NALHFA Meets with FHA Commissioner Brian Montgomery to Discuss Local HFA DPA Programs
Last month, NALHFA met with the U.S. De- partment of Housing and Urban Develop-
ment’s (HUD) Federal Housing administration (FHA) Commissioner Brian Montgomery and his single-family housing staff. Representing NALHFA at the meeting was Rich Froehlich, New York City Housing Development Corpo- ration, Anita Allgood, Invest Atlanta, Vivian Benjamin, Montgomery County Housing Op- portunities Commission, Shari Flynn, Lub- bock Housing Finance Corporation, Todd Lee, District of Columbia Housing Finance Agency, Rhonda Mitchell, Southeast Texas Housing Fi- nance Corporation and the NALHFA staff.
The group met to discuss the impending policy guidance regarding down payment assistance (DPA) in connection with FHA- insured mortgages. As a key industry stakeholder, NALHFA arranged the meeting to communicate the importance of preserving the ability of local HFAs to provide DPA and other secondary financing on a preferred basis with FHA single-family loans.
The meeting followed the release of HUD’s annual report to Congress regarding the FHA mutual mortgage insurance fund (MMIF) for fiscal year (FY) 2018. The report addresses FHA loans that use DPA programs funded by governmental entities and outlines HUD’s apprehension about higher default rates attributed to these governmental DPA programs along with concerns that certain governmental DPA programs may provide more benefit to the DPA provider than to the borrower. In the report, HUD notes the need for “swift and decisive” action regarding these programs.
During the meeting, Commissioner Montgomery wanted to hear from NALHFA members about what local HFAs were experienc- ing regarding their DPA programs. Based on the concerns in the annual FHA report, NALHFA prepared remarks highlighting the following points:
• Delinquency rates for local HFA DPA programs are not precariously high and do not present a risk to the MMIF; • The benefits borrowers receive from local HFA DPA programs outweigh the financial gains received by the local HFAs; and • At a time when our nation is facing an affordable housing crisis, local HFAs are providing quality affordable housing resources to low- and moderate-income families often without reliance on tax-payer dollars. These programs should be expanded, not obstructed.
Commissioner Montgomery and his staff were highly engaged throughout the meeting and receptive to NALHFA's message. The Commissioner could not share any specifics as to the pending DPA guidance, but he did share the top issues they plan to ad- dress. The first concern was related to jurisdiction. There have been national groups of note that are providing down payment assistance without operating within any particular jurisdiction or geography. This is concerning to FHA as they question the mo- tivation behind these programs and are apprehensive about organizations driven more by profit than by creating opportunities for their local communities.
In addition, FHA expressed concern with groups profiting from their DPA programs at the detriment of the borrower. The Hous- ing and Economic Recovery Act of 2007 (HERA) prohibits DPA programs where the assistance is provided by a “prohibited source” including instances where the property seller or other party financially benefits from the transaction. There are groups currently operating on a nationwide basis that are interpreting the prohibited source provision broadly and receiving benefits from their DPA programs while increasing costs—not benefits—to the borrower. FHA is worried that these transactions could put the MMIF at an unreasonable risk.
Page 8 TALHFA Winter 2018 / 2019
Talk
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20
