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Big FHA Insurance Premium Hikes in Proposed 2007 Budget
The Administration’s proposed budget for fiscal 2007 for the FHA Multifamily Mortgage Insurance Programs proposes a loan commitment authority level of $35 billion. While this amount is the same as for the previous year, the proposal includes increases in the mortgage insurance premiums (MIP) on some of the key FHA multifamily programs, including Section 221(d)(4).
While specific numbers are not included in the budget documents, NAHB has learned that the increases will be up to 35 basis points, with the premium capped at 80 basis points. Tax credit and risk sharing projects would be exempt from the increases.
According to the budget documents, the premium was increased to offset the administrative costs of the programs because, in the Office of Management and Budget’s view, they do not serve a “public purpose.” This is a dramatic departure from the basis that has been used to set MIPs.
The MIPs historically have been based on a formula that takes into account the performance of the loans in the FHA multifamily portfolio, as well as economic conditions over time. In recent years, the Section 221(d)(4) MIP was set at a level slightly above what was needed to cover anticipated claims.
NAHB staff members are looking into the justification for the new approach, as well as other background issues, and are evaluating possible avenues for opposing the increases.
For more information, e-mail Claudia Kedda at NAHB, or call her at 800-368-5242 x8352.
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