First of all and most important, I am not a spokesperson for Hud and my opinions are just that, my opinions.
For those who may not be familar with the non profit downpayment assistance programs one of the most important or the most important point is that the assistance is a gift.
From the outside it appears to be a lot of fancy dancing to make this seller's concession, ops we're not allowed to call it that, appear to solely be a gift from the non profit organization involved. The gift comes from the non profit organization's general pool and not from the seller. But, big BUT! if the seller does not make the appropriate contibution to the non profit there will not be any gift forthcoming from the non profit. Excuse me I meant a contribution exquivelent to the gift amount, plus a predetermined administration fee for the non profit. And once again, by some miracle, there is no tie between the two. Heh, heh.
As a gift it sits outside the FHA guideline of a maximum of 6% that the seller is allowed as a sales concession toward the buyers cost. Also as a gift it is considered by guideline to be "the buyer's money!" Pretty cool trick wouldn't you think. Now the fun part is that when all is said and done the seller may have in one way or another contributed 7,8,9% or more to the buyers purchase of the property.
So HUD is concerned that this has increased the purchase price of the home to the buyer. It's hard to argue that it hasn't.
On the other hand it has created an opportunity for a buyer to be able to purchase a home that they may not have otherwise been able to purchase.
1. Why doesn't HUD just tweak the guidelines as opposed to killing the program.
2. Why doesn't HUD get off their duff and finally start offering 100% financing, which could effectively kill these programs, as they are today.
I don't know the answers to these questions.
Now, and this is certainly an issue of concern;
Hud is concerned that mortgage brokers/lenders are putting pressure on appraisers to meet what HUD considers to be inflated purchase prices. This is a legitimate concern. Since I am not an appraiser I suggest you ask your favorite appraiser if this is the case, and I think you will find out that this is in fact the case.
Okay, so maybe the way non profits operate in regards to FHA loans needs to be addressed, but how much of this is political, and a response to today's market conditions. The non profits didn't just appear out of clear air. They have been operating for quite some time.
No system is perfect and when there are disagreements blame usually falls on both sides of the fence.
One man's opinion;
In today's market the HUD's action is inappropriate and needs to be reversed!
Once again, just one man's opinion!