GlobeSt.com EXCLUSIVE: MBA Duking It Out with HUD, FHA

DALLAS-The Mortgage Bankers Association is talking, but it doesn’t appear that the feds are listening, with the well now dry for practically three months for affordable housing money.

Texas is one of the biggest losers in the battle for more funds, with 13,124 units in projects totaling more than $730 million at stake. Florida is losing out on 4,500 units, with borrowers unable to get funding for loans in excess of $350 million. And the Maryland-District of Columbia-Virginia region has about 6,100 units and loans of about $500 million at risk. Nationwide, some $1.8 billion in construction loans for affordable housing have not closed, according to an MBA survey.

The feds have cast out a proposal to Congress to appropriate another $40 million for the FHA mortgage insurance program, but there’s a catch. The bottom line is tenants at any new projects emanating from the supplemental funding will pay an average of 4% more in rent per month, Bernard P. Malone, president of Dallas-based Malone Mortgage Co., tells GlobeSt.com. Malone is one of 10 members of the MBA Multifamily Steering Committee and a director of the National Multi-housing Council as well as a ULI member.

The funding well went dry April 19. Since then, the MBA has been lobbying long and hard to get HUD to release $40 million in already budgeted “emergency” funding. The key is the word “emergency.” HUD says it just can’t unleash the money because it’s unclear as to Congress’ definition of “emergency.” According to Malone, HUD claims that using the dried-up fund as cause would essentially open a can of worms for other federal agencies seeking relief via the same vehicle.

“As far as the Mortgage Bankers Association is concerned, having underestimated the need, that alone we thought was an emergency,” Malone says of the FHA credit subsidy that protects lenders and comforts borrowers.

The feds thought the solution would be the $40-million supplemental funding and, at the same time, snag a 30 basis point increase in mortgage insurance premiums. The allocation request is a step in the right direction, but the stipulation isn’t settling well with the MBA. The 60% hike trickles down to higher rents, says Malone. “It’s wrong. It’s unfair and it’s unjust,” he says. Taking President George Bush’s words to heart, Malone openly lobs them back at the FHA and HUD: “It’s fuzzy input, fuzzy analysis and fuzzy conclusions.”

Malone estimates his firm alone has close to $200 million in loans in jeopardy due to the credit subsidy snafu. Some could close at the higher basis points. “I’m not sure how many transactions will have to drop out,” he says. “We’ll survive. But, here we are wrestling in this country with the problem of affordable housing… something like this is contradictory and the Federal Government is causing it.