Revenge of the Renters, Washington Edition
How does HUD make the math work? Thank the mortgage meltdown for an unexpected windfall.
The agency's secret weapon is the Federal Housing Administration, which has stepped in to fill the void as other kinds of lending disappear. During subprime lending's peak, FHA insured less than 2 percent of new mortgages. Now, with other borrowing options obliterated in the wake of the credit market's collapse, Americans are unexpectedly depending on FHA as their ticket to a mortgage – today FHA-backed loans account for one-third of all home purchase loans.
So HUD did what any popular kid would do: it decided to capitalize on all the attention. Two weeks ago, it announced hikes in the premiums it charges FHA borrowers, explaining that the increase would "strengthen the FHA's capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities."
Now it turns out that supporting homeownership wasn't the only reason for the premium hikes. The new budget projects $6.9 billion in receipts from FHA and related sources, more than doubling this year's take, and the agency is spending most of that newfound money on the nation's long-suffering renters.
Among its new commitments is a $1 billion Affordable Housing Trust Fund and a $150 million fund for job-generating investments - the "urban development" part of HUD. The budget also includes enough money to fund about 35,000 new Section 8 vouchers to help low-income people pay rent.
"We had to make difficult choices in this budget," acknowledged HUD Secretary Shaun Donovan (pictured) in a conference call.
Feeling burned, dear homeowner? Please don't, especially now that tax time approaches. The feds spent more than $120 billion last year on the home mortgage interest deduction, or more than twice as much as they spent to help renters. And they're spending even more to bail out homeowners and the agencies that finance them, Fannie Mae and Freddie Mac (although don't look for that in the budget).
Suddenly, helping renters doesn't seem like such a bad bargain.