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96–527 PDF 2004

OVERSIGHT OF THE DEPARTMENT

OF HOUSING AND URBAN DEVELOPMENT

HEARING

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

MAY 20, 2004

Printed for the use of the Committee on Financial Services

Serial No. 108–89

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

DOUG BEREUTER, Nebraska 

RICHARD H. BAKER, Louisiana 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

DOUG OSE, California 

JUDY BIGGERT, Illinois 

MARK GREEN, Wisconsin 

PATRICK J. TOOMEY, Pennsylvania 

CHRISTOPHER SHAYS, Connecticut 

JOHN B. SHADEGG, Arizona 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

MELISSA A. HART, Pennsylvania 

SHELLEY MOORE CAPITO, West Virginia 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

TIM MURPHY, Pennsylvania 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

JAY INSLEE, Washington 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

KEN LUCAS, Kentucky 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

MIKE ROSS, Arkansas 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

RAHM EMANUEL, Illinois 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

CHRIS BELL, Texas 

BERNARD SANDERS, Vermont

ROBERT U. FOSTER, III, Staff Director 

(III)

C O N T E N T S 

Page 

Hearing held on: 

May 20, 2004 ..................................................................................................... 1

Appendix: 

May 20, 2004 ..................................................................................................... 61

WITNESSES 

THURSDAY, MAY 20, 2004

Jackson, Hon. Alphonso, Secretary, Department of Housing and Urban Development .................................................................................................................. 10

APPENDIX 

Prepared statements: 

Oxley, Hon. Michael G. .................................................................................... 62

Gillmor, Hon. Paul E. ....................................................................................... 65

Harris, Hon. Katherine .................................................................................... 66

Matheson, Hon. Jim ......................................................................................... 68

Ney, Hon. Robert W. ........................................................................................ 70

Vela ́zquez, Hon. Nydia M. ............................................................................... 73

Jackson, Hon. Alphonso ................................................................................... 75

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Frank, Hon. Barney: 

National Association of Affordable Housing Lenders letter to Assistant 

Secretary Liu, April 26, 2004 ....................................................................... 93

National Conference of State legislatures letter to Senator Sarbarnes, 

May 17, 2004 ................................................................................................. 94

Section 8 Activity because of HUD’s April 22 notice ..................................... 98

Section 8 Activity following HUD’s May 18 Announcement of a ‘‘Fix’’ ........ 102

Support letter for H.R. 4263 from various organizations, May 13, 2004 ..... 104

Wayne County Housing Authority letter, May 7, 2004 ................................. 105

Watt, Hon. Melvin L.: 

A Decade of Hope VI: Research Findings and Policy Challenges ................. 106

Jackson, Hon. Alphonso: 

Written response to questions from Hon. Spencer Bachus ........................... 171

Written response to questions from Hon. Barney Frank .............................. 172

Written response to questions from Hon. Mark Green ................................. 174

Written response to questions from Hon. Katherine Harris ......................... 180

Written response to questions from Hon. Carolyn B. Maloney .................... 176

(1)

OVERSIGHT OF THE DEPARTMENT 

OF HOUSING AND URBAN DEVELOPMENT 

Thursday, May 20, 2004

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The committee met, pursuant to call, at 10:08 a.m., in Room 

2128, Rayburn House Office Building, Hon. Michael Oxley [chairman of the committee] presiding. 

Present: Representatives Oxley, Baker, Royce, Ney, Kelly, Green, 

Shays, Miller of California, Tiberi, Feeney, Hensarling, Garrett, 

Barrett, Harris, Renzi, Frank, Waters, Sanders, Maloney, Gutierrez, Velazquez, Watt, Carson, Meeks, Lee, Inslee, Moore, Capuano, 

Hinojosa, Lucas of Kentucky, Clay, Israel, Baca, Miller of North 

Carolina, Emanuel, Scott, Davis and Bell. 

The CHAIRMAN. [Presiding.] The committee will come to order. 

The committee is meeting today to hear from the Secretary of 

Housing and Urban Development on the operations of the department and its budget request for fiscal year 2005. 

Pursuant to rule 3(f)(2) of the rules of the Committee on Financial Services for the 108th Congress, the Chair announces that he 

will limit recognition for opening statements to the Chair and 

Ranking Minority Member of the full committee and the Chair and 

Ranking Minority Member of the Subcommittee on Housing and 

Community Opportunity, or their respective designees to a period 

not to exceed 16 minutes, evenly divided between the majority and 

minority. Prepared statements of all members will be included in 

the record. 

The Chair recognizes himself for an opening statement. 

Today, the Financial Services Committee welcomes the newly 

confirmed Secretary of Housing and Urban Development, Alphonso 

Jackson, on the occasion of his first time testifying as the HUD 

Secretary. Secretary Jackson, congratulations on your confirmation. 

We look forward to working with you to address America’s housing 

needs and to improve our nation’s communities. 

The committee has jurisdiction over the budget for the Department of Housing and Urban Development. The department administers programs such as the Community Development Block 

Grants, HOME, HOPE VI, public housing, section 8 voucher programs, the Federal Housing Administration and the housing goals 

for both Fannie and Freddie. Over the past few years, this committee and the Administration have continued to seek bipartisan 

ways to make existing housing programs work better. In 2003, we 

enacted the American Dream Downpayment Act that would benefit 

2

45,000 new homeowners annually. The committee enacted legislation to increase FHA multifamily loan limits, which addresses the 

acute issue of affordable rental housing in high-cost areas. 

At a time when our homeownership rate is the highest ever at 

68 percent, President Bush has inspired us to make homeownership happen for even more Americans. We must address the lagging minority homeownership rates since less than 50 percent of 

African Americans and Hispanics are homeowners. The zero downpayment legislation would allow zero downpayment loans and financing of the settlement costs for an estimated 150,000 first-time 

homebuyers each year. I want to thank Congressman Tiberi and 

Congressman Scott for introducing that legislation. 

While ownership policy is the best avenue for strengthening families and improving communities, part of American society is not 

yet ready to pursue homeownership. There are several ways to create new rental housing opportunities, however any new approach 

is hampered by the potential hemorrhaging of the section 8 rental 

housing subsidy program. Unless we take dramatic steps to reform 

the section 8 voucher program, it would eventually consume the entire HUD budget. Without meaningful reform, the good work 

achieved by other housing programs could be compromised. 

Recently, articles have appeared in local newspapers stating that 

the section 8 housing voucher program in some communities is running out of money. I am concerned that vouchers are being revoked 

and that tenants may have to leave their homes. Equally troubling 

is the impact on conventional lenders and rating agencies’s decisions to finance assisted housing. Members on both sides of the 

aisle are anxious to hear from you about what steps are being 

taken to address this situation. 

This committee has been following GSE regulatory reform efforts 

closely. Thanks to Subcommittee Chairman Baker’s hard work, 

over 100 witnesses have testified on these issues and several policy 

goals have been achieved. The Senate Banking Committee approved a bill that was not supported by the Administration or the 

GSEs. We will be interested to know if the Administration’s perspective on GSE reform evolved since the Senate activity. It seems 

the Administration does not want a viable legislative product that 

could move through the House and Senate, but would rather attempt to enforce discipline on the GSEs through regulation. I am 

very interested in HUD’s efforts to improve its role in the oversight 

of the GSEs. 

HUD has proposed several new affordable housing targets for the 

GSEs and has eliminated the ability of the GSEs to receive additional credits for certain projects. These new proposals significantly 

raise the levels of affordable housing transactions the GSEs must 

meet. The stated purpose of these changes is to encourage Fannie 

and Freddie to be lenders in the affordable housing field. I look forward to your analysis of why these changes are needed and how 

these goals will be achieved. 

HUD is in the process of reviewing unusual transactions by the 

GSEs to meet the previous affordable housing goals. This committee is also looking at these transactions and examining whether 

they were appropriate. I hope that we can work together to ensure 

that the affordable housing goals are properly met. 

3

I also want to bring to your attention an issue raised at the 

Housing Subcommittee field hearing in Columbus, Ohio that was 

chaired by Subcommittee Chairman Bob Ney. While the hearing 

was primarily focused on affordable housing issues and the section 

8 program, there was a call from the majority of the witnesses 

about the Community Development Block Grant Program. Many 

believe the allocation formula is outdated and does not account for 

the growth of cities. I understand that the department has conducted a study of the CDBG formula. I am hopeful that you will 

discuss whether the formula is in need of a change either today or 

in writing at a later date. 

I would be remiss not to mention reform of the real estate settlement procedures act. I sent a letter in December to your predecessor regarding the department’s proposed rule, which was later 

withdrawn. We all support the goal of simplifying the homebuying 

process and making it less expensive for consumers. I am hopeful 

that you will address the department’s future intent regarding the 

development of a new proposed rule. 

Just before I conclude, I applaud the Administration for continuing to work on its goal to end homelessness. Representatives 

Renzi and Matheson have introduced the Samaritan Initiative Act. 

This initiative combines HUD’s permanent housing funding with 

assistance from the Departments of Health and Human Services 

and Veterans Affairs for services like substance abuse treatment 

and primary care. 

Mr. Secretary, thank you again for being here today. Again, congratulations on your confirmation and we look forward to your testimony. 

I now recognize the Ranking Member, the gentleman from Massachusetts, Mr. Frank. 

[The prepared statement of Hon. Michael G. Oxley can be found 

on page 62 in the appendix.] 

Mr. FRANK. Thank you, Mr. Chairman and Mr. Secretary. 

We are in the midst of a serious crisis involving the section 8 

voucher program. I know that Assistant Secretary Liu has said 

that a handful of the nation’s housing agencies would not have 

enough money, but either they cannot count or he can’t. I guess 

maybe I would suggest as a fundraising device we display Assistant Secretary Liu’s hands because they are apparently an interesting phenomenon. They must have dozens and dozens and dozens 

and dozens and dozens of digits, because I have been besieged, as 

have other members, with concerns from both parties. We have, 

and I would ask to put this into the record, a resolution from the 

standing Committee on Economic Development, Trade and Cultural Affairs, from the National Conference of State Legislatures, 

in which they are strongly critical of the department’s section 8 

program. ‘‘Be it resolved that the National Conference of State Legislatures calls on HUD to withdraw the April 22 notice about section 8 and begin a consultation process.’’

[The following information can be found on page 98 in the appendix.] 

I know that others have said, well, this is what the appropriators 

have said, but of the two Chairs and two Ranking Members on the 

Appropriations Committee, to my knowledge only one has really 

4

said that he is in agreement with what HUD is doing. Senator Mikulski, the Ranking Democrat, has been very critical. Senator 

Bond, the Chairman in the Senate, has said he thought that it was 

not being carried out in the right way. Senator Sarbanes has been 

very critical, and I ask unanimous consent to put all their statements in the record. 

The CHAIRMAN. Without objection. 

Mr. FRANK. What we have is this: From Richard Nixon until a 

few months ago, the section 8 program, the voucher program, was 

one in which municipalities and States, whoever administered it, 

housing authorities, were given money and guidelines to run the 

program. If they kept within the guidelines, they were reimbursed 

for their costs. And I believe since the program was begun at the 

initiative of the Nixon Administration, the number of people served 

by the voucher program has never dropped from one year to the 

next. We have never gone back in terms of the number. The level 

of increase has varied. 

The municipalities have been told to do the right thing in terms 

of how they administer it, but then having done that, they got their 

costs. Last November, HUD worked with some of the appropriators, 

bypassing entirely this authorizing committee, and secured a fundamental change in this program, section 8. For the first time, the 

program was capped and housing authorities and others who administered it were not given, we are now told, the authority to continue the number of people who they had been serving, but had a 

limited amount of money capped by last August’s amount of money 

plus an inflation factor, a very rigid one. 

The way in which this was promulgated is very troubling. HUD, 

which helped draft this legislation, probably drafted it, did this on 

November 30. It was not in either bill, as I recall. It was put in 

in conference. So HUD knew this from November 30 on. The appropriations were not actually passed until February. It was part of 

the overall bill. It was April 22 when this really quite new interpretation went to the communities. There was a great deal of disruption and upset and I ask unanimous consent to put in the record 

lists of dozens and dozens of communities in 25 States which have 

felt seriously disarranged by this. 

[The following information can be found on page 104 in the appendix.] 

It is not simply the way in which it was done. It is the consequence. Essentially communities were told on April 22 of this 

year that retroactively they were going to have less money for section 8 vouchers than they thought they were going to have. The response of many of them was they would have to evict people. We 

had a very serious problem with some of the most vulnerable people in this society now being told that they faced eviction. A great 

deal of chaos ensued. 

Now, as I understand it, HUD recently, and I am going to have 

to ask you to explain this to us because there is still a great deal 

of uncertainty, ambiguity and confusion about this, HUD is now 

telling people, well, they are going to redo the formula in ways that 

while there will still be limits, it may not in the best case require 

any evictions. 

5

But communities continue to tell us, recent articles about Houston, about other places, that they are going to be faced with too little money to continue to serve the number of people they are serving, so that even if evictions are avoided, and I guess there have 

been a couple of evictions already and people threatened with eviction, but even if evictions can be avoided, which I hope, because 

that would be particularly cruel, housing authorities are going to 

face the following choices. 

Either they are going to have to, when people give up their 

vouchers in the normal attrition, retire those vouchers from circulation, so they will be serving fewer people, or they will have to reduce the rents to landlords, greatly damaging this program by 

making the responsible landlords less willing to participate; or they 

will have to raise minimum rates on the poorest people around; or, 

and I just got this from the city of Fall River, they will have to go 

against one of the fundamental purposes of this program. That is, 

they will have to find cheaper apartments. 

Fall River is suffering, they tell me, Fall River, Massachusetts, 

because some of their section 8 certificate holders, their voucher 

holders, have gone from the city of Fall River to wealthier areas 

where the rents are higher, but because they were not in those 

areas a year ago, they do not get compensated for that. So Fall 

River is now telling people, well, you cannot move out of the city 

elsewhere. The purpose of de-concentration, of avoiding packing 

poor people is now being undercut. The result of this is the most 

substantial damage to the section 8 program, people not wanting 

to participate. 

I will say in closing, Mr. Secretary, I am troubled because reading some of your quotes on this, one, you referred to the fact that 

we have a wartime budget, which confirms what some of us fear, 

that the demands of Iraq and elsewhere are cutting into important 

domestic needs. But secondly, you said in the Dallas Morning News 

on April 14, quote, Mr. Jackson said he sympathizes, but we have 

to restructure section 8. The poorest recipients stay in the program 

five to eight years, tying up vouchers that higher income people 

could shed more quickly. The suggestion that one way to resolve 

this problem of housing the poor is to house people who are less 

poor seems to me to go directly contrary to what we ought to be 

doing. 

I will be asking you for some specifics, but I am very troubled 

that as a result of HUD’s actions, pre-dating your secretaryship, 

but continuing under it, we have this section 8 program which has 

been a major source of housing assistance now major source of 

chaos and trouble and difficulty for tenants, for landlords, for lenders and for municipal officials. 

The CHAIRMAN. The gentleman’s time has expired. 

The Chair is pleased to recognize the Chairman of the Housing 

Subcommittee, the gentleman from Ohio, Mr. Ney. 

Mr. NEY. Thank you, Mr. Chairman. 

I want to also welcome Secretary Alphonso Jackson to his first 

authorizing hearing, and also Chairman Oxley for holding this important hearing to examine both the programs and the budgets 

specific to the Department of Housing and Urban Development. 

6

Last year through bipartisan cooperation, the committee and the 

Administration were able to enact 11 bills into law that today are 

making housing programs work better than they have, again, on a 

bipartisan basis and through your leadership, Mr. Chairman and 

Ranking Member, we have been able to do that. 

Of those enacted, of course, last year the American Dream Downpayment Act and the proposal to raise the FHA model family loan 

limits are helping thousands of individuals and families to realize 

the dream of homeownership. In an effort to continue the goal to 

increase minority homeownership, on May 5 of this year the Housing Subcommittee approved H.R. 3755, the FHA Zero Downpayment Act. I want to commend our Ranking Member, Congresswoman Maxine Waters of California for her leadership, and members from both sides of the aisle working on this bill. It was introduced by Congressman Tiberi and Congressman Scott and would 

eliminate the downpayment requirements for certain families and 

individuals who buy homes with FHA-insured mortgages. It is a 

fiscally prudent bill and represents I think another important step 

forward in helping all Americans achieve the dream, and working 

with this committee and with the Administration we have been 

able to move this bill along the path. 

While homeownership is a desired goal, for many Americans and 

many in today’s society they are not yet ready for one reason or another to own their own home. It is therefore prudent that we continue to pursue all alternatives to make sure that affordable rental 

housing is also available. As you know, the section 8 housing assistance program is the major vehicle for providing rental assistance to low-income families and individuals. Today, the section 8 

program encompasses I believe half of HUD’s budget. The rising 

costs of providing rental assistance is due in varying degree to expansion in the program, the costs of renewing expiring long-term 

contracts, and the rising costs in housing markets across the country. 

The day of reckoning is coming fast. If we do not address the increasing costs of this program, it will continue to consume the 

HUD budget. I trust we can engage in a meaningful dialogue with 

all of our colleagues, both sides of the aisle and the Administration 

to find a solution to the escalating costs of the section 8 program. 

Of course, that is going to also have to involve the housing authorities and the advocacy groups that deal with housing. Not a day 

goes by that I do not talk to a constituent or a person who has a 

concern about the problems inherent to the program. 

I am anxious to hear from the Administration about their latest 

proposal for a flexible voucher program which I know the Secretary 

will be speaking about. I believe aspects of this proposal have some 

merit, but it remains to be seen whether this is the solution or not 

to the section 8 program. Nevertheless, we have to find a solution 

and it has to be done soon. 

Before I close, I also want to turn my attention to a proposed 

rule to raise Freddie’s and Fannie’s housing goals. It is clear this 

is an issue that will have a profound impact on America’s housing 

policy and profound ramifications. In 1992, Congress passed legislation establishing the existing housing goal structure. In my estimation, these goals have been a tremendous success story for the 

7

department, and more importantly for the homebuying consumer 

and those renting apartments in the United States. Recently, HUD 

proposed raising the low-mod goal from 50 percent up to 57 percent 

by 2008. 

I look forward to hearing from the Secretary this morning on the 

rationale for the increase. I represent rural Ohio, as a lot of people 

know, where the average loan purchased by Fannie Mae and 

Freddie Mac is still around $100,000. My focus is to make sure 

these companies fulfill their congressional mandate, and that is important that they do fulfill their mandate to serve as a liquidity 

source in markets at all times. 

I intend to pay careful attention to this proposed HUD rule, as 

I know everybody else will be, to make sure there is no adverse impact on the well-functioning housing market in the United States. 

I want these companies to serve more families and they should. I 

also worry about a rule where companies are on the point of forcing 

a potential credit allocation to the low end of the market, and negatively affects middle-income and also middle-class America. 

So I do have some concerns. I have other items in here, Mr. 

Chairman, so I will come to a conclusion, but if I could put them 

in for the record without objection. 

The CHAIRMAN. Without objection. 

Mr. NEY. My concern is that this proposed rule could force the 

GSEs to set higher interest rates for mortgage refinancing, which 

is what we do not want. 

In closing, let me say that the federal government, consumers 

and the housing industry are linked by our mutual goal of creating 

housing opportunity for Americans. We have much to achieve together for the American people, and our best hope of being successful is to work in close concert with each other, guided by the same 

high standards and principles. I do appreciate the Secretary being 

here today, and thank you for my time, Mr. Chairman, and your 

work on this issue. 

[The prepared statement of Hon. Robert W. Ney can be found on 

page 70 in the appendix.] 

The CHAIRMAN. The gentleman’s time has expired. 

The gentlelady, the Ranking Member of the Housing Subcommittee, Ms. Waters. 

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

Good morning, Secretary Jackson. While I congratulate you on 

your confirmation as HUD Secretary, I do not know whether you 

should be happy or sad. You have been given control of an agency 

with a disastrous proposed budget that takes us backwards in so 

many important ways. A budget that, for example, seeks $1.633 billion below the amount that HUD itself projects is needed to renew 

all section 8 housing vouchers. If enacted, your section 8 budget 

proposal will dislocate households and force many public housing 

authorities to raise rents and lower subsidies to needy seniors, persons with disabilities, and families with children. 

This funding level would result in 250,000 fewer vouchers being 

funded if housing authorities choose to maintain the current level 

of subsidy for those vouchers that they do maintain. If housing authorities choose instead to maintain the same number of vouchers 

currently authorized nationally, the average section 8 tenant’s rent 

8

would have to increase by an average of about $850 per year. In 

Los Angeles, the city housing authority would have to issue 5,336 

fewer vouchers and the county housing authority would have to 

issue 2,457 fewer vouchers if they choose to make up the funding 

shortfall by reducing the number of vouchers that they fund. 

If they issued the same number of vouchers, the city of Los Ange- les would have to raise the average tenant’s rent by $933 per year, 

and the county housing authority would have to raise the average 

tenant’s rent by $977 per year in order to absorb the impact of the 

Bush Administration’s proposed funding level. 

Mr. Secretary, I would need at least an hour to talk to you about 

all of the ways that this proposed budget fails to meet America’s 

pressing needs for housing, but let me try and summarize some of 

my principal concerns. Hopefully, we can cover more of the issues 

during the question period. 

HUD’s budget for CDBG block grants fails to keep pace with inflation, and zeroes out funding for brownfields, empowerment zones 

and CDBG section 108 loans, a program that is especially important to me. I put a lot of time in on section 108, and the city of 

Los Angeles has been able to use section 108 as have cities in this 

country for economic development. I am really concerned about 

that. 

Your budget cuts public housing funding by $182 million, re- scinds $675 million in funds that could be used to preserve affordable housing; zeroes out funding for HOPE VI and proposes to let 

50 housing authorities operate without statutory tenant protections. It proposes a $35 million cut for lead paint grants, and to 

zero out funding for rural housing and economic development 

grants which received $25 million in funding year 2004. 

I do not know how much you were involved in this budget, but 

I know some of your reputation. I have met and talked with you 

before, and I expect that you will provide the leadership to correct 

what are many problems with this budget. This is a very serious 

business. As I sit talking to you today, there are 1,500 households 

in Los Angeles who are not receiving assistance, whose vouchers 

were cancelled by the city housing authority because the vouchers 

that they waited so many years to receive were not funded. This 

is just not acceptable. HUD should be using its central reserve 

fund and taking whatever other steps are required to ensure that 

these families receive housing assistance. 

Your proposal is to block grant section 8 funds to the local PHAs, 

eliminate the guarantee that at least the same number of units will 

continue to be served, and end the targeting requirements that 

helped to ensure that section 8 vouchers are directed to those lowincome residents with the greatest needs. Again, it was mentioned 

on April 22 of this year. HUD announced that it will no longer reimburse housing agencies for their actual costs, but instead will 

renew quarterly voucher funding based on an agency’s per cost in 

August, 2003, adjusted only by a regional housing inflation factor. 

It is completely improper and unacceptable for HUD not to renew 

vouchers at payments high enough to keep pace with rent increases. It is simply unconscionable for HUD to adopt policies that 

will result in evictions, the non-renewal of vouchers, or require 

greater contributions from low-income section 8 tenants who really 

9

cannot afford it. HUD’s contract renewal policies must cover the 

true increases in housing costs in Los Angeles and other communities. HUD must replenish PHA reserves as the department has 

done in the past, as the department has not only done in the past, 

but to cover unanticipated cost increases. HUD should rescind the 

April 22 notice and return to policies that will protect those that 

Congress intended to help through the section 8 program. 

Finally, let me say a word about homeownership and GSEs. Now, 

I know some people are going to take great exception to this. 

The CHAIRMAN. Could the gentlelady conclude please? 

Ms. WATERS. One additional minute. 

The CHAIRMAN. Without objection. 

Ms. WATERS. In addition to this very difficult budget that you 

have to deal with, there is a fight that is going on that has been 

going on here with the GSEs. You all know and you understand 

very well what the confrontation is with FM Watch and the GSEs. 

It is about market share. There are any number of ways that have 

been concocted by the Administration to try and weaken the GSEs. 

This business of increasing the goals for low-income housing 

looked like it was a good thing when I first looked at it. But now 

that I have examined it, and I was involved in 1994 in increasing 

those goals, and I believe in increasing the goals and getting as 

much as we can, but when you take away the points that the GSEs 

receive for reaching those goals, it makes me wonder whether or 

not this is just another FM fight, or whether or not you are really 

serious about this, Mr. Secretary. 

The purchase of these mortgages from Washington Mutual and 

other places expands housing ownership opportunities. If you are 

going to take away the points and redefine how they can reach the 

goals, I am not sure that you are really serious about expanding 

the goals and having them reach them. I want you to think about 

that, and I certainly do not want you to be used as a point person 

in this fight against the GSEs. Let the markets work. Either these 

other financial institutions can step up to the plate and do what 

they need to do, but coming to government in so many ways to do 

this is totally unacceptable. 

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

The CHAIRMAN. The gentlelady yields back. 

The Chair recognizes the gentleman from Texas for the purpose 

of introducing our witness. 

Mr. HENSARLING. Thank you, Mr. Chairman. 

It is a great privilege and honor that I welcome my friend, my 

fellow Texan and fellow Dallasite, Secretary Jackson, before this 

committee. I want to congratulate him on his recent confirmation. 

I want to share with the committee my belief and the belief of 

many others that no one has brought more housing experience to 

this position as has Secretary Jackson. Specifically, he brings over 

25 years of housing experience in both the private and public sectors to this office. From 1989 to 1996, Secretary Jackson was the 

president and CEO of the housing authority of the city of Dallas, 

which constantly ranked as one of the best-managed large-city 

housing agencies in the country during his tenure. He has served 

with distinction on a number of national and State commissions, 

including the National Commission on America’s Urban Families 

10

and the National Commission on Severely Distressed Public Housing. 

On a more personal background note, Secretary Jackson I know 

grew up in a family of very modest means. He was the youngest 

of 12 children, but through hard work, through principle, through 

opportunity he has risen. He has managed not only the Dallas 

housing agency, but also was the president of the American Electric Power Company, a $13 billion utility company in Texas. All of 

Dallas, all of Texas is proud of you, sir. We welcome you to this 

committee and we look forward to hearing your testimony and look 

forward to your principled leadership at HUD. 

Thank you, Mr. Chairman. 

The CHAIRMAN. I thank the gentleman. 

So we will turn now to Secretary Jackson. Mr. Secretary, welcome to the committee and you may proceed. 

STATEMENT OF HON. ALPHONSO JACKSON, SECRETARY OF 

HOUSING AND URBAN DEVELOPMENT 

Secretary JACKSON. First, thank you, Congressman Hensarling. 

Chairman Oxley, Ranking Member Frank, distinguished members of this committee, thank you very much for inviting me here 

this morning. I am honored to discuss with you the fiscal year 2005 

budget proposed by President Bush for the Department of Housing 

and Urban Development. 

Mr. Chairman, in order to reserve time for the possible questions 

that I will be asked, I would like to focus my opening statement 

on some key priorities that I think are very important to discuss. 

I would like to ask you to allow me to submit the full statement 

for the record. 

The CHAIRMAN. Without objection. 

Secretary JACKSON. Thank you. 

Before I start the testimony, I would like to say this morning 

that I am concerned with some of the issues that were raised. So 

in that effort, I think it is important for me to first state that in 

an effort to be more effectively implementing the provisions of the 

2004 omnibus bill act, I have directed Mr. Michael Liu, the Assistant Secretary for Public and Indian Housing, to apply the full 2004 

inflationary factor, what HUD refers to as the annual adjustment 

factor, to each housing authority agency’s funding level of 2004. 

This adjustment to the funding formula will be retroactive to January 1, 2004 and will provide housing agencies more of their funding 

up front, rather than late in 2004. Again, this is good news for 

those agencies that have fiscal years ending in June and even in 

September. All agencies were notified of this funding calculation 

change on May 18 of this year. 

The second piece of good news I want to announce is that HUD 

is going to replenish the program reserve for approximately 500 

housing agencies, depleting their reserves in 2003 and qualifying 

for restoring of funding. HUD is using approximately $150 million 

in carryover central fund money from 2000 for this purpose. I want 

to be clear, HUD is not restoring 2004 reserves, but only 2003 reserves for legitimate costs incurred in 2003. HUD will notify the 

agencies eligible for the 2003 reserves fund to date. 

11

These two new actions by HUD, as well as additional clarification of information already sent to the agencies this week regarding their funding, will significantly improve the financial situations 

for most, if not all, of the agencies. It will enable them to manage 

their programs within the funding amount provided by Congress 

for 2004 and provide the needed assistance to their families that 

they serve. The program funding within the $31 million HUD budget will 

create new opportunities for those seeking affordable housing and 

the American dream of homeownership, while generating stability 

and prosperity in many communities in this country. The key priorities it addresses are central to the President’s plan to help make 

America a more secure, more prosperous and more hopeful country. 

Housing, of course, is vital to our national prosperity and remains 

the linchpin of the economy today. 

The housing market generated robust activities through 2001’s 

recession and today housing continues to fuel the ongoing economic 

recovery of this country. Homeownership last year reached an alltime high of 68.6 percent, and fourth quarter 2003 statistics reveal 

that for the first time a majority of minorities own their homes in 

this country, 50.3 percent. HUD’s fiscal year 2005 budget will empower our department to build on these successes as we seek to increase homeownership, promote decent affordable housing free of 

discrimination, encourage participation of faith-based and community organization, and HUD’s grant program and embrace the highest standard of ethics, management and accountability. 

Let me first discuss homeownership. In June 2002, President 

Bush announced an aggressive plan to increase the number of minority homeowners by 5.5 million by the end of this decade. Today, 

more than 1.5 new minority homeowners have been created in the 

United States since we initiated this proposal in 2002. HUD is proposing several new and expanded initiatives to continue increasing 

overall homeownership, while targeting assistance to help minority 

families experience the economic and social benefit of owning a 

home. 

As a first step, HUD proposed to fund the American Dream 

Downpayment initiative at $200 million in the coming fiscal year. 

The Congress showed great leadership in enacting President Bush’s 

American Dream Downpayment proposal last year. By fully funding the fiscal year 2005 initiative, we will help 40,000 families 

cross what has been represented as the single biggest hurdle in 

homeownership, that is high downpayment and closing costs. 

The Administration is proposing legislation that would create a 

new mortgage product targeted at first-time homebuyers. That is 

the zero downpayment mortgage, which would allow consumers to 

qualify for an FHA loan without having to come up with cash for 

downpayment and settling costs. The zero down proposal has generated a great deal of interest among the industry and the consumers. We estimate that it will help 150,000 families a year purchase their first home. 

It would be structured to assist the creditworthy, cash-poor working individuals who have been excluded from purchasing their first 

homes. Most of these families can afford monthly payments, but because of the circumstances have simply not had enough to save for 

12

the downpayment. HUD has designed this program to minimize default and to protect the mutual mortgage insurance fund. FHA has 

made a conservative financial assumption regarding this program. 

In order to cover the cost of the program, families who qualify 

for the zero downpayment plan would be charged a modestly higher insurance premium on their home loan. For example, for a 

$100,000 mortgage, a zero downpayment borrower would pay approximately $50 a month more than a regular FHA borrower. 

There would be no net cost to the FHA mutual mortgage insurance 

fund. 

The President’s budget projects that an additional $19 billion in mortgage commitment will generate revenues of about $180 million 

the first year of this program. Borrowers would be held to the same 

underwriting guidelines as those for FHA standard 3 percent downpayment mortgages. They must meet the same payment-to-income, 

debt-to-income ratio and the same credit standards. 

To further minimize the risk, the proposal for the zero downpayment program includes a housing counseling requirement. Specifically, participants would be required to satisfactorily receive oneon-one housing counseling from HUD-approved housing counseling 

agencies before they enter into a sales contract. I want to thank 

Representative Tiberi for introducing the zero downpayment legislation in the House, and I want to congratulate Chairman Oxley 

for holding a successful bipartisan full committee markup yesterday. 

To promote the production of affordable single-family homes in 

the area where such housing is scarce, the Administration is proposing a tax credit of up to 50 percent of the cost of constructing 

a new home or rehabilitating an existing home. Our request of $65 

million for the Self-Help Homeownership Opportunity Program, as 

we call SHOP, would more than double the funds SHOP received 

in 2004, to help produce 5,200 new homes for very low-income families. 

Along with boosting homeownership, HUD proposed a budget 

that will continue to promote the production and accessibility of affordable housing for families and individuals to rent in this country. Three major rental programs collectively help approximately 

4.5 million households nationwide. Our major program is the section 8 program, which provides both tenant-based funding through 

the housing choice voucher program, and project-based rental assistance through HUD’s public housing program. The Administration is proposing to reform the housing choice voucher program to 

make it more effective, efficient and able to meet the needs of lowincome families that depend on this program. 

Today, the section 8 program lacks any incentive for families to 

transition out of the program and begin to live independent lives. 

In addition, the program is unsustainable at the current growth 

level. Pre-voucher costs have increased at an alarming rate of 23 

percent in just the last two years. The Administration’s new flexible voucher program will serve at least as many Americans at the 

1.9 million families currently serving through the housing choice 

voucher program. 

More importantly, our proposed reform will help families move 

out of assisted housing and into self-sufficiency. The HOME proVerDate 0ct 09 2002 11:55 Nov 05, 2004 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 G:\DOCS\96527.TXT FIN1 PsN: MICAH
13

gram is a key initiative for addressing this shortage of affordable 

housing in America. In fiscal year 2005, we are proposing a total 

of $2.1 billion, which includes $200 million for the American Dream 

Downpayment initiative to help expand the nation’s supply of affordable housing. Participating jurisdictions have substantial discretion to determine how to spend and use the funds. 

HUD is committed to providing American cities as a viable hub 

of commerce in making the communities better places to work and 

to raise our families in. The fiscal year 2005 budget provides States 

and localities with tools they can use to improve their economic 

health and promote community development. Perhaps the greatest 

strength of these economic development tools, which include the 

highly successful Community Development Block Grant Program, 

is the way in which they encourage local decision making to address developmental priorities. 

Through our budget, HUD will strengthen its efforts to protect 

the nation’s most vulnerable, those individuals and families who 

truly need government assistance. The HUD budget for 2005 will 

benefit adults, children from low-income families, the elderly, those 

with physical and mentally handicapped disability, victims of predatory lending, families living in housing contaminated by leadbased paint hazards, and persons living with HIV-AIDS. 

In the coming fiscal year, the Administration will continue to 

work to meet the challenge of homelessness that confronts many 

Americans. The President has made an unprecedented Administration-wide commitment to eliminate chronic homelessness. This 

commitment is reflected in the fiscal year 2005 budget request 

through proposals such as the Samaritan initiative, which will provide additional options and services to homeless people living in 

the streets. 

Finally, Mr. Chairman, our budget creates new opportunities to 

improve HUD’s performance in its critical-need housing and community development programs. I know that this subject is particularly important to the committee. I can assure you that we share 

your concerns. We continue to make progress. This will remain the 

top priority in the years to come. I want to thank each of you for 

supporting our efforts and we welcome your guidance as we continue to move forward. 

Thank you, Mr. Chairman. 

[The prepared statement of Hon. Alphonso Jackson can be found 

on page 75 in the appendix.] 

The CHAIRMAN. Thank you, Mr. Secretary. 

Let me begin by asking about RESPA reform. We all share the 

goal of simplifying the home buying process. I constantly hearken 

back to when I was practicing law and involved in real estate closings and the madness that occurred in that process, and my clients 

not understanding what was going on. I know that the RESPA reform effort was withdrawn. What plans, if any, do you have of revisiting that issue? And could you give us a timeline if that is the 

case? 

Secretary JACKSON. Surely. Thank you very much for the question. 

I made a decision after critically reviewing the proposal and the 

process that had taken place. I asked at that point in time that 

14

OMB return the RESPA proposal back to us. It was my feeling, 

even though I cannot discuss the specifics with you, it was my feeling and my belief that the proposal had not had the necessary 

input, and a consensus that would be appropriate to move it forward. 

We have the staff at this point still reviewing it internally. We 

have a meeting weekly discussing the RESPA proposal. We expect 

that after having conversation with the industry, with Congress, as 

I assured you, Mr. Chairman and Chairman Allard, we will then 

look at the possibility of coming back out with a new proposed rule 

after having input from you and the industry. I have not set a 

timetable because still we have not answered a number of questions that have been asked of us by OMB. 

We hope to have those questions answered probably in the next 

30 to 45 days, and at that point in time we will get in to discuss 

with you and others your concerns that you have and take those 

concerns into consideration. Then I will be in a position to give you 

a timetable of when we expect to reissue the rule. 

The CHAIRMAN. I thank you, Mr. Secretary. I think you will find 

some willing participants on this side in regard to a solid RESPA 

reform effort, with input from the Congress. I appreciate your 

openness and ability to work with us. We look forward to that effort. 

Let me ask you about the GSE programs. We have recently received documents relating to HUD’s examination of GSE programs. 

The documents comment on proposed guidelines for some programs 

and seek additional information on others. Is this an effort by HUD 

to exercise its program approval authority over the GSEs? 

Secretary JACKSON. Yes, it is. I think it is very unique because 

we have been criticized over the years for not exercising that program authority. I think the GSEs serve a real functional purpose, 

but Mr. Chairman, the GSEs have an implicit government guarantee. Their goals are to serve low-and moderate-income people in 

this country. What I am about to say to you today are not figures 

that we have invented. They are figures that they have conveyed 

to us. They are not leading the market. They are following the 

market. Our position is that they should be the leaders of the market in addressing the needs of low-and moderate-income people. 

Today, I want to make it very clear because people have said 

that this is a new effort. No, since Secretary Martinez and I have 

been there, and I have been the Deputy Secretary and the Chief 

Operating Officer, we have spoken on numerous occasions with the 

heads of the GSEs and told them our concerns about not leading 

the market, and what we expected out of them. We still expect 

that. The difference is that as the Secretary, I am going to make 

every effort to enforce it. We do not care, nor do we have any desire 

to regulate this top-end of their market. But what we are saying 

in essence is that we want you to serve low-and moderate-income 

people in this country, which your charter mandates that you do. 

That is the only thing we asked them. 

The CHAIRMAN. Some would say that the program approval process may indeed stifle innovative products going to market. How 

would you answer that? 

15

Secretary JACKSON. If their investments in derivatives have not 

stifled them, I do not see how we are going to stifle them asking 

them to serve low-and moderate-income people. 

The CHAIRMAN. Do you think that HUD needs new tools to review GSE programs? If so, what would they be? 

Secretary JACKSON. I think that the Administration has put forward a proposal for regulating the GSEs. We are in full support of 

that proposal. I think our responsibility is to set the housing affordable goals to make sure that the GSE meets those. 

The CHAIRMAN. Are you referring to a legislative proposal or an 

administrative proposal? 

Secretary JACKSON. Administrative, which was put forth this 

year. We are very supportive of a strong regulator still today. But 

our goal today is to make sure that the GSEs simply meet their 

housing goals and their mandate to serve low-and moderate-income 

persons. That is what I am most concerned about today, and that 

is why we have been making every effort since I have been here 

to work with the GSEs. It is very different today because I guess 

I come with a very tremendous knowledge and background with 

the GSEs, having been in housing for so long. I do believe that they 

have the capability to meet those goals without any reservations at 

all. 

The CHAIRMAN. Thank you, Mr. Secretary. 

The gentleman from Massachusetts. 

Mr. FRANK. Mr. Secretary, in my 24th year, I do not startle easily, but you have accomplished that. I think I heard you say that 

there was an implicit government guarantee of the GSEs. One, I 

must tell you as a high government official, when you say it, it is 

not implicit anymore. You just made it explicit. But secondly, I do 

not think there is, and I understood it was the policy of the Administration that there was not. Are you now promulgating a new Administration policy, having said that there is an implicit government guarantee? 

Secretary JACKSON. No, I am not. I am just repeating what the 

GSE said to me when I was speaking to them, and I have met 

them on a number of occasions. 

Mr. FRANK. They think there is an implicit government guarantee? And you agree with that? You just stated it. 

Secretary JACKSON. No. 

Mr. FRANK. Mr. Secretary, you did not say you were quoting 

them. 

Secretary JACKSON. Congressman, yes, I repeated exactly what 

they said. I am not going to debate with you, Congressman. 

Mr. FRANK. Well, do you think there is an implicit government 

guarantee? 

Secretary JACKSON. That is not for me to decide. I just recounted 

what they said. 

Mr. FRANK. Excuse me, Mr. Secretary, it is for you to decide. You 

are a high government official here. I think it is very important for 

us to make clear that there is not. I think you are adding to confusion here. You will not tell me that you do not think there is an 

implicit government guarantee? 

Secretary JACKSON. I think my responsibility, Congressman, is 

what I said to the Chairman. I am here to make sure that the 

16

GSEs effectuate the affordable housing goals and that is what I am 

here to speak about. 

Mr. FRANK. Let me say, Mr. Secretary, I am glad about that. In 

fact, I was very critical. HUD delayed a year in promulgating new 

goals. HUD had the right to promulgate new goals that could have 

taken effect this year, and delayed. So I am glad they are doing it. 

We are pushing for even more. 

I want to get back to section 8. On the reserves, very important, 

you said that you are going to provide $150 million, is that accurate, to replenish reserves, and the authorities will know as of 

today whether they are getting new reserves? 

Secretary JACKSON. Yes. 

Mr. FRANK. And where does the $150 million come from? 

Secretary JACKSON. The $150 million, if I remember right, it 

came from carryover from 2003. 

Mr. FRANK. Did you just find it? When did you find out that we 

had this carryover from 2003? Is it a carryover in section 8 funding? 

Secretary JACKSON. Yes, it is. 

Mr. FRANK. And how long have you known that you had the section 8 funds? 

Secretary JACKSON. We have known it from the beginning, but 

that is always——

Mr. FRANK. Why did you wait until now? 

Secretary JACKSON. Every housing authority has a right at the 

beginning of the year to make a request for replenishing, when 

they spend 50 percent or more, and we answer that. A number of 

authorities did not do it this year, but still we felt it was imperative——

Mr. FRANK. I am troubled that you waited so long. I am glad that 

we are finally getting it. 

Let me ask you now on the inflation-adjusted. You say what you 

basically decided to do, you are sticking with the 2004 fiscal year 

formula, but basically the housing authorities are going to get, am 

I correct, the same amount of money, but they are going to get 

more of it early than they would otherwise get? 

Secretary JACKSON. Yes. 

Mr. FRANK. What does that mean later? Are they going to run 

out of money? Does that mean that they are going to have trouble 

sustaining this, if you give them more money up front? Let me put 

it to you this way. Do you believe that all of the housing authorities that you deal with will be able with this funding formula and 

the new reserves to maintain the current level of section 8 certificate holders? That none of them will have to cut back on the number of vouchers they offer? 

Secretary JACKSON. Surely. I do believe that. You asked a very 

important question. One of the reasons that we are doing it up 

front at this point, there are a number of housing authorities, as 

with my housing authority when I was in Dallas, that operate on 

a June-to-June schedule. This will help to empower those——

Mr. FRANK. I am glad you mentioned that. 

Secretary JACKSON. May I finish please? 

Mr. FRANK. Yes. 

17

Secretary JACKSON.—who operate on a September-to-September 

schedule. 

Mr. FRANK. Okay. But I just want to make clear, you do not believe now that any housing authority will have to either freeze 

vouchers, regain them by attrition or cut rents, or do any of that? 

Secretary JACKSON. No, because I just received a letter from your 

housing authority in Boston who thanked us for making sure that 

would not occur. 

Mr. FRANK. The city of Boston? 

Secretary JACKSON. Yes. 

Mr. FRANK. It is not mine. Mr. Capuano represents Boston. You 

can talk to him. 

[Laughter.] 

The city of Fall River, on the other hand, is very concerned, and 

I just heard from them. They have this problem where by your formula, they are being penalized because people who used to take 

vouchers in Fall River have now moved to more expensive areas 

and the formula does not pay for it. So I have to ask you this question. The language that is in the bill that made some changes, 

HUD supports that language? Does HUD think that is good language? 

Secretary JACKSON. I am not sure what you are asking me. 

Mr. FRANK. The language that was put in the bill, the language 

that has been somewhat controversial. Does HUD think that is 

good language? Do you want to keep that in the bill next year? 

Secretary JACKSON. My position is this, I understand clearly article I, section seven. It simply says that Congress is the appropriator and the authorizer. 

Mr. FRANK. And HUD has no position on this, Mr. Secretary? 

Secretary JACKSON. May I finish? 

Mr. FRANK. No, not with that silliness. 

Secretary JACKSON. You asked me a question. Do you want we 

to answer? 

Mr. FRANK. Yes, the question is, do you have a position on the 

language? 

Secretary JACKSON. I carry out the mandate of Congress. That is 

what HUD’s responsibility is. 

Mr. FRANK. No, Mr. Secretary, you are not answering the question. And that is just disingenuous. I am sorry. The fact is that we 

all know what the Constitution is. You are trying to run out the 

clock by quoting the Constitution and we all know it. I asked you, 

does HUD have an opinion on this? The notion that the Constitution somehow prevents you from expressing your opinion is a 

dodge. What is HUD’s opinion on the language? Do you want to 

continue it next year? The Constitution, I promise you, it is not unconstitutional for you to give your opinion. I guarantee it. I will get 

Scalia in here to reassure you. 

[Laughter.] 

What is your opinion as the chief housing officer on the desirability of including that language and continuing it? 

Secretary JACKSON. My opinion as the Secretary of Housing and 

Urban Development is I am going to carry out the wishes of Congress. 

Mr. FRANK. And you will not tell us what your wishes are? 

18

Secretary JACKSON. I am going to carry out the wishes of Congress. 

Mr. FRANK. And you will not express an opinion on what the policy ought to be? 

Secretary JACKSON. Well, my position is——

Mr. FRANK. I am asking you what your position is. 

Secretary JACKSON. I guess, Congressman, I do not think my position is really relevant at this point. 

Mr. FRANK. All right. I am sorry, Mr. Secretary. I have another 

minute. You do not believe that the position of the Secretary of 

HUD on matters of housing policy is relevant? What do you do 

down there? 

Secretary JACKSON. No, I do not think it is relevant to contradict 

the Congress. The Congress has said what it wanted done. 

Mr. FRANK. Okay. Then let me ask you this, so you are telling 

me now that HUD will express no position on this issue when we 

take it up? 

Secretary JACKSON. I am going to carry out the mandate of Congress. 

Mr. FRANK. Do you really think just repeating that mantra when 

it is not relevant to the question is helpful, Mr. Secretary? My 

question is, do you have an opinion? I know you will carry out the 

mandate. The question is, do you think it is an appropriate mandate? Do you think we should change it or keep it going? 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. FRANK. So has his patience. 

The CHAIRMAN. The gentleman from Ohio, Mr. Ney? 

Mr. NEY. Thank you. 

Let me move on to vouchers for a second. On page six of your 

testimony, you state that the current system fails to support families making the transition from public assistance to self-reliance 

and work, and doing so produces a number of families that could 

have been helped for a given amount of money. I am just wondering if you could elaborate a little bit of your view of the mission 

of section 8, but also, what do we envision people transitioning to? 

That is the real thrust of my question. 

Secretary JACKSON. Congressman, if we go back to the history of 

the section 8 program, we know the history of the section 8 program has come in two phases. First, it was basically section 23, 

which was supposed to help construct, build, and we would support 

those private developers through a section 8 project-based program. 

In the 1980s, we decided that that program was absolutely too expensive so we said why don’t we go to a voucher program. We did 

go to a voucher program, which in essence said, no longer are we 

going to be relegated to charging 30 percent of the adjusted gross 

income. If a family can afford to pay 40 percent or 50 percent, let’s 

do it. 

One of the mandates during that process, when we started the 

voucher program, was that it was to be a transition program between public housing and self-sufficiency. It was never envisioned 

as the QHWRA proposal in 1998 did, that said it has to be 30 percent or less of median in order for you to be qualified. 

So initially, the program was set up as a transitional program. 

From my perspective, I think that it should be. I do not think that 

19

the section 8 program should be a secondary or substitute for the 

traditional public housing program, which in my mind has perpetuated a system where people have lived in it two or three generations. Does that mean that people are going to be able to immediately move out of public housing? No, I am not foolish enough to 

believe that. Does that mean that we should not make every effort 

to help families who can afford to move out of public housing or off 

of section 8 to do it, yes, I believe we should. 

See, I come with a very different perspective. I do not come in 

dealing with public housing residents or low-income people from a 

position of paternalistic and patronizing. I believe that low-and 

moderate-income people are human beings with the same sense of 

worth that I have and I should work with them. I do not think, 

having run three major housing authorities, I have never seen anybody who consistently and constantly wants to stay in public housing or stay on the certificate. 

So my goal when running those authorities was to help them 

move. Did we move all of them? No, but in the end I think we have 

made enough progress. I think we should make that our objective, 

the same as we have done with the American Dream Downpayment Program to try to make homeownership a major initiative. I 

think we should do the same thing when we are talking about moving people from public housing through section 8. If we can avoid 

section 8, let’s try to avoid it, but to self-sufficiency. 

Mr. NEY. Thank you. The other interesting thing for our Subcommittee, we had hearings and we were in different spots, Los 

Angeles and Columbus, Ohio and different areas, hearings here, on 

the proposal that Secretary Martinez had, which was the block 

granting. We did not get a lot of reactions from Governors, obviously, on that issue. Now, we have this proposal. I do not know 

what happens in quick session here or with the authorizing and appropriations. 

Who knows what is going to happen with this whole proposal. 

But I do know either we add money, or if we do not add enough 

money, then that section 8 pie still grows, and then it starts to 

come down to taking money away, if there is limited amount of 

money, from some of the homelessness programs and AIDS. Then 

you have entities fighting each other. 

So I know it is a balancing act in the amount of time that is left 

this year, and the appropriations process, and I do not know what 

all happens here again, or what makes it through the system or 

not in the Congress this upcoming year. But I do think at some 

point in time, we are going to have to get people together for more 

than just a hearing, but people together on all sides of this issue 

for, I do not want to say a debate, but a reasonable civil dialogue 

back and forth until we can try to see what is going to be happening to this, versus always trying to do it at the appropriations 

process or the authorizing process, every year for a 3-or 4-month 

period. Because it is either add money, and if we are not going to 

add ‘‘sufficient’’ money for what people say the demand is out there 

in the housing authorities, then that pie will continue to shrink the 

programs, and get programs pitted against programs. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman’s time has expired. 

20

The gentlelady from California, Ms. Waters? 

Ms. WATERS. Thank you very much. 

Mr. Secretary, my staff took down your comments on the changes 

that you are proposing for section 8 and how you propose to deal 

with the crisis that we have now. We are going to check with our 

housing authority to see what this is going to do for those outstanding vouchers that we have. I am pleased that you are moving 

forward to try and deal with this problem. 

Let me ask you something about your overall budget. When did 

the budget that you submitted to OMB change to this budget that 

has now been proposed? 

Secretary JACKSON. I am not sure what you are asking. 

Ms. WATERS. HUD submitted a budget. 

Secretary JACKSON. This is our budget. 

Ms. WATERS. No, I am talking about the original budget to OMB. 

When did it change? 

Secretary JACKSON. No, this is our budget. 

Ms. WATERS. This is the one you submitted to OMB? 

Secretary JACKSON. This is the budget that we worked with OMB 

to formulate. In answering your question, I do not think anyone is 

more concerned at serving the needs of low-and moderate-income 

people in this country than I am. You might be, but I guess I have 

run three housing authorities, so I am real concerned. 

Ms. WATERS. No, you came from a family of 12. I came from a 

family of 13. 

[Laughter.] 

One of those housing projects, my family lived in in St. Louis. 

Secretary JACKSON. I never lived in one. Okay. 

Ms. WATERS. So you do not care more about this than I do. 

Okay? 

Secretary JACKSON. All right. Well, we care almost equally, then. 

[Laughter.] 

So I am very concerned, and I will defer to you that you care 

more. 

Ms. WATERS. Okay. Well, let me just say this. I was trying to 

find out, because I know that if you put together a budget, you did 

better than this, and somebody messed with it. Somebody changed 

it, but I am not going to keep on that. 

You said you know a lot about GSEs. I am really concerned 

about this, because again in 1994, I worked to increase the goals 

and they have been increased over about three times since 1994. 

I am looking at what is happening now, and I am concerned that 

you are taking away points and credits that should be given to the 

GSEs, and that you are doing away with bonuses for some of the 

most challenging housing projects. You are raising the goals. I am 

trying to find out why you are doing this. Are you familiar, for example, with the WOW program that the Congressional Black Caucus is involved in? 

Secretary JACKSON. Yes. 

Ms. WATERS. Do they get points for that? Do the GSEs get points 

for that? 

Secretary JACKSON. I cannot answer that. I have been with a 

number of your colleagues in their cities promoting the WOW program. 

21

Ms. WATERS. You know, it is heavily supported by the GSEs. Also, do they get points for the $1.7 billion in low-income housing 

tax credits? 

Secretary JACKSON. Yes, I think they do. 

Ms. WATERS. That is a question that we really do have to resolve, 

because as I understand it, they will not. 

What about the mortgage revenue bonds? I understand there are about $6.2 billion in 2003 in mortgage revenue bonds. Do they get 

credit for that? 

Secretary JACKSON. I will have to get back to you on that. 

Ms. WATERS. Okay. What do you know about the anti-predatory 

lending guidelines that come out of Fannie Mae, for example? 

Secretary JACKSON. We work well with them on that. 

Ms. WATERS. Do you know that they do much better than some 

of the institutions in FM Watch. We are concerned about some of 

those institutions in FM Watch, who have some very, very discouraging predatory lending practices. 

What about manufactured houses? We have beat up on them 

about manufactured housing. They are transforming manufactured 

housing. Do they get credit for that? 

Secretary JACKSON. They have not really transformed manufactured housing. That is not true. 

Ms. WATERS. Oh, yes, they are working with us. 

Secretary JACKSON. They might be working with you. 

Ms. WATERS. This effort was led by Mr. Benny Thompson of the 

Congressional Black Caucus, working with Mr. Ney and others. 

Secretary JACKSON. I think they are working with you, but you 

said they had transformed. They have not. We have not transformed manufactured housing. 

Ms. WATERS. Well, if they had, would they get credit for it? 

Secretary JACKSON. Yes. And the same, as I said before, if it 

qualifies as low-and moderate-income, we are not going to hesitate 

to give them credit, Congresswoman. 

Let me say this, because I think it is very, very important. No 

one, especially at HUD, is trying to penalize the GSEs. I can assure 

you of that. You asked about, is this new. No. I only use their figures. Now, they report the figures to us. We are not at liberty to 

discuss those figures publicly. If the chairmen of each one of those 

GSEs would like for us to submit those figures to you, then you 

would see what I am saying today, they are not leading the market. 

They are lagging behind the market. If you pay close attention, 

just the other day the Chairman of one of the GSEs specifically 

said that his organization was not doing or coming close to doing 

what they should be doing for low-and moderate-income people in 

this country and that he was restructuring it to make sure that he 

addresses the needs that were raised by HUD on the affordable 

housing efforts. Those are their words. 

Ms. WATERS. I do not know who said that, and I cannot debate 

with you about figures and information that I am not privy to or 

you say that I cannot have. Simply let me just say this, I join with 

anybody who is interested in expanding low-income housing opportunities. Let me must say that the no downpayment, low downpayment, all of that, that is good stuff, but it is a drop in the bucket. 

22

Most of the folks who are poor are going to be renting and they 

need some assistance and this is not enough. We do not want people to believe that all of a sudden because we have these very minimal programs that we are going to transfer everybody into homeownership. We have to do everything that we can. We cannot make 

it harder. 

I do not know why when you look at these points or these bonuses, or however you calculate this, that if one of these GSEs buys 

a lot of paper, lots of paper from Washington Mutual or anybody 

else, why they will not count. I mean, to the degree that they can 

get rid of that paper, that expands homeownership opportunities. 

The CHAIRMAN. The gentlelady’s time has expired. 

Secretary JACKSON. Congresswoman, that does not expand homeownership, buying mortgages from Washington Mutual. 

The CHAIRMAN. The gentleman from Wisconsin, Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. 

Let me join with others in welcoming you, Mr. Secretary, to the 

committee. We appreciate your time. 

Secretary JACKSON. Thank you. 

Mr. GREEN. I do not get this opportunity very often, Mr. Secretary, so if you will indulge me, I want to ask you a couple of very 

specific questions that hopefully you can answer or perhaps have 

someone get back to me with. 

Mr. Secretary, your office I think is aware that in Janesville, 

Wisconsin, which is in Congressman Ryan’s congressional district, 

the city council recently passed a resolution to provide the Salvation Army with federal funds in order to purchase an apartment 

building to use for transitional housing for the homeless. It has 

since been reported, unfortunately, that an amendment was added 

by the city council which forbids any and all religious activity conducted by the Salvation Army personnel related to this project. As 

far as I know, there is nothing in federal regulations that would 

preclude a faith-based organization from using federal dollars for 

this type of project as long as any voluntary religious activities are 

not paid for with the federal funds. 

I do know that my colleague, Congressman Ryan, has been in 

touch with folks in your office, and we are aware, both of us, that 

you are crafting a response for the city. My question is, I am wondering what the response might be. Do you know if your office has 

been able to provide that yet? 

Secretary JACKSON. We have not sent the response back, Congressman, but I can answer it this way. Your interpretation of the 

regulation is absolutely clear. We will make that clear to the city 

that as long as the prohibition is not to be able to push any specific 

or one religion, but as long as it is providing a service to persons 

within that respective community, yes, it qualifies under our proposals and grants. 

Mr. GREEN. Great. I appreciate that. Obviously, the sooner we 

can get a formal written opinion, the better off. I agree with your 

view, and obviously neither Congressman Ryan or myself want to 

see this great project sidelined. 

Secondly, as your office also knows and you have stated on a 

number of occasions, the FHA Title I insurance program is in need 

of reform. The program is very important to the manufactured 

23

housing industry. I am concerned with some developments that 

have recently been brought to my attention. I am aware that HUD 

has contracted with Frontline Systems to prepare a report on ways 

to reform the FHA title I program. I also understand that Frontline 

submitted its report to HUD almost a year ago. As you may know, 

the manufactured housing industry has made a number of requests 

to try to see this report. Apparently, so far all those requests have 

been denied. 

I am anxious that this important information is not being shared 

with the very folks who want to find ways to reform the system 

and to stop the loss of lenders, which obviously is a concern for all 

of us. This report has apparently now been sitting in an in-box for 

almost a year, and there are lending shortages that are going on 

in the manufactured home market that I think are hurting the lowincome borrowers that obviously all of us want to serve. Can you 

give us some idea when this report might be made public? 

Secretary JACKSON. Congressman and Mr. Chairman, if it is 

okay, may I have Dr. Weicher, who is the Assistant Secretary of 

Housing, answer this for me? 

Mr. WEICHER. Thank you, Mr. Secretary. I am John Weicher, Assistant Secretary for Housing and FHA Commissioner and responsible for the Title I program. We have been reviewing the report. 

It made a number of recommendations on both the manufactured 

housing program and the home improvement program. They are 

both part of Title I. We have made a commitment to provide that, 

to make that report public within the next 2 to 3 weeks. We have 

had conversations with folks on the Senate side about this, and it 

will be out shortly. 

Mr. GREEN. Great. I appreciate that. That is very helpful indeed. 

Next, I would like to talk briefly about the section 811 tenantbased funds. Mr. Secretary, as you know, several months ago a 

group of us on this committee wrote to you regarding HUD’s implementation of the section 811 mainstream tenant-based rental assistance program. In the letter, we raised a number of issues related to the absence of any programmatic guidelines to housing 

agencies and nonprofit grantees that receive these funds. 

In response to the letter, HUD has indicated that it has no plans 

to issue any guidance to these agencies. I wanted to hear from you 

your reasoning as to that, and I was hoping that you would reconsider. I think these guidelines are extremely important to grantees 

and others who are involved in the section 811 mainstream tenantbased program. 

Secretary JACKSON. I wanted to make sure that I was correct. I 

am sorry, Congressman. Since we provide those funds to public 

housing agencies, and they utilize them under their guidelines that 

they have set up. That is basically the way that we have done basically with the section 8 program. 

Mr. GREEN. Okay. Mr. Chairman, if I may have a chance to submit further questions for the record. 

The CHAIRMAN. Without objection. 

Mr. GREEN. Thank you, Mr. Secretary. 

Secretary JACKSON. Thank you so much, Congressman. 

The CHAIRMAN. The gentleman from Vermont, Mr. Sanders. 

Mr. SANDERS. Thank you, Mr. Chairman. 

24

Secretary Jackson, thank you very much for being with us this 

morning. 

Secretary JACKSON. Thank you. 

Mr. SANDERS. I must start off by saying that I regard it as slightly disingenuous for anybody here to be suggesting in any way that 

this Administration is serious in trying to deal with what amounts 

to a major crisis in this country in terms of affordable housing, a 

crisis that every American and certainly the Bush Administration 

should be ashamed of. More than 14 million Americans are paying 

over 50 percent of their limited incomes in housing; 3.5 million people in this country will experience homelessness this year, including 1.3 million children and 500,000 veterans. And people are suggesting that we are serious about addressing the housing crisis? 

We have a ‘‘war’’ budget, but we have hundreds of billions of dollars for tax breaks for millionaires and billionaires while children 

sleep out on the street and people with a straight face tell us that 

we are addressing the housing crisis. 

The National Millennium Commission, which was chaired by a 

former Republican Member of Congress, Susan Molinari, suggested 

that we needed to build 150,000 affordable housing units every 

year. Last year, I asked Secretary Martinez, who was sitting where 

you are, how many affordable housing units HUD was going to 

build. He said 5,000. We need 150,000, and we are building 5,000. 

Briefly, Mr. Secretary, how many affordable housing units are you 

going to build this year? 

Secretary JACKSON. Let me say this to you, and I will answer 

your question. 

Mr. SANDERS. I am asking you the question. 

Secretary JACKSON. Okay. I said I would answer your question. 

Mr. SANDERS. Okay. 

Secretary JACKSON. If you will help us pass the single-family 

housing tax affordable credit, we can build a lot of houses. With 

that, I want you to understand that the greatest barrier to affordable housing in this country is not the federal government. It is 

state regulatory barriers. 

Mr. SANDERS. I have heard that speech 100 times. 

Secretary JACKSON. Whether you want to hear it or not, I am 

just telling you. 

Mr. SANDERS. I have heard it. We have all heard it. 

Thank you. My time, sir. 

Now, if you want to build affordable housing, you could support 

the legislation that I have introduced which has 212 bipartisan cosponsors; which would build 150,000 units of housing every year, 

that is the National Affordable Housing Trust Fund. 

Let me go to another area, which has, by the way, support of 

5,000 organizations throughout this country. Yesterday, Mr. Secretary, public housing authorities throughout my State of Vermont 

contacted my office to express their outrage by a HUD notice announcing the following cuts in section 8 administrative expenses 

retroactive to January 1 of this year. We are a small state, not 

California; this is Vermont; a $262,000 cut representing 14.4 percent of the section 8 administrative budget for the Vermont State 

Housing Authority; $180,000 cut for the Burlington Housing AuVerDate 0ct 09 2002 11:55 Nov 05, 2004 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 G:\DOCS\96527.TXT FIN1 PsN: MICAH
25

thority, 19 percent of their budget; 17 percent for Winooski, 13 percent for Montpelier; et cetera. 

How are agencies supposed to administer programs when they 

are experiencing draconic administrative cuts? 

Secretary JACKSON. I would say this, Congressman. We are administering the pro-rata share of the money based on what Congress has told us to do. I think that clearly your housing authority 

will benefit in Vermont like all of the others. I think I said that 

in the beginning of this hearing. 

Mr. SANDERS. You said about the voucher program. 

Secretary JACKSON. Right. 

Mr. SANDERS. I understand that. You did not say about the administrative. What I am telling you is that the housing authorities 

in Vermont have told us there are going to be cuts by between 15 

and 20 percent. 

Secretary JACKSON. Okay. 

Mr. SANDERS. This is not what Congress mandated. 

Secretary JACKSON. We are distributing the money on a pro-rata 

basis that Congress mandated. 

Mr. SANDERS. That is not my understanding. 

Secretary JACKSON. Well, that is a fact. 

Mr. SANDERS. Can you justify to this committee how people are 

supposed to do their jobs when they are getting up to a 19 percent 

cut in administrative allowances? 

Secretary JACKSON. I can tell you that is the money that we have 

been allocated to pro-rata and that is what we are doing, Congressman. 

Mr. FRANK. Would the gentleman yield? 

Mr. SANDERS. Yes, I would. 

Mr. FRANK. The gentleman is correct. What the Secretary talked 

about was the voucher funding and the reserves, but not administrative funding. So what the Secretary said earlier does not respond to the gentleman’s question. 

Mr. SANDERS. You did not answer my question, sir. Are you telling us you are concerned about affordable housing and you are cutting housing authority administrative capabilities by up to 19 percent? I assume this is national. I am sure it is not just Vermont. 

Secretary JACKSON. What I am saying to you is that we are prorata-ing the money on the basis for the administrative fees that 

have been allocated by Congress, and your housing authority will 

receive their monies, too. 

Mr. SANDERS. Can you give the members of this committee any 

assurances that you are going to look at that issue and you are 

going to try to rectify what is potentially a disastrous situation? 

Secretary JACKSON. Congressman, you have my word. I will be 

happy to look at it. We are going to make every effort. 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. SANDERS. Can I give you a call and you and I will chat about 

this? 

Secretary JACKSON. You may, sir. 

Mr. SANDERS. Okay. Thank you very much. 

The CHAIRMAN. The gentleman from Connecticut, Mr. Shays. 

Mr. SHAYS. Thank you, Mr. Chairman. I am happy to swap my 

time with my Chairman of the Capital Markets Subcommittee. 

26

Mr. BAKER. I thank the gentleman for his courtesy. 

Mr. Secretary, I think you are doing an outstanding job. I regret 

the treatment you have received to date in this committee this 

morning because of your aggressive leadership in making changes 

that really count. 

Let me speak first to the GSE issue very quickly. GSEs are 

underperforming the market and the way to get to this number is 

to go look at what loans are held in portfolio. Those people who are 

low-income with lack of resources would be those people who would 

have low amounts of downpayment. They would be 95 percent to 

100 percent of LTV ratios. When you look at the GSEs’s annual reports, which I have done, you find that less than 5 percent in 

Fannie and less than 4 percent in Freddie are typified by those 

types of loans. When you go to a commercial bank, it averages 11 

to 13 percent nationally. 

Now, I am going to write the letter you asked for somebody to 

write, to make full disclosure of how HUD views now the conformity with those low-income housing goals which you stipulated 

you do not have the authority to release without a congressional request, because I think it is important for this committee to have 

the facts, whether they want to understand them or read them or 

not. 

Now, some will say the GSEs do not have the authority to initiate or originate loans. That is in fact the case, but they have the 

black box by which they determine who is approved or required to 

move into the secondary market, and you have to hit a certain 

score. The reason why those banks have 13 percent of those lowincome loans in portfolios is because the GSEs will not buy them. 

So if they were innovative in leading the market instead of worried about double-digit rates of return for their shareholders and 

paying their executives, the top 20 which I happen to know make 

in excess of $1 million in salaries and benefits, we could help lowincome people in this country by making a meaningful departure 

and taking the subsidy, which is valued by many at multi-billions 

of dollars for multi-years, including Alan Greenspan, the President, 

the OCC, the FDIC, anybody who has a ‘‘C’’ after their name who 

is a financial regulator. They will tell you that this deal is running 

sideways. 

We are taking taxpayer guarantee, implicit-explicit, it does not 

matter. You talk about removing the line of credit, markets go 

crazy. Gary Gensler in the Clinton Administration sat where you 

sat and said we ought to repeal line of credit. In that day, the stock 

price went down. Did it affect the interest rates on homeownership? Absolutely not. Did it hit the executives in their pocket? Absolutely. Why are they squealing? Because they are worried about 

losing their profit, not about helping poor people get housing. 

I have simply just had it. This argument is about not protecting 

market share. It is about protecting the way a corporate entity operates that makes profit at taxpayer guarantee. There is nobody 

that can convince a rational person that the explicit guarantee, the 

implicit guarantee, the sideways guarantee, does not in fact result 

in that enterprise making huge profit. If they were ever to lose 

money, is there a doubt by anyone on this committee that the taxpayer would be called on to pay off that? 

27

Let me jump one quick second. You are doing some innovative 

things. You have taken a look at a project down at Carville, Louisiana which provides resources between Job Corps, the National 

Guard and helping kids 16 to 18 years of age on the streets who 

otherwise would not get educational opportunity, by giving them a 

GED course in 5 months, giving them job training; 90 percent graduate or are fully employed. 

It is a remarkable program, and I am asking, with the time I 

have left, on page 12 of your testimony which I have read thoroughly and I really appreciate. I think it is outstanding testimony. 

The department will provide $55 million in funds to support the 

resident opportunity and self-sufficiency program for residents of 

public and Indian housing. The main purpose of these funds is to 

provide a link between residents and services that can help them 

achieve self-sufficiency. 

We care about people. We do not want to house them in public 

housing and leave them there without the tools necessary to succeed in life. That $55 million is going to give people job skills. What 

I hope you will be able to take a look at that program, the youth 

challenge program down in Carville, Louisiana, and replicate that 

wherever you think advisable. 

I want to yield back my time to Mr. Shays for whatever use he 

might care to make of it. 

[Laughter.] 

Secretary JACKSON. Congressman Shays, may I say I have had 

a chance to view the program and it is a phenomenal program. He 

is taking persons who had no perspective of what was going to happen to their lives and made them productive citizens. I would hope 

that that would be replicated around this country in every congressional district in this country. I think it is a very excellent program, especially where you have a high concentration of African 

Americans and Hispanics, the low-and moderate-income person. 

If you will notice, I never use the term ‘‘poor’’ because ‘‘poor’’ is 

a State of mind, not a condition. That is what it is. I have a lot 

of wealthy friends who are poor. So I always say low-and moderateincome people because I think we should think about making them 

as middle-class as we can. I think that the program that the Congressman is talking about is one of those programs that is productive. 

Mr. SHAYS. Thank you. With the 15 seconds I have left, I just 

want to say that I wish that the other side of the aisle had let you 

respond to the questions they asked, because they are important 

questions. They ask you the questions, and then they do not allow 

you the chance to respond. I just wish you had that opportunity. 

I will look forward to questioning you in my round. 

Secretary JACKSON. Thank you. 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. FRANK. Mr. Chairman, can I just ask unanimous consent 

that the pace at which Mr. Baker spoke be established as the norm 

for the committee. I would feel a lot more comfortable. 

[Laughter.] 

The CHAIRMAN. Without objection. 

28

Mr. BAKER. Mr. Chairman, I have a further request. The pace of 

speaking is one thing. The pace of understanding is entirely something else. 

[Laughter.] 

Mr. FRANK. There are limits to what you can accomplish by 

unanimous consent. 

[Laughter.] 

The CHAIRMAN. I think we have proven that time and again. 

The gentlelady from New York, Ms. Maloney. 

Mrs. MALONEY. Thank you. Welcome, Mr. Secretary. 

I would like to be associated with the comments of Ranking 

Member Frank on the overall section 8 program, the GSEs and 

other factors. But I would like to question you primarily on what 

this new formula, the devastating effect that it is having in New 

York City. I would say that every housing authority across the 

country, like New York City, is up in arms and their challenges are 

probably very similar to New York City’s. 

Under this new formula, New York City alone will lose $55 million out of their current budget for section 8. There are over 

141,000 people on the waiting list for section 8, and 83 percent of 

them have incomes less than $16,000 a year. They are no longer 

able to distribute vouchers available through attrition, and it has 

truly caused chaos in the tenants lives. I would say it has caused 

chaos in the private sector, those people that are willing to finance 

and work with the city and State and federal governments for affordable housing. They are now wanting to run away from their 

commitments. 

It has undermined the confidence in section 8 and one of its goals 

to de-concentrate the poor, but not only section 8. I am getting 

phone calls on section 202 saying, I no longer want to go forward 

with my 202 program that may be treated like the section 8 program, not funded and totally changed. This is a very, very serious 

problem. I agree with my colleagues who say you need a city, State 

and federal effort to build affordable housing. 

You came forward with two proposals today to try to be helpful, 

but in all due respect it appears to be more of spinning a problem 

than fixing a problem. In New York City, the annual adjustment 

factor which you mentioned, they were already counting on that. It 

seems that that was what they were supposed to get anyway. The 

only concession to the PHAs was basically nothing more than giving them their full year’s inflation factor, their annual adjustment 

factor, throughout the year instead of making it at a graduated 

rate leading up to the total AAF. So they tell me that that does 

not help them at all with the $55 million gap. 

Then the second item that you mentioned, Secretary Jackson, 

that you would free up more of the 2003 central reserve funds to 

be used to reimburse the public housing authorities that had their 

own program reserves depleted in 2003. Well, that is New York 

City and probably many more public housing authorities across the 

country. But this money was always supposed to be replenished 

from the city’s own depleted reserves. So New York City’s public 

housing authority, your two new programs do not help them at all 

with the $55 million gap that they are facing. I understand from 

29

press report that there are eviction notices going out across the 

country because of this new formula change. 

So my question to you is, what are you going to do for the poor 

families in public housing in New York City and in other places 

across the country to make up this tremendous cut in the budget 

this year that is harmful? Then the next question is, what in the 

world are you going to do next year? Are you going to cut even 

more? 

In all due respect, your answer that the problem with building 

affordable housing is problematic regulation, we need affordable 

housing, we need the federal government. We need the continuation of one of the most successful programs for the poor this country ever developed, from President Nixon to the present. Every specialist will tell you it has been the most successful program for the 

poor. 

So this is a devastating change. But my question, your two 

points will not help New York City’s crisis at this point. I predict 

it will not help other cities in the same position. 

Secretary JACKSON. First of all, I appreciate your Statement, but 

I can tell you that there will not be an alarming number of cities 

who are facing the crisis that you just said. Secondly, it is important that we will address the issue in New York City and we have 

begun to address the issues in New York City. I think that we will 

reach conclusion on those. But I think it is important to understand how you say we are devastating the program. Until 1999, the 

program was budget-based. You got a budget. You did not get 

units. When I ran housing authorities, there was no unit-based authority. That was after 1998. 

So I got a pile of money and the money simply said that you have 

to allocate your units based on whatever we give you. We changed 

that and we have had an exponential growth in the program since 

then. The question is, the program cannot keep going at the rate 

that it is going. It is about 53 percent of our budget today. If we 

continue to go to program, then I would be facing you tomorrow 

with you saying to me, what are we going to do about the homeless 

programs; what are we going to do about HOME; what are we 

going to do about the CDB grants. 

The CHAIRMAN. The gentlelady’s time has expired. 

The gentleman from New Jersey, Mr. Garrett. 

Mr. GARRETT. Greetings. 

Secretary JACKSON. Thank you., 

Mr. GARRETT. Just a couple of questions on some of the testimony that you have already given, some along the line from both 

sides of the aisle. It is my understanding that with regard to the 

rules that you have promulgated with regard to GSEs, that because 

of the existing housing goals, there is already in certain areas, not 

in every area of course, an over-capacity of multi-family rental 

units that are currently left vacant. It is suggested that these high 

vacancy rates are basically an example of whenever the government becomes involved in trying to allocate scarce resources from 

one location to another, that you are going to have inefficiencies in 

the system that is better left to the marketplace to derive. 

So wouldn’t it be better than to exacerbate this problem by placing additional burden on the system by stepping back? 

30

Secretary JACKSON. No, because Congressman, if we do not ask 

the GSEs to adhere to their missions, it is clear from the past that 

they will not adhere to those missions. We believe clearly what we 

are asking them to do is to, under the congressional mandate, be 

the leader in providing low-and moderate-income affordable units 

under the mandate. We are not asking them to do anything differently. It was said a few minutes ago that, well, they buy portfolios. Well, those portfolios that they bought are already in use. 

They have not expanded the base. We are asking them to address 

the issues the congresswoman just said, the congresswoman from 

New York, to provide more affordable housing. The only way we 

can do that is say that we are not going to continually give you 

points for something that is artificial and not realistic, but we want 

you to lead the market. 

They come back and say, well, this is going to put us in jeopardy. 

I do not see how it is going to put them in jeopardy. We are not 

talking about the high end of their market that they do the secondary writing. We do not really care. We are just saying, address 

the charter mandate, and if you do that we will work with you. I 

do not think we are stifling. I am with you. I do not think we 

should stifle the enterprise market, but I think we should make 

them carry out their mandate. 

Mr. GARRETT. Let me go to the other end of the line then. One 

of your opening comments, which drew some response, was the implicit government guarantee. Earlier on in hearings that we had 

last year, I guess it was, was discussion with regard to the line of 

credit, which I guess I am always told as a freshmen here, is just 

a small line of credit and one of the expressions they use, it is only 

a day’s impact of revenue as far as the GSEs are concerned. So one 

of the questions in earlier hearings at the time was, if it is such 

a de minimus amount, why does that line of credit still exist? If 

you remove that, would that obviate the whole question that seems 

to go back on the other side of the aisle as far as whether there 

is or is not an implicit line of credit there? 

Secretary JACKSON. I would think you would have the two chairmen of the GSEs. I do not think I am at liberty to really discuss 

that. 

Mr. GARRETT. I will do what the other side said, do you have an 

opinion on it? 

Secretary JACKSON. I think they should answer that question, 

Congressman, not me. 

Mr. GARRETT. Does he have an opinion on it? 

[Laughter.] 

Secretary JACKSON. No. 

Mr. GARRETT. Okay. 

Secretary JACKSON. I did not want to say it, but I think it is a 

good point to say it, as Dr. Weicher just said, as I told the congressmen here in my talking initially when I came in here with the 

GSEs, initially what was said to me about the implicit, but the 

market also believes that there is an implicit guarantee. I think 

you have heard it a number of times in the last 5 or 6 months in 

different papers. Whether there is or not, I think the people to answer that would be the GSEs. 

31

Mr. GARRETT. Okay. Let me go down a totally different road on 

this. In the discussion of the burden that is placed by the States, 

not by the Congress, not by the federal governments, as far as the 

housing restrictions. Some make light of this, but I certainly see it 

from the realtor community, from the building community back in 

my home State in New Jersey, and I certainly see it from not only 

the regulatory side of the equation, but the entire taking side of the 

equation as well. 

That is, we see it in our State right now, the whole taking of private property, taking it off the lists entirely so you just cannot 

build any housing, whether it is high priced housing or even affordable housing even less, considering where they are trying to do 

this. Is there anything that either you are able to do or is there 

any suggestion that you may be able to make to Congress that we 

are able to do on the federal level vis-a-vis the States as far as this 

taking issue and also the regulatory side, that we could step up to 

the plate to make sure that there is land there and less restriction 

on the costs? 

Secretary JACKSON. Before Secretary Martinez left, and I followed, we both agreed that in order for us to be effective in going 

to States in different locales to insist that they begin to relieve developers of these regulatory barriers, whether they are environmental, permit-wise or otherwise, is that we have to first do it at 

HUD. We are cleaning up our own process at this point. 

If you take, for example, California, the Congresswoman is leaving, before you leave, before you can even bring a house out of the 

ground, you are looking at somewhere between $105,000 and 

$115,000 with the regulatory barriers that you face. It is about 

$96,000 in New Jersey. So if we can break down those barriers 

with States, then I think we can make inroads. 

That is what we are doing with the single family affordable housing tax credit. We are giving those incentives to developers to go 

into the urban areas to develop and write-down almost 50 percent 

of what it takes to get that house out of the ground. But even if 

we do that, we are still going to have to have flexibility from the 

States, from the cities, and say that we are going to work with you 

to make sure that we can create affordable housing, as the Congresswoman from New York said. 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. GARRETT. Thank you. 

The CHAIRMAN. The gentlelady from New York, Ms. Velazquez. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. 

Mr. Jackson, in your testimony you stated that ‘‘HUD’s leadbased paint program is the central element of the President’s efforts to eradicate lead-based paint poisoning.’’ You also stated that 

‘‘Funding for the lead-based paint will increase to $139 million 

from $136 million requested by the President for fiscal year 2004.’’ 

When it comes to numbers that are provided by the Administration, they always make me uneasy, because I remember quite fresh 

the Medicare prescription bill numbers that were provided to us. 

Isn’t it true that the program was funded at $174 million last year, 

so the President’s request is in fact a cut of more than 20 percent, 

not an increase? 

32

Secretary JACKSON. I am sorry. Yes it was, but Congress added 

the money to it. You all did. 

Ms. VELAZQUEZ. I am sorry? 

Secretary JACKSON. You all added the money to it. It was at, I think, $136 million or $136 million., 

Ms. VELAZQUEZ. $136 million. 

Secretary JACKSON. Yes, and you all added the extra money, 

Congress did. 

Ms. VELAZQUEZ. But if the President is so concerned about protecting children in our nation, why didn’t you request to at least 

maintain current funding levels for these programs? 

Secretary JACKSON. That is because you all added the money because you wanted us to do some demonstration programs and we 

did. 

Ms. VELAZQUEZ. Because of us, so do not come here and tell us 

that the President’s priority is to protect our children, when the 

President’s request is totally inadequate. 

Secretary JACKSON. That is from your perspective. I am saying 

that we think it is quite adequate, and I think it addresses what 

we are trying to do. I think that the programs around the country, 

a number of cities and States, have given us great accolades for addressing the lead problem. 

I guess that, again, I appreciate your asking that question because probably nobody has had to deal with lead more than I have 

in two specific areas, both St. Louis and in Washington, D.C. This 

Administration has funded the lead hazardous program better than 

any Administration in the years that I ran public housing. That is 

a fact. 

Ms. VELAZQUEZ. Well, you come here and you say that you had 

a request to increase funding, when in fact it was not. It seems to 

me that there is a contradiction, sir, in the Administration’s demand to hold our schools accountable while retreating on efforts to 

protect children from lead poisoning, so that they can start school 

ready to learn. 

Secretary JACKSON. I agree with you wholeheartedly, Congresswoman, and I am saying to you that——

Ms. VELAZQUEZ. Okay. Let me ask you another question about 

the 203(k) scandal in New York, Harlem and Bushwick, one is part 

of my district, where so many people lost their homes, and now 

again you are going into the second round of selling those properties. Can you tell me whether the agency is implementing safeguards with these auctions to prevent a repeat of the 203(k) scandals? 

Secretary JACKSON. If it is okay, I would like Dr. Weicher to answer it. I know the answer, but I think he can give you more details. 

Ms. VELAZQUEZ. Sir, what is your plan to ensure that these families are not victimized one more time? We love to talk about accountability, but you created that mess in New York, so what are 

the safeguards that you are putting in place to protect those families? 

Mr. WEICHER. Ms. Velazquez, let me start by saying that the 

mess was created in 1998 and 1999 and 2000. We in this Administration have been addressing that and cleaning it up. We have 

33

been working with the City of New York, with HPD, in their established programs and with developers that they have worked with 

who know how to do the job of rehabilitating these properties and 

who are ethical developers with solid reputations, to make sure 

that the work is done and done properly. 

Ms. VELAZQUEZ. Sir, let me say this to you. 

Mr. WEICHER. Yes. 

Ms. VELAZQUEZ. I have been writing to you. I have been visiting 

with these tenants. I have been seeing these properties, and you 

are not taking care of that situation back in my district. It is a 

shame that either you or the City of New York, because you cannot 

just say I am going to give it back to the City of New York, and 

you just go ahead and do whatever. No one is accountable. I write 

to you. You do not deal with the issue. I write to HPD in New 

York. So you are giving these properties to New York with no type 

of federal regulations or anything. This is going to happen again. 

The CHAIRMAN. The gentlelady’s time has expired. 

The gentlelady from Florida, Ms. Harris. 

Ms. HARRIS. Thank you, Mr. Chairman. 

Welcome, Mr. Secretary. I am pleased to see you here. Thank you 

for taking the time to be with us today. 

Secretary JACKSON. Thank you. 

Ms. HARRIS. As you know, I was honored to sponsor the American Dream Downpayment Act last year that the President has 

signed. As I travel the country, people are so anxious to begin the 

opportunity of homeownership, including where I pick up my drycleaning every single week on Capitol Hill. They say, when can we 

start? 

I understand you are in the process of crafting the regulations, 

but can you give us an update as to when you expect that people 

can begin this opportunity? 

Secretary JACKSON. We have allocated the money to a number of 

cities. We hope that they will begin to disburse the money immediately. 

Ms. HARRIS. In the American Dream Downpayment Act, we also 

reauthorized HOPE VI with more accountable standards and allowing authorized Main Street programs throughout the country to be 

able to access some of those funds for affordable housing so our 

first responders can live in these small communities near where 

they work. I was disappointed to see that those funds were not allocated in the President’s budget. Hopefully, we will address that. 

A second quick question, we are working in obviously a tight fiscal environment, much accountability, many efficiencies. I am a 

member in the freshman class, a co-founder of the Washington 

Wastewatchers Club. There was at one point $7 billion that was 

identified by the HUD inspector general that was not used for its 

intended purposes. What types of programs do you have in place 

or are you planning to have in place to fight the waste, fraud and 

abuse which is at taxpayers’s expense? 

Secretary JACKSON. I think that is a very honest question. I must 

say that the Inspector General at HUD has been absolutely phenomenal. We have not always agreed, but he has kept HUD ethically true to the mission. Where there have been problems, he has 

brought them to us and we have worked with him. In the end, we 

34

might not have agreed from the HUD perspective, but he had to 

make a report. I can tell you that Ken Donohue, who is the Inspector General, has been absolutely excellent. We have not had any 

serious problems at HUD the last 3 years. 

We have tried to clear up those problems that we have had each 

time we found them. It does not mean that some of the problems 

we have had in the field or region have not been, I do not want 

to say not serious, that is not the question. We have had problems, 

but we have addressed them very quickly and worked with the inspector general to clear them up. So please excuse me for saying 

‘‘not serious.’’ I think that anytime we have fraud, waste and 

abuse, it is serious, but we have worked with him. 

Ms. HARRIS. Now to my real question, I want to turn you attention to HUD’s new proposed affordable housing goals for the GSEs, 

the 57 percent of the loan purchases that are going to be made to 

borrowers that are below the area median income. I have a strong 

record of desperately caring about affordable housing, but I am concerned that these goals may put the GSEs’s portfolio at risk. On 

the one hand we are constantly talking about the concerns that we 

have for the safety and soundness of these GSEs, and on the other 

hand I am concerned that we may be setting these goals unrealistically high. 

Secondly, if the targets and assumptions for these targets that 

are established are not correct, would the GSEs be forced to voluntarily lower their conforming loan purchase limits in order to assure that they hit those targets? Because if that were the case, I 

think it would be devastating in arenas such as Florida, New York 

and California where the costs are much higher. 

Secretary JACKSON. I think that is a very legitimate question. 

But let me say this to you, Congresswoman, I think asking them 

to address their mandate to serve low-and moderate-income people 

is less risky than investing in derivatives. I really do. 

Secondly, it is amazing to me that when you ask them to meet 

their mandate, they would say that it is going to affect their ability 

to carry out their mission or lower their abilities to make loans. 

That is their chartered mission, to address the needs of low-and 

moderate-income people in America. I would love to meet that 

mandate if I were doing as well as some of their top executives are 

doing. I would love to address the needs of low-and moderate-income people. 

Ms. HARRIS. You are not concerned that it is going to put their 

portfolios at risk at 57 percent? 

Secretary JACKSON. No, I do not. I can tell you honestly, if I 

thought that, I would not do it. I do not want to jeopardize any one 

of the two GSEs, because I think they serve a very vital purpose 

for this country. I also think that it is their responsibility to address the needs. As I said before you came in, they keep talking 

about what they cannot do. They report to us quarterly. 

If we are wrong when we are saying they are not leading the 

market that they should be leading, all I would ask the two GSEs 

is give us permission to provide you with the data that they provide us. If they give us permission, then you will see they are not 

coming close to addressing the needs of low-and moderate-income 

people in this country. All we are saying is to do it. 

35

The CHAIRMAN. The gentlelady’s time has expired. 

Ms. HARRIS. Thank you. 

The CHAIRMAN. The old right-hander from North Carolina. 

Mr. WATT. I assume that is me, Mr. Chairman. 

[Laughter.] 

The whole right-hander. I think that is the wrong characterization. Do not take that from my time. 

[Laughter.] 

Welcome, Mr. Secretary and thank you for being here today. 

Secretary JACKSON. Thank you. 

Mr. WATT. Mr. Chairman, may I start by asking unanimous consent to submit for the record a report prepared by the Urban Institute and the Brookings Institution entitled A Decade of HOPE VI 

Research Findings and Policy Challenges. 

[The following information can be found on page 106 in the appendix.] 

The CHAIRMAN. Without objection. 

Mr. WATT. I get a lot of questions about the whole budget, but 

I have spent a lot of time focusing on this HOPE VI issue. I would 

like to focus my questions solely on that issue. 

Back in 1989 or 1990, something called the National Commission 

on Severely Distressed Public Housing did an assessment of public 

housing to identify severely distressed public housing units. It indicated that there were 86,000 severely distressed public housing 

units. 

This report that I have just submitted for the record indicates 

that approximately 19,000 public and market-rate housing units 

have been generated under the HOPE VI program in the last 10 

years. Giving the benefit of the doubt, let’s round that to 20,000 

units. What happened to the other 66,000 severely distressed housing units that were identified? 

Secretary JACKSON. Let me say this, because——

Mr. WATT. I don’t want you to say. I just want you to answer my 

question, Mr. Jackson. 

Secretary JACKSON. I think I should clarify. 

Mr. WATT. I have a series of questions. I would like for you to 

answer the questions. I have heard you give speeches. I love to 

hear you speak. Today, I want you to answer my questions. 

Secretary JACKSON. First of all, there are not 66,000. There are 

about 126,000 that are unbuilt today. 

Mr. WATT. Okay. 

Secretary JACKSON. What has happened to this is that we have 

allocated the money to the housing authorities and the housing authorities have spent most of the administrative fees, but not spent 

on building the units. Secondly, what is important here is this, that 

there have only been 26 successful HOPE VI developments out 

of——

Mr. WATT. Is your answer that instead of 86,000 today, after 10 

years there are one-hundred-and-some thousand severely distressed housing units? 

Secretary JACKSON. That is what we funded. 

Mr. WATT. Okay. All right. The question is, how many severely 

distressed housing units do we have today? 

Secretary JACKSON. That is very difficult to answer. 

36

Mr. WATT. But the Administration apparently has concluded that 

the mission of HOPE VI has been met, I mean, I am quoting the 

President, and the gentleman behind you there, the last time he 

testified, told me that the mission of HOPE VI has been accomplished. I thought that mission was to replace those 86,000 starting 

off, and any that were added subsequently. 

Secretary JACKSON. The mission has been accomplished. 

Mr. WATT. Okay. So you are saying there are no severely distressed public housing units in the country? 

Secretary JACKSON. Not according to the initial 86,000. We are 

well above that. Congressman, I think you have to understand you 

are talking to the person who wrote the legislation. 

Mr. WATT. I do not care who I am talking to, Mr. Jackson. I just 

want you to answer my question. I did not come here to hear you 

give me a speech. I am trying to find out how many severely distressed public housing units you have. 

Secretary JACKSON. There were 86,000 in 1989. 

Mr. WATT. How many do we have today? That is the question I 

am asking, Mr. Jackson. 

Secretary JACKSON. We funded more than 86,000. 

Mr. WATT. I did not ask you how many you funded. I asked you 

how many severely distressed public housing units do we have in 

the country today. 

Secretary JACKSON. I will tell you, Congressman, we have, according to what the HOPE VI program was set out to be, we have 

none, if we said back in the study it was only 86,000. 

Mr. WATT. So your testimony is that there are no severely distressed housing units left in the country today. Is that what your 

testimony, Mr. Jackson? 

Secretary JACKSON. I am not going to say that to you. I am not 

going to say that. 

Mr. WATT. Then please answer the question. How many severely 

distressed public housing units do we have in the country? 

Secretary JACKSON. You answered the question yourself. You 

said there were 86,000 and I am telling you, we funded above 

86,000. 

Mr. NEY. [Presiding.] The time has expired. 

The gentleman from Connecticut? 

Mr. SHAYS. I am happy to pass a bit to hear my other colleagues 

ask questions. So I reserve my time. 

Mr. WATT. Would the gentleman yield me enough time to get my 

question answered? 

Mr. NEY. Does the gentleman yield? 

Mr. SHAYS. No. I am not using my time now. I am reserving my 

time, so ask another Republican. 

Mr. NEY. That is fine, the gentleman does not yield. 

Mr. Renzi? 

Mr. RENZI. I thank the Chairman. 

I want to let you know that Chairman Ney and Ranking Member 

Waters were kind enough to come out to the Navajo Nation. I appreciate your sending a representative out. I want to talk to you 

about Native American housing which is severely depressed. 

Secretary JACKSON. That is true. 

37

Mr. WATT. Oh, no. None of that exists anymore in this country, 

apparently. 

[Laughter.] 

Mr. NEY. Is the gentleman requesting time or saying something? 

Mr. WATT. I have been requesting an answer for the last 5 minutes. I just have not gotten it. 

Mr. NEY. The gentleman’s time has expired. 

Mr. FRANK. The gentleman from North Carolina is just severely 

distressed. 

[Laughter.] 

Mr. WATT. I am severely distressed, right. 

[Laughter.] 

You are absolutely right. I am severely distressed because we 

cannot get an answer. I thought this was a hearing to get the facts 

about what was going on. 

Mr. NEY. All Members of Congress are distressed at this point 

in time. 

The gentleman, Mr. Renzi. 

Mr. RENZI. Within section 184 of Title VI we have a situation 

where we are looking at a rescission of funds as it relates to programs that were supposed to be used extensively by Native Americans. I am sure you are aware of it. 

Secretary JACKSON. Yes. 

Mr. RENZI. We are coming up on that time where that money is 

supposed to be going back. What are we doing to make sure we do 

not lose that money? What are we doing to make sure that we, 

next time the money is available, that we are fully able to utilize 

it? 

Secretary JACKSON. I will ask Assistant Secretary Liu to help 

me, but it is clear we put the money back in place, because we realized that we had some serious problems, and I would like to let 

him speak to it. 

Mr. RENZI. Okay. I am not going to cut you off, but I had your 

answer at my hearing. Go ahead. 

Mr. NEY. Please state your name for the record. 

Mr. LIU. Assistant Secretary Michael Liu of the Office of Public 

and Indian Housing. 

Mr. RENZI. Go ahead. 

Mr. LIU. Congressman, I appreciate the time that we had a few 

weeks ago in Arizona. We are aggressively working with the Indian 

tribes to promote the section 184 program. We are having regional 

workshops and summits to build capacity among the tribes. We are 

expressing our concern with banks that are not currently——

Mr. RENZI. I got it. I got it. I would appreciate it if you would 

look at putting as many counselors, opening up offices. I do not 

care what you have to do, but the idea that we are going to rescind 

$54 million, okay, that we did not use, there are a lot of conservative fiscal hawks around here who enjoy that on my side, but the 

reason we are not using it is because we do not have Native Americans who can even use the Internet to get a mortgage. 

Let me go into a situation we have over at BIA. I realize it is 

not under your jurisdiction, but I want you to be made aware of, 

there is a 113-year backlog at BIA on closing escrows on trust land, 

not fee simple land, but trust land. So we give sovereignty to the 

38

Native Americans. We then have to do the research to close the 

title. We have 113 man-year backlog, which means escrows are taking over 2 years. So even if we are Native American and we can 

qualify for the loan, sir, even if we can get through and get the 184 

money, we still have 2 years to close on our home. Okay? I just 

want to make you aware of it that you have to help and you have 

to help put pressure on BIA to get this, because it is unacceptable 

out there. 

Ms. Waters said that the conditions are so deplorable in the Navajo Nation that they are as bad as they are in South Africa. Those 

are her words. We do not have to go and see third world conditions. 

We can see it right here in America, up on the Navajo. 

One of the things I also wanted to ask you real quick before I 

run out of time is, I think you have been kind enough to reach out 

and look at the possibility that under title VI, we are now looking 

at increasingly the guarantee, reducing it to 80 percent coming off 

that 95 percent guarantee, are you with me on this? 

Mr. LIU. Yes. 

Mr. RENZI. Okay. What is your position? What is your opinion on 

the idea of us going back to 95 percent guarantee so that we can 

have more private investments, better economic development, more 

jobs and more people owning homes in Indian Country? Are you 

willing? That is not a big stretch, is it? 

Mr. LIU. Yes. Congressman, we think that is certainly an issue 

that we will review and take back and work on. 

Mr. RENZI. If Congress came out and legislatively moved it back 

to 95 percent, would you oppose it? 

Secretary JACKSON. We are going to carry out what Congress 

says. 

Mr. RENZI. Thank you, Mr. Chairman. 

Mr. NEY. The gentleman, Mr. Meeks? 

Mr. MEEKS. Thank you, Mr. Chairman. 

We are working on a HOPE VI project, and I know that they are 

talking about eliminating some of the money, time is running out, 

the project is not finished. By the way, how many distressed housing is still currently in the United States of America? Severely distressed? 

Secretary JACKSON. I will say this, that the 1989 study from the 

National Commission on Severely Distressed Housing says that 

there were 86,000 units. 

Mr. MEEKS. In 2004, how many are there? 

Secretary JACKSON. I would say that we have funded under the 

HOPE VI program to date 129,000 units. 

Mr. FRANK. Will the gentleman from New York yield? 

Mr. MEEKS. I yield. 

Mr. FRANK. Let me just point out, Mr. Secretary, that assumes 

that even if you take that formulation, that no units became severely distressed in the 15 intervening years. Using the 1989 figure 

as the figure assumes that nothing became severely distressed in 

the last 15 years. So even on its own terms, it does not make sense. 

Secretary JACKSON. Well, we have done 136,000, so obviously 

there have some that have been distressed. He asked me how many 

there were. I said clearly, Congressman, there were 86,000 when 

we began writing the legislation. To date, we have done 136,000. 

39

Of those 136,000, we have only had 25 of those HOPE VI completed. 

Mr. MEEKS. Do you know if there are any severely distressed 

housing in America today? Do you know? Yes or no? 

Secretary JACKSON. I am sure there is distressed housing in 

America today. 

Mr. MEEKS. Do you have any idea approximately how many 

there are? 

Secretary JACKSON. I can tell you that there are 136,000. We 

funded that many. 

Mr. MEEKS. There were 136,000. 

Secretary JACKSON. There are 136,000, and of that probably——

Mr. MEEKS. So if there are 136,000 today, then the mission has 

not been completed with reference to HOPE VI, because there continues to be 136,000 severely distressed developments today. 

Secretary JACKSON. No. I do think the mission has been completed, and I will tell you why I think it has been completed. I suggested that the program be discontinued and I will stick with that. 

That is because the program was started to address the need to integrate people both socially and economically into the fiber of this 

country. 

We have had 25 of those completed in the last 12 years. We have 

over $3.2 billion outstanding after allocating $5 billion. My position 

is this, some of these cities have had the money 7 years, 8 years 

in the program. The HOPE VI have not been completed, nor has 

it been started. I do not think we should continue to fund the program that does not work. 

Mr. WATT. Will the gentleman yield? 

Does this reflect at all on HUD’s oversight of HOPE VI? Or you 

are just saying HUD does not have anything to do with this, I 

guess. 

Secretary JACKSON. No, I do not think it does because I have run 

housing authorities. You represent a city where you had probably 

the most illustrious HOPE VI other than Dallas. You had a person 

who made it work, and they did not have any impediment. Other 

cities have not. 

Mr. WATT. So the program does not work, then, because other 

cities did not make it work. That is what you are saying. And HUD 

did not oversee it to make the other cities make it work. That is 

what you are saying. So therefore it ought to be discontinued. 

Secretary JACKSON. Let me say this to you, I think your analysis 

is correct. 

Mr. MEEKS. Taking back my time. Let me ask another question. 

Let me go to New York City real quick with the time that I have 

left. You know, and I guess you told my colleague Carolyn Maloney 

that you will look into the $55 million shortfall that New York City 

has. But do you know that, going back to section 8, that right now 

that the HPD is not issuing any section 8 vouchers anymore? 

I have heard the conversation here today, the dialogue about reducing the amount of money that goes into section 8. That means 

that individuals who are now new people, we have some young people who were in foster homes, who are now turning 18 years old, 

they are not eligible. They cannot obtain any section 8 housing, any 

section 8 vouchers because there are none, because of the shortfall 

40

in New York. Does HUD have any suggestion what we do with 

those kinds of individuals, or do we just allow them to be homeless? 

Secretary JACKSON. Until 1998 under the QHWRA Act, persons 

like that took priority. That is not the case today. The law was 

changed. Everyone has to rise on the list. 

Mr. MEEKS. So they should just be homeless. 

Secretary JACKSON. You asked the question. I am saying, since 

1998, you are asking us if we can do something about it, that is 

something that Congress has to do something about. If you want 

to change it. 

Mr. MEEKS. So that is not part of HUD’s mission at all. 

Secretary JACKSON. Our mission is to implement any program as 

you say so. 

Mr. MEEKS. Let me ask another quick question. You talk about 

homeownership, and I believe in home ownership——

Mr. NEY. The time has expired. 

The gentleman, Mr. Miller of California. 

Mr. MILLER. Thank you, Mr. Chairman. 

Welcome, Mr. Jackson. It is good to have you here today. 

Secretary JACKSON. Thank you very much. 

Mr. MILLER. I have enjoyed working with HUD over the years. 

RESPA is a huge issue for me. I have been in the development industry for over 30 years, and I will agree with you that the largest 

impediment to housing in this nation is state and local regulatory 

barriers. If you add ESA to that, I will agree 100 percent with you. 

You started your talk today off with your goal is to make sure 

HUD meets their housing mandate. A lot of what we have said 

today would be applicable, because HUD is responsible for trying 

to build housing out there. But GSEs, Fannie Mae particularly, 

their goal is not to build houses. They do not build houses. 

Secretary JACKSON. That is correct. 

Mr. MILLER. They provide funding in the marketplace. In that 

area, they are restricted on how much they can loan. We call them 

conforming loan limits. As a matter of fact, I think conforming loan 

limits need to be raised in high-cost areas. I would really ask you 

to revisit this 57 percent mandate because what we are effectively 

doing is saying in a marketplace such as California, if you take a 

57 percent mandate, of those loans that are made 57 percent have 

to be below the median, that means last year, for example, 49 percent of the loans made in California could not have been made. I 

want to speak positively about this, because this is very serious in 

California. The current median home price in California is 

$428,000. 

Secretary JACKSON. That is correct. 

Mr. MILLER. Based on that 57 percent mandate, last year the 

loan limits would have been nothing above $195,000. So what we 

are doing, instead of trying to provide housing in this nation, we 

are dealing with rationing the amount of funds available to the 

marketplace. That really, really bothers me because I think it creates a shortage of competition, because Fannie is going to apply 

this based on the mandate placed upon them, and that is 57 percent, when in areas like Barney Frank represents, Maxine Waters, 

41

Barbara Lee’s and mine in California, we are going to wipe people 

out of the marketplace. 

If we want to provide affordable housing, that is HUD’s oversight, but to take and limit the amount of money and basically calling it credit allocation does not make sense. If we had a limited 

pool of funds here that Fannie was dealing with in a year, and they 

were having to take and reject borrowers because they did not have 

the money. So we are trying to make sure that more low-income 

people, medium-income people receive the funds available through 

a GSE, if there were a limited pool of money, it would make a tremendous amount of sense to do what you are trying to do. 

But there is no shortage of funds out there. Fannie is able to 

make every loan requested upon them each year. So if that is the 

fact and it has been proven to be, why in the world would we go 

to Fannie and say, we want you to basically restrict the amount 

of loans you make because we are going to require an allocation of 

57 percent to be below the median? 

If you were talking today about HUD meeting their housing 

goals, and there is an affordability crisis in this nation beyond belief. You have section 8 and then between section 8 and what is 

available is a huge, huge difference in price. We are unable to fill 

this price range of homes because of what you said about state and 

local regulatory barriers and restrictions placed upon property owners. But for us to go into this 57 percent requirement on GSEs, it 

just seems like it is going to have a drastic impact on the market 

out there. If I am incorrect, please explain to me how it is incorrect. 

Secretary JACKSON. Sure. Congressman, what I would like to do, 

because I think to give you a greater analysis of this would entail 

taking some time. 

Mr. MILLER. I will take the time privately with you. 

Secretary JACKSON. Okay. I will be happy to do that, because let 

me say this. The interpretation which you have given is not our interpretation. We are saying that we are not concerned with Fannie 

Mae or Freddie Mac, the high-end of the market. We are saying 

that that end of the market that you serve, we expect you to serve 

according to the three sub-categories that we have given. I would 

like to just sit down with you and go through it. I think that we 

can make it very clear to you. 

Mr. MILLER. I think I understand what you are saying, but the 

problem is you are dealing with an allocation and a restriction of 

funding within the marketplace when there is no shortage of funds. 

If there were a shortage of dollars and we are trying to force money 

into a given sector of the marketplace, then I would say okay, let’s 

look at a formula. But when there is no shortage of money, to falsely create a percentage out there that has to be complied with by 

the lenders to force money into an area that there is no shortage 

of money in, means you are going to take money and restrict it in 

another area. You cannot meet 57 percent, and yet provide for 

those in the other area. 

Mr. NEY. The time of the gentleman has expired. 

Mr. MILLER. I would love to talk to you privately. 

Secretary JACKSON. I think we can. Thanks. 

Mr. NEY. The time has expired. 

The gentlelady from California, Ms. Lee. 

42

Ms. LEE. Thank you, Mr. Chairman. 

First, Mr. Secretary, let me just say quite frankly I am very 

amazed at some of the callous nature of your responses. When I 

was out of the room, and I just want to clarify that you said or did 

not say that being poor was not a condition, but a State of mind. 

Is that an accurate statement that you made, first of all, as the 

Secretary of HUD who is responsible for providing a safety net for 

the poor? 

Secretary JACKSON. I do. I think ‘‘poor’’ is really a State of mind, 

not a condition, because if that was the case, I would not be sitting 

here. 

Ms. LEE. Yes, oh boy. Mr. Secretary, do you know there are over 

3.5 million people who will experience homelessness. I guess that 

is the reason that you guys are cutting the homeless budget, the 

McKinney-Vento budget. I know there is $50 million in this new 

Good Samaritan initiative and it is something you are going to respond to, but that still does not get us to the $128 million that we 

need every year to end chronic homelessness. I assume that is why 

you seem to be just dismantling programs for the homeless. 

Secretary JACKSON. We are not dismantling programs. 

Ms. LEE. Well, cutting programs for the homeless. 

Secretary JACKSON. We have not cut. We have level-funded all of 

the programs. 

Ms. LEE. But don’t you know that that is a cut? 

Secretary JACKSON. No. 

Ms. LEE. Mr. Secretary, okay, you know, the second point. In 

California, 12 percent of the black population is unemployed; 7.9 

percent of Latino population unemployed. The average income, for 

instance, in some areas, $38,000 or $39,000 a year; average cost of 

a house, $400,000 to $450,000. Now, how do your initiatives which 

you are focusing on in terms of homeownership address these people who are barely surviving and need you? 

Secretary JACKSON. I do not think necessarily that, if you are 

talking about homeless people, it addresses that. 

Ms. LEE. I am not talking about homeless. You answered on the 

homeless issue. I understand it is a State of mind. You clarified 

that in your budget. 

Secretary JACKSON. No, I did not say that about homeless people. 

Ms. LEE. I am talking about now the working poor, and African 

Americans and Latinos in high-income areas where they need 

HUD, they need a safety net, they need section 8, they need lowincome housing assistance, they need Shelter Plus, they need 

HOPE VI, they need all of the programs that your agency is supposed to be responsible for, and here you see these numbers just 

in California alone. 

Secretary JACKSON. I am glad you asked that question, Congresswoman, because I too agree with you when you are talking about 

the working class, those who are 60 percent, but above 30 percent 

of median. I think they should have accessibility to the section 8 

certificates and vouchers too, but under the present configuration 

of the QHWRA rule of 1998, they do not have it. So I am saying 

that if you agree with me, I think we should move toward the flexible voucher program which will address that issue. 

43

Ms. LEE. I am talking about expanding this. I am talking about 

not cutting. I am talking about your focus on homeownership. How 

do you intend for these people to become homeowners when in fact 

that is what your priorities are? That is what I asked. 

Secretary JACKSON. I am saying to you that I do believe that 

with the flexible voucher program, which we have used in this 

country, we can move people toward homeownership because they 

will not be on those vouchers and certificates for a long time. 

Ms. LEE. When the average cost of a house is $400,000 to 

$450,000, how are you going to allow section 8 homeowners to qualify for that kind of a house and handle the note with no subsidies? 

Secretary JACKSON. I think your question, again, is valid. I think 

there are two ways. First of all, I talked about the single-family affordable housing tax credit, which will basically help developers develop in areas like California, New Hampshire, Vermont. 

Ms. LEE. You will make the developers do affordable housing? 

Secretary JACKSON. Do affordable housing. Second of all, if we 

can get rid of many of the regulatory barriers that we have, just 

in your State alone, as I said to the Congresswoman, before a home 

comes out of the State of California, somewhere between $104,000 

and $115,000. If we can cut that in half, yes we can create affordable housing for people to live in. But we have to decide that this 

is what we want to do, and we have made the decision through the 

single-family affordable housing tax credit, and pushing States to 

get rid of the——

Ms. LEE. Then why don’t you take $3 billion or $4 billion out of 

the FHA reserves and do a production program and create some 

real affordable housing that can be done overnight? 

Secretary JACKSON. Because those people who are paying their 

mortgage every day to FHA, that reserve is to cover them in case 

we have a catastrophe. I think that is what it should be. 

Ms. LEE. Yes, but the reserves are way over $3 billion right now. 

Mr. Secretary, final question is, just on the section 8 vouchers, 

you have been responding to questions about that. I just want to 

ask you, in my area, the city of Alameda, there are going to be 

$800,000 or so under just in June based on the formula that you 

had come up with. I would like some clarification from your department with regard to certain areas, including the city of Alameda. 

Okay? I have just got to say to you I am very disappointed in your 

responses today, Mr. Secretary, and I hope that you begin to understand that ‘‘poor’’ really is not a State of mind, but there are some 

economic conditions that create poverty. 

Mr. NEY. The time has expired. 

The gentleman from Ohio. 

Mr. TIBERI. Thank you, Mr. Chairman. Mr. Secretary, thank you 

for being here today. Thank you for your call yesterday. Congresswoman Pryce and I want to thank you for your dealing with the 

Columbus situation. 

Secretary JACKSON. Thank you. 

Mr. TIBERI. I actually would like you, and I know you are pretty 

busy, to come out to Columbus because we have a housing authority that has been pretty innovative in dealing with section 8 vouchers. We have a Rebuilding our Lives program with an organization 

44

called the Community Shelter Board that has really been a leader 

in attacking homelessness. 

Homelessness is not just about shelter. It is about many other 

things dealing with services to these folks who are homeless. This 

program has just been an outstanding national model. We would 

love to have you to look at not only that, but also some of the innovative things our housing authority is doing with section 8. 

A concern I have with the section 8 program, I think you mentioned it; I think Chairman Ney mentioned it; is how the budget 

of section 8 is expanding so rapidly it is impacting other programs. 

One of those programs that I have expressed a concern about is the 

community block grant program. I have the 2000 study in front of 

me. We had a hearing in Columbus and the mayor and the council 

and other community leaders in Columbus, Ohio rightfully made 

an argument that the current formula for community block grant 

really negatively impacts newer cities. For instance, in your own 

numbers, the 2000 numbers, Columbus is the largest city in Ohio. 

The metropolitan area of Columbus is the second largest in Ohio, 

to Cleveland, but yet Akron, Cincinnati, Cleveland and Dayton all 

receive more CDBG money than Columbus. 

So I would hope that the study that you have undertaken most 

recently that we have not seen yet, that has not been released yet, 

takes a look at this hopefully, and hopefully will address the needs 

of cities like Columbus, growing new cities that are mostly in the 

south and west, but happen to be in other parts of the country as 

well, and how your budget is going to impact the growth of CDBG. 

Secretary JACKSON. Thank you, Congressman. We are extremely 

sensitive and well aware of that. We are trying to make sure that 

we address it in a very equitable and fair manner. 

Mr. TIBERI. The only other point, and I will yield back the balance of my time, is I want to thank you. I was a realtor before I 

came to Congress. I understand homeownership is a dream for 

many who unfortunately have not gotten there yet. Congressman 

Scott and I have introduced a bill. I heard the President this morning talk about the keys to homeownership, and certainly support 

your efforts at HUD to promote the zero downpayment bill. I want 

to thank you personally. 

Secretary JACKSON. Thank you very much. 

Mr. TIBERI. I yield back. 

Mr. NEY. The gentleman yields back the balance of his time. 

I would note there are three votes, 15, 5 and 5 minutes. What 

we will do is we will take another question. We are going to hold 

strict to the time. But also, when we come back, only the members 

that are currently here, they will have the obvious priority to ask 

their questions. With that, I recognize the gentleman, Mr. 

Capuano. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

Mr. Secretary, thank you for coming today. I want to focus on the 

section 8 issue that we just passed up. As I understand it, in April 

HUD notified various state and local agencies across the country 

that an interpretation of some language would require them to 

retroactively cut certain parts of the section 8 program. The result 

of that was widespread, nationwide panic among at least 60,000 to 

45

maybe 200,000 people. The result of that was then that everybody 

was in a hue and cry across the country, all across party lines. 

In May, HUD basically said, no, we found the money, which to 

me indicates the money was never the issue, which is what I 

thought at the first part, and I do not think HUD ever said the 

money was the issue, but there was a language issue. I am just curious, what changed between April and May to have HUD change 

its opinion? 

Secretary JACKSON. No, and I think that is a very fair question, 

Congressman. I do not think anything changed. I think that when 

we made the announcement according to our reading of the congressional mandate by Congress, we felt that clearly we had the reserves that were there to replenish for those who had asked for a 

replenishment, but there had not been very many who asked. 

Secondly, we felt that everyone who did not over-lease could operate within the guidelines that were set. It was clear that there 

were a number of agencies that over-leased. One of the first agencies that we heard from was from Los Angeles. We went out and 

worked with them and got them back basically into compliance. 

So the question was not that we did not feel that we could address the needs. It was that we felt that with the mandate that 

Congress had put forth, that the housing authorities could operate 

under it. Now, I want to clear it up because I have heard a lot of 

people say ‘‘nationwide.’’ We have almost 2,600 housing authorities 

around this country. We have a number of housing authorities in 

major urban areas who are in the process of over-leasing or had 

vouchers on the street at the time. Clearly, most of those agencies 

had reserves that could address that need. Where we could, we 

worked with those agencies. 

So we have not in any way stopped working with agencies. We 

have been working with them from the inception. 

Mr. CAPUANO. So in the final analysis, and I appreciate that, 

there was never any real need to get well over 200,000 families 

upset at the prospect of being evicted within a couple of months. 

I will tell you that in Massachusetts, well over 2,000 families, actually more than that because no one knew how it was going to be 

implemented, went through two months of hell. I will tell you, I appreciate the fact that it has been worked out. 

I do not appreciate the fact that it was not worked out before an 

announcement was made. You drove these people through hell that 

they were going to lose their house, and it was unnecessary. I think 

it just simply shows some of the attitude in HUD. 

I will tell you that I had a whole series of other questions, but 

your comment that ‘‘poor’’ is a State of mind, I will tell you, 

stopped me in my tracks. I find it so offensive, I am almost speechless. I am actually speaking slower than Representative Baker for 

the first time in history. 

Apparently, you do not know anyone, right now, as we speak, 

within America, who is without a job, without the prospects of a 

job, facing eviction, not being able to pay their rent, not being able 

to pay their heat bill, not being able to pay their auto insurance 

bill, with no prospects of a job because they may or may not be 

non-white, living in an area with 15 to 20 percent unemployment. 

46

If they are not poor, what is? I understand the definition of ‘‘poverty of spirit,’’ and that is a wonderful concept that has some place 

in our society for a wonderful after dinner discussion. But to not 

recognize the fact, the indisputable fact that there are real serious 

honest-to-God poor people in America disgusts me. The fact that 

you do not recognize maybe that any of them, that somehow simply 

by changing their concept of mind, they could get out of poverty. 

That is all it takes. Close your eyes and wish; change your attitude. 

To say that is a disregard of the history of mankind. To say that 

to me in my presence is insulting to the constituents that I represent that are poor. That does not mean they have a poverty of 

spirit. I do not know where or how you were raised, and I have no 

doubt that maybe you have had some struggles in your life and 

your family has, too. And you have risen above that and I appreciate it, but there are many who have not and you have insulted 

them. 

Thank you, Mr. Secretary. 

Mr. NEY. The time has expired. Let me just note, we are going 

to take a recess. The committee will go over and vote, and please 

come right back. Let me just make it clear who is up on the docket. 

We have on the majority side, Shays and Royce; on the minority 

side Israel, Scott, Davis, Carson, Hinojosa and Clay. 

The committee is in recess. 

[RECESS] 

Mr. NEY. The committee will come to order. We will begin again. 

The order that we have is Mr. Shays, Mr. Israel. 

Secretary JACKSON. Mr. Chairman, may I ask a favor of you 

please? 

Mr. NEY. Yes, sir. 

Secretary JACKSON. At the end of the hearing, one of the 

congresspeople was speaking to me. I would like to ask your permission or indulgence if I might be able to really elaborate on exactly what I said, because I do not want what I said to be misinterpreted. 

Mr. NEY. Without objection. Yes, Mr. Secretary? 

Secretary JACKSON. I think I made a statement earlier when 

asked by one of the congresspeople my perception. I said that ‘‘poor 

is a State of mind, not a condition.’’ That in no way eliminates my 

perception that there are people in poverty. I am well aware of 

that. But I think it goes back to a sense of how I was raised in 

the sense that as was stated when I was introduced that I am the 

last of 12 kids. My father had a fifth-grade education. 

I wonder if you will understand this. I think it was my ninthgrade year when I had just gone to Catholic school and many of 

the kids had a lot more than I had, and I came home and asked 

him why were we poor. Well, today with what he did to me, he 

would probably be accused of being a child abuser. He informed me 

that we were not poor. I will never forget what he said. He said 

that ‘‘poor is a State of mind, not a condition.’’ He said as long as 

there is hope, you can clearly make it in this country. 

Lastly, if you notice what I said when I said that, I said that I 

have a lot of friends who are very wealthy, but poor. I am talking 

about a mindset, not a person’s economic set in this country, because I am well aware that there is poverty in this country and I 

47

want to do everything as Secretary of Housing to eradicate that 

poverty. 

Mr. NEY. Thank you for the clarification, Mr. Secretary. 

Mr. Israel? 

Mr. ISRAEL. Thank you, Mr. Chairman. 

Mr. Secretary, welcome. I appreciate your clarification. I am sure 

you do not really believe that being poor is a State of mind. 

I want to share with you the plight of 50 families in my district 

who may be poor, not because of their State of mind, but because 

of the State of the bureaucracy at HUD. This is a unique situation 

in my district. This is not about funding or the lack of funding, and 

it is not about formulas. It is about 50 people who are about to be 

thrown out on the street because a bureaucrat at HUD, perhaps 

not even while you were Secretary, told one of my community development agencies something which turned out not to be true. 

This is a crisis that needs to be solved. 

Let me briefly take you through this. This is my only opportunity 

to do that. Several years ago, the Community Development Corporation of Long Island was awarded 75 vouchers under the HUD 

section 811 mainstream tenant-based rental assistance program. 

Before that agency submitted its budget to HUD for the first year 

of the program, it became clear that the award figure provided by 

HUD was insufficient to support a lease-up of the full 75 units. The 

agency spoke with HUD and HUD indicated to the agency that at 

the time they could only lease-up 32 units, far below the 75, and 

the agency resubmitted their budget to HUD, again projecting 32 

leased-up units. 

When HUD received this agency’s budget, a HUD official contacted the Community Development Corporation and indicated 

both verbally and in writing that a higher authorized amount 

would be made available to this agency on Long Island, and that 

the agency should request a budget modification later in the year. 

HUD later approved that budget, and based upon that assurance 

the Community Development Corporation of Long Island proceeded 

to lease-up the full 75-unit allocation. Got me so far? 

Now, after that allocation has been leased-up to the 75 units, 

HUD has said, well, we were wrong and the likelihood of obtaining 

an allocation for additional funding is bleak. Without sufficient 

funding to cover these rental costs, 50 households face the specter 

of homelessness. From my perspective, this situation was caused 

simply because somebody at HUD gave somebody at the Community Development Corporation of Long Island wrong information, 

wrong advice, and the victims should no be these 50 families. 

So my question to you, Mr. Secretary, is rather simple. How can 

we work together in a constructive fashion to address this problem 

and ensure that these 50 families are not thrown out on the street, 

not because it is their State of mind, not because of funding formulas, not because of a broad national debate on the amount of 

available funds for section 8, but because of a simple bureaucratic 

mistake. How can we work together and what specific actions can 

I expect your office to take to work with me to solve this problem? 

Secretary JACKSON. I cannot tell you right now the specific actions, but let me say this to you. I have encountered on a number 

of occasions where we have committed to something and reneged. 

48

Each time, we have tried to rectify it. I would like to know the specifics and I would ask you to get with Dr. Weicher and to let us 

know that. We will work through it with you. If it is our fault, then 

we will do everything in our power to rectify it. And that is a very 

different situation than we were talking about earlier today. 

Mr. ISRAEL. It is different, and Mr. Secretary, I do have a letter 

that I will give to you to give to your staff, and my staff will be 

following up within several days. Thank you. 

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

Mr. NEY. I thank the gentleman. 

Secretary JACKSON. Thank you. 

Mr. NEY. Thank you. 

The gentleman from California, Mr. Royce. 

Mr. ROYCE. Thank you, Mr. Chairman. 

Firstly, I would like to commend our witness today on his good 

service to this country. 

Secretary JACKSON. Thank you, sir. 

Mr. ROYCE. I think you have an outstanding background in housing. I think we are very fortunate to have you. I want to commend 

you also on your testimony and on your presence this morning in 

the face of Capitol Hill. 

Secretary JACKSON. Thank you. 

Mr. ROYCE. I hope you do not take my following question as critical of your overall efforts, because you have done an outstanding 

job. 

I do, however, have a few concerns about an initiative HUD is 

currently proposing. I am concerned that the zero downpayment 

program may not be an appropriate policy to be enacted by the government per se. I am somewhat sympathetic to the goals of this 

program, but I am afraid that if we enact this zero down, we may 

be suffering from what Friedrich Hayek called the fatal conceit, 

where there is a belief that, in his words, ‘‘man is able to shape 

the world around him according to his wishes.’’

Hayek and pretty much every other economist would tell us that 

a command-and-control role for government in the marketplace 

does not usually bring desired results over the long term. Many 

have argued for some time that to retain its market share, the 

FHA resorts to some questionable underwriting practices, and that 

those practices might put both the homebuyer and the taxpayer at 

greater risk. 

So to look at this new program, here you have a buyer that 

would be financing in essence more than 100 percent of the value 

of the home. I am afraid that this program might actually result 

in many more families being placed into default because some may 

not be able to afford over 100 percent of the value of their homes. 

Alternatively, I understand the FHA believes and predicts that 

it is going to make $180 million in profits on this program. My 

question is, Mr. Secretary, is FHA saying it is smarter than the 

market, which gives me great hesitation, or does the lack of participation from the marketplace in the zero down product suggest that 

there are more risks to the program than FHA’s financial modeling 

predicts? 

Secretary JACKSON. Thank you very much for the question. I do 

not think we are smarter than the marketplace. I will be the first 

49

to say that. But Congressman Royce, I really believe from my experience, and it might be limited, but my experience in Texas when 

I was running the Dallas Housing Authority, and then had the 

chance to sit for the Governor on a number of committees, that 

when a person or family is paying 50 percent or 55 percent or 60 

percent of their income for rent, that if we can give them an opportunity to own their homes, even at 40 percent of their budget, it 

is much better. 

So we are not going to change the underwriting guidelines. What 

we are saying is this, these persons will qualify. I have encountered 

so many families, especially Hispanic families, that want to own a 

home, but they do not have the downpayment or the closing costs. 

Now, I will tell you, the American Dream Downpayment Program 

which you all passed is excellent. But in my effort to be innovative 

and creative, we are trying to find other ways to get people into 

homes. 

To me, we are going to strictly scrutinize the persons that are 

coming in. I do not think our default rate will be any higher than 

it is in our regular program. If we see it, believe me, I had your 

same reservations when I was sitting down talking about the program. If it is, and I am the Secretary, I will come back and cut the 

program immediately. I think it is our responsibility to be very judicious with the taxpayer’s money. 

Mr. ROYCE. Secretary Jackson, I thank you. I thank you for appearing again here today. 

Secretary JACKSON. Thank you. 

Mr. NEY. I thank the gentleman. 

The gentleman, Mr. Scott. 

Mr. SCOTT. Thank you very much, Mr. Chairman. 

Secretary Jackson, I have two phases to my period of questioning. 

Secretary JACKSON. Yes, sir. 

Mr. SCOTT. The first one concerns legislation that I am working 

on and this committee is taking very seriously, and we have put 

forward. The major lead sponsor is Chairman Ney. Of course, 

Chairman Oxley is working on this and also our Ranking Member, 

Barney Frank, and also myself. It has to do with financial literacy. 

In its form in our housing counseling program, we have put forward a very significant measure. 

As you know, we are having a serious problem with predatory 

lending. We have a serious problem with financial abuses. It is all 

targeted as a part of this program, the cornerstone of which is a 

1-800 toll-free number with a live person on the other end. In addition to that, we set up local councils; we set up grants that could 

be made available to some of the groups, NAACP, AARP, other 

groups with credibility there. 

We would like to get your commitment today to this committee, 

to myself, that wants this bill passed and signed by the President, 

that you will implement this; the two-way 800 number in its entirety. 

Secretary JACKSON. When it is passed, you can be assured that 

I will do that, Congressman. We faced this before in another incident at HUD where we had numerous numbers and no one answered the phone. I am totally averse to that. I think that there 

50

should be a live person on the other end of the phone when people 

call. 

Let me say this to take it a little further. I cannot reiterate 

enough my feelings about if we are going to help low-and moderateincome people own homes, that counseling is absolutely imperative 

that they have, because they have to understand, first of all, what 

occurs at closing and what to look for, and second of all, how they 

have to have reserves to make sure that they stay in their homes. 

Mr. SCOTT. I am so glad to hear you give that response. I appreciate your commitment. This committee does as well, because that 

two-way 800 number, to have that person, to get a human being 

on the other end of that phone is going to go a long way. That is 

the major infrastructure piece that we have in place. 

It also serves to help us have a good measuring device. We will 

be able to receive input, and therefore be able to design the literacy 

programs to fit the target group. If we have a way of them initiating the communications to us, we will know that. So I really appreciate that and look forward to working with you. 

The other part of my question goes to HOPE VI. 

Secretary JACKSON. Yes. 

Mr. SCOTT. I represent Georgia, the Atlanta metro area. I think 

you may know Renee Glover, the director of our Atlanta Housing 

Authority, a wonderful program, one of the great, great success stories, as you know, in Carver Homes and the Centennial Olympic 

Village that we have, Eastlake. All of those are great programs. 

What we have, though, is we are in the middle of this. I want 

to lean on you, and I have been very, I do not want to say entertained, but I have been very well informed with this morning’s 

presentation and your interaction with this committee. I want to 

establish as best we can a partnership. It is very interesting that 

you made the point that you helped to write this law. As you know, 

it was founded as a Republican vehicle. It was founded by Jack 

Kemp out of New York. 

Secretary JACKSON. That is correct. 

Mr. SCOTT. It is one of the great stories, one of the great successes of the Republican Party in its efforts. Therefore, I am somewhat disappointed that there is any means of canceling this program. I can see adjustments. I can see where there have been some 

abuses. But why throw out the baby with the bath? In my own 

state, in Georgia, we would be very dramatically affected because 

we have programs in process. We have had great success there. I 

want to impress upon you to review your decision to be against this 

and do it in the name of your father’s advice that you just said he 

gave to you, just 20 minutes ago, when you gave your Statement 

to correct an impression that you gave. 

You said, ‘‘my father told me that as long as there is hope, you 

can make it in this country.’’ Let us keep HOPE VI alive, in the 

name of your father. 

Secretary JACKSON. Thank you. 

Mr. NEY. The time of the gentleman has expired. 

Mr. Shays. 

Secretary JACKSON. Thank you, Congressman. Thank you very 

much. I will look at it. 

Mr. SCOTT. Thank you. 

51

Mr. SHAYS. Mr. Secretary, welcome. 

I have been wrestling with a number of questions that I want to 

ask you, but HOPE VI was kind of on the top of my list. I have 

been trying to understand the Administration’s opposition to HOPE 

VI for a number of years, because I find it bizarre. I speak from 

just the experience. We have a HOPE VI project in Stamford where 

upper-income, upper-middle-income, middle-income, lower-middle 

income, lower-income and destitute people live in the same units. 

When an upper-income person leaves that unit, you do not know 

who may go in, but it could be someone with no income. 

You see young African Americans and Hispanic kids seeing 

someone get into a nice car, but guess what, they are going to a 

nice job. They are seeing firemen and policemen. They are seeing 

what I think is just an extraordinary experience. They are seeing 

the real world that they were cut out from seeing when they lived 

in public housing. 

Secretary JACKSON. That is true. 

Mr. SHAYS. What I am hearing as an argument is that the money 

has not been spent quickly enough. But when it is spent, it is spent 

well, is it not? 

Secretary JACKSON. Yes. I will tell you, Congressman, that of the 

136 projects that we funded, the 25 that have been completed have 

done very well. I would like to say something in answering your 

question to Congressman Scott and to Congressman Watt, nine of 

the successful 25 programs have been done within two cities, Atlanta and Charlotte. 

But at the same time, I think it is only fair for me to be candid 

with you. When we sat down, the five of us, at the request of the 

Congress and Secretary Jack Kemp, we envisioned this program to 

work extremely well very quickly. We have not had that. 

Mr. SHAYS. I accept that, but what I want to know is, you know, 

the money is not spent until the projects are under way, so the 

worst that happens is it is not spent, but when it is spent, it is 

spent so well. Of all the projects I have ever seen the government 

do, I am not exaggerating, this is the best. It is the best program. 

I feel real pride in it. And what was there before? What was there 

before was public housing that was smelly, dirty, just lots of poor 

kids. There was drug dealing. And now there is a swimming pool; 

there is a weight room; there are a lot of neat things. 

I just would again, in the name of your father or your mother 

or your grandmother or your great-grandmother, I would like you 

to review this. I think this is an awesome program. It is something 

that I think Jack Kemp and you and others did well. I think for 

some reason your assumption that it is not being spent has made 

you think that maybe we do not need it. I just would try to say, 

well, why isn’t it being spent as quickly and what can we do to 

make it be spent more quickly. 

The other thing I just want to touch base with you on is, I have 

always questioned the logic of eliminating all public housing, which 

seems to be the direction, because when you have public housing, 

you know you have locked yourself in to a certain cost. We replaced 

it with section 8 vouchers in many cases. But it is just logical that 

the section 8 vouchers are going to cost more each year as the market goes up. It is kind of like why I bought my own home. I bought 

52

my own home so I did not have to pay more exorbitant rent. That 

same logic, it seems to me, applies with public housing. 

Don’t you have a bit of concern that we have become so reliant 

on section 8s that ultimately we will not be able to afford them? 

Secretary JACKSON. Yes. 

Mr. SHAYS. Okay. Thank you, Mr. Chairman. 

Mr. NEY. I thank the gentleman. 

Mr. Miller? 

Mr. MILLER. Thank you, Mr. Chairman. 

Good morning, Mr. Secretary. Mr. Secretary, on page 17 or your 

testimony at the top of the page you devote two paragraphs to 

predatory lending. I would like to direct your attention to that. 

First of all, the rules that you talk about there, they apply only to 

FHA programs. Is that not correct? 

Secretary JACKSON. I do not have the testimony. 

Mr. MILLER. Can we stop the clock, Mr. Chairman? 

Mr. NEY. We have a copy that is coming to you. 

Secretary JACKSON. Which page now? 

Mr. MILLER. Page 17, the top two paragraphs, predatory lending. 

Secretary JACKSON. Yes, thank you. 

Mr. MILLER. First of all, the regs that you are talking about just 

apply to FHA programs. Isn’t that right? 

Secretary JACKSON. Yes. 

Mr. MILLER. They do not apply more broadly to what is going on 

in the economy or happening to consumers generally. 

Second, a definition. There does not appear to be an agreed-upon 

definition of predatory lending. We have had hearings at which 

lenders have testified the operating definition of predatory lending 

appeared to be something bad that I do not do. I would like to get 

at what your definition of predatory lending is. 

These two paragraphs seem to mix up two things. One is selling 

houses at fraudulently inflated rates based upon fraudulent appraisals, et cetera. And then also borrowing by someone who is, as 

I think Mr. Weicher testified to in February, a consumer who owns 

their home, who is house-rich and cash-poor, who is in a home with 

a lot of equity, but is strapped for cash, and practices that target 

those consumers. That is what I am talking about. Could you tell 

us what of the regs that FHA or your department has enacted get 

at that second situation, the consumer who is in their home and 

is refinancing? 

Secretary JACKSON. I can tell you, if you would like to go into detail, I think you would want a detailed answer for a short period. 

I will ask Dr. Weicher to do it for you. 

Mr. MILLER. Okay. 

Mr. WEICHER. Mr. Miller, we have a number of regulations. You 

are quite right. There is a distinction between the flipping regulations and the regulations addressing lending proper. We have a 

flipping regulation which we think is very effective. 

With respect to the lending regulations, what we have been doing 

is identifying individual practices of lenders which are damaging to 

people who are buying homes with FHA-insured mortgages. We 

have been either prohibiting those practices or we have been establishing rules as to what is exactly permitted. 

53

With respect to situations where people are borrowing more than 

they should be, what we have is essentially ratio guidelines as to 

how much of your income can be devoted to your mortgage payment. If your payment-to-income ratio is above our guidelines, then 

either there has to be a very good reason or we will not insure that 

mortgage. 

Mr. MILLER. How about equity-stripping practices, up-front fees, 

the financing of up-front fees, single-premium insurance policies, 

credit insurance, otherwise, are those prohibited by your rules? 

Mr. WEICHER. Single-payment premium credit life insurance certainly is prohibited. Excessive up-front fees are either prohibited or 

they come under the provisions of the HOPE, the homeowners equity protection act. In that situation, at that point, it is in the province of the Federal Reserve as to what is permissible. Those are not 

FHA loans. 

Mr. MILLER. If you know some Federal Reserve regs on this, you 

know more than I do. 

Mr. WEICHER. I am sorry? 

Mr. MILLER. I am not aware of any Federal Reserve regs on that 

point. 

Mr. WEICHER. I cannot give you the reference right here, but I 

can give it to you, Mr. Miller. 

Mr. MILLER. Okay. Also, at various places in your testimony in 

February and the Secretary’s testimony, there are various phrases 

used, predatory lending, abusive lending practices, deceptive and 

fraudulent practices. Do you use those terms interchangeably or do 

you mean something different by them? 

Secretary JACKSON. They are interchangeable, but also different, 

because you can have fraudulent transactions that might not necessarily be predatory. But usually when you have predatory transactions, they are fraudulent in many ways. 

Mr. MILLER. Okay. Well, particularly the phrase ‘‘deceptive and 

fraudulent practices,’’ I cannot help but notice how close that is to 

the phrase ‘‘unfair and deceptive trade practices’’ in section five of 

the Federal Trade Commission Act. Do you regard these practices 

that you prohibited as in violation of section five of the Federal 

Trade Commission Act? 

Mr. WEICHER. Mr. Miller, it is coincidental that our definition is 

very close to the FTC’s definition, but we have talked to them 

about that when we discovered that. 

Mr. NEY. The time has expired. 

We will now go on to the gentleman from Missouri, St. Louis to 

be specific, Mr. Clay. 

Mr. CLAY. Thank you, Mr. Chairman. It is always good to see the 

Secretary, to spend the better part of my morning with you. I am 

glad to see you again, Mr. Secretary. 

Secretary JACKSON. Thank you. 

Mr. CLAY. In St. Louis County, we are going to lose between 200 

to 300 of slightly more than 6,000 vouchers in the section 8 program. It is worse than that in St. Louis City. The county is going 

to be forced to use up their reserves to cover the shortfall of section 

8 funding. You announced on May 18 that HUD will calculate payments for the first quarter of 2004 by applying a full year inflation 

adjustment over an agency’s average per-unit cost in May through 

54

July in 2003, and pay that same level for each and every quarter 

of 2004. 

The frontloading of payments supposedly will ease the crisis. 

This is not seen as a solution in the First Congressional District 

of Missouri as our figures show that this will still result in a shortfall at the end of the year. This is only postponing the manifestation of the problem. Since you are already seeing evidence of 

States, Oregon for example, terminating voucher contracts, how is 

this announced efficiency supposed to work? Is it efficient to eliminate families from housing and place them in the streets? Is this 

a plan of the Administration to reduce section 8 rolls and place 

them on the homeless rolls? 

Mr. CLAY. Congressman, let me answer the last part. No, we are 

not in any way trying to reduce the section 8 rolls or to throw any 

person who presently has a certificate or voucher in use out of the 

certificate or voucher. 

I do believe that those persons who have vouchers that are on 

the street that have not been utilized, if they are over the cap that 

has been set, yes, that does present a problem. I am not going to 

sit here today and tell you it does not. But any person who is in 

the process right now, on a voucher, housing choice voucher, they 

are not losing their voucher. We believe that the corrections that 

we talked about earlier this morning, that I talked about earlier 

this morning, will address the need in St. Louis County as it has 

addressed the needs in Boston and the other places. 

I think it does clear up the problem, because the shortfall as the 

housing authorities foresaw it, was this year. We have corrected 

that problem. I think that if the flexible voucher program is approved by Congress, then clearly we will serve as many people, almost the two million people we serve today, on the present program. 

Again, I go back to what I said earlier. I did not have a unitbased section 8 program. I had a budget-based, where until 1998 

they went to the unit-based. They gave us a budget. That is what 

we are doing to the housing authorities now. We are saying, you 

have a budget; utilize your budget and stay within that budget. 

That is the way I operated the section 8 program for almost 16, 17 

years. 

Mr. CLAY. Okay. Thank you for that answer. 

Let’s go to GSEs. Are you familiar with an April 28 Wall Street 

Journal article entitled Regulators Hit Fannie, Freddie With New 

Assault. 

Secretary JACKSON. Yes, I remember. 

Mr. CLAY. Okay. In 2003, at Fannie Mae alone, investment in 

the low-income housing tax credit supported the production and 

preservation of over 37,000 homes, making them affordable to very 

low-income families. Additionally, mortgage revenue bonds financed affordable homes for nearly 98,000 families. Why don’t 

these numbers count toward reaching the GSEs’s housing goals? 

Don’t we want to encourage these activities? 

Secretary JACKSON. If they qualify, they will be used to count 

against them. But again, Congressman, I will simply say this, because the question has come up so many times today. What I would 

ask you or the other members of the committee to do is to ask the 

55

persons at the GSEs to give us permission to release the figures 

to you and let you judge yourself if they are meeting the goals of 

low-and moderate-income persons. We are restricted. We cannot. 

They give us quarterly those figures. I am willing to release them 

if the Chairman of each one of those GSEs says we can. They are 

not meeting their goals. They are not leading the market. 

Mr. CLAY. I have heard what you said today that you follow the 

direction of this Congress. I find the timing somewhat peculiar, 

that at a time when section 8 and HOPE VI are being curtailed, 

and that the major force holding up the economy is housing, that 

OFEO and Treasury and now HUD have the GSEs in their scope. 

Why 6 months prior to the presidential election is there this drive 

for goals? 

Secretary JACKSON. Well, Congressman, I will tell you, as I said 

to the Congresslady from New York and Congresswoman Waters 

and Congressman Frank, this is not new. I have been reiterating 

the housing goals and the sub-goals almost from day one coming 

in, because I thought then and I think now that they are very, very 

important to meet the low-and moderate-income guidelines that 

were set by Congress. It is not new. 

There is not a person probably in this room that is more supportive of the GSEs than I am. I think that they can do and have 

done a good job, but I think that clearly they can do a lot more to 

address the charter mandate group of people that they should 

serve. I am not in any way trying to restrict, halt them or hurt 

them. That is not the case, I can assure you of that. 

Mr. NEY. The time has expired. 

Would Mr. Davis like to yield to Mr. Clay? 

Mr. DAVIS. Not after two-and-a-half hours, Mr. Chairman. 

[Laughter.] 

Mr. NEY. Good answer, Mr. Davis. 

Mr. DAVIS. Thank you, Mr. Chairman. 

Let me try to go back and try to identify a little bit of new 

ground, Mr. Jackson, or at least a new question on some old 

ground. One thing that no one has really asked you today is this, 

you have heard from a lot of people on my side of the aisle about 

HOPE VI and the passion that certain Democrats feel around it. 

What is striking to me is that frankly there are a lot of Republicans, and not just Chris Shays, who has a fairly strong attachment to this program. Ms. Harris from Florida is a strong supporter of this program. 

Maybe most tellingly, you and I have a mutual friend in common 

in Secretary Kemp, your former boss. Based on my last conversations with him, he remains a supporter of HOPE VI. Can you for 

just a moment, I do not want a filibuster on this from you, but can 

you just give me some quick insight on why so many Republicans 

are as unenlightened as you are on this issue? On why so many 

Republicans are, from your perspective, as unenlightened as you 

are on this issue? Why do so many Republicans disagree with you 

on HOPE VI? What are they missing that you know? 

Secretary JACKSON. I honestly do not know. I am just speaking, 

Congressman, from my perspective. 

Mr. DAVIS. Does that make an impression on you? Just to give 

you some history, as you know, last year we had the same discusVerDate 0ct 09 2002 11:55 Nov 05, 2004 Jkt 000000 PO 00000 Frm 00059 Fmt 6633 Sfmt 6633 G:\DOCS\96527.TXT FIN1 PsN: MICAH
56

sion with Mr. Martinez, and ultimately the bipartisan forces that 

favored HOPE VI prevailed. Again, I give our colleagues on this 

side of the aisle their share of the credit for that. Does that move 

you at all, that so many people in your own party and of your own 

philosophy just do not agree with you on this, including Mr. Kemp? 

Secretary JACKSON. Does it give me reason to think? Yes, I have 

thought about it. 

Mr. DAVIS. Does it give you reason to move? 

Secretary JACKSON. No. I think that from my perspective, when 

you have authorities, 75 percent of them that have outstanding balances with their HOPE VI, that have gone on for more than 6 or 

7 years, no. 

Mr. DAVIS. What is the primary structural reason for that, Mr. 

Jackson? If you had to give me very quickly one primary structural 

reason why so many of these HOPE VI’s have not been completed, 

what is it? 

Secretary JACKSON. I will tell you, in my mind it is that from the 

inception of the program when we wrote it, we told the housing authorities they should go out and get developers who would leverage 

the program and create the atmosphere that Congressman Scott 

just talked about, and Congressman Shays, both socially and economically integrate the communities. They did not do it. In the 

process of them not doing it, the money has sat there. 

Mr. DAVIS. Then Mr. Jackson, why don’t you and the President 

simply come to Congress and give us a legislative approach that 

addresses exactly that problem, rather than throwing the whole 

program out? 

Secretary JACKSON. Well, my position is, and this is my recommendation and I do not want you to keep saying ‘‘the President.’’ 

I think that after reviewing the program with you——

Mr. DAVIS. I am saying ‘‘the President’’ because he signs his 

budget. 

Secretary JACKSON. Yes, he does. And after a year being here 

looking at it, and having another chance to evaluate it, it was my 

perspective and the Secretary at that time, Secretary Martinez, 

that clearly with almost $3.6 billion outstanding then, it would be 

better to let the program continue in its present form. And if they 

show us that in fact that the program is moving in the direction, 

whether we reestablish HOPE VI or some program corollary to 

that, then we would be willing to do that. 

Mr. DAVIS. Let me shift gears in the time I have, to the GSEs 

for a moment. Something that I do not understand about your position, the Administration’s position, Mr. Jackson. I hear your concern that the GSEs are not doing enough to meet their goal of providing affordable housing and to serve the mission. I understand 

that. What does that have to do with receivership? 

I will tell you why I make that point. I looked at Secretary 

Snow’s letter where he lays out the primary reasons he favors GSE 

regulatory reform. He spends the whole second paragraph talking 

about receivership. There is nothing in the second paragraph talking about affordable housing goals. Later on, there is a reference 

to affordable housing goals. Can you enlighten me on what receivership and changing over to the receivership option has been a failure as it has to do with housing goals? 

57

Secretary JACKSON. No, actually I cannot enlighten you about receivership. My only objective is to make sure that they meet the 

housing goals that they are chartered under. 

Mr. DAVIS. Have you seen the bill that was marked up in the 

Senate? 

Secretary JACKSON. Yes. 

Mr. DAVIS. Do you agree with me that there are very few provisions in that bill? There is a lot that deals with receivership. There 

is a lot that deals with the identity of the regulator. Do you agree 

with me that there is very little in that bill that deals with affordable housing goals and expanding that mission? 

Secretary JACKSON. The affordable housing goals were coming 

separate, and we have submitted——

Mr. DAVIS. I did not ask you about that. I asked you about the 

Senate bill, just to get your opinion on that. 

Secretary JACKSON. I support a strong regulator. 

Mr. DAVIS. But to answer my question, have you reviewed the 

Senate bill? 

Secretary JACKSON. I have reviewed it. You mean the initial one? 

Mr. DAVIS. The one that was marked up a few weeks ago. 

Secretary JACKSON. Yes. 

Mr. DAVIS. Do you agree with me that in a 39-page bill that, 

being charitable, maybe only two or three pages of it actually deal 

with the affordable housing mission, and that the bulk of it deals 

with receivership and the identity of the regulator? 

Secretary JACKSON. No, I thought the bulk of the bill, and this 

will be a difference in our interpretation, dealt with an efficient 

and effective way to regulate the GSEs. 

Mr. DAVIS. I agree with that, but how much of the bill deals with 

the phrase ‘‘improving affordable housing’’ mission or the concept 

of improving the affordable housing mission? 

Secretary JACKSON. I cannot get in depth of what it deals with, 

but I think the ultimate goal is to regulate them——

Mr. DAVIS. I will tell you, if the chair will indulge me 30 seconds 

since we are wrapping up, this is why I raise this, Mr. Jackson. I 

think Mr. Clay does raise an interesting point. We hear that the 

Administration is deeply concerned about improving the affordable 

housing mission, but yet the Administration appears to be supportive of a Senate bill that does not really address that issue. We 

hear that the Administration is concerned about safety and soundness, but yet the Administration has not identified a safety and 

soundness crisis. Those things do raise an obvious question of why 

the Administration is pushing this particular agenda, absent a crisis context. 

Just one final note, do you know of any scenario that leads you 

to think that the GSEs are more likely to collapse than, say, any 

major bank in this country? 

Secretary JACKSON. No. Let me say this. I agree with you. That 

is not the issue. The issue is steel. 

Mr. DAVIS. What is not the issue? When you say that is not the 

issue, what do you mean when you say ‘‘that is not the issue’’? 

Secretary JACKSON. You asked me if I believe that they were any 

more able in preventing themselves from collapsing. 

Mr. DAVIS. Right. Okay. 

58

Secretary JACKSON. No. 

Mr. DAVIS. So you agree with me on that. 

Secretary JACKSON. Yes. 

Mr. DAVIS. Okay. 

Secretary JACKSON. But the issue is I do think that as we regulate banks or others, that a strong regulator is very important for 

the carrying out of the missions and making sure that they carry 

out their responsibility. That is all that I think. 

Mr. DAVIS. But just to close out and summarize, you do agree 

with me that there is no empirical evidence that the GSEs are any 

more at risk than any other financial institution. 

Secretary JACKSON. I cannot tell you there is no empirical evidence. I can tell you that is——

Mr. DAVIS. That is not your major concern. 

Secretary JACKSON. My major concern is affordable housing 

goals. 

Mr. DAVIS. Okay. All right. 

Thank you, Mr. Chairman. 

Mr. FRANK. Mr. Chairman? 

Mr. NEY. The gentleman? 

Mr. FRANK. I just have to respond for 30 seconds on this Administration’s concern about the affordable housing goals. The fact is 

that you had the legal authority to promulgate increased goals last 

year that would now be in effect. Your Administration failed to do 

that. Indeed, when we called attention to that failure, the original 

response from the department was, oh well, we are planning to do 

it. Only afterwards did they realize that the time has passed in 

which you could have done it for this year. 

So the fact is that there was no, a whole presidential term will 

have gone by in which the goals were left untouched, although you 

had the authority last year to increase them, and you deliberately 

did not exercise that authority and you promulgated them this 

year, but you had the legal authority to do it last year, let it go 

by. In fact, when we noted that, someone said, well, we are going 

to it, but it was too late for you to do it last year. 

So it is pretty clear to me that historically your interest in increasing the goals came after your desire to make other changes in 

the GSEs. Otherwise, I do not know why you would not have done 

it before. Let me ask you then, why did HUD not last year use its 

authority to promulgate those higher goals so they would already 

be in effect? 

Secretary JACKSON. Congressman, I think that is absolutely a 

fair question. I will simply answer this way. It was an oversight 

on our part. I believe that the rules should be promulgated. 

Mr. FRANK. It was an oversight. You forgot to raise the goals for 

the GSEs. 

Secretary JACKSON. It was an oversight. I think your analysis is 

correct. It was brought to the attention, and immediately when it 

was brought to our attention——

Mr. FRANK. We brought it to your attention. 

Secretary JACKSON. I agree with you. You brought it to our attention. But it was not that we had not been working on it. 

59

Mr. FRANK. It is hard for me to believe, Mr. Secretary, that if 

this was really an important thing to you, that something that 

basic you would have just lost it. 

Secretary JACKSON. It is very important to me. That is why we 

are working on it. I am the Secretary and that is why we are working on it. 

Mr. FRANK. But you overlooked it last year. 

Secretary JACKSON. I was not the Secretary last year. 

Mr. FRANK. Okay, the Secretary overlooked it. You are clean. 

Secretary JACKSON. No, I was part of the Secretary. I said ‘‘we’’ 

and you are correct. 

Mr. NEY. And wrapping up briefly, 30 seconds, Mr. Scott. 

Mr. SCOTT. Thank you very much, Mr. Chairman, for your kindness on this question. 

Let me go back to HOPE VI just for a moment. I am not giving 

up on you. I am still there with you. 

Secretary JACKSON. Yes, sir. 

Mr. SCOTT. Let us see if we cannot get an area with which we 

can work going forward. You have agreed that Atlanta is a success 

story. You have agreed that Charlotte is a success story; that Dallas, Mr. Shays and several of us on this committee. You also recognize the strong bipartisan Republican and Democratic effort here. 

It is a great success story. 

What I would like to implore of you is to look and see going forward if we cannot do what is fair. Why should we punish those 

projects in Atlanta and other places across this country that have 

been successful; that have done everything they were supposed to 

do, and have gone on and have made additional investments of 

which they are partially through with other HOPE VI projects, 

which would be jeopardized if the funding is cut. 

Cannot we come up with a process in which we can evaluate 

each on its own basis? Those programs that are totally failures, I 

agree with you. If they have failed, if they have not done, then we 

should use a set of circumstances to deal with them, but not throw 

the whole baby out with the bath. Let’s find a way to keep those 

programs going that are successful, and then separate those others 

that have not and have failed, and work with those communities 

on maybe an alternative program, but to keep this program going 

where it has been successful. 

Could we get your commitment to work with this committee on 

that? 

Secretary JACKSON. You can get my commitment to work with 

the committee. I cannot give you a commitment that it is going to 

be in the form of the HOPE VI. Maybe there will be a HOPE VII 

program, but we have tried and we will continue to try to look at 

ways to make sure that we invest in the cities, and that the cities 

have the opportunity to propagate programs. 

Again, I go back. Yes, I will look for ways to work with cities who 

have been very, very productive. We are doing that now with bond 

issuance that we are permitting cities like Atlanta, Chicago, Charlotte and others to do, because we realize that they have been very 

progressive. I think that it is our responsibility when we have progressive cities who are doing what they should be doing for low-and 

moderate-income persons, that we work with them in every way to 

60

make sure that they are carrying out their mission. I will continue 

to do that. 

Mr. SCOTT. Fine. Thank you. I look forward to working with you 

on that and the financial literacy. 

Secretary JACKSON. Thank you. 

Mr. SCOTT. Thank you very much, Mr. Chairman. 

Mr. NEY. Thank you. 

And I want to thank everyone for participating. I would just 

make a closing comment, if I could. I do not want to get into the 

GSE debate, but I do think frankly that Treasury, and I have written a letter. I am speaking for myself here, but I think that as the 

whole debate started to go forth where we were going to discuss 

very serious issues about the future of housing and of course the 

controversy that has swelled up over this. I do think that, again 

a personal opinion, that Treasury just took the bill and completely 

scrapped it. The House will was completely unacceptable and then 

the Senate became unacceptable. Somebody made a comment about 

the Senate. Treasury finds the Senate unacceptable. 

So I do not know what they find acceptable, but I think they 

have put the kibosh, frankly Treasury did, on the whole ball of 

wax. I do not know if they intend to do it some other way. So this 

is not HUD. You see, I am giving you a break here. It is Treasury. 

I just think at some point in time we have to get together to talk 

the issue out. I think it was not fair, again, to a lot of the members 

on either side of the aisle, to do that, but it is just my opinion. 

I want to thank the members. I want to especially thank the Secretary for your time and your patience in coming before the Congress. 

Secretary JACKSON. Thank you so much. 

Mr. NEY. With that, the committee will be adjourned. The record 

will be open, without objection, for 30 legislative days in which 

members can have additional questions or revise and extend remarks. 

[Whereupon, at 1:55 p.m., the subcommittee was adjourned.] 

(61)

A P P E N D I X

May 20, 2004

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