FHA Mortgage Program Delays Downpayment Ban for Two Charities

by Peter G. Miller
October 28th, 2007

HUD has decided that will delay it’s new anti-charity rule for two prominent down-payment assistance organizations.

The downpayment assistance ban goes into effect for third-party charities as of October 31st. There are two exceptions, however:

*The Nehemiah Corporation of America, due to a previous Settlement Agreement and as discussed in the rule, is granted relief from the effective date of the rule until April 1, 2008.

*HUD has agreed to grant the AmeriDream Downpayment Assistance Program relief from the effective date of the rule until February 29, 2008.

HUD objects to third-party downpayment assistance plans because it says buyers in such programs have a higher default rate than other borrowers and that sellers are raising prices to compensate for the contributions they make to third-party charitable groups.

While complaining about default rates filtered through charities, HUD continues to allow up to a 6 percent seller credit under FHA guidelines. HUD, of course, does not say if home prices are raised when sellers give buyers a credit, nor has it said if foreclosure rates in such transactions are higher than normal.

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