President Bush has signed the American Dream Downpayment Act into law, fulfilling his 2000 campaign promise to create a downpayment assistance program for low-income first-time homebuyers.The new law also fixes the Federal Housing Administration hybrid mortgage program and increases FHA multifamily loan limits in high-cost areas. "Today, we are taking action to bring many thousands of Americans closer to the great goal of owning a home," President Bush said at a bill-signing ceremony at the Department of Housing and Urban Development. As passed by Congress, the bill (S. 811) provides $200 million annually for downpayment and closing-cost assistance. The assistance cannot exceed $10,000 or 6% of the purchase price of the single-family home, whichever is greater. S. 811 also eliminates a 100-basis-point cap on the initial interest rate adjustment to FHA 5/1-year hybrids. Lenders argued that the cap would reduce its acceptance in the marketplace. HUD is expected to issue regulations for the FHA hybrid program early next year.

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