Rural Housing SF Loan Program Change Would Increase Fees to Borrowers, Eliminate Current Subsidy, and Allow Program Expansion.

CBO Cost estimate for changes to RHS 502 single family program, which is projected to run out of money in May, is HERE.

Thomas link to bill, H.R. 5017, that would make changes that CBO has now scored is HERE.

Changed program would increase fees to borrowers to remove current subsidy and allow program expansion:

For fiscal year 2010, RHS received an appropriation of $173 million, which the agency expects will cover the cost of about $12 billion in loan guarantees. According to RHS, that subsidy appropriation will be exhausted in May 2010. Enacting this legislation would change the terms of the loan guarantee program such that it would no longer have an estimated cost to the government under FCRA accounting, but would result in a small savings (by increasing offsetting collections).....
Under this legislation, the cap on annual premiums for the RHS single-family program would increase from 2 percent to 4 percent of the loan amount. According to RHS, the agency expects that it would charge borrowers an up-front premium equal to 3.44 percent of their loan amounts under this new authority. Based on information from RHS, CBO estimates that increasing the up-front premium to this level would lower the estimated subsidy rate for the program from 1.44 percent to -0.06 percent. CBO estimates, based on information from RHS, that about $12 billion in additional loan guarantees would be made during the remainder of 2010 assuming that authority is provided in a supplemental appropriations bill within the next few months. Therefore,CBO estimates that implementing the bill would result in offsetting collections of $7 million in 2010. Because the value of the fees collected by GNMA is estimated to exceed the cost of loan defaults in each year, the Administration estimates that the GNMA mortgage-backed securities (MBS) program will have a subsidy rate of -0.24 percent in 2010, resulting in net receipt collections to the federal government. CBO estimates that about 60 percent of the new loan guarantees made by RHS under this legislation would be included in GNMA=s MBS program. Thus, CBO estimates that under the bill, the GNMA mortgage backed securities program would realize an increase of about $17 million in offsetting collections in 2010.

Originally created and posted on the Oregon Housing Blog.