Congress Is Set to Limit Down-Payment Assistance

Washington Post ^ | Tuesday, July 22, 2008 | Dina ElBoghdady

[sf4dubya]

Mortgage programs that helped nearly 79,000 people buy homes using government-insured loans last year would be eliminated as part of a broader housing package that Congress expects to pass this week, key lawmakers said.

Under these programs, nonprofit groups provide buyers with money for down payments. Home sellers then reimburse the organizations and pay an administrative fee. More than half a million people -- including many first-time home buyers, minorities and single mothers -- have bought homes this way in the past decade using loans insured by the Federal Housing Administration.

But the FHA said seller-funded down payments present the single biggest challenge to its solvency. Borrowers who take part in these arrangements go to foreclosure at nearly three times the rate of borrowers who put their own money down, according to the agency.

The fate of these seller-funded down-payment-assistance programs has been in limbo for weeks. The Senate version of the housing bill would have banned them. The House version would not. Negotiators crafting a compromise bill have agreed to the Senate's position, which also is supported by the Bush administration.

"We're going to yield to the Senate on that," said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee and a supporter of the programs. "There are a lot of trade-offs in the bill."

The administration has tried for years to end the programs but failed to overcome legal challenges. "No insurance company can sustain that amount of additional costs year after year and still survive," Brian D. Montgomery, the FHA commissioner, said in a recent speech.

[C19fan]

The couple worked with Nehemiah, the nation's largest down-payment-assistance charity. Nehemiah provided the 3 percent down payment the FHA requires. The couple secured a 30-year, fixed-rate loan for a townhouse in Herndon through First Savings Mortgage. Their monthly mortgage payment is now about $400 more than what they paid in rent, with taxes and insurance included, Warrior said.

I am not sure what townhouses go for in the DC metro area but you are telling me you could not save the $400 extra you are paying now for a miniscule 3% downpayment! You should have that type of downpayment in 2 years if you save properly.

But yesterday, he said he felt lucky that he bought his seven-bedroom house in Clinton this month. Without seller assistance, he and his wife would not have been able to close the deal. They have six children, two of them grown.

Nice to know my tax dollars are subsidising you buying a mansion.

[DoughtyOne]

Congress asked lending facilities to lend to people with no credit and no reasonable way to pay back loans. Now they want the lending concerns to reign in this terrible practice of making bad loans.

I’m surprise Congress has even 9% approval.

[Krankor]

Years ago I was selling my condo and because the owner occupancy rate of the building was below 50%, the banks demanded a 20% down payment for a mortgage. Anyway, a very attractive young lady came to look at the place and she liked it. She asked me if the bank would allow her uncle to help her with the down payment. I told her I really didn’t know but I thought it would be okay. Then she looked at me really seriously and said, “Umm..he really is my uncle.”

[hermgem]

There's an comparison equivalent showing up.
These people who put it in their minds that mortgages are something similar to credit cards where you can compromise and extend the “loan”, or walk away.
Next came not paying for utilities, before the bubble burst.
With falling home values, the ones that calculated, saved and paid off find themselves holding the bag at lowered home homes.
Accd. to Investor's Business Daily:
At the bottom of it the Government.
The Community Reinvestment Act forced lenders to lend in places where they didn't want to send money and where neither they nor politicians wanted to walk.
This situation blew up and brought disaster.

[CharlesWayneCT]

Well, there apparently IS something good in this bill. Of course, this is one of the things the Democrats supported that helped cause the housing mortgage crisis.

Force lenders to give money to people who can’t repay, and then provide money to those people to make them think they can pay, and encourage them to buy houses they can’t afford. That’s a great plan.