Non-Profits Urge Reinstatement of DAPs After Home Sales Decline
The National Association of Realtors reported Monday that existing home sales fell 3.1 percent to 4.98 million in October, which happened to be the same month seller-funded down payment assistance programs became defunct. A provision within the Housing and Economic Recovery Act of 2008 -- signed into law in July -- effectively banned seller-funded down payment assistance programs beginning Oct. 1. Since then, these non-profits and their supporters have urged Congress to reconsider the programs that helped put people with no funds for closing costs and down payments into homes by giving monetary "gifts" to prospective buyers in just the right amount needed to obtain an FHA loan. The non-profits would then accept donations from the home seller in -- surprise! -- the same amount given to the buyer, plus a service fee. The non-profit paid its staff, the seller got rid of the house and the buyer became a homeowner with no up-front expenses. Everyone was happy, right? That depends on whom you speak with. The non-profits got one thing right, however: The program didn't cost a taxpayer dime. And it put people into homes who otherwise couldn't have afforded them. It follows that these programs would try any way possible to reinstate seller-funded down payment assistance. One of the largest such non-profits, Nehemiah Corp. of America on Monday released a statement urging the reinstatement of the programs. “As we anticipated, the spike in September home sales was short-lived, driven by hardworking Americans racing to take advantage of seller-funded down payment assistance (DPA) before it was eliminated on Oct. 1," Nehemiah president Scott Syphax said. "October housing sales tanked, clearly illustrating the reality we now face in a post-DPA market.... We call on Congress to revisit the important role that DPA has played in providing access to homeownership, and urge them to remove the ban.” A supporter of DPA, the National Association of Black Mortgage Brokers on Tuesday released its own statement asking Congress to reconsider the programs. "The grim 3.1 percent drop in existing-home sales in October released by the National Association of Realtors may be just the tip of the iceberg," president Joy Jamison said. "There are an abundance of homes sitting on the market waiting to be purchased and there are hundreds of thousands of hardworking Americans, particularly minorities, who want nothing more than to be homeowners." This problem could be resolved, according to Jamison, by lifting the ban and giving "innumerable minorities" access to these programs and the ability to achieve the dream of homeownership. Neither press release addressed what NAR economists have said really lies at the heart of the home sales decline: consumer hesitation. “Many potential home buyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions,” NAR economist Lawrence Yun said in a press statement Monday. Consumer spending in October also saw its largest decline since September 2001 -- 1 percent -- according to a report Wednesday by the Commerce Department, suggesting much larger concerns than the scarcity of seller-funded down payment assistance have been driving the budgets of Americans in the past months. Non-profits like Nehemiah and AmeriDream Inc. frequently reiterate the statistic that more than 1 million borrowers have used seller-funded down payment assistance programs to achieve homeownership. The statistic these programs don't like to repeat is the one that led to their demise: Federal Housing Administration commissioner Brian Montgomery in June said the one-third portion of the FHA's portfolio that consisted of loans made to borrowers that used these non-profits might soon cripple the "FHA's ability to serve American citizens who need access to prime-rate home loans." “Data clearly demonstrates that FHA loans made to borrowers relying on seller-funded downpayment assistance go to foreclosure at three times the rate of loans made to borrowers who make their own down payments,” he said at the time. Where will the DAP battle go from here? The current issue of HousingWire Magazine looks into the demise of seller-funded down payment assistance in depth. Click here to learn more and to subscribe. Write to Diana Golobay at firstname.lastname@example.org.