Will the proposed FHA surcharge happen?

by MPA25 Nov 2014
A coalition of leading mortgage trade associations is urging Congress to fix a spending bill provision that would allow the Federal Housing Administration (FHA) to levy a surcharge on lenders. The groups said they are concerned that the provision is too broad based and could negatively impact consumers and lenders.

The provision in the Transportation, HUD and Related Agencies Appropriations Act for Fiscal Year 2015 (S. 2438) would grant HUD's request to charge lenders an administrative support fee, which would generate approximately $30 million per year to fund an enhanced quality assurance program for single-family loans, according to the Mortgage Bankers Assocation (MBA).

Congress is expected to take up the appropriations bills when they return next week from the Thanksgiving break.

The trade groups wrote in a letter last week to Congress that while the groups support the goal of improving FHA quality assurance processes, they consider the provision to be "overly broad, and could negatively impact consumers and lenders alike." They added that the House-passed version of the fiscal 2015 appropriations bill did not give HUD the authority to charge this new fee.

The letter signed by nine banking and real estate trades, noted that the provision could negatively impact consumers and lenders alike and urged Congress to limit it in size and scope, as well as ensure it would not penalize lenders retroactively.

The fee, as proposed, is not to exceed four basis points of the original principal balance of loans originated that were insured during the previous fiscal year.

 “A key concern for us is that the fee will be retroactive--calculated using the previous year’s mortgage originations instead of new originations,” the letter said. “This will retroactively raise costs on mortgages that have already been originated and insured. If included in a final appropriations bill, should be calculated on a prospective basis.”

The trade groups, led by the MBA, also expressed concern about the overall size of the fee, noting while HUD only sought $30 million for this new program, and the Senate Appropriations Committee provided $8 million of the original request through a direct appropriation, the language in the appropriations bill does not limit HUD to collecting only the remaining $22 million.

“The legislation allows FHA to charge as much as four basis points on aggregate lender originations--far in excess of what it needs,” the letter said. “And because the fee is not limited only to FY 2015, HUD would be permitted to levy this charge in future years. If the final T-HUD appropriations bill contains language authorizing FHA to impose a fee on lenders to fund a new quality assurance program, we believe it should be limited in size, scope and duration to cover the specific technology improvements needed to implement the program.”

Joining MBA in the letter: American Bankers Association; American Land Title Association; Credit Union National Association; Housing Policy Council; Independent Community Bankers of America; Leading Builders of America; and the National Association of Federal Credit Unions.
 
 

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