MBA, NAHB Voice Opposition to Increased Multifamily MIP

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Representatives of both the Mortgage
Bankers Association (MBA) and the National Association of Home Builders (NAHB)
testified before the House Committee on Financial Services’ Subcommittee on
Insurance, Housing and Community Opportunity Thursday.  The committee heard from stakeholders on the
oversight of the Federal Housing Administration’s Multifamily Insurance
Programs
.

Rodrigo Lopez, President and CEO of
AmeriSphere Multifamily Finance in Omaha, Nebraska spoke on behalf of MBA.  Lopez told the committee members that the
recent housing crisis had spotlighted rental housing and the critical
importance of FHA’s countercyclical role. 
One in three American households lives in rental housing today, he said,
and most Americans will rent at some point in their lives.

During the recession, as other rental
market participants pulled back, FHA significantly increased its presence.   Private
capital is coming back, he said, but FHA remains critical in many markets and
for many types of properties, particularly older affordable ones that other
investors are less willing to finance.

Even while FHA’s multifamily programs
have been providing critical liquidity to the market, they continue to have low
delinquency rates and show positive cash flow. 
Lopez referenced a 2011 MBA study that found that FHA multifamily and
healthcare loans originated between 1992 and 2010 have generated $927 million
in positive net cash flows. New tighter underwriting standards should further
improve loan performance going forward, he said.

MBA commissioned
its study because of the lack of good data on multifamily programs from the
Department of Housing and Urban Development (HUD).  What data is available, Lopez said, is
difficult to separate out from information on single family loans.   “Congress should require HUD to
separate the multifamily loans from the single family loans in the GI/SRI fund
in order to provide policymakers with a better understanding of the financial
performance of the multifamily programs.”

In order
for FHA continue to sustain the housing market’s long-term vigor it needs adequate
resources to operate effectively. Lopez pointed out that over the last four
years HUD’s multifamily staff level has dropped significantly while loan volume
has increased three-fold.  Technology
funding has also suffered and multifamily programs are still unable to submit
applications electronically.

Lopez
credited HUD efforts to improve its processes. FHA has initiated a pilot
program streaming applications for properties with low income housing tax credits.
MBA would like to see a nationwide expansion of the pilot as soon as possible.

The
proposed increase of mortgage insurance premiums (MIPs) for multifamily
programs seems to run counter to the strong performance of these programs and
recent tightening of underwriting standards. MBA believes any MIP increase
ought to be supported by a careful actuarial analysis and any insurance
premiums should be used only to manage risk associated with the programs.  Currently any excess income is returned to
Treasury, not used to improve the programs or for a reserve fund.

Bob Nielsen, the immediate past chairman
of NAHB gave similar testimony regarding increases in MIPS. The need to raise
fees to reduce defaults has not been demonstration and HUD has failed to
provide an analysis as to how the new fees would affect borrowers, lenders, or
renters, he said.  The proposed increases
will not provide a buffer against future FHA losses because there is no
segregated fund and excess income is simply returned to the U.S. Treasury each
year. Increases will only add to property owners’ costs, thereby affecting
rents and discouraging the production of rental housing.”

The effect would be felt
disproportionately by market rate properties in the secondary markets where
credit is limited, he added, because private capital is focused on the
strongest markets and the best capitalized large developers.

Turning to other topics, Nielson said NAHB opposes efforts to establish minimum
capital ratios
for the General Insurance and Special Risk Insurance (GI/SRI)
Funds before an in-depth analysis is done but supports efforts to fully fund
renewals of Section 8 Project Based Rental Assistance contracts.  The association also backs HUD’s efforts to
expand financing for small multifamily rental properties and to provide a
secondary market outlet for such loans.

He said that NAHB estimates that the aging “echo boom” generation
will result in demand for between 300,000 and 400,000 multifamily units per
year over the next decade. While economic recovery will determine the timing of
this demand it will not be postponed indefinitely and 2011’s 178,000
multifamily housing starts were only half what was needed to keep pace with
growing demand.

“Production of multifamily housing will undoubtedly increase above the
current low levels,” said Nielsen. “It is important that the
financing mechanisms to support that production are available and that Congress
ensures that the FHA multifamily mortgage insurance programs continue to meet
the needs of low- and moderate-income renters.”

Lopez
and Nielsen were among nine witnesses appearing before the committee.  Among others were Marie Head, Deputy Assistant Secretary for FHA and representatives of
the National Housing Trust, National Low Income Housing Coalition, National
Council of State Housing Agencies and the National Multi Housing Council

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