Rep. Crank Introduces Bill to Reclassify Student Loan Debt for First-Time Homebuyers

WASHINGTON, D.C. -- Representative Jeff Crank (CO-05) introduced H.R. 10084, the First Time Homebuyer Debt Reduction Act, to help eliminate crippling student loan debt and increase access to home ownership.

Student loan debt is preventing many Americans from purchasing a home. Totaling over $1.8 trillion, student loan debt is the largest category of consumer debt in America apart from home mortgages. Today, as students graduate from college, they are facing an average student loan debt of nearly $40,000, with a large percentage of those borrowers still paying off their loans more than 20 years after graduation. With large monthly payments going to paying off their debt, these individuals are often unable to save money as they pursue the American dream of home ownership.

To help alleviate one of the most significant financial hurdles to home ownership, the First Time Homebuyer Debt Reduction Act would allow home sellers to help pay off a buyer’s student loans, reducing their debt and improving their mortgage qualifications, easing the pathway to homeownership. Many home sellers already offer concessions, often worth thousands of dollars, to home buyers in the nature of interest buy-downs and covering the closing costs on the home transaction. The First Time Homebuyer Debt Reduction Act gives home sellers an additional option to attract home buyers.

“Student loan debt is holding back Americans from living out their dream of owning a home,” said Rep. Crank. “The First Time Homebuyer Debt Reduction Act gives home sellers the ability to reduce or eliminate the student loan debt of the home buyer, similar to other concessions that many home sellers are already offering. This policy change will boost home buyer eligibility to purchase a home and fulfill the American dream.”

The First Time Homebuyer Debt Reduction Act will:

• Instruct the director of the Federal Housing Finance Agency to require the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Association (Freddie Mac) to classify payments from a home seller to a buyer's student loans as a financial concession;
• Currently, agency rules allow these payments, but classifies them as a sales concession, which lowers the home's value in the Loan-To-Value calculation;
• Limits the maximum payment to be classified as a financial concession to $25,000 and retains its tax free status;
• Specifies that only federal student loans are eligible; and
• Specifies that the bill applies only to newly constructed homes that will be the homebuyer's principal residence.

Read the bill here.

###