Carol Galante Appears before the Senate to Discuss the FY 2014 Budget for the FHA
On Tuesday, June 4, the Senate T-HUD Subcommittee held a hearing focused on the Federal Housing Administration’s (FHA) fiscal year 2014 budget request. Carol Galante, the Assistant Secretary for Housing and the FHA Commissioner, served as a witness. Carol began her testimony by outlining the FHA’s funding request, which includes:
- $400 billion in loan commitment authority for the Mutual Mortgage Insurance Fund, which HUD estimates will provide 1.2 million single family mortgages; and
- $30 billion in loan guarantee authority for the General and Special Risk Insurance Fund, which HUD estimates will provide 273,000 units in multifamily housing properties
Later, she discussed the initiatives undertaken in the Office of Multifamily Housing Programs that aim to reduce administrative burdens and increase program efficiency. The Department is beginning to realize savings in administrative salaries and expenses as a result of these programs:
- Breaking Ground: Completed in mid-FY 2012, Breaking Ground was an initiative in Multifamily Housing Development to reduce backlogs, improve time frames, and create an early warning system that allows for more effective risk management by creating extensive tools to monitor and access credit for multifamily insured loans.
- Sustaining Our Investments: The Sustaining Our Investments initiative, which was fully implemented last month, has resulted in an overhaul of the processes used to manage the portfolio of the Office of Multifamily Asset Management. The initiative focuses on Risk Based Management – allowing project managers at both the Headquarters and field level to focus day-to-day operations on managing at-risk loans in the portfolio.
- Loan Committee: FHA Multifamily has also implemented a new loan committee approval process, aligning Hub and Program Center commitment authority and practice to ensure consistency in underwriting throughout the regional offices, as well as to provide a platform to share best practices.
Through its multifamily mortgage insurance program, the FHA has facilitated the lending of $11 billion for new construction and rehabilitation of over 150,000 affordable housing units over the past 18 months. Despite these federal investments, and the increasing demand for affordable housing, there continues to be a decline in the number of available affordable housing units. According to Carol’s testimony, HUD is taking steps to address this shrinking inventory while operating under less federal funding. She began by discussing the Rental Assistance Demonstration (RAD) program. The RAD program targets certain at-risk HUD programs (such as the Section 8 Moderate Rehabilitation program and the Rent Supplement program), and it seeks to preserve the affordable housing under these programs by allowing affordable housing units to convert to long-term Section 8 rental assistance. Public Housing properties may also convert to Section 8 assisted affordable housing properties. Long-term Section 8 rental assistance allows for state and local entities to leverage sources of private and public funds to rehabilitate their properties, which HUD believes will preserve these properties without extensive reinvestment. HUD has requested $10 million for FY 2014 for the converting assistance under RAD.
Carol Galante continued that the FY 2014 budget request also includes a legislative provision that seeks Congressional authority for Ginnie Mae to guarantee securities containing FHA multifamily Risk Share loans, which HUD estimates will increase liquidity and decrease capital costs for small building finance. She said that small building owners (meaning the property has between 5-49 units) are less likely than other multifamily property owner to be able to secure financing for repairs and improvements. This proposal would apply to both state and local Housing Finance Agency Risk Share lenders under Section 542(c) and new Risk Share lenders under Section 542(b).
The last piece of her testimony focused in on HUD’s Multifamily Office Reorganization. This two and a half year plan will consolidate Field Offices across the nation into five major hubs with five satellite offices. The catalyst for this decision is the reduction of operational costs, and as a forward-looking strategy to mitigate the number of HUD staff approaching retirement. The consolidation involves launching more routine workload sharing exercises across the country, introducing risk-based processing and underwriters in the Office of Multifamily Production , assigning the most experienced staff to focus on risky, complex or troubled assets, and a major streamlining of organizational structures including merging certain offices together and the use of more information technology infrastructure.
Interestingly, Galante noted that HUD is strategically investing in its staff while improving efficiencies and processing by “providing its employees training and leadership development opportunities”. Later, her testimony noted that 17 Hubs will be consolidated into 5, and the total number of field offices with multifamily presence will decline from 50 to 10. She stated that affected employees will have the ability to relocate, accept a buyout or take early retirement. You can read her testimony
here.
Also on June 4, the Office of the FHA Commissioner notified Congress that the FHA has committed 75% of its FY 2013 commitment authority. It is the FHA’s belief that without additional Congressional action, the administration will use-up the remaining commitment authority by mid-August. The FHA is still requesting an additional $5 billion in the commitment authority to ensure projected requests are met through the end of FY 2013; this additional $5 billion would raise the FY 2013 total commitment authority to $30 billion.
House Appropriations Committee Issues the FY 2014 US Department of Agriculture Appropriation Bill
This week, the House Agriculture Subcommittee approved the FY 2014 Agriculture Appropriations bill. An appropriations bill such as this requires passage in the House of Representatives and it authorizes the government to spend money for federal programs and agencies.
The bill provides a total of $2.2 billion for rural development (RD) programs, which is equal to the FY 2013 enacted level. The individual programs under the RD top-line funding level include:
- Section 521 Rental assistance is slated to receive $1.01 billion in funding for FY 2014 (this amount is $128 million higher than in FY 2013);
- Section 515 rental housing is budgeted at $28,432,000;
- $150,000,000 is pegged for section 538 guaranteed multi-family housing loans;
- The Multifamily Housing Revitalization Program would receive $27,084,000 and of this amount:
- $9,749,000 would be available for rural housing vouchers
- $17,335,000 shall be available for a demonstration program for the preservation and revitalization of section 514, 515, and 516 multi-family rental housing properties
The House of Representatives has not yet scheduled a floor vote for this appropriations bill. Members have so far voted, and passed, the appropriation bills for Homeland Security and Military Construction and Veterans’ Affairs. We will notify members as soon as the Transportation, Housing and Urban Development appropriations bill is released.
In order to avoid more continuing resolutions, Congress must pass the necessary appropriations bills by the beginning of the new fiscal year, which starts on October 1. However, Congress has yet to establish a final budget resolution, which sets the spending ceilings for upcoming fiscal years. This may cause a delay in the appropriations process. The House and Senate have separately passed their own budget resolutions, meaning that both appropriations committees in the House and Senate are not operating under the same spending ceiling. You can read the appropriations bill
here.
