House Subcommittee Approves Tiberi's Zero Downpayment Legislation
WASHINGTON - The House Financial Services Housing Subcommittee on May 5 approved bipartisan legislation that would increase homeownership by eliminating the downpayment requirement for families and individuals who buy homes with Federal Housing Authority (FHA)-insured mortgages. H.R. 3755, the Zero Downpayment Act of 2004 which was introduced by Rep. Patrick Tiberi (R-Ohio) was approved by voice vote with one amendment offered by Subcommittee Chairan Rep. Bob Ney (R-Ohio).. The measure would create opportunities for first-time homebuyers who don't have enough savings for downpayments; meet FHA's underwriting requirements; and can easily afford monthly mortgage payments. A manager's amendment, in the nature of a substitute adds safeguards to the legislature designed to protect homebuyers and the FHA program by requiring pre-purchase counseling, an option for foreclosure prevention counseling, and full disclosure of the incremental costs of the loan. The amendment would also require HUD to use an automated underwriting system to evaluate potential homebuyers and establish a process to monitor lenders to ensure they're meeting the participation requirements. HUD would be allowed to charge up to 2.25% up front and up to .55% in annual premiums. The increase in fees is designed to offset the potential increased risk of no downpayment. Lenders would be required to provide a written disclosure describing the additional costs associated with the program and that would allow the borrower to weigh the pros and cons of using the program compared to the original FHA program or a conventional loan product. The manager's amendment was approved by voice vote.