US federal mortgage insurer to lay off about half its workforce: sources
Officials are preparing to cut employees at the Federal Housing Administration
THE Trump administration is planning to lay off at least 40 per cent of the workers at the federal agency that provides mortgage insurance on loans for people who otherwise would not qualify for one, according to two sources familiar with the agency’s plans.
Federal officials are preparing to cut employees at the Federal Housing Administration (FHA), the office that helps certain homebuyers secure a loan if they cannot afford a down payment or have below-average credit scores, the sources said. It also protects lenders against losses on those loans.
The FHA is one of the largest mortgage insurers in the world and has insured more than 40 million home loans since 1934, according to the agency’s website. The insurance is a key resource for many first-time buyers and low-income Americans, and can help protect lenders as well. That has opened up more credit to buyers who might not normally be able to snag a home-purchase loan.
The Trump administration cut thousands of employees in recent days, after President Donald Trump directed agency heads to do so. He told officials to focus on firing workers who “perform functions not mandated by statute”, including “diversity, equity and inclusion programmes”.
The FHA returns billions of dollars each year to the US Treasury through what is known as the negative credit subsidy. Congress does not appropriate funding to the FHA’s Mutual Mortgage Insurance (MMI) Fund; instead, loans guaranteed by the agency generate a positive return for the fund.
The MMI Fund grew from US$145 billion to US$173 billion in capital over the last fiscal year, with a capital ratio of 11.47 per cent. One staffer described the agency as the goose that laid the golden egg.
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“None of the functions that support FHA would work,” says Ethan Handelman, former Department of Housing and Urban Development (HUD) deputy assistant secretary for multifamily housing programmes, referring to cuts planned across the department.
HUD, the parent agency for the FHA, plans to discharge 50 per cent of its workforce, Bloomberg Law previously reported.
Antonio Gaines, president of AFGE National Council 222, said on Tuesday those cuts will also hit the FHA. AFGE National Council 222 is the union that represents more than 5,000 employees at HUD. The agency employs 9,600 people, according to its website. It’s unclear how many are detailed to FHA work.
Kasey Lovett, spokeswoman for HUD Secretary Scott Turner, said Bloomberg Law’s reporting on staff cuts at the agency is “not accurate”. She declined to elaborate further.
The FHA is by far the largest agency within HUD, accounting for about three-quarters of its personnel. Even if FHA staff jobs were somehow spared, cuts to other divisions will necessarily affect its work due to the interdependencies of federal housing policy.
For example: the Office of Policy Development and Research, slated to lose much of its staff in the coming months, conducts market studies that help to determine loan activity at FHA. BLOOMBERG
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