Castro defends mortgage insurance program changes to House Republicans
WASHINGTON — In the run-up to political conventions where he could figure prominently, Housing and Urban Development Secretary Julian Castro fended off aggressive questioning today about a mortgage program he altered so as to benefit community groups and troubled homeowners.
After calling Castro to Capitol Hill on short notice, House Financial Services Committee Chairman Jeb Hensarling, R-Dallas, accused him of conducting “secret negotiations” that will result in benefits to political allies and enable “sweetheart deals to so-called community groups.”
Repeatedly interrupting Castro, Hensarling referred to the former San Antonio mayor’s status as a potential vice presidential candidate on the Democratic ticket and asserted that he is wrongly changing a government mortgage insurance program “into a social program designed to help special interest groups.”
Castro defended his agency, arguing that ongoing changes in the program protect the health of the Mutual Mortgage Insurance Fund, which backs mortgages, while at the same time helping homeowners.
“Some have tried to single out these changes as being politically motivated. They were not,” Castro said.
“It helps promote strong neighborhoods,” he added during questioning.
Sources have identified Castro as among those being vetted by Hillary Clinton as she decides on her running mate for November. Asked by reporters if he believed Republicans were focusing on him because of that potential, Castro replied: “Who knows? It’s the crazy season these days.”
HUD management of the Distressed Asset Stabilization Program became news during the Democratic Party primary fight this spring when an alliance of activist groups criticized the housing agency for what they referred to as “Julian Castro’s Wall Street giveaway.”
The program pools seriously delinquent mortgages moving toward foreclosure for sale at auction. The vast majority are purchased by banks and private equity groups, and Castro’s critics on the left contended community organizations should have more opportunity to purchase the mortgages so as to better preserve neighborhoods.
Of 106,000 loans that have been sold in the program, about 2,000 have gone to nonprofits.
On June 30, HUD announced changes that could enable more nonprofits to purchase the mortgages. The changes, which go into effect for the next sale in September, require any buyer to consider loan principal forgiveness as a first option and to limit interest rate increases to no more than 1 percent annually.
The new provisions also prohibit buyers of single-family mortgages from abandoning low-value properties, a main criticism of left-leaning activist groups.
The program reduces costs to the government because the Federal Housing Administration no longer insures the mortgages after they are sold.
During the questioning, Rep. Andy Barr, R-Ky., displayed a website admonishing Castro with the words Stop Selling Our Neighborhoods to Wall Street.
Barr asked if the website had influenced HUD’s recent changes.
Castro replied that it had not.
Rep. Maxine Waters of California, the committee’s ranking Democrat, remarked that Castro was being treated “in an unprecedented and discourteous way.”
“With this hearing, committee Republicans are hijacking a very important topic in order to launch attacks on the secretary and the Department of Housing and Urban Development,” she said.
Near the end, Rep. Robert Pittenger, R-N.C., asked: “Have the questions been too hard for you?”
No, Castro replied. “Sometimes I feel envious my brother being a congressman,” he said, referring to Rep. Joaquin Castro, D-San Antonio.