The House has given a 30-day stay of execution to the simplified method of calculating the downpayment for an FHA mortgage. But the Senate must still concur and the President must sign the extension by next Saturday before the reprieve is granted.

If the Sept. 30 deadline passes, lenders will have no choice but to once again use the old, more cumbersome method for figuring FHA downpayments. And that, says the Mortgage Bankers Association, could force home buyers seeking a $150,000 loan to come up with an additional $2,200 at closing.

As many as 200,000 buyers could be effected, the MBA claims.

The streamlined downpayment calculation, which was approved by Congress two years ago on an experimental basis, amounts to nothing more than technical changes to FHA downpayment requirements that have been amended so often over time that they had become difficult to understand, even by professionals who deal with them day-in and day-out.

A switch to an easier computation on a permanent basis was supposed to be non-controversial. After all, besides being simpler and easier to understand, it decreases the amount of money many FHA borrowers must bring to the closing table.

But it has become mired in election-year politics. The House has already passed legislation that would have given the two-year pilot permanent status. But the measure was authored by Rep. Rick Lazio, R-N.Y., who is running for Senator in the Empire State against Hillary Clinton. And the Democratic-controlled Senate has been reluctant to take up the bill out of fear it could give Lazio a leg up in his race against the First Lady.

The Senate Appropriations Committee was supposed to give the program an extra 12 months of life in the VA/FHA funding bill. That would have given supporters of the simplified downpayment calculation another full year to win the day. But "mysteriously," the extension was left out of the measure.

Now, the Senate is expected to take up the emergency 30-day extension on a unanimous consent request without discussion any day. But since Rep. Lazio also authored the stop-gap bill, no one is holding their breath. If even one Senator objects, the extension will be lost.

And that, says the MBA, could be devastating.

"Extension of this provision is critical this year or we will see as many as 200,000 American families unable to buy homes next year," said Howard Glaser, MBA's senior vice president for government affairs. "We need to make Congress understand that this is important. It's not something that can wait until next year."

Published: September 25, 2000

Use of this article without permission is a violation of federal copyright laws.