On February 11, HUD Secretary Julián Castro was the sole witness at a hearing before the House Committee on Financial Services on the financial status and oversight of the Federal Housing Administration (FHA), particularly the Mutual Mortgage Insurance Fund (MMIF). The hearing was called in response to the Administration's announcement in January that it would reduce the cost of mortgage insurance for FHA borrowers by 0.5 percentage points, from the current 1.35 percent to 0.85 percent. A coalition of 46 organizations, including NLIHC, signed a letter to Secretary Castro urging him to implement the insurance rate reduction, helping families save hundreds of dollars in mortgage payments each year.
For over four hours, Secretary Castro was asked to defend the Administration’s decision to reduce annual mortgage insurance premiums, as Republican lawmakers accused the HUD of recklessly acting like a subprime lender and violating federal law by failing to maintain the MMIF’s capital reserve ratio of at least 2% of the loans it guarantees. In November 2014, FHA reported to Congress that the MMIF had a capital reserve ratio of 0.41%.
Secretary Castro countered, saying that the cut in fees would only prevent the MMIF from reaching its 2% mandate by a couple of months and that FHA’s finances will continue to improve. He said, “The fact is that over the last several years since the crisis started, several safeguards have been put in place that helped strengthen the economic value of the fund… The premium is not changing who actually qualifies for an FHA loan. It is simply making it more affordable for hard-working Americans.”
In responding to Secretary Castro, Chair Jeb Hensarling (R-TX) stated, “With all due respect, we have heard that before, and you are sincere. But this committee has been told that once, twice, three times, and it hasn’t proven true. Once again, you are in violation of the law and that has got to stop.”
Mr. Hensarling also announced that, as HUD celebrates its 50th anniversary, the committee "will take an extensive review and thorough examination of the successes and failures of HUD. And not just measure inputs but measure the outputs as well and most importantly to find out how these programs can be designed to lift people from lives of poverty, lives of government dependency, and lift them to the dignity of work and self-sufficiency."
In response, Ranking Member Maxine Waters (D-CA) put out a statement questioning Mr. Hensarling’s motivations. She said, "I am very dubious of attempts to 'review and examine' HUD programs. Usually such reviews are merely a smokescreen to allow Republicans to cut or freeze spending that invests in our vulnerable citizens, and turn programs into block grants so that states can engage in a 'race-to-the-bottom.' I sincerely hope that the intent of this review is not to merely repeat the failed policies of the 1996 'welfare to work' reform law, but rather to find ways for our federal affordable housing programs to better meet the growing housing needs of our country.”
Watch the hearing and read Secretary Castro’s testimony here: http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=398666
Read Ms. Waters’s statement at: http://democrats.financialservices.house.gov/news/documentsingle.aspx?DocumentID=398851