WASHINGTON, D.C. - With the specter of tens of thousands of Americans locked out of a first home, the Mortgage Bankers Association of America (MBA) has called on the U.S. Congress to quickly pass legislation to extend a provision that simplifies the down payment calculation-and lowers the down payment amount-for Federal Housing Administration home mortgage loans.

As many as 200,000 first-time and low-income homebuyers a year, according to MBA's estimate, will be affected if the FHA's streamlined down payment calculation-passed by Congress two years ago as a pilot program-expires on Sept. 30. Unless it is extended, the down payment calculation for FHA loans reverts on Oct. 1 to an "old" formula that lowers the amount of money that can be borrowed and increases the down payment required.

"It is now time for the Congress to act to extend or make permanent the FHA streamlined down payment program so that the agency can continue to provide affordable homeownership opportunities to hard-working American families," said James M. Murphy, MBA vice president. "The FHA program has been very successful, and lawmakers need to ensure its continued success by passing this extension."

The FHA will make more than 400,000 loans above $125,000 during the two years the streamlined down payment is in effect-until Sept. 30. Under the "old" calculation, down payments were significantly higher for loans above $125,000. Using the streamlined calculation on a $150,000 loan, for example, the down payment would be about $2,200 less than it would be under the "old" calculation. (The current average home sales price is $172,000.)

Failure to extend the down payment simplification provision also will mean higher costs for lenders, both in lost business and in changes they'll need to make to their automated operations, MBA pointed out.

MBA is urging the Senate to adopt the Clinton administration's budget for the Department of Housing and Urban Development or House-passed H.R. 1776, both of which include an extension of the Streamlined FHA Down Payment Calculation. H.R. 1776, the American Homeownership and Economic Opportunity Act sponsored by Rep. Rick Lazio, R-N.Y., was approved April 6 by the House on a 417-8 vote.

To persuade Congress to move on the measure, MBA is mounting an extensive grassroots lobbying effort, including scheduling visits with lawmakers during Congress' August recess and asking its members to write their senators. MBA also unveiled an advertising campaign, with placements scheduled in Washington and financial publications.

In a related matter, MBA helped work out an agreement between HUD and Congress that sets a deadline for FHA to process loans using the simplified down payment calculation. After intense negotiations, Reps. Lazio and John LaFalce, D-N.Y. are announcing today that lenders may continue to process applications using the lower down payment calculation for loans closed through Sept . 30.

"A simplified, more affordable down payment process can mean the difference between homeownership and continuing to rent for thousands of Americans," said Rep. Lazio, who is chairman of the House Subcommittee on Housing and Community Opportunity. "The Mortgage Bankers Association of American has been the industry leader in advocating this critical interim measure." "HUD will continue to work with the Congress to make the streamlined down payment calculation permanent so that there are no future interruptions in FHA business," said FHA Commissioner and Assistant HUD Secretary William C. Apgar. "In the meantime, we were pleased to accept MBA's interim solution."

Published: July 20, 2000

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