Jan Shadburn
Administrator
Rural Housing Service, USDA
Washington, D.C.
Addressing the National Association of Home Builders’ Rural Housing Council:
It is indeed a privilege to come and represent President Clinton and Secretary Glickman and talk about where I think we are with the USDA Rural Development and the Rural Housing Service. I hope my remarks will tell you where I think we are with the Rural Housing Service as well as the challenges that we have in front of us, and some of those challenges we think we have mastered.
I can assure you that when a decision is made, or when it is not made, I will hear from groups such as the Council very quickly. That is what we need. Do not ever hesitate to call me; we try to be responsive. I think that through the Stakeholders Meetings that your involvement, participation and partnership is why we are here today. The future of the Rural Housing Service and of Affordable Housing is our future and yours.
Having been a State Director in Florida in 1993 and 1994, and coming to Washington in 1995 — the staff are to be commended for the challenges they have met. I know that many times you are looking for, and are frustrated by a lack of, consistency. I’ll try to bring you up to date on what we’re doing, some of the changes we’ve been through, and what we’re doing now. I ask for your patience and your support.
Rural Commitment
In terms of looking at where we are in terms of growth and commitment is to look very quickly at Community Development. The commitment of the Administration and Rural Development has been for infrastructure, job creation housing and community facilities. A lot of money has been spent, leveraged and partnered to make sure that community and rural development is sustainable; we have created partnerships and leveraging to put money into rural America. We don’t have all the money to do it. We have tried to look at areas and try to partner throughout the states and communities to make sure our funds go further and to create opportunities in Affordable Housing.
We just lowered our interest rates to 6.75% in the Single Family and the 515 program. This is the lowest interest rate in quite a while. Home ownership is at an all-time high; we realize that home ownership is not the only game in town because we have the Rural Rental Housing program that is necessary in rural America.
Continuing Rental Demand
Not only do we need to take care of the projects we have, some 18,200, but we have a continuing demand for Rural Rental housing. That is something we have to look from a standpoint of affordability, accessibility, and availability. Inflation is at an all-time low since 1986; unemployment is very low; and, we are looking at a balanced Budget. When you look at the commitment to Community Development, which first and foremost has to have infrastructure, and it certainly has to have jobs, and then, certainly, housing and community facilities. That’s what USDA Rural Development is all about. That’s what your partnership has been all about on the housing side; that’s what our commitment is. As we move forward from here, we have to go through these changes, and no one knows it better than our staff and, obviously, you.
Some Successes
In terms of looking at some areas that I’d like to discuss, I’d like to look at some successes that we have achieved this past Fiscal Year. Realizing all the changes that the Rural Housing Service has gone through over the last several months and years, I think that it is commendable that between the partnership you have provided and our staff that even with decreased funding in FY 97, we made over 54,000 loans. When you look at that, you’re looking at 14,000 single family Direct loans, 30,000 Guaranteed single family loans, and another 9,300 single family loans for Repair and Rehabilitation. In single family, we had 46% of our Low Income funds that were leveraged, which I think is a tremendous achievement. When I came on board around 1993, leveraging wasn’t even a word in our vocabulary; in just a short period, we have been able to bring in $58 million in other funds from partners.
If you look in terms of the 515 program, we had 2,300 new units with roughly $100 million. We had $153 million which we split up between Repair/Rehabilitation and new construction. We had 243 projects in Repair and Rehabilitation.
Section 538
With the 538 Guarantee program, we were able to do 18 projects (up from 9 the year before). In 1996, they had a 60% Loan-to-Value; last year we put out $28 million in our funds for $61 million in development costs, for a Loan-to-Value of 54%.
Changes for This Year
Where do we go from there? Obviously, the changes we are going through in the organization — the downsizing and redirecting of resources, the training, buyouts and vacancies (right now we’re running 18 short out of 111 just in the National Office), administrative convergence — will be implemented between now and October 1, 1998. Obviously, after looking at administrative resources, we saw duplicative administrative resources and are trying to consolidate them; hopefully to take those resources and redirect those that are duplicative and put them in some other areas of the program. Certainly, the changes that we are going through are a real challenge. It is not only a challenge for you, but it is for our staff.
We’ve got to make sure as we redistribute resources that program delivery continues to be our main point. Consistency is important — it comes with training, with staff getting used to a stabilized atmosphere. We don’t have that right now and its not going to happen tomorrow. But, we are focused on getting these programs as Congress and you, our customers, have desired — not only to make them more efficient and customer-friendly, but also to capture the savings so we can do more with less.
Regulation Reinvention
In the Regulation Reinvention, we have focused over the last year and a half on the 502 program. Those Regulations have been developed and we hope to have the Handbook by mid-February. In looking at 515, you participated in the proceedings last year; the comments you made have enabled us to have a series of products we can be proud of. The 515 NOFA went out in the Federal Register. On the Reinvention, we should be putting out the regulation out as a proposal in March or April.
For the Section 538 program, which is not taking the place of 515, but which is another tool, we are looking at some options. The regulations are in clearance right now; my concern is being able to get all that done so we have plenty of time in FY 1998. Right now, if we went through normal channels, it would take us through July to get that through the clearance process; we are looking at some other options.
Thank you if you have participated in the 538 program. This year we’re looking at around $38 million. Next month, I am going to the dedication of one of the first 538 projects.
In terms of budget, we’ve been holding that closely trying to get the Final Rule out on the Reforms so we would be able to go from $129 million to about $150 million in new construction and Repair/Rehabilitation.
On the Section 515 Industry Interface, which is automating the Tenant Certifications, we’re working on it. In your business you need the ability to get management information and reports; in government, that has not always been the case, so we’re focused on being able to get it so we can manage the program better.
Of course, we have the RHS home page so you — our customers — can access a website or Homepage with the information you need.
On our legislative side, we are seeking permanent authorization on 515 and 538; we are looking at civil penalties to be able to do some of the things HUD has done; these are some of the things we are looking at in the upcoming year.
Prepayment and Preservation
We have paid attention to Prepayment and Preservation for 515. We are establishing an Office of Prepayment and Preservation. That is the future in terms of our being able to look at 515 and trying to keep projects in the program. I can tell you we have had numerous meetings. Last week we had two meetings that lasted over two and one half hours each, trying to make sure we looked at Prepayment and Preservation — looking at how do we go from here; looking at what kind of resources we are looking at taking to establish the Office; and, what kind of dollars are we talking about — where is the impact; everywhere you look, Prepayment and Preservation takes Rental Assistance tied to it. Although in RA this year we are going to have enough to cover ourselves — that need for increased RA to some extent is going to be a dire need that we have in just the existing program, much less increases from either new construction or in looking at Prepayment and Preservation. In discussions we had prior to Christmas, we looked at getting out a new AN on the appraisal issue. It has been brought to my attention that there has been some confusion about when to order a new appraisal to develop incentives and how do you determine if there is equity in the project. We have worked with that and the AN should be going out in the next few days.
Servicing Problem Projects
Servicing is a major issue to me. I’m very happy with the progress that staff, NAHB and CARH have made in assisting us with the servicing. On the problem projects that we’ve had out there, the delinquencies have gone down; on our total projects out of about 18,200, we’ve reduced the troubled projects by 60 some.
By no means are we over the hurdles in some of our challenges. I would say FY 98 poses as many challenges to us as FY 97 because this is our first year of operating under the full restructured environment. I ask for your continued support. We pledge to you the customer service that you desire, responsiveness, and hopefully we can all work together so our funding levels will increase so we can meet the needs in the 502, 515 and 538 programs.