Two House Democrats have joined the outcry over the third suspension in eight years of the FHA rental housing mortgage insurance program.

On Wednesday, Reps. John J. LaFalce of New York and Barney Frank of Massachusetts urged Mel Martinez, the secretary of the Department of Housing and Urban Development, to immediately reopen the program, which provides mortgage insurance for construction of moderately priced rental housing units.

Congress had appropriated $40 million in December for the department to use as emergency funds for the program. But instead of spending it, HUD suspended the program in April after its own loan reserve funds ran out.

In an effort to make the program self-sustaining, Mr. Martinez announced Monday that he wants to increase its insurance premiums by 30 basis points, to 80. He is also seeking additional money from Congress to use instead of the emergency funds.

The two congressmen argued Wednesday that the program’s suspension imperils $3.4 billion of loans for the construction of 50,000 units nationwide. Mr. Martinez needs to use the $40 million already appropriated to get the program running now, they said.

“The HUD secretary has $40 million for this program at his disposal [that] he refuses to use,” Rep. LaFalce said at a press conference. “We are calling on the administration to immediately release these funds to restart the FHA rental housing loan program.”

Rep. Frank criticized the plan to increase premiums, saying it would force landlords to raise rents.

“This is a glaring example of the antisocial priorities of this administration,” he said. “First, low-income people get the short end of the massive tax cut; now the administration wants to raise fees — which means higher rents — on multifamily FHA housing.”

HUD officials responded Wednesday that the premium increase would end the “cycle of stops and starts” that have plagued the program. “The Bush administration inherited a multifamily insurance program that HUD shut down three times in the last eight years because the funds were not properly managed to last the entire year,” the department said in a written statement.

The Mortgage Bankers Association of America, which also opposes a premium hike, applauded the congressmen’s statements. Cheryl Malloy, senior vice president at the MBA, said in an interview that developers would not be able to absorb the increase without raising rents.

“If you are increasing the MIP 60%, it would lead to rents increasing,” she said. “The MIP is something that you have to pay every month to HUD; it is factored into the costs of the projects.”

The MBA also faults HUD’s insistence on maintaining large reserves for the program, Ms. Malloy said. The trade group does not believe a loan reserve is needed “on the basic multifamily production programs,” she said. “We think they are putting too much money into the loan-loss reserve.”

The suspension could also pose a serious problem for lenders who finance FHA rental projects, she said.

“The shutdown is a major issue because we can’t finance those projects. The longer you wait to close on these projects, the more costs go up and the more chances you miss to get these projects done.”

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