President Bush signed H.R. 3221 Housing and Economic Recovery Act of 2008 into law on July 30, 2008. Included in this bill was the elimination of down payment assistance (DPA) programs. Borrowers who are credit approved prior to October 1, 2008 can receive down payment assistance and have their loan FHA-insured.
While H.R. 3221 was intended to “rescue” the housing industry, the elimination of the DPA program will have the exact opposite effect of its intended purpose. Not only did it eliminate DPA programs, it also instituted a down payment requirement increase from 3 percent to 3.5 percent. This combination is a recipe for disaster and will further hurt the housing market.
Currently, roughly 40 percent of the monthly FHA loan origination volume utilizes down payment assistance to help lower-income Americans meet the previously mandated 3 percent downpayment requirement. It is estimated that 10-25% of potential homebuyers (approximately 50,000 nationwide) will have no way of securing home ownership without DPA programs. With the stroke of the president’s pen, millions of deserving Americans are now left with zero alternatives for attaining homeownership.
On July 31, 2008, a new bill, the FHA Seller-Financed Down Payment Reform and Risk-Based Pricing Authorization Act of 2008 (H.R. 6694) was introduced by several members of Congress. Representatives Maxine Waters, Gary Miller, Al Green and Christopher Shays sponsored the bill that if passed and signed into law will allow down payment assistance to continue indefinitely.
In order to save downpayment assistance programs, we must come together NOW to convince Congress to pass H.R. 6694 that allows down payment assistance to continue indefinitely. We need to preserve down payment assistance programs for families who are credit-worthy, but lack the savings necessary to fulfill their home ownership goals, protect the already fragile economy, improve the current housing market, and save jobs.
Don Zeigler
Princeton, WV
