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GAO-02-323R 1 (2002-02-01)

handle is hein.gao/gaobaalxj0001 and id is 1 raw text is: I Accountability * Integrity * Reliability United States General Accounting Office Washington, DC 20548 February 1, 2002 The Honorable Marge Roukema Chairwoman, Subcommittee on Housing and Community Opportunity House of Representatives Subject: Multifamily Housing Finance: Funding FHA's Subsidized Credit Programs Dear Madam Chairwoman: To facilitate the construction and rehabilitation of multifamily rental housing, several programs administered by the Federal Housing Administration (FHA) provide lenders with mortgage insurance, or guarantees, for multifamily loans. To cover the costs of some of these programs (credit subsidy costs), Congress provides budget authority as part of FHA's budget each fiscal year.' FHA estimates the subsidy cost of each program by calculating a credit subsidy rate that takes into account factors such as fees, defaults, and recoveries. FHA then applies this subsidy rate to the total dollar amount of mortgages the agency anticipates insuring under each program to estimate the total subsidy cost. Although the agency's programs are aimed at different types of projects, a single budget account covers all the programs. In fiscal year 2001, as in earlier years, FHA provided guarantees for all multifamily projects-regardless of program-on a first-come, first-served basis until the total budget authority for the multifamily programs was exhausted. FHA had obligated approximately $81 million of the $101 million of its credit subsidy budget authority for the fiscal year by April 2001 and suspended issuing commitments for additional loans under the multifamily programs requiring credit subsidy.2 For fiscal year 2002, FHA made some adjustments to the credit subsidy rates for certain multifamily programs. In response to your request, we (1) identified the reasons the subsidy budget authority was used earlier than expected and assessed the impact of FHA's suspension of its insurance programs on projects needing credit subsidy, (2) described how FHA estimates the dollar amount of the mortgages it anticipates 'The credit subsidy cost is the net present value of the estimated long-term costs to the federal government of extending or guaranteeing credit, calculated over the life of the loan and excluding administrative costs. Budget authority is the authority provided by law to enter into financial obligations that will result in immediate or future outlays involving federal funds. The Federal Credit Reform Act of 1990 (Pub. L. No. 10 1-508) requires that the budget authority for the credit subsidy cost be available before FHA guarantees any loans. 2Field offices could continue issuing FHA firm commitments for projects, conditioned upon the future availability of credit subsidy budget authority. On June 4, 2001, FHA discontinued authorizing commitments requiring credit subsidy. GAO-02-323R Multifamily Housing Finance

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