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

Mortgage and Lending with NMLS 291249

More than a month ago on Monday, October 5, 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 FHA insured mortgages from 3.5% to 5% and the law would prohibit financing FHA closing costs.  BUT WAIT there is more!

One tiny fact 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

This ill advised, poorly researched, 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.

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%.

If you feel Congressman Garret's bill must be defeated then email your congressman at: Congressional Email

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




Re-Blogged 5 times:

Re-Blogged By Re-Blogged At
  1. Melissa Anderson 10/08/2009 01:57 PM
  2. Bob Murphy 10/10/2009 07:11 PM
  3. Donne Knudsen 11/03/2009 03:04 AM
  4. 1~Judi Barrett 11/03/2009 11:17 PM
  5. Angela Niece 11/06/2009 11:14 AM
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Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

BRAVO Jane (#28).  The reason FHA is experiencing more defaults is because unemployment is skyrocketing.  When compared to other loan products, FHA defaults rates are actually lower than other loan products defaults rates.  When people stop losing their jobs then they'll stop losing their homes too.

Bill I am also forwarding this to my fellow LO's and my broker.  We need to let Congress know that this is not the way to address rising foreclosure problem.

Nov 03, 2009 02:59 AM #32
Ellen Crawford
Maximum One Executive REALTORS® - Alpharetta, GA
Alpharetta Real Estate Agents & Alpharetta REALTOR

A few more nails for the coffin we call real estate.  Raising the amount of a down payment is going to kill the market.

Nov 03, 2009 06:11 AM #33
Sandra Scott
DPR Realty - Payson, AZ
REALTOR of Choice! Payson, Pine & Strawberry, AZ

Our poor legislators...I know they are overworked, reading all those words they try to pass into law...what?...the bill is not even written before they pass it?  Do tell.  Let's fire the lot of them and start afresh.  Maybe the next batch will read their job description before they start voting.


Nov 03, 2009 08:08 PM #34
Fernando Herboso - Broker for Maxus Realty Group
Maxus Realty Group - Broker 301-246-0001 - Gaithersburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

We better get used to it. . after the shock of sub prime. . .they will start looking at us

Nov 03, 2009 08:30 PM #35
Mark VanBuskirk
Cassidon Realty - Lehighton, PA
PA REALTOR Specializing in Carbon & Monroe County

Thanks for that excellent note... He needs to be gooberized right out of office! Hopefully we will hear some good news this week with the extension of the credit. Trickle down and help alot of people!

Nov 03, 2009 10:02 PM #36
Janice Roosevelt
Keller Williams Brandywine Valley - West Chester, PA
OICP ABR, ePRO,Ecobroker

Appreciate this important post, but on a lighter side, I must ask what is a goober?

Nov 03, 2009 10:13 PM #37
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

You are right on the money Bill. The FHA program is fine as it stands!

Nov 03, 2009 11:01 PM #38
1~Judi Barrett
Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK


Sometimes you just gotta' do it!

I will email my congress people and reblog.


Nov 03, 2009 11:17 PM #39
Anthony Moretz
Moretz Realty Partners - Hickory, NC

Bill, Thanks for this important post. My first communication to legislators will be an opinion on the right thing to do. My second communication will be on election day!


Nov 04, 2009 09:56 AM #40
Bill Ladewig - Escondido, CA
Experience Is Your Advantage

Janice, a goober is a kind of backwoods, Gomer Pyle type of guy but not as bright.

Bill, if it ain't broke don't try to fix it :o)

Judi, thanks you are the best.

Anthony, Great! I am glad to be of small part of your first legislative communication and hope it is the first of many.

Nov 04, 2009 10:04 AM #41
Karen Fiddler, Broker/Owner
Karen Parsons-Fiddler, Broker 949-510-2395 - Mission Viejo, CA
Orange County & Lake Arrowhead, CA (949)510-2395

Hi Bill...I agree that this guy is a goober. But I think there is confusion about the closing costs. That provision you mentioned merely prevents a lender from seeing the money for closing costs as a "down payment" or money-out-of-pocket to satisfy the 3.5%. It does not prevent an FHA buyer from "financing" closing costs by adding it to the loan and then asking for a seller credit....that's a different thing.

Nov 06, 2009 10:21 AM #42
Robert Vegas Bob Swetz
Las Vegas, NV

When is rains it pours, it's all about (GREED)!

VB ;o)

Nov 06, 2009 11:41 AM #43
David Monsour
Keller Williams Keystone Realty - Gettysburg, PA

Good information as always.  90%+ of my sales are FHA or USDA loans so the lower they keep the downpayment the better.

Nov 06, 2009 11:44 AM #44
David Monsour
Keller Williams Keystone Realty - Gettysburg, PA

Good information as always.  90%+ of my sales are FHA or USDA loans so the lower they keep the down payment the better.

Nov 06, 2009 11:45 AM #45
Michael Regan
The Regan Team Home Loan Group - Petaluma, CA
Home Loan Extraordinaire

Increasing the down payment 1.5% isn't going to stop defaults, it'll just price some 1st time homebuyers out of the market. We have to be careful not to get too conservative. 

Nov 06, 2009 02:04 PM #46
Esko Kiuru
Bethesda, MD


Everybody and his nephew is now trying to fix the real estate mess to get their name up there and most of it, if passed, will just muddle the scene even more.

Nov 07, 2009 09:31 AM #47
Ron Brown NMLS #270845
NMLS ID: 40831 - Federal Way, WA

This is just more proof of government's Law of Unintended Consequences.  What difference will it make how much down payment a person has in their home if the market declines significantly, and the buyer loses their job? 

If a person put 10% down 15 months ago in our market they are now upside down in the home.  If they become unemployed they will probably lose that home.  The only difference is if they had used FHA with only 3.5% down, they might have some money in their savings to get them through the unemployment period without losing the home!

Nov 16, 2009 12:54 PM #49
Bill Ladewig - Escondido, CA
Experience Is Your Advantage

Hi Karen, the way I read the bill is that FHA does not allow closing costs to be used to compute the loan and that has been over for over a year.

Vegas Bob, greed and stupidity

David, FHA is an essential program for homebuyers without a lot of cash which is most buyers.

Michael, you are absolutely correct.

Esko, correct.  Some politicians just want a little "media time" and to hell with the consequences.

Ron, interesting take but I think you are correct.

Nov 16, 2009 10:41 PM #50
Concerned Patriotic American wanting to buy a house

Low or no down payments. Sellers paying closing costs. Buyers getting into a house with no money out of pocket. You think changing this is a good idea?

Increasing the down payment 1.5% isn't going to stop defaults, it'll just price some 1st time homebuyers out of the market. We have to be careful not to get too conservative. 

This is not conservative. Banks are asking for 20% down. 10% is not a conservative number. Once bueyrs have to (GASP) save for a downpayment they will look at a house a lot differently. It will be painful short term. Long term, it will help to strengthen the housing market.

I see no reason FHA should not follow the very sctrict financing standards all other borrowers must meet to get a house. Maybe allow them to offer a smaller down payment. Somewhere between 5-10%. But low credit score, (no), bad credit history (no), bankruptsy in the last 10 years (no), foreclosure in the last 10 years (no), make good credit mean something. Make people live with the consequences they have created for themselves.

FHA, Fannie, Freddie, Ginnie, ALL should be allowed to die. Go out of business. You are arguing about something that could make people prove they can afford a house. 

You only care because iit could affect your commissions. You do not care about the massive debt that FHA, Fannie, annd the rest of the GSE's are giving the country. I do.

Jan 20, 2010 02:04 AM #51
Bill Ladewig - Escondido, CA
Experience Is Your Advantage

Whew, you had me up to "increasing the down payment 1.5% isn't going to stop defaults"  that is true and you should have stopped there.

Jan 20, 2010 02:16 AM #52
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Experience Is Your Advantage
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