Department of Housing and Urban Development's Requirement That the Department of Defense Pay Mortgage Insurance Premiums on Wherry and Capehart Family Housing Properties

The Department of Housing and Urban Development (HUD) requires the Department of Defense (DOD) to pay mortgage insurance premiums on Wherry and Capehart family housing properties owned by DOD and insured by HUD. A review of this practice indicated that it is no longer necessary for HUD to require DOD to insure HUD against DOD's default, especially since DOD has guaranteed the payment of these mortgages and the Congress has provided annual appropriations to repay the mortgages.

DOD insurance premium payments have resulted in an insurance reserve balance in the Armed Services Housing Mortgage Insurance Fund (ASHMIF) of $76.5 million which far exceeds the $2.1 million in reserves that HUD considers necessary to insure itself against default. DOD has requested on several occasions that the Secretary of HUD no longer require the mortgage insurance premiums. HUD has maintained that, while ASHMIF has excess reserves, the Servicemen's Mortgage Insurance Fund had a reserve requirement deficit of about $29.9 million, and the premiums from ASHMIF are needed to help offset this deficit. The excess reserves of $74.4 million accumulated from the Capehart/Wherry programs are more than sufficient to offset the $29.9 million reserve requirement deficit in the Servicemen's Mortgage Insurance Fund and to negate any increase in the Servicemen's insurance premiums if HUD did not require further premiums from the Capehart/Wherry program.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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