Home Ownership - Limiting Mortgage Assistance Provided to Owners with High-Income Growth: Rced-90-117 (Paperback)

Pursuant to a legislative requirement, GAO provided information on provisions for qualified mortgage bond and mortgage credit certificate assistance, focusing on the recapture mechanism. GAO found that: (1) many assisted owners will use a higher recapture rate than the interest-rate reduction they received when computing their recapture amount, since most assisted owners had a mortgage interest reduction that was different from the recapture formula's assumed percentage point reduction; (2) because the recapture amount is phased out between the sixth and tenth years, owners with large income increases or those who receive assistance the longest will have their recapture amounts reduced and eventually eliminated; (3) buyers could receive mortgage bond assistance even if they were able to afford housing payments on a comparable market-rate loan without assistance; (4) half of the assisted households may have been able to afford the same home with a market-rate fixed-rate mortgage; and (5) one alternative to the recapture mechanism would be to increase an owner's monthly principal payment and interest when the owner's income has increased sufficiently to afford those payments, but this approach would require housing agencies or their agents to periodically reexamine owners' income and would result in a more complex and costly program administration.