[Congressional Record Volume 140, Number 86 (Thursday, June 30, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: June 30, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                  FIRST TIME HOMEBUYERS ASSISTANCE ACT

                                 ______


                        HON. WILLIAM F. GOODLING

                            of pennsylvania

                    in the house of representatives

                        Thursday, June 30, 1994

  Mr. GOODLING. Mr. Speaker, today I am introducing the ``First Time 
Homebuyers Assistance Act'' which will make the American dream of 
owning a home a reality for thousands of renters. Today's renters often 
pay as much for rent as homeowners pay for a monthly mortgage payment. 
It is not surprising that the 1994 Fannie Mae National Housing Survey 
found 86 percent of renters believe they would be better off owning a 
home, and 76 percent believe now is the time to buy a home because of 
lower interest rates.
  What does homeownership mean to Americans? Homeownership means 
financial, psychological, and familial security particularly for 
minorities, younger Americans, and those with lower incomes. 
Homeownership means a stronger economy, safer neighborhoods, and a 
better quality of life. Mr. Speaker, given such an optimistic view of 
homeownership, why do so many renters continue to rent? According to 
the Fannie Mae survey, an overwhelming 65 percent of renters rank the 
downpayment as their primary obstacle to owning a home.
  Several years ago, I visited a home builder in York, PA, located in 
my congressional district, who developed a unique and innovative 
arrangement in which moderately-priced single-family homes are 
constructed for purchase with no downpayment. A local financial 
institution finances 80 percent of the loan, while the remaining 20 
percent, in the form of a second mortgage, is financed by the local 
builder. This creative financing plan makes the purchase of a home 
affordable for financially, hard-working people who want to buy a home, 
but cannot afford a downpayment.
  As it turns out, however, the Tax Code penalizes builders who finance 
the downpayment on behalf of the purchasers. Currently, the Tax Code 
limits a builder's ability to finance second mortgages because it 
assumes that buyers are paying the entire balance of their tax 
obligations in the year the property is purchased. The law also 
requires builders to pay taxes on the entire amount of the income 
received from a mortgage in the year the purchase is made. For a 
builder, it becomes almost impossible to pay these taxes, not having 
cash on hand to do so until the balance of the mortgage payment is 
received at a future date. In other words, the Tax Code prohibits a 
builder from using the installment method to calculate his tax 
liability. This situation places a builder in a financial bind and 
jeopardizes the future of this and similar housing programs.
  The First Time Homebuyers Assistance Act will enable a builder to use 
the installment method to calculate his tax liability under certain 
specific circumstances. The bill applies to newly built, owner-occupied 
units only. The purchaser must be a first-time homebuyer who qualifies 
for 100 percent of the loan. Further, the legislation directs that a 
second mortgage on the property be no more than 20 percent of the sale 
price and applies only to single-family homes costing no more than 75 
percent of the median home price in a given area.
  Mr. Speaker, I urge my colleagues to cosponsor this legislation which 
is specifically geared to helping those who need the most assistance in 
buying a home. With your support, the First Time Homebuyers Assistance 
Act can make the American dream an American reality.

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