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Democratic senators propose 20-year mortgage for low-income, first-time homebuyers

by John Yellig

A group of Democratic senators has proposed a 20-year mortgage program aimed at helping low-income homebuyers build equity in their homes at twice the rate of a conventional 30-year mortgage.

The Low-Income First Time Homebuyers Act (LIFT) establishes a program at the Department of Housing and Urban Development to sponsor low, fixed-rate 20-year mortgages for first-time, first-generation homebuyers earning 120% or less of their area median income, according to a press release.

Through Ginnie Mae, the Treasury Department would subsidize the interest rate and origination fees associated with the LIFT mortgages to bring the monthly payments in line with 30-year FHA-insured loans, effectively allowing participants to build home equity at twice the rate of a conventional mortgage.

Under the mechanics of the program, Treasury would facilitate the origination of the LIFT loans by buying, at a premium, Ginnie Mae Mortgage Backed Securities collateralized by the loans. The purchase premiums would compensate lenders for making the loans.

According to the release, LIFT, in addition to targeted down-payment assistance, would help policymakers close the racial wealth gap and expand the wealth-building benefits of homeownership in underpriviledged communities.

The LIFT Act is co-sponsored by senators Mark Warner and Tim Kaine of Virginia, Chris Van Hollen of Maryland and Raphael Warnock and Jon Ossoff of Georgia.

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