Government National Mortgage Association, the major backer of FHA and VA mortgages, has received a year's reprieve in the administration's budget, according to government and private sources.
Sources said the White House has decided to go along with a significant reduction in Ginnie Mae's commitments to guarantee mortgage credit, as proposed by the Office of Management and Budget for fiscal 1983, but has decided not to propose phasing out Ginnie Mae by 1987 as part of this year's budget recommendations.
"The decision is left for another day," one government source said.
Ginnie Mae is a government agency within the Department of Housing and Urban Development that buys mortgages, converts them into securities with the full faith and credit of the federal government, and sells them to investors. The process is designed to provide more money for housing.
FHA and VA loans are designed for the first-time home buyer because of their requirements for low down payments or none. Buyers pay a fee in exchange for the government backing, and members of the housing industries argue that the Ginnie Mae mortgage-backed security program is self-supporting.
The Mortgage Bankers Association says that more than 70 percent of all FHA and VA loans are packaged and sold as Ginnie Mae securities and that killing Ginnie Mae also would mean an end to FHA and VA loans.
The OMB has argued that this kind of government credit support "crowds outs" other borrowers in the credit market, skews the allocation of credit and adds demand in financial markets, thus raising interest costs.
The administration wants to limit Ginnie Mae commitments for fiscal 1982 to $48 billion. But Congress approved a ceiling of $68 billion in its budget bill and included a clause that the administration could not limit this further unilaterally as the White House had said it could. The White House will propose another reduction in the credit commitments in fiscal 1983 to $38.4 billion, sources said.
The proposal may well run into problems in Congress, however, because the FHA and VA programs have a strong constituency in middle-income, first-time home buyers.