A report issued by accounting firm Deloitte & Touche stated that the Federal Housing Administration (FHA) has never been stronger financially since its inception. An array of events addressing the future of FHA soon followed the announcement.
The report said the FHA has an economic value of $16.6 billion in 1999, an increase of $5.3 billion over 1998 numbers. Just 10 years ago, the FHA had a negative economic value of $2.7 billion.
Andrew Cuomo, secretary of the Department of Housing and Urban Development (HUD), said the swift FHA turnaround was due to a number of management changes. "This is one heck of a management story," he said. "It's about management that works. FHA has been fixed."
Since 1990, FHA has privatized property disposition, automated underwriting, and consolidated 81 field offices into four home ownership centers, among other things. "All these things by themselves may not seem like much, but taken together, they mean management that works," Cuomo said.
In response to this study, members of various real estate groups, including the Mortgage Bankers Association of America, the National Association of Homebuilders, the National Association of Realtors and the U.S. Conference of Mayors wrote a letter to members of Congress. The letter is urging them to drop a proposal that would merge FHA with Ginnie Mae, the government-sponsored enterprise that securitizes FHA-insured mortgages and remove the two agencies from HUD (MBSL 1/24/00).
"Under the leadership of HUD Secretary Andrew Cuomo, FHA and Ginnie Mae are the strongest they have ever been," the letter stated. "Democratic and Republican administrations alike have proven that under the guidance and control of the HUD secretary, FHA and Ginnie Mae can play a vital role in helping more Americans become home owners. We urge you to pledge your support for keeping FHA and Ginnie Mae within HUD, and to oppose any congressional proposal to privatize these agencies."
HUD's deputy secretary Saul Ramirez said that if the agencies were privatized, it would be a disadvantage to low-income and minority families.
U.S. Rep. Rick Lazio (R., NY), chair of the House subcommittee on housing and community opportunity, responded to the letter by saying, "I am disturbed to hear that HUD is behind an effort to relabel a housing proposal originally offered by the Clinton-Gore Administration as a Republican anti-minority initiative. Such a characterization is a complete falsehood and is dangerously close to destructive racial politics."
He then stated it was the Clinton-Gore Administration who proposed privatizing the agencies, not Lazio's committee. He said that he was working on legislation to combine the agencies in 1994, when the Administration was trying to dismantle HUD.
President Clinton said that he would like $16.6 billion used to fund low-income housing initiatives over the next five years, and has requested recommendations. "And as the improved administration of HUD and the FHA make available additional resources, we will have the opportunity to do even more to ensure that all Americans have access to affordable housing," he said.
However, Lazio said in a press release that the excess has already been spent indirectly by being folded into the Department of Treasury budgetary receipts. "I am seriously concerned that HUD and the Clinton-Gore Administration have proposed spending money that does not exist, and is based on financial assumptions that may be seriously flawed," he said.