The 39-year-old, third-term mayor of San Antonio will replace current HUD Secretary Shaun Donovan, who will next lead the White House Office of Management and Budget (OMB).
Donovan replaces OMB head Sylvia Mathews Burwell, who replaces Kathleen Sebelius as Health and Human Services secretary in a reshuffling of White House staff.
Castro's twin brother, Joaquin Castro, serves in the U.S. House of Representatives as a Democrat from Texas.
Castro's confirmation comes as the White House is struggling with housing finance reform and measures that will free up more credit for minority or ‘underserved’ borrowers. It also comes as Democrats are working to maintain their advantage among Hispanic voters in the upcoming November elections.
Some political insiders say Castro is being groomed as a potential 2016 vice president pick and see his appointment as a way for him to get acclimated to Washington and raise his national profile.
Castro was first introduced to a national audience when he gave the keynote speech at the 2012 Democratic National Convention.
Eighteen Republicans supported Castro's confirmation.
In a statement following the vote, David H. Stevens, president and CEO of the Mortgage Bankers Association, said, ‘With Castro becoming the next HUD secretary and Shaun Donovan soon to become the new director of OMB, the administration will be well positioned to address the important housing policy issues. We look forward to working with both men to help ease access to credit for qualified borrowers and accelerate the housing recovery.’
During a confirmation hearing held in June before the Senate Banking Committee, a calm and cool Castro said it's possible to loosen credit requirements for lower-income borrowers and still keep the Federal Housing Administration (FHA) solvent. He said the FHA should continue to play a role in ensuring that creditworthy first-time home buyers ‘have the opportunity to reach the American Dream of homeownership.’
However, the FHA also needs to have ‘policies in place that ensure what happened a couple of years ago doesn't happen again,’ he added.
Last fall, the FHA required a $1.7 billion subsidy from the Treasury Department to cover losses of more than $50 billion resulting from loan defaults – including losses on its Home Equity Conversion Mortgage or reverse mortgage product. It was the first ‘bailout’ for the agency in its 80-year history.
In March, White House budget officials, in presenting the president's proposed budget plan, said the FHA had made great strides in shoring up its reserves, mainly by increasing the fees it charges, and thus would not likely need a second Treasury draw later this year.
The balancing act for the FHA has been keeping fees low enough so that lower-income borrowers have adequate access to mortgage credit while at the same time avoiding increased risk.
During his Senate committee hearing, Castro didn't provide details on how he would free up more mortgage credit for the underserved.
Castro also commented on housing finance reform, saying he supports the idea, without endorsing any particular proposed bill. In particular, he said he supports the idea of developing a single common security for government-sponsored enterprises Fannie Mae and Freddie Mac.
For more, check out this report in Politico.