WASHINGTON: For the second time in as many years, the Department of Housing and Urban Development has been forced to ration funds to operate the Federal Housing Administration's multi-family mortgage programs because it is running out of money.

According to HUD Secretary Mel Martinez, the department has only about $18 million in credit subsidy authority left for the remainder of the 2001 fiscal year, which doesn't end until Sept. 30. The credit subsidy is used to cover any losses on federally-insured apartment loans.

The White House has no plans to ask for additional credit subsidy funds. Instead, it is seeking an administration solution by asking lawmakers to increase the multifamily insurance premium by 30 basis points, from 0.5 percent to 0.8 percent. But that has raised the ire of the Mortgage Bankers Association.

HUD believes lenders should support the hike because it would make the program less dependent on the federal budget process and, therefore, less prone to being shutdown. But the MBA has told National Mortgage News the multi-family program now is strong enough to operate on its own without the need for Congress to appropriate funds to cover potential losses.

In the meantime, at a time when Sec. Martinez has conceded that skyrocketing costs have all but put a stop to the construction of affordable apartments, HUD is now approving only $2.5-$2.8 million of credit subsidy for new loan commitments per month for the rest of the fiscal year.

Worse, unless the situation is resolved, the Bush Administration's proposal to raise FHA's multi-family loan limits by 25 percent is all but meaningless. Indeed, all a higher loan ceiling will do is force HUD to run out of funds more quickly.

Hearings on the proposed HUD budget for the 2002 fiscal year are not scheduled until the middle of next month.

On a more positive note, meanwhile, the National Association of Home Builders is taking credit for blocking several proposed changes to the nation's model building codes the influential trade association says would have driven up the cost of multi-family housing even further.

But the 203,000-member builders' group also succeeded in gaining several favorable code changes, including allowing Romex wiring in multi-family buildings of any height, permitting frost-protected shallow foundations, and reducing the minimum separation necessary between exit doors.

Building codes are developed by private organizations such as the International Code Council. They are then used by most state and local governments as a starting point for adopting their own building and safety codes. Construction and occupancy permits are issued based on compliance with these rules.

Specifically, the NAHB successfully opposed, among other things, proposed code modifications that would have required engineered design for asphalt shingle installations and mechanical ventilation in most attic spaces.

"Unnecessary requirements that add needless costs and limit design have a tremendous impact on housing affordability," said Phil Hancock, a home builder from Utah and chairman of the NAHB's Construction Codes and Standards Committee. "Millions of Americans are struggling to find homes they can afford, and a key contributor is over-regulation at all levels of government."

For more articles by Lew Sichelman, please press here.

Published: April 18, 2001

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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.