WASHINGTON — The Federal Housing Administration is considering sharing risk on multifamily loans with the Treasury Department’s Federal Financing Bank beyond the end of this year, FHA Commissioner Brian Montgomery said Tuesday.
The multifamily risk-sharing program was launched in 2015 to encourage affordable housing production, and allows state housing finance agencies to underwrite multifamily loans in return for sharing the risk of loss on those loans with the FHA.
The program was originally devised in the Obama administration as a temporary response to the tightening of credit markets after the crisis.
“I understand that there was never any sort of permanence to it,” said Montgomery, speaking an affordable housing event Tuesday sponsored by the National Housing Conference. “In fact, even when it was developed in the previous administration, there was some deference to the fact that this would be a temporary solution.”
The risk-sharing program was originally supposed to end Oct. 1, but the FHA announced in September that it would continue through Dec. 31.
The FHA is actively trying to extend the program beyond the end of the calendar year and is “still having those discussions with folks in the administration,” Montgomery said.
However, Montgomery said if the program is continued it will need to be tailored in a way that would serve the entire country. Currently, the initiative is “very successful” in five states, including Massachusetts, New York and Maryland, but other states haven’t used the program at all, he said. Montgomery specifically mentioned Pennsylvania, Michigan, Ohio and Texas as states that “present great opportunities” for the program to gain broader appeal.
“I don’t take sides, but I think if we’re going to continue the program, it needs to be done with an eye more toward the entire country having access and use of the program,” he said.
While another extension of the program would be temporary, Montgomery noted that there may be more permanent ways to expand credit access for the multifamily sector, for example in the tax-exempt bond market or if Ginnie Mae were allowed to participate in risk sharing.
“Ultimately, getting that fixed would provide more long-term stability for us to use the risk-share program without the Federal Financing Bank,” he said.This post was originally published here