More Apartment Funding Proposed On Capitol Hill

A funding bill cleared by the Senate Appropriations Committee last week calls for a 25 percent increase in the limit of federally-insured multi-family mortgages.

The VA-HUD appropriations bill for fiscal 2002, which begins Oct. 1, also authorizes the Federal Housing Administration to begin insuring so-called "hybrid" ARMs, a move that could boost FHA production by some 40,000 loans, according to some estimates.

The legislation, which also covers a number of independent agencies, including the Federal Emergency Management Administration and the Environmental Protection Agency, could be taken up by the full Senate as soon as this week and "should pass with little controversy," said Sen. Kit Bond, R-Mo.

Because the bill also provides $2 billion to replenish FEMA's disaster account and with hurricane season rapidly approaching lawmakers have put the measure on a fast track.

The bill differs somewhat from the appropriations measure passed earlier this month by the House.

Out of deference to Rep. Marge Roukema, R-N.J., who has introduced separate legislation, the House bill does not include an increase in the MF loan limit. But the Senate's version calls for an increase the maximum loan amount the FHA can insure for a two-bedroom unit in a building without an elevator in a high cost area like Washington, D.C., from $67,000 to $83,650.

It is "the first increase in many years and enjoys wide support among members," said Sen. Barbara Mikulski, D-Md., chairman of the VA-FHA Appropriations Subcommittee, noting that the change will help increase the supply of affordable rental housing.

Under current law, the FHA can back loans up to only $40,248 for a two-bedroom unit in a non-elevator building. That amount varies by region, and may be multiplied by up to 240 percent in the most expensive markets. But nevertheless, production of federally-insured rental housing that's affordable by working families has all but disappeared in some places.

The panel also voted to meet the President's budget request for the Office of Federal Housing Enterprise Oversight at $27 million, $5 million more than it allowed in fiscal '01. The House increased OFHEO's budget by only $1 million.

The independent agency within HUD has oversight over the safety and soundness of Fannie Mae and Freddie Mac, the two federally-chartered financial institutions which keep the money flowing for home loans by purchasing mortgages from local lenders. In addition, the committee agreed to allow the FHA to back adjustable rate mortgages which remain fixed for the first three, five, seven or 10 years. Once the fixed period expires, though, rates would rise or fall annually based on market rates at the time.

Hybrid ARMs are widely available in the conventional market and starting to become popular once again as the spread between fixed rate loans and one-year ARMs has widened. The House also voted to allow the FHA to insure hybrids. Moreover, both chambers would limit the first rates increase on the three and five-year varieties to 1 percentage point, a consumer protection that could make the government's version more popular than conventional hybrids, which at best limit adjustments to 200 basis points.

Overall, the Senate panel approved slightly more than $30 billion in funding for HUD, a tad more than the $30.6 billion the President requested. Its bill also provides for:

The legal authority to reject lenders with high default rates.
Full funding of $15.6 billion for Sec. 8 housing vouchers, an amount that covers 17,000 new or "incremental" vouchers. As was done in the two previous funding bills, the measure includes an advance appropriation of $4.2 billion for the vouchers.
An additional $10 million so the Inspector General can investigate flipping and other abusive lending practices on a national basis.
An $200 million increase in funding for Community Development Block grants to just over $5 billion. The Senate appropriators continue funding at last year's level for Empowerment Zones, brownfields clean-up programs, homeless grants, and housing for the elderly and disabled.

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated.
He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year.
Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association.
He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972.
The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country.
He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others.
Sichelman is married, the father of five and grandfather of eleven.

Written by Lew Sichelman