[Congressional Record Volume 146, Number 114 (Friday, September 22, 2000)]
[Extensions of Remarks]
[Page E1572]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      FHA SHUTDOWN PREVENTION ACT

                                 ______
                                 

                          HON. JOHN J. LaFALCE

                              of new york

                    in the house of representatives

                      Thursday, September 21, 2000

  Mr. LaFALCE. Mr. Speaker, today, I am introducing legislation 
designed to prevent future shutdowns of FHA specialty lending programs. 
The ``FHA Shutdown Prevention Act'' provides standby legal authority 
for HUD to keep FHA loan programs under the so-called GI/SRI Funds 
operating in the event they run out of required credit subsidy.
  GI/SRI programs are all FHA loans, except the core single family MMIF 
loans. In late July of 2000, HUD was forced to shut down a number of 
specialty FHA loan programs, included in the GRI/SI account. These 
include the reverse mortgage program, condominium loans, Title 1 
property improvement loans, and various multi-family loans.
  The cause of the shutdown was that HUD had run out of credit subsidy 
required under law to keep making these loans, and Congress had failed 
to pass emergency legislation needed to provide additional credit 
subsidy. Though many of us have been calling on Congress to act to 
restore lending authority for these programs, the difficulty of finding 
a suitable spending bill to attach this to is easier said than done. In 
fact, just yesterday, the Senate rejected the Treasury-Postal 
appropriations bill, which had contained the necessary credit subsidy 
to restart these programs.
  These developments and yesterday's failure all illustrate that the 
current system is not working. The answer is that we should give HUD 
the standby legal authority to continue these programs, even when they 
run out of credit subsidy. This will not undercut the Credit Reform 
Act; appropriators will still have to appropriate the necessary credit 
subsidy each year (or if not, will still be scored as having 
appropriated such amount). But this bill merely provides a backstop in 
case our projections are inaccurate.
  The irrationality of the current system is underscored by the fact 
that the combined FHA GI-SRI funds actually make a net profit for the 
government. For FY 2001, FHA is projected to have 6 GI/SRI Fund loan 
programs which are projected to generate a positive credit subsidy--
that is, they are projected to generate a cumulative loss of $101 
million. For FY 2001, FHA is projected to have 16 GI/SRI Fund loan 
programs which are projected to generate a negative credit subsidy--
that is, they are projected to generate a cumulative profit of $122 
million.
  Thus, the 22 FHA GI/SRI Fund loan programs are projected to make a 
net profit of $21 million. In spite of this, the six programs projected 
to run a loss would be unable to continue at any point that they run 
out of credit subsidy--even if the combined fund continues to run a 
profit. This does not make sense. My legislation recognizes this 
reality, in effect allowing profit-making loan programs to pay for 
money-losing programs in the event there is a shortfall.
  I urge the appropriations committee to adopt this approach for the 
next fiscal year. When it comes to unnecessary shutdowns of FHA loan 
programs, we should make certain we never find ourselves in this 
position again.

Be it enacted by the Senate and House of Representatives of the United 
               States of America in Congress assembled, 

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``FHA Shutdown Prevention 
     Act''.

     SEC. 2. USE OF NEGATIVE CREDIT SUBSIDY FROM GENERAL AND 
                   SPECIAL RISK INSURANCE FUND PROGRAMS.

       (a) General Insurance Fund.--Section 519 of the National 
     Housing Act (12 U.S.C. 1735c) is amended--
       (1) by redesignating subsections (e) and (f) as subsections 
     (f) and (g), respectively; and
       (2) by inserting after subsection (d) the following new 
     subsection:
       ``(e) Use of Negative Credit Subsidy.--
       ``(1) In general.--In the case of any program for insuring 
     mortgages or loans which are obligations of the General 
     Insurance Fund that is determined for any fiscal year, for 
     purposes of title V of the Congressional Budget Act of 1974 
     (2 U.S.C. 661 et seq.), to have costs (as defined in such 
     title) of a negative amount, subject to paragraph (2), the 
     amount of such negative credit subsidy shall be considered to 
     be new budget authority provided in advance in an 
     appropriations Act for such fiscal year and shall be 
     available for covering the costs of making insurance 
     commitments under any program for insurance for mortgages or 
     loans under which such insurance is an obligation of the 
     General Insurance Fund or the Special Risk Insurance Fund.
       ``(2) Applicability.--Paragraph (1) shall apply with 
     respect to a fiscal year only if and beginning at such time 
     that, during such fiscal year, all amounts of budget 
     authority appropriated for such fiscal yea to cover the costs 
     of programs for insuring mortgages or loans which are 
     obligations of the General Insurance Fund or the Special Risk 
     Insurance Fund have been used to enter into commitments for 
     such insurance.''.
       (b) Special Risk Insurance Fund.--Section 238 of the 
     National Housing Act (12 U.S.C. 1715z-3) is amended--
       (1) by redesignating subsection (c) as subsection (d); and
       (2) by inserting after subsection (b) the following new 
     subsection:
       ``(c) Use of Negative Credit Subsidy.--
       ``(1) In general.--In the case of any program for insuring 
     mortgages or loans which are obligations of the Special Risk 
     Insurance Fund that is determined for any fiscal year, for 
     purposes of title V of the Congressional Budget Act of 1974 
     (2 U.S.C. 661 et seq.), to have costs (as defined in such 
     title) of a negative amount, subject to paragraph (2), the 
     amount of such negative credit subsidy shall be considered to 
     be new budget authority provided in advance in an 
     appropriations Act for such fiscal year and shall be 
     available for covering the costs of making insurance 
     commitments under any program for insurance for mortgages or 
     loans under which such insurance is an obligation of the 
     General Insurance Fund or the Special Risk Insurance Fund.
       ``(2) Applicability.--Paragraph (1) shall apply with 
     respect to a fiscal year only if and beginning at such time 
     that, during such fiscal year, all amounts of budget 
     authority appropriated for such fiscal year to cover the 
     costs of programs for insuring mortgages or loans which are 
     obligations of the General Insurance Fund or the Special Risk 
     Insurance Fund have been used to enter into commitments for 
     such insurance.''.





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