MBA Supports FHA and GSE Reforms -- Raises Concerns on Some Provisions in Budget
Feb 4, 2008
Washington, DC (February 4, 2008) — The Mortgage Bankers Association (MBA) expresses support for major aspects of the Administration’s proposed budget for housing. MBA specifically applauds the efforts to modernize FHA and to allow tax exempt bonds to be used for refinancing for troubled borrowers.
The Administration’s FY 2009 budget makes a strong case for reform of the FHA single family program. Due to deteriorating market conditions and the fact that FHA has been adversely selected, without some changes the program’s projected expenses will exceed revenues. In order for FHA to continue operation, Congress would need to appropriate funds or an increase in fees would be required.
MBA has repeatedly called for revitalization of FHA and endorses several proposals in the Administration’s budget, including:
• Raising the loan limits from 87 to 100 percent of the conforming loan limits
• Introducing a flexible premium structure
• Moving all single family programs to the Mutual Mortgage Insurance Fund
• Removing the statutory cap on Home Equity Conversion Mortgages
MBA believes the reforms should go further and include investment in technology and personnel as well as legislation to provide FHA with authority to introduce new programs without Congressional approval.
“MBA will continue to work closely with Congress to help people who want to become homeowners as well as to provide current homeowners with the refinancing opportunities to help them stay in their homes,” said Kieran Quinn, CMB, Chairman of MBA. “Comprehensive reform is crucial to the future of the FHA program and its ability to assist low- to moderate-income, first time homebuyers become homeowners and realize the advantages of the American Dream.”
MBA applauds the proposal to allow state and local governments to use tax exempt bonds for the refinancing of troubled borrowers’ loans and the necessary three-year increase in the state housing authorities’ bond caps to do so.
MBA supports the proposed funding of million for counseling of distressed borrowers and supports the Administration’s initiative to help educate consumers so they are able to make better housing decisions. The industry will continue to work with homeowners to help them stay in their homes.
MBA is pleased that the Administration has abandoned its efforts to increase insurance premiums for several of the FHA multifamily programs. The Administration has recognized that these programs are instrumental in providing affordable rental housing in today’s turbulent market.
MBA supports the Administration’s proposal to create a new, strengthened regulator for Fannie Mae, Freddie Mac and the Federal Home Loan Banks (GSEs) with authorities comparable to other world-class financial regulators. MBA has long advocated for a strong, effective GSE regulator to protect the financial stability of the GSEs and to ensure their important focus on their housing mission. In the current volatile markets, the viability of the GSEs is even more important.
MBA also supports the President’s goal of permanently extending expensing of real estate environmental remediation, or “Brownfields” cleanup costs, for tax purposes.
MBA is disappointed that the Administration again proposed a 50 percent increase in the fee for the Rural Housing Service’s (RHS) single family guarantee program. As the RHS program is frequently the best option for potential homeowners in rural areas, this increase will make it even more difficult for families in rural areas to become homeowners, especially since the Administration also zeroed out funding for the RHS single family direct loan program.
MBA is concerned that the Administration proposes to cap administrative costs for Ginnie Mae. Monthly payments on Ginnie Mae securities must be made as scheduled to maintain the integrity of the government’s full faith and credit guarantee. By capping the administrative costs and specifically appropriating them, the possibility arises that Ginnie Mae could not meet its obligations.
“Another area of disappointment for MBA is a proposed reduction in the Flood Map Modernization Fund,” said Quinn. “We learned three years ago, in the wake of Hurricanes Katrina and Rita, that the flood maps are grossly inadequate. This is the time to be increasing funding for this critical program, not decreasing it. Additionally, MBA strongly supports the National Flood Insurance Program (NFIP), yet cautions that phasing out the pre-FIRM subsidies could create significant delinquencies and foreclosures in the near- and long-term.
MBA is committed to supporting homeownership and affordable rental housing. The Association will work closely with Congress as it considers the President’s Budget and develops the FY 2009 budget resolutions and appropriations bills.
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