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Key Loan Programs Halted
Just weeks after saying it had enough capacity to make it through the end of the 2003 fiscal year, the Department of Housing and Urban Development has shut down several important loan programs. As of Sept. 16, HUD has temporarily suspended insuring any new loans made under the following programs: Section 203(k) rehabilitation mortgages, Section 234(c) condominium unit mortgages, mortgages made pursuant to the Hawaiian Homelands program under Section 247 and reverse mortgages under HUD"s Home Equity Conversion Mortgage (HECM) program. Single-family home loans to be insured as obligations of the Mutual Mortgage Insurance Fund under Section 203(b) of the National Housing Act are not subject to the temporary suspension. The interruption will last until Congress approves supplemental funding for the remainder of the year or votes on a new commitment authority for fiscal ‘04. But neither prospect appears likely in the immediate future. Temporary shutdowns are not unusual at HUD, which has had to close some loan programs on several occasions when it ran out of money. But this time, lenders were taken "by surprise," according to the Mortgage Bankers Association, which said it was told in July by HUD officials that they did not foresee any problems. Every year, HUD makes its best guess of what it needs to keep the FHA loan insurance programs operating for the next 12 months. And every year, lawmakers approve an appropriation that includes money, or "commitment authority," that is to be used to endorse mortgages insured under the general insurance and special risk insurance funds. But because of historically low mortgage rates that only recently began to tick upward and slow down borrowers, fiscal ‘03 has been a banner year for the lending business. And as a result, the FHA has run out of money. Congress can resolve the situation by either approving a new appropriation for HUD for the 2004 fiscal year beginning Oct. 1, or a supplemental appropriation bill that provides additional funding for the balance of this month. If an appropriation for the new year is not in place by the first of next month, Congress must pass a continuing resolution that provides temporary funding to restart the suspended loan programs. Lenders can continue to originate and close loans in the "hope and expectation" that the problem will be resolved quickly, according to Washington attorney James Brodsky, who serves as general counsel of the National Reverse Mortgage Lenders Association. NRMLA and other trade groups representing lenders are hopeful that HUD"s commitment authority will be restored within the next few weeks. But if lenders continue to originate and close FHA loans and Congress fails to act, loans that normally would be insured against loss by the FHA will not be covered. And if a borrower should default on an uninsured loan, the lender would have to eat the loss, not the government. According to Brodsky, a member of the law firm of Weiner Brodsky Sidman Kider, lenders also can continue to process loans but not close them unless and until the problem is rectified. The suspension is particularly unfortunate because it stops a number of vital loan programs in their tracks at a time when they were running at a record pace. Take home equity loans, for example. As of the end of August, HUD had insured an all-time high of nearly 16,500 home equity conversion mortgages, which allow seniors to convert the equity they have built up in their homes over the years into cash without having to sell or move out. The FHA"s HECM program is one of only two such loan options for house-rich but cash-starved seniors. In August alone, according to HUD statistics, the FHA insured a record 2,253 HECMs. That"s nearly twice the 1,198 loans endorsed by the agency under the program in the same month a year ago. For the first 11 months of fiscal ‘03, the FHA insured 16,448 HECMs. During all 12 months of fiscal ‘02, only 13,048 FHA-backed reverse mortgage were issued by lenders. The MBA says it is now working with HUD and Congress to secure a supplemental appropriation of commitment authority of $2 billion for the GI/SRI funds. It is important to continue the programs for the remainder of September because there is the possibility that a continuing resolution will be needed to allow HUD to operate in the new fiscal year, which begins Oct. 1, MBA says. "With a continuing resolution, HUD would be allocated only a prorated share of the $23 billion in FY "04 commitment authority equal to the number of days in the continuing resolution," the group told its 2,600 members. "If we go into FY ‘04 with a queue of commitments to be funded, we may be faced with stops and starts to (suspended loan) programs until an appropriations bill is enacted."QuickQuid commented:
I hope all conditions and programms on hold will be resumed soon. Thanks for such post.
18.11.2011
no credit check loans commented:
really great thinking.. I hope conditions of Key Loan Programs will be beneficial for the company and will start this program as soon as possible
07.03.2012