Friday I made the mistake to saying that I thought down payment assistance programs had vanished, going the way of the Ivory Billed Wood Pecker or the lavish mortgage banker Christmas party. It turns out that seller-funded DPA’s are a thing of the past (i.e. Nehemiah, Ameridream, etc.) but some programs are very alive and well.
One originator wrote and said, “In my opinion, those DPA’s were deceitful and enabled a seller to give money to a 3rd party to give to an unqualified borrower to get the problem off the hands of the seller. In essence, they were creating smoke and mirrors for the seller to give the down payment to a buyer for 100% financing.” Another wrote, “As far as I know, the only acceptable DPA’s allowed today are government (local, state) or charitable organizations (i.e., Chase sponsored redevelopment projects) that do not allow for seller funded deposits.” And “DPA’s have not disappeared. They are on our rate sheet but these programs are not the ones of yesteryear. Many programs are allowed – they are NOT the Nehemiah types with seller contributions, but rather government charity types.”
Lastly, “Housing assistance programs are being used widely and are not seller funded, but money available to thru the national stabilization program. They are used with FHA loans and are purchased by Chase, BofA, and GMAC’s correspondent lending channel. $15k – 20k of free money in the form of a silent second at zero interest rate, and a maximum DTI of 41% makes the risk attractive to loan servicers. Homebuyers go through an education process required by the program, and the money must be paid back if the house is sold or converted to a rental property.”
The SAFE Act – some folks wish that it would just go away. But it won’t. A check of HUD’s website (and remember that HUD is responsible for enacting licensing standards) shows a proposed rule that sets minimum standards for state licensing of loan officers and mortgage brokers. “To comply with the Act, states must put in place a Loan Originator Licensing program that requires originators to take an education course, pass a test, and undergo civil, criminal and financial background checks. States have until July 31, 2010, to have their loan originators licensed under the SAFE Act criteria, unless they already have them licensed under a different system. If already using a different licensing system, they have until December 31, 2010, to bring them in line with the Act’s requirements.” Anyone interested should visit HUD’s site here.