Housing Assistance: An Inventory of Fiscal Year 2010 Programs, Tax Expenditures, and Other Activities

U.S. Government Accountability Office

Graduated Payment Mortgage (Section 245(a))

Administering Agency/Entity Department of Housing and Urban Development
Short Description Provides mortgage insurance to protect lenders against risk of default on graduated payment mortgages (GPM), enabling households to make mortgage payments that increase gradually. Offers five plans with varying lengths of time and interest rate increases. When the interest rate (and mortgage payment) increases, the borrower's income should increase to make the higher payments. Requires larger down payments than typical Federal Housing Administration (FHA) insured mortgages to prevent total amount of loan from exceeding statutory loan-to-value ratios. Required down payments vary in proportion to interest rates. GPM insurance is available through FHA-approved lenders to those who intend to use the mortgage property as their primary residence and expect to see their income rise appreciably. FHA rules impose limits on some of the fees lenders charge in making a mortgage. FHA can establish and collect an up-front fee and annual premiums, but has limits (which vary by county) on the size of loans it may insure.
Primary Purpose Assistance for buying, selling, or financing a home
Type of Housing Supported Homeownership
Type of Assistance Insured loan
Fiscal Year 2010 Obligations None; no loans were made in fiscal year 2010.

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