House Subcommittee Examines Administration Response to Housing Crisis

On October 6, the House Financial Services Subcommittee on Insurance, Housing, and Community Opportunity held a hearing on the Obama Administration’s response to the housing crisis.  In her opening statement, Subcommittee Chairwoman Judy Biggert (R-IL) stated that the Administration did not achieve its own projections for the programs it created in response to the housing crisis, and that she believes the programs have failed to deliver.  She added that the two housing-related proposals—a modified version of the Home Affordable Refinance Program (HARP) and Project Rebuild—described in President Obama’s speech unveiling the American Jobs Act sound like additional stimulus spending and she hopes that we get a better understanding of lessons learned before starting new approaches.

Representatives from Treasury, HUD, and the U.S. Department of Agriculture (USDA) all testified about how programs run by their agencies are addressing the housing crisis.  Darius Kingsley, deputy chief of the Homeownership Preservation Office at Treasury, testified that as of August 31, 2011 more than 800,000 homeowners have received permanent loan modifications under the Home Affordable Modification Program (HAMP).  He explained that the percentage of borrowers receiving permanent modifications through HAMP has been increasing.  Over the last 16 months, 76 percent of borrowers starting trial HAMP modifications received permanent modifications.

Kingsley also highlighted the Hardest-Hit Fund (HHF), testifying that all 19 state housing finance agencies (HFAs) participating in the program are currently offering assistance.  He also stated that the five largest mortgage servicers are participating in programs with all 19 HFAs.

Acting Assistant Secretary for Housing and Federal Housing Administration Commissioner Carol Galante said HUD understands the disappointment that the Emergency Homeowner Loan Program (EHLP) is not reaching more families.  She said HUD is also disappointed and recognizes that the program set-up took longer than anticipated.  The Dodd-Frank Act allocated $1 billion to HUD for EHLP to help approximately 30,000 unemployed borrowers.  However, by the application deadline on September 30, HUD had received 100,000 applications with only about 12,000 of them qualified for assistance.  Therefore, HUD expects to allocate between $400 million and $500 million of the $1 billion allocated for the program.

Galante testified that FHA refinance programs have helped over 1.5 million homeowners take advantage of current low interest rates.  She also testified that the Neighborhood Stabilization Program (NSP) has been successful in reducing vacancy rates and lifting property values. 

USDA Rural Housing Services Administrator Tammye Trevino discussed the agency’s work to alter the Section 502 single-family housing guaranteed loan program so that its fees are expected to offset losses.  She stated that the FY 2012 fee structure will be a 1.97 percent up-front fee with an annual fee of 0.3 percent.

Trevino also testified that at the end of September, USDA, HUD, and the Michigan State Housing Development Authority signed a memorandum of understanding (MOU) to “coordinate subsidy layering reviews for rental housing developments funded by more than one source in Michigan…the MOU will pilot test national efforts to align federal rental housing policies and programs across the country."

Representative Maxine Waters (D-CA) said she was disappointed that HUD was not able to get the EHLP money out in a timely way.  She requested that the Federal Housing Finance Agency (FHFA) give her office information on FHFA’s request for information on how to dispose of single-family real estate-owned (REO) properties.

Representative Robert Dold (R-IL) questioned the cost for administering EHLP.  He said states receiving funding to run the program directly spent less than HUD on administrative costs.  He said that, for example, the cost per loan is approximately $2,600 in Connecticut and $2,800 in Pennsylvania but it is $7,400 at HUD.  Galante responded that the states had the benefit of already having the program up and running and that HUD’s costs include the cost of start-up. 

During a second panel that included testimony from private sector representatives, Representative Robert Hurt (R-VA) asked if the government should focus its resources on foreclosure prevention programs instead of neighborhood stabilization programs like NSP.  Andrew Jakabovics, senior director for policy development and research at Enterprise Community Partners, replied that NSP has helped reduce blight in neighborhoods and that foreclosure cannot be prevented in every case.