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)

HUD has a standing agreement to refer cases to its inspector general when it suspects mortgage fraud. But an audit by that office of one sample of recent records found that HUD did not refer more than two-thirds of the potentially fraudulent FHA mortgage loans it identified.

"If all of the regulators, including HUD, had looked specifically at mortgage fraud, looking at fair lending and fair housing in a more proactive way, the crisis might have not been as bad," Berenbaum said.

Jackson had insisted he would stay in office until the end of Bush's term. But last month, several Democratic senators who hold HUD's purse strings called for his resignation. He had refused to answer their questions about allegations that he was engaged in political favoritism and cronyism. A federal grand jury is investigating whether Jackson lied to Congress about his involvement in contracts and whether he steered millions of dollars in government work at the Virgin Islands and New Orleans housing authorities to his friends.

Sen. Patty Murray (D-Wash.), head of the Senate Appropriations subcommittee that oversees HUD, said March 21 that Jackson had become unfit to lead the agency.

"We are in the midst of a national housing crisis," she said. "The allegations of cronyism and favoritism against Secretary Jackson are a worsening distraction at HUD at a time when we must have a credible housing secretary that is beyond suspicion."

Staff researcher Julie Tate contributed to this report.