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Builders Working With Congress to Include FHA Condo Purchases in Zero Downpayment Program

NAHB is working to improve legislation introduced by Rep. Patrick Tiberi (R-OH) on Feb. 3 that would implement the proposed FHA-insured zero downpayment mortgage announced last month by Federal Housing Administration Commissioner John Weicher at the International Builders’ Show in Las Vegas.

After a review of the bill found that it did not include condominiums purchased with FHA-insured loans in the new program, NAHB wrote to Tiberi that it supported his legislation but was eager to work with him to correct this omission. Condo loans could be included with a minor amendment to the bill.

The zero downpayment mortgage would carry higher up-front and annual insurance premiums (MIPs) than other FHA single-family programs — 2.25% upfront compared with 1.50% for the standard FHA mortgage insurance programs and 75 basis points annually, decreasing to 50 basis points after five years of satisfactory payment performance.

Because the up-front MIP is normally included in the amount borrowed, the higher up-front and annual MIP would be reflected in slightly higher monthly payments. HUD estimates that an additional 140,000 families would be able to achieve homeownership if this proposal is enacted.

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In its HUD budget for FY 2005, the Administration also proposed a sub-prime FHA Payment Incentive Program, which would be targeted to serve families with “limited or weak credit histories.” A similar program was included in the Administration’s budget proposal for the current fiscal year, but it was deleted by the Congress.

Loans insured under this program would bear higher than standard mortgage insurance premiums, which would decrease after the borrower established a record of timely payment.

The Administration suggests an annual mortgage insurance premium not to exceed 1.0% for loans insured under this program, compared to 0.50% for standard FHA-insured loans. The program would assist an estimated 60,000 first-time home buyers.

To read Tiberi's bill, click here and enter HR 3755 in the box at the upper left. 
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