Real Estate Central

Flawed Legislation Would Increase Down Payments for FHA loans, Ban
Gifts for Low Income Buyers

DETROIT, July 23 /PRNewswire-USNewswire/ — A Detroit housing developer
is urging Rep. Carolyn Cheeks Kilpatrick, the chair of the Congressional
Black Caucus (CBC), to revisit the housing bill under negotiation in
Congress because it prevents low income people from receiving down payment
assistance from government, non-profits or other entities at a time when
many don’t have the personal savings to afford the down payment.

Frances Howze, Executive Director of Messiah Housing Corp., said the
legislation that is expected to be voted on this week in Washington creates
new hurdles for working families and individuals who need down payment
assistance. Moreover, she said the legislation will assist financial
institutions, but must do more for borrowers who can afford a mortgage
payment but do not have funds for the down payment to meet the necessary
mortgage application requirements.

“There are many good things in the bill,” Ms. Howze said. “But overall
it is also supposed to stimulate the economy. That will not be the case if
this provision is not amended. Instead of increasing economic activity, it
will further depress the housing market by eliminating many people as
potential buyers. It will adversely impact many faith- based and nonprofit
organizations and the communities they serve with these types of homebuyer
assistance programs. The government went all out to rescue Bear Stearns;
now government should ensure full access to housing for low to moderate
income working families.”

Ms. Howze said that Rep. Kilpatrick may be able to advocate for this
significant change because the CBC is a powerful voting bloc that the house
leadership will need to get a bill passed.

Specifically, Ms. Howze noted that provisions in the legislation could
also hinder prospective homeowners applying for loans backed by the Federal
Housing Administration (FHA). Minimum down payment requirements would
increase from 3% to 3.5%, and down payment assistance by non profits and
local governments would be banned. In addition, two other important
provisions address restructuring mortgages for homeowners at risk of
foreclosure and allowing judges to reduce the principal owed for homeowners
who have filed bankruptcy.

“This legislation squeezes low income buyers from both sides, making it
more difficult for them to become homeowners,” Ms. Howze said. “It bans
down payment assistance at the same time that is raising the down payment
amounts for the FHA program, which finances many mortgages for working
families. That’s not how to stimulate the economy; that’s how you bring on
a depression.

“We need legislation that helps working families keep their homes,
helps families purchase homes, and assist renters who are at risk of being
evicted and homeless due to their landlords’ foreclosure,” Ms. Howze said.
“Those should be the priorities. The priorities of this legislation are not
focused enough on working class homeowners.”

Moreover, Ms. Howze maintains that while the legislation calls on
Fannie Mae and Freddie Mac to pay $500 million a year for the refinancing
of loans for homeowners facing foreclosure, it does not respond to the
reality that by 2010 there will be well over 2 million additional families
in foreclosure.

“Working families in America expect the government to assist when we
have a fragile economy, but legislation must be fair, thoughtful and good
public policy,” she said. “We urge Rep. Kilpatrick to use her clout to make
this legislation better for Detroit’s working families.”

About Messiah Housing Corp.

Messiah Housing Corporation is an organization experienced in
developing, purchasing, rehabilitating, and constructing, and managing
property since 1978. It is one of the first Community Development
Corporations (CDC) and Community Housing Development Organization (CHDO) in
the nation. Messiah also provides homebuyer counseling, financial literacy,
foreclosure counseling and renter advocacy programs.

Contact:

Michael K. Frisby,

202-625-4328

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[Via Real Estate Newswire]