Jeff,

At the end of the day the bottom line is homeownership.....affordable homeownership! I consider myself an expert in down-payment assistance programs (DPA). However, it has probably been 7-10 years since I've done any DPA with Nehemiah, AmeriDream, etc. I am active in State of Florida Housing programs as well as various City/County SHIP programs. Depending on borrower eligibility I can combine these resources and get up to $40,000. Within the past 6 months the Florida program has been modified.  Six or so months ago I closed on a purchase with $55,000 in assistance.  So you can see that I haven't had much call for these seller-funded DPA programs. Plus, until the past year the Florida Real Estate market hasn't been conducive to seller concessions.

Much of the problem with these seller-funded program also ties to IRS rulings for Not-for Profit. This issue has been on and off for the better part of 10+ years.  There is a very fine line (gray area) in the interpretations and rulings.  I can see and understand both sides of this issue.  In  the very literal sense, the seller-funded DPA is a non-arms-length transaction. This is a pass through from seller to Not-for_Profit to the  buyer. This being said, is the money really a grant that may be partially tax deductible, particularly when the  seller has something to gain?  The DPA agencies such as Nehemiah were organized based on a perceived loop-hole in the IRS code.

If the IRS would rewrite the code surrounding Not-for-Profit this problem would probably go away.

Don't get me wrong, I just presenting information and perspective for discussion. I am not advocating one thing or another here......except affordable homeownership for all....in what ever way we can to maximize the opportunity.

Jeff,

Congratulations...Mr FHA Expert!  I just noticed that you have your website up. I hope it serves you well.

Jeff,

In reviewing some of my memos provided to Realtors that I work with I ran across a FHA/HUD press release from May 2006 that I had provided to them.  I don't know if you have seen/read it but it speaks of those coming changes that has been discussed in our posts/comment exchanges. Below is a cut and paste of this article just in case you or someone else may have missed it.

HUD PROPOSES MODERNIZATION OF FEDERAL HOUSING ADMINISTRATION
Legislative Proposal would increase access to FHA for potential homebuyers

WASHINGTON - In an effort to increase homeownership opportunity for many Americans, the Department of Housing and Urban Development today announced a far-reaching proposal to modernize the Federal Housing Administration (FHA) and make it an important financing option in today's housing market.

Assistant Secretary for Housing- Federal Housing Commissioner Brian D. Montgomery presented the House Subcommittee on Housing and Community Opportunity with the FHA Modernization Act, a legislative proposal that would enable FHA to reach deeper into the pool of prospective borrowers. Many of these borrowers are currently willing to pay subprime rates to become homeowners because they believe they have no other option.

"FHA was created during the Depression to stimulate the housing market at a time when homeownership simply wasn't a reality for most people," said Montgomery. "FHA has been able to help over 33 million families become homeowners since that time, but now it needs to be able to adapt to today's marketplace. A new, modern-era FHA would offer many hard-working Americans a variety of homeownership options that are safer and at a fair price."

The FHA Modernization Act would:

1) Create a new, risk-based insurance premium structure for FHA that would match the premium amount with the credit profile of the borrower . It would replace the current structure, in which there is standard premium amount for all borrowers, while still protecting the soundness of its Insurance Fund. FHA would have the flexibility to charge higher-risk borrowers a slightly higher premium, and to charge a lower premium for low-risk borrowers.

2) Eliminate the current statutory three percent minimum down payment, reducing a significant barrier to homeownership . FHA's existing down payment requirement does not meet the demands of today's marketplace, where most first-time homebuyers put down two percent or less. The "new" FHA would offer a variety of down payment options.

3) Increase and simplify FHA's loan limits . FHA's loan limit in high-cost areas would rise from 87 to 100 percent of the GSE conforming loan limit and in lower-cost areas from 48 to 65 percent of the conforming loan limit. This change is crucial in today's housing market. In many areas of the country, the existing FHA limits are lower than the cost of new construction, eliminating FHA financing as an option for buyers of new homes in those markets. FHA has simply been priced out of the market in other areas, such as California, where FHA insured only about 5,000 home mortgages in all of 2005.

The legislation would also expand the availability of the Home Equity Conversion Mortgage (HECM) program for the elderly by eliminating the cap on the number of these loans that FHA can insure. In addition, a new HECM for Home Purchase product would enable the elderly to move from the family home to housing more suitable for them as they age.

Other proposed reforms would make it easier for FHA to serve purchasers of affordable housing such as manufactured homes and condominiums. FHA would eliminate a feature of its Manufactured Housing program that limits how much a lender can recoup from mortgage defaults, providing greater incentive for lenders to make these loans. The proposal would also increase the loan limits to reflect the real cost of manufactured housing today. The legislation would also eliminate burdensome statutory provisions for insuring condominiums, which serve as one of the primary forms of affordable housing for first-time homebuyers.

HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development as well as enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet at http://www.hud.gov/ and espanol.hud.gov.