Time to tell HUD - back off

Posted by Steve Dalton / Category:

FHA is asking for comment and has provided a portal to view the new proposed rule at http://portal.hud.gov/portal. The comment period I think goes for 60 days after 6/16. But I would not wait.

The link for the rule is on the home page, just under the "At Home with FHA" pictures. I have posted the link here also: http://portal.hud.gov/fha/investment/5087-N-04_DPA_Pub_6-11-08.pdf

Quotes from the proposed rule:

"HUD's current policies in connection with downpayment assistance have given rise to a practice known informally as seller-funded downpayment assistance that has resulted in disproportionately high borrower default and claim rates among FHA borrowers. Over time, the rate of defaults, foreclosures, and claims has increased so dramatically that the practice has significantly jeopardized FHA's ability to maintain the solvency, as discussed herein, of its insurance fund and to facilitate the provision of affordable home financing to millions of American families."

HUD "seeks to disallow downpayment assistance from any entity that stands to derive a financial benefit from the sale transaction. The major proposed change to HUD's downpayment assistance policy is that it would apply this prohibition irrespective of whether that assistance is made directly or indirectly to the homebuyer. The data displayed in this notice clearly demonstrates the adverse impact of allowing the current policy to continue. HUD is concerned not only about the practice itself, but also about the consequences of the practice on homebuyers participating in FHA insurance programs and on the FHA insurance fund that is there to serve those homebuyers. A practice simply cannot be tolerated when default rates and claim rates for more than a third of home purchase loans it insures range between 2 and 3 times those applicable to the norm."

If you are an interested real estate professional or if you are an interested consumer, please post a comment. If you have been helped with a DPA loan, please post a comment.

To comment, click here:

http://www.regulations.gov/search/index.jsp

Type in the search field for Comments : Standards for Mortgagor's Investment in Mortgaged Property

This is the name of the proposed rule.

There are several pages of comments already.