Late last week, Julián Castro, who served as secretary of the Department of Housing and Urban Development from 2014 to 2017 under former President Barack Obama, told HousingWire that he has several issues with President Donald Trump’s budget proposal, which calls for a $6.2 billion cut to HUD’s budget.
But Castro isn’t the only former Obama administration HUD official to express concerns with Trump’s budget.
Richard Green, who currently serves as director and chair of the USC Lusk Center for Real Estate and served as HUD Senior Advisor on housing finance from July 2015-June 2016, said that the cuts come at a potentially dangerous time.
“My fear is that budget cuts at HUD will come at a time when the agency needs resources to ensure that loan issuers and other entities aren’t engaging in practices that lead the nation into another housing bubble, the last of which caused the Great Recession,” Green said.
Green, who took over as HUD Senior Advisor for Edward Golding when Golding became head of the Federal Housing Administration, identified three issues with Trump’s budget proposal.
Specifically, Green said that there are three specific operations within HUD that need more money, not less.
First, Green said that the FHA needs money to update its systems.
“My first area of concern is the ability of the Federal Housing Administration to do its job. For example, the software for FHA’s loan programs is woefully outdated and has needed modernization for some time,” Green said.
“If the system fails, FHA loans will be unavailable until a replacement system is up and running,” Green continued. “This is something that must be addressed now or FHA loans – which are where the large bulk of sub-680-720-FICO lending gets funded – go away.”
Second, Green argues that Ginnie Mae is understaffed, especially considering the market share of the FHA.
“The second issue is that understaffing at Ginnie Mae will get even worse,” Green said. “Ginnie Mae has 130 people managing guarantees of $1.7 trillion and monitoring issuers to prevent bad behavior. If issuers operate unchecked, it could throw the Ginnie Mae program into chaos and hamper a key source of liquidity for the FHA and VA loan programs.”
And third, Green identifies an issue that Castro also raised, the lack of funding for housing assistance.
“Lastly, and perhaps most importantly, I look at the fact that only one-in-four people eligible for housing assistance actually get it,” Green said.
“With more than 16 million people in need of assistance, and 5 million or so receiving it, a 10% cut means 500,000 more people won’t be able to afford housing,” Green concluded. “The homeless rate will go up as working mothers and veterans can’t afford the cost of housing.”