Real Estate Sales Representative with Fieldstone Real Estate

Thank you to my friends at First Savings for keeping me in the loop on potential changes affecting our housing market!



Dear Friend,

I am turning to you in the 11th hour, urging you to take action to oppose a housing bill that will eliminate downpayment assistance. The Senate and House of Representatives are fast-tracking this bill. See the Washington Post article below. Upon the President's signature, downpayment assistance will be shut down in the United States. Failure to act now will ensure the immediate death of downpayment assistance.

In recent weeks, I have come to you requesting your help in defeating HUD in their attempt to eliminate downpayment assistance. HUD and the Senate are now attempting to circumvent the rule making process by going after downpayment assistance via legislation. This course of action is being pursued in spite of the strong support of the Congressional Black Caucus, the Congressional Hispanic Caucus, the U.S. Conference of Mayors and Congresswoman Maxine Waters.

The consequences will be devastating! By FHA's own estimates, DPA comprises nearly 40% of FHA's volume. This means more than 300,000 working class families will be locked out of homeownership in the next year alone. Communities across America will take the brunt of the $50 billion in lost real estate sales, not to mention the indirect impact on the real estate, mortgage and building sectors that will be forced to shed tens of thousands of jobs due to this dangerous legislation.

Act now! Please call your Congressional Representative, Senators, trade associations and community groups IMMEDIATELY to voice your support for downpayment assistance and your opposition to this bill. Urge your legislators to oppose these provisions that would ravage your local economy by bringing the housing sector to a screeching halt.

Locate your elected officials.
1. Enter Your Zip Code and click "Go".
2. Click on the link of the Representative you would like to call and then click on the Contact tab to find their Washington D.C. office phone number.


Scott C. Syphax
President & CEO
Nehemiah Corporation of America



Congress Is Set to Limit Down-Payment Assistance

By Dina ElBoghdady
Tuesday, July 22, 2008
Washington Post Staff Writer

Mortgage programs that helped nearly 79,000 people buy homes using government-insured loans last year would be eliminated as part of a broader housing package that Congress expects to pass this week, key lawmakers said.

Under these programs, nonprofit groups provide buyers with money for down payments. Home sellers then reimburse the organizations and pay an administrative fee. More than half a million people -- including many first-time home buyers, minorities and single mothers -- have bought homes this way in the past decade using loans insured by the Federal Housing Administration.

But the FHA said seller-funded down payments present the single biggest challenge to its solvency. Borrowers who take part in these arrangements go to foreclosure at nearly three times the rate of borrowers who put their own money down, according to the agency.

The fate of these seller-funded down-payment-assistance programs has been in limbo for weeks. The Senate version of the housing bill would have banned them. The House version would not. Negotiators crafting a compromise bill have agreed to the Senate's position, which also is supported by the Bush administration.

"We're going to yield to the Senate on that," said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee and a supporter of the programs. "There are a lot of trade-offs in the bill."

The administration has tried for years to end the programs but failed to overcome legal challenges. "No insurance company can sustain that amount of additional costs year after year and still survive," Brian D. Montgomery, the FHA commissioner, said in a recent speech.

But supporters of this kind of assistance said it meshes with the FHA's mission to serve low- to moderate- income people. While the system may have its problems, they say, it should be fixed, not abandoned, so that people like Tanika Warrior are not shut out of the market.

Warrior and her husband, Jimmy Hicks, suffered housing sticker shock when they moved to the Washington area from Arkansas a few years ago.

The couple, recent college graduates, had depleted their savings on tuition and care for their newborn son. But they had steady jobs and did not want to keep sinking money into rent, Warrior said. They also did not want to put off buying a home because they were not convinced that their finances would be stronger in a few years.

"We don't want to throw money in a hole," said Warrior, 24, a federal patent examiner. "My thing is we pay our rent every month and we've never been late, not once in five years. If we can pay our rent every month, we can pay our mortgage every month."

The couple worked with Nehemiah, the nation's largest down-payment-assistance charity. Nehemiah provided the 3 percent down payment the FHA requires. The couple secured a 30-year, fixed-rate loan for a townhouse in Herndon through First Savings Mortgage. Their monthly mortgage payment is now about $400 more than what they paid in rent, with taxes and insurance included, Warrior said.

Scott Syphax, president and chief executive of Nehemiah, which is based in California, has been in Washington pushing to save the programs. After he got word yesterday of the agreement to ban seller-funded down payments, he said he was "angry and saddened" about the fallout for "families and communities who obviously did not get a seat the table as these harmful policies were conceived."

Syphax and the FHA disagree about the most basic statistics on these loans. Syphax maintains that the agency's assessment is skewed. He said it has undercounted the number of loans made while properly capturing the number of foreclosures it has had to pay for -- thus inflating the percentage of bad loans.

The FHA strongly denies that. It also maintains that programs backed by Nehemiah and other nonprofit groups aim to skirt its policies that prohibit a seller from directly financing a buyer's down payment. Seller assistance distorts "the fundamental economics of a mortgage agreement," Steven Preston, secretary of housing and urban development, said in a letter to Congress.

Sellers who reimburse the cost of a down payment and shell out related fees of $400 or more try to recoup that money by raising prices on the homes they're selling, government officials said.

Those higher prices result in larger mortgage loans, making it more difficult for buyers to keep up with their payments, they said. The inflated prices also make it tough for buyers to refinance or sell if they lose their jobs, get ill or face some other financial setback -- hence the high foreclosure rates.

"While the seller and lender are able to close a transaction, it is the home buyer and general taxpayer who ultimately bear the long-term risk," Preston said in his letter.

It's unclear how quickly the new policy would kick in if it's enacted.

Supporters of seller financing, including members of the Congressional Black Caucus and the Congressional Hispanic Caucus, said they will push to revive it, perhaps under another administration.

"The Bush administration does not have a lock on history," said Rep. Al Green (D-Tex.), a member of the black caucus. "They only have a lock on the moment."

The administration is not getting all it wants on the FHA front. While the compromise bill would get rid of seller assistance, Frank said, it also would wipe out a new FHA initiative under which the agency charges borrowers insurance premiums based on credit risk, instead of one flat rate.

Salmineo Sherman Sr., who recently used seller assistance to buy his first home, is not tuned in to the horse trading on Capitol Hill.

But yesterday, he said he felt lucky that he bought his seven-bedroom house in Clinton this month. Without seller assistance, he and his wife would not have been able to close the deal. They have six children, two of them grown.

"I do not see myself as any risk at all because I'm not stretching with this house," Sherman said. "We can afford the monthly payments. . . . We're staying put, right in this house."

Nehemiah Corporation of America | 424 N 7th Street, Suite 250 | Sacramento, CA 95811
Toll Free: 1-877-634-3642 | (877) NEHEMIAH





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Tracey Shrouder
360 Realty - Greensboro, NC
Listing Specialist

Thanks!  I just wrote my representative, Elizabeth Dole!

Tracey :)

Jul 22, 2008 07:34 AM #1
Associate Broker Falmouth MA Cape Cod Heath Coker & - Falmouth, MA
Heath Coker Robert Paul Properties Falmouth MA

If Down Payment Assistance loans are intended to assist buyers, and if those loans have greater odds of being foreclosed on than other loans, are they actually helping or hurting?  They may be looked at by those outside our business as only really helping the loan officer and the agent.  And, when they are foreclosed on, it hurts the whole market - not just that buyer.

Jul 22, 2008 07:42 AM #2
Gary Miljour
American Financial Network, Inc. NMLS#207208 - Southern Pines, NC
Mortgage Originator NMLS Licensed in AZ and NC


Great Post,

I found your post on Trulia, and wanted to respond.  I just had my Ameridream Rep. in my office and it looks like the President is going to sign this into law. 

This benefits outweigh the costs 10/1 and I think are politicians have been duped!,  I also wrote all my reps. and nothing was done. 

Guess who is getting voted out of office in November?


Jul 23, 2008 05:22 AM #3

Downpayment assistance is very often simply a form of fruad.  Its purpose is to skirt FHA rules that a borrower put down 3% to qualify for a loan.  The 3% is paid by the seller, and the seller usually adds the 3% into the sales price.  It is a scam.  The buyer has no "skin" in the game, and these loans default at a much higher rate than legitimate loans.

If the "non-profit" is legitimate than it would not need to collect money from sellers.  The downpayment assistance would go to those truly in need, in areas most in need of assistance.  That is simply not what is happening here.

Until downpayment assistance isn't simply a system to have sellers/buyers skirt FHA rules, it should be eliminated by congress.

Jul 27, 2008 04:51 PM #4
Vicky Chrisner
Fieldstone Real Estate - Leesburg, VA

Jamesk - It's fine to be against the seller paid down payment assistance programs; the beauty of America is that we can disagree, publicly, and politely.  

However, it seems you've labeled it fraud, when it fact it has been specifically permitted under these programs for years.  Fraud is a crime. Watch your mouth!  Do not accuse people of federal crimes when you clearly have no idea what you're talking about. I get very frustrated when people use words they do not understand, so you might want to read more about this word:

Fraud is going on around us, but this ain't it.

Jul 28, 2008 12:35 AM #5
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