The current administration has proposed a new, permanent, administrative support fee, ultimately to be paid for by borrowers on each Federal Housing Administration loan made. The idea was first floated late last year, rejected by Congress, and then reintroduced in the administration's budget request for fiscal year 2016. Congress has a long-established legislative process for appropriating funds to federal agencies on an annual basis.
While the Mortgage Bankers Association supports the FHA, and supports initiatives to give additional resources to the agency to improve quality control and modernize its technology, we do not believe that a fee on lenders — which essentially becomes a tax on many first-time homebuyers, the same borrowers whose entry into the market is critical to sustain a housing recovery — is the appropriate way to pay for them.
Stakeholders, as well as Congress itself, have asked HUD a series of questions on how the fee would be structured and how the revenue would be used, but answers have not been forthcoming. While ostensibly the fee would pay for upgrades to technology and for improved quality control programs at FHA, there really is no way to know how the money raised would be used over the long term.
MBA has supported, and will continue to support, efforts to get HUD funding in order to modernize systems and processes through the normal appropriations process. However, funding these items with a fee on lenders, outside the normal appropriations process, would set a dangerous precedent, essentially taxing the very borrowers they are intending to serve in order to fund priorities that the agencies may not have convinced Congress to support.
Government housing finance programs have grown ever more important in the years since the recession, as private capital has been slow to return, especially for those with all but the most pristine credit profiles. At the same time, federal agencies like the FHA, the Department of Veterans Affairs, the Department of Agriculture's Rural Housing Service and Ginnie Mae have struggled to appropriately fund the technology, systems and human capital needed to fulfill their missions in a fiscally responsible way.
It is worth reiterating MBA's strong support for providing FHA with every dollar it needs to function as a world-class mortgage insurance provider, one that continues to offer key homeownership opportunities to traditionally underserved populations such as first-time homebuyers and low-to-moderate income families. However, we believe Congress should fund these programs through the annual appropriations process, as they have been for decades.
Bill Cosgrove is Chairman of the Mortgage Bankers Association and President and CEO of Union Home Mortgage in Strongsville, Ohio.