Tom,

I hate to be the one to tell you, but you've got it wrong! I'd rather tell you than some of our zealot FHA/HUD supporters.

The problem is with the FHA/HUD bureaucrats, their charter doesn't call for a no down payment program so they came up with this DPA nonsense! To get around the rules.

If FHA/HUD were honest they would either offer no money down or direct seller help. But, no by playing this game they can claim they had a down payment from a disinterested third party. If they were honest, think how much easer it would be if to finance a $100,000 purchase it simply required a $103,333 appraisal!

The problem is not with the PDA's, they saw a need and helped a lot of good people get in to and succeed with their own homes. They are often though of as "charities" but they're not, never have been! They are "non-profits" which has to do with their management and tax structure. Non-profits are normally mistaken to mean charity or low cost neither is necessarily true, their employees and directors are often extremely over paid! Twelve years ago Elizabeth Dole was making over $3,000,000.00 as head of that "non-profit!"

Bill

Hey Bill: So HUD encouraged this before? They 'created' this very thing they want to get rid of? It sounds like to me that you are saying that HUD wants 100% and Congress won't give it to them....

I am sure Jeff Belonger will be along soon to tell us that we are both wrong.... and that we should be selling Mortgage Accellerator products anyway.
But I appreciate the insight!!

Tom, I hope they do too. Along with allowing condo's to be approved like single family residenses. By the way do you know of a loan, stated income for a Realtor friend of mine, She had put 19K down on a condo, 2 years ago and it is finished. Now she can't find a loan with only 10% down. Email me off line if you do. Her husband is self employed too.

Tom,

You got it! HUD blames the DPA's but they created them. DPA's let FHA get around the rules.

Jeff, will probaly speak up, but he deals only in the good that FHA does.There is a lot to be said, remember as bad as the cricis is most home buyers suceed, and we've created more home owners than any other country at any time in history. Praising HUD/FHA  is like praising a rattle snake by telling us how good they are a keeping the mice away!

Bill

So sad... so very sad... they ended the story with a couple that went into foreclosure and filed bankruptcy and are proud to buy another house... huh?  Those are the people who truly can't afford to own a house!  I hate the DPAs.  I rather them have a 100% program, but then you're still putting people in houses who have no money.  Sorry, but it takes money to maintain a house.  Who's going to mow the yard, fix the fence, replace the hail damaged roof, etc...?  Lots goes into owning a house, and if they can't afford a down payment or closing costs, they can't afford the upkeep either.  I loved your quote!!

Who is this Jeff Belonger character that you speak off?  lol 

Well...  right and wrong...  I think this is being blown out of proportion because there are misleading facts.  Yes, there are many foreclosures.... but a lot of this was due to a few builders that had their own lender and appraiser, who pushed value and put clients into homes with the highest FHA rates possible. That combination alone would add more foreclosures to the market.

There is a true story from about 1 1/2 years ago that took place in NC.  A builder had about 80% of his units go into foreclosure. Yes, he is now being investigated, but the damage has been down.

My take on this....  does it matter if it's a DOA or 100% financing?  You still have no money from the buyer.  A DPA is just as good as anything else, that's if the appraisal is 100% and not tilted in the favor of getting the deal done.

How about this.... if the house is worth $220,000 and the seller dropped the price to $200,000.  The buyer comes in and says, I will give you $218,000 for $18,000 in help, what is wrong with that. Especially if the appraisal appraises for that purchase price, including the seller help.  Don't forget, that much seller help will be in the equation, to determine value.

Don't forget, you still need to be approved for any type of FHA loan. What's the difference if my dad game me $18,000? 

I could be here for ever.... but a little FYI info.... HUD did approve FHA fianancing....   congress shot it down. It nevber made it back to the floor. That was approved 2 years ago... about the same time we started loosing all of these subprime companies that were doing 100% financing down to a 580 credit score. Look at Fannie Mae and the DU systemt approving 100% financing with a 55% to sometimes a 60% back end ratio. How come we forget about this and don't talk about it often?

When we do a DPA, we like to see about $1,000 paid by the buyer. I did close one 2 weeks ago to where the buyer got his $700 deposit check back....  but wait, their mortgage payment ended up being $47 less than what they were paying in rent. I think it can also come down to the lender and who they use as an appraiser, that makes the deal work.... don't we know, that there are always a few that ruin it for the rest of us?

Bill makes one of the best points... yes, we lose a few to foreclosures, but we still put more people in homes. People will buy up the foreclosures. If we are going to point blame, let's get the facts together and first find out which programs have created the most foreclosures. Secondly, what were the reasons to the foreclosure. I hardly ever see anyone mentioned these two things...  hhhhmmmm    

Well, that is my $50 worth...

Jeff,

Well said. Very well said!

Our problem here in Las Vegas, didn't involve FHA, but it was builder owned lending companies, and their hand picked appraisers.

Bill

Hi Tom: I think DPA's are o.k. The bottom line is it allows homebuyers (often strapped for cash) to get into a home. The alternative may be to wait and throw money away on rent. I'm presently doing a Nehemiah loan and the borrowers are well qualified and good with their money. They're also all of 22 years old so it's tough to even save the 3%. And what if you don't have that rich relative, etc? Then you just wait. I'd rather help people get into homes and, remember, that since it's FHA approved you have to document income, etc. Just my nickel!

Paul

Downpayment assistance may be going away, but not without my continuing comments on the available channels.

The biggest problem with the defaults, in my experience, is a combination of no money invested, with large housing increase, and limited tradelines or weak credit.

Our housing industry needs a way to enable responsible buyers to purchase with low or no downpayments.

It is just that the industry need a way to evaulate who will be a responsible buyer.

Adjusting for higher risk is perfectly acceptable as an additional offset along with tighten guidelines for no downpayment financing. Would that also apply to family gifted funds? Why not?

I am no fan of the DPA companies, but without another 100% option, it seems to me to be needed.

Thanks for the discussion.

Richard

It's a work-around.  Nothing sinister.  And for the life of me, I don't understand why more RE agents don't market their listings with some bells and whistles the way builders do.  Willingness to participate in a DPA great way to set your listings apart from the masses!

All of this discussion could be for naught. HUD is bound and determined to get rid of the DPAs unless someone does something about it. I agree, 100 FHA financing would be better, but we don't have that. DPAs are the next best thing. Take a look at my blog on the subject: http://www.activerain.com/blogsview/587140/Down-Payment-Assistance-Programs

Thanks,

They helped people that lacked ALL financial responsibility, therefore they had NO money at all saved, then our new borrowers started missing payments - go figure!

Not all deals were bad risks, but it looks like MANY were bad.  It may be too late to fix.

@ Rebecca Schrader....   the sky is not falling, but it will be bad for a while. Those are the facts.  I said 1 1/2 years ago that it wasn't going to get better until mid to late 2009. Yes, business has been better for me this year than in recent years. But the overall aspect of things, more people are doing worse.

I will be writing about this over the weekend or on Monday.....  it's will be titled, "Buckle Up".....  I am getting sick of the politicians, the realtors, and some loan officers that have no idea. The figures they keep touting are misleading in regards to the DPA's.... and people don't think common sense.  The bottom line, the average person just can't save, period. But if their rent is on time, what makes them a bad risk when buying with no money. We will see that the housing market will slow down even more once this is pulled....  mark my words... in markets that have homes priced from $80,000 to $300,000... depdning on the market.

Overall, the misleading facts that DPA's were bad recently, they aren't dissecting these figures... there is more behind the numbers. Gee, I have been doing DPA's since 1996....  all of a sudeen, these are bad?  Did anyone look at all loans and how they are performing??   Coupled by the enconomy?  It's just sad... the gov't needs to let the market correct itself.... period....

Jeff, you nailed it!! They are all of a sudden bad.

BUT!!

Part of the reason they are bad is the many new originations. People who normally would have been steered into an easy subprime loan is now finding their loan officers 'newly trained' on FHA.

I was originating FHA when FHA wasn't cool!!

Jeff, Tom,

Well said!

Bill

I am a little late in coming to your post.   I did find the comments interesting.   One thing that I disagee on is that HUD authorized the 501C3 DPA programs.   I personanally believe the DPA programs found a loophole that allowed them to operate.  At one time IRS tried to pull the 501C3 classification from them.   That failed for many reasons in my opinion, Lobbiests, politicians and individuals profiting by the DPA.   I know when they first came out, the company and investors that I worked with avoided them.   After a while, peoples opinions changed to "EVERYBODY ELSE IS DOING IT".   The flood gates openned.  It could be DPA, Stated Income, Low Down Payments or just a market correction.   For a while everything was going great as long as home prices kept growing because potential losses did not occur because of rising home prices.   People in trouble were still able to sell and break even.    Then the bubble burst or the AIR started coming out of the balloon.   Describe it as you like. 

One final thing, on another post I know I offended the blogger, but am reposting it here to save redoing the math.  As I have heard many times "FOLLOW THE MONEY"

Ricardo,  I did go to the http://www.supporthomeownership.com. site and was not supprised to see that it appears to be sponsorred by Ameridream.  A few numbers that might be interesting from their facts sheet.    They have assisted 200,000 + homebuyers.   The fact sheet also says they have committed 40 Million towards Affording Housing.    Let me do some math if they assisted 200,000 homebuyers and collected a processing fee of $395 on each one they collected 790,000,000 (I had to check my decimal places when I saw 790 Million)  and then they committed less than 5% of that towards Affordable Housing. 

One last piece from their Fact Sheet. 
in Southeast Washington, DC. The Woodson Heights development is a $30 million project that is serving as a catalyst for change transforming a blighted neighborhood into a good place to call home and raise families. 

AmeriDream Building Affordable Homes Program - currently developing 106 affordable homes

Lets divide 30,000,000 by 106 to see what is affordable housing?   It is 283,018.   Is this AFFORDABLE HOUSING??    What was the FHA Loan Limit when this was started?    Also do you believe AmeriDream will break even on these home sales or make a profit?

Second post to their blog:

Ricardo, I posted what I did to look at facts and numbers instead of just emotion.  I do what I do for a profit and a living.  I am not ashamed to say that.   I am sure that you do what you for profit as well.   My intent was (and is) to have people look a little further into issues.  One point I was trying to make is there are alternatives to the DPA programs.   Again, I wish Congress would solve the issue by authorizing 100% Financing instead of supporting a Special Interest Group that bills themself as a NON PROFIT.  I am not trying to pick on Ameridream.   Another source quotes about 600,000 people served by DPA Programs at the cost of $500.00 Each.  If my math is correct that is 3Billion Dollars. 

I appreciate your comments, Ricardo, but wish everyone would support efforts by congress to authorize 100% Financing instead of going with the flow that is trying to be created by Special Interests.   Here again "Rainers" let your thoughts be heard. 

I am surprised to read some of the comments that have been placed on a variety of blogs pertaining to DPA.  DPA's provide a service just like any other service provider.  They expect to be compensated ($399 - $599) for their efforts just like a Realtor or a mortgage professional expects to make their fee of 2-3%.  Just because they do alot of business, they are being scrutinized as "toxic or money launderers".  The fact remains that they have placed over 1 million homeowners into properties that we all have benefitted from in every market.  They even provide to charities and other non-profit foundations (I know Nehemiah does...)  How they spend their funds is their business, just as how we spend ours is our business.  I keep hearing the pot calling the kettle black.

DPA's did not cause the default problem in America.  If you were involved in an 80/20 SIVA, or SISA transaction in the last 6 years then you need to look at yourself in the mirror and take responsibility for your actions.  Those sub-prime loans are what fueled the increase in defaults.  But no one wants to blame themselves. 

The facts that HUD has provided the public are misleading.  The GAO has stated this fact on numerous occasions.  They let you believe that the forclosure rates are at 28%.  They are actually referring to mortgage lates, not forclosures.  Mortgage lates are high anytime we have such instability in the economy.  We are all faced with higher costs for our normal living requirments.  This always leads to an increase in late mortgage payments.

DPA's account for a total forclosure rate of 6%.  DPA's have been used in conjunction with FHA.  The subprime market has accounted for the remaining loans.  Over the last 5-6 years, DPA's & FHA were used sparingly due to the sub-prime programs not requiring a downpayment.  Now all of a sudden they comprise of 28% of the defaults in the market???  HUD really believes the American people can be fooled.

FHA is telling us that their loans comprise of 40% DPA.  They state the loss would be $50Billion initially and an additional 10Billion each month thereafter from our economy.  Now include the loss of 10K professionals in the industry and you will see the effect it will have on the economy.  Can the US afford to absorb this at this time?  NO!  It would crush our market!

The bottom line is this.  Whether or not you agree with DPA, your actions will be felt for years to come.  Will it be positive or negative?  The choice is yours.  I for one will campaign to keep the DPA's but regulate the programs.  Consumers dont have too many choices anymore.  If your parents arent rich, then you will be struggling for a long time to save up for a downpayment.  It wont matter if you have a 800 FICO, or not.  The rich get perks all the time that the taxpayers fund.  Its time we gave the little guy a break, and it wont cost us a dime.

I dont exppect you all to agree, but do yourself a favor and do the research.  Then you can make an educated decision.  I see too many comments that are emotionally fueled with no data to back them up.  If you have not seen the video on Ameridreams site then you are missing some important facts.  Do your research and then lets make this work for all of us in the industry.  This is one more thing that will be taken away from us.  Next, they will be banning mortgage brokers or YSP's.  Once it begins, it wont end.  Think about your futures.  Is it wise to cut off your ears to spite your face?

Hello Anonymous!!

Gimme FHA 100% and stop the belyy aching over a mere 3%. It's not like the money didn't add up to 100% in the first place - just call it an FHA 100% loan.

I think the statistics on FHA loans with DPA assistance, ( I don't buy the stats by the way ), are going to be long forgotten very soon. In the last month I have recieved at least two calls a week from slam dunk clients with option arms that are upside down on their house. Apparantly their previous mortgage banker did not explain defferred interest and negetive amoritization. By the way, I have seen these huds...20 - 30K fees by slamming the margin way up... 

We are not talking about loans where clients needed to find 3% -  these are the million dollar deals that are going to implode and i see it happening right now..... anyone else starting to get these calls?

Congress really should of let the market correct itself. But instead in the middle of a crisis they get take out a huge segment of buyers out of the market and increase the FHA down payment requirement to 3.5%. They probably should have taken marketing 101 and then they would be able to figure out that if we have too much inventory its probably not a good idea to make it more difficult and more expensive to buy.

Paul

I swear the legislation to take away the DPAs was lobbied by the banks to get rid of excess REO inventory.  We are ridiculous busy in the Vegas valley.  Pendings are currently SKYROCKETING at a time when they should be staying level or shrinking due to end of the month closes.  I predicted (last month) that (before this bill passed) our pendings would level.  HAha

Ten bucks says they will be back.

If not, let's say you are buying a 200K house.  You need Security, 1st Month, Application, Key, Cleaning and Pet deposit.  Yup equals 2.5-3%.  I don't believe for one minute that someone couldn't come up with the extra half to one percent to make it real provided they could get their closing costs paid.

Just my 2 cents.

Oh I must say that I agree with you about the money laundering aspect.  I know someone doing hard time because he created one of these little charities and didn't structure it properly.  Pretty much charged along money laundering lines.

Good Afternoon,

I have GREAT NEWS! Down Payment Assistance (DPA) is one step closer to being preserved thanks to all of your efforts. HR 6694 was passed by the House Financial Services Committee earlier today, positioning the Bill for a floor vote in the next couple of days.

Our fight is far from over. It is more critical now than ever before that we continue the charge to preserve DPA. Therefore, I am calling on you once again to assist with our collective efforts. We must make contact with some key individuals to voice our profound support of Down Payment Assistance. Failure to do so at this point in time could result in adversity to HR 6694 thus making all of our previous efforts a moot point.

I am respectfully requesting that you call, email, and / or personally visit the following individuals:

DPA Reform makes sense because:

* losing DPAQ will cost the economy $150B in housing sales in next 12 months.  Why infuse $300B + $700B and then lose $150B out the backdoor.

* since risk based pricing suggested by the CBO would pay for any losses so....

* it doesn't cost the taxpayers anything

* we have and will spend $1 Trillion on this housing crisis and I am not aware of any other program in either H.R. 3221 or the bailout that doesn't cost the taxpayers anything

* so if we can keep $150B in the economy at no cost to taxpayers and allow low-to-moderate income people to buy at today's low home prices, why wouldn't this be a part of the bailout solution package?

Main Street is asking "What's in it for us?" And Congress should make sure that working Americans see some direct benefit from this bill.

Contact Barney Frank at 202-225-5931, and Nancy Pelosi at 202-225-4965 today and tell them to include the DPA Reform H.R. 6694 language to the ‘Bail out Bill' and give something back to Main Street.

This report puts alot of negative comments about the cost of DPA to rest. See for yourself the reality of why the program needs to be saved!

http://www.cbo.gov/search/sitesearch.cfm?criteria=H.R.6694

This report puts alot of negative comments about the cost of DPA to rest. See for yourself the reality of why the program needs to be saved!

http://www.cbo.gov/search/sitesearch.cfm?criteria=H.R.6694