The Bush administration's proposal to increase insurance premiums for government-insured mortgages on multifamily properties was met with substantial opposition in Washington, D.C.
"The FY 2008 budget proposes increases of more than 35 percent in the mortgage insurance premium on most Federal Housing Administration multifamily housing programs," according to a copy of a letter sent by the Mortgage Bankers Association and signed by 38 senators including former U.S. Department of Housing and Urban Development Secretary Sen. Mel Martinez, Sen. Hillary Rodham Clinton and Sen. Charles E. Schumer. "We are concerned that this fee would adversely affect these programs."
The group suggested the increase would result in higher rents and fewer affordable units.
In his Fiscal Year 2008 Budget Summary, current HUD Secretary Alphonso Jackson called for the creation of risk-based insurance premiums.
"It would replace the current structure, in which there is a standard premium amount for all borrowers, while still protecting the soundness of its Insurance Fund," Jackson said. "Higher-risk borrowers, most of whom are currently unable to participate in FHA due to its outdated pricing structure, would be charged a slightly higher premium."
The letter opposing the increase in premiums noted an earlier senate bill expressed concern about increased FHA multifamily rental fees.
"This letter represents an impressive expression of the Senate's view of the proposed fee increase on FHA multifamily loans," MBA said in a message accompanying the group letter. The "Mortgage Bankers Association has similar concerns and believes that if these fee increases are implemented, FHA multifamily loan volumes will be reduced, production of affordable rental housing would decline and rents will be raised for future tenants."