U.S. Department of Housing and Urban Development (HUD) Secretary Julián Castro is scheduled to testify before the House Financial Services Committee on Wednesday, February 11, starting at 10 a.m. Eastern time.
This will be the first time Castro has testified before Congress since being named HUD Secretary in July 2014. In recent public appearances, such as a speech at the National Press Club and in a fireside chat-style meeting last month, Castro has touted 2015 as a "year of housing opportunity."
Among the topics Castro is expected to answer questions about before the Committee are the budget of the Federal Housing Administration (FHA) and President Obama's announcement last month that the FHA would be lowering its mortgage insurance premiums by 50 basis points down to 0.85 percent in order to make homeownership affordable for first-time buyers. HUD and FHA estimate that the lowering of the premiums will save homebuyers about $900 per year in mortgage payments.
The administration estimates that the lowering of the premiums will result in 250,000 new homebuyers over the next three years. FHA's value has increased by $21 billion in the last two years due to aggressive and necessary action taken in the last six years, according to HUD, and is on a strong trajectory.
While the move of lowering the insurance premiums has been praised by Democrats as a way to increase homeownership among creditworthy borrowers, it has drawn criticism from GOP lawmakers who say the move puts taxpayers at risk and will eventually lead to a repeat of the 2008 mortgage meltdown.
"The President's decision reflects a race to the bottom between the FHA and the GSEs in which the private sector is crowded out and taxpayers are left holding the bag," said Representative Ed Royce (R-California), a member of the House Financial Services Committee who will be questioning Castro on Wednesday. "The financial crisis is proof positive that an increased government presence in housing distorts the market and promotes the very boom-and-bust cycle we are trying to avoid."
Castro defended the lowering of the insurance premiums, however.
"A few have even suggested that this is a return to the mania that fueled the crisis," Castro said in his speech at the National Press Club last month. "It’s not. Our nation is smart enough to heed the lessons of the past without forsaking our future. The answer isn’t to deny responsible Americans homeownership — it’s to do it right."
Castro will likely face questions regarding HUD's Blueprint for Credit Access, which he introduced in October. Critics claim that opening up mortgages to a larger pool of borrowers will degrade loan quality, which Castro says will not happen.
"Policies have fundamentally changed to create safeguards so that we can offer the opportunity to own a home for people who are ready and responsible to buy," he said.