· 10/1/07: HUD issued its Final Rule "Standards for Mortgagor's Investment in Mortgaged Property" eliminating seller-assisted down payment assistance programs.
· 10/1/07: Lawsuit is filed against HUD.
· 10/2/07: HUD clarifies funding dates: "Therefore, in order for the homebuyer to use a gift that was derived from the seller, the homebuyer must have entered into a contract of sale (including any amendments to purchase price) before that date [Oct 31, 2007]."
· 10/10/07: Motion for Preliminary Injunction and a Motion for Temporary Restraining Order are filed. These motions can stop the Rule from being implemented.
• Recently: The Department of Housing and Urban Development finally gave the green light to the request by AmeriDream Inc., Gaithersburg, Md., to prolong its ability to provide downpayment assistance until Feb. 29, 2008. The new deadline does not include other DPA providers, who are required under a HUD rule to stop their seller-funded DPA operations by Oct. 31.
Dr. Gary Lacefield, Director of Compliance for WR Starkey Mortgage gave further clarification by stating, "The DPA related issues will not effect conventional or any type of government where downpayment funds come from local, state or federal bond or grant programs. I believe that it is the intent of HUD to eliminate all DPA that is seller funded whether the seller contribution is direct or indirect. However, to remain competitive in the market place, we will participate in these types of programs but will be well positioned to change direction as the Feds require."
It would appear that down payment assistance programs are dying a slow death.
Opinions expressed here are the sole responsibility of the author, and do not necessarily reflect the view of Starkey Mortgage.
Ruth Vogt, Colorado Regional Manager
Colorado #LMB100023827, NMLSR# 257576
The down payment assistance programs have not truly been a good deal for most buyers if they require the listing price to be inflated to cover the 4 to 6% required by many of these programs. In many cases it takes 4 to 5 years of mortgage payments to get the mortgage back down to the original purchase price. True 100% financing is a better way for the consumer especially in a flat or depreciating market. I am confident that we will be seeing new 100% risk based loans.
The only time a down payment assistance offer made any sense was in lieu of a price reduction where there was true value to begine with. Unfortunately, like most good things, it was misused, and wa-la! underwriters and appraisers were caught up trying to determine if values were in fact inflated to cover the DPA.
You know the saying: when one door closes, another opens. Imagine this: HUD closes the door to DPA; yet opens up the avenue for FHA no down payment options??? Possible? I believe so. We'll see...
Wow Ruth! This is an amazing "first post"! COngratulations!
Now, with the shifting market, I see a lot of old things dying and new things arriving. 'Tis the cycle of business!
Give me a break! So many folks, and I was one of them, wants the American Dream - owning your own home. I am so proud to help so many First time homebuyers and like to see any and all programs that accomplish that.
Sellers are so willing to give 6% or more just to sell and will take the listed price, or fair market value, at that time without any issue of price inflation.
I so hope these DPA Programs stay around and give these folks a chance. There's absolutley nothing wrong with it.
Looks like seller funded DPA made it after all!
On? Off? On? Who knows for sure???
Yes, the President did sign the "Housing Relief" Bill on July 30th, being referred to as legislation that will have more impact on our industry than any in the past decades. It should! Afterall, it was 789 pages long! (To see an overview of the bill click here: HR 3221.)
Other articles referencing the signing of this bill are (notice the reference to "depression"!!):
Bloomberg
Reuters
Was the elimination of the down payment assistance program a primary focus of the bill? The introduction of yet a NEW bill (HR 6694) would suggest is wasn't! That's right... yet another bill to bring DPA back to life!
Are you confused yet? Well, as of right now, this minute, but subject to change before I click SAVE, here's the deal on DPA loans: Must be officially signed off on and fully approved by Sept 30th. Closed by October 31st.
Stay tuned for more developments!
Ruth Vogt
Good point about the idea of TAXING the program. ha!
Did you also look at the information posted today (Speak NOW or forever hold your piece... of real estate!)? There is some important information on what WE can do to assure DPA stays around.
Thank you for your concern about this important program for both buyers AND sellers!
rv.