Summary of FHA Proposed Rule
- The proposed rule reiterates FHA's statutory requirement that an FHA borrower contribute funds to the transaction and lists the permissible and prohibited sources of these funds.
Restrictions on Seller/Interested Party Contributions
- Funds may not come from seller or other entities that benefit financially from the transaction
- Funds may not come from third-party that is reimbursed by seller or other party that benefits from the transaction
- Prohibition applicable to any type of entity, including non-profits, governmental bodies, instrumentalities of government, private companies
- Prohibition applicable to both gifts and loans
Permissible Sources of Funds to Close/Cash Investments:
***No funds may come from sellers or parties that benefit financially from the transaction.
Loans/Secondary Financing:
- Family members
- Federal, state, or local government agencies or instrumentalities
- Loans from other sources to individuals 60 years of age or older
- Federal disaster relief loans
Gifts/Grants:
- Family members
- Employers and labor unions
- Non-profits with tax-exempt 501 (c) status
- Disaster relief grants
- Other sources approved by the Secretary on a case-by-case basis
DPA (Downpayment Assistance) Providers' Position on FHA Proposed Rule
- Eliminates privately funded programs responsible for moving more than 500,000 homebuyers into homes in the past decade
- Eliminates $500 million of homebuyer resources currently available to support home purchases for working-class families
- Immediately reduces FHA purchase money volume by one-third
- Eliminates millions of dollars of local & state real estate taxes
- Eliminates lender commissions, real estate agent commissions and other local spending by new homeowners
- Downpayment requirement returns as barrier to working-class families, deny them access to asset and wealth accumulation opportunities
Copy of Internal Revenue Bulletin
Campaign to Protect Seller Funded Downpayment Assistance
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