The House passed a bill Tuesday temporarily extending a simplified FHA down payment program that lets lenders keep making loans under the program while legislators work to make it permanent.

The program, which was created by a 1998 amendment to the National Housing Act, simplifies the formula for calculating down payments on FHA-insured home loans to make it more understandable for lenders and borrowers. More importantly, the formula saves homebuyers $2,200 on a typical $150,000 FHA loan, according to the Mortgage Bankers Association.

The program was to end Sept. 30, but the bill approved Tuesday would keep it going another 30 days. If the program is not made permanent, the MBA estimates, FHA lenders would lose up to 200,000 borrowers a year.

The bill to extend the provision was sponsored by Reps. Rick Lazio, R-N.Y., and Steven Kuykendall, R-Calif. Rep. Lazio also is sponsoring an omnibus bill that would make the FHA down payment simplification permanent. The House overwhelmingly passed the latter bill, but it has not yet reached a conference committee for reconciliation with counterpart bills in the Senate. The temporary extension buys Rep. Lazio time to get his omnibus bill through conference.

"This is an important step to allow the House and Senate time to reach final agreement on our omnibus homeownership package," Rep. Lazio said.

The temporary extension also gives lenders much-needed breathing room to continue making loans using the simplified formula.

"Without this measure, homebuyers [would] face a gap in being able to utilize the down payment simplification program," said Howard Glaser, the MBA's head of government affairs.

The trade group applauded the measure and urged its quick passage in the Senate. However, MBA president Christopher J. Sumner said, "While this stopgap measure is helpful, to ensure that all borrowers have uninterrupted access to FHA loan programs, Congress must take further action and pass a permanent extension."

The MBA has lobbied Congress to support making the simplified down payment program permanent, and it has rallied its members to support the effort.

Under the amendment that created the program, it was unclear whether loans that were closed but not received under the FHA program by Sept. 30 of this year could be processed using the old calculation. At the MBA's behest, Rep. Lazio and Rep. John J. LaFalce, D-N.Y., sent letters to the housing agency requesting that the simplified calculation be used for loans closed through Sept. 30, and the agency agreed.


Visit the Library of Congress' Thomas database online for more information on HR.5193; a proper link had not yet been available Tuesday evening. Related Content Online:

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