Bill Would Raise FHA Downpayments

Finally, some sanity (so this bill will probably be killed):

Rep. Scott Garrett (R-N.J.) announced today the introduction of the FHA Taxpayer Protection Act of 2009.

Garrett noted that the Housing and Economic Recovery Act, which became law in July 2008, allowed closing costs to be financed on FHA loans -- effectively lowering required cash down to as low as 2.5 percent.

Garrett's bill proposes raising downpayments to 5 percent. In addition, it would eliminate the financing of closing costs.

The proposed law would also require a Government Accountability Office study of FHA fiscal soundness.

Of course many key Democrats still support lowering, if not eliminating, various aspects of "skin in the game" in public-linked housing finance. But it is pretty shameful when supposedly-fiscally-conservative Republicans like Johnny Isakson (R-GA) and Gary Miller (R-CA), both with personal ties to the real estate industry, support these measures to continue to reduce the soundness of public housing finance -- all for a quick "bump" in real estate transactions and more profits for connected industries.

So it is good to once in a while see a real fiscally-conservative Republican still out there, and what's more, attempting to move us even a little bit towards fiscal soundness and away from what got us into this crisis. The irony is, foreclosures are bad for public support for both parties, and the Republicans even more, but this is what Isakson's proposed $15,000 tax credit or Miller's resurrection of FHA seller-funded downpayment assistance would achieve.

Johnny Isakson was responsible for the $8,000 First Time Homebuyer Tax Credit that passed as a part of the stimulus bill he voted against (talk about a cynical maneuver). The credit, credited with the slight increase in home sales this past summer, is set to expire at the end of November.