HUD Reforms Would Improve Performance of Federal Housing Programs - 10/11/2004 - Mortgage Loan Refinance Debt Equity

HUD Reforms Would Improve Performance of Federal Housing Programs

With the efforts of the NAHB Task Force on Enhancing HUD’s Role in Housing now complete, the association will be working with HUD Secretary Alphonso Jackson and others to implement the recommended reforms. Legislation will be required to implement some of the recommendations, but others will require only regulatory changes or new policy at HUD.

Many of the task force recommendations were already supported by existing association policy. The NAHB directors voted on nine resolutions setting new policy in support of the recommendations:

• FHA Loan Performance Measurement. NAHB calls on HUD to revise its Credit Watch system to monitor the performance of the different types of FHA-insured home mortgages, such as purchase money loans, refinance loans and loans to first-time and move-up buyers. By focusing on the aggregate performance of lender portfolios, the current system puts lenders who make riskier loans in keeping with FHA’s mission at a disadvantage.
• Treating Grants and Subordinated Mortgages as Equity. HUD is urged to recognize homeownership grants and subordinated loans as home buyer equity in determining mortgage insurance premiums and underwriting requirements for FHA-insured mortgages.
• FHA-Insured Mortgages for Higher-Risk Home Buyers. The association is urging HUD to use existing statutory authority to implement pilot FHA-insured mortgage programs designed to expand homeownership opportunities among underserved segments of the population.
• Funding Hazard and Liability Insurance Deductibles for FHA-Insured Multifamily Properties. NAHB calls on HUD to allow owners of properties with FHA-insured properties to reduce hazard and liability insurance costs by funding deductibles out of loan proceeds or to purchase surety coverage with property cash flows.
• FHA Environmental Standards for Multifamily Properties. HUD is urged to revise its policies in order to permit FHA insurance on properties that have environmental issues but meet Environmental Protection Agency standards as implemented by a local or state regulatory agency. Under federal law, the department is exempt from liability for environmental clean-up costs.
• Davis Bacon Wage Requirements for HUD Housing Programs. In order to make housing more affordable, Congress, HUD and the Department of Labor should revise Davis Bacon requirements. Davis Bacon statutory and regulatory requirements should be the same for all federal housing programs; small projects of 50 units or less should be exempted; and multifamily buildings should be classified as residential rather than commercial structures.
• Improve Leverage and Match Requirements in HUD Grant Programs. HUD and Congress are urged to make changes in the HOME and Community Development Block Grant programs so that the limited federal dollars available for these programs can be used more efficiently and effectively. Proposed changes include: increasing matching funding requirements for program recipients; allocating funds through loans rather than grants; and reducing special set-asides that are outside of need-based allocations.
• Responsibility for Rural Multifamily Housing Production. NAHB urges Congress to move the responsibility and funding for rural multifamily housing programs from the Department of Agriculture’s Rural Housing Service to a new unit within HUD and to reduce the term on RHS Section 515 loans.
• Section 8 Housing Choice Voucher Program. HUD and Congress are urged to take steps to improve and streamline HUD’s existing rental assistance program as an alternative to the Administration’s proposal to convert it to a state-administered block grant program.

The task force was chaired by Fred Griffin and its other members were Don Croom, Bob Nielsen, Elton Parsons and Tom Woods.

For more information, e-mail David Ledford at NAHB or call him at 800-368-5242 x8265.