Wednesday, September 17, 2008

FHA Endorsement Volume to be Impacted by the End of Down Payment Assistance


Borrowers for roughly 35 percent of all FHA purchase money mortgages utilized down payment assistance from non profit organizations. As of October 1, 2008 borrowers will no longer be able to obtain seller assisted down payments coming through non profits. Unless a new law reinstates down payment assistance by non profits for FHA mortgages, a large proportion of FHA mortgages will be eliminated. We expect that the recent increases in FHA mortgages will be halted. This might be a temporary situation but it should be visible in our charting of the mortgage data.
Do the mortgagees need down payment assistance to stay in business?

4 comments:

Raym39 said...

I don't believe that Down Payment Assistance programs used to bolster loan activity is appropriate. It enables people who have not saved enough to enter into home purchase contracts for homes that will likely require more of a drain on their savings to live in. Encouraging adequate savings is more appropriate. Also, I suspect that many of these "Non Profits" are self-serving in other ways. That said, I am sure that Mortgage originators in some near-blighted areas will suffer substantially without these programs. Instead of "down payment assistance schemes", I would prefer to see the development of more transparent and risk-adjusted mortgage products that would provide for little or no down payment when it is clear that a needy borrower is truly responsible.

Ludwig said...

How about lottery tickets as down payment to secure a mortgage? Lottery tickets might have greater potential for appreciation then a home as security.

GoodPolicy said...

DAP is a scam! There is no benefit to the homeowner, the seller, the taxpayer and it should never have been alllowed in the first place.

Anonymous said...

There are plenty of situations with non FHA loans and no middleman where the seller assists the buyer with cash incentives and the buyer obtains 100 percent financing. They get conventional mortgages. Still going on.