Senate Amends Continuing Resolution
On Friday the 27th, the Senate passed their amended version of the House Continuing Resolution, H.J. Res 59, by a recorded vote of 54 to 44. The CR, in its original form, would fund all federal government operations through December 15, 2013 at slightly below the current sequester levels of $986.3 billion and it would have stopped funding for the Affordable Care Act. The House CR was controversial from the start because of its proposition to defund the President’s hallmark law. Upon introduction in the Senate, Majority Leader Harry Reid called the CR unworkable and President Obama said outright that he would veto any bill that would defund his health care law. The Senate’s version of the CR would remove provisions to defund the Affordable Care Act, and it would also change the end date in the House bill from December 15th to November 15th, in an attempt to “keep the pressure on” as the Senate Appropriations Chair Barbara Mikulski said.
A CR was necessary for the government to continue operations after September 30th (the end of fiscal year 2013) because both chambers of Congress failed to pass all of the finalized appropriations bills necessary to fund federal programs. Funding levels have not been altered in the Senate amended bill.If Congress fails to pass a CR by October 1st (the beginning of FY 2014), the government will temporarily shut down until a bill is passed. During a government shutdown, state governments would continue to be operational along with certain federal functions such as the US Postal Service and active duty army personnel. However, many departments would be closed during a shut down, including HUD. All 80 HUD field offices will be closed with some limited exceptions for a very narrow range of activities that are permitted during a lapse in appropriations.
HUD has released its contingency plan in advance of a possible government shutdown. This plan provides an outline of how HUD programs will operate without appropriations from the federal government. Emergency activities would continue and functions funded under multi-year appropriations would carry on as well. Of the 8,709 employees of HUD, only 349 would be sanctioned to work. The rest would be furloughed until a new government spending bill is authorized.
Below are some excerpts from the contingency plan relating to multifamily housing:
Asset Management/FHA and Assisted Housing
- Make payments under Section 8 contracts, rent supplement, Section 236, PRACS where there is a permanent or indefinite authority or multi-year funding.
- Renew/Fund Section 8 contracts and PRACS where there is budget authority available from prior appropriations or recaptures.
- Payment of PBCAs for work on properties with prior appropriations.
- Management of HUD-owned property and property where HUD is Mortgagee-in-possession.
- Approval of emergency repairs.
In the Industry FAQs regarding a shutdown, HUD outlines specific concerns of stakeholders and tenants. NAHMA selected the most relevant FAQs:
Q: Will HUD make payments under Section 8 contracts, rent supplement, Section 236, or PRACS where there is a permanent or indefinite authority or multi-year funding?
A: Only where there is budget authority available from prior appropriations or recaptures. (NAHMA: HUD has $400 million in advanced appropriations that can be used for these payments)
Q: Will PBCA’s continue to perform their duties?
A: Yes, PBCA contracts are funded at this time and they will continue their services as long as appropriated funds remain available.
Q: Will HUD close loans?
A: Yes, but only on projects with firm commitments that have a scheduled closing date, or projects with critical external deadlines, during the shut-down period.
Q: Will REAC still be scheduling and doing inspections?
A: No
Q: Will construction draws be processed? What guidance can we give the industry about FHA Multifamily insured loans under construction?
A: For the first 10 business days of a shut-down, the following policy will apply:
- MAP Lenders servicing construction loans may at their, and the Owners’, and General Contractors’ risk, process interim construction draws. HUD will perform or contract for construction inspections on a post-review basis at such time the government re-opens. Initial and Final draws will not be processed or approved.
- No change orders will be processed or approved.
- For any projects that obtain local authority approval (i.e. a Certificate of Occupancy), the Construction Loan Administrator (i.e. the Lender) and Owner may proceed with allowing occupancy. HUD will review, and assuming appropriate, approve the permission to occupy on a post review basis at such time the government re-opens.
Q: Will HUD continue to process requests for contract renewals during the shutdown?
A: No
Q: Will HUD continue to process subsidy payments (HAP’s, PRAC’s)?
A: Yes, processing of funding will continue to the extent there are appropriated funds available to make payments
Q: Can I submit a Section 236 refinance/prepayment application with the new online system?
A: Yes, however there will not be staff to review the applications during the shutdown and the review would start when the shutdown is over.
Q:Will HUD continue to process tenant certifications and electronic voucher payment requests?
A: Yes. Tenant Rental Assistance Certification System (TRACS) will be available to process vouchers, provided that appropriate funds are available
Q: Will the Financial Assessment Sub-System (FASS) accept audited financial statements?
A: Financial statements may be submitted through FASS; however, if problems are experienced with a submission, the REAC Technical Assistance Center (TAC) will not be available to provide assistance.
Q: Can Section 202/811 projects be closed?
A: Yes, but only on projects with firm commitments that have a scheduled closing date during the shut-down period
Q: Will the Service Coordinators or Assisted Living Conversion Program applications be processed?
A: The deadline for the Service Coordinator NOFA will be extended to November 16, 2013 to match the ALCP NOFA deadline, so applications will not be processed until after the deadline
Q: Will HUD process Service Coordinator extensions?
A: No
Q: Will HUD process funding requests for tenant protection vouchers for public housing demolition/disposition activities or Multifamily Housing Conversion Actions (e.g., owner prepayments and opt-outs) during a government shutdown?
A: No. During the period of the government shutdown these applications will not be processed.
Q: Should PHAs continue to issue vouchers during a government shutdown?
A: PHAs are not required to cease issuing vouchers during a government shutdown. However, PHAs are advised that HUD may be unable to make additional HAP and administrative fee disbursements beyond the October payment in the event of a prolonged government shutdown. PHAs should assess their financial ability to make payments on behalf of currently assisted households as well as those potentially to be served when considering their ability to issue vouchers.
The CR will now return to the House for approval. It is hard to predict the exact outcome, as many members of the House have vehemently opposed the President’s health care law and may amend the Senate’s bill with another one year the Affordable Care Act. NAHMA will remain in communication with HUD over the next few days and will continually update members as more information becomes available. Please follow
this link to view the contingency plan.
Federal Housing Administration seeks Subsidy from U.S. Treasury
On Friday, September 27, the Federal Housing Administration announced that it will take a $1.7 billion dollar subsidy from the U.S. Treasury in an effort to secure its insurance fund after losses on defaulted mortgages depleted reserves. The transaction will occur on September 30th, the last day of FY 2013. In a letter sent to Congress from FHA Commissioner Carol Galante, she stated that “this required mandatory appropriation is an accounting transfer and does not reflect an up-to-date view [of the insurance fund’s] performance, its long-term fiscal health or its current cash position… In the next few months we expect updated data and economic forecasts to reflect what we already know to be true — the health of the Fund has improved significantly.”
The FHA has authority to take the money without prior approval from Congress. The draw won’t affect the federal debt because the money is being transferred between government accounts, not spent. However, this move will serve to entice FHA reform in the upcoming Congress. Republicans have long been critical of the FHA’s role in the housing market since the federal bailout required for Fannie Mae and Freddie Mac; Democrats have countered that the Administration played a key role in preventing an absolute disaster during the Great Recession. Both chambers of Congress are working on separate bill to reform the Federal Housing Administration.
