CBO: Zero-Down FHA Would Cost Millions

A House committee-approved bill to create a federally insured zero-downpayment mortgage program would need $125 million appropriations each year to cover losses from defaults and foreclosures, according to an estimate by the Congressional Budget Office.The bill (H.R. 3755) approved by the House Financial Services Committee would eliminate the traditional 3% downpayment on Federal Housing Administration-insured loans and even allow first-time homebuyers to roll closing costs into the loan amount. However, the CBO found that the higher costs of offering these risky "zero-down" loans would not be offset by higher insurance premiums. "CBO estimates that implementing this legislation would have a net cost of about $500 million over the 2006-2009 period, assuming future appropriation actions consistent with the bill," the CBO says.