[Congressional Record Volume 142, Number 135 (Thursday, September 26, 1996)]
[Extensions of Remarks]
[Pages E1720-E1721]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  CONFERENCE REPORT ON H.R. 3666, DEPARTMENTS OF VETERANS AFFAIRS AND 
HOUSING AND URBAN DEVELOPMENT, AND INDEPENDENT AGENCIES APPROPRIATIONS 
                               ACT, 1997

                                 ______
                                 

                               speech of

                            HON. BILL ORTON

                                of utah

                    in the house of representatives

                      Tuesday, September 24, 1996

  Mr. ORTON. Mr. Speaker, with the passage of the VA/HUD appropriations 
bill in the House and Senate and expected approval by the President, I 
am very pleased to note the enactment into law of important FHA 
reforms, which will improve and enhance the program.
  The first reform is the elimination of the current prohibition 
against parental loans in conjunction with FHA mortgages. In spite of 
the fact that parental financial assistance plays an important role in 
meeting down payment requirements and promoting homeownership, current 
FHA rules do not permit parents to lend money to their children for 
this purpose. This prohibition is antihomeownership and antifamily. I 
am pleased to see Congress adopt my proposal and allow parental loans, 
on either a secured or unsecured basis, for this purpose.
  The second reform would allow direct endorsement lenders to issue 
their own mortgage certificates. This will lower costs for lenders and 
for FHA which can be passed along to borrowers in the form of lower 
premiums and lower loan costs. Since direct endorsement lenders are 
already given underwriting authority, this change will not negatively 
affect the quality of loans approved. This proposal was adopted 2 years 
ago in the House, and was included in my FHA reform bill introduced at 
the beginning of this Congress.
  The third reform is the establishment of an FHA down payment 
simplification proposal on a demonstration basis in Alaska and Hawaii. 
This proposal is based on my down payment proposal which was adopted in 
the Banking Committee in 1994. Virtually everyone who uses FHA 
acknowledges that the current down payment calculation is unnessarily 
complex. This proposal would greatly simplify the process for 
borrowers, lenders, and realtors.

  I am disappointed that the Senate prevailed over the House on this 
issue, scaling back nationwide application to a demonstration project. 
However, I am pleased that Congress has finally acknowledged that we 
ought to take action on this issue. My hope is that next year, we can 
expand this demonstration status to the entire Nation and make it 
permanent.
  And, I would like to acknowledge the efforts and leadership of 
Representative Weller's amendment to codify the lowering of the FHA 
premium from 2.25 percent to 2 percent for first-time home buyers who 
receive homeownership counseling. This continues a trend over the last 
4 years of lowering FHA premiums, as a result of lowered FHA loss rates 
and reductions in administrative costs.
  These legislative changes represent a great achievement, in light of 
the fact that it now appears that no comprehensive housing legislation 
will be enacted this Congress.
  The passage of these provisions is especially noteworthy, in light of 
the great number of House Members who are opposed to FHA. Early last 
year, legislation was introduced which would have effectively 
eliminated FHA. This legislation was supported by 60 House Members 
including many in leadership positions, such as Majority Leader Dick 
Armey and Majority Whip Tom DeLay. A companion bill was introduced in 
the Senate.

  Not only were FHA proponents able to repel this effort to destroy 
FHA, but we were able to improve the program through much-needed 
reforms. These reforms are critically important in my home State of 
Utah and throughout the country. A recent Fannie Mae study cited the 
required downpayment as the No. 1 impediment to home ownership in this 
country. FHA, with its low downpayment provisions, is the most 
effective and widely available mortgage tool used to help young 
families and individuals overcome that downpayment hurdle. And, it does 
so at no cost to the taxpayer.
  In fact, a recent GAO study showed that 77 percent of first-time home 
buyers who used FHA loans in 1995 would not have qualified for a loan 
without FHA. In my home State of Utah, 68 percent of first-time home 
buyers use FHA. Thus, in Utah, over half of first-time home buyers 
would not be able to enter the housing market without FHA.
  These statistics clearly show the folly of proposals to end or 
privatize FHA. They also show how critical it is to continue to improve 
and modernize the program.
  Therefore, it is my hope that next year, we can finish the job we 
started back in the 103d Congress. Specifically, we should extend the 
demonstration downpayment simplification proposal to nationwide status, 
raise the national FHA loan floor to 50 percent of the Fannie Mae/
Freddie Mac limit, allow the use of two-step mortgages, and eliminate 
the outdated 90 percent loan-to-value limitation on new construction.

[[Page E1721]]

  In closing, I would like to thank House and Senate conferees for 
preserving these important FHA reforms in the final conference report, 
and look forward to their implementation.

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