Administration Submits Fiscal 2017 Budget

The Obama Administration yesterday submitted its fiscal 2017 budget to Congress, calling for $4.1 trillion in government spending.  

The budget (https://www.whitehouse.gov/sites/default/files/omb/budget/fy2017/assets/budget.pdf) includes $48.9 billion for HUD, down slightly from $49.3 billion in fiscal 2016.  

“This budget proposal is a detailed statement of policy about the Administration’s agenda, which Congress may accept, decline, or modify however it sees fit,” said Steve O’Connor, senior vice president of public policy and industry relations with the Mortgage Bankers Association. “Additionally, it is important to note that President Obama will no longer be in office for a majority of FY 2017, as the next U.S. President will be sworn in on January 20, 2017.”  

MBA has provided a preliminary summary of budget items related to the real estate finance industry (http://mba-pac.informz.net/mba-pac/data/images/AdministrationFY2017Budget_InitialSummary.pdf), illustrated below:  

HUD

HUD’s budget proposal can be found at http://portal.hud.gov/hudportal/HUD?src=/budget. Key items include:

–$48.9 billion in gross discretionary funding for HUD. This is a slight decrease from $49.3 billion requested in FY 2016.
–$400 billion in loan guarantee authority for the Mutual Mortgage Insurance Fund, the same as FY 2016 and FY 2015.
–Volume of $204 billion in FHA single-family forward mortgages in FY 2017, up from an estimated $173.6 billion in FY 2016 and $135 billion in FY 2015.
–Volume of $18.5 billion in Home Equity Conversion Mortgages (HECMs) in FY 2017, up from $15.1 billion in FY 2016 and $15.9 billion in FY 2015.
–$160 million in administrative expenses, which will allow FHA to implement improved risk management and program support processes which are critical for FHA’s oversight of its insured portfolio. An additional $1,400 for administrative expenses would be provided for each $1,000,000 of additional guaranteed loan commitments beyond $200 million originated prior to April 1, 2017. The base $160 million amount is down from $174 million in FY 2016 and $170 million in FY 2015.
–Requests authority to charge lenders an administrative support fee, which would generate an estimated $30 million in offsetting collections in this account. This is the same amount requested in FY 2016 and FY 2015. These additional resources would fund enhancements to administrative contract support and information technology, with a focus on increasing FHA’s risk management efforts via expanded quality control sampling, enhanced tools and other risk management initiatives.
–To reduce potential losses to the MMI Fund, the FY 2017 Budget asks for Enhanced Indemnification Authority to Obtain Indemnification for Direct Endorsement Lenders and asks that to originate FHA insured loans, lenders must be approved by FHA to either be a Lender Insurance or a Direct Endorsement Lender.

Consumer Financial Protection Bureau
–Funding required to support the CFPB’s operations is obtained primarily through transfers from the Board of Governors of the Federal Reserve System. The Administration said it will continue to oppose efforts to restrict the funding independence of the CFPB.
–Transfers to the CFPB in 2016 are capped at $613.7 million. The transfer cap for 2017, as adjusted by an annual inflation indicator, is estimated to be $646.2 million. The CFPB anticipates requesting less than the transfer cap to fund operations in 2016 and 2017 and the Budget reflects estimates of $606 and $636 million, respectively.

Department of Veterans Affairs
–Requests $199 million for administrative expenses to carry out the direct and guaranteed loan programs, up from $164 million in FY 2016 and $161 million in FY 2015.

Department of Agriculture and Rural Housing Service
–Section 502 single-family housing guarantees are requested at $24 billion, the same amount as FY 2016 and FY 2015. This funding level allows the program to provide up to 160,000 new purchase/refinance transactions in the ficscal year. Based on prior years, the Budget assumes the actual production volume will be around 80 percent of that funding level.

Federal Housing Finance Agency
–Estimates an additional $151 billion in dividends from Fannie Mae and Freddie Mac,
–Estimates budget reductions from a 10 basis point guarantee fee surcharge of $40.5 billion through FY 2026.
–First set-aside of $373 million for certain affordable housing funds created by the Homeownership and Economic Recovery Act of 2008 is expected to be paid in early 2016.
–FHFA Office of Inspector General budgeted an appropriation of $49.9 million, derived from FHFA’s assessments of its regulated entities.

Ginnie Mae
–No change in commitment authority: $500 billion.