With the approval of the Federal Housing Administration, lenders are
continuing to compute downpayments based on a simplified two-step formula that actually
expired Sept. 30.
The House and Senate have cleared legislation granting the formula a
30-day reprieve. As of Friday, however, President Clinton had not yet signed the measure.
But in a letter to lenders last week, the FHA said they could use the
streamlined calculation as long as Congress keeps passing continuing resolutions keeping
the federal government operating even though lawmakers have not cleared the budget for
fiscal 2001, which began Oct. 1.
As of now, a continuing resolution is in effect until Oct. 14, by which
time Congress hopes to adjourn for the year.
The spending bills for housing and veterans programs includes a 27-month
extension of what was supposedly a non-controversial pilot program to replace the more
cumbersome three-step downpayment calculation. But that is still very much in doubt as the
Administration continues to use the extension as a bargaining chip.
Among other things, appropriators are fighting over White House demands
for a multi-family housing production program that's larger than the $1 billion program
proposed by Sen. Christopher Bond, R-Mo. The Administration also is insisting on 120,000 new
rental subsidy vouchers.
"We are open to a reasonable compromise," HUD Sec. Andrew Cuomo has
said. "But things are worse this year in terms of housing needs, and they are going to
have to be realistic."
Another factor is that the extension is authored by Rep. Rick Lazio,
R-N.Y., as is a bill that would make the simplified formula permanent. And so far, Democrats have
been reluctant to back a bill sponsored by the man who is locked in a close race with Hillary
Clinton for a seat in the Senate.
If Congress fails to give the formula new life, lenders will have to
revert to the old, more cumbersome calculation for determining how much cash FHA buyers must bring to
the closing table. And that, says the Mortgage Bankers Association, could force borrowers
seeking a $150,000 loan to come up with an extra $2,200 at closing.
An extension is "not something that can wait until next year," said the
MBA's Howard Glazer. It is "critical" or "we will see as many as 200,000 American families
unable to buy houses next year."
Published: October 9, 2000
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