HUD Chief Inattentive To Crisis, Critics Say

HUD Secretary Alphonso Jackson, left, with President Bush and Treasury Secretary Henry M. Paulson. Zealous about Bush's goal of increasing homeownership, Jackson encouraged policies that threatened to worsen the mortgage crisis, housing experts said. He is also under investigation for alleged cronyism. (By Ron Edmonds -- Associated Press)

At shrimp-cocktail buffets and receiving lines, Jackson and his wife became ubiquitous, making a 2005 list of the "100 most invited" people on Washington's social circuit.

Jackson made a show of having a cook on HUD's staff, visitors said, a perk normally associated with Cabinet members who have international travel schedules. Nordquist said the cook is an assistant who helps with receptions and banquets, and also answers phones and helps with attendance reports.

Though all Cabinet members are entitled to security, some have eschewed the expense. Jackson sought a full-time detail.

He launched the renovation of a larger HUD auditorium and cafeteria to replace what his spokesperson said was a "deplorable" 40-year-old facility. The oil portraits were commissioned by Jackson's office in an emergency contract last fall so that they would be ready in time for a scheduled opening, which was later postponed. Nordquist said HUD is updating the portraits of agency secretaries as part of the American tradition of "commemorating the contributions of our public servants."

"How can you spend that much money on building a shrine to yourself?" asked Peter Sepp, vice president of the National Taxpayers Union, a fiscally conservative watchdog group. Sepp said that "99 percent of Americans would probably not agree with that kind of extravagance."

Cabinet members historically have enjoyed perks, but their spending of taxpayer funds is limited to "legally authorized purposes." The Office of Management and Budget says those can vary from agency to agency.

In the policy arena, Jackson quickly made known his loyalty to Bush and his determination to help increase the number of U.S. homeowners by at least 5 million. Loans by FHA-approved lenders accounted for less than 10 percent of the overall market in the past five years, but its loan programs were supposed to be targeted to low- and moderate-income individuals, many of them first-time buyers.

In 2006, Jackson proposed plans to modernize the FHA lending process. Backed by the White House, his proposal would allow FHA lenders to offer loans with no down payment, eliminating the long-standing 3 percent minimum. Lenders also could increase the size of the loan to cover the median home price in high-cost areas. High-risk borrowers could qualify by agreeing to pay higher premiums.

Jackson said the goals were to encourage first-time home buyers and to help the FHA compete with the booming subprime market. In an online White House forum in 2007, he said the FHA "is undergoing a historic transformation to give homebuyers who do not qualify for prime financing a better alternative to high-cost, high-risk loan products."

But Inspector General Kenneth Donohue chided Jackson and FHA Commissioner Brian Montgomery, a former White House political aide with no previous housing experience. Testifying on Capitol Hill in March 2007, Donohue agreed that the FHA needed changes to help working families, but not to mimic subprime lenders. He said some of the changes could distract the FHA from its affordable-housing mission while helping government-backed lenders reach high-end buyers.

He also expressed concern that Jackson's proposals would do nothing to detect abuse and fraud. At the time, the FHA monitored 6 to 7 percent of the loans in its portfolio.

"Aggressive oversight and enforcement is crucial to prevent a recurrence of what we are witnessing in the subprime market today and the savings and loan industry in years past," Donohue said.