WashingtonWatch.com - H.R. 6694, The FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008

Comment by carl (December 23, 2008, 01:00:00)

Tue, 23 Dec 2008 00:00:00 EST

Software and they pay upfront. How do you know if that upfront payment came from a line of credit that they will have to pay back. What happens if they go under and leave the debt unpaid? Happens everyday just like it does in the housing business. Now to answer your question on Hondas....we will finance up to 120% of the value of a car. In this industry people come in everyday with big suv's with negative equity. Done every day with GOOD CREDIT. Thats my point...with good credit business all over the US including software sales sell products at 100% or more. Why should it be any different for Homes that INCREASE in value over time unlike the software you sell and the Honda's I sell. Business do not usually use their own money...they borrow it to buy goods to run their business as well as the product they sell so why should I use my savings and tie it up in a home when I could be using those funds for emergencies, provide for my family as well as invest as I see fit....

Comment by carl (December 23, 2008, 01:00:00)

Tue, 23 Dec 2008 00:00:00 EST

Merry Christmas...

Revision by webmaster (December 23, 2008, 01:00:00)

Tue, 23 Dec 2008 00:00:00 EST

H.R. 6694 would revise the requirements for seller-financed downpayments for mortgages for single-family housing insured by the Secretary of Housing and Urban Development under title II of the National Housing Act and to authorize risk-based insurance premiums for certain mortgagors under such mortgages.

Detailed Summary

FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008 - (Sec. 2) Amends the National Housing Act to make exceptions to the prohibition against mortgage insurance for mortgages involving a downpayment using funds furnished by: (1) the seller or any party that benefits financially from the transaction (seller-financed downpayment); or (2) any third party that is reimbursed by the seller or any such party.

Makes eligible for mortgage insurance, in spite of a seller-financed downpayment, any mortagors with credit scores equivalent to a FICO score of: (1) 680 or more; (2) at least 620 but less than 680; or (3) 619 or less. Prescribes conditions for mortgage insurance in the latter two situations.

Requires entities participating in a governmental or private nonprofit program that provides downpayment assistance for such a mortgage to offer and make available, before loan closing, counseling about the responsibilities and financial management involved in homeownership.

Authorizes the Secretary of Housing and Urban Development to impose civil money penalties for improperly influencing appraisals.

(Sec. 3) Prohibits the Secretary from implementing: (1) risk-based premiums designed for mortgage lenders to offer a Federal Housing Administration (FHA)-insured product that provides a range of mortgage insurance premium pricing based upon a specified risk that the insurance contract represents; or (2) any other risk-based premium product for mortgage insurance on a single family residence where the premium price for such new product is based upon the borrower's Decision Credit Score.

Makes an exception from such prohibition for flexible risk-based premiums. Authorizes the Secretary to establish, for a mortgagor whose FICO credit score is under 600, a mortgage insurance premium structure with a variable rate that reflects the mortgagor's credit risk, if the basis for determining such rate is established before the mortgage is executed.

Requires notice to mortgagees and to Congress before such a premium structure is established or changed.

Requires the Secretary to consider specified factors when premiums are established and collected under a flexible risk-based premium structure.

Authorizes the Secretary to provide for variations in such rates according to the credit risk associated with the type of mortgage product that is being insured.

Requires the Secretary to make payment incentives to a mortgagor, in the form of certain refunds, upon payment in full of timely mortgage payments.

Authorizes the Secretary, for mortgages with a flexible risk-based premium, to establish a higher annual premium in lieu of a higher up-front premium.

Status of the Legislation

Latest Major Action: 10/2/2008: Placed on the Union Calendar, Calendar No. 582.

Points in Favor

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Points Against

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Comment by Nate (December 22, 2008, 01:00:00)

Mon, 22 Dec 2008 00:00:00 EST

Well Carl, I think its pretty obvious that I am not a realtor or broker or any other profession that is connected to this huge lobbying effort to resurrect DPA just to boost sales at the expense of everyone else. I don't need to ask you the same because we both know the answer to that question....

Comment by RE: M (December 22, 2008, 01:00:00)

Mon, 22 Dec 2008 00:00:00 EST

So, Plumber Joe is allowed to buy Teacher Sally's home even though he has nothing in the bank. Plumber Joe gets laid off. Because Plumber Joe has no savings, Plumber Joe defaults. Teacher Sally seems happy because she sold her house, but is now sad because the new home she purchased just lost value due to all the Plumber Joes. Hmm, seems like there is still a leak in the this theory about DPA....

Comment by carl (December 22, 2008, 01:00:00)

Mon, 22 Dec 2008 00:00:00 EST

Well, Nate. I am neither. I sell Hondas so I guess your assumption is dead wrong. You are right when you say resurrecting DPA was stupid under the old program....but you need to read hr 6694. Buyers need good credit to take advantage of this program..the way it needed to be in the first place. So I will ask you again...what do you do for a living? If you are in sales...or your company sell products do they require down payments?...

Comment by Nate (December 22, 2008, 01:00:00)

Mon, 22 Dec 2008 00:00:00 EST

I am in software, customers pay the entire amount up front. There isn't a Honda dealership out there that would let a person drive away in a car without a reasonable down payment. And I'm certain the auto industry doesn't employ a rediculous gimmick like DPA. So what is your reason for supporting DPA? Do the new guidelines require people to have some savings should they fall on hard times? If they do have savings, then why should they qualify for DPA? Moreover, if they do have savings, doesn't that indicate they have the ability to save and all they have to do is save a little longer and won't need DPA? Please, give me a convincing argument why we need DPA, because I have read many of these pro DPA posts and have not come across one yet....

Comment by Carl (December 15, 2008, 01:00:00)

Mon, 15 Dec 2008 00:00:00 EST

I'm curious Nate...what do you do for a living?...

Comment by Nate (December 12, 2008, 01:00:00)

Fri, 12 Dec 2008 00:00:00 EST

I am so completely disgusted that DPA is rearing its ugly head again. Responsible homeowners are bearing the brunt of bailing out irresponsible morons that bought homes they could not afford and now there is talk of resurrecting DPA which allows people to purchase homes with virtually no money down. JFC!!! Do supporters of DPA really think we are that stupid or are they just greedy. I think we all know the answer to both is YES! So here we go again, I am certain the self-serving Democrats will push this through and Obama will sign it. Congratulations to all you greedy realtors and brokers, I'm sure you will get your wish....

Comment by Karla (December 11, 2008, 01:00:00)

Thu, 11 Dec 2008 00:00:00 EST

I support DPA programs 100% for many of the reasons brought up by people before me. I would just like to address the issue related to housing values. I closed 7 clients using the DPA program in 2008. All those clients purchased foreclosures or short sales (preforeclosures), homes that were already priced under market value, sometimes significantly. Our offers were at or slightly above asking price with DPA assistance. None of these sales resulted in inflated prices. With the quantity of unsold foreclosures and other housing inventory, we need these programs to give the housing market a boost, and it won't cost taxpayers the billions of dollars it would cost for the government to purchase this bad debt from the banks. Strengthen underwriting guidelines, don't kill the program....

Comment by M (December 9, 2008, 01:00:00)

Tue, 09 Dec 2008 00:00:00 EST

It all comes down to the "trickle UP effect" Plumber Joe is unable to purchase first home because of lack of required funds, Teacher Sally can't sell her home and buy Banker Carlos home, who can't then buy Attorney Candace estate....

Comment by re: Johnson (December 5, 2008, 01:00:00)

Fri, 05 Dec 2008 00:00:00 EST

I know you will find this hard to believe but I agree with you on most everything you wrote.I am in sales and see that people over the age of 65 usually owe nothing..have perfect credit and have paid cash for most everything in their life. We are broke not because of DPA but because our generation expects everything now and cannot wait. However my personal situation is that I owe nothing in credit cards, I drive a paid for 97 altima and work 55 hours a week. Me keeping my money and financing 100% is not costing you any money. I will pay my obligations as long as the good lord gives me the health and abiltiy to do so. Always have and always will. DPA will cost each family .13 cent per year. Nothing compared to the return on local taxes and durable goods it will give in return. Also....I don't own a 52" flat screen, Its a 32" big A** color set from Wal mart that takes 3 people to move..:) Enjoyed discussing this topic with you....I guess we will see what happens after Jan 20....

Comment by RE: Mark (December 4, 2008, 01:00:00)

Thu, 04 Dec 2008 00:00:00 EST

Honestly Mark, it matters little at this point. My children's future is being flushed down the toilet by the current shotgun approaches of giving away trillions of dollars to irresponsible people who never should have qualified for these loans to begin with. So whoopi, lets flush our grandchildren's futures as well by continuing the trend of irresponsible lending programs like DPA. You all fall into the category of people who believe that home ownership is a right. Unfortunately, for the rest of us, Democratic leadership believes the same. Just as an aside, what amazes me about so many people who can't afford to save for a home seem to have no problem affording a 52" flat panel television. But hey, I guess large flat panel television ownership is perceived as a right by the same people. There has never been a better and more rewarding time in this country for selfish, irresponsible people, what a joke....

Comment by Mel (December 4, 2008, 01:00:00)

Thu, 04 Dec 2008 00:00:00 EST

What's taking so long to bring pass HR 6694?????????????????...

Comment by RE:J Johnson (December 2, 2008, 01:00:00)

Tue, 02 Dec 2008 00:00:00 EST

First of all....there are many many more autos in this country than homes, so defaulting on autos do add up just like homes. Also consider long term a home is an asset that appreciates unlike a car that depreciates. I could use all my resources to make that down payment but common sense would tell me to hold on to my Cash and use it for that rainy day you refer too. If I am laid off all my savings would be tied up in my home instead of in my bank so I could weather the storm. This is how I would address your concern to supporting DPA. You are paying for loans that people could not afford from the beginning with bad credit and income that was not required to be verified. I agree with you that the past DPA was a joke and should had not been passed in the first place. It allowed most EVERYONE to get a loan with no sound financial judgement. But hr 6694 is different. It looks at credit scores, job history and income....

Comment by RE: Mark (December 1, 2008, 01:00:00)

Mon, 01 Dec 2008 00:00:00 EST

Mark, are you planning on buying a car for over $100,000, or a house for only $20,000? You are comparing apples to houses. When someone defaults on a car loan, which more and more people are doing, it does not have the same fiscal impact as defaulting on a home in a downward real estate market. My point is that people who put $9000 of their hard earned money toward the purchase of anything, a car, boat, home, etc., are much less likely to walk away from a loan obligation. You say it is not my money, I say it is. Not only am I going to pay for all these people defaulting, but most likely my children are too. I have yet hear a single viable argument from anybody in support of DPA that will address the question of how people with no savings will pay their mortgage should they fall on hard financial times. How will you pay your mortgage if you get laid off Mark?...

Comment by Mark (December 1, 2008, 01:00:00)

Mon, 01 Dec 2008 00:00:00 EST

Bill 3221, The Housing Recovery Act, or The Foreclosure Prevention Act, is the biggest failure in the history of the United States Congress. It is also the most tragic example of how our legislators can be swindled by another government agency, in this case FHA, into eliminating a vital and beneficial program. DPA requires NO tax dollars, is responsible for assisting thousands of Americans in purchasing a home, and generates home sales in all price points. It is imperative that Congress passes Bill 6694 to reinstate DPA and show the country that they are looking out for mainstreet Americans and not just bailing out special interest big business....

Comment by RE:J Johnson (November 21, 2008, 01:00:00)

Fri, 21 Nov 2008 00:00:00 EST

So are you saying everything we buy we should put down 3% to 20% before we can buy and if we don't then I don't feel like I have ownership. I can go out and buy a car with 0 down...in fact I can buy a car for over msrp to cover negative equity. I pay my bills!!!!! Come on....if I thought $9000 was chump change why would I need DPA. My point was over the 30 year life of the loan it lessens the impact on a homeowner that needs help. Stop preaching to me.....I'm not taking anything from you. Go after welfare, the government that wastes our tax dollars in programs that are not necessary....

Revision by webmaster (November 20, 2008, 01:00:00)

Thu, 20 Nov 2008 00:00:00 EST

Detailed Summary

FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008 - Amends the National Housing Act to make exceptions to the prohibition against mortgage insurance for mortgages involving a downpayment using funds furnished by: (1) the seller or any party that benefits financially from the transaction (seller-financed downpayment); or (2) any third party that is reimbursed by the seller or any such party.

Amends the FHA Modernization Act of 2008 to authorize the Secretary of Housing and Urban Development to implement a risk-based premium product for borrowers with lower credit or FICO scores through the establishment and collection of adequate mortgage insurance premiums to cover the risks of such loans.

Requires the Secretary to provide for a refund of a portion or all of the higher risk-based premiums paid at the time of insurance by such borrowers as a result of risk-based pricing, but only those borrowers with a history of on-time mortgage payments. Requires payment of such refund upon payment in full of the underlying mortgage obligation.

Status of the Legislation

Latest Major Action: 10/2/2008: Placed on the Union Calendar, Calendar No. 582.

Points in Favor

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Points Against

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Comment by Jim (November 13, 2008, 01:00:00)

Thu, 13 Nov 2008 00:00:00 EST

Real simple solution . . . Congress amends HUD's statutory cash investment requirement for borrowers as follows: "The 3% minimum investment is reduced to zero for buyers of foreclosed properties and those with less than 125% of the median income for their area. Buyers making less than the 3% investment will pay upfront and monthly MIP premiums of 150% of the amount charged to like buyers making a 3% or greater investment." There . . . No flim-flam DPA machinations needed . . . the MI pool gets funded enough to handle the higher defaults . . . REO's get sold, low income buyers get access to homeownership, etc. etc....

Comment by mark (November 5, 2008, 01:00:00)

Wed, 05 Nov 2008 00:00:00 EST

Hey J Johnson. Do you really think that someone that uses the DPA of only $9000 and defaults because they cannot make the payment would had been able to make the payment if they had actually made the DP themselves. $9000 would probably make the difference of 50 bucks at best. HR 6694 rewards those with good credit and a proven track of paying their bills....unlike the prior program. It cost you nothing!!!! Going through a divorce I know first hand how hard it is to save money when any extra goes to support my kids and my X. FHA defaults are because they lent money to those that had no business buying a home in the first place. 6694 is different!!!!!!! This is real life buddy....this is not asking for any of your money...just a way to help get into a home that I would pay TAXES on and purchase goods for the house....

Comment by RE: mark (November 5, 2008, 01:00:00)

Wed, 05 Nov 2008 00:00:00 EST

Hell yes mark, I know for a fact that most people are much much more likely to NOT walk away from their obligations if they are at risk of losing their own hard earned money. Not only would a person think twice about losing the money, they would certainly give more consideration to affordability if they had to put their own money on the line. You speak of $9000 like its chump change, and guess what, it is if you didn't have to earn it. Agreed, this is real life and you should treat it as such....

Comment by vstil (October 23, 2008, 01:00:00)

Thu, 23 Oct 2008 00:00:00 EDT

who are the sellers, who have just lost 20% of the value of the home ... to finance the buyer ... pay buyer down, closing, and the other costs. Again this is socialist thought, "from each according to their ability, to each according to need". We have all witnessed the bankers and stock marketers are more needy than the rest of us .. who pay for their excesses....

Comment by VS (October 23, 2008, 01:00:00)

Thu, 23 Oct 2008 00:00:00 EDT

Comment by GW (October 23, 2008, 01:00:00)

Thu, 23 Oct 2008 00:00:00 EDT

All the people who are screaming about trying to prevent poor people from owning a home or the ones sayign they can afford the home but not the down payment are rediculous. You can't afford the home if you can't afford the down payment. Why do you people think we are in this mess? If people took more responsibility and saved money then bought something we would all be better off but th ementality is that home ownerhips is a right given to you just because you live in the USA. If you can't afford the down payment then you can't afford the need repairs, the property taxes that are going to go up, the furniture to put in the house, etc. These programs are jsut ways to bend the system to get people who done want to wait and follow the system into a house. If you want to buy a house you need to set a monthly budget, spend less then you make, save for a down payment and then save some more for an emergency fund then buy a house. This process makes you vested in the house....