Bush
seeks to increase minority
homeownership
By
Thomas A. Fogarty
20 January 2004
USA TODAY
In
a bid to boost minority
homeownership, President
Bush will ask Congress
for authority to eliminate
the down-payment requirement
for Federal Housing
Administration loans.
In
announcing the plan
Monday at a homebuilders
show in Las Vegas, Federal
Housing Commissioner
John Weicher called
the proposal the "most
significant FHA initiative
in more than a decade." It
would lead to 150,000
first-time owners annually,
he said.
Nothing-down
options are available
on the private mortgage
market, but, in general,
they require the borrower
to have pristine credit.
Bush's proposed change
would extend the nothing-down
option to borrowers
with blemished credit.
The
FHA isn't a direct lender,
but guarantees loan
payments for mortgages
on moderately priced
owner-occupied property.
The FHA guarantee now
permits private lenders
to finance as much as
97% of the purchase
price of a home for
millions of low- and
middle-income borrowers.
In
the proposal soon to
be delivered to Congress,
Bush would allow the
FHA to guarantee loans
for the full purchase
price of the home, plus
down-payment costs.
As a practical matter,
the FHA would guarantee
mortgages as high as
103% of the value of
the underlying property.
Weicher
says the change is aimed
at potential home buyers
whose credit excludes
them from the private
mortgage market. Borrowers
would need sufficient
income to meet monthly
payments. But, he said,
the plan would eliminate
the single largest impediment
to homeownership for
millions of households
- lack of money for
a down payment.
The
most recent government
figures show a national
home ownership rate
of 68.4%, the highest
ever. But less than
half of black and Latino
householders own the
home in which they live.
Bush has a goal of 5.5
million new minority
homeowners this decade.
FHA
loans carry higher risks
of delinquency and foreclosure
than do private mortgages,
and the proposed change
presumably will lead
to greater losses to
the government than
the current program
does.
Weicher
said the added risk
will be offset by higher
fees charged to borrowers
who opt to make no down
payment.
On
a $100,000 mortgage
with an interest rate
of about 6%, the nothing-down
borrower could expect
closing costs $750 higher
than other FHA customers.
Monthly house payments
would be slightly higher.
Mortgage
analyst Keith Gumbinger
of financial publishers
HSH Associates says
the Bush plan "would
fill at least a small
niche in the mortgage
market" - first-time
buyers with somewhat
impaired credit.
Affordable-housing
advocate Scott Syphax,
CEO of Nehemiah Corp.,
called the proposal "revolutionary." It
marks the clearest official
acknowledgment that
millions of potential
homeowners are being
blocked by high down-payment
costs, he says.
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