October 12, 1998
H.R. 3899 - American Homeownership Act of 1998
(Lazio (R) NY and 31 others)
The Administration supports the objective of H.R. 3899 -- to improve
homeownership opportunities for all Americans. The bill would complement
many of the Administration's own efforts to expand homeownership. The
Administration is especially pleased that H.R. 3899 would reauthorize the
HOME program and the Neighborhood Reinvestment Corporation and create
Homeownership Zones to promote development in distressed neighborhoods.
The Administration, however, has a number of serious concerns about the
October 7th version of the bill. In particular, the Administration
opposes the provisions in H.R. 3899 that would:
- Require HUD to transfer ownership of certain FHA multi- and
single-family properties to community development corporations or units of
local government. This provision would unnecessarily restrict the
Secretary's ability to dispose of property and safeguard neighborhood and
taxpayer interests. This provision would also conflict with recently
approved provisions of the 1999 VA/HUD appropriations bill which would
improve the way HUD disposes of foreclosed FHA property. Lastly, the
provision would duplicate current National Housing Act procedures for
multi-family property disposition.
- Raise the Adjustable Rate Mortgage cap to 40 percent, with an
increased premium for mortgages over 30 percent. The Administration
does not believe that it is fair or desirable to charge higher premiums to
additional ARM borrowers who carry the same risks as other ARM borrowers.
- Add unnecessary specialized analytical requirements to the Federal
rulemaking process. The Administration strongly opposes the bill's
requirement for a specific "housing impact analysis" because it would
duplicate existing requirements and unnecessarily delay the rulemaking
process. Federal agencies are already required to consider costs and
benefits when developing a proposed rule and produce an economic analysis
for major rules.
- Allow PHAs to capitalize Section 8 subsidies for downpayment
assistance. This provision would further liberalize new homeownership
opportunities for low-income families provided by the recently enacted FY
1999 VA/HUD bill, by reducing or eliminating the cash barrier to purchase
posed by mortgage downpayment requirements. It could prove unworkable,
however, if these families do not otherwise qualify for a mortgage or if
many families subsequently default because they cannot afford the ongoing
costs of the mortgage and other expenses.
- Relax the income targeting requirements of the HOME program.
The targeting of the HOME program was established in order to supply
affordable housing to low-income individuals. Any relaxation of the income
requirements would dilute the targeting of HOME funds and decrease the
number of low-income families that would receive assistance.
- Authorize a new HOME Loan Guarantee program that is inconsistent
with existing Federal credit program standards. The Administration
would support authorization provided this bill is amended to be consistent
with existing Federal credit program standards. These standards are
necessary in order to ensure the least expensive, most efficient method of
financing for credit programs and minimize Federal exposure to loss.
The Administration understands that H.R. 3899 may be further modified
before House action, and hopes that those modifications will address its
Pay-As-You-Go Scoring. H.R. 3899 would affect direct spending;
therefore, it is subject to the pay-as-you-go requirement of the Omnibus
Budget Reconciliation Act of 1990. OMB's preliminary estimate is that the
bill could result in a net increase in direct spending during FYs