The House Financial Services Committee has approved a bill that would allow the Federal Housing Administration to insure zero-downpayment loans for first-time homebuyers.The bill (H.R. 3755) would establish a five-year pilot program for the zero-downpayment loans and cap originations at 10% of the FHA's loan endorsements. Several committee members have voiced concern that the high loan-to-value mortgages will result in even higher FHA default and foreclosure rates. Besides forgoing a downpayment, H.R. 3755 also allows lenders to roll the closing costs into the loan. Several committee Democrats said they want to loosen the 10% origination cap before the bill goes to the full House for a vote.
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