Magazine article Nation's Cities Weekly

House Banking Committee Looks to HUD for Savings

Magazine article Nation's Cities Weekly

House Banking Committee Looks to HUD for Savings

Article excerpt

Once again, Congress has looked to low- and moderate-income housing programs as a source of savings. In response to reconciliation instructions from the Budget Committee, the House Banking Committee agreed to $1.59 billion in savings from programs under the Department of Housing and Urban Development (HUD). This follows on the heels of the Congressional decision to use $3.5 billion of HUD's Section 8 reserves to help fund the $8.4 billion supplemental bill which President Clinton has vetoed and sent back to Congress. Not so long ago, Congress used HUD budget authority to fund $6.4 billion of the 1995 rescissions.

Through reform of the Single Family Mortgage Assignment program and limiting the automatic Section 8 rental increases, the Committee claims it will save $136 million in 1998 and a total of $1.59 billion between 1998 and 2002. $666 Million in Saving in FHA Single Family Mortgage Assignment Program

The Committee agreed to create a new mortgage assignment program which gives HUD the authority to pay partial mortgage insurance claims up to an amount equivalent to or less than twelve monthly mortgage payments. As a condition for accepting a partial claim payment, the lender would agree, on a short-term basis, to modify the terms of the loan to a level where the borrower (single family homeowner) would be able to meet the monthly mortgage payments and the lender would retain the loan in its portfolio. This would reduce foreclosures, which would be good for neighborhoods and low-income single family homeowners with FHA insured mortgages. It is expected to save $666 million over five years.

The Committee also included provisions to deal with mortgage modifications for longer periods than twelve months. HUD would be required to use private sector entities for all servicing and foreclosure activities.

$924 million in savings by changing Section 8 Rental Adjustment Factors

Two adjustment factors will be modified in the project-based contracts the federal government has with the private owners and operators of Section 8 New Construction, Moderate Rehabilitation and Substantial Rehabilitation programs that have rents that exceed HUD's fair market rents (FMRs) for a particular area. …

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