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36 2015 HUD BUDGET PROPOSAL REVEALS NEW FEE, PROGRAM U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan revealed HUD's fiscal year 2015 budget proposal at the start of March in a conference call. "HUD's FY2015 budget request helps to create opportunity for all Americans by providing housing, capital investments, and critical services for millions of families," Donovan said. Joining Secretary Donovan on the call was Federal Housing Administration (FHA) Com- missioner, Carol Galante. An accompanying report to the call high- lighted previous accomplishments of the Obama administration, while providing forward-looking programs to help those in need of housing. "HUD and its partners have steered the housing market through one of the worst recessions in recent history, while continuing to serve the most vulnerable," the report noted. HUD has reduced veteran homelessness by 24 percent since 2010, helped 3.9 million families buy a home in the last five years, and assisted 450,000 families in avoiding foreclosure this past year. e proposed budget for 2015 increases cur- rent levels by 2.6 percent to $46.66 billion, and is 10.1 percent increase from 2013. e large increase from 2013 is due to sequestration cuts. e topline budget numbers are already set in law as a result of e Murray-Ryan Bipartisan Budget Act of 2013. "is year's budget presents a unique op- portunity for HUD to work within the frame of the Bipartisan Budget agreement while continuing to build ladders of opportunity for all Americans," Donovan said. "is funding will continue to help strengthen and stabilize our na- tion's housing market while putting our economy back on the right track and helping those in most need." A portion of the new budget would be used to create a pilot program, Homeowners Armed with Knowledge (HAWK), a "new housing counseling pilot to increase access to credit for first-time homebuyers and to embed counseling for troubled homeowners, further strengthening the FHA fund," the report said. Additionally, housing counseling would be increased by 33 percent to $60 million. "Housing counseling delivered by HUD- approved counselors not only benefits the family, but actually lowers the risk of default," Donovan said on the call. Carol Galante spoke about the proposed new administrative fee collected by the FHA. e fee would be used to further the FHA's quality assurance efforts by expanding its ability to monitor loans. "e fee is for being able to implement our Quality Assurance framework, which includes things like sampling of a more diverse portfolio of loans, not only looking at loans in default," Galante said. e purpose of the new fee is to provide feedback to lenders in a "timely way," so that "Lenders can lend with confidence to the full credit spectrum of borrowers," Galante said. Donovan reinforced Galante's statement, clarifying the goal of the fee and the purpose of quality assurance efforts: "As the FHA, and the administration more broadly, have stepped up enforcement, to really hold lenders accountable for the mistakes that were made in the crisis, there is no mistake we have raised the bar for companies and their accountability." He continued, "What we are trying to do here is to provide as much transparency and clar- ity to what that enforcement will look like going forward." NEW REPORT SAYS 2013 GSE REVENUE 'WILL NOT BE REPEATED' Strong fourth-quarter 2013 earnings by Freddie Mac capped a year of unprecedented financial gains for the government-sponsored enterprises (GSEs) but reflect several one- time items, according to a release issued by Fitch Ratings. "While results of the type posted in 2013 will not be repeated, Fitch Ratings expects increased guarantee fees (g-fees) and improv- ing mortgage credit quality to support con- tinued profitability for the GSEs this year," Fitch commented. e dividends paid by both Fannie and Freddie total $15.4 billion more than total Treasury draws, with no mechanism cur- rently in place to reduce the amount of senior preferred stock outstanding. e release noted the substantial 2013 revenue brought in by the two companies was not likely to be repeated, due to "significant nonrecurring items related to deferred tax allowance (DTA) valuation reversals, private label RMBS lawsuit settlements, increased representation and warranty settlements, and sizeable decreases in loan loss reserves, which were mainly driven by improvements in the housing market and better asset quality." Fitch suggested net income will shrink in 2014, as mandated reductions in GSE on- balance sheet assets will push spread income downward. e Treasury is expected to draw more frequently, according to Fitch Ratings, due to the GSE's capital reserve buffers being reduced. "e buffers dropped from $3.0 billion in 2013 to $2.4 billion in 2014 for each of the GSEs and will eventually be reduced to zero by 2018," Fitch said. e remaining availability under the Treasury agreement for Fannie Mae is $117.6 billion. Freddie Mac's availability is slightly higher at $140.5 billion. e release noted that the settlement of legal claims could remain a potential source of earnings in 2014, although lower than earnings from settlements in 2013. GSEs, Freddie Mac and Fannie Mae, have paid $203 billion in profits to the U.S. Treasury since 2012, according the Heritage Foundation. KNOW THIS

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