HOUSING POLICY

WASHINGTON UPDATE

Bush Signs Omnibus Bill with Funding for HUD Programs

BY BARRY G.JACOBS

AFFORDABLE HOUSING FINANCE • FEBRUARY 2008

President Bush has signed into law an omnibus fiscal 2008 appropriations bill (H.R. 2764) that provides $37.637 billion for the Department of Housing and Urban Development (HUD), including $16.391 billion for Sec. 8 tenant-based assistance and $6.382 billion for Sec. 8 project-based aid.

The Sec. 8 money includes $14.695 billion for the renewal of tenant-based contracts and $6.139 billion for project-based renewals. Public housing authority allocations for calendar 2008 tenantbased renewals generally will be based on leasing and cost data for the most recent federal fiscal year, with the application of an annual adjustment factor and adjustments for other costs.

The tenant-based funding also includes $200 million for tenant protection vouchers; $75 million for vouchers for homeless veterans through a supportive-housing program operated in conjunction with the Department of Veterans Affairs (VA); $30 million for incremental vouchers for the Family Unification program; and $30 million for incremental vouchers for non-elderly disabled families.

According to HUD, the project-based funding should be sufficient to cover all contracts into fiscal 2009, but the department says $8.1 billion would be needed to renew all contracts for 12 months. HUD has been renewing contracts for shorter terms because of concerns that full-year renewals without sufficient funding would violate the Anti-Deficiency Act (ADA).

The statement of managers on the final appropriations bill gave HUD and the Office of Management and Budget until Jan. 15 to resolve this issue and instructed HUD to immediately begin issuing 12-month contracts subject to the availability of funds if no violation is found. If the agencies determine that such contracts would violate the ADA, they must report the violation to the appropriations committees.

For public housing, the bill provides $2.439 billion for the capital fund, $4.2 billion for the operating fund, and $100 million for HOPE VI. The capital fund appropriation includes $40 million for resident supportive services.

The HOME program gets $1.704 billion, including $50 million for housing counseling and $10 million for downpayment assistance.

HUD funding also includes $3.866 billion for community development, with $3.593 billion for formula Community Development Block Grants and $630 million for Indian housing block grants.

The bill provides $300.1 million for the Housing Opportunities for Persons with AIDS program and $1.586 billion for homeless assistance grants, including funds to renew Shelter Plus Care contracts. At least 30 percent of the remaining homeless assistance funding must be used for permanent housing.

Other program funding includes $735 million for Sec. 202 housing for the elderly, $237 million for Sec. 811 housing for the disabled, $50 million for fair housing, $145 million for lead hazard reduction, $112 million for the Office of Inspector General, and $66 million for the Office of Federal Housing Enterprise Oversight, which supervises Fannie Mae and Freddie Mac.

The bill authorizes $185 billion in commitments under the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund; $45 billion in commitments under the General and Special Risk Account, which includes multifamily programs; and $200 billion in commitments for Ginnie Mae securities.

The legislation also raises the maximum high-cost adjustments to FHA multifamily mortgage limits from 140 percent to 170 percent on an areawide basis and from 170 percent to 215 percent on a project-by-project basis in high-cost areas.

In addition, it removes the aggregate limit on FHA-insured home equity conversion mortgages for fiscal 2008.

To address the growing home mortgage default and foreclosure problem, the bill appropriates $180 million to the Neighborhood Reinvestment Corp. for foreclosure mitigation activities.

Congress keeps Sec. 515 program going

Congress again has rejected the administration’s efforts to eliminate funding for the Sec. 515 rural rental housing program, providing $70 million for the program in the U.S. Department of Agriculture’s part of the omnibus fiscal 2008 appropriations bill.

This amount, as well as the other rural housing funding provisions in the bill, will be reduced by 0.7 percent.

The measure also includes $130 million for Sec. 538 guaranteed multifamily loans and $482.1 million for rural rental assistance for Sec. 515 and farm labor housing projects.

The rental assistance funds, which can be used for the renewal of expiring contracts and for preservation incentives and new construction contracts, are to be provided through one-year contracts.

The bill also provides $28 million for multifamily housing revitalization, which can be used for rural housing vouchers and for demonstration programs.

The legislation also includes $22 million for the farm labor program account, which is expected to support $27.7 million in Sec. 514 loans and $10 million in Sec. 516 grants.

For rural homeownership, the bill provides $1.129 billion for Sec. 502 direct loans, $4.220 billion for unsubsidized Sec. 502 guaranteed loans, and $39 million for mutual and self-help housing grants.

Sec. 202 reform legislation approved

The House has approved legislation (H.R. 2930) to reform the Sec. 202 elderly housing program.

One change would delegate to state and local housing agencies the processing of projects that receive Sec. 202 capital advances and funding from other sources. The state or local agency also may provide low-income housing tax credits to the project, although such assistance isn’t required.

The processing agency would have to issue a firm commitment within 12 months of the delegation, and HUD would retain the authority to approve rents and development costs.

The bill also provides for the renewal of expiring project rental assistance contracts, with adjustments to account for cost increases, and for contract increases to deal with emergency situations that are outside the project owner’s control.

In connection with a HUD approved Sec. 202 prepayment and refinancing plan, the bill would authorize the department to provide project-based rental assistance in order to prevent the displacement of elderly residents. The assistance would be provided under a contract with a term of at least 20 years, subject to annual appropriations, under the same rules governing Sec. 8 project-based aid.

For a prepayment where HUD approval isn’t required and the project will continue to be owned by a nonprofit, the owner could elect to enter into a project- based rental assistance contract. Otherwise, tenants would be eligible for enhanced vouchers.

Senate passes FHA modernization bill

The Senate approved its version of FHA modernization legislation (S. 2338), setting the stage for resolution of differences with the House when Congress returns.

For example, while the House bill would authorize zero-downpayment FHA home loans, the Senate bill would reduce the required downpayment from 3 percent to 1.5 percent.

The Senate also didn’t go as far as the House in raising FHA mortgage limits. The current one-family loan limit is generally 95 percent of the median area home price, subject to floor and ceiling limits of 48 percent and 87 percent of the Fannie Mae-Freddie Mac conforming loan limit.

The Senate bill would increase the limit to the lesser of 100 percent of the area median price or the conforming loan limit (currently $417,000), subject to a floor of 65 percent of the conforming limit.

The House bill would raise the limit to the lesser of 125 percent of the area median price or 175 percent of the conforming loan limit, while also providing a 65 percent floor limit.

The House measure also would authorize HUD to raise the limits by up to $100,000 to accommodate market conditions.

The Senate bill would raise the maximum up-front FHA mortgage insurance premium from 2.25 percent to 3 percent (2 percent to 2.75 percent for borrowers who receive counseling), while the House legislation would authorize a risk-based premium structure.