President Bush signed the Housing & Economic Recovery Act on July 30, 2008 with reservations due to the bill giving relief to Fannie Mac and Freddie Mac. Not only did the Democratic Congress add this provision to the bill but also there is another provision that is causing frustration for Americans. The provision prohibits the Federal Housing Administration commonly referred to as FHA from using any type of down payment assistance programs in which the seller will benefit from the transaction.

A few of the seller funded down payment assistance programs have been cited for causing serious problems and have lead to major losses for FHA as recognized by The U.S. Department of Housing and Urban Development (HUD) Inspector General, the Government Accountability Office, and the Internal Revenue Service. FHA noted had $4.6 billion in unanticipated long-term losses in its annual re-estimate this year, mainly due to the increase in seller-funded loans in its portfolio. Not only has FHA lost money, but also foreclosure rates for these loans have been to blame for three times higher than other FHA loans.

Is there help for individuals looking for a down payment assistance program for a FHA loan?

The answer could be yes. Representative Al Green (D-TX) introduced the “FHA Seller-Financed Down Payment Reform and Risk-Based Pricing Authorization Act of 2008” (H.R. 6694). This bill will reinstate FHA seller funded down payment assistance for those with certain credit scores. At the time of this writing, H.R. 6694 is pending in the House Committee on Financial Services. There is at this time, no Senate companion bill has been introduced.

Due to all the concerns of Senate Banking, Housing, and Urban Affairs Committee with these type of seller assistance programs, similar legislation in the Senate may not be forthcoming.

This entry was posted on Tuesday, August 19th, 2008 at 6:30 am and is filed under Homes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.