CUNA, trades voice concerns over increased FHA fees

November 19, 2014

WASHINGTON (11/20/14)--The Credit Union National Association joined nine financial services organizations in a letter to Senate and House leadership expressing concerns with a provision of an appropriations bill that could raise U.S. Department of Housing and Urban Development (HUD) fees for credit unions and other financial institutions. 

Congress is expected to consider several appropriations bill before it adjourns for the year.

The provision in the Transportation, HUD and Related Agencies Appropriations Act for Fiscal Year 2015 (S. 2438) would grant HUD's request to charge lenders an administrative support fee, which would generate approximately $30 million per year to fund an enhanced quality assurance program for single-family loans.

While the groups featured in the letter support the goal of improving Federal Housing Administration (FHA) quality assurance processes, they consider the provision in S. 2438 to be "overly broad, and could negatively impact consumers and lenders alike."

The fee, as proposed, is not to exceed four basis points of the original principal balance of loans originated by the mortgagee that were insured during the previous fiscal year.

A key concern is that the fee will be calculated using the previous year's mortgage originations instead of new originations. The organizations feel that this will raise costs on mortgages that have already been originated and insured, and believe if the provision is included in a final bill, it should be calculated on a prospective basis.

The organizations are also concerned about the overall size of the fee. The Senate Appropriations Committee provided $8 million of the proposed $30 million HUD requested, but the provision in the appropriations bill does not limit HUD to collect only the remaining $22 million.

"The legislation allows FHA to charge as much as 4 basis points on aggregate lender originations, far in excess of what it needs. And because the fee is not limited only to FY2015, HUD would be permitted to levy this charge in future years," the letter reads. "If the final appropriations bill contains language authorizing FHA to impose a fee on lenders to fund a new quality assurance program, we believe it should be limited in size, scope and duration to cover the specific technology improvements needed to implement the program."

The House-passed version of the appropriations bill did not give HUD the authority to charge the administrative support fee. S. 2348 has been approved by the Senate Appropriations Committee but was not considered by the full Senate.