A HUD VIEWPOINT-SINS OF THE NON PROFITS

By
Mortgage and Lending with Premier Nationwide Lending

First of all and most important, I am not a spokesperson for Hud and my opinions are just that, my opinions.

For those who may not be familar with the non profit downpayment assistance programs one of the most important or the most important point is that the assistance is a gift.

From the outside it appears to be a lot of fancy dancing to make this seller's concession, ops we're not allowed to call it that, appear to solely be a gift from the non profit organization involved. The gift comes from the non profit organization's general pool and not from the seller. But, big BUT! if the seller does not make the appropriate contibution to the non profit there will not be any gift forthcoming from the non profit. Excuse me I meant a contribution exquivelent to the gift amount, plus a predetermined administration fee for the non profit. And once again, by some miracle, there is no tie between the two. Heh, heh.

As a gift it sits outside the FHA guideline of a maximum of 6% that the seller is allowed as a sales concession toward the buyers cost. Also as a gift it is considered by guideline to be "the buyer's money!"  Pretty cool trick wouldn't you think. Now the fun part is that when all is said and done the seller may have in one way or another contributed 7,8,9% or more to the buyers purchase of the property.

So HUD is concerned that this has increased the purchase price of the home to the buyer. It's hard to argue that it hasn't.

On the other hand it has created an opportunity for a buyer to be able to purchase a home that they may not have otherwise been able to purchase.

Two thoughts:

1. Why doesn't HUD just tweak the guidelines as opposed to killing the program.

2. Why doesn't HUD get off their duff and finally start offering 100% financing, which could effectively kill these programs, as they are today.

I don't know the answers to these questions.

Now, and this is certainly an issue of concern;

Hud is concerned that mortgage brokers/lenders are putting pressure on appraisers to meet what HUD considers to be inflated purchase prices. This is a legitimate concern. Since I am not an appraiser I suggest you ask your favorite appraiser if this is the case, and I think you will find out that this is in fact the case.

 

Okay, so maybe the way non profits operate in regards to FHA loans needs to be addressed, but how much of this is political, and a response to today's market conditions. The non profits didn't just appear out of clear air. They have been operating for quite some time.

No system is perfect and when there are disagreements blame usually falls on both sides of the fence.

One man's opinion;

In today's market the HUD's action is inappropriate and needs to be reversed!

 

Once again, just one man's opinion!

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Show All Comments
Rainer
201,243
James Gordon
Sibcy Cline Realtors® - Cincinnati, OH
REALTOR, PBD SFR SRS
HUD needs to offer a 100% model and that will do away with inflated appraisals to cover the seller contribution
October 04, 2007 07:42 AM #1
Rainer
406,157
Sean Allen
International Financing Solutions - Fort Myers, FL
International Financing Solutions

Hey Jay,

Great points that you have made about hUD and DPAs.Hopefully they will re-consider their decisions.

Sean Allen

October 04, 2007 07:46 AM #2
Ambassador
2,345,539
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

This is really tough.

It gets down to "smoke and mirrors". 

When a thing looks like a duck . . . . .

Sellers do, in fact, pay the money that gets laundered to make the "gift" to the buyer exceeding the HUD guidelines. 

Change the guidelines. 

October 04, 2007 07:49 AM #3
Rainmaker
263,238
Jay Beckingham
Premier Nationwide Lending - Port St Lucie, FL

James,

i agree 100%, pun intended.

Sean,

the first step would be if the court issues an injunction, if possible, preventing hud's action.

Lenn,

i intentionally stayed away from that laundering word, but i had a client who closed with a dpa last month. his dad was at the closing and asked what this was . he said, "they're laundering the money."

jay 

October 04, 2007 08:05 AM #4
Rainmaker
217,645
Joan Mirantz
Homequest Real Estate - Concord, NH
Realtor, GRI, CBR, SRES - Concord New Hampshire

The only place I have seen or heard about this is here? Has it been in the paper?

October 04, 2007 09:15 PM #5
Rainmaker
263,238
Jay Beckingham
Premier Nationwide Lending - Port St Lucie, FL

Joan,

it's been in industry mags, etc. this is propably over the heads of most of the national media.

they don't understand what it is.

jay 

October 05, 2007 08:20 AM #6
Anonymous
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Rainmaker
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Jay Beckingham

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