[Congressional Record Volume 145, Number 65 (Thursday, May 6, 1999)]
[Extensions of Remarks]
[Page E897]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                       FIRST TIME HOMEBUYERS ACT

                                 ______
                                 

                        HON. WILLIAM F. GOODLING

                            of pennsylvania

                    in the house of representatives

                         Thursday, May 6, 1999

  Mr. GOODLING. Mr. Speaker, today I am introducing the, First Time 
Homebuyers Act, which will make the American Dream of owning a home a 
reality for thousands of renters and low income families. Today renters 
often pay as much for rent as many homeowners pay for a monthly 
mortgage payment. It is not surprising that a recent Fannie Mae 
National Housing Survey found that 60% rank homeownership as their top 
priority in life.
  To many Americans, homeownership means financial, psychological and 
familial security. This is especially true for minorities, younger 
Americans and those with lower incomes. Homeownership means a stronger 
economy, after neighborhoods and a better quality of life. Mr. Speaker, 
given such an optimistic view of homeownership, why do so many 
individuals continue to rent? According to the Fannie Mae survey, 
renters cite the expense of a down payment as the major obstacle in 
their ability to afford 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 down payment. A local financial 
institution finances 80 percent of the loan, while the builder the 
remaining 20 percent as a second mortgage. This creative financing plan 
makes the purchase of a home affordable for financially responsible, 
hard-working people who want to buy a home, but can not afford the down 
payment.
  However, the Tax Code penalizes builders who finance the down payment 
on behalf of the purchasers. Currently, the Tax Code limits a builder's 
ability to finance second mortgages because it assumes that the 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 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 received at 
a future date. In other words, the Tax Code prohibits a builder from 
using the installment method to calculate their 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 Act will enable a builder to use the 
installment method to calculate their tax liability under certain 
specific circumstances. This bill applies to any one family, owner-
occupied unit. The purchasers 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 for newly constructed one-
family residential real property 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 
buying a new home. With your support the First Time Homebuyers Act, can 
make the American Dream an American reality.

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