Reprieve on Down Payment Assistance? HUD Reportedly Supports Compromise Bill

Mortgage and Lending

Let's not be too quick to schedule the funeral for Down Payment Assistance (DPA) programs such as Nehemiah yet.

HR 6694, the last-ditch effort to resurrect DPA programs before the October 1st deadline after which these programs will no longer be allowed by FHA, appears to have the support of HUD according to Rep. Barney Frank, D-Mass.

This piece of legislation is a compromise between HUD's aversion for down payment assistance and its love for risk based pricing on upfront mortgage insurance. If passed by the House, which appears likely, and the Senate, which might be achievable, then changes could occur for borrowers (buyers) with the following credit scores:

  • 680 +:  DPA allowed
  • 620-679:  DPA allowed with higher upfront mortgage insurance
  • Less than 620:  DPA not allowed at least until mid-2009

Congress would have to act quickly to beat the October 1st deadline to get this legislation approved and those involved in the committees working on the bill feel that it is achievable.

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