This is a repost....bear with me I am trying something out for some reason I was not credited for the original post

I am not attempting to take credit for this article, but felt it very important to share.  Not all of us have the time to read every paper and felt that it was important enough to share.  FYI It came from the Washington Post. 

FHA bans' gift down payments
Buyer ends up with costlier mortgage 
This came from an email that was sent to me via email.

Article Last Updated: 10/01/2007 01:35:58 AM PDT

WASHINGTON â€" The Federal Housing Administration will prohibit borrowers from using seller-financed down payment assistance programs that have helped hundreds of thousands of people buy homes but have come under the scrutiny of federal authorities.

Such programs allow home sellers to give money to charities, which then give a down payment assistance to buyers. The Sellers pay the charities a service fee, then often recoup the money by charging a higher price for the homes, usually 2 percent or 3 percent more, or an amount equal to the down payment, according to a study by the Government Accountability Office. 

In a conference call with reporters, Federal Housing Commissioner Brian Montgomery said that the FHA will publish its new rule in the Federal Register today. The rule, which is little changed from a preliminary version put out for comments in May, will go into effect 30 days after publication.

"These contributions often function as an incentive to purchase the home," Montgomery said. "But these gifts are ultimately paid for by the borrower through a higher mortgage amount. The home buyers are often unaware that the 'gift' is something they end up paying for and is not a gift at all."

Almost 200 charities nationwide have participated in such arrangements. But the IRS and other government entities have raised concerns, particularly after the 2005 GAO study found that borrowers receiving assistance from the charities were more than twice as likely to default

The sad part is due to people who abused the system we all now loose.  I don't understand why the government allowed the prices of these homes to be raised instead of making the seller make a real seller concession.  As a result many first time home buyers will remain as renters.