FHA No-Down Mortgage Plan Pushed

The Zero Downpayment Pilot Program Act of 2005 has been introduced and is now being debated in Congress. Real estate industry leaders strongly support this legislation. Here are a couple of quotes from leaders. Michael Petrie, chairman of Mortgage Bankers Association: "While our country currently enjoys record levels of homeownership, the downpayment hurdle is a major obstacle for low- and moderate-income and minority families who can afford the monthly mortgage payments but find it problematic to save for the downpayment. We believe in order to truly expand homeownership opportunities and improve housing affordability, we must overcome the downpayment challenge. This program is the appropriate tool for addressing the problem." David Wilson, president of the National Association of Home Builders: "This new legislation would help 50,000 families to achieve homeownership that would otherwise be denied the opportunity. It would continue the long tradition of innovation at the FHA by addressing a primary obstacle preventing many minority and low-income families from becoming home owners - the lack of funds needed for a downpayment." The new law would require borrowers to pay 2.25 percent mortgage insurance premium upfront, compared to the 1.5 percent required for an FHA single-family loan with a 3 percent downpayment, and an annual premium of 0.75 percent instead of 0.50 percent for the first five years of the loan, NAHB pointed out. Monthly payments would be slightly higher than for a standard FHA mortgage, and home buyer counseling would be mandatory for all buyers who participate in the program.