FY 2011 BUDGET REVIEW: Housing and Mortgage Related Proposals

by devteam February 3rd, 2010 | Share

The Obama Administration released the Fiscal Year 2011 Budget. To put the size of this document in perspective: the SUMMARY TABLES alone required 36 pages.

The main focus of the budget: CREATING JOBS


THE WHITE HOUSE SAYS:“Having steered the economy back fromrnthe brink of a depression, the Administration is committed to movingrnthe Nation from recession to recovery by sparking job creation to getrnmillions of Americans back to work and building a new foundation forrnthe long-term prosperity for all American families. To do this, thern2011 Budget makes critical investments in the key areas that willrnhelp to reverse the decline in economic security that American familiesrnhave experienced over the past decade with investments in education,rnclean energy, infrastructure, and innovation.”

HEREis the message from the President. Its five pages long and basicallyrnre-iterates the above statement. This is how he ends his message:rn”These have been tough times, and there will be difficult months ahead.rnBut the storms of the past are receding; the skies are brightening; andrnthe horizon is beckoning once more”

I think the National Council of State Housing Agencies outlined it best. I did re-order the proposals based on popularity.

The Administration yesterday sent Congress its FY 2011 Budget, proposing funding for all federal programs, including HUD and the Department of Agriculture’s (USDA) rural housing programs. It also contains the Administration’s tax proposals, including an extension of the Housing Credit Exchange program in 2010 and the extension and expansion of the Build America Bonds program. The Budget also says that the Administration will ask Congress for authorization to increase the Federal Housing Administration (FHA) annual single-family mortgage insurance premium.

The Budget does not contain a proposal to reform the housing Government-Sponsored Enterprises (GSE), Fannie Mae and Freddie Mac, but HUD Secretary Shaun Donovan said the Administration will release a GSE reform proposal soon.

NCSHA’s preliminary analysis of the Budget’s housing proposals follows…. <prnrnrnrnrnrnrnrnrnrnrn Normalrnrnrn 0rnrnrnrnrnrnrn falsernrnrn falsernrnrn falsernrnrnrn EN-USrnrnrn X-NONErnrnrn X-NONErnrnrnrnrn MicrosoftInternetExplorer4rnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrnrn<p&amp;amp;lt;!–rn /* Font Definitions *n @font-facern{font-family:"Cambria Math";rnpanose-1:2 4 5 3 5 4 6 3 2 4;rnmso-font-charset:1;rnmso-generic-font-family:roman;rnmso-font-format:other;rnmso-font-pitch:variable;rnmso-font-signature:0 0 0 0 0 0;}rn@font-facern{font-family:Calibri;rnpanose-1:2 15 5 2 2 2 4 3 2 4;rnmso-font-charset:0;rnmso-generic-font-family:swiss;rnmso-font-pitch:variable;rnmso-font-signature:-1610611985 1073750139 0 0 159 0;}rn /* Style Definitions *n p.MsoNormal, li.MsoNormal, div.MsoNormalrn{mso-style-unhide:no;rnmso-style-qformat:yes;rnmso-style-parent:"";rnmargin-top:0in;rnmargin-right:0in;rnmargin-bottom:10.0pt;rnmargin-left:0in;rnline-height:115%;rnmso-pagination:widow-orphan;rnfont-size:11.0pt;rnfont-family:"Calibri","sans-serif";rnmso-ascii-font-family:Calibri;rnmso-ascii-theme-font:minor-latin;rnmso-fareast-font-family:Calibri;rnmso-fareast-theme-font:minor-latin;rnmso-hansi-font-family:Calibri;rnmso-hansi-theme-font:minor-latin;rnmso-bidi-font-family:"Times New Roman";rnmso-bidi-theme-font:minor-bidi;}rn.MsoChpDefaultrn{mso-style-type:export-only;rnmso-default-props:yes;rnmso-ascii-font-family:Calibri;rnmso-ascii-theme-font:minor-latin;rnmso-fareast-font-family:Calibri;rnmso-fareast-theme-font:minor-latin;rnmso-hansi-font-family:Calibri;rnmso-hansi-theme-font:minor-latin;rnmso-bidi-font-family:"Times New Roman";rnmso-bidi-theme-font:minor-bidi;}rn.MsoPapDefaultrn{mso-style-type:export-only;rnmargin-bottom:10.0pt;rnline-height:115%;}rn@page Section1rn{size:8.5in 11.0in;rnmargin:1.0in 1.0in 1.0in 1.0in;rnmso-header-margin:.5in;rnmso-footer-margin:.5in;rnmso-paper-source:0;}rndiv.Section1rn{page:Section1;}rn–&amp;amp;gt;rnrnrnrnrnrn /* Style Definitions *nrnrn table.MsoNormalTablernrnrn{mso-style-name:"Table Normal";rnrnrnmso-tstyle-rowband-size:0;rnrnrnmso-tstyle-colband-size:0;rnrnrnmso-style-noshow:yes;rnrnrnmso-style-priority:99;rnrnrnmso-style-qformat:yes;rnrnrnmso-style-parent:"";rnrnrnmso-padding-alt:0in 5.4pt 0in 5.4pt;rnrnrnmso-para-margin-top:0in;rnrnrnmso-para-margin-right:0in;rnrnrnmso-para-margin-bottom:10.0pt;rnrnrnmso-para-margin-left:0in;rnrnrnline-height:115%;rnrnrnmso-pagination:widow-orphan;rnrnrnfont-size:11.0pt;rnrnrnfont-family:"Calibri","sans-serif";rnrnrnmso-ascii-font-family:Calibri;rnrnrnmso-ascii-theme-font:minor-latin;rnrnrnmso-fareast-font-family:"Times New Roman";rnrnrnmso-fareast-theme-font:minor-fareast;rnrnrnmso-hansi-font-family:Calibri;rnrnrnmso-hansi-theme-font:minor-latin;}rnrn

Government-Sponsored Enterprise (GSE) Reform: DespiternAdministration officials' repeated statements over the last few months that thernAdministration would be putting forward its planfor the housing GSEs, FanniernMae and Freddie Mac, with the FY 2011 Budget, its only comment about GSE reformrnsays, “The Administration continues to monitor the situation of the GSEs closelyrnand will continue to provide updates on  considerations for longer term reform ofrnFannie Mae and Freddie Mac as appropriate.”

HUD Secretary Shaun Donovan said today that thernAdministration will issue its GSE reform proposal soon but did not reveal whenrnor provide any information on the proposal.

HUD:The Administration proposes $41.6 billion in HUD budgetrnauthority, a $1.99 billion, or 5 percent, decrease from the $43.6 billion HUDrnappropriation provided under the FY 2010 rnomnibus spending bill the President signed December 16.

After accountingrnfor offsetting receipts, mostly from the FHA mortgage insurance program, thernBudget proposes to spend $48.5 billion on HUD programs, a $1.5 billion increasernover its 2010 funding.

Federal Housing Administration (FHA): The Budget says thatrnthe Administration will ask Congress for authorization to increase the FHArnannual single-family mortgage insurance premium to .85 percent of the loanrnamount for most mortgages and .90 percent for low-downpayment mortgages fromrnthe current .50 percent for all mortgages. HUD recently announced it isrnincreasing the FHA upfront premium to 2.25 percent from 1.75 percent. IfrnCongress approves the annual premium increase, HUD will reduce the upfrontrnpremium to 1 percent.

The Budget increases Housing Choice Voucher funding by 8rnpercent, the project-based Section 8 program by 9 percent, and homelessrnassistance by 11 percent. The Budget maintains funding at the FY 2010 level forrnCDBG. It cuts funding for HOME, Section 202 Housing for the  Elderly, and Section 811 Housing for Personsrnwith Disabilities. The Budget also proposes $1 billion in new funding to launchrnthe Housing Trust Fund.

The Budget proposes to eliminate the Rural Housing andrnEconomic Development program and the Brownfields Economic DevelopmentrnInitiative. The Budget again proposes to replace the HOPE VI program with thernChoice Neighborhoods Initiative.

Combating Mortgage Fraud: The Budget requests $20 millionrnfor the FHA Mortgage Fraud Initiative, launched last year, to combat mortgagernfraud and predatory practices. The request is equal to FY 2010's funding level.

HOME: The Budgetrnproposes $1.65 billion for HOME, a $175 million, or 10 percent, decrease in itsrnFY 2010 funding level of $1.825 billion.

Rural Housing Programs: The Budget proposes $1.2 billion forrnthe Section 502 single-family subsidized direct loan program, a $1 millionrnincrease over FY 2010. It also recommends an increase of $5.8 billion inrnfunding for the Section 502 unsubsidized guaranteed loan program to $12 billion.

The Budget proposes $95.2 million for the Section 515 ruralrnrental housing loan program, an increase of $25.7 billion. It also proposes tornfund the Section 538 multifamily loan guarantee program at $129 million, thernsame amount as in FY 2010.

The Budget proposes $18 million for the Section 542 ruralrnhousing voucher program, $2 million, or 13 percent, more than appropriated inrnFY 2010. The program provides vouchers for families living in Sectionrn515-assisted properties whose owners prepay their mortgages.

Rural Housing and Economic Development (RHED): The Budgetrnproposes no new funding for RHED. RHED provides capacity-building and programrngrants to nonprofits and public agencies supporting housing and communityrndevelopment in rural areas.

Build America Bonds: The Administration proposes to make thernBuild America Bond (BAB) program permanent in a way designed to bernapproximately revenue neutral in comparison to the federal tax cost fromrntraditional tax-exempt bonds. The Administration also proposes to expand thernBAB program beyond new investments in governmental capital projects to include certainrnadditional uses for which state and local governments may use tax-exempt bondsrnunder existing law. This may include allowing issuers to use BABs for privaternactivity bond-eligible activities, including housing.

Housing Counseling: The Budget proposes $88 million forrnhousing counseling, the same amount as its FY 2010 appropriation. The Budgetrnalso proposes $113 million for the Neighborhood Reinvestment Corporation'srnNational Foreclosure Mitigation Counseling program, a $48 million increase overrnthe 2010 funding level.

Housing CreditrnExchange Program: The Budget proposes to extend the Housing Credit Exchangernprogram for an additional year. If Congress accepts this proposal, which thernHouse included in the Tax Extenders Act of 2009 and the Senate has underrnconsideration, states would be allowed to exchange: their unused 2009 HousingrnCredit ceiling; Credits returned in 2010; up to 40 percent of the state's 2010rnper capita authority; and up to 40 percent of the state's share of the 2010rnnational pool allocation, if any. The proposal would not allow states tornexchange 4 percent or Disaster Credits. States would be required to use theirrnCredit Exchange funds by December 31, 2012.

Community Development Fund: The Budget proposes to fund thernCommunity Development Fund at $4.38 billion, a $70 million, or 2 percent,rndecrease in the FY 2010 appropriation, and to maintain CDBG funding within itrnat $3.99 billion.

The Budget proposes a number of improvements to the CDBGrnprogram, including redesigning the state and local government consolidatedrnplans and planning process, increasing accountability, and improvingrnperformance metrics in grantee reporting.

Sustainable Communities: The Budget proposes $150 millionrnfor the Sustainable Communities Initiative, equal to 2010 funding. Thisrninitiative has four parts. First, HUD will continue to collaborate with thernDepartment of Transportation (DOT) and the Environmental Protection Agencyrn(EPA) to offer Sustainable Communities Planning Grants. This program isrndesigned to catalyze integrated metropolitan transportation, housing, land use,rnand energy planning, using sophisticated data, analytics, and geographicrninformation systems. These integrated plans are created to inform state,rnmetropolitan, and local transportation, infrastructure, and housing investments.rnSecond, the initiative will fund challenge grants to help localities implementrnthe Sustainable Communities Plans. Third, the proposal will support therncreation and implementation of a capacity-building program and toolsrnclearinghouse designed to support both Sustainable Communities grantees andrnother communities interested in becoming more sustainable. Finally, thernInitiative will provide funding for a joint HUD-DOT-EPA research effortrndesigned to advance transportation and housing linkages.

HOPE VI/Choice Neighborhoods Initiative: The Budget proposesrnno new funding for the HOPE VI program for revitalization of severelyrndistressed public housing, as it proposes to replace it with the $250 millionrnChoice Neighborhoods Initiative. HOPE VI was funded at $200 million and ChoicernNeighborhoods was funded at $65 million in FY 2010.

Choice Neighborhoods' goal is to transform extremely poorrnneighborhoods into functioning, sustainable mixed-income neighborhoods withrnappropriate services, schools, public assets, transportation, and access tornjobs. The Choice Neighborhoods grants will primarily fund the preservation,rnrehabilitation, and transformation of public and HUD-assisted housing. Thernprogram builds on the success of HOPE VI with a broader approach to concentratedrnpoverty. Grantees will include PHAs, local governments, nonprofits, and for profitrndevelopers. Grant funds can be used for resident and community services,rncommunity development and affordable housing activities in surroundingrncommunities, and multifamily or single-family property disposition, includingrnthe conversion of these properties to affordable housing. The program will alsornimplement rent and work incentives to help public and HUDassisted housingrnresidents access jobs and move to self-sufficiency.

Housing Choice Vouchers: The Budget proposes $19.6 billionrnfor Housing Choice Vouchers, 8 percent more than the FY 2010 appropriation ofrn$18.2 billion. Of this amount, the Administration proposes $17.3 billion forrnexpiring voucher renewals, $971 million more than the FY 2010 appropriation.rnThe Budget also proposes a $150 million fund for adjusting PHA renewalrnallocations to account for unforeseen circumstances, includingrnportability-associated cost increases, the same as in FY 2010.

The voucher program funding includes $1.79 billion for PHAs'rnadministrative costs, $216 million more than the FY 2010 appropriation. Thernproposed administrative fee total includes $50 million for the Secretary tornallocate as he deems necessary to PHAs requiring additional administrativernfunds and for fees associated with tenant protection vouchers.

The Budget proposes continuing funding for all existingrnmainstream vouchers, including new vouchers awarded in 2010, as well as $85rnmillion in new special purpose vouchers for homeless and at-risk ofrnhomelessness families with children, and persons with disabilities. Inrnaddition, HUD proposes to design a comprehensive development strategy to improvernHUD IT systems to manage and administer the voucher program, implement an improvedrnSection 8 Management Assessment Program, improve administrative fee allocationsrnbased on the cost of an efficiently managed PHA, develop a study to evaluaterncurrent Housing Quality Standards (HQS) and improve the unit inspectionrnprocess, and eliminate the cap restriction on the number of families that eachrnPHA may serve.

Section 8 Project-Based Rental Assistance: The Budgetrnproposes $9.1 billion to renew expiring Section 8 project-based contracts, arn$734 million, or 9 percent, increase in the FY 2010 appropriation of $8.3rnbillion. HUD's budget materials say this amount will preserve approximately 1.3rnmillion affordable rental units through increased funding for contracts with privaternowners of multifamily properties. The Budget also proposes $322 million for performance-basedrncontract administrators' administrative fees, $64 million more than in FY  2010.

Transforming Rental Assistance (TRA): The Budget proposes torninitiate a multi-year effort called the Transforming Rental Assistance (TRA)rninitiative to regionalize the Housing Choice Voucher Program and convert publicrnhousing and some assisted housing to project-based vouchers. The primary goalsrnof this initiative are to improve the physical condition and management of thernpublic housing stock, increase the mobility of assisted families, and streamlinernHUD oversight of its rental assistance programs. The Budget proposes $350rnmillion in FY 2011 to fund the first phase of this initiative and preservernapproximately 300,000 units of public and assisted housing, increasernadministrative efficiency at all levels of program operations, and enhancernhousing choice for residents.

HUD's budget materials indicate that by the spring of 2010,rnthe Administration will transmit to Congress proposed legislation to amend thernproject-based voucher program to authorize long-term property-based rentalrnassistance contracts with a resident mobility feature.

Housing Trust Fund: The Budget requests $1 billion inrnmandatory spending, subject to PAYGO legislation, to capitalize the Housing TrustrnFund.

Catalytic Investment Competition: The Budget proposes underrnthe Community Development Fund, $150 million for a new initiative, thernCatalytic Investment Competition Grants program, which will provide economicrndevelopment and gap financing to implement and capitalize innovative andrntargeted economic investment for neighborhood and community revitalization forrnlow- to moderate-income families. Projects may  implement activities to augment the Choice NeighborhoodsrnInitiative, Promise Neighborhoods, HOPE VI, Sustainable Communities, or otherrnplace-based strategies to help strengthen existing and planned investments inrntargeted neighborhoods to improve economic viability, extend neighborhoodrntransformation efforts, and foster viable and sustainable communities.rnApplicants will be required to leverage other federal community developmentrnresources.

Homeless Assistance: The Budget proposes $2.06 billion forrnhomeless assistance, $187 million more than its FY 2010 appropriation, anrnincrease of 11 percent.

In 2011, the Administration will implement the HEARTH Act,rnwhich combined HUD's three competitive grant programs: Shelter Plus Care,rnSupportive Housing, and Section 8 Moderate Rehabilitation Single RoomrnOccupancy.

Housing for the Elderly and for Persons with Disabilities:rnThe Budget proposes $274 million for the Section 202 Housing for the Elderlyrnprogram, $551 million less than in FY 2010. The Budget proposes $90 million forrnthe Section 811 Housing for Persons with Disabilities program, $210 millionrnless than in FY 2010.

The Budget proposes to eliminate construction funding forrnnew projects in order to redesign the programs and institute reforms that willrnensure that future projects are more cost effective and well-targeted. ThernBudget also proposes to shift the $113.6 million required to renew nearlyrn15,000 Mainstream Vouchers from the Section 811 account to the tenant-based rentalrnassistance account.

Public Housing: The Administration proposes to provide $2rnbillion for the Public Housing Capital Fund, $455.8 million, or 18 percent,rnless than in FY 2010. The Budget proposes $4.8 billion for the Public HousingrnOperating Fund, $54 million, or 1 percent, more than last year.

AIDS Housing: The Budget proposes $340 million for thernHousing Opportunities for Persons with AIDS (HOPWA) program, $5 million morernthan its FY 2010 appropriation.

Lead-Based Paint Hazard Reduction: The Budget proposes $140rnmillion for the Lead Hazard Reduction Program, the same as its FY 2010rnappropriation.

Capacity Building: The Budget proposes $60 million for arnredesigned Capacity Building program. This competitive grant program isrndesigned to develop the capacity and ability of community developmentrncorporations, community housing development organizations, and localrngovernments to undertake community development and affordable housing projectsrnand programs for low-income families. In addition to nonprofit intermediariesrnand other consortia, this program will work with states and cities to help themrnreadily understand how to meet the needs of their communities, leverage privaternand other kinds of resources, and align existing programs to build resiliencernin difficult economic times. Grants provided under this program will require arnthree-to-one match from private sources.

Energy Innovation Fund: The Budget supports the continuationrnof the Energy Innovation Fund, which is intended to stimulate and enhancernprivate investment in cost-saving energy efficiency retrofits of existingrnhousing, through improved use of FHA single-family and multifamily mortgagernproducts. The Energy Innovation Fund provides support for promising localrninitiatives that can be replicated across the nation. HUD did not request newrnfunds for FY 2011 as it anticipates that the FY 2010 appropriation of $50rnmillion will fund significant pilot activity through FY 2011.

Transformation Initiative: The Budget proposes $20 millionrnfor the Transformation Initiative to transform and revive HUD, the same as itsrnFY 2010 funding level. In addition, up to 1 percent of each program's fundingrnwould be transferred to this fund for: research, evaluation, and programrnmetrics; program demonstrations; information and technology; and technical  assistance and capacity building.

HUD SAYS: “HUD’s budget proposal seeks to make targeted investments in people and places – instead of policies and programs –to effectively support HUD’s mission while being accountable to the American taxpayer. $6.9 billion in projected FHA and Ginnie Mae receipts contribute to the FY 2011 proposed $48.5 billion budget total and to the administration’s deficit reduction plans. Net of the $6.9 billion in projected FHA and Ginnie Mae receipts the Budget proposes overall funding of $41.6 billion, 5% below fiscal year 2010, and makes difficult decisions to cut funding for a number of programs.”

The carefully targeted investments in the Budget will enable HUD programs to:

  • House over 2.3 million families in public and assisted housing (over 58% elderly or disabled);
  • Provide voucher assistance to 78,000 additional families (over 47% elderly or disabled);
  • Assist nearly 5.5 million households, over 200,000 more than at the end of fiscal year 2009.
  • More than double the annual rate at which HUD assistance creates new permanent supportive housing for the homeless;
  • Create and retain over 112,000 jobs through the Department’s housing and economic development investments in communities across the country.


The Mortgage Bankers Association (MBA) issued the following reactions and analysis to the fiscal year 2011 federal budget, as proposed today by the Obama Administration.

“Reducing the federal deficit is vital to the long-term health of the US economy and our industry.  However, we believe it can and should be done without negatively impacting the already-fragile housing market,” said Robert E. Story, Jr., CMB, MBA's Chairman.  “Limiting the mortgage interest deduction and imposing additional taxes on lenders will only make economic recovery more difficult.”

MBA opposes the proposal to reduce itemized deductions, including the deduction of mortgage interest, for taxpayers reporting income above $250,000 (joint) $200,000 (single).  This would have a negative impact on the housing market, particularly in high cost states like California and New York, as it would increase the cost of mortgages for many potential homeowners, especially those in high-cost states.    MBA also opposes the proposal to tax carried interest at ordinary tax rates (as opposed to the capital gains rate, as it is taxed now), as it would discourage capital formation for lending.

MBA believes the Financial Crisis Responsibility Fee will reduce the availability and increase the costs of real estate loans to consumers and small businesses by discouraging large financial institutions from entering into new, private label commercial mortgage backed securities (CMBS) and residential mortgage backed securities (RMBS) transactions and significantly reducing the profitability of non-agency servicing.

Story also noted that the budget did not offer any indications of the Administration's plans for the future of Fannie Mae and Freddie Mac.

“MBA has been at the forefront of the debate over the future of the government's role in the secondary mortgage market,” said Story.  “We rolled out our proposal in September and have been meeting with all stakeholders on Capitol Hill, within the administration, and across the industry to share our perspectives.  Our proposal would provide a new foundation for supporting the core of the mortgage market.  We look forward to continuing our discussions as the administration readies its suggestions.”

MBA has supported the administration's efforts to improve risk management of the Federal Housing Administration's (FHA), and thus strongly supports the additional $18 million budgeted to allow FHA to implement its improved risk management systems.  MBA also supports the $20 million budgeted to combat predatory lending and mortgage fraud at HUD, as well as additional funding for housing counseling and foreclosure avoidance.

“We are pleased to see increased funding for several critical programs at FHA,” added Story.  “We support both the efforts to help FHA better manage its risk.  We also support additional funding at HUD and the Department of Justice to combat mortgage fraud.  I also want to add how pleased I am to see that FHA's multifamily programs are continuing to show strong performance in the face of the current challenges in the housing market.”

MBA also found troublesome the following additional provisions in the budget proposal:

  • Termination of program authority to allow expensing (for tax purposes) of real estate environmental remediation, or “brownfields” clean up costs.
  • Reduced federal support for terrorism risk insurance programs (TRIA).


All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of is prohibited.

About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

See all blogs


Leave a Comment

Leave a Reply

Latest Articles

Real Estate Investors Skip Paying Loans While Raising Billions

By John Gittelsohn August 24, 2020, 4:00 AM PDT Some of the largest real estate investors are walking away from Read More...

Late-Stage Delinquencies are Surging

Aug 21 2020, 11:59AM Like the report from Black Knight earlier today, the second quarter National Delinquency Survey from the Read More...

Published by the Federal Reserve Bank of San Francisco

It was recently published by the Federal Reserve Bank of San Francisco, which is about as official as you can Read More...