May 28, 2014
Reiss on Castro at HUD
Law360 quoted me in Obama Chooses San Antonio Mayor As Next HUD Chief (behind a paywall). It reads in part,
President Barack Obama on Friday nominated San Antonio Mayor Julian Castro to be the next secretary of housing and urban development, a move that observers say will result in the continuation of his administration’s housing policies.
If confirmed, Castro would take over an agency that is still dealing with the after-effects of the bursting of the housing bubble in 2007 and the resulting foreclosure crisis. HUD is also struggling to deal with a dearth of affordable housing in major metropolitan areas and reforming the Federal Housing Administration’s work.
Obama called Castro an “all-star” who has done a “fantastic job” in San Antonio over the last five years.
“He’s become a leader in housing and economic development,” the president said.
Speaking at the White House on Friday, Castro said that he looked forward to helping Americans get access to “good, safe affordable housing.”
“We are in a century of cities. America’s cities are growing again and housing is at the top of the agenda,” Castro said.
Castro would take over HUD from outgoing Secretary Shaun Donovan, whom Obama nominated to lead the Office of Management and Budget. Donovan would in turn replace Sylvia Mathews Burwell, Obama’s nominee to be the next secretary of health and human services.
Among his major tasks will be overseeing the FHA, which provides a government guarantee on mortgages issued to low-income and first-time homebuyers. The agency, which is led by Commissioner Carol Galante, last year was forced to take a $1.7 billion bailout from the Treasury Department as its reserves were depleted due to losses on bad loans.
In response, the FHA has increased insurance premiums on most new mortgages by 10 basis points and sold off some defaulting mortgages as part of a series of reforms aimed at bolstering its capital levels. Even with those changes, the bailout was necessary.
HUD has also been a key player in the Obama administration’s heavily criticized programs aimed at stemming foreclosures, including the Home Affordable Mortgage Program, and in efforts to develop affordable housing stock around the country.
The department is also at the center of fair lending and fair housing litigation against banks and other lenders.
Castro’s views on those subjects are unknown, but observers expect him to follow closely policies established by his predecessor Donovan.
“Our conversations lead us to believe that Castro is unlikely to deviate materially from the existing FHA single-family strategy,” Isaac Boltansky, an analyst at Compass Point Research & Trading LLC, said in a note to clients.
Castro, 39, is serving his third term as San Antonio’s mayor. A rising star in the Democratic party, Obama tapped Castro to give the keynote address at the 2012 Democratic National Convention in Charlotte, North Carolina.
In many ways the appointment is seen as a political decision as much as a policy one for housing experts, and a departure from Donovan, an expert on housing policy.
“Donovan focused his entire career on housing and affordable housing in particular. He is known for his deep understanding of housing issues. Mayor Castro has had a broader portfolio of concerns as a big city mayor,” said Brooklyn Law School professor David Reiss.
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While Castro has focused on affordable housing issues, the mayor of San Antonio is a nonexecutive position, Reiss noted.
“So his ability to implement his vision will be tested in this new position,” he said.
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