Rep. Jeb Hensarling (R-Texas), Chairman of the House Financial Services Committee, on Thursday asked for HUD Secretary Julián Castro [1] to appear before his Committee to answer questions about the effect of recent changes to HUD’s delinquent loan sales program on taxpayers.
In late June, FHA and HUD announced major changes [2] to the Distressed Asset Stabilization Program (DASP) that include principal reduction and capital arrearage forgiveness, payment shock protection, prohibiting buyers of the loans from abandoning lower-value properties, and alternative bidding for non-profit buyers.
DASP, as well as distressed loan sales conducted by the GSEs, have come under heavy criticism in the last year from housing advocacy and civil rights groups due to the large number of these loans being sold to private investors, whom the critics say are interested only in profiting from the foreclosure crisis rather than achieving the best outcomes for borrowers. In April, a coalition of activists called DASP sales a “Wall Street giveaway” [3]; some critics even suggested that this should disqualify Castro from consideration as Hillary Clinton’s vice president. Some have suggested that Castro made the changes to DASP in order to satisfy these critics.
Hensarling wants Castro to appear before committee at a hearing on Wednesday, July 13, to answer questions about how the changes to DASP will affect taxpayers. Hensarling said he believes the changes will create “preferential bidding” options for certain buyers and restrict investor options in the program.
Julián Castro
Jeb Hensarling
In late March, Hensarling and Sen. Richard Shelby (R-Alabama), Chairman of the Senate Banking Committee, wrote a letter to Castro and FHFA Director Mel Watt [4] saying that any proposed changes to the distressed loan sales programs should be “swiftly and categorically rejected” because such changes would “negatively impact the purpose of those programs and taxpayers alike.” Hensarling said Castro never responded to the letter.
“Secretary Castro was told months in advance that changes harming taxpayers would result in a congressional hearing, and we’re simply following through,” Hensarling said. “Hardworking taxpayers deserve to know why Secretary Castro suddenly decided to expose them to greater losses and worsen the nation’s already unsustainable national debt. The changes he’s making rig the program so certain buyers approved by Washington elites can receive steep discounts on properties and leave taxpayers holding the bag. There have been several media reports that these changes are motivated not by what’s best for taxpayers, but by what’s best for the Secretary’s future ambitions. The timing and impact of these changes certainly raise legitimate questions that need to be answered.”
Castro said in response to Hensarling's request, “I want to thank Chairman Hensarling for his invitation to speak about the recent improvements the Federal Housing Administration made to the Distressed Asset Stabilization Program. I look forward to answering the Committee’s questions about how this program is providing the greatest opportunity for struggling homeowners to remain in their homes while protecting FHA’s single-family insurance fund.”