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How Julian Castro plans to lower your rent and help you buy a home

President Obama shakes hands with San Antonio Mayor Julian Castro at the White House on May 23 after nominating him to lead the Department of Housing and Urban Development. (AP Photo/Pablo Martinez Monsivais)
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Housing and Urban Development Secretary Julian Castro on Tuesday laid out two of his main priorities going forward: boosting homeownership and combating the nation’s “rental housing crisis.”

In his first public policy speech since joining HUD in July, the former San Antonio mayor said that he criss-crossed the country during his first weeks in office to get a feel for what HUD does and what it needs to do. Here’s some of what he told the crowd Tuesday (his 40th birthday) at the Bipartisan Policy Center’s housing summit in Washington about his top goals:

Expanding homeownership. Just minutes into his speech, Castro said he’ll work to boost homeownership for all Americans, not just those with stellar credit. “It’s time to remove the stigma associated with promoting homeownership,” he said.

After the mortgage meltdown, lenders tightened their standards and began demanding higher credit scores than required for government-backed loans, including those insured by HUD’s Federal Housing Administration. Castro said it’s time for that to stop. “The pendulum has swung too far in the other direction,” he said. “The truth is that the dream of homeownership is out of reach for too many Americans.”

But Castro acknowledged that getting lenders to ease up will be tough. As we detailed in a story earlier this month, the industry says it’s getting mixed messages from Washington. The government wants lenders to approve more mortgages. But it also forced lenders to buy back billions of dollars in loans after the housing market unraveled, and it continues to trumpet massive legal settlements with large banks. Against that backdrop, lenders say they see no reason to widen access to credit. They also say they need more clarity on the rules that govern when enforcement actions can be taken against them.

“Many have been reluctant to lend because they fear unanticipated consequences,” Castro said in his speech. “They need to be able to manage their risk better – and so does FHA. So we’re making it easier for them to partner with us by overhauling our ‘Single Family Handbook.’ ”

Translation: The FHA is working to compile all its policy guidelines into one document. “By clarifying the compliance process, we’re giving lenders the confidence they need to lend, while protecting our financial health,” Castro said.

Making rent more affordable. Castro’s predecessor at HUD, Shaun Donovan, had often said the nation is in the midst of “the worst rental affordability crisis” ever. Castro said the same Tuesday and, along the way, managed to plug legislation that would overhaul the nation’s housing finance system.

The legislation – authored by Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) – is designed to dismantle Fannie Mae and Freddie Mac. It includes a provision that would use industry fees to fund various programs designed to meet affordable housing needs, instead of continuing to impose affordable housing mandates on Fannie and Freddie. The mortgage finance giants are required to buy a percentage of mortgages made for single-family homes and multi-family properties in underserved areas.

Castro said the Johnson-Crapo bill would dedicate billions of dollars every year to producing affordable housing, and presents an “unprecedented opportunity that we can’t afford to waste.” But the chance may have slipped away. After passing a key Senate committee in May, the bill has stalled and there’s no plan to revive it any time soon.

Castro also said he would work to preserve existing affordable housing. “The nation is losing 10,000 units of public housing every year, mainly due to disrepair,” he said.  Another grim statistic on that front: There’s a $26 billion backlog in capital needs for public housing buildings. And more challenges: HUD has received applications to convert more than 180,000 units of public housing into long-term Section 8 contracts, but its authority is limited to converting only 60,000 units in a year. Castro said HUD has asked Congress to lift the cap.

But will Congress come through with that -- and with more funding?  “In recent decades, as needs have gone up, HUD’s resources have gone down,” Castro said.  In 1981, HUD had roughly 16,500 employees. Today, it has 8,500.