Monday, August 25, 2008

AmeriDream's End

A provision of the recently enacted housing stimulus package kills of Down Payment Assistance programs as of October 1, 2008. (read more at AmeriDream's website)

Another provision of the bill raises the minimum down payment on an FHA loan from 3% to 3.5%.

Hmmmm..... we're in the middle of the biggest housing downturn in decades,  banks are nervously tightening up lending standards and so lending to fewer people, there's a glut of vacant foreclosed homes on the market which are dragging down the value of every home, and many sellers are so anxious about not selling that they're more than willing to help a buyer with the down payment.

Amidst all this Congress decides it's a good time to say "No, you have to save even more," and "the seller can't help you, even if they want to."

Yep, sounds about like our Congress. <shaking head in disbelief>

I've done a lot of DPA loans; several where I represented the seller. In each case, the seller was happy they finally got their home sold at all, given the current market. Many of these sellers told me that while they wish they didn't have to give any concessions to the buyer, at least they felt good that the money they gave up went to the worthy cause of helping someone else step into the American Dream of home ownership.

On the bright side, I'm hopeful that HR 6994, a.k.a. the FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008 will be passed into law soon and DPAs will be back. HR 6994 re-authorizes DPAs and mollifies the naysaysers by letting HUD charge risk-based insurance premiums on the mortgage loans.