U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

50–234 PDF 2009

S. HRG. 111–34 

NOMINATION OF SHAUN DONOVAN 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

ON 

NOMINATION OF SHAUN DONOVAN, OF NEW YORK, TO BE SECRETARY 

OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

JANUARY 13, 2009 

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 

CHRISTOPHER J. DODD, Connecticut, Chairman 

TIM JOHNSON, South Dakota 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

EVAN BAYH, Indiana 

ROBERT MENENDEZ, New Jersey 

DANIEL K. AKAKA, Hawaii 

SHERROD BROWN, Ohio 

JON TESTER, Montana 

HERB KOHL, Wisconsin 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

MICHAEL F. BENNET, Colorado 

RICHARD C. SHELBY, Alabama 

ROBERT F. BENNETT, Utah 

JIM BUNNING, Kentucky 

MIKE CRAPO, Idaho 

MEL MARTINEZ, Florida 

BOB CORKER, Tennessee 

JIM DEMINT, South Carolina 

DAVID VITTER, Louisiana 

MIKE JOHANNS, Nebraska 

KAY BAILEY HUTCHISON, Texas 

COLIN MCGINNIS, Acting Staff Director 

WILLIAM D. DUHNKE, Republican Staff Director and Chief Counsel 

JONATHAN MILLER, Committee Professional Staff 

DIDEM NISANCI, Legislative Assistant 

EMMA PALMER, Legislative Assistant 

MATTHEW PIPPIN, Legislative Assistant 

DAVID STOOPLER, Legislative Assistant 

NATHAN STEINWALD, Legislative Assistant 

JASON ROSENBERG, Legislative Assistant 

LAURA SWANSON, Legislative Assistant 

MARK OESTERLE, Republican Counsel 

MIKE NIELSEN, Legislative Assistant 

JENNIFER GALLAGHER, Legislative Assistant 

GREGG RICHARD, Legislative Assistant 

COURTNEY GEDULDIG, Legislative Assistant 

DAWN RATLIFF, Chief Clerk 

DEVIN HARTLEY, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

(II)

C O N T E N T S 

TUESDAY, JANUARY 13, 2009 

Page 

Opening statement of Senator Dodd ...................................................................... 1 

Prepared statement .......................................................................................... 43 

Opening statements, comments, or prepared statements of: 

Senator Shelby .................................................................................................. 5 

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

Senator Reed ..................................................................................................... 8 

Prepared statement ................................................................................... 44 

Senator Bennett ................................................................................................ 9 

Senator Menendez ............................................................................................ 9 

Senator Martinez .............................................................................................. 11 

Senator Akaka .................................................................................................. 12 

Senator Casey ................................................................................................... 17 

Senator Tester .................................................................................................. 18 

WITNESS 

Shaun Donovon, of New York, Secretary-Designate, Department of Housing 

and Urban Development ...................................................................................... 13 

Prepared statement .......................................................................................... 45 

Response to written questions of: 

Senator Dodd .................................................................................................... 48 

Senator Shelby .................................................................................................. 50 

Senator Corker .................................................................................................. 54 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

Statement of Marty Shuravloff, Chairman of the National American Indian 

Housing Council ................................................................................................... 55 

Letter submitted by the National Association of Real Estate Brokers— 

Investment Division, Inc. .................................................................................... 56 

Letter submitted by the Metropolitan Council on Jewish Poverty ...................... 57 

Letter submitted by Catholic Charities ................................................................. 58 

Letter submitted by the Council of Large Public Housing Authorities ............... 59 

(III)

(1) 

NOMINATION OF SHAUN DONOVAN, OF NEW 

YORK, TO BE SECRETARY OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

TUESDAY, JANUARY 13, 2009 

U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. 

The Committee convened at 10:11 a.m., in room 538, Dirksen 

Senate Office Building, Senator Christopher J. Dodd (Chairman of 

the Committee) presiding. 

OPENING STATEMENT OF CHAIRMAN DODD 

Chairman DODD. I apologize to all of you. This is a sort of a juggling match going on here today. I said downstairs, it is sort of like 

a New York day. Senator Hillary Clinton, we started her confirmation hearing this morning about 10 minutes ago in the Hart hearing room, and so as a Ranking Member of that Committee, I needed to be there for that opening. 

Senator Schumer is a very busy person. He is a member of this 

Committee today, but also is the presenter of both Senator Clinton 

before the Senate Foreign Relations Committee and will be here 

shortly to introduce Mr. Donovan, the Secretary-Designate of the 

Department of Housing and Urban Development. 

What I am going to do is, to get underway here, is make some 

opening statements, and as soon as Senator Schumer arrives, we 

will pause and allow him to make a formal introduction of you, Mr. 

Donovan, if that is all right with you. I would also note that for 

those, as well, we have the confirmation hearing of Arne Duncan, 

the Secretary-Designate of Education. So on the three committees 

on which I serve, Foreign Relations, chairing Banking, and Health, 

Education, and Pensions, we have confirmation hearings going on 

simultaneously this morning. 

So with that said, let me turn, if I can, to an opening comment 

on Mr. Donovan. I commend him for his willingness to take this 

tremendous responsibility of serving as the Secretary of HUD. This 

is a very, very challenging job and I think all of us are very excited 

about your nomination, I say, Mr. Donovan. 

I want to welcome my colleagues, first of all, back to the Committee on Banking, Housing, and Urban Affairs for the first hearing of the 111th Congress. As you know, the Committee was extremely busy, to put it mildly, and productive, I might add, in the 

previous Congress, and I expect this year to be every bit as busy 

with an agenda that is already extremely crowded. 

2 

As my colleagues know, this Thursday, January 15, the Committee will hold its second hearing to consider the nominations to 

the Securities and Exchange Commission, the Federal Reserve 

Board, and the Council on Economic Advisors, and we have tentatively scheduled a hearing for the 27th of this month on the 

Madoff securities fraud issue. I have distributed a draft agenda to 

Committee members on both sides and I am consulting with all 

members to develop a schedule for upcoming hearings as the Committee and the Congress continue to be confronted with the very 

fragile financial system. 

Today, we are considering the nomination of Mr. Shaun Donovan, Commissioner of the New York City Department of Housing, 

Preservation, and Development, to become the Secretary of the Department of Housing and Urban Development. Let me point out 

that we are extending to Mr. Donovan this morning the same courtesy we showed to our colleague, Senator Mel Martinez, my good 

friend from Florida, for whom the Committee under Chairman Senator Sarbanes also held a nomination hearing for the job of Secretary of HUD prior to the President actually taking office, and I 

don’t think a bad precedent to be setting given certainly the issues 

we are facing today, but also to allow an administration to get up 

and moving as quickly as possible. 

It is our view now, particularly given the urgency of our economic situation, that we ought to help get the President’s cabinet 

in place as quickly as possible. 

Senator Schumer has arrived. I announced you would be here 

shortly. 

Mr. Donovan, let me welcome you to the Committee. You have 

been nominated for a job fraught with significant challenges. Yet 

for that very reason, I think there are some tremendous opportunities, as well, not only for you, but for our country. 

For the past 3 or 4 years, the country has been facing a growing 

housing problem that had its origins in the scourge of predatory 

lending that has resulted in record high foreclosure rates. This 

housing crisis has been a primary cause of the deepening recession 

to which none of us are immune. Across the country, between 9,000 

and 10,000 home owners face foreclosures every single day in our 

nation. Foreclosures in my State are up 71 percent over last year 

and it is expected that we will have more than 13,000 subprime 

foreclosures in the next 2 years on top of the 17,000 that have already occurred in Connecticut. And my State is not anywhere near 

as adversely affected as the States of California and Arizona, Nevada, Florida, others that are facing far more serious problems 

with the foreclosure rates. 

Nationwide, cities such as Bridgeport, Connecticut, which have 

inordinately high rates of subprime loans, are struggling to keep 

themselves afloat as those loans reset one by one and families find 

themselves with nowhere, or very few places to turn. 

I recently met with the leaders in my own State where I heard 

about he toll this crisis is taking in the minority community, particularly. Some say this crisis will result in the net loss in home 

ownership rates for African-Americans, wiping out a generation of 

wealth gains and opportunities. 

3 

But let there be no doubt that this crisis today affects every 

American in one way or another. In all, by some counts, we can expect some eight million homes to go into foreclosure absent some 

form of additional action. 

Unfortunately, the current administration was slow to acknowledge the housing problem, and when it finally did, it was timid, in 

my view, in its response. Even now, as foreclosures tear apart 

neighborhoods and wreak havoc on our economy, the administration unfortunately has refused to use the authority of funds that 

we gave it in the Emergency Economic Stabilization Act to tackle 

the foreclosure crisis head-on, despite the Congress’s crystal clear 

intent when that law was written. 

Surprisingly and unfortunately, in my opinion, HUD has not 

played a central role in addressing the housing crisis. Frankly, it 

has been, to quote last Friday’s National Journal, and I quote them 

here, ‘‘at best a second-string player,’’ end of quote, following in the 

wake of other governmental departments with far less expertise in 

housing than the professionals at HUD. 

Indeed, as the cover page of CQ Weekly says, ‘‘The housing crisis 

remains at the core of the economic woes,’’ end of quote. Put simply, we cannot address our economic crisis until we address the underlying housing crisis, and to do that we need an active, aggressive, and well-run HUD with leadership that is confident in its 

mission and unafraid to act. As President Obama himself has said, 

HUD’s role has never been more important, and I agree with him. 

Unfortunately, HUD has been mismanaged and ridden with 

scandal in the last several years. Let me be clear that these problems did not arise, I might point out, under the very able leadership of our colleague on this Committee, Mel Martinez, who did a 

remarkable job, in my view, while he was at HUD, understood 

these issues, came from a background committed to it with his own 

previous experience in Florida. 

I would also say that in recent weeks, Senator Preston, who has 

been the new Secretary of HUD, a nomination we moved very 

quickly through this Committee, as my colleagues will recall, I 

think has done a very, very good job. He has had a short tenure, 

but done a very good job over these last several months. 

But fundamentally, HUD has been left adrift at a time when 

bold leadership and clear direction were never more important. 

Just last week, I learned about the Wright family in my home 

State of Connecticut, and every one of my colleagues can share 

similar stories. The Wrights are a middle-class, working-class family from Windsor, Connecticut, and they are right now in danger 

of losing their home. Like thousands of families across the country, 

the Wrights were lured into a mortgage they were sure they could 

afford, but they discovered they can’t, not because they acted irresponsibly, but Mrs. Wright became pregnant with her second child 

and she ran out of her paid sick time that she had been afforded 

as a teacher. For those reasons and circumstances, their income 

has declined, costs have risen, and all of a sudden that home, 

which was the source of the great wealth creation for that middleclass family, is now in danger of being lost. There are literally millions of Wright stories all across this country of ours. 

4 

Mr. Donovan, this is the kind of story being repeated in every 

community across our nation. With the right leadership, I believe 

HUD can be an effective partner in helping families such as the 

Wrights. This is an opportunity you have to restore HUD as a leading voice in addressing the crisis facing our country today. 

I would say to my colleagues that Mr. Donovan is the most experienced nominee for HUD Secretary this Committee has seen in a 

long time. Certainly Mel Martinez, as I mentioned, did a remarkable job and brought a strong background experience to the issue, 

as did Andrew Cuomo when he served as Secretary of HUD. But 

it is important to understand the background of Mr. Donovan. I 

think you will all be heartened by the wealth of knowledge he 

brings to this nomination. 

In addition to degrees in architecture and public administration, 

Mr. Donovan has run the Multi-Family Program at the Federal 

Housing Administration, was for a time the Acting Housing Commissioner. He has worked in the private nonprofit sector as a housing developer and has worked as a managing director of a large 

multi-family mortgage company. Since 2004, Mr. Donovan has been 

the Commissioner of New York City’s Department of Housing Preservation and Development, and in that role managed 2,800 employees and helped develop and manage Mayor Bloomberg’s New Housing Marketplace Plan, which I am sure Senator Schumer may reference in his introduction, one of the most remarkable plans not 

only in New York’s history, but anywhere in this country, a very 

exciting idea. 

Beyond the statistics and the numbers that so dramatically underscore Mr. Donovan’s accomplishments, I want to welcome him 

for the kind of leadership and vision that I am confident he will 

bring to the Department at a time when such leadership is so desperately needed. 

For example, as early as 2004, before most of the rest of the 

country was focused on the subprime crisis and foreclosures they 

would lead to, Mr. Donovan told a Newsweek reporter that he was 

worried about the coming flood of foreclosures. That is at least a 

year and a half before other people were even talking about the 

issue at all. He warned about the impact it would have on homeowners and neighborhoods across this country. 

Mr. Donovan sees the role of HUD as being more than a caretaker for physical housing structures or as a mortgage insurance 

company. Mr. Donovan, I believe, understands the danger of 

stovepiping within this arena and sees HUD as the Federal Government’s primary tool to help build communities, an agency that 

helps provide housing opportunities for homeowners, for renters 

along a spectrum of incomes and ages. He also understands, in my 

view, the need to coordinate housing with transportation, including 

public transportation and transit, to improve access to jobs and 

other economic opportunities. We had the chance to discuss this in 

a meeting we had in our office and I was impressed that you understood the holistic approach to the housing job and function and 

the problems that we need to address. 

And finally, Mr. Donovan is a man, I think, of integrity, who has 

shown a proven ability to work constructively with all interested 

parties. We have letters that I am going to ask consent to be inVerDate Nov 24 2008 14:34 Jun 22, 2009 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 S:\DOCS\50234.TXT SHERYL
5 

cluded in the record from a wide variety of housing groups, from 

realtors to home builders, Low-Income Housing Coalition, and 

many, many others, all expressing very enthusiastic support for 

your nomination. 

Chairman DODD. So Mr. Donovan, we welcome you to the Committee. The leadership you offer to this critically important Department, and more importantly, the hope that you offer millions of our 

families at this uncertain moment. I look forward to your testimony, and after I give my colleague here, Senator Shelby, former 

Chairman of the Committee, a chance for an opening statement, we 

will turn to Senator Schumer for purposes of introduction and then 

we will get to you, Mr. Donovan. 

Senator Shelby? 

STATEMENT OF SENATOR SHELBY 

Senator SHELBY. Thank you, Chairman Dodd. Thank you for calling today’s hearing on the nomination of Mr. Shaun Donovan to 

serve as Secretary of the Department of Housing and Urban Development. You are expediting it, and I think you should in this situation. 

I look forward to the Committee officially receiving that nomination and having the opportunity to review your record in depth, but 

right now, I want to welcome you to the Committee and to your 

family, the same thing, and I know you will introduce them in a 

few minutes. 

Mr. Donovan, his previous experience, as Senator Dodd has said, 

at HUD as Deputy Assistant Secretary for Multi-Family Housing 

and in New York City, where he presently serves as Commissioner 

of Housing. I hope that this experience will allow you to get a quick 

start on addressing, as Senator Dodd pointed out, HUD’s many 

longstanding deficiencies. 

In particular, I am very concerned about the financial health of 

the Federal Housing Administration. We talked about that in my 

office. While most mortgage delinquencies have been concentrated 

in the subprime area, market, FHA has not been immune and has 

experienced a similar increase in its own delinquencies. I believe 

the FHA program poses significant risk to taxpayers and therefore 

requires diligent oversight by you, Mr. Secretary. This situation is 

one that requires your immediate attention, I believe, after you are 

confirmed as HUD Secretary. 

Unfortunately, FHA is not HUD’s only troubled program. There 

are many other HUD programs, including the Section 8 voucher 

program and the Public Housing Program that are also in need of 

review and reform. 

Mr. Donovan, the task of reforming and ensuring the efficient operation of the Department present significant challenges. I believe, 

however, that the greatest responsibility that you would have as 

the incoming Secretary will be to address, as Senator Dodd has 

mentioned, the unprecedented crisis in the housing market. The 

sooner housing markets stabilize based on sustainable fundamentals, the sooner I believe we will see a recovery in the market and 

in our economy. Short of that, I think we are in for some deep trouble. 

6 

I look forward to hearing your plans somewhat this morning on 

how to reform HUD programs, and more importantly, how HUD 

can help stabilize—I know you can’t do it by yourself—our nation’s 

housing markets. 

Once again, we appreciate your appearance. We look forward to 

your tenure and helping you along. 

Chairman DODD. Thank you very much, Senator Shelby. 

Let me notify my colleagues that when Senator Schumer completes his introduction, I will then be turning to my colleagues if 

any of you would like to make some opening comments before hearing from our nominee. 

Chuck, you are a busy guy this morning. We’ve been running 

around here, and I appreciate your patience. 

STATEMENT OF SENATOR SCHUMER 

Senator SCHUMER. Thank you, Mr. Chairman. I want to thank 

you and Ranking Member Shelby for the honor of introducing 

Shaun Donovan. 

Before I begin, Mr. Chairman, I do want to say these—these 

have been just amazing times for the country and for the Committee and we couldn’t be under better leadership than yours and 

I really thank you for stepping up to the plate at a time when the 

country so much needs it. Thank you, and I want to thank Senator 

Shelby, as well, for his passion, keeping our feet to the fire through 

these times, as well, which proves a very important and salutary 

function. 

Mr. Chairman, I am really honored to be here to introduce 

Shaun Donovan as nominee for HUD. After being relegated to the 

shadows for so long, housing is now front and center on our national agenda. And at this crucial time, there is no one who has 

more experience, stronger judgment, and a better sense of balance 

to take the helm at HUD than Shaun Donovan. 

In history, there has been a great debate over whether the times 

make the man or the man makes the times. Shaun Donovan is the 

perfect person for these troubled times in housing and he will 

clearly improve our housing policy in a dramatic way, changing the 

times. 

Shaun’s career has ensured that he has seen the housing universe from all sides. He has worked for housing nonprofits, as you 

mentioned, Mr. Chairman. He has worked at HUD as the Deputy 

Assistant Secretary for Multi-Family Housing and as Acting FHA 

Commissioner; in the private sector, with Credential Mortgage 

Capital, focused on FHA and affordable housing investments; and 

most recently as one of the best Commissioners of New York City’s 

Department of Housing and Preservation Development that we 

have ever had. 

In his latest role, Commissioner Donovan spearheaded the city’s 

New Housing Marketplace Plan, a $7.5 billion effort that aims to 

build and preserve 165,000 units of affordable housing in New York 

City. The program, thanks in large part to Shaun’s leadership and 

commitment, developed innovative preservation and new production tools, chief among which is the New York City’s Acquisition 

Fund, to create a level playing field for those developers committed 

to building affordable housing in one of the most expensive real esVerDate Nov 24 2008 14:34 Jun 22, 2009 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 S:\DOCS\50234.TXT SHERYL
7 

tate and rental markets in the world. And it is so difficult to get 

things done in New York City and to build the number of units for 

people who need help—affordable housing—that Shaun has done is 

nothing short of a miracle. 

I have worked closely with Shaun on a number of preservation 

projects during his time at the helm of HPD. Together, he and I 

worked to save the birthplace of hip-hop music, a 100-unit affordable apartment in the Bronx. While we were ultimately unsuccessful in that effort, Shaun demonstrated his characteristic willingness to think outside the box to improve affordable housing, taking 

the unprecedented step of rejecting the sale of the project because 

the purchase price was inconsistent with the State and city Affordable Housing Program, whose benefits the developer hoped to continue to enjoy, and this is going to have major effect on helping 

keep tens of thousands of New Yorkers in their homes. 

Shaun has also been a critical partner in our 2-year effort to save 

Starrett City, the largest federally subsidized housing complex in 

the country. Starrett City was a haven for the working class, and 

again, because the Section 8 and other certificates expired, developers were going to come in and just change the total nature of it, 

eliminating 5,000 units of affordable housing so desperately needed 

in New York. This complex was almost sold for a dramatically inflated price, and it would have left 14,000 tenants out in the cold. 

I worked with Shaun day-in and day-out for 2 years. There were 

tense negotiations on all sides, tenants, developers, community people. And as a result, the owners recently announced they have chosen a bidder for a preservation sale of the complex, keeping those 

units going. Again, this was an amazing and complicated job that 

couldn’t have been done without Shaun’s leadership. 

And finally, on the most pressing issue of the day, housing and 

foreclosure crisis, Shaun has led New York City’s efforts to find a 

comprehensive counseling, legal services, and education center to 

help struggling homeowners to avoid foreclosure. And under 

Shaun’s leadership, HPD has also demonstrated that home ownership for low- and moderate-income people is not an unachievable 

goal. Of the more than 17,000 new or preserved affordable homes 

that HPD has created under its plan, 17,000 affordable units, only 

five owners have lost their homes to foreclosure, a number that 

barely registers when compared to the 2.2 million homeowners who 

entered foreclosure. To take that model that we used in New York 

City and expand it nationally would be a blessing for the Wrights 

and many others throughout the country. 

So I look forward to working with Commissioner Donovan on 

these and many other housing community development issues during his tenure. I know that he is the best possible steward for this 

crucial agent at this moment in history, and I thank the Committee for the opportunity to introduce him. 

Chairman DODD. Senator, thank you very, very much. Chuck, we 

appreciate immensely your leadership, as well. I have said to others through this last 2 years, this Committee has—and I sent 

around to all the members sort of a background of what we have 

been through. It was an awful lot, and I want to thank every member, and certainly you, Senator Schumer, have been tremendously 

valuable in this process. I know you are busy with Joint Economic 

8 

and the leadership role and on Finance, so you have an awful lot 

going on. We thank you immensely and thank you for introducing 

the Secretary-Designate. 

I will now turn to Senator Reed, then Senator Bennett, and we 

will go down the line for any opening statements my colleagues 

would like to make about this nomination. Then, Mr. Donovan, we 

will hear from you. 

Jack? 

STATEMENT OF SENATOR REED 

Senator REED. Thank you, Mr. Chairman. I would ask that a 

statement be included in the record and I would like to make just 

some brief comments. 

First, I think this is a superb selection and I commend the President. I have had the privilege of working with Mr. Donovan in 

many capacities. His experience, as illustrated by Senator Schumer, and his temperament and his talent, as demonstrated by his 

success in so many other areas of endeavor, in the housing area 

particularly, commend him immensely to this Committee and the 

Congress and I wish you well in your very important task. 

You have responsibility for some of the most vulnerable families 

in this country. In addition to that, you are, or will be, one of the 

most significant figures in the financial situation of our overall 

economy, with the huge role that the mortgage agencies play, the 

huge role that HUD’s policy plays in our economy. And in those 

two areas, you will be challenged, but I think you are more than 

capable of meeting and exceeding these challenges. 

In the last several years, your budget has not been, I think, adequate to the task, particularly in terms of the managerial expertise 

and skill that you need. Many of us have reflected upon the issues 

facing the Federal Housing Administration. Some of them are 

basic, about having the computer systems, the personnel, the ability to operate as a sophisticated financial institution in a very complicated world. So you will have to face those challenges right off 

the bat as you start your preparing the budget for the forthcoming 

year. 

As all of my colleagues have alluded to, this foreclosure problem 

is absolutely crippling. It cripples the hopes and dreams of families, 

their confidence to participate in the economy. Unless we can get 

a footing, some traction with respect to these foreclosures, I don’t 

think we will begin to see the economic expansion that we are all 

hoping for, and your role is going to be absolutely critical in that, 

along with your colleagues and the President’s team. 

There is one issue, too, that is consistent in the good times and 

the bad times and it is an unfortunate reflection upon this country, 

the homelessness issue. We have had soaring homelessness problems in the boom of 2 or 3 years ago and now they are even more 

exacerbated in this deplorable situation we face financially. We 

have all worked together. We have bipartisan legislation that has 

been supported by the Bush administration that is ready to go and 

we hope that is something that at least I hope that you can help 

us tee up and help us get through in the next few months. 

Again, I think the President has chosen wisely and I am looking 

forward to working with you and I wish you well. 

9 

Thank you, Mr. Chairman. 

Chairman DODD. Thank you, Senator, very much. 

Senator Bennett? 

STATEMENT OF SENATOR BENNETT 

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

Mr. Donovan, you and I had what I consider to be a very useful 

exchange in my office. You know how I feel about all of these issues 

and I won’t take the time of the Committee to go through them 

again. 

But I add my welcome to you and my tribute to you for your willingness to undertake public service at a time when sometimes that 

is not the most financially remunerative thing you can do, particularly with somebody with your background and your potential. And 

as you will discover from editorials, editorial cartoons, comments 

made, maybe not the most psychologically rewarding thing to do. 

[Laughter.] 

Senator BENNETT. But if you can rally the personnel at HUD behind you in your enthusiasm for the job that you have and lead 

those folks in the direction that I know you want to go, when it 

is all over, you can look back on it with a great deal of satisfaction. 

So I salute you for your willingness to undertake it, and unless 

something amazingly unforeseen should pop up, pledge you my 

vote in confirmation and support. Thank you. 

Chairman DODD. Thank you very much, Senator. 

Senator Menendez? 

STATEMENT OF SENATOR MENENDEZ 

Senator MENENDEZ. Thank you, Mr. Chairman. Mr. Chairman, 

with your expertise of Irish history, I would have pronounced the 

Commissioner’s name ‘‘Donovan,’’ but I keep hearing you say 

‘‘Dunovan’’ and I am going to defer to the Chairman and say 

‘‘Dunovan’’ for the purposes of this hearing. I am sure if it assures 

the passage, he won’t quite mind, whichever one is the correct one. 

[Laughter.] 

Chairman DODD. I don’t know, what do you say, Shaun? What 

is it? 

Mr. DONOVAN. I say ‘‘Donovan,’’ actually. 

[Laughter.] 

Senator MENENDEZ. Well, I always think the Chairman is right, 

so in any event—— 

[Laughter.] 

Chairman DODD. You had better start calling yourself 

‘‘Dunovan.’’ 

[Laughter.] 

Senator MENENDEZ. It might lead you well, at least for the hearing. But in any event—— 

Senator BENNETT. Senator Menendez, the Chairman is always 

right. 

Senator MENENDEZ. I thank my esteemed colleague for reaffirming what I thought was the case. 

[Laughter.] 

Senator MENENDEZ. Commissioner, I just came a little while ago 

along with the Chairman from Senator Clinton’s nomination, my 

10 

other committee assignment, and while HUD never seems to gather the press attention as other agencies do, to American families, 

your future role at this agency may be far more important as it relates to their lives. And I agree with those who say that HUD has 

been sitting at the kid’s table and it is time for that to change. 

I grew up in a tenement building in Union City, New Jersey. I 

understand first-hand the value and importance of our housing programs. These programs are more than dollar signs in our budget 

and more than paperwork they often entail. They are about providing a place to call home. 

I believe that every family, every man, woman, and child, deserves a place to call home. Home is where you are brought to 

when you are first born. Home is a place in which you are nurtured 

and grow and a place where you live through the good and the bad. 

It is the place that you start your day and end your day. It is a 

place where you leave from to go get married and come back to 

with your family. It is a quintessential part of the American ideal. 

Unfortunately, we have seen a real toll on the notion of home 

taking place over the last several years. The regulators fell asleep 

at the switch. Foreclosure rates have spiraled out of control, and 

now we have a snowball effect as families find a padlock on their 

homes and often find themselves without a place to call home. So 

as homelessness increases and families struggle to make ends 

meet, the need for housing and all of its related elements that your 

Department is going to be able to pursue are going to be even 

greater. 

These programs can be better and Americans expect them to be 

better. So now is a time for great leadership within HUD to get our 

housing programs back on track. 

I appreciated your visit with me. I appreciate the comments that 

I have read in your testimony and agree with you when you say 

that housing was at the root crisis that we are in and it must be 

part of the solution. I hope in the question and answer period, between jumping between committees, this new report by Financial 

Week that talks about the FHA being ill-equipped to stop the migration of predatory subprime lenders to the rapidly growing sector 

of U.S.-backed home loans, raising the specter of another cycle of 

lending abuse, is something that we can talk about and something 

that you will look at. 

And finally, I do think, living right across the river from where 

you presently are the Commissioner, that your experience in New 

York prepares you well for this role and I look forward to hearing 

your thoughts today on such issues as foreclosure, the elements of 

how we meet the challenges of public housing that we face today, 

Section 8, Hope VI, fair housing, and some of these other issues. 

These are tough times for American families, but I believe HUD 

under your leadership can be a place for hope again to have a place 

to call home. 

Thank you, Mr. Chairman. 

Chairman DODD. Thank you very much. A good statement. 

Senator Martinez? 

11 

STATEMENT OF SENATOR MARTINEZ 

Senator MARTINEZ. Mr. Chairman, thank you very much, and 

Shaun, welcome. I am so pleased to welcome you to the Committee 

and to congratulate you on your appointment and look forward to 

your confirmation. 

First of all, I can’t help but reminisce about 8 years ago, almost 

to the day, sitting at your table, and my youngest at the time was 

the same age as your youngest is today, 6 years old. By now, he 

was already out of the room. So I congratulate you on that. 

[Laughter.] 

Senator MARTINEZ. Anyway, the fact is, you are unusually qualified for this job and I would dare say, Mr. Chairman, in spite of 

your graciousness, I do think he is far more qualified than I was 

or even perhaps even the Attorney General of New York was at the 

time. I think Mr. Donovan brings some unusual qualifications to 

this job, and so I think it is an excellent choice by the PresidentElect. 

There are a number of troubling issues. You and I had a very 

lengthy discussion on them. I should also say, by the way, that at 

the time that I went to HUD, Shaun Donovan was there. My recollection is that I tried mightily to keep him there, but he chose to 

go back to New York, understandably, and to go home. But I am 

glad that you are back to HUD, even if 8 years down the road. But 

it is a better job than the one I was offering you, actually, so you 

have moved up. 

But the housing crisis, I will only echo what others have said, 

is unquestionably at the very root and the very heart of the economic crisis our country faces today, and until we solve the foreclosure problem and the home ownership problem and the mortgage crisis, we are not going to really come out of this recession. 

Nowhere is it worse perhaps than the State of Florida, where we 

are facing tremendous problems economically, all related to the situation with housing. Unemployment is up. Housing unemployment 

is dramatically up. More and more families are threatened with 

losing their home, and we have just not done enough in all that we 

have done to attack that problem aggressively. 

I am just hoping that you will have, as my colleague, Senator 

Menendez said, not a seat at the kid’s table, but a seat at the main 

table. Insist on it. Be there. That is where you belong and that is 

where you need to be to help solve these very vexing problems. 

I am concerned, as I mentioned to you, and I will hit on just a 

couple of these issues—the role of FHA, whether FHA is up to the 

task at hand, whether it is properly staffed, whether we need to 

focus on more funding. I also concern myself about the viability of 

FHA. I have always believed that risk-based pricing may be part 

of what they must do. But they have been getting an increasing 

share of the marketplace as every other vehicle has vanished, and 

I think it is important that FHA be up to the task so they can be 

part of the solution as we seek to get out of this current crisis. 

I am also very interested in what you might believe is the future 

of the GSEs. Unquestionably, HUD has a role in their regulation. 

One of the more frustrating aspects of my tenure at HUD was my 

inability, along with that of others, to get true and serious regulations of the GSEs in a way that only recently occurred, but almost 

12 

a little late. We now have to deal with what is the future of the 

GSEs. How should they be structured and what is the mechanism 

by which they perhaps should be completely private or just how 

they should be handled. 

Something that I also discussed with you privately and I want 

to make sure that I mention to you is RESPA reform. There is no 

question that if we had had better disclosure and better information as it relates to home ownership today, we would not have the 

problems we have. More and more American families are finding 

today as the resets of their mortgages come about what the rest of 

the story really is. So I believe RESPA reform is something whose 

time has come. I commend the current HUD Secretary for having 

made some efforts in this regard. Much more needs to be done and 

I commend it to your agenda. 

And last, I will mention something that I think has been one of 

the real remarkably good stories at HUD and that is the issue of 

homelessness. The effort to end chronic homelessness led by Philip 

Mangano. The fact that we brought all of the agencies and entities 

of the Federal Government to working together to try to end chronic homelessness has, in fact, yielded great results, and I am very 

proud of my embryonic role in that, but I also believe great credit 

goes to those who have continued the battle to bring this to a national focus. I know you have some experience in what New York 

has done in this regard and I would hope that you can continue the 

passion for an issue that has a very, very small constituency. There 

are no votes to be gotten among the homeless. It is just the right 

thing to do for a compassionate country like ours. 

So anyway, I thank you for your willingness to serve and that 

of your family and look forward to working with you in your new 

capacity. 

Chairman DODD. Thank you very much, Senator. 

Senator Akaka? 

STATEMENT OF SENATOR AKAKA 

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

you for holding this hearing today. 

I want to add my welcome to Commissioner Donovan and congratulations for your nomination to the Department of HUD. I also 

want to welcome your handsome family, Liza and Milo and Lucas, 

as well, to this hearing. 

My State of Hawaii suffers from a severe lack of affordable housing. The National Low-Income Housing Coalition’s Out-of-Reach 

Report ranked Hawaii as the most expensive State for housing. 

Having a job is not enough to ensure access to adequate housing. 

It will take long-term coordinated Federal, State, and county efforts to expand access to affordable housing. 

Commissioner Donovan, I look forward to working closely with 

you to help improve access to affordable housing and I smilingly 

would greatly appreciate it if you would take the time to visit Hawaii when you are Secretary of HUD. It would be helpful to see the 

work being done there by our Department of Hawaiian Homelands. 

The Native American Housing Assistance and Determination Act 

programs administered by DHHL in Hawaii provide essential housing assistance and home ownership opportunities to Native HawaiVerDate Nov 24 2008 14:34 Jun 22, 2009 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 S:\DOCS\50234.TXT SHERYL
13 

ians. DHHL raises the standard of living of all residents by increasing the number of affordable housing units available Statewide. 

In addition, I am greatly concerned about our nation’s homeless, 

in particular, our homeless veterans. Veterans comprise approximately one-third of the overall homeless population. As Chairman 

of the Committee on Veterans Affairs, I have worked to enhance 

and improve VA services for homeless veterans. Permanent, supportive housing is one of the most effective ways to end homelessness. I hope that, if confirmed, you would work in conjunction with 

VA to expand this program and make it available to more veterans. 

In addition to continuing to work with my colleagues on both this 

Committee and the Veterans Affairs Committee, I will work with 

you, Commissioner Donovan, to help homeless veterans find and 

maintain adequate housing and support services. 

Mr. Chairman, I would ask that my full statement be placed in 

the record. Thank you. 

Chairman DODD. We will do that for all members. I was hoping 

that you might suggest the entire Committee go to Hawaii for a 

hearing on that, sometime next January, maybe. 

[Laughter.] 

Senator AKAKA. I would extend that to the Committee, too. 

Chairman DODD. I imagine there would be no interest in that 

hearing. 

Let me, if I can, what I will do, Mr. Donovan, is to swear you 

in, and so I would ask you to stand and raise your right hand. 

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. DONOVAN. I do. 

Chairman DODD. And do you agree to appear and testify before 

any duly constituted Committee of the U.S. Senate? 

Mr. DONOVAN. I do. 

Chairman DODD. I thank you for that. 

Welcome to the Committee, and we are prepared to hear your 

opening comments. 

STATEMENT OF SHAUN DONOVAN, OF NEW YORK, 

SECRETARY-DESIGNATE, DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT 

Mr. DONOVAN. Thank you. Mr. Chairman, Senator Shelby, and 

distinguished members of the Committee, thank you for the opportunity to appear before you today. I would also like to thank Senator Schumer for that very kind introduction. 

Before I go any further, I would like to introduce my family 

again, my wife, Liza, and my two children, Milo and Lucas. Without them and their constant and steadfast support, I would not be 

here. 

Chairman DODD. Welcome. 

Mr. DONOVAN. I am honored and humbled by President-Elect 

Obama’s decision to nominate me as Secretary of Housing and 

Urban Development, an agency with a critical role to play as government partners with the American people to overcome the greatest economic crisis we have faced in many decades. 

14 

I want to thank the Committee for the speed with which you 

have scheduled today’s hearing and the time you have made in 

your busy schedules to visit with me and share your thoughts and 

views regarding housing in the United States. 

Throughout my career, I have been committed to affordable housing policy and development. In my line of work, we often talk in 

terms of numbers of units and dollars spent. That is our common 

language. But it does little to convey the reason I am in this field. 

America’s homes are the foundation for family, safe neighborhoods, good schools, and solid businesses. A home represents and 

confers stability, a base from which to raise our children. These 

things have not changed, but the world has. I am here before you 

today because I hope, should you confirm my nomination as HUD 

Secretary, that I can contribute to restoring this vital sector to 

health and making quality housing a possibility for every American. 

My first job after graduate school was at the Community Preservation Corporation, a nonprofit lender and developer of multi-family housing. While there, I saw firsthand the difference that effective public-private partnerships can make in developing decent, 

safe, and high-quality housing. In this, the Federal Government 

was often a valued and an essential partner. But I also experienced 

the headache of trying to navigate regulatory barriers or having 

deals fail because of inflexible programs. 

Later in my work at the Department of Housing and Urban Development, I saw how government can work to catalyze effective 

community development. While I gained an appreciation for the 

benefits of well-crafted and responsive government programs, I also 

saw a need to untangle and streamline policy and programs that 

too often led to missed opportunities. 

Because of these experiences, I believe that the best way to ensure access to safe, decent, and affordable housing is through 

strong partnerships among the government, private, and nonprofit 

sectors. Government can play a unique role in incentivizing the 

other sectors and removing barriers to the development of quality 

housing. 

That is why when I became Commissioner of New York City’s 

Department of Housing Preservation and Development in early 

2004, I engaged the agency in a top-to-bottom strategic planning 

process. This resulted in new and innovative policy and programmatic solutions, a more appropriate alignment of staff with 

the mission of the agency, and better measurement of results. 

Let me give you two examples. With contributions from our nonprofit and for-profit partners, New York created an acquisition fund 

that leveraged significant philanthropic support. In one of the most 

competitive real estate markets in the world, this pool of funds enables housing developers to acquire land and create affordable 

housing for hard-working families. 

We also changed land use policy to respond to the challenges 

posed by the New York City market. In order to incentivize the creation of more housing for low-income families, the city undertook 

a series of rezonings that will allow the development of up to 

500,000 total units of housing and crafted an inclusionary zoning 

program that will generate 6,000 affordable units. 

15 

I believe that together, we can create programs that will spur the 

development of affordable housing in our cities and towns across 

America. 

In the past, owning a home was emblematic of financial success. 

Sadly, we know that the landscape has changed. Clearly, the most 

important public policy decision facing Congress and the new administration is how to best ease the economic pain that millions of 

Americans and families are feeling right now because of our unsteady housing markets. 

As President-Elect Obama has said, the housing crisis has shaken not only the foundation of our economy, but the foundation of 

the American dream. It is estimated that approximately 2.2 million 

homes went into foreclosure in 2008. One in ten American families 

who owns a home is in financial trouble. Housing is at the root of 

the market crisis we are now experiencing and HUD must be part 

of the solution. 

President-Elect Obama is committed to working with you and 

your colleagues on an economic recovery plan that helps strengthen 

our housing and mortgage markets. 

We must ease our foreclosure crisis by helping Americans stay in 

their homes. How we structure this assistance is important. We 

certainly do not want to pursue policies that encourage irresponsible behavior from lenders or homeowners. But as President-Elect 

Obama stated, if my neighbor’s house is on fire, even if they were 

smoking in the bedroom or leaving the stove on, right now, my 

main incentive is to put out the fire so that it doesn’t spread to my 

house. 

That is why helping a family avoid foreclosure not only keeps a 

roof over their heads, but also protects the value of surrounding 

homes and prevents the deterioration of our neighborhoods. Keeping families in their homes means keeping our communities safe, 

healthy, and strong. 

These are very complex undertakings that will require a crossagency, broad-based approach. Keeping families in their homes. 

HUD needs to work with the Treasury, the Federal Housing Finance Agency, and the Federal Deposit Insurance Corporation to 

help stabilize our housing markets. 

At the same time, we need to make sure our mortgage markets 

and other financial markets are transparent, open, and fair. We 

need to work together to reach a bipartisan consensus on how to 

reform the outdated and often overlapping regulatory system that 

failed our citizens in the run-up to the current crisis. 

If I am confirmed, I look forward to working with the Committee 

as it examines how to proceed, not only in my capacity as HUD 

Secretary, but in my oversight roles with regard to the TARP and 

the Government-Sponsored Enterprises. If HUD is to help fix the 

cracks in our economic foundation, we also will need to implement 

reforms within the Department itself. As you well know, these are 

challenges—there are challenges and persistent management 

issues facing HUD, including modernizing IT systems, overhauling 

sluggish human resource systems, and strengthening contract oversight. If confirmed, I will be open and honest about such challenges 

and will work with you in effectively addressing them. 

16 

There are three particular issues I would like to highlight today. 

The Federal Housing Administration has capacity issues that require immediate attention. FHA’s share of the single-family mortgage market has grown from 4 percent in 2005 to 21 percent today. 

And, in fact, for new home purchases, FHA now has a 35 percent 

share, according to the most recent, albeit preliminary, data. 

Second, there have been significant budgetary issues regarding 

the renewal of expiring Section 8 rental subsidies for both the tenant and project-based programs. Approximately 3 million American 

families are served by these programs. It is HUD’s responsibility 

to make sure that it is delivering rental subsidies in the most costeffective and efficient manner possible. I look forward to working 

with Congress, this Committee, and the Committee on Appropriations toward that goal if I am confirmed. 

Third, there are a series of steps that could strengthen the Department overall. We must foster a culture of excellence and innovation. I have had the opportunity to work with some very talented 

professionals at HUD and they deserve the tools to succeed. It is 

critical that we restore HUD as a respected research institution, as 

well. Both you and I need to know what works based on objective 

analysis and reliable data so that taxpayer dollars can be spent 

wisely and effectively. I pledge to make management reform a high 

priority. Only in this way can we meet the enormous housing challenges facing our country. 

Through HUD, we can catalyze the creation of a market for energy-efficient homes, lower the utility bills of families, and decrease 

the subsidy cost to the government. Here, the Department can lead 

by example, by making efforts to green its own portfolio of public 

and assisted housing. HUD can help develop communities that are 

livable, walkable, and sustainable. By joining up transportation 

and housing, HUD can give families the choice to live closer to 

where they work and in the process cut transportation costs. 

HUD can help low-income families gain greater access to security 

and opportunity by expanding fair housing efforts, extending resident choice, and using housing programs to help families become 

self-sufficient. 

I also pledge to you to make HUD a model of evidence-driven 

government. As I have in New York City, I would set goals and 

metrics for each of our priorities so that we can clearly and openly 

show what we have done well and where we can do better. We can 

leverage the agency’s vast national network of State and local governments, along with nonprofit and for-profit real estate partners, 

to stimulate the production of workforce and mixed-income housing 

and to help preserve our existing affordable housing stock. HUD 

does not build homes, our partners do. They share our compassion 

and have the talent and capacity to do this work. 

I would like to conclude by saying again how honored and humbled I am to be before this Committee. I have worked with HUD’s 

programs from both the inside and the outside and am intimately 

aware of the challenges facing the Department. I have also witnessed the positive impact that HUD’s programs have on neighborhoods and people’s lives, and if confirmed by the Senate, I look forward to working with you to build a HUD that exists to do the people’s business, that is responsive to current market challenges, and 

17 

that ensures decent, affordable housing for millions of American 

families across the nation. 

Thank you, and I look forward to your questions. 

Chairman DODD. Excellent. Excellent opening statement. We 

thank you. 

Thank you for your willingness to do this, too. This is not an 

easy time to be in public life and public service. I think Senator 

Martinez made the point that deserves to be underscored, your 

willingness to take on these challenges. 

And let me take advantage of the Chair’s position here to underscore something else that Senator Martinez said, and I am confident the incoming administration will hear this. I want you at 

that table. So I am going to be insistent that you be at that table 

as these debates and discussions go forward. So when the so-called 

principals are meeting about our economic conditions, and if I hear 

you are not there, I am going to be terribly disappointed, because 

we really do have to have this integrated approach on these issues. 

Too often, not to include a HUD, for whatever the reasons may 

have been in the past, and some may have been absolutely legitimate, there is no longer any legitimacy to that point at all, in my 

view. So I hope you will insist upon it, but I want you to know you 

have an ally here that will insist upon it, as well. 

We have been joined by Senator Casey and Senator Tester. Let 

me ask either one of you if you would like to make a brief opening 

comment at all here. I know you have all got busy schedules, as 

well, but Senator Casey, any comments? 

STATEMENT OF SENATOR CASEY 

Senator CASEY. Mr. Chairman, I will be very brief and I will submit a longer statement for the record, but Mr. Donovan, we are 

honored you are here. We are grateful that you have put yourself 

forward again for public service. 

I know we will have a lot of questions. Mine will focus not just 

today, but throughout what I hope is your long tenure, on foreclosures and the challenge we have there, as well as an equally urgent challenge of making sure the Troubled Asset Relief Program 

is operated in a way that gives the American people confidence 

that it is going to improve our economy. There are some doubts 

about that now and we have to take steps to improve it, I know. 

You are not the sole arbiter of how that works, but I know you play 

a role and I am glad that you recognized that in your opening. 

And finally, just as we go forward, priorities that pertain to 

Pennsylvania, of course, that we will be paying attention to. I am 

not sure we will get to all of that today, but we are grateful for 

your work already leading up to this nomination and we certainly 

hope that your confirmation goes well. I am sure it will. We are 

honored you are here. 

Thank you very much. 

Chairman DODD. Senator Tester? 

18 

STATEMENT OF SENATOR TESTER 

Senator TESTER. Thank you, Mr. Chairman. I want to thank you, 

Mr. Donovan, for being here, and your family, and I appreciate you 

all being willing to do this job, put yourself up. 

I, too, am going to be very, very short. I will just say this. I appreciate you coming to my office last week so we could visit about 

some issues with housing in rural America and in Indian Country 

and I appreciate your openness to those challenges that we face. 

My questions will revolve around that mainly, but most of all, 

thank you all for being here. I really appreciate you putting yourself up for public service in this venue. It is a very, very important 

job and I know you will do a great job once confirmed. 

Chairman DODD. Thank you very much, Senator. 

I am going to have the clock on for 10-minute rounds. We don’t 

have a full complement here, so I am not going to be too rigid 

about that, but we will try and give everyone a chance to move 

along on this. My intention would be, I would say to my colleagues, 

assuming we are complete here today, my hope would be that by 

the end of the week, I would be asking us to convene for a business 

session, maybe even off the floor of the Senate, to vote on the nomination of Secretary-Designate Donovan. So keep that in mind, 

maybe Thursday or Friday, depending upon the schedule of the 

floor. 

Let me begin, if I can, Mr. Donovan, in my opening statement, 

I mentioned that if you are confirmed as Secretary, you will be confronted with some enormous challenges, and all have said that here 

this morning. Some will be pushing you from the outside, issues. 

We have talked about those, obviously. And some will come internally, as well, getting the institution, the Department, back on its 

feet. 

So let me open with sort of a broad opening question here for 

you. Give us a sense, as someone who has administered a significant department in New York City, how you will determine your 

priorities as Secretary with so many pressing issues, and second, 

give us a sense of your management agenda at HUD, as well. It 

is sort of an open-ended question, but I would like to get a feel for 

how you will approach those two issues. 

Mr. DONOVAN. Senator, first of all, let me say I think there is no 

question—you have heard it in my opening statement today, you 

have heard it, I think, from every member of the Committee—that 

the foreclosure crisis that is facing the American people, American 

families, American neighborhoods is job one for HUD and that we 

must immediately, should I be confirmed, move toward addressing 

that crisis. And I think you have heard President-Elect Obama say 

very clearly that his administration will put forward a bold and 

comprehensive plan that will address this crisis. 

Clearly, HUD has a very important role to play in that crisis. 

The Federal Housing Administration, through the Hope for Homeowners program and a range of other initiatives, the Neighborhood 

Stabilization Program, will have a key role to play in doing that. 

And so that will clearly be the first priority in terms of addressing 

the issues facing the country. 

But I also want to make clear that rental housing must continue 

to be a critical part of an overall national housing policy, and I 

19 

think perhaps too often, we have tended to overlook that at the 

Federal level, and that we need to have a balanced housing policy 

that addresses both sides of the housing market. So I will pledge 

also, should I be confirmed, that I would focus on the improvement 

of and the importance of HUD’s rental programs, as well. 

Finally, on the management side, I think there is no question 

that there is much that needs to be done. Whether you look at the 

systems, the information technology systems that exist today at 

HUD, whether you look at the personnel systems training, the resources that are available to staff at HUD or a range of other 

issues, they clearly are critical pressing issues. 

At the center of my management style, though, I think if you 

talk to my staff, I drive them crazy. I am a numbers guy. I am 

somebody who always wants to know—I meet monthly with every 

single team within my agency. I have a series of critical indicators 

that demonstrate progress to me, or where we are not making 

progress in the agency. And I feel both internally at the Department, but also, frankly, should I be confirmed, in my relationship 

with the Senate and with Congress more broadly, you have not had 

the information that you need to be able to make judgments about 

how the agency is running, whether we are making progress, 

whether the budget is the right budget for the agency. And I pledge 

to you, should I be confirmed, that I will do everything that I can 

to make sure that you have all the information that you need to 

be able to work with HUD to set direction for a national housing 

policy. 

Chairman DODD. Well, I thank you for that. In fact, you anticipate a point I was going to make, and that is on a monthly basis, 

I would like to arrange for the members of this Committee or their 

staffs to meet with HUD, whoever you would designate, to go over 

and share with us as current numbers and statistics we can have 

on this foreclosure issue and the number of rental housing units 

and so forth, so we are not just relying on the occasional hearing 

when you show up here, but have an ongoing basis of information 

so we can, particularly during this crisis, be kept very well informed as to what sort of progress is being made or where there 

are areas where we need to pay more attention. 

Let me, if I can, mention two issues. One, I would like to hear 

you comment a bit more specifically about the foreclosure issue. I 

point out, and my colleagues all on this Committee are more than 

aware of all of this, we began this Committee in the 110th Congress in the first week of February, literally 2 years ago, the very 

first hearings we had were on the foreclosure issue. I think we had 

over 30 of them over the last 2 years, plus some efforts we made 

in this area. It was not always easy. Obviously, there was a lot of 

resistance to some of these ideas. But nonetheless, this Committee 

paid a lot of attention to the subject matter. 

But Sheila Bair and others have made some suggestions on how 

more aggressively to deal with these numbers, the eight million 

homes we are now talking about that could be facing foreclosure in 

the country, and I wonder if you might share just some thoughts 

on those ideas. 

And second, on rental housing. Again, I want to thank Senator 

Shelby and the members of the Committee, because when we 

20 

passed the housing bill last summer, one of the things we included 

was a permanent Affordable Housing Program, as you may have 

watched. We are relying on funds coming out of Fannie Mae and 

Freddie Mac to support that effort on a permanent basis. Obviously, that has changed. 

But I raised the other day the possibility that as part of the stimulus package, these two funds, the trust funds that Senator Jack 

Reed has been so involved and others have, that we might get some 

of this assistance to help out in that affordable housing area. 

I point out in my State of Connecticut, the average two-bedroom apartment, you have got to make $21 an hour to afford it. I don’t 

need to tell you, that pretty much excludes most people who need 

rental housing, and I am sure the numbers around the country are 

close to that or certainly reflect that kind of a pressure. With the 

lack of stock and with more people going to foreclosure, obviously 

the number of people seeking rental housing is increasing simultaneously. 

So I wonder if you might just put a little more flesh on the foreclosure issue and then on whether or not you believe, and again, 

I realize that the stimulus package has a lot of hands on it. The 

administration, to their credit, is listening to a lot of us up here 

on this. But whether or not you think there is an argument to be 

made for including some of these things, given the fact that socalled—I don’t really like this expression because I think it excludes too many of the things, shovel-ready—but candidly, there 

are shovel-ready projects in affordable housing that could put people to work, but also deal with a legitimate housing need. 

Mr. DONOVAN. Absolutely. First, to address your question about 

some more specifics about the foreclosure issues, as you know, 

there have been already early discussions with the transition and 

yourself, leadership in the Senate and the House, on the disposition 

of the next round of the TARP funding. The administration, current administration as well as the transition, have had discussions 

about the potential for moving that funding forward. 

What I would tell you is that we are looking very carefully at the 

proposals that yourself, that Chairman Frank and others are discussing around that. We are looking very closely at the FDIC program. I think we generally say that we believe a significant effort 

to try to keep homeowners in their homes, using some kind of 

modification program, is an important part of an overall, comprehensive plan. 

We are also looking carefully at the data coming out of that plan 

in terms of whether—what numbers of folks are re-defaulting, trying to understand that data to make sure that any plan could be 

structured to make sure that we have incentives for long-term success for homeowners and that we don’t end up with the government 

just protecting loans that otherwise might go bad. So we are trying 

to balance those incentives very carefully in thinking about that. 

I would also say that, more specifically, I think two extremely 

important efforts, specifically under HUD’s responsibilities, one 

would be the Hope for Homeowners Program that I mentioned earlier. I know that you and others have ideas, which I think are very 

important to look at in terms of ways to improve that program, to 

look at the fees, the loan-to-value ratios and other aspects of that 

21 

program. Should I be confirmed, I look forward to working in more 

detail to make sure that program is a very effective alternative for 

foreclosure mitigation. Initially, 400,000 was the number that had 

been expected. There were just over 100 applications in the first 

month for that program, so I think it is clear to everyone that there 

need to be some changes to make sure that program is effective. 

And then finally, I would mention the Neighborhood Stabilization Program. There was $3.9 billion that was part of the Housing 

and Economic Recovery Act passed this summer, as you know. We 

worked very closely on that, and I think arrived at a very good 

compromise in terms of how to address the program. The situation 

specifically of the effect that foreclosures are having on neighboring 

homes is a very serious one. 

From my own experience in New York, where my agency at one 

point owned more than 100,000 apartments taken through tax foreclosure, we saw very directly the importance of stabilizing that 

housing and making sure that renovation of that housing can have 

a positive impact, not just for that home, but for the surrounding 

community. 

And so making sure that that $3.9 billion is effective, that it gets 

out quickly, and that it is used effectively is absolutely critical, and 

I think there, one very important aspect is going to be making sure 

that HUD provides the technical assistance necessary to localities 

that are dealing with this problem, because for many localities, it 

is a new problem and a very, very severe problem. 

Chairman DODD. Well, thank you for that, and as I mentioned, 

Jack Reed just walked back into the room and was our leader on 

the affordable housing issues and I am sure he will raise the issue, 

as well, about the two funds and whether or not something in the 

stimulus package could be included in those. 

Let me turn to Senator Shelby. 

Senator SHELBY. Thank you, Chairman Dodd. 

Mr. Donovan, the roots of our current mortgage crisis, I think we 

have to go back and learn something from what went wrong. The 

Federal Government, as you already know and you will be a big 

part of, has already tried a variety of interventions in our mortgage 

and our financial markets. Most of these have demonstrated up to 

now little success. In some ways, we may have actually made the 

situation worse, some people argue, by injecting further uncertainty into our markets. 

I have argued myself that any efforts to fix our financial system 

should begin with an evaluation of what exactly went wrong. If we 

don’t know what went wrong, how are we going to fix it? What do 

you see as the causes of our current financial crisis, from your perspective? 

Mr. DONOVAN. Senator, that is a tough question and it is, as you 

said—— 

Senator SHELBY. But it is an important question. 

Mr. DONOVAN.——a very, very—absolutely, I agree. It is a very 

important question, and I think it is one that deserves a significant 

amount of study, as well, in terms of understanding it. 

Let me say, frankly, to you, I think there is blame to go around. 

Senator SHELBY. Sure. 

22 

Mr. DONOVAN. And I think as you have seen, President-Elect 

Obama is someone who is not one to say, it is this or that. He is 

somebody who can say, let us look at a problem and understand 

all the different issues, and to say we can all take some responsibility, and we ought to look at all the various causes of—— 

Senator SHELBY. But shouldn’t we find out what went wrong? 

Mr. DONOVAN. Absolutely. 

Senator SHELBY. I mean, we are not up here today to say, I have 

got you and I have got you and this and that. I mean, gosh, we 

have got a housing crisis on our hands which is probably the root 

cause of a lot of our financial problems, or tied into it. So if we 

don’t deconstruct what went wrong and how to fix it, we will never 

fix it, will we? 

Mr. DONOVAN. I agree with you that we need to understand the 

causes of the problem, and again, I think that there are issues that 

occurred in the market, really in every part of the market and that 

we need to look comprehensively at, and that means we need to understand the incentives for lenders, for brokers, for a whole range 

of different players, rating agencies. It is a very complex system, 

as you know. We also know, frankly, that there were homeowners 

who got loans and ended up in homes that shouldn’t have, and I 

don’t think that we should take an approach that it was one side 

or the other. We should look comprehensively at the issue, and you 

have my pledge that, should I be confirmed, I would absolutely 

work closely with you to make sure that we understand those 

issues. 

I also would say that, looking forward, we do have a major challenge, and this is also to go back to Senator Dodd’s question, Chairman Dodd’s question, we have a major question of what the future 

of our mortgage finance system will look like, and that again is a 

complex question that will require much study and much discussion, which should I be confirmed, I look forward to having with 

you and all the members of the Committee. But this is something 

that we must make sure that we have a system that is transparent, that is open, that is fair, and that is flexible, that continues 

to harness the power of the private sector in this country in order 

to be able to drive innovation and change and entrepreneurism. 

But at the same time, we have to make sure that consumers, as 

we have seen over the last few years, have all the information that 

they need, are protected, and have the ability to make choices of 

programs and lending products that work for them, and I think we 

have seen that in New York City in the work that we have done, 

that you can ultimately help low-income and moderate-income 

homeowners successfully become homeowners. 

Senator SHELBY. FHA, we have touched on this earlier. We all 

know that they are playing a larger and larger housing role than 

they were. The crisis in our mortgage markets has not been confined just to the subprime market. Over the last 2 years, we have 

witnessed increasing delinquencies in FHA’s single-family business. 

In 2008 alone, the economic value of FHA’s insurance fund fell by 

over $14 billion, a decline of almost 70 percent of the fund’s value 

since 2007. At the same time, FHA’s presence in the market has 

increased dramatically. 

23 

Is it possible, in your judgment, that we could see a continued 

decline in FHA’s financial health, potentially wiping out the fund’s 

remaining value, if we are going down this road that we have been 

going? 

Mr. DONOVAN. Senator, this is a critical issue and one of the very 

first things, should I be confirmed—— 

Senator SHELBY. But you will have to deal with it. 

Mr. DONOVAN.——that I will have to understand in detail. What 

we know at this point is, as you said correctly, that the market 

share has gone up dramatically, from roughly 4 percent in 2005 to 

21 percent today. Close to roughly a third of all new home purchases are financed by FHA today. There are recent studies. One 

of them showed recently that the reserves in the FHA have declined to roughly 3 percent, and as you know, 2 percent is the required reserve level for FHA. So clearly an issue of concern, a decline from roughly 6.5 percent to 3 percent just over the last year. 

What I would also say, given the work that I have done thus far 

with the agency review team, I do not have the full information 

that I need to be able to tell you today—— 

Senator SHELBY. I understand that. 

Mr. DONOVAN.——whether we are looking at something in the 

short-term or long-term that is a serious concern. We also know 

that the scores, the credit scores under the FHA program have actually increased somewhat. So there are different signs in terms of 

what we have seen within the portfolio. 

And what I would pledge to you today is that one of my first priorities would be to look into what exactly is happening in FHA, ask 

for a full accounting of the health of the MMI fund, and to come 

back to you as quickly as I possibly can so that you can understand 

the full important, and so that, should I be confirmed, we could together begin to shape the future of the FHA to make sure that it 

continues to be a contributor to the recovery of the mortgage market in the United States. 

Senator SHELBY. Fraud in lending, big problems always. On several occasions, HUD’s Inspector General has raised concerns regarding FHA’s lax approach to reducing fraud in its mortgage insurance programs. For instance, the Inspector General reported 

last year that FHA does not consistently refer potentially fraudulent loans to the Inspector General’s Office. 

I suspect that you have had to deal with the issue of fraud before, both at HUD and in your present job. Could you share with 

this Committee briefly some of your efforts to eliminate fraud in 

the programs you administered on behalf of New York City, and 

how will that help you here? 

Mr. DONOVAN. Absolutely. I think this is a critical issue. As you 

think about the increase in volume that we just talked about at 

FHA without a corresponding increase in staff or changes in the 

systems, that is clearly an issue that needs to be addressed very 

quickly to make sure that there is increased scrutiny of the lending 

going on in the FHA programs. 

In terms of my experience in New York, this is something that 

has to be a top priority not just within FHA, but for HUD overall, 

is to make sure that every dollar of assistance gets to the people 

that it is intended by Congress to serve. 

24 

So a few things that I would say about our efforts in New York 

City. First of all, we run the fourth-largest voucher program, Section 8 voucher program, in the country at HPD and we have gone 

to enormous lengths, working in partnership, I will say, with HUD, 

to try to get access to the very latest systems and data about exactly program incomes for participants, to make sure that there are 

regular checks on those income levels within the programs, and 

frankly, I will tell you that the level of terminations that we have 

seen under my tenure in the Section 8 program in New York City 

has gone up significantly as a result of increased scrutiny to make 

sure that those dollars are serving the recipients that they are intended to serve. 

At the same time, we do a lot of work around new housing development or renovation of housing. I work very, very closely with the 

Department of Investigation in New York City and the commissioner there to make sure that we screen and check very closely all 

of our partners within the programs. And I have a record, I hope 

you would agree, that I can stand on and that I can be proud of 

in terms of the way that we have operated those programs in New 

York City. 

Senator SHELBY. One last question. HUD’s role in disaster relief, 

that is a huge role that HUD has played. We witnessed in New 

York City after the 9/11, we witnessed in the South, including my 

State of Alabama, Hurricane Katrina. In both instances, HUD has 

been tasked with helping to rebuild. I know that rebuilding efforts 

in my State of Alabama have been mixed, and probably in Mississippi and Louisiana, too, at best. Often, funds have not reached 

those most in need, nor have they been distributed in a fair, timely, 

and equitable manner by HUD. 

You have had experience in this relief. How would you rectify 

that as Secretary of HUD? 

Mr. DONOVAN. Senator, again, you have raised a very, very important issue for HUD. The numbers that I have seen show that 

in terms of just the two terms, recent terms, last 8 years at HUD, 

HUD has been tasked with distributing close to $30 billion of disaster assistance during that period. That compares to less than $2 

billion in the prior 8 years before that. So there has been an enormous increase in the level of disaster funding that is run through 

HUD. 

Frankly, in terms of the systems, in terms of the personnel, in 

terms of a range of management reforms, there needs to be a very 

significant effort to transform the way that HUD responds to disasters. So this is clearly a top priority in terms of what I would be 

facing, should I be confirmed. 

Senator SHELBY. Mr. Chairman, you have been generous with my 

time. I just want to say I look forward to supporting this nomination, working with the Secretary. I have a number of questions that 

I would like to submit to the Secretary for the record that I am 

sure he will get back with me. Thank you. 

Chairman DODD. We will try and do that, and let me just urge, 

if that is the case, being mindful. We would like to, if we could, get 

the nomination moved by the end of the week—— 

Senator SHELBY. Sure. I wouldn’t hold the nomination up. 

Chairman DODD. OK, fine. That would be—— 

25 

Senator SHELBY. But I would just submit them to—— 

Chairman DODD. OK. That clarity is important, as well. 

Senator Jack Reed? 

Senator REED. Well, thank you, Mr. Chairman. 

Following up, obviously, on the Chairman’s point about the 

Housing Trust Fund, again, we have communicated that this, I 

think, is a very useful and effective way to stimulate the housing 

markets, to build affordable housing. Despite the gains that may 

or may not have been made over the last several years, there is 

still a dearth of adequate affordable housing, so I would reinforce 

the Chairman’s point about working harder with your colleagues to 

incorporate something like this in the stimulus package. 

The other point, in listening to Senator Shelby, whose excellent 

questions raised the issue of FHA, their increased market share 

from 4 percent to 21 percent is just, I think for the record, a function of, frankly, the collapse of a lot of alternative mortgage 

issuers, is that fair to say from your—— 

Mr. DONOVAN. Absolutely. In fact, if you look at FHA’s market 

share combined with the GSEs, you are looking at over 90 percent 

of the current mortgage originations in the United States. 

Senator REED. So, I mean, essentially, and I think this was a 

conscious decision of the Bush administration, of Secretary Preston, 

without the mission to FHA and then Fannie and Freddie to go out 

there, the mortgage market in the United States would be moribund and we would be in a more precarious position at the moment? 

Mr. DONOVAN. Absolutely, Senator. I want to make sure I am 

clear. My point is that all of the efforts to make sure that FHA is 

running its programs in the most effective possible manner would 

be directed at ensuring that there continues to be a stable, open, 

fair, reliable mortgage system in the United States and that there 

is access to credit. In the long run, obviously, making sure that the 

broader market returns and that private lenders do return to the 

market in significant measure is a top priority. In the short-run, 

we have to make sure that FHA and the GSEs are contributors and 

are ensuring credit is available to American home buyers while at 

the same time protecting taxpayers in terms of the quality of those 

loans and the nature of the programs. 

Senator REED. And one of the ways, I think, that we have to protect taxpayers is to ensure that FHA has all of the tools they 

need—the computer systems, the resources, the qualified personnel—and my distinct impression over the last several years is 

that that has not been a priority in terms of resources at HUD. I 

would hope that you would be able to alert this Committee very 

quickly as to what you consider to be the needs, the technical 

needs, so that, in fact, we can avoid fraud, we can ensure that the 

benefits of FHA are directed to those who deserve it, and we can 

ensure the companies that participate in the FHA programs are legitimate, bona fide, and principled members of the mortgage market. I hope you will do that. 

Mr. DONOVAN. Senator, you have my commitment. Should I be 

confirmed, I will absolutely do that. 

Senator REED. One of the other areas, and you are very familiar 

with this from your work at HUD previously, is it is not just affordVerDate Nov 24 2008 14:34 Jun 22, 2009 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 S:\DOCS\50234.TXT SHERYL
26 

able housing, it is safe and affordable housing, and your work on 

lead paint exposure, again, just your thoughts about how some of 

these programs—weatherization, lead abatement—could be incorporated into the stimulus package, not only to provide stimulus, obviously, but also to ensure that the housing stock that taxpayers 

are supporting is safe and healthy to children and families. 

Mr. DONOVAN. One of the things that my agency is responsible 

for is removal of lead paint, both on an inspection front and a housing code enforcement front, as well as in terms of the renovations 

that we do on privately owned housing, and it is a critical issue. 

I am very proud of the record that in New York City, lead poisoning has declined by about 80 percent over the last 10 years, and 

I think HUD’s programs have been an effective help in terms of declining lead poisoning around the country. And so I do think 

through a range of programs, there is an opportunity, whatever 

that funding vehicle may be, to make sure that lead poisoning is 

as close as we possibly can eliminated as a threat to our children 

around the country. 

Senator REED. Thank you. There is another major responsibility 

that you have, and that is public housing. They have traditionally 

been running significant backlogs in capital funding necessary to 

improve them, to make improvements like energy efficiency. Last 

fall, I was in Providence, where we had one of our housing units 

which was kicking off an energy efficiency program that is going 

to save the Housing Authority hundreds of thousands of dollars 

over the next several years, environmentally. All of it is smart investment. 

I am just wondering, specifically with respect to these types of 

programs, but more generally, how are we going to support our 

public housing programs with real resources? 

Mr. DONOVAN. Well, Senator, this is something that if you look 

at the estimates, and I know this directly from New York City, but 

if you look at the estimates nationally, some of them are as high 

as a $30 billion or even higher backlog in terms of public housing 

capital needs. I will say to you, we are looking closely at this as 

an issue, particularly in terms of the ability to get renovation going 

quickly, to generate jobs as part of the recovery package. 

I will also say that I believe strongly that investments in the 

short-term in this kind of renovation can lead to longer-term operating savings and that that is a very important balance that we 

need to look at in terms of how we make smart investments today 

for longer-term savings. It is something that has been a priority in 

New York City, recognizing that close to 80 percent of the carbon 

emissions in New York City come from our buildings, and that 

number is about 40 percent nationally. Renovating our building 

stock, with leadership from HUD on that issue, is a critical priority 

and can really be smart investments that lead to savings in the 

long-term. 

Senator REED. Well, thank you, Mr. Secretary. Again, I look forward with great enthusiasm to supporting your nomination and to 

working closely with you on behalf of the people of this country. 

Thank you. 

Mr. DONOVAN. Thank you. 

Chairman DODD. Thank you, Senator, very much. 

27 

Senator Martinez? Welcome, Senator Corker, as well, and Senator Johnson have joined us, as well. 

Senator MARTINEZ. Thank you, Mr. Chairman. 

Obviously, we discussed and have throughout the hearing the 

current housing crisis and the problems that I described to you 

during my opening comments about the situation in Florida, which 

are indeed rather dire. I was wondering what you can tell me about 

your thoughts on how HUD can engage in this problem, and specifically if you would address your thoughts on the proper implementation of the funding provided by Congress for the Neighborhood Stabilization Program and your thoughts on how HUD, beyond the Hope for Homeowners Program, or even with that program, what we can do to prevent foreclosures and keep people in 

their homes. 

My experience and what I have heard on the Hope for Homeowners Program is that banks just don’t participate. They don’t 

want to take the pain. It just hasn’t worked. So how can we make 

that program work? What else do you think you can bring to the 

table from a HUD perspective and the Neighborhood Stabilization 

Program? 

Mr. DONOVAN. First of all, Senator, I would say, clearly, this program has to work nationwide, but very specifically it needs to work 

in Florida, because the latest estimates that I have seen are that 

roughly 50 percent of all the foreclosures are in California or Florida that we are experiencing today. 

Senator MARTINEZ. That is right. 

Mr. DONOVAN. And so absolutely critical. As we talked about 

when we met last week, there are great organizations on the 

ground in Florida that are beginning to address this. 

Given the scale of the crisis, however, what I would say is that 

the capacity right now nationally is uneven and that I think it is 

very important that HUD begin to focus on technical assistance, 

making sure that there is the infrastructure in place to deal with 

the foreclosure problem and the effect that vacant, deteriorating 

homes are having on neighborhoods and on the values of all homes. 

In fact, I think we would all recognize that stabilizing housing 

prices is key in terms of an overall economic recovery. 

And so I do think technical assistance would be a key piece of 

making sure that the Neighborhood Stabilization funding is effective as it is distributed as quickly as possible. 

On Hope for Homeowners, again, I look forward very much to 

hearing your ideas and the ideas of the Committee about that. 

From what I have heard and seen in terms of the way the program 

is operating, clearly, the fees, the loan-to-value levels, I think Secretary Preston has proposed that the LTV be raised from 90 percent to 96.5, I believe it is, and that certainly seems like it could 

be an effective piece of an overall solution. 

This is something that I would want to look at and get to resolution fairly quickly on a comprehensive set of changes to the program and would look forward to your input on that. 

Senator MARTINEZ. Well, we can deal in this in more detail down 

the road and I am happy to do so. I hope you have met with Secretary Preston—— 

Mr. DONOVAN. I have. 

28 

Senator MARTINEZ.——because I think he should have some 

ideas on what has worked and hasn’t worked. But we have two 

models out there right now that I can see. One is the model that 

the FDIC has been employing in the IndyMac workouts, which 

seems to have not only worked, but continue to work, and the projections are that it is going to help hundreds of thousands of homeowners. 

On the other hand, we have the Hope for Homeowners Program, 

which essentially has maybe helped a couple of hundred families. 

That seems to me a pretty dire contrast and something is happening that is different in one as opposed to the other, and I think 

it is a willingness of the financial institutions to really step to the 

table and do the right thing, which is really ultimately for the benefit of the communities and everything else, to find a way to keep 

people in their homes. 

Obviously, in your work at HUD, subsidized rental housing was 

a big part of what you did, and particularly in this economy, we 

find increasingly numbers of people who need rental housing in 

order to fulfill their dreams of a safe place to live. My question 

really is what do you think HUD’s role is in the continuing area 

of assisted rental housing, on Section 8 modernization or revamping of the Section 8 program? I was always very frustrated about 

the unused vouchers that went unused to housing authorities year 

after year, got an allocation of Section 8 vouchers well beyond what 

they could use. And we knew when they were being sent that they 

weren’t going to use them all, and at the end of the year, there 

they were. So utilization of the vouchers in a more efficient way as 

well as the role of the GSEs in this current environment where, 

frankly, there are very few private sources for financing rental 

housing. 

Mr. DONOVAN. A couple of points I would just make on that. 

First of all, clearly, HUD has not been a good partner with you and 

particularly the Appropriations Committees around providing clear, 

timely information about budget renewals, and this has to be a top 

priority, because right now on the ground, and I see it every day, 

owners are unsure about the length of the contracts that they are 

going to be able to have. It is leading some owners to decide to get 

out of HUD programs, even though they would like to stay in. The 

effects on residents and families are substantial. 

So should I be confirmed, you have my commitment that one of 

the first priorities would be to make sure you have full information 

about the programs, the costs of those programs, and the renewals. 

A second thing I would say is that there is a world of energy and 

innovation that has been happening over the last generation at the 

State and local level. As a local housing official, I see creative 

groups on the ground, but also in my work nationally, I have seen 

it in Florida. I have seen it in many other States around the country. And frankly, HUD’s programs are in many ways a generation 

behind. They have not kept pace with the changes that we are seeing on the ground, and I think the opportunity, whether it is 

through incorporating the Low-Income Housing Tax Credit into 

what is being done on a very simple level, or more broadly, creating 

the flexibility to allow local innovation to take place, looking at opportunities like the National Housing Trust Fund that was menVerDate Nov 24 2008 14:34 Jun 22, 2009 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 S:\DOCS\50234.TXT SHERYL
29 

tioned before, which President-Elect Obama has been a supporter 

of through the campaign and through the transition, all of those 

things need to be brought to HUD and there needs to be a new 

spirit and a new energy given to support local efforts on rental 

housing. 

Third and finally, I would say we can’t forget the renters in the 

foreclosure problem. If there is any innocent victim of what has 

happened out there, it is renters in two- or three- or four-family 

buildings that are being displaced, that are being evicted, and we 

have to make sure, whether it is on Neighborhood Stabilization or 

in other programs, that we are ensuring that those renters are 

kept in their homes as much as possible or that we have alternatives for rental of homes that are being foreclosed to make sure 

that we do as much as we can to stabilize housing markets. 

Senator MARTINEZ. I hope you won’t be shy about looking critically at programs that perhaps whose time has passed, well-intended when they began, but frankly have not fulfilled their mission and perhaps shouldn’t be done at HUD and perhaps they 

should be more aggressively done at the State and local level with 

assistance from the Federal Government perhaps, but not government-run out of HUD directing local people how better to do 

things, which, in fact, I find often is not what really takes place, 

because local sometimes knows best. 

One last question with the limited time I have left. This is on 

RESPA, and you and I discussed RESPA a little bit. I just wanted 

to make sure that I had your answer on the record as to whether 

you plan to carry through with the implementation of the regulations that have been put in place recently by Secretary Preston and 

whether you support those and intend to carry through with them, 

and perhaps giving a broader look at RESPA reforms that might 

come during your tenure. 

Mr. DONOVAN. I, first of all, would just say your work on this 

issue, I think, was really a model of leadership and I think very, 

very important efforts to make sure that, as you spoke about in 

your opening statement, transparency, clarity, the ability of families when they are making what can often be the most important 

financial decision of their lives, to know what they are getting into. 

To have full information is absolutely critical. 

I do know that there is pending litigation around the implementation of the new rule and obviously that is something I would need 

to look into, should I be confirmed, in greater detail. So I can’t give 

you a detailed answer on that. 

What I can say is that I think there obviously needs to be a balance. HUD should be interested in lowering the cost to homeowners of that transaction and that is critical, but I think we have 

also seen over the last few years the results of a focus exclusively 

on lowering costs or providing everyone a loan that they can get 

into without really focusing on the affordability, the transparency, 

the full information that is available. And I think there can be simplification while at the same time greater protection for consumers 

to make sure that they are not just becoming homeowners, but that 

they can be successful as homeowners in the long term. 

Senator MARTINEZ. Thank you, Mr. Donovan. I look forward to 

voting for your confirmation, hopefully in the very near future, and 

30 

really wish you the best and hope you will stay in touch if I can 

be of any help to you. 

Mr. DONOVAN. Thank you. I appreciate all your advice. 

Chairman DODD. Senator, thank you very much. 

Senator Akaka? 

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

Commissioner, in Native American communities, affordable housing development on Trust Lands requires unique and innovative 

approaches. Programs authorized by the NAHASDA have been 

vital to increasing access to affordable housing. Hawaii’s Department of Hawaiian Homelands, DHHL, effectively utilized and leveraged Federal resources. Hawaii’s housing costs are the highest 

in the country and homelessness is too prevalent. But despite the 

effective use of resources and severe need for additional affordable 

housing, the Bush administration proposed reducing the budget for 

Native Hawaiian housing programs. How soon do you anticipate reevaluating budgetary priorities, and will you work with me to try 

and improve access to affordable housing for Native Hawaiians? 

Mr. DONOVAN. Senator, first of all, let me say you have my commitment that, should I be confirmed, I will be as open and communicate with you as regularly as I possibly can about these types of 

issues, because one of the things that I have seen, frankly, as a 

local housing official in, like Hawaii, one of the highest-cost markets in the country, if not the world, is that too often, HUD’s programs, and frankly, government programs in general, are designed 

for the average place. 

And the types of problems, housing problems that are faced and 

the challenges in Hawaii are not the same as they are in the rest 

of the country, and certainly New York’s challenges are different, 

as well. And one of the things I have come to appreciate as a local 

housing official in New York City is that HUD’s programs need to 

be more flexible. They need to be able to respond to the differences 

that we see across this country because the housing challenges are 

so different in different places. 

And so one of the things that I feel would be a critical set of reforms to HUD’s programs more broadly is to have the flexibility to 

deal with, whether it is rural housing issues, whether it is the 

issues in the homelands that you are talking about in Hawaii, or, 

frankly, the issues that New York City is facing that don’t fit neatly into the box of typical HUD programs. And so, absolutely, that 

is something that you have my commitment on. 

Senator AKAKA. Mr. Commissioner, I am concerned that too 

many working families were steered into mortgages that they could 

not afford or effectively understand the potential risks associated 

with products such as Adjustable Rate Mortgages. You have spoken 

about informing the people about this. What must be done to ensure that working families have the financial literacy skills to be 

better prepared to purchase a home, select an appropriate mortgage, and remain in their house when challenged with the potential financial hardships? 

Mr. DONOVAN. Senator, I am very glad you mentioned this, because this is a critical part of the overall comprehensive solution 

to the mortgage foreclosure crisis that we are facing. One of the 

things that, we have seen it in New York, but I think we have also 

31 

seen it around the country, is that too often when a family is facing 

foreclosure, the shame that they feel, the confusion that they feel, 

or even the anger that they feel, honestly, at the situation that 

they are in, they haven’t been able to make the connections to their 

servicers, to organizations that can help them. 

And so it is absolutely critical, first of all, that there be outreach 

and education efforts. It is something that we have done aggressively in New York City and set up a program, a new 501(c)(3) organization called the Center for New York City Neighborhoods, 

which has done exactly that kind of outreach and education. 

We also have to make sure that, frankly, all of the programs that 

we have talked about, whether it be the FDIC or the Hope for 

Homeowners, there needs to be the kind of education about those 

alternatives on the ground because they are only as good as the 

amount that a homeowner knows and can be educated on those options being available. And so making sure that we have the funding, the resources available to do that outreach and to connect 

homeowners to the options that are available, whether it be a 

modification or a new mortgage or any of those other efforts. So 

those are critical pieces of making sure that low- and moderate-income homeowners can be successful. 

And finally, I would say, in the long-run, that is something that 

we need to make sure is incorporated into the home-buying process 

to begin with, is full education, full transparency in the process. 

We have seen in New York City, with more than 17,000 homeowners through our New Housing Marketplace Plan, only five foreclosures, and I think a big part of the reason for that is the work 

up front that we do to make sure that a homeowner can be successful. And the kinds of programs that you talked about are absolutely 

central to making sure that happens. 

Senator AKAKA. Mr. Commissioner, as I mentioned earlier, we 

have been working to improve VA services for homeless veterans. 

Since veterans are approximately one-third of the homeless population, how do you intend to reach out to veterans, who have 

unique needs, in order to help them access services? 

Also, how do you intend to collaborate with VA in order to provide supportive services and case management to veterans in permanent housing provided by HUD? 

Mr. DONOVAN. Senator, first of all, I would say, as you know, 

President-elect Obama, during his time in the Senate, was a champion of this issue, worked closely with you and others on drafting 

legislation around this issue. And so, you can rest assured this will 

be a very high priority for the Obama Administration. 

Second of all, I would say, from my own personal experience in 

New York, this has been an issue where—as part of a team, and 

I do not lead the efforts around—the Department of Homeless 

Services in New York City is the leader on arranging these issues. 

But I work very closely, in terms of the construction of supportive 

housing and the provision of services in supportive housing, including with veterans. And as part of the team responding to this issue 

in New York, we have built a partnership with the Veterans Administration that has focused on the needs of veterans. 

You are absolutely right to say, they are unique needs. And with 

supportive housing, I think what we have seen is that there can 

32 

be a range of responses for individuals, for families, for veterans, 

for populations that do have specific needs, and that we can tailor 

supportive housing and the range of responses around homelessness to meet those specific needs. 

So I feel very confident that, with the progress that has been 

made in areas all over the country on this issue, that we can forge 

a deeper partnership with the Veterans Administration to ensure 

that we significantly reduce the number of homeless veterans that 

we are seeing in this country. 

Senator AKAKA. Thank you very much for your responses, Commissioner Donovan. Thank you, Mr. Chairman. 

Chairman DODD. Senator Akaka, thank you very, very much. 

Senator Casey. 

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

Mr. Donovan, I wanted to reiterate what I mentioned in my 

opening comments about the challenge that foreclosures present to 

the country. As you have said, it is—and I am paraphrasing—but 

this problem has been at the root of our economic challenges in the 

country, really the crisis we are living through. 

I wanted to get a sense from you at a couple of levels. One is 

the kind of priority you will place upon this challenge. Second also, 

how you evaluate certain initiatives that are either on the table, 

so to speak, or in process, and how you think we can improve on 

some of the initiatives that have been set forth already. 

One thing that I think has been missing from some of the efforts 

or lack of effort by the prior administration is—I was just looking 

at a news clip from January 8, a Wall Street Journal clip, where 

President-elect Obama was quoted as saying ‘‘I do think that the 

FDIC and Sheila Bair have had the sense of urgency about the 

problem that I want to see.’’ And that is consistent with what I believe there has been lacking, is a sense of urgency, especially with 

regard to the Treasury Department, under the current administration. 

So I would ask you, as a threshold question, what are specific 

things, steps you can take, actions you can take in your first couple 

of months that you think will improve how we deal with foreclosures? And second, and related thereto, if you could evaluate the 

FDIC proposal, the way they have dealt with IndyMAC in terms 

of their own real-time and current experience. 

So if you would just take those two questions, first. 

Mr. DONOVAN. Clearly, this is something that has to be job one 

for HUD. There are both questions with HUD and FHA and then, 

more broadly across the administration. The FDIC program is a 

very good example. But I think that making sure the HOPE for 

Homeowners program is effective, the types of changes that we 

talked about that are being considered by Congress at this point, 

in discussions with the transition, that absolutely is an important 

piece of it. 

I do think that the FDIC program, as you rightly point out, has 

been a promising model and it is one that we are looking at very 

closely as part of a more comprehensive solution. The latest information that we are seeing from it is that it has reached a significant number of people, as was pointed out earlier by one of your 

colleagues, a far larger number than the HOPE for Homeowners 

33 

program. And I think making sure that the incentives are structured correctly so that we minimize the redefault rate in particular 

is something that I am looking at with the economic team to make 

sure that any program that encourages modifications is structured 

in the best possible way to maximize the success of the program 

but also to minimize the cost to the taxpayer. 

So that is the kind of balance that we are looking at right now 

around the FDIC-type program which, as you rightly point out, I 

think is a promising model. 

Senator CASEY. With regard to HOPE for Homeowners, where do 

you think the problem is there? This is—of course, you have seen 

this from the perspective of running a major operation in New York 

and you have seen it in preparations for your confirmation. But is 

it one of implementation, the problems with HOPE for Homeowners? Or is it one of the mechanics of it or the statutory underpinning of it? Or is it both? Or is it something else? 

Mr. DONOVAN. Senator, let me be frank with you. One of the 

things that is very important to me is that I not give you more information than I can, based on the limited amount of detail that 

I have been able over the past few weeks, with the agency team 

and with the existing administration. I will compliment Secretary 

Preston on his openness and the work that he has done with the 

agency team to try to make sure we have as much information as 

possible. 

And so cannot at this point, nor would I want to, give you a detailed final answer on that when, in fact, we are really looking into 

that information, getting more data from FHA, and trying to understand all of the details. 

Senator CASEY. Let me just interrupt. It would help, after the 

fact, once you are there and you have a sense to evaluate it more 

fully, if you could supplement the record or provide Committee 

members—because when you have a program that is supposed to 

help 400,000 people and it is helping—what was the number? 

Mr. DONOVAN. It was, I think, 111 loans in the first month of—— 

Senator CASEY. That is 111, not 111,000? 

Mr. DONOVAN. That is right. 

Senator CASEY. So I think it helps us to maintain the sense of 

urgency to be able to evaluate that kind of an effort. 

Mr. DONOVAN. Absolutely. And we are looking at it closely now. 

Clearly the upfront fees, the loan-to-value ratios and a number of 

other parts of the program are things that we are looking at. 

Senator CASEY. I want to move to—and I have just a few minutes left—to the Troubled Asset Relief Program. An awful lot of 

frustration in the country that as hard as people here worked to 

deal with an urgent situation that involved our credit markets and 

to help to stabilize our credit markets and therefore not only our 

economy but to help stabilize the world economy, we did the right 

thing and we passed legislation in October. The problem now is 

there is a real concern about—and frankly, beyond concern, frustration and anger about how it has been implemented. 

I wanted to ask you a question about the Troubled Asset Relief 

Program as it relates to foreclosures. One thing that I have said 

and insisted on, as others have, is that any grant of further authority with regard to funding for that have, as a central feature of it, 

34 

foreclosure prevention dollars, and tens of billions frankly, be made 

available. 

What is your sense of—if you have an opinion now, you may not, 

but if you have an opinion now—about how the TARP program has 

been implemented? And if you believe it has been implemented 

poorly or in a way that has been lacking, what would you recommend to Treasury? And you are obviously part of this discussion. What would you recommend to the administration as to how 

to fix it in terms of accountability and reform so that people do not 

get a sense that tens of billions of dollars go to banks, nothing happens, credit is not improved, lives are not improved in terms of 

foreclosures or other challenges the American people face? 

Mr. DONOVAN. Senator, it is an absolutely critical question. In 

fact, as you know, discussions have already begun, have gotten underway, between the current administration, the transition, and 

the Congress. And in fact, yesterday a letter from Larry Summers 

went to the leadership of the Congress to talk about the principles 

under which that next installment of money under TARP could 

move forward. 

And so clearly transparency and the accountability for the use of 

the money, clear reporting, ensuring that there are clear restrictions and conditions for the institutions that benefit from that 

funding, are all part of the commitment that was made yesterday 

in writing to Congress on the way that President-elect Obama 

would utilize that funding. 

One of the specific points in there was also, and I quote, ‘‘to 

launch a sweeping effort to address the foreclosure crisis.’’ And so 

we believe strongly, as I think Congress does, that there must be, 

as part of the next funding under TARP, the bold comprehensive 

effort that President-elect Obama has talked about on the foreclosure crisis. 

And the elements of those, some of which we have already talked 

about looking at the FDIC plan, making fixes to some of the FHA 

programs, those are all elements that we are looking at and that, 

should I be confirmed, I look forward to much more detailed conversations with you and your colleagues about in terms of what exactly the elements of that program would look like. 

Senator CASEY. Finally, and I am out of time but I will put this 

on the table not by way of a question but as a preview of a question 

I will submit to you. On the Neighborhood Stabilization Fund, we 

have heard a lot of feedback from institutions in Pennsylvania, government agencies really like the Department of Community and 

Economic Development, our major State economic development 

agency, that with regard to the almost $4 billion in funding, the 

statutory language has been interpreted rather narrowly, thereby 

constraining the discretion and ability of local decisionmakers to 

have the full benefit of this program. 

I hope we could—we will present that to you in a more detailed 

form and hope we could work together to try to remove some of the 

constraints on that discretion. 

But I am out of time. Thank you very much. 

Mr. DONOVAN. Thank you, Senator. And as a local user of the 

Neighborhood Stabilization Program in New York, we have had 

35 

some of the same concerns and I look forward to having those detailed discussions with you. 

Senator CASEY. Thank you very much. 

Chairman DODD. Thank you very much, Senator. 

Before turning to Senator Menendez, let me thank Senator 

Casey, raising the question on HOPE for Homeowners. I want to 

thank my colleagues here, as well. This was a—we started late— 

well, last spring—trying to fashion some relief program. And I say 

this respectfully but to put it mildly we had a lot of resistance from 

the administration about intervening in this area, other than just 

sort of jawboning on the question which obviously was not producing much at all. 

What you saw in HOPE for Homeowners was sort of a creation 

created by a Committee, which is not always the best way to operate, but trying to fashion something that would gather 60 votes in 

the U.S. Senate to get us through. And it is regrettable it has not 

performed. But I think all of us understood in the beginning that 

looking at it there was so many hoops to go through, the piggyback 

loans, a variety of things that were going to make this difficult. 

So I want to underscore Senator Casey’s request because this is 

important. I happen to agree with you. I think the FDIC approach 

is an interesting approach. I do not know, in response to some of 

these questions, whether you want to comment on the bankruptcy 

idea, what Citigroup has just announced its support of in terms of 

making primary residences available to a bankruptcy judge to encourage workouts, as a way of maybe getting more aggressively at 

the issue that can come before us. 

But we clearly need to go back and revisit either the FDIC idea 

or the HOPE for Homeowners as a way of getting something right 

here. And we would urge you and your team to give us some 

thoughts on that as quickly as possible so we could respond to it 

if, in fact, Congressional action is necessary. 

Senator Menendez. 

Senator MENENDEZ. Thank you, Mr. Chairman. 

Mr. Donovan, I appreciate the answers you have already given 

on public housing and Section 8, so I will not go over those. But 

I do appreciate those answers. 

Let me ask you, you know, the impact of the housing crisis and 

the foreclosure crisis is being felt across the country, but there is 

a universe that has no ability to protect themselves from the results. Those are children. There are about 2 million children who 

will be impacted by the foreclosure crisis. Three-hundred-thirty 

school districts are already reporting enrolling more homeless students in the first 3 months of the school year than they enrolled 

all of last year. 

And of course, this creates development delays for young children. It creates more difficult challenges for older children to stay 

in school. It makes it harder for enrolled students to succeed. 

So we have worked very hard. I know that we worked with the 

Chair in getting provisions here to try to help school districts. And 

I think there is something that we are trying to work on in the 

stimulus and McKinney-Vento. 

But as HUD Secretary, would you commit yourself to working 

with those of us on the Committee who are interested in this, parVerDate Nov 24 2008 14:34 Jun 22, 2009 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 S:\DOCS\50234.TXT SHERYL
36 

ticularly the needs of homeless children? And would you address 

family homelessness through such mainstream HUD programs as 

Section 8, along with ensuring that HUD’s McKinney-Vento Homeless Assistance Programs maintain the current incentives that penalize local efforts to address homelessness for children, youth and 

families? 

Mr. DONOVAN. Senator, thank you for asking a very important 

question because this is a troubling trend, frankly, that we are seeing in New York City and across the country as a result of the current crisis, is an increase in family homelessness. And so there is 

a range of things, I think, as you correctly point out, that we need 

to do to respond to this. 

One of the early promising efforts that I think can be addressed, 

and you allude to it in your question, is how do we craft HUD’s 

programs and responses to make sure that we have an effective 

prevention effort as well as the longer term supports like Section 

8 vouchers and others for affordable housing. It is cheaper and, 

frankly, a much better result for a family to be able to stay in their 

existing home. And it is one that we have begun to see some promising efforts in our HomeBase program in New York City. So I 

think it can be an effective part of an overall response to family 

homelessness. 

The only other thing I would say is that I think the good news 

here, if there is any, is that there has been a dramatic really movement across the country over the last decade or so that has focused 

energy around the problem of homelessness among individuals and 

that we have made an enormous amount of progress on that. 

And so I think if we can focus the same kind of energy and partnership that we have had at the local level organizations in your 

State, and others have been leaders on this, and partner it with 

HUD, we can make the same kind of progress on family homelessness that we have on individual homelessness. 

And a part of that, frankly, is we had data and research that 

really showed the results. One of the reasons why we have been 

able to make progress, I was part of a negotiation between the city 

and the State where we committed $1 billion of new funding for 

ending homelessness. The reason that we could get such consensus 

is because we could demonstrate the fact that it actually saved 

money, that investing in supportive housing reduced the cost, 

whether it was of jail stays or shelters, a range of other more expensive and, frankly, much less humane approaches to homelessness. 

So I think we can bring that same kind of effort and energy to 

the issue of family homelessness. And it is one that needs attention, as you rightly point out, right now. 

Senator MENENDEZ. We look forward to working with you on 

that. 

Second, I mentioned in my opening statement about this report 

that just came out, that the Federal Government may very well be 

ill-equipped to stop the migration of predatory subprime lenders to 

the rapidly growing U.S.-backed home loans and raising the specter 

of another cycle of lending abuses, something we definitely do not 

want to see. 

37 

HUD officials told our colleagues on the other side of the Capitol 

that the FHA lacks the sufficient staff, the adequate technology, 

and the legal authority to screen questionable lenders who seek to 

participate in the issuance of federally backed loans and they went 

on to say that their oversight shortcomings are not limited to lenders. Its reviews of appraisers are not adequate to reliably and consistently identify and remedy deficiencies. It talked about an audit 

found that the Government’s roster of appraisers included over 

3,400 with expired licenses, and nearly 200 that had been disciplined by the States, and on and on and on. 

So the last thing we want to see is a continuation of what happened in the private side of the marketplace move to the Government side of the marketplace. Is that something that you will be 

focusing your attention on when you—— 

Mr. DONOVAN. Absolutely, Senator. That has to be a top priority 

at FHA. 

Senator MENENDEZ. And last, 40 years after the passage of the 

Fair Housing Act, a good part of our country remains highly segregated. Of more than 4 million estimated Fair Housing violations 

annually, only 27,000 complaints are processed. Of these, HUD’s 

Office of Fair Housing and Equal Opportunity only charged 31 

cases and has failed, in my view, to address the continuing systemic discrimination nationwide. 

As HUD Secretary, would you reform HUD’s Fair Lending programs to assure that discrimination in lending is addressed? And 

how do you view the role of HUD in addressing discrimination and 

segregation as we move forward? 

Mr. DONOVAN. Senator, thank you for asking that question because I think this is a very important piece of HUD that, frankly, 

too often does not get the kind of attention that it deserves. Let me 

just say personally, one of the reasons I do the work that I do is 

because when a family chooses a home, be it a renter or an owner, 

they choose often a public school for their child, they choose a set 

of services. How good is the policing in that area? They choose access to jobs. They choose so many things that affect the very fabric 

of their lives. And so if we cannot ensure access, equal access to 

housing, I, frankly, think we cannot fulfill the promise of opportunity that this country holds out. 

And so we must make sure that fair housing is a real priority 

at HUD. And you quoted the numbers. Those 31 cases are down 

from about three times that number in 2001 and about four times 

that number from the height of HUD’s efforts. So I am significantly 

concerned about needing stronger enforcement of fair housing. 

You have my pledge that I will look at that. I also think that 

there is a very important report, the Kemp-Cisneros Report, that 

as you know I think has some very important conclusion that I 

think HUD needs to look very closely at in terms of understanding 

where its Fair Housing efforts need to go. 

Senator MENENDEZ. I appreciate your answers and the answers 

you gave me personally when we met and I look forward to supporting your nomination. 

Mr. DONOVAN. Thank you. 

38 

Chairman DODD. Thank you very much. That was an eloquent 

answer, by the way, let me say, to the question posed by Senator 

Menendez. 

Mr. DONOVAN. Thank you. 

Chairman DODD. Senator Tester. 

Senator TESTER. Thank you, Mr. Chairman. And I recall back the 

last two Banking Committee hearings we had. One was 4 and one 

was 5 hours, so we have got plenty of time here left. 

[Laughter.] 

Senator TESTER. First of all, I want to thank Senator Akaka for 

his comments on veterans. I can tell you that in the State of Montana we have far too many homeless veterans. And anything your 

agency can do to help solve that problem—and it is a problem— 

would be much appreciated and we would look forward to working 

with you on that. 

You had said, Mr. Donovan, that you are a numbers guy. A recent survey indicated that housing adequacy in rural America is at 

about—its inadequacy is about 1.7 million or 6.3 percent, which is 

slightly above what it is in metropolitan areas. What steps do you, 

through HUD, think that you can do for rural America to help reverse that trend? 

Mr. DONOVAN. Senator, first of all, I must say I really enjoyed 

the time that you gave me this past week and really appreciated 

hearing very personally the kinds of issues that Native Americans 

are facing in your State and elsewhere around the country. And it 

really made an impression on me. So I appreciate your taking that 

time. 

One of the things, while I do happen to be the Commissioner in 

New York City today, the very first housing that I worked on, HUD 

housing that I worked on in my career, was rural housing in Oklahoma, in Kansas, in Louisiana, in Alabama, and in Arkansas. I 

saw, literally at my very first experience, the kinds of unique 

issues that rural America faces. 

Then in my first experience at HUD, working with the Department of Agriculture on the Farmers Home Program and a range of 

others that are really deeply entwined with the programs, the Section 8 and other programs, at HUD. HUD has a very important 

role to play, in my mind, in rural areas of the country. And so this 

has to be a significant issue. 

One of the things, and we talked a little bit about this when we 

met, that strikes me as a housing official in New York is that there 

is not nearly the kind of flexibility in HUD’s programs that there 

need to be to be able to respond to issues in rural parts of the country, and frankly, not an understanding that whether it’s voucher 

programs or certain other programs that HUD has, that they do 

not work in the same ways in rural areas as they do in other parts 

of the country. 

To give you a very specific example, one of the things I was faced 

with when I worked at HUD the first time was a series of opt-outs 

in properties in rural parts of the country where the standard response was well, we can issue vouchers and they can go find another place to live. Well, if that place is 50 miles away or 100 miles 

away, you are asking that person or that family to leave their community along with leaving their home, which is hard enough. 

39 

And so it is just one example of the types of things where, in 

very specific parts of the HUD programs, we need to be mindful of 

the differences that folks face in rural markets and to respond to 

them. 

Senator TESTER. Well, I look forward to working with you on increasing that flexibility and in helping anybody that wants to try 

to understand it better do that. 

As long as you brought up Native American housing, I will ask 

a few questions on that. As you know, we have a unique trust responsibility. I think we have got seven major reservations in Montana. There have been court decisions, Executive Orders, treaties 

signed, all sorts of good stuff that talk about obligations to provide 

adequate housing. 

We talked about the disparities in my office. I guess the question 

is how do you envision helping address the disparities in Native 

American housing? How can HUD step up to the plate and help 

solve the problem? Because in many areas of Montana in Indian 

country, it is nothing short of Third World. 

Mr. DONOVAN. Senator, one of the things that I think you and 

others that I very much look forward, should I be confirmed, to 

working with you on is to hear your ideas about that. My sense, 

at this point, in terms of what I have looked at—which to be honest, I need to, should I be confirmed, understand more about this 

and understand more about the specific issues that you’re facing. 

But one of the things that I’ve seen is that there has not been 

adequate either flexibility or the ability to utilize the block grant 

funding that has been available in a way that has been effective 

in Native American communities. And that is certainly something 

that I look forward to talking to you more about, should I be confirmed, and to hearing your ideas about. 

Senator TESTER. A couple of things. As long as you brought that 

up, and I know you are very busy and Montana is two plane rides 

and a couple of thousand miles away from here. 

But one of the things that I think would help is if you, in particular, saw the conditions firsthand. If you would be willing to do 

that, I would be willing to help make that happen, too. 

The other thing that I think you could do that would help educate you, even more than I, would be to visit with tribal leaders. 

It does not have to be in person, although it would be better if it 

was. But it certainly can be over the phone. They have a lot of good 

ideas and suggestions that I think you might be able to incorporate 

into some of the programs you have. So I would also encourage you 

to do that. 

You talked about several programs. I do not need to go through 

them. But you talked about education and outreach, which is pretty easy to talk about. From my perspective, and I hope you have 

a different one, sometimes it is hard to educate and teach people 

about programs. So how do you plan on doing that? 

Mr. DONOVAN. Sorry, are you asking—— 

Senator TESTER. I am talking about there were several programs 

you listed off, HOPE for Homeowners was one. We are going to 

work on that to make that program better. There were FDIC programs. There were other programs. Any program within your purVerDate Nov 24 2008 14:34 Jun 22, 2009 Jkt 000000 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 S:\DOCS\50234.TXT SHERYL
40 

view, where you could educate people about what is going on, how 

do you plan on doing that? 

Mr. DONOVAN. I guess to answer that, let me talk a little bit 

about my experience over the last 5 years. One of the things that 

I think has really been a hallmark of what Mayor Bloomberg has 

done is to make information accessible to the public and to make 

government systems more responsive to the public through a range 

of means. In particular, we set up a call center, a single number, 

311, that responds to any question any citizen in the city has about 

government services. So you no longer have to know 800 different 

numbers. You do not have to know which program you are calling 

about just to call and say look, I have got this problem and how 

can you deal with that? 

So to me, there is a critical element of this, which is making programs open and transparent, whether it is through web-based services, whether it is through telephone contact, and a range of things. 

So that is on the response side. That is the reactive side. 

And then there is a proactive side that needs to happen which, 

again in New York, we have tried to make sure that we have language accessibility. I have 400 inspectors that speak roughly 30 

languages. They carry a card that would allow them to immediately identify a language that they do not speak and connect to 

a translation service that offers 170 different languages. And at the 

same time, to make sure that we can get to people where they are. 

And so through, for example, our Center for New York City 

Neighborhoods, we have begun to use advertising on bus shelters, 

going door-to-door, a whole range of different ways, depending on 

the community, to reach out and to make sure that folks are aware 

of the kinds of services that we are offering to help them get— 

whether it is a modification, to get a new loan, whatever might be 

the right thing for their situation. And frankly, to provide the resources to fund that kind of counseling and education as well, with 

local community partners that know the issues the best. 

Senator TESTER. The other thing that I would like to ask is 

around the jobs recovery stimulus package that we are going to be 

taking up here shortly. Have you been part of those discussions? 

And do you anticipate, when that package comes out, that HUD 

will be a part of the solution to what is going on in housing 

through that package? 

Mr. DONOVAN. Senator, I do, and I have already been part of significant discussions. And I do think HUD has an important, and 

housing has an important, role to play in that. 

Senator TESTER. No doubt about it. 

The last thing is, and this is pretty much common sense from 

your position, there has been a lot of questions whether it is HOPE 

for Homeowners or how we got into this mess. I value your judgment. Even though you are not from rural Montana, you have a 

good life experience. And I would—I value your judgment on what 

went wrong and how we can prevent it from happening again. I 

think that kind of information is going to be critically important for 

me as a policymaker to make good decisions down the line. So I appreciate any of those things you can come forward with to the Committee. 

41 

I want to thank you. I want to also thank your family gain. I 

mean, this is not a solo endeavor here. It takes a family to make 

this thing work. I hope you pass that along to your wife. 

Thank you very much. 

Mr. DONOVAN. Thank you. 

Chairman DODD. Senator, thank you very, very much. 

Good questions. The questions particularly, dealing with the 

communications stuff, is so critically important. And while there is 

nobody—obviously, the President is the primary spokesperson on 

many of those issues, every person, including yourself, can play a 

very important role. 

One thing I think I have noticed, I think, in all of this is the failure to communicate effectively to the American people why this is 

happening, what the answer we think is, how it should work, and 

how they will be benefited by it. And the lack of any communication has created an awful lot of the hostility, the frustration that 

people are feeling about this stuff. 

I was impressed with the number of languages that New York 

City is providing. English would help in a lot of this. 

[Laughter.] 

Chairman DODD. And so my hope is that you will take advantage. You are a very good communicator. I have met with you personally, but I have been very impressed this morning with how articulate you are and how clear you are in describing situations and 

what they mean. And I do not say that lightly to you. 

But I think it is very important that you utilize those skills and 

find means by which you can be heard. Because just the absence 

of people understanding what is going on contributes to an awful 

lot of what we are facing today in this issue. 

You mentioned earlier President-elect Obama’s talking about the 

house on fire. I have used this analogy maybe 100 times in the last 

few weeks, describing that when Franklin Roosevelt was describing 

the Lend-Lease Program, a highly complicated program in the late 

1930s and providing assistance to Great Britain during their big 

attack, obviously, by the Nazis that he used that very analogy. 

Your neighbor’s house is on fire, you have a hose, you lend it to 

them. And millions of Americans understood Lend-Lease in those 

few sentences. 

And we have lacked that kind of analogy and communication to 

describe why this is being done. What is TARP? Why is it designed? What is it intended to do? And how does it affect not just 

those who are getting the money out of Wall Street, but how does 

it affect the proverbial Main Street people in this country, whether 

it is rural Montana or a foreclosure tsunami that is occurring in 

Bridgeport, Connecticut? 

And that has really been missing. I have said this over and over 

again, more than almost anything else we need to have people who 

communicate about these programs so the American people understand what is happening. 

With that, I thank you very, very much. We will move as quickly 

as we possibly can. Obviously, I will stay in close contact with Senator Shelby, my ranking minority member of this Committee, so we 

can move you forward, as well. 

42 

There are probably some additional questions but you have done 

a good job here this morning and I think you have impressed all 

of us with your background, your knowledge, and your determination to roll up your sleeves and go work. I cannot begin to tell you 

how much we welcome that. 

So congratulations to you. 

Mr. DONOVAN. Thanks for your eloquent words and I will be officially changing my name to Dunovan. 

[Laughter.] 

Chairman DODD. You are going to have a great career. 

[Laughter.] 

Chairman DODD. The hearing will stand adjourned. 

[Whereupon, at 12:28 p.m., the hearing was adjourned.] 

[Prepared statements, responses to written questions, and additional material supplied for the record follow:] 

43 

PREPARED STATEMENT OF SENATOR CHRISTOPHER J. DODD 

Today, we are considering the nomination of Mr. Shaun Donovan, Commissioner 

of the New York City Department of Housing Preservation and Development to become the Secretary of the Department of Housing and Urban Development (HUD). 

Let me point out that we are extending to Mr. Donovan this morning the same 

courtesy we showed to our colleague, Senator Martinez, for whom the Committee, 

under Chairman Sarbanes, also held a nominations hearing for the job of the Secretary of HUD prior to the President actually taking office. It was our view then, 

and it is our view now—particularly given the urgency of our economic situation— 

that we ought to help get the President’s cabinet in place as quickly as possible. 

Mr. Donovan, let me welcome you to the Committee. You have been nominated 

for a job fraught with significant challenges yet, for that very reason, imbued with 

great opportunities. 

For the past 3 or 4 years, the country has been facing a growing housing problem 

that had its origins in the scourge of predatory lending that has resulted in record 

high foreclosure rates. 

This housing crisis has been a primary cause of the deepening recession to which 

none of us are immune. Across the country, between 9,000 and 10,000 homeowners 

face foreclosure every day. Foreclosures in my State were up over 71 percent since 

last year, and it’s expected that we will have more than 13,000 subprime foreclosures in the next two years. Nationwide, cities such as Bridgeport, which had inordinately high rates of subprime loans, are struggling to keep themselves afloat as 

those loans reset one-by-one and families find themselves with nowhere to turn. 

I recently met with leaders in my State where I heard about the toll this crisis 

is taking on our minority communities. Some say this crisis will result in a net loss 

in homeownership rates for African-Americans, wiping out a generation of wealth, 

gains and opportunities. 

But let there be no doubt that this crisis today affects every American in one way 

or another. In all, by some counts, we can expect some 8 million homes to go into 

foreclosure absent some form of additional action. 

Unfortunately, the current Administration was slow to acknowledge the housing 

problem, and when it finally did, it was timid in its response. Even now as foreclosures tear apart neighborhoods and wreak havoc upon our economy, the Administration has refused to use the authority or funds we gave it in the Emergency Economic Stabilization Act to tackle the foreclosure crisis head on—despite the Congress’ crystal clear intent in writing that law. 

Surprisingly—and unfortunately, in my opinion—HUD has not played a central 

role in addressing the housing crisis. Frankly, it has been, to quote last Friday’s National Journal, ‘‘at best, a second string player. . .’’ following in the wake of other 

government departments with far less expertise in housing than the professionals 

at HUD. 

Indeed, as the cover page of CQ Weekly says, ‘‘The housing crisis remains at the 

core of the economy’s woes . . . ’’. Put simply, we cannot address our economic crisis 

until we address the underlying housing crisis. And to do that, we need an active, 

aggressive, and well-run HUD with leadership that is confident in its mission and 

unafraid to act. As President-elect Obama has himself said, ‘‘HUD’s role has never 

been more important.’’ 

Unfortunately, HUD has been mismanaged and ridden with scandal in the last 

several years. Let me be clear that these problems did not arise under the able leadership of then-Secretary Martinez. I would also say that in recent weeks, Secretary 

Preston has made some improvements. 

But fundamentally, HUD has been left adrift at a time when bold leadership and 

a clear direction were never more important. 

Just this week, we learned about the Wrights—a middle-class family in Windsor, 

Connecticut, in danger of losing their home. Like thousands of families across the 

country, the Wrights were lured into a mortgage they were assured they could afford but couldn’t—not because they acted irresponsibly but because they became 

pregnant with their second child, and Mrs. Wright ran out of the paid sick time she 

was afforded as a teacher. 

Mr. Donovan, this is the kind of story being repeated in every community across 

America today. With the right leadership, I believe HUD can be an effective partner 

in helping families like the Wrights. That is the opportunity you have—to restore 

HUD as a leading voice in addressing the crisis facing our country today. 

I would say to my colleagues that Mr. Donovan is the most experienced nominee 

for HUD Secretary that this Committee has considered in my long experience. In 

addition to his degrees in architecture and public administration from Harvard, Mr. 

Donovan has run the multifamily program at the Federal Housing Administration 

44 

and was, for a time, the Acting Housing Commissioner. He has worked in the private non-profit sector as a housing developer and he has worked as a managing director of a large, multi-family mortgage company. 

Since 2004, Mr. Donovan has been the Commissioner of New York City’s Department of Housing Preservation and Development. In that role, he managed 2,800 employees and helped develop and manage Mayor Bloomberg’s ‘‘New Housing Marketplace Plan,’’ one of the most ambitious local housing plans in the nation. The $7.5 

billion plan calls for the creation or preservation of 165,000 units of affordable housing, about half of which has been accomplished to date. 

Beyond the statistics and the numbers that so dramatically underscore Mr. Donovan’s accomplishments, I want to welcome him for the kind of leadership and vision 

I am confident he will bring to the Department at a time when such leadership is 

needed so desperately. 

For example, as early as 2004, long before most of the rest of the country was 

focused on the subprime crisis and the foreclosures they would lead to, Mr. Donovan 

told a Newsday reporter that he was worried about the coming ‘‘flood of foreclosures’’ and the impact it would have on homeowners and neighborhoods. 

Mr. Donovan sees the role of HUD as being more than a caretaker for physical 

housing structures, or as a mortgage insurance company. He understands the danger of stove-piping within this arena, and sees HUD as the Federal Government’s 

primary tool to help build communities—an agency that helps to provide housing 

opportunities for homeowners and for renters along a spectrum of incomes and ages. 

He understands the need to coordinate housing with transportation, including public 

transportation and transit, to improve access to jobs and other economic opportunities—and we need someone with that vision at the helm. 

Finally, Mr. Donovan is a man of the utmost integrity who has shown a proven 

ability to work constructively with all interested parties. We have letters, that I ask 

unanimous consent to include in the record, from a wide variety of housing groups, 

from the Realtors, to the Homebuilders, to the Low-Income Housing Coalition, and 

many, many others, all expressing enthusiastic support for Mr. Donovan. 

Mr. Donovan, again, I welcome you to the Committee, the leadership you offer to 

this critically important department and, more importantly, the hope you offer to 

millions of families at this uncertain moment. I look forward to your testimony after 

I give my colleagues a chance to share some opening remarks. 

PREPARED STATEMENT OF SENATOR JACK REED 

I would like to thank Chairman Dodd and Ranking Member Shelby for scheduling 

this nomination hearing so quickly, an important part of our constitutional process. 

I also appreciate the willingness of our nominee to serve in the important position 

of Secretary of Housing and Urban Development. 

Mr. Donovan, as you know, you have been nominated for a position that requires 

you to manage an agency that has the interest of some of the most vulnerable families in this country in mind. Many of these individuals are elderly, disabled, or just 

plain out of luck. They usually don’t have powerful lobbyists representing their interests. As a result, if confirmed, you will, at times, be their only voice in housing 

policy discussions that occur within the Obama Administration. 

One of your chief responsibilities in this area will be internally advocating for appropriate resources for our nation’s housing programs. Given the current budget environment, and the funding shortfalls for many of these programs, it is going to be 

extremely tough, but vitally important for you to aggressively advocate on behalf 

families and elderly households across the country. 

There are four topics that I would like to briefly mention to you that are of importance to Rhode Islanders, specifically, but of extreme interest to individuals and 

families throughout the country. 

First, and foremost, I hope that as a member of the President’s Economic Team, 

you will make stabilizing the housing market one of your chief objectives. Rhode Island has the dubious distinction of having the highest foreclosure rate in New England, and we can not afford to allow the real estate market to remain in freefall. 

I also would like to focus your attention on some recent homelessness statistics. 

According to the latest US Conference of Mayors Report on Homelessness, homelessness has gotten worse nationwide. On average, homelessness in the cities surveyed 

rose 12 percent during the past year. According to a report released today by The 

National Alliance to End Homelessness, and estimated 1.5 million additional Americans could become homeless over the next 2 years without effective intervention. 

HUD has taken steps to effectively decrease the number of chronically homeless 

individuals during the past several years. However, homeless families with children, 

45 

veterans, and youth deserve the same attention and resources. I hope that as we 

move forward, we can count on your support for my bipartisan proposal to reauthorize the housing titles of the McKinney-Vento Homeless Assistance Act to make them 

more flexible and useful to local communities. 

I also would encourage you to increase the Administration’s focus not just on 

green housing, but on healthy housing as well. Environmental exposures within our 

nation’s housing stock contribute to almost one-quarter of the disease burden nationwide, resulting in millions of preventable deaths. I hope that we can count on 

you to expand the scope of HUD’s health-related housing initiatives, support them 

with robust funding, and ensure better coordination of these initiatives among other 

Federal agencies. 

A good road map for this is detailed in a bill that I introduced last Congress, and 

plan to introduce again, the Research, Hazard Intervention, and National Outreach 

for Healthier Homes Act. HUD’s Office of Healthy Housing and Lead Hazard Control has been on the forefront of some of the thinking on these issues, and I hope 

you will utilize their expertise as you move forward on some of your sustainable 

housing initiatives. 

Finally, if you are confirmed, you would also be responsible for enhancing HUD’s 

management and operations. While HUD has made progress during the past several 

years in this area, GAO reports continue to site serious management deficiencies, 

especially in human capital. I hope you will be diligent in ensuring that HUD has 

the capacity to run all of its programs efficiently and well. 

I look forward to hearing your testimony this morning, your swift confirmation, 

and working with you in your new capacity as Secretary of HUD. 

PREPARED STATEMENT OF SHAUN DONOVAN 

SECRETARY-DESIGNATE, DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

JANUARY 13, 2009 

Mr. Chairman, Senator Shelby, and distinguished Members of the Committee, 

thank you for the opportunity to appear before you today. I would also like to thank 

Senator Schumer for that kind introduction. 

Before I go any further, I would like to introduce my family: my wife, Liza, and 

my two children, Milo and Lucas. Without them, and their constant and steadfast 

support, I would not be here. 

I am honored and humbled by President-elect Obama’s decision to nominate me 

as Secretary of Housing and Urban Development—an agency with a critical role to 

play as government partners with the American people to overcome the greatest economic crisis we have faced in many decades. 

I want to thank the Committee for the speed with which you scheduled today’s 

hearing, and the time you have made in your busy schedules to visit with me, and 

share your thoughts and views regarding housing in the United States. 

Throughout my career, I have been committed to affordable housing policy and 

development. In my line of work we often talk in terms of numbers of units and 

dollars spent. That is our common language. But it does little to convey the reason 

I am in this field. America’s homes are the foundation for family, safe neighborhoods, good schools and solid businesses. A home represents and confers stability: 

a base from which to raise our children. These things have not changed—but the 

world has. I am here before you today because I hope—should you confirm my nomination as HUD Secretary—that I can contribute to restoring this vital sector to 

health and making quality housing a possibility for every American. 

My first job after graduate school was at the Community Preservation Corporation, a non-profit lender and developer of multifamily housing. While there, I saw 

firsthand the difference that effective public-private partnerships can make in developing decent, safe and high-quality housing. In this, the federal government was 

often a valued and an essential partner. But I also experienced the headache of trying to navigate regulatory barriers or having deals fail because of inflexible programs. 

Later, in my work at the Department of Housing and Urban Development I saw 

how government can work to catalyze effective community development. While I 

gained an appreciation for the benefits of well-crafted and responsive government 

programs, I also saw a need to untangle and streamline policy and programs that 

too often led to missed opportunities. 

Because of these experiences, I believe that the best way to ensure access to safe, 

decent, and affordable housing is through strong partnerships among the governVerDate Nov 24 2008 14:34 Jun 22, 2009 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6621 S:\DOCS\50234.TXT SHERYL
46 

ment, private and non-profit sectors. Government can play a unique role in 

incentivizing the other sectors and removing barriers to the development of quality 

housing. 

That is why when I became Commissioner of New York City’s Department of 

Housing Preservation and Development in early 2004, I engaged the agency in a 

top-to-bottom strategic planning process. This resulted in new and innovative policy 

and programmatic solutions, a more appropriate alignment of staff with mission, 

and better measurement of results. 

Let me give you two examples: with contributions from our non-profit and forprofit partners, New York City created an Acquisition Fund that leveraged significant philanthropic support. In one of the most competitive real estate markets in 

the world, this pool of funds enables housing developers to acquire land and create 

affordable housing for hard-working families. 

We also changed land use policy to respond to the challenges posed by the New 

York City market. In order to incentivize the creation of more housing for low-income families, the City undertook a series of rezonings that will allow the development of up to 500,000 units of housing and crafted an inclusionary zoning program 

that will generate 6,000 affordable units. 

I believe that together we can create programs that will spur the development of 

affordable housing in our cities and towns across America. 

In the past, owning a home was emblematic of financial success. Sadly, we know 

that the landscape has changed. Clearly the most important public policy decision 

facing Congress and the new Administration is how to best ease the economic pain 

that millions of American families are feeling right now because of our unsteady 

housing markets. 

As President-elect Obama has said, ‘‘the housing crisis has shaken not only the 

foundation of our economy, but the foundation of the American Dream.’’ 

It is estimated that approximately 2.2 million homes went into foreclosure in 

2008. One in ten American families who owns a home is in financial trouble. 

Housing is at the root of the market crisis we are now experiencing, and HUD 

must be part of the solution. President-elect Obama is committed to working with 

you and your colleagues on an economic recovery plan that helps strengthen our 

housing and mortgage markets. 

We must ease our foreclosure crisis by helping Americans stay in their homes. 

How we structure this assistance is important. We certainly do not want to pursue 

policies that encourage irresponsible behavior from lenders or homeowners. 

But as President-elect Obama stated: ‘‘if my neighbor’s house is on fire, even if 

they were smoking in the bedroom or leaving the stove on, right now my main incentive is to put out the fire so that it doesn’t spread to my house.’’ 

That is why helping a family avoid foreclosure not only keeps a roof over their 

heads, but also protects the value of surrounding homes and prevents the deterioration of our neighborhoods. Keeping families in their homes means keeping our communities safe, healthy and strong. 

These are very complex undertakings that will require a cross-agency, broadbased approach. HUD needs to work with the Treasury, the Federal Housing Finance Agency, and the Federal Deposit Insurance Corporation to help stabilize our 

housing markets. 

At the same time, we need to make sure our mortgage markets, and other financial markets are transparent, open and fair. We need to work together to reach a 

bipartisan consensus on how to reform the outdated and often overlapping regulatory system that failed our citizens in the run-up to the current crisis. 

If I am confirmed, I look forward to working with the Committee as it examines 

how to proceed, not only in my capacity as HUD Secretary, but in my oversight roles 

with regard to the TARP and the Government-Sponsored Enterprises. 

If HUD is to help fix the cracks in our economic foundation, we also will need 

to implement reforms within the department itself. As you well know, there are 

challenges and persistent management issues facing HUD, including modernizing IT 

systems, overhauling sluggish human resource systems and strengthening contract 

oversight. If confirmed, I will be open and honest about such challenges and will 

work with you in effectively addressing them. 

There are three particular issues I would like to highlight today. 

The Federal Housing Administration has capacity issues that require immediate 

attention. FHA’s share of the single family mortgage market has grown from 4 percent in 2005 to 21 percent today. For new home purchases, FHA now has a 35 percent share according to the most recent, albeit, preliminary data. 

Second, there have been significant budgetary issues regarding the renewal of expiring Section 8 rental subsidies, for both the tenant- and project-based programs. 

Approximately 3 million American families are served by these programs. It is 

47 

HUD’s responsibility to make sure that it is delivering rental subsidies in the most 

cost-effective and efficient manner possible. I look forward to working with Congress—this Committee and the Committee on Appropriations—toward that goal. 

Third, there are a series of steps that could strengthen the department overall. 

We must foster a culture of excellence and innovation. I have had the opportunity 

to work with some very talented professionals at HUD and they deserve the tools 

to succeed. It is critical that we restore HUD as a respected research institution. 

Both you and I need to know ‘‘what works,’’ based on objective analysis and reliable 

data, so that taxpayer dollars can be spent wisely and effectively. 

I pledge to make management reform a high priority. Only in this way can we 

meet the enormous housing challenges facing our country. 

Through HUD we can catalyze the creation of a market for energy-efficient 

homes, lower the utility bills of families, and decrease the subsidy costs of the government. Here, the Department can lead by example by making efforts to green its 

own portfolio of public and assisted housing. 

HUD can help develop communities that are livable, walkable and sustainable. By 

joining up transportation and housing, HUD can give families the choice to live closer to where they work and, in the process, cut transportation costs. 

HUD can help low-income families gain greater access to security and opportunity 

by expanding fair housing efforts, extending resident choice, and using housing programs to help families become self-sufficient. 

I also pledge to you to make HUD a model of evidence-driven government. As I 

have in New York City, I would set goals and metrics for each of our priorities, so 

that we can clearly and openly show what we have done well and where we can 

do better. 

We can leverage the agency’s vast national network of State and local governments, along with non-profit and for-profit real estate partners, to stimulate the production of workforce and mixed-income housing, and to help preserve our existing 

affordable housing stock. HUD does not build homes; our partners do. They share 

our passion, and have the talent and capacity to do this work. 

I would like to conclude by saying again how honored and humbled I am to be 

before this Committee. 

I have worked with HUD’s programs from both the inside and the outside and 

am intimately aware of the challenges facing the Department. I have also witnessed 

the positive impact that HUD’s programs have on neighborhoods and people’s lives 

and, if confirmed by the Senate, I look forward to working with you to build a HUD 

that exists to do the people’s business; that is responsive to current market challenges; and that ensures decent affordable housing for millions of American families 

across the nation. 

Thank you and I look forward to your questions. 

48 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR DODD 

FROM SHAUN DONOVAN 

Q.1. The Low-Income Housing Tax Credit has been an effective 

public/private partnership with states and sponsors. How do you 

view the role of HUD in working with the tax credit? 

A.1. Since the mid-1980s, the low-income housing tax credit has 

become the main engine behind virtually all affordable multifamily 

housing production. The tax credit has a proven track record over 

the past twenty years of delivering quality multifamily developments at the low end of the market, where supply is constrained 

and under constant pressure. 

As you know, developers often use HUD resources in conjunction 

with the tax credit. I believe HUD should redouble its efforts to foster the flexible use of HUD-controlled resources in support of tax 

credit production. In addition to working with the Congress to revise the tax credit statute to permit use of the program with Sections 202 and 821 without reducing the value of the credit, HUD 

should also simplify the current rules for HOME and CDBG to ease 

the process of combining these program resources with the LIHTC. 

All of these reforms should be coupled with Federal efforts to encourage State and local governments to lower regulatory barriers 

to the production and preservation of quality, affordable housing. 

Q.2. You were very eloquent in your hearing regarding the importance of fair housing. As you may know, the National Commission on Fair Housing and Equal Opportunity has recommended the 

creation of an independent fair housing enforcement agency to replace the existing fair housing enforcement structure at HUD. 

A proposed short term interim step is the division of the current 

Office of Fair Housing and Equal Opportunity into two offices with 

increased staff and resources, with a new Office of Fair Housing reporting directly to the Secretary and an Office of Civil Rights and 

Program Compliance headed by an Assistant Secretary. This division would separate fair housing enforcement from civil rights and 

fair housing program compliance. 

What is your view of these recommendations? What actions 

would you take to accomplish stronger and more effective fair housing and civil rights enforcement in the shorter term? 

A.2. The Kemp-Cisneros report is a powerful reminder of how 

much farther we have to go to realize the American promise of 

equal opportunity for all. It is noteworthy that the report was 

issued to commemorate the 40th anniversary of the passage of the 

Fair Housing Act (which was enacted in the immediate aftermath 

of Dr. Martin Luther King Jr.’s assassination). 

There can be no more important issue than ensuring real housing opportunity and choice for all Americans. In terms of the recommendation regarding organizational reforms, the report noted 

that it would make sense for there to be further study and analysis 

of the potential options to address the flaws in Fair Housing Act 

enforcement at HUD, and I believe that such an analysis is appropriate. To that end, I intend to examine the significant reduction 

in the number of fair housing charges at HUD, the increased 

delays in case processing over the past 8 years, and, given the importance of the issue, HUD’s insufficient presence in assessing and 

49 

addressing the disproportionate concentration of subprime lending 

in minority communities. 

As the process of assessing any structural reforms takes place, 

I believe we can move forward to revitalize the fair housing function at HUD in the following ways: by reestablishing effective partnerships with other Federal agencies, especially those related to 

lending oversight and enforcement, and with our State, local, and 

private fair housing partners; revamping HUD’s fair housing enforcement activities to prioritize cases and actions that will have 

maximum impact; and ensuring that access to meaningful opportunity is imbued throughout HUD programs. 

Q.3. There has been a lot of interest in taking a more regional 

approach to the development of affordable housing, similar to what 

is done in transportation. Do you support such an approach? What 

suggestions do you have that might promote a more regional approach to affordable housing development? 

A.3. I believe that housing is best developed ‘‘in the context’’ of 

communities and regions, as proximity to transit, jobs, and retail 

amenities influence the long term success of both the housing and 

its occupants. Walkable, transit-oriented, mixed-income and mixeduse communities substantially reduce transportation, create energy 

savings, and enhance access to employment and educational opportunities. Many HUD programs could readily be modified to reward 

such ‘‘location efficiency.’’ In addition, as Congress begins to consider reauthorization of the surface transportation bill, there is an 

opportunity to think about how metropolitan planning organizations might be more involved in linking transportation to housing. 

Q.4. One of the really big problems we are having in the housing 

markets today is the lack of housing demand. As a result, housing 

inventories have built up to 21 months or more—extremely high 

levels that continue to depress the market. 

There have been a number of proposals to help stimulate housing 

demand, including having the Federal Government buy-down interest rates to as low as 2.99 percent as well as making upfront tax 

credits for home purchasers more generous. 

Would you comment on these proposals, please? Are there other 

ways the incoming Administration is considering stimulating housing demand? 

A.4. The Administration is exploring a variety of strategies to address the housing crisis. Our first priority is to provide assistance 

to help at-risk borrowers stay in their homes. If we can reduce foreclosures, this will help to prevent a further weakening of the housing market. 

We are also reviewing a series of proposals to lower mortgage interest rates and stimulate housing demand. The Federal Reserve 

has already been working to lower interest rates through buying up 

mortgage-backed securities guaranteed by the GSEs. Mortgage interest rates are now quite low, due partly to government policies. 

Rates on 30-year loans are now lower than they have been in decades. It is not clear yet how much these reductions are helping to 

spur market demand and whether further reductions would be 

warranted. We’re seeing a significant increase in refinance applicaVerDate Nov 24 2008 14:34 Jun 22, 2009 Jkt 000000 PO 00000 Frm 00053 Fmt 6602 Sfmt 6602 S:\DOCS\50234.TXT SHERYL
50 

tions; but it does not appear that purchase applications are responding as rapidly. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR SHELBY 

FROM SHAUN DONOVAN 

Q.1. President-elect Obama recently pledged ‘‘an unprecedented 

effort to eliminate unwise and unnecessary spending.’’ He has 

pledged to do so by going through the Federal budget ‘‘line by line.’’ 

Mr. Donovan, in HUD’s ‘‘line-by-line’’ review, what standards 

would you use in determining whether a program is ineffective or 

unnecessary? 

A.1. These standards are going to be developed in conjunction 

with OMB and will be used across departments. The Administration plans to release proposals to reduce spending and eliminate 

programs as part of the President’s economic and budget overview, 

which is scheduled to be released in late February. When this guidance is promulgated, I would be happy to share it with the Committee. 

Q.2. Mr. Donovan, I understand that New York City is the only 

city in the country that spends more of its own funds on housing 

and community development than it receives from the Federal Government. 

Do you believe that this level of commitment can be copied by 

other cities, or is there something unique about New York City 

that allows only it to make such an effort on its own? 

A.2. New York City does commit a significant amount of local resources to housing and community development, but the size of this 

commitment may not be easily replicable given that New York 

City’s municipal budget is much larger than that of any other 

American city. What is worth replicating, however, is the unique 

partnership between local resources—be they public, private, or 

non-profit—and the Federal Government. These are the kinds of 

strategic investments that HUD can and must make in order to be 

successful in every city and State in the country. 

Q.3. Most of the focus on our mortgage market has been solely 

on the single-family side. However, over the last year we have seen 

increasing delinquencies on multifamily mortgages. Among 

securitized multifamily mortgages, delinquency rates have tripled 

over the last year. 

Mr. Donovan, given your past experience administering FHA’s 

multifamily programs, what is your view of the health of the multifamily mortgage market, and in particular, the financial health of 

FHA’s multifamily programs? 

A.3. The multifamily market remains stronger than the singlefamily market, but we are beginning to see some signs of trouble. 

While delinquency rates for multifamily mortgages have remained 

below historical averages, they continued to rise in the third quarter, and the economic downturn is likely to push these rates still 

higher. Plus, in some markets, investors bought multifamily properties at prices that used aggressive forecasts of rent increases that 

are not coming to fruition. In the last quarter of 2008, vacancies 

51 

were up and effective rents were down in most markets around the 

country. 

FHA multifamily mortgages play a small but critical role in the 

multifamily market. As private sources of financing have dried up, 

the FHA has increased its multifamily activity. Its share of market 

activity is rising. I plan to ask my FHA Commissioner to closely 

monitor and track the performance of these loans and ensure that 

FHA is adequately meeting its expanded role. 

Q.4. Mr. Donovan, you mentioned in your statement some of 

your efforts to expand the housing supply in New York City. While 

we all enjoy visiting New York, I suspect many of us would have 

trouble affording to rent or buy a property there. New York City 

remains one of the least affordable housing markets in the Nation. 

I believe we would all prefer to see our Nation’s housing markets 

become less like New York’s rather than more. 

What do you believe are the factors that have led to New York 

City’s housing market becoming so unaffordable? 

A.4. There are many factors that contribute to New York’s housing market, but one of the most important is the city’s relatively 

recent resurgence. 

During the economic downturns of the 1970s and 1980s, New 

York City lost hundreds of thousands of its middle-class families. 

Certain parts of the city were all but abandoned. During this time, 

the City assumed ownership of vacant lots and abandoned buildings through tax foreclosure, and began redeveloping them. During 

the late 1980s and 1990s, neighborhoods across the city were transformed block by block, from Harlem to Central Brooklyn to the 

South Bronx. By the mid-1990s, the city was a very different place, 

thanks to innovative crime-fighting techniques, an economic recovery, and effective community development. Immigrants from 

around the world—and from across the United States—came to 

New York to make their fortunes. By 2000, the city had regained 

much of the population it had lost in the postwar period, and one 

of the most significant effects of this population ‘‘boom’’ was an increase in housing costs. 

There are many ways to address the high cost of housing. One 

essential way is to subsidize the creation and preservation of affordable units, which we did with the creation and execution of the 

Mayor’s New Housing Marketplace Plan, a historic plan to create 

and preserve 165,000 units across the city. Another important way 

is to increase the supply of housing. In order to facilitate this goal, 

the Bloomberg Administration has rezoned a record number of 

neighborhoods in order to increase density and preserve community 

context. Nearly all of these rezonings have had an affordable housing component, and have led to the creation of market-rate and affordable units in neighborhoods across the city. 

Q.5. Mr. Donovan, you mentioned in your testimony the significant budgetary issues facing the Section 8 Voucher program. We 

have seen, over the last decade, the Section 8 program grow from 

around a third of the HUD budget to over half the HUD budget 

today. I believe this cost escalation is due to the fact that the program provides inadequate incentives for housing authorities to control costs. 

52 

Do you have any suggestions for bringing the costs of the Section 

8 program under control? 

A.5. Since the mid-1970s, rental housing vouchers have emerged 

as the most substantial form of subsidized housing in the United 

States; they now serve some 1.9 million households. Vouchers have 

become one of the most effective and direct ways of meeting the 

principal housing challenge facing very low-income families: affordability. They enable millions of families to live closer to their jobs, 

near better schools, and in safer neighborhoods. They have also allowed families to change location when there is a change in their 

housing or job situation. 

As Commissioner of the New York City Department of Housing 

Preservation and Development (HPD), I managed the fourth largest Section 8 Voucher program in the country, and am intimately 

aware of the challenges facing those in managing this program. 

One of the main challenges has been the unpredictability in the 

Section 8 renewal funding formula, which I believe has contributed 

to inefficient management of local programs. I would hope to first 

stabilize this program and make it more transparent. 

I also share your concern about the rising share of HUD’s budget 

represented by Section 8 expenditures, and am open to any proposals that would make the Section 8 programs more cost-effective 

and efficient. This could include experimenting with alternative 

forms of administration as a means to avoid the duplication of costs 

and enhance the effectiveness of the program so that more families 

can be served. I look forward to working with this Committee towards improving this vitally important program. 

Q.6. Mr. Donovan there exists a significant gap in the homeownership rate between white and minority households. Much of Federal housing policy is aimed at reducing that gap. 

What do you believe are the primary causes for this homeownership gap? 

A.6. I think there are two primary causes for the gap in homeownership rates between white and minority households. 

First, racial disparities in education and income drive disparities 

in homeownership. We all know that educational attainment rates 

are alarmingly low among African-Americans and Hispanics. In 

2006, for example, only 13 percent of Hispanics and 18 percent of 

African-Americans between the ages of 25 and 44 held a bachelors 

degree, compared with 34 percent of non-Hispanic whites and 59 

percent of Asians in the same age group. 

With economic restructuring, low educational rates result in 

lower wages and incomes. U.S. workers without a high school diploma saw their real wages stay virtually the same over 30 years. 

By contrast, individuals with a college degree experienced significant real wage growth over this period. With lower incomes, African-Americans and Hispanics have more difficulty purchasing 

homes and creating wealth through homeownership. 

Second, housing discrimination persists despite progress since 

the enactment of the Fair Housing Act of 1968, with 17 percent of 

all adults in the United States reporting some form of housing discrimination, according to one recent survey. The prevalence of 

subprime loans among racial minorities and the concentration of 

53 

such loans in minority neighborhoods further underscores the importance of vigorous enforcement of the Federal Fair Housing Act 

and the obligations of HUD and other Federal agencies to ‘‘affirmatively further fair housing’’ and ensure greater scrutiny of unfairness in the marketplace. 

Q.7. Last Congress, the Committee reported a bill reforming 

HUD’s homelessness assistance programs, but the bill was never 

voted upon by the full Senate. Included in this legislation was an 

expansion of HUD’s rural homelessness program. 

Mr. Donovan, working in New York City, I am certain you are 

familiar with urban street homelessness. However, I would like to 

hear your views on whether you believe separate tools are necessary to address rural homelessness. 

A.7. I believe that HUD’s tools for helping communities address 

homelessness need to be as flexible as possible, so that a community can figure for itself how to best prevent and end homelessness. 

I applaud the Committee’s efforts in this area to both consolidate 

HUD’s existing homelessness programs, so that they are more efficient and easier to use, while at the same time incentivizing communities to focus on preventing families and individuals from becoming homeless in the first place. Whether it is in a rural community or a big city, studies have shown that it is much more expensive to provide emergency care to families than to pay for prevention. We also know it is very hard for a family to look for employment or succeed in school once they have become homeless. 

I also believe the Committee’s efforts to create incentives and 

provide more flexible tools for more rural communities to prevent 

and end homelessness is extremely important, and I look forward 

to working with you to quickly pass a reauthorization of the 

McKinney-Vento Homeless Assistance Act. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR CORKER 

FROM SHAUN DONOVAN 

Q.1. In your testimony, you comment on the fact that the market 

share FHA has on home loans has grown approximately six times 

its market share since 2005. How do you and your staff plan to address this issue, and what do you believe is an appropriate market 

share for the FHA to have? 

A.1. I believe the increase in market share presents major challenges for FHA. To ensure the safety and soundness of the Fund, 

I believe FHA must have access to state-of-the-art automated valuation methods, income verification tools, and other fraud detection 

mechanisms, as well as the capacity to sanction those appraisers, 

mortgage brokers, and lenders that fail to adhere to FHA guidelines. 

I also believe that we need to examine carefully FHA’s staffing, 

contracting and technology needs, a review I intend to undertake 

in the coming months. 

Q.2. Last July, Congress passed the Housing and Economic Recovery Act (HERA) of 2008 which included a provision that ended 

the practice of allowing Seller-funded down payments. Certain data 

suggested these loans performed 2 to 3 times worse than the rest 

54 

of the FHA portfolio of loans. Do you believe this program should 

be resurrected? 

A.2. HERA mandated a temporary one-year ban on Seller Financed Down Payment Assistance (DPA) programs effective 

October 1, 2008. This ban followed a proposed rule by FHA to limit 

DPA programs in the aftermath of GAO reports indicating that 

loans receiving seller-financed DPA had unacceptably high mortgage delinquency and foreclosure rates, and threatened to undermine the safety and soundness of the FHA insurance fund. Others 

countered by noting that nearly 40 percent of all FHA insured 

loans involve some form of seller-financed DPA and that any effort 

to limit the availability of DPA would severely undermine the ability of FHA insurance programs to serve lower-income and/or minority borrowers. I intend to examine this issue with care during my 

first few months in office. 

Q.3. Some have suggested that because FHA is not a separate 

entity within HUD, unlike Ginnie Mae, it does not get the resources and authority it often needs to accomplish its mission. 

What are your preliminary thoughts on making FHA a separate 

entity or even a new corporation of the Federal Government? 

A.3. HUD Secretary Henry Cisneros proposed making FHA a 

separate corporation in the mid 1990s as part of his ambitious plan 

for HUD restructuring. I think this proposal and others like it deserve careful review, particularly given the need for additional hiring and contracting flexibility at FHA. 

In general, however, I believe that form should follow function. 

I believe that the form FHA should take should be determined in 

the context of a review of the entire housing finance system, including an assessment of the future role of the GSEs. Only then will 

we know what organizational structure will best strengthen FHA’s 

capacity to serve underserved households while retaining its accountability to the taxpayer. 

55 

STATEMENT OF MARTY SHURAVLOFF 

CHAIRMAN, NATIONAL AMERICAN INDIAN HOUSING COUNCIL

JANUARY 13, 2009 

On behalf of the National American Indian Housing Council (‘‘NAIHC’’) I am 

pleased to submit this statement regarding the nomination of Shaun Donovan to be 

Secretary of the Department of Housing and Urban Development (‘‘HUD’’). 

America is facing the most challenging economic difficulties since the 1930s, and 

this Committee will play a vital role in developing initiatives to lead the American 

people to a more promising future. 

It is worth remembering that while the business pages of the country’s newspapers call attention to the current unemployment rate of 7.2 percent, American Indian, Alaska Native and Native Hawaiian communities have endured jobless rates 

many times that rate for decades. In fact, the average unemployment rate in these 

Native communities is 30 percent and in some communities that figure exceeds 70 

percent. 

As an architect, Mr. Donovan knows the importance of ensuring that buildings 

and other structures have strong foundations. Once confirmed, the NAIHC is hopeful that he will forge a strong foundation with Native America upon which will build 

a brighter future for our people. 

As the Director of New York City’s Department of Housing and Preservation, Mr. 

Donovan has extensive experience with urban housing matters and with low-income 

housing in particular. He also served as a deputy assistant secretary for the multibillion dollar multifamily housing program in the Clinton Administration. 

The NAIHC is very encouraged that President-elect Obama has chosen a nominee 

as experienced and formidable as Mr. Donovan. We are hopeful that as secretary, 

Mr. Donovan will develop a keen understanding of the housing and economic problems that plague Native communities and will surround himself with professionals 

who are committed to improving the housing conditions of America’s first people. 

I can assure this Committee and the candidate that the NAIHC stands ready to 

work with him and the department on these important matters. 

Thank you, Chairman Dodd, for the opportunity to submit this statement for the 

record and I would be happy to answer any questions you might have. 

56 


11309-1.eps
57 


113092.eps
58 


11309-3.eps
59 


11309-4.eps