Why? Why take the chance to buy a home away from people who don't have the down payment? Sure price in a little extra risk, but don't eliminate.
It was reported today that FHA Commissioner Brian Montgomery stated FHA would again be trying to eliminate seller funded down payments. Documentation has been provided demonstrating these loans are 3 times more likely to default than regular FHA loans, and it is clear that HUD wants to restrict them. By the same token these loans are now representing about 1/3 of the loans insured by FHA and it is quite obvious they serve a great need. The thousands of families who have not defaulted on their loans are an excellent example of why we need to keep these programs.