Downpayment Assistance
Charitable Downpayment Assistance 1. Charitable downpayment assistance works .
HUD-approved charitable downpayment assistance (DPA) programs have been critical in enabling over one million low and moderate income families over the past decade to purchase their own homes, an estimated 80% for the first time.
The current FHA Commissioner who now opposes charitable DPA until recently praised the program, writing that “Borrowers who rely on seller-funded downpayment assistance are representative of the population that FHA was established to serve families who are otherwise underserved by the private sector. Because of this fact, FHA has determined that additional requirements or restrictions that would prevent these borrowers from obtaining FHA financing would not be beneficial, leaving this population with financing options that are more costly and riskier than FHA.”
HUD itself has utilized seller-funded DPA in the sale of HUD-owned properties. 2. Charitable downpayment assistance, including DPA funded in part by sellers, complies with applicable law and HUD guidelines.
Congress expressly provided for the use of charitable downpayment assistance to assist low and moderate income homebuyers to qualify for FHA insured loans; in doing so, Congress placed no limitation on the charities’ funding source.
HUD has developed clear guidelines which state how charitable downpayment assistance providers, including those funded in part by seller contributions, should be structured. Charitable DPA providers must, and do, adhere to HUD’s rules to operate. 3. Recent HUD claims regarding charitable downpayment assistance are flawed.
HUD recently has reversed its prior position on downpayment assistance and made unsubstantiated statements and released flawed data regarding seller-funded DPA. In 2008, two different federal courts took the extraordinary step of striking down implementation of a HUD regulation restricting seller-funded DPA, holding that HUD failed to provide an adequate policy rationale or reliable data in support of its position. 4. HUD should reform, not ban, charitable downpayment assistance programs.
In a June 2007 Congressional hearing on seller-funded downpayment assistance, HUD testified that it could “Absolutely” adopt underwriting reforms that would largely fix any policy concerns relating to DPA, but chose not to do so because it preferred to push legislation authorizing zero downpayment FHA loans.
Eliminating seller-funded DPA would force low and moderate income homebuyers to seek subprime or predatory loans, or not purchase homes at all. Reforms to reform, rather than eliminate, a highly successful program, would permit FHA to continue fulfilling its historic mission of service to families. 5. HUD’s mortgage insurance fund will not require taxpayer dollars.
HUD’s fund that supports the home mortgage program will realize over $1 billion annually and maintain a solvency ratio at three times the required amount as reported in the most recent congressionally mandated independent accounting report of HUD’s fund. No public documents support HUD’s claim that down payment assistance programs could cause the fund to be insolvent.6. A difference of 1% in the foreclosure rate exits between charitable downpayment assistance and government-funded down payment assistance homeowners.
Homeowners who used these charitable down payment assistance programs enjoy a 94% success rate as reported in a recent government study compared to a 95% success rate for government-funded down payment assisted homeowners. HUD’s loan program coupled with charitable down payment assistance programs has proven to be a safer alternative to subprime loans as echoed by HUD’s Assistant Secretary, Brian Montgomery.7. Dispelling the Myths of Downpayment Assistance Programs
Quick fact checker on charitable downpayment assistance programs... Read more
June 22, 2007 - HUD testifies that the agency could absolutely put standards in place for downpayment assistance programs during a U.S. House of Representatives Subcommittee on Housing hearing regarding the issue... Watch the hearing
February 2008 - Overview of charitable downpayment assistance issues in response to considerable and often conflicting commentary regarding these programs... Read full overview
March 2007 - George Mason University Center for Regional Analysis found the total economic impact of these downpayment assistance programs was $24.8 billion over a 5 year period... Read full report
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