Affordable Housing Finance

HOUSING POLICY

Washington Update

GSE Regulator Affirms Affordable Housing Commitment

AFFORDABLE HOUSING FINANCE • November 2008

BY BARRY G. JACOBS

The sudden government takeover of Fannie Mae and Freddie Mac raised concerns about the governmentsponsored enterprises’ (GSE) continuing support for affordable housing, and the new GSE regulator has tried to calm those fears by affirming their commitment to their basic mission.

Shortly after Fannie Mae and Freddie Mac were placed into conservatorship in September, the Federal Housing Finance Agency (FHFA) issued a statement acknowledging the importance of the GSEs’ multifamily activity, including their low-income housing tax credit (LIHTC) investments, to affordable housing: “As conservator, FHFA expects each enterprise to continue underwriting and financing sound multifamily business. We also do not expect either company to liquidate its portfolio of LIHTC or mortgage revenue bonds.”

In addition, FHFA Director James B. Lockhart III told the Senate Banking Committee that Fannie Mae and Freddie Mac “are important to the secondary market for multifamily loans, and multifamily lending is critical to the affordable housing mission of the enterprises. I am determined to ensure that, in conservatorship, both enterprises remain dedicated to, and actively involved in, multifamily lending.”

Lockhart told the committee that concern over the GSEs’ ability to carry out their mission was a key factor in the decision to put them into conservatorship. “Ceasing new business activity and shedding assets was not acceptable, especially given the enterprises’ public purpose.”

The GSE reform provisions of the Housing and Economic Recovery Act of 2008 also created a national affordable housing trust fund to be supported in part by contributions from Fannie Mae and Freddie Mac. The GSEs’ financial problems could call that support into question as the legislation requires the FHFA director to suspend their contributions if he finds they would contribute to financial instability or impair their capital position. Lockhart said he would only make such a finding “after a careful and thorough review of existing conditions.”

Any suspension of contributions wouldn’t affect the trust fund until 2010 because the law earmarks all of the funds to be contributed by the GSEs in 2009 for support of the new Federal Housing Administration (FHA) Hope for Homeowners refinancing program for troubled homeowners.

HUD issues list of 2009 DDAs

The Department of Housing and Urban Development (HUD) has issued the list of difficult development areas (DDAs) for the LIHTC program for 2009.

Tax credit projects in DDAs and qualified census tracts (QCTs) are eligible for a 30 percent increase in eligible basis. The department hasn’t changed the QCTs designated on Sept. 28, 2006.

The designation of 2009 DDAs is based on final fiscal 2008 Sec. 8 fair market rents, fiscal 2008 income limits, and 2000 Census populations.

The HUD notice also lists the DDAs for the Katrina, Rita, and Wilma Gulf Opportunity Zone areas, which are disregarded for purposes of the 20 percent cap on the total population of DDAs. For more information, see the HUD notice in the Sept. 3 Federal Register at www.federalregister.com.

FHA multifamily mortgage premiums won’t be increased

HUD has announced that FHA multifamily mortgage insurance premiums (MIPs) won’t be increased for fiscal 2009. For projects with LIHTCs, the annual MIP will be 45 basis points, though Sec. 223(f ) loans on existing projects insured under Sec. 207, like all Sec. 223(f) mortgages, will have a firstyear premium of 1 percent.

The 45-basis-point premium will also apply to Sec. 221(d)(4), Sec. 223(f), and Sec. 223(a)(7) refinancing loans on projects without tax credits.

For other apartment projects, the MIPs will be 50 basis points for Sec. 207 multifamily housing and manufactured home park loans, Sec. 220 urban renewal loans, and Sec. 223(f) loans. The MIP will be 80 basis points for Sec. 221(d)(3) loans to nonprofits, Sec. 223(d) operating loss loans, and Sec. 241(a) supplemental loans.