President George W. Bush has signed legislation that provides $200 million to help as many as 40,000 low-income families with down payment and closing costs.
“One of the biggest hurdles to homeownership is getting money for a down payment,” Bush said during the bill signing ceremony, according to a copy of his remarks posted on the White House Web site.
“This administration has recognized that, and so today I’m honored to be here to sign a law that will help many low-income buyers to overcome that hurdle, and to achieve an important part of the American dream,” Bush said.
The American Dream Downpayment Act is designed to help potential home buyers who can make monthly payments but don’t have the upfront cash for closing costs or a downpayment. It will provide a maximum down payment assistance grant of either $10,000 or six percent of the purchase price of the home, whichever is greater, according to a statement from the Department of Housing and Urban Development (HUD), a major supporter of the bill.
The grants will be distributed through HUD’s HOME program and administered by state and local governments.
“This is a good day for thousands of families who have only dreamed about sharing in the American dream of home ownership,” acting HUD Secretary and cabinet nominee Alphonso Jackson said in a statement.
“Not only will this allow thousands of hard-working Americans to unlock the door to home ownership, it will also help close the gap that separates minority households from the rest of the country when it comes to owning a home to call their own,” Jackson said.
In his remarks Bush said while the rate of homeownership in America stands at a record high of 68.4%, the rate for minorities is below 50%.
“That’s not right, and this country needs to do something about it,” he said. “Last year I set a goal to add 5.5 million new minority homeowners in America by the end of the decade. This is an attainable goal; that is an essential goal. And we’re making progress toward that goal.”
Mortgage industry groups hailed the bill as boom to the industry.
“Nationwide, mortgage brokers originate two out of every three home loans, and we are proud to support this important initiative,” A.W. Pickel III, president of the McLean, VA.-based National Association of Mortgage Brokers said in a statement.
The Mortgage Bankers Association of America’s senior vice president of government affairs Kurt Pfotenhauer said in a statement that the bill is “a major victory for American families.”
“The bill will help mortgage lenders nationwide offer more interest-rate flexibility in offering FHA 5/1 hybrid ARMs to consumer, and increase multifamily loan limits for FHA-insured properties in high-cost areas,” he said.
The bill does have its critics.
Arizona Republican Congressman Jeff Flake, a Republican, did not support the bill because he “is just philosophically opposed to subsidizing the purchase of homes,” his spokesman, Matthew Specht, told the Sarasota Herald-Tribune.
And The Heritage Foundation, a conservative Washington think tank, called the bill “wasteful and extravagant.”
“Although encouraging home ownership is a useful policy goal,” the foundation said in a statement, “policies to promote it should be ones that create opportunity and encourage individuals to save, not seek handouts.”
Supporters said the Bush administration is committed to comprehensive mortgage reform of RESPA.
“This administration has proposed new rules to simplify the forms homebuyers and homeowners fill out when they apply for a loan or close on a mortgage,” Bush said. “These changes in the rules will make (home buying) easier.”
HUD said the president’s proposals would lower closing costs by approximately $700 per loan, “further stimulating homeownership for all Americans, ” the agency said.
