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Higher Fees On VA and FHA Loans; Pause In Housing Programs For Poor

February 4, 1985

WASHINGTON (AP) _ The Reagan administration today proposed a two-year halt in new housing subsidies for the poor and elderly and asked Congress to allow increases in fees paid by veterans and Federal Housing Administration borrowers.

Higher charges for the operation of secondary mortgage markets also would add to the cost of buying a home.

To raise more money, the administration wants to increase the loan insurance premium collected by the Federal Housing Administration from 3.8 percent to 5 percent on single-family homes. On a typical 95 percent government-insured loan on a $75,000 house, this would require a homebuyer to come up with an additional $850 at settlement. The FHA plans to insure $32.7 billion in loans in 1986.

The 225,000 veterans expected to apply for VA home loans in 1986 would pay a 5 percent loan origination fee under the budget proposal. The fee is now 1 percent. A typical borrower would have to pay an additional $2,850 at settlement or add that amount to his loan.

The housing portion of the budget proposes a two-year halt in a program to help poor people pay their rents. Also put on the shelf for two years is a program to fix up rental housing units and another to construct subsidized housing.

A two-year moratorium is also planned for direct loans to finance the construction of rental housing for the elderly and handicapped. Actual spending will grow by $18 million, however, because of loan commitments already made.

William J. Retzlaff, president of the National Association of Housing and Redevelopment Officials, said the cuts ″constitute total abandonment of any pretense that this administration is trying to meet housing needs of low- and moderate-income Americans, nor is it concerned with the crippling effect on the communities’ ability to carry out desperately needed revitalization and economic development.″

Noting that state and municipal governments are in better fiscal health than the federal government, Reagan proposes a $1.23 billion reduction in community and regional development spending, a cut of about 15 percent.

The president wants to eliminate the urban development action grant program, which acts as a magnet for private funding of development in depressed areas. But because of projects already approved, spending will actually increase by $22 million.

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