June 6, 2012 – Legislation to create a one-year pilot program that couples reduced mortgage insurance premiums with homeownership counseling for first-time home buyers was introduced in the Friday Monday by Rep. Karen Bass, D-Calif., and awaits action of the House Financial Services Committee.
The bill, H.R. 5883, targets first-time home buyers obtaining loans backed by the Federal Housing Administration. It calls on the Secretary of Housing and Urban Development to carry out the pilot program and evaluate its effectiveness in reducing default rates on residential mortgages. Reps. Robert Dold, R-Ill., and Luis Gutierrez, D-Ill., are original cosponsors.
In the pilot program, those seeking loans for their first homes would get a reduction in the up-front mortgage insurance premium charged by the FHA after completing one-on-one pre-purchase counseling. The counseling would be provided by a nonprofit housing counseling agency approved by the HUD secretary. The up-front premium reduction would equal 0.25 percent of the original insured principal obligation.
The pilot program would begin 90 days after the bill’s enactment, and the HUD secretary would be required to report to Congress on the results.