Zero Downpay, Payment Incentives in Budget

The Bush administration will continue to push for a federally insured zero downpayment program for borrowers with strong credit histories and a payment incentives program for borrowers with limited or weak credit histories, despite resistance in Congress and concerns about high default rates and costs."To remove two large barriers to homeownership -- downpayment and impaired credit -- the budget proposes two mortgage programs," the president's fiscal year 2006 budget proposals says. The administration proposed the two Federal Housing Administration loan program in last year's budget. Legislation to create the FHA zero down program was approved by a House committee last year but the bill was stopped in its tracks when the Congress Budget Office estimated the new program would incur $125 million in losses annually. However, the President's budget estimates the zero down program would generate $231 million in revenues annually and help over 200,000 families purchase their first home. The payment incentives program, which is essentially a subprime program with higher FHA premiums, did not get any traction in Congress last year.