Will HUD’s FY 2017 budget proposal impose an “Administrative Support Fee” on lenders this year? As they say in New York – “Forget about it!”

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In a previous blog post, I discussed HUD’s announcement of some of the specific details of its proposed Fiscal Year 2017 Budget (which is part of the President’s overall Fiscal Year 2017 Budget Plan) that had been just submitted to Congress.

In reviewing HUD’s proposed 2017 Budget, there was one item of particular interest to mortgage lenders.  This was the imposition of a new “Administrative Support Fee” to be assessed on FHA lenders to help pay for long-overdue technology upgrades needed by FHA to modernize its IT systems.

In short, HUD is requesting from Congress that it be allowed to charge lenders an “Administrative Support Fee” totaling 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.

However, as was done in the past few years – the Senate subcommittee charged with overseeing HUD’s budget proposals reportedly rejected the administration’s proposal to fund these IT upgrades by assessing new fees on lenders.  Instead, funds for IT upgrades are now included in the appropriations bill that was approved by the subcommittee.  As a result, lenders need not worry about yet another fee to be imposed on them for participating in government loan programs.

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 Now that this issue has been addressed – perhaps FHA will give serious consideration to reducing its annual or up-front MIP for Borrowers?  The timing would be right for such a move but the chances are slim since FHA does want to remain fiscally sound in order to ward off its detractors.

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.