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Down Payment Assistant Programs Fading Fast!

By Ruth Vogt

Mortgage and Lending with Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. NMLS257576

October 29, 2007 11:34 PM

There has been much controversy over HUD granting a 6-month extension to Nehemiah only and to no other Down Payment Assistance Programs. A closed door meeting with the counsel for HUD, (the justice department), and counsel from Ameridream discussing the logic of the 6-month extension for everyone in the industry resulted initially in HUD's refusal to relent. The only option remaining for Ameridream was to file an injunction. Here is a timeline of what has happened:

· 10/1/07: HUD issued its Final Rule "Standards for Mortgagor's Investment in Mortgaged Property" eliminating seller-assisted down payment assistance programs.

· 10/1/07: Lawsuit is filed against HUD.

· 10/2/07: HUD clarifies funding dates: "Therefore, in order for the homebuyer to use a gift that was derived from the seller, the homebuyer must have entered into a contract of sale (including any amendments to purchase price) before that date [Oct 31, 2007]."

· 10/10/07: Motion for Preliminary Injunction and a Motion for Temporary Restraining Order are filed. These motions can stop the Rule from being implemented.

• Recently: The Department of Housing and Urban Development finally gave the green light to the request by AmeriDream Inc., Gaithersburg, Md., to prolong its ability to provide downpayment assistance until Feb. 29, 2008. The new deadline does not include other DPA providers, who are required under a HUD rule to stop their seller-funded DPA operations by Oct. 31.

Dr. Gary Lacefield, Director of Compliance for WR Starkey Mortgage gave further clarification by stating, "The DPA related issues will not effect conventional or any type of government where downpayment funds come from local, state or federal bond or grant programs. I believe that it is the intent of HUD to eliminate all DPA that is seller funded whether the seller contribution is direct or indirect. However, to remain competitive in the market place, we will participate in these types of programs but will be well positioned to change direction as the Feds require."

It would appear that down payment assistance programs are dying a slow death.

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Sam Miller

RE/MAX Stars Realty - Howard, OH

Knox County Ohio Real Estate Specialist

The down payment assistance programs have not truly been a good deal for most buyers if they require the listing price to be inflated to cover the 4 to 6% required by many of these programs. In many cases it takes 4 to 5 years of mortgage payments to get the mortgage back down to the original purchase price. True 100% financing is a better way for the consumer especially in a flat or depreciating market. I am confident that we will be seeing new 100% risk based loans.

Oct 29, 2007 11:47 PM

Ruth Vogt

Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. - Colorado Springs, CO

719-592-0855 www.ReverseLoansInColorado.com

The only time a down payment assistance offer made any sense was in lieu of a price reduction where there was true value to begine with. Unfortunately, like most good things, it was misused, and wa-la! underwriters and appraisers were caught up trying to determine if values were in fact inflated to cover the DPA.

You know the saying: when one door closes, another opens. Imagine this: HUD closes the door to DPA; yet opens up the avenue for FHA no down payment options??? Possible? I believe so. We'll see...

Oct 29, 2007 11:59 PM

Derek and Mariana Wagner

The Artisan Group- Keller Williams Premier Realty - Colorado Springs, CO

The Artisan Group - Colorado Springs REALTORS®

Wow Ruth! This is an amazing "first post"! COngratulations!

Now, with the shifting market, I see a lot of old things dying and new things arriving. 'Tis the cycle of business!

Oct 30, 2007 01:38 AM

Anonymous

Pat Shaffer, Royal Charter Mortgage, Clovis, CA

Give me a break! So many folks, and I was one of them, wants the American Dream - owning your own home. I am so proud to help so many First time homebuyers and like to see any and all programs that accomplish that.

Sellers are so willing to give 6% or more just to sell and will take the listed price, or fair market value, at that time without any issue of price inflation.

I so hope these DPA Programs stay around and give these folks a chance. There's absolutley nothing wrong with it.

May 02, 2008 10:24 AM

Craig Tone

DMZ Mortgage - Seal Beach, CA

Looks like seller funded DPA made it after all!

May 28, 2008 04:11 PM

Ruth Vogt

Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. - Colorado Springs, CO

719-592-0855 www.ReverseLoansInColorado.com

On? Off? On? Who knows for sure???

Yes, the President did sign the "Housing Relief" Bill on July 30th, being referred to as legislation that will have more impact on our industry than any in the past decades. It should! Afterall, it was 789 pages long! (To see an overview of the bill click here: HR 3221.)

Other articles referencing the signing of this bill are (notice the reference to "depression"!!):

Bloomberg

Reuters

Was the elimination of the down payment assistance program a primary focus of the bill? The introduction of yet a NEW bill (HR 6694) would suggest is wasn't! That's right... yet another bill to bring DPA back to life!

Are you confused yet? Well, as of right now, this minute, but subject to change before I click SAVE, here's the deal on DPA loans: Must be officially signed off on and fully approved by Sept 30th. Closed by October 31st.

Stay tuned for more developments!

Ruth Vogt

Aug 13, 2008 10:24 AM

Anonymous

Jim Beckham

DPA let's see, if the owner has the money and wants to donate it to the buyer to help them buy a home it is the sellers right to do so. It is up to the mortgage lender to ensure that the buyer is qualified and can make the payments. Just think if the seller is not allowed to participate in the DPA, an otherwise qualified buyer won't be able to buy the home. Unless he uses an alternitive program,bond money, or other programs states have to help with buying a home or 100percent financing which gives them even a higher rate. It makes you wonder who has stock where for the ones supporting the bill or which areas need the interest money atthe cost of the buyer to help their economy get out of debt. Just a thought. The lending community should love to get money upfront that cannot be taken back. If something did happen they would have at least received something. Bottom line is it is the owners money and they should be able to gift it to whom ever they want. Billions of dollars and resources are donated (gifted) everyday and no one complains. People love to help. Let them help. It doesn't cost us taxpayers anything. I bet if they could find a way to tax it they would have no problems with the program. DPA so how about if they gift the money just because the law says we can and the buyer happens to use it to put down on the house they are buying,it all falls down on honest lenders doing their job. IF the buyer is not ready step up and tell them, help them to fix the issues and show them the right path to owning a home and being financially responisble. To often the dollar sign gets in the way of doing the right thing. I am the seller it is my money and I should be able to do what I want with my money. Help put a roof over a familys head today DPA all the way.

Aug 27, 2008 07:18 AM

Ruth Vogt

Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. - Colorado Springs, CO

719-592-0855 www.ReverseLoansInColorado.com

Good point about the idea of TAXING the program. ha!

Did you also look at the information posted today (Speak NOW or forever hold your piece... of real estate!)? There is some important information on what WE can do to assure DPA stays around.

Thank you for your concern about this important program for both buyers AND sellers!

rv.

Aug 27, 2008 12:19 PM