I will be slowly, for the sake of accuracy, disseminating the changes in lending laws that will directly impact your world. In HR 3221, American Housing Rescue and Foreclosure Prevention Act of 2008, is filled with good and bad. Unfortunately the bad outweighs the good. But let’s look at what we need to know now to avoid being ensnared by a couple of the traps in this bill that will definitely impede your ability to get people into homes.
This is an ACT NOW warning and I guarantee there will be people boohooing in October because they (a) didn’t know what I am about to tell you (b) didn’t believe me or (c) didn’t give a rip.
If you or your client are planning on using seller funded down payment assistance (Nehemiah, Liberty Gold, Ameridream, etc.) the loan absolutely MUST have a CLEAR TO CLOSE – FINAL APPROVAL prior to October 1, 2008. There is one work-around but I’m not even going to tell you what it is because if you have to resort to it you’ll probably lose the deal anyway.
The elimination is not of down payment assistance it is of seller funded down payment assistance. Now I know I’m not always right, just usually. I wrote letter after letter with example after example of not only how this would affect Mr. and Ms. First Time Buyer but also the American economy. You see people can still use down payment assistance – and here is where we prove emphatically that even though individual members of Congress may be intelligent and wise that when they get together in their gang meeting it goes out the window.
If you work for me and you want to purchase a home using an FHA loan but you do not have the funds for the required 3% down (which is actually 2.25% down because of motion of funds but is facing a mandated increase) I can give you the money. In fact, as your employer, not only can I give you the money but I can lend you the money for your down payment. Yes, and I can put a second lien on your property to make sure I am repaid! Oh, and wait, there is no CLTV limit so I can lend you more than the value of your home!
Yes, ladies and gentlemen. It’s true. Congressmen and Congresswomen, most of them, are intelligent people. Congress, on the other hand, appears quite dim (remember, it wasn’t “George Bush” who believed the reports and sent us to war in Iraq – it was Congress & GW). So I can lend my employees their down payment taking the CLTV of the property to, say for example, 110% and charge them interest or get my money back when they sell or refinance their home! However, the seller cannot fund the down payment and have it repaid at FHA rates. Don’t believe it? Call James “Jim” Beavers, the Deputy Director of the Office of Single Family Program Development at FHA.
IMPORTANT IMPORTANT IMPORTANT!
If you have a client who must use seller funded DPA for a purchase their file must have final approval from an FHA underwriter – not AU – prior to October 1, 2008. If the file requires any adjustments or amendments or any changes on scorecard on or after October 1, 2008 your deal is dead. If you are the listing agent and you accept an offer on a property where the borrower is using FHA and seller funded DPA you must absolutely and positively do everything you can to get that file approved by October 1, 2008.
Let me repeat because this is so very important. If the home buyer is using down payment assistance such as Nehemiah, the file must have the final approval – final approval not just an approval – prior to October 1, 2008.
Okay – I have more detailed information just as important to your industry coming. There are at least SEVEN more items equally important that you need to know in detail. I will be hosting a conference call on Sunday, August 17, 2008 at 6PM Eastern time. Cost will be $30 per line for the call. It will last between one and two hours based on the number of questions I receive. I will only be opening 25 lines so reserve your line now to make sure you get in.
See you at the polls in November. I dare you to vote for inexperience in a time like this.
THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.
EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.
6 Comments on Crucial Information About FHA and Down Payment Assistance
AUG
14
2008
Good information. I understand that loans must actually close and fund prior to 10/01/08 to qualify for DPA. Have you heard that? I did not know about the employer assistance program, I am going to check into that for the state of Oklahoma.
Stan - that is the best way to operate but it is not accurate. My information comes straight from Jim Beaver's mouth to my ears - nothing lost in translation. (Jim is in the Deputy Director of FHA Single Family Product office at FHA. In other words he knows what he is saying. The problem is, and Jim made this perfectly clear yesterday, wholesale lenders and bankers act upon what they think instead of what he says. A lender may impose their own demand but it's not accurate. Still, I would operate under the need to close by 10/1 even though what you reall need is a "Clear To Close" or "Final Approval" issued prior to that date. Thank you for stopping in.
Bill - only the ones that are using seller funded down payment assistance. Thank you for your comment.
Again I really do encourage everyone to join the conference call this Sunday and encourage everyone you know to do so as well. This is just one part of many that will cause havoc in the coming weeks if agents and home buyers do not take the time and responsibility to learn NOW. These changes are coming at us like a high speed train.
Good stuff Ken. I have a Nehemiah pending right now. And to make matters worse it's also a short sale!!! It should be a miracle interesting to see if I mange to pull this one off in time. My guess? I'm going to get it closed. Fortunately, I'm on both sides of the transaction so have a lot of control.
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Good information. I understand that loans must actually close and fund prior to 10/01/08 to qualify for DPA. Have you heard that? I did not know about the employer assistance program, I am going to check into that for the state of Oklahoma.