I got a very interesting fax this morning from the Futures Down Payment Assistance group. They quoted a press release from Oct. 1st from Reps. Maxine Waters, Gary Miller and Al Green (I thought he was a singer) chastising HUD for getting rid of the program and saying Congress was going to do something about it. They seemed to be hinting that Congress was going to change the rule before it took effect.

Read the rest of this entry

Since FHA mortgages are all over the news these days, I am seeing a daily increase in the number of solicitations from lenders and questions from non-FHA approved mortgage brokers about the issue of referral fees being paid to non-HUD approved mortgage brokers. Some of the confusion on the part of mortgage brokers comes from the fact that this practice is allowed on FHA insured reverse mortgages.

Read the rest of this entry

Several years ago a problem cropped up all across the mortgage/real estate world and started causing a lot of problems for lenders whenever a mortgage defaulted. Every Tom, Dick and Harry that stayed up late at night wanted to become a real estate investor and “flip” houses. There is a very real market service being provided by legitimate investors who buy distressed property, restore it to market standards and sell it through an arm’s length market transaction. Unfortunately, these investors flooding the market didn’t quite fit that description. They would make an offer on a property having no possible way to finance it or to pay cash and then go in and sweep it up and mop a little before the closing. Simultaneously, they would find some sap who didn’t really understand what was going on, agree to pay all their closing costs and down payment assistance, and get them qualified for an FHA loan. Next would follow a set of back to back closings where they would buy the property and sell it to the new buyer without ever having put up any money of their own. Often at double the price they paid originally!

Of course these “sellers” would offer such easy terms (at a time when it was a seller’s market and others weren’t making such concessions) that they would have a boatload of potential prospective homeowners to choose from. Unfortunately after this had been going on for a few years, some of these new home owners began to default on their mortgages and HUD would have to pay off the lender from the FHA insurance fund. This is the source of all the HUD houses you see advertised in the weekend papers. Trouble is, when HUD was trying to sell these houses they kept having to take a big loss, endangering the very existence of the FHA program.

Read the rest of this entry

And the soap opera goes on. In response to HUD’s Oct. 1st issuance of a rule set to take effect on October 31st effectively banning seller funded down payment programs such as Ameridream and Nehemiah provide, the two are seeking injunctions to stop the rule from taking effect. I agree with them that HUD could not have picked a worse time to issue such a rule with the housing market reeling, but unfortunately HUD has backed the rule change with statistics showing that such programs increase defaults. Therefore, changing the rule would not seem to be capricious as the non-profit agencies claim unless they can show the statistics to be incorrect. Guess we will have to wait and see!

For many years, down payment assistance has been provided by non-profit groups such as the Nehemiah Foundation, Ameridream and others. Under these down payment assistance programs, the non-profit agency would give a gift to the buyer of 3% or more of the sales price of the home. In return, the seller of the home would make a donation to the non-profit foundation in the amount of the gift plus an administration fee. HUD has looking hard at these programs for quite a while and action has been fermenting since earlier in 2007 when the IRS began auditing and subsequently denying non-profit organization status to many of these groups. In July, HUD themselves released a potential rule forbidding the use of such down payment assistance on FHA loans for public comment. The adoption was delayed once while allowing for further comment.

Read the rest of this entry