H.R. 3221 Housing and Economic Recovery Act of 2008, aka Foreclosure Prevention Act, is scheduled to be signed by President Bush on Monday, July 28th and is projected to save over 400,000 American homeowners from foreclosure.
Nestled deep in this 700 page bill, located on 479-481 you will find the end date of October 1st, 2008 for the use of down payment charity gifts from currently allowed charities Nehemiah, Ameridream, HART and a small handful of other allowed charities.
Excerpt from Nehemiah Web Site:
SEC. 2113. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF SELLER-FUNDED DOWN PAYMENT ASSISTANCE.
Paragraph (9) of section 203(b) of the National Housing Act (12 U.S.C. 1709(b)(9)) is amended to read as follows:
(i) such lien shall be subordinate to the mortgage; and
(ii) the sum of the principal obligation of the mortgage and the obligation secured by such lien may not exceed 100 percent of the appraised value of the property plus any initial service charges, appraisal, inspection, and other fees in connection with the mortgage
(i) The seller or any other person or entity that financially benefits from the transaction.
described in clause (i). This subparagraph shall apply only to mortgages for which the mortgagee has
issued credit approval for the borrower on or after October 1, 2008.’’
- (ii) Any third party or entity that is reimbursed, directly or indirectly, by any of the parties
- (9) CASH INVESTMENT REQUIREMENT-(A) IN GENERAL – mortgage insured under this section shall be executed by a mortgagor who shall have
paid, in cash or its equivalent, on account of the property an amount equal to not less than 3.5 percent of
the appraised value of the property or such larger amount as the Secretary may determine.
(B) FAMILY MEMBERS – For purposes of this paragraph, the Secretary shall consider as cash or its equivalent
any amounts borrowed from a family member (as such term is defined in section 201), subject only to the
requirements that, in any case in which the repayment of such borrowed amounts is secured by a lien against
the property, that –
(C) PROHIBITED SOURCES.—In no case shall the funds required by subparagraph (A) consist, in whole or in
part, of funds provided by any of the following parties before, during, or after closing of the property sale:A valid argument is that there are other factors that many feel FHA is not revealing and that is the starting credit quality of those loans that experienced a higher rate of default. If FHA would simply follow suit with the rest of the credit markets and raise the bar slightly on thier qualifying guidelines we may not be a need to eliminate these programs…but this does not seem to even be a consideration for FHA.
In the upcoming years housing prices in America will reach an even higher level of affordability that will result many first time home buyers to enter the market. The key to recovery of the U.S. Housing market is two fold – foreclosures must slow to normal rates and people need to buy homes.
Seller paid down payment assistance has always been a valuable resource for new home buyers and with the tightening of the credit markets we may see this housing crisis unnecesarily prolonged by cutting off a key factor in this recovery – Helping new home buyers buy homes.
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