February 25, 2010
HUD logo.jpg

On February 23, HUD Secretary Shaun Donovan testified before the House Appropriations Transportation-HUD Subcommittee on the FY 2011 HUD budget.  In his opening statement, Chairman John Olver (D-MA) said he was pleased to see a continued commitment to HUD’s Sustainable Communities Initiative and the Homeless Assistance Grant program.  However, Olver also stated he was concerned with the proposed cuts to the Housing for the Elderly (Section 202) and Housing for Persons with Disabilities (Section 811) programs as well as the decision to replace HOPE VI with the Choice Neighborhoods Initiative.

Ranking Member Tom Latham (R-IA) expressed in his opening statement his concerns about the solvency of the Federal Housing Administration (FHA) insurance fund and that HUD is trying to take on too many different initiatives and changes at once.
 
When questioned specifically on the $760 million cuts to the Section 202 and 811 programs, Secretary Donovan replied that it was a difficult decision, but that the majority of units produced to house these populations use the Housing Credit program and that the two programs need to be reformed.
 
Congressman David Price (D-NC) asked why all funding for the Self-Help Homeownership Opportunity Program (SHOP) was cut in the Budget request.  Donovan replied that the program succeeded in its goal of creating new partnerships and that all activities allowed under SHOP are also eligible activities under the HOME program, so there is no longer a reason for SHOP.  Price then asked the Secretary why, if the HOME program is supposed to absorb the SHOP program, the Budget proposes to cut HOME funding by $175 million.  Donovan repeated that this was a very tough budget year and they had to make cuts to a number of different capital funding programs, which he acknowledged will make producing new units harder.  He said that it was a difficult decision and that HOME is achieving good things.
 
Donovan responded to questions about FHA, saying that HUD is requesting a combined mortgage insurance commitment limitation of $420 billion for new FHA loan commitments for the Mutual Mortgage Insurance (MMI) and General and Special Risk Insurance (GI/SRI) funds.  Donovan also reminded the Subcommittee that HUD is taking a number of steps to mitigate risk to FHA, including increasing the mortgage insurance premium and changing the credit score and minimum down payment rules.  Donovan stated that HUD was very conservative in estimating housing prices when projecting expected income, called receipts, from FHA.
 
Congressman Ciro Rodriguez (D-TX) asked Donovan why the Budget does not request any new HUD-VASH vouchers for housing homeless veterans.  Donovan responded that they have run into some barriers in using all of the authorized VASH vouchers, mainly in using them with the VA hospitals.  He added that all of HUD’s homeless programs also assist veterans.
 
In response to Latham’s question about whether HUD should continue the Home Equity Conversion Mortgages (HECM) program, Donovan replied that they need to make some minor changes, such as increasing housing counseling, but that they should keep the program.  The Budget requests $250 million for HECM to avoid a large decrease in the principal limit.
 
Congressman Steven LaTourette (R-OH) expressed his disappointment that Ohio was not included in the Administration’s recently announced $1.5 billion foreclosure prevention initiative.  Donovan responded that the new initiative is part of a broader program focused on addressing negative equity issues.  He added that the Neighborhood Stabilization Program (NSP) is better suited to addressing Ohio’s foreclosure crisis.
 
Secretary Donovan’s printed testimony and additional hearing information can be found on the House Appropriations Committee website.