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HR 600: Congress Introduces Bill to Inact Revised Downpayment Assistance Programs

Received this in my Gmail inbox this evening. Not sure what's up with this one. Can find almost nothing on it via Google.

DPAGroundSwell2 was launched today to coincide with the introduction of H.R. 600, FHA Seller-Financed Downpayment Reform Act of 2009, by Representative Al Green (D-TX). H.R. 600 is the 2009 version of last year's bill (H.R. 6694) that would restore seller-funded downpayment assistance (DPA).

Reformed DPA will help stimulate the housing market by providing working-class Americans with a path to homeownership and generate $150 billion in home sales this year. Purchasing a home now puts homebuyers in a position to build equity as markets recover.

CONGRESS INTRODUCES BILL THAT WOULD REINSTATE DOWNPAYMENT ASSISTANCE: NEHEMIAH RESPONDS

- Bill Would Broaden Opportunities for Sustainable Homeownership Without Government or Taxpayer Dollars -

Sacramento, CA, January 16, 2009 -- The following statement was issued today by Scott Syphax, president and CEO of the Nehemiah Corporation of America in response to H.R. 600, a bill introduced in Congress that would reinstate seller-funded downpayment assistance (DPA). Prior to the October 1, 2008 ban on DPA, Nehemiah was the oldest and largest provider of downpayment assistance.

"There is an overlooked solution to today's housing crisis and fortunately several members of Congress recognize the role DPA plays in getting us there. We commend Congressman Al Green [and additional members of Congress] for working tirelessly to support a bill (H.R. 600) that creates opportunities for sustainable homeownership, which serves as the cornerstone to strengthening a crumbling housing market and breathing life back into the economy.

With foreclosures on the rise and banks maintaining their stranglehold on credit, DPA offers a simple solution without spending a single government or taxpayer dime according to the Congressional Budget Office. Further, it enables worthy families to take advantage of depressed home prices, therefore reducing the glut of homes on the market. We urge Congress to reach across the aisle and prioritize broadening opportunities for responsible homeownership in America by reinstating DPA."

Well Folks, if this is in fact legit - it seems like we might yet see the return of what many of us believe to be a program that should never have seen the chopping block. If administered correctly, should DPAs in fact return? What does "administered correctly" even mean?

As always, your thoughts are welcome.

Posted by Kevin Sandridge - Winter Haven Mortgage Broker on 01/16/2009 10:11 PM

Comments (17)

downpayment assistance, dpa, hr 600

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17 Comments on HR 600: Congress Introduces Bill to Inact Revised Downpayment Assistance Programs

JAN

They think "administered correctly" means they are going to put FICO score minimums in place to hopefully not allow 100% financing to lower scores, which should make the loans less risky. I think the HR600 is missing a number, but since it's on the Nehemiah website, I'm running with it. I really thought Congress made a huge mistake, not only eliminating DPAs but also for raising the down payment to 3.5%. K

so with prices going down...and Interest where it is ... this is good for the buyers...

JAN

Kevin, my fingers are crossed that DPAs will make a come back! I dont' believe that they should have gone away and think they will help a great number of buyers and sellers. I hope this is just the first of many more sensible steps that pass Congress.

Hi Kevin

It's a step in the right direction, currently we all the help we can get with financing.

Good luck and success

Lou Ludwig

JAN

Just wondering how far down the list of ALL the things that the new administration must hear will DPA fall? I hope that they recognize that this is high priority and that "let's get to work" does not mean drag yer' heels!

JAN

So in an economy with too much bad debt, the solution is to give more loans to people who can't even manage to save up a 3.5% down payment? and to put them in houses that they are instantly underwater in? Most of the loans I have seen of this type have a seller's concession and then another 3% added to cover the DPA. So a 100k purchase suddenly turns into a 106k mortgage. The borrower that couldn't even save up 3.5% now owns a home and owes 6% more then it was worth on the open market before he even moves in, and the value is sure to keep dropping.

yeah, that'll really help the foreclosure rate improve....

JAN

@ADP: First, thanks for leaving your comment here. I am always open to differing opinions, as they help to balance out the overall take on each issue that I pose.

In response to your comment, I offer the following:

These loans are FHA loans, approved by FHA standards using government guidelines. The new Bill, HR 600 will have tighter credit and lending standards to ensure the right borrowers are qualified and are capable of paying their mortgage.

The mortgage industry at large has been asking HUD for tighter restrictions for years on this program and HUD has consistently refused to provide them. Granted, we don't hear too much about this fact in the media. So, I understand if folks may not be aware of this fact.

Regarding your point about rasigin home values to fit the DPA model:

I think I speak for all reputable mortgage brokers by saying that home loan amounts will not be increased as a means of reimbursing - if you will - sellers who participate in DPA programs. This practice is dishonest and goes completely against my personal beliefs and values. Again, I think most honest mortgage professionals and Realtors will agree with my take here.

Frankly, I don't know of a single FHA approved appraiser today who is going to risk their business and career to inflate an appraised value by 6%. It's just not going to happen. If you know appraisers willing to do this, please turn them in, as they are absolutely contributing to the problem!

Finally, the Congressional Budget Office did its homework and found back in October that DPA programs do not and will not costs taxpayers or the government one single dollar. To the contrary, these programs will help clear up the inventory of those foreclosed homes and actually help raise property values.

JAN

DPA has to long been the scape goat of the mortgage industry. Bringing back DPA will benefit the real estate market and the economy. We need to voice our support of HR 600!

JAN

The elimination of DPA programs is catastrophic at a time when qualified homebuyers are needed to purchase homes.

The Congressional Budget Office (CBO) estimates that seller-financed DPA will generate $65 million over the next five years and save taxpayers $13 million next year.

Downpayment assistance programs have the potential to add 235,000 more jobs without costing the taxpayers a penny.

Please express your support for H.R. 600 that reforms and restores DPA now by visiting http://capwiz.com/nehemia/issues/alert/?alertid=11709431. It has a helpful area to compose a message, which will be sent directly to your Senators and House Representative.

Thank you for your time.

JAN

Excellent idea - Give more people that can't afford homes - homes they can't afford. I've been working in the real estate industry for about 7 years so I saw all the stupid loans when they were happening and it wasn't just the 100% financing that got people. DPA is a fancy way of saying - money laundering...sorry folks, but it is. The "down payment" gets laundered through a company which in turn charges a fee to the seller, just so the buyer can get a house that they will eventually lose and be in a worse position than before. No matter how many disclosures they sign saying that they didn't hike up the price to cover the DPA, it happens so the buyer has just paid more for the house than they should have just to cover this great program. Yeah - let's bring that back! Our economy hasn't hit complete rock bottom, but I'm sure if we try hard enough we can get it there. This is a good start.

Why don't we go back to what worked for such a long time just fine....Making sure a person can afford the house....having the ability to save the money for a downpayment.

In response to the last comment, which I appreciate by the way... I'd just say that you're painting with a bit of a broad brush. The fact is that a very small percent of those who use DPA programs default. Would you place folks who have the 3.5% to put down but would rather keep that in savings so that they could retain a cushion into the category of "unworthy" to buy?

If you'll leave your contact info... I'll be happy to email you some data.

Kevin-thanks for the information. My "to-do" list includes contacting my representatives about this issue. Doing away with this program has really hurt the housing market in my area. I have had several buyers use this program in the past, and none have defaulted. We need this program back in some form.

Thanks, Pam! The program needs all the support we can give it!

FEB

I was so excited to read about this program coming back. I have a First Time Home Buyers who do not have down payment monies saved up. I sold my last house giving down payment assistance. It would be nice if they (the government) would just allow up to 6% seller assisted financing and cut out the middle man that they don't like. They claimed the program of Seller assisted down payment was sent to the non for profit and sent to the Buyer. A laundering program if you will. It was not it was just made out of need. If the Federal Gov. would just allow for up to 6% financing we would and could go about business as we did before October. It would also cut down on the paperwork we would have to file. I am excited to see the impact H.R. 600 will have on the market. I am eager to let everyone I know about what it can do today's market.I support the program fully!

MAR

111th CONGRESS

1st Session

To revise the requirements for seller-financed downpayments for mortgages for single-family housing insured by the Secretary of Housing and Urban Development under title II of the National Housing Act.

Mr. AL GREEN of Texas (for himself, Ms. WATERS, and Mr. GARY G. MILLER of California) introduced the following bill; which was referred to the Committee on Financial Services

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `FHA Seller-Financed Downpayment Reform Act of 2009'.

SEC. 2. FHA SELLER-FINANCED DOWNPAYMENT PROGRAM.

Paragraph (9) of section 203(b) of the National Housing Act (12 U.S.C. 1709(b)(9)) is amended--

(1) in subparagraph (C), by striking `In no case shall the funds required by subparagraph (A)' and inserting the following: `Except in the case of a mortgage described in subparagraph (D), the funds required by subparagraph (A) shall not'; and

(2) by adding at the end the following new subparagraphs:

`(D) EXCEPTIONS TO PROHIBITED SOURCES- A mortgage described in this subparagraph is any of the following mortgages:

`(i) A mortgage under which the mortgagor has a credit score equivalent to a FICO score of 680 or greater.

`(ii) A mortgage under which--

`(I) the mortgagor has a credit score equivalent to a FICO score of at least 620 but less than 680; and

`(II) mortgage insurance premiums charged are established--

`(aa) at levels necessary, but no higher than needed, to allow such class of loans to be insured without resulting in a need for an appropriation for a credit subsidy, which may exceed the maximum amount permitted under section 203(c)(2)(B);

`(bb) in the case of the single premium collected at the time of insurance, in an amount not exceeding 3.0 percent of the amount of the original principal obligation of the mortgage; and

`(cc) in the case of the annual premium for a mortgage under which the mortgagor has a credit score equivalent to a FICO score of at least 640 but less than 680, in an amount not exceeding 1.25 percent of the remaining insured principal balance (excluding the portion of the remaining balance attributable to the premium collected at the time of insurance and without taking into account delinquent payments or prepayments).

`(iii) For mortgages insured in fiscal year 2010 or thereafter, a mortgage under which the mortgagor has a credit score equivalent to a FICO score of 619 or less, but only if the Secretary certifies that such loans can be insured without resulting in a need for an appropriation for a credit subsidy. For such mortgages, the Secretary may charge premiums at levels authorized under items (bb) and (cc) of clause (ii)(II) and may establish a credit or FICO score limitation or impose such other requirements as are necessary to meet the conditions for certification under this clause.

`(E) REQUIREMENTS FOR DOWNPAYMENT ASSISTANCE ENTITIES- Any entity participating in a program that provides downpayment assistance for a mortgage described in subparagraph (D) pursuant to the exception under subparagraph (C), which programs shall include programs of governmental agencies and private nonprofit organizations, shall, before the closing for the loan involved in the mortgage in connection with which such assistance is provided--

`(i) offer to make available, to the mortgagor, counseling regarding the responsibilities and financial management involved in homeownership;

`(ii) if such offer is accepted by the mortgagor, make such counseling available for the mortgagor; and

`(iii) in the case of any such entity that is a private nonprofit organization, implement a conflict of interest policy that prohibits directors, officers, employees, and immediate family members from receiving financial benefits from any entity that is providing the program with goods or services other than the homeownership assistance program entity itself or its wholly owned affiliate.

`(F) CIVIL MONEY PENALTIES FOR IMPROPERLY INFLUENCING APPRAISALS- The Secretary may impose a civil money penalty, in the same manner and to the same extent as for a violation under section 536, for compensating, instructing, inducing, coercing, or intimidating any person who conducts an appraisal of the property to be subject to a mortgage described in subparagraph (D) and under which any part of the funds required by subparagraph (A) are provided to a party described in subparagraph (C), or attempting to compensate, instruct, induce, coerce, or intimidate such a person, for the purpose of causing the appraised value assigned to the property under the appraisal to be based on any other factor other than the independent judgment of such person exercised in accordance with applicable professional standards.'.

A BILL

January 16, 2009

IN THE HOUSE OF REPRESENTATIVES

H. R. 600

Sorry about the length of the post above, but I copied it verbatim from Thomas. I thought it was important to see the whole thing.

AUG

Excuse me. They are ill discoverers that think there is no land, when they can see nothing but sea. I am from Belize and bad know English, tell me right I wrote the following sentence: "The program is the district eighth special needs preschool class." Thank you so much for your future answers :-(. Meira.

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