|DEFENDING HIS INTENTIONS Henry Cisneros said his mistake was not the greed that afflicted many in banking and housing; it was unwavering belief.|
At the helm of the housing boom, Cisneros now has misgivings
SAN ANTONIO - A grandson of Mexican immigrants, and this city's first Hispanic mayor of the 20th century, Henry G. Cisneros has spent years trying to make the dream of homeownership come true for low-income families.
As the Clinton administration's top housing official in the mid-1990s, Cisneros loosened mortgage restrictions so that first-time buyers could qualify for loans they could never get before.
Then, capitalizing on a housing expansion he helped unleash, he joined the boards of a major builder,
And Cisneros became a developer himself. The Lago Vista development here in his hometown once stood as a testament to his life's work.
Joining with KB, he built 428 homes for low-income buyers in what was a neglected industrial neighborhood. He often made the trip from downtown to ask residents whether they were happy.
"People bought here because of Cisneros," said Celia Morales, a Lago Vista resident. "There was a feeling of, 'He's got our back.' "
But Cisneros rarely comes around anymore. Lago Vista, like many communities born in the housing boom, is under stress. Scores of homes have been foreclosed, including 1 in 5 over the last six years on the community's longest street, Sunbend Falls, according to property records.
While Cisneros said he remains proud of his work, he has misgivings over what his passion has wrought. He insists that the worst problems developed only after "bad actors" hijacked his good intentions, but acknowledges that "people came to homeownership who should not have been homeowners."
They were lured by "unscrupulous participants - bankers, brokers, secondary market people," he said. "The country is paying for that, and families are hurt because we as a society did not draw a line."
The causes of the housing implosion are many: lax regulation, financial innovation gone awry, excessive debt, raw greed. The players are also varied: bankers, borrowers, developers, politicians, and bureaucrats.
Cisneros, 61, had a foot in a number of those worlds. Despite his qualms, he encouraged the unprepared to buy homes - part of a broad national trend with dire economic consequences.
He reflects often on his role in the debacle, he said, which has changed homeownership from something that secured a place in the middle class to something that is ejecting people from it. "I've been waiting for someone to put all the blame at my doorstep," he said lightly, but with a bit of worry, too.
After a sex scandal destroyed his promising political career and he left Washington, he reinvented himself as a well-regarded advocate and builder of urban, working-class homes. He has financed the construction of more than 7,000 houses.
For the three years he was a director at KB Home, Cisneros received at least $70,000 in pay and more than $100,000 worth of stock. He also received $1.14 million in directors' fees and stock grants during the six years he was a director at Countrywide. He made more than $5 million from Countrywide stock options, money he said he plowed into his company.
He said his development work provides an annual income of "several hundred thousand" dollars. All told, his paydays are modest relative to the windfalls some executives netted in the boom.
Indeed, Cisneros said his mistake was not the greed that afflicted many of his counterparts in banking and housing; it was unwavering belief.
It was, he argued, impossible to know in the beginning that the federal push to increase homeownership would end so badly. Once the housing boom got going, he suggested, laws and regulations barely had a chance.
"You think you have a finely tuned instrument that you can use to say: 'Stop! We're at 69 percent homeownership. We should not go further. There are people who should remain renters,' " he said. "But you really are just given a sledgehammer and an ax."
From people dizzily drawing home equity loans out of increasingly valuable houses to banks racking up huge fees, few wanted the party to end.
"I'm not sure you can regulate when we're talking about an entire nation of 300 million people and this behavior becomes viral," Cisneros said.
Homeownership has deep roots in the American soul. But until recently, getting a mortgage was a challenge for low-income families.
Many of these families were minorities, which made the subject of special interest to Cisneros, who, in 1993, became the first Hispanic head of the Department of Housing and Urban Development.
He had President Clinton's ear, an easy charisma, and a determination to increase a homeownership rate that had been stagnant for nearly three decades.
"Henry did everything he could for home builders while he was at HUD," said Janet Ahmad, president of Homeowners for Better Building, an advocacy group in San Antonio, who has known Cisneros since he was a city councilor. "That laid the groundwork for where we are."