"President Bush’s weekend campaign promise that he will push legislation
allowing for no money down on some federally insured mortgages could
cost taxpayers as much as $500 million over four years because of a
higher rate of defaults, according to the Congressional Budget Office.
The election-year idea may appeal to those who can’t save as fast as
home prices are rising. But some financial planners warn that
increasingly common no- and low-down-payment programs can be ruinous for
some consumers – especially if home values decline.
If housing prices fall, consumers with little or no money of their own
invested in the home are more vulnerable to ending up with mortgages
larger than the value of the house.
And those who can’t afford large down payments usually don’t have enough
savings to serve as a cushion if someone in the household gets sick or
is laid off.
“If you’re really stretching, maybe you should back off and look at a
less expensive house,” said Joan Gray Anderson, a professor of family
financial counseling at the University of Rhode Island.
Bush proposed zero-down-payment legislation earlier this year. The
Congressional Budget Office has contended for months that the proposal
would generate huge losses, an assessment that could be a stumbling
block for the bill’s passage. But the Department of Housing and Urban
Development thinks the program could be run on a break-even basis.
Bush contends that reducing the required 3 percent down in the Federal
Housing Administration mortgage program to zero down would help 150,000
first-time buyers in the first year. Homeownership rates are now about
69 percent nationwide, compared to about 64 percent 10 years ago. The
FHA insures many private-lender home loans.
“To build an ownership society, we’ll help even more Americans to buy
homes,” Bush said in an Ohio speech to home builders. “Some families are
more than able to pay a mortgage but just don’t have the savings to put
I knew he had done this, but didn’t have the information. so I’ve kept mum for a while. I did mention this a couple times here over the last few years, but I tend to stay out of the politics threads. This whole time I’ve been thinking bastard not I knew it.