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Housing Secretary Jack Kemp on Oct. 3 proposed sweeping reforms in the Department of Housing and Urban Development (HUD), which would eliminate spending at the secretary's discretion and impose new management and ethics regulations. Rep. Tom Lantos (D) of California, the chairman of a House subcommittee that is investigating fraud and mismanagement at HUD, said he supported most of the plan.

Mr. Kemp, while seeking to eliminate some programs entirely, said HUD's co-insurance program - the source of nearly $1 billion in sour loans - should be maintained. The program allows private lenders to approve HUD-insured mortgages. ``The problem was not the idea,'' Kemp said. ``The problem was in the implementation of the idea.''

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Kemp said the agency should appoint a chief financial officer, and a separate comptroller for its Federal Housing Administration (FHA). He also proposed that lobbyists and consultants who work on HUD proposals be required to register with the agency and disclose their fees, which HUD could deduct from funding awards.

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