FHA Announces Termination of Down Payment Assistance Programs
From Michigan: Just received from our in-house mortgage company:
FHA ANNOUNCES TERMINATION OF DOWN PAYMENT ASSISTANCE PROGRAMS
September 28, 2007
Final Rule on Downpayment Assistance Gifts Will Be Published on October 1, 2007
Effective 30 days from the date of publication in the Federal Register (we assume October 31st), HUD will prohibit sellers or interested third parties that financially benefit from the transaction to provide down payment assistance.
By publication in the Federal Register, FHA is prohibiting downpayment assistance that is composed of funds provided by the seller or any other person or entity that financially benefits from the transaction or by any party that is reimbursed directly or indirectly by the seller or entity that financially benefits from the transaction. The prohibition is applicable regardless of the type of entity offering the assistance, meaning that both nonprofits and government entities (including Indian tribes) operating seller-funded gift programs would be unable to offer their assistance to FHA borrowers.
The final rule describes the types of downpayment assistance programs that would be deemed ineligible, but also makes clear that gifts from family members, employers, and labor unions are still permissible. In addition, the rule reiterates existing policy that government entities and instrumentalities of government may provide secondary financing so long as the loans are made, held, or insured by the federal, state, or local government agency or instrumentality.
Business in Process
We are waiting for information on whether HUD will use applications signed on or before the implementation date or some later date in the transaction. We expect a mortgagee letter in the coming weeks.
Possible Congressional Action
As a reminder, there are contradictory provisions in the House and Senate concerning seller funded downpayment assistance. The House bill makes changes to the program but mandates its continuation and the Senate bill prohibits these programs going forward.
Suggest every agent check with their mortgage contact.
Regards,
Deana
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