Realtors take higher FHA down-payment fight to Congress

Ron Phipps, president of the 1.1 million-member National Association of Realtors, told a Congressional subcommittee yesterday that raising the down payment on FHA mortgages would put homeownership out of reach for many families.

NAR estimates that it would take the average American family, living frugally and saving at the current national rate, nearly seven years to save for a 5 percent down payment on a $200,000 home and more than 10 years to save for 10 percent down.

The current FHA down payment requirement on most federally insured loans is 3.5 percent.

Phipps spoke before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity regarding a discussion draft of legislation to reform FHA.

Phipps also testified about the importance of making permanent the FHA mortgage loan limits currently in effect. He stated that decreasing the current loan limits would reduce the availability of mortgage loans across the country, not just in higher cost areas, and increase the cost of capital to consumers.

NAR estimates that reverting to the lower statutory limits on October 1 will impact 612 counties in 40 states and the District of Columbia, with an average loan limit reduction of more than $50,000. Further reductions to the loan limits could have an even greater dramatic impact on liquidity and halt the housing market recovery.