Foreclosures spur change; HUD works for solutions

Foreclosures persist along the Grand Strand despite government programs, but the U.S. Department of Housing and Urban Development has a plan to keep more people in their homes and support affordable housing.

There were 471 foreclosures in Horry County in August, down about 3 percent from July but up more than 200 percent from the same month last year. Georgetown had a 33 percent increase in foreclosures from July and a 50 percent increase from August 2009, according to data released by RealtyTrac this week.

As this news was being released, HUD Deputy Secretary Ron Sims was in South Carolina speaking about the department's efforts to stem foreclosures and other changes that should speed up decision making.

Sims, who was the county executive of King County, Wash., before taking the HUD job, said he used to avoid working with HUD because of the inefficiencies and chose instead to develop affordable housing using private funds. He is using that experience to help make some drastic changes to the agency that should help keep decisions at a local level and make approvals go more smoothly.

Question | Foreclosures continue to be a problem both locally and nationwide, despite HUD programs to prevent them. What is the agency doing to keep people in their homes?

Answer | I think that when we first started the process, which was the first time the federal government really went out in a very significant way to try to keep people in their homes and prevent foreclosures, the assumptions were that the market would respond, that the institutions that were making loans would just by sheer market force realize that they could probably reduce their losses. And that didn't occur in the way that we want to see it. So, what HUD has continued to do is leave no stone unturned, to be perfectly honest.

So we had an initiative that we're still pushing very aggressively to deal with underwater mortgages, where the mortgage clearly is greater than the dollar value of the property that was mortgaged. We're now trying to develop a process where we can get people to step down their mortgage so that they can get either short- or long-term mortgage reduction so they won't lose their homes.

So I think when you look at all the issues HUD is dealing with - underwater mortgages, thinning out payments short- and long-term, and provide the financial capacity for us to thin out mortgages - if you look at people getting back into mortgages through the First Look program, which is [Neighborhood Stabilization Program] 3 funds, we are, I think, doing everything that is humanly possible to keep people in their homes. ...

The federal government says that there are a number of people that are actually probably in a default stage that they are not foreclosing on them because I think people are beginning to say, "How can we weather this storm?" ... We are entertaining new ideas as people come to us with new instruments and say, why don't you do it this way or do it this way on the financial side. We are changing. So our doors have been pretty wide in finding ways to keep people from being foreclosed upon, and I think we will, we now know that underwater mortgages - those are not being foreclosed and realize that a number of people who are probably in default are not being foreclosed on, so the message is being sent that we don't want people out of their homes.

Q. | HUD is in the process of giving more authority to local and regional offices. How will that work, and how will it impact locals?

A. | Right now field offices and regional offices have got to take everything back to D.C. to be blessed. It's time-consuming. It's inefficient.

Most decisions are going to be local decisions. We've got to empower our offices to respond to the local dynamics. South Carolina is not like the state of Washington is not like Los Angeles. ... All these communities are unique. They have unique characteristics, and they have ways in which the people there do business. People have chosen to live in those communities because they have a certain touch and feel, and those decisions don't belong back in Washington, D.C., because in Washington, D.C., we don't know what is happening in those communities and we can't call every community the same. So, what we're doing is we're divesting ourselves from a lot of programmatic responsibility. Now we'll tell people the parameters to work in. ... We're going to say, "Here are the range of decisions you can make at the local level." ...

We have home funds, neighborhood stabilization funds, CDBG funding, public housing funding. We provide Section 8 housing for 4.8 million American families. All that we're saying is, how that works should be actually significantly influenced by the regional and field offices, and they should have the decision-making authority. It keeps us from having time-consuming decisions on stuff that I call stupid, no-brainer. We have no-brainer decisions that go back to headquarters. Why does headquarters have to say yes or no on them? They didn't, especially when the regional and field offices had already concurred on those decisions. ...

[It's a] huge transformation, very, very different, very, very challenging because it's not just that we're reorganizing HUD, it's that we're delegating authority, and we're doing it in a very short period of time. ... We'll start in October with the Seattle office and Denver, and three to four weeks later we'll start with the Southeast office and the Southwest office.

Q. | Especially with the economy in its current state, there is a high demand for affordable housing and thousands of people on waiting lists. What is HUD doing to address this growing need?

A. | We're trying to find an efficiency in it. HUD has 13 different rental assistance programs. We realize that we look at how do you meet demand. ... What we're doing is what we call a transformation of rental assistance. The idea is to say that, rather than say we have 13 different rental assistance programs, why don't we just consolidate them into one and give the voucher to individuals? The reason we want to do that is it attracts private-sector money.

We have a lot of people coming to us and saying, "I will build affordable units in market rate housing," but we often don't have the capacity to get the rental assistance to them. The way we see it working is if someone came to us from the private sector and said, "I'm going to build 60 units, I'd like 10 of those to be affordable housing units," which often becomes the difference if a project can come or go, we would say, "Fine, we'll give you rental assistance vouchers, we'll guarantee them, they'll be there." People who move in there will have to be there for five years, but the rental assistance voucher will always be there because we want to preserve the supply. People think that will generate about $25 billion of income directly related to affordable housing because the private sector will find it efficient to deal with us.

But we have to consolidate the rental assistance programs. Right now it's near impossible to make it work. ... Now the big fight we've been having is people say we don't want to change, but unless Congress intends to give us more money, the only solution we have is to attract private-sector capital, and the only way to do that is to basically take those vouchers and empower them to use them for their economic benefit. ... We're trying to expand the opportunities. We know we can do it. We just need to expand it in a more robust way, but what is hanging us up is we need to get Congress to agree in their budget to allow us to move forward.

Q. | What is HUD doing to create jobs? Is the agency changing its approach in this economic downturn?

A. | The month I was sworn in, there were 733,000 people losing their jobs per month. That is not happening anymore. The economy is coming back. Our plans have one goal, which is to make the kinds of adjusts and investments that allow for a recovery, that we're going to have housing stock available as we recover, and we will try to keep as many people in their homes during what we call the transition to economy and the recovering economy. It's going to be a formidable task getting out, but I think the president is simply saying to us at HUD, "We want you to go out and create jobs," and so part of what we're tasking our regional offices and field offices - we cover every area of the U.S.; we have 80 of them - to do is work what we call "doing drill down." Who's getting hired? Who's getting the contract? How quickly the money is getting spent? And we've been notorious in the federal government of calling cities and housing authorities and states and counties and saying, "You have money you haven't spent. It was given to you to spend, so if you can't spend it we'll take it from you." We've been pretty firm about that, so we've seen an accelerated amount of money being spent. ...

HUD is a development agency. We've been a housing agency for a long time, and that's been totally detonated. We see ourselves as a community development agency in urban and rural areas, which is why you saw all the relationships we're having with [U.S. Department of Agriculture, Department of Transportation, Health and Human Services] and the Department of Energy and [Environmental Protection Agency] because it's a whole different philosophy you have when you've got to say how does a community develop. It's no longer building housing and saying we don't care what else happens. We're actually caring about everything else. ... What it simply means is that we've found mutual interest in our approaches to dealing with our local problems. ...

Before we would just talk about our jobs. Now DOT is saying if we have money in an area, can you tell us where you are getting your work ... so we can tell our contractors who is out there to be hired because they also want to do the same thing. ... So now we're saying it's really important that we create jobs that are sustainable. So if you're working on a HUD project you may end up working on a U.S. DOT project, that is to say we don't want people just hired for a short period of time and then just dropped off. We want what we call sustained employment.