Judge Hands HUD a Public Smackdown
November 1, 2007
I try to stay away from politics here, but it pleases me to no end when one of George W’s minions gets a public slap in the face for doing something that’s blatantly political and hurts the Little Guy in the process.
You’ll recall that on October 2, the Housing & Urban Development department (HUD) issued a ruling stating they’d disallow any more Down Payment Assistance programs (DPA) as of today. See post about AmeriDream & HUD here.
HUD later ruled on October 22 (for fear of the federal district court’s review) that they’d extend the DPA programs till next February.
Yesterday a federal district judge handed down an injuction against HUD. He said their October 2 ruling lacked “reasoned analysis” and was based on “flimsy support”. You know you’ve made a big boo-boo when a federal judge calls your lawyers ”flimsy” in public. Ouch! Somebody over at HUD is gonna lose a job over this.
The good news for first time home buyers? HUD can’t shut down DPA programs. You don’t need to save tens of thousands of dollars for a down payment. Good folks like AmeriDream will continue to help by gifting you the down payment (by asking the seller for a donation which covers your cost).
Take that HUD! Score one for the Little Guy and bring on the buyers. Gawd knows we need ‘em now more than ever.
gavel photo is courtesy of gmarcelo at stock exchange
November 1, 2007 at 6:06 pm
Heather,
This is a good thing. I think the main concern for HUD was the IRS. They wanted to strip the non profits of their non profit status since they were making money doing this. Also, a HUD concern was the price inflation that sellers would insist on in order to pay for the FHA down payment assistance. This of course is a pretty big concern in todays market.
I agree with you though. At this stage, it’s fun to see the Administration get a smack down once in a while!
April 5, 2008 at 6:59 pm
As a former mortgage banker with over 40 years experience dealing with FHA loans, I am glad that this program will continue.
That being said, you need to be aware of a few issues:
1- DPA’s are not limited to first time homebuyers. Anyone who qualifies for an FHA can use this program.
2- This program has had a high level of fraud associated with it. Sellers do increase the sales price to cover the cost of the “donation”. Probably not as much an issue today as it has been in the past.
3- The default rate on these loans are three times the default rate of FHA loans where the borrower/homeowner has actually used their own funds for the downpayment.
I just wanted to clear up these points.