Entries Tagged 'Down Payment Assistance' ↓

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In answer to a recent comment on my post “H. R. 6694 Passes Out Of Committee” I made the statement that:

“I’m absolutely not opposed to people putting money down. For most of my career in the mortgage business, buyers had to put down essentially 5%.

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The seller assisted non-profit down payment assistance programs are officially gone for FHA loans as of October 1st 2008. These programs were easy to use and could be funded quickly and thus became extremely popular.

But they aren’t the only game in town.

There are literally thousands of federal, state, county, local and charity based grant programs available all over the country. During the last few real estate boom years, sellers had no patience with waiting while potential buyers jumped through all the hoops necessary to qualify for these programs, but times are different now. Those sellers who once had no patience have now had their home for sale by owner, listed and expired with 3 different real estate agents and on the market for over a year. They will jump at any buyer they can get and do whatever they can to help sell that buyer their home. They will now wait 45 days for a buyer to get qualified for down payment grants.

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Although there is a chance that legislation will bring seller assisted down payment gift programs back before the end of the year, the non profit DPA programs are officially dead as of October 1, 2008.

Mortgage applications have dropped precipitously over the last few weeks for other reasons, so it will be interesting to watch how the ban will affect home sales if it lasts very long. Although we do need to let the air out of this real estate/credit bubble, watching people hurt financially due to all this uncertainty in the mortgage market is painful for everyone.

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Word on the street is that the near collapse of the capital markets on Wednesday, and the proposals put forth today in order to bail out Wall Street have quickly shifted HR 6694, the bill reinstating the use of seller paid down payment assistance programs with FHA mortgages, onto a very cold back burner! It now appears very unlikely that the bill will have any chance of being passed soon. What a roller coaster.

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H. R. 6694 was passed out of the Financial Services Committee yesterday with strong support from both parties. The bill will probably be voted on by the entire House of Representatives soon. However, this is just the very first step in a long journey before the Bill is finally passed and there is not much time left before the October deadline when H. R. 3221 takes effect and seller assisted down payment programs are banned.

According to the good folks at the Nehemiah Corporation, Rep. Barney Frank’s committee will be meeting on September 16th to push H. R. 6694, the bill which will return seller assisted down payment programs to the market provided the Senate can pass it as well, out to the entire House of Representatives.

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It appears that a deal has been made to save FHA down payment assistance programs with seller participation. I have always said we should fight not to throw out the baby with the bath water when it comes to these programs. All we need to do in order to lower the foreclosure claim rates on loans with seller participating down payment assistance is to enforce the rest of the FHA underwriting guidelines.

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There’s a huge debate going on right now about seller assisted down payment programs on FHA insured loans. Most of the program’s detractors are those who are on the outside looking in. The objections of those opposed to seller assisted down payment programs are not completely without merit. There have been some problems in the implementation of the program which have led to a higher than necessary foreclosure rate among those borrowers using the program. And yet foreclosure rates

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