Initiative enhances homebuying opportunities

Initiative enhances homebuying opportunities The Department of Housing and Urban Development published in the Federal Register March 10 a final rule that will enhance homebuying opportunities by expanding its offerings of adjustable-rate mortgage (ARM) products on FHA-insured mortgages. Potential homebuyers will be able to choose mortgages with periods of three, five, seven or 10 years, depending on their needs, during which time the interest rate would be fixed.

The hybrid ARMs program was proposed by President Bush in an effort to increase opportunities for homeownership, particularly for minority families.

Under the rule, which takes effect 30 days from today, the interest rate for three-year and five-year ARMs cannot change by more than one percent per year after the fixed-payment period is over, with a maximum change of five percent for the life of the loan. For seven-year and 10-year ARMs, the maximums are two percent annually and six percent for the life of the loan. Currently, the only FHA-insured ARM that is available has a one-year fixed payment period, with caps of one percent a year and five percent for the remainder of the loan. That loan will still be available. 40,000 families are projected to take advantage of the hybrid ARMs program annually.

Other initiatives include:


* The Zero Downpayment Program, which would enable potential homebuyers to buy an FHA-insured home without having to put any money down. An estimated 150,000 families a year could achieve homeownership through this program;


* Creating the American Dream Downpayment Initiative, which will provide $200 million to help 40,000 low-income families each year with downpayment and closing costs;


* Instituting a single-family tax credit, designed to increase the supply of affordable homes;


* The FHA Payment Incentives Program, a new sub-prime loan product to offer FHA insurance to families with credit problems who would otherwise be charged higher rates in the private sector or not get a loan at all, and


* Expanding funding to $45 million in FY 2005 for housing counseling programs, which help families to better understand the home buying process and educate them against unscrupulous lenders.

HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The department also promotes economic and community development as well as enforces the nation's fair housing laws.

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