HUD to Challenge CBO Zero-Down Estimate

The Department of Housing and Urban Development is planning to challenge the Congressional Budget Office on a cost estimate for insuring zero-downpayment mortgages.The Bush administration originally estimated that a new Federal Housing Administration zero-downpayment program would generate $200 million in revenues over five years. However, the CBO concluded that a zero-downpayment bill (H.R. 3755), as passed by the House Financial Services Committee, would cost $125 million annually and require appropriations. The CBO's estimate of H.R. 3755 is "inconsistent" with the administration's projections, particularly since the committee placed restrictions on the zero-down program, said Sean Cassidy, HUD's general deputy assistant secretary. The bill limits zero-downs to 10% of FHA loan production and shuts down production if the foreclosure rate hits 3.5%. "The Department is conducting a complete analysis of the CBO cost estimate, and expects to present a response to the committee within the next few weeks," Mr. Cassidy said.