SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 2383 words

COMMITTEE: SENATE BANKING HOUSING AND URBAN AFFAIRS

HEADLINE: HOUSING AND COMMUNITY DEVELOPMENT NEEDS

TESTIMONY-BY: MEL MARTINEZ, SECRETARY

AFFILIATION: U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

BODY:
Opening Statement of The Honorable Mel Martinez Before the U.S. Senate Committee on Banking, Housing, and Urban Affairs

Thursday, December 13, 2001

Chairman Sarbanes, Ranking Member Gramm, and distinguished Members of the Committee, thank you for the invitation to testify before you this morning. I appreciate this opportunity to address the many ways in which the Department of Housing and

Urban Development (HUD) is working to meet the nation's housing and community development needs.

Mr. Chairman, I would like to begin by thanking you and the Members of this Committee for the advice and expertise you provided this year as I settled into town and took on this tremendous challenge. The Committee has shown me great respect, which I appreciate, and we have developed a very positive working relationship.

Let me also thank you for your cooperation in confirming HUD's Presidential nominees: I consider myself fortunate to be surrounded by colleagues who bring great expertise to the job from both the public and private sectors, and have a rich diversity of background and experience. With your continued assistance, we hope to have our entire management team in place in the near future. Our job is made easier through the support of a President who is firmly committed to HUD's mission of public service. President Bush is an active advocate for our work at HUD. He speaks passionately about the dreams a family can achieve through homeownership. He has joined me on two occasions to stress the point by building homes with Habitat for Humanity... and wants to triple the funding for the HUD program that supports the good work of similar organizations.

President Bush has directed this Department to serve Americans in need not simply by raising their quality of life to some minimum standard, but by fueling their hopes and dreams to achieve the life they always imagined. Despite the success of welfare reform, too many families still live below the poverty line. As a catalyst in our communities, HUD is putting its resources to work empowering citizens to lift themselves out of poverty and into prosperity.

We have touched many lives this year... in many different ways.

The Department reacted quickly and sympathetically following the tragic events in September. I immediately required lenders to provide relief on FHA-insured mortgages for families of the victims, and urged conventional lenders to do the same. They responded, and we have protected these families from losing their homes. A short time later, Secretary Rumsfeld and I also announced a mortgage rate cut for National Guardsmen and Reservists called to active duty.

HUD is providing an additional $700 million in Community Development Block Grant funds to help stimulate New York City's economic recovery. We also allowed waivers of regulatory provisions for the HOME, Section 8, and public housing programs.

Immediately after being sworn in, I took steps to steer HUD's focus back to its core mission: helping families find affordable and decent housing. This means ensuring housing opportunities for those who rent either out of necessity or by choice. And it means creating new opportunities for homeownership, so that more families can achieve what is envied around the world as the American Dream.

The Census Bureau reported in October that the homeownership rate reached an all-time high of 68.1%. Historically, homeownership rates for minority groups have been lower than for the rest of the population. Minority homeownership stands at 49.2%, and while this is a record high and positive news, we must continue to do better in closing the gap.

We have begun to create new opportunities for homeownership, so that more families can achieve what is envied around the world as the American Dream.

This year, HUD reached out to the thousands of low-income families who find the road to homeownership blocked by high downpayments, and proposed the President's American Dream Downpayment Fund. We also put forward the new Federal Housing Administration (FHA) hybrid adjustable rate mortgage, which promotes homeownership by reducing initial homebuying costs. Congress recently provided funds subject to authorization for the first of these, and authorized the second, for which you have my thanks.

If we are to further expand the ranks of America's homeowners, we must address the challenge of making the homebuying experience less complicated, the paperwork demands less time-consuming, and the mortgage process itself less expensive.

To ensure that homebuyers have the information they need in order to make an informed purchase, I have undertaken comprehensive reform of the Real Estate Settlement Procedures Act (RESPA). In addition to preserving yield spread premiums as a valuable tool for opening the doors of homeownership, reform will: (1) ensure better protections for new homebuyers and those who refinance; (2) offer clarity for the mortgage lending industry about their disclosure responsibilities, and; (3) provide an additional tool to fight predatory lending.

The need for RESPA reform is even more urgent during times of economic uncertainty. Homeownership helps create financial stability for families, and in return brings economic stability to our communities.

Homeownership is an important goal, but is obviously not an option for everyone. I appreciate the need to expand the availability of affordable rental housing, and ensure quality and options for residents. The just-enacted 25 percent increase in the limits for FHA multifamily insurance will help to spur the construction and rehabilitation of affordable rental housing. I am awaiting the recommendations of the Millennial Housing Commission, as we look to ways to address affordable housing needs. I will continue to urge the industry, and the Government- Sponsored Enterprises in particular, to do much more in the area of affordable housing production.

But let me say that I look forward to the day when we measure compassion not by the number of families living in assisted housing, but the number of families who have moved into a home of their own.

Predatory lending and property flipping are abusive practices that continue to plague homebuyers in cities across the country. Senator Sarbanes, the Administration is particularly concerned about the situation in Baltimore. Since April, our Housing Fraud Initiative has resulted in 40 indictments, six federal arrests, two state arrests, 27 successful prosecutions, and 66 debarments. We have provided relocation assistance to 46 families. We also worked with you, Mr. Chairman, to develop the Credit Watch legislation that was included in the fiscal year 2002 budget.

I am pleased with these accomplishments, but we know there is more work to be done. HUD remains committed to addressing the problems in Baltimore, and we feel confident that the lessons we learn there will be beneficial to the rest of the country. HUD looks forward to joining with the Treasury Department in its efforts to encourage the development of national best practices to address predatory lending.

Exposure to lead-based paint is a serious concern that many low- income citizens deal with on a daily basis. Every American child deserves the opportunity to grow up in a healthy home, safe from the debilitating and often irreversible effects of lead exposure. Because the most common source of exposure is lead paint in older housing, HUD has a critical role in protecting our children. HUD awarded more than $67 million in grants nationwide in October to protect children from lead-based paint, with a focus on eliminating lead hazards in low-income housing.

At HUD, we are working to ease the daily struggles of those who live in the most difficult circumstances. Certainly, this includes the residents of the colonias. Earlier this year, I traveled to the colonias - the communities along the Mexico border steeped in poverty - to see the difficult living conditions for myself. HUD has stepped in to offer assistance, through grants that will bring water and sewer hook-ups, and a Colonias Task Force I established to ensure that HUD programs make an impact in the colonias.

In January, President Bush directed HUD to assist in his Faith- Based and Community Initiatives. We have studied the barriers that prevent grassroots social service providers from reaching out in partnership with the federal government to Americans in need. HUD has prepared a report examining what the Department can do through regulatory and management improvements to "level the playing field" and encourage greater acts of charity in our communities, while preserving Constitutional safeguards.

I urge the Senate to take up the President's faith-based legislation before Congress adjourns. This legislation is critical to helping HUD expand its partnerships with groups working to meet the housing needs of low-income Americans, the elderly, disabled citizens, and those living with HIV/AIDS.

HUD has a special duty to the nation's vulnerable populations, and this includes those who have no place to call home. Last month, we announced the awarding of more than $1 billion to organizations serving homeless Americans - the largest homeless assistance in history. To streamline and focus the response of the many federal agencies involved in delivering homeless services, the Interagency Council on the Homeless is being reactivated.

In addition, the Administration remains committed to expanding housing opportunities for people with disabilities. For example, a voluntary compliance agreement, signed recently with the District of Columbia Housing Authority, will provide more than 500 fully accessible public housing units to disabled residents. HUD continues to strive to ensure equal housing opportunities for all.

Mr. Chairman, Committee Members warned me during the confirmation process that HUD was plagued by mismanagement on many levels. I understood that meeting the needs of the American people meant improving HUD's management, and I assured you that I was prepared to take on this challenge.

In the past eleven months, HUD has significantly streamlined its management structure to improve the quality and delivery of services, and restore the agency's credibility in the eyes of Congress and the American public

I set a goal that HUD address audit findings made by the Inspector General in a timely manner and make corrections that actually fix serious management problems. As a telling sign that we are committed to doing better, HUD completed the six-month period ending September 30 with no overdue management decisions on any of the Inspector General's 363 audit recommendations. This is only the second time that HUD has met the goal of no overdue decisions in all the years that the OIG has been reporting audit resolution activity to the Congress.

Our goal is to deliver the best possible services to those in need, and we have moved aggressively to ensure that HUD programs are getting the job done.

With the support of the National Education Association, the American Federation of Teachers, and the Fraternal Order of Police, I suspended HUD's Officer Next Door and Teacher Next Door programs in April. This came after officials handed down indictments and felony convictions against buyers who purchased their homes fraudulently. We put into place aggressive monitoring and tightened controls to prevent homebuyer fraud, and restarted the programs in August.

Working with Congress, we terminated HUD's drug elimination program this year. This was a well-intentioned program that suffered from a large number of abuses, and duplicated the work of other Cabinet Departments. Despite the termination of this program, HUD's commitment to ensuring safe and drug-free homes for America's families has not wavered. In fact, to partially offset the elimination of this program, the President's FY 2002 Budget proposed, and the Congress appropriated, an enhancement for the Public Housing Operating Subsidies, which local officials may use at their discretion, including for activities formerly supported by the drug elimination program. I will work with the Office of National Drug Control Policy (ONDCP) to determine how best to capture and account for Departmental funds used for drug control activities. In addition, I am working with ONDCP, the Department of Justice, and other agencies in exploring ways to effectively meet this commitment.

Until this year, HUD's credit subsidy - which is used to cover expected losses on FHA multifamily loans - was fraught with uncertainty due to regular appropriations shortfalls. The Department restructured the program to make it more self- sufficient and less dependent on taxpayer dollars. Since the restructuring became effective on October 1, 2001, HUD has issued firm commitments totaling $869 million for more than 10,000 housing units.

I am proud of the strides we have made in identifying the programs that are meeting the needs of the people... and identifying - and fixing - those that are not. HUD is quickly becoming a more efficient, more effective provider of the services no agency but ours can deliver.

Mr. Chairman, I will conclude my formal testimony so that I may dedicate as much of our remaining time as possible to answering questions from the Committee. As I indicated to you in our last conversation, HUD's ongoing negotiations with the White House regarding the fiscal year 2003 budget preclude me from addressing - in anything more than very general terms - any budget initiatives we may be considering.

In closing, we all understand that housing is a non-partisan issue - one that crosses the lines of politics and party. The families who come to us for help are not interested in our political affiliations, and our success in serving them depends on cooperation. I am happy to say that this is the spirit in which HUD and the Committee have undertaken our work this year... and the same spirit that will guide us tomorrow and into the future. I would like to thank each of you for your personal support of my efforts, and I welcome your guidance as we continue our work together on behalf of the American people.

Thank you.



LOAD-DATE: December 13, 2001