The Community Home Lenders of America (CHLA) sent a letter to Congress urging higher Senate funding levels for salaries and expenses of Ginnie Mae and the Federal Housing Administration (FHA) for fiscal year (FY) 2025, according to a release.

“Both Ginnie Mae and FHA play a critical role in affordable and equitable access to homeownership, particularly for first-time and low-to moderate-income borrowers,” CHLA Executive Director Scott Olson said in the release. “Securing increased funding for these critical agencies will better help them execute on their mission to serve borrowers, proactively work on initiatives in a fiscally responsible way, and collaborate with the private market lenders that make homeownership possible for millions of Americans.”

In the letter sent Dec. 9 to organization chairs and ranking members, including the Honorable Steve Womack, Mike Quigley, Brian Schatz, and Cindy Hyde-Smith, CHLA requested Congress consider adopting a continuing resolution until March 2025 or to finalizing the FY 2025 Transportation and Housing and Urban Development (THUD) Appropriations conference report.

“We seek higher funding levels for Ginnie Mae and FHA, so that both agencies can sustain their capacity to fulfill their mission to serve first-time homebuyers,” the CHLA policy council wrote. “Given the ongoing challenges facing the housing market, with high home prices and rising interest rates, first-time homebuyers rely on the FHA and Ginnie Mae for affordable home loans and need these organizations to be adequately resourced to support the mortgage market.”

Ginnie Mae plays a critical role in guaranteeing securities backed by FHA loans, as well as Rural Housing Service (RHS) and Veterans Affairs (VA) single family loans, the CHLA went on to say, further stating that in 2023, Ginnie Mae supported more than 1.2 million households in the nation’s urban, rural, and tribal communities, including underserved segments of the population, service members, and veterans, with nearly 630,000 Americans achieving the dream of homeownership for the first time.

The Senate THUD appropriations bill funded the Ginnie Mae salary and expense account at $67 million and the House bill funded this at $54 million. The FY 2025 budget requested $67 million for this account.

“We request the higher Senate level of $67 million be adopted in the final conference report. The difference between the two bills is relatively small, in relation to the FY 2025 budget projection that Ginnie Mae will generate approximately $1.4 billion in profits (negative credit subsidies) next year,” the CHLA said. “However, the higher level is important, because it is essential that Ginnie Mae has the resources and staff the agency needs to fulfill its responsibilities and focus on its core mission, including marketing Ginnie Mae securities to global investors and conducting oversight of the 300-plus companies that issue Ginnie Mae securities backed by FHA, RHS, and VA loans.”

Full funding for Ginnie Mae is also important so the agency can proactively work on initiatives to enhance market liquidity for issuers, to support their ability to make principal and interest advances to Ginnie Mae investors when borrowers are delinquent, and to buy loans out of pools in order to perform essential loss mitigation, the CHLA wrote, while bringing up the notion that development of expanded liquidity options would enhance issuer participation in the program while minimizing Ginnie Mae’s exposure and need to intervene in cases where an issuer is unable to meet its advance obligations.

The CHLA also pointed out in its letter that its request would also provide funds for Ginnie Mae and FHA to respond to recommendations from the Financial Stability Oversight Council to address these liquidity risk issues.

“We also encourage you to support the funding level requested for HUD’s Office of General Counsel, which is also essential for Ginnie Mae to ultimately pursue opportunities to expand market liquidity,” the CHLA added.

The FHA insured 766,942 “forward” single-family mortgages last year, of which 498,363 mortgages were for first-time homebuyers. FHA leads the market in providing mortgage credit for otherwise qualified borrowers with low down payment capabilities or minor credit blemishes.

FHA carries out this affordable homeownership mission in a fiscally responsible way. The latest FHA Mutual Mortgage Insurance Fund (MMIF) report showed a year end FY 2024 capital level of $172.8 billion, and a capital ratio of 11.47, many times over its required minimum capital.

The Senate THUD appropriations bill set funding at $505.7 million and the House bill at $487.55 million. The FY 2025 budget requested $509 million for this account.

“We request the higher level of $505.7 million be adopted in the final conference report. The difference between the two bills is relatively small, in relation to the FY 2025 budget projection that FHA forward mortgage loans will generate approximately $4.444 billion in profits (negative credit subsidies) next year,” the CHLA said. “Sufficient funding levels for FHA are critical to enable the agency to work effectively with the private market lenders who make homeownership possible for millions of Americans. FHA’s core risk management responsibilities include setting appropriate premiums and underwriting standards for new FHA loans, supervising approved FHA lenders, monitoring of loan performance on its existing portfolio of mortgage loans, monitoring of the servicing and loss mitigation on its existing loans, and managing information technology and other systems that support the loan program.”

The CHLA closed its letter to Congress recognizing the need for fiscal restraint as deficits grow. Yet, both of these agencies generate funds that serve as an offset for their own and other government programs, and, therefore, providing these programs the funding needed to properly manage risk and operate efficiently would both enhance their ability to carry out their mission and reduce the chances of program risks creating greater costs down the road.