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Mortgage News Daily combines the expertise of some of the housing industry's leading minds with the power of social media to offer an always lively, constantly evolving web community. MND communicates breaking news, streams video, and provides expert opinion and commentary to a community of interested market professionals and curious consumers.USDA Rural Housing Bill Passes; Low-Income Rental Legislation Advances
One government housing program
that had run out of funds months ago was revived by Congress yesterday, and
another bill targeted at low-income rental housing moved a step closer to
approval.
The Senate yesterday passed HR 4899 to reestablish the popular U.S. Department of Agriculture Single-Family
Housing Guaranteed Loan Program (Section 502 Housing) as a self-sustaining
program. Also, the House Financial Services Committee approved H.R.4868, the
Housing Preservation and Tenant Protection Act of 2010 which aims to stem the
loss of affordable rental housing units and prevent the displacement of
low-income tenants.
The Rural Housing program had run
through its $13.1 billion funding by early this year and many buyers hoping to
finance home purchases using Homebuyer Tax Credits were unable to close their
loans. Depleted funding has been a
nearly annual occurrence for the program that guarantees loans for single family
homes in designated exurban and rural areas.
The new legislation will end the annual uncertainty by putting the
program on a self-funding basis through enacting a 3.5 percent guarantee fee
paid by the borrower. The fee, while
substantial, can be included in the total amount financed.
Senator Michael Bennet released the following statement, "The Rural Housing Preservation and Stabilization Act increases the maximum loan guarantee fee that USDA's Rural Housing Service has authority to charge for new housing purchases from 2.0 to 3.5 percent and allows an annual fee of not more than 0.5 percent per year on the balance of the loan. The bill would also enable the Rural Housing Service to waive these fees for low-income borrowers for up to $679 million in loans. Together, these changes will enable the USDA-Rural Development's Rural Housing Service to continue offering loan guarantees through the duration of the year and to become self-funding."
Despite the low down payment
required to participate in the program, it is generally considered to be a good
risk by lenders because of the 90 percent government guarantee and because the
loan size is limited to 115 percent of the area's median income. This keeps the loans small; the average loan size
is $112,000. Last year the foreclosure rate for these USDA loans was a reported
1.72 percent compared to 3.32 percent for Federal Housing Administration loans.
MORE BACKGROUND ON SECTION 502 LOANS
The bill now
goes to President Obama for signature. As we went to press, USDA had not
commented on the action and we are still waiting for guidance from lenders.
H.R. 4868 was approved by the
House Financial Services Committee Thursday, and passed on to the full House
for consideration. It is designed to
prevent the loss of rental housing units from the pool subsidized by HUD for
low income tenants. According to the bill's
sponsor, Committee Chairman Barney Frank (D-MA), approximately 1.7 million
rental units in over 23,000 privately owned properties are subsidized by HUD
through various programs, some of which have existed since the 1950s. The Government Accountability Office (GAO) six
years ago projected that over 193,000 units could convert to market-rate housing
in the following 10 years as their HUD mortgages matured. These mortgages carry rental cost
restrictions which would also disappear, enabling the owners to convert units
to market rates or even to condominiums. While some of the tenants in those units would
be sheltered from big rental increases by existing protections such as enhanced
vouchers, GAO estimated that approximately 200,000 tenants in 101,000 units
might face rent increases or eviction. The bill establishes several mechanisms
to keep these units affordable.
Grants and loans will be
available to both for- and non-profit housing sponsors to recapitalize the property
and keep it affordable and the bill will establish a voluntary Preservation
Exchange Program to encourage owners to sell to purchasers who will keep the property
affordable. State housing agencies will
have a right of first refusal to purchase a property that the owner wishes to
sell as it comes out of the HUD program.
A right of first refusal does not prevent the seller from accepting a
better offer.
The legislation would permit
property owners to request project-based assistance in lieu of enhanced
vouchers if that would help keep the project affordable or assist with capital
for rehabilitation and ensure that tenants are not displaced. Owners will also be able to receive
budget-based rent increases as an incentive to renew Section 8 contracts and
keep the property maintained.
In the event that housing
does convert to market-rate rentals, the legislation will close gaps in
existing laws to make sure existing tenants are eligible for enhanced vouchers
to prevent displacement and includes notification requirements to ensure that
tenants have time to plan for alternative housing.
The law has specific
provisions for both elderly and rural housing.
It will give HUD and affordable housing providers assistance in
recapitalizing the aging Section 202 elderly housing portfolio and enables
tenants to be partners with HUD and the Rural Housing Service (RHS) to ensure
that housing is properly maintained. A
rural housing revitalization demonstration program initiated in 2006 to preserve
and recapitalize Section 515 properties will be made permanent and the bill extends
the above provisions for HUD-assisted housing to tenants in RHS-assisted
multifamily properties.
Finally, the law directs
HUD to establish a nationwide database of HUD and RHS assisted properties so
that the public and policymakers can more effectively monitor and preserve the
existing portfolio of affordable housing. A vote on H.R. 4868 on the House floor has not yet been scheduled. READ MORE
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USDA Rural Housing Bill Passes; Low-Income Rental Legislation Advances
One government housing program
that had run out of funds months ago was revived by Congress yesterday, and
another bill targeted at low-income rental housing moved a step closer to
approval.
The Senate yesterday passed HR 4899 to reestablish the popular U.S. Department of Agriculture Single-Family
Housing Guaranteed Loan Program (Section 502 Housing) as a self-sustaining
program. Also, the House Financial Services Committee approved H.R.4868, the
Housing Preservation and Tenant Protection Act of 2010 which aims to stem the
loss of affordable rental housing units and prevent the displacement of
low-income tenants.
The Rural Housing program had run
through its $13.1 billion funding by early this year and many buyers hoping to
finance home purchases using Homebuyer Tax Credits were unable to close their
loans. Depleted funding has been a
nearly annual occurrence for the program that guarantees loans for single family
homes in designated exurban and rural areas.
The new legislation will end the annual uncertainty by putting the
program on a self-funding basis through enacting a 3.5 percent guarantee fee
paid by the borrower. The fee, while
substantial, can be included in the total amount financed.
Senator Michael Bennet released the following statement, "The Rural Housing Preservation and Stabilization Act increases the maximum loan guarantee fee that USDA's Rural Housing Service has authority to charge for new housing purchases from 2.0 to 3.5 percent and allows an annual fee of not more than 0.5 percent per year on the balance of the loan. The bill would also enable the Rural Housing Service to waive these fees for low-income borrowers for up to $679 million in loans. Together, these changes will enable the USDA-Rural Development's Rural Housing Service to continue offering loan guarantees through the duration of the year and to become self-funding."
Despite the low down payment
required to participate in the program, it is generally considered to be a good
risk by lenders because of the 90 percent government guarantee and because the
loan size is limited to 115 percent of the area's median income. This keeps the loans small; the average loan size
is $112,000. Last year the foreclosure rate for these USDA loans was a reported
1.72 percent compared to 3.32 percent for Federal Housing Administration loans.
MORE BACKGROUND ON SECTION 502 LOANS
The bill now
goes to President Obama for signature. As we went to press, USDA had not
commented on the action and we are still waiting for guidance from lenders.
H.R. 4868 was approved by the
House Financial Services Committee Thursday, and passed on to the full House
for consideration. It is designed to
prevent the loss of rental housing units from the pool subsidized by HUD for
low income tenants. According to the bill's
sponsor, Committee Chairman Barney Frank (D-MA), approximately 1.7 million
rental units in over 23,000 privately owned properties are subsidized by HUD
through various programs, some of which have existed since the 1950s. The Government Accountability Office (GAO) six
years ago projected that over 193,000 units could convert to market-rate housing
in the following 10 years as their HUD mortgages matured. These mortgages carry rental cost
restrictions which would also disappear, enabling the owners to convert units
to market rates or even to condominiums. While some of the tenants in those units would
be sheltered from big rental increases by existing protections such as enhanced
vouchers, GAO estimated that approximately 200,000 tenants in 101,000 units
might face rent increases or eviction. The bill establishes several mechanisms
to keep these units affordable.
Grants and loans will be
available to both for- and non-profit housing sponsors to recapitalize the property
and keep it affordable and the bill will establish a voluntary Preservation
Exchange Program to encourage owners to sell to purchasers who will keep the property
affordable. State housing agencies will
have a right of first refusal to purchase a property that the owner wishes to
sell as it comes out of the HUD program.
A right of first refusal does not prevent the seller from accepting a
better offer.
The legislation would permit
property owners to request project-based assistance in lieu of enhanced
vouchers if that would help keep the project affordable or assist with capital
for rehabilitation and ensure that tenants are not displaced. Owners will also be able to receive
budget-based rent increases as an incentive to renew Section 8 contracts and
keep the property maintained.
In the event that housing
does convert to market-rate rentals, the legislation will close gaps in
existing laws to make sure existing tenants are eligible for enhanced vouchers
to prevent displacement and includes notification requirements to ensure that
tenants have time to plan for alternative housing.
The law has specific
provisions for both elderly and rural housing.
It will give HUD and affordable housing providers assistance in
recapitalizing the aging Section 202 elderly housing portfolio and enables
tenants to be partners with HUD and the Rural Housing Service (RHS) to ensure
that housing is properly maintained. A
rural housing revitalization demonstration program initiated in 2006 to preserve
and recapitalize Section 515 properties will be made permanent and the bill extends
the above provisions for HUD-assisted housing to tenants in RHS-assisted
multifamily properties.
Finally, the law directs
HUD to establish a nationwide database of HUD and RHS assisted properties so
that the public and policymakers can more effectively monitor and preserve the
existing portfolio of affordable housing. A vote on H.R. 4868 on the House floor has not yet been scheduled. READ MORE
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