House Passes American Dream Downpayment Act Including Calvert Legislation
HOUSE PASSES AMERICAN DREAM DOWNPAYMENT
ACT INCLUDING CALVERT LEGISLATION
Calvert's Access to Affordable Mortgages Act Included in Larger Bill
WASHINGTON, DC - Representative Ken Calvert (R-CA) was pleased that the U.S. House of Representatives passed S. 811, the American Dream Downpayment Act last night by unanimous consent. The bill included Calvert's bill H.R. 1443, the "Access to Affordable Mortgages Act," which will amend the National Housing Act to assure that 5/1 Adjustable Rate Mortgages (ARMs) are offered competitively in the marketplace. Calvert introduced his bill, H.R. 1443, on March 27, 2003.
"Congress has recognized the importance of more loan options to home-buyers and banks by allowing a range of adjustable mortgage rates," said Rep. Calvert. "This provision will increase interest rate flexibility and thereby contribute to a stable economy and a robust real estate market."
During a mark-up in the Senate Banking Committee, a manager's amendment introduced by Senator Tim Johnson (D-SD) added Calvert's language to S. 811, the American Dream Downpayment Act. The bill passed the Senate by unanimous consent on November 24, 2003.
A Hybrid ARM maintains a fixed interest rate for a specified period of time, after which the interest rate is adjusted annually according to a stated index (i.e., yield on U.S. Treasury Securities). The first number indicates the number of years the initial rate stays fixed and the second number indicates that the rate will adjust annually thereafter.
HUD estimates that the FHA Hybrid ARM loan program will account for an additional 40,000 loans per year. Lenders are currently not offering 5/1 Hybrid ARMs with a maximum 1% increase in the interest rate because such a cap does not offer sufficient interest rate flexibility. In contrast, a 3/1 Hybrid ARM is much more likely to be offered to potential homebuyers with a one percent maximum rate adjustment and will provide an affordable mortgage option, especially to first time homebuyers. Therefore, the law does not fully accomplish its intended purpose, which is to offer FHA borrowers a full range of hybrid ARM loans with starting interest rates lower than those on 30-year fixed rate mortgages.
"This provision will resolve this situation by treating 5/1 ARMs like 7/1 and 10/1 ARMs with a 2% annual interest rate adjustment allowed," said Rep. Calvert. "In order to promote homeownership we need to give lenders and consumers incentive to enter into mortgage agreements by giving both parties the flexibility to do so."
http://www.house.gov/calvert/press/releases/2003/HousingDownpayment.htm