Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, June 28, 1990 TAG: 9006280683
SECTION: BUSINESS PAGE: A13 EDITION: EVENING
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The bill also authorizes a $3 billion increase in government spending on housing programs next year. It was approved by a 96-1 vote Wednesday night with only Sen. William Roth, R-Del., objecting.
The measure also would extend for two years the $124,875 ceiling on FHA-insured mortgages that Congress last year raised from $101,250 in most high-cost areas.
The issue now moves to the House, where a competing version would cost far more money and take a different approach to restructuring often scandal-prone federal housing programs that have basically gone unchanged since 1968.
Housing Secretary Jack Kemp joined Senate sponsors earlier Wednesday in announcing a bipartisan agreement on key elements of the bill, which represents the biggest change in federal housing policies since 1968.
Senate Banking Committee Chairman Don Riegle, D-Mich., said the bill "charts a way out of a decade-long slide that has left 2 million Americans homeless."
"In the 1980s two-thirds of the families poor enough to get federal help with housing got none at all," Riegle said. "And, after 35 years of rising steadily, home ownership plummeted in each of the last 10 years."
But private lenders vowed immediately to oppose the Senate changes in the Federal Housing Administration mortgage insurance program when the issue reaches the House floor after Congress' July 4 recess.
"The compromise effectively closes the door to home ownership for thousands of American families," said Warren Lasko, head of the Mortgage Bankers Association of America.
Home buyers with FHA-backed loans would have to have at least a 5 percent down payment and would be required to pay at least two-thirds of closing costs up front, without financing. Loans with low down payments, deemed most at risk to default, would be subject to an added annual fee.
Under the compromise, according to lawmakers, the up-front costs to a young family "in a typical case" buying their first home with an FHA-insured mortgage would rise from $3,500 to $4,400.
Borrowers currently can finance all closing costs, sometimes resulting in loans greater than the value of the home, on FHA-backed mortgages.
Lasko estimated that 75,000 to 150,000 first-time home buyers would be closed out of FHA-backed loans. He called the change "the result of an overreaction to the savings and loan scandal."
The FHA insurance program lost $4.2 billion to bad loans in 1988, and its net worth has declined from $8 billion to $2.6 billion over the past decade.
Auditors have warned that without at least an annual 4 percent increase in housing values, the mortgage insurance fund could require a massive infusion of taxpayer funds to remain solvent, just like the savings and loan bailout.
Sen. Alan Cranston, D-Calif., a principal sponsor of the housing bill, had opposed changing the FHA rules last week but agreed to them in exchange for the administration dropping its opposition to a $3 billion increase in federal spending on housing.
As passed, the legislation would authorize $18.1 billion in spending in fiscal 1991, $19.5 billion in 1992 and $21 billion in 1993, compared with the $14.5 billion being spent this year.
In exchange for the new funds, Kemp's so-called Homeownership Opportunity for People Everywhere program, to encourage tenant purchase of public housing units, would get $1.9 billion over the next three years.
Kemp said the administration supported the greater spending, despite budget constraints that prompted Bush a day earlier to swallow his no-tax-increase pledge. But he noted the final amount will depend on budget talks.
Under the agreement, Senate Democrats also get their Housing Opportunity Program, which consolidates 10 existing housing programs funneling federal dollars to local governments for renovating or building housing.
Democrats agreed to allow part of that money to be spent on vouchers for the poor to use for rental housing, despite the Senate's rejection of a similar amendment last week.
by CNB