Home buyers bill goes to Riley
The House of Representatives passed the bill 101-0 on Tuesday to create the Alabama Homeowners Initiative Act, which takes $6 million from the Alabama Capital Improvement Trust Fund to begin a fund that would help guarantee loans.
Sen. Lowell Barron, D-Fyffe, said he expects the program to stimulate the economy and create jobs.
"It may be one of the best bills I have supported and sponsored in my 27 years in the Legislature," he said.
The Senate previously passed the bill so the proposal now goes to Gov. Bob Riley for consideration.
Barron called the passage of the bill wonderful and called on the governor to sign it soon. He said the program begins as soon as Riley signs it. Barron said he talked with Riley as late as Tuesday morning about the bill.
Todd Stacy, press secretary for Riley, told the Montgomery Advertiser that staff would review the final version of the bill before determining if Riley will sign it.
Some House members expressed concerns about whether the program would set up loans to unqualified applicants, which they said helped lead to the current economic crisis.
Barron said those concerns were justified because there were a lot of "quickie loan processors" who were unscrupulous, leading to the crash in the housing market.
The Alabama Housing Finance Authority would administer the program. Barron said the authority has administered more than 54,000 loans with a foreclosure rate of .08 percent. With that record and with the required qualifications for lenders, Barron said he feels "very comfortable" that the authority will protect taxpayers and home buyers.
"This plan will help qualified buyers," said House sponsor Rep. Marc Keahey, D-Grove Hill, who told his colleagues that the bill requires the purchaser to have a credit score of at least 620. The bill also requires the participants to complete a home-buying counseling course before the purchase and the buyer's debt ratio cannot exceed 50 percent of his gross monthly income.
Barron said the program could help 7,000 new home buyers in the next year and could ensure $1 billion in housing. The interest rates would be lower in the program and would bring mortgage money to Alabama, he said.
Barron and other supporters have called the bill a "win-win." Supporters include the Home Builders Association of Alabama.
Russell Davis, executive vice president of the Home Builders Association of Alabama, has said he is eager for home builders to get working again. The bill, he said, would create jobs and boost consumer confidence.
Since the borrower income cannot exceed $98,230, Barron said the program is targeted at those in the middle-class income range and below. The program would take 1 percent from the sell of the house and put that back into the fund to help guarantee up to 40 percent of mortgages that are foreclosed on.
With that guarantee fund, Barron believes more lenders would begin investing in Alabama.
He said the fund would save the homeowner money because there would not be a down payment and because they would not have to purchase mortgage insurance. So, he said, the upfront cost of the house would be less.
-- posted by Sebastian Kitchen