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HR 3899 -- 10/12/98

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Office of Management and Budget


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 concerns.

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 1999-2003.

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