MBA, NAHB Voice Opposition to Increased Multifamily MIP

Representatives of both the MortgagernBankers Association (MBA) and the National Association of Home Builders (NAHB)rntestified before the House Committee on Financial Services’ Subcommittee onrnInsurance, Housing and Community Opportunity Thursday.  The committee heard from stakeholders on thernoversight of the Federal Housing Administration’s Multifamily InsurancernPrograms.</p

Rodrigo Lopez, President and CEO ofrnAmeriSphere Multifamily Finance in Omaha, Nebraska spoke on behalf of MBA.  Lopez told the committee members that thernrecent housing crisis had spotlighted rental housing and the criticalrnimportance of FHA’s countercyclical role. rnOne in three American households lives in rental housing today, he said,rnand most Americans will rent at some point in their lives.</p

During the recession, as other rentalrnmarket participants pulled back, FHA significantly increased its presence.   Privaterncapital is coming back, he said, but FHA remains critical in many markets andrnfor many types of properties, particularly older affordable ones that otherrninvestors are less willing to finance. </p

Even while FHA’s multifamily programsrnhave been providing critical liquidity to the market, they continue to have lowrndelinquency rates and show positive cash flow. rnLopez referenced a 2011 MBA study that found that FHA multifamily andrnhealthcare loans originated between 1992 and 2010 have generated $927 millionrnin positive net cash flows. New tighter underwriting standards should furtherrnimprove loan performance going forward, he said.</p

MBA commissionedrnits study because of the lack of good data on multifamily programs from thernDepartment of Housing and Urban Development (HUD).  What data is available, Lopez said, isrndifficult to separate out from information on single family loans.   “Congress should require HUD tornseparate the multifamily loans from the single family loans in the GI/SRI fundrnin order to provide policymakers with a better understanding of the financialrnperformance of the multifamily programs.”</p

In orderrnfor FHA continue to sustain the housing market’s long-term vigor it needs adequaternresources to operate effectively. Lopez pointed out that over the last fourrnyears HUD’s multifamily staff level has dropped significantly while loan volumernhas increased three-fold.  Technologyrnfunding has also suffered and multifamily programs are still unable to submitrnapplications electronically.</p

Lopezrncredited HUD efforts to improve its processes. FHA has initiated a pilotrnprogram streaming applications for properties with low income housing tax credits.rnMBA would like to see a nationwide expansion of the pilot as soon as possible.</p

Thernproposed increase of mortgage insurance premiums (MIPs) for multifamilyrnprograms seems to run counter to the strong performance of these programs andrnrecent tightening of underwriting standards. MBA believes any MIP increasernought to be supported by a careful actuarial analysis and any insurancernpremiums should be used only to manage risk associated with the programs.  Currently any excess income is returned tornTreasury, not used to improve the programs or for a reserve fund.</p

Bob Nielsen, the immediate past chairmanrnof NAHB gave similar testimony regarding increases in MIPS. The need to raisernfees to reduce defaults has not been demonstration and HUD has failed tornprovide an analysis as to how the new fees would affect borrowers, lenders, orrnrenters, he said.  The proposed increasesrnwill not provide a buffer against future FHA losses because there is nornsegregated fund and excess income is simply returned to the U.S. Treasury eachrnyear. Increases will only add to property owners’ costs, thereby affectingrnrents and discouraging the production of rental housing.”</p

The effect would be feltrndisproportionately by market rate properties in the secondary markets whererncredit is limited, he added, because private capital is focused on thernstrongest markets and the best capitalized large developers.<br /<br /Turning to other topics, Nielson said NAHB opposes efforts to establish minimumrncapital ratios for the General Insurance and Special Risk Insurance (GI/SRI)rnFunds before an in-depth analysis is done but supports efforts to fully fundrnrenewals of Section 8 Project Based Rental Assistance contracts.  The association also backs HUD’s efforts tornexpand financing for small multifamily rental properties and to provide arnsecondary market outlet for such loans.<br /<br /He said that NAHB estimates that the aging "echo boom" generationrnwill result in demand for between 300,000 and 400,000 multifamily units perrnyear over the next decade. While economic recovery will determine the timing ofrnthis demand it will not be postponed indefinitely and 2011's 178,000rnmultifamily housing starts were only half what was needed to keep pace withrngrowing demand.<br /<br /"Production of multifamily housing will undoubtedly increase above therncurrent low levels," said Nielsen. "It is important that thernfinancing mechanisms to support that production are available and that Congressrnensures that the FHA multifamily mortgage insurance programs continue to meetrnthe needs of low- and moderate-income renters."</p

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

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