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
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
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.