|The Housing bill signed by the President on July 30, 2008, does not eliminate all downpayment assistance programs from eligibility for FHA insurance. Only those programs that are funded directly from the seller or other party to the transaction are prohibited. Downpayment assistance from family members, government programs, or charities that are not seller-funded is still permitted. The prohibition goes into effect October 1, 2008. Read more about the Seller-funded Downpayment Assistance Provision.|
Take Action Today to Save Downpayment Assistance!
Nehemiah Corporation of America, a national non-profit organization, has helped over 300,000 families who would have otherwise been locked out of homeownership due to lack of downpayment funds.
Both the House and Senate passed H.R. 3221, Housing and Economic Recovery Act of 2008, a comprehensive piece of legislation that addresses a variety of housing related issues. The bill contains a provision (SEC. 2113) that forbids FHA from insuring mortgages in which the borrower’s downpayment comes from a private downpayment assistance provider, beginning October 1, 2008. As of this date, the minimum downpayment will be increased from 3% to 3.5%.
The bill is headed for the President’s desk where his prompt signature is expected. With the stroke of the President’s pen, downpayment assistance will be shut down in the United States on October 1, 2008.
The consequences will be devastating! By FHA’s own estimates, DPA comprises nearly 40% of FHA’s volume. This means more than 300,000 working class families will be locked out of homeownership in the next year alone. Communities across America will take the brunt of the $50 billion in lost real estate sales, not to mention the indirect impact on the real estate, mortgage and building sectors that will be forced to shed tens of thousands of jobs due to this dangerous legislation.
Act Now! Contact your elected officials and urge them to introduce and pass a bill that allows downpayment assistance to endure. Failure to act now will ensure the death of all private downpayment assistance programs. www.getdownpayment.com
Earlier today President Bush signed into law a number of very significant changes that will occur starting . Please read these changes as they affect all of us and our Home buying abilities.
Details of the Housing and Economic Recovery Act are as follows:
The two items in bold will have the greatest immediate impact so please read these carefully.
Higher permanent loan limits for conventional conforming and will become EFFECTIVE . The act calls for limits to increase to a maximum amount of 625,500 , depending on the metropolitan area. The temporary limits established in March 2008 are set to expire
-FHA floor limit to remain at 271, 500
-VA guaranty will increase
**Minimum cash investment for FHA loans WILL increase to 3.5%**
-A moratorium on RISK Based Pricing for FHA loans will go into effect
**Seller Funded Down Payment Assistance with FHA loans will be TERMINATED on October 1, 2008. No more DPAs like Nehemiah & American Dream.**
-Condo processing for FHA loans will be streamlined
Nonprofits that funnel money from sellers to buyers are under attack by the Bush administration, but supporters say that these companies help thousands of middle-income people who would otherwise never save up enough to buy a home.
The Federal Housing Administration requires a down payment of 3 percent, but no-money down loans using charitable down-payment assistance grew to about 35 percent of the agency’s new loans last year, up from about 5 percent in 2001.
Defaults are higher than the FHA’s other loans. As of February, about 10 percent of borrowers receiving seller-financed down-payment assistance were either 90 or more days delinquent or in foreclosure, government statistics show.
That’s greater than the rate of about 6 percent for ordinary FHA loans, but less than the rate of about 24 percent for subprime loans made to borrowers with poor credit.
Supporters say that the programs would significantly reduce access to homeownership and some tightening of the regulations would solve problems with the program.
Source: The Associated Press, Alan Zibel
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