The highly-regarded celebrity brain surgeon who President Donald Trump placed in charge of federal housing policy for some reason was unable to grasp some of the root concepts of the work his agency does when questioned directly about it by a member of Congress Tuesday.
Housing and Urban Development (HUD) Secretary Ben Carson, who became nationally prominent as a pediatric neurosurgeon before launching a political career, at one point asked Rep. Katie Porter (D-CA) if she was talking about Oreo cookies during an exchange.
She was not.
The cringe-worthy moment actually came during Porter’s second attempt to get Carson to talk shop with her. She’d just broken off another line of questioning about mortgage interest rate curtailment schedules, which also seemed to confuse the secretary, after Carson promised to “look it up and find out what’s going on.”
As she began a second line of inquiry, Porter interrupted herself.
“So, as you look it up, I would also like you to get back to me if you don’t mind to explain the disparity in REO rates,” she said, using the acronym for “real estate owned,” which refers to foreclosed homes owned by real estate brokers or banks rather than by real people. “Do you know what an REO is?”
“An Oreo?” Carson asked.
“No, not an Oreo, an REO,” Porter said. “R-E-O.”
“Real estate?” Carson said back after Porter had clarified, his voice inflecting upward inquisitively.
“What’s the ‘O’ stand for?” Porter responded.
“Organization?” Carson asked.
“Owned, real-estate owned, that’s what happens when a property goes into foreclosure,” Porter said, explaining that she wanted Carson’s take on how his agency has come to oversee alarmingly high foreclosure rates.
While that firework of a moment raced around social media on Tuesday afternoon, aided along by Rep. Katie Porter’s (D-CA) own communications staff, the surrounding five minutes of questioning were every bit as brutal to watch.
Carson appeared to be learning terminology and basic policy mechanics from Porter on the fly, alternately deflecting with promises to get back to Porter later and flat-out asking her to explain what she was talking about.
For people who work in housing finance and affordability, “REO” is an everyday term that conveys not just the concept of a foreclosed home but an entire category of social ills and economic costs associated with foreclosures. When the pros talk about REOs, they’re also talking about generational wealth-building gone awry for families, tax-base evaporation and social dissolution for local communities, and the massive, sprawling tent cities of homeless Americans that have sprung up around the country since Wall Street greed generated a never-before-seen level of family-home foreclosures a decade ago.
The disquieting exchange illustrated the obtuse and almost intentionally impenetrable nature of the finance jargon that attends homeownership and related federal policies. It also illustrated the concerns housing policy activists, academics, and advocates had raised about Carson’s nomination in the first place, seeming to confirm his fish-out-of-water status atop the suite of federal programs and activities that are meant to promote homeownership for working-class families and provide dignified and safe housing for the destitute.
Few, if any ordinary people would have the foggiest clue what Porter’s questions were about; that the person in charge of HUD’s vast professional staff and general organizational direction didn’t understand them is unnerving.
Hapless though Carson’s performance before the House Financial Services Committee was, the high-profile REO/Oreo moment may afford a rare mass-media spotlight on the specific and troubling issue Porter on which had sought the top federal housing official’s insights.
HUD’s Federal Housing Authority (FHA) exists primarily to foster home ownership among working families who are unlikely to qualify for a reasonably priced mortgage without such assistance. Yet despite that mission, FHA has come to serve a perverse role in the current housing finance world: it is now “the leading cause of blighted homes in the United States,” as Porter put it Tuesday to Carson.
The problem, from the perspective of Porter and her peers from the housing finance policy world, is with the federal rules and process FHA operates — and which Carson in large part controls. An Urban Institute report on the matter from the spring of 2018, which Porter referenced at the hearing and offered to send to Carson, illustrated that the agency’s current practices both generate an avoidably high rate of people losing their homes in the first place, and an agonizingly slow process for re-selling those houses that do end up in foreclosure.
That’s where the blight Porter mentions creeps in: By both artificially enlarging the universe of houses that get foreclosed at all and artificially slowing the process by which those family tragedies can be resolved to the benefit of surrounding communities, the team Carson oversees are — perhaps inadvertently — operating at cross purposes to the mission of their programs. More houses are going empty for longer, being tended to poorly during their enlarged vacancy period, and putting unnecessarily large drag on their surroundings.
The Urban Institute report gives a much more detailed rendering of the problem and possible solutions. It does not directly address wider historical problems in the servicing business during the post-crisis foreclosure glut, when many families were wrongly foreclosed upon — some even having their homes burgled by workers indirectly employed by the people who had foreclosed on them. It’s a document written for bureaucrats to understand, but which leaders at the cabinet level typically wield as catalysts of change.
Jargon is helpful to the people who keep their hands in the dirt. It’s obscuring for everyone else. But the single most significant political appointee in the housing finance market apparently cannot manage to foster helpful conversations between those two groups — which makes the prospect that he might successfully force changes to improve housing outcomes downright dismal.