Jan Shadburn
Administrator
Rural Housing Service, USDA
Washington, D.C.
Addressing NAHB:
I would like to cover a broad range of topics and give you an idea of where I think we are at the USDA Rural Housing Service.
I know that two years ago plus when I came on board to be Acting Associate Administrator, the thing that I tried to bring from a private sector standpoint, and having been State Director in Florida, was the customer service aspect. And, I think this is one thing that as we have moved along, we have tried to do. Without our customers, we don’t have a job.
I keep telling our staff that; and with all of the things that have impacted the Agency as we’ve gone along in FY 97, that underscores it. As we move forward to FY 98, it is going to be even more important — not only in 98 and 99 — for us to survive. The key thing is customer service. Now, there are a lot of things that mean customer service, including being able to provide the ingredients to you, our customers.
Let me cover where I think we are right now.
The Customer Counts
In FY 97, if I were to grade our performance and what we were able to produce, I would say we had a pretty good year. Legislatively, from what I understand, we have been able to get across the street and up to the Hill more legislative agendas than in quite some time. I’m very proud of that on the multi-family side and the single family side, and in all areas of our Agency. What I am most focused on is the customer service and, at the same time, for us to survive we must make sure that on the Hill we are doing those things in loan making, making sure our programs get out to rural America, and that what we have on the books is being protected. Most of all that you, as satisfied customers, are telling the people on the Hill. Our job right now is to establish that comfort zone and the confidence that we are doing the things that it takes not only to put their money out to rural America that the Hill is allocating to us, but at the same time, that we are responsive and are listening to our customers.
In terms of program delivery, I think that we have done the things that we needed to do this year. In single family housing, we started out with $585 million and got $141 million from the Fund for Rural America. That’s like winning the Lottery and then someone coming along and saying they’d made a mistake and you have to give $31 million back after everyone had their applications in — but, through working with the industry and the States, I did not have the first call to me at the office where someone said “Wait a minute! You’ve rescinded some money in my District and you have to do something about it.” In addition to that, I have across the street right now, a request to the Under Secretary (and then to the Secretary) which I think will receive approval: transfer the 7% over to the Direct 502 program from the Guaranteed Program. Probably, of the programs that fell off this year, and I could not get it jump started as I did last year, was the Guaranteed Single Family Housing program. There was a lot that underscores that. But, that 7% equate from Guaranteed to Direct about $3 million. We did have, last Friday, about $32 million left on the Single Family side; we will be pooling some of that money today; Self Help and Rural Home Loan Partnership will be pooled on the 22nd; come the 23rd, we will access to all of the money in the Single Family Housing programs. We are looking for ways to transfer money around to make maximum use of it.
Into the Future
In terms of the regulations and regulation reduction, we have worked hard this last year. The Stakeholders Meeting last October marked the emergence of Chuck Wehrwein; I think he has been a terrific asset in the multi-family program, not only to the Agency but also to you, our customers. I think he understands: he walks the walk and he talks the talk. He helps come back to us and makes sure we understand that blend between the Agency staff and the private sector in trying to find ways of how can we. That’s what is most important.
We have been trying to deliver some 47,000 loans out to rural America and maximize the use of leveraging and partnerships, and we’ve also been trying to make sure as we said in 1995 and 1996, that we were going to make our regulations (that you and our staff deal with every day) customer friendly. The Hill sent us the message that we wouldn’t spend any money until we get some things done to our multi-family housing regulations. I did not believe it could be done, but in fact we will get the money out and we will get it used. With the program delivery, the regulation, Reform and and Reinvention, and the single-family DELOSS operation (DEdicated Loan Origination Servicing System), we’ve been busy.
As we have done DELOSS, it has allowed us to get into the field some of the information technology that we will ultimately be able to use for the multi-family housing side.
Servicing
Servicing, which all of you knew was probably stamped on my forehead when I came on board, was: first, you make good loans, you underwrite them, and then you collect. I was in the private sector for 24 years, and as long as I’m in government, I will be the same way. Obviously the Hill has asked me not only what loans have we made in serving rural America, but are we collecting these loans? The Secretary has sent information up to the White House about the progress we have made in our servicing, and I am very proud of it. As we take your taxpayer dollars and we make good loans that we underwrite properly, and at the same time, with the Low and Very-Low and Moderate income families that we serve, we simply cannot give the freedom as in the private sector to go two, three or four weeks before we try to collect their payment. If you do, you will be in trouble because they do not have the money to catch up. So, we will be continuing to move along in the servicing.
Downsizing and Restructuring
Downsizing and restructuring is another serious impact on the USDA Rural Housing Service and Rural Development. I am certainly optimistic as we move into FY 98 that in some states, the full impact of going from 1,200 plus to some 800 Field Offices and downsizing by some 600 to 700 individuals in the field, is still taking shape. It remains to be seen as State Directors look at their planning and their strategy, in many cases they have less than 50% of the offices that had at this time last year; in Tennessee, they have gone from 46 offices to 9. What does that mean? It means that it is going to be very challenging for us as we move through FY 98 to look at: how do we deliver our programs? how do we serve rural America? Last year, from August 15 to October 1 we were able to put out the door $600 million in FY 96; that’s simply not the case any more because we do not have the ability to throttle up that quickly any more. We have to make sure come October 1 that we are in the position, and that we have a plan, to make sure that we are not only covering that territory that’s right around those offices that we’ve downsized and restructured too, but that we’ve developed those partnerships to make sure our programs get out there. That will be very challenging.
On the multi-family housing side, what we said we would do with your help on Reforms has come to fruition. From the comments I have heard, for the most part, the Reform and Reinvention process has gone pretty well. And the product that we’re taking your comments and many others and putting together is a product that you can be fairly satisfied with.
I realize that there are some things that will continue to need to be tweaked, but for the most part, I think the process over the last year has worked. We appreciate very much your input.
Section 538
In terms of the challenge right now for multi-family housing, it is to look at the 538 program. We will continue to look at all aspects of the multi-family housing side, including the 538 program, and try to tweak it to get it where it is a customer and user-friendly program. It looks like we will pool around $6.7 million of 515 funds, and we have $8.1 million in requests.
I think with the repair/rehab and new construction we will make over 350 loans, in addition to the Farm Labor Housing side.
In the servicing side, I’m very proud of where we are. If you look at it from the standpoint that you’re sitting on a Board, and you’re looking at one year ago: we had 470 projects that were delinquent, or $31.5 million. Today we have 413 projects with $21.9 delinquent; so that is $10 million reduction. One of the areas that has been very surprising and has made tremendous improvement is Texas.
Automation Is Coming
Obviously, as we move forward in the multi-family housing program, in addition to the Reform and Reinvention side, we are also looking at the MFIS operation, which is just like the private sector: that is to have the staff sitting down and looking at projects and looking at audits and at those things that, with an aging portfolio, we can identify weaknesses that we can do something about now — not wait until it is already a full blown problem. It costs more money, it takes more staff, takes more of the management’s and owner’s time to get straightened out if we wait. Hopefully, using some of the private sector techniques, we can move down the road so when we do have some problems, we can minimize those. At the same time, for the first time, we have had the Agency appointed in a Receivership, that is going very smoothly.
Automation is another focus we will be looking at in FY 98. That is the Industry Interface where we can start the information technology where we can share information over the use of our computers instead of trying to do it all by paper. Obviously, the future of where this Interface goes has far-reaching advantages as we move forward.
In the Community Facilities side, we’re going to be putting together a group to look at how
we can take some existing funding, maybe in the Community Facilities and in existing multi-family housing projects, and look at putting some Assisted Living units together. We’ll be looking at how we can do that with a pilot operation this year, and hopefully get some of the bugs out of it, some of the questions answered, so that by next year’s time we can roll out with a full blown focus on that.
Serving Customers
We now have to face some of the things the field has been facing in terms of uncertainty and some changes as we move into FY 98.
I think that above anything else — whatever happens, whether it is trying to get our DELOSS conversion or Centralized Single Family Servicing operation up and running, or if we do our Reinvention — whatever we are doing, we must not lose sight of the fact that we must deliver our programs and utilize our funding allocation. We must get it to rural America and we must serve our customers. While anything else happens, I don’t care what’s impacting us, we must do that. If you’re not satisfied with our service, and we’re not delivering these programs to rural America, then we don’t have a job. That’s what I’m telling our people; that’s what I believe. It has been shown that because you’re a Career staff person doesn’t mean we’re all going to have a job forever. So, I believe that those Agencies that respond, that give good customer service and gear up to the 21st Century — but, we are looking to serve rural America in the 21st Century — and I believe the USDA Rural Housing Service has done that and will continue to do that. But, as we move along in the program delivery and the servicing and the downsizing and the restructuring, we too with the streamlining cuts that have been proposed (up as high as 33% at the National Office) we are providing information to across the street to show that when you try to run our $34 billion portfolio with 111 people, we don’t have any place to cut staff. I can tell you right now we are in the midst of hiring a multi-family housing workout specialist; we have been working the Rural Housing Service with a bare bones staff. We are trying to give Chuck, Ronnie Tharrington (in Single Family) and John Bowles (in Community Facilities) the staff they need to be able to serve you as our customers. We will be continuously faced with uncertainty as these streamlining numbers continue to move down the road.
Administrative Convergence
Administrative Convergence (where Farm Services Organization, Natural Resources and Rural Development are the three Agencies they are looking at) is collapsing those administrative functions under one umbrella. That has some far reaching impacts, not only in terms of staff, but also in terms of being able to get handled, such as we are handling it in the Centralized Servicing by turning around on a dime. As we move through this streamlining and Administrative Convergence, we must continue to keep our eye on the prize — the program delivery and the customer service.
As we begin FY 98, the most important thing is making sure that all of the regulation Reinvention that we are carrying through, that not only you as our customer are comfortable and familiar with how it should operate, but also our State Directors and our field staff. As we have heard ever since I came on in 1993, it is consistency — we need consistency. As we downsize and restructure, and as we have moved people into different jobs (some have moved from single to multi-family, to Community Facilities, and to Rural Business), the key thing is being able to look at these individuals, to be able to train them, so that we can ensure that we are giving you good customer service.
Equity Loans/Preservation
So it comes down to the same thing, as I might summarize, the same thing we started FY 97 with — that is to sit down with you as our customer, to listen, to look at such things as equity loans, to look at such things as a multi-family housing Office of Preservation, and having the time to spin another plate. I hear the message about equity loans; I hear the message about the Office of Preservation. I hear you and we are committed to putting that as another plate that we start spinning immediately; and start trying to come up with your input on how we can look at addressing that major, major issue.