But i do have some questions about how you suggest it would be implemented. First of all, it says it would be charged on a prospective basis. Your budget also says mortgages insured under that title under the previous fiscal year. Is this prospective or rhett owe active . Its prospective from when its enacted. But the fee will be assessed at one point in the year, at the end of the year. I dont think ive seen the text youre looking at. I believe thats whats been described. Its going to be on transactions Going Forward. Its not going to be going backward. It states the fee would be calculated based on mortgages that were insured under this title during the previous fiscal year. Thats right. If we started it tomorrow, the fee would be assessed after that one year. And its talking about going backward to capture everything after it was enacted. Also under your proposal it says small lenders i think would get hit with a pretty hefty fee because of the complexity of the formula. Will you base the fees on prior years of business . Wouldnt it be better to assess the fee on the mortgage at the time its made . Lastly, your request is for 30 million. You also say the fee could be as much as four basis points. Fha is projected to be a quarter Million Dollars over the threeyear life of this provision. What are you going to do with this money, is it the right number . Which is it . Weve actual said between 2 and 4 basis points now, as a recognition of this figure that you cited. And so were also aware of the usdas approach. Its a little bit of a different approach. And we did give thought to that. We actually believe that this and one of the reasons we pursued this is because we thought it might be more manageable to smaller lenders. As for what it would fund, this 30 million would Fund Investment in our i. T. And ensuring that our Risk Management is as strong as possible. So, you know, were confident that this will help us be a Stronger Organization at fha, that it would directly relate to the ability to work with lenders effectively and help them understand how they stand in comparison to their peers. And this is i think the third year that were asking for this. But during this time, we very much have reached out to the industry and worked with them in terms of taking suggestions. Thats why you see the change, that its prospective, that its limited to three years, that it has a sliding scale of what it could be in terms of the basis points. All of that is in response to feedback that weve gotten. Thank you, mr. Secretary. Let me ask you about first of all, welcome, mr. Secretary, good seeing you again. Let me ask you about colonias, those are the third world condition places that we have along the border. No water, no sewage. Housing is something thats needed. Sometimes they dont even have electricity. Its in the United States. We added some language through the help of the chairman and the Ranking Member, to make sure that the colonias were eligible for the Home Ownership opportunity program. Could you tell us what your plan is for the colonias, number one . Then after that, if you could talk about your upward mobility project also. I think thats the cdgb money administered by hud and hss, and see what your work is, what your vision is on that also. So its the upward mobility and then colonias. Okay. Thank you, representative. Good to see a fellow texan. Yes, sir. We have in this budget, were making a request that we made last year. We really do believe that this would help serve our colonias better. As you know, there are a couple of thousand of them over four states, new mexico, texas, arizona, and california. Current theres a 10 cgdb setaside in those four states. What were asking for in the fiscal year 2017 budget is that we take it up to 15 but that it still be at the discretion of those states. This year its only given the torsi authorization, lets say the states of new mexico, arizona, california, if they so desire, they can go up to that. Thats right. Right now, three of the states, only california. The rest is not. The rest of them are already maxed out at 10 . This would give them authority to go up to is15 . As you mentioned, these are the neediest communities by far in these states, with conditions that require a tremendous amount of attention in terms of infrastructure, in terms of housing, and so forth. And we believe that this is a modest but important measure that would help improve the quality of life there. As to your other question, this is the second year were proposing an upward mobility initiative. So the idea behind this is to give our cgdb grantees and home grantees as much upward flexibility as possible. It would allow up to ten communities, states or localities, to combine four sources of funding. Cdbg and home from hud, as well as social Service Block grants and community Service Block grants from hhs, as a Pilot ProjectGoing Forward, allow them to combine those funds for the allowable uses, and basically be able to get a bigger bang for the buck. On top of that, were requesting 300 million in mandatory appropriation for investments in communities that would allow that flexibility. So further proactive investments along those lines. And i believe that this is one way that were trying to fill this gap that was spoken of in terms of the cbdg, that it would be an Excellent Way to see what some of these communities can do, when we further give them flexibility and have a good impact. All right. Thank you very much. Thank you. Mr. Young, youre recognized, sir. Thank you, mr. Chairman. Welcome, secretary. I want to talk about a but Des Moines Register op ed that was in the paper last summer. There were a few issues youve probably heard about regarding waste and fraud and abuse. It published a story about a 5 million government loan in return for 40,000 in kickbacks. He was never disciplined about allowed to retire. Another hud employee was kept on the payroll for 19 months after charges of threatening to kill and accessing hud computers to obtain information on his victims. We share the same goal of ensuring that funding for hud is spent on the most vulnerable in our communities, who are in really difficult situations, and as the editorial states, and well get you a copy of this, quote, every tax dollar lost to waste, fraud, abuse, and incompetence, is a dollar not spent providing shelter for the poor and those who need it. Can you comment on what steps hud is taking to address these types of serious personnel problems, prevent them in the future, and increase accountantibility for taxpayers . In other words, how does this happen and how do we get to keeping our eye on this and making sure this doesnt happen again . I appreciate the opportunity to address that. I had not seen that editorial but look forward to taking a look at it. Number one, were second a culture of accountability at hud. One of the first things that i did within i believe it was the first month that i was there, it may have been the first a couple of weeks, was to send out a joint letter with the Inspector General that went out to all employees, encouraging them to collaborate with the Inspector General on any types of reviews or investigations that are happening, and make sure that we have a positive working relationship so that we can root out more issues like this. Secondly, we have increased our training for employees, including ethics training, so that employees understand the standard that we expect them to hold themselves to and that we will hold them to. Third, as i mentioned earlier in my testimony, we are in step with our Inspector General on the overwhelming majority of recommendations that he has made and were taking implementation of those recommendations seriously. Fourth, were trying to improve our hiring process so that we get the best and brightest from the beginning. I would say these instances you point out are an aberration. The vast majority of hud employees are honest, hard working people. But we also believe that we want to always improve as an organization. One of the things were trying to do is improve hiring. We recently partnered, for instance, with toyota who came in and worked with our hiring folks to improve the hiring plan process. And we continue to work through the hiring process in general so that we can get the best folks available out there. And were working with our employees to gauge them and provide an organization that listens to them i think more effectively, so that they feel more engaged, and the good ones are likely to stay on longer because of that. Our Employee Viewpoint survey scores went up significantly this year. Hud was the most improved midsize agency. Were doing all of those things and others to try and create a hud that is stronger, that is more responsive, and is more likely to avoid some of the individual instances that you pointed out. I certainly appreciate that. And i dont mean to infer that we only hear the bad things that happen out there on the news. So many positive things are happening as well with your employees. Thank you for instituting the ethics training and the personnel programs. Finally, i want to comment on the Veterans Affairs supportive housing. You mentioned that early on in your testimony, about a 36 decline in veterans homelessness. Thats great. Can you talk about how you come up with that data and track that issue . And then i notice in your budget request, youre really asking only for 7 million for vash, and thats for tribal justification only. My concern with that is, is that an inference that we dont have a veterans homelessness problem . Let me answer that part first. Thats an important question, of course. It is not. Number one, other resources that were dedicating serve veterans as well. So for instance, when we request, as we are in this budget, Additional Resources for housing choice vouchers for permanent supportive housing, for rapid rehousing, all of those impact veterans. The lack of a request this year for vash is a recognition that we believe with regard to vash vouchers, that we have the resources we need to address the challenge of veteran homelessness there, as vash vouchers can. We are proud to begin tribal hud vash. We awarded the first receivers allocations in december of 2015. We see a continuing need there. And let me just again thank the committee on both sides of the aisle, because i tell folks in public all the time that this really is an instance where i think things wording out the way that they should on behalf of veterans. The resources have been appropriated. Hud and the va have been working with local communities to get these vouchers on the street. And i have to say, the teams that work on this are probably the most active and passionate teams on either in either agency, for obvious reasons. Mr. Secretary, on that note, im going to have to well look forward to continue to drive down that number. Well have further conversations. Thank you, mr. Chairman. Thank you, mr. Young. Mr. Secretary, the fifo issue is a major time. We kind of talked about this before. It makes it impossible for you to deliver audible financials. Even worse, its causing hud to violent federal law. Can i have a Firm Commitment from you that this accounting problem will be corrected in time for your 2016 audit . I can tell you that we are working with the gao on this issue right now. As well as with the ig. Youre right, it is an accounting issue. We dont believe were violating the ada on it. But i can pledge to you that we will work diligently with the gao and the ig on this to resolve it. And again, mr. Secretary, you know, i want to work with you. This is a hugely important issue. So, you know, lets just make sure that we focus on that. Im obviously willing to work with you to be helpful. Will do. To be helpful. You are requesting let me go to the administrative fee area. Youre requesting 2. 1 billion for administrative fees. A 427 million increase, which is a 26 increase above last year. Now, we all understand the importance of supporting Public Housing authorities so they can efficiently run their programs. But does it really make sense to ask for such a i mean, its huge increase to the administrative account. This is an issue that i believe goes to how we can ensure that we have a Housing Choice Voucher Program that is more efficient, that is stronger, serves all of those voucher holders better. The fact is that over the last several years weve only dedicated between lets say 70 and 80 of the admin fee that ought to have been dedicated, appropriated to housing authorities what changed is that we undertook an admin fee study to understand what was the appropriate level that we ought to be investing for the administration of these vouchers. And based on that, we have made this request, to increase the admin fee. This is important for housing authorities because over the years, theyve been asked to do more and more with less and less. We believe this is the right level of funding to ensure this is a wellrun program. Its a very big program, and an important one, and we wanted to make sure they have the resources to get it right, to avoid problems in the future. Hud has had a fair amount of success in leasing up units. Phas have been able to leaguse nearly all of the available units in the purchavoucher prog the past two years. I dont want to punish you for your success, but the question it begs the question, if youre meeting your leasing milestones, why the need for more administrative overhead . I would just say the resources out there for administration are stretched very thin with housing authorities. Weve done a dependable job in many instances of trying to stretch those resources as far as possible. He also understand this kind of expense is probably not the first thing that folks think about. But it is tremendously important that we adequately resource these housing authorities so that they can continue to do a good job and get even better in the informatiadministration of program. My understanding is you have not yet implemented your new fee structure. Wouldnt it make sense to hold the line on spending for this account until youve actually finalized the new administrative fee formula . We believe we do know the best approach based on the administrative fee study. So that gives us confidence that we understand the level of the propose racial, where this ought to be. Thats reflected in the request. Finally, what are some efficiencies that the phas, i dont know why thats hard for me to say, could implement so that they can keep their overhead expenses down . You know, there are a number of them, actually, across the board. Some of them are addressed in chairman luke meyers housing opportunity through modernization 3700 legislation. Basically they center around different things. For instance, giving flexibility with regard to inspections and income verification, especially for smaller housing authorities, so that theyre not as administratively burdened. They can do things other than have to routinely check on the same information year after year, that oftentimes for many of the residents has stayed the same. If you have, for instance, a senior resident who is on fixed income, and thats demonstrated on record to the housing authority, theres really not a reason that they ought to be verified every single year. That can go to once every two or three years. Those are the types of things that were working, we want to work with housing authorities on in order to reduce their administrative burden. Thank you very much. Mr. Secretary, the ranking number. Mr. Bryce, youre recognized, sir. Thank you, mr. Chairman. Mr. Secretary, before moving on to other questions, i want to briefly return to the initial question about choice neighborhoods, because it was a rather complicated question, and certain aspects of it didnt get answered. You might want to respond for the record on some of this. But im eager to get on the record, one way or another, the answer to the question i asked about the level of demand here, the kind of ratio of meritorious proposals that implementation grants were talking about, the ratio of meritorious proposals to what youre able to fund given your appropriation in recent years. Yes. So most recently there were 33 implementation applicants for five implementation grants that were awarded. What time period does that cover . Well, the grants that were last awarded a few months ago. So this would cover the last fiscal years grants, which was i believe fiscal year 20142015, just a couple of months ago. Also you asked about planning grants. We awarded seven planning grants. We had 51 applicants for those grants. All right. So thats fairly typical of recent cycles, i assume, that ratio. It is. These are choice neighborhoods is very popular out there. There is a lot more need than were able to dedicate resources too. And thats one of the reasons that were requesting a significant increase this year from the 125 million that was appropriated last year to 200 million. Let me just quickly register a question about this new category of grants that youre proposing, the socalled planning and action grants. That aims at smaller projects. I wonder what kind of projects youre looking at there. I think ill ask you to do this for the record, because in asking the question im somewhat concerned about proliferating too much small and modestly sized grants in a way that begins to eat away at the limited funding we have for implementation grants. After all, the implementation grants, the larger grants, the more comprehensive projects, are what choice neighborhoods is all about. So im going to ask you to elaborate for the record how these smaller grants, especially this new category, what kind of volume youre anticipating there and what the budget impact would be. We would be glad to. As you know, this is the first time this is a new category and we are excited about them. Well be glad to elaborate on the record, why that is and how many we anticipate making and so forth. Yes. And of course the impact on the main item, which is the implementation grants. Housing for the disabled and elderly. I raised this in my opening statement. You know, mr. Secretary, many states are struggling to comply with the olmsted decision in terms of housing for the disabled. We need to do a lot more to integrate people with disabilities into their communities. This mismatch is widespread between the housing available, the housing required to meet this goal. Theres also a dearth