The Federal Housing Administration (FHA) Mutual Mortgage Insurance Fund will have a positive capital reserve balance at the end of Fiscal 2014 estimated at $7.8 billion and will not require a draw from the U.S. Treasury. This news was contained in an overview of the FY2015 budget for the Department of Housing and Urban Development (HUD) released today by HUD Secretary Shaun Donovan. The announced improvement of the fund immediately triggered a call from a lending industry group for FHA to reduce the premiums it currently charges homebuyers.
FHA will introduce several features in the upcoming fiscal year designed to strengthen its insurance fund and provide increased access to credit. First, it is asking for authority to collect an administrative fee. This will help it further develop its quality assurance efforts with a greater capacity to monitor loans and transform its business processes. HUD will also conduct a pilot housing counseling program for first-time homebuyers called Homeowners Armed with Knowledge or HAWK and will increase its overall counseling budget by 33 percent or $60 million.
HUD said that it and its partners have "steered the housing market through one of the worst recessions in recent history while continuing to serve the most vulnerable." In the last five years it has reduced veteran homelessness by 24 percent and chronic homelessness by 16 percent, helped nearly 4 million families buy a home and 450,000 families to avoid losing theirs through foreclosure. This progress the budget overview says, was set back by Sequestration in 2013 and 74,000 families who should gotten Housing Choice Vouchers remain on waiting lists while some families lost vouchers they had already received. Block grants to every community were cut and capital improvements to public housing units were reduced and jobs lost as a result. The Sequestration cuts also mean that HUD will not achieve its goal of ending chronic homelessness by 2015.
The cuts, HUD said, had real impact, but the FY2014 and 2015 budgets have begun to turn the page. Over the current budget and the proposed one HUD is reversing most of the harmful sequestration cuts and will be able to stabilize programs and grow investments. Still the overview stresses it is a very tough budget environment.
Overall, HUD's 2015 President's Budget increases gross Budget Authority by 2.6% over FY2014 levels, and by 10.1% over FY2013 levels, to $46.66 billion.
The Department says the majority of its budget each year is required to simply hold its ground - keeping current support recipients in their homes and providing basic upkeep to the public housing stock. Eighty-four percent of the 2015 budget request will be used to:
- Renew existing rental assistance and operating subsidies,
- Fund accrued capital needs of public housing,
- Renew existing homeless assistance grants
As inflation increases so does the need to increase funding for existing families and for every 1 percent increase in renewals other programs must be reduced by 5 percent to keep the budget level.
HUD's 2015 budget request makes key investments in rental programs including;
- An increase in Tenant Based Rental Assistance to above $20 billion. This will allow the Department to serve 2.2 million low income families and reverse sequestration;
- Increases funding for Homeless Assistance Grants by $301 million which will allow the strategic plan to end homelessness to get back on track.
- $75 million for 10,000 new vouchers for supportive housing for veterans,
- Funds Public Housing Capital at $1.925 billion and the Operating Fund at $4.6 billion.
- Proposes $440 million for elderly housing and %160 million for persons with disabilities.
In addition to a base budget request of $120 million for the Choice Neighborhoods program the President is proposing an additional $280 million through an initiative to fund comprehensive neighborhood revitalization in seven to ten additional high-poverty neighborhoods. The President's initiative also provides $75 million to help communities provide jobs and an additional $125 million to expand HUD's Jobs-Plus program to assist a total of 50,000 public housing residents to secure employment.
"This year's budget presents a unique opportunity for HUD to work within the frame of the Bipartisan Budget agreement while continuing to build ladders of opportunity for all Americans" said Donovan. "This funding will continue to help strengthen and stabilize our nation's housing market while putting our economy back on the right track and helping those in most need."
As the HUD budget was unveiled the Community Home Lenders Association (CHLA) called again for FHA to reduce its annual loan fee. CHLA had originally made the request in a letter to the Office of Management and Budget on February 18. It asked that the annual premium be reduced from the current 1.35 percent to 0.75 percent and to 0.5 percent for homebuyers who complete prepurchase counseling. CHLA also called for a subsequent reduction in the annual premium when the FHA MMIF fund reaches a 2% net worth level.
In a press release today CHLA Executive Director Scott Olson said, "Today's budget shows that our recent call for a meaningful reduction in FHA's annual premium can be done consistent with a steady buildup of the FHA fund. The numbers show annual premiums can be cut from 135 to 75 basis points while still increasing FHA's net worth by around $10 billion in the next year."
"We commend what the FHA has done in rebuilding the FHA fund and making important program changes to improve loan performance," Olson said. "We think it is now time to balance the emphasis on FHA finances with steps to make FHA loans more affordable and we believe our proposal would help to accomplish that."