The Department of Housing and Urban Development (HUD) released its 2013 budget yesterday, and as can be expected from an agency of HUD’s size and scope, there are dozens of pages in the budget proposal highlighting the many initiatives and areas HUD hopes to explore in the coming year.
Rather than cover every individual section of the budget, though, we opted to strictly analyze the agency’s efforts in housing stabilization, an area that has garnered particular interest from the Federal government the last few weeks.
HUD’s stabilization efforts begin with the Federal Housing Administration (FHA), the government loan agency that, since its inception in 1934, has guaranteed 39 million home loans and 53,000 multifamily projects, though arguably, the agency has never been more prominent in the housing market than now.
In the three years following the market downturn, FHA’s market share has increased dramatically, to the point where 60 percent of African American and Latino homebuyers used FHA-insured loans in that time. Last year, over half of all African Americans and 45 percent of Hispanics who purchased a home last year did so with FHA financing.
Those stats mirror the findings of the latest Obama Housing Scorecard, which reported that overall demand for FHA financing remains incredibly high (bordering on historic) going in to 2012; after spending much of the 2000s with no more than 10 percent of the mortgage loan market, FHA financing lept to 45 percent of the market in 2010 and 35 percent in 2011.
As a result, the HUD budget requests $400 billion in loan guarantee authority for the FHA’s Mutual Mortgage Insurance Fund fo 1.2 million addition single-family mortgages. Along with that, the budget requests $25 billion in loan guarantees for the agency’s General and Special Risk Insurance Fund, which covers the multifamily sector (the budget estimates 156,000 multifamily guarantees in 2012).
As we’ve reported on a number of occasions, the multifamily sector is one of the true high spots in housing right now, and it would appear that HUD is anticipating further increases to the multifamily market with its budget.
Another prominent entity of HUD’s stabilization efforts will be Ginnie Mae, the government-owned corporation that, through its mortgage-backed securities investments, funds 99 percent of government-insured mortgages, including those by HUD, the FHA, the Department of Veterans Affairs, the U.S. Department of Agriculture Rural Development and Community Facilities Program and HUD’s Office of Public and Indian Housing.
As with the FHA, Ginnie Mae has grown rapidly since 2008, increasing its insurance volume from $220.6 billion in 2008 to $350.4 billion in 2011, when it financed 1.6 million households. Altogether, the Ginnie Mae portfolio represents eight million single-family homes and 1.2 million rental properties.
Building on those gains, for the 2013 fiscal year HUD is requesting $500 billion in Ginnie Mae loan guarantee authority, undoubtedly to cover greater loan volume at the FHA and other government loan operators.
“Ginnie Mae is committed to supporting the housing market recovery by assisting with efforts to mitigate the foreclosure crisis through the development of a secondary market for modified loans,” the budget reads.
HUD’s budget contains lots of additional information on its 2012 activities, but its stabilization efforts are squarely centered on the FHA and Ginnie Mae. Is it the right direction for the agency to take, to up its budgets when some argue that the government is already overly-involved in housing? And given Washington’s polarized status, will such increases be accepted?