Before you get started, please click on : All out of Love - by : Air Supply - This is how so many others and myself have felt without the seller-financed downpayment assistance programs (DPA's). Such programs sponsored by Nehemiah and AmeriDream....
As many of us know, there are tens of thousands of homes available and vacant due to the foreclosure crisis. As of October 1, 2008, the seller-financed downpayment programs were eliminated with no real answer if they would ever return. I have been in touch with a few people over at Nehemiah from time to time. Well, the fight is back on.
Well, the Nehemiah Corporation has started that fight by introducing GroundSwell2. Basically a marketing campaign to get awareness out to the public and to Congress. Bill H.R. 600, just recently introduced, is the new 2009 version of last years bill H.R. 6694. There will be an annoucement on Tuesday to when the first Town Hall meeting for 2009 will take place. Please keep in touch with me or follow me to find out the date and time.
What does all of this mean? Yes, there are some of you the disagree with this program and want to see homeowners save their own money. Some of you have other reasons to dislike this program. But the positives far out way the negative. It comes down to morals and ethics, when working with a program such as the seller-financed DPA programs. Reinstating DPA's could help ensure continued liquidity in a stagnating housing market that is crippling us financially towards bankruptcy per se. Possibly to another Great Depression. Sorry if these are harsh words, but this is reality.
At this moment, our government is throwing money at new programs, throwing money at banks and corporations, in return for possibly taking it upon themselves to restore financial freedom. But do you know that the seller-financed DPA programs won't cost the government or the taxpayers any money? This type of program could actually save the government over 12 million just this year alone.
Overall.....
- How many of you sellers had a buyer use these DPA's to buy your home?
- How many of you buyers used this program because you didn't either want to use your savings or just couldn't save enough money. Do you know that FHA changed it's downpayment requirements for the beginning of 2009? If not, please read : New FHA loans downpayment changes
- How many of you realtors had clients that used this program to either help your sellers sell their home or to help your buyers buy a home?
FYI.... Nehemiah actually has something up their sleeve. I am in constant contact with Nehemiah. Even if the seller-financed DPA's don't work, Nehemiah has 2 to 4 new plans in motion. That is all that can be mentioned for now. And for those of you that didn't know, I had the pleasure of being asked to speak at a rally in D.C. last year with Scott Syphlax, CEO of Nehemiah. If you missed that, you can read several articles about it here.
- Mr. Belonger goes to Washington - by Patricia Kennedy
- The March to Washington D.C. - Taking back downpayment assistance programs
- Video : Here is a video of myself at the rally (PS... I spoke longer than what shows on the video, but someone cut out the first 5 minutes.. oh well)
Here are some things that HUD wants to see part of bill HR 600 are :
- Borrowers with credit scores from 620 to 680 could be subject to higher insurance premiums. (I personally wouldn't have a problem with this)
- Borrowers with credit scores below 620 would be banned from using the down payment assistance program until mid 2009. ( I truly think that we could improve on this one. First off, why down to 620? Secondly, even people with credit scores of 570 or such can still have decent credit, under FHA's credit guidelines.
In ending, in my opinion, such permanent elimination would put another severe strain on the already strained housing market. And it could add a ripple affect to those houses on the market, adding more days not sold. If you think about it, if you are moving up, someone needs to buy your home and that is usually a first time homebuyer.
At this moment, the hour-glass might be out of sand soon. That rope trying to pull us out of that quicksand might be coming to an end. Stay tune next Tuesday, the 20th of January, for more information regarding DPAs. And keep this in mind... those stats that you heard about from HUD last year, making DPA's sound bad? Many of them were just thrown out into the wind. There finally were independent studies that found many of those stats to be very misleading. The biggest one of all, that 1 out of every 3 DPA loans went into foreclosure. A FYI, there were political reasons behind the misinformation.
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For more information on FHA loans, please go to this link. The FHA Expert
For more information about the 2008-2009 Tax Credit for First Time Homebuyers : 2008 Tax Credit
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!
Copyright © 2009 by Jeff Belonger
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For more information on FHA loans, please go to this link. The FHA Expert
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!
For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors
Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc
Jeff- I have always thought these programs are great for first time homebuyers. IN our town we rarely would see someone ever get one, the prices are too high.
I am with you. I think the key here is regulation. Regulate those unethic mortgate brokers, agressive bankers, etc from abusing the program. Mandate that only first time buyers with steady income can buy. No no-doc loan at all.
Qualify ... don't over buy! The American Dream ... Home sweet Home! These programs work well in our area.
Jeff: I think the Nehemiah program was excellent, and I used it whenever I could. As far as first time homebuyers saving for a down payment... in a "normal" market... the money saved for the down payment would usually be less than the amount the home value had appreciated in that year. That makes "saving"... normal a good-idea sounding word... actually cause the buyer to lose money in the long run. I hope somehow the Nehemiah program is reinstated, or reinvented. It was not a fly-by-night program, and it helped many, many buyers. Thanks for sharing such a good post with us. Take care.
KATERINA..... . not only for first time homebuyers either. I did about 3 DPA's for buyers that were buying for the second time. What about those that are selling, but have no equity to use when buying their next home? But I agree... they are a great program for many reasons.
HUITING.... . regulation does help, if it's realistic and watched over. And as I mentioned to Katerina, this is just not for first time homebuyers.... with any full doc loan, you need income to qualify anyhow. thanks
PATTY.... . they work and if you educate and hold peoples hands, they work even better. It's when you don't explain things or educate, that many things fail. Just my opinion... thanks
KAREN... correct, it wasn't a fly-by-night type of program. Kind of funny how it was shot down this past year, but it was never really an issue in the last 10 years. There are some reasons to this, such as HUD wanted a piece of this or to get their 100% program off the ground. Overall, it sold houses... bottom line. And we need this more than ever. thanks
Jeff, the more programs that a buyer potentially has to get in a home the better. The confusing part to me is how they come and go with the times and the ever changing regulations. I guess we have to live with that though. It's life.
We have bond and grant program here with stiff requirements. I have had listings that sold from seller assisted DPA and buyers who bought using it also. It's much less red tape than the bond and grant programs. I would LOVE to see a buyer class instituted for seller assisted DPA if it returns :)
Great post again Jeff!
Good post Jeff
It is a whole bunch easier to use DPA then to re-write FHA and other lending rules. Yes things were broke but not with DPA. We need to remember that subprime never used it
Tony
To be honest, I only encountered a DPA program once. It worked like a charm and the Seller was tickled to participate. They had the equity and they wanted to sell the home. It was a little bit of a fixxer upper and this was the way the buyer could get in use a little sweat equity to fix the house and live happily ever after.
Jeff, Thanks for getting the information out so quickly...hot off the presses!
Jeff - I think you're right that even these programs serve a purpose. So many of these potential buyers could be picking up this over abundance of inventory. I would like to see the consumers/buyers a little more educated about buying what they can afford and keeping their debt in check.
I would rather see the fed look into a streamline refi for fannie loans than mess with this.
Jeff--This could be very good news as long as there are restrictions that are fair but strict enough to help those needing help but keep out those with no intention of paying. Most who use these programs fell into the first catagory in my experience.
Jeff, your last comments almost make it sound conspiratorial. I am curious what the change will be. As for me, I am a strong supporter of the DPA's. Just think how many homes could have missed the ever increasing national housing inventory had they maintained them?
Bo
GARY.... . I agree to an extent... we need to define programs first. Meaning, the 100% subprime programs were probably not a good decision. Same thing about no doc loans at an 80/20.... but something such as the DPA, it works. And the ever changing regulations is sometimes from the gov't stepping in when they shouldn't... at times. thanks
RENEE..... . Hey, some of these local and state bonds are great, but as you mentioned, some come with great restrictions. I think we need a mix of these and just more options. Time will tell...let's see what the gov't thinks, or do they want to keep throwing money at bailouts?
TONY..... . I would agree, I didn't see anything broken with DPA's... but we also need to understand that there are DPA's that are still allowed now and work, but they aren't seller-funded DPA's. Thanks for the compliment.
KEN..... . well, glad that you had a good experience. Bad experiences usually in the mortgage world, even on FHA loans are usually because of the loan officer or the lender, that they just didn't know what they were doing. And yes, having some equity can go a long way, hence why these can be great with many foreclosures.
BARB...... . my pleasure, thanks for following.... stay tuned next week.
CONNIE..... . I truly think that they do serve a purpose and yes, it could have helped with the excessive inventory out there.... but the gov't just ignored that part and would rather throw money around. Go figure.
TOM.... . hhhhmmmm.... you can streamline conventional loans, but it has to be with the original investor. You make a point, but I truly think we need this program back and quickly... this program and low rates would spark the housing market in my opinion.
TERI.... . restrictions are good, but I hope they don't over do it... I would like to see them go down to 580, but I will take 600... it still would help some, probably more than many think. And I agree, I think most that used this program fell into that first category also.
BO..... . they do? Well, I think that was one of the arguments by so many to begin with that killed this program. If you think about it, how different can this really be than a father giving their child a gift to buy... or a gift of equity? But yes, just think on how many homes could have been sold in the last 3 months.... a lot more than what has taken place now, that's for sure. thanks
Thanks Jeff. DPA was a lifesaver in the New Orleans area after Katrina. I hope they return, as others have said, with apprpriate regulation and fairness. Here hoping! Thanks for the post.
Jeff - I was floored last week speaking to a lender that my buyers had chosen. He said, "well of course they have to bring in their 3% for an FHA loan". I said your kidding right . . that changed to 3.5% as of January 1, 2009. He actually argued with me that it wasn't true! I said, and I quote "dude you are seriously wrong and you need to keep up with your industry". He said I was wrong again, I called my buyers and told them to be ready because it was a fact. The next day he called them and told them. GEEEZZZZZ!!!
Tami
There are a great number of loan officers pitching this new loan, FHA. Thing is, FHA is celebrating 70 yrs of existence.
Realtors need to be aware that many loan officers don't know FHA and they anly started offering it because they have to now. (they did subprime because it was easier)
Mr. Belonger - First off, I loathe that song. That's going to be ringing in my ears all evening now. Burris is right in regards to some loan officers not understanding FHA. Heck, some folks ate, drank, and breathed subprime and nothing else. My bet is they are all but gone by now. Subprime has a place in lending, just not as prominent of one that went down before. Even when I couldn't do FHA, Conventional Financing was about 60% of my business. DPA's also have a place in mortgage financing, it's important to understand them. For me, I don't have to understand them... I just ask Jeff:)
Jeff, this is good news. I have had several clients that could have obtained home ownership with DPA. You're right that it works wonderfully.
TROY.... . I am sure it definitely was a life saver down there... and my pleasure, thanks for stopping by.
TAMI...... . hey, I know that we are human and that we make mistakes, but that is a blunder. That should be FHA 101.... yes, that one is scary... and for those that aren't sure, you can read about it here... New FHA changes to downpayment - 3 1/2% now required.
TOM..... . bingo... FHA has been around a long time and so many loan officers just new subprime and conventional, because it was easier in many cases. thanks
JASON..... . sorry dude... what are you going to do about it... lol Why did you listen to it? lol Well, I'll talk to you in a few days and see if it's still on your brain.
In regards to your comment... yes, some people eat and drank subprime. And yes, DPA's do have a place in today's financing and market. Thanks.... and you understand them. But thanks for the compliment.
HEATHER..... . I think it is.... time will only tell. I hope some people come to their senses and not get stupid because of politics... thanks
Jeff, I've had clients who bought with one of these programs, and I think that the assumption that they are all poor people who should be renting is way off. In my case, one was an attorney who became a Superior Court Judge, one is a producer for NPR and one is a young Secret Service Agent. Most of these programs here in DC included classroom time on home ownership, and except for minimal savings, these buyers were all solid in terms of their bill paying habits and income. And these were not sub prime loans. They came with down payment help and a very low interest rate. And so far, none of mine have even come close to defaulting.
I think we have to get people out of the habit of assuming that all of these programs are for sub prime borrowers.
Jeff, I think the seller assisted down payment programs are a win win for everyone. The problem I saw before was buyers OVER BUYING in general! Tighten up the debt to income ratios and keep these buyers in check...I see nothing wrong with that.
Okay, tell me if you have heard this yet...a lender said there could possibly be a $7500 credit coming down the pipeline to ALL buyers, not just first timers...The bill hasn't been passed yet. Have you heard about this? That would be AWESOME!
Great info Jeff. Here in Washington State we have a State Bond program that allows for a 2nd Mtg, but it must be used with the their 1st Mtg. Currently the rates on the 1st are 1% higher on FHA and the income restrictions often eliminate many potential buyers because the income is above the maximum. Keep us up to date!