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AMERIDREAM RESPONDS TO FHA ZERO DOWN PAYMENT MORTGAGE PROPOSAL

Gaithersburg, Maryland (January 20, 2004) – The announcement by President George Bush that he will ask Congress for authority to eliminate the down-payment requirement for Federal Housing Administration loans represents a significant step forward in responding to the needs of those seeking to become homeowners for the first time.

We could not be more pleased that President Bush recognizes the enormous need to help low and moderate income wage earners purchase homes.  We applaud his positive action to address this need.  Our concern, however, is based on our years of experience in dealing with first time homebuyers, many of whom have limited ability to meet the qualifications for a home mortgage, a loan that represents the biggest single credit undertaking of their lives.

We believe that it is much better to enable these homebuyers to purchase homes using gift funds for their down payment rather than saddling them with the additional debt represented by a loan made at greater than 100% of the home’s value.  Such a loan, while enabling some to purchase a home without a down payment, has the effect of increasing the financial burden on families and limiting their ability to qualify for additional credit in the future.  A mortgage at 103% of a home’s value has the effect of skewing a consumer’s debt to income ratio – a critical factor in most lenders’ decision to qualify a buyer for a home loan.  These loans also result in increased closing costs and higher monthly mortgage payments, in turn, reducing families’ disposable income to meet other needs.

     

      · By contrast, purchasing a home with down payment gift funds enables families to enter their new home with instant equity not zero equity. 

      · Immediately, this greatest advantage of homeownership goes from just a dream to a reality.  

      · All at once, the new homeowner is well on the way toward financial independence for the family, financial vitality for the community, and financial benefit for the national economy. 

 

While commendable, the President’s proposal fails to acknowledge that a robust and thriving private sector down payment assistance industry already exists and is in a position to immediately achieve the goals the President has set out without creating additional bureaucracy or cost to the taxpayer.  AmeriDream alone has helped 130,000 people become homeowners using down payment gift funds.

Already, existing private sector down payment providers are helping people buy homes in a way that reduces their overall indebtedness and increases their ability to manage monthly mortgage costs in the short term, while enhancing their overall credit worthiness in the long term.  

In addition, providers such as AmeriDream are advancing their investments in homeownership through funding for community redevelopment, consumer education about owning a home, and programs that help new buyers retain their creditworthiness and stay in their homes.  These additional initiatives take the President’s proposal far beyond the basic goal of helping families purchase a home. 

As the largest nonprofit down payment assistance provider in the country, AmeriDream looks forward to working with HUD and President Bush as they evaluate this new proposal.  Our hope is that the Administration and Congress will recognize that a public private partnership is the fastest route to the goal of putting hundreds of thousands of Americans into their own homes each year. 

AmeriDream stands ready to work with the Administration in such a partnership to achieve this goal.

 

Attributable In Its Entirety to:
Ann Ashburn
Chief Executive Officer
AmeriDream, Inc.


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The mission of AmeriDream, Inc., headquartered in Gaithersburg, MD, is to expand homeownership opportunities for underserved groups and promote the value of homeownership as the foundation for building strong communities and individual prosperity. AmeriDream, Inc. is a non-profit, publicly supported organization that is tax-exempt under Internal Revenue Code Section 501(c)(3). AmeriDream, Inc. meets the requirements for a charitable organization, as referenced in the HUD Handbook 4155.1 REV-4, CHG-1 Section 2-10 for FHA insured loans.  In addition to The AmeriDream Downpayment Gift Program, AmeriDream also operates The AmeriDream Redevelopment Program in the Washington, DC metropolitan area and the Community Link Program nationwide. Through the Redevelopment Program, AmeriDream has spent more than $8 million to rehabilitate properties and return them to the market at affordable prices. Through Community Link, AmeriDream has donated more than $1.5 million to a range of community organizations, including Habitat for Humanity, the American Red Cross Disaster Relief Fund, and the Victims Rights Foundation.