Posts Tagged ‘HUD’

MHI SAFE Act comment letter filed with HUD March 1st

March 2nd, 2010 1 comment

MHI filed the following comment letter today regarding HUD’s proposed rule on the SAFE Act.

The deadline for comments is this Friday, March 5th. Please fell free to incorporate all or portions of MHI’s comments into your letter.

You can submit comments electronically through the Federal eRulemaking Portal at

March 1, 2010

Regulations Division
Office of General Counsel
U.S. Department of Housing and Urban Development
451 Seventh Street, S.W., Room 10276
Washington, D.C. 20410-0500

RE: Docket No. FR-5271-P-01
SAFE Mortgage Licensing Act: HUD Responsibilities Under the SAFE Act

Dear Office of General Counsel:

The Manufactured Housing Institute (MHI), a trade association representing all segments of the factory-built housing industry including manufacturers, lenders, community owners, retailers, and state associations, appreciates the opportunity to comment on the Department of Housing and Urban Development’s (HUD) Proposed Rules to Implement the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) (12 U.S.C. §§ 5101-5113).

When reviewing the below comments we encourage HUD to keep in mind two of the purposes of the SAFE Act: (1) increase uniformity; and (2) reduce regulatory burden. The manufactured housing industry has been adversely affected by the SAFE Act in ways that are inconsistent with the purpose of the SAFE Act. State laws are not being applied uniformly to retail sellers of manufactured homes or personal property-only finance companies as compared to the application of the SAFE Act to traditional mortgage lenders. In addition, the regulatory burden is much greater for the manufactured housing industry than that of the mortgage lending industry.

Section 3400.103(c)(1) – Takes an Application

  1. Amend the Rule to Incorporate Clarity from Preamble

In its preamble HUD clarifies that “takes a residential mortgage loan application” does not include an individual whose only role with respect to the application is physically handling a completed application form or transmitting a completed form to a lender on behalf of a prospective borrower. For clarity purposes, we encourage HUD to place this language in the body of its final rule. So section 3400.103(X)(x) will read:

An individual “takes a residential mortgage loan application” if the individual receives a residential mortgage loan application for the purpose of deciding (or influencing or soliciting the decision of another) whether to extend an offer of residential mortgage loan terms to a borrower or prospective borrower (or to accept the terms offered by a borrower or prospective borrower in response to a solicitation), whether the application is received directly or indirectly from the borrower or prospective borrower. An individual whose only role with respect to the application is physically handling a completed application form or transmitting a completed form to a lender on behalf of a prospective borrower does not take an application.

  1. Factual Scenarios – Examples of Not Taking an Application

We seek HUD’s concurrence that the following activities when performed by a manufactured housing retailer or salesperson would not constitute “taking an application.”

  1. Giving a home buyer access to a kiosk in order to complete an application on-line which goes directly to a funding source.
  2. Directing a home buyer to complete a paper application for financing.
  3. Assisting a home buyer with general questions regarding the completion of a loan application by clarifying what type of information is necessary for the application or otherwise explaining the qualifications or criteria necessary to obtain a loan product.1
  4. Suggesting that a home buyer may have incorrectly completed or neglected to complete parts of the application.
  5. Describing the steps that a home buyer would need to take to provide information to be used to determine whether the home buyer qualifies for a loan or otherwise explaining the loan application process.2
  6. Transcribing information from the home buyer and directing to funding sources. For example, entering information into an online application system on behalf of the buyer when the entered data goes directly to the lender.

Section 3400.103(c)(2) – Offers or Negotiates

Examples of Offers or Negotiates. In its proposed rule HUD provides three examples of offering or negotiating terms of a mortgage loan: (a) presenting mortgage loan terms to a borrower for acceptance; (b) communicating directly or indirectly with a borrower for purposes of reaching an understanding about prospective loan terms; or (c) recommending, referring, or steering a borrower to a particular lender or set of loan terms, in accordance with a duty to or incentive from any person other than the borrower (emphasis added).

  1. Presenting Mortgage Loan Terms to a Borrower for Acceptance. We understand this example of offering or negotiating is intended to focus on activities that are the equivalent to an extension of an offer. Consistent with traditional contract terms, in order to qualify as an offer, the item or terms that are being presented to the home buyer must be items or terms that are capable of acceptance. Otherwise, an offer has not been made.

Therefore, MHI seeks HUD’s concurrence that the following activities when performed by a manufactured housing retailer or salesperson do not rise to the level of an offer under the SAFE Act.

  1. The mere sharing of general information about a financing source, such as available financing.
  2. Acting as a passive conduit between the home buyer and the financing source without engaging in specific discussion of financing options from a particular funding source.
  3. Discussing hypothetical financing options.
  4. Presentation of a spectrum of options.
  5. Giving the home buyer a list of available financing sources without recommending any of the sources.
  1. Communicating Directly or Indirectly with a Borrower for Purpose of Reaching an Understanding about Prospective Loan Terms. We understand that it is HUD’s intention to capture communication between the home buyer and the manufactured housing retailer or the salesperson that rises to the level of mutuality, i.e., agreement on specific loan terms.

Therefore, MHI seeks HUD’s concurrence that the following communications between a home buyer and a manufactured housing retailer or salesperson do not rise to the level of negotiating under the SAFE Act.

  1. Discussing the home buyer’s ability to afford a particular home, i.e., examples of monthly payments for a particular home.
  2. Discussion of various alternative financing options.
  3. Presentation and/or discussion of generic facts sheet or generic rate sheets (which may be provided by financing sources).
  4. Closing personal property transactions. A retailer may assist a home buyer by receiving closing documents from the lender. The retailer will deliver the closing documents to the home buyer for review and signature. Since the home buyer and the lender already agreed upon the loan terms, there is no offering or negotiating. Additionally, there is no reasonably available alternative for closing personal property transactions, as third party closing agents limit their services almost exclusively to real estate-secured transactions (e.g., closing attorneys, title agents, etc.).
  1. Recommend, Refer or Steer A Borrower to a Particular Lender or Set of Loan Terms, in Accordance with a Duty to or Incentive from any Person Other than the Borrower. We understand that in order for a manufactured housing retailer or sales person to trigger this example of offering or negotiating, the retailer or salesperson must act as a result of a duty to a financing source or the retailer or salesperson acts in order to receive an incentive from the financing source. Without the duty to the financing source or the incentive from the financing source, this example of offering or negotiating will not be met.

MHI therefore seeks HUD’s concurrence that the following examples do not constitute recommending, referring, or steering a home buyer.

  1. Forwarding a completed application to only those financing sources that will consider the home buyer’s application.
  2. Forwarding a completed application to a limited scope of lenders.
  3. Giving the home buyer a list of available financing sources without recommending any of the sources.

MHI seeks HUD’s concurrence that the duty must flow to the financing source and the incentive must come from the financing source and therefore, the following would not qualify as a duty or incentive.

  1. The desire to sell a manufactured home.
  2. The commission resulting from the sale of a manufactured home.
  3. A sales person’s salary.

MHI seeks HUD’s guidance on whether the following items are considered incentives or duty to act on behalf of the financing source.

  1. A pre-arranged agreement between the retailer or sales person and the financing source with regard to available financing and underwriting guidelines.
  1. Compensation or Gain. The receipt of compensation or gain is critical to the trigger of licensing requirements under the SAFE Act. We therefore seek HUD’s agreement that the following examples are not considered compensation or gain.
  1. A sales person’s commission for the sale of a manufactured home to the extent that the commission received is the same in a financed transaction as that in a cash transaction. In this situation, there is no direct or indirect correlation between the compensation or gain and the taking of an application or the offering or negotiating of a loan.
  2. Any benefit which is the same in a financed transaction as that in a cash transaction. In this situation, there is no direct or indirect correlation between the compensation or gain and the taking of an application or the offering or negotiating of a loan.
    Loan Processor. Section 3400.23 of the proposed rule provides that a loan processor is an individual who performs his or her duties at the direction of and subject to the supervision and instruction of a state-licensed loan originator. We seek HUD’s clarification that the state-licensed loan originator who supervises an individual who tangentially performs clerical and support tasks is not required to be that individual’s direct supervisor. As long as the state-licensed loan originator directs, supervises and instructs the loan processor, he or she is not required to be the loan processor’s immediate/direct supervisor.

De Minimis Exemption. We encourage HUD to follow the recommendation of the Federal Agencies and consider a de minimis exception for certain individuals.3 In their draft final rule, the Federal Agencies suggest that an individual who does not regularly or principally function as a loan originator, for example has acted as a loan originator for 5 or fewer residential mortgage loans in the past 12 months, is not subject to the SAFE Act. Similarly, we ask HUD to consider the small manufactured housing communities who may take very few applications in a 12 month period. Consideration is requested based on the uniqueness of the industry. A small community is not motivated by the same incentives as a mortgage lender. A community is motivated to find the best home for the buyer and maintain that person within their community. These are typically family-run businesses with very few home sales within any 12-month period.

    HUD’s Express Authority to Review State’s Laws. We respectfully suggest that HUD’s review of state SAFE Acts is limited in scope. In HUD’s July 2009 Report to Congress, HUD acknowledges that it is “charged by the SAFE Act with establishing and maintaining a loan originator licensing and registration program for any state or territory that does not have in place a process for licensing and supervising loan originators that meets the requirements of the SAFE Act, or that fails to participate in the NMLSR.” The requirements of the SAFE Act that Congress authorized HUD to review for compliance is limited to three sections of the SAFE Act. Specifically, section 5107 of the SAFE Act, entitled “Secretary of Housing and Urban Development Backup Authority to Establish a Loan Originator Licensing System” provides that after the time periods for compliance allowed by the statute, if the “Secretary determines that a State does not have in place by law or regulation a system for licensing and registering loan originators that meets the requirements of sections 5104 and 5105 and subsection (d) of [section 5107], or does not participate in the Nationwide Mortgage Licensing System and Registry, the Secretary shall provide for the establishment and maintenance of a system for the licensing and registration by the Secretary of loan originators operating in such State as State-licensed loan originators.” HUD’s review of state compliance is limited to sections 5104, 5105 and 5107(d). HUD is not given express authority to approve or deny state definitions of loan originators or exclusions for individuals traditionally regulated by the states.
    State’s Sovereign Rights to Create Exclusions. The states have the right to interpret their SAFE Acts in order to enact and implement their own laws covering or excluding certain persons and activities. Congress did not give HUD the broad authority to preempt a state’s interpretation and implementation of section 5102 of the SAFE Act. We respectfully suggest that HUD will exceed its statutory scope of review if it interprets states’ exclusions as non-compliant with the SAFE Act. A determination by HUD that manufactured housing retailers and salespersons are included in the definition of loan originator will be given deference only if there is ambiguity in the SAFE Act and Congress either explicitly or implicitly delegated authority to HUD to cure that ambiguity. See, American Bar Ass’n v. F.T.C., 430 F.3d 457, 469 (D.C. Cir. 2005).

Delayed Effective Date. Section 3400.107 of HUD’s proposed rules authorize HUD to approve a later effective date upon a state’s demonstration that substantial numbers of loan originators (or of a class of loan originators) face unusual hardship. We request HUD consider allowing the demonstration of unusual hardship to be proven on a national basis by industries suffering unusual hardship.

In addition, we request HUD consider issuing a statement to the states permitting a delayed effective date in the licensing of loan originators. A delayed effective date will give states time to address HUD’s comments and amend laws, if necessary. Once the laws are in final form, the industry will be able to appropriately interpret laws and determine who must be licensed as a loan originator.

Moratorium on Enforcement of Loan Originator Laws. For the reasons stated above, we also believe that a moratorium on enforcement of the current state SAFE Act laws is in the interest of all affected until the state laws are final and compliance is achievable. We therefore, request HUD consider issuing a statement to the states permitting a moratorium on enforcement of the licensing requirements for state-licensed loan originators.

Loan Assumptions. We encourage HUD to agree that assumptions are not the equivalent of a new loan subject to the SAFE Act because assumptions do not result in the extinguishment of an existing loan and the replacement by a new loan, but rather the loan is assumed by a new obligor.4 We strongly urge HUD to consider the importance of consistency in the application of the SAFE Act and apply the rational from the Federal Agencies draft final rule, that individuals engaged in assumptions are not acting as loan originators as defined in the SAFE Act.5

Application of the SAFE Act to the Manufactured Housing Industry. Congress expressly stated two objectives of the SAFE Act are to create uniformity and reduce regulatory burden. These two objectives are not being met when it comes to the manufactured housing industry. In fact, there are unintended consequences placing significant increased burden on the manufactured housing industry as a result of the states’ implementation of the SAFE Act. There is also unequal application of the laws and licensing requirements on the manufactured housing industry.

As the states enacted their SAFE Acts, many also amended their mortgage lending laws to incorporate the SAFE Act definition of mortgage loan. This resulted in the inclusion of personal property transactions in state mortgage lending laws. Personal property finance lenders are now finding themselves subject not only to state sales finance and installment loan laws and licensing regimes, but they are now also subject to mortgage licensing and compliance requirements.

The result is dual licensing requirements for personal property lenders (and transactions) in many states. The traditional mortgage lender is not subject to the same dual licensing requirements. This is an unequal application of the SAFE Act to the manufactured housing industry and a significant increase in regulatory burden.

Personal property finance lenders must immediately become licensed under a mortgage lending scheme and/or comply with the substantive requirements of the state mortgage lending laws. This will result in duplicative disclosures to the consumer for the same transaction, conflicts between rates and charges, and in many instances duplicative examinations for the same transactions by different state agencies. Personal property finance lenders have been put in a disadvantaged competitive position. The cost of the new regulatory burdens will outweigh remaining in the business of personal property financing.

We seek HUD’s assistance in guiding the states to reconsider the application of their amended laws and focus on the intent and purpose of the SAFE Act: (i) to license individuals (not to create new licensing requirements for already sufficiently regulated entities); and to (ii) create uniformity and reduce regulatory burden.

Implementation of the SAFE Act through NMLSR is not Meeting its Minimum Goals. HUD is required to oversee the successful implementation of the NMLSR system. This requires state licensing of individuals acting as loan originators, including obtaining a unique identifier. Although not a prerequisite of the SAFE Act, the NMLSR creates sponsorship of an individual loan originator as a condition precedent to license approval. An individual loan originator can not work until he or she is sponsored by an entity in the NMLSR. Typically, the sponsoring entity must be the loan originator’s employer.

In the manufactured housing industry, at least three types of entities may employ loan originators: (i) personal property-only finance lenders; (ii) retail sellers of manufactured homes; and (iii) owners of manufactured housing communities. These entities typically hold sales finance company licenses, installment loan licenses, or retail seller licenses. Because NMLSR does not include these licenses in its system, these entities are unable to sponsor their employees. This is a fatal flaw in the NMLSR system. We encourage HUD to address this NMLSR flaw by creating an exempt status to allow these personal property finance lenders, retail sellers and community owners to sponsor their loan originator employees.

1This example is taken from the FFIEC’s draft final rule.
2This example is taken from the FFIEC’s draft final rule.
3See Federal Agencies draft final rules pages 18-19.

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MHI and its members look forward to working with HUD in the months ahead regarding the matters raised in this comment letter.


Thayer Long
Executive Vice President
Manufactured Housing Institute

Legal and Legislative Update – VERY IMPORTANT

February 20th, 2010 3 comments

Hi all! Your government is at it again. Just when we thought seller financing would finally be recognized as an alternative to clogged-up credit markets, it again comes under attack. This time it’s HUD’s interpretation of the 2008 SAFE Mortgage Licensing Act that requires our immediate attention AND ACTION.

Included below is the verbiage of an e-mail I received earlier today from a member of the national REIA. BE SURE TO READ THE PROPOSED RULES. Then, make your views known by commenting on the website.

This is extremely important. We could dissect the proposed rules and write volumes about why they are bad not only for our industry but our entire economy. However, there simply isn’t time. The deadline for comments is next Tuesday, February 16th. Deadline for comments has been extended to Friday, March 5th. PLEASE ACT NOW.

HUD Issues Problematic Rules Interpreting SAFE Mortgage Licensing ACT

HUD has proposed to eliminate ALL seller financing unless the seller lives in the home or becomes a licensed mortgage originator. The proposed HUD Rules interpreting the federal SAFE mortgage act can be viewed at Use the search parameter “HUD” and the keyword “safe”. Please review and comment regarding the impact of this broad interpretation of the law.
“In addition to establishing HUD’s responsibilities under the SAFE Act, through this rule, HUD proposes to clarify or interpret certain statutory provisions that pertain to the scope of the SAFE Act licensing requirements, and other requirements that pertain to the implementation, oversight, and enforcement responsibilities of the States. HUD solicits comment on the proposed clarifications and on the regulations proposed to be codified.”

As you may recall, we lobbied hard last year to maintain the right for individuals to make up to five seller financed transactions per year before being subject to mortgage originator licensing, etc… However, that law was passed subject to the Department of Housing and Urban Development’s (HUD) approval of the law as “compliant” with the intention of the federal law. If any state does not have a compliant law, the SAFE act allows HUD to implement licensing for the state. HUD has since issued proposed rules. In a nutshell, seller financing would no longer be allowed for non-owner occupied homes.

How YOU can help:
We learned about the publishing of the rules very late in the process…
and the deadline for comment is upon us on February 16. However, we desperately need thousands of seller finance professionals across the country to go on record with HUD on this issue. We will be working to try to affect this law in other legislative ways, but cannot hope to gain traction unless you have clearly communicated you are opposed to this portion of the rules. This is your chance to be counted on this issue.

PLEASE SUBMIT YOUR COMMENTS TO HUD! We have less than one week to flood this system with comments.

Follow these simple steps:

  1. Logon to
    You will see two white boxes for searching
  2. On the left box labeled “Document Type”, pull the menu down and select “proposed rules”
  3. On the right box labeled “Enter keyword or ID”, enter “safe mortgage”. Then, press search
  4. Locate the blue search result “FR-5271-P-01 Safe Mortgage Licensing Act: HUD Responsibilities Under ….” To read the rules, click on this title. You will be taken to another page. You will see “views”. You can click on PDF file or another symbol which will show you the rule document online.
  5. On the right of the screen, click on “submit comment”
  6. Complete the form providing required information and your comments and then submit

What do you say?

Say what you feel, but say it politely! The message should include that you would like the definitions in the proposed rules to be changed so that private individuals can originate and service loans on properties they personally own.

Some ideas from others:

  • bank loans are not available on some types of properties
  • the tight lending climate has made bank financing “out of reach” for many
  • seller financing is an “age old” tradition based on private property rights
  • these rules would prohibit even partial seller financing – i.e. a “seller second”
  • according to HUD’s “Residential Finance Survey” in 2001, roughly 40% of all non-farm residential properties in the US are owned free and clear
  • an estimated 6 million Americans own a property other than their own primary residence
  • an estimated 4.5% of Americans own three or more properties, many purchased solely as investment properties
  • 40% of non-owner occupied residences are mobile homes which are more difficult to sell with bank financing
  • approximately 5% of homes in US are for sale or for lease… seller financing may be key to liquidating this inventory

The continued success of our industry as we know it is threatened by these proposed regulatory changes. Please do not hesitate to follow the steps above and make your voice heard.

Marc Faulkner

Please comment below:

HUD’s William Matchneer Speaks at MHI’s Winter Meeting

February 4th, 2010 No comments

William Matchneer, HUD’s Associate Deputy Assistant Secretary for Regulatory Affairs and Manufactured Housing addressed over 100 members at MHI’s Winter Meeting on February 2 in Savannah, Georgia. Matchneer outlined the Department’s priorities for the manufactured housing program in 2010 as follows:

  • The long awaited proposed rule on the new Title I loan insurance will be published within the next few weeks.
  • A Manufactured Housing Lenders Summit hosted by FHA Commissioner David Stevens and Congressman Joe Donnelly (D-IN) will be held to find solutions to the financing issues affecting this industry.
  • Action will be taken to protect preemption of the HUD code by publishing a proposed rule on the changes recommended by the Manufactured Housing Consensus Committee (MHCC) and it would be in the industry’s best interest for this to be on a three year cycle of code changes consistent with other nationally recognized building codes.
  • Changes to the MHCC by-laws and rules as prescribed by the Federal Advisory Committee Act were finalized to improve the MHCC process.
  • Efforts will continue in working with manufacturers to provide technical assistance to update manufacturing plant quality assurance manuals. He emphasized that HUD is not viewing these actions as an enforcement issue, but rather an opportunity for HUD to serve as a resource to assist manufacturers in putting updated quality assurance procedures in place.
  • A proposed rule to Manufacturer Inspection and Certification Requirements and Primary Inspection Agency responsibilities (24 CFR Part 3282 Subparts E and H) will be published by this Summer.
  • Serious and thoughtful review of all comments submitted to HUD in response to its proposed rulemaking on the SAFE Act will be made. Matchneer encouraged everyone to submit comments to the proposed rule by February 16.
  • The non-career administrator position will not be filled in the next few months due to budget constraints. He assured members that we have an excellent industry advocate in FHA Commissioner David Stevens who is a highly regarded official. Matchneer is the industry’s point person at HUD. He knows how critical these issues are to the industry and is there to help. He encouraged members to continue to work through the MHI staff with which he has a great working relationship.

Other topics discussed at the Winter Meeting were weather radios, Energy Star Tax Credit extender legislation, pre-1976 replacement home legislation, FEMA emergency housing and financing issues. The two-day meeting concluded with a meeting of the MHI Board of Directors. Resolutions were passed on the SAFE Act and federal preemption. MHI will be working hard during the upcoming months on these critical regulatory and legislative issues.

MHI is the the preeminent national trade association for manufactured and modular housing industries, representing all segments of the industries before Congress and the Federal government. From its Washington, D.C. area headquarters, MHI actively works to promote fair laws and regulation for all MHI members and the industry. For more information on MHI, visit

HUD’s Exposed Plan for the Manufactured Housing Industry is Unacceptable

January 25th, 2010 4 comments

Posted by Danny Ghorbani, MHARR

As has previously been reported, a steadily expanding number of members of Congress have been making inquiries to senior officials at HUD regarding the declining state of the HUD Code manufactured housing industry, the continuing inability of consumers to access public and private financing to acquire affordable, non-subsidized manufactured homes, as well as the Department’s management of — and plans for — the unique HUD (Title VI) manufactured housing program and FHA manufactured home financing. Throughout 2009, these congressional inquiries became more urgent, more specific and more pointed, as industry production and sales fell below 50,000 homes (its lowest output since 1950), and members of Congress became more concerned about closures of manufactured housing businesses (particularly smaller concerns) and related job losses, as well as the unavailability of manufactured home consumer financing in their districts and states.

Although HUD officials responded to these inquiries anecdotally and in a fragmented manner at various meetings and as part of congressional hearings, an extraordinarily articulate and well-focused December 2, 2009 inquiry from Rep. Travis W. Childers (D-MS), has now elicited a January 11, 2010 written response from HUD that provides a bleak and shocking window into HUD’s views concerning — and plans for — the federal manufactured housing program, consumers financing, the HUD Code industry and consumers of manufactured housing that have not previously been exposed in such frank detail. The revelations in this response — both stated and implied — are remarkable and should spur all program stakeholders to take stock now and address their implications for an industry and consumers already facing unprecedented challenges and obstacles.

Enclosed with this communication are copies of Congressman Childers’ December 2, 2009 inquiry letter and HUD’s January 11, 2010 response, together with a complete paragraph-by-paragraph analysis of HUD’s response. This packet is a must-read for all those with an interest in manufactured housing, including industry members, consumers and elected officials.

Based on the information exposed by these documents, the following priorities need to be pursued and implemented:

Regarding the HUD manufactured housing program and public financing —

  • The appointment of a non-career Administrator for the HUD manufactured housing program as provided by Congress in the Manufactured Housing Improvement Act of 2000 (2000 reform law). Based on the track record compiled while this position has been vacant for the past five years, without such an appointed Administrator, nothing else about the program will change.
  • Issuance of final rules implementing improvements to the FHA manufactured housing program approved by Congress in the Housing and Economic Recovery Act of 2008 (HERA) and the removal of the existing Ginnie Mae moratorium on the securitization of FHA Title I loans.
  • Full and proper implementation of all manufactured housing program reforms contained in the 2000 reform law.

And regarding private consumer financing, on a parallel track, with the Federal Housing Finance Agency (FHFA) —

  • Full and expeditious implementation of the HERA-based “duty to serve underserved markets” mandate for the two Government Sponsored Enterprises (GSEs).

Each of these priorities is critical to the recovery of the manufactured housing industry and to the availability of affordable non-subsidized housing to millions of Americans and particularly lower and moderate-income families. Accordingly, their implementation should be vigorously pursued by all stakeholders in the HUD manufactured housing program, by Congress and by the Administration.

Click to download Analysis of HUD’s Response to Congress