How Much Does it Cost for Each $1 Billion in Federal Housing Loan Guarantees? Which Programs Cost the Least/Most?

For federal budget purposes all loan guarantee programs are "scored" as either requiring a set aside of money to cover future losses ("positive credit subsidy") or as producing net revenue ("negative credit subsidy").

More (112 pages) about loan subsidy costs can be found in the OMB FY 2010 budget document, Federal Credit Supplement.

To show you how ALL federal HOUSING loan guarantee programs compare in cost I produced the attached PDF graph HERE, showing the projected federal budget cost/(revenue) for $1 Billion dollars in loan guarantees, as scored in the FY 2010 budget.

Which Housing Loan Guarantee Program Cost the Least/Most Per $1 Billion in Loans?

• A HUD multifamily refinance program (Section 223f) produces the greatest net revenue; producing $32.8 Million in net revenue for every $1 Billion in loans made.
• The proposed HUD HOPE for Homeowners program would be the most expensive, requiring an appropriation of $237.2 Million for every $1 billion in loans made.

Example: RD and HUD Multifamily Loan Costs Per $1 Billion in Loan Guarantees
Loan guarantee programs serving similar needs can also have significantly different costs. As shown on the PDF graphic:

1. A Rural Development multifamily loan program, Section 538, requires $156.8 million in appropriations
2. In contrast, two HUD/FHA Multifamily loan programs produce net revenue:

• The FHA Section 221d4 produces $11 million in net revenue.
• The FHA Section 223f program produces $32.8 million in net revenue.

So, $1 Billion in loan guarantees for the RD Section 538 program are projected to cost:

• $167 million MORE than the FHA 221d4 program and
• $189 million MORE than the FHA Section 223f program.

NOT Included in the PDF graphic:

• Costs for DIRECT loan programs of all kinds.
• Cost for NON housing loan guarantee programs.

ORIGINALLY CREATED AND POSTED ON THE OREGON HOUSING BLOG.