PRESIDENT CLINTON ANNOUNCES URBAN HOMESTEAD INITIATIVE TO BOOST HOMEOWNERSHIP IN AMERICA'S CITIES

The President announced the Department of Housing and Urban Development programs in a speech to the U.S. Conference of Mayors as part of his second-term urban agenda.

"The American Dream of homeownership doesn't stop at the city line," HUD Secretary Andrew Cuomo said. "President Clinton knows that families in cities as well as suburbs want to become homeowners, and he wants to give them the opportunity."

The new programs in the Urban Homestead initiative will:

Annually save first-time homebuyers an average of $200 each in closing costs when they purchase inner city homes with a mortgage insured by the Federal Housing Administration. This comes on top of an average $1,200 in such savings for all FHA homebuyers that have been approved by President Clinton since he took office. The new program is designed to create an incentive for central city homeownership that will help rebuild cities.

Enable as many as 2,000 police officers to buy HUD-owned inner city homes at half price. The pilot program, called the Officer Next Door initiative, is designed to reduce crime and make low-income neighborhoods more attractive to homeowners.

Allow working families who receive rental vouchers from HUD under the Section 8 program to convert the rental vouchers into new Empowerment Vouchers that will enable them to buy homes, under legislation expected to become law. Freddie Mac today announced a new commitment to purchase up to 2,000 of the mortgages originated by private lenders.

Crack down on illegal housing discrimination, doubling the number of housing discrimination cases HUD refers to the Justice Department for prosecution in the next four years. This will further the President's initiative on race.

The President also said HUD will move forward with a planned expansion of its Homeownership Zone program. HUD will use an additional $10 million in grants to cities this year and has requested $50 million in fiscal 1998 to create large-scale single-family housing developments that can spur millions of dollars of local investment, helping to reinvigorate cities.

The goal of the Urban Homestead initiative is to narrow the city-suburban homeownership gap. While 72.1 percent of suburban families own their homes, only 49.8 percent of city families are homeowners.

Cuomo recently set a goal of creating 2 million new homeowners in America's cities by the year 2000 -- boosting the urban homeownership rate above 50 percent.

"Homeownership promotes strong families, community stability, neighborhood vitality, and economic growth in communities across the nation," Cuomo said. "We are all better off when homeownership increases."

The Urban Homestead initiative is part of the National Homeownership Strategy launched by President Clinton in 1995. The strategy brings all levels of government, the housing industry, lenders and non-profit groups together to increase the national homeownership rate to an all-time high of 67.5 percent by the year 2000. Sixty-two national groups joined HUD to form the National Partners in Homeownership.

Over the last two years the strategy has helped create 2.5 million new homeowners, while the nation's homeownership rate has grown to 65.4 percent -- the highest annual rate since 1980. Currently, a record 66.3 million American families are homeowners. The number of American homeowners has grown by 4.7 million since President Clinton took office.

Here are more details on three of the programs in the Urban Homestead initiative announced by President Clinton:

FHA PREMIUM CUT

Effective Sept. 1, the FHA mortgage insurance premium will be cut by a quarter point for first-time homebuyers in central cities, down from 1.75 percent for other first-time homebuyers. This will reduce closing costs by $200 on the average FHA-insured mortgage of $85,000. The total average reduction in closing costs for qualifying urban homebuyers will be $1,400 since the start of the Clinton Administration.

Cost-saving management improvements at the FHA -- which is part of HUD -- will allow the FHA to reduce its mortgage insurance premiums, Cuomo said.

The savings to homebuyers exceeds the $1,000 goal for cuts in mortgage closing costs that was set by the President.

To qualify for the premium reduction, prospective first-time homeowners must successfully complete the Homebuyer Education and Learning Program, a 16-hour course that covers such topics as how to select the right house and mortgage, household budgeting, managing credit, and home maintenance and repair. Homeowners who complete homebuyer counseling programs are less likely to default on their mortgage payments.

THE OFFICER NEXT DOOR

The Officer Next Door program is designed to encourage as many as 2,000 city police officers around the country to live in poor communities where they work. This would strengthen neighborhoods, reduce crime and make areas more attractive to homeownership.

The program is expected to also make officers more sensitive and committed to serving communities where they live.

The one-year initiative will give police officers a 50 percent discount on the purchase of HUD-owned foreclosed homes in designated inner city areas. For example, in Miami -- where the average price of a home is $112,000 -- such a home in an eligible area could be sold to a police officer for $66,000. The downpayment for police buying homes with FHA mortgages will be just $100.

Police officers participating in the program must live in the homes for at least three years.

Five cities have already agreed to participate in the program: Cleveland; Miami/Dade County; Kansas City, MO; Los Angeles; and Springfield, MA. In all, 24 cities are expected to participate.

Many cities across the country -- including: Los Angeles; Portland, OR; Fort Wayne, IN; and Columbia, SC -- have implemented home loan programs to encourage police to live in communities they serve.

In Columbia, crime fell 16 percent from 1991 to 1996, and much of the drop was attributed to a program of placing police officers in homes within communities where they worked.

Police interested in participating in the program can call 1- 800-217-6970.

EMPOWERMENT VOUCHERS

The Clinton Administration has proposed an Empowerment Voucher program to allow some of HUD's Section 8 rental vouchers to be used by poor working families to make mortgage payments, enabling the families to become homeowners.

Freddie Mac, a leading purchaser of home mortgages from private lenders, announced today that it will buy 1,000 to 2,000 mortgages that use Section 8 subsidies, once authorizing legislation is enacted. Such secondary market purchases are essential to encourage private lenders to participate in the initiative. Freddie Mac will require downpayments of only 3 percent.

In addition, Mortgage Guaranty Insurance Corporation announced today that it has agreed to help develop the Empowerment Vouchers initiative and provide private mortgage insurance on loans.

Empowerment Vouchers would not cost HUD additional money. They would simply use existing housing subsidies to make mortgage payments rather than to pay rent for poor working families.

Empowerment vouchers would be a five-year pilot program to be operated by public housing authorities.

To qualify, Section 8 families would need to be first-time homebuyers, have income from employment, contribute toward a downpayment and use their own funds along with HUD assistance to pay their monthly mortgage payments. Family contributions toward downpayments could include "sweat equity" -- manual labor in building or rehabilitating a home.

Public housing authorities would administer Empowerment Vouchers and certify families' eligibility. Qualified families would receive additional assistance from public and private agencies to qualify for a mortgage originated by a private lender.