As a Realtor®, I am out in the trenches every day, and see first-hand the huge number of foreclosures and the problems they have brought not to only the owners that have lost their homes, but to the owners that are diligently paying their mortgage every month.  And then finally, a glimmer of hope in the form of the Down Payment Assistance Program.   After a long and slow winter in the housing market, we suddenly have activity - homes are starting to sell, and now HUD wants to pull the plug.   

I have heard countless ideas from well-intentioned law-makers - delay foreclosures, give financial assistance to homeowners, regulate lenders - none of which have provided a cure -So now, we have the only solution that IS working - in the form of DPA programs, and HUD decides it is a bad thing.  I want to point out specifically how the DPA programs are helping the market - right now:

•1.       The obvious. It is making it easier for buyers to buy a home.  HUD doesn't like this for some reason, but I will point out that the vast majority of the people that used the 100% financing plans of the past - ARE still paying their mortgage.  Right now, a renter can potentially purchase a home and have a mortgage payment for close to the same or sometimes less than they are paying in rent.  Buyers can buy a great home for a great price, and come into it with a little equity complements of the DPA.  Isn't that a good thing? 

•2.       The less obvious.  Say you are a seller that has taken a job in a new city.  You have to move, and you have plenty of money saved for that downpayment.  But, due to the high number of foreclosures in the area, your home is worth less money than you owe to the bank.  Right now the only options these sellers have is to default on that home, because they are unable to sell- adding to the foreclosure problem or, negotiate a "short sale" where the bank will accept less money for the home - but also nicks your credit so you can't buy a new home.  Or you can bring a check to closing for the difference between what the new buyer is paying for the home and what you owe to the bank.  (The highest number I have heard personally is $40,000.)  This saves your credit, but wipes out your reserves for a downpayment on the next home.   But you can use the downpayment assistance program, enabling you to buy a home in the new city.

•3.       Helping Sellers. Sellers don't realize it yet, but they love this program too.  It is allowing them to sell their home.  Five out of my last 8 transactions have utilized a down payment assistance program.  The sellers always grumble about contributing to the program, cutting into their bottom line, but they are always happy when the home is sold and they can move on.  The reality of this market is that most sellers are competing against foreclosures in their neighborhood and it is difficult to sell without offering a low price and incentives to the buyer.

In my view, The DPA programs are saving the market.   Without these programs, the number of buyers out there would be grossly depleted, and more homes will sit unsold, driving up the foreclosure rate because sellers can't sell, and driving down the prices even more than the low levels of today - devastating the market, and more importantly - homeowners.   We need this program, it is working, everyone is happy, please leave it alone.