Rep. Gary Miller, R-Calif., has introduced a bill that would establish a shared-equity homeownership pilot program through the Federal Housing Administration (FHA). The program would lessen the risk of homeownership and decrease the FHA's vulnerability to fluctuations in the housing market, Miller says.
The legislation – the Strengthening FHA Through Shared Equity Homeownership Act of 2010 (H.R.6256) – would enable homeowners to sell, through the FHA, a portion of the equity in their home to an investor. In return, a homeowner and an investor would share the value of any home price appreciation that may occur relative to the proportion of the investment.
"At no cost to the taxpayer, my proposal contains a potential twofold benefit,’ Miller says. "Decreasing the loan-to-value rates will result in lower monthly mortgage payments, thereby reducing the risk of homeownership. By mitigating the risk for homeowners, this will also decrease FHA's exposure to volatility in the housing market.’
Any investment would go toward principal and may not be used for down-payment or closing costs. Investors would have to be independent and not a party to the sale, and the mortgagor would have to retain at least a 60% equity share in the home, in addition to retaining all rights associated with homeownership.
SOURCE: Office of Rep. Gary Miller