MBA Letter Urges Support for FHA T-HUD Funding

Mike Sorohan msorohan@mba.org

June 07, 2018

Ahead of a vote today on key fiscal 2019 housing and real estate finance appropriations, the Mortgage Bankers Association sent a letter to members of the Senate Appropriations Committee and its Transportation, Housing and Urban Development subcommittee, urging funding for key FHA and HUD infrastructure initiatives.

MBA said it continues to "staunchly support" providing FHA with staffing and systems upgrade resources and supports HUD's budgetary request for $150 million in administrative contract expenses for FHA, a $20 million increase over FY 2018. However, MBA also reiterated its opposition to a HUD request to impose an administrative fee on a per loan basis to fund information technology and quality assurance initiatives, insisting that such funding go through time-honored appropriations requests.

In the letter, MBA Senior Vice President of Legislative & Political Affairs Bill Killmer expressed support for HUD's requested increase for administrative contract expenses, noting the additional $20 million would be used to support the much-needed modernization of Single-Family IT systems.

"We agree that given the scope of need to modernize the decades-old IT infrastructure at FHA, additional ongoing appropriations or set-asides from the HUD ITF for FHA systems improvements are warranted," Killmer said. "Beyond funding levels, MBA has been a long-time proponent of potential improvements to FHA's IT and systems that would allow the agency to better manage the risks to its Mutual Mortgage Insurance Fund. Over the years, MBA has also urged FHA to implement a new quality assurance program and defect taxonomy that would provide lenders with greater certainty regarding loan review--and, in doing so, expand access to credit for low- to moderate-income homebuyers."

On the administrative fee, however, MBA noted its ongoing concerns. "While we are pleased that the current leadership at HUD has reached out to our industry to solicit input--and for the ongoing dialogue with the staff at FHA about how a fee might be structured (and how the resources acquired would be utilized), we continue to believe the Congress should ideally fund FHA's IT and QA needs through the regular appropriations process, as has been the practice for decades," the letter said.

MBA said legislative language should ensure that any administrative fee is applied prospectively, require transparency and equal application to lenders of all sizes, and limit the fee's size, scope and duration in order to create adequate safeguards for tax payers, lenders and housing consumers. "Moreover, oversight and accountability mechanisms associated with such a fee should be explicitly included and feature: a written plan detailing the expected implementation costs and timelines; a clear prohibition on funds being used for any purpose other than upgrading FHA technological infrastructure and operating systems; opportunities for public comment throughout the planning and prioritization process; regular reporting by HUD to update the public throughout the implementation process; and, an ongoing advisory role for lenders participating in the FHA program," MBA said.

The letter also offers MBA's support providing the full $24.4 million requested for Ginnie Mae staffing, training and technology needs, noting Ginnie Mae's increased role in providing liquidity targeted to low- and moderate-income families, first-time homebuyers, renters, veterans and rural households.

"This funding level is necessary to prudently manage the increased loan volume in the single-family and multifamily mortgage markets," MBA said. "In addition, in recent years, market share for FHA, VA and Rural Housing Service single-family lending has continued to shift towards a more diversified base of smaller lenders. MBA believes this to be a positive trend for Ginnie Mae that reduces concentration risks in the program, but cautions it may require increased oversight or funding in the near future to support Ginnie Mae's counterparty risk management of the expanded issuer base."

With respect to FHA's multifamily and healthcare finance programs, MBA also urged the Committee to again provide $30 billion in commitment authority for the General and Special Risk Insurance Fund in FY 2019, as well as adequate funding for rental assistance, particularly Section 8 Project Based Rental Assistance.

Additionally, based on administrative actions taken by HUD during the prior administration, MBA strongly recommended the appropriations bill include a section that would prohibit the use of federal funds to either newly guarantee or insure any FHA mortgage where the property is subject to a Property Assessed Clean Energy (PACE) loan or other related obligation.

"This action is necessary because most PACE financing supersedes the FHA's first lien position, either through its categorization as a property tax or through a super-lien status granted by state law," MB said. "Simply put, this undermines the government's collateral position and disrupts the very nature of secured lending. While energy efficient home improvements can be beneficial for some homeowners, these loans pose a grave risk to traditional lien priority and are a serious risk to the FHA program and to consumers."

MBA also encouraged the Committee to maintain the prohibition on federal funds being used to facilitate eminent domain seizures if performing mortgage loans, noting that such actions "would severely impact the return of private capital to our markets, and would undermine congressional efforts to successfully transition to a new housing finance system."

MBA also urged the Committee to adopt the full $45 million requested for housing counseling services, saying these funds are "critical to assisting homeowners facing foreclosure, helping first-time homebuyers navigate the challenges of the purchase process and counseling for reverse mortgages (a program requirement) for seniors, a traditionally high-risk group for financial fraud."

The Appropriations committee meets today at 10:30 a.m. A live link to the hearing can be found at https://www.appropriations.senate.gov/hearings/full-committee-markup-of-the-thud-and-military-construction-va-appropriations-bills-for-fy2019.

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