HUD Issues Proposed Rule to Revise Risk-Sharing Program

In a move that could affect our multifamily members, Housing and Urban Development issued a proposed rule today to revise its regulations for the Section 542(c) Housing Finance Agencies Risk-Sharing Program.

The program provides credit enhancement for mortgages of multifamily housing projects whose loans are underwritten, processed, serviced and disposed of by housing finance agencies (HFAs). HUD and HFAs share in the risk of the mortgage, which enables HFAs to provide more insurance and credit for multifamily loans.

Under the program, qualified state and local HFAs may originate and underwrite affordable housing loans that include new construction, substantial rehabilitation, refinancing and housing for the elderly. HFAs may elect to share 10%-90% of the loss on a loan with HUD. In the event of a claim, the HFA reimburses HUD pursuant to terms of the risk-sharing agreement.

This proposed rule would amend existing regulations for the program so that they better align with policies for other HUD programs, reflect current industry and HUD practices, and conform to statutory amendments.

Additionally, this proposed rule would provide HUD with greater flexibility in operating the Section 542(c) HFA Risk-Sharing program over time, and would provide more flexibility for certain HFAs accepting a greater share of the risk of loss on mortgages insured under the program.

HUD is providing only a 30-day comment period. Comments are due on or before April 7.

NAHB will review this proposed rule in consultation with the Multifamily Finance Subcommittee. Members who wish to offer feedback for consideration as part of the Home Builders Association’s comments should email Michelle Kitchen at

RHS Releases Final Rule for Single Family Loan Program

The U.S. Department of Agriculture’s Rural Housing Service (RHS) published a final rule on Feb. 8 implementing changes to its Single Family Housing Guaranteed Loan Program (SFHGLP).

Designed to streamline the program, the final rule:

  • Removes the cap on the number of units per year for a single contractor or builder under the combination construction and permanent loan feature. It also allows a combination construction and permanent loan to be used for a manufactured home if the builder’s contract includes the sum of the cost of the unit and all on-site installation costs.
  • Allows discount points as a permissible loan purpose to “buy down” the interest rate for moderate-income borrowers, as well as for low-income borrowers.
  • Extends the SFHGLP guarantee to coincide with the terms of a loan modification, including an extended-term loan modification so that the guarantee will cover the duration of the loan.
  • Permits lenders to charge a maximum interest rate equal to the Fannie Mae posted yield plus 1%, but removes language from a 2013 interim rule referencing the Freddie Mac required net yield, since Freddie Mac no longer publishes its net yield rate.

The final rule becomes effective March 9, 2016.

Good News for Home Owners

In an important victory for NAHB and home owners, the House today approved a five-year highway bill that will not use guarantee fees (g-fees) collected by Fannie Mae and Freddie Mac to pay for transportation programs.

The Senate is expected to approve the measure tomorrow and President Obama will sign the legislation into law shortly thereafter.

NAHB led the charge to strip a provision that would have used g-fees to help offset a funding shortfall from the final legislation.

G-fees are a critical risk management tool used by Fannie Mae and Freddie Mac to protect against credit-related losses on mortgages they have purchased or mortgage-backed securities they have guaranteed. NAHB has always maintained that these fees should only be used for their intended purpose – to protect against mortgage defaults and ensure the safety and soundness of Fannie Mae and Freddie Mac.

Despite strong opposition from NAHB, Congress voted in 2011 to enact a 10-year, 10 basis point increase in g-fees to fund the extension of the payroll tax cut. To help fund the long-term transportation bill, lawmakers subsequently proposed what would amount to a $1.9 billion tax on home owners by providing a four-year extension of the previous 10 basis point increase through 2025.

In an official statement, NAHB Chairman Tom Woods called it “outrageous” that Congress would consider using a g-fee hike to pay for transportation programs unrelated to the housing government sponsored enterprises.

“With first-time home buyers still hesitant to enter the marketplace, it makes no sense to impose what amounts to a new tax on homeownership that will disproportionately affect low- to moderate-income borrowers. Homeownership cannot, and must not, be used as the nation’s piggybank.”

Working with our Democratic and Republican allies in the House and Senate, NAHB ultimately was able to get the g-fee provision removed from the final transportation bill.