This Goober Wants to Raise FHA Down Payment to 5% from 3.5%

Last Monday, October 6, The FHA Taxpayer Protection Act of 2009 - HR 3706 - authored by Rep. Scott (Goober) Garrett (R-NJ) was introduced to Congress.  If passed It would increase the minimum down payment for Federal Housing Administration (FHA)-insured mortgages from 3.5% to 5% and the law would prohibit financing FHA closing costs.

This ill advised legislation will not help our recovering market or even our future mortgage stability.  FHA is not the culprit or even one of the culprits in the recent mortgage fiasco.  That blame lies at the feet of sub-prime mortgages and Wall Street greed.

One tiny fact that looms large and questions the Congressman's competence to propose any laws governing FHA is that FHA already no longer allows closing costs to be computed in the loan amount.  This changed last year.  See FHA Regs 4155 page 35

Originally FHA loan amounts were computed by adding FHA allowable closing costs to the purchase price to calculate an "Acquisition Price".  Then a series of percentages were applied to calculate the loan amount which usually resulted in about 97.75% LTV.  The FHA Allowable Closing Costs varied from High Cost to Low Cost States.  Remember FHA is a government program and therfore must be very complicated.

FHA, with a 3% downpayment had been stabile source of financing for almost 80 years.  Actually, because closing costs used to be computed in the loan the previous LTV was more like 2.25%.  The minimum down payment was recently increased to 3.5%.

Below is Congressman Scott (Goober) Garret's contact information.  I am sure he would enjoy hearing your view; I know he was thrilled to hear mine

137 Cannon House Office Building
Washington, DC 20515
(202) 225-4465
fax: (202) 225-9048

P.S. I know it serves no intelligent purpose to Gooberize Congressman Scott but it makes me feel good.

Bill Ladewig, Your Fha Guru

bill@yourfhaguru.com