[Congressional Record Volume 146, Number 111 (Tuesday, September 19, 2000)]
[House]
[Pages H7743-H7745]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          FHA DOWNPAYMENT SIMPLIFICATION EXTENSION ACT OF 2000

  Mr. LEACH. Mr. Speaker, I move to suspend the rules and pass the bill 
(5193) to amend the National Housing Act to temporarily extend the 
applicability of the downpayment simplification provisions for the FHA 
single family housing mortgage insurance program, as amended.
  The Clerk read as follows:

                               H.R. 5193

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``FHA Downpayment 
     Simplification Extension Act of 2000''.

     SEC. 2. EXTENSION OF APPLICABILITY OF DOWNPAYMENT 
                   SIMPLIFICATION PROVISIONS.

       Subparagraph (A) of section 203(b)(10) of the National 
     Housing Act (12 U.S.C. 1709(b)(10)(A)) is amended by striking 
     ``executed for insurance in fiscal years 1998, 1999, and 
     2000'' and inserting ``closed on or before October 30, 
     2000''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Iowa (Mr. Leach) and the gentleman from New York (Mr. LaFalce) each 
will control 20 minutes.
  The Chair recognizes the gentleman from Iowa (Mr. Leach).
  Mr. LEACH. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, H.R. 5193, the FHA Downpayment Simplification Extension 
Act of 2000 would extend existing statutory provisions in the National 
Housing Act that provides for the manner and method of calculating 
downpayments by new homeowners closing on mortgage loans insured by the 
Federal Housing Administration.
  This simplification is merely a technical change that rewrites and 
clarifies downpayment requirements that, over time, have been amended 
in such a manner that are now unclear and difficult to understand. A 
simplified or streamlined method would provide savings to homebuyers 
and a calculation method uniformly understood by the mortgage industry 
and consumers.
  This calculation method would reduce from a three-tiered approach to 
a two-tiered approach. Its effect would also decrease the amount of 
downpayments necessary. For example, this streamlined approach will 
save borrowers of a typical $150,000 home loan approximately $1,000 to 
$2,000 at closing.
  In the 105th Congress this body passed similar legislation. 
Originally,

[[Page H7744]]

the legislation was extended through a demonstration project to Hawaii 
and Alaska. In last year's VA-HUD appropriations act, this body 
extended the legislation to the rest of the country.
  The current legislation will expire September 30. This bill's 
extension through October 30 accomplishes two goals. First, the 
extension will allow this committee more time to complete its work and 
pass the comprehensive housing conference report on H.R. 1776, the 
American Homeownership and Economic Opportunity Act of 2000. H.R. 1776 
overwhelmingly passed the House on April 6 by a 417 to 8 vote and 
includes permanent authorization to simplify the manner of FHA 
downpayment calculations.
  Secondly, and more important, this extension will eliminate any 
confusion that now exists in the mortgage finance market for the next 
few weeks where some borrowers would face uncertain downpayments 
requirements at closing.
  Let me close by stressing that the extension of a technical change to 
the law reflects sound policy and allows creditworthy families greater 
homeownership opportunities.
  I would also like particularly to express my appreciation for the 
work of the gentleman from New York (Mr. Lazio), the gentleman from 
California (Mr. Kuykendall), and the gentleman from New York (Mr. 
LaFalce) for their leadership in this area.
  Mr. Speaker, I am submitting for the Record a letter received in 
support of this legislation by the National Association of Home 
Builders.

                                      National Association of Home


                                                     Builders,

                               Washington, DC, September 18, 2000.
       Dear Representative: On behalf of the 200,000 members of 
     the National Association of Home Builders, I am writing to 
     express our support for H.R. 5193, the ``FHA Downpayment 
     Simplification Extension Act,'' which is scheduled to come 
     before the full House of Representatives tomorrow under 
     suspension of the rules. The bill provides a fifteen-day 
     extension of the Federal Housing Authority's (FHA) 
     downpayment simplification. We very much appreciate your 
     consideration of our views.
       NAHB is very supportive of FHA's downpayment simplification 
     process. It has been hugely successful in enabling more low-
     income households to purchase their first home. Given such 
     successes, we support Congress' action to provide a short-
     term extension until a more appropriate venue--namely through 
     the authorization process--may be utilized and further, that 
     at that time, the downpayment simplification be made 
     permanent.
       The simplification is a technical change that rewrites and 
     clarifies downpayment requirements, that over time had been 
     amended in such a manner that makes them unclear and 
     difficult to understand. A simplified or streamlined method 
     provides savings to the homebuyer and a calculation method 
     uniformly understood by the mortgage industry and consumers. 
     This calculation method is reduced from a three-tiered 
     approach to a two-tiered approach. Its effect decreases the 
     amount of downpayments necessary where the borrower is 
     otherwise creditworthy.
       Finally, as you may be aware, the issue of extending the 
     FHA downpayment simplification is addressed in H.R. 1776, the 
     ``American Homeownership and Economic Opportunity Act,'' 
     which passed in the U.S. House of Representatives on April 6, 
     2000 by an overwhelming and bipartisan vote of 417 to 8. 
     Considering the strong support of this housing proposal 
     within the House of Representatives, we continue to urge the 
     Senate to consider H.R. 1776 and either bring it to the floor 
     for a vote, or move to a formal conference with S. 1452, the 
     Senate's manufactured housing legislation as soon as 
     possible.
       Thank you for the opportunity to express our views on this 
     important housing issue. We appreciate your continued support 
     for the home building industry and look forward to working 
     with you during the remaining days of the 106th Congress, and 
     into the 107th Congress, as we seek to provide safe, 
     affordable housing for all Americans.
           Sincerely,
                                               William P. Killmer.

  Mr. Speaker, I reserve the balance of my time.
  Mr. LaFALCE. Mr. Speaker, I yield myself such time as I may consume, 
and I rise in support of this bill.
  Mr. Speaker, I strongly support this 30-day technical extension of 
the FHA downpayment simplification formula. The bill makes sure that in 
the event of a VA-HUD appropriations bill not being signed into law by 
October 1, that FHA borrowers and lenders may continue to use the 
current simplified downpayment formula in anticipation of a permanent 
biennial or annual extension of this formula.
  This bill is the second development over the last few months which 
clearly illustrates the folly of the current approach of interim 
extensions of the FHA downpayment simplification formula. Two years 
ago, Congress applied this formula nationwide to all 50 States for a 
period of 2 years ending October 1 of this year. Yet just a few months 
ago, confusion set into the mortgage markets as many lenders were 
concerned about the technical language of the 2-year application; 
whether the effective cutoff date was the day a loan closed or the day 
that HUD insured it.

                              {time}  1030

  We were in the ridiculous situation in which lenders all over the 
country might have had to revert to the old formula for a month or two, 
potentially raising down payment levels, creating confusion, and 
killing home purchases.
  Fortunately, both congressional leaders and HUD concurred that 
Congress' intent was to refer to the closing date and HUD issued a 
clarification to that effect, and today's bill explicitly uses this 
approach.
  The second development is today's bill, which highlights the 
possibility that we will not enact a VA-HUD bill by October 1. This 
once again raises the very real possibility that an interim extension 
for down payment simplification could expire unintentionally.
  The obvious conclusion is that anything less than a permanent 
extension of the down payment formula runs the risk that we will be in 
the same position a year or so from now, facing expiration of the new 
formula.
  Moreover, the approach of a permanent extension was taken in H.R. 
1776, the homeownership bill, which passed the House earlier this year. 
This approach of a permanent extension was taken with overwhelming 
bipartisan support.
  So I think our course should be clear. We should make this formula 
permanent through whatever legislative vehicle is available in the next 
few weeks.
  Unfortunately, there is a real risk that through inadvertence the 
down payment simplification formula could lapse for an extended period 
of time, thereby forcing FHA borrowers and lenders to revert to the 
old, confusing, anti-consumer formula. This risk was highlighted by an 
action the other body took last week where a 1-year extension of the 
down payment formula was put into the VA-HUD bill in subcommittee but 
then was inexplicably stripped by the majority in full committee.
  Thus, the real risk is that, as we simultaneously consider both the 
fiscal year 2001 VA-HUD appropriations bill and potentially a 
conference on H.R. 1776, down payment simplification could fall through 
the cracks, especially in the confusion of the last week or so of this 
Congress.
  That would be a terrible result for the hundreds of thousands of home 
buyers that use FHA.
  Therefore, I ask the chairman of our Committee on Banking and 
Financial Services that, however these various bills are considered, 
that we work to ensure that down payment simplification either 
permanently, as in H.R. 1776, or as an extension, is included in some 
bill that the President signs into law. And if it is an extension, I 
hope it will be a long-term extension, although I support the 30-day in 
today's bill.
  Mr. LEACH. Mr. Speaker, will the gentleman yield?
  Mr. LaFALCE. I yield to the gentleman from Iowa.
  Mr. LEACH. Mr. Speaker, let me say to the gentleman, I concur in 
everything the gentleman has just said, and it is one of the reasons I 
am so strongly supportive of getting H.R. 1776 made into public law.
  Mr. LaFALCE. Mr. Speaker, reclaiming my time, I thank the Chair for 
changing this bill from 15 days to 30 days.
  Mr. LEACH. Mr. Speaker, if the gentleman will continue to yield, in 
any regard, I will say to the gentleman that the scenario that he has 
laid out of possible problems is a credibly unfortunate scenario that 
could occur, and it is the intent of the Chair to be as vigilant as 
possible to ensure that it does not occur.
  Mr. LaFALCE. Mr. Speaker, I thank the chairman of the committee, and 
I thank the chairman of the full committee for their comments. I ask 
all to support this bill.

[[Page H7745]]

  Mr. Speaker, I yield back the balance of my time.
  Mr. LEACH. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Linder). The question is on the motion 
offered by the gentleman from Iowa (Mr. Leach) that the House suspend 
the rules and pass the bill, H.R. 5193, as amended.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

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