Testimony of John C. Weicher, Assistant Secretary for Housing-Federal
Housing Commissioner-Designate, U.S. Department of Housing and Urban
Development before the Senate Committee on Banking, Housing and
you, Mr. Chairman. It is a great honor to appear before this distinguished
Committee today as the nominee for Assistant Secretary for Housing/FHA
Commissioner. I am extremely grateful to President Bush and to Secretary
Martinez for offering me the opportunity to be part of this Administration,
in this important position.
has been central to the American Dream of homeownership since the
1930s. It is widely and rightfully regarded as a social policy experiment
that worked. FHA revolutionized the housing finance system and the
mortgage instrument. Working with GNMA, it pioneered the Mortgage-Backed
Security. It has helped to establish the viability of new mortgage
instruments such as Graduated Payment Mortgages and Home Equity
Conversion Mortgages. It has provided mortgage insurance for purchasers
of manufactured homes. FHA has a proud legacy.
homeownership remains important today. As Secretary Martinez has
pointed out, the homeownership rates among African-Americans and
Hispanic Americans remain below 50 percent, even though the overall
homeownership rate is at a record high. That is a challenge to HUD
and FHA in particular. During his campaign, President Bush proposed
the "New Prosperity Initiative," to expand homeownership opportunities
to lower-income families. The New Prosperity Initiative includes
$1.7 billion for an investor-based tax credit to encourage the construction
and rehabilitation of single-family homes in distressed communities,
parallel to the Low Income Housing Tax Credit. It also includes
the "American Dream Down Payment Fund," to provide $1 billion in
matching grants to lenders to help low-income families become homeowners;
and the downpayment voucher, enacted by Congress in December, allowing
low-income families and individuals with disabilities to use Section
8 rental vouchers toward the down payment on a home. The primary
responsibility for developing and implementing these important initiatives
will lie with other program offices in HUD, and with other agencies
in the Administration, but FHA will be working with them, drawing
on its long experience, to help more Americans realize the American
dream of owning their own home.
In addition to promoting homeownership, FHA provides mortgage insurance
for multifamily housing, supporting the construction of new apartment
projects and the refinancing of older ones. FHA multifamily insurance
serves an important public purpose - most of the projects that FHA
insures are affordable to families in the lower half of the income
distribution, and almost half are in underserved areas. These families,
and these communities, need FHA.
also insures a large portfolio of assisted rental housing projects
for lower-income families. It insures hospitals and nursing homes.
It insures home improvement loans. These are important programs
his confirmation hearing, Secretary Martinez stated that his first
priority will be for HUD to continue to put its own house in order,
building on the work of Secretaries Kemp, Cisneros, and Cuomo, and
addressing the institutional weaknesses identified by GAO and the
HUD Inspector General. He mentioned specifically some of FHA’s programs.
If confirmed, I plan to work with these experts and with the senior
management at HUD to remedy these problems. It is my intention to
make all of FHA’s programs work as well as possible, serving the
public purposes for which they were created.
Chairman, I know the issues and the problems of HUD from experience.
I have served at HUD in three previous administrations. From 1989
to 1993 I was Assistant Secretary for Policy Development and Research
for Secretary Jack Kemp in the administration of President George
Bush. I was Deputy Assistant Secretary for Economic Affairs (Chief
Economist) from 1975 to 1977 with Secretary Carla Hills in the administration
of President Gerald Ford. Before that, I spent one year (1973-1974)
as a division director. I have also served as Associate Director
for Economic Policy (Chief Economist) at the U.S. Office of Management
and Budget, from 1987 to 1989.
As Assistant Secretary for Policy Development and Research, I was
active in addressing several major policy issues that concerned
FHA. These included reform of FHA home mortgage insurance, regulation
of real estate settlement practices, and environmental issues in
housing. In addition, I directed the Secretary's Advisory Commission
on Regulatory Barriers to Affordable Housing. I also worked on some
of HUD’s major management challenges of that time.
1993, I have been Director of Urban Policy Studies at the Hudson
Institute. I was the project director for Hudson’s Michigan Urban
Policy Initiative, designing a state urban homeownership strategy
and developing a reform of the state’s property tax reversion process.
After two years of work, all our proposals were passed with overwhelming
bipartisan support in the state legislature and signed into law
by the Governor in July 1999. I have also held the F.K. Weyerhaeuser
Chair at the American Enterprise Institute, and I was Director of
the Housing Markets Program at the Urban Institute. Before coming
to Washington, I was a professor of economics at The Ohio State
University for ten years.
Last September I was very pleased to be appointed by the Congress
to the Millennial Housing Commission. I have also served on the
Committee on Urban Policy of the National Academy of Sciences, and
the Advisory Committee on Population Statistics of the U.S. Census
Bureau, and I have worked on three other national housing commissions.
All of this experience will be helpful at FHA.
Chairman, as I have talked with members of this Committee in the
last few days, several have asked me about my views on FHA programs.
They have referred to testimony that I’ve given and some of my publications
during 1995 and 1996. I would like to take this opportunity to make
my views clear, and place my testimony in the context of the policy
discussions of the time.
1995, the Clinton Administration published a "Reinvention Blueprint"
calling for drastic change in nearly all of HUD’s programs. (For
example, it proposed to voucher out public housing.) At the same
time, there were numerous proposals from Republican members of Congress
to abolish HUD, among them: a group of freshmen Congressmen; Sen.
Faircloth, who was chairman of the HUD Oversight subcommittee of
this Committee; and Sen. Dole, the majority leader and leading Presidential
candidate. Rep. Lazio, chairman of the Housing Subcommittee in the
House of Representatives, developed legislation to repeal the National
Housing Act and he carried it through the House and into conference.
In 1996, the Republican platform included a plank to abolish HUD.
was asked to testify and speak on these proposals, and I kept telling
my fellow Republicans that they should not abolish HUD. HUD served
- and serves - important public purposes, public purposes that are
supported by both Republicans and Democrats, and it serves those
purposes reasonably well. Rather than abolish HUD, I pointed out
the parts of HUD that did not work very well, and suggested that
Congress should fix them, or make sure they were better managed,
or abolish them if they chose. But they should not abolish HUD.
At a hearing before two subcommittees of this Committee in March
1995, Sen. Faircloth asked me, "Do you think we should abolish HUD?"
and I responded, "No, Senator, I don’t." I said further, "I would
leave the things that HUD does now with HUD doing them."
was almost the only Republican interested in housing policy who
didn’t want to abolish HUD.
the same time, President Clinton’s Reinvention Blueprint proposed
drastic changes in FHA’s single-family mortgage insurance program,
while leaving multifamily insurance unchanged. I thought that was
the wrong approach. Home mortgage insurance worked well; it served
a market that was not being served in the private sector; and it
did so while covering its cost and building reserves. The multifamily
programs presented the most serious management challenges in HUD.
Both Commissioner Retsinas and the IG were talking about the problems
in strong terms, and HUD was estimating that FHA would lose about
20 cents on the dollar for its entire multifamily portfolio. The
Reinvention Blueprint had things backwards.
Now, five and six years later, nobody in either party is proposing
to abolish HUD or terminate any of its major programs. Certainly
neither President Bush or Secretary Martinez has offered such proposals.
The Republican Party is much closer to the position I took in 1995
than it was back then. But of course what I wrote at that time is
still in print, or available through the internet, without the policy
context in which I was writing.
Mr. Chairman, I have been concerned with housing and urban policy
all my professional life, since my years as a graduate student in
economics at the University of Chicago. Most of my fellow students
chose to specialize in public finance, or money and banking, or
labor economics; quite a few became agricultural economists. I thought
about some of those fields. But I felt that the cities presented
the most urgent economic policy problems in America, and indeed
the University and the city threatened to be overwhelmed by them.
Starting with my doctoral dissertation, I have devoted my career
to housing and urban issues, and I’ve never regretted it. The Federal
Government has had two major housing policy objectives for many
years: helping families become homeowners, and making sure that
everyone lives in decent housing. Those are very important public
purposes; they are FHA’s basic missions; and I support them wholeheartedly,
as I have throughout my career.
Mr. Chairman and members of this Committee, the office of Assistant
Secretary for Housing is a high honor, a great responsibility, and
a tremendous challenge. Both President Bush and Secretary Martinez
have stated a strong commitment to working on a bipartisan basis
to address our urban problems. If I am confirmed, I pledge to work
with Congress, with both houses and both parties. Working together,
we can achieve the goals of housing policy, and I will certainly
do my part.
Thank you for the opportunity to appear before you this morning.