FY 99 Budget
IV. Program Reforms and Improvements

A. Property Disposition Reform

The proposed reforms to the single family property disposition program would provide HUD with the flexibility to choose the most cost-effective way of paying insurance claims and disposing of acquired (defaulted) notes on insured homes. Current law requires HUD to pay insurance benefits for defaulted single family mortgagees and details the manner of calculating the amount of insurance benefits that must be paid.

If enacted, HUD would be able to take assignment of the mortgage notes (instead of taking properties into inventory) and then selling or transferring the property to a third party for servicing, loss mitigation, foreclosure and potentially disposition. It is expected that savings of more that $525 million (on a present value basis) will be result from the higher return on sales and reduced interest payments to lenders because properties will be disposed of much sooner than can be accomplished under current law.

B. Repealing Unnecessary HUD Programs

HUD has identified numerous programs that are no longer operative and which have not received funding for a number of years. Therefore the Department will be submitting legislation to repeal a number of programs that no longer are being funded or which were one-time demonstration projects that have been completed. In addition, a number of programs which have been authorized but never funded will also be included in repeal legislation.

C. Section 8 Savings Proposals

The Department is requesting a number of savings proposals for the Section 8 program. The budget extends several provisions which were enacted in 1998 appropriations law but expire at the end of the fiscal year. These include reforms that establish minimum rents of up to $25 per month, maintain current law public housing authority administrative fees for tenant-based rental assistance PHAs, and maintain Section 8 fair market rents at the 40th percentile of existing rents.

In addition, the Department is proposing two new savings provisions. One such provision enhances enforcement of rent reasonableness tests in the administration of Section 8 to ensure that private landlords are not oversubsidized. In addition, the budget proposes to adjust occupancy standards for single individuals, so that singles are subsidized on the assumption that they rent efficiency apartments rather than one-bedroom apartments, where efficiencies are available in the private market place.

If enacted, all of these reforms are expected to save the Section 8 program over $300 million in 1999 and nearly $1 billion by the year 2003.