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Should the Government bring back the FHA down payment assistant program ?

The government claimed that the DPA programs were bankrupting the FHA  but with so many foreclosures could this program help  future purchaser ? Take a look at the new proposed H.R 600  that could reinstate the DPA programs.
  • February 10 2009 - Reseda
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Answers (25)

Consider the number of people out there willing to walk away from houses who put down 20%!!!.
Mentality is "hey, the house isn't worth what I owe on it...why should I keep on paying?...I'll just walk away from my obligation and let the bank eat the loss".
Yes, it's hard to save money for that down payment and closing costs...but owning a house is not a right guaranteed by the gov't folks.
And these DPA programs are a shell game, it just took a declining market for FHA to figure that out.
  • February 15 2009
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The "PRO DPA" peeps never seem to read any statistics when they get up on the box  16+% default rate   (When unemployment was sub 4%).  It was abused by INV and Builders trying to unload/CASHOUT of properties.  Yes, Sellers and Builders CASHING OUT  of their inventory.  We cut off those loans so they simply would "sell" them with no money down.. It's JUNK.  We all know it, but there is there is always the ABC Home Makeover DPA story that we hang an entire government lending program on:  You know, the vibrant school teacher who walks to work everyday teaching underprivileged kids and stayed afters school to tutor (to make ends meet).  One day, she was moonlighting as the county mechanic on the schoolbusses changing tires and the jack collapsed severing her 2 legs and left arm.. Now, back in class, she rides a skateboard to work, but wants a home.... and needs DPA.....  Can I make a more ridiculous KLEENEX moment to avoid the billions of criminal activity???   The program had good intentions and was hardly used (when it was good)... then needed when FHA dominated the lending market (Subprime part deux) and now that all the old DPA loans are REPOed...  we get the silly (without factual credibility) bottle rocket pleas for reinstatement.. Find me a paying borrower and we'll get them a loan somewhere, somehow.  Keep rockin'.
  • February 15 2009
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Profile picture for PRMI Branch Manager
This is a tough question acutally as there are two schools of thought.  I personally think a compromise could be made that you must have a minimum credit score(let's say 650 for conversation's sake) to qualify for downpayment assistance AND take a homebuyers course to be eligible or as the other poster's have stated create a 100% FHA program.

Al Norman
Branch Manager
Primary Residential Mortgage Inc.
www.theprimaryteam.com
  • February 15 2009
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my 2 cents.

I believe unemployment has caused most of these FHA defaults. I'm in Ohio and us and Michigan have lost soooooo many jobs over the last 5+ years, mainly manufacturing jobs.

Also, Ohio and Michigan have by far the most FHA defaults (aka HUD homes)
When you compare the number of FHA's originated in a State vs. the number of FHA defaults in a State...the higher default States seem to also be the higher job loss/unemployment States.

Again, I'm only speaking of FHA defaults...we all know FHA has very favorable terms for the borrower. But you still need a JOB to make any payment.

I think at least there should be a DPA allowed that corresponds to the borrowers overall credit profile OR higher risk FHA borrowers that use DPA pay a little more in the mortgage insurance. Something could be used so everyone is not punished.
Also, if DPA is used, something does need to be put in place to limit inflated appraisals.

Either way, some "tuning" to DPA could have been done rather than sending it to the "scrap yard"
  • February 11 2009
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Profile picture for Texas Banker

A part of me says yes but the facts say no.

DPA programs have up to 6 times the default rate than buyers that actually have skin in the game.
 

However I think it will come back because there is a huge lobby behind it.

  • February 10 2009
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Profile picture for jimmy57
"HUD's mission is to increase homeownership, support community development and increase access to affordable housing free from discrimination."

Political pressure to put low-income people into houses was a large part of what got this RE bubble rolling, let's not repeat that mistake.  With prices still falling, it's a risky time to be borrowing to buy RE, anyway; but trying to pull in marginal buyers for the sake of fees and commissions is just shameful.

While prices are still falling, today's 100% LTV loan -- whatever institution offers it --creates tomorrow's upside-down buyer.  You're just asking for future waves of defaults if you start selling houses to every penniless rube with a job.


  • February 10 2009
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There may be a place on the menu for a 100% LTV HUD loan. I could live with a well written program that leaves off the "shell" game of the referenced DPA programs.

  • February 10 2009
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The real question is "why doesn't FHA have 100% financing?" They said they were going to roll it out, but never did.

Before you go off about how there should be no 100% financing, consider this: VA has 100% financing. No monthly mortgage insurance premiums. And the funding fee can be rolled into the loan.

USDA has 100% financing. No monthly insurance premiums. And their Upfront Mortgage Insurance Premium can be rolled into the loan.

So, if VA and USDA, both government loan guarantee programs by the way, can offer 100% financing, why can't FHA do the same? HUD's mission is to increase homeownership, support community development and increase access to affordable housing free from discrimination.

  • February 10 2009
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it = is     that edit button is just for show, right?
  • February 10 2009
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Jimmy, what it that, a Gretsch, Gibson?
  • February 10 2009
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Profile picture for jimmy57
NO.  Purchasing a house should begin with a personal financial stake, not an accounting trick.  Putting people into houses before they had demonstrated financial responsibility is what got us into this mess.
  • February 10 2009
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Great point Barry, some can do the 100% who are qualified. $8 Billion is enough proof of the other way. 
  • February 10 2009
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My thoughts exactly Barry...Eliminate the shell game and call a spade a spade!
  • February 10 2009
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First-I do not agree that it is prudent lending for a borrower not to have a downpayment.
Having said that, prior to this program being re-instated by burying it deep in a housing bill, I would prefer HUD to just create a 100% LTV program with more stringent credit and income guides along with a true homebuyer education course. This way it is underwritten as a 100% loan and cuts out the "bs" of a seller kick back and pay a non-profit one percent of the funds. Just add the 1% back into the financed MIP, HUD is on the hook for the deal anyway.

  • February 10 2009
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That may work to Slick.
  • February 10 2009
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If they have no downpayment, they can buy a HUD home for $100 down. I dont think the government claimed DPA was bankrupting FHA, I believe they showed aprx 8 Billion in DPA defaults out of a 21 Billion MIP fund. That was not a claim, it was a result.

  • February 10 2009
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Profile picture for SlickPoetry
god, why don't we just have the government buy the house for you?
  • February 10 2009
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Profile picture for Rob Cochems
I say do it, if and only if the government subsidizes purchase rates down to 2.99%, gives a tax credit of 15k and allows it on investment properties.
  • February 10 2009
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Lets get rid of PMI co's too. (Lord knows they're afraid to u/w anything these days) and bring back old fashioned 20% loans, full doc, good credit, Chevrolet, apple pies, etc.
Seriously, if you can't manage to save the down payment&closing costs, you probably shouldn't be buying a home. I've seen too many renters with 52 inch plasma TV's and Tahoes in the driveway, crying that they can't dave money for a down payment.
I counsel a lot of low income buyers through a local non-profit program here at the Jersey Shore, and the first thing we tell people is: don't buy the big TV, skip the vacation, take a pass on the new $600 boots and before you know it, you'll have $15 G's in the bank.
  • February 10 2009
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NO.......

The contribution is "baked" into the sales price, somebody collects fees and 1% for "helping" the borrower? Where is the help for the borrower a few years later with no equity and a household job loss, can't afford the payment and can't write a check to sell the property?

  • February 10 2009
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George,

I have to agree with Joe on this topic.

All eyes are on the real estate industry and to reinstate a program that essentially allows consumers to participate in home ownership with none of their own money would not be prudent at this time. Accountability starts with the consumer especially since mortgage professionals are being scrutinized for leading the consumer down the wrong path.
  • February 10 2009
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Profile picture for Clearpoint

No!

Why not bring back 100% STATED/STATED W2 Borrower with a 580 score?  A lot of people were helped into a home with that Bill K..  Realize the people who are crying for this are the Ameridream/Neihmiah scam artists that want their cut of the pie before they give it to the borrower, and the brokers that misses subprime.



 

  • February 10 2009
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NO
  • February 10 2009
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One word.....   NO!!!!!!!
  • February 10 2009
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The Ameridream program has helped several of my clients in purchasing thier homes.   Without this program they would not be homeowners today.   I know the program was eliminated dues to research showing higher % of foreclosures in this program.   I know my clients have been able to keep their payments update and have since refinanced to lower rates.   I think as loan officers, we have to educate these and all borrowers so they understand exactly what is being offered to them. 

  If you are interested in supporting the ameridream program, go to ameridream.org and click the link to contact congress.

  • February 10 2009
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