Congressional Budget Office Report: H.R. 600 Will Not Require U.S. Government Funding

Sacramento, CA — January 20, 2009
By: Nehemiah Corporation of America

Click here to download the complete Congressional Budget Office Cost Estimate

Prior to the introduction of FHA Seller-Financed Downpayment Reform Act of 2009 (H.R. 600), the Congressional Budget Office (CBO) confirmed that H.R. 600, just as last year’s downpayment assistance (DPA) bill (H.R. 6694), will not require U.S. government funding. This is due largely to the self-funding mechanism that sets mortgage insurance premiums based on an individual’s credit scores.

H.R. 600 is identical to the final version of H.R. 6694 as it relates to seller- funded DPA transactions and requires no changes to the previous CBO estimate. The only change to the legislation was the removal of all language regarding the implementation of risk-based pricing for all FHA borrowers. H.R. 600 allows risk-based pricing for DPA borrowers only.

“Downpayment assistance has helped more than one million renters achieve the dream of homeownership,” said Representative Al Green (D-TX) who introduced H.R. 600 on January 16, 2009. “My colleagues and I recognize that these programs have transformed lives without spending a single taxpayer dollar. The Congressional Budget Office estimates that seller-financed DPA will generate $65 million over the next five years and save taxpayers $13 million next year. I introduced this bill, H.R. 600, to revive this critical program under new standards that will effectively balance the risk of potential foreclosures with the goal of increasing homeownership. Seller-financed downpayment assistance helps hardworking Americans achieve the dream of homeownership at no cost to taxpayers. I strongly believe that we can mend the program rather than end the program.”

The Department of Housing and Urban Development (HUD) had claimed DPA programs contribute to higher default rates and could potentially result in having to offset the risk by tapping into its reserves. DPA providers and industry members have long disputed this claim.

“This is an ideal example of why Congress has been so ineffective in moving toward a solution to the current crisis,” said Scott Syphax, president and CEO of Nehemiah Corporation of America. “Congress has already passed over $1 trillion in aid to those responsible for gambling with American’s credit markets. They are considering another stimulus package that could match that level. On the other hand, it won’t support a program that would help hundreds-of-thousands Americans without costing the government or taxpayers a dime according to its own budgeting office. It doesn’t seem like they can get on the same page, even when the proof is in the pudding.”

According to Nehemiah Corp of America, a DPA provision within the bailout to reinstate DPA could help ensure continued liquidity in the stagnating housing market by providing aid to an estimated 600,000 working-class people for home purchases next year, generating $150 billion in home sales.

“Creating opportunities for homeownership will be the cornerstone to strengthening a crumbling housing market and breathing life back into the economy,” said Mr. Syphax. “With credit scarce and homeownership harder to achieve than ever, the consequences of removing a program that created 50,000 homeowners a month is unfathomable and will likely further devastate the housing market, not to mention communities across the country that have come to rely on these programs. Congress must ensure that the pending bailout of Wall Street does not undercut the important role that consumers play in any economic recovery, not to mention the liquidity programs like downpayment assistance provide at no cost to taxpayers.”

DPA was created to aid borrowers who qualify for Federal Housing Association-insured loans but do not have access to the minimum down payment requirements of at least 3%.

“It’s for times like these that the government initiated the Federal Housing Association during the New Deal, and its role is as germane now as it ever was,” continued Mr. Syphax. “Washington needs to follow H.R. 600’s lead and see what is so plainly obvious to the CBO. DPA can provide the liquidity and access to homeownership needed to push billions of otherwise lost dollars into the housing market and won’t cost taxpayers, Treasury or the U.S. government a thing. Language is already drafted through a bi-partisan Bill and it has been vetted by the CBO. Now Congress just needs to use it!”

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For additional information, please contact Shelley Mitchell, smitchell@nehemiahcorp.org, 916-231-1999.

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