MARKET CONDITIONS

A new bill presented in the Senate this week could have far reaching effects for low and moderate income buyers.

Senator Jim Talent (Rep) of Missouri already has the support of HUD secretary Alphonso Jackson for his "The Expanding American Homeownership Act."

The new proposal would "modernize" the FHA, which doesn't meet the demands of many low and moderate income buyers, by:

1. Eliminating three percent minimum down payments and offering a variety of downpayment options.



2. Create new insurance premium structures to match the credit profile of borrowers.



3. Increase and simplify loan limits -- 87 to 100 percent in high cost areas and 48 to 65 in lower cost areas.

"In many areas of the country, the existing FHA limits are lower than the cost of new construction, eliminating FHA financing as an option for buyers of new homes in those markets. FHA has simply been priced out of the market in other areas, such as California, where FHA insured only about 5,000 home mortgages in all of 2005, down 95 percent from 109,000 in 2000." (HUD)

And it isn't just the Senate that is getting in on the action. The House introduced its version of the Expanding American Homeownership Act in early April, which intends to "modernize and update the National Housing Act and enable the Federal Housing Administration to use risk-based pricing to more effectively reach underserved borrowers, and for other purposes." It was approved by the House Financial Committee on May 24, 2006.

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by Carla L. Davis