LIFT Act Proposes 20-Year-Fixed-Rate Mortgages For First-Time Buyers

New legislation introduced in the Senate, known as the “Low-income First Time Homebuyer (LIFT) Act,” proposes creating a new 20-year-fixed-rate mortgage program through Ginnie Mae, subsidized by taxpayers.

First-time, first-generation homebuyers with an income equal to or less than 120% of the area median income would qualify. Ginnie Mae, along with the Department of the Treasury, would subsidize the interest rate and origination fees for these 20-year mortgages. The result would be a monthly bill in line with a new 30-year FHA-insured mortgage.

The bill is sponsored by Sens. Mark Warner (D-VA), Tim Kaine (D-VA), Chris Van Hollen (D-MD), Raphael Warnock (D-GA), and Jon Ossoff (D-GA). All except Sen. Kaine are members of the Senate Committee on Banking, Housing, and Urban Affairs.

“We have too many first-generation, first-time homebuyers that are falling behind,” Sen. Warner said. “The number one way that middle-class Americans build wealth is through homeownership, an opportunity that due to racism and structural inequality has been denied to too many families of color. “Today, Black families in this country have an average net worth just one-tenth the size of their white counterparts.”

The proposal comes as the red-hot seller’s market continues to sizzle. While the market has shown signs of softening, home prices are expected to remain high, contributing to climbing rents. And Redfin reports demand for houses hit a three-year high earlier this month.

Former FHA Commissioner Dave Stevens told HousingWire that the bill could do well in Congress. However, a best-case scenario would also link it to Representative Maxine Waters’ (D-CA) downpayment assistance bill. The “Downpayment Toward Equity Act of 2021” was drafted by the U.S. House Committee on Financial Services, which Rep. Waters chairs.

The bill would offer grant funding to potential buyers who meet certain income requirements and must be first-time homebuyers, defined by the federal government as those who have not owned a home in the previous three years. Qualified buyers could use the funding at closing for their downpayment.

“In Congress right now, and I would guess the White House, they would like to see both Maxine Waters down payment assistance bill and this one make its way to the reconciliation process,” Stevens said. 

“If you could get a modest amount of dollars for both Chairwoman Waters’ piece of legislation as well as for the LIFT bill, you get some really good dollars targeted for first-time homebuyers.”