At Hearing, HUD Nominee Commits to Consider Changes that Facilitate Sales of Distressed Homes to Homeowners, Not Private Equity Firms
Washington, D.C. - At today's Senate Banking, Housing, and Urban Affairs Committee hearing to consider the nominations of Julia Gordon, David Uejio, and Solomon Greene for positions at the Department of Housing and Urban Development (HUD), United States Senator Elizabeth Warren (D-Mass.) highlighted the need for stronger guardrails around Federal Housing Administration (FHA) programs regarding the sale of distressed and foreclosed homes. Senate Warren is urging the agency to prioritize making these homes available for homeowners to purchase rather than predatory private equity firms.
In response to Senator Warren’s questions, Julia Gordon, nominee to be Assistant Secretary for the Office of Housing of HUD, committed to evaluate the FHA Claims Without Conveyance of Title (CWCOT) program, and consider changes that facilitate sales of distressed homes to owner-occupants, not institutional investors. About half of HUD’s property disposition activities took place through CWCOT in 2020, but the program bypasses existing protections that give homeowners and nonprofits a first look period, and properties are sold on private auction websites that aren’t accessible to the average family – sometimes with cash-only listings.
Transcript: Senate Banking Hearing to consider nominations of
Gordon, Uejio, and Greene
Date: August 5, 2021
Senator Elizabeth Warren: Thank you, Mr. Chairman. And congratulations to each of you for your nominations. I know you have each received well-deserved support from leaders around the country.
Mr. Uejio, you have been endorsed by leading Asian American, Native Hawaiian, and Pacific Islander organizations, by dozens of civil rights, community, consumer and small business organizations. I know that you will bring extensive management experience to this role, and are well-prepared to help rebuild the Office of Fair Housing and Equal Opportunity to ensure the office can meet its critical mission. I enthusiastically support your nomination, and look forward to your swift confirmation.
Now all of you here today are nominated to deal with housing issues so I want to talk a little bit about housing. In fact, I want to take us back to the 2008 financial crash. Between 2007 and 2010, there were an estimated 3.8 million foreclosures. The recession hit Black families the hardest, wiping out nearly all of the growth in Black homeownership since the Fair Housing Act back in the 1960s. Black and Latino families’ wealth plummeted.
The crash devastated families. But not everyone got hurt - private equity firms had a giant payday.
Between 2011 and 2017, large corporate investors purchased more than 200,000 homes, turning homes once owned by families into poorly managed rental properties, and turning private equity firms into predatory landlords.
This massive transfer of wealth from families to corporations got a helping hand from the federal government.
The Federal Housing Administration (FHA) started bundling distressed mortgages, from different parts of the country, and putting them up for auction.
Ms. Gordon, say a family renting a home down the street from a foreclosed FHA property wanted to buy that property and become a homeowner – would they have been able to do so through this program the FHA set up to sell pools of distressed mortgages?
Ms. Gordon: Thank you Senator for that question. And the answer is no they would not. That’s not how these homes were sold. There were several different kinds of bulk sales that happened after the crisis both by FHA and by Fannie Mae and Freddie Mac. Bulk sales of properties that had already been foreclosed on which were also sold to investors and bulk sales of what we call non-performing loans, which are held by somebody else, managed by somebody else and in many cases as you mentioned never returned to owner occupancy because they are then used for rental because it brings more of a cash flow for the investor.
Senator Warren: So here we have these homes that had been owned by families, family gets into trouble and another family under FHA policies was not able to buy the loan but private equity could. You know, this was a policy that was great for the Blackstones of the world, great for giant investors, but it shut out families and it shut out community organizations.
It didn’t have to turn out that way. The FHA wrote the rules.
So let me ask, Ms. Gordon, if confirmed, you’d be in charge of those rules. Why is it important for FHA to prioritize making distressed homes available for homeowners to purchase?
Ms. Gordon: The answer is because we have a shortage of homes available right now for people who want to buy them which is driving up prices and making them even less affordable. I will note that HUD has a program called Good Neighbor Next Door and I know it might be surprising that I’m about to bring up the police again but this is actually a program that provides police and other first responders and teachers with discounted homes. And actually, that program has language because some of the changes that have been made in how HUD disposes of homes.
Senator Warren: Good, good. So, I want to see us move in this direction and if I can I just want to focus on one program for a moment, Mr. Chair: FHA’s Claims Without Conveyance of Title program. About half of all distressed properties are being sold through it – and right now it’s doing the opposite of prioritizing owner occupants.
You know, the program feels like the financial crisis response all over again. Properties are sold on private auction websites that aren’t accessible to the average family – sometimes with cash-only listings. And the program bypasses existing protections that give homeowners and nonprofits a first look period for homes.
So this one is simple, just a yes, no, Ms. Gordon, if confirmed, do you commit to evaluating the Claims Without Conveyance of Title program, and considering changes that facilitate sales to homeowners – rather than to private equity?
Ms. Gordon: Yes, I do.
Senator Warren: Good. I appreciate this. Ms. Gordon, you’ve been a trusted housing policy leader, and you will bring significant expertise and experience to this role. I look forward to the opportunity to work together to help families and stabilize neighborhoods, and look forward to your speedy confirmation.
I didn’t have time for questions here for everyone, but based on our conversations and based on your extraordinary public service, I strongly support all of your nominations and look forward to our making that happen quickly. Thank you, Mr. Chairman.
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