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%.
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.
HUD is once again about to propose the rule banning down payment assistance programs and open it up for a 60 day comment period. You can find more about that at the link above.
HUD continues to use higher default rates associated with loans using DPA as their rationale for killing off the non-profit down payment assistance programs. However, you can’t use HUD’s raw statistics to say DPA causes a higher foreclosure rate, only to show that DPA is associated with a higher foreclosure rate. The reason is that these raw figures aren’t adjusted to account for other factors such as credit, debt ratio, time on the job, local economic conditions etc.
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