Introduction

Over the past two years, we have worked hard at the U.S. Department of Housing and Urban Development (HUD) to aggressively implement President Bush's housing agenda and to fulfill our obligations to the American people. Our mission is straightforward: to expand homeownership; increase access to affordable housing free from discrimination; support community development and address the housing needs of society's most vulnerable.

Historically, HUD has often suffered from mismanagement and loss of focus. The Department, at times, has strayed from its core mission, seeing its programs balloon from 50 to over 300 during the past few decades. As the nation's 12th HUD Secretary, Mel Martinez took immediate action to put the HUD house back in order and to restore the public's confidence in the agency. Secretary Martinez made ethics, accountability and program effectiveness top priorities. Under his leadership, HUD's management has been streamlined, program duplication is being eliminated and tighter oversight procedures have been mandated. The goal is to become a high-performance department focused on solutions and results for the American people.

One of the Bush Administration's top priorities is to make homeownership a viable option for every American who wants to own a home. HUD responded by launching its Blueprint for the American Dream Partnership in 2002. For those who are not in a position to own a home or choose to rent, HUD is working hard to increase the supply and quality of affordable housing. Examples include HUD's Section 8 housing voucher and housing subsidy programs that help over three million low-income households pay rent.

We also made the unprecedented commitment to eliminating chronic homelessness within the next ten years, while ensuring that society's most vulnerable have the shelter and care that they need today¹. HUD has reconvened the Interagency Council on Homelessness and recently announced the largest homeless assistance program in the nation's history aimed at funding thousands of local housing and service programs around the country. The Administration also placed increased emphasis on community renewal and neighborhood redevelopment programs that battle social distress and empower individuals to make a difference at the local level. In the past two years, HUD's Community Development Block Grant (CDBG) program has provided $8.7 billion in assistance to over 1,000 eligible states and communities to undertake a broad array of housing, community and economic development activities.

As President Bush often says, it is compassionate to actively help our citizens in need and it is conservative to insist on accountability and results. Through HUD's efforts to aggressively implement the President's housing agenda, families now have more opportunities than ever to achieve the American Dream of homeownership; affordable housing opportunities for low-income Americans have increased; more protections exist for the most vulnerable among us, including homeless individuals, those with AIDS, the elderly and the disabled; and our nation's communities are being renewed. While much work remains, we are proud of the fact that we are making a real difference in people's lives.

¹The chronically homeless are a subpopulation of perhaps 150,000 who often have an addiction or suffer from a disabling physical or mental condition.

Our Mid-term Accomplishments

I. Increase Homeownership:

The Bush Administration's homeownership program is expanding the overall number of homeowners and closing the "homeownership gap" that exists between minorities and non-minorities.

Today, homeownership in America is at an all time high, but not all Americans have benefited. While nearly three-quarters of all white Americans own their homes, less than half of the nation's African Americans and Hispanic Americans are homeowners. The President, therefore, has set the goal of creating 5.5 million new minority homeowners by 2010, and he has challenged the public and private sectors to work together to reach or exceed this goal. A HUD study released last year revealed that adding 5.5 million first-time minority homebuyers will add a staggering $256 billion to the U.S. housing market.

• Key Accomplishment: In June 2002, President Bush announced America's Homeownership Challenge, the centerpiece of the Administration's efforts to close the homeownership gap that exists between minority and non-minority Americans. HUD's response to the President's challenge was the October 2002 launch of the Blueprint for the American Dream Partnership, an unprecedented public/private initiative that harnesses the resources of the federal government with those of the housing industry to accomplish the President's goal.

• Key Accomplishment: On October 15, 2002, President Bush and HUD hosted the first White House Conference on Increasing Minority Homeownership.

  We brought together representatives of the entire housing industry to provide specific commitments and discuss important issues on how they will work with us to empower more families through homeownership. As the President said in his remarks to the conference, "We can put light where there's darkness, and hope where there's despondency in this country. And part of it is working together as a nation to encourage folks to own their own home."

• Key Accomplishment: In 2002, President Bush proposed the $200 million American Dream Downpayment Initiative to help 40,000 low-income families annually make the move into homeownership over the next four years.

  Said Secretary Martinez, "The downpayment can be the single greatest obstacle to homeownership and with just a little help, President Bush and I believe hundreds of thousands of families can cross that threshold and share in the American Dream." The fund will be administered under HUD's HOME Investment Partnerships Program (HOME) and qualifying families will receive an average of $5,000 to be used toward their downpayment and closing costs.

• Key Accomplishment: In 2001, Secretary Martinez directed HUD to launch a major effort to reform the Real Estate Settlement Procedures Act (RESPA), aimed at making the homebuying process less expensive and far less complicated for consumers.

• Key Accomplishment: The Administration is working to remove uncertainty from the mortgage finance process and ensure that would-be homeowners, and existing homeowners looking to refinance, are armed with the facts. RESPA reform will ultimately prevent unscrupulous lending practices and increase homeownership for those who seek it, particularly minorities.
  
  We believe that our proposal can reduce settlement costs by an average of $700 per closing. Overall, the annual savings to consumers could be as much as $8 billion. That kind of savings will allow many Americans who are priced out of the homebuying market today to buy a home.

• Key Accomplishment: Under the Bush Administration, HUD has provided significant emphasis and support for low-income family homeownership opportunities with its Section 8 Homeownership Program. As of December 2002, the Section 8 Homeownership Program has enabled over 550 families to attain the dream of homeownership and over 200 Public Housing Authorities (PHAs) are now actively involved in this program.

  The program currently provides assistance to help low-income families cross the bridge from subsidized housing into homeownership, including help for the new homeowner with monthly homeownership expenses through the family's monthly payment and housing assistance payment subsidy. Monthly homeownership expenses include: principal and interest; mortgage insurance premiums; taxes and insurance; PHA allowances for utilities, routine maintenance costs, major repairs and replacements; and principal and interest on debt to finance major repairs, replacements or improvements for the home.

• Key Accomplishment: HUD is providing increased flexibility for Section 8 renters to own a home by allowing them to use up to a year's worth of vouchers toward a downpayment to purchase a home.

  On October 18, 2002, HUD published a final rule that provides, subject to appropriations, a single downpayment grant to be used toward the family's downpayment and closing costs. The rule also eliminates barriers to current program guidelines.

• Key Accomplishments: To increase single-family homeownership rates, HUD had set a national goal of 1.1 million Federal Housing Administration (FHA) single-family mortgage endorsements for 2002. HUD's Office of Housing greatly surpassed this goal with nearly 1.3 million actual endorsements last year.

  HUD also set a national goal of insuring 660,000 home-purchase mortgages for first-time homebuyers, but we surpassed that goal by insuring 684,248 first-time mortgages.

  To increase the number of minority families who could secure financing to buy a home, HUD set a national goal of insuring 346,500 home-purchase mortgages for minority families. Again, we far surpassed this goal by insuring 419,850 such mortgages. And to increase the efficiency of the loan approval process, we established a goal of processing 360,350 loan applications via automated underwriting. HUD surpassed its goal by processing a total of 404,617 applications.
  

• Key Accomplishment: During the last two years, Ginnie Mae provided a record $329 billion in mortgage capital for the FHA, Veterans Affairs (VA), and other housing programs, moving its total capital contribution to affordable housing to over $2 trillion. Reaching this milestone means that more than 27 American million families have had access to affordable housing or lower mortgage costs since Ginnie Mae began in 1968. Ginnie Mae, a division of HUD, provides liquidity for low- and moderate-income and first-time homebuyers.
  
  
• Key Accomplishment: During the past two years, Secretary Martinez has stepped up HUD's efforts to combat predatory lending. We are strengthening HUD's Credit Watch program, which identifies FHA-approved mortgage lenders who are responsible for excessive defaults and foreclosures. Under our changes, the program will allow fewer defaults and claims before we take action against lenders. And to further expand our protection of homebuyers, we have proposed an Appraiser Watch system modeled after Credit Watch. Faulty appraisals could lead to default and foreclosure, so this new program will hold appraisers of FHA-insured homes accountable for their performance in the same way lenders are held accountable. In cooperation with our partners on the federal and state levels, HUD is aggressively investigating predatory lending cases and creating an environment in which dishonest lenders find it harder to take advantage of unsuspecting borrowers. During the last two years, HUD has issued 16 new rules to prohibit deceptive or fraudulent lending practices, including a rule to bar "flipping" (reselling homes to uninformed buyers at higher prices).
  
  
• Key Accomplishment: In November 2002, Ginnie Mae proposed to reduce to 19 from 44 the minimum number of basis points that issuers of federally guaranteed mortgages must set-aside for servicing, a move that will cut the cost of federally insured mortgages and increase homeownership rates. Ginnie Mae-issued securities, backed by mortgages from the FHA, Veterans Administration and Rural Housing Service, are guaranteed by the full faith and credit of the U.S. Government.
  
  The proposed changes stem from President Bush's June 2002 call to add 5.5 million minority families to the roles of homeowners by the end of the decade and will help meet that goal by streamlining processes and making the securities more attractive to investors. The proposed changes also will provide lenders with more flexibility in pricing their mortgage products to homebuyers. Better pricing ultimately translates to reduced interest rates to borrowers and increased homeowners opportunities.

• Key Accomplishment: HUD provided $20 million in homebuyer education to assist future homebuyers in the process of buying, and keeping, a home.

  This new education assistance is targeted primarily toward those immigrants and minorities who may not be familiar with the homebuying process. Our goal is to make these new homebuyers more comfortable entering into the largest and most important financial transaction of their lives. Our Homebuyer Bill of Rights also will simplify the homebuying process and make it less confusing and costly.

  The vocabulary of mortgage lending and the process of buying a home are confusing and complex for even the most experienced investor. That is why it is important that families looking to purchase a home are educated about the homebuying process. They need reliable, understandable information about their options for financing.
  

• Key Accomplishment: Secretary Martinez boosted homeownership opportunities for police officers and teachers by improving management controls over HUD's Officer Next Door and Teacher Next Door programs in April 2001.

  These management changes, which were supported by the National Education Association, the American Federation of Teachers and the Fraternal Order of Police, were initiated after criminal charges were brought against buyers who purchased their homes fraudulently. HUD put into place aggressive monitoring controls to prevent homebuyer fraud and restarted the programs in August 2001. Today, both programs offer police officers and teachers a 50 percent discount on HUD-owned, single family homes in certain designated revitalization areas.

II. Promote Affordable Housing:

Increasing the availability of affordable housing has been a top priority for Secretary Martinez since taking office. To this end, we seek to expand access to affordable housing, improve the physical quality and management accountability of public and assisted housing, increase housing opportunities for the elderly and persons with disabilities, and help HUD-assisted renters make progress towards self-sufficiency.

At HUD, we are deeply committed to the families in this country who rent. Three-quarters of the HUD budget, approximately $23 billion next year, is dedicated to supporting the rental costs of low-income individuals and families. HUD has three major assistance programs that collectively help more than four million rental households: public housing and two Section 8 programs.

• Key Accomplishment: To encourage the production of single-family homes for sale in neighborhoods where affordable housing is scarce, the Bush Administration has proposed a single-family affordable housing tax credit.

  Over the next five years, this will provide developers with $1.7 billion in tax credits for building affordable single-family housing in distressed areas. These credits will make 200,000 new homes available over the next five years to low-income purchasers.

• Key Accomplishment: Under Secretary Martinez's leadership, FHA's basic multifamily housing insurance program, Section 221 (d)(4), experienced a substantial increase in activity.

  In 2002, HUD made commitments for 201 new construction or substantially rehabilitated projects, with over 39,000 units totaling $2.8 billion in mortgage loans. This total dollar figure is the largest number for the program during the last 10 years. In 2001, HUD made commitments for 139 projects, with over 21,000 units, totaling $1.5 billion in mortgage loans. The 2002 figures reflect a 42 percent increase in projects, a 79 percent increase in apartment units and an 85 percent increase in dollar value commitments.

• Key Accomplishment: HUD has initiated a 25 percent increase in the per-unit limits for FHA multifamily mortgage insurance programs.

  The increase, the first since 1992, is helping to boost the affordable housing supply in high-cost areas. For example, Philadelphia has seen its first new FHA-insured multifamily projects in more than five years and mortgage insurance applications have been submitted to finance developments in Washington, D.C., Baltimore, St. Louis and Minneapolis. These new developments would not be under consideration without an increase in the per-unit mortgage insurance limits.

• Key Accomplishment: Under Secretary Martinez's leadership, HUD put FHA's major multifamily insurance program on a stable, break-even footing.

  In 2001, HUD conducted the first comprehensive review of the program in over a decade and found that the methodology being used to establish premiums required change. After completing the review, HUD determined that the program could operate at a lower level of mortgage insurance premium, without the need for appropriations from Congress.

  During the previous eight years prior to 2001, the program ran out of funds on three separate occasions, shutting down the program. By correcting this problem, the Department has been able to lower mortgage insurance premiums without seeking additional appropriations from Congress. Today, the program is self-sustaining and responds to market forces, saving the taxpayers money and ensuring that developers have access to the program in the years to come. The result has been an increase in activity in FHA's major multifamily program from $1.5 billion in mortgage amounts in FY2001 to $2.8 billion in FY2002.

• Key Accomplishment: HUD lowered the mortgage insurance premium from 80 basis points to 57 basis points, saving individual developers $25,000 annually in mortgage insurance costs - savings that can be passed on to property residents.

• Key Accomplishment: HUD unveiled its Regulatory Barriers Clearinghouse in November 2002. The Web-based Clearinghouse encourages builders and developers to share ideas for overcoming the regulatory barriers that too often block affordable housing production on the local level.

  Our hope is that by sharing development ideas from throughout the country, we will expose other communities to solutions that can assist them in increasing their affordable housing stock. The Clearinghouse supports state and local governments, builders, community planners,
  non-profits, and the American public seeking information about laws, regulations, and policies affecting the development, maintenance, improvement, availability and cost of affordable housing.

• Key Accomplishment: HUD helped preserve affordable housing in New York City through an unprecedented partnership with the local government.

  Secretary Martinez and then-Mayor Rudolph W. Giuliani brokered a five-year plan to save affordable housing for 1,500 families who had fallen prey to unscrupulous lenders and nonprofit organizations in Manhattan, Brooklyn, Queens and the Bronx. In the partnership, HUD and New York City are investing nearly $168 million to rehabilitate more than 500 properties that were originally insured under HUD's 203(k) mortgage insurance program. These HUD-owned properties are now part of the city's overall revitalization program in these neighborhoods.

• Key Accomplishment: HUD has initiated reform efforts to improve the delivery of affordable housing units and to hold itself, as well as past grantees and new applicants, accountable for project readiness and performance.

  HUD first reformed its own internal processing procedures and greatly reduced the amount of time it takes to review and approve development proposals from Public Housing Authorities (PHAs). HUD has also worked with current HOPE VI grantees to revamp and tighten project milestones and has begun holding PHAs accountable to such deadlines. To that end, HUD has issued default letters to PHAs that fail to meet stated goals and time frames.

• Key Accomplishment: HUD also made several reforms to the HOPE VI program through its FY 2002 HOPE VI Notice of Funding Availability (NOFA). HOPE VI is a HUD program to revitalize severely distressed public housing properties.

  Through the NOFA, HUD will award smaller, more manageable grants to a wider range of PHAs with a strong emphasis on accountability and project readiness. Each HOPE VI applicant must now procure a developer by the time the application is submitted, commit up-front matching funds to the project, submit a complete family relocation plan, meet initial thresholds in order to have their application considered and demonstrate past performance with any prior HOPE VI awards. These changes will significantly improve the quality of applications and accelerate the development of new housing units.

• Key Accomplishment: HUD has significantly reduced its inventory of Real Estate Owned (REO) properties by almost 50 percent.

  Our REO inventory has been reduced to about 30,000 homes every month for more than a year now, down from about 50,000 homes per month just four years ago. This is especially impressive due to the fact that we accomplished this reduction during a period of economic stagnation, usually characterized by higher REO inventories, more defaults and greater difficulty in selling homes. We have also cut our time in inventory from 220 days to 171 days, and cut our loss from 41 cents on the dollar to 29 cents. Those savings add about $600 million each year that can be spent on other homeownership programs.

Fair Housing

• Key Accomplishment: HUD dramatically increased its fair housing enforcement activities.

  FHEO also completed 1,010 enforcement activities, including reasonable cause determinations, conciliation agreements and HUD referral of fair housing cases to the Department of Justice for processing. These activities represent 126 percent of the stated target of 800. The Fair Housing Assistance Program (FHAP) agencies completed 2,012 enforcement activities, representing 121 percent of the target of 1,656.

• Key Accomplishment: During 2001 and 2002, HUD's Office of Fair Housing and Equal Opportunity (FHEO) succeeded in drastically reducing the number of aged fair housing complaints from previous years.

  Major emphasis was placed on reducing the percentage of aged fair housing cases in the overall inventory, which was at an all-time high of 85 percent at the close of FY 2000. FHEO had a target of reducing the percentage of aged cases to no more than 35 percent of the inventory by the end of 2001. The goal was exceeded with a reduction to 29 percent of open cases being aged.

• Key Accomplishment: FHAP agencies succeeded in reducing their inventory of aged fair housing cases to 45 percent of the overall inventory.

  This surpassed FHAP's goal of reducing their inventory to no more than 48 percent of the inventory. HUD and the FHAPs achieved levels that were the lowest in the history of the program. This was accomplished through individually tailored regional plans, close monitoring of field activity by HUD and assistance from HUD field offices to over 90 FHAP agencies.

• Key Accomplishment: HUD has expanded initiatives and partnerships aimed at increasing accessible housing opportunities for persons with disabilities.

  HUD entered into a historic partnership with the National Association of Home Builders (NAHB) to educate and train persons in the housing industry about their responsibilities to provide accessible housing to persons with disabilities.

  In reaching this accord, HUD and NAHB agreed to aggressively promote design and construction requirements for accessibility in all multifamily housing, including apartment buildings, condominiums and cooperatives. These collaborative efforts will reach builders, architects, building owners, engineers, local governments, disability advocates and the general public to increase awareness of design and building requirements. HUD and NAHB will also encourage national trade organizations, the U.S. Conference of Mayors and the National League of Cities to inform their members on how to construct multifamily housing that is accessible to persons with disabilities.

• Key Accomplishment: HUD's FHEO program awarded a grant of nearly $900,000 to the International Code Council to ensure that more apartments, condominiums and other housing covered by the law are built to be accessible to people with disabilities, and to inform state and local governments about the safe harbors for compliance with the Fair Housing Act's requirements.

  This is a two-year grant that will provide training and technical assistance to states and other jurisdictions on the benefits of adopting building codes or laws that incorporate one of the seven safe harbors recognized by HUD as being consistent with the Fair Housing Act's accessibility requirements.

III. Strengthen Communities:

The Bush Administration is committed to helping local communities help themselves. We take great pride in empowering communities to flourish by encouraging local solutions to solve local problems.

HUD supports the community and economic development efforts of states, local communities and other HUD partners through our Office of Community Planning and Development (CPD). For nearly three decades, CDBG funds have built and rehabilitated homes, fueled business development, created jobs and improved the overall health of our nation's communities. Our HOME program helps strengthen communities by expanding the availability of homeownership opportunities and affordable rental housing. And CPD administers HUD's homeless programs, which are an essential component of the Administration's bold strategy to end chronic homelessness by the end of the decade.

We also share President Bush's commitment to knocking down the barriers that faith-based organizations face in acquiring federal grants. Unfortunately, the government has often been slow to recognize the importance of these groups, especially at the local level. Through our Center for Faith-Based and Community Initiatives, we are eliminating these roadblocks and substantially strengthening our partnership with faith-based and community groups. We believe that the spirit of compassion is alive and well in America's communities.

• Accomplishment: Because of our experience with disaster recovery and the flexibility of the CDBG program, HUD became central to the Administration's recovery effort after the September 11, 2001 terrorist attacks.

  To assist New York City, HUD awarded $2.7 billion in CDBG funding to the Empire State Development Corporation and the Lower Manhattan Development Corporation, with an additional $700 million coming from the President's emergency fund. These monies provides assistance for property and businesses damaged by, and economic revitalization related to, the terrorist attacks, including compensation to small businesses, nonprofit organizations and individuals for economic losses.

  HUD's CDBG 9-11 assistance program has shown results. Though residential occupancy rates in parts of lower Manhattan fell to 60 percent after the terrorist attacks on the World Trade Center, the HUD-funded Residential Grant program administered by the Lower Manhattan Development Corporation has offered incentives to retain and attract residents, helping raise the occupancy rate to 95 percent.

  Administered by the Empire State Development Corporation, the
  HUD-funded economic loss compensation program has as of early January 2003 aided more than 12,000 small businesses, employing almost 120,000 people. Our business assistance programs have retained and attracted more than 550 mostly small businesses, translating into thousands of jobs created or saved. We are also proud of the fact that substantial percentages of beneficiaries are of low and moderate-income households.
  

• Key Accomplishment: During 2002, CDBG provided housing assistance to 187,390 households, which was an increase of 8.7 percent over the 2001 level of assistance.

  The CDBG program provides assistance to states and communities to undertake a broad array of housing, community and economic development activities. One of those activities is housing assistance, a program that helps homeowners with housing rehabilitation assistance, as well as assistance to families to become homeowners.

• Key Accomplishment: HUD encouraged economic development and promoted affordable housing through its Community Renewal Initiative.

  The 41 Renewal Communities and eight new Empowerment Zones created by the Bush Administration have access to a very important tool - $22 billion in tax relief they can put to work creating jobs, growing businesses, promoting renewal and building houses.

  HUD's CDBG and HOME programs are key components of federal investment in America's cities. These programs work because HUD allocates the grants to local governments and organizations, which then determine the best way to spend them.

• Key Accomplishment: HUD is leading an unprecedented, Administration-wide commitment to eliminate chronic homelessness within the next ten years.

  Meeting such an ambitious goal requires investing in permanent solutions that decrease the number of homeless men and women, not simply moving individuals off the street and into shelters. In 2001, HUD reactivated the Interagency Council on Homelessness to better coordinate this effort and the work of the 18 federal agencies working to meet the needs of homeless persons. HUD and the Departments of Health and Human Services (HHS) and Veterans Affairs (VA) also have joined together in a unique collaboration that will provide $35 million to support local programs that provide permanent housing to the long-term homeless.

• Key Accomplishment: On December 17, 2002, Secretary Martinez announced the largest amount of homeless assistance in the nation's history, more than $1.1 billion to fund thousands of local housing and service programs around the country.

  This announcement signals a continuing effort by the Bush Administration to focus more resources on providing permanent housing and supportive services for the homeless population, including those persons who are mentally ill, addicted or physically disabled.
  
  Two types of grants were awarded:
  

  1. Continuum of Care Grants provide permanent and transitional housing to homeless persons. In addition, these grants fund services like job training, health care, mental health counseling, substance abuse treatment and child care; and
  2. Emergency Shelter Grants convert buildings into homeless shelters, assist in the operation of local shelters and fund related social service and prevention programs.
     
     

  HUD's Continuum of Care and Emergency Shelter Grant programs will support more than 3,000 local programs in all 50 states, the District of Columbia, Puerto Rico and Guam. As a result, an estimated 740,000 persons will receive the housing and services they need to become self-sufficient.

• Key Accomplishment: On December 6, 2001, Secretary Martinez approved 52 policy recommendations to enhance the management, coordination and delivery of HUD programs and services to improve the lives of residents in the Southwest Border Region (SWBR), colonias and migrant/farmworker communities.

  Since that time, HUD has successfully completed 85 percent of the policy report recommendations. In 2002 alone, more than $28 million of HUD investments were directed to colonias and migrant/farmworker communities.

• Key Accomplishment: On October 21, 2002, Secretary Martinez announced the Colonias Gateway Initiative, which seeks to develop affordable housing and infrastructure, and foster economic opportunity in the colonias. The undertaking will be accomplished by enhancing the capacity of organizations working along the U.S./Mexico border and acts as the catalyst in assisting businesses, nonprofit organizations and state and local governments to make sustainable, long-term investments in the quality of life for colonias residents. The Initiative legislation authorizes $16 million for the first year and such sums as necessary for six subsequent years.

  "The Gateway Initiative will make the federal government a partner with local residents who have an understanding of the border communities," said Martinez. "This is consistent with President Bush's philosophy that the best way for the federal government to inspire positive change is to help communities and individuals to help themselves."

• Key Accomplishment: To protect and strengthen Housing Authority communities that are suffering from the plague of drugs and drug related crime, HUD's Office of the General Counsel (OGC) worked with the Department of Justice to enforce a prompt eviction policy for those who engage in drug activity on or near public housing properties.

  Residents of public housing have a right to be safe and secure in their homes. The policy is incorporated through a provision in the public housing tenant's lease agreement that says tenants must assure that no member of the household, a guest, or another person under the tenant's control will engage in any drug related criminal activity on or near the premises. OGC worked to enforce this policy in courts throughout the country and was reinforced in early 2002 by the United States Supreme Court. In the landmark decision HUD v. Rucker, the Supreme Court unanimously held that "With drug dealers 'increasingly imposing a reign of terror on public and other federally assisted low income housing tenants,'" the prompt eviction policy was a valid way to keep communities safe from drug related crime.

• Key Accomplishment: America's children should have the opportunity to grow up in safe and healthy homes. Eliminating lead-based paint and other health hazards in the home is one way that HUD has committed to providing children this opportunity.

  Secretary Martinez recently celebrated the tenth anniversary of the Residential Lead-Based Paint Reduction Act by awarding nearly $95 million to protect children and families from health and safety hazards in the home. The Administration has increased the funding level for this important program by $26 million since taking office. The bulk of these funds will be used directly for lead abatement in homes, while the remainder will go to vital educational programs and research.

  In 2002, HUD initiated Operation LEAP (Lead Action Elimination Program), to leverage additional private sector resources for lead hazard control. These include: manufacturer donations of lead-free building components, no interest or low interest lead-based paint home improvement loans, and temporary housing from hotels or colleges for those who need to be relocated during lead abatement.

  The Administration also made the transition to new requirements to ensure that federally assisted housing is lead-safe for children and trained over 40,000 workers across the nation to implement the new safety rules. The Department also has been active in enforcing the Lead Disclosure Rule, a regulation that requires sellers and landlords to provide homebuyers and tenants with crucial information about the presence of existing lead-based paint hazards. To date, HUD has resolved twenty-seven cases resulting in commitments to test for and abate lead-based paint in nearly 160,000 units at an estimated cost of $22 million, $478,350 in penalties and $358,750 to fund child health improvement projects.

Center for Faith-Based and Community Initiatives

• Key Accomplishment: HUD has conducted an exhaustive review of the Department's regulations to identify barriers to faith-based participation in HUD programs. During this process, we found 82 instances of such regulatory obstacles.

  Our Center for Faith-Based and Community Initiatives also has conducted broad-based consultations on appropriate legal standards for church/state interaction, defined guiding legal principals for HUD and managed the entire clearance process.

• Key Accomplishment: On December 12, 2002, President Bush and Secretary Martinez announced that HUD would remove unwarranted restrictions preventing the participation of faith-based organizations in the Department's programs.

  By signing Executive order 13279, the President made it clear that faith-based organizations receiving HUD funds have every right to hold, express and practice their faith, so long as they do not use HUD funds to support inherently religious activities. The objective is to ensure that HUD programs do not discriminate and are open to all qualified applicants, regardless of their religious affiliation.

• Key Accomplishment: Earlier in 2002, Secretary Martinez announced HUD's support for the participation of faith-based and community groups in federally funded public housing programs. He authorized approximately 3,100 local housing agencies to institute "an open-door policy" for
  faith-based organizations to provide social services to public housing residents.

  In addition, Secretary Martinez has prohibited local housing agencies from forbidding seasonal religious symbols or displays in federally funded public housing, stressing that HUD regulations do not prohibit such displays in public settings, provided that equal opportunity is provided to organizations of all faiths.

• Key Accomplishment: HUD has improved lines of communication and information sharing with faith-based and community groups.

  As part of our outreach effort, HUD created the first CD-ROM of all SuperNOFA (Notice of Funding Availability) materials, including program descriptions, grant applications and a message from the Secretary. HUD
  has distributed 30,000 copies to date, with an additional mailing to 120,000 faith and community leaders underway.

  HUD also has designed a matrix handout to help faith-based and community groups readily identify the grant programs most relevant to their activities and areas of expertise. In addition, we have produced a satellite broadcast explaining grant opportunities, narrowcasted to HUD field offices and simultaneously webcasted.

IV. Improve Management, Accountability and Ethics:

For decades, HUD has been criticized for mismanagement, waste and lack of focus. Since taking office, however, Secretary Martinez has made strong ethics, sound management and accountability top priorities at HUD.

Because we manage public programs supported by the American taxpayer, we are accountable for ensuring that government funds are handled properly and achieve measurable results. Part of putting compassionate conservatism into action means using resources effectively and efficiently so we have the means to help others live the American Dream. Much has been done over the last two years to restore the public's trust in our Department.

• Key Accomplishment: Working with President Bush's Management Council and the Office of Management and Budget, Secretary Martinez and his team are fully implementing the President's Management Agenda to reform the agency.

  Under the leadership of Secretary Martinez, the first year of his Administration at HUD was largely devoted to getting the management team in place, assessing the Department's management environment, and formulating viable strategies and plans to address the major management challenges and program risks still facing HUD.

  The Department has provided the GAO with several reports that highlight HUD's progress in addressing management challenges, including the implementation of the President's Management Agenda. HUD has gone a long way toward restoring the confidence of Congress and the public in HUD's management of its financial resources.

• Key Accomplishment: HUD launched a new Management Plan process, initiated for FY 2002, to provide a unifying means for HUD organizations to produce strong, integrated results and to improve overall compliance, standards and efficiencies.

  Key elements of this plan included: assessing customer needs; developing working-level strategies, goals and action plans; establishing accountability for results; and evaluating management performance.

  Overall accomplishments for FY 2002 operations are impressive. HUD delivered results that made a difference for neighborhoods, homebuyers, public housing residents and citizens, particularly those of low and moderate-income levels. The Department completed or exceeded 85.9 percent of the performance goals established in the FY 2002 Management Plan.

• Key Accomplishment: Since the beginning of the Bush Administration, HUD's OGC has led and implemented Secretary Martinez's call that everything we do rest on a strong foundation of ethics.

  Extensive ethics briefings are annually conducted for all political appointees and other personnel in sensitive positions. While training for other employees is at the discretion of the Department, the Annual Ethics Training was offered in 2002 to all HUD employees. The information gained in HUD's annual trainings is emphasized and added to throughout the year in the OGC publication, The Ethics Standard. Developed at the start of the administration, the agency-wide newsletter provides regular information on ethics trainings as well as departmental practices and policies. HUD is also participating in the Fellows Program of the Council for Excellence in Government where selected managers from Headquarters and the field will work on a strategy to incorporate integrity and accountability as the foundation for HUD performance.

• Key Accomplishment: Secretary Martinez and his management team have taken aggressive enforcement action against participants in HUD programs who engage in fraud or otherwise fail to follow applicable requirements.

  Proper enforcement of HUD programs and regulations reduces the Department's risk of financial loss and improves the condition of HUD assisted or insured housing by deterring HUD participants committing violations. Over $8 million in civil money penalties have been administratively assessed, some in connection with predatory lending schemes; more than $3 million has been recovered for False Claims Act violations; and over $15 million recovered for violations of multifamily housing regulatory agreements. In addition, the OGC has vindicated the integrity of HUD programs by debarring over 500 participants in HUD programs who act irresponsibly. This precludes them from future participation in federal government programs.

• Key Accomplishment: HUD published the second in a series of periodical studies to measure the accuracy of income and rent determinations in all of the Department's rental subsidy programs.
  
  These studies have helped identify errors in rent and subsidy determinations, focusing attention on the need for stronger controls to reduce waste and possible fraud. In support of this effort, HUD launched a Rental Integrity Monitoring Program to provide detailed rent and income reviews by HUD field staff in high-risk housing agencies. The Department also established Wage Matching Agreements with state labor agencies as independent sources of earned income for use by housing agencies in rent calculations. Earned income has been determined to be approximately 50 percent of the $3 billion net annual subsidy overpayment problem.
  
  Other activities include, widespread training for HUD field staff and housing agencies responsible for income and rent determinations; revised user-friendly fact sheets and guidebooks for HUD field staff and housing agencies; a new tracking system to demonstrate operational progress in preventing as well as reducing rental subsidy errors; and a series of proposals for simplifying rent and income requirements.

• Key Accomplishment: Working with Congress, Secretary Martinez terminated HUD's drug elimination program in 2001. 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 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.

• Key Accomplishment: HUD developed and implemented a new general ledger system for FHA.

  This was the first step in a multiyear plan to replace FHA's commercial accounting system with an integrated financial management system that fully complies with federal budgeting, accounting and system requirements.

  Previous plans to implement a new general ledger had gone unfulfilled for nearly a decade and the commercial accounting system did not comply with federal financial management systems requirements, including requirements for budgetary accounting, funds control and implementation of credit reform. Implementation of the new general ledger is the first major phase in a multiyear plan to provide FHA with an integrated financial management system that fully complies with federal requirements to strengthen the management and control of FHA's business.
  

• Key Accomplishment: HUD completed a major enterprise-wide realignment resulting in a streamlined organization with fewer organizational layers.
  This support and realignment created a more efficient and effective organization by: (1) building a structure that supports a focus on results and (2) strengthening the ability of HUD's Program Assistant Secretaries to better coordinate and monitor all day-to-day operations.
  
  
• Key Accomplishment: HUD's Office of Human Resources drafted its first Human Capital Management Plan.
  
  To address the human capital issues facing the Department, the Human Capital Management Executive Steering Committee, chaired by the Assistant Secretary for Administration and composed of senior officials from offices throughout HUD, crafted this initial plan. The draft plan, completed in December 2002, supports a strategic vision that HUD's workforce is mission-focused, diverse, highly qualified and well prepared to meet the challenges ahead. Within the new plan, strategic priorities have been identified to establish processes and information systems within HUD to enable effective implementation of the Human Capital Strategic Plan into HUD's day-to-day operations.

  The Department also prepared the requirements for a Comprehensive Workforce Analysis, which is vital to successful succession planning, the carrying out of mission-critical functions and addressing skill gaps/deficiencies in mission-critical occupations.

• Key Accomplishment: In January 2002, HUD completed a Resource Estimation and Allocation Process (REAP) baseline for estimating resource requirements and prioritizing staffing allocations by program and office.

  REAP will be a key tool supporting the Department-wide effort to manage staffing resources and workload. REAP will also provide a foundation for HUD's long-term human capital strategies, including succession planning.
  

• Key Accomplishment: Secretary Martinez expanded HUD's Internship Program in an effort to maintain a constant flow of promising, talented individuals into HUD's workforce.
  
  Over 200 interns (Career, Presidential Management, and Legal Honors Interns) have been hired, with more than 50 percent being hired to meet critical staffing needs throughout HUD's field offices.
  
  
• Key Accomplishment: HUD developed in advance of most federal agencies the Department's first E-Government Strategic Plan.
  
  This enterprise-wide effort, demonstrates HUD's fundamental commitment toward transforming how the Department conducts business and strives to make government more citizen-centered. Through this initiative, which is at the heart of President Bush's Management Agenda, HUD has found new ways to empower citizens, help business partners improve efficiencies and enable employees to spend more time on value-added activities.
  
  
• Key Accomplishment: HUD increased the emphasis on awarding performance-based service contracts (PBSC). During fiscal year 2001, HUD awarded $75.3 million in PBSC obligations. For fiscal year 2002, this figure increased to $80.4 million.
  
  
• Key Accomplishment: Under Secretary Martinez's leadership, HUD expanded and improved its Continuity of Operations Program (COOP).
  This initiative, which also was developed in advance of most federal agencies, ensures that critical HUD programs and services are provided during any national emergency or catastrophic event. The Plan established and began quarterly testing of COOP emergency notification systems at HUD Headquarters and in all regional and field offices. It also provides training to over 300 Regional and Field Office Directors and support staff on developing and executing COOP Plans and established the Headquarters Emergency Relocation Site for use in the event a catastrophic disaster occurs in Washington, D.C.