Down Payment Assistance Programs to Continue

On October 1, 2007, the Department of Housing and Urban Development (HUD) published a rule that would have eliminated the use of seller-funded down payment assistance programs for FHA loans effective October 31, 2007 (See FHA Bans “Gift” Down Payment Assistance Programs). On that date, Judge Friedman of the United States District Court for the District of Columbia issued a temporary injunction against HUD from implementing that rule (See HUD’s Ban on FHA Down Payment Assistance Programs on Hold). In the injunction, Judge Friedman agreed that there was a “substantial likelihood” that the regulation violated applicable law. Judge Friedman further stated that the regulation lacked a “reasoned analysis” and was based on “flimsy” support. Judge Friedman also questioned whether HUD acted appropriately in issuing the regulation in view of a published report that Secretary Jackson was committed to that course of action regardless of whatever public comments HUD would later receive.

On March 3, 2008 Judge Karlton of the United States District Court for the eastern District of California set aside the HUD rule, thus allowing down payment assistance programs to continue to help thousands of American families realize the dream of homeownership.

In addition to the various down payment assistance programs such as Ameridream, Inc and the Nehemiah Program, opposition to HUD’s rule included several members of Congress, the Mortgage Bankers Association, the U.S. Conference of Mayors, the National Association of Home Builders, the National Urban League, and over 15,000 individuals and families nationwide.

Down payment assistance programs have helped over 1 million families and individuals purchase a home. In addition to helping the home buyers, these programs also help to stabilize the neighborhoods in which they are utilized.

With all of the issues facing the housing industry over the past couple years, this is welcomed news. FHA will be an integral part of a housing turnaround. In addition to the recent changes to FHA guidelines (See FHA Mortgages to Become More Popular and This is Not Your Father’s FHA) as well as the temporary increase to FHA loan limits (See Mortgage Limits Increased), down payment assistance programs enable more people to afford a home.

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