HUD's rule FR-5087-P-01 Summary

Real Estate Agent with NewEdge Realty

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


  • 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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