Hi Jeff - I've seen "Nehemiah" before but did not know what it was.  Thanks for that info, now at least I have a little notion about it.

Ann

received today via e-mail

Dear Colleague,

I am pleased to announce that Nehemiah was victorious in its litigation against HUD!

Judge Lawrence K. Karlton of the United States District Court for the Eastern District of California upheld Nehemiah?s motion for summary judgment. The Court Clerk's Office is directed to enter judgment and close the case.

To be clear, the U.S. Department of Housing and Urban Development?s (HUD) rule to ban private downpayment assistance as proposed in the ?Standards for Mortgagor?s Investment in Mortgaged Property? regulation published October 1, 2007, is permanently set aside.

We are thrilled with the Court?s decision to support low-to-moderate income families across the country by ruling against HUD?s attempt to ban private downpayment assistance. This is a major and conclusive judgment, leaving no uncertainty that downpayment assistance is a life line to the families that Nehemiah serves. It is heartening to see that the Court?s arguments echo our sentiments and concerns. This decision preserves access and supports the use of sensible and reasonable approaches to homeownership for millions of working class families. It is a privilege to continue providing a helping hand to America?s underserved families by building both safer communities and financial strength through homeownership. As we have said before, we look forward to working with HUD to support deserving families across the country.

Since May 2007, Nehemiah has led the fight against this controversial rule. Since it was announced, there has been confusion throughout the industry regarding the potential impact of this rule. As the DPA industry leader, Nehemiah took seriously our responsibility to provide you with timely, accurate and responsible information about the events and activities surrounding this issue.

We took action by educating influential people and organizations regarding the truth about downpayment assistance. We asked for our homebuyers and industry partners to help us by voicing their support and the response has been overwhelming. I want to thank each of you for your letters, phone calls and spoken support of Nehemiah throughout this unfortunate situation. Your support has helped raise awareness in Washington D.C. which has increased the dialogue regarding DPA regulation though legislation. We hope to see some positive congressional developments aimed preserving the option of private downpayment assistance for homebuyers. Currently, the Senate is contemplating FHA Reform legislation that will determine the fate of private downpayment assistance programs. Please help us one more time by contacting your Senators to convey your support for downpayment assistance; a very important vote is expected in the next few weeks.

As a reminder, we provide a section on our website called Regulatory Updates where we detail significant issues relating to DPA regulatory and legislative events. Check back for new postings or sign-up to have accurate and timely information delivered to you.

On behalf of the entire Nehemiah team, we look forward to providing you with the same unmatched quality you have come to expect from us for years to come.

Sincerely,

Scott Syphax
President & CEO
Nehemiah Corporation of America

Belonger....

 You know you are BIG TIME when the President of Nehemiah reads your blog and comments....Don't let it go to your head....oops....too late!

I have personally been opposed to the seller paid down-payment assistance program methodology. I've used them, but have often felt like it was putting a buyer in a precarious position. I know I'll get the other side of why these programs help homebuyers, and I get it. Really, I get it.

Yesterday, a first time buyer called me and asked if I could compete with the offer she has from her builder's mortgage company. In short, the home was being sold for $8,000 more than the initial price and the buyer was getting about $10,500 in down-payment and closing cost assistance. Without that "aid" the buyer could not realize the "dream" of home ownership.  However, the same home, same floorplan and all, coincidentally was being bought by another client of mine in the same neighborhood. Perhaps there are minor differences in upgrades, but that home was under contract for $6,000 LESS than the initial price.

The difference after closing is that one person bought for $14,000 less than the other. If 2 years from now, both clients had to move due to job relocation one probably can and the other.....well....hopefully they can rent it. It may work out fine.....it may not....but in the throes of excitement of being able to buy the home, often times clients forget to pause and ask if they should.

I think that this is huge in two effects.....1 just what Ken had two say about the president of Nehemiah reading your blog....and two....this is a good "stay", if you will, of the inevitable collapse of DPA.  However, I know the Marlo feels otherwise, but if the bill is passed, I really think that this could be the true demise of DPA.  I like it, but feel that it has contributed to our foreclosure rates in that it forced values up beyond what the market could bear.  WE'll see where this all goes brother.....Kudos on your recognitionq

Hi Jeff, I agree that it is great to keep this Tool alive, but something has to be done to improve the performance of loans that use this tool.  Statistically, when people get something for nothing, they don't take care of it and feel like they can walk away from it.  You care about what you pay for.  There are of course exceptions, but human nature is fairly predictable!  I would suggest toughening the standards:

1) no refer/eligibles in conjunction with DPA.

2) tighter ratios.

3) no manufactured homes.

We will lose the program forever if the default rates on FHA loans with DPA continue to be higher than non-DPA loans.

Rich, guideline changes are ok but I don't think they address the real issue of pricing additional risk.

To me this is not a regulatory issue or even a guideline issue, it's a pricing issue.

The banks can't bump the loan an extra .25 and still compete. Additionally they might incur the risk of being accused of discrimination.

I have always felt there should be a pool of funds that's sole purpose is to provide an additional gap insurance if the loan goes south.

The banks do have the opportunity before they securitize to purchase additional insurance for the entire pool. Now the only question is do they take that expense off of their profit or find some way to pass that expense back to the borrower.

Marlo

RICH....    I am not sure if I said it in this post or in my comments, but I also believe that if people get something for nothing, that they are likely to not appreciate it as much. Now, a new home could and can be a different example.  

But this is to those that fight for programs such as Nehemiah, the DPA programs, butt don't understand the "behind the scenes" issues, problems, and concerns.  It's been proven that there is a higher default rate on the DPA loans than the regular loans by 13%. 

In regards to your suggestion of tightening standards... I agree, but I disagree with the first one.

1.  not to allow a DPA on a refer/eligible?  How many do you get with approved/eligible?   And yes, I think the loan should be stronger though, which I will get to number 3 and 4....

2. tighter ratios... I semi agree.  Current ratios are 31/43.....  maybe that they can't exceed 33/45?   Also...   when we do them, my underwriter wants them to have at least something in the deal. Meaning.... we want them to pay for the Nehemiah fee and sometimes the appraisal out of pocket.

How about this... that they HAVE to have at least 1 to 2 months in reserves, no matter what.

3.  no manufactured homes.... I totally agree.....

And I agree with your last statement.

MARLO....  so, what is the real issue?  When you say guideline changes don't address the real issue of pricing additional risk?  I think that could be argue and say, yes, changing guidelines would.

Let pose a question to you. Do you think penalizing someone in rate and/or points would help the DPA programs?  I can see your point, that it would give a surplus of money to a pool for those that default. But what about making some of the standards just a tad tougher so they don't go into default. Wouldn't this be cheaper for everyone in the long run? 

If you are going to tighten on either one...  stricter conditions or pricing fees or penalties... or in your case, higher mortgage insurance premiums...   how about this... pretend this was your money. Which would you want to risk more of? 

You make this statement....  "The banks can't bump the loan an extra .25 and still compete. Additionally they might incur the risk of being accused of discrimination."

Now... in regards to your first part of the statement.... if banks bump an extra 1/4... extra in fees or rate?  But who are they competing against?  I am lost on that one.... it comes down to the actual lender, the servicer.  I guess I am not sure who is competing against who. You and I?  Other lenders? Look at what Fannie and Freddie did... they made a hit on all credit scores below 680. They made it universal....  Do you want HUD to pass this type of hit in the Ginnie pools?  Which gets me to the next part of your 2nd answer.

Part two....  they might incur a risk of being accused of discrimination?  I agree that this can be a fine line... BUT....  it's the investors who can make up rules and guidelines. Why can't we just argue on a conventional loan that it should be fair to give the consumer a loan with a 350 credit score then?  Same with FHA...  FHA says that they don't have fico score cut offs.  But you know what, they aren't lending their own money. Any investor that we deal with won't go below a 500. I know some lenders that won't go below a 550 or a 560. I know some that will hit you with a penalty in points below a 580, a 560, and a 530. GMAC just added hits to pricing last week on this. A few other lenders don't. Do you think that they won't now jump in...  ??

Lastly....  in regards to your last statement. I would have to assume that they would have to pass that expense on. Seriously, how much of a fine line is it when it comes to a company's profit margin are we going to quibble at.  Aren't they the ones taking the final risk on a loan?  My company, we are classified as a banker. We underwrite our own loans, fund them, and then wait for the investor to fund them from us. Meaning... we are holding all of the risk until they take it off of our warehouse line.  If they say no, we have to find someone else. If we are making some loans that others aren't, shouldn't we be able to price this accordingly?  

Overall... if a consumer is not willing to put a dime into a transaction, do you think they should get the same deal as everyone else?  Just curious... you bring up some good points...  thanks for your input...

Jeff, I would love to respond, but I have been offline all day in meetings. I just got home and I'm leaving in the AM for NY and to visit my sister in West Orange and I have not yet packed.

Tomorrow is a travel day, on Thursday and Friday I am meeting with some banks and a securitization firm so it looks like I wont be back online until the weekend.

In general, I do not believe if a consumer is not willing to put a dime into a transaction, they should get the same deal as everyone else.

In fact you will be surprised to hear I'm actually a supporter of risk based pricing for FHA just not for another year or two or until we dig out of this housing crisis. I think it's the lesser of two evils and ultimately cheaper for the Government and our tax dollars.

There are a lot of issues in play here and I really will respond as soon as my time frees up a little.

Thanks,

Marlo

I'm getting an education just reading the comments!  (and people wonder the value of belonging to AR)

Jeff, I believe if you have a respectible credit score, these programs should apply.  And I agree that 2 months of reserves could be part of the equation.  I really was pleased at the decision to allow these programs.  AJ

The Nehemiah Program should be banned.  It is a crooked method to bypass the law.  First they are no charity.  The Seller must pay Nehemiah the amount that Nehemiah is gifting; plus an administration fee.  What a joke to work around the law.  Basically, the Seller is paying the Buyer's Downpayment.  Why does the Seller need to pay Nehemiah the money plus an administration fee.  The Seller should be able to just give the money straight to the Buyer.  Nehemiah is a hightly profitable money making organization.  As far as I am concerned the this is a scam to bypass the FHA loan rules and I can not believe they allow it to continue. 

What happens is the Seller raises their selling price and then contributes the extra money to Nehemiah who gives it to the Buyer.  So the Buyer gets in the property no money down.  Well,  we have all seen that movie and we know how it ends - "BADLY"