The Senate Appropriations Committee has approved a fiscal 2009 funding bill that would provide a substantial boost over current-year funding as well as the president’s budget request for the Department of Housing and Urban Development (HUD).

The bill includes $42.4 billion for HUD, compared with $37.6 billion appropriated for fiscal 2008 and $39.1 billion sought by the administration for 2009.

The funding outlook is uncertain, however. On the House side, Appropriations Committee Chairman David Obey (D-Wis.) has halted action on appropriations bills in a dispute with Republicans over increasing oil exploration. A continuing resolution will probably be required to keep HUD and other government agencies operating after Oct. 1.

The Senate bill would provide $16.703 billion for Sec. 8 tenant-based assistance, including an advance appropriation of $4.2 billion to become available at the beginning of fiscal 2010. The total includes $14.827 billion for contract renewals, with funding to be allocated among public housing authorities according to voucher management system leasing and cost data for the most recent federal fiscal year.

The funding also includes $20 million for incremental voucher assistance under the Family Unification program and $75 million for incremental vouchers for the HUD-Veterans Affairs supportive housing program. In addition, the bill provides $39 million to prevent the involuntary displacement of low-income and disabled families after the disaster housing assistance program for Gulf hurricane victims ends.

For project-based Sec. 8, the bill provides $8.45 billion, including an advance 2010 appropriation of $1.75 billion, with $8.208 billion to be used for contract renewals. The funding is $1.05 billion more than the budget request.

The committee report criticizes HUD and the Office of Management and Budget for failing to request enough money to fully fund 12-month contract renewals, accusing the department of trying to push the “day of reckoning” off to the next administration by funding renewals for only a few months and delaying payments to owners for up to six months.

“While the amount provided still will not be sufficient to allow HUD to return to the practice of renewing all expiring contracts for the usual 12-month duration,” the report says, “this additional funding should restore some stability to the program by allowing the department to enter into longer-term contracts with owners. Such stability should provide greater certainty that tenants will be able to stay in their homes.”

For public housing, the bill provides $2.444 billion for the capital fund, $4.4 billion for the operating fund, and $100 million for HOPE VI, which would be authorized through fiscal 2009.

Other program funding includes $650 million for Indian housing block grants; $315.1 million for housing opportunities for persons with AIDS; $3.889 billion for community development, including $3.593 billion for formula Community Development Block Grants; $1.967 billion for HOME, including $10 million for downpayment assistance; $1.667 billion for homeless assistance grants; $765 million for Sec. 202 housing for the elderly; and $250 million for Sec. 811 housing for the disabled.

For mortgage programs, the bill would set commitment limits of $185 billion for the Federal Housing Administration (FHA) Mutual Mortgage Insurance Fund; $45 billion for the General and Special Risk account, which insures multifamily loans; and $200 billion for Ginnie Mae securities.

Sec. 515 funding stays

The Senate Appropriations Committee has once again rejected the administration’s proposal to eliminate funding for the Sec. 515 rural rental housing loan program.

The fiscal 2009 agriculture appropriations bill approved by the committee includes $69.5 million for Sec. 515, the same as the current-year funding. In its report, the committee noted that a substantial portion of the Sec. 515 funding in recent years has been used for repairs and rehabilitation, but it said project rehab can be better handled through the multifamily revitalization program, which would get $27.7 million under the bill. The administration, by contrast, proposed to rescind $20 million in prior-year multifamily revitalization funding.

The revitalization funding includes $5 million for rural housing vouchers for lowincome families residing in Sec. 515 projects whose mortgage is prepaid after Sept. 30, 2005. Revitalization funds can also be used for multifamily revolving loans and housing preservation and revitalization activities.

The bill also includes $1.005 billion for rural rental assistance for tenants in Sec. 515 projects and Sec. 514/516 farm labor housing, to be provided through oneyear contracts.

Other funding in the bill includes $1.121 billion for Sec. 502 direct singlefamily loans, $4.191 billion for unsubsidized Sec. 502 guaranteed loans, $129 million for Sec. 538 guaranteed multifamily loans, $17.8 million for Sec. 514 farm labor housing loans, $7.5 million for Sec. 516 farm labor housing grants, $34.4 million for Sec. 504 housing repair loans, $29.8 million for Sec. 504 housing repair grants, $38.7 million for mutual and self-help housing grants, and $8.9 million for housing preservation grants.

Streamlining FHA loans

HUD has taken steps to facilitate FHA financing of low-income housing tax credit projects by streamlining the processing of multifamily mortgage insurance applications.

In Mortgagee Letter 2008-19, the department outlined four program changes to give increased processing discretion to hub offices and program centers, reduce transaction costs, and improve coordination among HUD, mortgagees, and tax credit allocation agencies.

The changes apply to multifamily accelerated processing applications for Secs. 221(d)(4), 220, and 231 loans.

One change modifies the cash escrow requirement for tax credit syndication proceeds. HUD regulations require borrowers to deposit with lenders an amount deemed sufficient by FHA to assure project completion and pay the initial service charge, carrying charges, and legal and organizational expenses related to project construction.

To satisfy this condition, HUD had required 100 percent of the tax credit equity proceeds to be deposited in cash before initial endorsement of the mortgage, but that requirement has been relaxed. Now the initial deposit can go as low as 20 percent, the minimum recommended by HUD, with its size being determined by the circumstances of the transaction. HUD may allow installments of less than 20 percent, but only with headquarters approval.

HUD has also modified the requirement for submission of complete and final architectural drawings and specifications with the application for an FHA commitment, allowing schematic drawings to be submitted at that stage instead. The commitment may be conditioned on the receipt of final plans and specifications.

The other changes will allow commitments to be conditioned on HUD-2530 previous participation approval, rather than requiring 2530 clearance to be obtained prior to the issuance of a commitment, and will require each hub and program center to designate a tax credit coordinator to enhance staff understanding of the tax credit program, increase processing consistency among offices, and improve marketing of FHA mortgage programs.

Barry G. Jacobs is editor of Housing and Development Reporter, the nation’s premier source for in-depth, factual coverage of all aspects of affordable housing and community development. The two-part publication includes informed reports and insightful analyses in “HDR Current Developments,” and an always up-to-date compilation of essential documents in the “HDR Reference Files.” Jacobs is also the author of the annually updated HDR Handbook of Housing and Development Law. For more information, call (800) 723-8077.