Testifying before the Congress last month, the National Association of Home Builders (NAHB) expressed support for H.R. 3755, the “Zero Downpayment Act of 2004,” legislation that would authorize the Federal Housing Administration (FHA) to insure no-downpayment mortgages for single-family, first-time home buyers.
“H.R. 3755 addresses one of the greatest obstacles that prevent many families from becoming home owners - the funds necessary for the downpayment and closing costs. Introduced by Rep. Patrick Tiberi (R-OH), the legislation will help working families, particularly minority households, to achieve the American dream of owning a home by removing this financial barrier,” Bobby Rayburn, president of NAHB and a home builder from Jackson, Miss., told members of the Housing and Community Opportunity Subcommittee of the House Financial Services Committee.
The bill would eliminate the statutory requirement for a minimum three percent downpayment for FHA-insured single-family loans for first-time home buyers. To mitigate risk to the FHA’s Mutual Mortgage Insurance Fund, home buyers would be required to pay a 2.25 percent “upfront” premium on the loan compared to the 1.5 percent for the FHA’s standard mortgage insurance programs, and 75 instead of 50 basis points for the first five years of the loan.
Monthly mortgage payments would be slightly higher than for a regular home and home buyer counseling would be mandatory for all borrowers who participate in the program.
To enhance the legislation to assure that it reaches as many households as possible and extends to all forms of homeownership, Rayburn urged lawmakers to amend the bill to include condominium and cooperative loans. “In many communities around the country, single-family detached homes are far out of the price range for low- and moderate-income families. Condos and co-ops, on the other hand, are within their financial reach and can provide the same wealth-building benefits for families and also bring stability to neighborhoods.”
The Department of Housing and Urban Development estimates that 140,000 families would be able to take advantage of this new opportunity and achieve the American dream of homeownership if this legislation is enacted.
“As NAHB President, I have made housing America’s working families - the teachers, police officers, firefighters and other moderate-income workers who represent the heartbeat of any community - a top priority. H.R. 3755 will help to close the housing affordability gap and address our nation’s ‘workforce’ housing problem,” said Rayburn.