Federal Housing Administration-insured multifamily and healthcare loans shouldn’t be lumped together with any single family loans because they have a much stronger performance record and are actually cash flow positive, a lender said in his testimony on behalf of the Mortgage Bankers Association during a Congressional hearing on Thursday.
Loans made through certain multifamily and healthcare facility programs yielded positive net cash flows of about $927 million for the U.S. Treasury between 1992 and 2010, according to an MBA-commissioned study conducted by the Federal Practice Group.
While Congress made “significant strides” in separating single family and multifamily programs in fiscal year 209, when all new single family loans (except for Title 1 loans) were removed from the GI/SRI fund and moved to the MMI fund, there is still a “large volume” of single family loans originated between 1992 and 2009 that remain in the GI/SRI fund.
These leftover loans are “distorting the income and expense numbers in the fund, which many assume now only includes multifamily and healthcare loans,” said Rodrigo Lopez, president and CEO of AmeriSphere Multifamily Finance, in his written testimony on behalf of the MBA.
That’s why the mortgage trade group wants Congress to ask HUD to fully separate all the multifamily and healthcare loans from the single family loans in the GI/SRI data contained in budget documents to provide Congress with a “better understanding” of how they’re financially performing.
Lopez also mentioned HUD’s plans to increase mortgage insurance premiums for certain FHA healthcare facility loan programs for commitments issued or reissued in FY2013.
This proposed increase should be supported and justified by data, but it’s not, Lopez said.
“Increasing the MIPs will not serve to build a buffer against future losses for FHA’s multifamily loan programs, because there is no segregated fund and excess income is returned to the Treasury each year for purposes separate from these programs,” he wrote in his testimony.
The premium should continue to be based on risk management to the government considering the potential and severity of mortgage losses, and the “demonstrated strong performance” of these programs along with the recent implementation of changes to tighten credit review and underwriting all “run counter to the proposed increase in the MIP.”
It’s difficult to get data to support this increase, Lopez emphasized, because the Obama administration’s budget document doesn’t account for multifamily and healthcare programs separately, and some older single family loans are negatively affecting the GI/SRI fund’s performance.
Read his testimony here.
Written by Alyssa Gerace
