Lots of sparks flying right now, with popular down payment assistance programs (DAP) to first-time home buyers under scrutiny, and a mortgage industry fearful of losing another business niche. This recent story brought quiet a bit of chatter into the markets.
The FHA, who lost $4.6 billion last year, may be losing their ability to accept down payment assistance money. Nearly 79,000 people last year took advantage of them, where nonprofit groups provide buyers with money for down payments and home sellers then reimburse the organizations and pay an administrative fee. 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 Senate version of the housing bill would have banned the programs but the House version would not. At this point a compromise bill has backed the Senate’s version on this, which also is supported by the Bush administration.