Opposition of Down Payment Assistance

Hi Ken, More Power to You. You are preaching to the choir, there are so many people that just listen to the Media Headlines without understanding the facts or wanting to research and get the facts. Great post.

I have typed my fingers to the bone on this matter.  Sure, we can still get DPA from churches, family, employers, etc.  

However, what is so disgusting about this matter is the fact that the Congress is regulating what a home owner can do with his own equity. 

Ken - Great insight. Last month my daughter-in-law closed escrow on a great starter home using the Nehemiah Program DPA. She and her fiance are both well employed and good wage earners and paying rent higher than their mortgage is now. This month they would not be able to buy a home and that would be a shame. My daughter has just put an offer in and I am her DPA so that still flies - however, because she's a hairdresser and, like most of us self-employed, writes off everything she can, she needs a stated income loan. Those have all but disappeared too. I agree we need more oversight and regulation but it's being applied directly against some of the people who need it most and abuse it least. We're busy taking homes away from older buyers and at the same time making it prohibitive for first time buyers to enter the market at a time when housing is the most affordable it's been in years. Tough spot for us all.

Ken,

I think you make a better argument in favor of DPA than most I've seen.  First, I absolutely support  DPA if it will enable a homeowner to purchase a home with a payment that is lower than what they are paying in rent.  In my area of the country this is not the case, as I've found that rents generally are equal to mortgage payments only after putting 20% down, but if it works in other areas ok.

As far as people using DPA being smart enough to use the funds instead of their own reserves, this may be true as well but it kind of raises the point as to whether or not the "assistance"is really necesssary.

Regarding the tax deduction aspect of homeownership, your statement that the deduction is available if you go to a tax professional is a bit misleading.  The fact of the matter is that professional or not, some people simply do not have enough deductions above the standard deduction to be able to itemize.  Granted this is not a blog about taxes but just to give you an example, the standard deduction for someone who is married and filing jointly was $10,700 for 2007.  This means that in order to deduct mortgage interest you'd have to have itemized deductions above this amount.  Now assuming a person buys an inexpensive home, and lives in a state with no income taxes and low property taxes (like DE) they may not be able to deduct the interest.

I'd be interested if you would be able to provide a link as to the "true" number of foreclosures linked to DPA's, since you dismiss HUD's numbers as propaganda.  They very well be, but  I always see figures quoted on both sides of the argument, yet no one ever names the source.

Michelle

Ken,

You make a great argument for DPA, though I am still against it in most cases.  They do carry higher default rates, though some exaggerate them.

I am a money guy and love getting people to use OPM (other people's money) to make their own financial situation better, so one would think I would love DPA.  The problem I have is that many people have not developed fiscal discipline up to the point of buying their first home.  In the past, we used to see people work hard to save their down payments and that has gone by the wayside in many cases. 

To me, which is just the way I work, I like to see a disciplined borrower even if they are getting 100% financing or using DPA.  If I see demonstarted ability, I can then feel confident they will implement a mortgage plan and stick to it.

Are these programs BAD?  No, not at all.  It is just that, for me at least, I want to see that my clients can truly handle the mortgage they are about to take on, even when less than current rent.

As for tax deductions, Michelle makes a good point in that not all homeowners can take advantage of the tax deductibility.  I would just add that many who could, do not.  That is because they prefer the "EZ" way or simply do not realize the numerous tax deductions that go beyond owning a home.

Ken... I didn't get a chance to read all of the comments... but damn, hit so many excellent things on the head. I am also tired of those that spit out stats without the actual stat on paper. Overall, I want to add some of your post into this post.  : http://activerain.com/blogsview/677079/The-March-to-Washington  thanks, jeff

Ken,

I think what HUD officials despise is the violation of the "spirit" of the gift fund being provided.  It's akin to an escort service claiming that they charge for "companionship".

100% HUD financing, with risk-based pricing and strict adherence to credit and income requirements, is a much more honest approach.  The default rates for zero-down loans can be reduced to manageable levels through strict adherence to those guidelines.

Why are we lining the pockets of the "charitable organizations" when we can lower the costs to the consumer, by offering a common-sense loan program, through HUD?

We are fighting similar battles here in WA state. I just spent a couple of days meeting with legislators last week on DPA and homeowner education programs. I know we are in a deficit, but the housing market makes up for appx 24% of total employment in WA state alone, and over 20% of state income. If they don't help up do our jobs and get this market stimulated again, the economy cannot recover. Great post!! Hope you are successful!! ~A:)