Three and a half years ago, a new administration took the helm at the Federal Housing Administration (FHA). And it's been a very eventful few years.
The former “lender of last resort” became the go-to source for construction funds during the downturn and posted annual volumes that dwarfed its best years. Meanwhile, the agency attempted to seize upon the opportunity and win repeat borrowers by streamlining its processes and simplifying its requirements.
But as the country draws nearer to another heated election season, a potential turnover in FHA leadership could derail some of that momentum. Apartment Finance Today recently sat down with the FHA's multifamily chief, Marie Head, to get a sense of how far the agency has come, and where it's heading.
AFT: What do you see as this administration's signature achievement since the change in leadership in 2009?
HEAD: I would say our biggest achievement is that we were able to step up to the plate during a time when there was no liquidity in the market. Our portfolio increased, our pipeline increased; the amount of business and production we managed from 2008 to 2011 went up by $10 billion.
AFT: What are some other FHA accomplishments?
HEAD: We've made tremendous strides in streamlining our production processes. I've been in this business a long time, and the FHA hasn't always been the easiest capital source to deal with, but I'm very proud of the [gains we've] made here. And we've significantly reduced the time frames on our loans while at the same time managing the staffing levels that we have to deal with.
We've also done a tremendous job of managing the risk because of the change in profile of our business. We're now much broader in the market-rate arena than we were before. So managing some of the challenges there, with getting up to speed on that portfolio, moving from a more assisted portfolio to a market-rate portfolio, [has been positive].
AFT: To what degree have staffing shortfalls slowed down the processing of applications?
HEAD: I don't think the staffing shortfalls are what slowed down the process. I think the fact that we were in the market more broadly than we had ever been in our history was probably the biggest reason for the shortfall. Clearly, the staff stepped up to the plate. While the time frames didn't always meet expectations, we've now put some additional streamlined initiatives in place that are helping us deliver. [Most of] the loans in our pipeline are now less than 90 days old.
AFT: How much multifamily volume do you expect to do this year compared with last year?
HEAD: We're tracking to meet the same volume we did last year. A lot of that is due to the fact that some of the loans that were left over from last year are getting through now.
AFT: What's the latest on the FHA's proposed mortgage insurance premium (MIP) increase?
HEAD: We published our proposal to increase the MIP a couple of months ago. We're being very proactive in ensuring that we're managing the risk profile we're now dealing with and that we're not underpricing our product in the marketplace. This is truly a balancing act, and that's our No. 1 priority, making sure we're managing the risk with the new types of larger loans we're doing. And we're forward-thinking in that arena, rather than relying on historical data in a budgeting model that didn't have the new parameters in it.
FHA Raises IRE by Raising MIPS
THE FEDERAL HOUSING ADMINISTRATION (FHA) recently issued a notice that it will be increasing mortgage insurance premiums (MIPs) in 2013.
This is not the first time, and it won't be the last time, the FHA hopes to raise MIPs, but the multifamily industry is in an uproar, and it is giving the agency an earful.
Currently, the MIP tacks on an additional 45 basis points (bps) to each FHA loan on top of the interest rate. The new bump would push that number to 65 bps for new-construction and substantial-rehabilitation deals. Refinancings under Sec. 223(a)(7) would see a 5 bps increase, and refis under Sec. 223(f) would get an increase of 15 bps.
All other multifamily or health-care transactions would see a 15 bps rise, although the MIP on deals using low-income housing tax credits would remain the same.
All other multifamily or health-care transactions would see a 15 bps rise, although the MIP on deals using low-income housing tax credits would remain the same.
Following the notice, a coalition was formed by some of the housing industry's major associations— including the Mortgage Bankers Association, the National Multi Housing Council, the National Association of Home Builders, and nine other groups—to draft a letter voicing opposition to the increase.
“Our organizations do not believe that HUD has provided compelling justification for the increases,” read the letter.
