Well, it's official.  I got an email this morning from our last wholesaler that was offering to fund loans using seller-funded down payment assistance programs like Nehemiah or Ameridream, stating that they were going to stop accepting new registrations for loans using these programs. 

So, this means no more 100% financing, right? 

Well, not exactly. 

According to the Wall Street Journal on Wednesday, several members of Congress, including Financial Services Committee Chair Barney Frank, are pushing legislation that would restore the status of seller-funded down payment assistance programs such as Nehemiah and Ameridream.  The legislation would, however, place significant restrictions on who could use that money. 

Specifically, credit and risk would play a major part in that.  Because loans using down payment assistance have historically defaulted at much higher rates than loans where buyers supplied their own down payment funds, Congress moved in August to prohibit use of such programs.  Research had shown that as many as one quarter of all loans with seller-funded assistance were defaulting, putting s major strain on HUD's FHA insurance fund. 

On further review, though, it was found that these defaults were concentrated among those homeowners with lower credit scores.  Currently proposed legislation would reinstate down payment assistance for buyers with 680 or higher credit scores without restriction, and would allow buyers with scores of at least 620 to purchase, albeit potentially facing higher FHA insurance premiums.  These higher premiums would fund the higher probability of default brought by those buyers. 

In the meantime, there are other options still available to buyers unable or unwilling to make the 3.5% down payment FHA mortgages will require as of October 1^st.  Specifically, USDA and VA mortgages continue to be attractive options for qualified buyers.  Please check back later this week for more information on these options.