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SUSTAINABLE HOUSING FINANCE: 

THE GOVERNMENT’S ROLE IN 

MULTIFAMILY AND HEALTH CARE 

FACILITIES MORTGAGE INSURANCE 

AND REVERSE MORTGAGES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

HOUSING AND INSURANCE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

MAY 16, 2013 

Printed for the use of the Committee on Financial Services 

Serial No. 113–21 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

GARY G. MILLER, California, Vice Chairman 

SPENCER BACHUS, Alabama, Chairman 

Emeritus 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

MICHAEL G. GRIMM, New York 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

TOM COTTON, Arkansas 

KEITH J. ROTHFUS, Pennsylvania 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

SUBCOMMITTEE ON HOUSING AND INSURANCE

RANDY NEUGEBAUER, Texas, Chairman 

BLAINE LUETKEMEYER, Missouri, Vice 

Chairman 

EDWARD R. ROYCE, California 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

LYNN A. WESTMORELAND, Georgia 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

MICHAEL E. CAPUANO, Massachusetts, 

Ranking Member 

NYDIA M. VELA ́ ZQUEZ, New York 

EMANUEL CLEAVER, Missouri 

WM. LACY CLAY, Missouri 

BRAD SHERMAN, California 

JAMES A. HIMES, Connecticut 

CAROLYN MCCARTHY, New York 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

May 16, 2013 ..................................................................................................... 1 

Appendix: 

May 16, 2013 ..................................................................................................... 33 

WITNESSES 

THURSDAY, MAY 16, 2013 

Coulter, Charles, Deputy Assistant Secretary for Single Family Housing, Federal Housing Administration, U.S. Department of Housing and Urban Development .............................................................................................................. 6 

Head, Marie, Deputy Assistant Secretary for Multifamily Housing, Federal 

Housing Administration, U.S. Department of Housing and Urban Development ...................................................................................................................... 7 

Miller, Roger, Deputy Assistant Secretary for Healthcare Programs, Federal 

Housing Administration, U.S. Department of Housing and Urban Development ...................................................................................................................... 9 

APPENDIX 

Prepared statements: 

Neugebauer, Hon. Randy ................................................................................. 34 

Coulter, Charles ................................................................................................ 36 

Head, Marie ...................................................................................................... 36 

Miller, Roger ..................................................................................................... 36 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Capuano, Hon. Michael: 

Letter to Roger E. Miller, HUD Deputy Assistant Secretary for 

Healthcare Programs, from Baptist Hospitals of Southeast Texas, dated 

May 15, 2013 ................................................................................................. 49 

Letter from Guadalupe Regional Medical Center, dated May 15, 2013 ...... 50 

Letter to Roger E. Miller, HUD Deputy Assistant Secretary for 

Healthcare Programs, from Hillcrest Baptist Medical Center, dated 

April 24, 2013 ................................................................................................ 51 

Letter to Hon. Barbara Mikulski, Hon. Richard Shelby, Hon. Harold 

Rogers, and Hon. Nita Lowey from various housing groups, dated 

March 6, 2013 ................................................................................................ 53 

Written statement of the National Council of State Housing Agencies ....... 55 

Article from The Times-Picayune entitled, ‘‘New hospital for eastern New 

Orleans receives needed federal mortgage insurance,’’ dated October 

1, 2012 ............................................................................................................ 60 

HUD: 

Written responses to questions for the record from Representatives Heck 

and Fitzpatrick .............................................................................................. 62 

Written responses to questions for the record from Representative Stivers ................................................................................................................... 65 

(1) 

SUSTAINABLE HOUSING FINANCE: 

THE GOVERNMENT’S ROLE IN 

MULTIFAMILY AND HEALTH CARE 

FACILITIES MORTGAGE INSURANCE 

AND REVERSE MORTGAGES 

Thursday, May 16, 2013 

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HOUSING

AND INSURANCE, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:55 p.m., in room 

2128, Rayburn House Office Building, Hon. Randy Neugebauer 

[chairman of the subcommittee] presiding. 

Members present: Representatives Neugebauer, Luetkemeyer, 

Royce, Garrett; Capuano, Cleaver, Clay, Sherman, Himes, Sinema, 

and Beatty. 

Also present: Representatives Fitzpatrick, Heck, and Ellison. 

Chairman NEUGEBAUER. The committee is called to order. 

This Subcommittee on Housing and Insurance hearing is entitled, ‘‘Sustainable Housing Finance: The Government’s Role in 

Multifamily and Health Care Facilities Mortgage Insurance and 

Reverse Mortgages.’’ 

We will have opening statements, with a limit of 10 minutes per 

side. 

There may be Members in attendance today who are not assigned to the Housing and Insurance Subcommittee, but without 

objection, we will let those Members participate in the hearing, as 

well. 

I ask unanimous consent that the members of the Financial 

Services Committee who are not members of the subcommittee, 

who have joined us today, will be entitled to participate in the 

hearing. 

I will now give my opening statement. 

We have had a number of hearings on FHA, and this is one that 

will focus on an area of FHA that quite honestly doesn’t get a lot 

of attention. But if you are going to look to Congress doing its job, 

we have two responsibilities. And one of those is oversight. So, we 

are going to hear somewhat of a report from the people who head 

up those various programs, about the steps of that program. But 

also, as we are possibly looking at some FHA reform, I think it is 

important for our Members to understand all of the aspects of 

FHA. 

2 

I think one of the things that we have found consensus on, on 

both sides of the aisle, is that FHA has played an important role 

in housing over a number of years. 

I think there has also been some consensus that maybe there has 

been some mission creep at FHA, and that they possibly have 

moved outside of their historical mission. 

One of the troubling things, though, that we have learned is that 

FHA is having a little bit of a solvency issue, and that they have 

basically a negative net worth. That then puts the taxpayers at 

risk. And one of the things that we want to focus on today is what 

should be the core mission of FHA, and have a better understanding of some of these other businesses. 

One of those businesses is the reverse mortgage program. And 

basically, that program is troubling to me, because it now has a 

negative economic value of about $2.8 billion, a capital ratio of negative 3.6 percent, and it comprises 7 percent of the single family 

guaranteed program, but it is 17 percent of the MMI—its fund 

losses. 

Secretary Donovan, in fact, was quoted the other day as saying that, of the $943 billion that the Administration thinks they are 

going to have to tap the Treasury for, a good deal of that can be 

attributed to the Home Equity Conversion Mortgage (HECM) portfolio. 

I think one of the troubling things about HECM borrowers, or reverse mortgage borrowers is they aren’t really required to meet any 

income or credit qualification, and these lax underwriting standards have resulted in higher default rates, many times, leaving 

many of these seniors in financial hardship. And so, we want to 

hear more about that. 

The FHA Multifamily Program—I think a lot of people don’t realize, some do, that FHA has a multifamily program. I have a couple 

of questions about that. One concerns the transparency of the Multifamily Home Program—FHA does not disclose or publish any delinquency rates or financial data. Nor is the Multifamily Program 

required to have a minimum capital reserve ratio. 

And again, we have to remember what the core business of FHA 

is. They are a mortgage insurance company. And so, they are insuring mortgages on single family houses. They are insuring mortgages on multifamily projects, but wherein for the single family, 

they are required to keep a certain amount of reserve, on the multifamily, they are not required to keep that reserve. Nor are they 

really reporting the results of that program. 

And so, we want to talk a little about prioritization, transparency. 

The other piece that I do want to talk about is the prioritization 

piece. And one of the things that we know is that FHA is approaching their commitment authority for Fiscal Year 2013. 

But we understand that the agency also has continued to refinance existing developments that are financed outside of FHA, 

which could be at the expense of FHA taking on new projects. And 

so, we want to have a little bit more discussion about that. 

And then finally, the hospital program, in which FHA is basically 

guaranteeing the debt of a number of the hospitals around the 

country and exhausting large amounts of their multifamily commitVerDate Nov 24 2008 11:20 Nov 12, 2013 Jkt 081756 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 K:\DOCS\81756.TXT TERRI
3 

ment authority on these large hospital projects. And what we are 

learning is that there is not very many transactions in this area, 

but that the transaction amounts can be rather large. And I think 

that the question I have is, should that be a mission of FHA, and 

if there are so few transactions it appears to me that private financing for these projects must be fairly available and maybe that 

might be one of the things that we might want to look at is whether FHA should continue funding—or guaranteeing hospital loans in 

the future. 

So I look forward to the panel. I think we have a great panel, 

composed of people who are very knowledgeable on these various 

programs. 

And with that, I will now yield to my good friend, Mr. Capuano, 

the ranking member of the subcommittee, for such time as he may 

consume. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

And I want to thank the panelists for being here and for your 

enlightened testimony. I have already read most of it, and actually 

understood a fair amount of what I read, surprisingly. 

But today, we are trying to figure out what to do with the housing market and how to deal with it. 

Obviously, we all agree that we have some issues with it, though 

obviously, there may be some differences on the extent of those 

problems and what to do about them. For instance, a couple of 

years ago, everybody was lamenting Fannie Mae and Freddie Mac, 

yet at the moment nobody acknowledges the fact that they have already paid over $65 billion in dividends; that is 35 percent of what 

they borrowed. And we are anticipating another $66 billion being 

paid by the end of the second quarter. 

That is going to be over 70 percent of what they repaid. Yet, because of a law that makes no sense to me, we are not allowed to 

use that to offset their principal. So they are going to pay us these 

dividends and still owe us the full amount of money. 

And even when it comes to the FHA, as we delve into this 

more—I am no different than anybody else; I learn as we go. And 

I will tell you that it comes as a little bit of a surprise to me to 

find out, not too long ago, but after we got involved with this oversight, that the HECM program is really what drives the MMI fund 

into a problem, and that the non-HECM aspect of the MMI fund 

are actually in reasonable shape and getting better by the day. 

That doesn’t mean that we don’t have to deal with it. I totally 

agree with the chairman that we still have an obligation to make 

sure that we don’t get into these problems again, to the best of our 

ability, and that they do perform their mission and so we can move 

forward and continue to build the middle class and maintain the 

middle class we have. 

But at the same time, I also think that what has happened over 

the last several years and what is happening now and the rebound 

in some of these things that we need to be a little bit careful about 

how much we tinker with this. We should do something. We absolutely have some certain things that I think we can agree on relatively quickly. But whatever it is we do, I think, for me, I am not 

interested in killing the golden goose that has produced such stable 

4 

homeownership across the country for so many middle-income people, including myself. 

So with that, I just put that caveat out there. I don’t think there 

is disagreement on that. But nonetheless, I think it is important 

to state that with all the issues that we do know that are there, 

we still have to be careful in fixing it to make sure that we don’t 

over-fix it or over-tighten so that there is no housing market going 

forward. 

With that, I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, Mr. Fitzpatrick is recognized for 1 minute. 

Mr. FITZPATRICK. Thank you, Mr. Chairman, for allowing me a 

moment here in your hearing. 

I believe that the Home Equity Conversion Mortgage program, 

when used properly, can be very useful as a tool for our Nation’s 

seniors, giving them access to capital in their retirement to help 

improve or maintain their quality of life. 

Of course, we are all concerned with the health of FHA and the 

need to reform the system in order to ensure its sustainability. 

The legislation that I am working on with the gentleman from 

Washington, Mr. Heck, will give HUD the tools it needs to provide 

timely and appropriate reforms to the HECM program to ensure 

that reverse mortgages are still an option for older Americans. So 

I thank you for the opportunity to participate, and I look forward 

to the testimony of the witnesses. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from Missouri, Mr. Clay, is recognized 

for 2 minutes. 

Mr. CLAY. Thank you, Mr. Chairman. Thank you for conducting 

this hearing. 

And I am really interested in the testimony of the witnesses. 

However, I do want to bring to the attention of the witnesses and 

the committee that recently Secretary Donovan announced consolidation and closures of HUD offices around the country in the area 

of multifamily housing. However, there was no discussion with the 

stakeholders in the regions that are being affected by the closures. 

In fact, many Members of Congress were not informed until the announcement by your agency, blindsiding them as to how this decision was being made. 

This brings us to the main problem we are having with these closures. How did you come to make these decisions? What criteria 

did you use to develop the list of closures? What plan do you have 

to replace the services that these offices that are currently providing? 

The notice in the Federal Register relating to the current multifamily transformation initiative made sweeping claims about improving efficiency and improving the service provided to HUD’s 

customers, a HUD regional system and keeping the other 40 offices 

as satellites so that you can remain in the communities you serve. 

And I need to know why that wouldn’t work. 

Over the last 2 years, you have rolled out extensive training for 

all multifamily housing staff under the names Sustaining Our Investments and Breaking Ground. Now under this plan, you are exVerDate Nov 24 2008 11:20 Nov 12, 2013 Jkt 081756 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 K:\DOCS\81756.TXT TERRI
5 

pecting that nearly 400 of those trainees will not be working for 

the agency by 2016. 

Aside from the fact that the investment in these employees will 

be lost, I am concerned about how much you spent on consultants, 

training costs, travel costs, and work hours that were lost for the 

weeks of training, and what the taxpayers got for their money. 

I see my time is up, Mr. Chairman, but I am sure when we get 

to the round of questioning, we will be able to discuss that. 

I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentlewoman from Ohio, Mrs. Beatty, is recognized 

for 2 minutes. 

Mrs. BEATTY. Thank you, Mr. Chairman, and Ranking Member 

Capuano. 

And I thank the witnesses for being here today. 

Today, we look to determine what role the government should 

play in the multifamily, healthcare, and reverse mortgage markets. 

Throughout these hearings, though, there seems to be a consistent 

and recurrent theme that the government is somehow crowding out 

the private market for capital. 

With respect to FHA’s multifamily housing, it was the strong 

performance in this portfolio that has historically generated offsetting receipts for the Treasury and which prompted the request for 

additional commitment authority. And the GSEs that purchased 

and guaranteed multifamily mortgage loans have driven the market for affordable and specialized multifamily projects. 

Similarly, with regard to healthcare programs, the government 

ensures and the securitizers lower the cost of building and rehabilitating nursing homes, assisted living facilities, and hospitals, 

which in turn reduces the overall cost of healthcare. 

We have seen the government’s share of the market decline in 

an inversely proportional manner that is that of private capital. 

The one area where I do have concern is the Home Equity Conversion Mortgage, or the reverse mortgage program. So I look forward 

to discussing ways to improve the reverse mortgage program to develop risk-based pricing methods which take into account the possibility of broad property value decline. 

Thank you, and I yield back. 

Chairman NEUGEBAUER. I thank the gentlewoman. 

We will now hear from our witnesses. With us today are: Charles 

Coulter, Deputy Assistant Secretary for Single Family Housing at 

the U.S. Department of Housing and Urban Development; Marie 

Head, Deputy Assistant Secretary for Multifamily Housing, U.S. 

Department of Housing and Urban Development; and Roger Miller, 

Deputy Assistant Secretary for Healthcare Programs, U.S. Department of Housing and Urban Development. 

Each of you will be recognized for 5 minutes to give an oral presentation of your testimony. And without objection, each of your 

written statements will be made a part of the record. 

Mr. Coulter, you are recognized for 5 minutes. 

6 

STATEMENT OF CHARLES COULTER, DEPUTY ASSISTANT SECRETARY FOR SINGLE FAMILY HOUSING, FEDERAL HOUSING 

ADMINISTRATION, U.S. DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

Mr. COULTER. Thank you. 

Thank you for the opportunity to testify on FHA’s Home Equity 

Conversion Mortgage or HECM program. 

HECM is a government-insured reverse mortgage which enables 

seniors ages 62 and older to convert a portion of the equity in their 

homes into cash, allowing them to age in place. The proceeds of a 

HECM loan can address a variety of financial needs faced by seniors, including healthcare costs, other unexpected expenses or to 

augment monthly income. 

HUD has endorsed nearly 778,000 HECM loans since the creation of the program, including 54,000 in Fiscal Year 2012. 

The HECM program has a variety of consumer protections, including mandatory counseling for borrowers, a guarantee of timely 

cash advances, caps on fees, anti-churning disclosures to ensure 

that refinancing is not solely for the benefit of lenders, and a prohibition on cross-selling HECMs and annuities by anyone who participates in HECM origination or counseling. 

The mandatory counseling requirement is perhaps the most important consumer protection feature. It ensures that borrowers understand a reverse mortgage and allows them to make informed 

choices about their financial future. Beginning in 2009, FHA made 

a number of improvements which have reduced risk both to the 

fund and to homeowners. We lowered the maximum principal limit 

twice—once in 2009, and again in 2010—reducing the amount borrowers can draw against their homes. 

In Fiscal Year 2011, we created the HECM Saver, a lower cost 

option for borrowers willing to accept a smaller equity draw upfront as a lower risk complement to the HECM standard option. 

In January 2013, we announced a temporary consolidation of the 

fixed-rate standard program into the fixed-rate saver, reducing the 

amount borrowers can draw, further reducing risk. 

Additionally, in January 2011, we issued extensive guidance on 

the handling of property charge-related delinquencies, including detailed requirements of notifications to borrowers, reporting to HUD, 

and lost mitigation and counseling options 

Despite all of these efforts, FHA must and will take additional 

action with regard to the HECM program to ensure it has a negative credit subsidy going into Fiscal Year 2014. 

The President’s Fiscal Year 2014 budget anticipates that the 

MMI fund may experience a $943 million shortfall. The HECM program alone has a negative capital position of over $5 billion in contrast to the forward portfolio which is expected to have a positive 

reserve of $4 billion. 

As you know, any decision to draw from Treasury will depend on 

the actual performance of the entire fund during the remainder of 

this Fiscal Year. We have several legislative requests in our Fiscal 

Year 2014 budget that will allow FHA to: increase our ability to 

develop a strong, consistent, and transparent lender enforcement 

model; improve recoveries on defaulted loans; and allow FHA greater ability to respond quickly to risks as they emerge. 

7 

One of these requests granting FHA the explicit authority to 

make changes to the HECM program via the Mortgagee Letters is 

crucial. We must make changes swiftly to preserve the program, 

protect consumers, and minimize risk going forward. 

Specifically, we would like to limit the amount of the allowable 

draw, require the establishment of an escrow or set-aside or mandatory property obligations including taxes and insurance in appropriate circumstances, and mandate the use of a financial assessment by lenders originating HECM loans. 

HUD is also seeking congressional assistance to clarify the rights 

and responsibility of a nonborrowing spouse of a HECM borrower. 

Absent help from Congress, we will be forced to make changes that 

could cripple the program in order to address critical risk management concerns, preventing seniors from accessing a tool that allows 

them to age in place with dignity while ensuring their needs are 

met. In the past 30-plus years, nearly three-quarters of a million 

seniors have done just that. 

These are seniors like Larry and Helen Driscol who, despite their 

best efforts to plan ahead, outlived their retirement savings and 

were facing a health crisis. Twenty years into Larry’s retirement, 

they needed help. Despite downsizing to a smaller home, their 

monthly expenses were outpacing their income. 

The HECM program gave them a way to keep their home, afford 

Helen’s treatment for cancer, and continue to assist their son who 

was disabled, just as it has for hundreds of thousands of other seniors. 

The HECM program plays an important role in housing finance 

and ensures that seniors who have worked hard to achieve the 

American dream have options as they live their remaining years 

with dignity and confidence. 

Thank you, and I would be happy to answer any questions you 

may have. 

[The joint prepared statement of Mr. Coulter, Ms. Head, and Mr. 

Miller can be found on page 36 of the appendix.] 

Chairman NEUGEBAUER. Thank you. 

Ms. Head, you are recognized for 5 minutes. 

STATEMENT OF MARIE HEAD, DEPUTY ASSISTANT SECRETARY FOR MULTIFAMILY HOUSING, FEDERAL HOUSING 

ADMINISTRATION, U.S. DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

Ms. HEAD. Thank you. 

Chairman Neugebauer, Ranking Member Capuano, and members 

of the subcommittee, thank you for the opportunity to speak today. 

FHA insurance has long assisted the Nation in meeting the need 

for safe, decent, and affordable housing by providing mortgage insurance for private financing of multifamily rental housing. 

More than one-third of American families rent their home and 

over 8.5 million unassisted families with very low incomes spend 

more than 50 percent of their income on rent. 

FHA’s ability to play a critical countercyclical role in the multifamily housing market during the financial crisis ensured access to 

credit when conventional financing retreated from the market. 

8 

FHA’s programs also create employment opportunities in a variety of fields. In Fiscal Year 2012 alone, multifamily programs directly or indirectly created about 54,000 jobs across the Nation. 

That countercyclical role, combined with historically low interest 

rates, led to an unprecedented increase in demand for FHA multifamily mortgage insurance. Our production increased more than 

sixfold, rising from $2.3 billion in Fiscal Year 2008, to over $14 billion in Fiscal Year 2012. A significant share of the demand for 

FHA insurance reflects the increased demand for rental housing 

during the period. 

At the same time FHA has been supporting our economic recovery, we recognize that private capital must return to the market, 

and we have already taken a number of actions to encourage it to 

do so. 

The Mortgage Bankers Association estimates that while the 

number of FHA-insured initial endorsements is up overall, its 

share of the market is down to 17 percent from its record high of 

22 percent in Fiscal Year 2010. 

This is in part because we implemented the first changes to the 

underwriting criteria for market rate products in over 40 years, we 

increased premiums for the first time in 10 years, we established 

a large loan policy with increased underwriting requirements, and 

implemented a concentrated risk underwriting policy to strengthen 

underwriting requirements for borrowers with larger portfolio risk. 

These risk management efforts ensure the solvency of the General Insurance and Special Risk Insurance (GI/SRI) fund and have 

resulted in a decrease in our default rate to less than one-quarter 

of a percent, down from 1⁄2 percent in 2009. And, as I promised this 

committee last year, our GI/SRI claim rates are now available publicly on our Web site for the first time. 

FHA multifamily programs continue to play an important role in our fragile but growing recovery. That is why an additional $5 billion in commitment authority for the GI/SRI fund in Fiscal Year 

2013 is critical. 

This additional commitment authority comes at no cost to the 

taxpayers while facilitating the construction of over 15,000 new 

rental and healthcare units, 40 percent of which will be affordable. 

It could lead to the creation of nearly 22,000 jobs and return an 

additional $200 million in receipts to the Treasury. 

Without this additional commitment authority, we will be forced 

to shut down the multifamily and healthcare programs in mid-August, delaying shovel-ready projects vital to the economic recovery 

in communities across the country and hindering our Super Storm 

Sandy recovery efforts. 

Finally, FHA multifamily continues to focus on business re-engineering efforts that update our operating model for a 21st Century. 

Last month, we announced a transformation that includes restructuring headquarters, consolidating our field presence, and several 

other major operating improvements. 

In headquarters, we will reduce the number of business lines 

from 6 to 4. In the field, 17 hubs that manage 50 offices will be 

consolidated into 5 hubs that manage 5 satellite offices. This transformation centers on a plan to nationally balance work loads, implement additional risk-based processing standards for underVerDate Nov 24 2008 11:20 Nov 12, 2013 Jkt 081756 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 K:\DOCS\81756.TXT TERRI
9 

writing and managing assets, enabling more efficient business 

management, and providing consistent and timely delivery of our 

programs to our customers. 

Once fully implemented, the transformation has the potential to save an estimated $40 million to $48 million annually. 

In conclusion, Mr. Chairman, FHA serves as an important complement to private mortgage financing while delivering on our mission to provide safe, decent, and affordable housing and contributing to a positive fiscal environment that shapes the future of 

rental housing. 

Thank you for the opportunity to speak today, and I would be 

pleased to answer any questions. 

[The joint prepared statement of Mr. Coulter, Ms. Head, and Mr. 

Miller can be found on page 36 of the appendix.] 

Chairman NEUGEBAUER. Well-timed, right on the money, 5 minutes. 

Ms. HEAD. Thank you. 

Chairman NEUGEBAUER. Mr. Miller, you are recognized for 5 

minutes. 

We will see how you do. No pressure. No pressure. 

[laughter] 

STATEMENT OF ROGER MILLER, DEPUTY ASSISTANT SECRETARY FOR HEALTHCARE PROGRAMS, FEDERAL HOUSING 

ADMINISTRATION, U.S. DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

Mr. MILLER. Thank you, Chairman Neugebauer, and Ranking 

Member Capuano. 

I appreciate the opportunity to testify today on the importance 

of FHA’s healthcare programs, how they support FHA’s mission by 

helping communities obtain and maintain access to modern medical facilities by ensuring those facilities get necessary capital financing to continue to serve vulnerable populations and generate 

an average of $87 million in receipts to the Treasury each year. 

FHA’s Office of Healthcare Programs facilitates the construction 

and refinancing of healthcare facilities through private commercial 

lenders by providing mortgage insurance, not direct loans or grants 

by helping private lenders serve a broader swathe of the market. 

Heatlhcare facilities are built, modernized or refinanced increasing access to care particularly in rural or distressed areas, decreasing overall healthcare cost, and filling a need not met by the private market in loan. 

Using the GI/SRI commitment authority, the Section 232 program provides mortgage insurance for residential care facilities like 

nursing homes, assisted living facilities, and board and care homes, 

while the Section 242 program provides insurance for hospitals. 

Due to the economic crisis, access to healthcare financing facilitated by commercial bond insurers decline, healthcare insurance 

providers left the market and the number of facilities seeking FHA 

insurance grew. 

Today, our market share is approximately 8 percent for hospitals 

and 12 percent for residential care. In Fiscal Year 2012 alone, FHA 

insurance programs supported the construction, improvements, 

substantial rehabilitation or refinancing of 791 healthcare facilities 

10 

with more than 91,000 beds. But rather than displacing the private 

market, we encourage it. 

Our hospital program frequently produces graduates: facilities 

that due to the benefit of FHA-insured financing are able to develop operational efficiencies, and improve their own financial performance enough to seek financing in the private market. 

One recent graduate, Hillcrest Baptist Medical Center in Waco, 

Texas, provided critical care to dozens of the injured following the 

tragic explosion at a fertilizer plant in West, Texas. Hillcrest asserts that they would not have been able to construct the badly 

needed replacement hospital that served as the lead trauma facility 

during the emergency, nor enter into a new partnership that improved the financial standing without the 242 program. 

To continue to minimize any risk, we are constantly improving 

our portfolio process to ensure the strength and long-term stability 

of the GI/SRI fund. We encourage and engage in proactive asset 

management to give properties the support they need before they 

get in trouble. And, in addition to reviews done by the program office, loans over a certain threshold are also reviewed by FHA’s Office of Risk Management to ensure that all risk factors are properly 

identified. 

LEAN business process reengineering has also played an integral 

part in streamlining our business operations, despite increased volume. We have completed and revamped our Section 232 documents, 

adding specificity and HUD additional rights and risk management 

capabilities. 

Through our work, the office has maintained claim rates of less 

than 1 percent across our portfolios in Fiscal Year 2012, and we 

are on track to do the same in 2013. 

This careful stewardship has also allowed our Sections 232 and 242 programs to return $0.75 billion in receipts to the U.S. Treasury since 2000. 

As part of our efforts to strengthen whole communities by addressing specialized financing needs, we are seeking Congress’ help 

to permit critical access hospitals to become eligible for FHA insurance again. 

Mr. Chairman, by continuing to offer mortgage insurance for 

vital healthcare facilities, the Federal Government encourages private lending, promotes economic growth, and better enables underserved communities to meet medical needs. 

Thank you, and I look forward to your questions. 

[The joint prepared statement of Mr. Coulter, Ms. Head, and Mr. 

Miller can be found on page 36 of the appendix.] 

Chairman NEUGEBAUER. Thank you, Mr. Miller. 

Now, each Member will have 5 minutes for questions, and I will 

first recognize myself for 5 minutes. 

Mr. Coulter, let’s kind of review the stats a little bit—$2.8 billion 

negative economic value in the HECM program. Is that correct? 

Mr. COULTER. Actually, the President’s budget updated that number to roughly $5 billion. 

Chairman NEUGEBAUER. So it is $5 billion negative? 

Mr. COULTER. That is correct at this point in time. 

Chairman NEUGEBAUER. Whoops. So the capital ratio, roughly 

what is the negative percentage on it now that it is—if $2.8 billion 

11 

was 3.6 percent, that is probably going to bump it up to 7-something percent, right? Just calculate. 

Mr. COULTER. Yes. It would bump it up. That is correct. 

Chairman NEUGEBAUER. I will give you a little credit here. I will 

round it off at 7 percent, and I think it is going to be a little higher 

than that. 

So the HECM portfolio is only 7 percent of the MMI fund, but 

it is representing almost 17 percent—and it looks like that number 

will be higher—of the fund’s losses. 

And, as you recall, Secretary Donovan requested $943 billion lifeline from taxpayers into his budget, and alluded to a lot of that had 

to do with the HECM program—580,000 reverse mortgages originated through HUD, and 54,000 of those are in default. So, nearly 

one in 10 of those loans are in default, and we have kind of gotten 

those seniors in a rough spot. 

And so we have a program that is supposed to be tailored to help 

seniors, but what we have is a program that not only puts the taxpayers kind of at risk, but we also have a program here that has 

probably put some of our seniors in not very good financial shape. 

Here is the question I have, we have seen a huge—the private 

sector has pretty much abandoned the reverse mortgage business. 

I don’t think currently today, there are any private companies 

making any reverse mortgage loans. I think that some of them 

used to, but they have gotten out of that business. 

So that has left FHA with 100 percent of the reverse mortgage 

business. 

The question I have is, are there other financial products that 

can do similar things to what you have outlined the benefits to seniors, of providing them the ability to use the equity in their home? 

I guess the first question is, if everybody else has gotten out of 

the reverse mortgage business, why are we still in the reverse 

mortgage business? 

Mr. COULTER. You are absolutely correct to focus on the financial 

performance of these products, first of all. And we take the financial performance of this program and our overall portfolio very seriously. 

I will say that the Treasury draw amount or potential is $943 

million, not billion. So— 

Chairman NEUGEBAUER. I apologize. 

Mr. COULTER. —but that is not to say that it is not material. 

In terms of your question about why should we stay in this program, FHA was set up by Congress to meet the affordable financing needs of underserved markets. 

If you think about seniors today, the baby boom generation is 

aging. Those seniors are not going to have the benefits that our 

parents did of defined pension plans, reasonably healthy 401(k) 

plans, and they are going to be heavily reliant on their home equity. This program allows them to responsibly tap into that home 

equity. 

Now, a kind of clear follow-up from your perspective would be, 

well, can we do it financially responsibly on a go-forward basis and 

can we address the fact that there are 10 percent of these loans 

that are in tax and insurance default? 

12 

The answer is yes. And that is one of the reasons that we have 

asked Congress for support to make changes to this program that 

will get it structurally back on the right track. 

Chairman NEUGEBAUER. I think that one of the questions I have 

is that I think FHA is trying to be in two businesses here where, 

one, they are trying to be in the mortgage insurance business, but 

two, they are also now in the annuity business. 

And I question whether FHA has the expertise within the organization, because I guarantee that if you make me a reverse mortgage at 63 years of age, and nobody has to pay that back until they 

die, I am married to a woman whose parents and grandparents 

lived a very, very long time, and you would have to advance me a 

very small amount of money for the government to come out. 

Otherwise, what is going to end up happening is that at some 

point in time, that loan is going to be underwater, and somebody 

is going to have to pick up the tab. And we know who picks up that 

tab. 

So, I hear your reforms and I think the Mortgagee Letter is 

something that is being considered to give you that authority. 

But I think the overriding question is I think we have to have 

a lot further discussion about whether this is a program that: one, 

we should be doing; and two, if we are getting 1 in 10 seniors in 

trouble financially with this program, then we are not doing what 

we should be doing. 

My time has expired. 

I now recognize Mr. Cleaver, the gentleman from Missouri, for 5 

minutes. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

I want to be parochial, first, to talk about the HUD reorganization. And Kansas City, Missouri, is a regional—actually, you moved 

your office over in Kansas. But it is a regional center. And so, we 

have not been impacted by the reorganization, as I currently look 

at what has been done. 

But in making the decision, was there any kind of community 

participation—for example, with CBDG, there is a community 

hearing requirement. You have—you are supposed to. I know some 

people—some examples, some communities that didn’t do it. 

But so what happened when you made decisions to close certain 

HUD offices? 

Ms. HEAD. Thank you for that question. There are two pieces of 

the reorganization at HUD. One of the pieces is to close small, subState offices. And in those offices, there is no program management 

of the different FHA programs and so there also are other offices 

in the State that can serve the same function for program delivery. 

So that is one piece of this. 

Then, there is the multifamily consolidation piece. And in the 

multifamily consolidation piece, we are not closing offices. We are 

consolidating our multifamily functions into the 10 offices that 

we—that I mentioned in my opening statement. 

So in 40 or better years, the multifamily operating model has not 

been refined. This is our attempt to make sure that we are providing efficient program delivery to our customers in a manner that 

is not a risk to the taxpayers. 

Mr. CLEAVER. Yes, I— 

13 

Ms. HEAD. So part of—I am sorry, I will answer your question. 

Mr. CLEAVER. No. 

Ms. HEAD. We did look at a number of things when choosing the 

offices that would be in the remaining 10 offices, including how we 

would continue to provide the market information that was needed 

in the different markets. 

So under the restructuring of multifamily, we will have dedicated 

teams in the other offices that will function to provide the services 

in the States that you are talking about. 

Mr. CLEAVER. I actually believe that HUD and all the Federal 

agencies at this austere time should make decisions such as those 

that you made. My question is not about making efficient moves. 

But I know there are communities—there are Members, for example, who sent questions because there were offices closed in their 

communities, without any prior information-sharing with the community. 

So with the closings, I think you did the right thing. I am conveying to you the concern of some of my colleagues. 

Because I want to move to the reverse mortgage issue, and with 

reverse mortgages, there are a lot of benefits, but there are some 

burdens as well. 

Is the HUD interest rate lower than the conventional interest 

rate? On these reverse mortgages, sometimes the interest rates can 

be very high. So where do we come in? 

Mr. COULTER. The interest rate on these loans is a function of 

where the ultimate security trades. 

We put out principal limit factor tables that currently come down 

to 5 percent, and we are planning on publishing principal limit factor tables that come down to interest rates below that. 

Typically the interest rate, the fixed rate of interest on these 

loans is generally in the 4 percent range. 

Mr. CLEAVER. You said 3 percent to 4 percent? 

Mr. COULTER. Four percent or higher. 

Mr. CLEAVER. Oh, okay. 

I yield back, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, the vice chairman of the subcommittee, Mr. 

Luetkemeyer, is recognized for 5 minutes. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

Ms. Head, with regards to multifamily housing, it seems that 

they are competing quite heavily for the available credit authority 

in the GI/SRI fund. In fact, there is a concern you may run short 

before the end of the current Fiscal Year. It is my understanding 

that the Department has been focused on refinancing existing multifamily insured loans in the existing portfolio, and even refinancing existing developments that are outside of FHA. 

I started out with a preface for my questions, but I have several 

of them with regards to, don’t you think that your mission would 

be better fulfilled if you used the commitment authority to actually 

loan to multifamily housing in the underserved areas? 

Ms. HEAD. Thank you for that question. 

So, the requested commitment authority will enable us to continue to play the role that you are referring to in the much-needed 

underserved markets. Part of the commitment— 

14 

Mr. LUETKEMEYER. Forgive me for interrupting, but are you 

going to change the way that you are doing it? 

Ms. HEAD. The way that we are— 

Mr. LUETKEMEYER. This was one of my later questions, but since 

you brought it up already, my question right now is, when you are 

already close to the limit and you are refinancing things that are 

outside—you are refinancing stuff within FHA and you are refinancing stuff that is outside of FHA, instead of new stuff, what is 

going to change? 

Ms. HEAD. The commitment authority is needed to continue to 

refinance our existing portfolio. Fifty percent of our pipeline—I am 

sorry, sir. Am I not understanding your question? 

Mr. LUETKEMEYER. Okay. You are also refinancing stuff outside 

of FHA. You are doing Fannie and Freddie stuff. So— 

Ms. HEAD. No sir, I don’t believe we are doing Fannie and 

Freddie stuff. And I can tell you the differences between the 

Fannie and the Freddie markets that we do. So, FHA does not offer 

the same programs as the GSEs. While there are some similarities 

between the FHA and the GSEs— 

Mr. LUETKEMEYER. You are not refinancing any other loans other 

than FHA loans? 

Ms. HEAD. Of the GSEs? 

Mr. LUETKEMEYER. Yes. 

Ms. HEAD. We are refinancing some of those loans that come to 

us for FHA insurance. 

Mr. LUETKEMEYER. What percentage of your loans are? 

Ms. HEAD. Are Fannie and Freddie? I do not have that information. 

Mr. LUETKEMEYER. Can you get that information to us? 

Ms. HEAD. I am happy to get you that information. 

Mr. LUETKEMEYER. Okay. Now, with regards to the new commitment that you are wanting, how much of that is going to be for refinancing outside FHA? 

Ms. HEAD. About 40 percent is our existing portfolio that we are 

refinancing this year, both in healthcare and in multifamily. Then, 

there is about 25 percent that are new construction loans. So that 

would leave probably another 25 percent to 30 percent that are not 

in our portfolio. 

But we provide—those loans that come to us in other underserved markets are not necessarily in the GSEs’ portfolios. 

Mr. LUETKEMEYER. Okay. Why are we refinancing existing loans? 

Ms. HEAD. Because there is a need in the marketplace for us— 

Mr. LUETKEMEYER. You are refinancing due to rate? Are you refinancing due to—they purchase a different residence and you are 

refinancing it to a different residence? Or are you taking the same 

house and just refinancing the loan to add more money to it? 

Ms. HEAD. Let me clarify. Multifamily is the finance of the apartment complexes, the healthcare facilities, and the hospitals. That 

those fall under the GI/SRI funds. So, we are not refinancing folks’ 

homes that are— 

Mr. LUETKEMEYER. I am using ‘‘home’’ as a form of multifamily 

housing unit— 

Ms. HEAD. No, that is okay— 

15 

Mr. LUETKEMEYER. —instead of all by itself. So, you are refinancing the entity. Okay? 

Ms. HEAD. We are refinancing the multifamily properties in 

order to provide more affordable rental housing for the marketplace 

in many underserved communities. 

Mr. LUETKEMEYER. Are they rehabbing them? Or why are you 

doing that? 

Ms. HEAD. Many of them are being rehabbed. 

Mr. LUETKEMEYER. Or is it due to rate? 

Ms. HEAD. Pardon me? 

Mr. LUETKEMEYER. Is it due to rate? Have you got a better rate 

now than what they are financed at previously? 

Ms. HEAD. The FHA mortgage insurance does provide a lower 

rate for these entities, which, again, makes them affordable in the 

marketplace in many tertiary markets. 

Mr. LUETKEMEYER. Okay. What are the standards you have 

when you take into consideration refinancing a loan? 

Ms. HEAD. What are our standards? 

Mr. LUETKEMEYER. Yes. 

Ms. HEAD. We have a set of underwriting guidelines that we use 

in order to underwrite those loans. Are you asking me for the specific criteria for those loans? 

Mr. LUETKEMEYER. Yes. 

Ms. HEAD. They range from 70 percent of value, which is comparable to the—some of what the GSEs do—to 85 percent of loanto-value. 

Mr. LUETKEMEYER. Okay. What are the criteria? Are they geographic, population, political considerations? 

Ms. HEAD. They are not political considerations, no, sir. We are 

providing the need to finance in underserved market areas more 

than anything else, and providing affordable housing in those— 

Mr. LUETKEMEYER. Urban versus rural—does it make a difference? 

Ms. HEAD. I am sorry. I am— 

Mr. LUETKEMEYER. Is it urban versus rural? Is that a criteria? 

Ms. HEAD. We serve underserved markets both in rural areas 

and in tertiary markets and in some urban areas. 

Mr. LUETKEMEYER. Can you give me a percentage of where you 

go with urban versus rural? It is 80 percent urban, 20 percent 

rural? 

Ms. HEAD. I would have to get those statistics for you. 

Mr. LUETKEMEYER. All right. Thank you very much. My time is 

up. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentlewoman from Ohio, Mrs. Beatty, is recognized 

for 5 minutes. 

Mrs. BEATTY. Thank you so much, Mr. Chairman, and Mr. Ranking Member. 

Mr. Coulter, let me ask you this question: Is there a way in 

which private capital can be brought into the reverse mortgage 

market in any substantial volume? 

Mr. COULTER. The chairman mentioned earlier that private capital has exited this market and he was absolutely correct. If you 

go back to 2006, 2007 when the market was heating up, you did 

16 

see some private capital start to enter this marketplace, in particular in the jumbo and super-jumbo space. So, there is interest 

from private capital, but until you get to a house price path that 

is strong and stable, you are not going to see any new interest. 

Mrs. BEATTY. And let me ask you, what could HUD, or what is 

HUD able to do to improve its reverse mortgage program without 

congressional action? And what, if any, congressional action is 

sought? 

Mr. COULTER. Without congressional action, we can change the 

mortgage insurance premiums, which we have done. In 2010, we 

increased them by 75 basis points. Or we can reduce the principal 

limit factors. And we did that twice, once in 2009, and once in 

2010, with the introduction of the Saver program, which basically 

reduces the amount of the principal limit factor and reduces the 

amount of the up-front mortgage insurance premium charged for it. 

So that was done in 2010. 

And we did it again at the beginning of this year as a result of 

the actuarial results. We effectively collapsed the fixed-rate standard and fixed-rate Saver programs to mitigate the risk on the fixedrate side of the portfolio. 

So we can—the answer to your question of what we can do is 

deal with principal limit factors and deal with mortgage insurance 

premiums. We have asked for your support, because we believe 

that we want to make structural changes to this program that ensure it is viable for the long term. Those changes include capping 

the amount of the up-front draw. They include instituting a financial assessment, and I know there was a note made earlier that we 

don’t do a financial assessment today. That is correct and we believe we should. 

And the third thing we would like to do is have an escrow account and/or set-aside to deal with the tax and insurance defaults. 

And the one thing that I would note here on the tax and insurance 

default, again the chairman mentioned a 10 percent default rate. 

That is absolutely the correct number, but the median amount outstanding on those defaults is $3,000. So we are not dealing with 

a huge dollar-amount on those types of defaults, and we do believe 

that an escrow account or a set-aside can materially cure that 

issue. 

The last thing that we would like to do, and we would like your 

support on, is to deal with the issue of nonborrowing spouses. 

Again, it is important to build this program on an actuarily sound 

basis. We need to know who the youngest of the mortgagors will 

be that we have to underwrite the property against or underwrite 

the mortgage against. And we want to make sure that issue is crystal clear on a prospective basis. 

Mrs. BEATTY. Thank you. 

Thank you, Mr. Chairman. I yield back. 

Chairman NEUGEBAUER. I thank the gentlewoman. 

And now the gentleman from Missouri, Mr. Clay, is recognized 

for 5 minutes. 

Mr. CLAY. Thank you so much. 

And I will direct my questions to Ms. Head. By your own estimates, Ms. Head, you are expecting to lose nearly 400 people who 

feel they have no choice but to leave HUD due to this forced relocaVerDate Nov 24 2008 11:20 Nov 12, 2013 Jkt 081756 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 K:\DOCS\81756.TXT TERRI
17 

tion program. Most of your anticipated savings are as a result of 

the reduction in staff. 

If that is the primary goal, why did the agency choose not to conduct a reduction in force (RIF?) Don’t veterans and high performers 

have more protections in a RIF than in the process you have chosen? 

Ms. HEAD. Thank you for the question, Congressman. 

In our decisions to make this—we were trying our best to make 

sure that any employee who wanted to remain with Multifamily 

would have the opportunity to remain with Multifamily. The reduction in force process that is throughout the Federal Government 

can have what we considered more devastating effects on our employees. 

So we have offered every—are committed to every Multifamily 

employee having an opportunity in the new structure through relocation to other offices and also opportunities to move into additional jobs. 

Mr. CLAY. Okay. Do those opportunities include retraining or 

some kind of association with local community colleges to—so that 

they can do some kind of cross-transfer at HUD? 

Ms. HEAD. Yes, sir. One of the things that we are looking at and 

committed to is making sure that employees are getting trained. So 

we have in our estimates for the—for this restructuring, training 

benefits for all employees. 

To your question about opportunities across the organization, we 

are also committed to looking at how we could manage that so that, 

it needs to be understood that we are not closing Multifamily offices. The offices that will remain have other program areas. And 

we are looking at how we can make sure that employees have opportunities within those other areas if they want to stay in their 

geographic location. 

Mr. CLAY. I guess I am looking for the least disruptive way to 

consolidate these offices and to give those employees who you have 

trained over the years the option of staying in those communities 

where they have a home and a family. 

Have you taken that into consideration? 

Ms. HEAD. Yes, sir. As I said, we are looking at opportunities for 

employees, because there are—will still be HUD offices in those geographic locations. There will be opportunities within those offices 

for the staff. 

Mr. CLAY. Okay. Now, I understand that you are allowing multifamily employees in the Seattle office to slide into newly created 

positions in the Office of Healthcare Programs, Mr. Miller’s division. 

Why are you not providing then, equal opportunity to multifamily housing employees around the country and especially in offices where the Office of Healthcare Programs has a significant 

presence, like Saint Louis, Jacksonville, Milwaukee, and Los Angeles? 

Ms. HEAD. When the LEAN program, which is in the Office of 

Healthcare, was created, I believe in 2008—when the consolidation 

on the healthcare programs happened—the Seattle hub was instrumental in implementing that program. And as part of that implementation, the Office of Healthcare Programs now is understaffed. 

18 

And we believe that with an opportunity to make sure that the expertise was—and the resources were used, as part of the restructuring. 

Mr. CLAY. Can you do those in those other four cities? 

Ms. HEAD. That would be more difficult to do in those other cities, because those folks have not been involved in the healthcare 

programs in the past. 

Mr. CLAY. So, what is the— 

Ms. HEAD. Also, as Mr. Miller has staffing needs, he will post 

jobs, possibly in some of those locations, where people would have 

the opportunities to apply for them. 

Mr. CLAY. What is going to happen to the majority of my constituents in Saint Louis when you close that office? 

Ms. HEAD. This is a Multifamily consolidation. And in other offices where there will be a Multifamily presence, there will be dedicated teams that will support your State. 

Mr. CLAY. I am going to be following you closely, and hopefully, 

we will be able to resolve this. 

Ms. HEAD. I am happy to answer any questions for you, sir. 

Mr. CLAY. It is always a pleasure. 

I yield back. 

Ms. HEAD. Thank you. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from Washington, Mr. Heck, is recognized for 5 minutes. 

Mr. HECK. Thank you. 

First, I would like to thank the chairman and the ranking member for the courtesy of allowing me to participate today. Thank you 

very much. 

Mr. Coulter, these are HECM questions. 

I think you are probably familiar with the relatively brief text 

that Mr. Fitzpatrick and I have been developing with respect to 

granting you additional authority. And my question is, you have already enumerated several changes you would like to make. 

Does this language of the proposed legislation give you what you 

need to address this problem? 

Mr. COULTER. Yes, sir. We appreciate your efforts. And we do believe that it gives us the flexibility we need to make the changes 

that I noted earlier. 

Mr. HECK. And in that regard, you are confident that you could 

significantly reduce the number of seniors who are being materially 

affected in a negative way, as well as enhancing the portfolio’s assets? 

Mr. COULTER. I am. I believe that we can put this—with the 

changes that I noted, I believe that we can put this program on a 

positive track, and ensure that it is serving the market constructively, serving seniors constructively, and that we can get it on 

sound financial footing. 

Mr. HECK. In addition to the proposed legislation, are there any 

other things that you can do to help spouses better understand 

their circumstance, and borrowers, their obligations, as well? 

Mr. COULTER. It is an excellent question, and we clearly need to 

continue to work closely with the industry, with CFPB, and with 

housing counseling. 

19 

We have an office of housing counseling now. We have engaged 

them, and they are very focused on ensuring that as we move forward respectively with this program, the counseling that is mandatory ensures that the seniors who are taking this product know 

what they are getting themselves into, they know exactly what 

their obligations are, and they recognize that it is part of an overall 

financial planning solution, not just a way to tap into the money 

up front. It is a mechanism that they should be using over their 

life to tap into it when they have unexpected financial needs. 

Mr. HECK. And finally, Mr. Coulter, just to be crystal clear, can 

you state unequivocally that if this legislation that Mr. Fitzpatrick 

and I have been proposing were to be adopted, that unequivocally, 

there would be fewer seniors hurt, and your portfolio performance 

would improve? 

Mr. COULTER. I can. I do very firmly believe that with the legislation that you are moving forward, we can put—we can make 

changes that are substantive, and as I said earlier, will get this 

program on a track that ensures that fewer seniors are negatively 

impacted. We will get the right seniors into the right program. We 

have a program that effectively serves a market that is highly sensitive at that point in their life. And we all want to do everything 

we can to ensure that we give that product only where it is appropriate, and only where it preserves homeownership in a constructive way. 

So, the answer to your question is yes. 

Mr. HECK. Thank you, Mr. Coulter. 

Mr. Chairman, I ask unanimous consent to submit the series of 

questions from both Mr. Fitzpatrick and myself for the agency to 

respond to. 

Chairman NEUGEBAUER. Without objection, it is so ordered. 

Mr. HECK. I yield back the balance of my time, and thank you 

again, sir. 

Chairman NEUGEBAUER. The Chair recognizes the ranking member has asked unanimous consent to enter in the record a written 

statement from the National Council of State Housing Agencies. 

Without objection, it is so ordered. 

I now recognize the ranking member, Mr. Capuano, for 5 minutes. 

Mr. CAPUANO. Thank you, Mr. Chairman. And I thank the witnesses for being here. 

Let me just say to Mr. Miller, I am informed, and I want to make 

sure that I get this right, that the two programs together—the 

multifamily and the healthcare programs, have returned $750 million to the Treasury since the year 2000? Is that approximately 

right, do you know? 

Mr. MILLER. Thanks for the question. 

Let me just clarify that the Office of Healthcare Programs has 

two other programs. One is the Skilled Nursing Program, and the 

other one is the Hospital Program. It does not have multifamily involved with it. 

And, yes, indeed, we have returned $750 million. 

Mr. CAPUANO. So that amount is just out of the healthcare end? 

Mr. MILLER. That is correct. 

Mr. CAPUANO. Okay. Thank you. 

20 

Ms. Head, my understanding is that the Multifamily is in reasonably good shape financially, as well. Is that correct? 

Ms. HEAD. Yes, sir, that is absolutely correct. 

Mr. CAPUANO. Thank you. 

Mr. Coulter, that leaves the reverse mortgage. I am not going to 

say ‘‘HECM,’’ because nobody knows what it means except you and 

us. It is the Reverse Mortgage Program. 

Am I right to understand, based on the numbers, that if the Reverse Mortgage Program were not in the MMI fund—it was pulled 

out, like it used to be in a separate fund—it was just the single 

family aspect of the fund, that there would be no need to draw on 

the Treasury this year? Is my math correct here? 

Mr. COULTER. That is a correct statement, yes. 

Mr. CAPUANO. So the biggest problem is the reverse mortgage 

part? I just want to make sure my understanding of the whole 

math thing is correct. 

I have a couple of other questions. 

I know that you have instituted some changes. Have you instituted any changes relative to the amount of the lump sum that is 

allowed to be taken out at the beginning? Because as I read it— 

and I have read the information—it seems to me, that is probably 

the biggest problem. And never mind the reduction in residential 

value, because that is across-the-board. But one aspect to this is 

the fact that you give out lump sums at the beginning, and people 

can use the money the way they want, within a reasonable period 

of time. Either people outlive it, or they have to spend it on other 

things. And all of a sudden, they are in serious trouble. 

Have you done anything to limit the amount of the lump sums 

up front? 

Mr. COULTER. So, first of all, you are absolutely correct. And that 

is the biggest concern we have, the amount of the up-front draw. 

The fact that we have gravitated to a program that is predominantly fixed-rate, where borrowers are taking a large up-front 

draw, or basically tapping out the entire line up-front. 

What we have done is we reduced the principal limit factors on 

the fixed-rate standard, basically collapsing it with the fixed-rate 

saver so that—refuse the amount that they can draw up-front. But 

as I noted earlier, what we want to do is restrict the amount that 

borrowers can take up-front to a maximum of some percentage for 

mandatory obligations. And those mandatory obligations would include closing costs on the loan and in mortgage liens. 

Mr. CAPUANO. I want to back up to one of the other things that 

is relative to—I think enters the provision that we roll the reverse 

mortgage fund into the MMI fund. I think that is right. 

Knowing what we know now, would you agree that maybe we 

should have the reverse mortgage fund separate from the single 

family house? Again, just—for me—my argument is, I want to 

focus on what the problems are. I don’t want to take a program, 

or any program—not just here, but any program that has trouble— 

and mix it in with a program that has significantly less trouble, 

and so we can focus on what the problems are. And I think we 

have spent a fair amount of time looking at the entire FHA portfolio, when in truth, the biggest problem is simply the reverse 

mortgage aspect. And I am just curious—one of the things I have 

21 

been thinking about is requiring the reverse mortgage coverage to 

go back into a separate fund. 

Would you think that is something worth pursuing? 

Mr. COULTER. I would say it is something that is definitely worth 

exploring, and we would definitely be interested in working with 

you on that. 

Mr. CAPUANO. The last aspect—as we go forward, I just want to 

point out two things. 

Number one is, personally, I have some real problems with some 

of the issues we are dealing with regarding surviving spouses. People who own their homes—the average person, their home—they 

have no idea the legal way that they own their home, whether it 

is jointly, or as tenants in common. They just sign documents. 

Many of them—the people we are dealing with signed them 40 

years ago. They don’t have a clue how they own the home. 

And because somebody needs some money and they do a reverse 

mortgage, I think the worst possible thing that a society can do 

is—for all intents and purposes—put people in a position where 

they have to lose their home—not them—one spouse dies, and 

while they are dealing with the death of their spouse, they then 

have to move out of their home. 

And for me, just—I want to put this on record—I have some very 

serious problems with the way we deal with surviving spouses now. 

And I will have some very serious problems moving forward. 

I know it is not really an issue that we should be discussing 

today, but I just want to put that on record. Because it permeates 

the whole program. 

Mr. COULTER. I agree with you. And what we want to do is underwrite the loan to the younger of the two spouses to ensure that 

it is actuarially sound against that younger spouse. 

Mr. CAPUANO. That is all well and good, except age isn’t always 

the sole determining factor. Who dies first is a factor, but it is not 

the sole determining factor. 

So I wouldn’t care how old the surviving spouse was, even if it 

was the older spouse, it is still a problem. 

People who live in their homes for 40 years under this situation 

should be able to stay in their home until the last spouse goes. 

And with the chairman’s indulgence, one other aspect. I don’t 

have—as I understand it, the people who are actually selling these 

things are not Federal employees. They are private companies that 

do it through the FHA. 

Mr. COULTER. Correct. 

Mr. CAPUANO. I don’t know about anybody else, but I watch TV 

late at night to put me to sleep. It is a great way to go to sleep; 

turn the TV on. 

I go to sleep to the sound of someone trying to sell me a reverse 

mortgage. And the way I count it, I have four very well-known actors from four of my favorite shows, one game show host from one 

of my favorite game shows, and one of my favorite singers from the 

1950s, all of whom are telling me to take out a reverse mortgage, 

and everything is safe. 

I think one of them actually says something like, ‘‘I don’t know 

anything about finances, but I played a financial person in real 

life.’’ 

22 

Is there anything we can do to knock these ads out or at least 

reduce them? These people are not working for free, I presume, nor 

would I expect them to. They are very well-known names. I am 

sure they are fine Americans. And I am sure they are getting paid 

top dollar. 

Maybe if we—I don’t know if you have the ability to say to the 

people that you contract with, ‘‘You can’t spend that kind of money 

on advertising.’’ Is that a possibility? 

Mr. COULTER. I don’t believe so. It is a possibility—we do work 

with other regulatory agencies. We have talked to the Consumer 

Financial Protection Bureau (CFPB) about this. So we do care 

about how this program is marketed. We are not doing the marketing, obviously. And one of the things that we are ensuring is we 

are coming behind that marketing or whatever else is drawing the 

borrower to the table and ensuring that there is good counseling 

they get— 

Mr. CAPUANO. It is just when you see some of your favorite actors on TV telling you something is safe—I think that raises questions. And, personally, I would have some problems renewing those 

contracts with people who won’t take your suggestions, if not your 

insistence. 

I appreciate the chairman’s indulgence. 

Chairman NEUGEBAUER. And what the ranking member didn’t 

know is one of the ideas that I had was actually to bring those actors for the second panel. 

[laughter] 

I now yield 5 minutes to the gentleman from California, Mr. 

Sherman. 

Mr. SHERMAN. Thank you. 

Ms. Head, clearly we need more affordable housing. That tends 

to be multifamily rental housing. You folks stepped up at an important time. Where would we have been in 2010 or 2011 if you hadn’t 

been there to provide insurance for those building multifamily 

housing? 

How much less would we have built? 

Ms. HEAD. There would have been a substantial amount of building not done. And we created, as I mentioned, during the countercyclical market, about 54,000 jobs in the market with our new construction loan program. 

Also, we provided the capital for much of the affordable housing 

in the country to be preserved during that time. 

Mr. SHERMAN. Thank you. 

You are closing a number of offices. We just found out one of 

them is in Los Angeles. How will you be able to serve Southern 

California without a Los Angeles office? And since it is my understanding you are going to have an office in every State, Southern 

California is as big as 10 or 15 States put together, so how are you 

going to serve Southern California without an L.A. office? 

Ms. HEAD. We are consolidating Multifamily offices throughout 

the country. And our proposal is that we will have offices in 10 

States for multifamily. 

In the State of California, the San Francisco office will serve the 

State. And they are already doing much of that out of the San 

Francisco office now. 

23 

In fact, our San Francisco hub director in Multifamily is managing the L.A. office. 

Mr. SHERMAN. Hmmm. 

Ms. HEAD. The L.A. office itself will remain open, by the way. 

Mr. SHERMAN. So you are not closing the L.A. office; you are just 

running it out of San Francisco. 

Ms. HEAD. No, sir. The multifamily staff will be consolidated into 

the San Francisco office, but there will be a hard presence in the 

L.A. office. 

Mr. SHERMAN. Okay. 

I am trying to understand the reverse mortgage. I can understand how there would be problems for the consumer—too high an 

interest rate or, as the ranking member points out, a situation 

where you have to leave your home when one of the spouses dies, 

but the other would ordinarily continue. 

What I am trying to understand is why from the lender/insurer 

side, there are losses in this area. Who does the FHA insure—one 

of the ways to lose in a reverse mortgage is the person lives for a 

very long time. You have to make monthly payments. 

Do you assume the risk or not? Do you insure against the risk 

that somebody will take out a reverse mortgage and live a long 

time? 

Mr. COULTER. We do. So we have to insure that the program is 

actuarily sound in terms of longevity. And certainly the fact that 

people are living longer, which is a great thing, does add complications to this particular product. 

Specific to your question about how we lose money anytime the 

loan accrues to a balance that exceeds the value of the property, 

that happens a lot more frequently when somebody lives for a long 

time, or when the house price path is different than what you expect it to be. 

Mr. SHERMAN. Okay. 

I have pretty much run out of questions. 

Thank you. 

Chairman NEUGEBAUER. I thank the gentleman. 

I am going to go another round here for those Members who are 

interested. And I will recognize myself for 5 minutes. 

This is going to be kind of a lightning round, so I would ask our 

witnesses to be brief. 

I want to make some clarifications here, because we have thrown 

around a lot of terms, and it is easy sometimes to get confused. 

Now, Mr. Coulter, you have testified that you probably wouldn’t 

have needed the—nearly a billion dollars had it not been for 

HECM, but I just want to make it clear that you testified that the 

negative economic value of the reverse mortgage is $5 billion, but 

in the annual report, the total number of negative economic value 

is $16.3 billion, so this isn’t all the reverse mortgage. 

So of the $16.3 billion, $5 billion, so about a third of the negative 

economic value, is attributed to the reverse mortgage program. 

I think we just need to make sure we are keeping— 

Mr. COULTER. Just to clarify, Mr. Chairman, the numbers you 

are referencing are from the actuary report, and those numbers are 

the $2.8 billion and the $16 billion that you referenced. 

24 

I am working off of the President’s budget numbers, which are 

similar, but slightly different. 

Chairman NEUGEBAUER. Okay. 

Mr. COULTER. Those numbers are $22.4 billion. You take off $3.3 

billion in capital reserves, that takes you down to about $19.1 billion. 

We expect receipts of $18.1 billion during Fiscal Year 2013, that is how you get to the $1 billion. 

Chairman NEUGEBAUER. Mr. Coulter, I appreciate that. But what 

we do know about the Administration’s numbers is that they have 

failed year after year after year actually to meet those projections. 

And so, we will go back to the actuarial number, which—this ac- tually makes this case a little bit different, $2.8 billion from the report for a total of $16 billion. 

So I think we all agree that the reverse mortgage is a part of the 

problem, but I don’t want to mislead anybody that it is the only 

issue here in the fund. 

And, Ms. Head, I wanted to—oh, wait, I want to go back to you, 

Mr. Coulter. And I appreciate the fact that you are bringing some 

positive solutions to stop this bleeding. 

I guess the question is why we waited 5 years to start bringing 

these forward? And I appreciate Mr. Heck and Mr. Fitzpatrick’s efforts to work on this. But why did we wait for 5 years to bring 

these changes? 

Mr. COULTER. We definitely appreciate the work of Congress as 

well. And I would say that we have not waited 5 years. 

If you go back to 2009 and 2010, we reduced the principal limit 

factors twice. In 2010, we raised premiums by over 100 percent. 

And we have introduced measures to ensure that the HECM program in terms of tax and insurance defaults, which you referenced 

earlier, that there is a program to ensure that those are worked 

out. 

So we have done things for the HECM program very similar to 

what we have done on— 

Chairman NEUGEBAUER. I heard that. But you are just now asking for this additional authority. And I guess the question is, why 

didn’t we ask for that additional authority in 2009 and 2010 and 

2011, instead of why, here into 2013, we are just now asking for 

that additional authority? 

Mr. COULTER. I would say that we took definitive action in the 

fall when we saw that the negative net economic value of the 

HECM portfolio was going to be significant. We began working 

with the industry. We determined at that point in time that the 

structural changes that we wanted to make could not all be done 

by a Mortgagee Letter; we would have to go through rulemaking. 

So we took the steps and we did what we could by Mortgagee 

Letter in January of 2013. The balance either has to be done 

through rulemaking or with your support, through a Mortgagee 

Letter. 

And, Ms. Head, I want to go back to a—you answered a question. 

Somebody asked, ‘‘Is the fund healthy,’’ and you said, ‘‘Yes.’’ 

Do you have a financial statement showing that the fund balance 

you have would substantiate that it is healthy, that you have documentation to support that this multifamily fund is actuarily sound? 

25 

Ms. HEAD. Yes, sir. And it is the combination—the GSI–FGI–SRI 

fund. 

Yes, we can provide you some information— 

Chairman NEUGEBAUER. Does it show a breakout between—I 

would just like to see the breakout of what you—when you tell me 

that this is— 

Ms. HEAD. The Multifamily piece? 

Chairman NEUGEBAUER. It is trust and verify, and I am to the 

verification standpoint now, so if you could furnish that to us. 

Ms. HEAD. We have the annual financial audits that we can 

share. 

Chairman NEUGEBAUER. Yes. 

Ms. HEAD. May I also clarify for the gentlemen the 223(f) program that he mentioned earlier, our refinance. 

Chairman NEUGEBAUER. We are going to give him additional 

time here in just a minute. 

Ms. HEAD. Okay. Thank you. I have his statistics. 

Chairman NEUGEBAUER. And so then, Mr. Miller, according to 

HUD, the Section 242 program has a portfolio of $9 billion; and 

what proportion of that $9 billion is concentrated in the State of 

New York? 

Do you know? 

Mr. MILLER. Yes I do, 23 percent. 

Chairman NEUGEBAUER. Twenty-three percent. 

I have information here that shows that $5 billion of that—so it 

would be more like 50 percent. 

Could you furnish me information on that? 

Mr. MILLER. I would be glad to— 

Chairman NEUGEBAUER. Thank you. 

The other question is that you stated that the 242 program provides capital to finance hospitals in underserved private capital 

markets. Is that right? 

Mr. MILLER. That is correct. 

Chairman NEUGEBAUER. Yes. 

So are you familiar with the New York Presbyterian Hospital in 

New York City? 

Mr. MILLER. Yes, yes I am. 

Chairman NEUGEBAUER. And that is a nationally ranked hospital, isn’t it? 

Mr. MILLER. Yes, it is. 

Chairman NEUGEBAUER. In fact, I think President Clinton went 

there for his heart surgery, is that correct? 

Mr. MILLER. Yes, he did. 

Chairman NEUGEBAUER. Would you say that is an underserved 

hospital? 

Mr. MILLER. The association that we had with New York Presbyterian—actually it was New York Hospital in 1985, so our association with them began back then. 

And, at that point, they really weren’t—they were underserved. 

They weren’t doing very well financially and they continued in our 

program. In 1995, they had another insured loan that they took 

out. And in 1997, there was a merger with Presbyterian Hospital. 

So it did become New York Presbyterian Hospital. 

26 

Our association continued with them and they grew and they 

continued to provide even better care as the years went on. And— 

Chairman NEUGEBAUER. So the point—I appreciate that history, but in 2013, you gave almost $763 million financing assistance, 

which included a $500 million loan modification. 

I guess the question is—to me, that should be a fairly financially 

stable entity and I would not think that it is serving an underserved area. And that is quite a bit of commitment authority. 

Mr. MILLER. Yes. Thank you for that question. 

As I told you, we have an ongoing relationship with them. And 

in 2010, and 2012 by the way, they did refinancing through Ginnie 

Mae, and they got a very good rate through that. So, a loan modification in and of itself makes good sense because it, as you well 

know, decreases the interest that they are paying. 

So it made good sense because they are able to pass that along to others, including being able to deliver $81 million of indigent 

care in that region. 

Chairman NEUGEBAUER. There are a lot of hospitals providing 

indigent care. I think the question here is—and I think Mr. 

Luetkemeyer is going to pursue that, but we are doing these 

refinancings and everybody is coming to FHA and to Freddie and 

Fannie for lower interest rates because they are doing that, basically using the American taxpayers as a backstop or as a risk premium—risk enhancement. 

And so, if we are going to use these programs, whether it is as 

a single family program to get people started in the housing business, and if we are going to use the FHA for low- and moderateincome Multifamily housing, and we are going to use the hospital 

program for underserved areas, to me the intent of FHA is kind of 

the first grade teacher. 

And, so then, at some point in time, you graduate and these entities have the ability to provide their own credit enhancement in 

that they have a hospital with a great reputation. But for us to 

come back and start refinancing—of course one of the reasons a lot 

of people are coming to that is, one, you have nonrecourse financing, you have longer terms than the private market will generally 

give, and then you put the taxpayers’ credit enhancement on top 

of it, so it makes you look very lucrative. 

But the question is, when we sit here and look at these numbers 

of negative economic values, it doesn’t sound like the taxpayers are 

necessarily getting the right end of that deal. 

So, we have seen some information here that is probably going 

to require some additional information to follow up. 

With that, my time is way beyond extended. So I now yield to 

the ranking member for 5 minutes, or maybe even a little bit more. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

I would just like to submit for the record 4 letters and one news 

article that I don’t think I have to read. I am just going to— 

Chairman NEUGEBAUER. Without objection, it is so ordered. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

The only other thing I would like to say is a follow-up about your 

point. There are numbers all over the place, and they are all good 

numbers. I just wanted to say that is part of the problem—one of 

the reasons I want to get—I would like to get the reverse mortVerDate Nov 24 2008 11:20 Nov 12, 2013 Jkt 081756 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 K:\DOCS\81756.TXT TERRI
27 

gages out of the MMI. There are a lot of numbers here. They are 

all big numbers, and they all kind of interact. And they are all legitimate. 

But there is one other number as well, which is, Mr. Coulter, 

how much money is currently sitting in the MMI fund as of your 

most recent knowledge? 

Mr. COULTER. Over $30 billion. 

Mr. CAPUANO. Over $30 billion that is sitting there waiting to 

be—if necessary to be used. And the last I have heard from most 

knowledgeable observers is that money is not—technically it is in 

jeopardy, like technically—theoretically, my guess is I am bankrupt 

because I get mortgages and stuff, and theoretically we all are on 

some levels, but in reality, nobody really expects that money to be 

eaten up this year or even the following year. 

I know that I wouldn’t even ask you to go on the record on that, 

because that puts you on the record, but that is my understanding 

of it. 

And, with that, Mr. Chairman, again I want to thank you for this 

hearing. I want to thank the panel very much. And I yield back the 

balance of my time. 

Chairman NEUGEBAUER. Thank you. 

I now recognize the last questioner, Mr. Luetkemeyer, for 5 minutes. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

It is also very instructive and rewarding to know that the gentleman from Massachusetts enjoys watching Fox news. 

Ms. Head, do you have some good news for me? 

Ms. HEAD. I have some statistics for you, sir. 

Mr. LUETKEMEYER. Yes ma’am. 

Ms. HEAD. Five percent to 10 percent of the 223(f) program—our 

refinance program—comes from GSE. So less than 10 percent 

comes from GSE. 

Mr. LUETKEMEYER. Okay. 

Ms. HEAD. Our Multifamily portfolio is broken into 25 percent 

rural, 50 percent suburban, and 25 percent urban. 

Mr. LUETKEMEYER. Okay, very good— 

Ms. HEAD. The total percentage of the refinance portfolio year to 

date for 2013 is about 40 percent of our business. 

Mr. LUETKEMEYER. So, 40 percent is refinance. 

Ms. HEAD. Yes, sir. 

Mr. LUETKEMEYER. Okay, one of the concerns that we have—and 

I have another question for Mr. Coulter in a minute, but then I 

didn’t get time to develop all of the questions I was trying to get 

to here with regards to the refis and the private market and what 

all is going on there. But at some point when you refinance something, these people who you are refinancing have to have enough 

equity in that thing and then go to the private market. 

As a result, there have been complaints and considerations and 

some folks are saying that you are crowding out the private market, because you are taking some of these loans and you are refinancing them and they could go to the private market. 

How do you answer that— 

Ms. HEAD. So the private market— 

Mr. LUETKEMEYER. —question? 

28 

Ms. HEAD. —does not always go into the same underserved areas 

that we go into. They— 

Mr. LUETKEMEYER. Ms. Head, ma’am, I have a banking background. I am a former bank regulator. I know all about the Community Reinvestment Act (CRA). Don’t tell me that they don’t go 

into places that are underserved. 

Ms. HEAD. There are some private mortgage companies that do 

not go into certain areas. And FHA provides the— 

Mr. LUETKEMEYER. Are they crowding out all the rest of the 

folks? 

Because how can the other lenders not go into some of these 

other areas that are underserved? That is part of the mandate of 

the Community Reinvestment Act. This is some of the problems 

that some of these institutions have gotten into because they have 

gone into some of these areas— 

Ms. HEAD. I am— 

Mr. LUETKEMEYER. —and been forced to make some of these 

loans. 

Ms. HEAD. I have also been in the mortgage banking industry for 

many years. 

I started out at FHA 20 years ago and spent 15 years at Prudential Financial doing mortgage— 

Mr. LUETKEMEYER. You said 50 years? 

No, you said 15. 

[laughter] 

Ms. HEAD. Fifteen. 

Mr. LUETKEMEYER. All right. There we go. 

[laughter] 

Ms. HEAD. My southern accent— 

Mr. LUETKEMEYER. I love your accent by the way, but I— 

Ms. HEAD. Thank you. 

Mr. LUETKEMEYER. You look 29, so I was kind of serious about 

that word. 

Ms. HEAD. Oh yes, okay. 

So what was the answer you wanted, sir? 

[laughter] 

I did spend 15 years in the mortgage banking business— 

Mr. LUETKEMEYER. Okay, very good. 

Ms. HEAD. —with Prudential, and I do know that, as a private 

mortgage company, there were markets that we did not go into. 

And part of that was because of the underwriting structure at FHA 

that enables us at FHA to serve some of those private—underserved areas. 

Mr. LUETKEMEYER. I don’t want to get into an argument with 

you, but I can tell you that I can list you a half a dozen banks right 

now that are either in my district or just outside my district that 

are being required by the FDIC, the Comptroller or whomever—the 

regulatory authorities—to go into underserved areas in order for 

them to be able to get a new branch or a new—or be able to get 

a consolidation or go purchase another bank. That is a requirement 

they are having to do. 

So I have a hard time understanding that. And as a result, what 

you are doing is crowding out the private market from being able 

29 

to go into those places. And that is my point I am trying to get to. 

So perhaps we will agree to disagree for a moment. 

Mr. Coulter, I have have a minute-and-a-half left. So, another 

issue that has popped up with regards to—it is a kind of a novel 

idea that some folks have—some groups have had with regards to 

eminent domain. They are asking municipalities in some instances 

to take over residences, then turn around and ask other entities to 

refinance them by lowering the principle on it. 

I was aware that this was happening in St. Louis—I see my good 

friends from St. Louis are here—but the local city council voted 

against this, but I am aware that it was already in my State. So 

I am very concerned about this. 

The other day, former Commissioner David Stevens was here. He 

testified that FHA has published a statement that Fannie and 

Freddie will no longer—will not be permitted to repurchase loans 

acquired through eminent domain, and that such a program will 

represent a cost ultimately borne by the taxpayers. 

So by doing that, you, FHA, are going to be the default and in 

fact, in the business plan of the groups that are pushing this, they 

highlight the role of FHA. 

So my question to you is: Does the current leadership of FHA 

share former Commissioner Stevens’ view that FHA should not be 

in the business of insuring loans acquired through eminent domain? 

Mr. COULTER. The issue of eminent domain—I think the Secretary has spoken on this. And he has expressed a high degree of 

concern about it. I wasn’t aware of the GSE statement in terms of 

they won’t finance properties acquired through eminent domain. 

We will certainly take a look at it and consider doing something 

similar. I am reasonably confident that would be supported up 

through the Secretary. 

Mr. LUETKEMEYER. Okay. Are you going to give us a written 

statement, then, with the position on where you are going to stand 

on this? 

Mr. COULTER. Sorry? Ask the question again. 

Mr. LUETKEMEYER. Are you—you have deferred my question 

here. I want a yes or no. And if I can’t get a yes or no, can you 

get me a written answer to my question? 

Mr. COULTER. I would be happy to give you a written answer, 

yes. 

Mr. LUETKEMEYER. Okay. Thank you very much. 

I yield back. Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I now recognize Mr. Ellison for 5 minutes. 

Mr. ELLISON. Thank you, Mr. Chairman. And I would like to 

thank the ranking member as well, and the panel. 

I am from Minneapolis. I am really, really proud to say that our 

HUD Multifamily program in Minneapolis is a model. And I believe 

when it comes to proactive portfolio management, they are really, 

really doing us all proud. Our interagency stabilization group has 

25 years of proven success. 

And this collaboration with HUD and partners has preserved, 

built, and managed thousands of desperately needed affordable 

housing units, something that we are really concerned about beVerDate Nov 24 2008 11:20 Nov 12, 2013 Jkt 081756 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 K:\DOCS\81756.TXT TERRI
30 

cause our vacancy rate in the Twin Cities is down to about 2 percent and low-income people are being hurt the most by this short 

supply. 

So, I would encourage HUD to be open to suggestions for modifications to the transformation plan. And I believe that this Congress has ideas that will build on and improve your ability to 

achieve your goals. 

Are you all open to suggestions about the modification to the 

transformation plan? 

Ms. HEAD. Yes, sir. We are open to having discussions, and I understand that Deputy Secretary Jones and I will be meeting with 

you next week to discuss some of this. 

Mr. ELLISON. And let me publicly thank you for that. I know that 

there are all kind of pressures and all kind of directions, and you 

have to do what you think you have to do. But being able to discuss 

things openly sometimes leads to a better place. 

Ms. HEAD. Thank you, and we appreciate that. 

Mr. ELLISON. Yes. I would also like to just talk to you a little bit 

about affordable housing in general. I mentioned my own city, my 

own State, where the rents have just been jacked up for even the 

most low-income people. It has caused a homelessness problem. We 

have 3,500 kids in Minneapolis who go to school every day from a 

shelter. It is a disgrace, a national one. 

I say that to just sort of set the table a little bit. I have heard— 

and I can’t verify this; I am hoping you can—that only one in four 

individuals or families who qualify for housing assistance actually 

receive that assistance. Do you all have any information on that? 

Ms. HEAD. We do have some statistics on that we can share with 

you. 

Mr. ELLISON. Okay. 

Ms. HEAD. I am sorry I can’t quote them off— 

Mr. ELLISON. No, it is okay. But I am interested in hearing that. 

And like I said, in Minneapolis, there are more than 10,000 people 

on the waiting list for public housing. They have actually closed the 

list. And so if you are a family in need of this service, you can’t 

even put your name on the list because the list is closed. 

Not a single family has moved off that list and received safe, affordable housing in the past 15 months. And I fear that no more 

will due to the sequester and continued cuts to housing. 

Can you share with me just—this is a general question—how you 

all analyze this problem of the availability of affordable housing 

particularly for low-income families? Do you think at this time we 

are in an acute crisis stage? 

I think we are, but what do you think? 

Ms. HEAD. I would say that it is clear that there are still huge 

demands across the country for affordable housing. I would definitely agree with you on that. We do analyze through our policy development and research. We do a lot of analysis of where those 

needs are. And part of those statistics are part of our underwriting 

decisions when we are underwriting loans. 

Mr. ELLISON. Right. 

Ms. HEAD. That is how we manage it from the FHA mortgage insurance program. And of course, we do know that we have waiting 

lists across the country for our project-based rental assistance proVerDate Nov 24 2008 11:20 Nov 12, 2013 Jkt 081756 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 K:\DOCS\81756.TXT TERRI
31 

grams, too, our Section 8 program. So there does continue to be a 

demand for affordable housing. 

I will share with you also that last year we implemented a lowincome housing tax credit pilot program so that we could ensure 

that FHA was playing in the right market, where we could provide 

additional affordable housing. And those loans are being expedited 

through the process in our organization. 

Mr. ELLISON. With the limited time I have, could you just elaborate on your thoughts on why it is important for the public sector, 

HUD and others, to be involved in making sure that there is housing availability for the low-income? 

Ms. HEAD. As part of FHA’s mission, we are here to provide safe, 

sanitary, affordable rental housing. And in the current market crisis that we have been in where many, many folks lost their homes, 

the demand for the rental assistance across the country and the 

rental programs across the country escalated. We have been in a 

position to provide that and we have played our countercyclical role 

in that realm. 

Mr. ELLISON. Mr. Chairman, may I ask one last question, sir? 

Chairman NEUGEBAUER. Absolutely. 

Mr. ELLISON. Thank you. 

Could you please elaborate on the health and educational impacts, particularly on kids, when their family’s home is insecure because of the housing environment that they are in, and therefore 

why your mandate and mission is important? 

Ms. HEAD. That is a tough question for me to answer. 

Mr. ELLISON. Okay. 

Ms. HEAD. It is. Obviously, many of us would understand that 

when folks are homeless throughout the country, it does have emotional impacts and other impacts on the community and on the individuals. So, I think all of us realize that. 

Mr. ELLISON. Thank you. 

I yield back, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from California, Mr. Royce, is recognized 

for 5 minutes. 

Mr. ROYCE. Thank you, Mr. Chairman. I would like to return to 

this eminent domain question, and maybe get a little bit more concrete answer from you on that question. 

I originally raised this question with FHA Commissioner Dave 

Stevens. And he, of course, made the point, as has been reiterated 

here, that FHA should be barred from refinancing loans acquired 

through eminent domain. We have a situation in California, of 

course, where a number of municipalities are exploring what is 

likely unconstitutional, and that is the new use of eminent domain 

to seize residential mortgages. 

And the point that I would make to you is that with Fannie and 

Freddie not being in the program, then such a program if it is done 

just by FHA would represent a cost ultimately borne by taxpayers, 

and we would, under that scenario, be leaving the FHA open to adverse selection as the only conduit for loans seized this way. 

And the other point I would make, and maybe you could comment on this, but the group pushing this approach has highlighted 

the role of the FHA in their business plan. So you had commented 

32 

that the Secretary has spoken on this. If the Secretary has spoken 

on it, could you tell us what the Secretary expressly said about it? 

Mr. COULTER. To my knowledge, eminent domain has not occurred—or no governmental entity has enforced eminent domain at 

this point in time. There is— 

Mr. ROYCE. Yes, at this point in time, but this is about the future. 

Mr. COULTER. And what I am telling you is in terms of what 

FHA will or won’t do in the future, I am not going to make policy 

on the fly. I will, however, get back to you in writing and— 

Mr. ROYCE. Okay. Then, let me put it this way. Maybe I can be 

more precise with an exact question that you could answer at this 

time. Does the current leadership of FHA share former Commissioner Stevens’ view that FHA should not be in the business of insuring loans acquired through eminent domain? 

Mr. COULTER. We absolutely share those concerns. And I think 

the Secretary has been clear on that. And I would further add 

that— 

Mr. ROYCE. You share those concerns. You share that view. That 

was the question. You share the view. As I understand it, what you 

are saying is the FHA should not be in the business of insuring 

loans acquired through eminent domain. You share that view. 

Those were his words, and I was trying to see if those are your— 

Mr. COULTER. My words are that we share the concerns about a 

government entity taking properties through eminent domain. The 

policy that you are articulating is a policy that the GSEs have out. 

We have not evaluated that policy to determine what, if anything, 

FHA would do prospectively. It would be highly improbable, I believe, for FHA to put itself in a position where we would be the 

only insurer on those types of refinance transactions. 

Mr. ROYCE. Because of the adverse selection problems and everything else, I assume. And maybe because of the unconstitutionality 

of it on the face of it. But what do you think about the fact that 

the group pushing this approach has highlighted the role of the 

FHA in their business plan? Could I have your commentary? 

Mr. COULTER. I think they are highlighting a principle that has 

not been vetted, endorsed, or reviewed by Single Family Housing, 

FHA, or, I believe, HUD. 

Mr. ROYCE. My time has expired, Mr. Chairman. Thank you very 

much. 

Chairman NEUGEBAUER. I thank the gentleman. 

And I thank each of the panelists. I think this has been a good 

discussion. I think Members probably have a little better understanding of these programs, but I think we also exposed that we 

have some areas to work on. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

And without objection, this hearing is adjourned. 

[Whereupon, at 4:36 p.m., the hearing was adjourned.] 

(33) 

A P P E N D I X 

May 16, 2013 

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