The Senate has been a minefield for major legislation aimed at preserving existing FHA loan programs and creating new ones.

As the legislative session winds to a close, the fate of FHA down payment simplification, a high priority for mortgage lenders, remains up in the air.

Last Tuesday the House passed a 30-day extension of the down payment simplification program, but proponents of an omnibus housing reform package sponsored by Rep. Rick Lazio, R-N.Y., which would have made the program permanent, appear to have conceded defeat.

Capitol Hill sources said that the 30-day extension has run into opposition from Sen. Fred Thompson, R-Tenn., but that this is not a serious threat.

Joseph Ventrone, Republican deputy staff director for the House Banking Committee, said that, Sen. Thompson's opposition aside, "I fully expect the Senate to pass it" before the program expires Saturday.

The omnibus housing bill, which passed overwhelmingly in the House but has languished in the Senate, includes numerous provisions that would expand the types of FHA loans that can be insured and would create new lending programs.

The simplification program is of particular interest to FHA lenders because it not only simplifies their calculations of down payments on FHA loans but also is estimated to save borrowers a lot of money. That makes the loans more attractive to borrowers, proponents say, which helps lenders make more of them.

The calculation method saves borrowers about $2,000 on the down payment for a typical, $150,000 FHA loan, according to the Mortgage Bankers Association. Ending the simplified down payments could cost lenders 200,000 FHA loans a year, the association said.

Rep. Lazio and Rep. Jim Leach, R-Iowa, chairman of the House banking panel, wrote last week to members of the House and Senate Appropriations committees asking them to include Rep. Lazio's bill in next fiscal year's Housing and Urban Development/Veterans Administration appropriations bill.

"Our legislation solves forever the issue of down payment simplification for new homeowners closing on mortgage loans insured" by HUD, the letter said. "This will mean that hundreds of thousands more working families every year will have a greater opportunity at homeownership."

In a separate letter, Rep. John J. LaFalce of New York, the ranking Democrat on the House Banking Committee, asked lawmakers to include in the appropriations bill provisions from Rep. Lazio's bill to make down payment simplification permanent, create 1%-down FHA loans for public servants, and allow HUD the authority to insure hybrid adjustable-rate mortgages.

He did not endorse the omnibus bill in its entirety.


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