Home Ownership

In response to a congressional request, GAO provided information on how to tighten eligibility criteria to better target assistance for first-time home buyers receiving reduced-interest rate loans through qualified mortgage bonds.

GAO found that: (1) bond-assisted loans could have more of an impact on home ownership rates if agencies targeted them to households less likely to become home owners without it; (2) unassisted first-time buyers tended to have average incomes and to purchase houses priced below average because they lacked equity; (3) the statutory income ceiling for bond-assisted households was 115 percent of the area median and the price ceiling was 90 percent of the area average; and (4) placing eligibility restrictions on household size and age would prevent many households that were likely to become home owners on their own from qualifying for bond assistance. GAO also found that other mechanisms to target assistance included: (1) prohibiting households from receiving bond-assisted financing if they could afford to buy the same home with a mortgage at the market interest rate; (2) having the federal government recapture a portion of the subsidy from any house price appreciation when the recipient sold the house; and (3) periodically reassessing a buyer's continued need for a reduced-interest-rate loan.