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Th e M Rep o RT | 59 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SECONDARY MARKET The laTesT House subcommittee investigates misconduct at HUd Witnesses attest that senior hUD staffers violated federal employment law, engaged in other onerous practices. i nvestigators from HUD's Office of the Inspector General (HUD OIG) and the Government Accountability Office (GAO) testified before the House Financial Services Subcommittee on Oversight and Investigations that some senior officials at HUD violated federal law and obstructed investigators' efforts to uncover wrongdoing. Some of the individuals identi- fied were presidentially appoint- ed and Senate-confirmed, accord- ing to testimony. HUD Inspector General David Montoya testified to the subcommittee that some senior officials were guilty of "outright misconduct." Witnesses offered testimony to the subcommittee that senior HUD employees violated federal employment law practices as well as HUD policies by hiring Debra Gross, a former registered lobbyist, for a position with HUD's Office of Public and Indian Housing. Witnesses said Gross misused her position with HUD to further an agenda favor- able to her former employer's public housing groups and also by hiring two HUD employees without proper vetting. The HUD Inspector General found that Gross obstructed the investigation of these actions by "providing false statements to investigators" and denying key HUD officials access to pre- employment email communica- tions. Witnesses testified that the two employees were "less than forthcoming" regarding their hiring, and both had stated they were never interviewed prior to being hired. In a separate case, HUD's Inspector General testified that then Deputy Secretary Maurice Jones and four other senior HUD officials violated HUD's admin- istrative policies by engaging in a grassroots lobbying campaign. Witnesses said Jones and the four others re-transmitted a July 21, 2013, email urging 1,000 recipi- ents to lobby specified senators regarding a pending appropria- tions bill. In addition to violating HUD policy, GAO found dis- semination of this email by Jones and the others to be in violation of federal anti-lobbying laws. Testimony before the subcom- mittee also revealed that certain HUD officials attempted to obstruct the investigation in that case by attempting to improperly influence witnesses, threatening investigators from HUD OIG they would be "charged as a result of their inappropriate actions," and withholding information regard- ing their involvement with the dissemination of the email. "[T]hat case illustrated what can happen when senior govern- ment officials veer from the course of ethical decision-mak- ing, skirt the edges, and act in a manner that is not in the gov- ernment's best interest," Montoya told the subcommittee. Montoya testified that a HUD OIG report issued last year regarding the anti-lobbying investigation detailed attempts by HUD officials to cover up their illegal activity, but he said HUD took "no formal disciplinary ac- tion" in response to the report of the investigation. "At the time, I found those revelations troubling, but I had hoped we could chalk it up to a few bad apples at HUD," said U.S. Rep. Sean Duffy (R-Wisconsin), chairman of the subcommittee. "But we're back here today to discuss what hap- pened with those so-called 'bad apples' because of other, com- pletely unrelated allegations that have surfaced." credit Union trade group voices Opposition to Proposed FHlB requirements More than a million members would be disenfranchised if the rules come to bear, the national association asserts. a national trade group representing credit unions has come out against a recent proposal to revise requirements for Federal Home Loan Bank (FHLB) membership. In a comment letter addressed to the Federal Housing Finance Agency's (FHFA) general counsel, Alicia Nealon, direc- tor of regulatory affairs for the National Association of Federal Credit Unions (NAFCU), voiced the association's opposi- tion to the proposal, which she said would "disenfranchise over 1 million credit union member-owners." "Given the onerous nature of this proposal on credit unions, the lack of a congressional mandate for 'ongoing' FHLB membership requirements, and the current requirements that already exist for FHLB members to dem- onstrate a commitment to housing finance, NAFCU must oppose the proposed rule and urge its withdrawal," Nealon wrote. NAFCU's complaint stems from a provision of the proposed rule that would require FHLB members and applicants to keep 1 percent of assets in home mortgage loans. Current members would also be re- quired to hold at least 10 percent of assets in residential mortgage loans on an ongo- ing basis as opposed to just at the time of application, as the current rule requires. In her comment letter, Nealon says the membership requirements fail to take into account a credit union's asset size or experience level. She also says NAFCU is concerned that the standards (particularly the 1 percent requirement) don't take into account the kinds of fluctuations that can happen in portfolios due to changes in economic conditions. As an alternative, the group suggests that the agency allow loans sold in the secondary market to count toward an institution's 1 percent threshold. Also of concern to NAFCU is FHFA's proposal to determine if FHLB members meet eligibility standards on a yearly basis and to terminate any members that fail to comply af- ter a two-year grace period. The group instead suggests a five-year probationary period for lenders to get back up to standard.