Washington, DC (February 5, 2007) – The Mortgage Bankers Association (MBA) expressed concern today over the Administration’s proposed budget for housing.  MBA’s primary concern is that the budget not only imposes new taxes on homeowners and renters by increasing fees for key housing guarantee and insurance programs, it falls short on the need for structural, in addition to programmatic, FHA reform.

The Administration’s FY 2008 budget proposal demonstrates the need for reform of the FHA single family program.  Volumes have dropped precipitously and FHA has been adversely selected, causing the program’s projected expenses to exceed revenues.  MBA has repeatedly called for reforms and endorses several proposals in the Administration’s budget, including:

• Raising the loan limits from 87 to 100 percent of the conforming loan limits
• Introducing new mortgage products with risk-based premiums
• Allowing FHA to set premiums based on risk
• Moving all single family programs to the Mutual Mortgage Insurance Fund
• Removing the statutory cap on Home Equity Conversion Mortgages

MBA believes the reforms should go further and include investment in technology and personnel as well as providing FHA with authority to introduce new programs without Congressional approval.

“Comprehensive FHA reform is crucial to the future of low- to moderate-income, first time homebuyers becoming homeowners and realizing the advantages of the American dream,” said John M. Robbins, CMB, Chairman of MBA. “This has been a priority for MBA and will continue to be.  We will work closely with Congress to help people who want to be homeowners become homeowners.”

MBA is also very concerned the Administration is proposing an increase in insurance premiums for several of the multifamily programs. This proposal is ill-conceived and taxes programs that provide badly-needed affordable rental housing.  Both the new construction and refinance programs more than break even and the imposition of higher premiums will increase rents on low- and moderate-income families merely to generate revenue for other activities in the federal budget.  Last year 122 Members of the House and 26 Senators sent a letter opposing a similar increase and we are surprised that the Administration would again propose to negatively impact these programs.

The Administration seems to indicate that extension of TRIA past 2007 is not necessary.  “The private insurance industry simply cannot price for the risk of a terrorist act,“ said Kieran Quinn, CMB, Chairman-elect of MBA.  “It is critical to the commercial and multifamily finance markets that TRIA be extended, as a public, private partnership remains necessary to assure that terrorism insurance is available and affordable.” 

“The proposed budget imposes a fee on the Ginnie Mae mortgage-backed securities’ programs when Ginnie Mae has consistently generated significant net income – $786.5 million in FY2005, alone - to the Treasury,” said Robbins. “This new fee would affect affordability and have a significant impact on first-time homebuyers and minorities who rely on FHA loans to achieve homeownership.”

The proposed budget would also increase by 50 percent the fee for the Rural Housing Service’s single family guarantee program.  As the RHS program is frequently the only option for potential homeowners in rural areas, this increase will make it even more difficult for families in rural areas to become homeowners, especially since the Administration zeroed out funding for the RHS single family direct loan program.

“Another area of disappointment for MBA is a proposed reduction in the Flood Map Modernization Fund,” said Robbins.  “We learned two years ago, in the wake of Hurricanes Katrina and Rita, that the flood maps are grossly inadequate.  This is the time to be increasing funding for this critical program, not decreasing it.  MBA strongly supports the NFIP, yet cautions that phasing out the pre-firm subsidies could create significant delinquencies and foreclosures in the near- and long-term. 

MBA supports the Administration’s proposal to create a new GSE regulator with authorities comparable to other world-class financial regulators.  MBA has long advocated for a strong, effective GSE regulator to protect the financial stability of the GSEs and to ensure their important focus on their housing mission. 

MBA is committed to further increasing homeownership and affordable rental housing.  The Association will work closely with Congress as it considers the President’s proposed budget and develops the FY 2008 budget.

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 370,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.