Maintain FHA as Key Capital Source

The U.S. Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) is a vital component of the U.S. housing finance system for apartments and residential healthcare facilities. The counter-cyclical role FHA's programs played during the Great Recession, and the revenue they produce for the federal government prove how valuable FHA is, particularly during periods of economic distress, when FHA provided needed liquidity and stability to the multifamily and residential healthcare markets. These programs have consistently exhibited strong performance and have experienced very low delinquency rates. As a result, FHA is fulfilling its important and congressionally mandated rental housing mission while consistently producing revenue for the federal government.

RECOMMENDATIONS

Provide stable and sufficient resources to support workforce housing, affordable rental housing and residential healthcare properties.

Through the FHA Transformation reorganization effort, HUD made significant strides to address the inconsistencies that FHA lenders and borrowers had experienced, and since the Transformation's completion, HUD has received generally positive feedback on its results. MBA recommends that FHA continue to review areas needing improvement related to production and asset management-related issues, timeliness and responsiveness, consistency on how production and asset management areas interpret guidance, and retaining and attracting key staff through possible FY2018 budget cuts.  

Reduce regulatory burdens and programmatic barriers to FHA-insured financing.

Consistent with President Trump's Executive Order on Core Regulatory Principles, MBA encourages HUD to perform impact analyses of new regulations and policy initiatives, to assess their "efficiency, effectiveness, and the appropriate tailoring," including the following. 

  • MBA encourages HUD to defer implementation of its several pending environmental policy priorities pending completion of rigorous review of their impacts and revisions that may be necessary to limit financial burden. For example, we recommend that HUD narrow the scope of the specific regions where it deems the risk of flooding, radon-exposure, noise or other environmental complications to warrant more stringent mitigation standards.
  • MBA recognizes the important priorities of energy efficiency benchmarking and streamlining production data processing. However, MBA encourages HUD to delay extensive process changes until HUD can validate that these new processes are in fact more efficient and effective than current procedures.
  • The processes around Davis-Bacon wage rate determinations can have a substantial adverse impact on new construction and rehabilitation projects. To minimize disruption, MBA recommends that the regulatory and administrative procedures for managing Davis-Bacon wage requirements be clarified and updated. In particular, we recommend that HUD and the Department of Labor provide appropriate guidance to prevent unwarranted multiple- or split-wage decision and to provide more reasonable procedures for implementing periodic updates to Davis-Bacon wage rates. This is a significant issue for MBA members and industry stakeholders.


Resolve technological and operational issues with the implementation of the CNA e-Tool.


 The CNA e-Tool is mandatory for FHA multifamily mortgage insurance applications, Rental Assistance Demonstration conversions, 10-year update capital needs assessments for FHA-insured multifamily properties, and other asset management milestones, such as partial payment of claims, but it has not yet reached an acceptable level of functionality. Because of the substantial impact the e-Tool has on the application process, MBA strongly recommends that HUD take immediate steps to achieve a level of acceptable functionality, and follow that effort by making other important, but somewhat less time sensitive, changes to the e-Tool. MBA also recommends that HUD receive adequate funding to accomplish these changes.  


Expand HUD's targeted affordable multifamily housing programs including the Low-Income Housing Tax Credit (LIHTC) program and the Rental Assistance Demonstration (RAD) program.

MBA lenders have worked with HUD to provide recommendations as HUD develops a 221(d)(4) pilot LIHTC program to produce new construction and substantial affordable rehabilitation multifamily rental housing. HUD has recently indicated that final approval of and launch of pilot program to rapidly approve qualified lender applicants is currently pending. MBA supports RAD and acknowledges strong lender participation in the RAD program. Accordingly, we recommend that Congress increase or lift RAD's unit cap.   MBA is pleased that the Tax Cuts and Jobs Act of 2017 preserved the LIHTC program, consistent with MBA's strong advocacy. Separately, however, the Act lowered the corporate tax rate, which has affected the value of tax credits under the program. We recommend that policymakers address resulting adverse impacts on the LIHTC program, and take actions necessary to maintain and strengthen the continued viability of LIHTC as an effective program for financing for low-income housing.  


Expand the network of FHA-approved private sector lenders.

The public-private partnership between FHA and lenders has produced over 10,000 outstanding multifamily loans and is a tremendous resource that should remain a priority. The success of the FHA program is reflected in the sustained strong performance of the multifamily FHA-insured portfolio. To further this success, MBA recommends that FHA maximize its network of FHA-approved private sector lenders to work as the preferred partners and the primary source for FHA delivery of affordable and workforce housing by the private sector.

Training of FHA staff is critical to a successful, long-term Transformation.

Adequate staff and expertise is necessary to realize the full benefits of the Transformation effort. MBA supports FHA staff training to allow new and seasoned staff to upgrade their skills in underwriting, risk analysis and asset management. In this regard, MBA has worked with HUD to provide a key educational resource, the FHA underwriter training program. Launched in 2013 and continuing into 2018, the participation of over 75 HUD employees in the program along with many industry participants is a resounding testament to its success. MBA recommends continued support for training HUD staff to increase overall knowledge and promote consistency across offices and regions, and will continue to provide training support as HUD determines appropriate.

FHA policies and procedures should reflect the current competitive landscape and economic trends in the housing market.

MBA applauds the positive steps that the FHA took in 2017 to strengthen multifamily and healthcare finance programs by launching two handbooks, which included many revisions strongly supported by MBA. MBA strongly encourages HUD to continue efforts to update the 4350.1 Multifamily Asset Management & Project Servicing Handbook and to leverage the knowledge and expertise of FHA lenders in the process. FHA enhanced the partnership with its lenders, and supported the financing of multifamily rental housing and energy efficient housing. MBA recommends that that HUD also review Mortgage Insurance Premiums (MIPs) for residential healthcare loans.

May 2018

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