New York – Cuomo’s HUD Career Under Scrutiny

New York – Andrew Cuomo promised to “transform the lives of millions of families across our country” when as HUD secretary he announced his historic plan to increase home ownership.

Eleven years later, many experts think that much-heralded transformation played a role in the devastating subprime mortgage meltdown and the worst economic downturn since the Great Depression.

“They should have known the risks were large,” said Edward J. Pinto, former chief credit officer at Fannie Mae. “Cuomo was pushing mortgage bankers to make loans and basically saying you have to offer a loan to everybody.”

Pinto argues that Cuomo, now running for governor of New York, helped create the framework for the subprime crisis by pushing unrealistic and irresponsible affordable housing goals as head of the U.S. Department of Housing and Urban Development.

“He was a contributor in terms of him being a cheerleader, but I don’t think we can pin too much blame on him,” Dean Baker, co-director of the Center for Economic and Policy Research, said of Cuomo’s role in the subprime crisis.

Baker sees Cuomo as a contributor because he advocated a philosophy that almost everyone should be able to own a home. And yet, he thinks others, most notably mortgage lenders and brokers, were the real culprits.

The debate over Cuomo’s culpability in the subprime crisis has its roots in his eight-year record at HUD, most notably his role in:

• New requirements that Fannie Mae and Freddie Mac, two of the nation’s largest finance companies, expand their purchase of mortgages held by low- and moderate-income homebuyers.

• A reform that allowed Fannie and Freddie to receive affordable-housing credit for buying private subprime mortgage-backed securities.

• Increased loan ceilings and looser underwriting standards at the Federal Housing Administration.

• President Bill Clinton’s National Homeownership Strategy, an unprecedented private-public partnership that made financing more available and flexible.

Of all the initiatives endorsed by Cuomo, first as assistant HUD secretary and later as the agency’s top guy, none is as controversial as the affordable housing goals he imposed on Fannie and Freddie with the blessing of the White House and Congress.

In reality, what those goals meant was to increase from 42 percent to 50 percent the percentage of affordable housing loans Fannie and Freddie were required to buy each year.

“It will strengthen our economy,” Cuomo said at the time, and “it will help ease the terrible shortage of affordable housing plaguing far too many communities, and it will help reduce the huge homeownership gap dividing whites from minorities and suburbs from cities.”

Well-intentioned?

Even critics say yes.

The question they’re asking 11 years later is, was it wise or foolish?

Cuomo faces that same question as he embarks on his campaign for governor, an effort sure to result in renewed scrutiny of his HUD record, a record supporters say is filled with achievement.

Cuomo declined to comment for this story, but his campaign spokesman suggested it was the Bush administration, not the Clinton administration, pushing Fannie and Freddie into the subprime market.

“The GOP is trying to cover up the Bush administration’s complicity in allowing Wall Street and the banks to turn mortgage lending into the Wild West,” spokesman Josh Vlasto said in a statement. “It is a well-established fact that those institutions were the main source of risky lending.”

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