Julian Castro, President Barack Obama’s nominee to head the U.S. Department of Housing and Urban Development, said it’s possible to give lower-income borrowers access to mortgages while keeping the Federal Housing Administration financially solvent.
The FHA should ensure that creditworthy first-time homebuyers “have the opportunity to reach the American dream of homeownership,” Castro, 39, said at a confirmation hearing today held by the Senate Banking Committee in Washington. “But at the same time that we have policies in place that ensure what happened a couple of years ago doesn’t happen again.”
The FHA is a mortgage insurer run by HUD that helps lower-income borrowers buy houses. Losses of more than $50 billion on mortgages it insured as the housing bubble burst caused it to take a taxpayer subsidy of $1.7 billion last year, the first in its 80-year history.
Castro, a third-term mayor of San Antonio, has focused on increasing the number of affordable rentals in his city and redeveloping neighborhoods plagued by crime and joblessness. He said today he’s seen how access to credit has affected people in San Antonio, yet didn’t give details on how he would help more Americans get mortgages.
“I would emphasize the problem of access, that many people are being cut out of the housing market,” Senator Elizabeth Warren, a Democrat from Massachusetts, said during the hearing. “Any kind of reforms we do have got to be reforms that make mortgages accessible to middle-class families.”
Democratic leaders have said they expect Castro will be approved by their party’s majority in the full Senate. He would replace outgoing HUD Secretary Shaun Donovan, who has been named to lead the Office of Management and Budget.
Congressional efforts to overhaul the nation’s housing finance system aren’t expected to move forward this year. Any policy changes will be largely under the control of the administrators of FHA and the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. The two companies buy loans and package them into guaranteed securities.
Castro expressed support for efforts to find a new housing finance system to replace the two government-sponsored mortgage companies, Fannie Mae and Freddie Mac, although he stopped short of endorsing proposed Senate legislation.
“I absolutely believe that there are better alternatives than what we have in place with this duopoly, with the conservatorship,” Castro said in response to a question by Senator Bob Corker, a Tennessee Republican. “I agree with you on that point.”