House Republicans recently discussed – but have not yet introduced – a bill that would push the required down payment for an FHA-backed mortgage to 5 percent, up from the current rate of 3.5 percent, according to a report from Fox News. The proposed change, which drew fire at a House Financial Services subcommittee hearing, comes because the FHA is cash-strapped as a result of the massive number of foreclosures nationwide. Currently, the government agency insures about 5 million mortgages.
However, critics argue that introducing such a measure could be disastrous for the still-recovering housing market, the report said. Statistics from the National Association of Realtors show that about 300,000 consumers, who would otherwise be creditworthy, would be unable to afford a home if the down payment requirement rose to 5 percent.
“The National Association of Realtors is a strong supporter of the loan insurance programs administered by the Federal Housing Administration; while we support reforms to strengthen the program, changes should not be made at consumers’ expense by drastically impacting the affordability and availability of mortgage capital,” said NAR President Ron Phipps, according to the site.
Republicans have long been fighting to alter the mortgage market so that government agencies are less involved. Already, they have attempted to pass bills that would substantially reduce the government’s role in the mortgage giants Fannie Mae and Freddie Mac.