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Castro Begins HUD Confirmation Hearings

San Antonio Mayor Julian Castro, the president's pick to replace Shaun Donovan as secretary of HUD, appeared to breeze through his first nomination challenge Tuesday as he fielded questions from the Senate Banking Committee.

Appearing before the committee for his nomination hearing, Castro, whose work in San Antonio includes an initiative to spark private investment for the production of thousands of additional housing units in the city in 2014 alone, opened his testimony with reassurances that his leadership would have HUD focusing on "outcomes, not only inputs."

"We shouldn't just track projects and dollars spent. We must measure those investments by the impact they make," he said.

Facing questions from the group of senators, Castro addressed the current stability and role of the Federal Housing Administration (FHA), which had to take a $1.7 billion bailout last year for the first time in its history as a result of losses suffered from mortgages insured as the housing market collapsed.

Noting that FHA's financial position has improved as a result of changes adopted by the agency, Castro admitted "there can be action taken to ensure that the FHA stays on a positive track," though he was non-specific regarding any plans.

In the wake of the housing and foreclosure crisis, the agency has drawn no small amount of fire from critics who say its standards have become too loose on loans it insures.

Edward Pinto, resident fellow at the American Enterprise Institute and one of FHA's most vocal critics, says the problem lies in four areas: too-low credit scores, minimal down payments, high acceptable debt ratios, and long terms that prevent wealth building.

"The combination of all that risk-layering leads to very high default rates," Pinto said, noting nearly one in eight FHA loans went through foreclosure in the nearly 40-year period from 1975 to 2011. "That's an unacceptable level of calamity that FHA has put on low- and moderate-income homebuyers."

Nevertheless, in his hearing, Castro seemed confident the agency is moving in the direction it needs to be moving.

"My perspective ... is that we achieve this balance to stay within the mission of the FHA, the historic mission to ensure that first-time homebuyers, that folks of modest means who are creditworthy, that they have the opportunity to reach the American Dream of homeownership," he said. "At the same time, we have policies to ensure that what happened a couple of years ago does not happen again."



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