The Bush administration proposes scaling back or eliminating six Department of Housing and Urban Development programs to save $1.6 billion, while boosting the department’s overall budget by $1 billion, to $38.5 billion.

The administration’s proposed fiscal-year 2009 budget for HUD would include $2 billion for federal block grants for affordable housing for low-income families — a $263 million increase in funding for the HOME Investment Partnerships Program. The increase will help an additional 13,000 families find affordable housing, HUD said.

Other major provisions of the proposed budget include $29.4 billion in rental assistance for 4.8 million low-income families, including $16 billion for tenant-based rental assistance such as housing vouchers, and $7.4 billion in project-based rental assistance such as Section 8 payments.

Six programs representing $1.6 billion have been targeted for termination or reduction, including the Community Development Block Grant (CDBG) program, which the administration says is not well-targeted to the neediest communities and hasn’t shown results. The administration’s budget proposes $3 billion in CDBG funding, a $900 million reduction.

The Bush administration is once again proposing to eliminate the HOPE VI program, which is aimed at rehabilitating public housing projects. The administration has been unable to eliminate funding for program in past budgets, however, and the House of Representatives last year passed legislation to renew the program for eight years.

In briefing reporters Monday, HUD Secretary Alphonso Jackson renewed the administration’s call for Congress to pass legislation expanding Federal Housing Administration loan guarantee programs.

Jackson said in the five months since the administration launched its FHASecure program to help delinquent borrowers refinance into lower-cost loans, it has helped 75,000 homeowners.

He said FHA could serve an additional 250,000 borrowers by the end of the year if Congress approves legislation raising maximum loan limits, lowering minimum down-payment requirements, and allowing the expansion of risk-based pricing.

Both the House and Senate have passed their own FHA modernization bills, and differences in the bills must be reconciled before they can be signed into law.

Assistant Housing Secretary Brian Montgomery said the administration favors a provision in the Senate’s version of the bill that would lower minimum down-payment requirements from 3 percent to 1.5 percent, rather than eliminate them altogether as called for by the House bill.

Private mortgage insurance providers have raised their rates or stopped providing insurance altogether in California and Florida on loans with down payments of less than 5 percent (see Inman News story).

Montgomery said increasing maximum loan limits will make more borrowers eligible for FHA guarantees in areas where it’s now priced out of the market. In California, Montgomery said, FHA guaranteed less than 5,000 purchase and refinance loans in all of 2007.

The Bush administration supports raising FHA loan limits in high-cost areas to 100 percent of the conforming loan limit in high-cost areas including California and the Northeast, and from 48 percent to 65 percent of the conforming loan limit in lower-cost areas.

The conforming loan limit is currently $417,000, although Congress is debating a temporary increase that would allow FHA to guarantee loans of up to 125 percent of the median home price, with a cap of $729,750.

Source: Inman News