Housing Finance: Options to Help Prevent Suspensions of FHA and RHS Loan Guarantee Programs
Published: 2005-03-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In fiscal year 2004, the Department of Housing and Urban Development's Federal Housing Administration (FHA) and the Department of Agriculture's Rural Housing Service (RHS) guaranteed approximately $136 billion in mortgages for single-family homes, multifamily rental housing, and healthcare facilities under a variety of programs. In past years, both agencies have occasionally had to suspend the issuance of guarantees under some programs when they exhausted the dollar amounts of their commitment authority (which serves as a limit on the volume of new loans that an agency can guarantee) or credit subsidy budget authority (the authority to cover the long-term costs--known as credit subsidy costs--of extending these guarantees) before the end of a fiscal year. These suspensions can be disruptive to homebuyers, developers, and lenders. GAO was asked to determine (1) how often and why FHA and RHS have suspended their loan guarantee programs over the last decade, (2) how these agencies manage and notify Congress of the rate at which the authorities for these programs will be exhausted, and (3) options Congress and the agencies could exercise to help prevent future suspensions and the potential implications of these options.
section_title: What GAO Found
paragraphs: On 10 occasions since 1994, FHA and RHS have suspended the issuance of loan guarantees after exhausting the commitment authority or credit subsidy budget authority for certain programs before the end of a fiscal year. Specifically, FHA suspended several programs six times and RHS suspended one program four times. The resources budgeted for these programs have not always been adequate to keep them operating for a full fiscal year due partly to difficulties in estimating demand for loan guarantees--a difficulty compounded by the process of preparing the budget request to Congress, which requires that the agencies forecast demand nearly 2 years in advance. FHA and RHS both manage their programs on a first-come, first-served basis, a factor limiting their ability to control the rate at which they use commitment authority and obligate budget authority. However, the agencies have different requirements and approaches for estimating the rate at which they will exhaust these authorities and notifying Congress. For example, unlike RHS, FHA is statutorily required to notify Congress when it has used 75 percent of its commitment authority and when it estimates that it will exhaust this authority before the end of a fiscal year. GAO's analysis indicates that FHA's basic approach for making estimates--applying utilization rates experienced up until the time of the analysis to the remainder of the fiscal year--does not always accurately forecast whether the agency will exhaust its commitment authority. However, FHA officials and federal budget experts said that more complex methods would not necessarily produce better estimates. Through discussions with federal agency and mortgage industry officials, GAO identified several options that Congress, FHA, and RHS could exercise to help prevent future suspensions; however, the options would also have budgetary impacts (such as increasing the budget deficit), make oversight of the programs more difficult, or impose additional administrative burdens on the agencies. For example, Congress could require FHA to provide more frequent notifications about the percentage of commitment authority the agency has used and expand this requirement to include obligations of credit subsidy budget authority. This option, which could also be applied to RHS, could give Congress additional and more timely information to consider whether to provide supplemental appropriations before the end of a fiscal year. Other options for Congress include (1) authorizing FHA to use revenues generated by some of its loan guarantee programs to cover any shortfalls in budget authority for others and (2) providing "advance funding"--budget authority made available in an appropriation act for the current fiscal year that comes from a subsequent year's appropriation--for FHA and RHS program credit subsidy costs. Further, FHA and RHS can continue to use or be given additional administrative tools--such as transferring budget authority--to help delay or prevent program suspensions.

section_title: Letter
paragraphs: The Department of Housing and Urban Development’s (HUD) Federal  Housing Administration (FHA) and the Department of Agriculture’s  (USDA) Rural Housing Service (RHS) administer loan guarantee programs  aimed at expanding access to mortgage financing for single-family homes  and facilitating the construction, purchase, and rehabilitation of  multifamily rental housing and healthcare facilities. These programs do  not lend money directly to borrowers; instead, the federal government  guarantees loans made by FHA- or RHS-approved lenders. Both agencies  have periodically had to suspend the issuance of guarantees under some of  these programs when they exhausted the programs’ budgets before the end  of a fiscal year. For example, in fiscal year 2001 FHA had to suspend its  Section 221(d)(3) loan guarantee program for nonprofit multifamily  housing developers because of unexpectedly high demand. These  suspensions can be disruptive to homebuyers, developers, and lenders  because they can delay, complicate, or result in the cancellation of  important financial transactions.
FHA has four funds with which it guarantees mortgages. As of   September 30, 2004, the four funds had guaranteed loans with a total  estimated unpaid principal balance of almost $513 billion. For budget and  accounting purposes, these funds are grouped into two accounts—the  Mutual Mortgage Insurance and Cooperative Management Housing  Insurance (MMI/CMHI) account and the General Insurance and Special  Risk Insurance (GI/SRI) account. The MMI/CMHI account supports FHA’s  largest single-family mortgage insurance program and a minor multifamily  program. In contrast, the GI/SRI account supports a wide range of loan  guarantee programs, including programs for healthcare facilities as well as  multifamily and single-family housing. RHS has one fund—the Rural  Housing Insurance fund (RHIF)—and a corresponding budget account  under which it guarantees mortgages for one single-family program  (Section 502) and one multifamily program (Section 538). As of September  30, 2004, this fund had guaranteed loans with a total estimated unpaid  principal balance of almost $14 billion.
FHA and RHS loan guarantee programs are discretionary programs that  operate within constraints established through the congressional  appropriations process. In developing their annual budgets, the agencies  must estimate the amount of “commitment authority” and, when  applicable, credit subsidy budget authority required for their loan  guarantee program accounts. Commitment authority serves as a limit on  the total dollar volume of new loans that an agency can guarantee. Credit  subsidy budget authority is the authority to incur financial obligations to  cover the long-term costs, known as credit subsidy costs, of extending  these guarantees. Credit subsidy costs can be negative (i.e., the present  value of cash inflows exceeds the present value of cash outflows) or  positive (i.e., the present value of cash inflows is less than the present value  of cash outflows).
The Office of Management and Budget (OMB) reviews the agencies’  estimates of loan commitment authority and credit subsidy budget  authority before they are finalized and included in the President’s Budget  request to Congress. When FHA exhausts the commitment authority for  either of its accounts, it must suspend issuance of additional loan  guarantees for all programs under that account until Congress provides  additional authority. For FHA’s programs with a positive subsidy cost, the  amount of credit subsidy budget authority Congress appropriates also  limits the dollar volume of new loans the agencies may guarantee. For  example, $5 million in credit subsidy budget authority would cover the  credit subsidy costs for up to $50 million in loan guarantees for a program  with a 10 percent credit subsidy rate. RHS’s programs—both of which  currently have positive subsidy costs—are limited by the amount of credit  subsidy budget authority they receive. When FHA or RHS exhausts the  budget authority for its programs with positive credit subsidy costs, the  agency must suspend issuance of additional loan guarantees under those  programs until Congress appropriates additional budget authority.
You requested that we review issues surrounding suspensions of FHA and  RHS loan guarantee programs, including ways to prevent future  suspensions. Accordingly, the objectives of our review were to determine  (1) since fiscal year 1994 how often and why FHA and RHS have suspended  the issuance of loan guarantees due to the exhaustion of commitment  authority or credit subsidy budget authority before the end of a fiscal year;  (2) how FHA and RHS manage, and notify Congress of, the rate at which  they use commitment authority and obligate credit subsidy budget  authority; and (3) options Congress, FHA, and RHS could exercise to help  prevent future suspensions of loan guarantee programs and the potential  implications of these options.
To meet these objectives, we reviewed laws, regulations, and guidance  governing FHA’s and RHS’s loan guarantee programs. We reviewed  information pertaining to the agencies’ suspensions of loan guarantee  programs from fiscal years 1994 through 2004. We also performed a  detailed analysis of FHA monthly budget and accounting data for fiscal  years 2003 and 2004. We assessed the reliability of these data and found  them sufficiently reliable for the purposes of our report. In addition, we  interviewed officials from FHA and RHS headquarters, OMB, the  Congressional Budget Office (CBO), and housing industry groups. We  conducted our work in Washington, D.C., from January 2004 through  January 2005 in accordance with generally accepted government auditing  standards. Our scope and methodology are discussed in greater detail in  appendix I.
subsections: section_title: Background
paragraphs: FHA and RHS operate a variety of loan guarantee programs, organized  under three budget accounts, that support the financing of single-family  and multifamily housing, as well as healthcare facilities (see fig. 1). The  guarantees substantially reduce the financial risk for lenders in the event  that borrowers default, thereby allowing lenders to make loans available to  more borrowers. FHA and RHS loan guarantees for multifamily properties  are often combined with other financing sources, such as low-income  housing tax credits and tax-exempt bonds issued by states and localities.
FHA is the federal government’s principal provider of mortgage loan  guarantees and operates numerous loan guarantee programs. In fiscal year  2004, FHA guaranteed over $107 billion in loans under the MMI/CMHI  account, the vast majority of which occurred within the 203(b) program.  The 203(b) program provides loan guarantees for the purchase or refinancing of single-family homes. The other program in the MMI/CMHI  account is the Section 213 program, which guarantees mortgage loans to  facilitate the construction, substantial rehabilitation, and purchase of  cooperative housing projects. Because both programs currently have  negative subsidy costs, neither requires credit subsidy budget authority.  The MMI/CMHI account received $185 billion in commitment authority in  fiscal year 2004. FHA’s GI/SRI account, which received $29 billion in  commitment authority in fiscal year 2004, supports an array of programs.  These include programs that facilitate the development, construction,  rehabilitation, purchase, and refinancing of multifamily apartments and  healthcare facilities. For example, the 221(d)(4) program—FHA’s largest  multifamily program—guarantees loans to for-profit developers of  multifamily apartments, and the 221(d)(3) program guarantees loans to  nonprofit developers. The GI/SRI account also includes several specialized  single-family programs, such as the 203(k) (rehabilitation mortgage),  Section 234 (condominiums), Title I (property improvement and  manufactured housing), and Section 255 (home equity conversion  mortgage) programs. In contrast to the MMI/CMHI account, several of the  programs in the GI/SRI account have positive subsidy costs, which require  credit subsidy budget authority. In fiscal year 2004, four GI/SRI account  programs—Section 221(d)(3), Section 241, Multifamily Operating Loss, and  Title I Property Improvement—received $15 million in credit subsidy  budget authority.
RHS’s loan guarantee programs, as a whole, are much smaller than FHA’s,  are targeted to rural areas, and have more income restrictions. Under its  RHIF account, RHS guarantees loans through two programs—the Section  502 program and the Section 538 program. The Section 502 program serves  rural residents with incomes not exceeding 115 percent of the U.S. median  income who wish to purchase or refinance a single-family home. In fiscal  year 2004, this program received $2.7 billion in commitment authority and  about $40 million in credit subsidy budget authority. The Section 538  program guarantees loans to nonprofit or for-profit developers for the  construction, acquisition, and rehabilitation of multifamily rental housing  in rural areas that serve households with incomes that do not exceed 115  percent of area median income. In fiscal year 2004, this program received  $100 million in commitment authority and about $6 million in credit  subsidy budget authority.
In formulating and executing the budgets for their loan guarantee  programs, FHA and RHS must adhere to specific federal budgetary and  accounting requirements. The process of preparing their annual budget  request requires that FHA and RHS prepare estimates of the dollar amount  of loans they anticipate guaranteeing nearly 2 years in advance. These  estimates influence the amount of commitment authority and credit  subsidy budget authority the agencies request and receive. The Federal  Credit Reform Act of 1990 requires the President’s Budget to reflect the  costs of credit programs and include the planned level of new loan  guarantees associated with each appropriation request. Agencies  therefore must calculate and estimate the long-term cost, known as the  credit subsidy cost, to the federal government of extending or guaranteeing  credit and the amount of new loan guarantees they plan on making. The  agencies estimate these costs for each program by calculating a credit  subsidy rate that takes into account factors such as fees, defaults, and  recoveries, and applying this rate to the total dollar amount of loans they  anticipate guaranteeing. When an agency decides to guarantee a loan, it  uses this rate to determine the credit subsidy cost of doing so. Under  programs requiring positive credit subsidies, the agency can issue the new  guarantee only if the budget authority to cover this cost is available. In  contrast, programs with negative subsidies are constrained only by  commitment authority, which limits the amount of financial risk the federal  government assumes each year.
FHA and RHS receive their commitment authority limit and appropriations  of credit subsidy budget authority on a somewhat different basis. Although  FHA, as required, estimates its commitment authority and credit subsidy  needs for each loan guarantee program under the MMI/CMHI and GI/SRI  accounts, it requests and receives these authorities on an account, rather  than a program, basis. Congress has generally not specified a level of  commitment authority or credit subsidy budget authority for each program.  In addition, FHA routinely requests and receives a commitment authority  limit that exceeds the dollar amount of loans it has estimated it will make, a  practice that helps prevent exhaustion of commitment authority before the  end of a fiscal year. In contrast, RHS receives credit subsidy budget  authority on a program basis. That is, the Section 502 program and Section  538 program receive separate appropriations of credit subsidy budget  authority. For both of these programs, the commitment authority limit is  the amount of credit subsidy budget authority divided by the credit subsidy  rate.
section_title: Difficulties in Estimating Demand Underlie FHA and RHS’s 10 Suspensions of Loan Guarantee Programs Since 1994
paragraphs: On 10 occasions since 1994, FHA and RHS have suspended the issuance of  loan guarantees under certain programs because the programs effectively  exhausted their commitment authority or credit subsidy budget authority  before the end of a fiscal year. Specifically, FHA suspended programs six  times and RHS four times. Several factors contributed to these  suspensions, including unforeseeable fluctuations in mortgage interest  rates that led to changes in the demand for loan guarantees. Further, the  need to make budget estimates nearly 2 years in advance compounds the  difficulty of predicting demand. As a result, and because of resource  constraints and competing priorities within the federal budget, the  resources appropriated for these programs have not always reflected the  amounts required to keep them operating for an entire fiscal year.
subsections: section_title: FHA Suspended Guaranteed Loan Programs Six Times Over the Past Decade
paragraphs: As shown in table 1, FHA has suspended the issuance of loan guarantees  under certain programs six times since 1994 after effectively exhausting the  commitment authority or credit subsidy budget authority for these  programs before the end of the fiscal year. For example, from fiscal year  1994 through fiscal year 2004, FHA suspended the programs with positive  subsidy costs under its GI/SRI account three times—in February 1994, July  2000, and April 2001—after effectively exhausting the credit subsidy budget  authority under this account.
FHA has also suspended all of the programs under the GI/SRI account three  times after effectively exhausting the account’s commitment authority. On  September 16, 2003, FHA suspended the issuance of loan guarantees under  the GI/SRI account until Congress raised the commitment authority limit in  a supplemental appropriations act. The other two suspensions occurred  while the agency was operating under a series of continuing resolutions in  early fiscal year 2004. The first suspension occurred in early December  2003, when FHA exhausted the $3.8 billion in commitment authority  provided in the first of these resolutions. FHA lifted the suspension after  receiving an additional $3.9 billion under a subsequent resolution in mid- December 2003 but suspended the programs again after exhausting this  amount on January 14, 2004. FHA restarted the programs approximately 2  weeks later, after Congress passed the Consolidated Appropriations Act,  2004.
section_title: RHS Suspended Its Section 502 Program Four Times during the Past Decade
paragraphs: RHS has suspended its Section 502 program four times since 1994—in  fiscal years 1995, 1996, 2003, and 2004—after effectively exhausting its  credit subsidy budget authority. However, in some cases, RHS was able to  take actions that delayed or mitigated the impact of the suspensions on  borrowers and lenders. For example, in early August 2003, RHS transferred  $3.6 million in budget authority from the Section 523 (Mutual and Self-help  Technical Assistance) grant program to the Section 502 program in order to  delay suspension of the program. This transfer enabled the Section 502  program to guarantee an additional $297 million in loans and delayed  suspension of the program until August 27. Also, during the 4-week  suspension period, RHS continued to accept and approve loan guarantee  applications submitted by lenders and committed to issuing the guarantees  as soon as it received its next appropriation. Further, in March 2004, RHS  anticipated that the Section 502 program would exhaust its credit subsidy  budget authority early in the fourth quarter. In June, RHS increased the  program’s guarantee fee and transferred a total of $7 million in budget  authority from the Section 504 (Natural Disaster), 514 (Farm Labor  Housing), 515 (Multifamily Housing), 516 (Rural Housing Assistance), and  538 programs to the Section 502 program. The increase in the guarantee  fee enabled RHS to issue an additional $100 million in loan guarantees, and  the transfers enabled RHS to issue an additional $531 million in loan  guarantees. Although these actions delayed suspension of the program,  RHS eventually had to suspend the program on August 24, 2004. During this  suspension period, RHS again accepted and approved loan guarantee  applications submitted by lenders and committed to issuing the guarantees  as soon as it received its next appropriation.
section_title: Difficulties in Estimating Program Demand Contributed to the Exhaustion of Commitment and Budget Authority before the End of a Fiscal Year
paragraphs: Due partly to difficulties in estimating the demand for loan guarantee  programs, the resources budgeted for these programs have not always  reflected the amounts required to keep them operating for a full fiscal year.  Estimating demand for budget purposes is difficult for several reasons. A  primary reason is that demand for loan guarantees is highly responsive to  interest rates, which are volatile and difficult to forecast. For example, due  in part to the decline in mortgage interest rates in fiscal year 2003, the  number of FHA single-family refinancing loans was 60 percent higher than  in fiscal year 2002. According to FHA officials, they could not have  anticipated the interest rate change or reflected it in their fiscal year 2003  budget. As a result, FHA used its commitment authority faster than  anticipated and effectively exhausted the authority for the GI/SRI account 2  weeks before the end of the fiscal year. Similarly, according to RHS  officials, low interest rates in fiscal year 2003 resulted in significantly  higher demand for Section 502 loan guarantees (and a corresponding  increase in the use of commitment authority) compared with the previous 3  years (see fig. 2). Because RHS based its fiscal year 2003 budget estimate  primarily on actual demand levels from these prior years, the amount the  agency requested and was appropriated for the Section 502 program was  not adequate to fund the program for the entire fiscal year, resulting in  suspension of the program in late August 2003.
In addition, FHA and RHS have implemented program and policy changes  that were not foreseen or whose specific effects could not be known at the  time the agencies developed their budgets. For example, in response to a  statutory change that occurred after HUD submitted its fiscal year 2004  budget request, FHA increased its individual loan limits for multifamily  housing in high-cost areas during the second and third quarters of fiscal  year 2004. FHA officials told us that while they expected that these  changes would result in higher utilization of commitment authority, they  could not have factored them into the department’s budget request.  Additionally, in the beginning of fiscal year 2003—well after federal  agencies had developed their budgets for that year—the administration  established a goal to increase the number of minority homeowners by at  least 5.5 million families by 2010. To help achieve this goal, RHS, among  other things, lowered its guarantee fee, conducted outreach with minority  lenders, and promoted credit counseling and homeownership education.  According to RHS, these actions helped increase loan volume under the  Section 502 program to an historic high but could not have been taken into  account in preparing the agency’s fiscal year 2003 budget.
Compounding the difficulty in predicting demand is the federal budget  process, which requires that FHA and RHS submit to OMB estimates of the  dollar amount they anticipate guaranteeing in a given year nearly 2 years in  advance. The agencies’ estimates influence the amount of commitment  authority and credit subsidy budget authority the agencies request and  receive through the budget process. Because these estimates are prepared  so far in advance, they cannot be made with a high level of certainty.  Further, the agencies’ appropriations do not always reflect estimates of  program demand because of resource constraints and competing priorities  within the federal budget.
section_title: FHA and RHS Manage Their Programs in a Similar Manner but Estimate and Notify Congress of the Rate at Which They Will Exhaust Commitment and Budget Authority Differently
paragraphs: FHA and RHS basically manage their loan guarantee programs on a first- come, first-served basis, a factor limiting both agencies’ ability to control  the rate at which they use commitment authority and obligate credit  subsidy budget authority. FHA is required to estimate, at least monthly, the  rate at which it will use commitment authority for the remainder of any  fiscal year and notify Congress (1) if an estimate indicates that the agency  will exhaust its commitment authority before the end of a fiscal year or (2)  when 75 percent of the authority has been used. FHA has recently  complied with the 75 percent notification requirement, but could not  provide us with documentation of notifications prior to fiscal year 2003.  FHA has also prepared the estimates on a daily basis since the beginning of  fiscal year 2004 and determined that none of the estimates indicated that it  would exhaust its commitment authority before the end of a fiscal year.  Our analysis indicates that FHA’s basic approach for making estimates does  not always accurately forecast whether the agency will exhaust its  commitment authority; however, FHA officials and federal budget experts  said that more complex methods would not necessarily produce better  estimates. Although not subject to the same requirements as FHA, RHS  periodically estimates the rate at which it will obligate credit subsidy  budget authority for its Section 502 and Section 538 programs and in recent  years has notified Congress when the agency’s estimates indicated that the  Section 502 program would deplete its budget authority before the end of  the fiscal year.
subsections: section_title: FHA and RHS Manage Their Loan Guarantee Programs on a First-Come, First- Served Basis
paragraphs: FHA and RHS basically manage their loan guarantee programs on a first- come, first-served basis, a factor that limits control over the rate at which  they use commitment authority and obligate credit subsidy budget  authority. More specifically, according to FHA and RHS officials, neither  agency prioritizes or rejects eligible applications as long as sufficient  commitment and budget authority are available because they have  determined that, with few exceptions, they lack the authority to do so.   The agencies do not, for example, try to reduce their utilization or  obligation rates by placing a higher priority on smaller loans than larger  loans. FHA officials told us that even if they had this authority, they would  not want to be in the position of judging whether loans under one program  should be guaranteed before loans under another program or choosing  between eligible loans under the same program. Consequently, all FHA  programs (those with positive and negative subsidy costs) under the same  account provide loan guarantees until the account’s commitment authority  is exhausted, or, for programs with positive subsidy costs, until either the  account’s commitment authority or credit subsidy budget authority is  exhausted.
FHA and RHS implement the first-come, first-served approach somewhat  differently. Although FHA makes loan guarantees through its single-family  and multifamily housing field offices, it does not allocate commitment  authority and credit subsidy budget authority to these offices in advance of  using and obligating the authorities. In contrast, under its Section 502  program, RHS first allocates the budget authority to its state offices based  on a formula. Each state office then obligates the budget authority on a  first-come, first-served basis. RHS also maintains a central reserve that can  be used to supplement funding to state offices that run out of budget  authority before the end of the fiscal year.  In addition, RHS may  redistribute budget authority from state offices that have more than  necessary to state offices with shortfalls. For its Section 538 program, RHS  obligates budget authority on a first-come, first-served basis without first  allocating the funds to its state offices. Appendix II provides additional  information on FHA’s and RHS’s processes for making loan guarantees.
section_title: FHA Has Specific Estimation and Notification Requirements for Utilization of Commitment Authority and Relies Primarily on a Straightforward Estimation Process to Satisfy These Requirements
paragraphs: FHA is required by statute to estimate, on at least a monthly basis, the rate  at which it will use commitment authority for the remainder of the fiscal  year and to notify Congress (1) when 75 percent of the authority has been  used or (2) if estimates indicate that the authority will be exhausted before  the end of the year. These notifications help Congress to determine  whether supplemental authority may be needed to prevent a suspension of  the programs due to the exhaustion of commitment authority. These  requirements do not pertain to FHA’s credit subsidy budget authority.
To determine when it has reached the 75 percent level, FHA continuously  monitors the amount of commitment authority used under its loan  guarantee programs. FHA currently relies on several unintegrated data  systems to monitor its authority balances. An FHA official receives end-of- day activity reports from all guaranteed lending programs on commitment  authority utilization and credit subsidy budget authority obligations and  manually enters the data into a spreadsheet on a daily basis. By the end of  calendar year 2006, FHA expects to complete the implementation of a new  subsidiary ledger accounting system that, according to FHA officials, will  replace the spreadsheet and provide them with real-time utilization and  obligation data.
Although FHA notified Congress, as required, when it had used 75 percent  of its commitment authority in fiscal years 2003 and 2004, it could not  provide us with documentation of notifications prior to fiscal year 2003.  Specifically:  In June 2003, FHA notified Congress that it had used 75 percent of the  commitment authority under the MMI/CMHI account and that it  anticipated using 75 percent of the commitment authority under the  GI/SRI account within a few weeks.
In January 2004, FHA notified Congress that while it did not anticipate  exhausting the commitment authority provided under a continuing  resolution, it had used 75 percent of the commitment authority under  the MMI/CMHI account.
In July 2004, FHA notified Congress that the agency estimated it would  use 75 percent of the commitment authority under the GI/SRI account  within a few weeks and that while the utilization rate was slightly lower  than the rate necessary to exhaust the commitment authority before the  end of the fiscal year, there was a possibility of a shortfall.
FHA has estimated the rates of future use of commitment authority on a  daily basis since fiscal year 2004, essentially using a “straight-line” method  that applies the utilization rate experienced up until the time of the analysis  to the remainder of the fiscal year. To supplement the straight-line  estimates, FHA officials indicated that they also use their judgment and  experience to factor in market and economic variables, such as interest  rates. Although FHA provided us with examples of its straight-line  estimates, it did not maintain records of its more comprehensive estimates,  which incorporated judgments about these other variables. FHA officials  told us that none of these more comprehensive estimates made after the  agency had received its fiscal year 2004 appropriation clearly indicated that  either the MMI/CMHI or the GI/SRI account would exhaust its commitment  authority before the end of the fiscal year. The officials said that they do  not make similar estimates of obligation rates for credit subsidy budget  authority but indicated that they monitor actual obligations on a daily basis  and monitor anticipated obligations by periodically querying the FHA field  offices that process loan guarantees.
Although a straight-line estimation analysis has its limitations, FHA  officials told us they do not believe that a more complex method for  making estimates—one that might systematically account for the effects of  additional variables—would necessarily result in more accurate estimates  because of the inherent unpredictability of the demand for loans. They also  said that it would be difficult to develop such a method. Officials from  OMB, CBO, and housing industry groups agreed that it is difficult to  estimate the rate at which commitment authority will be used and that a  more complex method may not yield better estimates.
While FHA maintains data on its utilization of commitment authority, it  could not provide us with complete records of its straight-line estimates. In  the absence of these estimates, we analyzed FHA’s data on commitment  authority utilization and found that a basic straight-line method cannot  always accurately predict whether the agency will exhaust its commitment  authority before the end of a fiscal year. As shown in table 2, by the end of  March 2003—halfway through the fiscal year—FHA had used less than half  of its commitment authority (45.5 percent) under the GI/SRI account.  Assuming the same utilization rate for the second half of the year (i.e., 45.5  percent over 6 months), we estimated that FHA would have used 91  percent of its commitment authority by the end of the fiscal year. However,  in actuality, FHA used 91 percent of its commitment authority by the end of  August—earlier than it might have estimated based on a straight-line  analysis—and was forced to suspend the issuance of loan guarantees under  this account in the middle of September. Even if FHA had conducted this  analysis at the end of June, it would have estimated that it would use less  than 100 percent of its commitment authority by the end of the fiscal year.
Further, as shown in table 3, straight-line calculations can also  overestimate utilization. Specifically, an analysis conducted at the end of  March 2004, when FHA had used 52.5 percent of the commitment authority  under the GI/SRI account, would have projected that FHA would exhaust  the authority before the end of the fiscal year and that almost 105 percent  of its commitment authority would be needed in order to prevent a  suspension. However, FHA actually used only 95.2 percent of its total  commitment authority by the end of the fiscal year.
Variations in utilization rates are a fundamental reason why FHA faces  difficulty in estimating its use of commitment authority for the entire year.  For example, in fiscal year 2003, FHA’s monthly utilization rates ranged  from 3.5 percent in November to 14.2 percent in December. In addition, the  widely varying size of multifamily projects adds to the difficulty in  projecting volume, and a single large project can significantly change a  utilization rate.
section_title: RHS Does Not Have Estimation and Notification Requirements but Has Relied on a Complex Estimation Process to Notify Congress of the Rate at Which it Obligates Budget Authority
paragraphs: Although not subject to the same requirements as FHA, RHS, as a matter of  policy, monitors its obligations of credit subsidy budget authority on a daily  basis and has recently notified Congress when it appeared that its Section  502 program would exhaust its credit subsidy budget authority before the  end of a fiscal year. In August 2003, RHS notified Congress that credit  subsidy budget authority for the Section 502 program would soon be  exhausted and that the agency was exercising its authority to transfer  budget authority between programs to help cover the expected shortfall.  Similarly, in early 2004, RHS officials notified Congress that credit subsidy  budget authority for the Section 502 program might be exhausted by July  2004 because of a strong demand for housing that would most likely remain  constant or increase. Then, in June 2004, RHS notified Congress that credit  subsidy budget authority for the Section 502 program would be exhausted  early in the fourth quarter and that in order to continue guaranteeing loans,  RHS would (1) increase the guarantee fee—effectively decreasing the  subsidy rate and allowing the agency to guarantee more loans—and   (2) exercise its authority to transfer budget authority. In contrast, RHS  officials told us that in August 2004 they estimated that the Section 538  program would exhaust its credit subsidy budget authority by September  15, but did not notify Congress of this situation. However, the program was  able to operate until the end of the fiscal year.
In contrast to FHA, RHS’s estimation process is less formulaic, more reliant  on staff judgment, and performed less frequently. To estimate when the  Section 502 program may exhaust its budget authority, RHS officials told us  they analyze obligation data and external variables at least monthly. RHS  officials explained that, depending on current program performance and  time elapsed into the fiscal year, they may base the estimate on obligation  rates from a specific prior year or an average of several prior years and on  differences in obligations from the previous year(s) to the current year.  RHS officials emphasized that they also use their experience and judgment  to incorporate market and economic information, such as interest rates  and data on new housing starts, into formulating the estimates. Because  RHS’s estimation process (1) can differ from one estimate to another,   (2) relies heavily on program officials’ interpretations of external variables,  and (3) does not include documentation of all the data used and  assumptions made in reaching the estimates, we could not replicate this  process to assess it. However, RHS provided us the results of an estimate  from April 2004, which accurately predicted that the Section 502 program  would exhaust its budget authority before the end of the fiscal year.
Because RHS’s Section 538 program is relatively small—it guaranteed 42  loans in fiscal year 2003—RHS officials told us they are able to estimate  whether the credit subsidy budget authority for the program will be  sufficient for the entire fiscal year by surveying RHS’s state offices and  participating lenders about anticipated demand for loan guarantees.
section_title: Congress, FHA, and RHS Could Exercise Options to Help Prevent Suspensions, but Options Would Have Other Implications
paragraphs: Through discussions with FHA, RHS, OMB, CBO, and housing industry  officials, and a review of relevant literature, we identified options—some of  which would require statutory changes—that could provide better warning  of future suspensions of loan guarantee programs or help prevent them  altogether. For example, by requiring FHA to provide more frequent  notifications concerning its commitment authority balances and creating  notification requirements for FHA and RHS concerning their balances of  credit subsidy budget authority, Congress could gain additional and more  timely information to consider whether supplemental appropriations  would be needed to prevent program suspensions. Congress could also  provide FHA higher annual limits on commitment authority to minimize the  likelihood that the agency would exhaust this authority before the end of a  fiscal year. To help prevent program suspensions due to the exhaustion of  credit subsidy budget authority, Congress could (1) combine multifamily  programs with negative and positive subsidy costs under the GI/SRI  account to eliminate the need for credit subsidy appropriations, (2)  authorize FHA to use negative subsidies to cover any shortfalls in credit  subsidy budget authority, or (3) make budget authority from the  subsequent year’s appropriation available in the current year. Finally, the  agencies can continue to use or be given additional administrative tools to  help delay or prevent program suspensions due to exhaustion of credit  subsidy budget authority. However, each of the options we identified would  have legal, budgetary, administrative, or oversight implications, and their  specific impacts would depend on how they were structured and  implemented.
subsections: section_title: Expanding FHA Notifications on the Use of Commitment Authority
paragraphs: As noted previously, FHA is currently required to notify its authorizing and  appropriations committees when it has used 75 percent of the commitment  authority for the MMI/CMHI and GI/SRI accounts. (In contrast to FHA,  RHS—which manages its programs based on credit subsidy budget  authority—does not have a notification requirement.)  Congress could  require FHA to provide additional notifications before and after the agency  has reached the 75 percent level—for example, when the agency has used  specified percentages of commitment authority or at certain points in the  fiscal year.
More frequent notifications would provide additional and more timely  information to Congress on the status of commitment authority balances  for FHA’s MMI/CMHI and GI/SRI accounts. For example, in June 2003, FHA,  as required, notified Congress that it would soon use 75 percent of the  commitment authority in its GI/SRI account. However, this was the only  notification Congress received prior to FHA’s suspension of the GI/SRI  account programs in mid-September. Had FHA been required to provide an  additional notification when it reached, for example, the 90 percent level,  Congress would have been notified in August—when there was a strong  possibility that the programs would need to be suspended—giving  Congress timelier information to consider providing supplemental  commitment authority that could have prevented the suspension.
FHA could implement this option with little administrative effort because it  already maintains the data on its commitment authority balances that  would be needed to meet expanded notification requirements.
section_title: Expanding Notifications to Include Obligations of Credit Subsidy Budget Authority by FHA and RHS
paragraphs: As discussed previously, the exhaustion of credit subsidy budget authority  before the end of a fiscal year has resulted in FHA and RHS suspending the  issuance of loan guarantees. Currently, neither agency is required to notify  Congress of the status of its balances of credit subsidy budget authority.  Congress could require FHA and RHS to provide such notifications—for  example, when they have obligated specified percentages or at certain  points in the fiscal year. These notifications would apply only to FHA’s  GI/SRI account and RHS’s Section 502 and 538 programs, which require  credit subsidy budget authority.
Requiring these notifications would provide Congress with more  information to use in considering if supplemental appropriations would be  needed to prevent program suspensions. FHA and RHS could implement  this option with little administrative effort because they already maintain  the data on their balances of credit subsidy budget authority that would be  needed to meet the notification requirements.
section_title: Establishing a Higher Limit on FHA Commitment Authority
paragraphs: The amount of commitment authority for FHA’s loan guarantee programs is  set in annual appropriations acts and serves as a limitation on the volume  of loans the agency can guarantee. For programs under FHA’s MMI/CMHI  account, this limitation exists even though they generate substantial  negative subsidies. As noted previously, for the programs with positive  subsidy costs under the GI/SRI account, the volume of loans FHA can  guarantee is also limited by annual appropriations of credit subsidy budget  authority. FHA’s annual budget requests and enacted levels of commitment  authority for its MMI/CMHI and GI/SRI accounts reflect commitment  authority limits that usually exceed the dollar volume of loans the agency  estimates it will actually guarantee. According to FHA officials, the  “cushion” between the enacted commitment authority limit and FHA’s  estimate of guarantees is intended to minimize the possibility of FHA  exhausting its authority before the end of the fiscal year. The enacted  commitment authority limits are increased periodically to reflect growth in  the loan guarantee programs over time but do not always reflect changes in  FHA’s estimates from year to year. As a result, the difference between the  enacted commitment authority limits and FHA’s estimates—what FHA  refers to as “standby authority”—has varied considerably. For example,  from fiscal years 1999 through 2004, the enacted commitment authority  limits exceeded FHA’s estimates by anywhere from 5 to 49 percent for the  MMI/CMHI account and 0 to 94 percent for the GI/SRI account. To  overcome the inherent difficulties in forecasting program demand and to  help ensure that FHA’s commitment authority limit is high enough to  prevent program suspensions, Congress could enact total commitment  authority limits that exceed FHA’s estimates by at least a minimum level.
With a higher commitment authority limit, it is possible that FHA would  guarantee a higher volume of loans—thereby assuming a greater insurance  risk—than it would otherwise. In that event, loan programs with negative  subsidy costs, such as FHA’s 203(b) program, would, all other things being  equal, increase the amount of negative subsidies available to offset FHA’s  budget but also increase the agency’s exposure to risk. In contrast, loan  volume for programs with positive subsidy costs under FHA’s GI/SRI  account would continue to be limited by the annual credit subsidy  appropriation and so would not be affected by this option. Depending on  the level of additional loan guarantee activity resulting from a higher limit, FHA may also require supplemental administrative resources to process,  review, and manage additional loan guarantees.
section_title: Combining Multifamily Programs under FHA’s GI/SRI Account for Credit Subsidy Purposes
paragraphs: Currently, several multifamily, healthcare, and single-family programs  make up FHA’s GI/SRI account, and programs may have a positive or  negative credit subsidy rate. Under the Federal Credit Reform Act of 1990,  the President’s Budget must reflect the costs of loan guarantee programs  and must include the amount of new loan guarantees planned. Federal  agencies must therefore prepare a budget estimate for each loan guarantee  program which represents the amount of credit subsidy budget authority  the program would require or the amount of negative subsidy the program  would generate. For example, for fiscal year 2004, FHA estimated that it  would need approximately $8 million in credit subsidy budget authority for  three multifamily programs under the GI/SRI account. FHA also estimated  that the remaining six multifamily programs under the account would  generate approximately $79 million in negative subsidies. As proposed by  the Millennial Housing Commission in 2002, HUD could combine all nine of  these programs for credit subsidy purposes, which, unless current credit  subsidy rates and levels of program activity changed dramatically, would  result in a single negative credit subsidy rate and thus eliminate the need  for annual appropriations of credit subsidy budget authority.
Currently, negative subsidies generated by some of FHA’s multifamily  programs are considered as offsetting receipts in the agency’s annual  budgets. Using some of the negative subsidies to, in effect, pay for the  positive subsidies required for other GI/SRI programs would reduce the  offset, all other things being equal. The elimination of credit subsidy  appropriations under a combined multifamily program could compensate  for the reduced offset. However, because the programs with positive  subsidies would no longer be constrained by appropriations of budget  authority, they could experience more activity and higher resulting costs  than they would otherwise, thus increasing the budget deficit (all other  things being equal). Because FHA already estimates credit subsidy rates for  each multifamily program to comply with Federal Credit Reform Act  requirements, limited additional administrative effort would likely be  required to merge these rates into a single rate.
This option would require congressional action and pose several challenges  to Congress and FHA. For example, to the extent that the option may be  inconsistent with Federal Credit Reform Act requirements, Congress would  have to provide FHA a limited exception to these requirements. Further,  congressional oversight would be affected because combining the  programs would eliminate the need for credit subsidy budget authority.  Therefore, congressional appropriators would only be able to control the  size of the programs through limits on commitment authority. Additionally,  to maintain its current level of oversight, Congress would need to ensure  that HUD continued providing the estimated cost of, and number of  guarantees under, individual programs in its annual budget requests. This  option would also require FHA to alter its accounting and record keeping  systems to accurately track the budget activity for the combined programs.
section_title: Authorizing Use of Negative Subsidies to Cover Shortfalls in Credit Subsidy Budget Authority for FHA
paragraphs: In recent years, negative subsidies generated by the single-family and  multifamily programs under FHA’s GI/SRI account have exceeded the  account’s positive subsidy requirements (i.e., credit subsidy costs) by over  $200 million per year. A bill introduced in April 2001 would authorize FHA  to use negative credit subsidies from its GI/SRI account programs to cover  the credit subsidy costs of making loan guarantees if FHA exhausted the  original appropriation of credit subsidy budget authority before the end of  a fiscal year.
If this option were implemented, it would be unlikely—given the current  credit subsidy rates and level of activity for each program—that FHA  would have to suspend the issuance of loan guarantees for GI/SRI account  programs due to the exhaustion of credit subsidy budget authority. The  proposal would require Congress to amend section 519 of the National  Housing Act (codified at 12 U.S.C. § 1735c) to allow the use of negative  subsidies as budget authority for programs with positive subsidy costs,  which could result in these programs experiencing more activity and higher  resulting costs than they would otherwise, thus increasing the budget  deficit (all other things being equal). From a budgeting perspective, this  option would prevent these subsidies from being used as offsetting receipts  in HUD’s overall budget. As a result, additional appropriations or cuts in  HUD’s other discretionary spending might be required to compensate for  the elimination of the offset. Further, the amount of negative subsidies that  CBO estimated FHA would need to cover shortfalls in credit subsidy  budget authority would be charged against FHA’s overall budget authority  in the current fiscal year.
section_title: Appropriating Advanced Funding for Credit Subsidy Costs at FHA and RHS
paragraphs: To help ensure that FHA and RHS programs with positive subsidy costs  would not be suspended due to exhaustion of credit subsidy budget  authority, Congress could also provide “advance funding” for FHA and RHS  program credit subsidy costs. Advance funding authorizes agencies, if  necessary, to charge obligations in excess of the specific amount  appropriated for that year to the next fiscal year’s appropriation. Congress  could stipulate in the agencies’ annual appropriations acts that an  additional amount of budget authority would automatically be made  available to cover additional credit subsidy costs in the current fiscal year if  the original appropriation of credit subsidy budget authority were  exhausted. For example, Congress could specify this amount as a fixed  sum or a percentage of the original appropriation.
If FHA or RHS were to obligate any of these additional amounts, the  amounts would be charged to the agencies’ appropriations of credit  subsidy budget authority for the subsequent fiscal year. All other things  being equal, this would reduce the amount of budget authority available in  the subsequent year.
section_title: Continuing or Expanding Currently Permitted Practices at FHA and RHS, Such As Increasing Fees or Transferring Budget Authority
paragraphs: FHA and RHS have existing tools that they can and have used to help delay  or prevent program suspensions. For example, FHA and RHS establish  application or guarantee fees for their loan guarantee programs and have  the discretion to change them during the fiscal year. All other things being  equal, raising fees lowers the credit subsidy rate for the affected program  and allows the agencies to cover the credit subsidy costs for more loan  guarantees. For example, in June 2004, RHS increased its loan guarantee  fee by 25 basis points (0.25 percent) on all Section 502 guaranteed loans.  RHS indicated that the fee increase allowed it to reduce its credit subsidy  rate and thereby cover the credit subsidy costs for more than 1,000  additional loan guarantees. Additionally, and as discussed previously, RHS  has limited authority to transfer budget authority to cover resource  shortfalls. RHS used this authority in fiscal years 2003 and 2004, when it  transferred funds from various loan and grant programs to cover the credit  subsidy costs for the Section 502 program. FHA does not have, but could be  given, similar authority by Congress.
The agencies cannot transfer budget authority or change fees without  significant administrative effort. According to FHA officials, changing  application fees requires them to promulgate regulations, while increasing  guarantee fees requires them to develop and place a notice in the Federal  Register. Furthermore, increasing fees makes loan guarantees less  affordable for borrowers. Finally, administrative transfers of budget  authority cannot be made without budget authority being available  elsewhere in an agency’s budget and requires concurrence by OMB.
section_title: Agency Comments
paragraphs: We provided a draft of this report to HUD and USDA for their review and  comment. HUD provided comments in a letter from the Deputy Assistant  Secretary for Finance and Budget (see app. IV). HUD agreed with our  findings but said it saw difficulties with each of the options we presented  for helping to prevent program suspensions. HUD cited specific difficulties  with some of the options. For example, HUD questioned the option to  expand FHA notifications on the use of commitment authority, saying we  presumed that Congress did not act to prevent the suspension of the GI/SRI  account programs in fiscal year 2003 because it did not receive timely  notifications. Our draft report did not make this presumption.  Nevertheless, we clarified the final report to emphasize that had FHA been  required to provide an additional notification once there was a strong  possibility that the programs would need to be suspended, Congress would  have had timelier information to consider providing additional  commitment authority.
HUD also commented that the option to combine multifamily programs  under FHA’s GI/SRI account for credit subsidy purposes is inconsistent  with the Federal Credit Reform Act, which requires that credit subsidy  rates be determined for each program. Our draft report indicated that this  option would require congressional action. We added language to our final  report to recognize that this could involve giving FHA a limited exception  to Federal Credit Reform Act requirements to the extent that the option  may be inconsistent with these requirements. Also, as our draft report  stated, to maintain its current level of oversight, Congress would need to  ensure that HUD continued providing the estimated cost of, and number of  guarantees under, individual programs in its annual budget requests.
HUD said that the option for appropriating advance funding for credit  subsidy costs was a one-time-only solution because program activity in the  year from which funding was advanced would be at risk for suspension due  to inadequate credit subsidy budget authority. We disagree that the option  would only be a one-time solution, because any year from which funding  was advanced could likewise receive an advance from the subsequent  fiscal year to avoid program suspensions, if necessary.
USDA agreed with our findings and provided technical comments, which  we incorporated into this report as appropriate.
As agreed with your office, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days from the  date of the letter. At that time, we will send copies to other interested  Members of Congress and congressional committees and to the Secretaries  of HUD and USDA. We will also make copies available to others upon  request. In addition, the report will be available at no charge on the GAO  Web site at http://www.gao.gov.
Should you or your staff have any questions or comments on matters  discussed in this report, please contact me at (202) 512-8678 or  woodd@gao.gov or Steve Westley at (202) 512-6221 or westleys@gao.gov.  Major contributors to this report are listed in appendix V.
section_title: Scope and Methodology
paragraphs: To determine how often and why FHA and RHS have suspended their loan  guarantee programs due to the exhaustion of commitment authority or  credit subsidy budget authority before the end of a fiscal year, we reviewed  relevant agency and housing industry notices, budget data, and  correspondence relating to program suspensions since fiscal year 1994. We  also interviewed cognizant agency and housing industry officials.
To determine how FHA and RHS manage, and notify Congress of, their use  and obligation of these authorities, we reviewed laws, regulations, and  guidance governing the agencies’ approval, monitoring, and estimation  processes and the agencies’ procedures for informing Congress of the  status of their loan guarantee programs. We also interviewed agency  officials responsible for these tasks and obtained information on the  information systems they use to administer their loan guarantee programs.  Finally, to assess FHA’s approach for estimating utilization of commitment  authority, we analyzed FHA monthly budget and accounting data for fiscal  years 2003 and 2004. We conducted a straight-line analysis for each month  within that time frame that assumed that the agency would use  commitment authority for the remainder of the fiscal year at the same rate  experienced previously in the year.
To identify options that Congress, FHA, and RHS could exercise to help  prevent the agencies from suspending their loan guarantee programs  before the end of a fiscal year and the likely implications of these options,  we interviewed budget, legal, and housing finance specialists from OMB  and CBO; housing industry officials from the National Association of Home  Builders, the Mortgage Bankers Association, and the National Association  of Realtors; and we conducted a literature review to identify relevant  studies and legislation. To determine and illustrate the potential  implications of these options, we obtained these officials’ views on the  effects of various alternatives and analyzed agency budget and accounting  data.
We assessed the reliability of the data used in our analyses by (1) reviewing  existing information about the systems and the data, (2) interviewing  agency officials knowledgeable about the data, and (3) examining the data  elements (fields) used in our work by comparing known and/or anticipated  values. When inconsistencies were found, we discussed our findings with  agency officials to understand why inconsistencies could exist. We  determined that the data were sufficiently reliable for the purposes of this  report.
We conducted our work in Washington, D.C., between January 2004 and  January 2005 in accordance with generally accepted government auditing  standards.
section_title: FHA and RHS Loan Guarantee Processes
paragraphs: FHA’s loan guarantee processes are different for its single-family and  multifamily programs. As shown in figure 3, for FHA’s single-family  programs, an FHA-approved lender determines a borrower’s (homebuyer’s)  eligibility for an FHA loan guarantee. If the lender determines that the  homebuyer and the property being financed are eligible, the loan case file is  sent to an FHA field office for review. If the field office approves and issues  the loan guarantee, FHA then records the amount of commitment authority  used and, when appropriate, obligates credit subsidy budget authority.
For FHA’s multifamily programs, the process begins when a borrower  (developer) applies for a loan from an FHA-approved lender, who in turn  submits a loan guarantee application to an FHA field office for review (see  fig. 4). If the field office determines that the borrower and the property  being financed are eligible, then the lender underwrites the loan and  submits an application for commitment—the formal agreement by the  government to guarantee the loan once the lender fulfills certain  conditions—to the field office. If the field office approves the application,  FHA then records the amount of commitment authority used and, when  appropriate, obligates credit subsidy budget authority upon headquarters  authorization, after which the field office issues the commitment.
RHS also has separate loan guarantee processes for its Section 502 and  Section 538 programs. For the Section 502 program, as shown in figure 5, a  borrower (homebuyer) applies for a guaranteed loan through an RHS- approved lender. RHS is notified and reserves the required amount of credit  subsidy budget authority. The RHS field office then reviews the loan  documentation and, if the documentation meets RHS’s requirements,  obligates credit subsidy budget authority, and issues a commitment.
Lender closes loan, submits loan  closing package to field office, and  field office issues loan guarantee.
Field office notified of potentially eligible applicant and   informs lender credit subsidy reserved for pending application.   Lender performs underwriting tasks and field   office reviews loan documentation.   Field office obligates credit subsidy budget authority and   issues conditional commitment. commitment.
As shown in figure 6, for loans guaranteed under the Section 538 program, a  borrower (developer) applies for a guaranteed loan through an RHS- approved lender. RHS selects proposals based on eligibility requirements  and has a field office review the underwriting. The field office then  forwards a request for credit subsidy budget authority to headquarters,  which obligates the authority.
section_title: Applicability of Options to Past Program Suspensions
paragraphs: The usefulness of options for delaying or preventing suspensions of FHA’s  and RHS’s guaranteed loan programs can be considered in light of whether  they would have been applicable to past suspensions. (See table 4.)  As  previously noted, the expanded notification options would have provided  additional information on the status of resources for FHA and RHS  guaranteed lending programs and would thus have been applicable to most  of the suspensions since fiscal year 2000. Providing a higher limit on  commitment authority would have increased the amount of commitment  authority available to FHA and, as a result, would have been applicable to  the suspension of programs under FHA’s GI/SRI account in fiscal years 2003  and 2004 due to the exhaustion of commitment authority. The option that  would combine the multifamily programs under FHA’s GI/SRI account for  credit subsidy purposes would likely eliminate the need for appropriations  of credit subsidy budget authority and therefore would have been  applicable to the suspension of GI/SRI account programs due to the  exhaustion of budget authority in fiscal years 2000 and 2001. The option  that would permit the use of negative subsidies to cover shortfalls in credit  subsidy budget authority would have been applicable to the same  suspensions. In addition, the option that would appropriate advance  funding for credit subsidy costs would have been applicable to the  suspension of programs under FHA’s GI/SRI account in fiscal years 2000  and 2001 and the suspension of RHS’s Section 502 program in fiscal years  2003 and 2004—all of which were due to the exhaustion of credit subsidy  budget authority. Further, the option to continue or expand currently  permitted practices, such as increasing fees or transferring budget  authority, would have been applicable to or was actually used to delay the  same four suspensions. For example, RHS used its authority to increase  fees to delay suspension of the Section 502 program in fiscal years 2003 and  2004. FHA could have taken similar steps to help avoid or delay the  suspension of programs under its GI/SRI account in fiscal years 2000 and  2001. Finally, RHS used its authority to transfer budget authority to delay  the suspension of its Section 502 program in fiscal years 2003 and 2004. If  FHA had the authority to transfer budget authority, this option would have  been applicable to its fiscal year 2000 and 2001 suspensions.
section_title: Comments from the Department of Housing and Urban Development
section_title: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: Staff members who made key contributions to this report include Eric  Diamant, Ginger Tierney, Bill Sparling, Patty Hsieh, Barbara Roesmann,  Carlos Diz, Linda Rego, Marc Molino, Jerry Sandau, Dan Blair, Christine  Bonham, Marcia Carlsen, Rachel DeMarcus, and Alison Martin.