Jan Shadburn
Acting Administrator
Rural Housing Service, USDA
Washington, D.C.
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I’d like to acknowledge publicly to Chuck Wehrwein how much I appreciate his service and his coming on board from the private sector and taking control in ninety days of the Multifamily housing program from June until October 30, when we threw him into the fire on the Reform process.
I’ve been able to look at the big picture. This Agency has never been through the changes we have already gone through and are going to experience over the next 12 to 18 months. While our focus is on the Multi-family housing program, certainly with the changes we have going on in the Rural Housing Service, you will see how all the changes interact with the future of the Rural Rental Housing program.
This partnership with organizations, and partnership is the buzzword in Washington, we have established (whether you call us Farmers Home, RECD, or now, Rural Development) didn’t just start yesterday. Right now, with 18,000 projects and 445,000 units and $11 billion, those kinds of partnerships didn’t just start over night. What we think about, more importantly, is that you are providing, with us, housing in rural America for individuals that cannot afford the American dream. We also think about the jobs, tax base and other impacts the Rural Rental Housing program has in rural America. Your partnership with us allows us to meet our mission, which to is provide safe, sanitary and affordable housing in rural areas for families and the elderly. If you have been through the projects as I have when I was the Florida State Director and Associate Administrator, all you have to do is look at how much these families and elderly appreciate the kinds of projects you have helped provide in support of the Agency.
I don’t think I have to tell you what kind of competition we have in competing for funds within USDA for the Rural Housing Service. The President and Secretary Glickman came from rural America; they believe the strength of America lies in the development of our rural communities — creating jobs, infrastructure, essential community facilities, but most importantly, in safe, sanitary and affordable housing. That is what is most important, that is the base of everything in Rural Development — rural housing.
In competition for the dollars within USDA, the Fund for Rural America, for which the Secretary made the announcement on January 17, the Rural Housing Service was able to get 66% of those funds. We were able to compete. I think that in terms of the focus on housing and the importance of housing, we have the attention of the President and the Secretary.
We have to continue to remember that there is a focus that we must make on the Rural Rental Housing side. It is now and in the future. Associations are key as we go through this Reform process and into the budget negotiations. The Associations should help us work on focusing on the need for funding for the Rural Rental Housing program.
State of Change
If I were to describe the Agency at the present time, I would say it is in a state of change. Obviously, we have challenges and opportunities ahead of us. All of the changes that we have within the Rural Housing Service all build and underscore and complement the program that you are most interested in. We’ve been through a name change; we’ve transferred the farm programs over to FSA, which has probably helped us tremendously in that we are now a pure rural development Agency. This is very important because we can focus what resources we have on housing and rural development.
We are downsizing and restructuring right now. We’ve gone from about 8,000 staff down to around 7,500 and eventually we’ll be down to around 7,000 staff in the field. As we go through this transition, it is important that we get through and put these resources out into the areas such as the Rural Rental Housing program to help manage them.
We’re looking at Reinvention in every program that we have. In every program in the Rural Housing Service, we are doing some sort of reform or reinvention. We have them in Single Family, we have them in Community Facilities.
We’re looking at how we can change the automation at the Rural Housing Service to provide a better product for our customers. We’re looking at being a better facilitator and participate with our partners to leverage our funding and then make it go further. The partnership in leveraging is most important to us right now. The Reforms have come a long way. What we would like to try to do is have the Reforms published by the end of March; we have our Appropriation hearings on March 13, so we’ll certainly be getting some questions on them. Once published, then we intend to put out the new construction money.
However, we must be careful. In looking at our health and safety — rehab and repair money, which accounts for about $56 million, we’ve only received $1.3 million in applications. So what we face is a log jam for getting in all of the repair — health and safety applications along with the new construction applications. We need to get those health and safety — repair and rehab applications in.
Stakeholder Meetings
The Stakeholder meetings have helped us to communicate better. They’ve helped us to build up trust; they’ve certainly established in our partnership, the confidence in our staff in interacting with you. They’ve established teamwork, and most important, I think we’re going to have a great product. The Stakeholder meetings are very important; we found that when we were doing our 1930-C and our Comprehensive Servicing Strategy; we found that when we were doing our 538 program last year. I know that many people did not feel that the staff would be able to pull the 538 program together and get a product out. I think it turned out well.
As we go through the 1930-C process and the Comprehensive Servicing Strategy (we haven’t lost sight of that, but the Reform process took priority), we will be trying to put out a product that is both customer friendly and reduced in size of regulation. We may not be able to reduce it 90% as we did in the Single Family Housing program, but I can assure you that it will be much more condensed and user friendly.
Legislative Package
In the legislation package, we are looking at the permanent reauthorization of the 515 and 538 programs; transfer of the HUD Section 8 into USDA and then the Section 8/515 projects to the Rural Housing Service; and Farm Labor Housing legislative issues. In funding for FY 97, we have about $4.3 billion for RHS, which accounts for about 50-60% of the Rural Development budget. You can see that the Rural Housing Service does command a great deal of attention at USDA, although we are still fighting and are in competition within the Agency for the dollars as well as within Rural Development.
In the 515 program, we have about $56 million in health and safety — repair rehab that we need to try to get out the door. $180 million in new construction funds. In FY 98, without mentioning specifically, I think the Associations need to focus on funding and Rental Assistance. I think the key is for us not to look backwards, but to look forward; one of the keys in this is to make sure we focus on how we can take the information of our accomplishments within the 515 program, and the changes we have made and are making now. I think Congress will be pleased with the kind of product you’ve helped us put together.
I think the leveraging of creative ideas is something that we must continue to focus on in the 502 program and the 515 program. I know that in Iowa and New York, especially New York, they took $2.5 million (which can generate about 50 units) and turned it into about $11.8 million in projects with about 200 units with matching Rental Assistance. These are the kinds of things we got to look at in terms of leveraging and creative ideas.
We also must make sure that we use an outreach awareness and education approach to show that the changes in the 515 program are good. We must make sure that you, in your states, get the Congressional staffers and Congressional delegation out to look at our projects. Work with the State Directors to show these Congressional staffers how important the rural housing program is, and what kind of projects we run.
Section 502 DELOS
The DELOS System (Dedicated Loan Origination and Servicing System for 502) is one of the key projects we are working on right now that will have an impact on 515. We are trying to avoid privatization of our 502 program; we did this by being able to convince Congress that we would be able to consolidate our 650,000 loans into one place, in St. Louis. It is a monumental task. We’ve not hired outside people to do it; we are doing it from within our own Agency; taking resources out of several program areas to be able to put this together. We had to answer the call from Congress to be more efficient and to be consistent with the programs; we must save money; we must free up resources. Those resources that this centralized servicing is going to free up is approximately 1,500 resources that we had servicing our Single Family Housing program out in the states.
The Deputy Secretary allowed us to keep 900 of those 1,500; 45% of those 900 will go to Chuck Wehrwein’s program. It is the most complicated program that we have at USDA, bar none. It’s not getting any easier. I understand your concerns about consistency. We are working to be able to move these resources as soon as possible and get them in place and get them trained.
Automation is certainly an area that we have learned from in this DELOS that we are going to carry over into the automation of the Rural Rental Housing program.
Portfolio Management
In portfolio management, we have focused on all of our programs in the Rural Housing Service. In the 502 program, we have lowered that to the lowest delinquency it has had in 25 years; we have the lowest number of inventory properties. In the 515 program, the delinquency is 2.4%; we are looking at the immediate delinquency and how we can improve the program, as well as utilizing the Project Classification system that was used by the banking industry during the 1980’s when they had a lot of real estate problems in cleaning up their portfolio. We’re using that Project Classification system in our operation in Washington mainly to look and be able to identify the early warning signs in projects that we need to give attention to and not wait until they are in already a problem, but look at how to work with them during these early warning signs Not only could we minimize the amount of money, resources, and staff it takes to correct it, but also to save money; that is what Congress is looking at.
So, in all of the programs we have at the Rural Housing Service, we will be focused, and have been and will be more so, on portfolio management.
I’d like to say thank you for your partnership. Not only has it meant a great deal to us at Farmers Home, RECD, and now, Rural Development, but it is going to be even more important in the future. I can assure you. There are challenging times ahead of us. The next 15 to 18 months, we will have the most challenging times as we move the 502 portfolio in from the field into centralized servicing and getting these resources back into the field.
Staffing Challenges
With Buy-Outs of 431 people in November, we had not anticipated having to run 431 people short at this present time. What we had planned to do as we phased in the DELOS tier states, about eight tiers two months apart, that we would gradually absorb this reduction in staffing and redirect the resources. However, it wasn’t in the cards, so we lost 431 people overnight. So we are short in the field and we are looking to see how we can patch that up so we can get through this process.
Our mission remains the same: to work with you to provide safe, sanitary and affordable housing in rural America. It will require your efforts in outreach, awareness and education. We must, and we will, continue to work on our Reforms and the reinvention process to make sure that not only we come through the Reform process we’re working on now, but on the 1930-C. That we will have the product that is not only customer-user friendly, but that we consolidate it. That we get resources trained and out there in the field, that they can give you good customer service. That we can focus on funding and compete for those scarce resources.
We have done a good job, and you have as our partner, done a great job in helping us with the program. What we have to do is convince Congress now that we have taken the necessary steps so that they will look and give us the funding that we need for you to stay interested in the program.
Welfare and immigration reform is something that is a unknown at this time — what kind of impact will it have on the program?
We do have a lot of challenges ahead of us. The Agency is in a state of change. We don’t believe the private sector has ever experienced as much change as the Rural Housing Service is going through. With Chuck on board providing leadership to the staff, and Ronnie Tharrington providing leadership within the 502 program, we are gaining the support and confidence from across the street. I think with your partnership, that we’ll also gain the confidence and support from the people on the Hill.
We look forward to working with you.
Next: Remarks by Charles Wehrwein