The Department of Housing and Urban Development (HUD) could be forced to suspend endorsing multifamily and healthcare loans by the end of March as a result of reaching its commitment authority.
However, a new deal in the works would extend HUD’s fiscal year 2012 commitment authority of $20 billion to fiscal year 2013.
The clock has been ticking on the limit under which HUD must remain for its multifamily housing programs. Once that limit, or HUD’s commitment authority, is reached—expected to take place later this month—HUD will no longer be able to make loans under those programs without the approval of additional commitment authority from Congress.
HUD last week informed industry partners in its multifamily and healthcare sectors that it will likely reach its limited commitment authority some time before March 27, leading the agency to prioritize loans in the meantime.
“HUD is currently operating under a Continuing Resolution, which expires March 27, 2013, and under which FHA has partial-year mortgage insurance commitment authority,” HUD wrote to its lending partners. “At the average daily rate of insurance issued fiscal year to date, FHA expects that it will utilize the limited resources during the current Continuing Resolution period.”
Any commitments that have already been issued will move forward, according to the letter, but mortgages seeking insurance prior to March 27 may face delays until the Federal Housing Administration can receive an extension of commitment authority—a measure that will have to meet congressional approval.
Insurance will still be issued on a first-come, first-served basis, with priorities spelled out by HUD for Priority Projects including affordable, RAD, projects under any Multifamily or Healthcare program in Hurricane Sandy impacted areas and others; as well as Section 223(a)(7) and market rate 223(f) projects and new construction/substantial rehabilitation applications.
Although the expected increase to HUD’s commitment authority won’t happen, the House is expected to pass a continuing resolution on Wednesday, March 6, extending the budget to September 2013, which the Senate will likely also pass on Thursday without amendment.
Prior to the announcement of the continuing resolution, lenders expressed concern over the potential lost time that receiving new commitment authority will require.
“Right now, HUD thinks they will hit the cap in the next three to four weeks,” says Nick Gesue, chief credit officer for Lancaster Pollard. “They just have to go to Congress…which should be a no brainer, but it’s gridlock right now.”
Congress is expected to pass the recently-announced continuing resolution extending last year’s commitment authority, said Michael Vaughn, Senior Vice President, FHA Finance, at Walker & Dunlop, during a session at NIC’s 2013 Regional Conference. However, HUD might be about a billion dollars short by the time September rolls around, he said, which could cause delays for some deals.
“The thing is, HUD can’t do too much more than they did last year,” Vaughn said. “They’ll probably stay within the limit, and if they’re off by about a billion, there are a lot of deals that can be done once fiscal year 2013 ends.”
Written by Elizabeth Ecker and Alyssa Gerace
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