President Clinton has signed a bill granting a 30-day reprieve to the Federal Housing Administration's simplified downpayment formula.
In addition, the somewhat controversial program that provides small thrift institutions and community banks a less expensive source of funds for home loans seems to have escaped the Congressional ax. But the omnibus housing bill that passed the House by an overwhelming 417 to 8 vote is dead.
Under the FHA extension, lenders can continue using the easier, two-step formula they have been employing under a two-year pilot until Oct. 30. By then, supporters hope, lawmakers will have reconciled their differences on a spending bill for housing and veterans programs that includes a 27-month extension.
As lawmakers struggled late last week to end the 106th Congress, House and Senate continued to wrangle with the HUD/VA appropriations bill. While nothing in Washington is a sure-thing, it now looks as though they won't allow to die what practically everyone has said has been an extremely successful experiment.
If it did pass into oblivion, borrowers seeking a $150,000 FHA loan would have to come up with an extra $2,200 in cash at closing, according to the Mortgage Bankers Association.
It also appears that backers of a popular mortgage purchase program run by the Federal Home Loan Bank system have been able to convince Senate Banking Committee Chairman Phil Gramm, R-Texas, not to push for an amendment that would have shut down the initiative.
The mortgage partnership finance program gives financial institutions wishing to sell their mortgages in the secondary market a third alternative to either Fannie Mae or Freddie Mac, an alternative its supporters say is less expensive because they don't have to pay costly guarantee fees to the two giant financial institutions, which dominate the after market.
Also, by providing commercial banks and savings institutions with another outlet for their mortgages, the amount of capital available for more loans is increased, and that leads to better rates and terms for borrowers.
But Sen. Gramm considers the bank system's regulator, the Federal Housing Finance Board, to be a rogue agency which implemented the program without the approval of Congress.
Meanwhile, a housing bill that contained something for practically everyone is not in the cards, at least not this year. The measure, which was authored by Rep. Rick Lazio, R-N.Y., who is battling Hilary Clinton for a Senate seat in the Empire State, simply found no interest in the upper chamber.
The legislation would have, among other things, helped 125,000 teachers, police officers and other public employees purchase houses, authorized the FHA to back the popular adjustable-fixed rate combo loans, increased the loan limit on FHA Title I home improvement loans from $25,000 to $32,500, and added important consumer protections to the FHA's 203(k) renovation loan program.
There is some talk of resurrecting a smaller housing bill, but it's doubtful that can be achieved before lawmakers head for home.
Published: October 16, 2000
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