrs. BEATTY. Thank you so much. 

And in my few seconds, Mr. Chairman, let me just say someone 

on the other side talked about the Bible; someone also introduced 

the war on poverty by President Johnson. And what was so interesting about that when he did it, it didn’t reduce poverty but it increased the American housing living standards. 

Thank you. 

Chairman HENSARLING. The time of the gentlelady has expired. 

The Chair now recognizes the gentleman from Maine, Mr. 

Poliquin. 

Mr. POLIQUIN. Thank you, Mr. Chairman. I appreciate it. 

And thank you, Mr. Castro, for being here again. It’s good to see 

you again, sir. 

I represent Maine’s 2nd District, Mr. Castro, which is the most 

wonderful district and State in the country. And I know that you 

are planning your family vacation to come to Maine, and I wanted 

to let you know I will meet you at the New Hampshire border to 

welcome you and your family. 

Secretary CASTRO. I should. 

Mr. POLIQUIN. I appreciate that, and I know you are on your 

way. 

Mr. Castro, we are a very proud and independent people. We love 

our homes. And I am very proud to say that about 70 percent of 

Maine families live in their own homes. That is the tenth-highest 

in the country. 

Now, we want everybody to be able to stay in their homes, and 

everybody has a role, Mr. Castro. The workers need good-paying 

jobs, so we need to make sure we help our businesses grow so they 

have good-paying jobs by keeping taxes lower and energy prices 

lower, health insurance premiums lower, and all the good stuff that 

you and I both know. 

The regulators have a role. They need to make sure they don’t 

put pressure on banks to extend big loans to families when they 

know those families can’t afford them. 

49 

Now, the homeowners themselves and the REALTORS® who 

deal with them, they have a responsibility to make sure they don’t 

take on too much debt they can’t afford. 

You have a role, with all due respect, sir. HUD has a role to 

make sure the Mortgage Insurance Fund is healthy. These homeowners pay into that Mortgage Insurance Fund, and we need to 

make sure it stays healthy in case there is a problem with this 

market. 

Now, we called you in here because you changed the rules without really notifying us. As I understand it, now, going forward, 

HUD is going to set aside a bucket of mortgages and they are going 

to offer them to nonprofit special interest groups. And during this 

bidding process, Mr. Castro, the nonprofit special interest groups 

are going to be able to go and take a look at this bucket of mortgages and pick out the ones that they think will be the most profitable for them, and the rest of the for-profit community will be able 

to bid on the rest. 

Now, you have told us here today that the reason you want to 

set aside up to 10 percent of this mortgage pool for nonprofit special interest groups is that you think that they can do a better job 

owning these mortgages and helping families stay in their homes. 

Where is the data? 

Show me the data. We are 20 feet away. Show me the data that 

you have right now, sir, that confirms to you that these nonprofits 

do a better job than the for-profit companies keeping peoples in 

homes. 

Secretary CASTRO. Thank you for the question. I would be glad 

to get you that data. 

Mr. POLIQUIN. Good. I am right here. Your staff is right here. Do 

you have the data right now? 

Secretary CASTRO. They may have it, sure. 

Mr. POLIQUIN. They may have it. 

Secretary CASTRO. And if they don’t— 

Mr. POLIQUIN. You are the one who runs the organization. 

Secretary CASTRO. —we will—we have no problem— 

Mr. POLIQUIN. Do you have the data confirming the set-aside for 

nonprofit special interest groups does a better job keeping folks in 

their homes? 

Secretary CASTRO. Yes, so— 

Mr. POLIQUIN. Do you have that data? 

Secretary CASTRO. —I do have data— 

Mr. POLIQUIN. Good. 

Secretary CASTRO. —and what the data shows is that with our 

largest nonprofit bidder, it has had about 3 times the success rate 

at keeping folks in their homes— 

Mr. POLIQUIN. In this program or in general? In this program— 

Secretary CASTRO. In this program. 

Mr. POLIQUIN. In this program. Good. 

Secretary CASTRO. In the DASP program. That is what we are 

talking about today. 

Mr. POLIQUIN. If they are doing such a great job, why not— 

Secretary CASTRO. Compared to—if I could just finish— 

Mr. POLIQUIN. I am not quite done because I have a minute-anda-half, Mr. Castro. 

50 

Secretary CASTRO. But compared to the average— 

Mr. POLIQUIN. Why would you set aside only 10 percent if they 

are doing such a— 

Secretary CASTRO. —for-profit investor. 

Mr. POLIQUIN. Why would you set aside only 10 percent if they 

are doing such a great job? Why not 20 or 30 percent? Why not set 

aside 30 percent for these special interest groups? 

Secretary CASTRO. That is a very good question. Let me tell you 

why, and let me go back to something that I said earlier. Because 

we want to take reasonable steps to operationalize these programs 

in ways that can ensure we meet both of those goals, because we 

want to test this out further because we are being responsible. 

Mr. POLIQUIN. No, I have have to step in here, if you don’t mind, 

Mr. Castro, and say you want to test this out with 10 percent set 

aside for nonprofits. Okay. 

Secretary CASTRO. No, no, no, no. 

Mr. POLIQUIN. And if there is a problem— 

Secretary CASTRO. What we want to test out is just mechanically, 

if I can explain, that we are actually doing the pools in a different 

way now from the way that we were doing them earlier. 

Mr. POLIQUIN. And you are giving preferential treatment to some 

folks in the industry. 

Secretary CASTRO. We are not. 

Mr. POLIQUIN. Yes, you are. That is exactly what you are doing. 

Let’s move on to something else in my last 30 seconds, sir, because we can’t agree that reduced competition is going to result in 

a better outcome for our families and to make sure this insurance 

fund stays healthy. We don’t agree on that, but maybe there is 

something we can agree on. 

In April you folks changed another rule, and it deals with manufactured housing. Now in my State of Maine, sir, there are 64,000 

families who live in manufactured, housing, and we are very proud 

of that. That is about one in eight in the State of Maine. 

Now, you came out with new rules specifically telling our State 

how to deal with building a frost-free foundation. I would submit 

to you, Mr. Castro—and I want to work with you on this, if I may, 

Mr. Chairman—that there is nobody in the country other than the 

folks in the State of Maine who know more about winter and how 

to build a frost-free wall. 

I hope we can work such that our State regulators can continue 

to have the flexibility to do what the law says. Will you work with 

me on that, sir? 

Secretary CASTRO. We look forward to connecting with you on it, 

sure. 

Mr. POLIQUIN. Thank you, Mr. Castro. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Washington, Mr. 

Heck. 

Mr. HECK. Thank you, Mr. Chairman. 

Mr. Secretary, thank you so much for being here today. Thank 

you for your endurance. 

Secretary CASTRO. It’s good to be here. 

Mr. HECK. I want to take you in a slightly different direction and 

actually ask you to help me solve a great mystery, at least to me, 

51 

in the market rate housing area. And my premise is that while the 

wheelhouse of HUD is in affordable housing, we will never be able 

to deal adequately with that, or we will be hugely complicated in 

our effort to deal adequately with that, if market rate housing is 

not working correctly. 

And I find that there is a great disconnect between supply and 

demand. What do I mean by that? We know that supply is not 

keeping up with demand because home prices are increasing at 

rates significantly greater than the consumer price index. 

We know that, for example, the amount of time on the market, 

what a REALTOR® would call the inventory, is way below equilibrium in many markets. In the county I live it is less than 62 

days; in the next county it is less than 60 days. That means that 

there is more demand than supply, and I cannot understand why 

it is supply is not moving faster to keep up with demand. 

Now, the way I look at this is that there are three basic elements 

that go into this. There are three basic inputs. If I am missing one, 

correct me. If I don’t understand any of this, please correct me. I 

am just looking for some wisdom or insight as a housing expert. 

The first is dirt. Do we have enough available land to build on? 

We know that can complicate it if there is an excessive regulatory environment, but we also know that in Cities like Dallas in 

your home State, which are very pro-development zoning areas, or 

even Seattle, which is generally considered a pro-zoning—pro-development zoning construct, that there is a considerable problem. 

It cannot be that there is excessive regulation such that dirt is 

overly constrained. 

There is financing, which is, of course, broken down for both the 

acquisition construction and development side as well as the homeowner side. 

And then there is labor. Do we have enough people to pound 

nails to build new homes? 

So there is nothing that we know about the data of these three 

elements that would help me understand why supply is not keeping up with demand. So, Mr. Secretary, am I leaving something 

out? Am I not understanding the data? Why isn’t it the case that 

we are building more homes faster than we are? What am I missing, sir? 

Secretary CASTRO. I think that, number one, particularly coming 

out of the Great Recession, as we have been, that you have a confluence of challenges particularly with the first two that you mentioned with respect to land and local regulation, but also financing. 

And we do, as you mentioned, focus particularly on affordable 

housing, and I can tell you that with respect to the supply question 

on affordable housing that if I could do one thing it would be to 

figure out a way to make those numbers work in more instances, 

and that is why I mentioned earlier, for instance, expanding the 

low-income housing tax credit. 

The Administration has also been very clear about the need for 

local governments to look at their regulation and to strike a good 

balance between being as friendly to reasonable, good development 

as possible and also protecting their other interests. 

In the budget we included a proposal for something called local 

housing incentive policy grants that would basically incentivize 

52 

local governments who do a good job of sparking more supply, including for affordable housing, to get some Federal investment, to 

say, ‘‘Hey, you are doing the right thing. You should be doing more 

of that,’’ and to set an example for other communities. 

And the importance of this cannot be overstated. I read a very 

fascinating article, for instance, a few months ago about Toyota’s 

decision to move their North American headquarters to the suburbs 

of Dallas because of the lower housing costs there. And so they are 

doing that, of course. You have a lower housing cost there compared to other places. 

However, what is also happening in that North Texas area is 

that it is normalizing, as compared to other markets of that size, 

and you are getting more people in there, and so they are facing 

this question that you have posed of a lack of supply both for affordable and for market rate. And I think it is tied up into the first 

two issues that you mentioned. 

We don’t have any magic solution to that, but we do think that 

there are smart investments that can be made that will spark more 

supply, and those are some of the things that we have suggested, 

along with the Treasury and in our budget. 

Mr. HECK. Thank you, sir. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Pennsylvania, Mr. 

Rothfus. 

Mr. ROTHFUS. Thank you, Mr. Chairman. 

And thank you, Mr. Secretary, for coming in this morning and 

this afternoon. 

You testified about the success of this particular nonprofit in this 

work, and we had asked for data, so I would ask—again, I would 

echo their requests, mindful of the full data. Numerators are important; denominators are important; percentages, numbers, and 

qualitative factors, and how this particular nonprofit got access to 

those particular loans. So all that information I think would be relevant. 

I lost track of the number of times that you used the word ‘‘believe.’’ ‘‘I believe this is going to work.’’ 

You testified repeatedly that you believe these programs will not 

have a negative impact on the Mutual Mortgage Insurance Fund 

and, consequently, the taxpayers. At the same time, I think you 

testified that you have sold loans at a lower price to a nonprofit 

than you might have received from a for-profit, so I would question 

whether that might be a negative impact right there. 

This word ‘‘believe’’ is subjective. Can you be more definitive? 

Will this program not hurt the fund? 

Secretary CASTRO. Yes. I guess one way to say it is that we have 

confidence that it won’t. The reason that we can’t tell you definitively, of course, is because these are new changes, and— 

Mr. ROTHFUS. It is a risk. There is a risk here, isn’t it? There 

is a risk that it might not. 

Secretary CASTRO. There is an inherent risk in that the program 

may start to see, no matter what is done to the program or if it 

is left alone, may start to see a decline in its effectiveness compared to REO. 

53 

Mr. ROTHFUS. But there is a risk, and I remember the former 

Democratic chairman of this committee talking about rolling the 

dice. These programs are putting the taxpayer at risk, and that is 

the issue. 

And let me tie this into something that is going on back home, 

because we have tight budgets, we have scarce resources. My district is home to an organization called HEARTH, which provides 

vital transitional housing services to victims of domestic violence. 

For more than 20 years women and families in Allegheny County 

fleeing domestic abuse have had a reliable and caring place that 

provided temporary shelter and protection from danger. HEARTH 

has provided hundreds of women of western Pennsylvania and 

their children with a temporary safe space and the support needed 

to transition to permanent housing. 

HEARTH has a compelling mission and it fulfills a priceless 

service for the community. That is why I find it troubling to learn 

that the organization would be cut off from HUD funding in the upcoming fiscal year. This funding represents nearly half of the 

group’s budget. 

According to the Allegheny County Continuum of Care, HUD is 

deprioritizing transitional housing services for adults. Since any 

application to HUD that includes funding for these services will be 

viewed as less competitive by the agency, Allegheny County has decided to decline to ask for funding for HEARTH. 

This puts the entire organization in danger of closing its doors 

to vulnerable women and families in western Pennsylvania. I find 

that unacceptable, and I hope you can provide us with some answers. 

Does addressing homelessness caused by flight from domestic violence remain a priority for HUD? 

Secretary CASTRO. It is a stronger priority today than it ever has 

been for HUD. In fact, in the Continuum of Care process that you 

are talking about we specifically put more points in for housing 

service providers that are able to address the survivors of domestic 

violence. 

Let me say that this is an issue that we are hearing from transitional housing providers across the country. It is accurate to say 

that HUD is focused more now on permanent supportive housing. 

The reason we are doing that is because Congress funded a study 

called the Family Options Study for HUD to do that looked at, 

studied, analyzed what are the most effective housing services that 

we can provide that have the best outcomes. 

What it clearly said was that permanent supportive housing 

gives us the best outcomes for people and the best bang for the 

buck. So we are emphasizing more in this round permanent supportive housing. So we have done— 

Mr. ROTHFUS. But why are persons living in transitional housing 

still counted as homeless? They can provide housing at this particular place for up to a year. 

Secretary CASTRO. I don’t think the issue is whether they are 

still counted as homeless. The issue is if we are talking about the 

long-term positive outcome for the person, what is the best type of 

housing for them to get to? And what we have found is that it is 

54 

to get to permanent supported housing right away. That is why we 

are emphasizing this. 

And it is not just our opinion. That is a study that was an analysis that was done that was funded called the Family Options 

Study. We are following the data where it has led, and this was 

the first Continuum of Care process where we have actually implemented the findings of the Family Options Study. 

I will say, though, Congressman, that we are trying to work with 

communities where we see this drop-off in funding for transitional 

housing to look at if they have other unexpired money—home funding or other money that might go to fill that gap that they would 

otherwise lose. 

Mr. ROTHFUS. But this is how I— 

Secretary CASTRO. So we are willing to work with them. 

Mr. ROTHFUS. And this is how I tie this back to the issue we are 

looking at today. There are scarce resources out there, and to the 

extent that we are putting at risk taxpayer dollars through your 

program, that hurts other organizations. 

I yield back. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from California, Mr. 

Vargas. 

Mr. VARGAS. Thank you, Mr. Chairman. Again, thank you for the 

opportunity to make my comments and ask my questions. 

I also want to thank you, Mr. Secretary, for being here for quite 

some time. 

And I also want to thank you for all the work you have done in 

my district. I appreciate that very much. 

I do want to ask you about some of the changes that you have 

made in the investor pool of DASP. I agree very much that we 

should try to keep families in their homes if they can afford it and 

at the same time protect the taxpayers. I think those two goals are 

very, very important. 

So could you once again try to explain that to me, how that 

makes sense to you and your thinking—your thought process in 

that? 

Secretary CASTRO. Yes. Just again, we have seen in this DASP 

program that we have been able to keep 10,000 families out of— 

or in their homes and another 15,000 to avoid foreclosure through 

short sale or some other way that they avoid foreclosure. 

We believe that DASP has been positive to the Mutual Mortgage Insurance Fund. It has produced more than $2 billion versus what 

REO would have produced. 

And then the other goal of trying to keep families in their homes, 

that there is some work we can do. And the evidence we have suggests that nonprofits can do a better job of keeping families in their 

homes. 

So these changes are aimed squarely at both of those goals, and 

we are confident that we are going to be able to strike that good 

balance and have a healthy MMI Fund and also keep more families 

in their homes. 

Mr. VARGAS. How do you build, then, the capacity in the nonprofits then? Because I did look at the numbers. The numbers are 

quite small still for the nonprofits. How do you build that capacity 

55 

then to make sure that more people can stay in their homes and 

afford them? 

Secretary CASTRO. It is a great question. FHA has reached out 

to nonprofits, has done webinars, has offered technical assistance 

to nonprofits. 

I also do have to say that we have been very responsible in making sure that these nonprofits have to qualify to be able to bid, just 

like the investors do. They have a set of requirements that they 

have to go through so that we certify that they can bid on these 

pools. 

So we are doing the responsible thing. We are ensuring that we 

help more families stay in their homes, but we are doing it with 

organizations, with nonprofits that are stable, that do have a capacity. 

Probably the biggest challenge is the one that you have put your 

finger on, which is, how do we get more nonprofits that have that 

capacity? Because as I mentioned earlier, this is challenging. There 

are not a lot of nonprofits that do the servicing of loans like this, 

and it is new for them. But we want to continue to work with them 

so that more of them can bid on this. 

Mr. VARGAS. And when you say, ‘‘work with them,’’ how do you 

work with them? Do you give them expertise? Do you allow people 

from your office to sort of teach them this process? 

It is something they haven’t been involved in very often, although some have previously, to be honest with you. I know in 

California we have had some nonprofits that have done great at affordable housing. 

Secretary CASTRO. We certainly engage in outreach, in walking 

them through the process and explaining the process and the requirements. And then, of course, there is a vetting process that 

goes into certifying that they can bid on these things. 

And we also are doing that with respect to local governments for 

our direct sales and trying to increase the number of direct sales. 

Mr. VARGAS. Okay. And I do want to ask you this as a—and I 

think I speak for everyone: Please try to do more for veterans— 

homeless veterans. We still have them out there. In San Diego we 

still have veterans who are homeless. 

I know that you guys have been trying to work very hard on this, 

but it really is a stain on our Nation when you have these men and 

women who go out and literally put their lives on the line and then 

they come back and they live on the street. That is a sin that we 

have to cure. 

Secretary CASTRO. I very much appreciate that. As you know, we 

are very proud that because of the Mayors Challenge to End Veteran Homelessness and the focus of opening doors that under the 

Obama Administration between 2010 and 2015, we saw a 36 percent reduction in veteran homelessness. 

But we know that 36 percent is not 100 percent, and we want 

to get to 100 percent. So we are going to keep working hard. 

Mr. VARGAS. Please get to 100 percent. 

I do want to ask, Mr. Chairman, if I can, unanimous consent to 

enter into the record the following letters and statements in support of changes to the DASP program that HUD has recently announced: The Urban Institute; the National Fair Housing Alliance; 

56 

the Leadership Conference; and the National Association of REALTORS®. Chairman HENSARLING. Without objection, it is so ordered. 

Mr. VARGAS. Thank you, sir. I yield back the balance of my time. 

Chairman HENSARLING. The gentleman yields back. 

The Chair now recognizes the gentleman from Michigan, Mr. 

Huizenga, chairman of our Monetary Policy and Trade Subcommittee. 

Mr. HUIZENGA. Thank you, Mr. Chairman. 

And, Secretary Castro, thank you for being here today. 

I want to pursue a couple of different avenues, but first I want 

to ask, do you have a list or database of all the groups with whom 

FHA met with in your decision-making process? 

Secretary CASTRO. As I mentioned earlier, we would be glad to 

share that. 

Mr. HUIZENGA. Okay. So you would be doing that. Okay. 

How soon can we get that list? 

Secretary CASTRO. Congressman, I will ask my staff after this 

hearing how long that will take. 

Mr. HUIZENGA. You are committing to— 

Secretary CASTRO. But I don’t anticipate— 

Mr. HUIZENGA. —days not months, correct? 

Secretary CASTRO. That is right. I don’t anticipate that is a long 

timeframe. 

Mr. HUIZENGA. Okay. And I am glad to hear that you have that 

database and that list. 

Do you have a list or database of all the suggestions that you 

considered and rejected? As you were meeting with these groups I 

am sure they are coming in with their bullet points and their lists. 

Can you provide that database for all the suggestions that you received, and then obviously we can see what was rejected. 

Secretary CASTRO. I certainly know that there are a set of suggestions of policy changes that FHA has considered, whether it was 

in the last 6 months or for many years. As I mentioned, several of 

these changes have actually been advocated for by different organizations and folks for years. 

Mr. HUIZENGA. So there has to be some sort of list that you had 

then said, ‘‘Okay, this is in and this is out,’’ right? 

Secretary CASTRO. I don’t know if I would describe it strictly as 

a list. There are probably documents that reflect those different 

considered changes, sure. 

Mr. HUIZENGA. Okay. And you are willing to provide that? 

Secretary CASTRO. We have those. As long as it is something that 

we usually in the course of business would give over, sure. I have 

no problem doing that. 

Mr. HUIZENGA. Okay. Because I think it is important to explore 

really what were those options, and then what was your decisionmaking process of going through that. 

And I appreciate this attempt, as I would take it, as attempt to— 

for transparency. When you were mayor of San Antonio and there 

were changes happening at a governmental level—my father was 

involved in local politics; he served on the city council and as county commissioner, as well, and there is a transparency and an openness for a reason. 

57 

There is a reason we have television cameras here today. It is 

to make sure that the folks who put us here hold us accountable 

and, in turn, provide that transparency and that ability to understand what is going on. 

And I was glad to hear my colleague from California pursue this 

a little bit. He seemed a little more willing to accept your answer 

than maybe I am. 

My background is in real estate and developing, as well, and I 

am missing the math on how if you are having a certain number 

of your anything—could be any kind of widget, but in this case, 

these very important mortgages that are going on—if they are 

being sold at a reserve price but the market dictated that they 

could have been sold at a higher price, I am confused as to how 

that is bringing more money in, which I think is one of the things 

that you had said, as I had jotted down. I am curious if you do assert that it has brought in more money than offering—by offering 

it to these nonprofits at a reserve price versus— 

Secretary CASTRO. Yes. So I have said I think a couple of things, 

number one, that there may be some instances where the nonprofit 

did end up bidding higher than some of the for-profits did. Secondly, you are making an assumption that the loans that the nonprofits go after, which often are specific to geography, for instance, 

would have been picked up or bid on by these for-profit investors 

or how much they would have been bid on—how much value they 

had to these for-profit investors. 

I don’t think that we can assume in every case the one-to-one 

comparison of this—that a nonprofit would always bid lower on 

that property than a— 

Mr. HUIZENGA. Sure. But we don’t know that if it wasn’t offered 

out to the marketplace, correct? 

Secretary CASTRO. I didn’t hear your question. 

Mr. HUIZENGA. You won’t know that. It is impossible to prove a 

false negative. You can’t prove something unless you go out and 

test it. 

Secretary CASTRO. Well— 

Mr. HUIZENGA. I am curious if you have done an estimate of how 

much return has actually been left on the table by pulling off that 

certain number. 

Secretary CASTRO. Based on these changes, of course we haven’t. 

We haven’t yet implemented these in a sale. 

Mr. HUIZENGA. So, but going into the reserve. I saw earlier you 

had a slide saying 2 percent—only 2 percent, I think, were—was 

the gist I took from that, was going to these nonprofits. So I am 

curious if there is a number of how much you think that has been 

left on the table, returned to the taxpayers. 

Secretary CASTRO. We would be glad to provide what we have 

with respect to the return on nonprofit sales versus investor sales, 

sure. 

Mr. HUIZENGA. All right. I appreciate that. 

I look forward to having a few documents coming our way, and 

we will follow up in writing, as well. 

So, thank you. 

Chairman HENSARLING. The time of the gentleman has expired. 

58 

There are no other Members in the queue. Therefore, I would 

like to thank the witness for his testimony today. 

The Chair notes that some Members may have additional questions for this witness, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to this witness 

and to place his responses in the record. 

I would ask, Mr. Secretary, that you please respond as promptly 

as you are able. 

Also, without objection, Members will have 5 legislative days to 

submit extraneous materials to the Chair for inclusion in the 

record. 

This hearing stands adjourned. 

[Whereupon, at 1:03 p.m., the hearing was adjourned.] 

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A P P E N D I X 

July 13, 2016 

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