California Teachers and Employees

August 18th, 2008 - Important Update: Many of the lenders are cutting off Seller Assisted Down Payment Grants effective immediately.  The last day FHA will buy a loan with Nehemiah is October 1st, 2008.

As the fight for Nehemiah continues do not lose hope, there are still many down payment assistance programs available if you are a member of CalSTRS, CalPERS, or if you are a first time home buyer you can look to CalHFA for down payment assistance.

If you’re unsure what program you might qualify for, complete this simple form and we will get to work looking for a down payment assistance program to meet your home buying needs.

If you haven’t written your representative to tell them that you support keeping Nehemiah, AmeriDream and HART available to home buyers, please read this and follow the link to voice your support!

Nehemiah, Ameridream, HART and other private charities that offer seller assisted down payment grants score a win with the introduction of H.R. 6694.

This proposal counters the legislation passed last week that puts an October 1st, 2008 cutoff for seller assisted down payment assistance programs under title II of the National Housing Act (H.R. 3221)

H.R. 6694 calls the authorization of risk based mortgage insurance premiums for certain mortgagors that meet Fico requirements of 620 and above.

I believe this bill will move quickly through the process and be the saving grace of these valuable charities. This is responsible legislation and necessary to continue to stimulate the U.S. Housing market in a responsible way.

For more information, to take action against the ending of Nehemiah and programs like it and to follow the progress of this new legislation you can go to Nehemiah’s website here.

When I first wrote about H.R. 6694 it was after I wrote to my representatives through the Nehemiah and the DPAgroundSwell.org website in support of the bill - Received this email today from Dianne Feinstein.  I have to say that I at least appreciate the attempt to personally address me and speak specifically to the subject of my original contact which was Seller Paid DPA.

Take Action Now - Use this easy tool to email your representatives and tell them that you want to save Nehemiah!

Dear Mr. Schang:

I am writing in response to your letter regarding down payment assistance programs. Thank you for taking the time to write, and I welcome this opportunity to respond to your concerns.

On July 30, 2008, President Bush signed into law the Housing and Economic Recovery Act. This legislation, which provides critical relief for American homeowners facing foreclosure, also contains a provision prohibiting Federal Housing Administration (FHA) program participants from using down payment assistance programs in which the seller financially benefits from the transaction.

The U.S. Department of Housing and Urban Development (HUD) Inspector General, the Government Accountability Office, and the Internal Revenue Service have cited serious problems with some seller-funded down payment assistance programs that have lead to substantial losses for FHA. The agency had $4.6 billion in unanticipated long-term losses in its annual re-estimate this year, primarily as a result of the increased amount of seller-funded loans in its portfolio. Foreclosure rates for seller-funded down payment assistance loans have been found to be three times higher than other FHA loans.

You may be interested to know that on July 31, 2008, Representative Al Green (D-TX) introduced the “FHA Seller-Financed Down Payment Reform and Risk-Based Pricing Authorization Act of 2008″ (H.R. 6694). The bill would reinstate FHA seller-funded down payment assistance for individuals with certain credit scores. Currently, H.R. 6694 is pending consideration in the House Committee on Financial Services and a Senate companion bill has not been introduced. Given the major concerns of the Senate Banking, Housing, and Urban Affairs Committee with seller-funded down payment assistance programs, it is uncertain if similar legislation will be considered in the Senate. Please know that I will keep your views in mind should the Senate consider this legislation.

Again, thank you for your letter. If I can be of further assistance, please contact my Washington, DC office at (202) 224-3841. Best regards.

Sincerely yours,

Dianne Feinstein
United States Senator

Further information about my position on issues of concern to California and the Nation are available at my website http://feinstein.senate.gov/public/. You can also receive electronic e-mail updates by subscribing to my e-mail list at http://feinstein.senate.gov/public/index.cfm?FuseAction=ENewsletterSignup.Signup.

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.