The ink of President George W. Bush’s signature on the housing rescue bill had barely dried when a handful of U.S. representatives began trying to revive seller-funded down-payment assistance (DPA), which will end Oct. 1 under the landmark housing legislation.
Now, with that deadline approaching, the effort to revive seller-financed DPA with new requirements is intensifying, according to a story in today’s Wall Street Journal: "Members of Congress are making a last-ditch effort to head off an Oct. 1 ban on the use of seller-assisted down payments on federally insured mortgages with a compromise measure designed to win over skeptical federal housing officials."
The bill, introduced July 31 by Rep. Al Green (D-Tex.) and supported by Rep. Maxine Waters (D-Calif.), Rep. Gary Miller (R-Calif.), and Rep. Christopher Shays (R-Conn.), proposes revising the requirements for such lending strategies, allowing seller-financed DPA on Federal Housing Administration (FHA) loans for buyers meeting certain credit score requirements.
Under the bill, known as HR 6694, if a would-be home buyer had a credit score of 680 or higher, he or she could use seller-funded DPA on an FHA loan. Borrowers with credit scores of 620 to 680 could utilize seller-financed DPA, but would have to pay higher insurance premiums for their home loans. Hopeful homeowners with credit scores of 619 or lower would be out-of-luck until at least 2009, when HUD could revisit the program and decide to broaden eligibility requirements.
According to the Journal story, “Supporters of the measure face an uphill battle, with just weeks before the Oct. 1 deadline and with Congress focused on other matters in the weeks before an election recess. Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, said that HUD has appeared receptive to the proposal, but a HUD spokesman said the agency had "deep reservations about the legislation in its current form."
Alison Rice is senior editor, online, at BUILDER magazine.