Housing Finance: Expanding Capital for Affordable Multifamily Housing

Highlights

Pursuant to a legislative requirement, GAO examined: (1) the problems that have led to the shortage of mortgage financing for affordable multifamily housing; (2) the factors limiting the expansion of multifamily housing financing; (3) alternative federal credit enhancements; and (4) ways to limit the federal government's exposure to risk in adopting specific credit enhancements.

Recommendations

Matter for Congressional Consideration

Matter	Status	Comments
To establish a national database on multifamily housing loans, Congress should consider reauthorizing and appropriating funds for the task force authorized by the Housing and Community Development Act of 1992.	Closed – Not Implemented	Congress has yet to appropriate funds to establish a database on multifamily housing loans, and it does not appear that funds will be provided in the foreseeable future. However, initiatives were begun but terminated due to lack of funding by the private sector to establish this database. As part of GAO's follow-up review, mandated by the Housing and Community Development Act of 1992, GAO will inquire as to the impact on the risk-sharing demonstration programs of not having this database.

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Department of Housing and Urban Development	The Secretary of Housing and Urban Development, in cooperation with the Commissioner of the Federal Housing Administration (FHA), should convene a conference of senior officials representing each of the financial institutions referred to in the authorizing legislation. The conference should begin to: (1) draft policies and procedures for participating in the credit enhancement demonstration programs; (2) develop options for providing credit enhancements on individual loans as well as loan pools; and (3) formulate principles to guide the implementation of the credit enhancement options.	Closed – Implemented HUD has met with officials of state and local housing agencies as well as those representing major financial institutions. Further, HUD entered into credit enhancement demonstration agreements with these parties. Following GAO's follow-up review mandated by the Housing and Community Development Act of 1992, GAO will evaluate HUD's success in implementing this recommendation.
Federal Housing Administration	The Secretary of Housing and Urban Development, in cooperation with the Commissioner of the Federal Housing Administration (FHA), should convene a conference of senior officials representing each of the financial institutions referred to in the authorizing legislation. The conference should begin to: (1) draft policies and procedures for participating in the credit enhancement demonstration programs; (2) develop options for providing credit enhancements on individual loans as well as loan pools; and (3) formulate principles to guide the implementation of the credit enhancement options.	Closed – Implemented HUD has met with officials of state and local housing agencies as well as those representing major financial institutions. Further, HUD has negotiated credit enhancement demonstration agreements with these parties. Following GAO's follow-up review mandated by the Housing and Community Development Act of 1992, GAO will evaluate HUD's success in implementing this recommendation.
Federal Housing Administration	The Commissioner, FHA, should incorporate in draft instructions or regulations the policies and procedures agreed to. These regulations should specify the: (1) data that must be collected in the demonstration programs to ensure that thorough evaluations of the costs and benefits of these programs can be made; and (2) way FHA will monitor participating institutions' compliance with the objectives and requirements of the demonstration programs, including any provisions requiring the participating institutions to adopt new operating procedures for improving the financing of affordable housing.	Closed – Implemented Regulations for FHA's Credit Enhancement Demonstration Program were finalized in December 1995 and HUD Handbook 4590.1 outlines program coordination procedures between HUD and state and local housing finance agencies. To date, over 30 state and local agencies have begun participating in this program.
Federal Housing Administration	FHA should reassess its staffing and management information systems and make any necessary staff realignments or requests for additional resources necessary to help ensure that it has adequate capacity to successfully implement the credit enhancement demonstration programs.	Closed – Implemented HUD has implemented these credit enhancement demonstration programs with dedicated staff and management information systems in headquarters and specifically designated field offices nationwide. This implementation effort, however, was not based on any thorough reassessment of its staffing and management information system capacity.
Department of Housing and Urban Development	The Secretary of Housing and Urban Development and the Chairman of the Federal Housing Finance Board, in their capacity as cochairpersons of the interagency task force on multifamily housing, should direct that the task force, once created, to research and resolve several critical policy and technical issues in developing a national database on multifamily housing. These issues concern the: (1) confidentiality of and access to the data; (2) inclusion of performance data on prospective as well as past loans; (3) definition of items and underwriting standards to be included in the database; (4) question of who should bear the cost of developing and maintaining the database; (5) question of whether the required data should be provided voluntarily or required by federal law; and (6) standardization of the public subsidy risk associated with affordable multifamily housing.	Closed – Not Implemented The lack of appropriations for the congressionally authorized task force has precluded action on this recommendation. Future appropriations are unlikely.
Federal Housing Finance Board	The Secretary of Housing and Urban Development and the Chairman of the Federal Housing Finance Board, in their capacity as cochairpersons of the interagency task force on multifamily housing, should direct that the task force, once created, to research and resolve several critical policy and technical issues in developing a national database on multifamily housing. These issues concern the: (1) confidentiality of and access to the data; (2) inclusion of performance data on prospective as well as past loans; (3) definition of items and underwriting standards to be included in the database; (4) question of who should bear the cost of developing and maintaining the database; (5) question of whether the required data should be provided voluntarily or required by federal law; and (6) standardization of the public subsidy risk associated with affordable multifamily housing.	Closed – Not Implemented The lack of appropriations for the congressionally authorized task force has precluded action on this recommendation. Future appropriations are unlikely.
Department of Housing and Urban Development	The Secretary of Housing and Urban Development and the Chairman of the Federal Housing Finance Board should direct that the task force recommend in its report which agency or institution should be given the authority and responsibility for maintaining and managing the database in the future.	Closed – Not Implemented The lack of funding has precluded action on this recommendation. Future funding is unlikely.
Federal Housing Finance Board	The Secretary of Housing and Urban Development and the Chairman of the Federal Housing Finance Board should direct that the task force recommend in its report which agency or institution should be given the authority and responsibility for maintaining and managing the database in the future.	Closed – Not Implemented The lack of funding has precluded action on this recommendation. Future funding is unlikely.

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Housing

CapitalCommunity developmentDatabasesFederal aid for housingFinancial institutionsGovernment guaranteed loansInvestment planningLow income housingMortgage loansMortgage programs