I received a comment on one of my previous posts about the endangered non-profit assistance programs and FHA loans that mentions a trend I'm seeing in many solicitations lately.

Here's the quote:

"Earned Income DPA's are still alive and functioning and in fact are specifically approved in the new HUD Ruling. Here is the comment from the report.

                                           [link removed -you can find it in the original comment]

When you can't use the gifting DPA's the earned income programs can help!"

I've been hearing a lot about these earned income down payment systems from several sources for a while now, but I haven't noticed them taking off yet.  They offer a commission to the borrower for selling a membership of some kind to the seller of the home they are buying. I think part of the reason they haven't taken off is that we loan officers instinctively feel that it violates the intent of the rules, if not the letter, and that it will be cracked down upon if it comes into wide usage.

In HUD's example quoted above from the comment section of the new rule disallowing seller funded down payment assistance, the real estate agent is providing a traditional service for which a large commission is normal and common. With these earned income programs, the commission is being paid for a service not nearly as involved or perceived to be as valuable as the services of an agent acting in a fiduciary capacity. Our worry is that HUD will regard this as a thinly veiled attempt to have the seller give the buyer the down payment in almost the same manner HUD now objects to with the traditional DPA groups.

I would welcome hearing from anyone who knows more about these programs, and if in fact any FHA lender is accepting them. 

Carl Pruitt is a 22 year veteran of the mortgage/real estate businesses and specializes in FHA loans.

More information and regular updates about FHA loans can be found at http://fhaloanadvice.com