March 7, 2024

By Monica Hogan, Inside Mortgage Finance

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A risk-sharing program of FHA and the Treasury Department’s Federal Financing Bank has been extended indefinitely, the Department of Housing and Urban Development announced last week.

The program provides capital to state and local housing finance agencies to offer FHA-insured multifamily loans at reduced rates to developers or rehab companies creating affordable rental properties.

The Obama-era program was originally launched in 2014. It wound down in 2018. In 2021, HUD temporarily resumed the program, with a sunset deadline of three years after implementation.

Sarah Brundage, CEO of the National Association of Affordable Housing Lenders, said the extension should give HFAs the confidence to stand up a multifamily lending program that they might not have had if they thought the FFB program was about to sunset.

According to HUD, more than 12,000 affordable housing units have been created or preserved, supported by almost $2 billion in FHA loans under the program, since 2021. HUD estimates an additional 38,000 units would be created over the next 10 years through the program.

Stockton Williams, executive director at the National Council of State Housing Agencies, said the federal government saves money through the FFB program because lenders aren’t faced with the same hurdles, so it saves time for HUD staff.

“It’s revenue generating to the government and provides benefits to communities,” Brundage said.

Bob Broeksmit, president and CEO of the Mortgage Bankers Association, last week said the MBA agrees with the administration that there is a “desperate need” for more affordable housing supply.

However, he said extending the risk-sharing program was “unnecessary, as it undermines the successful FHA Multifamily Accelerated Processing program and creates unfair competition with the private sector.”

Brundage disagreed, noting the risk-sharing program is relatively small and deals only with affordable housing, which is a small piece of the overall multifamily housing market.

“We can’t let any lever go to waste” in helping address the shortage of affordable housing, she said.

Brundage suggested HUD extend eligibility for the FFB program to community development financial institutions, which tend to have the same public missions as HFAs.

She called for additional policy proposals to address the shortage of multifamily housing. “We are nowhere near the finish line,” she added.

NCSHA’s Williams said there’s a need for more sources of financing to support affordable multifamily housing. He said that the Biden administration has done “incredible work” to optimize its existing federal authority, but he’d like to see Congressional action, too.