The president's proposal to start a Federal Housing Administration zero-downpayment loan program is not meant to compete with "zero-down" products offered by private lenders, according to a Department of Housing and Urban Development official."In introducing this new product, the department believes it is complementing, and not competing with, existing zero-down products in the conventional market," FHA Commissioner John Weicher told a House appropriations panel. Private zero-down products are designed for borrowers with high credit scores, he said, while any first-time borrower who meets FHA current underwriting standards for 3% downpayment product would be eligible for the FHA zero-downpayment mortgage. "FHA would continue to allow flexible underwriting with the use of compensating factors," Mr. Weicher testified. And the FHA's new mortgage scorecard would be used to evaluate the overall creditworthiness of the borrowers. "Studies have shown that creditworthiness is a better predictor of the homeowner's ability to pay mortgage payments than the amount of the downpayment," the FHA commissioner said.

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