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Prepared Oral Testimony for
Secretary Alphonso Jackson
before the Banking Committee U.S. Senate

March 12, 2008

Thank you, Chairman (Christopher) Dodd. I want to thank you, Ranking Member (Richard) Shelby, and the members of the committee for this opportunity to appear today.

Mr. Chairman, I am here to present the Fiscal Year (FY) 2009 HUD budget. But, before I do that, Mr. Chairman, I want to thank you and the entire Committee for the priority given to Federal Housing Administration (FHA) modernization.

As you and your colleagues finish work on this important legislation, I should mention the Administration's remaining priorities with respect to what's in the final bill.

First, the legislation must allow the Department of Housing and Urban Development (HUD) to address the recent explosion in loans where sellers provide buyers with down payment assistance, and then add it to the price of the home. These loans have a foreclosure rate two to three times the norm. They are costing hard-working Americans their homes and these types of loans have pushed FHA to the brink of insolvency.

Second, Congress should allow FHA to proceed later this year with some flexibility in setting premiums. I assure you we have no intention of increasing premiums on our bread-and-butter customers. But, a few modest changes will strengthen FHA's ability to offer safer alternatives to homeowners who want to refinance out of high-cost subprime loans, and it will actually allow us to reduce premiums for our potential homeowners with low incomes.

Such legislation would fit in well with the general direction of the President's budget. The proposed budget is fiscally sound and represents an historic investment of $38.5 billion for the programs at HUD. This is an increase of more than $3 billion, or nine percent, over last year's proposal. The budget is almost $1 billion more than our current budget authority.

This funding will be timely and on-target for the people served by my department. We need this budget to maintain current homeownership and stimulate new purchases. It will help us expand our current efforts.

Let me put the budget in context. Last year the President and I introduced FHASecure to help more Americans facing foreclosure refinance into a safer, more secure FHA loan. We did this using current regulatory authority. And we have been able to make FHA available to more qualifying families. There has been a noticeable increase in the number of closings. We believe that FHASecure will help about 300,000 families refinance into affordable FHA-insured mortgages.

FHASecure has proven to be extremely valuable. Mr. Chairman, you should also know that in only five months, from September 2007 through January 2008, FHA helped pump more than $37.5 billion of much-needed mortgage activity into the housing market. More than $14.7 billion of that investment came through FHASecure.

FHA modernization would greatly assist our efforts. As you know, the economic stimulus package provides a temporary, 10 month window. We announced the new loan limits last week. They will help hundreds of thousands of people nationwide right away, perhaps as many as 250,000. But this is no substitute for FHA modernization, which would raise appropriate loan limits permanently, but also provide other important changes that would benefit American homeowners.

In addition to these actions, we are also taking steps to ensure it is easy for homeowners to understand the fine print when they do sign on the dotted line. That's why we are committed to RESPA reform. We are in the process of publishing a new Real Estate Settlement Procedures Act (RESPA) rule and hope it will help bring much needed transparency to the home-buying process.

Now, the budget will work in concert with these other actions. For instance, the proposed budget appropriately increases the funding for housing counseling. America needs the President's request for $65 million in this budget for housing counseling. Those funds, in addition to NeighborWorks' $180 million, provide great services to those who reach out. Many Americans facing foreclosure would have greatly benefited from housing counseling. We know it works. Last year, 96 percent of households that saw a HUD-approved housing counselor and completed the program avoided foreclosure. This funding will help partially address today's crisis and prevent another such situation in the future. This $65 million figure is exactly what we need. It will get the job done.

We also need to continue government efforts to partner with the private sector to help build back the housing market. The Hope Now Alliance is a good example. Hope Now is a private-sector, voluntary industry effort to address foreclosure through freezing mortgage interest rates and working directly with financially-troubled homeowners.

I also commend a recent effort by six Hope Now Alliance members to provide a temporary "pause" for homeowners in the foreclosure process.

These actions provide direct assistance to those who need it right now. These are the sort of responses that provide quick help for homeowners.

As in the past, Mr. Chairman, the largest part of our budget is for affordable rental housing. Combined, this budget seeks more than $29 billion for our rental assistance programs which we expect will help more than 4.8 million households. We are mindful of the continued need for more affordable rental housing, especially as low-and-middle-income workers still find themselves priced out of the real estate market in many cities. We need to maintain the units currently available and expand that number. This budget will help us do that.

Finally, Mr. Chairman, the homeless must not be forgotten. We are making strides in cutting the number of chronically homeless with our "continuum of care" approach. For the first time ever, we saw a decrease in the number of chronically homeless last year - a drop of 12 percent. We must continue that progress. Our budget once again seeks an increase for homeless programs to continue this good work.

Mr. Chairman, I know you are mindful of the need to help our nation's homeless veterans. Americans are deeply, profoundly grateful for the service and sacrifice of our nation's veterans. In the proposed budget, there is a request for $75 million for our Veterans Affairs Supportive Housing Program (VASH). Prior to FY 2008, this program had not been funded since 1993. Working with the Veterans Administration (VA), we will create an additional 9,800 vouchers for FY 2009. This will bring the total to approximately 20,000 homeless veterans being served through housing and social services, double the number of available housing vouchers.

Overall, this is a good budget for the department...balanced, reasonable, appropriate, and workable. It allows us to operate within a framework of cooperation and partnership with related federal agencies, other levels of government, and non-profit initiatives.

Mr. Chairman, as we proceed through the budget process, I look forward to working with you and the committee.

Thank you.


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