Prepared Testimony of Senator Connie Mack (R-FL)

Hearing on the Nomination of Ira G. Peppercorn, of Indiana, to be the
Director of the Office of Multifamily Housing Assistance Restructuring

9:30 a.m., Wednesday, October 7, 1998

This morning, the Banking Committee is holding a hearing on the President's nominee to serve as Director of the Office of Multifamily Housing Assistance Restructuring, or OMHAR. I want to welcome the nominee, Mr. Peppercorn, to the Committee.

Before swearing in the nominee, I want to make a couple of observations, which relate to what has occurred so far in the development of OMHAR. Let me make it clear at the outset that my comments in no way reflect on the qualifications of the nominee.

Congress enacted the "mark-to-market" restructuring of FHA- insured and Section 8 assisted mortgages almost a year ago. The mark- to-market program is scheduled to become effective 20 days from now. This Committee received Mr. Peppercorn's nomination to serve as director of the mark-to-market program on September 29th.

Frankly, we face a dilemma. Mark-to-market cannot be implemented unless an OMHAR director is confirmed by the Senate. The Administration submitted a nomination for this position with fewer than two weeks remaining in this session -- more than nine months late. That is barely enough time for the Senate to discharge responsibly its Constitutional advice and consent function. Our choices at this point seem to be: this nominee or no program.

It is certainly not Mr. Peppercorn's fault that the name of another potential nominee sat at the White House for six months before being pulled. In fact, he probably should be commended for agreeing to take on this huge responsibility on what I assume was very short notice. But, given the critical importance of the program to Congress, HUD, project owners and managers, residents and communities, the lateness of this nomination is puzzling.

Frankly, the fact that we have received this nomination so late in the day and with so little recourse could leave one with the impression that the process has been manipulated by the Administration. In effect, if mark-to-market is not implemented, an untold number of units of affordable housing and hundreds of millions of dollars in projected budget savings will be lost.

I have no reason to question this nominee's sincerity or commitment to doing a good job. However, the fact is that he has served since March as a political appointee in the Office of Housing at HUD. This raises a concern in my mind as to whether there was a conscious decision all along by the Administration to send forward the name of an individual who by virtue of his background is less likely to exercise the type of truly independent judgment the position requires. The nominee will have the opportunity to clarify for the record, under oath, how he will act in his position to ensure the independence of his office.

With respect to the position itself, the mark-to-market legislation established a process to restructure the mortgages on thousands of FHA- insured multifamily properties over the next several years. This is a significant responsibility, not only to ensure that the process reduces the cost of renewing expiring Section 8 contracts but also to ensure that the process preserves affordable housing and benefits residents and communities.

By statute, the position of OMHAR director is to be filled by an individual with a demonstrated understanding of multifamily financing and the mortgage restructuring of multifamily affordable housing. Further, the statute is structured to assure that the OMHAR Director performs his duties in a manner that is cooperative -- yet independent of -- the HUD Secretary. As the author of the mark-to-market legislation, I want to stress that the intent of Congress was that the OMHAR director have unfettered independence from the Secretary of HUD.

Finally, while I believe the career staff at HUD has done a remarkable job in drafting guidelines and regulations for the mark-to- market program to ensure that it can be implemented on time, I have to express a certain amount of frustration with both HUD and OMB for their frequent misinterpretations of the intent of Congress throughout the rulemaking process. I will seek the assurance of the nominee that he will consult frequently with Congress to ensure that the program is implemented consistent with the intent Congress.

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