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Sweat equity, 100 percent loan-to-values and subprime programs are all items proposed in the Bush administration’s 2007 budget. The analysis states it will provide $100 million in HUD funding to assist low-income families with the down payment and closing costs for first-time buyers. The budget would also provide $45 million in funding for Housing Counseling coordinated through HUD and associated organizations to help 600,000 families obtain homeownership and avoid default, according to the analysis. Housing and Urban Development Secretary Alphonso Jackson said in a recent news release that the proposed budget would allow HUD to continue and improve its core programs that serve the nation’s communities.
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“The President’s proposed budget is a real investment in building a society based on ownership and reaching out to those people and places in need to make sure every American has a place to call home,” Jackson said in the announcement.
For its Self-Help Homeownership Opportunity Program, HUD is slated to receive $40 million. The program allows low-income first-time homebuyers to contribute at least 100 hours of “sweat equity” to the purchase of their home.
And to increase minority homeownership by addressing illegal discrimination, the budget proposes $45 million to finance Fair Housing and Equal Opportunity activities, the analysis said.
FHA borrowers would also benefit from two mortgage programs the administration is proposing. The Zero Down Payment mortgage would allow first-time borrowers with “strong” credit to finance up to 100% LTV plus closing costs.
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For those in the subprime category, a second program called Payment Incentives would be offered, the analysis said. The program would “initially charge a higher insurance premium and reduce premiums after a period of ontime payments.” The budget analysis explained that current mortgage insurance guidelines do not allow variances according to a borrower’s credit risk resulting in “safer borrowers” obtaining financing from conventional lenders and paying “higher prices than they would if offered FHA risk-based pricing. To address this issue the budget proposes a tiered risk-based pricing structure. Although the analysis didn’t provide for further details, it stated that the President’s 2007 budget would introduce a “new initiative to improve the management of the Federal Government’s credit portfolios.” HUD is included in the initiative because “FHA has a portfolio of $421 billion in outstanding direct loans and loan guarantees and $7.51 billion in defaulted loans.”
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