Rep. Pat Tiberi, R-Ohio, wasted no time in introducing legislation last week that would eliminate the downpayment requirement for families and individuals who buy a home with loans insured by the Federal Housing Administration.

Practically before the ink was dry on the Bush Administration's budget proposal for a zero downpayment FHA mortgage, Rep. Tiberi and nine co-sponsors, including fellow Ohio Republicans Michael Oxley and Robert Ney, tossed legislation into the hopper that the GOP says will unlock the door to home ownership for 150,000 families a year, mostly first-timers and mainly minorities.

But not everyone is enamored with the idea, which was first announced at the National Association of Home Builders' annual convention in Las Vegas last month.

For example, the National Multi-Housing Council, which represents apartment builders and owners, questions the wisdom of making "homeownership at any cost" the centerpiece of America's housing policy.

Even though NMHC is an advocate for the rental housing industry, it usually doesn't take on homeownership. After all, says spokesperson Kim Duty, "we know it rates up there with apple pie and motherhood and that people will just assume that we are simply motivated by self interest."

The group also agrees that homeownership is a worthy goal. "Shoot," says Duty, "several of our members offer rent-to-own programs."

But with nothing-down FHA loans now on the table, NMHC feels it has to speak up.

"This thinly-veiled attempt to woo voters in an election year is likely to do more harm than good to the very households they claim to be helping," Duty says. "FHA foreclosures are already at record levels -- more than double the average foreclosure rate for the past 20 years. It's bad enough that the average FHA foreclosure costs each family $7,200. But there is also a ripple effect. When you factor in the losses to all the other stakeholders -- lenders, insurers, states and local communities who lose tax revenue -- the average cost (estimated back in 1995) for each FHA foreclosure is $73,000.

"Homeownership is worthy, but homeownership at any cost only further distracts us from the fact that homeownership is not a magic bullet that can solve all of our problems. We have real housing needs that cannot be addressed -- and sometimes are actually exacerbated -- by pushing the homeownership envelope.

"They include suburban sprawl that pushes first-responders 70, 80 even 90 miles away from their jobs, the widespread affordable housing shortage, the need to revitalize many of our cities and the need to house the wave of echo boomers graduating from college and the aging baby boomers."

Another group that has weighed in on the President's budget for housing in fiscal 2005 is the National Housing Conference, a prominent, broad-based housing policy organization.

While lauding the zero-down plan and other ownership proposals, NCH said it is "strongly discouraged" by the White House's "on-going failure to address the critical need to preserve and produce affordable rental housing."

NCH President Conrad Egan warned that the administration's "continuous lack of support for preserving and increasing affordable rental housing is inevitably leading to homelessness for too many families."

On the other side of the debate, the Mortgage Bankers Association lauded Rep. Tiberi's action in getting "The Zero Downpayment Act of 2004" into play so quickly.

"A lot of consumers have the income to make mortgage payments and have a good credit record, but can't overcome the hurdle of a downpayment," said the MBA's chief lobbyist, Kurt Pfotenhauer. "This legislation will give future homeowners a chance to own a home today."

Even the Department of Housing and Urban Development said it is looking forward to "working in a bi-partisan fashion to extend the American dream of homeownership to lower income families."

Rep. Tiberi is a member of the House Financial Services Committee, which is chaired by Rep. Oxley, who promised the bill will get top priority. Rep. Ney chairs the Housing and Community Opportunity Subcommittee, which will consider the legislation.

The measure is aimed at potential homeowners who can afford the monthly payment but have been unable to save enough money to come up with the three percent downpayment that the FHA normally requires.

Borrowers who qualify would be charged a modestly higher insurance premium on their home loans, so their monthly payments would be somewhat higher. For example, on a $100,000 mortgage, a zero-down-payment borrower would pay approximately $50 a month more than a regular FHA borrower.

But the slightly higher premium would completely cover the costs of the program, meaning there would be no cost to taxpayers, the Bush administration says.

Published: February 11, 2004

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.