Congress ended a monthslong deadlock over fiscal 2011 appropriations by fi- nally approving a long-term continuing resolution (H.R. 1473) that will cut funding for some Department of Housing and Urban Development (HUD) programs below fiscal 2010 levels while providing additional money for the renewal of Sec. 8 tenant- based and project-based contracts.

The focus will now shift to fiscal 2012, which begins Oct. 1, where efforts to rein in continuing budget deficits could make agreements on spending and taxes even harder to reach. The issue is complicated by the fact that the government is already bumping up against the $14.3 trillion debt ceiling.

For fiscal 2011, the full-year funding bill provides $18.4 billion for tenantbased Sec. 8, including $16.7 billion for renewals, and $9.3 billion for projectbased assistance, with $8.9 billion for contract renewals and amendments. For fiscal 2010, by comparison, Congress appropriated $18.2 billion and $8.6 billion for the tenant-based and project-based Sec. 8 programs.

The 2011 funding isn't quite as big as it looks, however. All of the specific funding levels in the fiscal 2011 continuing resolution for non-security domestic discretionary programs, including Sec. 8, will be reduced by a 0.2 percent acrossthe- board cut.

For rural housing, the continuing resolution continues the Sec. 515 rental housing loan program at the 2010 level of $69.5 million in 2011, but cuts funding for Sec. 538 guaranteed multifamily loans from $129.1 million to $31 million and for rural rental assistance from $980 million to $955.6 million.

The measure also includes $24 billion for Sec. 502 guaranteed single-family loans, doubling the fiscal 2010 level, and $1.1 billion for Sec. 502 direct loans, the same as 2010.

Donovan defends HUD budget, acknowledges need for restraint

HUD Secretary Shaun Donovan defended the administration's fiscal 2012 budget at a Senate Banking Committee hearing, while acknowledging the need for fiscal restraint in the current economic environment.

“We have to take responsibility for our deficit,” Donovan said in his prepared testimony, “by investing in what makes America stronger and cutting what doesn't, and in some cases making reductions in programs that have been successful."

Donovan said the budget is intended to help responsible families at risk of losing their homes, provide affordable rental housing, transform poor neighborhoods, rebuild the public housing stock, and leverage private-sector investments to create jobs and generate economic growth.

To help meet rental housing needs, he noted, the budget includes $19.2 billion for the Sec. 8 housing choice voucher program and $9.4 billion for projectbased Sec. 8, along with $2.4 billion for the public housing capital fund and full funding of almost $5 billion for the operating fund.

However, $1 billion of the operating fund money would come through an offset from public housing authority reserves, a proposal which has been sharply criticized by public housing organizations.

Donovan defended the plan, explaining that the reserves were set aside for a rainy day, and “that rainy day is here."

While the budget has no new initiatives, Donovan pointed out that it would continue funding for the Choice Neighborhoods program, a replacement for the HOPE VI program aimed at redeveloping poor neighborhoods through the revitalization of distressed public and assisted housing. In addition, it includes $200 million for the transforming rental assistance proposal to convert up to 255,000 public and assisted housing units to long-term project-based rental assistance contracts.

In addition, the administration is seeking $1 billion to capitalize the national affordable housing trust fund. Donovan said a long-term funding source is needed for the trust fund, since Fannie Mae and Freddie Mac aren't making their scheduled contributions while they are in conservatorship, but he made no specific proposals.

HUD completes revision process of FHA closing documents

HUD has issued revised Federal Housing Administration (FHA) multifamily closing documents, completing a process it started in 2004. The department has also promulgated conforming changes to program regulations.

Use of the new documents and rules will generally be required for mortgages for which a firm commitment is issued on or after Sept. 1, though borrowers can continue to use the existing documents and regulations if necessary to avoid financial hardship.

One of the controversial changes in the revised multifamily procedures imposes personal liability for so-called “bad boy” acts by principals in otherwise nonrecourse FHA transactions.

In response to concerns about the implementation of this provision, HUD has modified the final documents to state that the department will identify in the firm commitment the individuals required to accept liability for “bad boy" acts. Also, individuals who are responsible for signing documents will generally attest to compliance with requirements only “to the best of their knowledge” and primarily to their own representations and statements.

Under other changes in the documents, HUD has clarified that regulatory changes that are subject to the notice and comment process will generally be effective only when the process is completed, and updates to other guidance will generally apply to existing projects only to the extent that they interpret provisions in the regulatory agreement, rather than adding or removing terms.

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 twopart publication includes informed reports and insightful analyses in “HDR Current Developments,” and an up-todate 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.