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24–198 PDF 2005

S. HRG. 108–870

NOMINATIONS OF: ROMOLO A. BERNARDI,

DENNIS C. SHEA, AND CATHY MACFARLANE

HEARING

BEFORE THE

COMMITTEE ON

BANKING, HOUSING, AND URBAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

ON

NOMINATIONS OF:

ROMOLO A. BERNARDI, OF NEW YORK, TO BE THE DEPUTY SECRETARY OF

THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

DENNIS C. SHEA, OF VIRGINIA, TO BE ASSISTANT SECRETARY FOR POLICY

DEVELOPMENT AND RESEARCH OF THE U.S. DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

CATHY MACFARLANE, OF VIRGINIA, TO BE ASSISTANT SECRETARY FOR PUBLIC

AFFAIRS OF THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

APRIL 21, 2004

Printed for the use of the Committee on Banking, Housing, and Urban Affairs

(

Available at: http://www.access.gpo.gov/congress/senate/senate05sh.html

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

RICHARD C. SHELBY, Alabama, Chairman

ROBERT F. BENNETT, Utah

WAYNE ALLARD, Colorado

MICHAEL B. ENZI, Wyoming

CHUCK HAGEL, Nebraska

RICK SANTORUM, Pennsylvania

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

JOHN E. SUNUNU, New Hampshire

ELIZABETH DOLE, North Carolina

LINCOLN D. CHAFEE, Rhode Island

PAUL S. SARBANES, Maryland

CHRISTOPHER J. DODD, Connecticut

TIM JOHNSON, South Dakota

JACK REED, Rhode Island

CHARLES E. SCHUMER, New York

EVAN BAYH, Indiana

ZELL MILLER, Georgia

THOMAS R. CARPER, Delaware

DEBBIE STABENOW, Michigan

JON S. CORZINE, New Jersey

KATHLEEN L. CASEY, Staff Director and Counsel

STEVEN B. HARRIS, Democratic Staff Director and Chief Counsel

MARK A. CALABRIA, Senior Professional Staff

JONATHAN MILLER, Democratic Professional Staff

JENNIFER FOGEL-BUBLICK, Democratic Counsel

JOSEPH R. KOLINSKI, Chief Clerk and Computer Systems Administrator

GEORGE E. WHITTLE, Editor

(II)

CONTENTS

THURSDAY, FEBRUARY 26, 2004

Page

Opening statement of Chairman Shelby ................................................................ 1

Opening statements, comments, or prepared statements of:

Senator Sarbanes .............................................................................................. 2

Senator Dole ...................................................................................................... 3

Senator Reed ..................................................................................................... 4

Senator Allard ................................................................................................... 5

Senator Schumer .............................................................................................. 6

WITNESSES

James T. Walsh, a U.S. Representative in Congress from the State of New

York ....................................................................................................................... 7

Robert Dole, a former U.S. Senator from the State of Kansas ............................ 8

John W. Warner, a U.S. Senator from the State of Virginia ............................... 9

Hillary Rodham Clinton, a U.S. Senator from the State of New York ............... 26

NOMINEES

Romolo A. Bernardi, of New York, to be Deputy Secretary, U.S. Department

of Housing and Urban Development .................................................................. 11

Biographical sketch of nominee ....................................................................... 27

Response to written questions of:

Senators Shelby and Sarbanes ................................................................. 47

Senator Reed .............................................................................................. 47

Dennis C. Shea, of Virginia, to be Assistant Secretary for Policy Development

and Research, U.S. Department of Housing and Urban Development ............ 13

Biographical sketch of nominee ....................................................................... 35

Response to written questions of:

Senators Shelby and Sarbanes ................................................................. 55

Senator Reed .............................................................................................. 55

Cathy MacFarlane, of Virginia, to be Assistant Secretary for Public Affairs,

U.S. Department of Housing and Urban Development ..................................... 14

Biograhpical sketch of nominee ....................................................................... 41

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

Letter from Richard M. Daley, Mayor, City of Chicago, to Senator Paul

S. Sarbanes, dated April 20, 2004 ...................................................................... 60

(III)

(1)

NOMINATIONS OF:

ROMOLO A. BERNARDI, OF NEW YORK,

TO BE DEPUTY SECRETARY

DENNIS C. SHEA, OF VIRGINIA,

TO BE ASSISTANT SECRETARY FOR

POLICY DEVELOPMENT AND RESEARCH AND

CATHY MACFARLANE, OF VIRGINA,

TO BE ASSISTANT SECRETARY

FOR PUBLIC AFFAIRS

U.S. DEPARTMENT OF HOUSING

AND URBAN DEVELOPMENT

WEDNESDAY, APRIL 21, 2004

U.S. SENATE,

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS,

Washington, DC.

The Committee met at 2:04 p.m., in room SD–538, Dirksen Senate Office Building, Senator Richard C. Shelby (Chairman of the

Committee) presiding.

OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY

Chairman SHELBY. The hearing will come to order.

We have three nominees to consider this afternoon, and I appreciate the willingness of the nominees to appear before the Committee today.

Our first witness will be Mr. Romolo A. Bernardi, nominated to

be the Deputy Secretary of the Department of Housing and Urban

Development. Currently, Mr. Bernardi serves as HUD’s Assistant

Secretary of Community Planning and Development, where he

oversees many of HUD’s most important programs, including the

Community Development Block Grant Program and the HOME Investment Partnership Program. Mr. Bernardi was the fifty-first

mayor of the City of Syracuse, New York.

Our second witness is Ms. Cathy MacFarlane—welcome—nominated to be Assistant Secretary for Public Affairs for the Department of Housing and Urban Development. Most recently, Ms.

MacFarlane served as Director of the Office of Public Affairs at the

Federal Trade Commission. She has also held a variety of public

affairs positions with the National Institute for Justice and the

Federal Bureau of Investigation.

2

Our final witness this afternoon is no stranger to the Senate. It

is Mr. Dennis Shea, who has been nominated to be Assistant Secretary for Policy Development and Research for the Department of

Housing and Urban Development. I would like to take a second

just to welcome Mr. Shea back to the Senate. As we all know, he

spent a lot of years working with Senator Dole when he was the

Minority Leader and when he was the Majority Leader. And we are

also glad to see Senator Dole, as well as Senator Schumer and others here today.

I want to commend all of today’s nominees for their willingness

to take on what will surely be a difficult job. Over the years, HUD

has consistently been plagued by problems of management and

miscommunication. While I believe former Secretary Martinez and

current Secretary Jackson have made considerable progress, a lot

remains to be done.

After we administer the oath, the nominees may make their

opening statements. You can also feel free, at that time, to introduce any members of your family that are here today. But before

we start that, I want to yield to Senator Sarbanes and then Senator Dole.

STATEMENT OF SENATOR PAUL S. SARBANES

Senator SARBANES. Thank you very much, Mr. Chairman. I am

pleased to join with you in welcoming the nominees before the

Committee today and our colleagues who are going to be presenting

them.

Mr. Bernardi, of course, has been here before when he was up

to be Assistant Secretary of Community Planning and Development, and we are very pleased you are going to continue your work

at HUD. The programs you have been overseeing—CDBG, HOME,

the homeless programs—are some of the most effective and important at HUD. You have done a good job as Assistant Secretary, and

as you move to the Deputy Secretary’s office, your responsibilities

will obviously grow. And I am confident that you are well-qualified

to take on this new challenge.

I have, Mr. Chairman, a statement by Senator Clinton, who is

unable to be with us today, but wants it included in the record.

Chairman SHELBY. Without objection, it will be ordered.

Senator SARBANES. And I will not read it, but let me just say it

is very effusive in its praise of Former Mayor Bernardi and the Assistant Secretary.

[Laughter.]

She appeared here before us to support your appointment before,

and she says, ‘‘I am happy to say that he has met my highest expectations.’’ We are very pleased with that.

I am pleased Mr. Shea is with us today. He, of course, worked

here in the Senate and worked for Senator Dole as counsel in his

office. So we welcome him back. He is familiar with the workings

of this institution, and we look forward to his testimony to be the

Assistant Secretary for Policy Development and Research.

And Ms. MacFarlane, you have had extensive experience, both

inside and outside, of Government, most recently with the FTC. In

fact, I believe you may have still been at the Commission when the

settlement with Fairbanks Capital was announced.

3

Ms. MACFARLANE. Yes, sir.

Senator SARBANES. That was a very good event and a very helpful agreement, and we expect the Department will benefit from

your broad experience as we consider you to be the Assistant Secretary for Public Affairs.

Mr. Chairman, I want to take just a moment to make one point

for all of the nominees. It is extremely important, that this Committee and HUD work together whenever possible, and it should be

possible all of the time. As the authorizing committee for most of

the Department’s programs, we need to make sure there is an ongoing exchange of information and ideas. We may not always agree

on what policies HUD should pursue, but obviously the Committee

and the Committee staff need to have timely access to important

information about the programs run by the Department.

I mention this because there continues to be some resistance at

HUD to providing information, which we have sought as recently

as 2 weeks ago, about the voucher program, although we had gotten similar such information in the past. We wanted update information on the program, and I intend, of course, to ask the nominees for their commitment that they will provide information to the

Committee and to the Congress in a timely fashion. We need this

information if we are going to do our oversight function, which we

take seriously, and which I am very pleased to say that Chairman

Shelby has placed high on our priority list in terms of exercising

our oversight. And it is a matter of concern whenever the Department seems to be dragging its feet in response to reasonable requests for information, but I will pursue that with each of the

nominees in turn.

Thank you very much, Mr. Chairman.

Chairman SHELBY. The current Senator Dole.

STATEMENT OF SENATOR ELIZABETH DOLE

Senator ELIZABETH DOLE. Thank you, Mr. Chairman, for this opportunity to speak about our three nominees. I think I have a little

competition over here from Juliette.

[Laughter.]

Senator ELIZABETH DOLE. Mr. Bernardi has an excellent record

of building stronger communities across the Nation and especially

in the City of Syracuse. He distinguished himself as the Mayor of

Syracuse for almost 8 years before beginning his work at HUD and

has an impressive list of accomplishments in making communities

more livable. This is exemplified in his work to remediate

brownfield sites, reclaiming those industrial wastelands, turning

them around and providing economic opportunity and jobs.

The effort to renew and improve our urban communities is very

important to me, and I appreciate Mr. Bernardi’s background and

focus on these issues. Ms. MacFarlane has also distinguished herself as an excellent servant of the public. Her assistance at the

Federal Trade Commission was invaluable to me and to my staff

as we worked to reauthorize the Fair Credit Reporting Act, and of

course I welcome you today as a fellow alumnus of the Federal

Trade Commission.

And, finally, I take great pleasure in recognizing the third nominee and the distinguished gentleman who has come before us to inVerDate 11-MAY-2000 17:39 Nov 07, 2005 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 24198.TXT SBANK4 PsN: SBANK4
4

troduce him. I cannot help but recall the afternoon some years ago,

when my husband, Mr. Chairman, introduced me to a Senate Committee on my nomination for Secretary of Transportation. Bob said

at that time, ‘‘I regret that I have but one wife to give to my country’s infrastructure.’’

[Laughter.]

Senator ELIZABETH DOLE. Now, that was all right, but then he

went on to say that he expected the Federal Highway Administration at DOT to use my biscuit recipe to fill potholes. Can you imagine?

[Laughter.]

Senator ELIZABETH DOLE. It is so tempting to exact a little revenge this afternoon, Mr. Chairman, but I will restrain myself.

Seriously, this is a special day for both Bob and me, for Dennis

Shea is a member of our extended family. I first met Dennis when

he was working as Deputy Chief of Staff to my husband in the Republican Leader’s Office, and I came to know him as a man of extraordinary intelligence, judgment and, above all, integrity. He

gained a reputation throughout the Senate as someone who works

well with people of both parties and whose overriding passion is

finding the best policy to solve a tough problem.

Dennis’ imprint is on many bills passed by Congress to fight

crime and illegal drugs, and he helped broker the compromise that

led to the enactment of the Civil Rights Act of 1991. Dennis handled labor issues for Bob when I was Secretary of Labor, and my

staff and I were impressed with his deep understanding of the complex problems facing the working poor in our country, including access to affordable housing.

Dennis grew up in Queens, New York, and this background has

given him a deep consciousness of the challenges and opportunities

facing our cities. The many issues he will confront at HUD require

the compassion and balance that I know Dennis will bring to his

new position. I recommend that all of my colleagues support this

outstanding man’s confirmation to serve as HUD Assistant Secretary for Policy Development and Research.

Thank you, Mr. Chairman.

Chairman SHELBY. Senator Reed.

STATEMENT OF SENATOR JACK REED

Senator REED. Thank you very much, Mr. Chairman and Senator

Sarbanes, for holding this hearing, which is a very important process in our constitutional duties to confirm these very able and experienced public servants. I have had the privilege to work with

Secretary Bernardi, and I have enjoyed it very much and look forward to working with Ms. MacFarlane and Mr. Shea.

You are taking on extraordinary tasks and opportunities, but

also challenges, particularly since your department represents

some of the country’s most vulnerable families and vulnerable people in our entire Nation. Many of these people are elderly and disabled or just do not have the luck that others have, and they do

not have powerful lobbyists typically to defend them, so it falls

upon you to work for them, and I know and hope you will.

And, Mr. Bernardi, you particularly will have significant responsibilities. You will be responsible for working within the AdminisVerDate 11-MAY-2000 17:39 Nov 07, 2005 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 24198.TXT SBANK4 PsN: SBANK4
5

tration for appropriate resources for our Nation’s housing programs. I think all of us here will say, without contradiction, how

important housing is and how much we need to do, but really it

is the resources available that limits us or enables us to do those

things, and that is a difficult fight you are going to have to urge.

We have seen the current budget where there are proposals for cutting the Section 8 voucher program by $1.6 billion. So your job

will be to convince people that what you believe in is what they

should believe in, and I wish you well.

And, also, Secretary Bernardi, you will be responsible for the operations of HUD and the improvements. Years ago, when I first

came to this Committee, HUD was one of the agencies identified

as being in serious trouble. Problems still remain, so we expect you

to devote yourself to that.

I had a chance to meet Mr. Shea, and I was impressed with his,

as Senator Dole said, his intelligence, his integrity, and his dedication. Again, Ms. MacFarlane, I look forward to working with you.

Thank you so much for be willing to serve the Nation in and a

very important agency. Thank you.

Chairman SHELBY. Senator Allard.

STATEMENT OF SENATOR WAYNE ALLARD

Senator ALLARD. Mr. Chairman, I am going to be brief. I have

a full statement I want to put in the record.

Chairman SHELBY. Without objection, it will be made part of the

record.

Senator ALLARD. I do want to welcome Senator Dole. It is good

to see him here, and I just want to recognize, in a public way, all

of his fine work on the World War II Memorial. We are going to

have a lot of veterans here, and we are going to have an open

house in my office for him and others because I think we are going

to be overwhelmed with veterans here coming into the Capitol to

celebrate that time.

Also, I just would like to say that I am glad that we have

Alphonso Jackson confirmed. And now that we have had a transition of leadership, it is important that we get moving ahead with

a number of vacancies currently at HUD. Your Committee has always shown a willingness to move ahead with those. I think we

need to urge HUD and the various authorities to be sure and get

those names to us as quickly as possible so we can get those vacancies filled.

I would also just reiterate the fact that the Government Performance and Results Act—which is something I keep hammering on all

of the time with everybody that comes before us, it is called GPRA,

some people just call it the Results Act—this is a way of measuring

performance of what is happening in the various agencies. I think

this is especially important in HUD because it has revealed some

problems in the past. It is improving, but again continue to push

on this GPRA.

And then, finally, I would just follow up that there is a constitutional relationship between the legislature and the executive

branch. It is important that we maintain that perspective, and I

would hope that each and every one of you—when the Committee

requests information—that you respond in an expeditious way and

6

get the information to us. We need that to do our job and to represent our constituencies, so I would just second what has been

said in that regard, and I will thank you, Mr. Chairman.

Chairman SHELBY. We have some special guests here. We will

start with first on our list is former Mayor Bernardi, and Senator

Schumer and Representative Walsh I think are here to introduce

him or say something.

STATEMENT OF SENATOR CHARLES E. SCHUMER

Senator SCHUMER. Thank you, Mr. Chairman, and thank you for

holding a timely hearing. I am here, of course, to support the nomination of Roy Bernardi for Deputy Secretary, but first let me congratulate our other two nominees for their good work, and I want

to particularly say, Mr. Chairman, this is a good day for New York.

Mr. Shea is from Queens, Burns Street in Forest Hills. I correctly guessed that he was from Mary Queen of Martyrs Parish.

[Laughter.]

And I welcome him here as well. New York has always had the

habit of sending people—people come to New York, sally forth

around the rest of the Nation and do great things. And so Senator

Warner, we have sent you one of our best, now that he is a Virginia

resident.

I want to welcome Senator Dole here as well, and my good colleague and a Congressman who has served Syracuse for so long

and so well, Congressman Walsh, who got a new haircut today I

see for this occasion.

[Laughter.]

Mr. Chairman, it is my honor to be here next to Roy Bernardi,

and I support this nomination unequivocally. Roy is a native

Syracusan, born in Syracuse and worked his way up through the

ranks here. He served five terms as City Auditor, where he developed an outstanding reputation as somebody of integrity, and he

actually overhauled municipal financial services, eliminated duplicative department functions and streamlined governmental operations, resulting in a lot of budget savings.

His good work as auditor led him to his next job, which was

Mayor, and he was really a fine and outstanding mayor at Syracuse. He combined the understanding that you needed to be fiscally

responsible. In our cities upstate, we are trying to keep the lid on

things because, comparatively, we do not want to pay more taxes

than other places, so we can attract jobs, and yet at the same time

New York has a real tradition of compassion, and Mayor Bernardi

was able to do both of those. He was able to be fiscally responsible

and yet unite the city and be compassionate as well, and he was

an outstanding mayor.

I will not forget, Mr. Chairman, I just had been elected Senator

in 1999, had beaten a Senator who Roy had worked with of his

party, and I was wondering what kind of reception I would get, and

he opened the door for me, and we worked well together from the

day I became Senator, which I think speaks to his bipartisanship,

as well as his character.

Chairman SHELBY. Plus, he was a wise man, too.

[Laughter.]

Senator SCHUMER. Indeed, as you are, Mr. Chairman.

7

In any case, he will make an outstanding Deputy Secreatry. He

has all of the good qualities needed to be a Deputy Secretary of

HUD. He understands how to run a large organization. He is fiscally responsible and moderate and at the same time is compassionate and understanding. He did an outstanding job as Secretary

for CPD, for Community Planning and Development, and I think

we are all very impressed with the job he did.

And so, as they say, Mr. Chairman, he got his promotion to Deputy Secretary the old-fashioned way—he earned it. It is my honor

to be here with him and to welcome Alice, his wife, and his two

children, Dante and Bianca, here today.

And I would ask unanimous consent my entire statement be put

in the record.

Chairman SHELBY. Without objection, so ordered.

Representative Walsh, do you have anything to add to that?

STATEMENT OF JAMES T. WALSH

A U.S. REPRESENTATIVE IN CONGRESS

FROM THE STATE OF NEW YORK

Reprensentative WALSH. I will try not to be repetitive, Mr. Chairman, but former Mayor Bernardi has certainly made his remark in

our community, and I want to be here to support him.

So, Mr. Chairman, Senator Sarbanes, and Members of the Committee, thank you for inviting me to be here with you today and

sit with the distinguished panel here, including our Senator from

New York, Senator Schumer, with whom I work very, very closely

on many issues.

Former Senator Dole, who even though I represent a city, he

came out and visited a farm in the Eastern part of my district one

time on a very, very cold Upstate New York day, and he did it very

graciously, Senator Warner, also.

I am here to support my former mayor and close personal friend,

Roy Bernardi. He has served well as Assistant Secretary of Community, Planning and Development, for the Department of Housing

and Urban Development, and as Chairman of the House Subcommittee for VA, HUD, and Independent Agencies, we have

worked very, very closely since his appointment in 2001.

Prior to joining the Bush Administration, Mr. Bernardi was the

fifty-first mayor. And I have a special affection for mayors of Syracuse. My dad was the forty-eighth mayor and also served in the

House of Representatives.

I also had the pleasure of working with Roy on a variety of community issues during his tenure as Mayor and as City Auditor. I

served on the City Council in Syracuse while Roy was cit auditor,

and we worked very, very closely together. He was a promoter of

urban neighborhoods, a believer in cities, and someone who implemented initiatives all throughout the city to improve the quality of

life of its residents.

Along with the men and women of the Syracuse Police Department, Mayor Bernardi made a remarkable change in reducing violent crime in Syracuse to the lowest levels in recent history, and

this is no small accomplishment in an urban center.

On a personal note, I would like to extend my congratulations to

his wife, Alice, and the two kids, Dante and Bianca. I have a good

8

friend at home who always says, ‘‘Behind every successful man

there is a very surprised woman.’’

[Laughter.]

This is a solid family who offers a great deal, including their dad

and husband, to the service of the United States of America. Rising

to the position of Deputy Secretary of HUD is both challenging and

exciting. The responsibilities are great, and sound judgment on

issues dealing with national housing policy require a constant effort by both the Deputy Secretary and his team. Roy has proven

over the years to listen carefully before making judgments on policy matters, whether local or national. He will reach out to others

to seek their advice which, in my view, is a sound business practice

needed to be a good manager. He also returns telephone calls when

contacted by Members of Congress, which I know within this room

is considered a high mark.

I know this Committee will be pleased with the caliber of this

nominee, and the others, and I extend my congratulations at this

time to them also.

The people of Mayor Bernardi’s hometown of Syracuse are very,

very proud of their native son.

Thank you very much.

Senator SARBANES. I always thought it was a surprised motherin-law that was behind every successful man.

[Laughter.]

Representative WALSH. There is plenty of surprise to go around.

Chairman SHELBY. We will next hear from Senator Dole and

Senator Warner on behalf of Dennis Shea.

Senator Dole.

STATEMENT OF ROBERT DOLE

A FORMER U.S. SENATOR FROM THE STATE OF KANSAS

Senator ROBERT DOLE. It is good to be in the Committee room

again with another Senator Dole. I never made it to the Banking

Committee. I just did not have the intelligence and the seniority

or I did not have any money.

Chairman SHELBY. You did not represent North Carolina.

[Laughter.]

Senator ROBERT DOLE. They have a lot of banks in North Carolina.

Chairman SHELBY. Yes, absolutely.

Senator ROBERT DOLE. Charlotte is the banking capital of the

world. New York is a close second.

[Laughter.]

But Wayne Allard mentioned, and I just want to mention because if you live I Maryland or Virginia, you are going to see more

World War II veterans than you thought ever existed. We think between 2- and 300,000 will be there that day. And some of these

men are just living long enough to be here for this dedication.

Senator ALLARD. I could not remember the date. You can share

the date with us maybe, Senator Dole.

Senator ROBERT DOLE. Yes, May 29, and there are 118,000 seats,

and the tickets are already gone for those. And now we are trying

to find more space because some of these men are amputees. Some

9

cannot walk. Some cannot see. So it is going to be a great day, and

I appreciate Wayne mentioning it.

But, as an aside, Dennis Shea’s father was in the Navy, in the

South Pacific. So he is one of the World War II vets, one of that

‘‘Greatest Generation’’ that Tom Brokaw referred to, which is now

becoming a disappearing generation. We are losing about 1,200 per

day. We are down to less than 5 million out of 16.5 million.

But I want to say a special thank you to Senator Warner, who

helped us out. We did not ask for Federal money. We said if we

cannot raise it, we will not build it. But he did help me out, when

we got in a little crack, and I offered to pay the money back, and

I think it is still pending, and I have not mailed the letter.

[Laughter.]

But, in any event, I am really here today for the purpose of introducing—I know it is going to be a tough hearing and a tough vote

for all of these nominees, I can already tell, but Dennis Shea and

I have worked together for about 15 years—first, my Staff Counsel

and then Deputy Leader of the Chief of Staff when I was Majority

Leader and Republican Leader of the Senate and also in the private practice of law. So I have had three different areas to work

with Dennis.

But above all, I think what I would stress is integrity. He also

watched me on ethics. Anything I wanted to check on to see if I

could do this, I would give it to Dennis, and there were a lot of

things I wanted to do, he would not let me do.

[Laughter.]

So he has told me, no, many, many times and probably for my

own benefit. But, Dennis, I thank you for that.

But if you are looking for someone who is willing to work, and

who is a man of intelligence, and a man of integrity, who has a

wife named Elizabeth, this is your nominee.

That is my entire statement, and make it part of the record.

[Laughter.]

Chairman SHELBY. Senator Warner.

STATEMENT OF JOHN W. WARNER

A U.S. SENATOR FROM THE STATE OF VIRGINIA

Senator WARNER. Mr. Chairman and Members of the Committee,

I am breathless. This is my 26th year in the Senate, and most of

it was spent with Bob Dole, who I never met a finer man in my

life. I mean that. You know that.

We went to the 50th anniversary of D-Day together, and to Italy,

where he spoke to a crowd as far as the eye could see. And then

we went to visit his battleground, and those are things that bond

individuals that you never forget. Bob is the big brother I never

had in life, and it is such a privilege to be here today. And now

you are successor Senators on the Armed Services Committee, and

so the Dole family has been a part of my life.

I have come to represent Dennis Shea, and why should I take

more time than you took?

Senator ROBERT DOLE. Because you have a vote.

Senator WARNER. Oh, I have a vote. Yes. Right.

[Laughter.]

10

He could always put me down with a one-liner. But I will put

my staff on behalf of Dennis in the record because you have spoken

so eloquently.

Chairman SHELBY. Without objection, so ordered.

Senator WARNER. But I will just say one thing. As a young Senator, when I came to see Senator Dole, I had to sit out in his office

and wait to see him out of his office. So, from now on, you are

going to wait out in my anteroom to see me, subject to confirmation.

[Laughter.]

So, I will put the rest of it in, and it is really an extraordinary

accomplishment, remarkable how the President and the Secretary

of HUD can find two such eminently qualified individuals.

Now, to this other lovely individual, Cathy. I have quite a bit to

say about her. She is here with her mother and father; is that what

I understand?

Chairman SHELBY. Right here, right.

Senator WARNER. Yes. She has been nominated to serve as Assistant Secretary and has over 24 years of experience in public relations.

Dole could have used you.

[Laughter.]

Public relations, and Government Affairs and Communications.

She has served two Administrations, President Ronald Reagan

and the current one at the Federal Trade Commission, in substantive positions with honor and distinction. Most recently she

served as Director of Public Affairs for the FTC and was instrumental in the communications outreach for the National Do Not

Call registry. You could have got elected on that to anything you

wanted to get elected to.

[Laughter.]

The Outreach and Communication Plan to promote the registry

has been an unqualified success and something I know many have

been grateful for, including this Senator. I do not know how many

of your families had dinners or other family functions disrupted by

the ill-timed phone calls, but speaking for myself, I can say, Ms.

MacFarlane worked a minor miracle. We thank you.

She has earned the confidence of two Presidents, and I believe

she has more than the qualifications to handle this next assignment, and I wish you well.

Thank you, Mr. Chairman and Members of the Committee, and

what a privilege to be with you, dear friend.

Chairman SHELBY. I want to thank you——

Senator ROBERT DOLE. Can I put my statement in the record?

Chairman SHELBY. Without objection, Senator Dole’s statement

will be made part of the record.

I want to say before Senator Dole and Senator Warner leave, I

believe, we know Dennis Shea real well, Mayor Bernardi, Ms.

MacFarlane, we know of your good work, and I believe you are

going to have a lot of support on this Committee, but we still have

got to go through a hearing.

Thank you.

[Laughter.]

If the nominees will stand and raise your right hand.

11

Do you swear or affirm that the testimony that you are about to

give is the truth, the whole truth, and nothing but the truth, so

help you God?

Mr. BERNARDI. I do.

Mr. SHEA. I do.

Ms. MACFARLANE. I do.

Chairman SHELBY. Do you agree to appear and testify before any

duly-constituted committee of the Senate?

Mr. BERNARDI. I do.

Mr. SHEA. I do.

Ms. MACFARLANE. I do.

Chairman SHELBY. Take your seat.

All of your written testimony will be made part of the record in

its entirety. And we will start with you, if I can call you, Mayor,

with your testimony, if you will sum this up as briefly as you can.

STATEMENT OF ROMOLO A. BERNARDI, OF NEW YORK

TO BE DEPUTY SECRETARY

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Mr. BERNARDI. I thank you, Mr. Chairman, Ranking Member

Sarbanes, and Senator Dole, Senator Allard, and Senator Reed.

It is a pleasure to be here. I want to start by thanking Senator

Schumer and Congressman Walsh for their very kind words. It is

also nice obviously to be with Senator Dole and Senator Warner.

My name is Roy Bernardi, and I am the Assistant Secretary for

Community Planning and Development at the Department of

Housing and Urban Development, and I am here to thank you for

inviting me to appear as President Bush’s nominee for the position

of Deputy Secretary.

I want to express my gratitude to the President for the confidence that he has shown in me. For 3 years, I have had the pleasure of working with Deputy Secretary, at that time, Jackson, now

it is Secretary Jackson, and I am thankful for the confirmation that

this Committee provided for him. And I look forward, hopefully, to

be working with him as his Deputy Secretary.

It is a pleasure to be here with my two distinguished colleagues,

Cathy MacFarlane and Dennis Shea. All of those wonderful words

that were spoken of them, in working with them, I find to be nothing but more than accurate, and they are very good people.

At this time, I would like to introduce, have her stand, if she

would—she will be embarrassed—my wife, Alice, and our son,

Dante, and our daughter, Bianca, right behind me. Without them,

ladies and gentlemen, I do not know how it was put, in spite of myself, I have been able to succeed, but with Alice’s help and the children’s love and support each and every day is just a God-given day,

and it is a pleasure.

I take humble pride in what I am about to do. I am a first generation Italian-American. My mom and dad migrated to this country when they were teenagers. They met in an English class in

high school, learning the language skills and the working skills in

this country. They married and had four children. I have an older

sister, and a younger brother and a younger sister, and I believe

we have given them some measure of happiness with our successes

that we have attained. I grew up in Syracuse’s Northside. And

12

when I went to first grade, I distinctly remember I spoke Italian.

I did not speak English, and that was quite a challenge for my

mom to get me back in school.

As has been mentioned, I had the opportunity to be the Syracuse

City Auditor for 20 years, and 8 years nearly as Mayor of the City

of Syracuse, before President Bush and Secretary Martinez asked

me to serve as Assistant Secretary for CPD, and it was an honor

and a privilege to accept.

I know, in nominating me, President Bush has not only honored

me with this distinction, but also the important responsibilities

that come with it. The Deputy Secretary is the Department’s Chief

Operating Officer, managing an agency of some 9,000 employees,

with a budget of approximately $31 billion. The Department is a

little bit larger than what I handled in the City of Syracuse as

mayor, but I see the same challenges. Obviously, they are magnified. I feel confident, with my experience, that I will be able to

do a good job for the Secretary, the President, and more importantly, for all of the people that we serve.

HUD’s purposes are especially aimed at helping low- to moderate-income individuals as you know. We want to supply safe, decent, and affordable housing throughout no only the largest cities,

but also in the rural areas of America. We administer economic development programs throughout the communities, to revitalize decayed neighborhoods, and improve the quality of life of all residents. We deal with everyone in the spectrum. We deal with senior

citizens, persons with disability, people with HIV/AIDS, people that

cannot afford housing, people that need assistance. We deal with

communities to provide economic development to create jobs and

create economic opportunity for a better quality of life for everyone,

and I would look forward to working closely with Secretary Jackson

and President Bush to achieve our goals and objectives.

I will be committed to fostering better cooperation with the people who serve at every grade and with unions representing many

of them. I will work to understand and improve the bargaining

process. In my 3 years as Community Planning Development Assistant Secretary, I feel very good about the relationship that I

have had with the career employees and the ability to work as a

team to accomplish the things that were charged to us, and I hope

to bring that same kind of commitment, that same kind of working

together with all of the employees, all of the union and nonunion

employees in HUD.

Let me assure you that I also intend to work closely with this

Committee, and its staff, and with other Committees and anyone

and everyone that needs information, and needs our assistance,

and needs our cooperation. I understand the importance of the

work that I am about to undertake with your permission, and I

know full well that it is a partnership, that the Administration and

the legislative body must work together, that we all have the same

goals and objectives that we want to obtain, and that is to help the

people that are going to be served by the money and the over 300

programs that we have in HUD.

I thank you and I would like to enter this into the record, if I

could, Mr. Chairman.

Chairman SHELBY. Without objection.

13

Mr. BERNARDI. I look forward to your questions. Thank you.

Chairman SHELBY. Mr. Shea.

STATEMENT OF DENNIS C. SHEA, OF VIRGINIA,

TO BE ASSISTANT SECRETARY FOR POLICY

DEVELOPMENT AND RESEARCH,

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Mr. SHEA. Chairman Shelby, Ranking Member Sarbanes, and

Members of the Committee, good afternoon, and thank you for convening this hearing during this busy legislative session. It is a

privilege to be here with you today, along with my colleagues, Roy

Bernardi and Cathy MacFarlane.

I want to thank Senator Dole or Senators Dole, and Senator

Warner for their kind words of introduction. Serving the leader was

an honor. It involved a lot of hard work and long hours, but I must

say it was a lot of fun too.

If I may have the Committee’s indulgence, I would like to introduce two important people——

Chairman SHELBY. We have been waiting for that.

[Laughter.]

Mr. SHEA. I think you have been introduced to them already. My

wife, Elizabeth, is in the back, anlong with my 6-month old daughter, Juliette. My parents, Dennis and Molly Shea of Forest Hills

are right behind me, as well as my Aunt Jeanne Clarke of Bethesda, Maryland. I do not know where—there she is.

Chairman SHELBY. Right back there.

Mr. SHEA. Great. I, too, would like to express my appreciation to

President Bush for the honor of being nominated as Assistant Secretary for the Office of Policy Development and Research. I have

been looking forward to the chance to work with Secretary Jackson,

so I am grateful that the Senate has confirmed his appointment.

As you know, the Office of Policy Development and Research provides advice and information to the Secretary to support the Department’s policies and proposals. PD&R compiles information to

monitor current housing needs and market conditions. The Office

also carries out both short-term and long-term research on priority

housing and community development issues. An important responsibility of PD&R is to conduct evaluations of our programs to make

sure they are operating as Congress intended. PD&R’s mission

within HUD is critical to the success of our programs and to the

achievement of Congress’ goals. I will see to it that this mission is

carried out with professionalism and integrity.

In my most recent job, as the Executive Director of the President’s Commission on the U.S. Postal Service, I was able to lead

a small staff in developing a comprehensive report recommending

ways to preserve universal mail service. I am pleased that the

Commission’s report has been generally well-received and is viewed

as a substantial achievement, particularly in light of our tight

deadline and the fact that no commissioner or staff member, including myself, came to this assignment with any significant experience in postal policy.

I believe that this experience, as well as my other experiences in

the policy development arena, will help me be an effective leader

of the PD&R team. I am personally honored to have the opporVerDate 11-MAY-2000 17:39 Nov 07, 2005 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 24198.TXT SBANK4 PsN: SBANK4
14

tunity to join the men and women of PD&R, who, I must say, are

among the best and brightest of the HUD work force.

Mr. Chairman, let me conclude by saying that, as a former member of the staff of the U.S. Senate, I also have a deep appreciation

for this institution. Congress plays the central role in legislating

our Nation’s housing policy and in funding the programs that the

Department administers. I look forward to working with this Committee in an open and collaborative spirit to advance the goals of

affordable housing, homeownership and strong communities that

we all share.

Thank you for your attention, and I look forward to answering

any questions you may have.

Chairman SHELBY. Ms. MacFarlane.

STATEMENT OF CATHY MacFARLANE, OF VIRGINIA,

TO BE ASSISTANT SECRETARY FOR PUBLIC AFFAIRS,

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Ms. MACFARLANE. Chairman Shelby——

Chairman SHELBY. Do you want to introduce anyone?

Ms. MACFARLANE. Yes, sir. I would like to introduce my father,

Joe MacFarlane, and my mother, Mary MacFarlane. I also have

numerous friends which I would like to just thank for being here.

Chairman Shelby, Ranking Member Sarbanes and distinguished

Members of the Committee, thank you very much for inviting me

here to appear before you today with my colleagues, Roy Bernardi

and Dennis Shea.

I am honored that President Bush and HUD Secretary Alphonso

Jackson nominated me to be Assistant Secretary for Public Affairs

at HUD, and I am very grateful for the confidence that they have

shown in me.

The responsibility of directing the public affairs of a Federal

agency is a serious one, but not a new one to me. During my tenure

as Director of the Federal Trade Commission’s Office of Public Affairs, the Do Not Call registry was authorized by Congress, as Senator Warner noted, and the task of educating the American public

about how to stop telemarketers from contacting them became our

responsibility. Together with a staff of seven of the finest PR professionals in the Federal Government, we reached out to every

newspaper, radio station, and broadcast outlet in the country. Six

months after the Do Not Call registry was launched, more than 55

million people had registered. And a recent Harris Poll survey indicated that the Do Not Call registry was recognized by 92 percent

of the American public.

If confirmed, I intend to make certain that the good news about

HUD’s programs reached the eyes and ears of the people who most

need to benefit from them. Every day HUD assists low-income families find safe and affordable shelter, they help first-time homebuyers make their dream of homeownership a reality, and they

provide a means for individuals to move from Government dependence to self-sufficiency. HUD’s programs are carried out by the executive branch, but we understand that they are written here, in

Congress. And legislation enacted by Congress has opened the

doors to homeownership for millions of Americans.

15

I am honored to be the nominee for Public Affairs. With the support of the Committee, I look forward to assisting in the important

work of keeping America informed about the Federal Government’s

housing and community development policies.

Mr. Chairman and Senators, thank you for your courtesy in listening to my remarks, and I would be happy to take your questions.

Chairman SHELBY. Thank you.

Mr. Bernardi, 2 years ago, the General Accounting Office, GAO,

testified before one of our Subcommittees and said that ‘‘human

capital is the most pressing management challenge facing HUD.’’

More specifically, GAO offered its opinion that HUD did not even

have an analysis of what its staffs should be doing and what skills

the staff needed to accomplish their responsibilities.

How much progress, sir, has HUD made in strengthening its

human capital over the last 2 years, and do you have any thoughts

on what HUD can do to improve the productivity of its staff?

Mr. BERNARDI. Mr. Chairman, HUD established a Human Capital Steering Committee back in 2002. Presently, we are in the

process with a REAP report to ascertain not only the number of individuals, but also what tasks need to be performed and the individuals that have to perform them.

Quite candidly, I think that we are in the process of reevaluating

the total number of employees that have been appropriated to us.

That is 9,177. About half of the HUD workforce is eligible for retirement. That is a major concern. We need to make sure that as

these people leave that we provide the opportunity for middle management and people coming into the program to be able to spend

time so that we do not lose that systemic knowledge that they have

regarding the various programs.

As the Deputy Secretary, if I am so confirmed, I will make sure

that each of the departments at HUD is staffed with the necessary

personnel, with the expertise that they will need, to carry out their

duties and functions.

Chairman SHELBY. OMB, Office of Management and Budget, has

rated the Community Development Block Grant program, ‘‘as ineffective.’’ More specifically, OMB states that the program suffers

from unclear purpose, loose targeting requirements, and a lack of

results. This is the largest program under your direction within the

Office of Community Planning and Development, CPD.

What can you tell the Committee you see as some of the sources

of OMB’s concern? Do you agree with those? And, if not, why not?

And could you also tell us what you have done during your time

at CPD to address some of these issues. These are not new issues.

Mr. BERNARDI. Senator, the Community Development Block

Grant program is the flagship program in Community Planning

and Development. It is budgeted at $4.6 billion, and I am sure, as

you are all aware, that money goes, on a formula basis, to over

1,100 entitlement communities to all 50 States, and the 50 States

provide those dollars to the small towns and villages that dot our

country that are not entitlement communities.

It is a very flexible program. There is so much good that is done

with that program. You can use it for housing, you can use it for

brownfields, you can use it for homelessness, public services, public

16

facilities. You can build a recreation center. And it is that beauty

of the program that leaves the discretion, if you will, and the

prioritization of how that money is spent at the local level. Obviously, there are national objectives that have to be adhered to. So

it is a difficult program in which to be able to have performance

measurements.

Now, with OMB giving us a very low PART score, unlike the

score we received in the HOME program, where we received a very

high score, but the HOME program is a very targeted program. It

deals with people. It provides that $2 billion-plus to people who are

at 80 percent or less than median income, and the average is 34

percent of median income. So that is really targeted. It is a little

easier to gauge your results.

Having said all of that, sir, we are in agreement with OMB. We

have implemented performance measurements here at headquarters, into the field, and with the communities. We would like

the communities themselves to indicate to us what kind of performance measurement system, in conjunction with us, they would like

to use, so that at the end of the day we can indicate that the dollars that are going to their communities, not only where they have

been spent, but have they also received the maximum value.

Having said that, be assured that we are looking to make sure

that the communities will be able to provide for us performance

measurements that we can use in the next budget process.

Chairman SHELBY. Mr. Shea, I want to touch on another point

raised by GAO. HUD, over the last 10 years or so, has been increasingly reliant on outside contractors to perform many of its responsibilities. I know this is not an issue solely in the research

area, but it does seem that most of the research produced by HUD

is conducted by outside parties. GAO has raised the issue of HUD’s

ability to effectively monitor its contractors.

Could you detail for the Committee, and if you want to do it for

the record you could do that, your relevant experience in monitoring and evaluating contract performance because you are going

to have to do some of that in the future.

Mr. SHEA. Yes. I had, in my most recent experience, Mr. Chairman, as the Executive Director of the President’s Commission on

the Postal Service, I was involved in making decisions on nine procurements. We procured nine outside contracts to assist the Commission in performing its work, and these were done on a pretty

fast-track basis.

And I think, in that capacity, I was pretty clear in evaluating

what contracts were successful, and there are a couple of contracts

that I do not think the performance was up to snuff, and I registered that sentiment to the people who performed the work for

us. So, as you know, PD&R contracts out a lot of its research.

Chairman SHELBY. Sure.

Mr. SHEA. And PD&R is currently aggressively pursuing opportunities to find small businesses to contract out——

Chairman SHELBY. I am not necessarily against contracting out,

but they just have to be monitored in what you pay them for.

Mr. SHEA. If confirmed, that will be one of my priorities: To ensure that we have strong systems in place to monitor contract performance. Currently, PD&R has systems in place under the general

17

deputy assistant secretary for PD&R. She has done a wonderful

job, Darlene Williams, in making people accountable within the office for the contracts that they are charged with monitoring.

So this will be a priority for me, to make sure we are actually

getting bang for the buck and that we are also making sure that

the contract money is spent out to different vendors who are able

to perform the work.

Chairman SHELBY. Ms. MacFarlane, you know where you are

going. You know you have been nominated by the President, and

you are accepting that job. You have a challenge over there as far

as PR. Would you share briefly some of your thoughts on how you

are going to improve the public perception.

Ms. MACFARLANE. Chairman Shelby, I am very much in favor of

what I call transparency. I think it is very important for an agency

to show their hand, show their cards, and explain exactly what

every aspect of that means. I believe that if HUD did that, that we

could have the public understand a bit better than they currently

do some of the programs and the reasons for the aspects of the programs that are currently being challenged.

Chairman SHELBY. You have a lot of experience, and you have

the confidence of President Bush, and you are going to have our

help everywhere we can give it to you because we want you to succeed, all three of you to succeed.

Senator Sarbanes.

Ms. MACFARLANE. Thank you, Senator.

Senator SARBANES. Thank you very much, Mr. Chairman.

Mr. Chairman, I have a letter from Mayor Daley of Chicago in

support of Mr. Bernardi, and I would like to have that—

Chairman SHELBY. It will be made part of the record.

Senator SARBANES. And in part he says, commenting about his

work at HUD, he says he has ‘‘worked in partnership with cities

such as Chicago to help us address many difficult issues, including

the creation of affordable housing, expansion of economic development opportunities, and the reduction of homelessness.’’

Mr. Bernardi, I want to ask you about the Section 8 vouchers.

It is the largest affordable housing program operated by HUD. It

consists of almost 2 million families, including many children, elderly, and disabled people, in achieving affordable and stable housing. Recently, HUD briefed our staff, as well as a number of public

housing authorities that administer the voucher program, regarding the Department’s policy on renewing these vouchers in the current fiscal year, the year we are in right now. And we understand,

from a number of the public housing authorities, that the proposed

policy, if finalized, may result in a number of people losing their

voucher and thereby losing their affordable housing.

Now, Congress, of course, when they passed the fiscal year 2004

HUD appropriations bill, it was clear that we intended that every

voucher in use should be funded and that nobody should lose their

assistance.

And Secretary Jackson was quoted in the Dallas Morning News

on April 15, as saying in response to these concerns expressed by

the public housing authorities, ‘‘We are not going to remove one

person that is already on the Section 8 program.’’

18

I have difficulty squaring the promise of Secretary Jackson and

the clear intent of the Congress, in enacting the 2004 appropriations legislation, with the apparent outcome of this proposed policy.

I am interested in how you can square them. I am actually more

interested in some commitment or understanding that nobody is

going to lose their affordable housing under the Section 8 program.

Mr. BERNARDI. Senator Sarbanes, the budget for 2004 is $16.4

billion. As you indicated, through the Appropriations Act, Congress

mandated to us that that would be the amount of money that we

would use for the Section 8 voucher program, as well as the project

based.

That is a substantial increase every year. One of the conditions that we have at HUD is that, in the 2004 budget, about $23 billion

of our $31 billion, goes to maintain assisted rental housing. That

is a significant increase and a significant task for all of us.

Back in 1998, approximately a third of our budget was for the

Section 8 voucher program. That is now up over 51 percent. In the

2004 budget, the public housing authorities, the 2,500 public housing authorities, are going to receive the amount of money from

their August 1, 2003 allocation, with a, as I understand it—this is

not my area—but as I understand it, with a cost-of-living index

added to that.

Our Budget people and our people in Public and Indian Housing

have indicated to us that no voucher will be lost, that there will

be sufficient resources to provide for the individuals that are presently in the system.

Now, speaking as the Assistant Secretary for Community Planning and Development, and trying to look at the big picture, obviously, we would all like to spend—and I know Senator Reed and

I had this conversation on homelessness—and we would all like to

spend additional dollars, but it is going to be very, very difficult.

And just jumping to 2005, if I may, Senator, we have budgeted $16.9 billion and I remember, I believe, in your statement that you

indicated that that is $1.6 billion less than what we would need.

Well, that would take us to $18.5 billion. And the appropriators

provide us with a set amount of money. We have to live within

those parameters. In this particular case, in 2004, we are doing

what the Congress mandated us to do.

Senator SARBANES. I am not clear from that answer whether, in

2004, what is your response to these public housing authorities

that say they are going to have to cut back because of the nature

in which you are proposing to allocate the money?

Mr. BERNARDI. Again, our numbers indicate that there are sufficient dollars in the 2004 budget to meet the vouchers that they

presently have. Now, some housing authorities—and some have—

if they are overvouchering, if they are going out putting additional

people onto the list without paying attention to the budget that

they have to live under, we all have to live under a budget, there

are going to be some difficulties, obviously, in certain areas, but as

I understand it, there will be the sufficient resources to provide for

the vouchers through 2004.

Senator SARBANES. Well, the Center on Budget and Policy Priorities, which does good analytical work, estimates that under HUD’s

interpretation, that you have given to the public housing authoriVerDate 11-MAY-2000 17:39 Nov 07, 2005 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 24198.TXT SBANK4 PsN: SBANK4
19

ties, HUD will be left with almost $200 million in unused fiscal

year 2004 voucher funds at the very same time that some public

housing authorities will be forced to terminate assistance.

Mr. BERNARDI. If there is money——

Senator SARBANES. I take it you are assuring me that that is not

going to happen; is that right?

Mr. BERNARDI. What I can indicate to you, Senator, is that if

there are additional dollars left in the program, it is because all of

the vouchers have not been used. And I believe Secretary Liu has

indicated that we will look at housing authority individually to see

ways in which we can assist in the event that there is a difficulty.

But if they overvoucher, if they go out, and they have 10,000

vouchers, and they offer them to 12,000 people, then we are going

to have a problem.

Senator SARBANES. Well, they are authorized for a certain

amount of vouchers.

Mr. BERNARDI. That is correct.

Senator SARBANES. Are you going to provide the money for the

authorized amounts?

Mr. BERNARDI. That is what we hope, that is what we plan to

do. That is what our budget indicates, but we cannot provide dollars for vouchers that are not authorized. And in some instances,

and I think we understand some areas are going out and issuing

more vouchers than they have resources for.

Senator SARBANES. Well, this is a very, very important issue.

Mr. BERNARDI. Absolutely.

Senator SARBANES. And the Secretary himself is now quoted as

saying that no one is going to be cut off, we are not going to remove

one person that is already on the Section 8 program, and we expect

HUD to deliver on that.

You have the money to do it.

Mr. BERNARDI. Each and every year, I believe, approximately

250,000 people are off of the program. So we do not anticipate that

anyone will be without a voucher who presently has one this year.

Senator SARBANES. Well, we are going to watch that very closely.

I wonder, Mr. Chairman, if I could ask one more question.

Chairman SHELBY. You go ahead.

Senator SARBANES. As I mentioned in my opening statement, we

have had an ongoing problem with HUD in getting the data and

information we need to evaluate the Department’s proposals and

budgets. There is no reason that I can see why a request from

many of our offices for data that the Department has readily available should not be handled in a timely manner.

Now, on occasion, we use this data to actually criticize the Department, it all depends, but we need the information in order to

have a rational dialogue, and discourse, and it does not help anyone at HUD to be an obstacle to ensuring that we have proper information on which to base decisions.

So, I am anxious to obtain from each of you a commitment to

work closely with the Committee and its staff so that these requests for information are met on a more timely basis. It has been

a problem, and it ought not to be a problem. And if it continues,

it, of course, cannot help but contribute to increased tension and

worsening relationships between the Committee and HUD.

20

Could I hear from each of you on this issue?

Mr. BERNARDI. Sure, Senator. Secretary Jackson has indicated to

me, and I feel the same way—and someone mentioned that I return my phone calls—I look forward to providing any and all information that you need. Rest assured, however, that if we give you

information, we want it to be correct information. We want to make

sure that whoever provides us this information, whether it is internally to HUD or outside, that the information is valid, that the information is as accurate as it can be, and then provide it to you.

Senator SARBANES. Ms. MacFarlane.

Ms. MACFARLANE. Senator, I would like to echo exactly what Mr.

Bernardi said, I too will work with you.

Senator SARBANES. Mr. Shea.

Mr. SHEA. Yes, Senator, I will echo what Cathy and Roy said. I

will work very closely with this Committee—if Jonathan or Steve

gives me a call I will return the call promptly.

Senator SARBANES. We need the information too, along with a return of the call.

Mr. SHEA. I will work cooperatively. Sure; understood.

Senator SARBANES. Mr. Chairman, thank you very much.

I want to say that Mr. Shea is another example, I think, of the

quality of the people that Senator Dole when he was Leader had

around him, and I think it is one of the reasons he had such an

effective leadership.

Ms. MacFarlane, you have done a nice job over at the Federal

Trade Commission. I am familiar with some of your work there,

and I wish you well at HUD. HUD has some good programs and

they should get out across the—I mean, the public housing program, for example, is always taking a hit and getting negative

press, and yet in many communities across the country there is

very good public housing and it is meeting a very important need.

The same thing about the HOPE VI program which gets some criticism. On occasion it may be deserved, but there are cities in our

country where the HOPE VI has helped to actually transform the

communities.

So we count on you to get this message out there. You were very

good at the FTC in getting the message out, so I hope you will be

able to do as well over at HUD.

Ms. MACFARLANE. Thank you, Senator.

Senator SARBANES. Mr. Chairman, let me just say I intend to

support these nominees and I welcome a hearing where we have

been able to start off on that premise in the beginning and carry

it all the way through.

Chairman SHELBY. Quality nominees.

Senator SARBANES. That is right.

Chairman SHELBY. They are quality nominees. I think we know

that.

Senator SARBANES. I agree with that.

Chairman SHELBY. Senator Allard, thank you. And thank you for

the work that you and Senator Reed do in the housing area on this

Committee.

Senator ALLARD. Thank you, Mr. Chairman. I agree with Senator

Sarbanes that we do have a number of worthy programs out there,

but just like anything else, you have got a few bad actors. We have

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businesses, say—I am a veterinarian. We have got a few bad actors

that tend to reflect negatively on the profession. Physicians, lawyers, we all have our bad actors. I think the challenge with HUD

is being able to ferret out those individuals that are not responsible

and are not accountable.

You have come, Mr. Bernardi, out of a position where you have

had to hold people accountable. Have you had an opportunity to

think about things that you can implement in HUD that would

bring about more accountability in the process as a Deputy Secretary?

Mr. BERNARDI. Yes. The fact of the matter is that you can always

improve communication, that your correspondence can always be

crisper, if you will. The fact of the matter remains that it is the

relationship that you develop with the staff. There are only a few

of us. There are many career employees. I encountered that same

situation in the city of Syracuse. And overwhelmingly those individuals are dedicated public servants who want to do a good job.

So the relationship that we need to continue to develop with our

deputy assistant secretaries and our program directors in making

sure that every program is working at the maximum possible level.

The Government Performance and Results Act, Senator, that I

know that you are keenly involved with, at HUD we have a strategic plan and we have an annual performance that we, each and

every year, provide information to the Congress as to how we are

doing with our strategic plan. Are we meeting our goals and objectives? Because in the final analysis, that is how we will be judged.

We also have program performance reports. Along with the

President’s management agenda and the Results Act, as Deputy

Secretary, if I am so appointed—if I am so confirmed, I should say,

my goals and objectives are to make each and every office there the

best that it can possibly be.

The Chairman indicated about CDBG and performance results.

We need to drive our budget with performance. We need to indicate

to you when we come here, we are looking for resources and programs that we would like to change, we have to be able to provide

you the necessary measurements so that you can support what we

would like to do. I look forward to that relationship.

There are many, many challenges as Deputy Secretary. There

are over 300 programs at HUD and I am trying to get my arms

around most of them. I enjoyed CPD, and being Assistant Secretary

of that department was just absolutely wonderful, dealing with the

programs such as CDBG, HOME, the homeless program, and the

HOPWA program. Those are good programs. You are able to bring

happiness to the face of people around the country.

But, sir, I look forward to managing with strong ethics, making

sure that everyone provides the necessary energy and expertise

that is needed.

Senator ALLARD. Mr. Shea, I think perhaps you were around

when they passed GPRA, the Government Performance and Results Act. I have always liked the idea because it gives us an opportunity as policymakers to look down very quickly and see what is

actually happening within the agency, and if the programs are not

working then it gives us an opportunity to go back and visit with

the agencies; what they can do to make things better. Do you have

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any thoughts about GPRA and how we measure and improve performance in HUD?

Mr. SHEA. As you know, Senator, I am currently serving as a

consultant at the Department, and when I first walked in the door,

the first thing I picked up was the 5-year strategic plan and the

annual performance plan to read, to get my hands around what the

Department is doing, what it intends to do in the future. I am

pleased to say that PD&R, the office for which I have been nominated, takes one of the lead roles in drafting the Results Act, or

GPRA, documents for the Department. We will continue to do so,

and I find a great utility in those documents and in the Act.

Senator ALLARD. Ms. MacFarlane, I think you have a chore here

for public relations. I think that with the regional offices you have

an opportunity to reach out to communities and work with public

relations. But have you any thoughts on how you can deal with

some of the public relations issues as they come up in HUD?

Ms. MACFARLANE. Yes, Senator. I too have been a consultant but

have been able to observe what the regions talk about on conference calls and the field offices. What I proposed to Mr. Jackson

is that when the assistant secretaries or Mr. Jackson are traveling

to an area on an invited opportunity, that we extend the trip and

we visit the communities where HUD has placed money. We invite

the press to visit those committees with us, and then we hold town

hall meetings afterwards so that we can reach the community and

let them know what opportunities there are, along with some of the

other partners in the industry who also assist with low-income and

moderate-income housing.

Senator ALLARD. Mr. Chairman, I see my time has expired. If I

could just have a moment——

Chairman SHELBY. Good ahead.

Senator ALLARD. —and I will be finished after the first round

here. I do not know what your plans are.

I am a strong supporter of helping people get into their first

home. I hope that you can strengthen those programs. I think that

we have some volunteer programs out there where you build in

sweat equity, where people build their own homes, by volunteering

their time. I hope that you will take time to try and stimulate

those kind of programs, and encourage them to flourish. I have also

worked and carried legislation called the American Downpayment

Act, which is to help people over this downpayment hump that

first-time homebuyers you run into. I think it will be helpful too.

But again, I think those kind of programs have to be monitored

very closely and see that they are managed properly. I would give

you an opportunity to comment any further on those programs if

you want. If not, then we can just move forward.

Mr. BERNARDI. I would like to say a few words, if I may. The

American Dream Downpayment program, there is $161 million

that is available. It is going to be going out the door this month,

as a matter of fact. President Bush signed that at HUD and I believe you were there yourself, sir, back on December 16. That is to

help first-time homebuyers. For the 2005 budget we have a $200

million request. It is through the HOME program, and Senator, as

you indicated, HOME received a very high mark. It is well-managed. It will go to the people that need it the most. It will increase

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homeownership and give those people that do not have the opportunity to own their home downpayment, closing cost assistance. So

I feel very good about that.

Our supportive housing opportunity program, our sweat equity program, our SHOP program, in 2005 we are asking for $65 million. It is budgeted at $25 million here in 2004. I was with some

of the good Senators—Senator Reed, I guess I just missed you here

in Washington. We did the house that Congress built. And to see

the faces of these people that are going into those homes.

Right now they are required to do 200 hours of sweat equity. We

are looking to lower that a little bit. The fact remains it is very difficult for them to spend 200 hours on their own home when they

are building numerous homes. But with Tom Jones with Habitat

for Humanity and the Housing Assistance Council, they receive the

bulk of those dollars and we provide anywhere from 2,200 to 2,500

homes for low-income individuals, and it is a great program.

Senator ALLARD. Thank you, Mr. Chairman.

Chairman SHELBY. I will call on Senator Reed. He has been very

patient and he knows a lot about housing.

If you are required to spend 200 hours on your own home and

you cannot do it, could there be some way they could help on other

homes and people would help them, as long as you get bona fide

credit?

Mr. BERNARDI. Yes.

Chairman SHELBY. Just a thought. I do not know.

Mr. BERNARDI. They have indicated—they being Habitat and the

Housing Assistance Council, that that has been a very difficult provision, and we are going to be reducing that to 100 hours, 50 hours

for the husband or for the individual. They do so many builds now

where they do a number of builds at the same time that that provision is very difficult to meet.

At the same time, because of an increase in costs over the years, instead of $10,000 on a particular unit we are going to be able to

go up to $15,000. We would like to do that. I have been working

very closely with the individuals in those organizations. They also

would like us to take the SHOP program, move it up earlier in the

year so that we could grant the awards in May and June as opposed to October and November so they have the building season

in front of them.

I tell you that to let you know that we are working to try to improve that program and all of our programs.

Chairman SHELBY. Thank you.

Senator Reed, thank you.

Senator REED. Thank you, Mr. Chairman.

Secretary Bernardi, let me return again to the issue of CDBG.

Senator Sarbanes touched upon it. In the fiscal year 2005 briefing

that you gave to staff you talked about the four proposals developing for the formula, and the first indication of changes that we

received was back in the 2004 budget submissions where there was

some discussion without any details really about perhaps changing.

There was a sidebar that made the comparison between Cleveland

and three other cities and said, Cleveland gets as much even

though they seem to be in the same category, which led many people to observe that there is perhaps a movement to change formula

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B which relates to the age of infrastructure and other factors,

which is particularly important to cities like Syracuse, Providence,

Philadelphia, Patterson, New Jersey, and other places.

First of all, do you have details on these four formula proposals?

Mr. BERNARDI. We are just in the process of completing the study

that PD&R has done in conjunction with CPD and with OMB’s

input as well. You are correct, there is formula A and formula B,

and the entitlement community takes the one obviously that provides the most amount of resources. That study will be available,

I believe, in a few months and we plan to provide that. I cannot

get into too much detail.

There are four alternates. Obviously with the 2000 census there

is an awful lot of change that has taken place over the last 10

years, and I can candidly indicate to you that it is not as targeted

a program as it once was. So it will be up to Secretary Jackson and

the Administration to make a determination as to whether or not

to seek change to that formula. There are four alternative proposals that I have looked at in a rough draft. But then again, we

are not going to do this in a vacuum. We will make sure that every

member, that the entitlement communities, the States and any interest groups that are out there have an opportunity to take a look

at this and give their input.

But any time you change a formula of that size, as you well

know, there are winners and losers. But we want to make sure, I

think, in the final analysis—I know Secretary Jackson does and I

feel very strongly on this—that we do it in a way that is equitable

and provides for the individuals that our programs are geared to,

and that is low- and moderate-income.

Senator REED. I think you understand this is a vital concern to

everyone, both the potential winners and the potential losers, so as

soon as you can get those details I would appreciate it and I assume my colleagues would also. We will take you up on your invitation to work closely with you in trying to look at these.

Mr. BERNARDI. Happy to do it, Senator.

Senator REED. I know OMB has rated the CDBG program is ineffective, but it is not just—there is an implementation problem that

might be at the heart of it rather than a formula problem, so I

would hope you would look at that too.

Mr. BERNARDI. With CDBG we are able to provide numbers for

number of units that are rehabilitated, and at the same time number of jobs that are created. But rightfully so, OMB wants to go

deeper than that. They want to know if you are using that money

for public services, and public facilities, exactly who does it benefit.

As I mentioned earlier, working with the communities and with

ourselves we are going to put together performance measurements.

I believe there is $10 million within the CDBG budget for 2004 for

a demostration that will allow communities to competitively utilize

that money to create the kind of system or systems that we are

going to need to measure progress.

Senator REED. Thank you, Mr. Bernardi.

Mr. Shea, first of all let me say, Juliette expressed feelings that

we have all had at one time or another in this room but we did

not have the license to do it, and I am glad she is here today. Congratulations.

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Mr. SHEA. Thank you very much.

Senator REED. Your office just recently released a study, Trends

in Worst Case Needs For Housing, and it underscored that the

trends are getting much, much worse. The report indicated that the

number of renter households with worst case needs rose by 210,000

to 5.7 million in 2001. In this great country that is of concern to

all of us.

The point I would make though is that this report typically

issues every 2 years, and we had to wait 3 years for this recent report, so we only have 2001 data. I hope you can commit to us that

you would be to issue this report on the regular 2-year basis.

Mr. SHEA. Let me just say, Senator, that the report did say that

the percentage of individuals with worst-case needs in 1999 was

the lowest ever recorded. There was a slight uptick from 1999 to

2001, but statistically insignificant. But the report did emphasize

that there is a need for more affordable housing.

Yes, I can commit that we will get a second or a follow-up worstcase needs report out in the near future. I cannot commit to you

to a specific timeframe, but I know you expressed a concern last

year in getting the report out on a timely basis. I can assure you

that we will get it out on a timely basis for more updated figures.

Senator REED. Thank you, Mr. Shea.

Ms. MacFarlane, congratulations on your success at FTC. You

have an important story to tell at HUD, and as Senator Sarbanes

and my colleagues said, there are good things to tell and I wish you

well in telling that story.

Ms. MACFARLANE. Thank you, Senator.

Senator REED. Thank you, Mr. Chairman.

Chairman SHELBY. I just want to tell all of you, you bring a lot

of experience, Secretary Bernardi, Mr. Mayor, your experience at

HUD. Mr. Shea, his experience in the Senate, practice of law,

working with the Majority Leader. Ms. MacFarlane with the FTC.

At HUD, you can make a difference over there, and I believe you

will. We are going to move these nominations as soon as we possibly can, we assure you. We congratulate all of you.

Mr. BERNARDI. Thank you.

Ms. MACFARLANE. Thank you, Mr. Chairman.

Mr. SHEA. Thank you.

Chairman SHELBY. The hearing is adjourned.

[Whereupon, at 3:20 p.m., the hearing was adjourned.]

[Prepared statements, biographical sketches of nominees, response to written questions, and additional material supplied for

the record follow:]

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PREPARED STATEMENT OF HILLARY RODHAM CLINTON

A U.S. SENATOR FROM THE STATE OF NEW YORK

APRIL 21, 2004

Thank you very much, Mr. Chairman. I am very sorry I was not able to personally

attend this hearing to endorse the nomination of Roy Bernardi to Deputy Secretary

at the U.S. Department of Housing and Urban Development. Two years ago, I had

the pleasure of appearing before this Committee to support his appointment as Assistant Secretary for Community Planning and Development and I am happy to say

that he met my highest expectations.

Roy Bernardi has truly dedicated his career to public service. For the past 30

years, he has worked to improve the overall management of the Government while

ensuring the delivery of much needed services. From his start as elected City Auditor, to his two-terms as Mayor of Syracuse, and his service as the President of the

New York State Conference of Mayors, Mr. Bernardi has championed improving the

quality of life of New Yorkers. His experiences in New York made him uniquely

qualified to serve as the Assistant Secretary for Community Planning and Development of HUD, where he provided strong leadership and worked to improve the delivery of important HUD services to communities throughout our Nation. He has

been a strong supporter of providing Federal assistance to the many financially

strapped municipalities in our Nation that depend on CPD programs, which provide

funding for community and economic development, homeless assistance, and housing for people with AIDS.

In New York, I have had the pleasure of working closely with Assistant Secretary

Bernardi to provide HUD assistance to many of the distressed cities in Upstate New

York, to improve communication between Federal, State, and local government on

behalf of HUD empowerment zones and renewal communities in our region and to

deliver vital HUD funding to help rebuild Lower Manhattan. I admire Roy because

he has always brought people together to work on behalf of community-based solutions and has always helped people seek a better life for themselves and their children. One example of his extraordinary leadership that comes to mind is when

Assistant Secretary Bernardi went out of his way to convene a special meeting of

renewal communities in Upstate New York, in March 2002. He spent the entire day

working closely with mayors and local community development officials to help them

fully understand the benefits of a Federal renewal community program. Over one

hundred and fifty people attended this hands-on session and the results have proven

to be invaluable.

I am convinced that his experience as Assistant Secretary for Community Planning and Development, coupled with his impressive record as a public servant of

Syracuse, has prepared him to serve as Deputy Secretary of HUD. I commend the

President for the selection of this nominee and highly recommend him to this Committee, and ask that you act favorably on his nomination.

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RESPONSE TO A WRITTEN QUESTION OF SENATORS SHELBY

AND SARBANES FROM ROMOLO A. BERNADI

Q.1. Do we have your commitment that HUD will provide all information requested by any Member of the Committee regarding program operations, management, and other information relevant to

the Committee’s oversight activities, as soon as such information is

available, without delay?

A.1. Yes, you have my commitment.

RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED

FROM ROMOLO A. BERNADI

Q.1. In July 2002, then-Deputy Secretary Jackson testified at a

Housing Subcommittee hearing I chaired regarding attempts to improve HUD management. And in response to my written questions

from his nomination hearing, Secretary Jackson elaborated on the

progress of HUD’s management initiatives. However, most of these

initiatives were enacted in 2002, but in the January 2003 report

from the U.S. General Accounting Office (GAO) on HUD management, Major Management Challenges and Program Risks (GAO–

03–103), GAO was still concerned that important management

challenges have not been fully addressed. To quote from its 2003

report: ‘‘many of HUD’s strategies for resolving problems in its

high-risk program areas represent new initiatives in early stages

of implementation, and evidence shows that significant problems

remain.’’

• Beyond the HUD management initiatives enacted in 2002 that

Secretary Jackson cited in his written response to my question

for his nomination as Secretary, what are your plans to address

HUD’s management challenges, if you are confirmed? Please

elaborate.

A.1. HUD needs to continue to improve the management of its

human capital, information systems, and acquired services in order

to improve the delivery and results of its core programs, particularly the high-risk rental housing assistance and single family

mortgage insurance programs. The President’s Management Agenda (PMA) is addressing HUD’s management challenges and highrisk programs through five governmentwide initiatives to improve

Government performance, a sixth HUD-specific initiative to correct

HUD program weaknesses, and a seventh initiative to improve

HUD’s program delivery by enabling increased participation by

faith-based and community organizations.

HUD’s major management challenges and high-risk program

areas are longstanding issues requiring sustained effort to address.

A discussion of the nature and plans on each of the PMA initiatives

addressing the HUD management challenges and high-risk program areas identified by GAO follows below. If confirmed as Deputy Secretary, I will make, as my highest priority, implementation

of the comprehensive corrective action plans HUD has put in place

to address these important issues. At the same time, it is important to stress that the efforts made to date under the leadership

of Secretary Alphonso Jackson have already yielded significant results.

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Strategic Management of Human Capital. This PMA initiative is

directed at improving HUD’s most important asset, its ‘‘human capital.’’ Significant steps have been taken to better utilize HUD’s existing staff capacity and obtain, develop, and maintain the capacity

necessary to adequately support HUD’s future mission-critical program delivery. A 5-Year Human Capital Management Strategy has

been developed with implementation plans to ensure that: HUD’s

organizational structure is optimized; succession strategies are in

place to provide a continuously updated talent pool; performance

appraisal plans for all managers and staff link to HUD’s mission

goals and objectives; skills gaps are assessed and corrected; and

human capital management accountability systems are in place to

support effective management of HUD’s human capital.

As Deputy Secretary, I would strive to complete and support the

workforce analyses and planning process to address critical staffing

and skill gaps in HUD’s core program areas and occupations. Addressing those gaps would be accomplished through targeted training and development, controlled hiring, and realignment where

necessary.

Expanded Electronic Government and Financial Performance.

While HUD is pursuing increased electronic commerce and actively

participating in governmentwide ‘‘e-Gov’’ projects, this PMA initiative is also focused on more fundamental, HUD-specific needs to:

Improve the information technology (IT) capital planning process;

complete a systems modernization blueprint or enterprise architecture to guide future systems development; convert to performancebased IT service contracts and strengthen IT project management

to produce better results; and provide a secure systems environment for all platforms and applications. In addition, HUD is continuing its efforts to improve financial performance and eliminate

material weaknesses.

HUD has already established measures for tracking its participation and performance on fifteen major e-Government projects that

support PMA objectives to simplify the delivery of services to citizens, enable the agency’s business processes to be more efficient,

and reduce costs through integration and elimination of redundant

systems.

It has received an unqualified or ‘‘clean’’ audit opinion on HUD’s

consolidated financial statements for the last 4 consecutive fiscal

years (2000–2003), and it has reduced the number of material

weaknesses from 5 to 3 to 2 over the past 3 years, with plans to

eliminate the remaining 2 in fiscal year 2005 and fiscal year 2006.

Having served as a HUD program Assistant Secretary, I would

serve as Deputy Secretary to improve program management participation in IT investment decisions and project management to

better assure HUD’s IT systems efficiently and effectively fulfill the

information needs of HUD programs and program participants.

Completing the HUD Integrated Financial Management Improvement Project (HIFMIP) to better manage HUD financial systems

projects and fulfill unmet financial reporting and internal control

needs would be one of my priorities.

Improved Acquisition Management. HUD acquires over $1 billion

in contracted services and goods each year. As part of an overall

strategy to improve HUD’s acquisitions management, actions are

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being taken to ensure that HUD’s centralized contracting management information system contains reliable data on the number of

active contracts, the expected cost of the contracts, and the types

of goods and services acquired, and that its financial management

information systems provide complete and reliable obligation and

expenditure information on HUD’s contracting activities across the

Department. Other aspects of HUD’s acquisitions management improvement strategy are being addressed through the human capital

management strategy, which incorporates actions to enhance

HUD’s procurement staff capacity and improve guidance and training for HUD’s acquisition officials. Given the significance of contracted services to the delivery of HUD programs, improving HUD’s

procurement capacity and acquisition management skills and information systems would be among my highest priorities as Deputy

Secretary.

Reduced Rent Subsidy Overpayments. HUD has developed a com- prehensive plan for reducing the estimated $2 billion in net annual

rental housing assistance overpayments. Establishing an adequate

field monitoring capacity, with provisions for improved guidance,

training, staffing, and action on monitoring results, is a key component of the strategy. Significant actions to date include: The Office

of Public and Indian Housing’s (PIH) conduct of over 700 Rental Integrity Monitoring (RIM) reviews at PHA’s managing over 80 percent of PIH funding; PIH implementation of the Upfront Income

Verification (UIV) System using State wage data; and the Office of

Multifamily Housing’s increased monitoring through the expanded

use of Performance-Based Contract Administrators (PBCA’s). These

actions contributed to an estimated 30 percent reduction in the

rental assistance payment errors attributed to program administrator performance in fiscal year 2003. The recent Congressional

enactment of HUD’s legislative proposal for increased computer

matching and data-sharing authority to allow upfront verification

of tenant income in all rental assistance programs has the potential to reduce the estimated payment error by over one-half. As

Deputy Secretary, effective implementation of this new computer

matching authority would be among my highest priorities.

Improved FHA Risk Management. Several new risk management

rules have been completed or proposed to protect both the FHA

fund and homebuyers from predatory lending practices like property flipping. Under the new ‘‘Appraiser Watch’’ process, appraisers

with poor performance records are now automatically targeted for

monitoring, or even disqualified from program participation, when

they hit unacceptable performance thresholds. FHA is also implementing a measure of the effectiveness of its targeted compliance

monitoring efforts, which are proving to be more effective in identifying problems and protecting FHA through increased indemnifications and sanctions. FHA’s new automated underwriting system,

the Technology Open To Approved Lenders (TOTAL) Scorecard,

will improve the automated underwriting process to increase lender

efficiency and decrease losses to the FHA fund through more consistent, objective evaluations of the credit worthiness of borrowers,

and better integration of the automated underwriting systems

usage into FHA’s existing processes and workflow. FHA also believes that the objectivity and broad availability of the TOTAL

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Scorecard will increase homeownership opportunities for minority

families. As Deputy Secretary, I will continue to pursue efforts to

reduce FHA’s financial risks while promoting increased homeownership goals for first-time and minority homeowners and other

underserved areas.

Q.2. President’s Management Agenda highlights ‘‘strategic management of human capital’’ and ‘‘electronic government’’ (encompassing

improved information systems) as 2 of 5 governmentwide reform

initiatives. The President’s Agenda also includes a specific initiative regarding HUD management and performance, citing among

other things ‘‘weak information systems and controls, staff

misallocation, and the retirement of many experienced employees.’’

The GAO and many housing groups have indicated that HUD’s information technology systems continue to have severe problems, despite additional Congressional appropriations provided specifically

to correct HUD’s deficiencies.

• What are your plans to correct these information system deficiencies? Please elaborate.

A.2. The bottom line is this: HUD has to improve its IT systems.

The Department has to ensure that the diverse operating platforms

can talk to each other. Data has to be accessible and managers

have to be able to use it in a timely and efficient manner. Important steps have been taken that I will influence, if confirmed. For

example, HUD has made important progress in implementation of

an Enterprise Architecture (EA) program and the Capital Planning

and Investment Process (CPIC). These two initiatives help ensure

that information systems are in alignment with HUD’s business

and that systems are reviewed and approved based on cost, schedule, and performance.

The EA program has developed a target architecture that serves

as a blueprint for modernization of HUD systems in the future.

The EA program now reviews all requests for information technology services.

HUD’S CPIC process governs decisions on the use of the Working

Capital Fund by selecting investments to receive funding, tracking

the achievement of project cost/schedule/performance goals through

quarterly control reviews, and evaluating the success of the investments through post-implementation reviews.

Both of the above programs are helping direct better investment

decisions for HUD and are leading to more efficient and effective

delivery of information technology systems.

Q.3. The GAO’s November 2002 report, HUD Management: Actions

Needed to Improve Acquisition Management (GAO–03–157), March

2004 report, HUD Single-Family and Multifamily Property Programs: Inadequate Controls Resulted in Questionable Payments and

Potential Fraud (GAO–04–390), and a number of other GAO and

HUD Inspector General Reports have clearly demonstrated that

HUD relies heavily on contractors to carry out its programs, and

it is essential that these contractors are held accountable by HUD

for their performance. These previous reports have shown how deficiencies in these areas—the lack of properly trained and equipped

staff, poor information systems, and insufficient oversight of contractors—negatively affects the performance of HUD programs.

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• What are your plans to improve oversight of HUD contractors?

Please elaborate.

A.3. Because we are improving our information systems, because

managers are better trained and because Secretary Jackson has

made this a priority for himself, HUD is taking the right steps to

improve oversight of HUD contractors. HUD now uses and enters

contractor performance data in to the National Institutes of Health

Contractor Performance System (CPS) Implementation and training was completed in early 2003.

In December 2003, HUD implemented the HUD Procurement

System (HPS) Version 3.6 which addressed GAO recommendations.

HUD established, in early 2004, an Acquisition Workforce Council (AWC) that will focus on training and development of HUD’s acquisition workforce.

As indicated in my comments on acquisition management in response #1, the Department is making significant progress to ensure

that HUD’s centralized contracting management information system contains reliable data on the number of active contracts, the

expected cost of the contracts, and the types of goods and services

acquired, and that its financial management information systems

provide complete and reliable obligation and expenditure information on HUD’s contracting activities across the Department.

Further, the Department has taken strong action to deal with

HUD IG and GAO concerns about management of single and multifamily housing.

Multifamily Housing: On February 27, 2003, the HUD Multifamily Property Disposition oversight contract with Management

Solutions of America Inc. (MSA) was modified to require additional

monitoring of work completed by HUD’s Property Management contractor.

Specifically, this modification requires that, prior to a site visit,

the Oversight Contractor (currently MSA) generate a report listing

all purchaser orders and contracts issued for the site over the previous 6 months. The Oversight Contractor will select a sample of

15 percent of these actions on which to review invoices as follows:

(1) 5 percent of those actions issued in the previous 30 days but

not yet shown as paid for the type of work that, in the judgment

of the contractor is likely to be still going on; (2) 5 percent of those

actions issued in the previous 90 days and shown as paid; and (3)

5 percent of those actions issued during the first 90 days of the 6-

month period.

The actions selected shall be for varying types of requirements

(including supply purchases), varying dollar levels, and varying

vendors. The Oversight Contractor shall then request the property

management contractor to provide, via overnight mail, copies of the

invoices where they have been received, relevant contract documents, and evidence of competition (or justification as to why

competition was not obtained) if the purchase order is over the

micropurchasing level. The contractor will not include major construction projects in the sample as that work is inspected by HUD’s

architectural and engineering contractors.

Once on-site, the Oversight Contractor will, for actions where the

invoices have been processed, compare the item bought against the

associated contract document (with specifications) and invoice to

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ensure that what was purchased per those documents was received.

For actions/orders where the work is still on-going, the contractor

shall review the work against the contract document (with specifications) and determine if work is being performed as procured.

The Oversight Contractor will take at least one digital photograph

of each work product reviewed and additional digital photographs

as needed to illustrate problems identified by the contractor during

its review.

Also, while on-site, the Oversight Contractor shall review the site’s rotation lists for purchases of less than $2,500 and provide

written comments as to the adequacy of those lists for the area in

which the site is located and kinds and volume of purchases being

made.

The Oversight Contractor will identify in its written report the

results of its entire site visit, which actions were reviewed, and any

problems identified with those actions. The contractor shall also

identify any situations where it appears the PM contractor placed

repetitive purchase orders in order to avoid HUD approval levels

set forth in the PM Contracts.

The MFPD Centers have been routinely requiring the Oversight

Contractor (MSA) to follow the revised scope of work as outlined

above since it was approved on February 27, 2003.

Single Family Housing: For single family housing, the current

Management and Marketing (M&M) contracts expire July 31, 2004.

The Department is currently in the process of awarding new performance-based contracts to manage, market, and sell its single

family properties throughout the United States owned by or in the

custody of HUD. Award on these contracts are expected by July

2004. Contract requirements include a provision to allow electronic

monitoring of the contractors working files, as well as on-site and

physical property inspections.

Staff training on management controls over the Management and

Marketing (M&M) contractors is scheduled for June 15–17, 2004

for HUD Real Estate Owned staff, both in headquarters and at the

four Homeownership Centers (HOC’s). The purpose of the training

is to provide direction to the HOC and headquarters’ staff on improved monitoring responsibilities involved with the implementation of the new M&M contractors. The core issues to be discussed

are: Contract administration (which includes start-up related activities, transition activities, GTR approval standards and procedures requiring GTR action and review); contract monitoring and

management controls; systems controls and access; financial controls on disbursements, sales closings and collections; and regulations and notices.

The Department is currently in the process of procuring for the

services of property maintenance of the occupied 203k properties in

New York City. HUD previously terminated the task order with

ARCO for these services, and hired NHG (National Housing Group)

on an interim 8a sole source contract, whose options run out in

September. A revised performance-based statement of work will be

issued prior to June 2004.

A contract which provides expanded financial support services to

the four HOC’s will be awarded by September 2004. This contractor

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ducted by HUD’s M&M contractors and closing agent contractors,

including monitoring of disbursements made for pass-through expenses, monthly contractor fees, and real estate property taxes, and

researching and resolving inconsistencies resulting from sales closings, as necessary. The reprocurement will be one competition for

four separate 8a set-aside contracts for each of the HOC’s.

In addition to the above training, a contractor was hired by the

Office of Single Family Asset Management to review and analyze

its procedural functions. The Real Estate Owned operation was reviewed in each of the four HOC’s, headquarters, and the National

Servicing Center in Oklahoma City, OK. The staffing allocated to

the Real Estate Owned operation and the internal control procedures necessary for the Office of Single Family Asset Management

to maintain programs and procedures to protect the integrity of the

FHA mortgage insurance funds, as well as achieving its program

objectives, were reviewed by this contractor. The contractor will

provide the Office of Single Family Asset Management with a final

report which will contain its findings and recommendations for improvement, if necessary, in functional, staffing and/or internal control areas. The final report is due in June 2004.

HUD recently awarded a contract to conduct operational, management, and performance reviews of each of the current M&M

contract areas and any subsequently awarded M&M contract areas,

including a consolidated review of each M&M contractor of those

contractors having multiple areas. The purpose of these reviews is

to analyze and assess the performance of the M&M contractors.

The reviews will be conducted at all M&M office locations on a

monthly basis. The contractor will develop and maintain a riskbased methodology for selecting on-site reviews of M&M contractor

compliance, with property specific and overall program support

activities that includes a statistically valid file/item sampling methodology. The contractor will perform a monthly review of all relative activities performed by all of the M&M contractors and report

its findings to the respective HOC and headquarters. The contractor will also maintain a national web-based database file previously developed for and owned by HUD that is compatible with

HUD’s current operating environment that can be used to perform

detailed analysis of the results of the reviews at various levels of

risk. A monthly risk analysis report will be furnished to headquarters and the respective HOC on the M&M contractors

reviewed that summarizes the current performance of the M&M

contractors for each area of risk.

Q.4. Secretary Jackson has informed me that HUD and the Association of Federal Government Employees (AFGE) have agreed in

principle to a student loan repayment program to address HUD’s

strategic human capital needs, but had not funded it. He also mentioned that the program is in departmental clearance.

• In light of the fact that many Federal agencies and the Senate

have successfully implemented and funded student loan repayment programs, why has HUD not allocated funds for its proposed student loan repayment program to address the need HUD

has itself identified as a significant part of its strategic human

capital needs? Please elaborate.

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• Is the proposal still in departmental clearance? When can it be

expected to be approved? When can we expect to see it fully funded? Please elaborate.

A.4. The Department believes that a student loan repayment program is an important component of its human capital needs strategy. HUD’S Student Loan Repayment Policy has completed the

departmental clearance process. Comments are being reviewed currently. Comments will be shared with AFGE. Upon agreement

HUD will prepare a supplement to the AFGE agreement and will

insert Student Loan Repayment Policy into the HUD handbook.

Three hundred fifty thousand dollars has been identified for fiscal year 2004 to support this program.

Q.5. As a part of its HUD’s strategic human capital planning, it

implemented the Resource Estimation and Allocation Process

(REAP) to determine appropriate staffing levels, and followed that

initiative with periodic Total Estimation and Allocation Mechanism

(TEAM) measurements of staffing needs.

Q.5.a. To what extent has HUD implemented and used the results

of REAP and TEAM to determine staffing levels and locations?

A.5.a. Both REAP and TEAM have been implemented. REAP establishes a staffing baseline that is used for budget formulation

and execution, strategic planning, and management and organizational analyses. TEAM validates the REAP baseline on a regular

basis by capturing and reporting actual workload.

REAP and TEAM were the underlying systems used to develop

the staffing requests in the fiscal year 2003, 2004, and 2005 Budgets and was the basis for the fiscal year 2002–2004 staffing plans.

REAP is now used by the Appropriations Committees to allocate

workyears and associated funding by Office in HUD’s Appropriation Acts.

Q.5.b. What factors, if any, impede application of this process?

How accurate is REAP and TEAM in its estimation of actual staffing needs?

A.5.b. There are no impediments to REAP and TEAM, but both

must be updated on a regular basis to reflect organizational

changes, changes in program content, and the implementation of

the Strategic Plan. The original REAP baselines were developed in

2000–2001. HUD is currently completing the first round of updates

of the original studies. This update covers approximately 80 percent of the Department’s FTE’s. The remaining programs will be

restudied by the end of this calendar year. REAP ‘‘refreshes’’ will

be conducted approximately every 2 years for every HUD program

or sooner if required by changes in programs, functions, processes,

or organizational structure.

REAP establishes a baseline of staffing needs based on current

program requirements; TEAM measures actual staff usage and

work performed and compares them against the REAP baseline by

function, location, and programs for possible adjustment or updating. To date, TEAM reports demonstrate that REAP estimates of

workload are accurate to within the 95 percent confidence limits.

This result validates the accuracy of the methodology developed by

HUD and the National Academy of Public Administration (NAPA).

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Q.6. In response to my question regarding funding the commitment

to end chronic homelessness and the Samaritan Initiative, thenActing Secretary Jackson stated that the Administration has provided sufficient resources to meet the commitment. However, in

order to meet the goals the Administration has set, the budget for

supportive housing would have to be $100 million a year ($1 billion

over the decade) to fund 15,000 units a year (150,000 a year). The

Samaritan Initiative is authorized and proposed to be funded at

$50 million a year.

• How do you reconcile those numbers? Please elaborate.

A.6. The Samaritan Initiative will be a dedicated program targeted

to the chronically homeless. HUD proposes $50 million for Samaritan to provide permanent housing for this population. It is important to note that Samaritan is by no means the only resource that

will be used to end chronic homelessness. In addition to the Samaritan Initiative, HUD’s proposed consolidated homeless assistance

program, requested at a 2005 funding level of $1.282 billion (including $25 million for the proposed ‘‘Prisoner Re-entry’’ program),

will be a significant resource in ending chronic homelessness. Communities will be able to tap into these funds to house chronically

homeless persons. In addition to the targeted homeless assistance

programs, communities will be able to use HUD’s mainstream

housing programs (including HOME, Section 8, and public housing)

to help end chronic homelessness. Finally, HUD is not the only

housing resource that communities will tap to achieve this important goal. Resources from States, localities, and organizations committed to providing affordable housing, such as Fannie Mae, will

also be used to end chronic homelessness.

RESPONSE TO A WRITTEN QUESTION OF SENATORS SHELBY

AND SARBANES FROM DENNIS C. SHEA

Q.1. Do we have your commitment that HUD will provide all information requested by any Member of the Committee regarding program operations, management, and other information relevant to

the Committee’s oversight activities, as soon as such information is

available, without delay?

A.1. Yes, you have my commitment.

RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED

FROM DENNIS C. SHEA

Q.1. The first major report of the year from the office you are nominated to head, HUD’s Office of Policy Development and Research,

was ‘‘Trends in Worst Case Needs for Housing,’’ which documents

the significant challenges that too many of America’s working families experience in finding an affordable place to live. It states,

‘‘Worsening shortages of housing affordable and available to extremely low-income renters . . . show that the underlying gap between demand and supply continues.’’ The report indicates that the

number of renter households with worst case needs rose by 210,000

to 5.07 million in 2001, and that ‘‘there were only 42 units affordable and available for every 100 families with extremely low-incomes,’’ an astounding deficit of almost 5 million units. In my own

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State of Rhode Island, one of every two renters is unable to afford

the two bedroom HUD Fair Market Rent levels.

Furthermore, the gap between demand and supply is going to increase. Based on the most recent Census data, demographic trends

indicate that the United States will grow by 30 million households

by 2025 and at the current annual rate of the loss of units, we will

lose another 15 million units also by 2025. Combined with the 5

million deficit indicated by the Worst Case Needs report, this

means that we will need to build at least 50 million units by

2025—almost 2.5 million units a year—just to keep up with demand. We are not building at that rate, especially for rental housing affordable for low-income and minority families.

In light of these trends, what policy development and research

initiatives do you believe are important to address the upcoming

demand for housing, especially regarding rental housing for low-income and minority families?

A.1. As you point out, HUD’s ‘‘worst case needs’’ reports have historically highlighted the need for a greater supply of affordable

housing for low-income households. In the future, this overall need

will be compounded by the unique challenges of meeting the housing needs of the elderly, who will make up a larger portion of the

population, as well as the disabled and the homeless.

The latest ‘‘worst case needs’’ report released by the HUD Office

of Policy Development and Research indicated that the percentage

of households with worst case needs in 1999 stood at 4.72 percent,

the lowest percentage ever recorded. While this percentage increased slightly to 4.77 percent in 2001, the latest ‘‘worst case

needs’’ report indicated that this increase was not statistically significant. Since 1977, the percentage of U.S. households with ‘‘worst

case needs’’ has hovered around 5 percent, with the highest percentage recorded in 1983 (6.03 percent).

Working closely with the private sector and our State and local

partners, the Federal Government clearly has an important responsibility to help respond to the need for more affordable housing.

PD&R is uniquely positioned to assist in this effort by providing

sound research and objective information to guide policymakers in

their decisionmaking. Historically, PD&R has achieved this mission

by examining housing and demographic trends through surveys

and reports, including ‘‘worst case needs’’ analyses and funding for

the American Housing Survey. We intend to continue this legacy

through an aggressive research agenda that is tightly focused on

key housing issues with high policy relevance. Some of our current

research priorities include:

• Affordable Housing. PD&R has a number of projects underway or

under consideration that will examine ways to expand affordable

homeownership and rental opportunities. These include support

for the goal of ending chronic homelessness in 10 years; studying

ways of closing the minority homeownership gap and creating 5.5

million more minority homeowners by 2010; and critical support

to FHA in the operation of its single family and multifamily insurance programs, including the introduction of new products to

expand affordable housing opportunities.

• Program Evaluations. Improving the operation of HUD’s current

programs is a key PD&R priority. Examples of current and proVerDate 11-MAY-2000 17:39 Nov 07, 2005 Jkt 000000 PO 00000 Frm 00060 Fmt 6633 Sfmt 6601 24198.TXT SBANK4 PsN: SBANK4
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posed program evaluations include improving the delivery of Section 202 and Section 811 housing and evaluating the formulas for

distributing HOME and CDBG funding. PD&R plays a key role

in monitoring and evaluating the Low Income Housing Tax Credit program and will continue to do so, if I am confirmed. • Reducing Regulatory Barriers. Working with HUD’s Affordable

Communities Initiative, PD&R is helping States and communities to reduce regulatory barriers that increase the cost of

housing without improving the value to the residents or to their

communities. By working collaboratively with developers and

community groups, communities will be able to reduce delays

and unnecessary costs, which constitute a barrier to affordable

housing. • Housing Technology. PD&R’s Division of Research and Technology has helped shine the spotlight on innovative technologies

that not only make American housing safer and more durable,

but also more affordable. In addition, PD&R is sponsoring continuing research to improve the quality of manufactured housing.

Finally, to remain effective, PD&R needs the continuing support

of Congress to provide funding for research and program evaluation.

I look forward to working together with you and the other Members of the Senate Banking Committee to expand opportunities for

affordable housing. If confirmed, I hope to elevate PD&R’s role in

ensuring that the Department’s policy decisionmaking process is

informed by sound research. You have my assurance that, if given

the opportunity to lead PD&R, the Office will continue to make affordable housing, particularly housing for low-income households, a

key focus of its research and policy development efforts.

Q.2. In early April 2004, HUD released proposed new affordable

housing goals for Fannie Mae and Freddie Mac, based largely upon

recommendations and data from HUD’s Office of Policy Development and Research.

Q.2.a. Do you believe that these proposed goals are rigorous

enough to help address the need for affordable housing in many of

the high housing cost communities across the Nation? Why or why

not?

A.2.a. The Department is proposing higher goals than those in effect for 2004, and yes, I believe that the proposed goals are rigorous enough to help address affordable housing problems in all

communities across the Nation. HUD’s proposed higher housing

goals for Fannie Mae and Freddie Mac for the 2005–2008 period

were published in the Federal Register on May 3, 2004. Specifically,

HUD is proposing to raise:

• the low- and moderate-income goal from 50 percent in 2004 to 52

percent in 2005, 54 percent in 2006, 56 percent in 2007, and 57

percent in 2008;

• the special affordable goal from 20 percent in 2004 to 22 percent

in 2005, 24 percent in 2006, 26 percent in 2007, and 28 percent

in 2008; and

• the underserved areas goal from 31 percent in 2004 to 38 percent

in 2005, 39 percent in 2006 and 2007, and 40 percent in 2008.

A portion of the proposed increase in the underserved areas goal

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between 2004 and 2005 reflects the incorporation of data from

the 2000 census on the prevalence of underserved (low-income

and/or high-minority) areas.

In addition, HUD is proposing to establish home purchase

subgoals for the GSE’s to increase homeownership among American

families, especially lower-income families and families in underserved areas.

In the past, the GSE’s have generally lagged the market in funding mortgages for families in owner-occupied and rental properties

targeted by the housing goals. In 1992, Congress said that one factor that HUD should take into account in setting the goals was the

ability of the GSE’s to lead the market, and the Department has

done so in proposing the goals for 2005–2008. That is, the Department has proposed to increase the goals in steps, so that by the

year 2008 the goals are set at the upper end of the estimated range

of the goal-qualifying shares of mortgages originated in the primary mortgage market.

HUD is confident that the higher national housing goals proposed for the post-2004 period can only be met by GSE support of

affordable housing in all parts of the country, including communities with high housing costs. I support the Department in this effort and believe that the proposed goals, if implemented, will help

respond to the need for affordable housing in these communities.

Q.2.b. On Monday, April 19, at the Mortgage Banking Association’s

Secondary Market Conference, representatives from Fannie Mae

and Freddie Mac alleged that HUD’s proposed goals were too rigorous, and may even force them to reduce annual purchases of

moderate or high-income mortgages.

Do you think there is any merit to Fannie and Freddie’s argument that the proposed goals may be too rigorous? Why or why

not?

What effect, if any, do you think that the proposed goals will

have on the purchases of moderate or high income mortgages?

Please elaborate.

A.2.b. HUD has undertaken detailed analyses of the primary mortgage market and presented the results of such analyses in Appendix D of the proposed rule for 2005–2008 and in the regulatory

analysis accompanying the proposed rule. These analyses demonstrate that there are many mortgages in the categories targeted

by the housing goals that have not been purchased by the GSE’s

in the past. There have been ample opportunities for both Fannie

Mae and Freddie Mac to increase their purchases of targeted loans

and improve their overall goal performance. And projections indicate that there will be an ample number of such mortgages in the

period covered by the proposed rule. Thus, there should be no need

for the GSE’s to curtail their purchases of mortgages for higher-income families or families living outside of underserved areas, as defined by the Department. The Department’s regulatory analysis

also demonstrates that the GSE’s have earned a high return on equity (ROE) on their purchases of both targeted and nontargeted

mortgages. This suggests that they will not be curtailing their regular business in order to meet the housing goals.

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Q.2.c.1. Unlike every other goal established by HUD, which are

proposed to be increased over the course of the next 4 years, the

Special Affordable Housing Multifamily Goal is set at 1 percent of

Fannie and Freddie’s volume of mortgage purchases.

Do you think it is appropriate to have the multifamily goal able

to be changed, as are the other housing goals? Why or not?

A.2.c.1. HUD has increased the minimum multifamily special affordable subgoal several times in the past. For Fannie Mae, the

subgoal was $1.29 billion annually for 1996–2000 and $2.85 billion

annually for 2001–2004, and the Department is proposing to raise

this subgoal to $5.49 billion annually for 2005–2008. For Freddie

Mac, the subgoal was $0.99 billion annually for 1996–2000 and

$2.11 billion annually for 2001–2004, and the Department is proposing to raise this subgoal to $3.92 billion annually for 2005–2008.

Thus, for both GSE’s the proposed subgoals for 2005–2008 are approximately four times the subgoals that were established for

1996–2000. These changes have been made in order to reflect the

overall growth in the multifamily mortgage market and the increased capacity and expertise of both GSE’s in purchasing multifamily mortgages.

Q.2.c.2. Should the multifamily goal be set as percentage of volume

or as a specific dollar amount? Why or why not?

A.2.c.2. As discussed in Chapter 3 of the regulatory analysis, HUD

has considered alternative formulations of this subgoal, but has set

it in terms of a minimum dollar volume of such mortgage purchases. Comments were invited regarding alternatives in the 2000

rule, and commentors generally supported the dollar-based approach followed in the past by the Department.

The Department believes it would not be feasible to establish

these subgoals as a percentage of all units currently financed by

the GSE’s, because their total mortgage volume varies greatly between years, especially when refinance waves take place in the single-family mortgage market, as seen in the past few years. I share

the Department’s view that the dollar-based subgoals have helped

ensure that the GSE’s play at least a minimal role in the special

affordable portion of the multifamily mortgage market.

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