Mortgage bankers are disappointed over some provisions of President Bush's proposed 2008 budget, which indicated the number of federally-insured home loans will drop this year.
The administration proposed $35.2 billion for the Department of Housing and Urban Development, an increase of $1.6 billion over this year's budget, the agency announced today.
"Our budget reflects the president's goal to support what works and cut the federal budget deficit by prioritizing funding towards programs with measurable, documented results," HUD Secretary Alphonso Jackson said in the statement.
The budget supports the modernization of the Federal Housing Administration's mortgage insurance program, HUD said.
"The nation now has the highest minority homeownership rate in its history," the White House said in a statement about the proposed HUD budget. "The President's 2008 Budget ... furthers the department's management improvement initiatives through workforce optimization efforts, continued technological investments, and a strong commitment to financial management improvements, including continued reductions in improper payments."
But the budget increases fees for key housing guarantee and insurance programs and falls short on FHA reform, the Mortgage Bankers Association said in its own announcement today.
"Volumes have dropped precipitously and FHA has been adversely selected, causing the program's projected expenses to exceed revenues," the group said in its announcement. "MBA has repeatedly called for reforms."
FHA loans guaranteed totaled 79,623 last year, are expected to drop to 64,917 this year then jump to 91,510 next year, the White House said.
MBA did say it endorses some provisions of the proposed budget including raising FHA loan limits to 100 percent of conforming limits, introducing risk-based premiums and removing the statutory cap on home equity conversion mortgages.
"The Administration's proposal would base mortgage insurance premiums on the risk of the loan based on traditional credit variables, including the borrower's credit profile and the loan-to-value ratios," the White House statement said. "This will result in more families having access to market-rate mortgage financing and will provide financial incentives for families to improve their credit histories or save for a down payment."
But the reforms should go further and provide FHA the ability to introduce new loan programs without the approval of Congress, MBA said.
A proposed fee on the Ginnie Mae mortgage-backed securities' programs when Ginnie consistently generates significant earnings would "have a significant impact on first-time homebuyers and minorities who rely on FHA loans," MBA Chairman John M. Robbins said in the statement.
"The proposed budget would also increase by 50 percent the fee for the Rural Housing Service's single family guarantee program," MBA said.
"HUD is also continuing to reduce its improper payments and build improved financial systems to better serve both taxpayers and its clients," the White House added. "These efforts and others like them have helped HUD garner several noteworthy recognitions, such as improving its internal controls to eliminate any material weakness in the department's annual financial audit and gaining recognition as a leader among federal agencies in information technology use."