[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
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
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81-756 WASHINGTON : 2013
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HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
GARY G. MILLER, California, Vice MAXINE WATERS, California, Ranking
Chairman Member
SPENCER BACHUS, Alabama, Chairman CAROLYN B. MALONEY, New York
Emeritus NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California BRAD SHERMAN, California
FRANK D. LUCAS, Oklahoma GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina CAROLYN McCARTHY, New York
JOHN CAMPBELL, California STEPHEN F. LYNCH, Massachusetts
MICHELE BACHMANN, Minnesota DAVID SCOTT, Georgia
KEVIN McCARTHY, California AL GREEN, Texas
STEVAN PEARCE, New Mexico EMANUEL CLEAVER, Missouri
BILL POSEY, Florida GWEN MOORE, Wisconsin
MICHAEL G. FITZPATRICK, KEITH ELLISON, Minnesota
Pennsylvania ED PERLMUTTER, Colorado
LYNN A. WESTMORELAND, Georgia JAMES A. HIMES, Connecticut
BLAINE LUETKEMEYER, Missouri GARY C. PETERS, Michigan
BILL HUIZENGA, Michigan JOHN C. CARNEY, Jr., Delaware
SEAN P. DUFFY, Wisconsin TERRI A. SEWELL, Alabama
ROBERT HURT, Virginia BILL FOSTER, Illinois
MICHAEL G. GRIMM, New York DANIEL T. KILDEE, Michigan
STEVE STIVERS, Ohio PATRICK MURPHY, Florida
STEPHEN LEE FINCHER, Tennessee JOHN K. DELANEY, Maryland
MARLIN A. STUTZMAN, Indiana KYRSTEN SINEMA, Arizona
MICK MULVANEY, South Carolina JOYCE BEATTY, Ohio
RANDY HULTGREN, Illinois DENNY HECK, Washington
DENNIS A. ROSS, Florida
ROBERT PITTENGER, North Carolina
ANN WAGNER, Missouri
ANDY BARR, Kentucky
TOM COTTON, Arkansas
KEITH J. ROTHFUS, Pennsylvania
Shannon McGahn, Staff Director
James H. Clinger, Chief Counsel
Subcommittee on Housing and Insurance
RANDY NEUGEBAUER, Texas, Chairman
BLAINE LUETKEMEYER, Missouri, Vice MICHAEL E. CAPUANO, Massachusetts,
Chairman Ranking Member
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
GARY G. MILLER, California EMANUEL CLEAVER, Missouri
SHELLEY MOORE CAPITO, West Virginia WM. LACY CLAY, Missouri
SCOTT GARRETT, New Jersey BRAD SHERMAN, California
LYNN A. WESTMORELAND, Georgia JAMES A. HIMES, Connecticut
SEAN P. DUFFY, Wisconsin CAROLYN McCARTHY, New York
ROBERT HURT, Virginia KYRSTEN SINEMA, Arizona
STEVE STIVERS, Ohio JOYCE BEATTY, Ohio
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
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.
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 commitment 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 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 expecting 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.
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.
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.
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 underwriting 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 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 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?
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, sub-State 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--
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--
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--
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
loan-to-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 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 fixed-rate 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 relocation 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. 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.
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.
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 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.''
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.
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.
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 actually 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?
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.
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 moderate-income 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 mortgages 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?
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 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
because 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 programs, 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
low-income 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 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.]
A P P E N D I X
May 16, 2013
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