HUD plans to start a study to determine whether structural changes are necessary for the Federal Housing Administration to continue as an effective public policy-oriented agency, but the thrift industry has suggested HUD's initiative is, rather, an attempt to head off a similar congressional proposal in favor of a potentially less-intensive, self-serving study.
HUD Secretary Henry Cisneros and FHA Commissioner Nicholas Retsinas announced the study during a May 31 press conference. The Retsinas-led study, which will be conducted through a series of hearings in six cities across the country, will take between six and eight months to complete. HUD will try to develop "a consensus on the public policy purpose of FHA and what's the ... most appropriate measure to incorporate," then presenting their findings to Congress next year, Cisneros said.
The hearings will be held in Detroit; Charlotte, N.C.; Denver; San Jose, Calif.; New York; and Washington. Topics will vary, but most will be based on the pressing needs for each selected region. In Charlotte, for example, HUD said it will hear recommendations on rural lending initiatives. Capital markets and access to insurance will be discussed in New York and in Detroit the department will hear ideas about policy changes for inner cities, Retsinas said. The first hearing has been tentatively set for Detroit in late July, HUD said.
Cisneros speculated future plans could include more agreements with housing agency entities, including Fannie Mae and Freddie Mac. HUD said it also plans consultations with many others, and Cisneros specifically mentioned upcoming consultations with mortgage bankers and Realtors.
The Savings and Community Bankers of America, the trade group representing the thrift industry, was conspicuously missing from HUD's growing list of participants. But the Mortgage Insurance Companies of America, which has been vocal in their opposition to the FHA increase, were included on HUD's list.
"FHA operates a business with a public purpose, namely, to expand housing choice and support communities by helping partners raise capital for the development and preservation of affordable housing," Retsinas said.
Retsinas said FHA has to take on a more entrepreneurial "wholesaler" role in the industry, explaining rather than having the agency work on individual projects it lacks the resources to properly operate, it could better spend its time trying to find "partners" to fill those roles. "The department would still have a role in the process," Retsinas said, adding HUD and FHA would still be responsible for oversight.
"Although FHA's purpose is not profit maximization, it must conduct its business with the tools used by the best of the private sector and other well-managed entrepreneurial organizations," Retsinas said in a memorandum to Cisneros issued May 10.
"Unfortunately, FHA has few of these ... tools. The same barriers to resolving the management deficiencies also impede our ability to transform FHA into a first-class financial institution able to serve as a competent partner," he said.
But while HUD is steaming toward its study on reinventing FHA, some lobbyists believe HUD is trying to head off a congressional proposal that would call for an independent commission to study FHA. Congress' proposal--which was included in the reported-out version of H.R. 3838, the Housing and Community Development Act--would authorize the creation of a 17-member commission to conduct an 18-month study, then make recommendations on who FHA should be serving and what its future role should be.
"Congress is still in the process of defining the parameters of [its] study," said Jay Harris, of a proposal being developed that could be included in the administration's housing bill. Harris, a lobbyist with the Savings and Community Bankers of America, said SCBA favors the congressional proposal, and warned HUD's study could prove laden with one-sided conclusions. But Cisneros said the department was going to conduct the study with "no preconceptions--no precooking the results."
Others disagreed as well. HUD's study would compliment the findings of a congressional commissionon FHA, said one Republican Housestaffer, who added HUD's study was "well intentioned" and he believed Retsinas was sincerely trying to reorganize FHA. But the congressional commission would take more time for analysis and would look at "a broader picture," the staffer said. "Yes, this is a [procedural] slowdown from what the administration wanted, but HUD has asked for a lot of legislative changes to FHA, and we need a way to review them."
Some mortgage finance analysts also speculate HUD, believing significant portions of its FHA bill--specifically the loan limit increase and single--family risk-sharing provisions--may not survive the legislative process, HUD is posturing itself for another run at similar provisions next year.