Opinion

Senate Action Protects Future Homebuyers

Recently, the Senate Appropriations Committee passed the annual funding bill for the Departments of Transportation and Housing and Urban Development. The passage was an expected event with one exception — the appropriations bill for FY2020 contained language that hard-working Americans dreaming of owning their own home one day might find very encouraging.

The bill, which each year lays out the budget for HUD, specifically included report language addressing the longstanding uncertainty around the performance of down payment assistance (DPA) programs provided by individual government entities across the country.

The simple addition, language “encouraging” HUD to require loan originators to collect and report the tax ID numbers for government entities providing DPA, allows HUD to collect new data so it can accurately track and manage DPA programs. This represents a significant protection for taxpayers interested in more efficient government programs, as well as future homebuyers who need help with the down payment to own a home. 

The greatest barrier to purchasing a home for most people is coming up with the down payment. Millions struggle to keep up with rising rents while trying to save thousands of dollars required for both the down payment and associated closing costs of home purchase. They recognize the mortgage may be less than their monthly rent, and owning will allow them to start building equity in their own home. For those without family resources or friends to offer loans, DPA programs are the only hope for them to make the jump to homeownership, and start on the road to wealth creation. Without the support of DPA programs, would-be homeowners are left with few resources to purchase a home, forcing them to delay buying a home by years or possibly forever.

The timing of the Senate’s language is critical. Earlier this year, HUD initiated a massive policy overreach that would have effectively ended or significantly reduced many DPA programs run by government entities — under the assumption that these programs threaten the solvency of the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund (MMIF). HUD took this action with no data to support its claim. Fortunately, following a legal dispute, a federal judge stayed HUD’s ability to enforce its new policy, and ultimately the agency withdrew it.

And that’s a good thing. With the judge’s ruling and the case now dismissed, DPA providers may continue helping families buy their first homes and put their descendants on upward paths — for now. But HUD is likely to begin a rulemaking process on government DPA programs early next year, if not sooner, in which it will attempt to implement restrictions on government DPA.

But with the Senate’s “encouragement,” HUD will hopefully collect sufficient data on individual government DPA programs so that it may at least be armed with data before beginning future policymaking. By collecting this data, HUD can provide better oversight of DPA programs, better manage risk to the MMIF fund and better protect taxpayers. If there are poor performing players, HUD can weed them out without restricting or eliminating good government DPA programs that are investing heavily in the success of borrowers. 

By taking one simple step to require mortgage originators to include their tax ID numbers when originating loans, HUD can see the performance of each government DPA program. From there, HUD could regulate DPA based on fact instead of guesswork — and consumers and taxpayers would benefit.

 

Michael Whipple is Vice President of CBC Mortgage Agency in South Jordan, Utah.

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