House Democrats to demand more information on HUD cuts

A group of House Democrats plan to issue a public call for details of Republican-led Department of Governmental Efficiency's efforts to slash the Department of Housing and Urban Development's budget.

House Committee on Financial Services Democrats led by Rep. Maxine Waters, D-Calif., its ranking member, will "hand-deliver" a letter to HUD Secretary Scott Turner on the topic at day-end, when they also will convene a public meeting with housing advocacy groups.

The event adds to earlier efforts by the party's counterparts in the Senate to get more clarity on $260 million in budget cuts at HUD, including some at the Federal Housing Administration and Ginnie Mae, two agencies that provide significant support to first-time homebuyers.

Democratic members of the House committee said in a press release on Monday that they are seeking more clarity on cuts at the FHA and other department affiliates amid reports of personnel terminations, "closed field offices and rolling back of civil rights enforcement."

They also said they plan to "sound the alarm on how Trump and DOGE's actions will worsen our nation's housing and homelessness crisis and exacerbate discrimination in housing."

HUD had acknowledged receipt of inquiries about its cuts but had not provided a response at deadline. It has said that funding freezes will not disrupt deals in progress in the market. The Office of Management and Budget had not responded to inquiries at the time of this writing.

But amid the cost-cutting, HUD recently reported that it did make some expenditures to address the needs of people made homeless by hurricanes and severe storms in four areas, allocating $2.5 million in grant funds to "unsheltered survivors" in parts of Texas and the Carolinas.

In line with actions during President Trump's first term, HUD reported recently that it would be once again rolling back the Affirmatively Furthering Fair Housing Rule, which had been reinstated under Democratic President Biden.

HUD also cut $4 million in diversity, equity and inclusion contracts in line with the Trump administration broader push to abolish DEI programs, and recirculated reports claiming it had saved a total of $1.9 billion by "de-obligating" certain "mis-placed" funds.

Documents that DOGE posted on X, a social media platform owned by Trump advisor Elon Musk, ties the funds to three single-family master subservicing contracts, including one that references a period of performance between 2014 and 2019.

Former Ginnie Mae President Ted Tozer, who co-authored an Urban Institute paper warning of potential unintended consequences from cuts, has said the images look like contracts the government securitization guarantor uses to authorize backup servicing.

The contracts pre-authorize a certain amount of spending with private companies that can handle operations if Ginnie is forced to seize servicing assets from a failed mortgage company that serves as an issuer in the large securitized market it supports, as it did in 2022.

Tozer said, based on the information he has seen to date, he could not see how there could be immediate savings from ending such contracts as no money is spent unless there is a mortgage-backed securities issuer failure Ginnie has to address. 

The lack of a preset obligation to pay the money could make it difficult to immediately access operational support for Ginnie's role to ensure that no government-backed payments to mortgage securitizations are interrupted, he said.

Drawing up new subservicing contracts can take six months or more, Tozer said, noting that he expects government officials to ensure there is a way for Ginnie to address this risk.