FHA: Budget Cuts Will Impact Healthcare Lending

Federal Housing Administration commissioner Carol Galante sent a letter on Monday to Department of Housing and Urban Development (HUD) lenders telling them to expect sequester-related delays in healthcare and multifamily lending.

“At this time, the Department of Housing and Urban Development is taking every step to mitigate the effects of these cuts, but based on our analysis, it is likely that your organization’s business processes may be affected,” Galante wrote in a letter addressed to industry partners. 

The sequester will require HUD to furlough staff and take reductions for systems maintenance and in other areas which may, according to Galante, result in delays in processing mortgage insurance applications. There may also be delays in loan closings, construction inspections, and other “essential program activity.”


As a result of sequestration, HUD will be reducing its salaries and expenses by $66.6 million, and all 9,000 of the department’s employees are currently expected to take seven furlough days.

The proposed dates of the furlough, according to a HUD spokesperson, are May 10, May 24, June 14, July 5, July 22, August 15, and August 30, although employees have not yet received formal notification for these proposed days. 

In other budgetary news, the Federal Housing Administration (FHA) is on pace to exhaust its commitment authority for multifamily and healthcare program loans for fiscal year 2013, and mortgage industry groups are urging Congress to address this by increasing the existing $20 billion amount. 


“MBA is calling on Congress, as it considers its continuing resolutions to fund government programs for the remainder of fiscal year 2013, to add a provision granting FHA an additional $5 billion in commitment authority for multifamily and healthcare loans,” said Debra Still, CMB, chairman of the Mortgage Bankers Association, in a statement.

If the FHA runs out of commitment authority for multifamily and healthcare loans, it will need additional authority to insure loans over the limit. Failure to provide this authority, says Still, has the potential to cause “significant disruptions” to financing these sectors.

“Not funding these programs with disrupt financing for rental housing and healthcare properties,” she says, adding that the provision would require “no direct appropriation of funds.” 

While FHA’s approximately 12% share of the overall healthcare lending market isn’t dominant, the agency provides “needed capital” to the industry, according to Michael Vaughn, senior vice president of FHA finance at Walker & Dunlop. 

Written by Alyssa Gerace

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