Seller Funded Down Payment Assistance Ending!

OMG I can see Dianne's tax loophole website email now.........
If RE agents aren't apparently under enough IRS scrutiny!

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"You can't be king of the world, if you're slave to the grind" - S. Bach

Got this reply from one of my Senators today -- Sounds like they aren't budging, so I guess it's a good thing enterprising folks out there are finding ways around this mess before they bring the whole market to a screeching halt:

Dear Hakrjak:

Thank you for contacting me with regard to down payment assistance programs in H.R.3221, the Foreclosure Prevention Act. I appreciate hearing from you.

Down payment assistance programs are intended to help families who would otherwise struggle to come up with the down payment necessary to qualify for Federal Housing Administration (FHA) mortgages. However, both HUD officials and a number of members of Congress have raised concerns about the way some of these organizations fund their activities.

These concerns are based on the fact that many of these non-profits work actively with sellers, often receiving reimbursements for down payments made from the sellers themselves in the form of donations. They also usually charge the seller a service fee, which amounts to millions of dollars in revenue.

In light of these concerns, H.R.3221 forbids FHA from insuring mortgages in which the borrower's down payment comes from a private down payment assistance provider. The bill passed the Senate with my support and was signed into law by President Bush on July 29, 2008.

Again, thank you for writing. Please be assured that I am supportive of efforts to encourage homeownership, especially those aimed at families who struggle to afford their own homes, and that I will keep your thoughts in mind should the Senate consider legislation pertinent to this issue in the future.

Sincerely,

Ken Salazar
United States Senator

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"Don't let good enough be good enough" -- Coach Bill Parcells to Tony Romo upon leaving the Dallas Cowboys.

Hak,
I have to admit I'm quite impressed. First, the new avatar is very Hugh Hefner-ish and now a personal letter from a US senator. Whats next?

Hak, on a more serious note-

One of my lenders made me aware of a current 100% financing option. Its a no down payment purchase loan underwritten by USDA rural development. There are income limits but they seem fairly generous and probably not restrictive. Underwriting guidelines and housing acceptability standards are very similar to FHA. Its through Countrywide and its called a USDA rural development loan. It would probably be worth checking around to see if its available in your area.

Apparently my construction company has major sway out here in Colorado now! LOL

Do you have to be a farmer or in the Ag industry to use it though?

- Hakrjak

__________________
"Don't let good enough be good enough" -- Coach Bill Parcells to Tony Romo upon leaving the Dallas Cowboys.

No. Its just a loan program. As far as I know it has nothing to do with the Ag industry. I'm using it to sell a 3 bedroom house on a town lot. The buyers are not involved in ag. The income limit for a family of 4 is around $55k in this area. Thats good enough to buy most of the houses I'm selling. Its sounds like a good program, like I said before its supposed to be very similar to FHA. We'll see.

This whole area could be considered "rural," maybe thats a qualifier. I'm not sure.

For what I read, yes, the area must be considered rural... so usually downtown properties won't qualify but many "suburbs" would. I don't know where to check for that info though.

I have to disagree with Hakrjak on this one. I sell residential re as part of my income and I fully support the actions against DPA. Yes it's true that 40% or so of FHA deals implement Ameridream, Nehemiah or one of those non-profits. Your information is correct, but I think you're drawing a faulty conclusion. I've had countless clients ask about downpayment assistance, but after I describe the process and their options to them in full, they almost always opt to produce a downpayment on their own. Why? Because at the end of the day, it's easier for everyone and it's better for the homeowner in the long run. Most people don't take these extra steps, but I like talking to a client two years later and having them be happy with their purchase. DPA deals are often a nightmare to close these days.

The assumption is that the 40% of buyers who use DPA wouldn't buy without it. Not true. They would buy, and they do buy. If you give someone the *option* of buying with no money down and having the seller even cover the closing costs for them, of course they're going to take it. But if you take a minute and educate them about what it is they're actually signing up for, all of a sudden they have an aunt who will help them or some other legit source for down payment...you know, like in the "olden days".

Nehemiah and these guys tout their services as "making homeownership possible for millions of Americans". What I've seen in the real world is that all they've done is make *zero down loans* possible for buyers. There is a much higher percentage of foreclosures coming from this sector of loans as well...they're not making homeownership possible if the home just ends up going back to the bank anyway.

It's a good vehicle for investors. That's about it. I believe it will have a negative impact on sales for a while, but not because it matters. It will have a negative impact because Realtors *think* it matters.

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"I'm not a business man. I'm a business, man." -Jigga
"The difference between genius and stupidity? Genius has limits." -Einstein

You're right. I've used the USDA deals for residential properties many times, but it's always in an area that has not yet been annexed or something must qualify the home as rural, even if it's in a subdivision. The rules leave a good amount of homes qualifying in our area.

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"I'm not a business man. I'm a business, man." -Jigga
"The difference between genius and stupidity? Genius has limits." -Einstein

The loan officer told me my area qualified. Its a typical midwestern small town of about 6000 people. The property does not fit my definition of rural. Its in the town limits on a 50x100 lot a block from the school and 3 blocks from McDonalds. It has all public utilities. You can't see a corn field from the house! I would bet that the whole area is considered "rural" and is probably a targeted area for this program. I'm not sure about all the details, but I'm glad its available. Just another tool in the toolbox.

Impressive, hak! Did you sell yourself to him as an investor when you emailed him, or did you just lead him to believe you were someone concerned that they couldn't get a zero down deal?

P.S. Do you have a blown up version of your avatar image?

We had a subdivision with just shy of 700 homes sell out in about 2 yrs...majority of loans were usda. Same as what you're talking about. you wouldn't look at that area and think "rural" in a million years.

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"I'm not a business man. I'm a business, man." -Jigga
"The difference between genius and stupidity? Genius has limits." -Einstein

Nah, I just told him straight up I was a developer / rehabber who specialized in low income housing for poor folks who can't afford a 5% down payment even. You would have thought the guy would have been more receptive, considering his political leanings -- but sadly it looks like anybody who is trying to make a buck in this shattered market is being labeled evil, and not deserving of any favorable legislation. Hurts the poor folks too.

- Hakrjak

__________________
"Don't let good enough be good enough" -- Coach Bill Parcells to Tony Romo upon leaving the Dallas Cowboys.