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Backlog of Multifamily Mortgage Apps at HUD Creating Potential Economic Consequences

NationalMortgageProfessional.com
May 25, 2011

The National Multi Housing Council (NMHC) and National Apartment Association (NAA) have testified before key Congressional subcommittee of the House Financial Services Committee, stating that failure by the U.S. Department of Housing & Urban Development (HUD) to keep pace with the volume of multifamily mortgage applications is exacerbating the nation's shortage of workforce housing, jeopardizing the thousands of jobs created by new apartment construction and reducing the new revenues the program could be generating for the federal government. Peter Evans, delivering testimony on behalf of NMHC/NAA, told lawmakers that demand for apartment financing from the Federal Housing Administration (FHA) has increased more than five-fold, with applications increasing from $2 billion annually to $10 billion. Peter Evans is a partner at Chicago-based Moran and Company. FHA has been unable to keep up with this demand, however. Loan processing times can now exceed 18-24 months, and borrowers often have no idea where in the pipelines their applications are. The consequences of this backlog, as viewed by the NMHC and NAA, are magnified by the fact that private capital markets still have not recovered, leaving apartment firms with few alternatives. The result is a dramatic reduction in new apartment construction at a time when the nation's demand for affordable rental housing is growing faster than in recent decades. "In 2010, new apartment construction set a post-1963 low at just 97,000 new starts," said Evans. "We need to build 300,000 units a year to meet demand, yet we'll start fewer than half that many this year." In his testimony, Evans offered numerous suggestions to streamline FHA processing that would still protect the safety and soundness of FHA's multifamily portfolio. Among other things, FHA should instruct field offices to more consistently follow its multifamily accelerated processing guide to expedite transactions. Instead of requiring all loans over $15 million to be processed by a national review committee, it should impose this additional threshold only on loans that exceed the program's terms and requirements. FHA should also create a special underwriting team for large, atypical loans to expedite processing of more standard transactions. Evans also recognized HUD's efforts to work with stakeholders to address its backlog and other administrative issues, but reiterated that HUD needs more resources to accommodate the increased volume in the FHA multifamily programs. Evans took the opportunity to address suggestions that FHA replace or take over Fannie Mae and Freddie Mac's multifamily programs. He expressed the industry's strong opposition to such proposals, noting that FHA is woefully unprepared to assume a larger role. In addition, FHA serves a specific niche within the market and is simply not capable of providing the full range of unique and complex loans required by the apartment sector. NMHC/NAA's written testimony is available at www.nmhc.org/goto/6118. The National Multi Housing Council (NMHC) and National Apartment Association (NAA) operate a Joint Legislative Program and represent the nation's leading firms participating in the multifamily rental housing industry. NMHC/NAA's combined memberships are engaged in all aspects of the development and operation of apartment communities, including ownership, construction, finance and management. One-third of Americans rent their housing, and over 14 percent of all U.S. households live in an apartment home. For more information, contact NMHC at 202/974-2300, e-mail the Council at info@nmhc.org or visit NMHC's web site at www.nmhc.org. Read more: Backlog of Multifamily Mortgage Applications at HUD Creating Economic Consequences
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