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Bush Administration Joins NAHB Efforts on Behalf of Zero Downpayment Mortgage

“NAHB has long advocated an FHA-insured zero downpayment mortgage as a significant tool for expanding the ranks of the nation’s home owners,” said Jerry Howard, the association’s executive vice president and CEO. “We are grateful that the Bush Administration recognized the value of such a program to help working families realize the American dream of owning a home of their own by removing a significant financial barrier to achieving that goal.”

The proposal to eliminate the statutory requirement for a minimum 3% downpayment for FHA-insured single-family mortgages for first-time home buyers “addresses the single biggest obstacle” facing families aspiring to become home owners, Federal Housing Commissioner John C. Weicher said in making last week’s announcement, and would be especially helpful to minority households.

“This is the most significant move by the FHA in more than a decade,” Weicher noted, and complements the American Dream Downpayment Act, which was recently signed into law.

Weicher estimated that about 150,000 families a year would take advantage of this new opportunity and that about 100,000 of those would not otherwise be able to purchase a home.

Home buyers would be required to pay a 2-1/4% premium for the loan upfront, compared to the 1-1/2% that is required for an FHA single-family loan with a 3% downpayment, Weicher said, and 75 instead of 50 basis points for the first five years of the loan.

Buyers would be required to qualify for the monthly payments under normal underwriting guidelines and would also be required to complete a homeownership counseling program. Monthly mortgage payments on a $100,000 home would be about $50 more than for a regular FHA loan.

The program will be proposed as part of the President’s budget for HUD, in which case it would be considered by the Congress late in the year, or it could be enacted as a free-standing authorization bill, Weicher said.

Howard said that the zero downpayment legislative proposal would be a top priority for NAHB this year.

“As the nation’s builders focus on expanding affordable housing opportunities for teachers, police offers, firefighters and other moderate-income workers who represent the heartbeat of any community, the zero downpayment mortgage will help close the housing affordability gap, and we will work tirelessly to ensure that this soon becomes a reality,” said Howard.

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