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Remarks of Secretary Julián Castro Bipartisan Policy Center 2014 Housing Summit

Tuesday, September 16, 2014
Washington, DC

As prepared for delivery

Good afternoon.  Thank you very much for that warm welcome.  It’s great to be with y’all today, especially as I celebrate my 40th birthday. 

It’s funny: all my life, I’ve bragged about being one minute older than my twin brother, Joaquín.  Now, I’m starting to get jealous because he’s the younger one!

In all seriousness, I’m fortunate to be with so many friends and colleagues today.  Thank you for having me. 

My thanks to Ron for your kind introduction.  You’ve made an incredible difference for others and we’re all grateful for your work.

I’d also like to thank all the former HUD Secretaries who’ve participated in this Summit, including Mel Martinez who’s in the room today.  I’m proud to be associated with these distinguished public servants, and I thank them for their contributions.

Finally, I’d like to thank the Bipartisan Policy Center.

Former New York City Mayor Fiorello LaGuardia once said “there is no Republican or Democratic way to clean a street – but merely a right way and a wrong way.”  As a former Mayor, I know that getting things done requires partnership, not partisanship. 

That’s why I appreciate your efforts.  In fact, your report helped me through the confirmation process.  It also helped put housing back at the top of the national agenda.

Thank you for your good work and for inviting me today. 

We come together at a time when our economy is growing.  A time when American businesses have created 10 million new jobs over the last four-and-a-half years – the most since the late 1990s. 

A time when businesses are exporting more goods stamped “Made in America” than ever before.  And a time when the housing market has gotten stronger, with home sales, starts and values all rising in recent years. 

These are days of tremendous progress across the board, and now our charge is to accelerate this progress for every American.  That’s where HUD comes in. 

HUD is the Department of Opportunity.  It plays a powerful role in helping folks lift themselves up. 

I’ve spent my first weeks as Secretary meeting folks across the country.  In New Orleans, I visited a school we helped rebuild after it was destroyed by Hurricane Katrina. 

In Gary, I met veterans we helped get off the streets and into housing.  In Chicago, I saw how we’re working with local leaders to turn neighborhoods around.

In every corner of our nation, HUD is delivering help and hope.  And we’ll spend the next two-and-a-half years expanding opportunity for all Americans.

The best place to start is homeownership.  In fact, it’s time to remove the stigma associated with promoting homeownership.

When done responsibly, it strengthens communities and boosts our economy.  It helps families put down roots and secure their financial futures.  In short, it’s a cornerstone of the American Dream.

Just ask Vera Bigham from Jamestown, California.  She lost her husband, Donald, in the Korean War and only recently learned that his service made her eligible for a VA home loan.

She told a newspaper that for decades, homeownership was something she only talked about and thought about.  But, earlier this year, she was able to take that next step and buy her first home – at the very young age of 91 years old.

In her words, she now knows that “miracles do happen.”  Right now, across this country, there are responsible families thinking and talking about owning a home – but they shouldn’t have to wait for a miracle to secure this dream.   

A few years ago, bad loans and risky secondary market products prompted a housing crisis. There was plenty of blame to go around.  Some believe it was too easy to get a home loan.  Today it’s too hard.

The pendulum has swung too far in the other direction.  According to the Urban Institute, the average credit score for loans sold to GSEs this year is roughly 750.  Currently, there are 13 million people with credit scores ranging from 580 to 680.

Many of them are ready to own, but are being left out in the cold.  The truth is that the dream of homeownership is out of reach for too many Americans.  This has to change. 

Housing finance reform obviously represents an important step.  A government-dominated market is unsustainable.

Instead, we need to attract private capital back to the market, establish certainty for lenders and protect taxpayers for the future. 

The bipartisan passage of Johnson-Crapo in the Senate Banking Committee was a huge step forward.  Now we must keep pushing until housing reform legislation gets over the finish line – once and for all.

In the meantime, we must do all we can to get capital flowing again.  As Commissioner Galante told you yesterday, FHA will do its part.  We’ve created a “Blueprint for Access” that has two main components.

We call the first part HAWK – Homeowners Armed With Knowledge.  It will allow homeowners who commit to housing counseling to qualify for reduced mortgage insurance premiums.

This will increase the pool of responsible borrowers and save the average FHA buyer nearly $10,000 over the life of the loan.  It will also strengthen FHA’s financial health so it can continue to assist underserved communities for generations to come.

The second part of the Blueprint is clearing up our quality assurance policies to reduce uncertainty for lenders.  Now, I doubt the phrase “quality assurance” will ever trend on Twitter, but y’all know how important it is.

In the wake of the crisis, we’ve seen a lot of frustration from lenders when it comes to their FHA business.  Many have been reluctant to lend because they fear unanticipated consequences. 

They need to be able to manage their risk better – and so does FHA.  So we’re making it easier to partner with us by overhauling our “Single Family Handbook.”

It brings together 900 mortgagee letters and other policy guidance into a single document.  By the end of this month, we’ll publish our first section on loan origination through endorsement.

We’ve also committed to helping lenders better identify loan defects and determine how serious those defects are.  In fact, today, we are posting online for feedback our Loan Quality Assessment Framework.

By clarifying the compliance process, we’re giving lenders the confidence they need to lend, while protecting our financial health. 

This is a win for the industry.  This is a win for FHA.  And, most importantly, it’s a win for the American people.  But we’re not stopping there.

For instance, Ginnie Mae is kicking off a pilot program to give small financial institutions more access to the secondary market.

In partnership with the Federal Home Loan Bank of Chicago, the effort allows members that do FHA … VA lending … and Rural Housing loans to have access to our full-faith and credit guarantee, and get the execution that provides for their loans.

As a result, participating community lenders will get a better price in the marketplace, and use that capital to make credit available for other loans.  Building on this success, we’ll be launching a nationwide effort in the first quarter of next year so more lenders can benefit. 

Additionally, HUD is planning an event with the White House we call a “codeathon.”  We’re bringing together data experts and programmers to take our information about communities and develop new digital tools that empower others.  

One of our hopes is that lenders will use these tools to see the whole picture when working with potential homebuyers.

Let’s say they can easily determine a family wants to buy in an area where transportation costs are low.  Lenders may consider these savings as they make their decisions about the quality of the loan – and that can help get credit moving.

With all our efforts, I want to send a simple message to lenders: let’s work together.  

We share a common interest: to see a robust, healthy housing market where those who are ready can buy a home – from the millennial starting out, to the veteran returning from the battlefield,  to the couple expecting their first child.    

We can advance this interest and move our nation forward – but that takes partnership.  So let’s come together to secure the dream of homeownership not only for ourselves – but for generations to come.

Of course, boosting homeownership isn’t the only part of the opportunity equation.  So is combating our nation’s rental housing crisis.

Recently, Zillow reported that in 88 of the country’s 100 largest metropolitan areas, renting is more expensive than ever.  This is an issue that touches every demographic—whether you’re a young professional or the new HUD Secretary, who was shocked by the rents here in Washington—and it needs urgent attention.

The first step is producing affordable housing with efforts like the National Housing Trust Fund. As you know, Johnson-Crapo proposes dedicating billions of dollars every year for the production of affordable housing. 

This is an unprecedented opportunity that we can’t afford to waste, and another reason why this Administration is going to keep fighting for housing finance reform.

Another critical step is preserving existing affordable housing.  Much of our nation’s public housing is falling apart.  Many developments are now old enough to qualify for Social Security.

I joked earlier about how I’m getting old, but, I’ve got nothing on many of these buildings.  There is currently a backlog of roughly $26 billion in capital needs.

Children are growing up exposed to mice and mold.  Folks are dealing with broken windows and untiled bathroom floors.

The nation is losing 10,000 units of public housing every year, mainly due to disrepair.  Making things worse, this is happening as funding from Washington decreases. 

Communities are wondering how they can preserve their public housing in this tough fiscal climate. The answer for many of them is HUD’s Rental Assistance Demonstration initiative – also known as RAD.

Created in 2012, RAD helps housing authorities—and owners of assisted housing—convert to long-term Section 8 contracts. 

This allows them to better leverage private debt and equity to improve their properties.  RAD is cost neutral for the federal government and is making a big difference in places like Yazoo, Mississippi.

Back in July, the residents of the Magnolia Crossing Development wiped away tears as they broke ground on their renovation project.

In the past, conditions were so bad that they’d coordinate when to do laundry because their units would flood when too many machines were running at the same time.  

Thanks to RAD, they are shaping a brighter tomorrow – and communities across the nation want to do the same. 

We’ve received applications to convert over 180,000 units of public housing.  But we’re in danger of losing momentum because our current authority is limited to 60,000 units.

We’ve asked Congress to lift the cap in our FY2015 budget request.  The affordable housing crisis is growing.  RAD is part of the solution.

And we’ll keep making our case to Congress until every public housing authority has a chance to provide folks with a decent and affordable place to live.

But our work doesn’t stop at the home.  Housing should be a springboard to success.  That’s why we’re linking these homes to the jobs, training, transit options and other community assets that folks need to thrive. 

So we’re bringing new life to HUD initiatives that boost access to knowledge and employment. 

Later this month, we’ll award $75 million to nearly 750 Public Housing Authorities to connect residents with the education and job opportunities they need to build assets and improve their lives. 

Through our new Section 3 business registry, we’re increasing contracting opportunities for businesses that hire in low-income areas so residents can participate in the growth of their own neighborhoods. 

And, building off past efforts, we’re launching a new Jobs-Plus initiative that provides employment and training services to public housing residents – as well as financial incentives that hold rents constant as incomes increase.

To complement this work, over the next two-and-a-half years, I’m going to place a special focus on expanding broadband access.  Access to knowledge and information is as vital to a thriving community as access to jobs, good schools and safe streets.

But, many haven’t been able to secure this access.  Take the Bronx, for example.  When the Bronx Library Center opens up every morning, dozens of people are already lined up to use one of the free computers.

When it closes, young people lean against the windows from the outside because they’re trying to get the free WiFi signal on their phones.  Think about that: they’re literally and figuratively on the outside looking in. 

These folks have the odds stacked against them because they’re not connected – and many of them live in communities that HUD serves.

A White House report released last year found that only 4 in 10 families making under $25,000 had broadband access at home.  Compare that to 9 in 10 families making over $100,000.  This disparity simply isn’t right.

Last week, I met a young student in Birmingham named Janey who told me one of the biggest obstacles facing her peers was no Internet access at home.

President Obama has challenged the nation to connect 99% of American's students to broadband and wireless in their schools and libraries by 2018.  As HUD Secretary, I’d like to ensure that this access follows them home.

HUD has already worked with partners, including Best Buy, to provide digital literacy training at public housing authorities in four cities.  And we’re looking for more creative ways to build on this success.

The time has come for our nation to finally close the digital divide so that every child has the chance to succeed in the 21st century global economy. 

In addition to broadband, the Obama Administration’s place-based initiatives are providing access to the other community assets that folks need to succeed.  

Through the Promise Zones initiative, twelve federal agencies are working with local partners to provide comprehensive support to distressed communities.

These areas are getting competitive advantages in federal initiatives, fulltime VISTA volunteers, technical assistance to build capacity and, if Congress acts on current legislation, tax breaks for businesses.

Two weeks ago, I had the pleasure of visiting one of the first Promise Zones, located in West Philadelphia.

I saw how the public and private sectors are coming together to advance common goals.  I met with local leaders who are committed to shaping their own destinies and fulfilling their vision for change.

I witnessed a community’s plan for the future turning into progress on the ground.  These folks had new hope for their neighborhood.  Through Promise Zones—and all our other efforts—we want this hope to reach all communities.

We’re going to give folks who have been underserved for far too long the chance to fulfill their full potential.

But make no mistake: this won’t be easy.  In recent decades, as needs have gone up, HUD’s resources have gone down. 

In 1981, HUD had roughly 16,500 employees – almost enough to fill the Verizon Center just a few blocks away.  Today, we have 8,500 employees – not even enough to fill half the arena.   

It’s clear that the Department has to be innovative and more efficient in the years to come.  In this age of limited resources, the answer is smart government.

How do we do this?  First, we’re going to increasingly rely on evidence-based practices to guide our work and measure outcomes.  

For example, in 2010—under the leadership of former Secretary Donovan—HUD launched HUDStat, which uses data to evaluate initiatives. 

It’s helped drive progress on a number of fronts, including a 33% drop in homelessness among veterans over the last four years.  

During my tenure, we’re going to make these evidence-based practices the norm at HUD so we can maximize our dollars and results.     

And building off the work of my predecessors, we’re going to improve the way we do business by training our people, by investing in our IT to help our team do their jobs and get rid of redundant systems and by enhancing financial transparency and efficiency to maximize our budget dollars. 

We’re also breaking down the silos and increasing collaboration with other federal agencies, local governments and the private and non-profit sectors.
 
In this budget climate, we know we can’t address problems alone – nor do we want to.  As a former Mayor, I know that progress often begins from the ground up, and we’re going to support this innovation in every way we can.    

And I want to work closely with all partners to make this an era of expanding opportunity for all Americans. 

This work is happening at a critical moment in our nation’s history.  We’re living in a Century of Cities.

For years, more and more Americans have been moving back to cities.  By 2050, the Census Bureau projects that the entire population will grow by 80 million people, 60 million of which is likely to happen in urban areas.

And cities are the heart of regional economies—impacting suburban, rural and tribal areas—so it’s clear that creating thriving urban areas should be a top national priority.    

HUD has a unique role to play in this work, and we intend to make the most of it.  I know I’ve mentioned a lot of program names and talked a lot about process.

But at the end of the day, we’re about people.  And I will judge my tenure by one standard: how well did we spark opportunity for Americans?

With the stakes so high, we cannot afford to fail.  As the Bipartisan Policy Center knows better than anyone, housing is not a Republican or Democratic issue.  It is an American issue. 

That’s why we’ve got to work together to give folks who are ready and responsible the chance to buy a home.  We’ve got to provide folks with a fair shot to secure decent, affordable rental housing.

We’ve got to help boost their access to knowledge and employment by connecting their housing to surrounding community assets.  All of us here have been blessed with these kinds of opportunities.

The folks we serve—from Birmingham to Baton Rouge, from Philadelphia to Fresno—they deserve them, too.

Let’s pass the opportunity on to them. 

Thank you.