Carson Hearing Focuses on FHA, HUD’s Budget, Hurricane Relief Efforts

At a recent House Financial Services Committee oversight hearing, HUD Secretary Ben Carson outlined his new "FORWARD" Initiative; responded to a series of questions about the Federal Housing Administration, HUD’s Fiscal Year (FY) 2018 Budget, and the agency’s disaster relief efforts; and repeated statements he has made in the past supporting the Housing Credit.

In his written and oral testimony, Carson told the Committee that an increasing number of Americans pay more than half their income for housing and that chronic homelessness continues unabated. Solving these issues, he argued, will require HUD to adopt a new plan, which Carson called the FORWARD initiative, designed to meet the needs of today’s housing market.

Carson said his FORWARD Initiative is comprised of three parts: "Reimagining How HUD Works," which involves updating HUD’s internal processes and training; "Restoring the American Dream," or adjusting HUD’s housing assistance programs to better promote self-sufficiency; and "Rethinking American Communities," which Carson described as promoting community development through public-private partnerships.

Carson’s testimony also touched on HUD’s disaster assistance efforts in response to Hurricanes Harvey, Irma, and Maria. Carson told the Committee that Deputy HUD Secretary Pam Patenaude was overseeing HUD’s disaster response and that HUD currently has staff on the ground in disaster-impacted areas helping displaced residents find shelter.

Carson concluded his testimony by calling on Congress to consider housing finance reform. HUD, Carson argued, should play a key role in any discussion on the future housing finance system given the important role the Federal Housing Administration (FHA) and Ginnie Mae play in the market.

In his opening statement, Committee Chairman Jeb Hensarling argued that Carson may be the most qualified leader HUD has ever had, given his upbringing in poor urban neighborhoods and passion for addressing urban poverty through HUD programs. Hensarling also stated that HUD has failed to live up to its anti-poverty aspirations, noting that the national poverty rate since HUD was established 52 years ago remains basically unchanged, despite the agency spending $1.6 trillion. Hensarling expressed support for the tenant-based Section 8 program, which he said was an invaluable resource for helping the elderly and disabled.

Committee Ranking Member Maxine Waters’ opening statement expressed her concerns that Carson was unfit to lead HUD. She criticized Carson for supporting the proposed cuts to HUD programs in President Trump’s proposed FY 2018 Budget when the country is facing a severe affordable housing shortage.

FHA Mortgage Insurance

During the hearing, Carson faced several questions on the status of FHA’s single-family mortgage insurance programs. Carson told the Committee that he expected President Trump to submit to the Senate very soon Brian Montgomery’s nomination to serve as FHA Commissioner. Recently, the Senate Banking Committee announced that it will hold a hearing on October 26 to discuss Montgomery’s nomination.

Rep. Brad Sherman (D-CA) asked Carson about the status of FHA’s mortgage mutual insurance fund (MMF), which insures loans originated through FHA’s home purchase and reverse mortgage programs. Carson replied that the MMF was "very close" to its statutorily mandated 2 percent capital ratio and performing adequately. Sherman then pressed Carson on whether FHA would consider cutting the annual mortgage insurance premiums it charges borrowers for FHA home purchase loans and whether it would reverse FHA’s policy requiring FHA borrowers to pay annual insurance premiums for the entire life of the loan. HUD in early January announced a 50 basis point reduction in FHA annual fees, which was quickly reversed by the Trump Administration after the new president was sworn in.

Carson told Sherman that both issues are "under study" but that he would not reach a decision until an FHA Commissioner has been confirmed.

In response to questions from Rep. David Trott (R-MI), Carson said that HUD was currently working with the U.S. Department of Justice (DOJ) to end DOJ’s use of the False Claims Act to seek remittances from lenders defects associated with FHA loans. Many lenders have said that DOJ’s willingness to use such claims in recent years has made it too risky to originate FHA loans. Financial Institutions and Consumer Credit Subcommittee Chairman Blaine Luetkemeyer (R-MO) inquired about the status of an FHA rulemaking proposed last year designed to make it easier for condominium loans to be eligible for FHA insurance. Carson said that HUD is in the "home stretch" with the rulemaking and hopes to release a final rule soon.

Proposed Program Cuts

In addition to Waters’ opening remarks, several other Committee Democrats criticized Carson’s support for the President’s proposed budget, which would cut $13 billion from various HUD programs. Carson replied to several questions on the Budget by suggesting that HUD would have to learn to do more with less.

Support for Housing Credit

Answering a question from Rep. Dennis Ross (R-FL) about how the federal government can attract more community development investment, Carson said the Housing Credit is an example of an effective federal program that utilizes private investment. Carson noted that the Housing Credit was one of only two federal tax credits that were included in a tax reform framework released jointly by the Trump Administration and congressional Republican leaders.

Support for Puerto Rico Assistance

Committee Democrats, including Waters and Nydia Velazquez (D-NY) asked Carson whether he agreed with a series of messages President Trump had posted on Twitter that some interpreted as the President suggesting that his Administration may have to end efforts to assist disaster victims in Puerto Rico before recovery efforts are complete. Carson declined to address the specific Tweets, but pledged that HUD would continue disaster recovery efforts on the island for as long as necessary.

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