HUD
No. 03-022
Lemar Wooley
(202) 708-0685, x 6631
www.hud.gov/news
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For
Release
Tuesday
March 11, 2003 |
BUSH ADMINISTRATION ANNOUNCES NEW ADJUSTABLE-RATE MORTGAGE PRODUCTS TO ENHANCE
HOMEBUYING OPPORTUNITIES
40,000 More Families Expected To Benefit From New Offerings
WASHINGTON - The Department of Housing and Urban Development is proposing
to enhance homebuying opportunities by expanding its offerings of adjustable-rate
mortgage (ARM) products on FHA-insured mortgages. Potential homebuyers would
be able to choose mortgages with periods of three, five, seven or ten years,
depending on their needs, during which time the interest rate would be fixed.
"By offering additional types of FHA-insured ARMs tailored to the financial
conditions and desires of the borrowers, we are creating more homeownership
opportunities," said HUD Secretary Mel Martinez today in a speech to America's
Community Bankers. "We estimate that as many as 40,000 families a year
will choose these new adjustable-rate mortgages as their way of financing their
home purchase."
Under the proposed rule, which has a 60-day public comment period in the Federal
Register, the interest rate for 3-year and 5-year ARMs cannot change by more
than one percent per year after the fixed-payment period is over, with a maximum
change of five percent for the life of the loan. For 7-year and 10-year ARMs,
the maximums are two percent annually and six percent for the life of the loan.
Currently, the only FHA-insured ARM that is available has a one-year fixed payment
period, with caps of one percent a year and five percent for the remainder of
the loan.
The proposed rule is the latest housing initiative by the Bush Administration
to increase homeownership rates. Other initiatives include:
- Creating the American Dream Downpayment Initiative, which will provide $200
million to help 40,000 low-income families each year with downpayment and
closing costs;
- Modifying the regulatory requirements under the Real Estate Settlement
Procedures Act (RESPA) to more simplify and clarify the home buying and refinance
processes;
- Instituting a single-family tax credit, designed to increase the supply
of affordable homes;
- Expanding funding to $45 million in FY 2004 for housing counseling programs,
which help families to better understand the home buying process and educate
them against unscrupulous lenders; and,
- Tripling Self-Help Homeownership Opportunity Program (SHOP) funding to
$65 million in FY 2004 to help produce approximately 5,200 new homes nationwide
for low-income families by providing grants to non-profit organizations and
requiring homebuyers to contribute sweat equity to the construction or rehabilitation
of the property.
HUD is the nation's housing agency committed to increasing homeownership, particularly
among minorities, creating affordable housing opportunities for low-income Americans,
supporting the homeless, elderly, people with disabilities and people living
with AIDS. The Department also promotes economic and community development as
well as enforces the nation's fair housing laws. More information about HUD
and its programs is available on the Internet at www.hud.gov.
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