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MIP increase to raise cost of affordable housing, says MBAMortgagePress.commortgage insurance premiums, multifamily mortgages, rent increases MIP increase to raise cost of affordable housing, says MBA The Mortgage Bankers Association recently completed a study to measure the potential impacts of the notice issued by the U.S. Department of Housing and Urban Development (HUD) to increase the mortgage insurance premium (MIP) on most new Federal Housing Administration (FHA) multifamily mortgages. The survey, which is scheduled to be shared with members of Congress and was highlighted in MBA's comment letter on the notice, revealed the decision by HUD would primarily affect affordable housing developments. According to the survey, 98 percent of the loans the FHA endorsed in fiscal year 2007 were for properties with average rents affordable to families earning 80 percent or less of area median income (AMI), and 90 percent of the properties were affordable to families earning 50 percent or less of AMI. "By imposing these higher fees, HUD will be hurting the FHA multifamily programs and the families they serve," said MBA Chairman Kieran Quinn, CMB, in MBA's comment letter to HUD. "The proposed 35 percent increase in the premium will translate directly into an approximately 2.6 percent increase in rents necessary to make each of these apartment developments economically feasible. This rent increase will be borne by the low- and moderate-income working Americans who typically occupy these apartments." "With recent turmoil in the housing and capital markets, many homeowners are losing their homes," expressed Quinn. "This is not the time to be restricting the supply of affordable rental housing for these families." In addition to letters to HUD Secretary Alfonso Jackson spearheaded by House Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd, in which 117 members of the House and 38 senators denounced the proposed increase in the MIP, both committees incorporated language in their FHA reform bills to strictly prohibit HUD from increasing the MIP, unless it was necessary to keep the programs from requiring an appropriation. MBA is supportive of both FHA reform bills and is working to achieve enactment of a bill this year. MBA survey highlights ++Ninety-eight percent of the properties initially endorsed by FHA in fiscal year 2007 under the affected programs had average rents affordable to families earning 80 percent or less of AMI. ++Ninety percent of the properties were affordable to families earning 50 percent or less of AMI. ++Seventy-nine percent of the properties contained project-based Section 8 assistance. ++Looking only at properties without Section 8 assistance, 50 percent were affordable to families earning 50 percent or less of AMI, and over 86 percent were affordable to families earning 80 percent or less of AMI. ++The pipeline of loans that would be affected by the proposed MIP increase had similar affordability characteristics, with 94 percent affordable to families at 80 percent or less of AMI and 74 percent affordable at 50 percent or less of AMI. The survey did not include any loans with equity from low-income housing tax credits or covered loans originated by lenders who were responsible for 82 percent of the properties initially endorsed through the affected programs in fiscal year 2007. For more information, visit www.mbaa.org.