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NAHB Seeks Passage of Seller Downpayment Assistance Bill
NAHB last week sent a letter to all House members in support of legislation to reinstate Federal Housing Administration (FHA) seller downpayment assistance for qualified borrowers.
Introduced by Rep. Al Green (D-Texas), H.R. 6994, the FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008, would allow this critical homeownership program to continue past its current Oct. 1 expiration date.
The bipartisan measure, which will be considered by the House Financial Services Committee on Sept. 16 and by the full House shortly thereafter, is also sponsored by Reps. Maxine Waters (D-Calif.), Christopher Shays (R-Conn.) and Gary Miller (R-Calif.).
Of note to home builders, H.R. 6694 would remove the current 12-month moratorium on risk-based mortgage insurance premiums. NAHB supports this provision and believes the authority to set insurance premiums that are commensurate with credit risk, while retaining the principle of actuarial soundness, would open the FHA program to growing ranks of potential home buyers who currently are shut out of the mortgage market by a tightening of qualification criteria.
The legislation would reinstate FHA seller downpayment assistance by establishing three classes for eligible borrowers based on their credit scores:
- Those with FICO scores above 679 would be allowed FHA seller downpayments under current Department of Housing and Urban Development guidelines.
- Those with FIOC scores of 620 to 679 would pay a risk-based mortgage insurance premium to cover their possible defaults in the amount of 3% of the original principal for a single premium and 1.25% of the principal balance as an annual premium.
- Those with FICO scores of less than 620 who may be deemed as eligible by HUD for FHA seller downpayments would be subject to HUD-established risk-based pricing.
For nearly a decade, HUD regulations and policies have permitted qualified charitable organizations to provide “gifts” to pay all or part of purchasers’ required cash contributions toward home purchases when using FHA-insured mortgage loans, regardless of the ultimate sources of the funds for these gifts.
A number of NAHB builder members have participated in the downpayment assistance program to provide homeownership opportunities to buyers using FHA-insured mortgages. It is typical for builders to provide downpayment assistance as one of a variety of sales incentives for new home purchases, particularly for entry-level home buyers.
“A sudden shutdown of this supplementary source of assistance would have a devastating impact on efforts to provide homeownership opportunities,” NAHB said in its letter to House members. “It is not in a builder’s interest to have a recently sold home return to the market through foreclosure. That is why NAHB is committed to finding a way to continue seller-funded downpayment assistance in a manner that is in the best interest of home buyers, builders and the solvency of the FHA mortgage insurance fund. NAHB strongly believes that H.R. 6994 accomplishes this goal.”
NAHB continues to urge lawmakers to pass this measure before Congress adjourns for the year in October.
To view the legislation, click here and type the bill number in the box at the center of the page.
For more information, e-mail Scott Meyer at NAHB, or call him at 800-368-5242 x8144.
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