Downsizing plans targeted at the Department of Housing and Urban Development, including the Federal Housing Administration, could impact the processing of mortgage insurance for single-family homes, affordable apartment buildings, hospitals and nursing facilities.
HUD field offices in 34 states, plus the District of Columbia, are slated to close, according to a Bloomberg report. Department employees and their union say this may run afoul of a federal law that requires the agency to maintain at least one field office in every state where staffers process applications for mortgage insurance.
“They’re required to have a field office in every state,” said Antonio Gaines, president of the American Federation of Government Employees (AFGE) National Council 222, representing HUD employees. “If they decide not to do that, they’re supposed to ask for a waiver. They’re supposed to go to Congress.”
Bloomberg reported the agency's hub in Seattle and regional office in San Francisco could be on the chopping block, leaving Idaho, Oregon and Washington without a local presence and California with only one office. HUD employees have reported receiving notices that they have been reassigned to offices in different states.
A HUD spokesperson said no decisions about field office closures have been finalized, but the department is exploring consolidation.
Field office closures won’t necessarily interrupt loans for borrowers or lenders in affected states but could affect the capacity of the FHA and other federal housing agencies to do business, said Bloomberg’s report. In addition to underwriting loans, HUD regional and field offices assist landlords, tenants and municipalities with privately owned and publicly assisted properties, according to former HUD director of multifamily in the Midwest region Dan Burke. He told the publications that the loss of the insurance function could adversely impact the supply of affordable housing.
Local HUD offices also address fair housing claims and work with local governments who need attention from the department. Meanwhile, some locations house specialized functions. For example, the Tulsa, Oklahoma's field office employs key staff for the FHA’s Home Equity Conversion Mortgage program, Bloomberg reported.
Another federal law could come into play if the Trump administration moves ahead with HUD cuts. That law specifies that the reorganization of any HUD regional or field office can only proceed after the government has released a cost-benefit analysis that includes a study of the impact on the local economy.