Would Down Payment Assistance Programs Help or Hurt the Credit Markets?

Mortgage and Lending with Liberty One Lending

We need to get some form of Down Payment Assistance Back to help the real estate market moving again

Original content by James Wexler

In the midst of the mortgage crisis, rising interest rates and tighter lending and the disappearance of 100% financing, the last lending option has been taken away for credit worthy borrowers who lack the money for a down-payment

Down-payment assistance programs like Are down payment-assistance programs cash-back fraud?

have offered Phoenix area home buyers....an opportunity to obtain mortgage loans with the help of non-profit organizations and charity assistance groups that contribute the down-payment for buyers to obtain FHA loans.


Federal Regulators believed that these lending practices and programs is actually a contribution or kick-back from the seller. Here's why.

The buyer is including an extra amount (usually 3%-5%) in the price of the loan which is insured by FHA which insures all loans involving down-payment assistance. The money then is a credit funneled from the seller to the non-profit organization to the buyer as a down-payment.

This practice, which has been described as a ‘loophole' in FHA guidelines that allows down -payments from charities has been banned.

Now that sub-prime loans require much higher down-payments, this has become a very popular strategy to get risky loans approved with little money down that are still insured by FHA. Thus, Wall Street buyers of loans can more comfortably buy the debt as any default would be insured by the FHA.

The housing-reform bill eliminatd this practice.

What do you think??  should this be reversed ??

Would Down Payment Assistance Programs Help or Hurt the Credit Markets?


Contact James Wexler (480) 221-8080 for all your Phoenix | Scottsdale Real Estate needs

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Comments (1)

James Wexler
wexzilla.com - Scottsdale, AZ

hope all is well, havent talked to you or seen you on-line in quite some time, hope you are still doing well and making money

Feb 21, 2009 01:38 AM