Today, the New York Times revealed the FHA's plan to do away with downpayment assistance programs offered through non-profits because they expect $4.6 Billion in losses, which they attribute to these programs. FHA commissioner, Brian D. Montgomery, warns that the F.H.A., "would have to renew its efforts to end the seller-financed down payment program, which accounted for 35 percent of its loans in 2007."

Rachel L. Swarns describes these "F.H.A programs" as downpayment assistance programs typically facilitated by non-profit organizations, such as Ameridream and the Nehemiah Corporation of America. However, these programs are actually downpayment assistance gift programs and, as many of us know, a non-profit organization provides the downpayment after the seller agrees to pay a fee equal to the downpayment provided plus an administrative fee to the non-profit that provides the downpayment gift on behalf of the buyer.  

There is much debate going on with congressional leaders right now as to whether or not the FHA should ban these programs. On one side, critics say that these programs put overpriced homes in the hands of the poor. On the other side, supporters claim that banning these programs would make homeownership unattainable for low income families.

I believe there is a middle ground somewhere. Downpayment assistance programs are ok so long as buyers can afford them. The problem starts when buyers cannot afford the higher purchase price that results from adding the downpayment and closing costs to the purchase price so that the seller is willing to pay them. Instead of banning these important programs, it would make more sense to implement stricter qualifying requirements for buyers intending to use these downpayment assistance gift programs or, at least, implement any other sensible alternative to a straight ban.

Read the NY Times news piece: "F.H.A. Faces $4.6 Billion in Losses".