Groups Lobby Against Hike in FHA Downpayment

Mortgage industry and consumer groups are urging members of the House Financial Services Committee to vote against an amendment that would raise the minimum downpayment on Federal Housing Administration loans to 5%, from the current 3.5%. "Increasing FHA's downpayment could disenfranchise more than 300,000 responsible homeowners," eight groups say in a letter to the committee, warning such a hike could derail the fragile recovery in housing. Rep. Scott Garrett, R-N.J., claims FHA is making too many risky loans and the downpayment increase is needed to protect taxpayers. The Financial Services Committee is expected to vote this week on Garrett's 5% downpayment amendment as it marks up an FHA reform bill. The bill (H.R. 5072) includes several proposals to adjust FHA annual and upfront mortgage insurance premiums to replenish the agency's mortgage insurance fund. The Garrett amendment would "do little to strengthen FHA's capital reserve ratio," the eight believe. The organizations that put their name on the letter include the Mortgage Bankers of America, National Association of Realtors, National Association of Home Builders, Center for Responsible Lending, Consumer Federation of America, National Fair Housing Alliance, National Consumer Law Center and National Council of La Raza.