The House and Senate have passed a continuing resolution that will restart key Federal Housing Administration insurance programs that were shut down early this month when the agency ran out of its annual commitment authority.

The resolution, which continues to fund all government operations after today, when the federal fiscal year expires, specifically provides $3.8 billion for the FHA's General and Special Risk Insurance Fund, which insures multi-family mortgages, rehabilitation loans, condominium loans and reverse mortgages.

The money should be enough to cover all loans that were in the pipeline when the programs were halted temporarily on Sept. 16 as well all loans written since then and those that will be made in October.

The shut down did not impact the FHA's single-family mortgage program, which operates its own insurance fund.

Congress is currently working on an appropriations bill to fund HUD's programs for fiscal 2004. But passage of a full bill is not imminent.

Last week, the Senate approved an emergency commitment authority. But the House has yet to vote.

According to National Mortgage News, the FHA exhausted its $23 billion commitment authority for fiscal ‘03 because of record activity in condo loans and reverse mortgages which enable cash-strapped seniors to dip into the equity they have in their homes without having to sell or move to another residence.

Multi-family originations are only slightly ahead of last year's production, the trade paper reported.

In hopes that lawmakers would act -- and to prevent minimal disruption -- the FHA has continued to process applications for federal insurance. But it cannot actually endorse the loans until the President signs the resolution, which he is expected to do.

The $3.8 billion in new authority will cover loans which have been waiting for firm commitments in recent weeks, plus normal activity through Oct. 31.

Effectively immediately, meanwhile, FHA will allow lenders to lock-in rates on behalf of senior homeowners when they apply for a Home Equity Conversion Mortgage. Rates can be guaranteed for as long as 60 days.

Previously, borrowers had to wait until their loans were closed before they knew their exact mortgage rate. And between the time they applied and the time they closed, rates may have moved substantially higher, meaning they would net less money.

The change "will eliminate confusion and unexpected reductions to a HECM borrower's principal limit when market interest rates increase during the interim between loan application and loan closing," HUD said in a letter to lenders, who are not permitted to charge a fee for offering a rate lock.

Published: October 1, 2003

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