Some Impacts for Mortgage Lenders in HUD’s FY 2017 Budget Proposal

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HUD recently announced the specific details of its proposed Fiscal Year 2017 Budget. This is part of the President’s overall Fiscal Year 2017 Budget Plan that was just submitted to Congress.

In reviewing HUD’s proposed 2017 Budget, there are some items that will be of particular interest to mortgage lenders.  Some examples are as follows:

• HUD is requesting from Congress that it be allowed to charge lenders an “Administrative Support Fee” of up to $30 million on endorsements through September 30, 2019. This is the same amount previously requested in the past two Budget proposals. It is indicated that the collection of the receipts from such fees will be credited as offsetting collections to the Mutual Mortgage Insurance (MMI) Program account. Upon collection of such fees, it is HUD’s intent to transfer these funds to its Information Technology Fund and/or the Housing Salaries & Expenses account to be used for the purpose of modernizing FHA systems and supporting the implementation of new practices for interaction with lenders. In this regard, HUD is requesting a total appropriation of $160 million to fund enhancements to its administrative contracts, FHA staffing and information technology.  If the $30 million in Administrative Support Fees is realized, it is HUD’s intention to utilize these fees as an offset to the $160 million appropriation.

• HUD is requesting that the National Housing Act be amended to enable FHA to take enforcement action against lenders on a nationwide basis instead of a branch by branch termination authority. For example, if a mortgagee is found to have a very high rate of early defaults or claims – HUD is seeking authorization to terminate the approval of the lender to originate or underwrite single family mortgages in a specified area or areas, or on a nationwide basis.
• HUD is seeking authority to obtain Indemnifications from lenders that have Direct Endorsement authority on loans that they originate or underwrite if fraud or misrepresentation is found regardless of when an insurance claim is paid. At the present time, this authority is applicable only to lenders that have Lender Insurance approval.

• On a positive note, HUD is seeking an amendment that will clarify that Down Payment Assistance (DPA) from state and local governments and their respective agencies and instrumentalities are not impermissible sources of down payment assistance for FHA borrowers. This would make it clear that down payment assistance from a government source (whether state or local) will not be considered as a prohibited source of DPA funds.

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We will all have to wait to see if any of these proposed changes will ultimately be accepted, modified or rejected by Congress.

Stay tuned!

About the Author

Gerry Glavey

Gerard (Gerry) Glavey is Senior Vice President / Chief Credit Officer for LoanLogics. Gerry has decades of experience working in residential mortgage credit and compliance and brings insights that few in the industry can match. In his role, he develops new services and provides support for all post close quality control and quality assurance, pre-close quality control, due diligence services, and document processing services. He spent 37 years with the US Department of Housing and Urban Development, where most recently he was the Director, Processing and Underwriting Division for the Home Ownership Center (HOC) in Philadelphia. In this capacity, Mr. Glavey was responsible for the administration of all HUD/FHA Single Family Loan Origination activities, including underwriting, appraisal and endorsement for the 16 state jurisdiction of this HOC.